| Wed 4 Feb 2009, 17:19 | | RES - Resilient Property Income Fund - Summarised Audited Consolidated |
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RES
RES
RES - Resilient Property Income Fund - Summarised Audited Consolidated
Financial Statements for the Year Ended 31 December 2008
Resilient Property Income Fund Limited
Incorporated in the Republic of South Africa
Reg no 2002/016851/06
Share code: RES & ISIN: ZAE000043642
("Resilient" or "the group")
SUMMARISED AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31
DECEMBER 2008
DIRECTORS` COMMENTARY
The distribution for the 2008 financial year increased to 169,98 cents per
linked unit, an increase of 18,28% over the distribution for the previous
financial year. This pleasing performance was achieved in a deteriorating and
difficult economic environment and is the result of the successful
implementation of the group`s strategy over the past six years.
Resilient`s strategy is to invest in dominant retail centres with strong
anchor tenants and a high percentage of national retailers. The focus is on
small cities outside of metropolitan areas. Resilient successfully took
advantage of the buoyant property market in past years to dispose of
properties with weaker trading densities that are more vulnerable during an
economic downturn. Resilient`s strategy includes the development of new retail
centres in target cities, often in partnership with leading developers and
local communities. This provides Resilient with exposure to powerful new
retail centres at significantly higher yields than are available in the open
market. These new developments have in the past and should in the future
enable Resilient to achieve superior growth in distributions. Resilient does
not distribute development profits.
On 30 June 2008 Resilient acquired all the units not already owned in
Diversified Property Fund Limited ("Diversified"). Diversified unitholders
received 0,4375 linked units in Resilient for each linked unit held in
Diversified. Good progress has been made in disposing of smaller retail
properties that do not form part of Resilient`s focus and the intention is to
dispose of the industrial properties in due course.
1. PROPERTY ACQUISITIONS AND DEVELOPMENTS
Arbour Town (Amanzimtoti)
Resilient owns a 10% interest in the Arbour Town precinct in partnership with
Keystone Investments. The housing estate and land zoned for residential
development have been sold for a total of R40 million and transfer has been
effected. Arbour Crossing, the value centre with a gross lettable area (GLA)
of 36 000 m2 and anchored by Pick `n Pay Hypermarket, opened in November 2008.
The Galleria, a regional mall with a GLA of 76 600 m2, is 90% pre-let and is
scheduled to open in November 2009.
An offer to purchase The Galleria, Arbour Crossing and the remaining land,
which is zoned for commercial development, has been accepted. The offer is
subject to suspensive conditions.
Burgersfort Mall
Resilient has entered into an agreement with the original vendors to cancel
their option to buy back 50% of the proposed regional mall planned for this
property. Tenant demand for the mall is strong and the Edcon group has agreed
to anchor the proposed regional mall with an Edgars store. Construction of a
38 000 m2 GLA mall will commence once provision of services to the site has
been completed. Eskom is on schedule to provide the additional electricity
required for the development by the end of 2009.
Chemserve Spartan
Construction of a sub-divisible 9 690 m2 warehouse and office development on
previously unutilised land was completed in October 2008 at a budgeted forward
yield of 11%. Negotiations are in progress with a multinational company to
take all the available space.
Game Centre Polokwane
Resilient acquired a 40% interest in this value centre for R40 million at a
forward yield of 10%. The remaining interest is held by the Moolman and
Flanagan & Gerard groups, Resilient`s partners in the Mall of the North
development.
The Grove
Resilient has a 50% interest in this 39 000 m2 GLA mall currently being
developed in Equestria in the north-eastern suburbs of Pretoria. The mall is
to be anchored by Edgars, Pick `n Pay and Woolworths and is scheduled to open
in August 2009. A further 2,28 ha of land has been acquired adjacent to the
site at a total cost of R13 million. Application has been made for retail
rights with the intention to extend the mall`s GLA by between 8 000 m2 and
10 000 m2.
I`langa Lifestyle Centre (Nelspruit)
Resilient has a 25% interest in this 8,9 ha site. The proposed 40 000 m2 GLA
development is 90% pre-let and will be anchored by Edgars, Game, Pick `n Pay
and Woolworths, with all major national clothing retailers represented.
Construction of the development has commenced and the mall is scheduled to
open in August 2010.
Mafikeng Mall
This 22 500 m2 GLA mall anchored by Spar, Game and Edgars is due to open in
April 2009. Tenant demand is strong and application has been made for rights
to develop a further 15 000 m2 GLA.
Mall of the North (Polokwane)
The approval of retail rights for 75 000 m2 was upheld on review by the
Provincial Tribunal. Resilient will increase its stake in the development from
48% to 57%. A service agreement for electricity has been entered into with the
local authority and sufficient supply has been set aside for the development.
Tenant demand is strong and the centre will be anchored by Checkers, Edgars,
Game, Pick `n Pay and Woolworths. Construction of the 75 000 m2 GLA regional
mall is expected to commence in March 2009 with completion in April 2011.
Village Mall (Kathu)
This 19 000 m2 GLA closed mall in Kathu opened in November 2008. Kathu is
based on the fourth largest iron ore deposit in the world and the area is
currently undergoing strong growth and development. Tenants include Edgars,
Spar and the Truworths, Foschini, Mr Price and Clicks groups. Resilient has
agreed to expand the mall to accommodate Checkers once additional retail
rights are in place.
2. Properties sold
The following properties were sold during the financial year:
Book value Net sale price
R`million R`million
Shoprite Rustenburg 25,7 27,0
Shoprite Vryheid 23,5 24,1
Checkers Queenstown* 13,6 13,6
Jet Stores Queenstown* 10,1 10,1
Bester Street Nelspruit* 7,8 7,8
Ellerines Umtatha* 6,7 6,7
*not transferred by 31 December 2008.
3. INVESTMENTS AND ASSOCIATE COMPANY
Resilient continues to hold significant stakes in Capital Property Fund
("Capital"), Pangbourne Properties Limited ("Pangbourne") and New Europe
Property Investments plc ("Nepi"). The long-term strategy is to reduce these
holdings and to use the proceeds to finance new developments. During the past
financial year, however, Resilient took advantage of two sharp corrections in
the listed property market to increase its holdings in Capital and Pangbourne
at attractive prices. Resilient now holds 96 135 421 units in Capital,
42 500 000 units in Pangbourne and 7 392 500 units in Nepi.
4. THE ENVIRONMENT
Resilient is placing considerable emphasis on reducing energy consumption and
limiting the direct and indirect environmental impact of its developments.
Initiatives include greater utilisation of natural light and the installation
of low-energy light fittings. Most of the energy consumption of malls is
utilised for air-conditioning and initiatives are being implemented to reduce
this consumption by using improved insulation, more efficient air-conditioning
systems and the retention of cool air through better access systems.
5. PROSPECTS
Retail trading conditions are expected to remain difficult in 2009 but little
or no deterioration in rental collections or increase in vacancies in the
portfolio is anticipated. Although retrenchments in the resource sector could
impact on some of Resilient`s centres it should be compensated for by the
increases in social grants. Resilient`s record of strong growth in
distributions will continue in 2009, albeit at a slower rate than in 2008.
By order of the board
Des de Beer Andries de Lange
Managing director Financial director
Johannesburg
4 February 2009
CONSOLIDATED BALANCE SHEET
Audited Audited
31 Dec 2008 31 Dec 2007
R`000 R`000
ASSETS
Non-current assets 6 701 358 4 303 235
Investment property 3 889 584 2 546 618
Straight-lining of rental income adjustment 57 702 39 399
Investment property under development 1 041 163 362 619
Investment in associate company 192 847 -
Investments 1 178 970 1 164 128
Intangible asset 26 422 -
Loans 312 800 188 574
Property, plant and equipment 1 870 1 897
Current assets 184 506 65 698
Investment property held for sale 38 007 -
Straight-lining of rental income adjustment 96 -
Trade and other receivables 141 297 62 558
Cash and cash equivalents 5 106 3 140
Total assets 6 885 864 4 368 933
EQUITY AND LIABILITIES
Total equity attributable to equity holders 3 367 783 2 201 332
Share capital 2 303 1 607
Share premium 1 608 632 584 235
Treasury shares - (251)
Non-distributable reserves 1 756 838 1 615 731
Retained earnings 10 10
Total liabilities 3 518 081 2 167 601
Non-current liabilities 2 904 324 1 955 820
Linked debentures 1 105 407 771 520
Treasury debentures - (101)
Interest-bearing borrowings 1 335 375 680 784
BEE instrument 28 310 56 967
Deferred tax 435 232 446 650
Current liabilities 613 757 211 781
Trade and other payables 117 360 63 905
Linked debenture interest payable 208 392 121 740
Income tax payable 1 817 26 136
Interest-bearing borrowings 286 188 -
Total equity and liabilities 6 885 864 4 368 933
RECONCILIATION OF PROFIT FOR THE YEAR TO HEADLINE EARNINGS AND DISTRIBUTABLE
INCOME
Audited Audited
year ended year ended
31 Dec 2008 31 Dec 2007
R`000 R`000
Basic earnings (share) - profit for the year 141 169 544 654
attributable to equity holders
- Interest to linked debenture holders 385 822 223 919
Basic earnings (linked unit) 526 991 768 573
Adjusted for: (227 932) (583 955)
- fair value gain on investment property (296 312) (478 607)
- fair value loss/(gain) on investments 58 318 (196 276)
- profit on disposal of investment property (1 860) (197)
- loss/(profit) on disposal of investments 4 117 (57 529)
- loss on realisation of bond shorts 18 268 -
- impairment of goodwill - 2 795
- income tax effect (10 463) 145 859
Headline earnings 299 059 184 618
Adjustment resulting from straight-lining of (18 399) (12 804)
rental income
Fair value (gain)/loss on BEE instrument (28 657) 56 967
Fair value adjustment on interest rate 53 681 (11 703)
derivatives
Fair value adjustment on bond shorts 73 789 -
Interest paid by BEE SPV (refer to note 2.2) 24 824 22 534
Income received by BEE SPV (refer to note 2.2) (18 376) (15 536)
Other (99) (157)
Distributable income 385 822 223 919
Less: Distribution declared (385 822) (223 919)
Income not distributed - -
Headline earnings per linked unit (cents) 131,89 118,70
Diluted headline earnings per linked unit 125,89 110,99
(cents)
Basic earnings per share, basic earnings per linked unit and headline earnings
per linked unit are based on the weighted average of 226 751 719 (31 Dec 2007:
155 531 286) 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
237 562 530 (31 Dec 2007: 166 342 097) shares/linked units in issue during the
year.
CONSOLIDATED INCOME STATEMENT
Audited Audited
year ended year ended
31 Dec 2008 31 Dec 2007
R`000 R`000
Net rental and related income 290 539 186 535
Recoveries and contractual rental income 388 918 265 779
Straight-lining of rental income adjustment 18 399 12 804
Rental income 407 317 278 583
Property operating expenses (116 778) (92 048)
Distributable income from investments 76 500 67 919
(Loss)/profit on disposal of investments, (20 525) 57 726
investment property and bond shorts
Profit on disposal of investment property 1 860 197
(Loss)/profit on disposal of investments (4 117) 57 529
Loss on realisation of bond shorts (18 268) -
Fair value gain on investments and 237 994 674 883
investment property
Fair value gain on investment property 314 711 491 411
Adjustment resulting from straight-lining
of rental income (18 399) (12 804)
Fair value (loss)/gain on investments (58 318) 196 276
Fair value gain/(loss) on BEE instrument 28 657 (56 967)
Other income 14 088 16 026
Administrative expenses (24 386) (25 412)
Impairment of goodwill - (2 795)
Other expenses - (59)
Distributable income from associate 7 359 -
Profit before net finance costs 610 226 917 856
Net finance costs (479 520) (227 343)
Finance income 93 420 34 061
Interest from loans 24 800 15 528
Fair value adjustment on interest rate - 11 703
derivatives
Interest on linked units issued cum 68 620 6 830
distribution
Finance costs (572 940) (261 404)
Interest on borrowings (59 648) (37 485)
Fair value adjustment on interest rate (53 681) -
derivatives
Fair value adjustment on bond shorts (73 789) -
Interest to linked debenture holders
- interim (177 429) (102 179)
- final (208 393) (121 740)
Profit before income tax expense 130 706 690 513
Income tax expense 10 463 (145 859)
Profit for the year attributable to 141 169 544 654
equity holders
Basic earnings per share (cents) 62,26 350,19
Basic earnings per linked unit (cents) 232,41 494,16
Diluted earnings per share (cents) 59,42 327,43
Diluted earnings per linked unit (cents) 221,83 462,04
SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
Audited Audited
year ended year ended
31 Dec 2008 31 Dec 2007
R`000 R`000
Cash outflow from operating activities (90 144) (2 160)
Cash outflow from investing activities (507 592) (565 751)
Cash inflow from financing activities 599 702 561 991
Increase/(decrease) in cash and cash 1 966 (5 920)
equivalents
Cash and cash equivalents at beginning of year 3 140 9 060
Cash and cash equivalents at end of year 5 106 3 140
Cash and cash equivalents consist of:
Current accounts 5 106 3 140
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non-
Share Share Treasur Distribu- Retained
y table
capital premium shares reserves earnings Total
Audited R`000 R`000 R`000 R`000 R`000 R`000
Balance at 31 1 419 259 972 - 1 070 939 10 1 332 340
December 2006
Issue of units 188 324 263 (251) 324 200
- Issue of 6 68 114 398 114 466
818 181 units
on
16 April 2007
- Issue of 1 16 26 681 26 697
632 000 units
on 20 April
2007
- Issue of 4 46 76 620 76 666
555 808 units
on
13 September
2007
- Issue of 5 58 106 564 106 622
848 421 units
on
21 September
2007
Units acquired (251) (251)
by The
Resilient Unit
Purchase Trust
Profit on 138 138
units issued
by The
Resilient Unit
Purchase Trust
to employees
Total
recognised
income and
expense
- profit for 544 654 544 654
the year
Transfer to 544 654 (544 654) -
non-
distributable
reserves
Balance at 31 1 607 584 235 (251) 1 615 731 10 2 201 332
December 2007
Issue of units 696 1 024 397 251 1 025 344
- Issue of 62 625 914 440 915 065
476 800 units
on 30 June
2008
- Issue of 2 24 36 150 36 174
431 875 units
on 12
September 2008
- Issue of 4 47 73 807 73 854
651 162 units
on 11 December
2008
Units issued 251 251
by The
Resilient Unit
Purchase Trust
Loss on units
issued by The
Resilient Unit
Purchase
Trust to (62) (62)
employees
Total
recognised
income and
expense
- profit for 141 169 141 169
the year
Transfer to 141 169 (141 169) -
non-
distributable
reserves
Balance at 31 2 303 1 608 632 - 1 756 838 10 3 367 783
December 2008
Non-distributable reserves comprise those profits and losses that are not
distributable to unitholders and are made up of mainly fair value
adjustments on investment property, investments, interest rate derivatives
and bond shorts, profits or losses on the disposal of investment property
and investments, the share of post-acquisition reserves of associates and
straight-lining adjustments.
NOTES
1. PREPARATION AND AUDIT OPINION
The summarised audited consolidated 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
period. KPMG Inc. has audited the financial statements from which the
financial information included in this report has been extracted. Their
unmodified audit report on the financial statements is available for
inspection at the group`s registered address.
2. SUMMARY OF FINANCIAL PERFORMANCE
31 Dec 2008 30 Jun 2008 31 Dec 2007 30 Jun 2007
Distribution per linked 90,49 79,49 75,74 67,97
unit (cents)
Units in issue 241 104 048 234 021 011 171 544 211 161 139 982
Property operations
Net asset value* R19,55 R17,87 R18,46 R15,93
Gearing ratio** 24,3% 21,7% 14,9% 10,2%
Units in issue 241 104 048 234 021 011 171 544 211 161 139 982
Consolidated
Net asset value* R19,42 R17,73 R18,50 R15,79
Units in issue 230 293 237 223 210 200 160 712 400 150 329 171
*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.
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 R28 310 000 (31 Dec 2007: R56 967 000). The value of
this right/option will be considered on an ongoing basis and changes in its
fair value are 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
Consolidated BEE SPV operations
31 Dec 2008 R`000 R`000 R`000
Income statement
- Fair value gain on BEE instrument 28 657 (28 657) -
Financing costs
- Interest on borrowings (59 648) 24 824 (34 824)
- Interest to linked debenture holders (385 822) (18 376) (404 198)
Balance sheet
Current assets
- Trade and other receivables 141 297 (1 559) 139 738
Share capital 2 303 108 2 411
Share premium 1 608 632 142 270 1 750 902
Non-distributable reserves 1 756 838 46 491 1 803 329
Non-current liabilities
- Linked debentures 1 105 407 51 892 1 157 299
Interest-bearing borrowings
(non-current and current) 1 621 563 (223 793) 1 397 770
BEE instrument 28 310 (28 310) -
Current liabilities
- Linked debenture interest payable 208 392 9 783 218 175
2.3 The acquisition of Diversified has been accounted for as an acquisition of
investment property, related assets and related liabilities and not as a
business combination.
3. GEARING
Amount Interest % of
Expiry R`million rate borrowings
Interest rate swaps
July 09 50,0 7,87% 3,22%
August 09 50,0 9,70% 3,22%
August 09 50,0 8,59% 3,22%
October 10 50,0 8,06% 3,22%
November 10 65,0 10,70% 4,19%
December 10 100,0 8,64% 6,44%
July 11 50,0 10,65% 3,22%
August 11 50,0 9,16% 3,22%
December 11 100,0 8,55% 6,44%
September 12 50,0 8,86% 3,22%
November 12 50,0 8,53% 3,22%
November 12 100,0 8,99% 6,44%
June 13 100,0 9,51% 6,44%
October 13 50,0 9,70% 3,22%
November 14 50,0 8,94% 3,22%
November 15 50,0 8,86% 3,22%
November 15 100,0 8,20% 6,44%
November 16 100,0 8,18% 6,44%
Interest rate cap
July 13 50,0 11,55% 3,22%
Bond shorts
- R186 139,3 8,14% 8,97%
- R201 98,3 8,73% 6,33%
- R204 108,0 9,31% 6,96%
Hedged borrowings 1 610,6 103,73%
Variable rate borrowings (58,3) (3,73%)
Total gearing* 1 552,3 9,49% 100,00%
*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 R`million
31 Dec 2008 31 Dec 2007
Interest-bearing borrowings 1 621,6 680,8
Interest-bearing borrowings of BEE SPV (223,8) (215,2)
Current liabilities 327,6 211,8
Current liabilities of BEE SPV 9,8 8,2
Current assets (184,5) (65,7)
Current assets of BEE SPV 1,6 (5,8)
Total gearing 1 552,3 614,1
4. LEASE EXPIRY PROFILE
Based on
Contractual Based on
rental rentable
Lease expiry income area
Vacant - 3,2%
Dec 09 18,7% 18,4%
Dec 10 11,0% 10,6%
Dec 11 25,4% 21,0%
Dec 12 18,8% 14,1%
Dec 13 13,5% 15,9%
>Dec 13 12,6% 16,8%
Total 100,0% 100,0%
5. SEGMENTAL ANALYSIS
31 Dec 2008 31 Dec 2007
Rental income R`000 R`000
Retail 374 618 264 267
Commercial 2 480 14 316
Industrial 30 219 -
Total 407 317 278 583
31 Dec 2008 31 Dec 2007
Profit before net finance costs R`000 R`000
Retail 566 407 658 765
Commercial 2 477 6 574
Industrial 19 827 -
Corporate 21 515 252 517
Total 610 226 917 856
6. PAYMENT OF FINAL DISTRIBUTION
The board has approved and notice is hereby given of a final interest
distribution (distribution no 12) of 90,49 cents per linked unit for the six
months ended 31 December 2008.
The last date to trade linked units cum distribution will be
Friday, 20 February 2009 and trading will commence ex distribution on
Monday, 23 February 2009. The record date to participate in the distribution
will be Friday, 27 February 2009.
Linked unit certificates may not be dematerialised or rematerialised between
Monday, 23 February 2009 and Friday, 27 February 2009, both days inclusive.
Payment of the distribution will be made to linked unitholders on
Monday, 2 March 2009.
In respect of dematerialised linked unitholders, the distribution will be
transferred to the Central Securities Depository Participant accounts/broker
accounts on Monday, 2 March 2009. Certificated linked unitholders`
distribution payments will be posted on or about Monday, 2 March 2009.
Directors
JJ Njeke (chairman) Thembi Chagonda 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)
Company secretary
Nick 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
Sponsor
Java Capital (Pty) Ltd
Date: 04/02/2009 17:19:34 Produced by the JSE SENS Department.
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