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RDF - Redefine Properties Limited - Interim results for the six months ended 28
February 2010
REDEFINE PROPERTIES LIMITED
("Redefine" or "the company" or "the group")
(Formerly Redefine Income Fund Limited)
Registration number 1999/018591/06
JSE share code: RDF
ISIN: ZAE000143178
REDEFINE PROPERTIES
INTERIM RESULTS
for the six months ended 28 February 2010
Quarterly distribution of 16.75 cents per linked unit
Total tangible assets R27.3 billion
Market capitalisation R20.1 billion
Corporate action to gain control of Hyprop
Internalisation of property management
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
UNAUDITED REVIEWED AUDITED
Six months Six months Year
28 February 28 February 31 August
2010 2009 2009
R`000 R`000 R`000
REVENUE
Property portfolio 1 223 277 316 000 770 139
Contractual rental income 1 184 996 303 070 741 620
Straight-line rental income
accrual 38 281 12 930 28 519
Listed security portfolio 122 178 169 380 308 203
Trading income 18 340 3 186 39 089
Fee income 116 999 - 14 328
Total revenue 1 480 794 488 566 1 131 759
Operating costs (277 368) (65 913) (130 413)
Administration costs (58 004) (30 941) (92 863)
Net operating income 1 145 422 391 712 908 483
Changes in fair values of
properties, listed
securities and intangibles 1 059 827 (600 196) (389 841)
Interest in associates (25 024) (8 016) (3 938)
Income/(loss) from operations 2 180 225 (216 500) 514 704
Interest paid (292 886) (170 469) (350 129)
Interest received 58 305 33 762 71 835
Foreign exchange gain/(loss) 49 600 (682) 7 244
Income before debenture interest 1 995 244 (353 889) 243 654
Debenture interest (891 595) (239 367) (711 354)
Profit/(loss) before taxation 1 103 649 (593 256) (467 700)
Taxation (157 854) 98 974 176 949
Profit/(loss) for the period 945 795 (494 282) (290 751)
Other comprehensive income
Exchange differences on
translating foreign operations (49 486) - (807)
Deferred profit on residential
property realised (9 488) - -
Revaluation of property, plant
and equipment, net of deferred taxation - - 549
Other comprehensive income for
the period (58 974) - (258)
Total comprehensive income for
the period 886 821 (494 282) (291 009)
Profit/(loss) attributable to:
Redefine shareholders 936 762 (494 282) (288 104)
Non controlling interests 9 033 - (2 647)
945 795 (494 282) (290 751)
Total comprehensive income
attributable to:
Redefine shareholders 877 788 (494 282) (288 362)
Non controlling interests 9 033 - (2 647)
886 821 (494 282) (291 009)
Reconciliation of earnings,
headline earnings
and distributable earnings
Profit/(loss) attributable to
Redefine shareholders 936 762 (494 282) (288 104)
Changes in fair values of
properties, net of deferred taxation(133 049) 179 813 205 028
Changes in fair value of properties (194 593) 221 530 380 619
Deferred taxation 61 544 (41 717) (175 591)
Headline profit/(loss) to
shareholders 803 713 (314 469) (83 076)
Debenture interest 891 595 239 367 711 354
Headline earnings/(loss)
attributable to linked
unitholders 1 695 308 (75 102) 628 278
Changes in fair values of listed
securities and financial securities,
net of deferred taxation (768 938) 321 409 7 864
Changes in fair values of listed
securities and
financial instruments (865 234) 378 666 9 222
Deferred taxation 96 296 (57 257) (1 358)
Adjustment of consolidated
foreign earnings to
anticipated dividends 5 532 - 1 429
Straight-line rental income
accrual (38 281) (12 930) (28 519)
Foreign exchange (gain)/loss (49 520) 682 (7 244)
Fair value adjustment of
associates and minorities 35 705 5 308 (10 610)
Capital write offs included in
administration costs 2 593 - 14 930
Pre-acquisition income on Hyprop
units acquired in 2009 9 196 - 105 226
Distributable earnings 891 595 239 367 711 354
Quarter ended 30 November 443 651 116 111 116 111
Quarter ended 28 February 447 944 123 256 123 256
Four months ended 30 June - - 160 769
Two months ended 31 August - - 311 218
Total distributions 891 595 239 367 711 354
Actual number of linked units in
issue (`000) 2 674 295 * 893 161 * 2 648 662
Weighted number of linked units
in issue (`000) 2 648 662 * 893 161 * 1 042 258
Earnings per linked unit (cents) 69.03 (28.54) 40.61
Headline earnings per linked unit
(cents) 64.01 (8.41) 60.28
Distribution per linked unit (cents) 33.50 26.80 56.55
*Excludes 5 876 770 treasury units.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
UNAUDITED REVIEWED AUDITED
Six months Six months Year
28 February 28 February 31 August
2010 2009 2009
R`000 R`000 R`000
ASSETS
Non-current assets 31 018 683 9 523 392 25 129 646
Investment property 21 033 471 5 854 953 18 234 776
Fair value of property portfolio
for accounting purposes 20 448 715 5 431 273 17 555 250
Straight-line rental income accrual 584 756 239 096 546 475
Property under development - 184 584 133 051
Listed securities portfolio 3 547 159 3 398 496 2 807 448
Goodwill and intangibles 4 754 428 - 3 258 326
Interest in associates and joint
ventures 428 849 143 726 201 387
Loans receivable 1 182 222 75 931 560 600
Guarantees fee receivable 40 408 19 865 36 040
Property, plant and equipment 32 146 30 421 31 069
Current assets 978 919 423 596 640 129
Properties held for trading 163 207 124 498 186 908
Listed securities held for trading - 102 378 9 316
Trade and other receivables 353 238 81 315 211 996
Guarantees fee receivable 20 127 - 20 127
Listed security income 102 277 109 705 100 628
Cash and cash equivalents 340 070 5 700 111 154
Non-current assets held for sale 96 700 - 173 200
Total assets 32 094 302 9 946 988 25 942 975
EQUITY AND LIABILITIES
Share capital and reserves 14 763 417 3 910 115 13 200 268
Share capital and premium 11 602 596 2 088 943 11 602 835
Reserves 2 472 072 1 815 466 1 594 332
Non controlling interests 688 749 5 706 3 101
Non-current liabilities 15 869 033 5 790 303 12 036 910
Debenture capital 4 767 591 1 607 689 4 767 591
Interest-bearing liabilities 8 824 894 3 480 928 5 460 099
Interest rate swaps 95 219 28 735 46 210
Financial guarantee contract 6 323 12 373 9 838
Deferred taxation 2 175 006 660 578 1 753 172
Current liabilities 1 461 852 246 570 705 797
Trade and other payables 541 107 106 244 374 271
Interest-bearing liabilities 17 319 - 20 308
Bank overdraft 11 831 17 070 -
Linked unitholders for
distribution 891 595 123 256 311 218
Total equity and liabilities 32 094 302 9 946 988 25 942 975
Net asset value per linked unit
(excluding deferred taxation)
(cents) 785.90 691.74 744.57
The group`s share in associate`s
post-acquisition reserves (12 267) 8 679 12 757
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
UNAUDITED REVIEWED AUDITED
Six months Six months Year
28 February 28 February 31 August
2010 2009 2009
R`000 R`000 R`000
Balance at beginning
of the period 13 200 268 4 404 397 4 404 397
Issue of shares - - 9 514 815
Issue expenses written off (239) - (923)
Total comprehensive income for
the period 886 821 (494 282) (291 009)
Effect of acquiring controlling
interest in ApexHi - - (427 054)
Non controlling interests on
acquisition of subsidiaries 676 567 - 42
Total share capital and reserves 14 763 417 3 910 115 13 200 268
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
UNAUDITED REVIEWED AUDITED
Six months Six months Year
28 February 28 February 31 August
2010 2009 2009
R`000 R`000 R`000
Net cash outflow from operating
activities
Cash generated from operations 1 102 949 375 357 1 034 422
Net financing costs (234 581) (140 108) (271 050)
Linked unit distributions paid (311 218) (254 819) (1 002 916)
Payments to non-controlling
interests (899) - (280)
Net cash movement from
operating activities 556 251 (19 570) (239 824)
Net cash movement from
investing activities (763 277) 50 024 480 928
Net cash movement from
financing activities 435 942 (200 019) (288 145)
Net movement in cash and cash
equivalents 228 916 (169 565) (47 041)
Opening cash and cash
equivalents 111 154 158 195 158 195
Closing cash and cash
equivalents 340 070 (11 370) 111 154
SEGMENTAL ANALYSIS
Office Retail Industrial
R`000 R`000 R`000
Six months ended 28 February 2010
Revenue (excluding straight-line
rental income accrual) 531 231 474 357 166 382
Straight-line rental accrual 3 257 25 001 10 023
Revenue 534 488 499 358 176 405
Operating costs (130 595) (112 432) (31 935)
Net property income ## 403 893 386 926 144 470
Non-current assets
- Investment property 7 861 492 7 982 115 2 964 075
Year ended 31 August 2009
Revenue (excluding straight-line
rental income accrual) 363 556 222 502 155 562
Straight-line rental accrual 8 051 30 163 (9 695)
Revenue 371 607 252 665 145 867
Operating costs (68 054) (38 465) (23 894)
Net property income * 303 553 214 200 121 973
Non-current assets
- Investment property 8 066 451 7 535 407 2 632 918
Ciref Total
R`000 R`000
Six months ended 28 February 2010
Revenue (excluding straight-line rental
income accrual) 13 026 1 184 996
Straight-line rental accrual - 38 281
Revenue 13 026 1 223 277
Operating costs (2 406) (277 368)
Net property income ## 10 620 945 909
Non-current assets
- Investment property 2 225 789 21 033 471
Year ended 31 August 2009
Revenue (excluding straight-line rental
income accrual) - 741 620
Straight-line rental accrual - 28 519
Revenue - 770 139
Operating costs - (130 413)
Net property income * - 639 726
Non-current assets
- Investment property - 18 234 776
## Includes Ciref net property income for February 2010 only.
* Includes ApexHi net property income for August 2009 only.
COMMENTARY
Introduction
Redefine is one of the largest listed property funds in South Africa, with a
diversified portfolio of 400 properties valued at R18.9 billion and R4.1
billion of South African and international listed investments, including a
70.7% interest in Ciref Plc ("Ciref") which has been consolidated in the group
results.
The results for the six months ended 28 February 2010 represent the
consolidated earnings for the full period of Redefine, incorporating ApexHi
Properties Limited ("ApexHi") and Madison Property Fund Managers Limited
("Madison") for the full period, and Ciref with effect from 1 February 2010.
The results of Corovest Fund Managers Limited ("Corovest"), the asset
management company of Ciref, have been consolidated for the five months from 1
October 2009.
Financial results
Redefine has declared a distribution of 16.75 cents per linked unit for the
three months ended 28 February 2010 which together with the distribution of
16.75 cents for the three months to 30 November 2009, results in a total
distribution of 33.50 cents per linked unit for the period under review.
Included in distributable income is a R9.2 million distribution received on
Hyprop Investments Limited ("Hyprop") units acquired by Redefine at the end of
the 2009 financial year. In terms of accounting practice, this income has been
accounted for as a reduction to the cost of the investment in Hyprop and has
not been included as revenue in the statement of comprehensive income.
Contractual rental income comprises 82.1% of total revenue, income from listed
securities 8.5% and trading and fee income 9.4%. Fee income includes asset
management and consulting fees, guarantee fees, transaction fees and
commissions. Operating costs are 20.9% of rental income, excluding the
amortisation of tenant installations and lease commissions.
Changes in fair values
The property portfolio was internally valued at 28 February 2010 resulting in
an increase in value of R156.2 million, which includes an increase in value of
properties owned by Ciref of R29.0 million.
The South African listed portfolio increased in value by R973.2 million during
the period under review. Ciref`s 13% interest in Cromwell Group ("Cromwell"), a
listed Australian property trust, decreased in value by R23.4 million at 28
February 2010.
Amortisation of intangibles and interest rate swaps amount to R46.2 million.
South African property portfolio
At 28 February 2010, the property portfolio comprised 400 properties with a
total gross lettable area ("GLA") of 3.6 million m2 valued at R18.9 billion.
SEE PRESS RELEASE FOR GRAPH
At 28 February 2010, 9.0% of the GLA was vacant, comprising office 12.0%,
industrial 8.6% and retail 6.0%.
Arrears at 28 February 2010 amounted to R24.3 million (August 2009: R36.2
million) against which a provision for doubtful debts of R9.1 million (August
2009: R7.0 million) has been raised.
Property acquisitions and disposals
During the period under review, Redefine took transfer of two properties with a
GLA of 40 671m2 for an aggregate purchase price of R205.0 million at an average
yield of 10.8% and disposed of five properties with a GLA of 35 285m2 for an
aggregate price of R81.3 million at an average yield of 5.2%.
SEE PRESS RELEASE FOR GRAPH
Land for development and trading
At 28 February 2010, Redefine held land valued at R177.7 million for future
development, a small trading portfolio of commercial sectional title space and
a 50% joint venture interest in Oasis Retirement Village.
Listed securities portfolio
The listed securities portfolio of Redefine valued at R4.1 billion constituted
17.8% of Redefine`s investment in property and listed securities at 28 February
2010. The portfolio comprises:
Fund Value Holding
R`000 %
Hyprop 2 765 645 33.3
Ciref * 1 019 252 70.7
Sycom 133 226 3.1
Oryx 138 411 26.4
4 056 534
* Consolidated by Redefine. On consolidation, this investment has been
eliminated and Ciref`s 13% holding in Cromwell, valued at R509.9 million, is
reflected as a listed security of the group.
Hyprop
Redefine has entered into an agreement to acquire an additional 19 686 558
Hyprop units for R984 million, equating to R50 per Hyprop unit. The acquisition
is conditional on the approval by 31 August 2010, of the Competition
Authorities and, to the extent necessary, of the Redefine linked unitholders.
If the transaction is approved, the acquisition will increase Redefine`s stake
in Hyprop from 33.3% to 45.2% and will trigger a mandatory offer by Redefine to
all Hyprop unitholders at a price of R50 per unit.
Ciref
During the period, Redefine increased its interest in Ciref, the vehicle
earmarked for Redefine`s international expansion, from 28.6% to 70.7% by the
exchange of its 19.2% interest in Wichford Plc ("Wichford") and by increasing
its interest in Ciref pursuant to a placement of shares by Ciref. The cost of
the additional interest acquired was R636.9 million and the market value of the
Wichford interest exchanged was R248.5 million.
The interest in Ciref has been acquired utilising foreign investment capacity
of South African institutions (asset swap).
The interest in Ciref has been consolidated with effect from 1 February 2010.
As it is Redefine`s policy to distribute its share of Ciref income to the
extent of dividends received, an adjustment has been made to Redefine`s
distributable income.
Corovest
Redefine`s interest in Corovest was increased during the period from 34.0% to
75.9% at a cost of R178 million. The investment in Corovest, which was
previously equity accounted, has been consolidated. As it is Redefine`s policy
to only distribute its share of Corovest income to the extent of dividends
received, an adjustment has been made to Redefine`s distributable income.
Business Combinations
On 1 October 2009, the group acquired an additional 41.9% interest in Corovest
and with effect 1 February 2010, Redefine increased its interest in Ciref by
42.1%.
The acquired businesses contributed revenues of R54.9 million and net profit
after tax of R40.4 million, including the effect of fair value adjustments, to
the group for the period under review. These amounts have been calculated using
the group`s accounting policies together with consequential tax effects.
If the acquisition had occurred on 1 September 2009, the contribution to group
revenue and net profit after taxation would have been R113.8 million and R92.8
million respectively.
Details of the net assets acquired and goodwill are as follows:
Purchase consideration: Ciref Corovest Total
R`000 R`000 R`000
Cash paid 636 876 178 014 814 890
The carrying amounts of the
assets and liabilities, on the dates
acquired, were as follows:
Investment properties 2 253 680 - 2 253 680
Listed securities portfolio 499 495 - 499 495
Intangible assets 88 431 544 023 632 454
Investment in associates and
joint ventures 298 083 - 298 083
Loans receivable 481 247 136 096 617 343
Property, plant and equipment - 658 658
Other financial assets 17 940 - 17 940
Trade and other receivables 125 371 33 635 159 006
Cash and cash equivalents 562 772 2 352 565 124
Minority shareholders (573 484) (102 369) (675 853)
Interest-bearing borrowings (2 702 126) (252 132) (2 954 258)
Interest rate swaps (57 873) - (57 873)
Trade and other payables (157 790) (39 867) (185 797)
Acquirees` carrying amount at
acquisition 835 746 322 396 1 170 002
Goodwill 650 369 - 638 509
1 486 115 322 396 1 808 511
Value of interest already owned
by Redefine (600 756) (144 382) (745 138)
Value of shares in Wichford
swapped for Ciref shares (248 483) - (248 483)
Purchase consideration settled in
cash 636 876 178 014 814 890
The business combinations have been accounted for using provisional figures in
terms of IFRS 3 - "Business Combinations". The excess of the purchase price
over Ciref`s net assets has been reflected as goodwill. A detailed assessment
of the assets, liabilities and contingent liabilities acquired will be
completed by the 2010 financial year-end and the required adjustments will be
processed.
Prior year acquisition
In 2009, Redefine acquired all of the ApexHi A, B and C linked units it did not
already own and all of the linked units in Madison. The excess of the purchase
price over the net assets acquired was reflected as goodwill in Redefine`s
annual financial statements at 31 August 2009. In the current period, the
purchase price allocation has been completed. This has resulted in the
recognition of an intangible asset, "the right to manage property", as follows:
28 February 2010
R`000
Right to manage property 942 835
Deferred taxation thereon (263 994)
Net asset recognised 678 841
Goodwill initially recognised in 2009 3 248 835
Net goodwill after purchase price allocation 2 569 994
The intangible asset will be amortised over a period of 15 years.
Interest in associates and joint ventures
This includes Ciref`s 19.2% interest in Wichford, valued at R255.1 million,
together with its interest in joint venture property investments valued at
R30.3 million. It further includes Redefine`s 49% interest in two Enterprise
Development Initiatives, Dipula Property Investment Trust and Mergence Africa
Property Investment Trust, valued at R143.4 million.
Borrowings
As at 28 February 2010, borrowings of the group amounted to R8.8 billion,
including Ciref and Corovest borrowings of R2.7 billion. Excluding the assets
and borrowings of Ciref and Corovest, which are ring-fenced, Redefine`s
borrowings represent 26.6% of the value of its property and listed securities
portfolios. Redefine`s current all inclusive interest rate is 9.31% and the
interest rates are fixed on 58% of borrowings for an average period of 6 years.
Linked units and liquidity
During the six months under review, 529.2 million linked units traded for R3.8
billion, equivalent to 20% of the weighted number of linked units in issue.
Property management
A decision has been taken to internalise Redefine`s South African property
management function in anticipation of the termination of the agreement with
Broll Property Group. A general manager and financial manager have been
appointed from internal resources to set up the business and recruit the
necessary management and staff. In addition to creating the potential for
significant annual savings in the future, the strategy is intended to increase
service delivery and streamline business processes and efficiency.
Prospects
The forecast distributions per linked unit for the six months ending 31 August
2010 have been based on distributable earnings for the six months ended 28
February 2010, allowing for contractual growth in income reduced to take
account of the failure of Queensgate which was due to take occupation of a
newly developed hotel in Cape Town, lower than expected dividends from Ciref
and reduced fee income. As a result, distributions for the year ending
31 August 2010 are expected to be between 65.5 cents and 67.5 cents per linked
unit. This forecast has not been reviewed or reported on by the auditors.
Debenture interest distribution
Unitholders are advised that interest distribution number 40 of 16.75 cents per
linked unit has been declared for the three months ended 28 February 2010. The
distribution will be payable to Redefine linked unitholders in accordance with
the abbreviated timetable set out below:
May 2010
Last day to trade "cum" interest distribution Friday, 21
Linked units "ex" interest distribution Monday, 24
Record date Friday, 28
Payment date Monday, 31
There may be no dematerialisation or rematerialisation of linked units between
Monday, 24 May 2010 and Friday, 28 May 2010, both days inclusive.
Basis of preparation
The results for the six months ended 28 February 2010 have not been reviewed or
audited by the company`s auditors. These results have been prepared in
accordance with International Financial Reporting Standards (IFRS), the JSE
Limited Listings Requirements and the requirements of the South African
Companies Act, 1973. This report has been prepared in terms of IAS 34 -
"Interim Financial Reporting". The accounting policies used are consistent with
those applied in the annual financial statements for the year ended 31 August
2009.
On behalf of the Board
D Gihwala W E Cesman
Chairman Joint CEO
5 May 2010
Registered office: 3rd Floor, Redefine Place, 2 Arnold Road, Rosebank, 2196
(PO Box 1731, Parklands, 2121)
Directors: D Gihwala (Chairman), W E Cesman* (Joint CEO), M Wainer*
(Joint CEO), B Azizollahoff*, J A Finn*, M N Flax*, G J Heron, G G L Leissner,
H K Mehta, M K Khumalo, B Nackan, D Perton, D H Rice* *Executive British
Transfer secretaries: Computershare Investor Services (Proprietary) Limited
Sponsor: Java Capital (Proprietary) Limited
Company secretary: Probity Business Services (Proprietary) Limited
Website: www.redefine.co.za
Date: 05/05/2010 16:00:02 Produced by the JSE SENS Department.
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