Wrap Text
Condensed Unaudited Consolidated Interim Results
for the six months ended 30 September 2018 and Dividend Declaration
Stor-Age Property REIT Limited
Registration number: 2015/168454/06
Incorporated on 25 May 2015
Approved as a REIT by the JSE
Share code: SSS ISIN: ZAE000208963
("Stor-Age" or "the group" or "the company")
CONDENSED UNAUDITED CONSOLIDATED INTERIM RESULTS
for the six months ended 30 September 2018
INCLUDED IN THIS ANNOUNCEMENT IS A DIVIDEND DECLARATION AND POSTING OF A CIRCULAR CONTAINING A DIVIDEND INVESTMENT ALTERNATIVE ELECTION
COMMENTARY
The board of directors ("the board") of Stor-Age is pleased to present the condensed unaudited consolidated interim results of the group for the
six months ended 30 September 2018 ("the period").
HIGHLIGHTS
- Dividend up 9.1% to 51.30 cps
- SA rental income and net property operating income up 17.4% (like-for-like 9.4%) and 14.2% (like-for-like 9.8%)
- Strong operating performance in UK business
- Acquisition of All-Store (Cape Town) in April 2018 and development of additional GLA underway
- Completion of new Bryanston property in September 2018
- Development of Craighall (Johannesburg) underway
- Acquisition of Managed Portfolio completed post period-end - investment property valued at R5.3 billion
INTRODUCTION
Stor-Age successfully delivered a 9.1% increase in dividends per share for the period to continue its track record of consistently strong trading results,
underpinned by a combination of solid organic growth in the SA and UK portfolios and the successful integration of strategic acquisitions.
We remain focussed on our core objective of delivering real and sustainable growth to our shareholders.
In a still challenging operating environment, Stor-Age continues to outperform in our key focus areas, namely: occupancy and revenue growth;
acquisitions and new developments; and enhancing our market-leading operating platform. The group's excellent trading performance further reflects the
resilient nature of our assets and our specialist skill.
During the period we made substantial progress in two strategic initiatives - the acquisition of the Managed Portfolio, and the restructuring of our SA and
UK debt facilities - which were both successfully completed shortly after the period-end. We also successfully raised R400.0 million in early October in an
oversubscribed bookbuild (see Events after the Reporting Date).
GROUP SNAPSHOT
Stor-Age is the largest and most recognisable self storage property fund and brand in South Africa. The portfolio comprises 63 self storage properties
across both SA (49) and the UK (14). The SA portfolio is valued at R3.8 billion(1) and the UK portfolio - under the brand Storage King - at R1.5 billion.
(In the UK a further 12 properties trade under the licence of the Storage King brand and generate licence and management fee revenue. In total this represents
26 properties trading under the Storage King brand.)
DEFINITIONS
SA - South Africa
UK - United Kingdom
CPC - Certificate of Practical Completion
GLA - gross lettable area
m2 - square metres
sqf - square foot
cps - cents per share
Managed Portfolio - a portfolio of 12 properties managed and operated by Stor-Age
(1) Including acquisition of Managed Portfolio in October 2018.
OPERATIONAL REVIEW
- Total portfolio occupancy up 72 400m2 (SA 26 000m2; UK 46 400m2)
- Closing occupancy of 83.5% (SA); 81.2% (UK)
- Closing rental of R93.5/m2 (SA), up 8.7% (excl. acquisitions), and GBP21.46/sqf(2) (UK)
- Post-period completed acquisition of Managed Portfolio
SA
The GLA in the SA portfolio closed at 268 400m2 (2017: 234 900m2), up by 33 500m2 due to the acquisitions of StorTown (November 2017) and
All-Store Self Storage ("All-Store") (April 2018), as well as the opening of Bryanston in September 2018 and expansion at existing stores.
The occupancy profile of the portfolio by GLA is disclosed in the following table:
30 September 2018
GLA m2 % Occupied
Gauteng 130 691 82.9
Western Cape 92 427 83.2
Eastern Cape 11 032 88.2
KwaZulu-Natal 27 604 85.4
Free State 6 679 85.0
268 433 83.5
The 0.8% year-on-year decrease in closing occupancy, from 84.3% to 83.5%, reflects the impact of the StorTown acquisition and the inclusion of Bryanston.
Occupancy in the StorTown portfolio decreased by c.500m2 during an extensive refurbishment and build out at the Durban CBD property. This build out is scheduled
for completion in December 2018.
Post conclusion of the All-Store acquisition we began development work to add an additional 1 700m2 GLA. This is expected to be available in the early
part of 2019 and, with the store trading at mature occupancy levels in excess of 90.0%, the lease up of the additional GLA is expected to be earnings-accretive.
The proven ability to acquire and integrate strategic acquisitions and to successfully execute asset management initiatives to enhance our properties are
key competitive advantages, particularly in a tough economic environment.
There is a strong acquisition pipeline in place which remains subject to our stringent vetting criteria.
In October 2018 we completed the acquisition of the Managed Portfolio. The acquisition was in line with the Board's stated intention and eliminates the
former related party relationships of executive management. Nine of the 12 properties are high quality "big-box" type stores and six have already reached
mature occupancy levels. Over the 12 months to 30 September 2018, occupancy growth (12 900m2) and the increase in the average rental rate (12.8%) have been
significant. Further details are set out under Events after the Reporting Date.
UK
The UK portfolio delivered a strong operational performance. Occupancy increased by 4 000m2 year-on-year and like-for-like occupancy by 1 300m2.
The UK self storage industry experiences a more marked degree of seasonality, with occupancy peaking in the spring and summer months. Accordingly we
anticipate some occupancy loss to come through over the winter months but remain on track to meet our full year expectations.
(2) UK rental rate quoted on an annual basis.
Since the acquisition of Storage King in November 2017, we have progressed all focus areas and continue to leverage the SA operating infrastructure to
support the UK operations in improving efficiencies and reducing costs. Over the last 12 months we have also analysed several attractive UK acquisition
opportunities but we remain selective and disciplined in our investment strategy. Competition for quality assets remains fierce.
FINANCIAL RESULTS
The results for the period include the trading results for both StorTown and Storage King for the full six months, while All-Store has been included for the
part-period from its acquisition date.
The table below sets out the group's underlying operating performance analysed between the SA and UK operations.
30 September 2018 30 September 2017 variance %
SA UK Total SA UK Total
R'000 R'000 R'000 R'000 R'000 R'000 SA Total
Property revenue 132 813 92 956 225 769 114 710 - 114 710 15.8 96.8
Rental income 129 251 83 120 212 371 110 106 - 110 106 17.4 92.9
Ancillary income 3 562 9 836 13 398 3 604 - 3 604 (1.2) 271.8
Licence fees - - - 1 000 - 1 000 (100.0) (100.0)
Direct operating costs (30 876) (29 003) (59 879) (25 466) - (25 466) (21.2) (135.1)
Net property operating income 101 937 63 953 165 890 89 244 - 89 244 14.2 85.9
Total property revenue increased by 96.8% to R225.8 million (2017: R114.7 million).
Rental income for the period was R212.4 million (2017: R110.1 million), a 92.9% increase on the prior year. On a like-for-like basis (excl. Storage King
and other SA acquisitions) rental income increased by 9.4%, driven by a 0.7% increase in average occupancy levels and an 8.7% increase in the average
rental rate.
Total occupancy in the SA portfolio grew by 26 000m2 year-on-year (organically 2 000m2; acquisitions 24 000m2). Excluding acquisitions in this time,
the closing rental rate increased by 8.7% to R93.5/m2.
The UK portfolio performed broadly as expected. Closing occupancy (81.2%) and the average rental rate (GBP21.46/sqf) increased by 3.0% and 1.6% from
March 2018, respectively.
Licence fee income of R1.0 million in the prior period relates to the opening of the Randburg property in the Managed Portfolio in July 2017.
Ancillary income (net of related costs) of R13.4 million (2017: R3.6 million) reflects the positive contribution of acquisitions. Although ancillary
income is a relatively small proportion of total revenue, each component makes a meaningful contribution to earnings with little capital investment.
In a more challenging economic environment, the overall performance of this revenue stream plays an important role in driving overall earnings growth.
Excluding a once-off sundry income amount of R0.4 million in 2017, ancillary income increased by 11.9% on the prior year.
The increase in direct operating costs to R59.9 million (2017: R25.5 million) reflects the impact of acquisitions. On a like-for-like basis direct
operating costs increased by 7.8%, slightly above our forecast of 7.0% and mainly the result of higher municipal rates charges on certain properties.
Disciplined cost control remains top of mind.
Net property operating income of R165.9 million (2017: R89.2 million) reflects both organic growth and the benefit of acquisitions. On a like-for-like
basis (excluding acquisitions and non-recurring income), net property operating income increased by 9.8%. Storage King contributed R64.0 million (c.40%)
to the group's total net property operating income.
The increase in administrative expenses from R14.1 million to R28.1 million relates mainly to the Storage King acquisition. This increase is also
attributable to the underlying growth in the business, a greater investment in technology, the appointment of new non-executive directors, centralisation
and automation, and the employment of additional staff.
Interest income comprises interest received on the share purchase scheme loans (R6.6 million), cross currency interest rate swaps (R14.4 million) and
call and money market accounts (R1.1 million). The increase in interest income from R5.9 million to R22.1 million relates mainly to the cross currency
interest rate swaps entered into pursuant to the Storage King transaction.
Interest expense of R22.0 million (2017: R11.0 million) comprises mainly interest on bank borrowings and the increase is due to the GBP-denominated debt
arising from the Storage King acquisition. Further details of bank borrowings are set out in Capital Structure below.
Profit for the period of R112.2 million (2017: R136.0 million) includes a fair value adjustment to derivative financial instruments (realised and unrealised
mark-to-market adjustments relating to forward exchange contracts, interest rate swaps and cross currency interest rate swaps) of R33.0 million (2017: R58.3 million
positive adjustment).
CAPITAL STRUCTURE
Our financing policy is to fund our current needs through a mix of debt, equity and cash flow to enable the group to expand the portfolio and achieve
our strategic growth objectives.
Details of the group's borrowing facilities at 30 September 2018 are set out below:
SA UK Group
R million R million R million
Total debt facilities 995.0 447.0 1 442
Undrawn debt facilities 610.6 - 610.6
Gross debt 384.4 447.0 831.4
Net debt 332.3 404.9 737.2
Investment property^ 2 662 1 532 4 194
Subject to fixed rates
- Amount 250.0 402.0 652.0
- % hedged on gross debt 65.0% 90.0% 78.4%
- % hedged on net debt 75.2% 99.3% 88.4%
Effective interest rate 9.06% 4.03% 6.35%
Gearing (LTV ratio) 12.5% 26.4% 17.6%
LTV ratio defined as the ratio of net debt as a percentage of investment property (net of finance lease obligations relating to leasehold investment property)
At 30 September 2018 the group had SA loan facilities of R995.0 million available. The respective maturities of the various facilities ranged from
December 2019 to November 2022 and accrued interest at an average margin of 1.29% below prime.
The acquisition of Storage King in November 2017 was structured with an amortising GBP25.0 million LIBOR-linked facility. The balance at 30 September 2018 was
GBP24.3 million/R447.0 million (31 March 2018: GBP24.5 million/R406.0 million). The interest rate risk on the loan was hedged at 90.0% of the gross debt, in line
with the amortisation profile, with underlying LIBOR fixed at 1.051%.
Post period-end, the group restructured both its SA and UK debt facilities. Further details are set out in Events after the Reporting Date.
^Investment property reflected as gross investment property of R4 387 million less finance lease obligations relating to leasehold investment property of R193 million.
At 30 September 2018, Stor-Age's total gross borrowings amounted to R831.4 million (31 March 2018: R758.6 million) with 78.4% (31 March 2018: 82.0%)
subject to fixed rates, and total undrawn borrowing facilities of R610.6 million (31 March 2018: R642.4 million).
On a net debt basis 88.4% of borrowings was subject to fixed rates (31 March 2018: 100.0%). Net debt stood at R737.2 million (31 March 2018: R619.7 million)
with a gearing ratio (LTV) of 17.6% (31 March 2018: 16.1%).
The effective interest rate at 30 September 2018 was 6.35% (31 March 2018 was 6.54%).
In April 2018 the group raised R52.0 million of equity capital through the issue of ordinary shares pursuant to a vendor consideration placement for the
acquisition of All-Store. Stor-Age also conserved R17.3 million cash under the Dividend Reinvestment Programme in July 2018.
Net asset value per share (net of non-controlling interest) was R11.71 (2017: R10.70) and net tangible asset value per share (net of non-controlling interest)
was R11.23 (2017: R10.23).
ACQUISITIONS AND DEVELOPMENTS
As previously announced on SENS:
All-Store
On 6 April 2018 Stor-Age concluded the acquisition of All-Store, located in Cape Town's northern suburbs, for a purchase consideration of R52.0 million.
The purchase consideration was settled in full by the issue of ordinary shares pursuant to a vendor consideration placement.
Bryanston and Craighall developments
The Bryanston development was completed in September 2018 at a total cost of R80.9 million with trading commencing in the latter part of the month.
On full fit-out Bryanston will comprise 6 100m2 GLA. The development was completed by Stor-Age Property Holdings Proprietary Limited ("SPH") under the
CPC acquisition structure which results in the risk and reward of ownership passing to Stor-Age on practical completion of the development. Under these terms a
development cost saving of R1.0 million accrued to Stor-Age.
The Craighall development is being completed under the same CPC acquisition structure. The development cost is R95.1 million (i.e. the maximum amount payable by
Stor-Age before any potential cost saving). On completion the property will have 6 650m2 GLA. The development is progressing according to schedule and is expected
to be completed by June 2019.
EVENTS AFTER THE REPORTING DATE
Acquisition of Managed Portfolio
As previously announced, on 9 October 2018 Stor-Age completed the acquisition of the Managed Portfolio for an aggregate purchase consideration of
R58.0 million. The 12 purpose-built self storage properties - located in Cape Town, Johannesburg, Durban, Port Elizabeth and Pretoria - were previously
operated and managed by Stor-Age.
Equity raise
On 3 October 2018 Stor-Age issued 33.33 million shares at R12.00 per share for a consideration of R400.0 million ("the equity raise").
The equity raise was completed, in part, by way of vendor consideration placings and Stor-Age's existing general authority to issue shares for cash.
Restructuring of SA and UK debt facilities
Post period-end, Stor-Age completed the restructuring of its SA and UK debt facilities.
The SA loan facilities increased from R995.0 million to R1.645 billion. The respective maturities of the various facilities range from October 2019 to
November 2021 with a weighted average maturity of 2.4 years. R1.125 billion of the facilities accrue interest at an average rate of 1.40% below prime and
the remaining R520 million accrues interest at JIBAR plus 1.66%.
The UK loan facility increased from GBP24.3 million (R447.0 million) to GBP37.5 million (R691.0 million) with an expiry date of November 2023. The loan facility
is priced at LIBOR plus 2.75% (previously LIBOR 3.30%) and is non-amortising (i.e. interest only).
Following the completed acquisition of the Managed Portfolio and the equity raise, and assuming the investment property values and cash balances on
hand as at the date of this report, the group's gearing ratio (LTV) is 28.4%. The group's policy is to fix approximately 80.0% of its borrowings on a net
basis. In line with this policy, the board commenced with a strategy of entering into interest rate swap agreements, taking account of market conditions,
to hedge its interest rate exposure following the Managed Portfolio acquisition. As at the date of this report, on a net debt basis, 84.7% of borrowings
was subject to fixed rates (SA 80.1%; UK 97.2%). The effective interest rate of the SA and UK borrowings is 9.15% and 3.85%, respectively.
OUTLOOK
The resilience of the Stor-Age business model continues to be tested by a harsh macro climate in SA, and we are pleased to be consistently demonstrating
its strength. The SA economy remains under severe pressure and we expect the local operating environment to remain challenging. In the UK our primary focus
continues on driving revenue growth, primarily through occupancy gains.
We are confident that our growth strategy and strong operating platform will continue to deliver sustainable earnings growth.
In this light the Board reaffirms the full year distribution growth to 31 March 2019 to be 9-10% higher than the prior year, subject to no further
deterioration in the macro-economic environment. This guidance has not been reviewed or reported on by the company's auditors.
DIVIDEND DECLARATION DETAILS
DECLARATION OF A CASH DIVIDEND WITH THE OPTION TO RE-INVEST THE CASH DIVIDEND IN RETURN FOR STOR-AGE SHARES
Notice is hereby given of the declaration of the gross interim dividend (number 6) of 51.30 cents per share for the six months ended 30 September 2018 ("Cash Dividend").
Shareholders of Stor-Age ("Shareholders") will be entitled, in respect of all or part of their shareholdings, to elect to re-invest the Cash Dividend
in return for Stor-Age Shares ("Share Alternative"). Those Shareholders who do not elect the Share Alternative will receive the Cash Dividend.
A circular providing further information in respect of the Cash Dividend and Share Alternative ("the Circular") will be posted to Shareholders on
20 November 2018.
Certificated Shareholders who wish to elect to receive the Share Alternative must complete the Form of Election contained in the Circular.
Dematerialised Shareholders who wish to receive the Share Alternative must instruct their CSDP or Broker with regard to their election in terms of the
custody agreement entered into between them and their CSDP or Broker.
The distribution of this Circular and the right to elect Shares in jurisdictions other than the Republic of South Africa may be restricted by law and
failure to comply with any of these restrictions may constitute a violation of the securities laws of any such jurisdiction. The rights of Shareholders
to elect Shares is not being offered, directly or indirectly, in the United States of America, the United Kingdom, Canada, Australia or Japan unless
certain exemptions from the requirements of those jurisdictions are applicable.
Salient dates and times 2018
Record date for Shareholders to be registered in the Company's Securities Register
in order to be entitled to receive the Circular Friday, 9 November
Circular and Form of Election posted to Shareholders and announced on SENS Tuesday, 20 November
Finalisation announcement of Share Alternative issue price released on SENS
("Finalisation Announcement") Tuesday, 27 November
Finalisation Announcement published in the press Wednesday, 28 November
Last day to trade ("LDT") cum-dividend and Share Alternative Tuesday, 4 December
Shares to trade ex-dividend Wednesday, 5 December
Listing of maximum possible Share Alternative Shares commences on the JSE at 09:00 Friday, 7 December
Last day to elect to receive the Share Alternative
(no late Forms of Election will be accepted) at 12:00 Friday, 7 December
Record date to determine which Shareholders may participate in the Cash Dividend/Share
Alternative ("Record Date") Friday, 7 December
Announcement of results of the Cash Dividend/Share Alternative on SENS Monday, 10 December
Cheques posted to Certificated Shareholders and accounts credited by CSDPs or brokers
of Dematerialised Shareholders who will receive the Cash Dividend Monday, 10 December
Share certificates posted to Certificated Shareholders and accounts credited by CSDPs
or brokers of Dematerialised Shareholders who have elected the Share Alternative Wednesday, 12 December
Adjustment to number of Shares listed on or about Friday, 14 December
Notes:
- All times are South African times. The above dates and times are subject to change and any change will be advised on SENS and in the press.
- Shareholders electing the Share Alternative are reminded that the new Shares will be listed on LDT+3 and that these new Shares can only be
traded on LDT+3 as a result of the settlement of Shares three days after the Record Date, which differs from the conventional one day after the
Record Date settlement process.
- Shares may not be dematerialised or rematerialised between the commencement of trade on Wednesday, 5 December 2018 and the close of trade on
Friday, 7 December 2018 (both days inclusive).
FRACTIONS
Fractions of Shares are not capable of being traded on the JSE. Accordingly, where a Shareholder's entitlement to Shares in relation to the Share
Alternative as calculated in accordance with the Reinvestment Price gives rise to a fraction of a new Share, such fraction will be rounded down to the
nearest whole number in accordance with the JSE Limited Listings Requirements and a cash payment will be made for the fraction.
TAX IMPLICATIONS
As the Company has REIT status, shareholders are advised that the dividend has been declared out of income reserves and meets the requirements of a "qualifying
distribution" for the purposes of section 25BB of the Income Tax Act (No. 58 of 1962), as amended, ("Income Tax Act"). The dividend on the Shares will be
deemed to be a dividend, for South African tax purposes, in terms of section 25BB of the Income Tax Act.
South African tax residents
The dividend received by or accrued to South African tax residents must be included in the gross income of such Shareholders and will not be exempt
from income tax (in terms of the exclusion to the general dividend exception, contained in paragraph (aa) of section 10(1)(k)(i) of the Income Tax Act)
because it is a dividend distributed by a REIT. The dividend is exempt from dividend withholding tax in the hands of South African tax resident
shareholders, provided that the South African resident Shareholders provide the following forms to the CSDP or broker in respect of uncertificated shares,
or to the Company, in respect of certificated shares:
a) a declaration that the dividend is exempt from dividend tax; and
b) a written undertaking to inform the CSDP, broker or the Company,
should the circumstances affecting the exemption change or the beneficial owner cease to be the beneficial owner, both in the form prescribed by the
Commissioner for the South African Revenue Service. Shareholders are advised to contact their CSDP, broker or the Company to arrange for the above-mentioned
documents to be submitted prior to payment of the dividend, if such documents have not already been submitted.
Non-resident Shareholders
Dividends received by non-resident Shareholders will not be taxable as income and instead will be treated as an ordinary dividend which is exempt from
income tax in terms of the general dividend exemption in section 10(1)(k)(i) of the Income Tax Act. It should be noted that up to 31 December 2013
dividends received by non-residents from a REIT were not subject to dividend withholding tax.
Since 1 January 2014, any dividend received by a non-resident from a REIT will be subject to dividend withholding tax at 20%, unless the rate is reduced in
terms of any applicable agreement for the avoidance of double taxation ("DTA") between South Africa and the country of residence of the Shareholder concerned.
Assuming dividend withholding tax will be withheld at a rate of 20%, the net dividend amount due to non-resident Shareholders is 41.04 cents per share.
A reduced dividend withholding rate in terms of the applicable DTA may only be relied on if the non-resident Shareholder has provided the following form
to their CSDP or broker in respect of uncertificated shares, or the Company, in respect of certificated shares:
a) a declaration that the dividend is subject to a reduced rate as a result of the application of DTA; and
b) a written undertaking to inform their CSDP, broker or the Company should the circumstances affecting the reduced rate change or the beneficial owner
cease to be the beneficial owner,
both in the form prescribed by the Commissioner for the South African Revenue Service. Non-resident shareholders are advised to contact their CSDP, broker or
the Company to arrange for the above-mentioned documents to be submitted prior to payment of the dividend, if such documents have not already been submitted.
The Company's tax reference number is 9027205245.
Non-participating shares
An amalgamation and merger agreement was entered into between the Company, Castle Rock Investments and the HJS Trust prior to listing, in terms of which
the Company acquired all the assets owned by Stor-Age Self Storage Proprietary Limited in terms of s44 of the Income Tax Act ("the Agreement")
in consideration for the allotment of 10 000 000 ordinary shares in the Company ("Consideration Shares"), comprising 2.92% (2017: 3.44%) of the issued
share capital, and the distribution of those shares to Castle Rock Investments and HJS Trust as a dividend.
In terms of the Agreement, a mechanism was agreed in terms of which the Consideration Shares will not participate fully in the distribution of distributable
profits earned by the Company in the ordinary course of business ("Distributable Profits"), and declared by the Company as an interim or final dividend,
for the period from the listing date of the Company (16 November 2015) until 31 March 2020, on a tiered basis as follows:
% of the Consideration Shares
entitled to participate in the
distribution of the Distributable Profits
16 November 2015 to 31 March 2016 0%
1 April 2016 to 31 March 2017 0%
1 April 2017 to 31 March 2018 25%
1 April 2018 to 31 March 2019 50%
1 April 2019 to 31 March 2020 75%
1 April 2020 onwards 100%
The Consideration Shares will however participate fully in any distribution of profits earned from the disposal of any properties.
The amount which would have been declared as a dividend in respect of the Consideration Shares shall be declared and paid as a dividend, pro rata,
to the holders of the remaining shares in Stor-Age. As security for this arrangement, the Consideration Shares, or the relevant portion thereof, as the
case may be, are held in certificated form in escrow for the period during which the distribution restrictions apply and in the event that these shares are
disposed of, the shares will be transferred to another escrow arrangement and the acquirer thereof will be subject to the same restrictions regarding the
distributions detailed above.
A reconciliation of the number of shares in issue and the number of shares entitled to receive the dividend, together with the resultant dividend per share,
is included below:
Distributable profits (R'000) 172 824
Number of shares entitled to the dividend ('000) 336 889
Number of shares in issue as at the date of this announcement ('000) 341 889
Consideration Shares not entitled to the dividend ('000) (note 2) 5 000
Dividend per share (cents) 51.30
Notes:
1. Stor-Age did not undertake any disposals of any properties during the six months ended 30 September 2018 and all of the distributable profits of
Stor-Age were earned in the ordinary course of business.
2. Comprises 5 000 000 Stor-Age shares, being 50% of the Consideration Shares that are excluded from participating in the Distributable Profits.
3. At the date of this announcement, Stor-Age had 341 888 938 ordinary shares in issue.
On behalf of the board.
PA Theodosiou GM Lucas
Chairman CEO
Cape Town
20 November 2018
BASIS OF PREPARATION
The condensed unaudited consolidated interim results for the six months ended 30 September 2018 are prepared in accordance with the JSE Limited Listings
Requirements for interim reports and the requirements of the Companies Act of South Africa. The report is prepared in accordance with the framework concepts
and the measurement and recognition requirements of International Financial Reporting Standards ("IFRS"), the SAICA Financial Reporting Guides as issued by
the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and also, as a minimum, contain the
information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of these condensed unaudited consolidated
interim financial statements are consistent with those applied in the previous consolidated financial statements except for the adoption of IFRS 9 and
IFRS 15. The implementation of these standards do not have a material impact on the group's interim results.
Any information included in this announcement that might be perceived as a forward looking statement has not been reviewed or reported on by the company's
auditors in accordance with section 8.40(a) of the Listings Requirements.
The condensed unaudited consolidated interim results for the six months ended 30 September 2018 were prepared under the supervision of the Financial Director,
Stephen Lucas CA(SA). These consolidated interim results have not been reviewed or audited by Stor-Age's independent external auditors.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 30 September 2018
Unaudited Unaudited Audited
30 September 30 September 31 March
2018 2017 2018
R'000 R'000 R'000
Assets
Non-current assets 4 846 385 2 382 715 4 493 563
Investment properties 4 387 277 2 111 906 4 034 430
Property and equipment 5 407 2 290 4 969
Stor-Age share purchase scheme loans 184 172 125 252 166 961
Goodwill and intangible assets 148 611 83 686 144 036
Derivative assets 99 674 58 315 124 069
Deferred taxation 21 244 1 266 19 098
Current assets 116 317 31 933 90 156
Trade and other receivables 62 912 24 213 65 165
Inventories 3 141 1 808 3 168
Cash and cash equivalents 50 264 5 912 21 823
Total assets 4 962 702 2 414 648 4 583 719
Equity and liabilities
Total equity 3 643 587 1 920 846 3 494 259
Stated capital 3 257 766 1 796 284 3 175 075
Non-distributable reserve 490 046 198 792 523 006
Accumulated loss (137 375) (74 230) (108 855)
Foreign currency translation reserve 3 457 - (120 732)
Total attributable equity to owners 3 613 894 1 920 846 3 468 494
Non-controlling interest 29 693 - 25 765
Non-current liabilities 956 218 160 207 801 598
Bank borrowings 769 028 151 921 624 985
Derivative liabilities 1 143 2 853 3 343
Finance lease obligation 186 047 5 433 173 270
Current liabilities 362 897 333 595 287 862
Bank borrowings 18 428 147 677 16 571
Trade and other payables 148 658 32 153 94 817
Provisions 15 535 20 004 16 331
Finance lease obligation 7 452 680 8 230
Dividends payable 172 824 133 081 151 913
Total equity and liabilities 4 962 702 2 414 648 4 583 719
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
for the period ended 30 September 2018
Unaudited Unaudited Audited
6 months 6 months 12 months
30 September 30 September 31 March
2018 2017 2018
R'000 R'000 R'000
Property revenue 225 769 114 710 310 177
- Rental income 212 371 110 106 295 359
- Other income 13 398 4 604 14 818
Direct property costs (59 879) (25 466) (76 917)
Net property operating income 165 890 89 244 233 260
Other revenue 9 017 9 315 22 053
- Management fees 9 017 9 315 22 053
Administration expenses (28 082) (14 058) (36 923)
Operating profit 146 825 84 501 218 390
Transaction and advisory fees - - (6 552)
Gain on bargain purchase - 371 377
Fair value adjustment to investment properties - - 203 001
Fair value adjustment to derivative financial instruments (32 960) 58 315 178 570
- Realised 5 474 - 56 321
- Unrealised (38 434) 58 315 122 249
Depreciation and amortisation (2 229) (933) (2 232)
Profit before interest and taxation 111 636 142 254 591 554
Interest income 22 125 5 942 23 601
Interest expense (22 021) (10 970) (33 091)
Profit before taxation 111 740 137 226 582 064
Taxation expense 476 (1 232) (3 839)
- Normal taxation 471 - (3)
- Deferred taxation 5 (1 232) (3 836)
Profit for the period 112 216 135 994 578 225
Items that may be reclassified to profit or loss
Fair value adjustment to derivative financial instrument - (1 444) -
Deferred taxation - 404 -
Translation of foreign operations 127 022 - (123 902)
Other comprehensive income for the period, net of taxation 127 022 (1 040) (123 902)
Total comprehensive income for the period 239 238 134 954 454 323
Profit attributable to:
Owners of the company 111 121 135 994 576 726
Non-controlling Interest 1 095 - 1 499
Total comprehensive income attributable to:
Owners of the company 235 310 134 954 455 994
Non-controlling interest 3 928 - (1 671)
Basic and diluted earnings per share (cents) 36.81 79.58 250.26
Definitions
Other income comprises licence fee income relating to the opening of new stores in the Managed Portfolio and ancillary income such as the sale of merchandise
(e.g. packaging materials and padlocks), administration fees, late fees and other sundry income.
Direct operating costs comprise mainly store-based staff salaries, rates, utilities, a full allocation of marketing spend and other property-related costs such
as insurance, maintenance, IT and communications at a property level.
Management fees comprise property and asset management fees charged on the Managed Portfolio and development fees on properties being developed under the
CPC structure.
Administrative expenses relate mainly to support function costs for IT, finance, HR, property management, professional fees and directors' remuneration.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period ended 30 September 2018
Foreign
Non- currency Total Non-
Stated distributon Accumulated translation attributable controlling Total
capital reserve loss reserve to parent interest equity
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at 1 April 2017 1 766 561 141 058 (17 788) - 1 889 831 - 1 889 831
Total comprehensive income for the period - - 576 726 (120 732) 455 994 (1 671) 454 323
Profit for the period - - 576 726 - 576 726 1 499 578 225
Other comprehensive income - - - (120 732) (120 732) (3 170) (123 902)
Transactions with shareholders, recognised directly
in equity
Issue of shares 1 408 514 - - - 1 408 514 - 1 408 514
Proceeds 1 440 643 - - - 1 440 643 - 1 440 643
Share issue costs (32 129) - - - (32 129) - (32 129)
Transfer to non-distributable reserve - 381 948 (381 948) - - - -
Dividends - - (285 845) - (285 845) - (285 845)
Total transactions with shareholders 1 408 514 381 948 (667 793) - 1 122 669 - (1 122 669)
Changes in ownership interests
Acquisition of subsidiary with non-controlling interest - - - - - 27 436 27 436
Balance at 31 March 2018 3 175 075 523 006 (108 855) (120 732) 3 468 494 25 765 3 494 259
Balance at 1 April 2018 3 175 075 523 006 (108 855) (120 732) 3 468 494 25 765 3 494 259
Total comprehensive income for the period - - 111 121 124 189 235 310 3 928 239 238
Profit for the period - - 111 121 - 111 121 1 095 112 216
Other comprehensive income - - - 124 189 124 189 2 833 127 022
Transactions with shareholders, recognised directly
in equity
Issue of shares 82 691 - - - 82 691 - 82 691
Proceeds 83 278 - - - 83 278 - 83 278
Share issue costs (587) - - - (587) - (587)
Transfer to non-distributable reserve - (32 960) 32 960 - - - -
Dividends - - (172 601) - (172 601) - (172 601)
Total transactions with owners of the company 82 691 (32 960) (139 641) - (89 910) - (89 910)
Balance at 30 September 2018 3 257 766 490 046 (137 375) 3 457 3 613 894 29 693 3 643 587
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the period ended 30 September 2018
Unaudited Unaudited Audited
6 months 6 months 12 months
30 September 30 September 31 March
2018 2017 2018
R'000 R'000 R'000
Cash flows from operating activities
Cash generated from operations 203 396 65 407 201 766
Interest income 13 414 5 466 19 365
Interest paid (19 898) (14 320) (33 475)
Dividends paid (151 690) (75 290) (209 222)
Net cash inflow/(outflow) from operating activities 45 222 (18 737) (21 566)
Cash flows from investing activities
Acquisition of investment properties (175 630) (11 460) (204 369)
Proceeds from disposal of investment properties - - 5 369
(Advances)/repayments of Stor-Age share purchase scheme loans (14 323) 228 1 594
Acquisition of property and equipment (757) (1 141) (2 828)
Acquisition of intangible assets (205) (16) (1 799)
Acquisition of subsidiaries, net of cash acquired and settlement of
financial liabilities - (42 655) (1 079 212)
Net cash outflow from investing activities (190 915) (55 044) (1 281 245)
Cash flows from financing activities
Advance/(settlement) of bank borrowings 97 951 46 926 (25 388)
Proceeds from the issue of shares 83 278 25 158 1 392 557
Share issue costs (587) (240) (32 129)
Repayment of finance leases (10 411) (182) (8 693)
Net cash inflow from financing activities 170 231 71 662 1 326 347
Net cash inflow/(outflow) for the period 24 538 (2 119) 23 536
Effects of movements in exchange rate changes on cash held 3 903 - (9 744)
Cash and cash equivalents at beginning of period 21 823 8 031 8 031
Cash and cash equivalents at end of period 50 264 5 912 21 823
SEGMANTAL INFORMATION
for the period ended 30 September 2018
Segmental information is based on the geographic location of each investment property. The group trades in five of the nine provinces in South Africa
and in the United Kingdom through its subsidiary Betterstore Self Storage Holdings Limited. The group is managed on a consolidated basis and inter-segmental
transactions have been eliminated. The segmental information is limited to:
- On the statement of profit or loss and other comprehensive income: Rental income, other income, fair value adjustment to investment properties and direct
property costs.
- On the statement of financial position: Investment property, tenant debtors and inventories.
The chief executive officer reviews the segmental information on a quarterly basis.
Statement of profit or loss and other comprehensive income extracts*
Western Gauteng Free KwaZulu- Eastern Total Total Total
Cape State Natal Cape South United as
Africa Kingdom reported
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
For the six months ended
30 September 2018 (unaudited)
Property revenue 57 906 56 104 1 844 13 111 3 848 132 813 92 956 225 769
- Rental income 56 543 54 262 1 772 12 933 3 741 129 251 83 120 212 371
- Other income 1 363 1 842 72 178 107 3 562 9 836 13 398
Direct property costs (12 815) (12 966) (766) (3 246) (1 083) (30 876) (29 003) (59 879)
Segment property operating income 45 091 43 138 1 078 9 865 2 765 101 937 63 953 165 890
For the six months ended
30 September 2017 (unaudited)
Property revenue 55 400 51 849 1 787 2 293 3 381 114 710 - 114 710
- Rental income 53 648 49 205 1 714 2 258 3 281 110 106 - 110 106
- Other income 1 752 2 644 73 35 100 4 604 - 4 604
Direct property costs (11 024) (12 062) (643) (850) (887) (25 466) - (25 466)
Segment property operating income 44 376 39 787 1 144 1 443 2 494 89 244 - 89 244
For the year ended
31 March 2018 (audited)
Property revenue 113 477 105 082 3 594 12 264 6 982 241 399 68 778 310 177
- Rental income 110 548 100 720 3 436 12 154 6 799 233 657 61 702 295 359
- Other income 2 929 4 362 158 110 183 7 742 7 076 14 818
Direct property costs (21 974) (23 463) (1 622) (4 000) (2 144) (53 203) (23 714) (76 917)
Segment property operating income 91 503 81 619 1 972 8 264 4 838 188 196 45 064 233 260
Fair value adjustment to investment properties 106 771 48 237 1 097 15 639 884 172 628 30 373 203 001
* Head office costs and treasury function costs are not allocated to the operating segments.
Statement of financial position extracts
Total Total Total
Western Free KwaZulu- Eastern South United Unallo- as
Cape Gauteng State Natal Cape Africa Kingdom cated reported
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
30 September 2018 (unaudited)
Investment properties 1 222 084 1 134 500 25 700 226 471 59 092 2 667 847 1 719 430 - 4 387 277
Trade and other receivables 1 535 1 260 74 641 67 3 577 10 543 48 792 62 912
Inventories 1 120 1 070 60 200 71 2 521 620 - 3 141
30 September 2017 (unaudited)
Investment properties 1 049 280 945 715 24 560 34 224 58 127 2 111 906 - - 2 111 906
Trade and other receivables 754 1 186 50 31 69 2 090 - 22 123 24 213
Inventories 721 666 37 39 45 1 508 - 300 1 808
31 March 2018 (audited)
Investment properties 1 161 948 1 026 053 25 700 216 863 59 000 2 489 564 1 544 866 - 4 034 430
Trade and other receivables 1 314 1 594 82 354 139 3 483 6 396 55 286 65 165
Inventories 1 109 1 209 74 169 85 2 646 522 - 3 168
Net asset value*
Unaudited Unaudited Unaudited
30 September 30 September 31 March
2018 2017 2018
Net asset value per share (cents) 1 180.85 1 069.80 1 157.56
Net asset value per share excluding non-controlling interest (cents) 1 171.23 1 069.80 1 149.03
Tangible net asset value per share (cents) 1 132.69 1 023.19 1 109.84
Net tangible asset value per share excluding non-controlling interest (cents) 1 123.07 1 023.19 1 101.31
Key reporting ratios*
Unaudited Unaudited Unaudited
30 September 30 September 31 March
2018 2017 2018
Total property cost-to-income ratio 27% 22% 25%
Based on total direct property costs divided by property revenue
Administrative cost-to-income ratio 12% 11% 11%
Based on administration expenses divided by total revenue
*This information has not been audited by the group's external auditors.
RECONCILIATION BETWEEN EARNINGS, HEADLINE EARNINGS AND DISTRIBUTABLE EARNINGS
for the period ended 30 September 2018
Unaudited Unaudited Audited
6 months 6 months 12 months
30 September 30 September 31 March
2018 2017 2018
R'000 R'000 R'000
Profit for the period (attributable to shareholders of the parent) 111 121 135 994 576 726
Basic earnings 111 121 135 994 576 726
Adjusted for:
Gain on bargain purchase - (371) (377)
Fair value adjustment to investment properties - - (203 001)
Fair value adjustment to investment properties (NCI)+ - - 778
Headline earnings 111 121 135 623 374 126
Adjusted for:
Fair value adjustment to derivative financial instruments 38 434 (58 315) (178 570)
Fair value adjustment to derivative financial instruments (NCI)+ - - 79
Depreciation and amortisation 2 229 933 2 232
Deferred tax (5) 1 232 3 836
Foreign exchange gain available for distribution 5 602 - -
IAS 17: Leases change in estimate# (2 956) - -
Transaction and advisory fees - - 6 552
Antecedent dividend^ 18 399 53 608 77 590
Distributable earnings 172 824 133 081 285 845
Total shares in issue ('000) 308 556 179 552 301 864
Weighted average shares in issue ('000) 306 913 178 385 237 950
Shares in issue entitled to dividends ('000) 336 889 283 030 298 524
Weighted average shares in issue entitled to dividends ('000) 302 169 170 885 230 450
Dividends per share (cents) 51.30 47.02 97.83
- Interim dividend (cents) 51.30 47.02 47.02
- Final dividend (cents) 50.81
Basic and diluted earnings per shares (cents) 36.81 79.58 250.26
Basic and diluted headline earnings per share (cents) 36.81 79.37 162.35
The board declared an interim dividend of 51.30 cents (2017: 47.02 cents) per share for the six months ended 30 September 2018 on 16 November 2018.
This represents growth of 9.1% over the comparative period.
+ Non-controlling interest.
# Arising from lower than expected rental escalation resulting in a lower leasehold liability.
^ In the determination of distributable earnings, the group elects to make an adjustment for the antecedent dividend arising as a result of the issue of
shares during the period for which the company did not have full access to the cash flow from such issue.
FINANCIAL INSTRUMENT FAIR VALUE MEASUREMENTS
for the period ended 30 September 2018
The company's financial assets and liabilities are classified according to the following three-tiered fair value hierarchy:
- Level 1: Quoted prices (unadjusted) in an active market for an identical instrument.
- Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes
instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are
considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.
- Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not
based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category also includes instruments that
are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences
between the instruments.
The table below shows financial assets and liabilities carried at fair value, where the fair value approximates the carrying value, according to their fair
value hierarchy level classification:
Carrying
value Level 1 Level 2 Level 3
R'000 R'000 R'000 R'000
30 September 2018 (unaudited)
Assets
Derivative assets 99 674 - 99 674 -
Liabilities
Derivative liabilities 1 143 - 1 143 -
30 September 2017 (unaudited)
Assets
Derivative assets 58 315 - 58 315 -
Liabilities
Derivative liabilities 2 853 - 2 853 -
31 March 2018 (audited)
Liabilities
Derivative liabilities 1 070 - 1 070 -
The following table reflects the valuation techniques used in measuring the Level 2 fair values:
Type Valuation technique Significant Inter-relationship
unobservable between key
inputs unobservable inputs and
fair value measurements
Derivative assets and liabilities: Fair valued monthly by Nedbank Capital and the
Interest rate swaps Royal Bank of Scotland using mark-to-market mid-market
values. This involves, inter alia,discounting the future
cash flows using the yield curves at the reporting date
and the credit risk inherent in the contract. Not applicable Not applicable
Derivative assets and liabilities:
Cross-currency interest rate swaps Fair valued monthly by Investec and Nedbank using
mark-to-market mid-market values. This involves,
inter alia, discounting the future cash flows using
the basis swap curves of the respective currencies
at the dates when the cash flows will take place. Not applicable Not applicable
Derivative assets and liabilities:
Forward exchange contracts Fair valued monthly by Investec using mark-to-market
mid-market values. This fair value is determined,
inter alia, using quoted forward exchange rates at
the reporting date and present value calculation. Not applicable Not applicable
RELATED PARTY TRANSACTIONS
for the period ended 30 September 2018
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in
making financial or operational decisions. The shares of Stor-Age Property REIT are widely held.
Identity of the related parties with whom material transactions have occurred
- Subsidiaries
- Roeland Street Investments Proprietary Limited
- Wimbledonway Investments Proprietary Limited
- N14 Self Storage Proprietary Limited
- Storage RSA Investments Proprietary Limited
- Units 1-4 Somerset West Business Park Proprietary Limited
- Unit Self Storage Proprietary Limited
- Stor-Age Properties KZN Proprietary Limited (previously known as Dancor Properties Proprietary Limited)
- Stor-Age International Proprietary Limited
- Betterstore Self Storage Holdings Limited
- Directors as listed in this announcement
- Related through common shareholding/directorships or affiliation with related parties
- Madison Square Holdings Close Corporation
- Roeland Street Investments 2 Proprietary Limited
- Roeland Street Investments 3 Proprietary Limited
- Stor-Age Property Holdings Proprietary Limited
Material related party transactions and balances
Unaudited Unaudited Audited
6 months 6 months 12 months
30 September 30 September 31 March
2018 2017 2018
R'000 R'000 R'000
Related party balances
Amounts - owing to SPH^ 67 199 1 751 -
Amounts - owing by related parties 3 126 8 585 9 325
Working capital - owing by related parties - - 1 024
Working capital - owing to related parties - - 2 492
Related party transactions
Interest received on Stor-Age share purchase scheme loans 6 605 5 022 8 739
Interest received from related party 244 - -
Interest paid to related party 901 - -
Construction fees paid to related party 7 435 18 193 30 163
Development fees received from related parties 932 2 351 4 953
Asset management fees received from related party 3 213 3 624 7 531
Property management fees received from related party 3 159 3 249 4 913
Licence fees received from related party - - 1 000
Office rental paid to related party 419 392 801
Purchase of Bryanston self-storage property^ 80 946 - -
^ Relates to the development of Bryanston under the CPC structure. The development was completed in September 2018 and acquired by Stor-Age for a consideration
of R80.9 million. At 30 September 2018, R67.2 million of the purchase consideration was still owing to SPH.
ADMINISTRATION
Registered office
216 Main Road
Claremont
7807
Directors
PA Theodosiou (Chairman)#+, GM Lucas (CEO)*, SC Lucas*+, SJ Horton*, MS Moloko#, GA Blackshaw�, GBH Fox#+, KM de Kock#, P Mbikwana#
� Non-executive
# Independent non-executive
* Executive
+ British citizen
Company secretary
HH-O Steyn
Transfer secretaries
Computershare Investor Services Proprietary Limited
2nd Floor
Rosebank Towers
15 Biermann Avenue
Rosebank
Sponsor
Questco Corporate Advisory Proprietary Limited
1st Floor, Yellowwood House
Ballywoods Office Park
33 Ballyclare Drive
Bryanston
Investor relations
Singular Investor Relations (a division of Systems Proprietary Limited)
28 Fort Street
Birnam
Date: 20/11/2018 07:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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