| Wed 3 Nov 2010, 16:34 | | RDF - Redefine Properties Limited - Audited results for the year ended 31 August |
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RDF - Redefine Properties Limited - Audited results for the year ended 31 August
2010
REDEFINE PROPERTIES LIMITED
(formerly Redefine Income Fund Limited)
Registration number 1999/018591/06
JSE share code: RDF ISIN: ZAE000143178
("Redefine" or "the company" or "the group")
AUDITED RESULTS
for the year ended 31 August 2010
- 17,6% increase in distributions to 66,5 cents per linked unit
- 9,2% increase in NAV to 824 cents per linked unit
- Total assets exceed R30 billion
- Market capitalisation R21,2 billion
- Hyprop investment increased to 46%
- Controlling interest in international operations
- Listing of Redefine Properties International
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
31 August 31 August
2010 2009
R000 R000
Revenue
Property portfolio 2 657 976 770 139
Contractual rental income 2 502 135 741 620
Straight line rental income accrual 155 841 28 519
Listed securities 266 098 308 203
Fee income 193 364 14 328
Trading income 19 963 39 089
Total revenue 3 137 401 1 131 759
Operating costs (537 639) (138 913)
Administration costs (135 904) (84 363)
Net operating income 2 463 858 908 483
Changes in fair values of properties, listed
securities and financial instruments 1 359 269 (389 841)
Amortisation of intangibles (108 142) -
Impairment of financial assets (64 143) -
Interest in associates (62 931) (3 938)
Income from operations 3 587 911 514 704
Interest paid (843 211) (350 129)
Interest received 283 905 71 835
Foreign exchange gain 28 967 7 244
Income before debenture interest 3 057 572 243 654
Debenture interest (1 777 412) (711 354)
Profit/(loss) before taxation 1 280 160 (467 700)
Taxation (161 478) 176 949
Profit/(loss) for the year 1 118 682 (290 751)
Other comprehensive income/(expense)
Exchange differences on translating foreign
operations (133 364) (807)
Deferred profit on residential property realised (9 488) -
Revaluation of property, plant and equipment
(net of deferred taxation) 345 549
Other comprehensive income for the year, net of
taxation (142 507) (258)
Total comprehensive income for the year 976 175 (291 009)
Profit/(loss) attributable to:
Redefine shareholders 1 135 752 (288 104)
Non-controlling interest (17 070) (2 647)
1 118 682 (290 751)
Total comprehensive income attributable to:
Redefine shareholders 996 788 (288 362)
Non-controlling interest (20 613) (2 647)
976 175 (291 009)
Reconciliation of earnings, headline profit and
distributable earnings
Profit/(loss) for the year attributable to Redefine
shareholders 1 135 752 (288 104)
Changes in fair values of properties (net of
deferred taxation) (216 503) 205 028
Changes in fair value of properties (295 909) 380 619
Deferred taxation 79 406 (175 591)
Headline profit/(loss) to shareholders 919 249 (83 076)
Debenture interest 1 777 412 711 354
Headline earnings attributable to linked unitholders 2 696 661 628 278
Changes in fair values of listed securities and
financial instruments (net of deferred taxation) (981 191) 7 864
Changes in fair values of listed securities and
financial instruments (1 063 360) 9 222
Deferred taxation 82 169 (1 358)
Amortisation of intangibles 108 142 -
Impairment of financial assets 64 143 -
Align consolidated foreign profits with anticipated
dividends 17 505 1 429
Straight line rental income accrual (155 841) (28 519)
Foreign exchange gain (28 967) (7 244)
Fair value adjustment of associates and minorities 34 534 (10 610)
Fee income from foreign subsidiary 7 533 -
Capital write-offs included in administration costs 5 697 14 930
Pre-acquisition income on Hyprop units acquired in 2009 9 196 -
Pre-acquisition income of ApexHi and Madison - 105 226
Distributable earnings 1 777 412 711 354
Quarter ended 30 November 443 651 116 111
Quarter ended 28 February 447 944 123 256
Quarter ended 31 May (2009: 4 months ended 30 June) 429 487 160 769
Quarter ended 31 August (2009: 2 months ended
31 August) 456 330 311 218
Total distributions 1 777 412 711 354
Actual number of linked units in issue (000)* 2 684 295 2 648 662
Weighted number of linked units in issue (000)* 2 661 915 1 042 258
Earnings per linked unit (cents) 109,44 40,61
Headline earnings per linked unit (cents) 101,31 60,28
Distribution per linked unit (cents) 66,50 56,55
*Excludes 5 876 766 treasury units.
Extracts of comprehensive income South African Foreign Total
Distributable income R000 R000 R000
Net property income (excluding
straight line rental accrual) 1 875 841 88 655 1 964 496
Listed security portfolio 230 624 35 474 266 098
Fee income 100 351 93 013 193 364
Trading 19 963 - 19 963
Total revenue 2 226 779 217 142 2 443 921
Administration costs (84 149) (51 755) (135 904)
Interest in associates (excluding
fair value adjustments) (864) 25 435 24 571
Net finance costs (491 816) (67 490) (559 306)
Net distributable profit before taxation 1 649 950 123 332 1 773 282
Taxation 2 243 (2 147) 96
Non-controlling interest (excluding
fair value adjustments) 1 862 (37 759) (35 897)
Net profit before distributable
adjustments 1 654 055 83 426 1 737 481
Distribution adjustments: 22 426 17 505 39 931
Align consolidated foreign profits
with anticipated dividends - 17 505 19 472
Fee income from offshore subsidiary 7 533 - 7 533
Capital write-offs included in
administration costs 5 697 - 5 697
Pre-acquisition income on Hyprop
units acquired in 2009 9 196 - 9 196
Distributable income 1 676 481 100 931 1 777 412
South African fee and trading income amounting to R120,3 million (5,4% of South
African gross revenue) is non-recurring income.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
31 August 31 August
2010 2009
R000 R000
Net cash outflow from operating activities
Cash generated from operations 2 180 214 1 034 422
Net financing costs (559 306) (271 050)
Linked unit distributions paid (1 632 300) (1 002 916)
Payments to non-controlling interests (14 522) (280)
Net cash outflow from operating activities (25 914) (239 824)
Net cash (outflow)/inflow from investing activities(3 115 670) 480 928
Net cash inflow/(outflow) from financing activities 3 678 382 (288 145)
Net movement in cash and cash equivalents 536 798 (47 041)
Cash and cash equivalents at beginning of the year 111 154 158 195
Translation effects on cash and cash equivalents of
foreign operations (40 972) -
Cash and cash equivalents at end of the year 606 980 111 154
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 August 31 August*
2010 2009
R000 R000
ASSETS
Non-current assets 33 122 788 25 393 640
Investment property 21 650 529 18 234 776
Fair value of property portfolio for accounting
purposes 20 553 136 17 555 250
Straight line rental income accrual 702 316 546 475
Property under development 395 077 133 051
Listed securities portfolio 5 099 485 2 807 448
Goodwill and intangibles 4 682 809 3 522 320
Interest in associates and joint ventures 346 227 201 387
Loans receivable 1 107 016 560 600
Other financial assets 4 115 -
Guarantee fees receivable 21 349 36 040
Property, plant and equipment 211 258 31 069
Current assets 1 497 974 640 129
Properties held for trading 128 317 186 908
Listed securities held for trading - 9 316
Trade and other receivables 572 277 211 996
Guarantee fees receivable 37 037 20 127
Listed security income 153 363 100 628
Cash and cash equivalents 606 980 111 154
Non-current assets held for sale 351 359 173 200
Total assets 34 972 121 26 206 969
EQUITY AND LIABILITIES
Share capital and reserves 15 111 062 13 200 268
Share capital and premium 11 788 301 11 602 835
Reserves 2 669 922 1 594 332
Non-controlling interests 652 839 3 101
Non-current liabilities 16 781 037 12 300 904
Debenture capital 4 831 731 4 767 591
Interest-bearing liabilities 9 562 035 5 460 099
Interest rate swaps 199 933 46 210
Financial guarantee contract 8 596 9 838
Deferred taxation 2 178 742 2 017 166
Current liabilities 3 080 022 705 797
Trade and other payables 636 386 374 271
Interest-bearing liabilities 1 987 306 20 308
Linked unitholders for distribution 456 330 311 218
Total equity and liabilities 34 972 121 26 206 969
Net asset value per linked unit (excluding deferred
taxation) (cents) 824.11 754.53
The group`s share in associate`s post-acquisition
reserves 37 287 12 757
* Restated - refer to prior year business combination.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
31 August 31 August
2010 2009
R000 R000
Balance at beginning of the year 13 200 268 4 404 397
Issue of shares 185 466 9 514 815
Issue expenses written off - (923)
Total comprehensive income for the year 976 175 (291 009)
Effect of acquiring controlling interest in ApexHi - (427 054)
Changes in ownership interests in subsidiary 70 204 -
Transactions with minorities (76 017) 42
Non-controlling interests on acquisition of
subsidiaries 754 966 -
Total share capital and reserves 15 111 062 13 200 268
SEGMENTAL ANALYSIS
Office Retail Industrial
R000 R000 R000
Year ended 31 August 2010
Revenue (excluding straight line
rental income accrual) 1 182 781 898 132 321 043
Operating costs (275 691) (192 631) (57 793)
Net property income 907 090 705 501 263 250
Non-current assets
- Investment property portfolio 8 427 703 7 374 696 3 194 705
Year ended 31 August 2009 *
Revenue (excluding straight line
rental income accrual) 363 556 222 502 155 562
Operating costs (72 554) (40 965) (25 394)
Net property income 291 002 181 537 130 168
Non-current assets
- Investment property portfolio 8 004 718 7 464 090 2 632 917
Foreign Total
R000 R000
Year ended 31 August 2010
Revenue (excluding straight line
rental income accrual) 100 179 2 502 135
Operating costs (11 524) (537 639)
Net property income 88 655 1 964 496
Non-current assets
- Investment property portfolio 2 258 348 21 255 452
Year ended 31 August 2009 *
Revenue (excluding straight line
rental income accrual) - 741 620
Operating costs - (138 913)
Net property income - 602 707
Non-current assets
- Investment property portfolio - 18 101 725
Includes results of Redefine International from the effective date of
acquisition, being 1 February 2010.
* Includes results of ApexHi from the effective date of acquisition, being 1
August 2009.
Basis of preparation
The annual financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS), the AC 500 series issued by
the South African Institute of Chartered Accountants, JSE Listings Requirements
and the requirements of the South African Companies Act. 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.
These condensed financial statements have been derived from the consolidated
financial statements which have been audited by the company`s auditors, PKF
(Jhb) Inc. Their unqualified audit opinion is available for inspection at the
company`s registered office.
COMMENTARY
Introduction
Redefine is one of the largest listed South African property companies with a
diversified portfolio of 397 properties in South Africa valued at R19,0 billion
and a R5,2 billion portfolio of listed property investments, including a
controlling interest in Redefine Properties International Limited ("RIN"). RIN,
a property loan stock company which listed on the JSE Limited on 7 September
2010, owns 82% of Redefine International Plc ("Redefine International")
(formerly Ciref Plc), a property and development company listed on the AIM
market of the London Stock Exchange.
Redefine is focused on achieving long-term growth in distributions and capital
for its unitholders. The company seeks to meet its objectives through the
superior management of its property portfolio and funding requirements, the
strategic management of its listed investments and its ability to identify and
execute value-adding trading and corporate opportunities.
Financial results
Redefine has declared a final distribution of 17,0 cents per linked unit for the
three months ended 31 August 2010, which together with total distributions of
49,5 cents for the nine months to 31 May 2010, results in a total distribution
of 66,5 cents per linked unit for the year under review.
The distribution of 66,5 cents represents an increase of 17,6% over the
distribution of 56,55 cents for the year ended 31 August 2009. While this
improvement is significant and is in line with the company`s latest
communication to unitholders, the distribution is below the forecast of 68 cents
to 71 cents projected in its 2009 final results announcement. The primary
reasons for the lower distribution are the reduced contribution from the trading
operations, the yield differential on the increased investment in Redefine
International and challenging general economic conditions, including rand
strength.
Contractual rental income comprises 84% of total revenue, income from listed
securities 9% and trading and fee income 7%. Operating costs are 21% of
contractual rental income. Redefine International contributed 2,2 cents and
Redefine International Fund Managers Limited ("RIFM"), the fund manager of
Redefine International, contributed 1,5 cents to the distribustion for the year.
Changes in fair values
The property portfolio was valued at 31 August 2010 resulting in a net increase
in value of R295,9 million. The South African portfolio increased by R320,7
million while the property portfolio owned by Redefine International decreased
by R24,8 million since 1 February 2010, the effective date of acquisition.
Property valuations in the United Kingdom and Europe are stabilising and
indications are that values may strengthen in the medium term.
The investment in listed securities increased in value by R605,5 million during
the year under review.
South African property portfolio
At 31 August 2010, the portfolio comprised 397 properties with a total gross
lettable area ("GLA") of 3,65 million mSquared valued at R19,0 billion.
Geographical spread by lettable area
%
Eastern Cape 2.9%
Free State 1.2%
Gauteng 57.0%
KwaZulu-Natal 14.0%
Limpopo 2.6%
Mpumalanga 2.9%
North West 3.2%
Northern Cape 0.4%
Western Cape 15.9%
100.0%
Sectoral spread by lettable area
%
Retail 32.8%
Office 37.4%
Industrial 29.8%
100.0%
Lease expiry profile
RETAIL OFFICE INDUSTRIAL TOTAL
M2 % M2 % M2 % M2 %
Monthly 36 072 3 137 757 12 24 379 2 198 208 6
Sep 10 - Aug 154 363 14 230 371 19 182 153 19 566 887 17
11
Sep 11 - Aug 211 939 19 211 127 18 188 234 19 611 300 19
12
Sep 12 - Aug 216 311 20 230 213 19 253 468 26 699 992 21
13
Sep 13 & 491 414 44 373 423 32 326 781 34 1 191 618 37
Beyond
1 110 099 1 182 892 100 975 015 3 268 006
100 100 100
At 31 August 2010, vacancy levels as a percentage of GLA were as follows:
Office 13,4% (2009: 10,8%)
Retail 7,4% (2009: 6,9%)
Industrial 10,1% (2009: 7,2%)
Total 10,4% (2009: 8,5%)
At 31 August 2010, arrears amounted to R39,7 million (2009: R36,2 million)
against which a provision for possible bad debts of R9,7 million (2009: R7,0
million) has been raised.
Property acquisitions and disposals
During the year under review, Redefine took transfer of four properties with a
GLA of 61 411m2 for an aggregate purchase price of R514 million at an average
yield of 11,2% and disposed of 11 properties with a GLA of 72 869 mSquared for
an aggregate price of R230,3 million at an average yield of 5,7%. Subsequent to
year end, Redefine has entered into an agreement to acquire two properties with
a GLA of 24 792 m2 for R500 million at an average yield of 9,3%.
Listed securities portfolio
The listed securities portfolio comprises:
2010
Value Holding
Fund R000 %
Hyprop 3 959 361 45,7
Cromwell 851 206 19,9
Redefine International -* -
Sycom 144 067 3,1
Oryx 144 851 26,4
Wichford - -
5 099 485
2009
Value Holding
Fund R000 %
Hyprop 2 345 183 33,3
Cromwell - -
Redefine International 129 777 28,7
Sycom 117 552 3,2
Oryx 152 862 26,4
Wichford 62 116 11,0
2 807 490
*Redefine International is consolidated by Redefine with effect 1 February
2010.
Hyrop Investments Limited ("Hyprop")
In August 2010, Redefine acquired an additional 19,7 million Hyprop units at R50
per unit, increasing its stake in the retail focused fund from 33,3% to 45,2%.
This transaction triggered a mandatory offer by Redefine to all remaining Hyprop
unitholders in terms of which Redefine acquired 926 593 linked units at R50 per
unit, thereby increasing its stake marginally to 45,7%.
The transaction has further enhanced Redefine`s position as Hyprop`s shareholder
of reference.
International
Redefine International
During the year, Redefine increased its interest in Redefine International from
28,6% to 70,7% by exchanging its 19,2% interest in Wichford, at a market value
of R248,5 million, and by subscribing for additional shares in Redefine
International at a cost of R636,9 million. In August 2010, Redefine exchanged
its entire holding in Redefine International for a 100% interest in RIN which
was diluted to 57,2% after the listing of RIN on 7 September 2010.
The investments in Redefine International and RIN have been consolidated from
the effective dates of acquisition, being 1 February 2010 and 31 August 2010,
respectively. The results and financial position of Redefine International were
consolidated at a GBP:ZAR closing rate of R11,38 and an average exchange rate of
R11,44 for the period.
RIFM
Effective 1 October 2009, Redefine increased its interest in RIFM from 34,0% to
75,9% at a cost of R178 million and in May 2010, further increased its
investment to 76,0% at a cost of R29,8 million. RIFM, which was previously
equity-accounted, has now been consolidated at the same closing and average
exchange rates used for Redefine International.
Accounting for Redefine International and RIFM
The estimated fair value of the assets and liabilities acquired in the initial
acquisitions on the effective dates were as follows:
Redefine
International RIFM Total
R000 R000 R000
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 2 723 - 2 723
Trade and other receivables 140 588 33 635 174 223
Cash and cash equivalents 562 772 2 352 565 124
Non-controlling interests (652 710) (102 369) (755 079)
Interest-bearing borrowings (2 622 900) (252 132) (2 875 032)
Interest rate swaps (57 873) - (57 873)
Trade and other payables (157 790) (39 867) (197 657)
Acquirees` carrying amount at
acquisition 835 746 322 396 1 158 142
Goodwill 650 369 - 650 369
1 486 115 322 396 1 808 511
Value of shares in Wichford swapped (248 483) - (248 483)
Value of investment already owned
by Redefine (600 756) (144 382) (745 138)
Purchase consideration settled in
cash 636 876 178 014 814 890
The acquired businesses contributed revenues of R217,1 million and a net loss
after taxation and fair value adjustments of R6,2 million to the group for the
year under review.
If the acquisitions had occurred on 1 September 2009, the contribution to group
revenue and net loss after taxation and fair value adjustments would have been
R265,7 million and R124,8 million, respectively.
The business combinations have been accounted for using provisional figures in
terms of IFRS 3 - "Business Combinations". The excess of the purchase price over
Redefine International`s net assets has been reflected as goodwill. A detailed
assessment of the assets, liabilities and contingent liabilities acquired will
be completed by the 2011 financial year end and the required adjustments
processed.
Distribution adjustment
It is Redefine`s policy to distribute its share of income from foreign
subsidiaries to the extent of dividends received. Accordingly, an adjustment of
R17,5 million has been made to Redefine`s distributable income for the year to
align the consolidated results from its foreign subsidiaries for the year with
the anticipated dividends.
Interest in associates and joint ventures
This includes Redefine International`s 21,7% interest in Wichford Property
Management valued at R215,4 million, together with its interest in joint venture
property investments of R23,2 million. It also includes Redefine`s 49% interest
in two Enterprise Development Initiatives, Dipula Property Investment Trust and
Mergence Africa Property Investment Trust, valued at R147,6 million.
Borrowings
Excluding Redefine International and RIFM, Redefine`s borrowings at 31 August
2010 represented 34,7% of the value of its property and listed securities
portfolio. Redefine`s average cost of borrowing is 9,25%. Interest rates are
fixed on 48% of Redefine`s borrowings with a further 8% (R1,0 billion) hedged in
terms of interest rate swaps commencing in the 2011 financial year. Redefine
International and RIFM borrowings of R3,1 billion (GBP 275,7 million) are
negotiated directly by Redefine International and RIFM and have no recourse to
Redefine`s South African balance sheet.
Contingencies
At year end, Redefine had guarantees and suretyships in respect of its BEE
initiatives amounting to R459,3 million.
Linked units and liquidity
35 633 803 linked units were issued during the year to fund the acquisition of
investment properties. The linked units were issued at an average price of
R7,01.
During the year, 1,078 billion Redefine linked units traded for R7,966 billion,
equivalent to 40% of the weighted number of linked units in issue.
Prior year business combination
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:
R000
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 effect on the prior year balance sheet is an increase in the deferred
taxation liability of R264 million, which arises on the recognition of the
intangible asset, and a corresponding increase in goodwill. The comparatives
have been restated accordingly.
The intangible asset will be amortised over a period of 15 years.
Property management
The property management function, which was previously outsourced, is in the
process of being brought in-house. While this project is not without challenges,
Redefine believes that internalised property management will enhance its tenant
offering and will result in increased efficiencies and economies. The benefit of
this initiative will be realised in the second half of the 2011 financial year.
Changes to the Board
Wolf Cesman resigned as joint CEO of Redefine on 10 May 2010.
Janys Finn will be resigning as financial director of Redefine with effect from
31 December 2010. The Board has embarked on a process of appointing a suitable
replacement and expects to make an announcement in this regard in the near
future.
Prospects
The company anticipates economic conditions remaining at levels similar to those
currently being experienced with a possibility of moderate growth in the latter
half of the 2011 financial year. Reasonable growth is expected from the core
property portfolio, primarily as a result of contractual rental escalations, and
the key investments in Hyprop and RIN. Fee and trading income are largely
unpredictable and difficult to forecast. Based on this, and assuming fee and
trading income are at a level similar to that of 2010, the company is
anticipating a modest increase in distributions for the year ending 31 August
2011. This forecast has not been reviewed as reported on by the group`s
auditors.
Debenture interest distribution
Unitholders are advised that interest distribution number 42 of 17,0 cents per
linked unit has been declared for the three months ended 31 August 2010. The
distribution will be payable to Redefine linked unitholders in accordance with
the abbreviated timetable set out below:
2010
Last day to trade "cum" interest distribution Friday, 19 November
Linked units "ex" interest distribution Monday, 22 November
Record date Friday, 26 November
Payment date Monday, 29 November
There may be no dematerialisation or rematerialisation of linked units between
Monday, 22 November 2010 and Friday, 26 November 2010, both days inclusive.
By order of the Board
Redefine Properties Limited
3 November 2010
Directors
D Gihwala (Chairman), M Wainer* (CEO), B Azizollahoff*#
J A Finn*, M N Flax*, G J Heron, M K Khumalo, G G L Leissner
H K Mehta, B Nackan, D Perton#, D H Rice*
*Executive #British
Registered office
3rd Floor, Redefine Place, 2 Arnold Road, Rosebank, 2196
(PO Box 1731, Parklands, 2121)
Transfer secretaries
Computershare Investor Services (Proprietary) Limited
Sponsor
Java Capital
Company secretary
Probity Business Services (Proprietary) Limited
www.redefine.co.za
Date: 03/11/2010 16:34:38 Produced by the JSE SENS Department.
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