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HERIOT REIT LIMITED - Group interim unaudited results and dividend distribution declaration for the six months ended 31 December 2023

Release Date: 28/03/2024 16:16
Code(s): HET     PDF:  
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Group interim unaudited results and dividend distribution declaration for the six months ended 31 December 2023

(Incorporated in the Republic of South Africa)
(Registration number: 2017/167697/06)
(Approved as a REIT by the JSE)
JSE share code: HET ISIN: ZAE000246740
("Heriot" or "the Company" or "the Group")


Heriot is a property holding and investment company that is listed in the "Diversified REITs" sector on the
Alternative Exchange of the JSE Limited ("JSE"). The Group is primarily invested in retail and industrial
properties situated in areas with high growth potential and has a strategic interest of 48,7% in Safari Investments
RSA Limited ("Safari"). Heriot's primary objective is to grow and streamline its asset base through the
acquisition of high-quality properties, the redevelopment of existing properties and the disposal of assets identified
as non-core.

                                                            Unaudited for the      Unaudited for the          Change
                                                               6 months ended         6 months ended               %
                                                                  31 Dec 2023            31 Dec 2022
 Distribution per share (cents)                                         49.87                  52.04            (4,2)
 Total assets (R'm)                                                  9,662.51               6,013.21             60,7
 Net asset value per share (cents)                                   1,578.54               1,301.83             21,3
 Gross revenue (R'm)                                                   596.62                 305.51             95,3
 Net profit after taxation (R'm)                                       310.00                 255.69             21,2
 Earnings per shares (cents)                                           102.56                  97.25              5,5
 Headline earnings per shares (cents)                                   51.06                  47.64              7,2

Heriot is continuing to increase its strategic interest in Safari and at the date of this report, its stake in Safari has
increased to 48,7% through the acquisition of 5,232,136 shares at a cost of R28.78 million. Together with a concert
party, Thibault REIT Limited, the broader Heriot Group's shareholding in Safari increased to an effective interest
of 58,8%, at the date of this report.

Distributable earnings of the Group for the six months ended 31 December 2023 (the "Reporting Period") of
R127.371 million, or 49.87 cents per share, are 4,2% below distributable earnings of 52.04 cents per share for the
comparable period in 2022. Distribution per share remains Heriot's measure of performance.

Like-for-like, net property operating income grew by 12,9%, led by the strong performance of the retail and
industrial assets. While the Group achieved double-digit growth from its property operations, distributions were
significantly reduced as a result of the 350-bps increase in the repo rate over the period 1 July 2022 to 31 December

The Group's continued effective cash management and strong cash flows support the payment of 100% of
distributable earnings as a dividend and on this basis, the Company is declaring an interim dividend of 49.87 cents
per share.

Heriot's net asset value per share increased by 21,3% from R13,02 at 31 December 2022 to R15,78 at 31
December 2023. This increase is mainly attributable to the consolidation of Safari into Heriot's statement of
financial position at 30 June 2023, which resulted in an unrealised, non-distributable bargain gain of R464,3
million, in the Group's year end results ended 30 June 2023, equating to R1,82 per share. The growth is further
attributable to an increase in the value of the Group's property portfolio, which is supported by positive rental
escalations achieved on renewals and re-lets across the portfolio during the period.

At 30 June 2023, assets and liabilities held for sale included net assets of R19.3 million relating to a subsidiary,
Hagley 3965 Proprietary Limited (a property holding company) ("Hagley"), that was sold to by Heriot Properties
Proprietary Limited ("Heriot Properties"), a wholly owned subsidiary of Heriot, to Heriot Investments
Proprietary Limited ("Heriot Investments") for R40.3 million (the "Initial Hagley Disposal"). Heriot
Investments is the majority shareholder of Heriot. In terms of the Initial Hagley Disposal agreement, Heriot
Properties had an option to repurchase up to 100% of Hagley's equity for a period of five years from 30 June 2023
in Heriot's discretion ("Option").

Hagley owns a single asset, being a 70 000 m2 property located at Erf 3865 in the City of Cape Town
Stellenbosch Division, Province of the Western Cape, situated on Nooiensfontein Road, Wembley Park, Cape
Town, on which a 36 900 m2 distribution centre is being constructed for Ackermans. Heriot Properties disposed
of Hagley in order to mitigate any development risks associated with the project.

On 31 December 2023, Hagley's investment property was independently valued by Peter Parfitt of Quadrant
Properties Proprietary Limited using the discounted cash flow less costs to completion method, resulting in an
increase in the valuation of the property of R47.9 million and an increase in the fair value of Hagley to R67.2

The Hagley Disposal agreement has now been amended to remove the Option with effect from 31 December 2023
and to increase the selling price to the current market value of R67.2 million ("Amended Hagley Disposal"). On
this basis, there is no profit or loss attributable to the transaction. The selling price will be settled in cash upon
completion of the redevelopment of the property owned by Hagley ("Property"), provided that the amount shall
be payable in full by 31 December 2025. The Amended Hagley Disposal is not subject to any conditions precedent.

In terms of the latest management accounts of Hagley, for the six months ended 31 December 2023, the net asset
value of Hagley amounted to R67,2 million, while there were no profits or losses after taxation attributable Hagley
for the six months months ended 31 December 2023 as all costs were capitalised to the development. The
Company is satisfied with the quality of the management account.

The proceeds from the disposal of Hagley will be utilised to reduce debt.

Details of the Property owned by Hagley is as follows:
 Property            Location           Sector              Gross Lettable     Weighted          Fair value
 Name                                                       Area (m2)          Average Gross     attributable to
                                                                               Rental (m2)       Property (m2)

 Wembley Park        Western Cape       Industrial          N/A                N/A               R67.2 million

    1. Post completion of the construction, the Property will have a gross lettable area of 36 900 m2 and a
       weighted average gross rental (m2) of R76.25 at the commencement of the lease.
    2. No additional expenditure has been incurred by the Company in connection with the disposal.
    3. The Property was valued by Peter Parfitt of Quadrant Properties Proprietary Limited who is registered as
       A professional valuers in terms of the Property Valuers Profession Act, No. 47 of 2000 and is an
       independent valuer as such term is contemplated in the JSE Listings Requirements. The effective date of
       the valuation was 31 December 2023.

Heriot Investments is 100% owned by The Gusi Trust, being a trust of which Steven Herring and his family are
beneficiaries. In addition, Steven Herring is a director of Heriot and Heriot Investments. The Initial Hagley
Disposal and the Amended Hagley Disposal therefore constitute a transaction with a related party, but due to their
size in relation to Heriot's market capitalisation, only requires announcing and is not subject to shareholder

The Groups' results for the reporting period demonstrate the resilience of its portfolio and in particular, the
durability of its emerging market retail and industrial properties. The current local and global macro-economic
conditions have created difficult trading conditions for the Group in the short to medium term. Future prospects
are inherently linked to the Group's operating environment and to significant macro issues facing the Group. The
board is committed to a proactive yet conservative approach to mitigate the effects of elevated interest rates,
increasing costs of fuel, electricity shortages, unprecedent levels of unemployment and high levels of inflation.
The Group will continue to explore strategic opportunities that will extract value from its existing portfolio while
continuing to grow its asset base through the acquisition of high yielding properties in its target markets.
Furthermore, given the strength of Group's cash flows, the board has resolved to maintain the 100% pay-out ratio
of distributable earnings.

Despite difficult trading conditions, management is pursuing growth of 3,0% to 5,0% in the dividend per share
for the year ending 30 June 2024.

The forecast in support of this guidance has been prepared using the following key assumptions:
    •   Group income will include 15 months of distributable earnings from Safari;
    •   Forecast property income is based on contractual rental escalations and market-related renewals;
    •   Adequate allowance has been made for vacancies and rent reversions;
    •   No further major corporate and tenant failures will occur; and
    •   No further changes to interest rates will occur to 30 June 2024.

This guidance has not been reviewed or reported on by the Company's auditor.

The board has declared an interim gross cash dividend of 49.87199 cents per share out of the Company's
distributable income for the period ended 31 December 2023.
The dividend is payable to Heriot shareholders in accordance with the timetable set out below:
 Declaration date                                                                              Thursday, 28 March
 Last date to trade cum dividend                                                                Tuesday, 16 April
 Shares trade ex dividend                                                                     Wednesday, 17 April
 Record date                                                                                     Friday, 19 April
 Payment date                                                                                    Monday, 22 April

Share certificates may not be dematerialised or rematerialised between Wednesday, 17 April 2024 and Friday,
19 April 2024, both days inclusive. The dividend will be transferred to dematerialised shareholders' Central
Securities Depository Participant ("CSDP") or broker accounts on Monday, 22 April 2024. Certificated
shareholders' dividend payments will be paid to certificated shareholders' bank accounts on or about Monday, 22
April 2024.

In accordance with Heriot'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 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 39.89759 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 the dividend: 255,395,858 (excluding 900,000 treasury shares)

Heriot's income tax reference number: 9541295185

Where the transfer secretaries do not have the banking details of any certificated shareholders, the cash dividend
will be held in trust by the transfer secretaries pending receipt of the relevant certificated shareholder's banking
details where after the cash dividend will be paid via electronic transfer into the personal bank accounts of
certificated shareholders.

This short-form announcement is the responsibility of the directors of Heriot and the contents were approved by
the board on 28 March 2024. This short-form announcement is only a summary of the full interim unaudited
consolidated financial statements for the six months ended 31 December 2023 ("Full Interims"), which are
available at and on Heriot's website at This announcement does not include full or complete details and any investment decisions
by investors and/or shareholders should be based on consideration of the Full Interims as a whole. The information
contained in this short-form announcement has not been audited or reviewed by the Company's external auditors.

By order of the board

28 March 2024

CIS Company Secretaries Proprietary Limited

Suite 1, Ground Floor, 3 Melrose Boulevard, Melrose Arch, Johannesburg, 2196
PO Box 652737, Benmore, 2010
SB Herring (Chairperson)*, RL Herring (CEO), D Snoyman (CFO), JA Finn*, SJ Blieden*†, R Lockhart-
Ross*†, N Ngale*†
*Non-executive †Independent

Computershare Investor Services Proprietary Limited

Valeo Capital, Unit 12 Paardevlei Specialist Centre, Paardevlei, Somerset West, 7130

Date: 28-03-2024 04:16:00
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