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Voluntary Update – Impact Of COVID-19 On L2D’s Business And Withdrawal Of FY20 Distribution Guidance
LIBERTY TWO DEGREES LIMITED
(Registration number: 2018/388906/06)
JSE share code: L2D
ISIN: ZAE000260576
(“L2D”)
Voluntary Update – Impact Of COVID-19 On L2D’s Business And Withdrawal Of FY20
Distribution Guidance
L2D is supportive of the South African Government’s 21-day national lockdown to reduce the spread
of the COVID-19 pandemic. L2D has noted the exemptions gazetted by Minister Ebrahim Patel from
the Ministry of Trade, Industry and Competition on 24 March 2020 entitled COVID-19 BLOCK
EXEMPTION FOR THE RETAIL PROPERTY SECTOR 2020 and supports the implementation thereof
across L2D’s portfolio
To date the implementation of our business continuity measures are working according to plan as we
strive to maintain adherence to government guidelines in keeping people as safe as possible across
all touch points in our business.
Since the start of the lockdown period at midnight on Thursday 26 March 2020 all tenants in L2D’s
shopping centers and offices that are classified as trading in non-essential goods under the regulations,
have closed. All tenants classified as essential services remain open within strict hygiene and security
protocols that adhere to the government guidelines.
L2D’s management continues to engage with tenants and the property industry in assessing the impact
of the lockdown on business and in assessing measures that may mitigate the impact on all
stakeholders.
This update aims to provide the Board’s view of the potential impact as a best estimate given current
information in a very uncertain period and to reaffirm that our conservatively managed balance sheet
affords the business a significant buffer to the volatility expected in the short term.
Operational Impact
The objective during this time is to support our customers, tenants and service providers as well as
safeguard our employees and assets. Management are involved in the work of the industry bodies to
align with a solution that is in the best interest of all stakeholders.
Turnover of retail tenants will be negatively impacted by the lockdown and the subsequent drag on the
economy which will impact turnover rentals. While several L2D’s leases have turnover rental clauses,
the total turnover rental at 31 December 2019 represented less than 1% of total rentals.
Tsogo Sun Hotels Limited (Tsogo Sun Hotels) released a voluntary announcement on Friday, 20 March
2020 setting out its response to the impact of Covid-19. L2D has three hotels in the Sandton City
precinct that will be impacted by this announcement. The contribution of the hotels to the total portfolio
Net Property Income (NPI) for the 2019 financial year was 4.3%. The financial impact on L2D will vary
depending on demand as well as the period of deactivation of the hotels both of which remain uncertain
at this stage.
Capital Management and Property Valuations
L2D has relatively low levels of debt and reported a loan-to-value (“LTV”) ratio of 16.1% at 31 December
2019 with an interest cover ratio of 4.68 times. These are well within our current LTV and interest cover
ratio covenants with our lenders and provides headroom to extend debt facilities should this become
necessary.
The L2D property portfolio was valued at 31 December 2019 by reputable independent valuers as part
of the year end reporting process. L2D management have engaged with its valuers for views in
assessing the potential impact of the COVID-19 pandemic on valuation metrics and forecast
assumptions. We emphasize that formal valuations have not been called for, but management has
performed an analysis of the current position and potential stresses on the individual assets. Having
reviewed these indicative outcomes, should the current conditions be sustained into the second half of
2020, we believe that L2D will remain within our covenants notwithstanding the potential negative
impact on the portfolio valuation.
Withdrawal of FY20 distribution guidance
Given the current uncertainty in estimating the impact on NPI, L2D withdraws its distribution guidance
for the 31 December 2020 financial year.
The wellbeing of our staff, tenants and customers and the safety of our assets remains the highest
priority. L2D will ensure all increased safety and hygiene protocols remain in place in order to continue
to support tenants that remain open during this national lockdown.
Shareholders are advised that the information contained in this announcement has not been reviewed
or reported on by L2D’s external auditors.
Johannesburg
30 March 2020
Sponsor
The Standard Bank of South Africa Limited
Investor Relations
Gareth Rees
Contact number: 011 448 6804
Date: 30-03-2020 09:12:00
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