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RES
RES
RES - Resilient Property Income Fund - Audited Abridged Financial Report
For The Year Ended 31 December 2007
RESILIENT PROPERTY INCOME FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2002/016851/06)
Share code RES & ISIN ZAE000043642
("Resilient" or "the group")
AUDITED ABRIDGED FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2007
DIRECTORS` COMMENTARY
A distribution of 143,71 (67,97 interim; 75,74 final) cents per linked unit
has been declared for the 12 months ended 31 December 2007. This represents
a 19,78% increase over the distribution for the previous financial year.
Resilient`s portfolio of 15 retail centres performed well during the
financial year. The strategy of investing only in dominant centres in target
markets placed Resilient in a strong position to continue this performance
in a challenging macro economic and retail trading environment. Resilient`s
pipeline of new developments has been strengthened. These new developments
will continue to enhance the overall quality of the portfolio and the
attractive yields of these developments will continue to enhance growth in
earnings and distributions. Resilient does not distribute profits from the
sale of assets nor development profits.
The highlight of the 2007 financial year was the opening of the Highveld
Mall in April 2007. Resilient has a 60% interest in this regional mall
situated in Witbank. A free-standing unit for Sportsmans Warehouse and
Outdoor Warehouse was completed in November increasing the GLA to 42 660 m2.
All major retailers have confirmed that they are trading well and further
extensions to the centre are being evaluated.
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. A value centre with a GLA of 37 900 m2 and
anchored by Pick `n Pay Hypermarket is under construction and is scheduled
to open in November 2008. Earthworks for the regional shopping mall, The
Galleria, are nearing completion. The Galleria will have a GLA of 76 600 m2
tenanted by all national retailers and is scheduled to open in April 2009.
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 construction of an 8 500 m2 GLA convenience
centre as a first phase has been approved.
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-eastern part of Pretoria. Tenants include Woolworths, Pick `n Pay,
Edgars 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 10% on completion.
I`langa Lifestyle Centre
A 25% interest in the 8,9 ha site with retail rights was acquired at a cost
of R12,5 million. The site is well situated along the N4 highway in
Nelspruit with excellent access to the upmarket suburbs. Construction of a
42 000 m2 GLA regional mall is planned to commence in April 2008. The centre
will be anchored by Pick `n Pay, Edgars, Woolworths and Game and will
include all major national retailers.
Mafikeng Mall
A 66% 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 Edgars has commenced and is scheduled to open in March 2009.
Additional land measuring 4,1 ha is being acquired which will allow for
expansion of the centre to a total GLA of 35 000 m2.
Mall of the North
Resilient acquired a 48% interest in a 27 ha site in Polokwane during 2006.
The 75 000 m2 of retail rights applied for was approved by the planning
tribunal in November 2007. This approval has been taken on review and the
decision by the appeal tribunal is anticipated by April 2008. Tenant demand
for the proposed regional mall is strong and the intention is to commence
construction of the mall upon successful completion of the appeal process.
In addition, Resilient acquired a 55% interest in 55 ha of land adjacent to
the Mall of the North site. Subsequent to year end, a further 10 ha of land
was added to this land assembly at a cost of R10 million. The intention is
to develop a value retail centre on this property.
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%. Subsequent to year end the remaining interest in the centre
was acquired.
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 and serviced. The rezoning has been
approved and negotiations are in progress with the local authority for
services. In addition, Resilient has the option to acquire 70% of the two
adjacent properties measuring 9,51 ha at a cost of R15 million.
Brits Mall
Resilient acquired a 51% interest in a 9,8 ha site in Brits at a cost of
R15,5 million. The site has approved retail rights and development of a 35
000 m2 GLA regional mall is under evaluation.
The Village, Klerksdorp
A 50% interest in a 15,6 ha site adjacent to Resilient`s Pick `n Pay
Hypermarket was acquired in November 2006 at a cost of R10,3 million. The
hearings by the planning tribunal regarding the application for retail
rights have commenced and a decision is anticipated by June 2008. Should the
rezoning be successful the intention is to develop a 35 000 m2 regional mall
on the site.
2. Extensions to existing developments
The extension to Mvusuludzo Mall was completed on schedule in April 2007 and
the mall is trading well. 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 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 was completed within
budget in October 2007. A 536 m2 GLA extension to Limpopo Mall to
accommodate the expansion of the ABSA branch and Nando`s has commenced and
is scheduled for completion in June 2008.
3. Properties sold
Resilient`s 50% interest in Woolworths Kimberley was sold for R8,7 million
and Pick `n Pay Nelspruit was sold for R53,9 million. Both transfers have
been effected.
4. Investments
Resilient sold 7 177 420 units in Acucap Properties Limited and a net
13 917 686 units in Capital Property Fund at average prices of R31,52 and
R5,82 respectively. Resilient acquired a net 4 759 443 units in Diversified
Property Fund Limited and 28 400 000 units in Pangbourne Properties Limited
at average prices of R10,70 and R16,02 respectively.
The board is of the opinion that the Pangbourne portfolio is under-rented
and Resilient management is working together with Pangbourne to extract this
value.
Property Fund Managers Limited, the management company of Capital Property
Fund, was sold for R30 million.
5. Prospects
Resilient`s property portfolio consists of either new developments or retail
centres that have been refurbished during the past three years. The
portfolio is well positioned to benefit from the continued expansion of the
resources sector as well as the emerging black middle class. The 2008
financial year will have the positive impact of a full year`s earnings from
Highveld Mall and the extensions to Mvusuludzo Mall. These developments
achieved yields of 10% and 11,6% respectively and are earnings enhancing for
Resilient. The board anticipates strong growth for the 2008 financial year.
CONSOLIDATED BALANCE SHEET
Audited Audited
31 Dec 2007 31 Dec 2006
R`000 R`000
ASSETS
Non-current assets 4 303 235 2 954 294
Investment property 2 546 618 1 911 469
Straight-lining of rental income
adjustment 39 399 26 473
Investment property under 362 619 170 582
development
Investments 1 164 128 728 679
Loans 188 574 115 209
Property, plant and equipment 1 897 1 882
Current assets 65 698 48 992
Investment property held for sale - 8 558
Straight-lining of rental income
adjustment - 122
Trade and other receivables 62 558 31 252
Cash and cash equivalents 3 140 9 060
Total assets 4 368 933 3 003 286
EQUITY AND LIABILITIES
Total equity attributable to equity
holders 2 201 332 1 332 340
Share capital 1 607 1 419
Share premium 584 235 259 972
Treasury shares (251) -
Non-distributable reserves 1 615 731 1 070 939
Retained earnings 10 10
Total liabilities 2 167 601 1 670 946
Non-current liabilities 1 955 820 1 535 768
Linked debentures 771 520 681 019
Treasury debentures (101) -
Interest-bearing borrowings 680 784 528 931
BEE instrument 56 967 -
Deferred tax 446 650 325 818
Current liabilities 211 781 135 178
Trade and other payables 63 905 29 369
Linked debenture interest payable 121 740 89 668
Income tax payable 26 136 11 541
Interest-bearing borrowings - 4 600
Total equity and liabilities 4 368 933 3 003 286
CONSOLIDATED INCOME STATEMENT
Audited Audited
year ended year ended
31 Dec 2007 31 Dec 2006
R`000 R`000
Net rental and related income 186 535 135 076
Recoveries and contractual rental 265 779 181 988
income
Straight-lining of rental income 12 804 10 163
adjustment
Rental income 278 583 192 151
Property operating expenses (92 048) (57 075)
Distributable income from 67 919 55 682
investments
Profit on disposal of investments 57 726 57 490
and
investment property
Profit on disposal of investment 197 5 991
property
Profit on disposal of investments 57 529 51 499
Fair value gains on investments 674 883 445 409
and
investment property
Fair value gain on investment 491 411 407 938
property
Adjustment resulting from straight- (12 804) (10 163)
lining of rental income
Fair value gain on investments 196 276 47 634
Fair value loss on BEE instrument (56 967) -
Other income 16 026 12 887
Administrative expenses (25 412) (21 483)
Impairment of goodwill (2 795) (6 951)
Other expenses (59) (2 311)
Income from associate company - 37 198
Deconsolidation of The Siyakha - (4 470)
Education
Trust
Profit before net finance costs 917 856 708 527
Net finance costs (227 343) (175 225)
Finance income 34 061 20 264
Interest from loans 15 528 9 338
Fair value adjustment on interest 11 703 7 023
rate
swaps
Interest on linked units issued 6 830 3 903
cum
distribution
Finance costs (261 404) (195 489)
Interest on borrowings (37 485) (30 302)
Interest to linked debenture
holders
- interim (102 179) (75 519)
- final (121 740) (89 668)
Profit before income tax 690 513 533 302
Income tax expense (145 859) (137 540)
Profit for the year attributable 544 654 395 762
to
equity holders
Basic earnings per share (cents) 350,19 287,95
Basic earnings per linked unit 494,16 408,14
(cents)
Diluted earnings per share (cents) 327,43 266,95
Diluted earnings per linked unit 462,04 378,40
(cents)
RECONCILIATION OF PROFIT FOR THE YEAR TO HEADLINE EARNINGS AND
DISTRIBUTABLE INCOME
Audited Audited
year ended year ended
31 Dec 2007 31 Dec 2006
R`000 R`000
Basic earnings (shares) - profit for 544 654 395 762
the year attributable to equity
holders
- interest to linked debenture 223 919 165 187
holders
Basic earnings (linked units) 768 573 560 949
Adjusted for: (583 955) (368 571)
- fair value gain on investment (478 607) (407 938)
property
- fair value gain on investments (196 276) (47 634)
- profit on disposal of investment (197) (5 991)
property
- profit on disposal of investments (57 529) (51 499)
- impairment of goodwill 2 795 6 951
?- income tax effect 145 859 137 540
Headline earnings 184 618 192 378
Adjustment resulting from straight- (12 804) -
lining of rental income
Fair value loss on BEE instrument 56 967 -
Fair value adjustment on interest (11 703) (7 023)
rate swaps
Interest paid by BEE SPV (refer to 22 534 11 976
note 2.2)
Income received by BEE SPV (refer to (15 536) (7 240)
note 2.2)
Post-acquisition reserves from - (31 683)
associate company
Deconsolidation of The Siyakha - 4 470
Education
Trust
Other (157) 2 319
Distributable income 223 919 165 197
Less: Distribution declared (223 919) (165 187)
Income not distributed - 10
Headline earnings per linked unit 118,70 139,97
(cents)
Diluted headline earnings per linked 110,99 129,76
unit (cents)
Basic earnings per share, basic earnings per linked unit and
headline earnings per linked unit are based on the weighted average
of 155 531 286 (2006: 137 441 187) shares/linked units in issue
during the year.
Diluted earnings per share, diluted earnings per linked unit and
diluted headline earnings per linked unit are based on the weighted
average of 166 342 097 (2006: 148 251 998) shares/linked units in
issue during the year.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non-
Trea- distri-
Share Share sury butable Retained
capita premium shares reserves earnings Total
l
R`000 R`000 R`000 R`000 R`000 R`000
Balance at
31 December 1 330 164 877 (102) 674 912 10 841 027
2005
Issue of 89 95 095 102 95 286
units
?- Issue of
10 810 811
units on 27
June 2006 108 142 270 142 378
?- Issue of
2 815 000
units on
27 September 28 27 438 27 466
2006
?- Issue of
6 060 606
units on 22
November 61 67 657 67 718
2006
Units issued
by The
Resilient
Unit?Purchas 102 102
e
Trust
Units issued
to BEE SPV
eliminated (108) (142 (142 378)
270)
Profit on
units
issued
by The
Resilient?
Unit
Purchase 265 265
Trust to
employees
Total
recognised
income and
expense
??- profit
for 395 762 395 762
the year
Transfer to
reserves 395 762 (395 -
762)
Balance at
31 1 419 259 972 - 1 070 939 10 1 332 340
December
2006
Issue of 188 324 263 (251) 324 200
units
?- Issue of
6 818 181
units on 16
April 2007 68 114 398 114 466
?- Issue of
1 632 000
units on 20
April 2007 16 26 681 26 697
- Issue of
4 555 808
units on 13
September
2007 46 76 620 76 666
?- Issue of
5 848 421
units on 21
September
2007 58 106 564 106 622
Units
acquired
by The
Resilient
Unit (251) (251)
Purchase
Trust
Profit on
units
issued
by The
Resilient ?
Unit
Purchase 138 138
Trust to
employees
Total
recognised
income and
expense
??- profit
for 544 654 544 654
the year
Transfer to
reserves 544 654 (544 -
654)
Balance at
31 1 607 584 235 (251) 1 615 731 10 2 201 332
December
2007
Non-distributable reserves comprise those profits and losses that
are not distributable to unitholders and are made up of mainly
revaluation adjustments on investment property, investment property
held for sale and investments, profits or losses on the disposal of
investment property and investments, the share of post-acquisition
reserves of associates, straight-lining adjustments and other non-
distributable balances.
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Audited Audited
year ended year ended
31 Dec 2007 31 Dec 2006
R`000 R`000
Cash outflow from operating (2 160) (29 584)
activities
Cash outflow from investing (565 751) (441 619)
activities
Cash inflow from financing activities 561 991 476 583
(Decrease)/increase in cash and cash (5 920) 5 380
equivalents
Cash and cash equivalents at 9 060 3 680
beginning
of year
Cash and cash equivalents at end of 3 140 9 060
year
Cash and cash equivalents consist of:
Current accounts 3 140 9 060
NOTES
1. Preparation and audit opinion
The abridged consolidated audited financial statements have been prepared in
accordance with the recognition and measurement criteria of International
Financial Reporting Standards (IFRS), the presentation and disclosure
requirements of IAS34 and the requirements of the Companies Act (Act 61 of
1973). The accounting policies adopted are consistent with those of the
prior year. KPMG Inc. has audited the financial information set out in this
abridged report. Their unqualified audit report is available for inspection
at the group`s registered address.
2. Summary of financial performance
2.1. To comply with financial reporting requirements, the group will 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 Eagle`s Eye Investments (Proprietary)
Limited (BEE SPV).
2.2. On 27 June 2006, 10 810 811 linked units were issued to BEE SPV and
Resilient has guaranteed the funding obligations of BEE SPV in
acquiring these units. 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 R56 967 000 (2006: nil) and was accounted for through profit
and loss during the year. 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
2007
Income statement
Fair value loss on BEE (56 967) 56 967 -
instrument
Financing costs
- Interest on borrowings (37 485) 22 534 (14 951)
- Interest to linked (223 919) (15 536) (239 455)
debenture
holders
Balance sheet
Current assets
- Trade and other receivables 62 558 5 775 68 333
Share capital 1 607 108 1 715
Share premium 584 235 142 270 726 505
Non-current liabilities
- Linked debentures 771 520 51 892 823 412
- Interest-bearing borrowings 680 784 (215 231) 465 553
(non-current and current)
BEE instrument 56 967 (56 967) -
Current liabilities
- Linked debenture interest 121 740 8 188 129 928
payable
2006
Income statement
Finance income
- Interest on linked units 3 903 5 731 9 634
issued cum distribution
Financing costs
- Interest on borrowings (30 302) 11 976 (18 326)
- Interest to linked (165 187) (12 971) (178 158)
debenture
holders
Balance sheet
Share capital 1 419 108 1 527
Share premium 259 972 142 270 402 242
Non-current liabilities
- Linked debentures 681 019 51 892 732 911
- Interest-bearing borrowings 533 531 (205 838) 327 693
(non-current and current)
Current liabilities
- Linked debenture interest 89 668 6 832 96 500
payable
Historical 31 Dec 30 Jun 31 Dec 30 June
performance 2007 2007 2006 2006
Distribution per 75,74 67,97 63,20 56,78
linked unit
(cents)
Units in issue 171 544 161 139 152 689 143 814 195
211 982 801
Property
operations
Net asset value* R18,46 R15,93 R14,49 R12,46
Gearing ratio** 14,9% 10,2% 14,4% 12,5%
Units in issue 171 544 161 139 152 689 143 744 195
211 982 801
Consolidated
Net asset value* R18,50 R15,79 R14,19 R11,85
Units in issue 160 712 150 329 141 878 132 933 384
400 171 990
*Net asset value includes total equity attributable to equity
holders and linked debentures.
**The gearing ratio is calculated by dividing the total gearing
by the investment in non-current assets excluding loans and
property, plant and equipment.
3. Gearing
Amount Swap Interest % of
Expiry R`million rate rate borrowings
March 2008 50,0 8,06% 8,14%
April 2008 50,0 7,49% 8,14%
July 2009 50,0 7,87% 8,14%
August 2009 50,0 9,70% 8,14%
November 2010 65,0 10,70% 10,58%
August 2011 50,0 9,16% 8,14%
November 2012 50,0 8,53% 8,14%
June 2013 (effective from 100,0* 9,51% -
June 2008)
Hedged borrowings 365,0 10,67% 59,44%
Variable rate borrowings 249,1 12,20% 40,56%
Total gearing** 614,1 11,29% 100,0%
*Not included in total hedged borrowings of R365,0 million as not
yet effective.
**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 2007 2006
follows: R`millio R`million
n
Interest-bearing 680,8 533,5
borrowings
Interest-bearing (215,2) (205,8)
borrowings
of BEE SPV
Current liabilities 211,8 130,6
Current liabilities of BEE 8,2 6,8
SPV
Current assets (65,7) (49,0)
Current assets of BEE SPV (5,8) -
Total gearing 614,1 416,1
4. Lease expiry profile and segmental analysis
Lease expiry Based on Based on
rentable contractual
area rental
income
Vacant 0,6% 0,0%
December 2008 14,4% 13,9%
December 2009 14,6% 14,0%
December 2010 8,5% 10,6%
December 2011 24,8% 25,6%
December 2012 14,6% 20,6%
>December 2012 22,5% 15,3%
Total 100,0% 100,0%
Rental Profit Rental Profit
income before net income before net
finance finance
costs costs
2007 2007 2006 2006
Geographical area R`000 R`000 R`000 R`000
Gauteng 31 981 99 840 6 925 32 711
KwaZulu-Natal 33 022 28 855 26 491 43 916
Limpopo 98 384 176 364 79 467 235 674
Mpumalanga 47 845 186 239 22 956 58 486
North West 25 353 75 159 27 884 59 189
Northern Cape 41 998 98 882 28 428 108 866
Corporate - 252 517 - 169 685
Total 278 583 917 856 192 151 708 527
5. Payment of final distribution
The board has approved and notice is hereby given of a final distribution
(distribution no 10) of 75,74 cents per linked unit for the six months ended
31 December 2007.
The last date to trade linked units cum distribution will be Friday, 22
February 2008 and trading will commence ex distribution on Monday, 25
February 2008. The record date to participate in the distribution will be
Friday, 29 February 2008.
Linked unit certificates may not be dematerialised or rematerialised between
Monday, 25 February 2008 and Friday, 29 February 2008, both days inclusive.
Payment of the distribution will be made to linked unitholders on Monday, 3
March 2008.
In respect of dematerialised linked unitholders, the distribution will be
transferred to the Central Securities Depository Participant accounts/broker
accounts on Monday, 3 March 2008. Certificated linked unitholders`
distribution payments will be posted on or about Monday, 3 March 2008.
By order of the board
Des de Beer Andries de Lange
Managing director Financial director
Johannesburg
7 February 2008
Directors
Directors
JJ Njeke (chairman); Jorge da Costa; Des de Beer*; Andries de Lange*;
Marthin Greyling; Johann Kriek*; David Lewis*; Sydney Malabie; Phumelele
Msweli; Rory Turner; Barry van Wyk; Jeff Zidel*
*Executive directors
Transfer office
Link Market Services South Africa (Pty) Ltd 11 Diagonal Street
Johannesburg 2001
Sponsor
Java Capital (Proprietary) Limited
Date: 07/02/2008 16:58:42 Produced by the JSE SENS Department.
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