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RES
RES
RES - Resilient- Reviewed Interim Financial Report: Six Months
Ended 30 June 2007
Resilient Property Income Fund Limited
Incorporated in the Republic of South Africa
("Resilient" or the "group")
Reg no 2002/016851/06
Share code RES & ISIN ZAE000043642
REVIEWED INTERIM FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2007
CONSOLIDATED INCOME STATEMENTS
Reviewed Audited Reviewed
6 months 12 months 6 months
ended ended ended
30 Jun 2007 31 Dec 2006 30 Jun 2006
R`000 R`000 R`000
Net rental and related 105 930 135 076 64 287
income
Recoveries and contractual 121 866 181 988 80 269
rental income
Straight-lining of rental 27 199 10 163 7 570
income adjustment
Rental income 149 065 192 151 87 839
Property operating expenses (43 135) (57 075) (23 552)
Distributable income from 29 206 55 682 32 243
investments
Profit on disposal of 53 032 57 490 33 629
investments and investment
property
Profit on disposal of - 5 991 -
investment property
Profit on disposal of 53 032 51 499 33 629
investments
Fair value gains on 445 409 57 196
investments and investment 218 885
property
Fair value gain on 101 607 407 938 112 773
investment
Property
Adjustment resulting from (27 199) (10 163) (7 570)
straight-lining of rental
income
Fair value gain/(loss) on 144 477 47 634 (48 007)
investments
Fair value loss on BEE (54 162) - -
instrument
Other income 10 130 12 887 6 230
Administrative expenses (13 672) (21 483) (9 993)
Other expenses - (9 262) (374)
Income from associated - 37 198 22 743
company
Deconsolidation of The - (4 470) -
Siyakha Education Trust
Profit before net finance 349 349 708 527 205 961
costs
Net finance costs (98 188) (175 225) (81 799)
Finance income
Interest from the purchase 6 275 9 338 4 529
trust
Fair value adjustment on 9 417 7 023 9 429
interest
Interest on linked units 3 429 3 903 -
issued cum distribution
Finance costs
Interest on borrowings (15 130) (30 302) (14 099)
Interest to linked debenture
?
holders
- interim (102 179) (75 519) (81 658)
- final - (89 668) -
Profit before income tax 251 161 533 302 124 162
Income tax expense (73 053) (137 540) (27 716)
Profit for the period 178 108 395 762 96 446
attributable to equity
holders
Basic earnings per share 118,48 287,95 72,51
(cents)
Basic earnings per linked 186,45 408,14 133,91
unit (cents)
Diluted earnings per share 110,53 266,95 72,51
(cents)
Diluted earnings per linked 173,94 378,40 133,91
unit (cents)
CONSOLIDATED BALANCE SHEETS
Reviewed Audited Reviewed
30 Jun 2007 31 Dec 2006 30 Jun 2006
R`000 R`000 R`000
ASSETS
Non-current assets 3 348 868 2 954 294 2 231 536
Investment property 2 152 914 1 911 469 1 350 073
Straight-lining of rental 52 359 26 473 23 881
income adjustment
Investment property under ? 196 916 170 582 48 056
development
Investments 797 251 728 679 729 221
Loans 147 540 115 209 79 159
Property, plant and 1 888 1 882 1 146
equipment
Current assets 89 447 48 992 103 101
Investment property held for 52 000 8 680 52 498
sale
Trade and other receivables 35 980 31 252 50 514
Cash and cash equivalents 1 467 9 060 89
Total assets 3 438 315 3 003 286 2 334 637
EQUITY AND LIABILITIES
Total equity attributable to 1 651 748 1 332 340 937 205
equity holders
Share capital 1 503 1 419 1 330
Share premium 401 051 259 972 164 775
Treasury shares - - (218)
Non-distributable reserves 1 249 185 1 070 939 771 318
Retained earnings 9 10 -
Total liabilities 1 786 567 1 670 946 1 397 432
Non-current liabilities 1 619 821 1 535 768 1 248 690
Linked debentures 721 580 681 019 637 744
Treasury debentures - - 336
Interest-bearing borrowings 456 923 528 931 394 290
BEE instrument 54 162 - -
Deferred tax 387 156 325 818 216 320
Current liabilities 166 746 135 178 148 742
Interest-bearing borrowings 16 352 4 600 3 400
Trade and other payables 35 288 29 369 26 958
Linked debenture interest 102 179 89 668 81 658
payable
Income tax payable 12 927 11 541 36 726
Total equity and liabilities 3 438 315 3 003 286 2 334 637
ABRIDGED CONSOLIDATED STATEMENTS OF CASH FLOWS
Reviewed Audited Reviewed
6 months 12 months 6 months
ended ended ended
30 Jun 2007 31 Dec 2006 30 Jun 2006
R`000 R`000 R`000
Cash inflow/(outflow) from 10 122 (19 143) (22 119)
operating activities
Cash outflow from investing (139 183) (452 060) (153 663)
activities
Cash inflow from financing 121 468 476 583 172 191
activities
(Decrease)/increase in cash (7 593) 5 380 (3 591)
and cash equivalents
Cash and cash equivalents at 9 060 3 680 3 680
?
beginning of period
Cash and cash equivalents at 1 467 9 060 89
end of period
Cash and cash equivalents
consist of:
Current accounts 1 467 9 060 89
RECONCILIATION OF PROFIT FOR THE PERIOD TO HEADLINE EARNINGS AND DISTRIBUTABLE
INCOME
Reviewed Audited Reviewed
6 months 12 months 6 months
ended ended ended
30 Jun 2007 31 Dec 2006 30 Jun 2006
R`000 R`000 R`000
Basic earnings (share) 178 108 395 762 96 446
Interest to linked 102 179 165 187 81 658
debenture
holders
Basic earnings (linked 280 287 560 949 178 104
unit)
Adjusted for: (226 063) (368 571) (70 679)
- fair value gain on (101 607) (407 938) (112 773)
investment ?property
- fair value (gain)/loss (144 477) (47 634) 48 007
on
investments
- profit on disposal of - (5 991) -
investment ?property
- profit on disposal of (53 032) (51 499) (33 629)
investments
- impairment of goodwill - 6 951 -
- income tax effect 73 053 137 540 27 716
Headline earnings 54 224 192 378 107 425
Fair value loss on BEE 54 162 - -
instrument(refer to note
2.3)
Fair value adjustment on (9 417) (7 023) (9 429)
interest rate swaps
Interest paid by BEE SPV ? 10 820 11 976 202
(refer to note 2.3)
Income received by BEE SPV (7 348) (7 240) (407)
?
(refer to note 2.3)
Post-acquisition reserves - (31 683) (22 743)
from?associated company
Deconsolidation of The - 4 470 -
Siyakha Education Trust
Other (262) 2 319 6 610
Distributable income 102 179 165 197 81 658
Less: Distribution declared (102 179) (165 187) (81 658)
Income not distributed - 10 -
Headline earnings per linked unit amounts to 36,07 cents (31
December 2006: 139,97 cents; 30 June 2006: 62,05 cents).
Basic earnings per share, basic earnings per linked unit and
headline earnings per linked unit are based on the weighted
average of 150 329 171 (31 December 2006: 137 441 187; 30 June
2006: 133 003 384) linked units in issue during the period.
Diluted earnings per share and diluted earnings per linked unit
are based on the weighted average of 161 139 982 (31 December
2006: 148 251 998 ; 30 June 2006: 133 003 384) linked units in
issue during the year.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Non-
distri-
Share Share Treasur butable Retained
y
Reviewed capita premium shares reserve earnings Total
l s
R`000 R`000 R`000 R`000 R`000 R`000
Balance at 1 330 164 775 (102) 674 912 10 840 925
1 January 2006
Issue of units
- Issue of 10 810 811 108 142 270 142 378
units on 27 June 2006
Units held by The (116) (116)
Resilient Unit Purchase
Trust
Units issued to BEE SPV (108) (142 (142
eliminated 270) 378)
Profit on units issued (50) (50)
by The Resilient Unit
Purchase Trust to
employees
Total ecognized income
and expense
- profit for the 96 446 96 446
period
Transfer to reserves 96 456 (96 456) -
Balance at 1 330 164 775 (218) 771 318 - 937 205
30 June 2006
Balance at 1 419 259 972 - 1 070 10 1 332
1 January 2007 939 340
Issue of units
- Issue of 6 818 181 68 114 398 114 466
units on
16 April 2007
- Issue of 1 632 000 16 26 681 26 697
units on
20 April 2007
Profit on units issued 137 137
by The Resilient Unit
Purchase Trust to
employees
Total ecognized income
and expense
- profit for the 178 108 178 108
period
Transfer to reserves 178 109 (178 -
109)
Balance at 30 June 2007 1 503 401 051 - 1 249 9 1 651
185 748
Non-distributable reserves comprise those profits and losses that are not
distributable to unitholders and are made up of mainly revaluation adjustments
on investment assets, profits and losses on the disposal of investments and
profits and losses resulting from activities other than the group`s investment
in properties and investments.
NOTES
1. PREPARATION AND REVIEW OPINION
This abridged report has been prepared in accordance with International
Financial Reporting Standards (IFRS) and the requirements of the Companies Act
(Act 61 of 1973). The accounting policies adopted are consistent with those of
the prior period. KPMG Inc. has reviewed the financial information set out in
this abridged report. Their unqualified review report is available for
inspection at the group`s registered address.
2. SUMMARY OF FINANCIAL PERFORMANCE
2.1 The group will, in compliance with financial reporting requirements,
account for entities that do not form part of its operations, do not
operate under its operating policies and whose businesses, risk profiles
and debt levels are not comparable to that of its own. Disclosure under
"Property operations" excludes The Siyakha Education Trust and Eagle`s Eye
Investments (Proprietary) Limited (BEE SPV).
2.2 Resilient promoted the formation of The Siyakha Education Trust (Siyakha),
a trust dedicated to black education in South Africa. Property operations
include an adjustment to exclude the impact of consolidating Siyakha at 30
June 2006. Siyakha is no longer consolidated into the group as Resilient
has been released from its funding guarantees.
2.3 Stakeholders are referred to the meeting of unitholders on 23 June 2006, in
which the company obtained a mandate for the implementation of a strategy
that will allow for the investment of BEE groups in Resilient. For this
purpose BEE SPV was formed and 10 810 811 linked units were issued on 27
June 2006. Resilient has guaranteed the funding obligations of BEE SPV. In
terms of IFRS the issue did not take place and the essence of the
transaction was that the BEE shareholders received a right/option to
acquire linked units in Resilient at a future date at a predetermined
price. As a consequence, the issue of linked units has been eliminated in
the preparation of these financial statements. The right/option the BEE
shareholders have acquired has a value of R54,2 million and was accounted
for through profit and loss during the period. The value of this
right/option will be considered on an ongoing basis and changes in its fair
value will be accounted for through profit and loss.
The following table indicates the effect of the BEE transaction on the group
financial statements (the column "Property operations" indicates Resilient`s
results had the BEE transaction been accounted for as an issue for value):
Property
Consolidate BEE SPV operations
d
R`000 R`000 R`000
Income statement
- Fair value loss on BEE (54 162) 54 162 -
instrument
Finance income
Finance costs
- Interest on borrowings (15 130) 10 820 (4 310)
- Interest to linked (102 179) (7 348) (109 527)
debenture holders
Balance sheet
Current assets
- Trade and other 35 980 5 369 41 349
receivables
Share capital 1 503 108 1 611
Share premium 401 051 142 270 543 321
Non-current liabilities
- Linked debentures 721 580 51 892 773 472
- Interest-bearing
borrowings
(non-current and current) 473 275 (210 459) 262 816
BEE instrument 54 162 (54 162) -
Current liabilities
- Linked debenture interest 102 179 7 348 109 527
payable
2.4 Investment properties are fair valued at 31 December each year by external
valuers. The value of construction work at existing properties and that
relating to new developments are initially recognised at cost and only fair
valued, based on external valuations, once construction work has been
completed. During the period under review, construction of Highveld Mall
was completed and a related revaluation gain of R102 million was recorded
in profit for the period.
30 Jun 31 Dec 2006 30 Jun 2006 31 Dec
2007 2005
Distribution 67,97 63,20 56,78 52,15
per linked
unit
(cents)
Units in issue 161 139 152 689 801 143 814 195 133 003
982 384
Property
operations
Net asset value R15,93 R14,49 R12,46 R11,12
Gearing ratio* 10,2% 14,4% 12,5% 16,0%
Units in issue 161 139 152 689 801 143 744 195 132 963
982 384
Consolidated
Net asset value R15,79 R14,19 R11,85 R11,12
Units in issue 150 329 141 878 990 132 933 384 132 963
171 384
*The gearing ratio is calculated by dividing the total gearing by the investment
in non-current assets excluding loans to the unit purchase trust and property,
plant and equipment.
3. GEARING
Amount Interest % of
Expiry R`million rate borrowings
March 2008 50,0 9,44% 15,4%
April 2008 50,0 8,79% 15,4%
July 2009 50,0 9,25% 15,4%
August 2009 50,0 9,70% 15,4%
November 2010 65,0 10,70% 20,0%
August 2011 50,0 10,46% 15,4%
November 2012 50,0 9,83% 15,4%
Hedged borrowings 365,0 9,78% 112,4%
Prime linked borrowings* (39,3) 10,70% (12,4%)
Total gearing** 325,7 9,67% 100,0%
*Based on the current prime lending rate of 13,00%.
**Total gearing comprises the level of external interest-bearing borrowings,
excluding those of BEE SPV, should current liabilities be liquidated and current
assets be realised.
Gearing is calculated as follows: R`million
- Interest-bearing borrowings 473,3
- Interest-bearing borrowings of BEE SPV (210,5)
- Current liabilities 150,4
- Current liabilities of BEE SPV 7,3
- Current assets (89,4)
- Current assets of BEE SPV (5,4)
Total gearing 325,7
4. LEASE EXPIRY PROFILE AND SEGMENTAL ANALYSIS
Lease expiry (based on contractual rental income)
Vacant -
Dec `07 0,1%
Dec `08 6,7%
Dec `09 14,8%
Dec `10 14,6%
Dec `11 16,3%
Dec `12 25,9%
>Dec `12 21,6%
Profit before
Geographical area Rental income net finance costs
R`000 R`000
Gauteng 54 535 11 195
KwaZulu-Natal 17 380 6 028
Limpopo 21 812 26 043
Mpumalanga 13 819 113 621
North West 17 457 9 827
Northern Cape 24 062 13 623
Corporate - 169 012
Total 149 065 349 349
5. PAYMENT OF INTERIM DISTRIBUTION
The board has approved and notice is hereby given of an interim distribution
(distribution no 9) of 67,97 cents per linked unit for the six months ended 30
June 2007.
The last date to trade linked units cum distribution will be Friday, 24 August
2007 and trading will commence ex distribution on Monday, 27 August 2007. The
record date to participate in the distribution will be Friday, 31 August 2007.
Linked unit certificates may not be dematerialised or rematerialised between
Monday, 27 August 2007 and Friday, 31 August 2007, both days inclusive.
Payment of the distribution will be made to linked unitholders on Monday, 3
September 2007. In respect of dematerialised linked unitholders, the
distribution will be transferred to the Central Securities Depository
Participant accounts/broker accounts on Monday, 3 September 2007. Certificated
linked unitholders` distribution payments will be posted on or about Monday,
3 September 2007.
DIRECTORS` COMMENTARY
The distribution of 67,97 cents per linked unit for the six months ended 30 June
2007 represents a 19,71% increase over the distribution for the comparable prior
year period.
The highlight of this reporting period was the opening of Highveld Mall in April
2007. Resilient owns 60% of this regional shopping centre situated in Witbank.
All major retailers have advised that they are trading well and the existing
40 901 m2 GLA is being extended to accommodate a free-standing unit for
Sportsmans Warehouse and Outdoor Warehouse.
1. PROPERTY ACQUISITIONS AND DEVELOPMENTS
Arbour Town
Resilient has a 10% interest in this 96,9 ha site situated along the N2 highway
in Amanzimtoti. The remaining 90% interest is held by Keystone Investments and
Resilient has a right of first refusal should Keystone Investments decide to
sell. Earthworks are nearing completion for the retail developments which will
comprise a 77 000 m2 GLA mall (The Galleria) that includes all major national
clothing retailers and a 37 800 m2 GLA value centre anchored by Pick `n Pay
Hypermarket.
Burgersfort Convenience Centre
A 50% interest in this 11,3 ha property, situated in the upmarket suburbs of
Burgersfort, a rapidly developing town situated on the eastern limb of the
bushveld igneous complex, was acquired at a cost of R9 million. The property has
approved retail rights and plans are at an advanced stage to develop an 8 000 m2
convenience centre as a first phase.
Burgersfort Mall
Resilient acquired a 17,2 ha site situated on the main road in Burgersfort at a
cost of R17,1 million. Plans are in progress to develop a regional shopping
centre on this site. The property has approved retail rights. The vendor has the
right to buy back 50% of the development on completion.
The Grove
Resilient is developing this 39 000 m2 GLA mall in a 50/50 partnership with
Keystone Investments. The development is situated in the upmarket suburbs in the
north-east of Pretoria. Tenants include Woolworths, Pick `n Pay and the Mr
Price, Foschini and Truworths groups. Construction has commenced and the mall is
scheduled to open in August 2009. The development is anticipated to yield 9,8%
on completion.
I`langa Lifestyle Centre
A 25% interest in this 8,9 ha site with retail rights was acquired at a cost of
R12,5 million. The site is well situated along the N2 in Nelspruit with
excellent access to all the upmarket suburbs in Nelspruit. Plans are at an
advanced stage to develop a 42 000 m2 GLA retail centre on the site.
Mafikeng Mall
A 68% interest in a 4,6 ha property with retail rights was acquired at a cost of
R3,8 million. Construction of a 22 500 m2 GLA mall anchored by Spar, Game and
Woolworths is scheduled to commence in October 2007. Additional land measuring
4,1 ha is being acquired and the intention is to extend the mall to a total GLA
of 35 000 m2 to accommodate Edgars and Checkers.
Mall of the North (Polokwane Mall)
Resilient acquired a 48% interest in a 27 ha site in Polokwane during 2006.
Application has been made in terms of the Development Facilitation Act for
75 000 m2 of retail rights. Public hearings have been completed and a decision
by the tribunal is anticipated by the end of August 2007. The Polokwane city
council is only supporting 50 000 m2 of rights. Should the rights be granted, it
is anticipated that competing developments will take the tribunal decision on
review.
Northam Plaza
Resilient increased its shareholding in Northam Plaza to 67% through the
acquisition of an additional 12%. The purchase price was based on a forward
yield of 10%.
Powerville Value Centre
Resilient acquired a 70% interest in this 7,75 ha site, opposite the Pick `n Pay
Hypermarket in Vereeniging, at a cost of R4,27 million. The purchase is subject
to the property being rezoned to business, which is anticipated within the next
three months. In addition, Resilient has the option to acquire 70% of the two
adjacent properties measuring 9,51 ha at a cost of R15 million.
2. EXTENSIONS TO EXISTING DEVELOPMENTS
The extensions to Mvusuludzo Mall were completed on schedule in April 2007 and
the mall is trading well. A further extension to accommodate a Pick `n Pay
family store is in progress. The 5 500 m2 GLA extension to Tzaneng Mall is on
schedule for completion in September 2008. Extensions to Diamond Pavilion, to
accommodate Hi-Fi Corporation, and to The Crossing in Mokopane, to accommodate
Nedbank, were completed on schedule and within budget. A further 4 000 m2
extension to Diamond Pavilion to accommodate Mr Price Sport, cinemas and an
amusement arcade has commenced and will be completed in June 2008. The 2 000 m2
GLA extension to Murchison Mall is scheduled for completion in October 2007 and
further extensions on strong tenant demand are being evaluated.
3. PROPERTIES SOLD
Resilient`s 50% interest in Woolworths Kimberley was sold for R8,7 million and
transfer has been effected. Subsequent to the reporting period Pick `n Pay
Nelspruit was sold for R52 million. The sale remains subject to suspensive
conditions.
4. INVESTMENTS
Resilient sold 3 677 420 units in Acucap Properties Limited and a net 2 917 686
units in Capital Property Fund at average prices of R32,46 and R5,43
respectively. Resilient acquired a net 3 006 565 units in Diversified Property
Fund Limited at an average cost of R10,53.
Property Fund Managers Limited, the management company of Capital Property Fund,
was sold for R30 million.
5. PROSPECTS
The current financial year will have the positive impact of the full year`s
earnings from Diamond Pavilion, Northam Plaza and Jabulani Mall as well as eight
months` earnings from Highveld Mall and the extensions to Mvusuludzo Mall. These
developments yield a minimum of 10% and are earnings-enhancing for Resilient.
By order of the board
Des de Beer Andries de Lange
Managing director Financial director
Johannesburg
8 August 2007
DIRECTORS
AS Nkonyeni (Chairman) JJG da Costa D de Beer* A de Lange* MP Greyling JJ Kriek*
DJ Lewis* MMS Malabie PP Msweli MH Muller* MJN Njeke R Turner BD van Wyk JN
Zidel* *Executive director
COMPANY SECRETARY
NW Hanekom
BUSINESS ADDRESS
4th Floor Rivonia Village Rivonia Boulevard Rivonia 2191
TRANSFER OFFICE
Link Market Services South Africa (Pty) Ltd
11 Diagonal Street Johannesburg 2001
www.resilient.co.za
Date: 08/08/2007 16:50:48 Produced by the JSE SENS Department.
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