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Summarised audited consolidated results and cash dividend declaration for the 9 months ended 28 February 2019
EXEMPLAR REITAIL LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2018/022591/06)
JSE share code : EXP
ISIN : ZAE000257549
Approved as a REIT by the JSE
("Exemplar" or "the Company" or "the group")
SUMMARISED AUDITED CONSOLIDATED RESULTS AND CASH DIVIDEND DECLARATION FOR THE 9 MONTHS ENDED 28 FEBRUARY 2019
HIGHLIGHTS
Total annualised return of
14.2%
for the 9 months ended 28 February 2019
based on increase in net tangible asset value (NTAV) and interim dividend per share
NTAV per share increased by
8.7%
from acquisition date of 1 June 2018
to financial year end date
Total dividend for the 9 months ended 28 February 2019 of
61.84 cents per share
which is ahead of the prospectus forecast of 61.37 cents per share
Loan to value ratio of
30.9%
based on financial liabilities net of cash over investment property
Average basic rental through rate increased to
R128,54 per m2
from R125.96 per m2 at listing date
Vacancies steady at
3.1%
against 3.1% at listing date
Property operating expenses achieved of
34.8%
versus forecast of 35.4%
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited as at
R'000 28 Feb 2019
Non current assets 5,439,942
Investment Property 5,270,795
Operating Lease Asset 168,351
Property, Plant and Equipment 796
Current assets 154,964
Loans Receivable 44,400
Trade and Other Receivables 47,711
Cash and Cash Equivalents 62,853
TOTAL ASSETS 5,594,906
EQUITY
Total equity 3,609,122
Shareholders' interest 3,463,002
Stated Capital 3,185,487
Retained Earnings 277,515
Non-controlling Interest 146,120
Non Current Liabilities 1,824,079
Financial Liabilities 1,695,459
Derivative financial instruments 3,643
Finance lease liabilities 30,174
Deferred Taxation 94,803
Current Liabilities 161,705
Trade and Other Payables 159,136
Finance lease liabilities 2,569
TOTAL EQUITY AND LIABILITIES 5,594,906
Shares in issue 305,871,896
Shares to be issued 13,867,240
Effective shares in issue 319,739,136
Net asset value per share (Rand) 10.83
Net tangible asset value per share (Rand) 10.83
Net asset value per share (excluding deferred tax) (Rand) 11.13
Net tangible asset value per share (excluding deferred tax) (Rand) 11.13
SUMMARISED CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
Audited for the 9 months ended Forecast for the 9 months ended
R'000 28 Feb 2019 28 Feb 2019*
Property portfolio 517,431 547,858
Rental income and recoveries 504,240 510,088
Straight-line lease income adjustments 13,191 37,770
Property operating expenses (175,410) (180,669)
Net rental and related income 342,021 367,189
Other income 9,282 8,309
Administrative expenses and corporate costs (20,744) (23,041)
Profit from operations 330,559 352,457
Interest income 5,768 11,764
Finance costs (124,189) (128,263)
Profit before fair value adjustments 212,138 235,958
Fair value adjustment to investment properties 161,697 (37,770)
Fair value adjustment to derivative financial instruments (3,643) -
Profit before taxation 370,192 198,188
Taxation 1,100 -
Total profit for the period 371,292 198,188
Total profit attributable to: -
Equity holders of Exemplar 335,937 191,585
Non-controlling interests 35,355 6,603
Total profit for the period 371,292 198,188
Reconciliation between earnings and headline earnings
Audited for the 9 months ended Forecast for the 9 months ended
R'000 28 Feb 2019 28 Feb 2019
Profit for the year attributable to equity holders of Exemplar 335,937 191,585
Fair value adjustment to investment properties (161,697) 37,770
Non-controlling interest in fair value adjustment to investment properties 27,338 -
Headline earnings 201,578 229,355
*Extracted from the company's forecast issued 30 May 2018
Number of shares in issue 305,871,896 319,739,136
Weighted average number of shares in issue 233,247,311 311,897,484
Basic and diluted earnings per share (cents) 144.03 61.43
Headline and diluted headline earnings per share (cents) 86.42 73.54
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Audited for the 9 months ended
R'000 28 February 2019
Stated capital
Share issue for cash 1,889
Shares issued to share scheme 42,551
Issue of shares on listing for acquisitions 3,024,339
Share issue expenses (21,964)
Shares to be issued for acquisitions 138,672
Non-controlling interest on acquisition of assets 112,437
Profit for the 9 months ended 28 Feb 2019 371,292
Dividends declared and paid (60,094)
Balance at 28 February 2019 3,609,122
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited for the 9 months ended
R'000 28 Feb 2019
Cash generated from operations 304,172
Interest income 5,768
Finance costs (124,189)
Dividends paid (60,093)
Cash inflow from operating activities 125,658
Additions to investment property (52,608)
Additions to property, plant and equipment (347)
Decrease in loans receivable 36,175
Cash outflow to investing activities (16,780)
Proceeds from the issue of shares - at incorporation 1,889
Proceeds from the issue of shares - acquisitions 124,964
Share issue expenses (21,964)
Decrease in financial liabilities (150,914)
Cash outflow to financing activities (46,025)
Net increase in cash and cash equivalents 62,853
Cash and cash equivalents at beginning of the year -
Cash and cash equivalents at end of the year 62,853
INTRODUCTION
Exemplar was incorporated as a public company on 17 January 2018 and listed on the main board of the JSE on 12 June 2018 in the "Retail REITs"
sector. It holds a portfolio of 20 income generating properties with a total gross lettable area ("GLA") of 331 388 m2 that were acquired in a
sequence of transactions with an effective date of 1 June 2018. The properties were all developed by the Company's biggest shareholder,
McCormick Property Development (Pty) Ltd ("MPD"). MPD continues to develop its significant pipeline of green fields projects which, if
disposed of by MPD, will be offered to Exemplar on a right of first refusal basis. This access to a pipeline of value and yield enhancing
properties is a key differentiator for Exemplar and will contribute to the Company's objective of growing its base of quality assets, earnings
and distributions, thereby improving shareholder value. In addition to the MPD pipeline, Exemplar is currently and will continue to
investigate the acquisition of good quality properties.
TRADING RESULTS
Prior to 1 June 2018 Exemplar was not trading and hence this announcement reflects its trading results for the 9 months ended 28 February
2019. As this is the first period of trading, no comparative information has been presented.
Total distributable income for the period before antecedent adjustments amounted to R192,4 million versus a forecast of R191,6 million. The
marginal outperformance of the forecast belies the undeniably difficult trading conditions for retailers and in turn landlords, which often
translates into lower escalations on renewal, or in some instances rental reductions to assist distressed tenants. Rental and recovery income
of R504,2 million is R5,9 million less than that forecast of R510,1 million. Of this difference R3,0 million relates directly to lower than
forecast rental income and the balance of R2,9 million is a consequence of lower than forecast recovery income. The lower than forecast rental
and recovery income has been offset in the main by lower than forecast property operating expenses which at R175,4 million are R5,3 million
less than those forecast. Expense to property income ratio on a gross basis was 34,8% versus forecast of 35,4%.
Many tenants continue to trade well, both relative to the market and in absolute terms. Trading densities of the national grocer tenants
averaged R3 533 per m2 per month across the portfolio during the period under review. The average rental through rate of the portfolio at the
reporting date on a one year forward basis is R128,54 per m2 compared to R125,96 per m2 at listing.
The board of directors ("the board") has declared a final dividend of 42,74 cents per share which together with the interim dividend of 19,10
cents per share equates to a total dividend of 61,84 cents per share for the 9 months ended 28 February 2019. The dividend forecast for the
period was 61,37 cents per share.
VACANCIES AND ARREARS
Vacancies at the reporting date were 3,1% which is consistent with the vacancies at listing. The vacancy rate would have improved marginally
had it not been for the pressures exerted on Acornhoek Mega City due to the opening of a competing centre. Acornhoek Mega City continues to
trade albeit at reduced levels and the fair value of Exemplar's interest in this centre has been written-down by R27,2 million to R163,6
million.
Arrears across the portfolio, net of deposits, have been provided in full and amount to 2,48% of annualised property income.
THE PROPERTY PORTFOLIO
The Exemplar property portfolio comprises 20 income generating properties. At the reporting date the property portfolio is fairly valued at
R5,406 billion against R5,036 billion at listing, an increase of R370 million or 7,35%.
Investment property carrying value make-up: R'000
Investment property 5,270,795
Operating lease asset 168,351
Finance lease liabilities (32,742)
5,406,404
Modi Mall and Kwagga Mall Redevelopments
During the period the Modi Mall and Kwagga Mall redevelopments were completed and delivered to the Company on 1 November 2018 and 1 December
2018 respectively thereby adding 17 176 m2 to the GLA of the portfolio. In terms of the exchange agreements in this regard, the consideration
shares, being 13 867 240 shares in Exemplar, rank for distribution from the date that the redevelopments were delivered to Exemplar, which
was also the date that Exemplar was entitled to the income from the redevelopments. The consideration shares themselves were however only
issued in March 2019 when all conditions of the exchange agreements were fulfilled and consequently these shares reflect as "Shares to be
issued" in the summarised consolidated statement of changes in equity above.
New developments
As detailed in the prospectus Exemplar agreed to acquire three new developments, being Katale Square, Mabopane Square and Riba Cross Mall,
from their respective vendors, subject to them being developed to the agreed specification and within certain agreed time frames. The
construction of Katale Square and Mabopane Square is progressing well and they are scheduled for opening on 27 June 2019 and 31 October 2019
respectively. Construction of Riba Cross Mall has not yet commenced as to date it has not been sufficiently let. The delay of Riba Cross Mall
is not expected to have a significant effect on the forecast for the year ending 29 February 2020 at a per share level, both earnings and net
asset value.
BORROWINGS AND INTEREST RATE HEDGING
Total facilities available to the Company at the reporting date amounted to R2,280 billion of which R1,7 billion had been utilised. R380
million of the total facilities is earmarked for the cash components of the acquisitions of Katale Square, Mabopane Square and Riba Cross
Mall. R200 million of the total facilities are structured as a revolving credit facility against which surplus funds are deposited such that
as at the reporting date the revolving credit facility was unutilised. The loan terms are 3, 4 and 5 years expiring in 2021, 2022 and 2023.
The loan to value ratio, measured as financial liabilities net of cash over investment property, was 30,9% at the reporting date. The
Company's weighted average cost of borrowing is 3-month JIBAR plus 1.86% excluding the amortisation of hedging costs and participation fees.
The company has entered into the following sequence of collar and cap transactions to hedge its interest rate exposure:
Fixed rate payer Floating rate payer Cap/Floor rate (3m JIBAR) Notional
Interest rate cap Exemplar Counterparty 7.25% R1,1 billion
Interest rate cap Counterparty Exemplar 8.75% R1,1 billion
Interest rate collar Exemplar Counterparty 7.00% R1,1 billion
Interest rate cap Exemplar Counterparty 7.25% R600 million
Interest rate cap Counterparty Exemplar 8.00% R600 million
Interest rate collar Exemplar Counterparty 7.00% R600 million
The arrangements terminate on 4 October 2021. The effect of the hedging arrangements is that the Company has no interest rate exposure on
R1,7 billion of its nominal debt should 3-month JIBAR fluctuate between 7.25% and 8.00%, and no exposure on R1,1 billion of its nominal debt
should 3-month JIBAR fluctuate between 8.00% and 8.75%. The Company has foregone any upside should 3-month JIBAR trade below 7.00%.
SEGMENT ANALYSIS AND RECONCILIATION TO DISTRIBUTABLE INCOME
Segment analysis
R'000 Revenue Profit/(loss) from operations Investment property GLA (m2)
Gauteng 220,526 153,465 2,399,000 124,103
Mpumalanga 121,197 80,654 1,298,825 81,136
KwaZulu Natal 81,006 48,308 753,000 59,135
Limpopo 77,447 51,338 778,579 53,417
Eastern Cape 17,255 9,414 177,000 13,597
Exemplar H/O (12,620) - -
Total 517,431 330,559 5,406,404 331,388
Reconciliation between earnings and distributable income
Audited for the 9 months ended Forecast for the 9 months ended
28 Feb 2019 28 Feb 2019
Profit for the 9 months attributable to equity holders of Exemplar 335,937 191,585
Fair value adjustment to investment properties (161,697) 37,770
Non-controlling interest in fair value adjustment to investment properties 27,338 -
Fair value adjustment to derivative financial instruments 3,643 -
Straight-line lease income adjustments (13,191) (37,770)
Non-controlling interest in straight-line lease income adjustments 1,509 -
Deferred tax movement (1,100) -
Antecedent adjustment 2,650 4,641
Distributable income 195,089 196,226
Number of shares in issue 305,871,896 319,739,136
Number of shares ranking for distribution 319,739,136 319,739,136
Distributable income per share (cents) 61.84 61.37
Distributable income for the year 195,089 196,226
Interim dividend paid (58,422) -
Dividend per share (cents) 19.10 -
Number of shares 305,871,896 305,871,896
Final dividend 136,668 196,224
Dividend per share (cents) 42.74 61.37
Number of shares 319,739,136 319,739,136
Dividend per share for the 9 months (cents) 61.84 61.37
PROSPECTS
Exemplar remains poised for growth due to its strategic relationship with MPD which has a development pipeline of several hundred thousand
square meters of GLA. As mentioned, Katale Square and Mabopane Square, currently being developed by MPD and already agreed to be acquired by
Exemplar, are due for opening on 27 June 2019 and 31 October 2019 respectively. The purchase prices, due to be settled on completion, are as
follows:
No of Exemplar shares Cash
Katale Square 1,418,000 R95,820,000
Mabopane Square 4,460,730 R132,392,700
5,878,730 R228,212,700
Other MPD developments recently announced and likely to be acquired by Exemplar in the near future include Capital Mall, the Mall of Tembisa
as well as the developments being undertaken in Mamelodi and Dobsonville jointly with Putprop Limited. In addition to these "in-house" green
fields developments, Exemplar is and will continue to seek other acquisitions where the opportunity exists to enhance the value of these
assets through our experienced and dedicated property management team.
Forecast
The board is of the view that the actual results for the year ending 29 February 2020 will not differ materially from the forecast presented
in Exemplar's Prospectus
As indicated in the Prospectus this view assumes no material deterioration in the macroeconomic environment relative to current levels, that
no major corporate failures will occur and that tenants will be able to absorb increases in municipal and utility costs. Forecast rental
income is based on contractual lease terms and anticipated market related renewals.
CAPITAL RAISING ACTIVITIES
Despite the relatively low gearing levels and cost of debt, the board is desirous of raising equity capital to enhance the company's ability
for acquisitions as well as improve liquidity in the Exemplar share and intends approaching the equity capital markets during the current
financial year. The company will not raise equity capital at pricing levels that are detrimental to the company and existing Exemplar
shareholders.
DIVIDEND DECLARATION
Dividend number 2 of 42.74348 cents per share for the six months ended 28 February 2019 will be paid to shareholders in accordance with the
timetable set out below:
Last date to trade cum dividend Tuesday, 11 June 2019
Shares trade ex dividend Wednesday, 12 June 2019
Record date Friday, 14 June 2019
Payment date Tuesday, 18 June 2019
The dividend will be transferred to dematerialised shareholders' CSDP/broker accounts on Tuesday, 18 June 2019. Certificated shareholders'
dividend payments will be paid to certificated shareholders' bank accounts on or about Tuesday, 18 June 2019.
In accordance with Exemplar's status as a REIT, shareholders are advised that the dividend meets the requirements of a "qualifying
distribution" for the purposes of section 25BB of the Income Tax Act, No. 58 of 1962 ("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.
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 exemption, contained in paragraph (aa) of section 10(1)(k)(i) of the
Income Tax Act) because it is a dividend distributed by a REIT. This dividend is, however, exempt from dividend withholding tax in the hands
of South African tax resident shareholders, provided that such shareholders provide the following forms to their Central Securities Depository
Participant ("CSDP") or broker, as the case may be, in respect of uncertificated shares, or the Company, in respect of certificated shares:
a) a declaration that the dividend is exempt from dividends tax; and
b) 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.
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. Any distribution 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. Assuming dividend
withholding tax will be withheld at a rate of 20%, the net dividend amount due to non-resident shareholders is 34.19478 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 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
b) 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.
Shares in issue at the date of declaration date of the dividend: 319 739 136
Exemplar income tax reference number: 4860281965
BASIS OF PREPARATION
These audited summarised consolidated results for the financial year ended 28 February 2019 ("the results") have been prepared in accordance
with International Financial Reporting Standards ("IFRS"), IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued
by the Financial Reporting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council,
the JSE Listings Requirements and the requirements of the Companies Act of South Africa, No 71 of 2008. The accounting policies applied in the
preparation of the results are in accordance with IFRS and are consistent with those applied in the preparation of the forecast statements of
comprehensive income and the pro forma statement of financial position reflected in the Company's prospectus issued on 30 May 2018.
The results were prepared under the supervision of the Chief Financial Officer, DA Church CA(SA). They have been extracted from the group's
consolidated annual financial statements which have been audited by the Company's independent auditors, BDO South Africa Inc, but this results
announcement itself has not been audited. The independent auditors have expressed an unmodified opinion on the group's consolidated annual
financial statements. A copy of the group annual financial statements incorporating the audit opinion is available at the Company's registered
office.
The directors are not aware of any matters or circumstances arising subsequent to 28 February 2019 that would require any disclosure or
adjustment to the results, other than as disclosed in this announcement. The directors further take full responsibility for the preparation of
this results announcement and for ensuring that the financial information has been correctly extracted from the underlying audited financial
statements.
For and on behalf of the board
Exemplar REITail Limited
23 May 2019
Executive directors Independent non-executive directors
Jason McCormick (CEO) FM Berkeley (Chairman)
DA Church (CFO) PJ Katzenellenbogen (Lead)
John McCormick (Executive director) GVC Azzopardi
EP Maponya
Company Secretary
A Booysen BA(Hons) LLB
Registered Office
Sokatumi Estate, Cnr Lyttelton Road and Leyden Avenue, Clubview, Centurion, 0157
PO Box 12169, Clubview, 0014
Transfer Secretaries
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196
PO Box 61051, Marshalltown, 2107
Auditor
BDO South Africa Inc
Sponsor
Java Capital
Date: 23/05/2019 05:50:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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