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RES
RES
RES - Resilient Property Income Fund - Condensed reviewed interim financial
report for the six months ended 30 June 2010
RESILIENT PROPERTY INCOME FUND
Incorporated in the Republic of South Africa
Reg no 2002/016851/06
Share code RES
ISIN ZAE000043642
("Resilient" or "the group")
CONDENSED REVIEWED INTERIM FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 JUNE
2010
Directors` commentary
The distribution of 100,60 cents per linked unit achieved for the six months to
June 2010 is a 9,93% increase on the distribution for the comparable prior year
interim period. Retail sales growth remained muted, however, centres in non-
metropolitan areas continued to outperform. The period`s growth in distribution
was further supported by the strong performance of the listed property holdings.
Vacancies declined marginally from 3,2% to 2,9% as vacant space at The Grove and
The Galleria was reduced.
Resilient made further progress with its long-term strategy of gradually
reducing its listed property holdings and investing the proceeds in the pipeline
of new regional mall developments. In addition, Resilient was successful in
acquiring two existing retail developments, both of which are well located but
will require extensive redevelopment in the future.
PROPERTY ACQUISITIONS
Park Central Bloemfontein
Resilient acquired Park Central in Bloemfontein from Murray & Roberts for R73,8
million and at a projected forward yield of 10,5%. The property is well situated
in the Bloemfontein CBD adjacent to the taxi rank and is linked to the railway
station by an aerial pedestrian bridge. A bus rank is situated on the roof of
the building. The intention is to extensively redevelop the property in the
future. Transfer has not yet been effected.
Circus Triangle Mthatha
Resilient has agreed to acquire this 20 800 m2 GLA mall in the centre of the
Mthatha CBD at a forward yield of 9,5% and a cost of R225 million. The mall is
anchored by Shoprite and Woolworths and includes a number of national clothing
retailers. The intention is to extend the mall to accommodate additional
national clothing retailers. The acquisition is subject to Competition
Commission approval.
PROPERTY DEVELOPMENTS
I`langa Mall
This 45 000 m2 GLA regional mall in Nelspruit opened on schedule in April 2010.
The mall is anchored by Edgars, Game, Pick `n Pay and Woolworths, includes all
major national clothing retailers and is fully let. Resilient has agreed to
acquire an additional 25% interest in the mall at a forward yield of 8%, which
will increase Resilient`s undivided share in the mall to 50%. This acquisition
remains subject to Competition Commission approval.
Brits Mall
Construction of a 33 000 m2 GLA mall anchored by Checkers, Edgars, Pick `n Pay
and Woolworths commenced in October 2009. After construction commenced, Game
committed to a 4 500 m2 store and the size of the development has been increased
to a GLA of 37 500 m2. The mall is currently 85% let and is scheduled to open in
October 2010. Resilient has an 80% interest in the development.
Highveld Mall
The extension to Highveld Mall to accommodate Dischem, Capitec, @Home and
Standard Bank, as well as the extension to Pick `n Pay, is within budget and on
schedule to open in November 2010. Edgars has exercised its option to extend its
premises by 943 m2.
Nelspruit Plaza
The 2 400 m2 GLA extension to Nelspruit Plaza to accommodate Ackermans, DFX,
John Craig, Markham, Sterns, Totalsport and Truworths Man was completed within
budget and on schedule in May 2010.
Northam Plaza
Construction of a 6 000 m2 extension to Northam Plaza to accommodate Mr Price,
John Craig, Standard Bank, Totalsport and an extension to Shoprite commenced in
May 2010. As there is no additional land cost, these extensions are anticipated
to achieve a forward yield of 13%. Subsequent to the reporting period, the
Shoprite store was destroyed by fire. The damage is fully covered by insurance
and no financial loss to Resilient is anticipated. Resilient and Shoprite
Checkers are working closely together to ensure that the store is rebuilt in
time for Christmas.
Mall of the North
Resilient has a 57% interest in this 75 000 m2 GLA regional mall being developed
in Polokwane. The mall is 98% let and will be anchored by Checkers, Edgars,
Game, Pick `n Pay and Woolworths and includes all national clothing retailers.
Construction is currently ahead of schedule for the planned April 2011 opening.
The mall is being developed on a forward yield of 9,5%.
Investment Number of % of Carrying Market
units/shares units/shares value value
in issue (R`000) (R`000)
Capital Property 141 230 000 19,7% 1 030 979 1 030
Fund 979
Pangbourne
Properties 37 430 000 8,5% 655 399 655 399
Limited
Fortress Income Fund
Limited
- A linked units 33 300 000 16,5% 365 258 329 670
- B linked units 62 900 000 31,2% 132 090
New Europe Property
Investments plc
(Nepi) 15 130 000 24,4% 368 931 431 205
2 420 567 2 579
343
Fortress and Nepi were treated as associates (equity accounted) and were thus
not fair valued at June 2010. Resilient`s holding in Capital is no longer equity
accounted. Nepi acquired its investment advisor, Nepi Investment Management
Limited. The purchase price of EUR6,3 million was settled through the issue of 2
450 748 shares in Nepi. Resilient received 1 531 717 shares in payment for its
62,5% shareholding in Nepi Investment Management Limited.
FUNDING
At the reporting period Resilient had R1 151 million in approved facilities
available for acquisitions and the development pipeline. Of this, R344 million
will be utilised to repay expiring facilities.
Resilient`s developments were financed from the proceeds of the sale of listed
property holdings and as a result the gearing remained unchanged compared with
December 2009. Gearing at 26,4% remains below the board`s target range of 35% to
40%.
PROSPECTS
The second half of the current financial year will be negatively impacted on by
increased bank margins on the new facilities, particularly the replacement of
the Conduit facility, as well as the relatively low acquisition yield on the 25%
additional interest in I`langa Mall. The results will be positively impacted on
by significantly lower rates achieved on interest rate swaps as well as the
attractive yields achieved on the Park Central Bloemfontein acquisition and the
Highveld Mall extension.
The board is confident that the forecast growth in distributions of
approximately 10% for the 2010 financial year will be achieved. This forecast
has not been audited or reviewed by Resilient`s auditors.
By order of the board
Des de Beer
Managing director
Andries de Lange
Financial director
Johannesburg
11 August 2010
Consolidated statement of financial position
Reviewed Audited Reviewed
Jun 2010 Dec 2009 Jun 2009
R`000 R`000 R`000
ASSETS
Non-current assets 7 950 595 7 790 624 5 841 841
Investment property 4 175 683 4 112 446 3 269 640
Straight-lining of rental revenue
adjustment 84 792 73 970 64 006
Investment property under development 751 661 516 416 779 688
Investment in associate companies 734 189 1 983 864 193 835
Investments 1 686 378 707 576 1 138 983
Intangible asset 26 422 26 422 26 422
Loans 490 307 368 459 367 529
Property, plant and equipment 1 163 1 471 1 738
Current assets 540 051 439 521 1 391 415
Investment property held for sale - - 1 154 720
Straight-lining of rental revenue
adjustment - - 12 882
Loans to development partners 448 133 302 216 155 638
Trade and other receivables 82 858 126 665 63 361
Cash and cash equivalents 9 060 10 640 4 814
Total assets 8 490 646 8 230 145 7 233 256
EQUITY AND LIABILITIES
Total equity attributable to equity
holders 4 196 108 4 073 844 3 616 440
Share capital 2 471 2 451 2 415
Share premium 1 904 106 1 863 969 1 798 163
Non-distributable reserves 2 289 521 2 207 414 1 815 852
Retained earnings 10 10 10
Total liabilities 4 294 538 4 156 301 3 616 816
Non-current liabilities 3 297 407 2 924 409 3 187 553
Linked debentures 1 186 003 1 176 355 1 158 993
Interest-bearing borrowings 1 650 753 1 305 900 1 584 042
BEE instrument 83 017 65 784 34 493
Deferred tax 377 634 376 370 410 025
Current liabilities 997 131 1 231 892 429 263
Trade and other payables 142 306 104 684 106 693
Linked debenture interest payable 248 566 251 495 220 957
Income tax payable 12 221 8 081 873
Interest-bearing borrowings 594 038 867 632 100 740
Total equity and liabilities 8 490 646 8 230 145 7 233 256
Consolidated statement of comprehensive income
Reviewed Audited Reviewed
for the six for the for the six
months year months
ended ended ended
Jun 2010 Dec 2009 Jun 2009
R`000 R`000 R`000
Net rental and related revenue 190 025 390 049 201 579
Recoveries and contractual rental
revenue 257 436 530 417 264 641
Straight-lining of rental revenue
adjustment 10 822 18 043 19 092
Rental revenue 268 258 548 460 283 733
Property operating expenses (78 233) (158 411) (82 154)
Distributable income from
investments 73 835 88 656 53 374
Fair value gain/(loss) on
investment property and
investments 96 597 377 498 (27 308)
Fair value gain on investment
property - 224 414 25 581
Adjustment resulting from straight-
lining of rental revenue (10 822) (18 043) (19 092)
Fair value gain/(loss) on
investments 107 419 171 127 (33 797)
Fair value loss on BEE instrument (17 233) (37 474) (6 183)
Other income 15 139 25 617 12 591
Administrative expenses (16 083) (32 846) (17 822)
Profit on sale of subsidiaries 36 868 15 550 -
Income from associates 44 653 133 174 6 947
Profit before net finance costs 423 801 960 224 223 178
Net finance costs (329 042) (489 437) (189 316)
Finance income 36 004 94 879 64 840
Interest from loans 35 260 51 933 11 162
Fair value adjustment on
interest rate derivatives - 14 621 27 089
Fair value adjustment on bond
shorts - 22 007 22 007
Interest on linked units issued
cum distribution 744 6 318 4 582
Finance costs (365 046) (584 316) (254 156)
Interest on borrowings (104 644) (172 150) (65 367)
Capitalised interest 28 245 60 286 32 168
Fair value adjustment on interest
rate derivatives (40 081) - -
Interest to linked debenture
holders
- interim (248 566) (220 957) (220 957)
- final - (251 495) -
Profit before income tax expense 94 759 470 787 33 862
Income tax expense (12 652) (20 211) 25 152
Profit for the period attributable
to equity holders 82 107 450 576 59 014
Total comprehensive income for the
period 82 107 450 576 59 014
Basic earnings per share (cents) 33,23 185,22 24,44
Basic earnings per linked unit
(cents) 133,83 379,43 115,95
Diluted earnings per share (cents) 31,84 177,34 23,39
Diluted earnings per linked unit
(cents) 128,22 363,29 110,98
Reconciliation of profit for the period to headline earnings and distributable
income
Reviewed Audited Restated
for the six for the for the six
months year months
ended ended ended
Jun 2010 Dec 2009 Jun 2009
R`000 R`000 R`000
Basic earnings (shares)- profit for the
period attributable to equity
holders 82 107 450 576 59 014
- interest to linked debenture holders 248 566 472 452 220 957
Basic earnings (linked units) 330 673 923 028 279 971
Adjusted for: (28 211) (236 231) (26 461)
- fair value loss/(gain) on
investment property 10 822 (206 371) (6 489)
- profit on sale of subsidiaries (36 868) (15 550) -
- fair value adjustments on
investment property of associates (7 305) (27 322) 4 072
- income tax effect 5 140 13 012 (24 044)
Headline earnings (linked units) 302 462 686 797 253 510
Adjustment resulting from straight-
lining of rental revenue (10 822) (18 043) (19 092)
Fair value (gain)/loss on investments (107 419) (171 127) 33 797
Fair value loss on BEE instrument 17 233 37 474 6 183
Fair value adjustment on interest
rate derivatives 40 081 (14 621) (27 089)
Fair value adjustment on bond shorts - (22 007) (22 007)
Interest paid by BEE SPV 10 746 21 485 11 456
Income received by BEE SPV (10 876) (20 987) (9 893)
Fair value adjustments on
investments of associates (351) (33 937) (4 845)
Other - 219 45
Income tax effect 7 512 7 199 (1 108)
Distributable income 248 566 472 452 220 957
Less: distribution declared (248 566) (472 452) (220 957)
Income not distributed - - -
Headline earnings per linked unit
(cents) 122,41 282,32 104,99
Diluted headline earnings per
linked unit (cents) 117,28 270,31 100,49
Basic earnings per share, basic earnings per linked unit and headline earnings
per linked unit are based on the weighted average of 247 084 021 (Dec 2009: 243
265 511; Jun 2009: 241 457 001) 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 257 894
832(Dec 2009: 254 076 322; Jun 2009: 252 267 812) shares/linked units in issue
during the period.
Consolidated statement of changes in equity
Non-
distribu-
Share Share table Retained
capital premium reserves earnings Total
Reviewed R`000 R`000 R`000 R`000 R`000
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
Total comprehensive
income for the period 59 014 59 014
Transfer to non-
distributable
reserves 59 014 (59 014) -
Balance at 30 June 2009 2 415 1 798 163 1 815 852 10 3 616 440
Issue of units 36 65 806 65 842
Total comprehensive
income for the period 391 562 391 562
Transfer to non-
distributable reserves 391 562 (391 562) -
Balance at
31 December 2009 2 451 1 863 969 2 207 414 10 4 073 844
Issue of units -
2 010 000 units
on 8 March 2010 20 40 137 40 157
Total comprehensive
income for the period 82 107 82 107
Transfer to non-
distributable reserves 82 107 (82 107) -
Balance at 30 June 2010 2 471 1 904 106 2 289 521 10 4 196 108
Non-distributable reserves comprise those profits and losses that are not
distributable to unitholders and are made up of 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.
Abridged consolidated statement of cash flows
Reviewed Audited Reviewed
for the six for the for the six
months year months
ended ended ended
Jun 2010 Dec 2009 Jun 2009
R`000 R`000 R`000
Cash outflow from operating activities (178 574) (417 798) (81 647)
Cash inflow/(outflow) from investing
activities 55 930 (508 930) (247 100)
Cash inflow from financing activities 121 064 932 262 328 455
(Decrease)/increase in cash and
cash equivalents (1 580) 5 534 (292)
Cash and cash equivalents at
beginning of period 10 640 5 106 5 106
Cash and cash equivalents at end
of period 9 060 10 640 4 814
Cash and cash equivalents consist of:
Current accounts 9 060 10 640 4 814
Notes
1 PREPARATION AND REVIEW OPINION
The condensed consolidated interim financial statements have been prepared in
accordance with IAS34, Interim Financial Reporting, the AC500 standards as
issued by the Accounting Practices Board or its successor, the JSE Listings
Requirements and the requirements of the South African Companies Act. The
accounting policies adopted are consistent with those of the prior period and
in accordance with IFRS. Headline earnings for June 2009 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 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 2010 Dec 2009 Jun 2009 Dec 2008
Distribution per linked
unit (cents) 100,60 102,62 91,51 90,49
Units in issue 257 894 832 255 884 832 252 267 812 241 104 048
Property operations
Net asset value* R22,02 R21,61 R19,92 R19,55
Gearing ratio** 23,8% 23,7% 20,2% 20,3%
Units in issue 257 894 832 255 884 832 252 267 812 241 104 048
Consolidated
Net asset value* R21,78 R21,42 R19,78 R19,42
Gearing ratio** 26,4% 26,4% 23,3% 23,5%
Units in issue 247 084 021 245 074 021 241 457 001 230 293 237
*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 R83 017 000 (Dec 2009: R65 784 000; Jun 2009: R34 493 000). 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
Jun 2010 R`000 R`000 R`000
Statement of comprehensive income
Fair value loss on BEE instrument (17 233) 17 233 -
Finance costs
- Interest on borrowings (104 644) 10 746 (93 898)
- Interest to linked debenture holders (248 566) (10 876) (259 442)
Statement of financial position
Current assets
- Trade and other receivables 82 858 (1 057) 81 801
Share capital 2 471 108 2 579
Share premium 1 904 106 142 270 2 046 376
Non-distributable reserves 2 289 521 101 566 2 391 087
Non-current liabilities
- Linked debentures 1 186 003 51 892 1 237 895
- Interest-bearing borrowings
(non-current and current) 2 244 791 (224 120) 2 020 671
BEE instrument 83 017 (83 017) -
Current liabilities
- Trade and other payables 142 306 (632) 141 674
- Linked debenture interest payable 248 566 10 876 259 442
3 GEARING
Amount Interest % of
Expiry R`million rate borrowings
Interest rate swaps
October 2010 50,0 8,06% 2,47%
November 2010 65,0 10,70% 3,22%
December 2010 100,0 8,64% 4,95%
March 2011 100,0 7,10% 4,95%
July 2011 50,0 10,65% 2,47%
August 2011 50,0 9,16% 2,47%
December 2011 100,0 8,55% 4,95%
March 2012 100,0 7,41% 4,95%
July 2012 (effective July 2010) 100,0 6,64% 4,95%
September 2012 50,0 8,86% 2,47%
November 2012 50,0 8,53% 2,47%
November 2012 100,0 8,99% 4,95%
March 2013 100,0 7,77% 4,95%
April 2013 50,0 8,12% 2,47%
June 2013 100,0 9,51% 4,95%
July 2013 (effective July 2010) 100,0 6,98% 4,95%
October 2013 50,0 9,70% 2,47%
February 2014 100,0 8,19% 4,95%
March 2014 100,0 8,07% 4,95%
April 2014 50,0 8,26% 2,47%
July 2014 (effective July 2010) 100,0 7,21% 4,95%
November 2014 50,0 8,94% 2,47%
February 2015 50,0 8,47% 2,47%
March 2015 100,0 8,29% 4,95%
November 2015 50,0 8,86% 2,47%
November 2015 100,0 8,20% 4,95%
November 2016 100,0 8,18% 4,95%
February 2017 100,0 8,76% 4,95%
Hedged borrowings 2 215,0 109,59%
Variable rate borrowings (194,3) (9,59%)
Total gearing* 2 020,7 10,24% 100,00%
* Total gearing comprises the level of external interest-bearing borrowings,
excluding those of BEE SPV.
4 LEASE EXPIRY PROFILE
Based on
Based on contractual
Lease expiry rentable area rental
income
Vacant 2,9% -
December 2010 5,3% 6,4%
December 2011 20,0% 22,3%
December 2012 14,4% 19,9%
December 2013 16,0% 16,9%
December 2014 14,6% 15,3%
>December 2014 26,8% 19,2%
Total 100,0% 100,0%
5 SEGMENTAL ANALYSIS
Jun 2010 Dec 2009 Jun 2009
Rental revenue R`000 R`000 R`000
Retail 268 258 506 072 248 396
Industrial - 39 034 33 335
Commercial - 3 354 2 002
Total 268 258 548 460 283 733
Jun 2010 Dec 2009 Jun 2009
Profit before net finance costs R`000 R`000 R`000
Retail 179 203 557 298 169 277
Industrial - 36 430 37 526
Commercial - 2 692 1 259
Corporate 244 598 363 804 15 116
Total 423 801 960 224 223 178
6 PAYMENT OF INTERIM DISTRIBUTION
The board has approved and notice is hereby given of an interim interest
distribution (distribution no 15) of 100,60 cents per linked unit for the six
months ended 30 June 2010.
The last date to trade linked units cum distribution will be Friday,
27 August 2010 and trading will commence ex distribution on Monday,
30 August 2010. The record date to participate in the distribution will be
Friday, 3 September 2010.
Linked unit certificates may not be dematerialised or rematerialised between
Monday, 30 August 2010 and Friday, 3 September 2010, both days inclusive.
Payment of the distribution will be made to linked unitholders on Monday, 6
September 2010. In respect of dematerialised linked unitholders, the
distribution will be transferred to the Central Securities Depository
Participant accounts/broker accounts on Monday, 6 September 2010. Certificated
linked unitholders` distribution payments will be posted on or about Monday, 6
September 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
12 August 2010
Date: 12/08/2010 12:27:01 Produced by the JSE SENS Department.
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