| Wed 12 Aug 2009, 16:24 | | RES - Resilient Property Income Fund Limited - Reviewed interim financial report |
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RES
RES
RES - Resilient Property Income Fund Limited - Reviewed interim financial report
for the six months ended 30 June 2009
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")
REVIEWED INTERIM FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2009
DIRECTORS` COMMENTARY
Resilient`s distribution of 91,51 cents per linked unit for the six months ended
30 June 2009 represents a 15,12% increase over the 79,49 cents per linked unit
distributed for the comparable prior period. This strong performance is the
result of strategies implemented over past years rather than actions taken
during the period under review. The dominance of Resilient`s retail centres in
their markets and the high percentage of national retailers have largely
insulated Resilient from the impact of the economic downturn.
The first six months of the year were characterised by a deteriorating
macroeconomic environment which has negatively impacted on retail sales. Retail
trading conditions are expected to remain difficult for at least the remainder
of 2009. National retailers have confirmed that non-metropolitan centres have
outperformed the metropolitan markets. The board believes that this is the
result of significantly lower personal debt levels in the non-metropolitan areas
and increases in social spending. The downturn in the resources sector has had
limited affect on retail sales to date but the impact may simply be delayed.
Resilient`s vacancies declined from 3,2% at 31 December 2008 to 2,9% at 30 June
2009 mainly due to the Chemserve Spartan industrial unit being let to Consol
Glass. Vacancies and arrears are budgeted to increase for the remainder of the
financial year, however, no significant deterioration is anticipated.
PROPERTY ACQUISITIONS AND DEVELOPMENTS
Arbour Town
Resilient owns 10% of the Arbour Town precinct with the remaining 90% held by
Keystone Investments. The value centre, Arbour Crossing, opened in November 2008
with the regional mall, The Galleria, scheduled to open in November 2009.
Resilient intends either to sell its 10% interest or to increase its holding to
a meaningful percentage.
The Grove
Resilient is developing this 39 000 m2 GLA mall in a 50/50 partnership with
Keystone Investments. The mall is anchored by Edgars, Pick `n Pay and
Woolworths. All major tenants have taken occupation of their stores for shop
fitting and the mall will open in September 2009. Application has been made for
a further 10 000 m2 of retail rights on the adjacent property and approval is
expected by the end of the year. Despite the difficult economic climate, tenant
demand by national retailers remains strong and it is anticipated that the 10
000 m2 GLA extension will
commence after approval of the rights.
I`langa Mall
Resilient has a 25% interest in this 40 000 m2 GLA development. The mall will be
anchored by Edgars, Game, Pick `n Pay and Woolworths and will include all major
national clothing retailers. Heavy rains initially resulted in delays in
construction, however, this backlog has largely been caught up and the board is
confident that the development will open on schedule in August 2010.
Mafikeng Mall
This 22 500 m2 GLA mall in which Resilient has a 64% interest opened in April
2009. The mall is anchored by Spar, Game and Edgars and tenants include the
Truworths, Foschini and Pepkor groups.
Mall of the North
Construction of the 75 000m2 GLA mall commenced in March 2009 with completion
scheduled for April 2011. Resilient has a 57% interest in this development with
Flanagan & Gerard and the Moolman Group as partners. The
mall will be anchored by Checkers, Edgars, Game, Pick `n Pay and Woolworths and
will include all national clothing retailers. This will be the largest retail
development in the Limpopo Province.
PROPERTIES SOLD
Resilient has agreed to sell Isando Business Park, City Deep Industrial Park,
Chemserve Spartan and its 25% interest in Montague Business Park to Capital
Property Fund ("Capital") for R611,5 million with effect from 1 August 2009. The
sale price is payable in Capital units to be issued at R6,20, excluding the
distribution for the period ending June 2009. The rationale for the sale is to
improve Resilient`s focus as a retail fund and to enhance Capital`s portfolio
with the addition of quality industrial assets. The sale is now unconditional
following Competition Commission and
Capital unitholder approval.
Checkers Queenstown, Jet Stores Queenstown, Bester Street Nelspruit and
Ellerines Mthatha which were sold during 2008 and disclosed as held for sale in
December 2008, have been transferred.
FORTRESS INCOME FUND LIMITED
Resilient has in principle agreed to the sale of 14 properties valued at R556
million to a new property fund, Fortress Income Fund Limited ("Fortress"),
scheduled for listing on the JSE in October 2009. Resilient`s projected exit
yield is 10,5%. Fortress will list A and B linked units with the A units
entitled to a predetermined initial yield, escalating at a fixed annual
percentage. The A units will have preference over the B units. Similar
structures have in the past been well received by the market.
Should the sale to Fortress proceed, the Resilient property portfolio will
consist of 18 retail centres with a further four under development.
INVESTMENTS
Resilient held 82 931 701 units in Capital, 47 500 215 linked units in
Pangbourne Properties Limited ("Pangbourne") and 7 392 500 shares in New Europe
Property Investments plc ("Nepi") at 30 June 2009. The units in Capital and
Pangbourne were valued at R5,85 and R13,70 respectively. Nepi is accounted for
as an associate.
PROSPECTS
Resilient`s property portfolio and equity investments continue to perform well
despite the difficult macroeconomic environment. The group is well positioned to
achieve growth in distributions for the full financial year similar to that
achieved for this interim period.
Consolidated balance sheet
Reviewed Audited Reviewed
Jun 2009 Dec 2008 Jun 2008
R`000 R`000 R`000
ASSETS
Non-current assets 5 841 841 6 701 358 5 790 055
Investment property 3 269 640 3 889 584 3 572 542
Straight-lining of rental income
adjustment 64 006 57 702 64 727
Investment property under
development 779 688 1 041 163 764 795
Investment in associate company 193 835 192 847 198 800
Investments 1 138 983 1 178 970 784 289
Intangible asset 26 422 26 422 26 422
Loans 367 529 312 800 376 540
Property, plant and equipment 1 738 1 870 1 940
Current assets 1 391 415 184 506 149 607
Investment property held for sale 1 154 720 38 007 23 144
Straight-lining of rental income
adjustment 12 882 96 356
Loans to development partners 155 638 81 949 44 887
Trade and other receivables 63 361 59 348 77 083
Cash and cash equivalents 4 814 5 106 4 137
Total assets 7 233 256 6 885 864 5 939 662
EQUITY AND LIABILITIES
Total equity attributable to equity
holders 3 616 440 3 367 783 2 885 647
Share capital 2 415 2 303 2 232
Share premium 1 798 163 1 608 632 1 498 675
Treasury shares - - (251)
Non-distributable reserves 1 815 852 1 756 838 1 384 981
Retained earnings 10 10 10
Total liabilities 3 616 816 3 518 081 3 054 015
Non-current liabilities 3 187 553 2 904 324 2 775 472
Linked debentures 1 158 993 1 105 407 1 071 409
Treasury debentures - - (101)
Interest-bearing borrowings 1 584 042 1 335 375 1 255 038
BEE instrument 34 493 28 310 16 186
Deferred tax 410 025 435 232 432 940
Current liabilities 429 263 613 757 278 543
Trade and other payables 106 693 117 360 99 850
Linked debenture interest payable 220 957 208 392 177 429
Income tax payable 873 1 817 1 264
Interest-bearing borrowings 100 740 286 188 -
Total equity and liabilities 7 233 256 6 885 864 5 939 662
Consolidated income statement
Restated
Reviewed Audited reviewed
for the for the for the
six months year ended six months
ended Dec 2008 ended
Jun 2009 R`000 Jun 2008
R`000 R`000
Net rental and related income 201 579 290 539 111 553
Recoveries and contractual rental
income 264 641 388 918 143 169
Straight-lining of rental income
adjustment 19 092 18 399 8 233
Rental income 283 733 407 317 151 402
Property operating expenses (82 154) (116 778) (39 849)
Distributable income from
investments 53 374 76 500 29 342
Profit/(loss) on disposal of
investments, investment property
and bond shorts 26 136 (20 525) (6 293)
(Loss)/profit on disposal (17) 1 860 1 299
ofinvestment property
Profit/(loss) on disposal of
investments 4 146 (4 117) (7 592)
Profit/(loss) on realisation of bond
shorts 22 007 (18 268) -
Fair value (loss)/gain oninvestments
and investment property (31 437) 237 994 (388 553)
Fair value gain/(loss) on investment
property 25 598 314 711 (60 530)
Adjustment resulting from straight-
lining of rental income
(19 092) (18 399) (8 233)
Fair value loss on investments (37 943) (58 318) (319 790)
Fair value (loss)/gain on BEE
instrument
(6 183) 28 657 40 781
Other income 12 591 14 088 5 831
Administrative expenses (17 822) (24 386) (14 316)
Income from associate 6 947 7 359 -
Profit/(loss) before net finance
costs 245 185 610 226 (221 655)
Net finance costs (211 323) (479 520) (112 816)
Finance income 42 833 93 420 89 403
Interest from loans 11 162 24 800 10 629
Fair value adjustment on interest
rate derivatives
27 089 - 14 797
Interest on linked units issued
cum distribution 4 582 68 620 63 977
Finance costs (254 156) (572 940) (202 219)
Interest on borrowings (33 199) (59 648) (24 790)
Fair value adjustment on interest
rate derivatives
- (53 681) -
Fair value adjustment on bond
shorts - (73 789) -
Interest to linked debenture
holders
- interim (220 957) (177 429) (177 429)
- final - (208 393) -
Profit/(loss) before income tax
expense 33 862 130 706 (334 471)
Income tax expense 25 152 10 463 103 721
Profit/(loss) for the period
attributable to equity holders
59 014 141 169 (230 750)
Basic earnings per share (cents) 24,44 62,26 (103,38)
Basic earnings per linked
unit(cents) 115,95 232,41 (23,89)
Diluted earnings per share (cents) 23,39 59,42 (98,60)
Diluted earnings per linked unit
(cents) 110,98 221,83 (22,78)
Consolidated statement of changes in equity
Non-
Trea- distri-
Share Share sury butable Retained
capital premium shares reserves earnings Total
Reviewed R`000 R`000 R`000 R`000 R`000 R`000
Balance at
31 December
2007 1 607 584 235 (251) 1 615 731 10 2 201 332
Issue of
units 625 914 440 915 065
Loss for the
period (230 750) (230 750)
Transfer to
non-distribu-
table
reserves
(230 750) 230 750 -
Balance at
30 June 2008 2 232 1 498 675 (251) 1 384 981 10 2 885 647
Issue of
units 71 109 957 110 028
Units
acquired by
The
Resilient
Unit
Purchase
Trust 251 251
Loss on
units issued
by The
Resilient
Unit
Purchase
Trust to
employees (62) (62)
Profit for
the period 371 919 371 919
Transfer to
non-distri-
butable
reserves 371 919 (371 919) -
Balance at
31 December
2008 2 303 1 608 632 - 1 756 838 10 3 367 783
Issue of
units 112 189 531 - - - 189 643
- Issue of 8
988 764
units on 10
March 2009 90 153 531 153 621
- Issue of 2
175 000
units on 11
May 2009 22 36 000 36 022
Profit for
the period 59 014 59 014
Transfer to
non-distri-
butable
reserves 59 014 (59 014) -
Balance at
30 June 2009 2 415 1 798 163 - 1 815 852 10 3 616 440
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 and investments, profits or losses on the disposal of
investment property and investments, the share of post-acquisition reserves of
associates, straight-lining of rental income adjustments and other non-
distributable balances.
Reconciliation of profit/(loss) for the period to headline earnings and
distributable income
Reviewed Audited Restated
for the for the reviewed
six year for the
months ended six months
ended Dec 2008 ended
Jun 2009 R`000 Jun 2008
R`000 R`000
Basic earnings (shares) -
profit/(loss) for the period
attributable to equity holders
59 014 141 169 (230 750)
- interest to linked debenture
holders 220 957 385 822 177 429
Basic earnings (linked units) 279 971 526 991 (53 321)
Adjusted for: (19 851) (227 932) 291 125
- fair value (gain)/loss on
investment property
(6 506) (296 312) 68 763
- fair value loss on investments 37 943 58 318 319 790
- loss/(profit) on disposal of
investment property 17 (1 860) (1 299)
- (profit)/loss on disposal of
investments
(4 146) 4 117 7 592
- (profit)/loss on realisation of
bond shorts (22 007) 18 268 -
- income tax expense (25 152) (10 463) (103 721)
Headline earnings 260 120 299 059 237 804
Adjustment resulting from straight-
lining of rental income
(19 092) (18 399) (8 233)
Fair value loss/(gain) on BEE
instrument 6 183 (28 657) (40 781)
Fair value adjustment on interest
rate derivatives (27 089) 53 681 (14 797)
Fair value adjustment on bond shorts - 73 789 -
Interest paid by BEE SPV(refer to
note 2.2) 11 456 24 824 12 104
Income received by BEE SPV (refer to
note 2.2) (9 893) (18 376) (8 594)
Post-acquisition reserves from
associate (773) - -
Other 45 (99) (74)
Distributable income 220 957 385 822 177 429
Less: distribution declared (220 957) (385 822) (177 429)
Income not distributed - - -
Headline earnings per linked unit
(cents) 107,73 131,89 106,54
Diluted headline earnings per linked
unit (cents) 103,11 125,89 101,62
Basic earnings per share, basic earnings per linked unit and headline
earnings per linked unit are based on the weighted average of 241 457
001 (Dec 2008: 226 751 719; Jun 2008: 223 210 200) shares/linked units
in issue during the period.
Diluted earnings per share, diluted earnings per linked unit and diluted
headline earnings per linked unit are based on the weighted average of
252 267 812 (Dec 2008: 237 562 530; Jun 2008: 234 021 011) shares/linked
units in issue during the period.
Abridged consolidated cash flow statement
Reviewed Audited Reviewed
for the for the for the
six months year six months
ended ended ended
Jun 2009 Dec 2008 Jun 2008
R`000 R`000 R`000
Cash outflow from operating
activities (81 647) (90 144) (19 397)
Cash outflow from investing
activities (247 100) (507 592) (1 375
698)
Cash inflow from financing
activities 328 455 599 702 1 396 092
(Decrease)/increase in cash and cash
equivalents
(292) 1 966 997
Cash and cash equivalents at
beginning of period
5 106 3 140 3 140
Cash and cash equivalents at end of
period
4 814 5 106 4 137
Cash and cash equivalents consist
of:
Current accounts 4 814 5 106 4 137
NOTES
1 PREPARATION AND REVIEW OPINION
The condensed consolidated interim 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 reviewed the financial information set out in this report.
Their unmodified review report is available for inspection at the group`s
registered address.
2 SUMMARY OF FINANCIAL PERFORMANCE
Jun 2009 Dec 2008 Jun 2008 Dec 2007
Distribution per
linked
unit (cents) 91,51 90,49 79,49 75,74
Units in issue 252 267 812 241 104 048 234 021 011 171 544 211
Property operations
Net asset value* R19,92 R19,55 R17,87 R18,46
Gearing ratio** 23,7% 24,3% 21,7% 14,9%
Units in issue 252 267 812 241 104 048 234 021 011 171 544 211
Consolidated
Net asset value* R19,78 R19,42 R17,73 R18,50
Units in issue 241 457 001 230 293 237 223 210 200 160 712 400
* 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. For calculating the gearing ratio in June 2009, the investment
property held for sale was classified as a non-current asset (refer to note 3
for the gearing calculation).
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 with 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
is standing surety for 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 R34 493 000 (Dec 2008: R28 310 000; Jun 2008: R16 186 000). 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
June 2009 R`000 R`000 R`000
Income statement
Fair value loss on BEE instrument (6 183) 6 183 -
Finance costs
- Interest on borrowings (33 199) 11 456 (21 743)
- Interest to linked debenture
holders (220 957) (9 893) (230 850)
Balance sheet
Current assets
- Trade and other receivables 63 361 (933) 62 428
Share capital 2 415 108 2 523
Share premium 1 798 163 142 270 1 940 433
Non-distributable reserves 1 815 852 54 237 1 870 089
Non-current liabilities
- Linked debentures 1 158 993 51 892 1 210 885
- Interest-bearing borrowings (non-
current and current) 1 684 782 (224 756) 1 460 026
BEE instrument 34 493 (34 493) -
Current liabilities
- Trade and other payables 106 693 (84) 106 609
- Linked debenture interest payable 220 957 9 893 230 850
2.3 It is the group`s policy to revalue investment property at year end. The
fair value gain on investment property of R25 598 000 for the six months to June
2009 relates to the revaluation of investment property held for sale. The fair
value loss on investment property of R60 530 000 for the six months to June 2008
relates to the acquisition of Diversified Property Fund Limited. The June 2008
period was restated to be in line with that of December 2008 and to account for
the acquisition as an acquisition of investment property, related assets and
liabilities and not as a business combination.
3 GEARING
Amount Interest % of
Expiry R`million rate borrowings
Interest rate swaps
July 2009 50,0 7,87% 3,17%
August 2009 50,0 9,70% 3,17%
August 2009 50,0 8,59% 3,17%
October 2010 50,0 8,06% 3,17%
November 2010 65,0 10,70% 4,13%
December 2010 100,0 8,64% 6,35%
July 2011 50,0 10,65% 3,17%
August 2011 50,0 9,16% 3,17%
December 2011 50,0 8,55% 3,17%
December 2011 50,0 8,55% 3,17%
September 2012 50,0 8,86% 3,17%
November 2012 50,0 8,53% 3,17%
November 2012 100,0 8,99% 6,35%
April 2013 50,0 8,12% 3,17%
June 2013 100,0 9,51% 6,35%
October 2013 50,0 9,70% 3,17%
February 2014 100,0 8,19% 6,35%
April 2014 50,0 8,26% 3,17%
November 2014 50,0 8,94% 3,17%
November 2015 50,0 8,86% 3,17%
November 2015 100,0 8,20% 6,35%
November 2016 100,0 8,18% 6,35%
Hedged borrowings 1 415,0 89,78%
Variable rate borrowings 160,4 10,22%
Total gearing* 1 575,4 9,57% 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.
Jun 2009 Dec 2008 Jun 2008
Gearing is calculated as follows: R`million R`million R`million
Interest-bearing borrowings 1 684,8 1 621,6 1 255,0
Interest-bearing borrowings of BEE
SPV (224,8) (223,8) (219,4)
Current liabilities 328,5 327,6 278,5
Current liabilities of BEE SPV 9,8 9,8 8,6
Current assets (223,8)* (184,5) (149,6)
Current assets of BEE SPV 0,9 1,6 1,3
Total gearing 1 575,4 1 552,3 1 174,4
* The consideration for the investment property held for sale will be included
in non-current assets as it will not result in a cash
inflow and the investment property held for sale was thus excluded from the
current assets in June 2009.
4 LEASE EXPIRY PROFILE
Based on
Based on contractual
rentable rental
Lease expiry area income
Vacant 2,9% -
December 2009 11,9% 10,5%
December 2010 12,1% 11,8%
December 2011 24,3% 26,7%
December 2012 14,3% 20,1%
December 2013 13,0% 13,6%
>December 2013 21,5% 17,3%
Total 100,0% 100,0%
5 SEGMENTAL ANALYSIS
Jun 2009 Dec 2008 Jun 2008
Rental income R`000 R`000 R`000
Retail 248 396 374 618 151 402
Industrial 33 335 30 219 -
Commercial 2 002 2 480 -
Total 283 733 407 317 151 402
Profit/(loss) before net finance Jun 2009 Dec 2008 Jun 2008
costs R`000 R`000 R`000
Retail 169 277 471 801 111 553
Industrial 37 526 114 471 -
Commercial 1 259 2 439 -
Corporate 37 123 21 515 (333 208)
Total 245 185 610 226 (221 655)
6 PAYMENT OF INTERIM DISTRIBUTION
The board has approved and notice is hereby given of an interim interest
distribution (distribution no 13) of 91,51 cents per linked unit for the six
months ended 30 June 2009.
The last date to trade linked units cum distribution will be Friday,
28 August 2009 and trading will commence ex distribution on Monday,
31 August 2009. The record date to participate in the distribution will
be Friday, 4 September 2009.
Linked unit certificates may not be dematerialised or rematerialised between
Monday, 31 August 2009 and Friday, 4 September 2009, both days inclusive.
Payment of the distribution will be made to linked unitholders on Monday, 7
September 2009. In respect of dematerialised linked unitholders, the
distribution will be transferred to the Central Securities Depository
Participant accounts/broker accounts on Monday, 7 September 2009. Certificated
linked unitholders` distribution payments will be posted on or about Monday, 7
September 2009.
By order of the board
Des de Beer Andries de Lange
Managing director Financial director
12 August 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
Registered address
4th Floor Rivonia Village
Rivonia Boulevard
Rivonia 2191
Transfer office
Link Market Services South Africa
(Proprietary) Limited
11 Diagonal Street Johannesburg 2001
www.resilient.co.za
Sponsor
Java Capital (Proprietary) Limited
Date: 12/08/2009 16:24:06 Produced by the JSE SENS Department.
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