Wrap Text
Preliminary summarised audited consolidated
financial statements for the year ended 28 February 2019
Equites Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2013/080877/06)
JSE share code: EQU ISIN: ZAE000188843
(Approved as a REIT by the JSE)
("Equites" or "the group" or "the company")
Preliminary summarised audited consolidated
financial statements for the year ended 28 February 2019
1. Our performance
Financial highlights
- Growth in distributable earnings of 37.2% and DPS of 11.8%
- NAV per share growth of 10.2%, increasing NAV per share to R16.92
- Low LTV of 26.9% at year-end within the target range of 25%-35%
- UK exposure increased to 32.7% of portfolio with acquisitions and
developments concluded at a weighted average acquisition yield of 5.4%
- CCIRS utilisation reduced from 50.9% of UK assets at FY18 to 36.3%
at FY19
- Introduction of progressive income hedging policy for UK earnings
resulting in incremental DPS of 0.2% for FY19
- All-in cost of funding reduced from 8.0% to 6.7%
- 94.5% of interest rate exposure hedged with a weighted average
maturity of 4.0 years
- Awarded first-time issuer national scale ratings of A(za) and A1(za)
for the long and short term respectively with a 'Stable' outlook
- R2 billion DMTN programme registered and successfully issued
R300 million 12-month, unlisted, senior unsecured commercial paper
at a margin of 115 basis points over 3-month JIBAR
- Successfully raised R1.5 billion in new equity through two
over-subscribed accelerated bookbuilds
Operational highlights
- 47.6% growth in portfolio value to R12 billion
- Total GLA of portfolio increased by 45% from 444 175m2 to 643 965m2
with a further 105 235m2 under development at year-end
- Vacancies increased from 2.0% of GLA at FY18 to 3.9% as a result
of speculative developments completed, all of which were let by
the end of April 2019, resulting in a vacancy rate of 0.9%
- Weighted average lease expiry increased by 11.4% from 7.9 years to
8.8 years
Strategic highlights
- Concluded strategic joint venture with UK-based development company,
Newlands Property Developments LLP
- B-BBEE contributor level 4 with certified black ownership of
53% achieved
- First 4 star "as-built" green rated building with plans to build to
this standard going forward
- Increased strategic land holdings in Gauteng to meet ongoing
development demand
2. Equites - who we are
Equites listed on the Johannesburg Securities Exchange ("JSE")
on 18 June 2014 and has established itself as a market leader
in the logistics property space. The group has executed its vision
of becoming a globally relevant Real Estate Investment Trust
("REIT"), with a footprint in South Africa ("SA") and the United
Kingdom ("UK"). Whilst retaining a clear focus on high-quality
logistics properties, the value of the fund has grown significantly
from R1 billion on listing to R12 billion at 28 February 2019.
3. Our competitive edge
Over the past five years, the group has curated a high-quality
logistics portfolio across SA and the UK, with a focus on assets
that are modern, well-located, and tenanted by A-grade users on
long-dated leases. The group benefits from being a market leader in
this class of specialisation, where the company is still the only
listed property company on the JSE to provide shareholders with
pure exposure to prime logistics. The group initially operated solely
in South Africa until June 2016 when it entered the UK market to
counteract the inherent emerging market risk and simultaneously
provide access to one of the most advanced logistics markets in
the world. The UK business has grown to 32.7% of the portfolio at
year-end through 9 acquisitions and developments concluded at a
weighted average acquisition yield of 5.4%.
The growth strategy in SA has focused on single asset acquisitions,
high-quality portfolio acquisitions, the acquisition of strategic
land holdings in order to capture increasing occupier demand in key
logistics nodes and the development of prime logistics facilities
on controlled land parcels. This in-house development expertise and
the ability to unlock key nodes has been instrumental to the group's
success and will continue to play a role in the group's ongoing
profitability and long-term value creation.
The group has grown its investment into the UK where high levels of
demand for the asset class point to continued, robust performance of
the sector. Despite concerns around Brexit, strong market fundamentals
supported by e-commerce suggest continued optimism and further yield
compression, making this market increasingly desirable. Given the
significant demand, opportunities to acquire completed properties
that meet the group's requirements have been limited and consequently
the last four transactions concluded in that market have been
development funding arrangements.
The group's in-house capacity to oversee developments and its close
working relationships with proven UK-based developers has been key in
securing opportunities. In order to further its growth in the UK, the
group has concluded a joint venture ("JV") with UK-based development
company, Newlands Property Developments LLP ("Newlands"). The senior
executive team of Newlands recently left the employ of a major UK
logistics developer, Roxhill Developments. Newlands specialises in
logistics and infrastructure developments and has considerable
in-house skills in turning farmland into appropriately zoned land,
ready for logistics developments. This is a particular advantage in
the UK market, where land shortage is one of the largest constraints
to supply.
The agreement has an initial duration of five years and will see
Newlands acting as development manager within the JV, providing the
group with exclusive access to Newlands-generated development
opportunities. These opportunities require a minimal capital outlay
from Equites until the land is ready for development. This partnership
will provide the group with access to sought-after land parcels
earmarked for logistics warehouses and pre-let development
opportunities in key logistics nodes in the UK.
The group has complemented its ability to build a world-class
portfolio of logistics properties with optimising its cost of
capital and has efficiently managed both its cost of debt and
equity. The group carefully manages its available facilities to
execute on any acquisitions which meet its strict investment criteria.
4. Operating context
In SA, tough business conditions driven by low GDP growth (0.8% for
2018 and 1.2% forecast for 2019) has necessitated innovation from
South African retailers in order to maintain margins. Many
retailers have chosen to focus their efforts on supply chain
efficiencies, with a greater emphasis on their distribution centres.
Retailers have also started identifying the importance of e-commerce
in their operations and are gearing up for future demand in this
space. It is estimated that online sales in SA will reach R62 billion
by 2020, which represents a 36% increase from 2018. Well-located,
efficient distribution centres will be essential to maintaining and
growing market share in this segment. Equites is acutely aware of
the importance of these structural changes in the landscape and is
well placed to take advantage of pent-up demand from occupiers. The
group's South African portfolio has grown 40.3% from R5.7 billion at
28 February 2018 to a total value of R8.0 billion at 28 February 2019.
In the UK, online retail continues to build momentum, significantly
increasing demand for modern logistics facilities. In an uncertain
economic and political climate resulting from Brexit, consumer
spending has largely driven the economy since the referendum.
Despite benign GDP growth of 1.4% in 2018 and projected growth of
1.2% in 2019, the growth in online sales has been rapid and is
approaching 20% of total retail sales. The shift in the retail
landscape has resulted in record levels of demand for high quality
logistics assets combined with a short supply of quality land and
assets. This contributes to strong momentum for rental growth.
Equites has positioned itself well in the UK market with a total
portfolio value of R3.9 billion at the reporting date. In addition
to the existing portfolio of completed buildings amounting to
R3.5 billion, the group is engaged in the construction of three
developments at varying stages of completion, which have a carrying
value of R415 million at year-end. The group is actively pursuing
acquisitions, focusing on development funding agreements and has
recently joined forces with local JV partner Newlands to unlock
strategic land tracts for development.
Globally, logistics assets finished 2018 with record levels of demand,
vacancies at historic lows, significant yield compression and
strong rental growth in the sector. All these fundamentals evidence
a changing structural landscape with e-commerce and supply chain
changes redirecting demand for retail space towards prime logistics
space.
5. Our outperformance
5.1 Distribution per share ("DPS")
The group has achieved DPS growth of 11.8% for FY19 which was
underpinned by:
- Strong like-for-like rental growth (including the impact of
leverage), contributing 8.1% to overall DPS growth. The like-for-
like rental growth now reflects the additional contribution of the
group's UK properties acquired in the 2017 financial year which is a
large contributor to the year-on-year decrease;
- Acquisitions and developments in SA and the UK, contributing 1.9% to
overall DPS growth as a result of the positive differential between
the net initial yields and the marginal weighted average cost of
capital;
- A reduction in the all-in cost of debt led to a 0.4% increase in
DPS growth partially as a result of the increased contribution of
GBP debt funding and due to the decrease in the SA cost of debt
achieved through negotiating new loan facilities at preferential
rates;
- The introduction of the group's progressive UK distributable
earnings hedging policy in September 2018 had the impact of adding
0.2% to overall DPS growth; and
- Increased fixed costs over the period pertaining partially to a
nominal increase in the fixed cost base, the impact of an increase
in headcount across the group, additional travel expenditure and
increased Broad-Based Black Economic Empowerment ("B-BBEE")-related
costs.
In June 2018, the group raised R800 million of equity capital and the
differential between the marginal cost of debt and the effective
yield of the equity price achieved added 2.3% to the DPS growth.
5.2 Net asset value ("NAV") per share
In conjunction with distribution growth, the board of directors ("the
board") understands the importance of NAV per share growth in
long-term shareholder value creation. NAV per share grew by a pleasing
10.2% during the year under review with the following main contributors:
- The fair value uplift on the group's investment properties
contributed 3.0% to overall NAV per share growth;
- The impact of the depreciation in the Rand from R16.33/£ at FY18 to
R18.68/£ at FY19 coupled with a reduction in the group's utilisation
of cross-currency interest rate swaps resulted in a contribution of
1.7% to the NAV growth per share during the year;
- The growth in operating income generated during the year (net of the
dividend paid over the coterminous period) added 1.8% to the NAV
growth per share; and
- Raising equity capital at a premium to the group's NAV per share
contributed 3.7% to the NAV growth on a per share basis.
6. Property fundamentals and portfolio movements
The group's property fundamentals have markedly improved, with the
weighted average lease expiry ("WALE") increasing to 8.8 years and
the vacancy rate falling to 0.9% (Feb 19: 3.9%) following the
successful letting of two properties shortly after year-end. 92.5%
of the group's revenue is now received from A-grade tenants reducing
default risk.
The table below reflects significant movements in the group's industrial
portfolio for the year under review, each of these movements aim to
serve its long-term strategic goals.
Gross lettable
area m2 Occupied Vacant Pre-let Speculative Total
At 1 March 2018 429 897 9 098 61 725 26 390 527 110
Acquisition
of Nestle,
Longmeadow 6.1 36 741 1 093 - - 37 834
DSV Peterborough,
UK completed 6.2 28 124 - (28 124) - -
Coloplast
Peterborough,
UK development
commenced 6.3 - - 12 609 - 12 609
DPD Burgess
Hill, UK
development
commenced 6.3 - - 4 025 - 4 025
Premier
FMCG,
Equites
Park-Lord's
View
completed 6.2 15 216 - (15 216) - -
Unit let
to JF
Hillebrand
at Equites
Park-Atlantic
Hills - - 4 623 (4 623) -
Development
in Bellville,
Cape Town
commenced 6.6 - - - 6 003 6 003
Tower Road,
Cape Town
let to Courier
IT/RTT 9 098 (9 098) - - -
Assets
classified as
held for sale (17 015) - - - (17 015)
Remeasurements
and extensions 235 - 253 - 488
At 31 August 2018 502 296 1 093 39 895 27 770 571 054
Assets
reclassified
from held
for sale 17 015 - - - 17 015
Acquisition
of Pick 'n Pay,
New Germany,
KwaZulu-Natal 6.1 28 383 - - - 28 383
Speculative
development
at Equites
Park-Lord's
View completed 6.5 - 11 382 - (11 382) -
Refurbishment
of development
at Equites Park-
Meadowview 6.2 (7 852) 7 852 - - -
DHL Reading,
UK development
completed 6.2 9 626 1 401 (9 626) - 1 401
Acquisition
of Simba,
Germiston 6.1 40 428 - - - 40 428
DPD Swansea,
UK development
commenced 6.3 - - 5 453 - 5 453
Commencement
of pre-let
developments 6.6 - - 48 280 - 48 280
Unit let
to Prestige
at Equites
Park-Atlantic
Hills 6.6 5 839 - - (5 839) -
Unit let to
Wright-
Millners at
Equites
Park-Atlantic
Hills 6.6 4 653 - - (4 653) -
Unit let to
JF Hillebrand
at Equites
Park-Atlantic
Hills 4 623 149 (4 772) - -
Development
in Bellville,
Cape Town
pre-let 6.6 - - 6055 (6 055) -
Tenant at
Equites
Park-Meadowview
vacated 6.5 (3 072) 3 072 - - -
Commencement
of speculative
developments 6.6 - - - 19 500 19 500
Remeasurements
and extensions (378) - 450 159 231
At 28 February 2019 601 561 24 949 85 735 19 500 731 745
Unit let to
Anchor Logistics
at Equites Park-
Meadowview 6.5 7 852 (7 852) - - -
DPD Burgess
Hill, UK
completed 6.3 4 025 - (4 025) - -
Unit let to
Bidvest
Panalpina
Logistics
at Equites
Park-Lord's
View 6.5 11 382 (11 382) - - -
At 6 May 2019 624 820 5 715 81 710 19 500 731 745
6.1 Acquisitions
The group acquired three completed prime logistics properties during
the current year: 1) a 37 834m2 distribution centre let to Nestle
South Africa (Pty) Ltd situated in Longmeadow, Gauteng; 2) a 28 383m2
distribution centre let to Pick n Pay Retailers (Pty) Ltd situated in
New Germany, KwaZulu-Natal; and a 40 428m2 distribution centre let to
Simba (Pty) Ltd situated in Germiston, Gauteng.
These three properties have a capital value of R1.1 billion, a
formidable WALE of 8.5 years and represent well-located, high-quality
modern logistics assets which meet the group's strict investment
criteria.
6.2 Completion of developments
Premier FMCG development, Gauteng, South Africa
The group completed the development of a new 15 216m2 prime logistics
property for Premier FMCG (Pty) Ltd, who had outgrown their existing
facility owned by the group. The total capital value of the
development on completion was R177 million and was let on a
twelve-year lease. This development was constructed on 3.9 hectares of
vacant land which Equites owned in Lord's View Industrial Park in
Gauteng.
The existing property in Equites Park-Meadowview underwent a minor
refurbishment and was let to Anchor Logistics from April 2019.
DSV development, Peterborough, United Kingdom
The group acquired 13.3 acres of vacant land for £4.6 million and
simultaneously concluded a forward funding agreement for the
development of a 28 124m2 distribution warehouse for DSV Solutions
Ltd on a ten-year lease. The building was completed in August 2018
and has a capital value of £30 million.
DHL development, Reading, United Kingdom
The group acquired 8.0 acres of vacant land for £9.7 million and
the concluded a development funding agreement for the construction of
a 9 626m2 last-mile fulfilment centre for DHL International (UK) Ltd
("DHL"). This distribution centre, with a capital value of £25.6
million was completed in December 2018 when the new fifteen-year
lease commenced.
6.3 Ongoing developments
Federal Mogul development, Gauteng, South Africa
The group concluded a development agreement with Federal Mogul South
Africa (Pty) Ltd for the construction of a new distribution centre on a
ten-year lease with a gross lettable area ("GLA") of 10 147m2 with a
capital value of R95 million. The warehouse and office will serve as
the SA headquarters of the global business and estimated completion
is May 2019.
Coloplast development, Peterborough, United Kingdom
The group acquired 7.33 acres of vacant land for £2.6 million and
concluded a forward funding agreement to develop a 12 609m2
distribution centre situated in Peterborough, UK. On completion, the
property will have a capital value of c.£13 million and will be let to
Coloplast Limited on a ten-year lease. Construction is nearing
completion and the tenant is expected to take occupation in June 2019.
DPD development, Burgess Hill, United Kingdom
During the period under review, Equites concluded a development
funding and land acquisition agreement to purchase the property and
to fund the development of a new 4 025m2 warehouse for a maximum
commitment of £12 million. The property is situated in Burgess Hill,
West Sussex. Construction of the asset commenced in August 2018 and
the asset was completed in April 2019, when the new 25-year lease
commenced with DPDGroup UK Ltd.
DPD development, Swansea, United Kingdom
The group concluded a development funding agreement to acquire the
land and fund the development of a 5 453m2 warehouse for a maximum
commitment of £11.5 million. The property is situated in Swansea,
Wales and will also be let to DPDGroup UK Ltd on a 25-year lease on
completion. Construction of the asset commenced in February 2019 and
is expected to be completed in October 2019.
6.4 Acquisition of strategic land holdings
The group continues to see an increase in the demand for logistics
assets and has started to see significant interest for new development
leases with occupiers investigating options for large-scale warehouses
as part of their supply chain optimisation strategies.
In light of this demand, the group has made a strategic decision to
position itself for future growth by acquiring and preparing
significant tracts of land in key logistics nodes. In addition to
land holdings in Meadowview and Lord's View, the group has
identified Witfontein on the R21 and Jet Park near OR Tambo to be
prime logistics nodes. During the year under review, the group
entered into agreements to acquire 66 hectares of land in these
locations.
Following these acquisitions, the group has 101 hectares of land
available at various stages of zoning and infrastructure development.
The group is currently pursuing several opportunities for
distribution centres on these parcels of land which will continue to
contribute to a healthy development pipeline.
6.5 Asset management
At 28 February 2019, the group had a total vacancy of 3.9% across
the portfolio; this comprised 23 707m2 of logistics space and 1 242m2
of commercial space. Following successful lettings at both the old
Premier FMCG facility in Equites Park-Meadowview and the speculative
development at Equites Park-Lord's View shortly after year end, the
vacancy rate at the date of this report is 0.9%.
Nine leases came up for renewal during the current year and as at
the date of this report, six were renewed with the existing tenants
and two were let to new tenants. On aggregate, the rentals on the
six leases with existing tenants were renewed at 10.1% above the
exit rentals. Including the two leases that were let to new tenants,
the aggregate positive reversion was 7.0%. Individual reversions
ranged from -14.0% to +14.3%, but on aggregate this evidences the
resilience of the group's rental income, particularly with our larger
properties with existing tenants.
The DSV group is the group's largest tenant and they have agreed to
extend the lease at the DSV Healthcare facility in Equites Park-
Meadowview by a further 5 years to August 2027. The facility will be
extended by 4 426m2 in the near future and the overall rental was
agreed on mutually acceptable terms, taking the wider relationship
into account.
6.6 Other
The previously reported speculative developments at Equites Park-
Atlantic Hills (14 965m2) and Equites Park-Lord's View (11 275m2)
have all been fully let at the date of preparing this report.
The group has started a new development in Bellville, Cape Town. The
development commenced in 2018 and will house a 6 003m2 warehouse on
a 10.2 hectare site. The anticipated capital value on completion is
R55 million. Discussions with a potential tenant are well advanced.
The group has further commenced two new tenant developments; one at
Equites Park-Lord's View with a GLA of 23,280m2 and the other at
Equites Park-Meadowview, with a GLA of 25,000m2.
6.7 Disposals
The group disposed of one of its commercial properties situated in
Illovo, Gauteng for R60 million. Following this transaction, the
group has one remaining stand-alone office building valued at
R50 million and a further office building which was acquired as part
of a brownfields acquisition, valued at R112 million.
7. Funding
During the current financial year, the group has further diversified
its sources of borrowing and now has 9 financial institutions which
fund its operations together with the holders of the debut commercial
paper issuance in February 2019. The total debt outstanding at
28 February 2019 increased to R3.3 billion from R1.9 billion at
28 February 2018.
The R300 million commercial paper issued in February 2019 and a new,
R200 million loan entered into with Investec at prime minus 2.1%
Represent the group's first unsecured borrowings since its
incorporation in 2014. These unsecured issuances bear witness to the
growth in its ability to successfully negotiate preferential funding
rates which are commensurate with its robust credit metrics.
7.1 Conservative financial and liquidity profile
Paramount to the group's financial stability is its loan-to-value
("LTV"). A conservative LTV provides the group with the necessary
flexibility required to facilitate a strong development pipeline and
to take advantage of future growth opportunities. The LTV at
28 February 2019 was 26.9% which is well within the group's target
range of 25% to 35% despite having spent over R3 billion on
acquisitions and developments over the past 12 months.
The group had available undrawn facilities of R0.9 billion at
28 February 2019, over 2 times the contracted capital commitments at
28 February 2019. Furthermore, R2.2 billion of the group's properties
were unencumbered at 28 February 2019, representing 18.5% of the total
portfolio.
The depth of the group's existing liquidity reserves, evidenced
partially by its available undrawn facilities but also as a result
of the level of unencumbered assets at 28 February 2019, places it
in prime position for further growth into the 2020 financial year.
7.2 Domestic Medium-Term Note ("DMTN") Programme
Over the past 12 months, there has been objective evidence of firming
yields in the domestic corporate bond market partially as a result of
waning demand for the credit risk of state-owned entities, an
increased participation in corporate bond issuances by financial
institutions and a decrease in global bond yields. These factors
collectively created a compelling case for the group to formally
register a DMTN programme.
The group's first foray into the debt capital market took place
immediately after registering its programme in February 2019 whereby
the group issued 12-month, unlisted, senior unsecured commercial
paper at a margin of 115 basis points over 3-month JIBAR. Considering
that a first-time issuer premium typically ranges between 5 to 10 basis
points, the group considers the outcome to be highly favourable, a
result which yet again evidenced its strong credit metrics.
The group has since received reverse enquiries following its first
issuance and is actively discussing further issuances into the debt
capital market with 3 and 5-year tenors at competitive pricing levels.
7.3 Growth in GBP in-country debt funding and decrease in cross currency
interest rate swap ("CCIRS") utilisation
When the group entered the UK in June 2016, it funded its first
acquisition using synthetic GBP debt achieved through the employment
of a CCIRS. This was executed because of the relative strength of the
group's bargaining power in SA and because of the extent to which
the Rand was oversold at the time. At 28 February 2019, the group had
£65 million outstanding with 3 financial institutions, Aviva
Commercial Finance Limited ("Aviva"), HSBC Bank and Royal Bank of
Scotland and it continues to unwind the utilisation of cross currency
interest rate swaps as GBP in-country debt funding rates become more
competitive.
The group's treasury policy now restricts the utilisation of CCIRSs to
45% of foreign denominated assets over time. The group achieves this
by continually monitoring its exposure to foreign exchange rates as a
result of its investment into the UK. In the current financial year,
it has effectively reduced its hedge cover over its net investment
into the UK by maintaining largely unchanged nominal values of CCIRSs
despite a strong increase in the group's foreign denominated net
assets. This was deliberately executed as a strategy both in light
of the diminishing excess USD liquidity and tepid global growth
forecasts and to facilitate the growth in in-country GBP debt funding.
In accordance with the group's treasury policy, the utilisation of
CCIRSs was reduced from 50.9% at 28 February 2018 to 36.3% at
28 February 2019.
The group augmented its GBP debt funding during the current year at
an opportune time where pricing mismatches between the UK gilt curve
and the GBP LIBOR forward curve were able to be exploited. The group
achieved this by entering into a £48 million, 8-year term loan
facility (structured into three tranches) with Aviva at an all-in
fixed interest rate of 2.9%. A comparable GBP LIBOR 8-year forward
rate would have been 3.1%, 21 basis points higher than the contracted
interest rate. The third and final tranche of £12.5 million was drawn
subsequent to year-end.
7.4 Decrease in cost of debt and evolution in debt maturity profile
The overall all-in cost of debt has fallen substantially over the
past 12 months from 8.0% at 28 February 2018 to 6.7% at 28 February
2019 mainly as a result of the additional contribution of GBP
in-country debt funding to the overall debt pool. However, the group
has also seen a 13-basis point reduction in the SA cost of debt
mainly due to the conclusion of new loan facility agreements at more
preferential rates than the existing sources of SA debt funding. This
is particularly noteworthy because the decrease in the SA cost of debt
occurred despite the duration of outstanding SA debt funding
increasing, an achievement that bodes well for the group's future
refinancing negotiations.
Furthermore, the duration of the group's total debt facilities has
increased to 3.6 years at 28 February 2019 from 2.8 years at
28 February 2018 and 94.5% of term loan balances were hedged at
year-end.
7.5 Introduction of foreign exchange rate hedging policy
The introduction of the group's hedging policy for GBP distributable
earnings generated from its UK operations has resulted in additional
returns arising from the translation of GBP distributable at a higher
GBPZAR exchange rate than the average exchange rate over the second
half of the current financial year. The average GBPZAR exchange rate
for the second half of the current financial year was R18.36/£, while
the group managed to achieve an average GBPZAR exchange rate of
R18.61/£, some 1.4% higher.
The group has applied the base hedging level for the next 24 months
and locked-in the following GBPZAR participation levels as follows:
Effective Blended Blended
hedging participation participation
Six-month period ended level floor cap
31 August 2019 80.1% R19.22/£ R19.96/£
29 February 2020 70.0% R19.84/£ R20.86/£
31 August 2020 45.0% R20.74/£ R21.73/£
28 February 2021 30.0% R20.70/£ R22.03/£
8. Transformation and B-BBEE
Equites remains committed to transformation and to making a
meaningful contribution within the property sector. The amended
property sector code was gazetted by the Department of Trade and
Industry in June 2017 which encouraged Equites to focus on improving
ownership, management control employment equity, skills development,
enterprise and supplier development.
Brimstone Investment Corporation Limited made strategic empowerment
investments into Equites in 2015 and 2016. The board is also pleased
to have large shareholders with predominantly black beneficiaries such
as the Government Employment Pension Fund and the Eskom Pension Fund,
which has contributed to Equites having 53% verified black ownership.
Various initiatives have resulted in a largely transformed workforce,
a fully implemented learnership programme, a successful enterprise
and supplier and development programme and significant investments
into under resourced areas as part of economic development efforts.
These have all contributed to a level 4 contributor rating under the
amended property sector code as at 28 February 2019.
9. Prospects
The group continues to grow its portfolio through a significant
development pipeline and high-quality acquisitions. Although largely
hedged, the group is exposed to currency fluctuations and other
commercial risks. In this light, the board expects that the company
will achieve DPS growth of at least 8%-10% over the next financial year.
The group is currently engaged in discussions with Tesco Distribution
Ltd in the UK to review the rent payable for its property in Hinckley,
which is subject to an upwards only open market review. Although the
group expects there to be a significant rental increase that will be
applied retrospectively to 23 December 2018, no increase in this
regard has been included in the guidance, pending agreement with
Tesco.
This guidance is based on the assumptions that a stable macro-economic
environment will prevail, no major corporate failures will occur, the
rand / pound exchange rate remains materially unchanged and tenants
will be able to absorb the recovery of rising utility costs and
municipal rates. This forecast has not been audited or reviewed by
Equites' auditors.
10. Subsequent events
Except for the events noted in the document, new and ongoing
development activities and the final Aviva loan tranche noted above,
there were no material transaction after the reporting date up to
the date of this report.
11. Basis of preparation
The preliminary summarised consolidated financial statements are
prepared in accordance with the JSE Listings Requirements for
preliminary reports and the requirements of the Companies Act of
South Africa. The Listings Requirements require preliminary reports to
be 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.
Except for the adoption of revised and new standards that became
effective during the year, all accounting policies applied in the
preparation of these summarised consolidated financial statements are
in terms of IFRS and are consistent with those applied in the
previous consolidated financial statements. There was no material
impact on the annual financial statements as a result of the adoption
of these standards.
The auditors, PricewaterhouseCoopers Inc., have issued their opinion
on the group's annual financial statements for the year ended
28 February 2019. The audit was conducted in accordance with
International Standards on Auditing. They have issued an unmodified
audit opinion. These preliminary summarised consolidated financial
statements have been derived from the group financial statements and
are consistent, in all material respects, with the group financial
statements. The directors take full responsibility for the
preparation of the preliminary summarised consolidated financial
statements and for ensuring that the financial information has been
correctly extracted from the underlying audited annual financial
statements. A copy of their audit report is available for inspection
at the Equites' registered address. This preliminary report has been
audited by PricewaterhouseCoopers Inc. and an unmodified audit
opinion issued. The auditor's report does not necessarily report on
all of the information contained in this announcement. Shareholders
are therefore advised that in order to obtain a full understanding
of the nature of the auditor's engagement, they should obtain a copy
of that report together with the accompanying financial information
from Equites' registered address.
Bram Goossens CA (SA), in his capacity as Financial Director, was
responsible for the preparation of these summary consolidated
financial results.
12. Declaration of a final cash dividend with the election to reinvest
the cash dividend in return for Equites shares ("dividend reinvestment
alternative")
Notice is hereby given of the declaration of the final dividend
(number 11) of 70.31469 cents per share.
The board has declared a final gross dividend of 70.31469 cents per
share on 6 May 2019 further to the interim dividends of 68.12 cents
per share. This brings the total distributions for the year ended
29 February 2019 to 138.43 cents per share, which is a 11.8% growth
over the prior year total distributions of 123.86 cents per share.
The DPS growth is in line with the previous guidance of 10% to 12%.
Dividends declared
(cents per share) % change Feb 19 Feb 18
Interim dividends 68.12 60.98
Final dividend 70.31 62.88
Total distributions for the year 11.8% 138.43 123.86
Shareholders will be entitled, in respect of all or part of their
shareholdings, to elect to reinvest the cash dividend in return for
Equites shares. Those shareholders who elect not to reinvest will
receive a gross cash dividend of 70.31469 cents per share. The
entitlement for shareholders to receive the dividend reinvestment
alternative is subject to the board agreeing on the pricing and terms
of the dividend reinvestment alternative. The board in its
discretion may withdraw the dividend reinvestment alternative
should market conditions warrant such actions and such withdrawal
will be communicated to shareholders prior to the finalisation
announcement to be published by 11:00 on Tuesday, 21 May 2019.
A circular providing further information in respect of the cash
dividend and dividend reinvestment alternative ("the circular") will
be posted to shareholders and published on SENS on Friday, 10 May 2019.
Shareholders who have dematerialised their shares through a Central
Securities Depository Participant ("CSDP") or broker should 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 the circular and/or accompanying documents and the
right to elect shares in jurisdictions other than the Republic of
South Africa may be restricted by law and any failure to comply
with any of these restrictions may constitute a violation of the
securities laws of any such jurisdictions. Shareholders' rights to
elect shares are not being offered, directly or indirectly, in the
United Kingdom, European Economic Area, Canada, United
States of America, Japan, Hong Kong or Australia unless certain
exemptions from the requirements of those jurisdictions are applicable.
FRACTIONS
Trading in the Strate environment does not permit fractions and
fractional entitlements. Where a shareholder's entitlement to the
shares in relation to the dividend reinvestment alternative gives rise
to an entitlement to a fraction of a new share, such fraction will be
rounded down to the nearest whole number with the cash balance of
the dividend being retained by the shareholders.
SALIENT DATES AND TIMES
2019
Equites results including declaration of a
year-end distribution published on SENS Thursday, 9 May
Circular and form of election posted to shareholders Friday, 10 May
Finalisation information including the share
ratio and reinvestment price per share
published on SENS by 11:00 (SA time) Tuesday, 21 May
Last day to trade in order to participate
in the election to receive shares in
terms of the dividend reinvestment
alternative or to receive a cash dividend ("LDT") Tuesday, 28 May
Shares trade ex-dividend Wednesday, 29 May
Listing of maximum possible number of shares
under the dividend reinvestment alternative Friday, 31 May
Last day to elect to receive shares in terms
of the dividend reinvestment alternative or to
receive a cash dividend (no late forms of
election will be accepted) at 12:00 (SA time) Friday, 31 May
Record date for the election to receive shares
in terms of the dividend reinvestment alternative
or to receive a cash dividend ("record date") Friday, 31 May
Announcement of results of cash dividend and
dividend reinvestment alternative released on SENS Monday, 3 June
Payment of cash dividends to certificated
shareholders by electronic funds transfer Monday, 3 June
Dematerialised shareholders' CSDP or broker
accounts credited with the cash dividend payment
(if applicable) Monday, 3 June
Share certificates posted to certificated
shareholders on or about Wednesday, 5 June
Dematerialised shareholders' CSDP or
broker accounts credited with the new shares
(if applicable) Wednesday, 5 June
Adjustment to shares listed on or about Friday, 7 June
Notes:
1. Shareholders electing the dividend reinvestment alternative are
alerted to the fact that the new shares will be listed on LDT + 3
and that these new shares can only be traded on LDT + 3, due to the
fact that settlement of the shares will be three days after the
record date, which differs from the conventional one day after
record date settlement process.
2. Shares may not be dematerialised or rematerialised between
Wednesday, 29 May 2019 and Friday, 31 May 2019, both days
inclusive.
3. The above dates and times are subject to change. Any changes will
be released on SENS.
TAX IMPLICATIONS
Equites listed on the JSE as a REIT in line with the REIT structure as
provided for in the Income Tax Act, No. 58 of 1962, as amended (the
"Income Tax Act") and section 13 of the JSE Listings Requirements.
The REIT structure is a tax regime that allows a REIT to deduct
qualifying distributions paid to investors, in determining its
taxable income.
The cash dividend of 70.31469 cents per share meets the requirements
of a "qualifying distribution" for the purposes of section 25BB of the
Income Tax Act (a "qualifying distribution") with the result that:
- qualifying distributions received by resident Equites shareholders
must be included in the gross income of such shareholders (as a
non-exempt dividend in terms of section 10(1)(k)(aa) of the Income
Tax Act), with the effect that the qualifying distribution is
taxable as income in the hands of the Equites shareholder. These
qualifying distributions are however exempt from dividends
withholding tax, provided that the South African resident
shareholders provided the following forms to their CSDP or broker,
as the case may be, in respect of uncertificated shares, or the
company, in respect of certificated shares:
- a declaration that the dividend is exempt from dividends tax; and
- a written undertaking to inform the CSDP, broker or the company,
as the case may be, 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, as the case may be, to arrange for
the abovementioned documents to be submitted prior to payment of
the dividend, if such documents have not already been submitted.
- qualifying distributions received by non-resident Equites
shareholders will not be taxable as income and instead will be
treated as ordinary dividends but which are exempt in terms of the
usual dividend exemptions per section 10(1)(k) of the Income Tax
Act. Any qualifying distributions are subject to dividends
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. Assuming dividends withholding tax will be withheld
at a rate of 20%, the net dividend amount due to non-resident
shareholders is 56.25175 cents per share. A reduced dividend
withholding rate in terms of the applicable DTA, may only be
relied upon if the non-resident shareholder has provided the
following forms to their CSDP or broker, as the case may be, in
respect of uncertificated shares, or the company, in respect of
certificated shares:
- a declaration that the dividend is subject to a reduced rate as
a result of the application of a DTA; and
- a written undertaking to inform their CSDP, broker or the
company, as the case may be, 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, as the case may be, to
arrange for the abovementioned documents to be submitted prior to
payment of the dividend if such documents have not already been
submitted, if applicable.
Shareholders are advised that in electing to participate in the
dividend reinvestment alternative, pre-taxation funds are utilised
for the purposes and that taxation will be due on the total cash
dividend amount of 70.31469 cents per share.
Other information:
- The issued ordinary share capital of Equites is 503 416 786
ordinary shares of no par value each before any election to
reinvest the cash dividend.
- Income Tax Reference Number of Equites: 9275393180.
The cash dividend or the dividend reinvestment alternative may have
tax implications for resident as well as non-resident shareholders.
Shareholders are therefore encouraged to consult their professional
advisors should they be in any doubt as to the appropriate action to
take.
By order of the board
Equites Property Fund Limited
6 May 2019
Preliminary summarised consolidated statement of financial position
Equites Property Fund Limited and its subsidiaries at 28 February 2019
28 February 28 February
R'000 2019 2018
Assets
Non-current assets
Fair value of investment property
(excluding straight-lining) 11 721 087 7 899 697
Straight-lining lease income accrual 236 510 171 352
Derivative financial assets 38 692 132 732
Deferred tax asset 68 930 32 639
Property, plant and equipment 10 366 7 529
12 075 585 8 243 949
Current assets
Investment property held-for-sale - 28 000
Trade and other receivables 110 640 58 202
Derivative financial assets 13 985 135 532
Financial assets held at fair value 2 278 900
Cash and cash equivalents 36 279 17 813
163 182 240 447
Total assets 12 238 767 8 484 396
Equity and liabilities
Equity and reserves
Stated capital 7 026 680 5 203 773
Accumulated profit 1 442 632 1 339 846
Foreign currency translation reserve (19 361) (312 423)
Share-based payment reserve 69 842 67 578
Total attributable to owners 8 519 793 6 298 774
Non-controlling interest 149 919 109 410
Total equity and reserves 8 669 712 6 408 184
Liabilities
Non-current liabilities
Derivative financial liabilities 22 355 18 542
Loans and borrowings 3 232 837 1 887 730
Other payables 2 240 -
3 257 432 1 906 272
Current liabilities
Loans and borrowings 77 687 54 939
Derivative financial liabilities 33 099 613
Current tax liability 729 92
Trade and other payables 200 108 114 296
311 623 169 940
Total liabilities 3 569 055 2 076 212
Total equity and liabilities 12 238 767 8 484 396
Preliminary summarised consolidated statement of comprehensive income
Equites Property Fund Limited and its subsidiaries for the year
ended 28 February 2019
28 February 28 February
R'000 2019 2018
Property revenue and tenant recoveries 701 000 540 150
Straight-lining of leases adjustment 65 158 33 548
Gross property revenue 766 158 573 698
Property operating and management expenses (107 384) (87 957)
Other net gains / (losses) (81 959) 208 343
Administrative expenses (42 413) (33 055)
Fair value adjustments - investment property 220 212 239 546
Operating profit before financing activities 754 614 900 575
Finance costs (70 731) (68 765)
Finance income 3 223 24 990
Net profit before tax 687 106 856 800
Tax expense 28 854 34 313
Profit for the period 715 960 891 113
Other comprehensive income
Items that may subsequently be reclassified
to profit or loss:
Translation of foreign operations 293 062 (139 049)
Total comprehensive income for the period 1 009 022 752 064
Profit attributable to:
Owners of the parent 669 856 870 188
Non-controlling interest 46 104 20 925
715 960 891 113
Total comprehensive income attributable to:
Owners of the parent 962 918 731 139
Non-controlling interest 46 104 20 925
1 009 022 752 064
Basic earnings per share (cents) 149.6 226.1
Diluted earnings per share (cents) 148.8 225.4
Preliminary summarised consolidated statement of cash flows
Equites Property Fund Limited and its subsidiaries for the year
ended 28 February 2019
28 February 28 February
R'000 2019 2018
Cash flows from operating activities
Profit before tax 687 106 856 800
Adjusted for:
Finance costs 70 731 68 765
Finance income (3 223) (24 990)
Loss / (Profit) on disposal of investment property 4 947 (2 498)
Foreign exchange differences (3 459) -
Loss on scrapping of property, plant and equipment 1 210 16
Straight-lining of leases adjustment (65 158) (33 548)
Fair value adjustments - investment property (220 212) (239 546)
Fair value adjustments - foreign exchange
derivatives 199 402 (106 184)
Depreciation and amortisation 1 702 941
Equity-settled share-based payment charge 7 782 6 514
Working capital movements:
(Increase) / Decrease in trade and other
receivables (48 611) 42 977
Decrease/ (Increase) in foreign exchange
derivatives 46 080 (23 130)
(Decrease) / Increase in trade and other payables (1 083) 3 107
Cash generated from operations 677 214 549 224
Finance costs paid (51 243) (62 899)
Finance income received 1 846 24 990
Tax paid (734) -
Dividends paid (572 665) (454 491)
Net cash flows generated from operating activities 54 418 56 824
Cash flows from investing activities
Acquisition of investment properties (1 589 514) (1 477 496)
Development of investment properties (1 447 590) (410 037)
Proceeds from disposal of investment properties 91 771 254 166
Purchases of current financial assets (210 000) (1 260 000)
Proceeds on divestment of current financial assets 210 000 1 262 453
Proceeds on disposal of property, plant and equipment - 215
Purchase and development of property, plant
and equipment (5 482) (257)
Net cash flows utilised by investing activities (2 950 815) (1 630 956)
Cash flows from financing activities
Proceeds from share issue (net of costs) 1 497 705 1 006 911
Proceeds from share issue relating to dividend
reinvestment programme 125 145 -
Repurchase of share capital (114) -
Proceeds from bank loans 3 732 162 1 016 876
Repayment of bank loans (2 442 146) (443 180)
Net cash flows raised from financing activities 2 912 752 1 580 607
Net increase in cash and cash equivalents 16 355 6 475
Effect of exchange rate movements on cash and
cash equivalents 2 111 296
Cash and cash equivalents at the beginning of
the year 17 813 11 042
Cash and cash equivalents at the end of the year 36 279 17 813
Preliminary summarised consolidated statement of changes in equity
Equites Property Fund Limited and its subsidiaries for the year
ended 28 February 2019
Foreign
currency
Stated Accumulated translation
R'000 capital profit reserve
Balance at 1 March 2017 4 193 749 919 099 (173 374)
Profit for the year - 870 188 -
Other comprehensive income - - (139 049)
Shares issued for cash 1 015 157 - -
Shares issued in terms of
Conditional share plan 3 113 - -
Equity-settled share based payment
for the acquisition of land - - -
Equity-settled share-based payment
charge - - -
Dividends distributed to shareholders - (449 441) -
Share issue costs (8 246) - -
Balance at 28 February 2018 5 203 773 1 339 846 (312 423)
Balance at 1 March 2018 5 203 773 1 339 846 (312 423)
Profit for the year - 669 856 -
Other comprehensive income - - 293 062
Shares issued for cash 1 511 441 - -
Shares issued in terms of
conditional share plan 5 518 - -
Equity-settled share based payment
for the acquisition of land 194 653 - -
Equity-settled share-based payment
charge - - -
Dividends distributed to shareholders - (567 070) -
Share issue in terms of dividend
reinvestment programme 125 145 - -
Treasury shares acquired ( 114) - -
Share issue costs (13 736) - -
Balance at 28 February 2019 7 026 680 1 442 632 (19 361)
Preliminary summarised consolidated statement of changes in equity
(continued)
Equites Property Fund Limited and its subsidiaries for the year
ended 28 February 2019
R'000 Share- Total
based attri- Non-
payment butable controlling
reserve to parent interest Total
Balance at 1 March 2017 7 881 4 947 355 93 535 5 040 890
Profit for the year - 870 188 20 925 891 113
Other comprehensive income - (139 049) - (139 049)
Shares issued for cash - 1 015 157 - 1 015 157
Shares issued in terms
of Conditional share plan (3 113) - - -
Equity-settled share
based payment for the
acquisition of land 56 296 56 296 - 56 296
Equity-settled share-based
payment charge 6 514 6 514 - 6 514
Dividends distributed
to shareholders - (449 441) (5 050) (454 491)
Share issue costs - (8 246) - (8 246)
Balance at
28 February 2018 67 578 6 298 774 109 410 6 408 184
Balance at 1 March 2018 67 578 6 298 774 109 410 6 408 184
Profit for the year - 669 856 46 104 715 960
Other comprehensive income - 293 062 - 293 062
Shares issued for cash - 1 511 441 - 1 511 441
Shares issued in terms of
conditional share plan (5 518) - - -
Equity-settled share
based payment for the
acquisition of land - 194 653 - 194 653
Equity-settled share-based
payment charge 7 782 7 782 - 7 782
Dividends distributed to
shareholders - (567 070) (5 595) (572 665)
Share issue in terms of
dividend reinvestment programme - 125 145 - 125 145
Treasury shares acquired - ( 114) - ( 114)
Share issue costs - (13 736) - (13 736)
Balance at
28 February 2019 69 842 8 519 793 149 919 8 669 712
Preliminary summarised consolidated operating segment information
Equites Property Fund Limited and its subsidiaries for the year
ended 28 February 2019
28 February 28 February
R'000 2019 2018
Revenue
SA industrial 532 142 447 958
UK industrial 153 232 75 646
Other 15 626 16 546
701 000 540 150
Operating profit before financing activities
SA industrial 559 042 605 206
UK industrial 189 099 318 307
Other 6 473 (22 938)
754 614 900 575
Total assets
SA industrial 8 075 299 5 962 586
UK industrial 3 987 185 2 400 810
Other 176 283 121 000
12 238 767 8 484 396
Total liabilities
SA industrial 2 262 521 1 536 548
UK industrial 1 260 549 539 664
Other 45 985 -
3 569 055 2 076 212
Selected explanatory notes to the results
Equites Property Fund Limited and its subsidiaries for the year
ended 28 February 2019
1. Earnings per share
This note provides the obligatory information in terms of IAS 33
Earnings per share and SAICA Circular 4/2018 for the group and should
be read in conjunction with Appendix 1, where earnings are reconciled
to distributable earnings. Distributable earnings determine the
dividend declared to shareholders, which is a meaningful metric for
a shareholder in a REIT.
1.1 Basic earnings per share
28 February 28 February
2019 2018
Number of Number of
Shares in issue shares shares
Number of shares in issue at end of year 503 416 786 409 973 331
Weighted average number of shares in issue 447 727 114 384 863 958
Add: weighted potential dilutive impact of
conditional shares 2 305 592 1 267 726
Diluted weighted average number of
shares in issue 450 032 706 386 131 684
Basic earnings per share Cents Cents
Basic earnings per share 149.6 226.1
Diluted earnings per share 148.8 225.4
1.2 Headline earnings per share
Reconciliation between basic earnings
and headline earnings: R'000 R'000
Earnings (profit attributable to owners
of the parent) 669 856 870 188
Adjusted for:
Fair value adjustments to investment properties (220 212) (239 546)
Less: Fair value adjustment to investment
properties (non-controlling interest) 33 825 5 578
Profit or loss on sale of non-current assets 6 157 (2 482)
Headline earnings 489 626 633 738
Headline earnings per share Cents Cents
Headline earnings per share 109.4 164.7
Diluted headline earnings per share 108.8 164.1
28 February 28 February
R'000 2019 2018
2. Investment property
Investment property (excluding
straight-lining) (note 2.1) 10 028 625 6 847 987
Investment property under development
(note 2.1) 738 299 534 113
Freehold land available for development
(note 2.1) 954 163 517 597
Investment property held for sale (note 2.2) - 28 000
Straight-lining lease income accrual (note 2.3) 236 510 171 352
11 957 597 8 099 049
2.1 Reconciliation of investment property
South Africa
R'000 Logistics Industrial Commercial
Balance as at 28 February 2017 4 074 371 294 623 127 988
Acquisitions - - -
Improvements and extensions 83 765 - -
Construction and development costs - - -
Transfers* 229 779 - -
Fair value adjustment 51 272 (26 071) (10 969)
Disposals - (17 286) -
Foreign exchange movements - - -
Balance as at 28 February 2018 4 439 187 251 266 117 019
Acquisitions 1 112 388 - 112 000
Improvements and extensions 29 194 5 780 520
Construction and development costs 1 154 - -
Transfers* 411 787 - -
Letting commission capitalised 3 449 - -
Letting commission amortised (238) - -
Fair value adjustment 109 988 3 739 751
Disposals - - (68 717)
Foreign exchange movements - - -
Balance as at 28 February 2019 6 106 909 260 785 161 573
2.1 Reconciliation of investment property (continued)
South Africa (continued)
R'000 Properties Land Land for
under immediately future
development available# development#
Balance as at 28 February 2017 187 531 287 360 89 520
Acquisitions - - 181 597
Improvements and extensions - - -
Construction and development costs 216 432 26 274 19 422
Transfers* (170 463) (52 677) (33 898)
Fair value adjustment - - -
Disposals - - -
Foreign exchange movements - - -
Balance as at 28 February 2018 233 500 260 957 256 641
Acquisitions - 347 653 120 000
Improvements and extensions - - -
Construction and development costs 295 675 64 813 28 239
Transfers* (206 571) (111 321) (93 895)
Letting commission capitalised - - -
Letting commission amortised - - -
Fair value adjustment (811) 26 024 55 052
Disposals - - -
Foreign exchange movements - - -
Balance as at 28 February 2019 321 793 588 126 366 037
2.1 Reconciliation of investment property (continued)
United Kingdom
Land
acquired
as part
of a
Properties forward
under funding
R'000 Logistics development agreement
Balance as at 28 February 2017 790 960 1 237 -
Acquisitions 1 128 970 - 293 367
Improvements and extensions 13 761 - -
Construction and development costs - 28 396 -
Transfers* 1 237 292 130 (293 367)
Fair value adjustment 225 314 - -
Disposals - - -
Foreign exchange movements (119 727) (21 150) -
Balance as at 28 February 2018 2 040 515 300 613 -
Acquisitions - - 92 126
Improvements and extensions 2 130 - -
Construction and development costs - 1 077 275 -
Transfers* 1 165 464 (1 073 338) (92 126)
Letting commission capitalised 2 516 1 656 -
Letting commission amortised - - -
Fair value adjustment (3 001) 28 470 -
Disposals - - -
Foreign exchange movements 291 734 81 831 -
Balance as at 28 February 2019 3 499 358 416 507 -
2.1 Reconciliation of investment property (continued)
R'000 Total
Balance as at 28 February 2017 5 853 590
Acquisitions 1 603 933
Improvements and extensions 97 526
Construction and development costs 290 524
Transfers* (27 259)
Fair value adjustment 239 546
Disposals (17 286)
Foreign exchange movements (140 877)
Balance as at 28 February 2018 7 899 697
Acquisitions 1 784 167
Improvements and extensions 37 624
Construction and development costs 1 467 156
Transfers* -
Letting commission capitalised 7 621
Letting commission amortised (238)
Fair value adjustment 220 212
Disposals (68 717)
Foreign exchange movements 373 565
Balance as at 28 February 2019 11 721 087
* Transfers relates to the following:
i) Land which have been zoned and service and available for a
development to commence;
ii) Land where a development has commenced;
iii) Investment properties under development which have been
completed; and
iv) Properties that have been recognised as held for sale.
# Land immediately available for development are land parcels
that have the necessary zoning rights and have been prepared
for developments. Land for future developments relate to land
parcels which are in the process of obtaining the necessary
zoning rights to be available for development.
28 February 28 February
R'000 2019 2018
2.2 Investment property held for sale
Opening balance 28 000 234 381
Transferred from investment property - 28 000
Disposed during the year (28 000) (234 381)
Fair value of investment properties
held for sale - 28 000
2.3 Straight-lining lease income accrual
Contractual lease receivables are as follows:
Within one year 544 073 392 764
Between one and five years 2 000 603 1 561 561
Beyond five years 1 219 515 694 877
3 764 191 2 649 202
Less: lease revenue on straight-line basis (3 527 681) (2 477 850)
Straight-lining lease income accrual 236 510 171 352
3. Property analysis
3.1 Tenant profile
Gross Gross Number
lettable lettable Number of
Revenue Revenue area area of tenants
(R'000) (%) (m2) % tenants %
A - Large
nationals,
large listeds
and government 647 800 92.5% 544 803 84.6% 51 67.1%
B - Smaller
international
and national
tenants 15 763 2.2% 20 135 3.1% 8 10.4%
C - Other
local tenants
and sole
proprietors 37 437 5.3% 54 078 8.4% 17 22.5%
Vacant n/a n/a 24 949 3.9% n/a n/a
701 000 100.0% 643 965 100.0% 76 100.0%
3.2 Sectoral profile (including vacancy profile)
Gross Gross
lettable lettable Vacant
Revenue Revenue area area area Vacancy
(R'000) (%) (m2) % (m2) %
Industrial 685 374 97.8% 626 510 97.3% 23 707 3.8%
Commercial 15 626 2.2% 17 455 2.7% 1 242 7.1%
701 000 100.0% 643 965 100.0% 24 949 3.9%
3.3 Geographical profile
Gross Gross
lettable lettable
Revenue Revenue area area
(R'000) (%) (m2) %
Gauteng 370 966 52.9% 325 623 50.6%
Cape Town 165 000 23.5% 163 283 25.4%
KwaZulu-Natal 11 801 1.7% 28 383 4.3%
United Kingdom 153 232 21.9% 126 676 19.7%
701 000 100.0% 643 965 100.0%
3.4 Lease expiry profile
Lease expiry profile
Based on
Based gross
on lettable
revenue area
Vacant 0.0% 3.9%
Expiry in the year to 29 February 2020 2.6% 2.1%
Expiry in the year to 28 February 2021 4.0% 4.9%
Expiry in the year to 28 February 2022 7.8% 8.6%
Expiry in the year to 28 February 2023 6.1% 9.2%
Expiry in the year to 29 February 2024 14.3% 12.7%
Thereafter 65.2% 58.6%
100.0% 100.0%
3.5 Weighted average escalations, lease expiry and yield
Escalation(%)
Lease by gross
Yield expiry lettable
Sector (%) (years) area
South Africa - Industrial 8.2% 7.9 7.6%
South Africa - Commercial 12.0% 3.0 8.4%
8.3% 7.9 7.7%
United Kingdom - Industrial* 4.8% 11.0 n/a
Average annualised portfolio 7.1% 8.8
* The leases for properties in the United Kingdom are structured
with five year annual rent reviews and not fixed annual escalations.
28 February 28 February
R'000 2019 2018
4. Capital commitments
Authorised and contracted for construction
of new industrial properties 378 640 922 824
Authorised but not contracted 313 662 861 868
692 302 1 784 692
5. Related parties
Related party relationships exist between
the company, its subsidiaries, directors,
and key management of the group.
In the ordinary course of business,
the group entered into the following other
transactions with related parties:
Dividend paid to related party shareholders 138 216 115 702
Fees paid to BTKM (Pty) Ltd (in which
Nazeem Khan is a director) 525 60
6. Restatement note
During the year, the group reassessed how it deploys cash to fund
its development activity. As part of this assessment, it was identified
that interest capitalised to projects was shown in operating
activities in the statement of cash flows while the other development
costs were included within investing activities. The group therefore
has restated the statement of cash flows to include interest
capitalised to projects as an investing activities together with the
other development costs. The group believes that this change in
accounting policy results in financial statements which provide more
relevant information about the effect of these transactions on its
statement of cash flows.
The impact on the presentation of the statement of cash flows is
as follows:
28 February 28 February
2018 2018
R'000 As reported Movement Restated
Cash flows from
operating activities
Finance costs paid (127 679) 64 780 (62 899)
Net cash flows generated
(utilised) from operating activities (7 956) 64 780 56 824
Cash flows from investing
activities
Development of investment
properties (345 257) (64 780) (410 037)
Net cash flows utilised by
investing activities (1 566 176) (64 780) (1 630 956)
Appendix 1
Distributable earnings
28 February 28 February
R'000 2019 2018
Profit or loss for the period
(attributable to owners of the parent) 669 856 870 188
Adjusted for:
Fair value adjustments to investment
properties (220 212) (239 546)
Less: Fair value adjustment to
investment properties (NCI)+ 33 825 5 578
Profit or loss on sale of non-current assets 6 157 (2 482)
Headline earnings 489 626 633 738
Adjusted for:
Straight-lining of leases adjustment (65 158) (33 548)
Less: Straight-lining of leases adjustment (NCI)+ 7 616 12 522
Fair value adjustments to derivative financial
assets and liabilities 214 479 (93 729)
Less: Fair value adjustments to derivative
financial assets and liabilities (NCI)+ 520 (3 215)
Equity-settled share-based payment reserve 7 782 6 514
Capital items non-distributable (5 351) (12 636)
Less: Capital items non-distributable (NCI)+ - 2 345
Deferred taxation (30 186) (34 409)
Antecedent dividend* 77 575 30 220
Distributable earnings 696 903 507 802
+ Non-controlling interest
* Antecedent dividend
In the determination of distributable earnings, an adjustment is
made where equity capital is raised during the financial year to
avoid diluting the returns of existing shareholders prior to the
share issue. During the reporting period, the group issued the
majority of the shares pursuant to the accelerated bookbuild on
04 June 2018 and the second accelerated bookbuild on
15 February 2019 which gave rise to antecedent earnings
included above.
28 February 28 February
2019 2018
The following inputs impacted the Number of Number of
antecedent adjustment: shares shares
Opening balance - shares in issue 409 973 331 350 465 100
Increase in shares in issue as a result of
accelerated bookbuild 76 950 771 59 020 730
Dividend reinvestment programme 6 256 682 -
Shares issued in terms of conditional share plan 786 818 487 501
Share issue in respect of property acquisition 9 449 184 -
Closing balance - shares in issue 503 416 786 409 973 331
Dividends declared and distribution per share Cents per
Total distribution for the year - 2019 share R'000
Interim dividend declared on 8 October 2018
(Dividend number 10) 68.12 309 266
Final dividend declared on 6 May 2019
(Dividend number 11) 70.31 387 637
Total distribution for the year ended
28 February 2019 138.43 696 903
Cents per
Total distribution for the year - 2018 share R'000
Interim dividend declared on 11 October 2017
(Dividend number 8) 60.98 250 002
Final dividend declared on 7 May 2018
(Dividend number 9) 62.88 257 800
Total distribution for the year ended
28 February 2018 123.86 507 802
Administration
Directors
A Taverna-Turisan (CEO)^, G.R. Gous (COO), B Goossens (CFO), P.L. Campher*#
(Chairman), G Lanfranchi* (Deputy Chairman), A.J. Gouws*, K Dreyer*, N
Khan*#, R.E. Benjamin-Swales*#, M.E. Brey *#, G. Mtetwa *#
* Non-executive
# Independent
^ Italian
There have been no changes to the board during this period.
Registered office
14th Floor
Portside Tower
4 Bree Street
Cape Town
8001
Contact details
info@equites.co.za
Company secretary
Riaan Gous
Transfer secretary
Computershare Investor Services Proprietary Limited
Auditors
PricewaterhouseCoopers Inc.
Equity sponsor
Java Capital
Date of Publication
9 May 2019
Date: 09/05/2019 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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