Wrap Text
Unaudited Results for the Six Months Ended 31 December 2018
ORION REAL ESTATE LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1997/021085/06)
Share Code: ORE ISIN: ZAE000201695
("Orion Real Estate Limited or “the Company” or “the Group”)
UNAUDITED RESULTS FOR THE 6 MONTHS ENDED 31 DECEMBER 2018
Condensed Consolidated Statement of Financial Position
as at 31 December 2018 Unaudited Unaudited Audited
Restated
Figures in Rand 31-Dec-18 31-Dec-17 30-Jun-18
ASSETS
Investment property 638 500 000 733 984 000 741 000 000
Property, plant and equipment 4 713 924 5 148 233 4 996 496
Deferred tax asset - 651 152 -
Total non-current assets 643 213 924 739 783 385 745 996 496
Loans to related parties 264 696 1 906 611 264 696
Loans to shareholders 32 630 383 46 094 154 47 347 803
Consumables - 94 890 -
Trade and other receivables 19 476 616 19 839 984 18 025 697
Cash and cash equivalents 410 711 890 147 1 861 951
Total current assets 52 782 406 68 825 786 67 500 147
Investment property held for sale 102 500 000 8 400 000 -
Total assets 798 496 330 817 009 171 813 496 643
EQUITY AND LIABILITIES
Capital and reserves
Share capital and share premium 114 336 674 114 336 674 114 336 674
Retained earnings 482 430 595 488 732 459 494 152 797
Total equity attributable to owners of the
parent 596 767 269 603 069 133 608 489 471
Non-controlling interest (289 732) (291 068) (289 732)
Total equity 596 477 537 601 370 385 608 199 739
Borrowings 11 960 985 127 725 818 11 960 985
Deferred tax liabilities 1 189 515 - 1 189 515
Total non-current liabilities 13 150 500 127 725 818 13 150 500
Current income tax liabilities 13 251 809 12 328 016 14 918 211
Loans from directors 18 508 17 508 18 508
Loans from related parties - 4 705 029 -
Tenant deposits 6 720 520 7 609 168 6 720 520
Trade and other payables 47 712 743 45 264 337 50 329 487
Borrowings 99 283 511 14 559 450 118 240 470
Bank overdraft 1 498 685 2 021 780 1 919 208
Current liabilities 168 485 776 86 505 288 192 146 404
Borrowings on held for sale properties 20 382 517 - -
Total liabilities 202 018 793 214 231 106 205 296 904
Total equity and liabilities 798 496 330 817 009 171 813 496 643
Condensed Consolidated Statement of Comprehensive Income
Unaudited Unaudited Audited
6 months Restated
year ended
ended 6 months ended
Figures in Rand 31-Dec-18 31-Dec-17 30-Jun-18
Revenue 43 053 547 44 848 701 87 982 847
Other income 284 441 108 568 13 997 302
Administration expenses (15 770 128) (9 931 661) (36 725 509)
Property related expenses (18 020 790) (20 468 972) (46 286 125)
Fair value adjustment - - 8 707 165
Operating profit before interest 9 547 070 14 556 636 27 675 680
Finance income 1 435 433 3 553 543 6 608 776
Finance costs (6 937 238) (8 602 628) (15 341 374)
Profit before taxation 4 045 265 9 507 551 18 943 082
Taxation - - (4 176 963)
Profit for the period 4 045 265 9 507 551 14 766 119
Profit/(Loss) and total comprehensive income/(loss) for the period attributable to:
Shareholders 4 045 265 9 507 551 14 764 783
Non-controlling interest - - 1 336
Total Comprehensive Income 4 045 265 9 507 551 14 766 119
Earnings per share
Basic earnings per share (cents) 0.65 1.52 2.35
Diluted earnings per share (cents) 0.65 1.52 2.35
Headline earnings per share (cents) 0.65 1.52 1.48
Condensed Consolidated Statement of Changes in Equity
for the six months
ended 31 December
2018
Non-
Share Retained controlling Total
Figures in Rand capital earnings Total Interest equity
Balance at 30 June
2018 as restated 114 336 674 494 152 797 608 489 471 (289 732) 608 199 739
Total comprehensive
income for the period - 4 045 265 4 045 265 - 4 045 265
Dividend paid - (15 767 467) (15 767 467) - (15 767 467)
Balance at 31
December 2018 114 336 674 482 430 595 596 767 269 (289 732) 596 477 537
Condensed Consolidated Statements of Cash Flows
for the six months ended 31 December 2018 Unaudited Unaudited Audited
Restated
6 months
6 months year ended
ended
ended
Figures in Rand 31-Dec-18 31-Dec-17 30-Jun-18
Cash flows from/(to) operating activities (17 173 696) 7 936 786 17 427 810
Cash generated by operations 5 761 978 13 569 337 27 416 009
Interest received 1 435 433 3 553 543 6 608 776
Dividends paid (15 767 467) - -
Interest paid (6 937 238) (8 602 628) (15 341 374)
Taxation paid (1 666 402) (583 466) (1 255 601)
Cash flows from/(to) investing activities 14 717 421 (8 871 045) (540 044)
Loans (advanced to)/repaid by related parties - (759 416) 882 500
Loan repaid by shareholder 14 717 421 (8 074 417) (9 327 076)
Proceeds on sale of investment property - - 8 250 000
Purchases of property, plant and equipment - (37 212) (345 468)
Cash flows to financing activities 1 425 558 (927 273) (17 674 924)
Movement in related party loans - 4 684 933 20 096
Loans (repaid)/raised from directors - (1 000) -
Repayment of long-term interest-bearing
borrowings 1 425 558 - (35 094 451)
Repayment of/(Increase in) short-term interest-
bearing borrowings - (5 611 206) 17 399 431
Net decrease in cash, cash equivalents and bank
overdrafts (1 030 717) (1 861 532) (787 158)
Cash, cash equivalents and bank overdrafts at
the beginning of the period (57 257) 729 900 729 901
Cash, cash equivalents and bank overdrafts at
the end of the period (1 087 974) (1 131 632) (57 257)
Headline earnings reconciliation and distribution information
31 December 31 December 30 June
Basic earnings per share 2018 2017 2018
Basic earnings per share is determined by dividing profit or loss attributable to the ordinary equity
holders of the parent by the weighted average number of shares outstanding during the year.
Headline earnings per share is determined by dividing headline earnings by the weighted average
number of shares during the year.
Headline earnings is determined by adjusting basic earnings by excluding separately identifiable
re-measurement items. Headline earnings is presented after tax and non-controlling interest.
There are no dilutionary instruments in issue.
The earnings and weighted average number of ordinary shares used in the calculation of basic
earnings per share are as follows:
Profit for the year attributable to owners of the
company 4 045 265 9 507 551 14 764 783
Earnings used in the calculation of basic earnings
per share for continuing operations 4 045 265 9 507 551 14 764 783
Weighted average number of shares used to
calculate basic earnings per share 627 009 822 627 009 822 627 009 822
Reconciliation of numerators used for basic and
diluted earnings:
Shares in issue 630 698 688 630 698 688 630 698 688
Number of shares for basic earnings 630 698 688 630 698 688 630 698 688
Less: treasury shares (3 688 866) (3 688 866) (3 688 866)
Number of shares for net asset and diluted
earnings per share 627 009 822 627 009 822 627 009 822
Headline earnings reconciliation:
Basic earnings/(loss) 4 045 265 9 507 551 14 764 783
Fair value adjustment to investment properties - - (5 614 318)
Write down of investment properties - - -
Net (profit)/loss on disposal of investment
properties - - 150 000
Headline earnings 4 045 265 9 507 551 9 300 465
Reconciliation of net asset value:
Total equity attributable to equity holders of the
parent 596 767 269 603 069 133 608 489 471
Total net asset value 596 767 269 603 069 133 608 489 471
Earnings per share (cents)
Basic and diluted earnings per share (cents) 0.65 1.52 2.35
Headline earnings per share (cents)
Diluted headline earnings per share (cents) 0.65 1.52 1.48
Net asset value per share (cents)
Net asset value per share at year-end (cents) 95.17 96.18 97.05
Segment Report
Operating segments are reported in a manner consistent with the internal reporting provided to the
chief-operating decision-maker. The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating segments, has been identified as
the managing director in consultation with the board of directors. The chief operating decision-
maker evaluates and report on the Group results on a monthly basis. The group comprises 5
segments being retail, commercial, industrial, residential and hospitality according to the nature of
the tenants.
All properties are owned in South Africa and therefore no separate geographical report has been
made.
31-Dec-18 % 31-Dec-17 %
Revenue (excluding recoveries)
Commercial 12 590 930 39% 11 376 854 38%
Industrial 5 488 354 17% 4 853 407 16%
Retail 12 913 774 40% 12 228 967 42%
Hospitality 968 533 4% 1 228 811 4%
Residential - 0% - 0%
32 284 436 100% 29 688 039 100%
There are no inter-segment revenues for the Group.
31-Dec-18 % 31-Dec-17 %
Profit before taxation
Commercial 1 496 748 37% 3 103 379 38%
Industrial 889 958 22% 1 324 169 16%
Retail 1 577 654 39% 3 336 463 42%
Hospitality 80 905 2% 335 260 4%
Residential - 0% - 0%
4 045 265 100% 8 099 271 100%
31-Dec-18 % 31-Dec-17 %
Property values (including
properties held for sale, before
adjustment for straight-lining of
leases)
Commercial 300 764 013 41% 348 369 404 47%
Industrial 100 204 846 14% 82 044 512 11%
Retail 209 025 731 28% 205 680 677 28%
Hospitality 121 005 410 16% 96 289 407 14%
Land 10 000 000 1% - 0%
Residential - 0% - 0%
741 000 000 100% 732 384 000 100%
Related parties
Gmeiner Investment Holdings Proprietary
Ultimate holding company Limited
Company Orion Real Estate Limited
Fellow Subsidiaries Orion Property Holding Trust
SBD Investments Proprietary Limited
Ixia Trading 532 Proprietary Limited
GEHS Leasing Company Proprietary Limited
Fellow Subsidiaries - Dormant CBB Properties Proprietary Limited
Orion Developments One Proprietary Limited
Orion Developments Two Proprietary Limited
Orion Developments Three Proprietary Limited
Gold Edge III Proprietary Limited
Entities controlled by Director: Orion Security Services Proprietary Limited
Orion Creative Business Ideas Pty Ltd t/a Orion
Business Solutions
Fargoscene Proprietary Limited
OFM Property Management Proprietary Limited
Orion Hotels & Resorts Proprietary Limited
Orion Hotels & Resorts (SA) Proprietary Limited
Orion Agri Proprietary Limited
Eagle Fleet Solutions Proprietary Limited
Members of key management: Board of Directors
Executive
F Gmeiner
D Dabideen (resigned 15 March 2019)
AJ Ritzlmayr (appointed 1 April 2019)
Non-
Executive
AC Gmeiner
DK Mthembu
R Wilkinson (Chairperson)
TFJ Oosthuizen
Group
Related party balances: 31-Dec-18 31-Dec-17 30-Jun-18
Loan accounts – Owing (to) by group
companies
Loan accounts – Owing (to) by related parties 264 696 1 127 100 264 696
OFM Property Management Proprietary Limited - - -
Orion Security Services Proprietary Limited - 20 764 -
Gmeiner Family Trust - - -
Star Finance Corporation Proprietary Limited 264 696 20 549 264 696
Orion Agri Proprietary Limited - 1 665 -
Orion Creative Business Ideas Proprietary
Limited - 176 743 -
Eagle Fleet Solutions Proprietary Limited - 711 946 -
Fargoscene Proprietary Limited - (20 096) -
Orion Hotels & Resorts SA Proprietary Limited - 215 528 -
Loans to directors - (18 508) (267 782)
F Gmeiner - (18 508) (267 782)
Loans to shareholders 32 630 382 35 204 377 47 347 803
Gmeiner Investment Holding Proprietary Limited 32 630 382 35 204 377 47 347 803
Amounts included in Trade payables 17 537 639 1 997 919 -
Companies with common directors 17 537 639 1 997 919 -
Amounts due from subsidiaries
Subsidiaries 2 394 802 - 39 158 684
Orion Property Holding Trust - - 28 475 301
Ixia Trading 532 Proprietary Limited 2 394 802 - 10 683 383
Related companies 15 142 837 - -
Orion Security Services Proprietary Limited 139 659 - -
Orion Hotels & Resorts SA Proprietary Limited 15 003 178 - -
Amounts included in Trade receivables 15 509 256 23 709 711 15 606 004
Companies with common directors - 23 709 711 15 605 004
Related companies 15 508 256 - -
Orion Hotels & Resorts SA Proprietary Limited 15 508 256 - -
Amounts due from subsidiaries 1 000 - 1 000
Orion Property Holding Trust 1 000 - 1 000
Related party transactions:
Interest received
Loans to shareholders - - 2 851 554
Gmeiner Investment Holding Proprietary Limited - - 2 851 554
COMMENTARY
1. Basis of preparation
The condensed consolidated results have been prepared in accordance with the Listings
Requirements of the JSE Limited (“Listings Requirements”) and the requirements of the
Companies Act, 71 of 2008. The Listings Requirements require interim reports to be prepared
in accordance with the framework concepts and the measurement and recognition
requirements of the International Financial Reporting Standards (“IFRS”) and the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Pronouncements as issued by the Financial Reporting Standards Council, and to also, as a
minimum, contain the information required by IAS 34 Interim Financial Reporting. The
accounting policies applied in the preparation of these unaudited results, are in terms of IFRS
and are consistent with those applied in the annual financial statements for the year ended
30 June 2018, except for the first-time adoption of IFRS 15 and IFRS 9.
The summarised interim financial statements were prepared by the financial manager Chris
Dibb CA (SA). The directors take full responsibility for the preparation of the interim financial
statements which have not been audited or reviewed by the Group’s auditors.
Post period end, an offer has been accepted on Orion Real Estate Limited House for R97,5m
and this property was reclassified to Investment property held for sale.
Any reference to future financial performance included in these results has not been
reviewed by or reported on by the Company's auditors.
Standards and interpretations effective and adopted in the current financial year
IFRS 9 – Financial Instruments
Classification
• All financial assets are initially measured at fair value
• Debt instruments are subsequently measured at fair value through profit or loss
• Equity instruments are measured at fair value through profit or loss
Nature of change
Classification and measurement of financial liabilities
For liabilities measured at fair value through profit or loss, the change in the fair value of the
liability attributable to changes in credit risk is presented in other comprehensive income. The
remainder of the change in fair value is presented in profit on loss; and all other classification
and measurement requirements in IAS 39 have been carried forward into IFRS 9.
Impact on the financial statements
The Group measures its interest bearing borrowings and derivative liability at fair value
through profit or loss and all changes in fair value due to credit risk will therefore be presented
in other comprehensive income.
Impairment
The impairment requirements are based on an expected credit loss (ECL) model. Entities are
generally required to recognise 12-month ECL on initial recognition and thereafter, as long as
there is no significant deterioration in credit risk. However, if there has been a significant
increase in credit risk on an individual or collective basis, then entities are required to
recognise lifetime ECL.
Impact on the financial statements
Impairment requirement might result in earlier recognition of credit losses.
Hedge accounting
Hedge effectiveness testing is prospective and depending on the hedge complexity, can be
qualitative.
A risk component of a financial or non-financial instrument may be designated as the hedge
item if the risk component is separately identifiable and reliably measurable.
More designations of groups of items as the hedged item are possible, including layer
designations and some net positions.
Impact on the financial statements
The Group does not apply hedge accounting, therefore no expected effect.
The effective date of this standard is for annual periods beginning on or after 1 January 2018
and the standard has been applied in these interim financial statements.
The amendments have not materially impacted the Group’s financial statements as
presented.
IFRS 15: Revenue from contracts with customers
New standard that requires entities to recognise revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or services. This core principle is
achieved through a five step five-step methodology that is required to be applied to all
contracts with customers which involves identifying the contract, identifying the performance
obligations under the contract, determining the transaction price, allocating the transaction
price to the performance obligations in the contract, and recognising revenue when the
entity satisfies a performance obligation.
The new standard will also result in enhanced disclosures about revenue, provide guidance
for transactions that were not previously addressed comprehensively and improve guidance
for multiple-element arrangements.
The effective date of this standard is for annual periods beginning on or after 1 January 2018.
Impact on the financial statements
The amendments have not materially impacted the Group’s financial statements as
presented.
IFRS 16: Leases
IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets
and liabilities for all leases with a term of more than 12 months, unless the underlying asset is
of low value. A lessee is required to recognise a right-of-use asset representing its right to use
the underlying leased asset and a lease liability representing its obligation to make lease
payments. A lessee measures right-of-use assets similarly to other non-financial assets (such as
property, plant and equipment) and lease liabilities similarly to other financial liabilities. As a
consequence, a lessee recognises depreciation of the right-of-use asset and interest on the
lease liability, and also classifies cash repayments of the lease liability into a principal portion
and an interest portion and presents them in the statement of cash flows.
IFRS 16 contains expanded disclosure requirements for lessees.
The effective date of this standard is for annual periods beginning on or after 1 January 2019.
Impact on the financial statements
The Group has chosen not to early adopt the standard and interpretations. The impact of this
amendment is not expected to be material once effective.
2. REIT status
As at 30 June 2018 Orion Real Estate Limited Real Estate was a JSE-approved Real Estate
Investment Trust (REIT) in accordance with the provisions of section 13 of the JSE Listings
Requirements and it remained at REIT at the date of the 2018 REIT distribution being 24
November 2018; and the interim financial Statements have been prepared on the basis that
the company is a REIT.
3. Operating performance
Orion Real Estate Limited experienced a decrease of 4% in revenue from R44.8 million for the
6 months ended 31 December 2017 to R43 million for the 6 months ended 31 December 2018.
Operating profit declined by 34% for the 6 months ended 31 December 2018 from R14.6
million for the 6 months ended 31 December 2017 to R9.5 million for the 6 months ended
31 December 2018.
Other direct, operating and management costs were a focus area increasing from R30 million
for the 6 months ended 31 December 2017 to R33.7 million for the 6 months ended
31 December 2018. This represents an increase of 12.3%.
Headline earnings decreased from a restated 1.52 as at 31 December 2017 to 0.65 cents per
share. The net asset value has decreased from 96.18 cents per share for the 6 months ended
31 December 2017 to 95.17 cents per share for the 6 months ended 31 December 2018.
4. Investment property disposed
During the period under review the Company accepted an offer for the sale of Orion House
for R97.5 million. The sale of Orion House was finalised in April 2019. The sale of Orion House
has been reclassified to Investment Property held for sale.
5. Subsequent events
For a full understanding of the history of the events disclosed below, this disclosure should be
read in conjunction with the Subsequent Events disclosure in the Group’s annual financial
statements as at 30 June 2018.
28 January 2019
The deal on the Promenade falls through and an improved offer is accepted by Orion Real
Estate Limited for the amount of R185m subject to conditions precedent.
31 January 2019
The first of the nine properties is transferred to Orion Real Estate Limited resulting in the issue
of 11,8m new shares to minorities (1, 84% of the increased share capital).
3 February 2019
RSM notify Orion Real Estate Limited that they will not return to complete the audit unless their
demand for increased audit fees are paid in full, two of the directors sign personal sureties for
the audit fees and a revised letter of appointment be agreed and signed by the audit
committee and the Board. Orion Real Estate Limited declines these terms and RSM do not
return to the audit.
7 February 2019
Despite a detailed motivation to retain REIT status, the JSE removed Orion Real Estate
Limited’s REIT status for failing to submit a required compliance declaration in terms of the JSE
Listings Requirements and its failure to meet the minimum spread requirements in terms of
S4.28.
12 February 2019
Orion Real Estate Limited terminates the services of RSM and appoints Nexia SAB&T in its
place.
17 February 2019
Orion Real Estate Limited opposed the liquidation proceedings in the High Court and is
currently awaiting an opposed motion date.
26 February 2019
Orion Real Estate Limited announces the disposal of Orion Real Estate Limited House in
Braamfontein for R102.5 million, subject to conditions precedent.
14 May 2019
As of the date of this report, the company remains suspended on the JSE and it has lost its
REIT status.
The production of this annual report removes one of the reportable irregularities lodged with
(IRBA); and all related party transactions have now been appropriately approved by
company resolutions. The shareholding spread will be remedied by the acquisition of the nine
properties, the first of which has transferred on 31 January 2019.
The Investec facility has not been settled and a balance of R118,8m is due as of the last
Investec statement received by the company on 31 January 2019.
Orion Real Estate Limited has taken the decision to extinguish the Investec debt in full either
through replacement facilities or the disposal of properties or and continues to keep Investec
informed.
Following the publication of the interim financial statements, the Company will apply for the
lifting of the suspension of trading in the Company’s shares by the JSE. Thereafter, Orion Real
Estate Limited will take immediate steps to have its REIT status restored.
6. Distributions
The board declared a distribution of 2, 5 cents a share for the year ended 30 June 2018
amounting to R15, 767, 467 (30 June 2017: 0.00 cents), which was paid on 24 December 2018.
7. Financial director
A SENS announcement of 19 March 2019 advised shareholders of the resignation of
Mr D Dabideen, effective 15 March 2019. Until a new appointment was made, Mr F Gmeiner,
a qualified Chartered Accountant, was acting in this role. On 1 April 2019, Mr Andreas
Ritzlmayr was appointed as financial director.
8. Going concern
The assets of the Company fairly valued comfortably exceed its liabilities and it has adequate
operational liquidity. The discharge of the Investec loans will be achieved from property sales
and the Company is, and will remain, a going concern.
9. Future prospects
The 2018 financial year was a year of consolidation and planning for expansion. Trading
conditions were difficult during the year and were reflective of the broader South African
economy.
Paying off the Investec loans and regaining the REIT status of the Company are at the
centre of focus and management is confident of success on both fronts.
Vacancies and particularly office vacancies are an industry challenge at the moment.
Whilst many new and prestigious office developments are evident in all major office
nodes in South Africa the landscape is scattered with vacant or partially vacant office
buildings. Our office space portfolio is no exception. To this end we have been on a major
initiative to correct this;
- Appointment of additional letting executives
- Creation of a BEE structure to secure government leases
- Commissioning architects to design conversions of office space to residential space
- Offering our largest office buildings to the market
- Commissioning architects to design conversion of office space to student
accommodation
- Negotiations with BEE companies for the purpose of creating student
accommodation
- Converting basement car parking space to storage units (Star Storage)
- Converting some office space to retail space.
- Setting up project team to redesign website, marketing collateral and widen on-line
& social media exposure
We continue to evaluate our portfolio and wherever an opportunity exists we will either dispose
of or re purpose properties. We have disposed of some properties and in a creative effort to
consummate selling transactions we have concluded our first “rent to own” transaction for one
of the Selby industrial buildings.
We expect these endeavours to produce positive results in the financial year.
By order of the board
Johannesburg
17 May 2019
Directors:
RS Wilkinson* DK Mthembu** AC Gmeiner* F Gmeiner (CEO)# TFJ Oosthuizen** A Ritzlmayr#
Independent non-executive** Non-executive* Executive#
Company secretary and Transfer office
registered office Computershare Investor Services
Corporate Governance Proprietary Limited
Facilitators CC
Registered office Sponsor
Registered office and business Arbor Capital Sponsors
address Proprietary Limited
16th Floor, Orion Real Estate
Limited House
49 Jorissen Street
Braamfontein
Johannesburg, 2017
Date: 17/05/2019 05:39:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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