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Unaudited consolidated interim financial statements for the six months ended 31 December 2020
Resilient REIT Limited
Incorporated in the Republic of South Africa
Registration number: 2002/016851/06
JSE share code: RES
ISIN: ZAE000209557
Bond company code: BIRPIF
LEI: 378900F37FF47D486C58
(Approved as a REIT by the JSE)
("Resilient" or "the Company" or "the Group")
www.resilient.co.za
Short-form announcement: Unaudited consolidated financial results for the
six months ended 31 December 2020
Nature of the business
Resilient is a retail-focused Real Estate Investment Trust ("REIT") listed
on the JSE Limited. Its strategy is to invest in dominant retail centres with
a minimum of three anchor tenants and let predominantly to national retailers.
A core competency is the successful development of new malls and the
reconfiguration of existing malls to adapt to changing market demands.
Resilient also invests in offshore property-related assets.
Distributable earnings and dividend declared
The Board has declared an interim dividend of 202,70 cents per share for
1H2021. This represents a 24,4% decrease from the 267,96 cents per share for
1H2020, a period prior to the COVID-19 pandemic.
During 1H2021, 95% of rental and recoveries billed (before discounts) were
collected. COVID-related discounts and tenant arrears are set out below:
Dec 2020
six months
SA Nigeria Group
R'000 R'000 R'000
Discounts provided
to tenants 42 100 1 611 43 711
Tenant arrears written off 18 923 1 600 20 523
Net arrears at period-end 58 229 6 939 65 168
Dec 2019
six months
SA Nigeria Group
R'000 R'000 R'000
Discounts provided
to tenants - - -
Tenant arrears written off 5 188 2 367 7 555
Net arrears at period-end 27 013 5 678 32 691
Jun 2020
six months
SA Nigeria Group
R'000 R'000 R'000
Discounts provided
to tenants 166 300 6 620 172 920
Tenant arrears written off 18 607 3 168 21 775
Net arrears at period-end 63 516 3 524 67 040
A total of R15,2 million of the arrears at December 2020 has been collected and
Resilient expects to recover R14,3 million on conclusion of the Edcon business
rescue process. This aligns the arrears balance to that of the comparative
pre-COVID period.
The Group's listed investments contributed R123 million less towards the
1H2021 distributable earnings compared to that for 1H2020. The operational
performances of NEPI Rockcastle and Lighthouse were impacted by
COVID-related restrictions imposed in the markets in which they operate.
In addition, NEPI Rockcastle reduced its payout ratio affecting
Resilient's 1H2021 period.
The 1H2020 period benefitted from R127 million of interest earned on the
EUR221 million cross-currency swaps as well as R19 million of capitalised
interest. The Group had no cross-currency swaps during 1H2021 and capitalised
only R55 000 of borrowing costs during this interim period. This had a negative
impact on distributable earnings, however, was largely offset by lower
borrowing costs as the South African prime rate was 3% lower than during the
comparable period.
Financial performance
Unaudited Unaudited
for the for the
six months six months
ended ended
Note Dec 2020 Dec 2019 Difference
IFRS information
Total revenue (R'000) A 1 403 972 1 898 331 (494 359)
Basic (loss)/earnings
per share (cents) B (219,00) 148,52 (367,52)
Headline (loss)/earnings
per share (cents) B (126,75) 155,91 (282,66)
Dividend (cents per share) 202,70 267,96 (65,26)
Net asset value (R) 50,60 68,14 (17,54)
Management account
information
Net asset value (R) 55,63 68,78 (13,15)
Loan-to-value ratio (%) C 33,7 27,2 6,5
Gross property expense
ratio (%) D 38,6 36,9 1,7
Notes:
A: In addition to COVID-related discounts provided and the increase in
tenant arrears written off during 1H2021, the comparable period included
R374,7 million of revenue from Resilient's listed investments. The Group
received no revenue from its listed investments during 1H2021.
B: The movement in basic and headline earnings can be attributed to the
following:
Unaudited Unaudited
for the for the
six months six months
ended ended
Dec 2020 Dec 2019
Note R'000 R'000
Revenue from investments A - 374 661
Fair value gain/(loss)
on investments 353 241 (454 836)
Share of loss of associate E (1 757 000) (26 485)
C: The loan-to-value ratio is calculated by dividing total interest-bearing
borrowings adjusted for cash on hand and the fair value of derivative
financial instruments by the total of investments in property, listed
securities and loans advanced.
D: 1H2021 was impacted by Resilient's pro rata share of COVID-related
discounts of R44 million. It was further impacted by the continued
above-inflation increases in administered prices, particularly utilities and
rates.
E: Resilient owns 40% of its associate, Lighthouse. Lighthouse recognised a
negative fair value adjustment on its investment in Hammerson as the investment
was fair valued to GBP0,163 per share immediately prior to Hammerson becoming
its associate. Lighthouse further recognised its share of Hammerson's
loss for the period, which impacted the basic earnings.
Property performance
South African retail sales for 1H2021 declined by 1,6% compared to 1H2020. This
performance demonstrates the resilience of the property portfolio given that
the comparable period was unaffected by COVID-related restrictions. Of the
28 malls, 15 recorded positive sales growth.
In line with the trends noted during 2H2020, malls with exposure to mining and
high-value agricultural produce performed strongly while those with leisure and
entertainment offerings were negatively affected as a result of the extended
lockdown restrictions. I'langa Mall was the worst performing mall in the
portfolio as it was also impacted by the closure of the border and travel
restrictions between South Africa and Mozambique. The closure of the offices
in the surrounding office nodes had a more severe impact on Rivonia Village
than initially expected. Arbour Crossing benefitted from new lettings
particularly the relocated and expanded Food Lover's Market and a new
gymnasium. A Boxer supermarket was introduced to Mvusuludzo Mall enabling it
to gain market share.
Expiring leases with tenants that remained in occupation (including the cession
of Edgars leases to Retailability) were renewed at an average increase of 0,5%
on expiring rentals. Leases concluded with new tenants (including new leases
with TFG in respect of Jet) were on average 8,5% higher than the rentals of the
outgoing tenants. In total, rentals for renewals and new leases increased by
2,5% on average. Administered costs, particularly rates and taxes and
electricity, are still escalating well ahead of inflation and retail sales
growth and are affecting tenants' cost of occupancy.
Post-COVID strategy
Resilient has continued its support for tenants with sustainable business
models. The pandemic has, however, accelerated a number of trends affecting
retail properties including the decline of department stores, improved
logistics by retailers resulting in more efficient use of retail space,
changes in demographics with resulting changes in brand preferences,
increased spend on groceries as a proportion of retail sales as well as
the demand for increased convenience by customers. Resilient has
initiatives impacting all malls which, in many cases, require structural
changes but will place the malls in a strong position to compete
effectively in the future.
Retailability, the new owner of Edgars, has repositioned this business as a
fashion emporium with a beauty offering rather than as a department store.
The target store size in Resilient's malls is between 2 500m2 and 4 500m2.
Resilient supports this approach and 9 of the previous 18 Edgars stores in
the portfolio are being closed, relocated and/or reduced in size to meet
the new strategy. Resilient will evaluate the remaining stores to
determine whether further action needs to be taken.
In some instances, the right-sizing of the Edgars stores will facilitate the
introduction of an additional grocer. At Irene Village Mall, Mahikeng Mall
and Tzaneen Lifestyle Centre, the malls will be expanded to accommodate
additional grocers.
A number of retailers may not recover from the impact of COVID. Fortunately,
other established retailers and new entrants are seeking to expand their
footprints, particularly in non-metropolitan markets. These include the
Studio 88 group, Webbers, Refinery, Ackermans Woman, Polo, Fashion Fusion,
Code, Bathu and Drip.
Prospects
Resilient's property portfolio has proved to be defensive in a difficult
trading environment. Leisure and entertainment remain severely impacted by
COVID and the recovery of these segments is dependent on the roll-out of the
vaccination programme. The performance of these segments is already in
Resilient's base. Resilient is focused on the future relevance and growth
of its portfolio as is evident from the extension, repositioning and
reletting programme.
The successful roll-out of the vaccination programme in Europe, particularly
in the UK, bodes well for the easing of restrictions which will support the
future of Resilient's investments. The investment of Lighthouse in Hammerson
looks promising as the Hammerson share price recovers from deeply discounted
levels.
The level of uncertainty, particularly relating to the pandemic and the
distribution that Resilient will receive from its listed securities, remains
elevated. Under these circumstances, the Board is not in a position to provide
guidance for 2H2021. The distribution policy remains unchanged and Resilient
will maintain its payout ratio at 100%.
Payment of interim dividend
The Board has approved and notice is hereby given of an interim dividend of
202,70000 cents per share for the six months ended 31 December 2020.
The dividend is payable to Resilient shareholders in accordance with the
timetable set out below:
Last date to trade cum dividend Tuesday, 13 April 2021
Shares trade ex dividend Wednesday, 14 April 2021
Record date Friday, 16 April 2021
Payment date Monday, 19 April 2021
Share certificates may not be dematerialised or rematerialised between
Wednesday, 14 April 2021 and Friday, 16 April 2021, both days inclusive.
In respect of dematerialised shareholders, the dividend will be transferred to
the CSDP accounts/broker accounts on Monday, 19 April 2021. Certificated
shareholders' dividend payments will be posted on or about Monday,
19 April 2021.
This short-form announcement is the responsibility of the directors and is only
a summary of the information in the full announcement released on SENS and does
not include full or complete details. This short-form announcement has not been
audited or reviewed by the Company's auditor. The full announcement can be
found on the Company's website at
www.resilient.co.za/downloads.htm?Subcategory=2021 and can be accessed using
the following JSE link:
https://senspdf.jse.co.za/documents/2021/jse/isse/RESE/Dec2020.pdf.The full
announcement is available for inspection at the registered offices of the
Company or its sponsor, at no charge, during office hours from Tuesday,
23 March 2021 to Friday, 9 April 2021. Any investment decision should be based
on the full announcement available on the Company's website.
Tax treatment
In accordance with Resilient's status as a REIT, shareholders are advised that
the dividend of 202,70000 cents per share for the six months ended
31 December 2020 ("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 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 the South
African resident 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 162,16000 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) 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 of this dividend: 400 126 254
Resilient's income tax reference number: 9579269144
By order of the Board
Des de Beer Monica Muller
Chief executive officer Chief financial officer
Johannesburg
23 March 2021
Directors
Alan Olivier (chairman), Stuart Bird, David Brown, Thembi Chagonda,
Des de Beer*, Des Gordon, Nick Hanekom*, Johann Kriek*, Dawn Marole,
Monica Muller*, Protas Phili, Umsha Reddy, Barry van Wyk (*executive director)
Company secretary
Ashleigh Egan
Registered address
4th Floor, Rivonia Village, Rivonia Boulevard, Rivonia, 2191
Transfer secretaries
Link Market Services South Africa Proprietary Limited
13th Floor, 19 Ameshoff Street, Braamfontein, 2001
Sponsor
Java Capital Trustees and Sponsors Proprietary Limited
6th Floor, 1 Park Lane, Wierda Valley, Sandton, 2196
Debt sponsor
Rand Merchant Bank (a division of FirstRand Bank Limited, 1 Merchant Place,
corner of Fredman Drive and Rivonia Road, Sandton, 2196
Date: 23-03-2021 08:30:00
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