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RES
RES
RES - Resilient Property Income Fund - Condensed Audited Consolidated Financial
Statements for the year ended 31 December 2009
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")
Condensed Audited Consolidated Financial Statements for the year ended
31 December 2009
Directors` commentary
Resilient`s distribution of 194,13 cents per linked unit for the financial year
ended 31 December 2009 is a 14,21% increase on the 169,98 cents distribution for
the 2008 financial year. These results were achieved in a difficult
macroeconomic environment with continued fallout from the global credit crisis
and the South African economy in recession for most of the period.
Resilient`s strategy is to invest in dominant retail centres in non-metropolitan
areas tenanted predominantly by national retailers. These centres outperformed
similar centres in metropolitan areas due to customers having lower levels of
personal debt and the underpin provided by increases in social spending.
Vacancies in the portfolio remained static at 3,2%. Most of the current
vacancies are at The Grove and The Galleria which opened during September and
November respectively. Vacancies are expected to decline during 2010. Arrears
and bad debts were lower than budgeted and no significant deterioration is
anticipated.
Resilient sold four industrial properties (Isando Business Park, City Deep
Industrial Park, Chemserve Spartan and its 25% interest in Montague Business
Park) to Capital Property Fund for R611,5 million and
18 properties to Fortress Income Fund Limited for R665,4 million. Resilient now
has a focused portfolio of 20 retail centres, three further centres under
development and a substantial listed property portfolio. The listed property
investments will be reduced to fund the development pipeline and property
acquisitions.
Resilient is taking advantage of the downturn in the construction cycle to enter
into contracts to develop new malls with the most reputable and competent
construction companies at attractive rates. Construction of the 75 000m2 GLA
Mall of the North and the 33 000m2 GLA Brits Mall commenced in 2009. The board
intends to commence construction of Pick `n Pay Tzaneen and Burgersfort Mall
before the cycle turns, but this is dependent on delivery of services.
1 PROPERTY DEVELOPMENTS
Arbour Town
Resilient owns 10% of the Arbour Town precinct which comprises of Arbour
Crossing (a value centre), The Galleria (a 85 286m2 GLA regional mall) and 102
hectares of additional zoned land for future development. The development faces
a number of challenges including traffic congestion which will only be rectified
in 2011. The Galleria is larger than warranted by current market demand and this
will result in higher vacancies in the short term. The Galleria, however, traded
well over the Christmas period.
We are confident that the Arbour Town developments possess critical mass and are
attractive long term investments. Resilient`s holding is, however, relatively
insignificant and the strategy remains to increase its interest to at least 25%
or to dispose of these investments.
Brits Mall
This 33 000m2 GLA mall will be anchored by Checkers, Edgars, Pick `n Pay and
Woolworths and other tenants include the Foschini, Truworths and Pepkor groups.
Construction of the mall commenced in October 2009 and the mall is scheduled to
open in November 2010. The projected yield of this development is 9,5%.
Resilient has an 80% interest in this development.
The Grove
This 40 000m2 GLA mall is 50% owned with Keystone Investments as Resilient`s
partner. The mall is anchored by Edgars, Pick `n Pay and Woolworths. Letting of
the smaller shops was more difficult than anticipated resulting in vacancies of
6% based on GLA at year end. The majority of the vacant space has since been let
and a number of national tenants (seeking larger units) have requested space in
the future extension.
I`langa Mall
Resilient has a 25% interest in this 45 000m2 GLA development which is on
schedule to open in April 2010. The mall will be anchored by Edgars, Game, Pick
`n Pay and Woolworths and includes all major clothing retailers. Tenant demand
for this centre has been strong and the centre is 95% let with a projected
initial yield of 8,5%.
Mafikeng Mall
Resilient has a 66% interest in this 22 778m2 GLA mall which opened in April
2009. Tenants include Spar, Game, Edgars and the Truworths, Foschini and Pepkor
groups. The mall is already the dominant retail centre in Mafikeng, however,
additional land has been acquired adjacent to the mall with the intention of
increasing the GLA to 30 000m2 once all regulatory approvals have been obtained.
Mall of the North
Construction of this 75 000m2 GLA mall commenced in March 2009 with completion
scheduled for April 2011. Resilient has a 57% interest 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 is the largest retail development in the Limpopo Province, is
currently 92% let and is expected to achieve a yield of 9,5%.
2 EXTENSIONS TO EXISTING PROPERTIES
The 5 000m2 GLA extension to The Crossing, Mokopane to accommodate Game,
Foschini and Maxi`s and the 1 000m2 GLA extension to Murchison Mall to
accommodate Foschini and Pep were completed on schedule and within budget.
A 2 400m2 GLA extension to Nelspruit Plaza to accommodate Markham, Totalsport,
DFX and Ackermans has commenced and is expected to be completed in May 2010 at a
yield of 10%.
The board has approved a 6 400m2 GLA extension to Highveld Mall to accommodate
Dischem, @Home, Capitec and an extension to Pick `n Pay at a forecast yield of
10%.
In response to strong tenant demand, a 6 000m2 GLA extension to Northam Plaza is
being planned. Construction is anticipated to commence in May 2010 with
completion in March 2011.
3 INVESTMENTS
% of
Number units/ Carrying Market
of units/ shares value value
Investment shares in issue (R`000) (R`000)
Capital Property Fund 176 500 000 24,60% 1 153 897 1 253 150
Pangbourne Properties
Limited 41 500 000 9,44% 707 576 707 576
Fortress Income Fund
Limited - A 53 650 000 28,78%
545 650 624 190
Fortress Income Fund
Limited - B 62 900 000 33,75%
New Europe Property
Investments plc ("Nepi") 11 500 000 28,28% 284 317 323 150
2 691 440 2 908 066
Capital, Fortress and Nepi were treated as associates (equity accounted) and
were thus not fair valued at year end.
4 GEARING
Resilient`s gearing at year end increased to 26,4% from 23,5% the previous year.
The gearing remains below the board`s target range of 35% to 40%. Although lower
gearing has benefitted the group through the "credit crisis", this may restrict
growth in distributions in the long term. Resilient is in the fortunate position
of having a solid development pipeline and drawdowns for these developments
(together with limited disposals of listed holdings) will result in gearing
increasing during the 2010 financial year.
5 PROSPECTS
Retail trading conditions are anticipated to gradually improve during 2010 which
should be positive for growth in rentals. The board remains concerned about the
substantial increase in the cost of services, particularly electricity, which
has a direct impact on tenants` cost of occupancy.
The distribution per linked unit is forecast to increase by approximately 10%
compared with the 2009 financial year. This forecast has not been audited or
reviewed by Resilient`s auditors.
By order of the board
Des de Beer Andries de Lange
Managing director Financial director
Johannesburg
3 February 2010
Consolidated statement of financial position
Audited Audited
Dec 2009 Dec 2008
R`000 R`000
ASSETS
Non-current assets 7 790 624 6 701 358
Investment property 4 112 446 3 889 584
Straight-lining of rental revenue adjustment 73 970 57 702
Investment property under development 516 416 1 041 163
Investment in associate companies 1 983 864 192 847
Investments 707 576 1 178 970
Intangible asset 26 422 26 422
Loans 368 459 312 800
Property, plant and equipment 1 471 1 870
Current assets 439 521 184 506
Investment property held for sale - 38 007
Straight-lining of rental revenue adjustment - 96
Loans to development partners 302 216 81 949
Trade and other receivables 126 665 59 348
Cash and cash equivalents 10 640 5 106
Total assets 8 230 145 6 885 864
EQUITY AND LIABILITIES
Total equity attributable to equity holders 4 073 844 3 367 783
Share capital 2 451 2 303
Share premium 1 863 969 1 608 632
Non-distributable reserves 2 207 414 1 756 838
Retained earnings 10 10
Total liabilities 4 156 301 3 518 081
Non-current liabilities 2 924 409 2 904 324
Linked debentures 1 176 355 1 105 407
Interest-bearing borrowings 1 305 900 1 335 375
BEE instrument 65 784 28 310
Deferred tax 376 370 435 232
Current liabilities 1 231 892 613 757
Trade and other payables 104 684 117 360
Linked debenture interest payable 251 495 208 392
Income tax payable 8 081 1 817
Interest-bearing borrowings 867 632 286 188
Total equity and liabilities 8 230 145 6 885 864
Reconciliation of profit for the year to headline earnings and distributable
income
Audited Restated
for the for the
year ended year ended
Dec 2009 Dec 2008
R`000 R`000
Basic earnings (shares) - profit for the year
attributable to equity holders 450 576 141 169
- Interest to linked debenture holders 472 452 385 822
Basic earnings (linked units) 923 028 526 991
Adjusted for: (236 231) (214 812)
- fair value gain on investment property (206 371) (298 172)
- profit on sale of subsidiaries (15 550) -
- fair value adjustments on investment property
of associates (27 322) -
- income tax effect 13 012 83 360
Headline earnings (linked units) 686 797 312 179
Adjustment resulting from straight-lining of
rental revenue (18 043) (18 399)
Fair value (gain)/loss on investments (171 127) 62 435
Fair value loss/(gain) on BEE instrument 37 474 (28 657)
Fair value adjustment on interest rate
derivatives (14 621) 53 681
Fair value adjustment on bond shorts (22 007) 92 057
Interest paid by BEE SPV 21 485 24 824
Income received by BEE SPV (20 987) (18 376)
Fair value adjustments on investments of
associates (33 937) -
Other 219 (99)
Income tax effect 7 199 (93 823)
Distributable income 472 452 385 822
Less: distribution declared (472 452) (385 822)
Income not distributed - -
Headline earnings per linked unit (cents) 282,32 137,67
Diluted headline earnings per linked unit (cents) 270,31 131,41
Basic earnings per share, basic earnings per linked unit and headline
earnings per linked unit are based on the weighted average of 243 265 511
(2008: 226 751 719) 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 254
076 322 (2008: 237 562 530) shares/linked units in issue during the year.
Consolidated statement of changes in equity
Share Share Treasury
capital premium shares
Audited R`000 R`000 R`000
Balance at 31 December 2007 1 607 584 235 (251)
Issue of units 696 1 024 397
Units acquired by The Resilient Unit
Purchase Trust 251
Loss on units issued by The Resilient
Unit Purchase Trust to employees
Total comprehensive income for the
year
Transfer to non-distributable
reserves
Balance at 31 December 2008 2 303 1 608 632 -
Issue of units 148 255 337
- Issue of 8 988 764 units on
10 March 2009 90 153 531
- Issue of 2 175 000 units on
11 May 2009 22 36 000
- Issue of 3 617 020 units on
23 September 2009 36 65 806
Total comprehensive income for the
year
Transfer to non-distributable
reserves
Balance at 31 December 2009 2 451 1 863 969 -
Consolidated statement of changes in equity (continued)
Non-
distributable Retained
reserves earnings Total
Audited R`000 R`000 R`000
Balance at 31 December 2007 1 615 731 10 2 201 332
Issue of units 1 025 093
Units acquired by The Resilient Unit
Purchase Trust 251
Loss on linked units issued by
The Resilient Unit Purchase
Trust to employees (62) (62)
Total comprehensive income for the
year 141 169 141 169
Transfer to non-distributable
reserves 141 169 (141 169) -
Balance at 31 December 2008 1 756 838 10 3 367 783
Issue of units 255 485
- Issue of 8 988 764 units on
10 March 2009 153 621
- Issue of 2 175 000 units on
11 May 2009 36 022
- Issue of 3 617 020 units on
23 September 2009 65 842
Total comprehensive income for the
year 450 576 450 576
Transfer to non-distributable
reserves 450 576 (450 576) -
Balance at 31 December 2009 2 207 414 10 4 073 844
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, the
share of post acquisition reserves of associates, straight-lining adjustments
and other non-distributable balances.
Consolidated statement of comprehensive income
Audited Restated
for the for the
year ended year ended
Dec 2009 Dec 2008
R`000 R`000
Net rental and related revenue 390 049 290 539
Recoveries and contractual rental revenue 530 417 388 918
Straight-lining of rental revenue adjustment 18 043 18 399
Rental revenue 548 460 407 317
Property operating expenses (158 411) (116 778)
Distributable income from investments 88 656 76 500
Fair value gain on investment property and
investments 377 498 235 737
Fair value gain on investment property 224 414 316 571
Adjustment resulting from straight-lining of
rental revenue (18 043) (18 399)
Fair value gain/(loss) on investments 171 127 (62 435)
Fair value (loss)/gain on BEE instrument (37 474) 28 657
Other income 25 617 14 088
Administrative expenses (32 846) (24 386)
Profit on sale of subsidiaries 15 550 -
Income from associates 133 174 7 359
Profit before net finance costs 960 224 628 494
Net finance costs (489 437) (497 788)
Finance income 94 879 93 420
Interest from loans 51 933 24 800
Fair value adjustment on interest rate
derivatives 14 621 -
Fair value adjustment on bond shorts 22 007 -
Interest on linked units issued cum
distribution 6 318 68 620
Finance costs (584 316) (591 208)
Interest on borrowings (172 150) (107 829)
Capitalised interest 60 286 48 181
Fair value adjustment on interest rate
derivatives - (53 681)
Fair value adjustment on bond shorts - (92 057)
Interest to linked debenture holders
- interim (220 957) (177 429)
- final (251 495) (208 393)
Profit before income tax expense 470 787 130 706
Income tax expense (20 211) 10 463
Profit for the year attributable to equity
holders 450 576 141 169
Total comprehensive income for the year 450 576 141 169
Basic earnings per share (cents) 185,22 62,26
Basic earnings per linked unit (cents) 379,43 232,41
Diluted earnings per share (cents) 177,34 59,42
Diluted earnings per linked unit (cents) 363,29 221,83
Abridged consolidated statement of cash flows
Audited Audited
for the for the
year ended year ended
Dec 2009 Dec 2008
R`000 R`000
Cash outflow from operating activities (417 798) (90 144)
Cash outflow from investing activities (508 930) (507 592)
Cash inflow from financing activities 932 262 599 702
Increase in cash and cash equivalents 5 534 1 966
Cash and cash equivalents at beginning of the
year 5 106 3 140
Cash and cash equivalents at end of the year 10 640 5 106
Cash and cash equivalents consist of:
Current accounts 10 640 5 106
Notes
1 PREPARATION AND AUDIT OPINION
The condensed audited consolidated financial statements have been prepared in
accordance with IAS34, the JSE Listings Requirements and the requirements of the
South African Companies Act. The accounting policies adopted are consistent with
those of the prior year and in accordance with IFRS. Headline earnings for 2008
has been restated to include the fair value adjustments on investments and bond
shorts. The group previously disclosed profit or loss on disposal of investment
property and investments separately from the fair value adjustments on these
items. To better reflect the nature of these transactions, these amounts are now
combined into the respective fair value adjustment lines in the statement of
comprehensive income.
Deloitte & Touche has audited the financial information set out in this report.
Their unmodified audit report is available for inspection at the group`s
registered address.
2 SUMMARY OF FINANCIAL PERFORMANCE
Dec 2009 Jun 2009 Dec 2008 Jun 2008
Distribution per
linked unit (cents) 102,62 91,51 90,49 79,49
Units in issue 255 884 832 252 267 812 241 104 048 234 021 011
Property operations
Net asset value* R21,61 R19,92 R19,55 R17,87
Gearing ratio** 23,7% 20,2% 20,3% 17,4%
Units in issue 255 884 832 252 267 812 241 104 048 234 021 011
Consolidated
Net asset value* R21,42 R19,78 R19,42 R17,73
Gearing ratio** 26,4% 23,3% 23,5% 21,1%
Units in issue 245 074 021 241 457 001 230 293 237 223 210 200
*Net asset value includes total equity attributable to equity holders and linked
debentures.
**The gearing ratio is calculated by dividing the total interest-bearing
borrowings by the total assets.
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 R65 784 000 (Dec 2008:R28 310 000). 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
Dec 2009 R`000 R`000 R`000
Statement of comprehensive income
Fair value loss on BEE instrument (37 474) 37 474 -
Financing costs
- Interest on borrowings (172 150) 21 485 (150 665)
- Interest to linked debenture
holders (472 452) (20 987) (493 439)
Statement of financial position
Current assets
- Trade and other receivables 126 665 (1 024) 125 641
Share capital 2 451 108 2 559
Share premium 1 863 969 142 270 2 006 239
Non-distributable reserves 2 207 414 84 463 2 291 877
Non-current liabilities
- Linked debentures 1 176 355 51 892 1 228 247
- Interest-bearing borrowings
(non-current and current) 2 173 532 (224 551) 1 948 981
BEE instrument 65 784 (65 784) -
Current liabilities
- Trade and other payables 104 684 (516) 104 168
- Linked debenture interest payable 251 495 11 094 262 589
3 GEARING
Amount Interest % of
Expiry R`million rate borrowings
Interest rate swaps
October 2010 50,0 8,06% 2,57%
November 2010 65,0 10,70% 3,34%
December 2010 100,0 8,64% 5,13%
July 2011 50,0 10,65% 2,57%
August 2011 50,0 9,16% 2,57%
December 2011 100,0 8,55% 5,13%
September 2012 50,0 8,86% 2,57%
November 2012 50,0 8,53% 2,57%
November 2012 100,0 8,99% 5,13%
April 2013 50,0 8,12% 2,57%
June 2013 100,0 9,51% 5,13%
October 2013 50,0 9,70% 2,57%
February 2014 100,0 8,19% 5,13%
April 2014 50,0 8,26% 2,57%
November 2014 50,0 8,94% 2,57%
November 2015 50,0 8,86% 2,57%
November 2015 100,0 8,20% 5,13%
November 2016 100,0 8,18% 5,13%
Hedged borrowings 1 265,0 64,95%
Variable rate borrowings 684,0 35,05%
Total gearing* 1 949,0 9,65% 100,00%
*Total gearing comprises the level of external interest-bearing borrowings,
excluding those of BEE SPV.
4 LEASE EXPIRY PROFILE
Based on
contractual Based on
rental rentable
Lease expiry income area
Vacant - 3,2%
December 2010 9,8% 7,8%
December 2011 23,1% 20,7%
December 2012 20,5% 14,5%
December 2013 15,0% 15,3%
December 2014 16,5% 15,6%
>December 2014 15,1% 22,9%
Total 100,0% 100,0%
5 SEGMENTAL ANALYSIS
Dec 2009 Dec 2008
Rental revenue R`000 R`000
Retail 506 072 374 618
Industrial 39 034 30 219
Commercial 3 354 2 480
Total 548 460 407 317
Dec 2009 Dec 2008
Profit before net finance costs R`000 R`000
Retail 557 298 471 801
Industrial 36 430 114 471
Commercial 2 692 2 439
Investments and other 363 804 39 783
Total 960 224 628 494
6 PAYMENT OF FINAL DISTRIBUTION
The board has approved and notice is hereby given of a final interest
distribution (distribution no 14) of 102,62 cents per linked unit for the six
months ended 31 December 2009.
The last date to trade linked units cum distribution will be Friday, 19 February
2010 and trading will commence ex distribution on Monday, 22 February 2010. The
record date to participate in the distribution will be Friday, 26 February 2010.
Linked unit certificates may not be dematerialised or rematerialised between
Monday, 22 February 2010 and Friday, 26 February 2010, both days inclusive.
Payment of the distribution will be made to linked unitholders on Monday, 1
March 2010.
In respect of dematerialised linked unitholders, the distribution will be
transferred to the Central Securities Depository Participant accounts/broker
accounts on Monday, 1 March 2010. Certificated linked unitholders` distribution
payments will be posted on or about Monday, 1 March 2010.
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 Daniel Rodriques (Alt) Rory Turner
Barry van Wyk Jeff Zidel# (*Executive director) (#Non-independent)
Company secretary
Nick Hanekom
Business address
4th Floor Rivonia Village Rivonia Boulevard Rivonia 2191
Transfer office
Link Market Services South Africa (Proprietary) Limited
11 Diagonal Street Johannesburg 2001
Sponsor
Java Capital (Proprietary) Limited
4 February 2010
Date: 04/02/2010 16:36:33 Produced by the JSE SENS Department.
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