| Wed 14 Mar 2001, 0:00 | | Richway Retail Properties Interim Results |
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RICHWAY RETAIL PROPERTIES
INTERIM RESULTS & DISTRIBUTION ANNOUNCEMENT FOR THE 6 MONTHS ENDED 31 DECEMBER
2000 & CAUTIONARY ANNOUNCEMENT
Consolidated Balance Sheet
Unaudited Unaudited Audited
6 months 6 months Year end
31 Dec 2000 31 Dec 1999 30 June 2000
R'000 R'000 R'000
ASSETS
Non-current assets
Investment in fixed properties 567 551 345 798 355 129
Investments-unlisted 3 373 3 373 3 373
Current assets 6 093 40 937 13 422
TOTAL ASSETS 577 017 390 108 371 924
EQUITY AND LIABILITIES
Capital and reserves
Share capital 653 653 653
Distributable reserves 427 235 354
Ordinary shareholders' interest 1 080 888 1 007
Debentures 280 620 280 620 280 620
Linked unitholders' interest 281 700 281 508 281 627
Outside shareholders' interest - 3 235 -
Long term liabilities
Interest bearing 231 450 10 000 28 168
Current liabilities
Interest bearing 34 672 63 450 31 482
Non-interest bearing 29 195 31 915 30 647
63 867 95 365 62 129
TOTAL EQUITY AND LIABILITIES 577 017 390 108 371 924
Consolidated Income Statement
Unaudited Unaudited Audited
6 months 6 months Year end
31 Dec 2000 31 Dec 1999 30 June 2000
R'000 R'000 R'000
Revenue 36 257 29 007 62 927
Net rental from properties 26 851 19 624 38 787
Interest received 701 904 1 672
Net income 27 552 20 528 40 459
Interest paid (10 930) (2 059) (3 251)
Depreciation (178) (188) (360)
Profit before debenture interest 16 444 18 281 36 848
Debenture interest (16 244) (18 193) (36 549)
Profit before taxation 200 88 299
Taxation (46) (51) (50)
Profit after taxation 154 37 249
Ordinary dividends (81) (91) (183)
Retained profit for the period (73) (54) 66
Headline earnings per linked unit
(cents) 1.2 25,41 27,92 56,35
Earnings per linked unit (cents) 25,11 27,92 56,35
Distribution per linked unit (cents)
Dividends 0,12 0,14 0,28
Interest 24,88 27,86 55,97
25,00 28,00 56,25
Linked units in issue ('000) 65 302 65 302 65 302
Consolidated Cash Flow Statement
Unaudited Unaudited Audited
6 months 6 months Year end
31 Dec 2000 31 Dec 1999 30 June 2000
R'000 R'000 R'000
OPERATING ACTIVITIES
Cash received from tenants 33 635 30 335 64 942
Cash paid to suppliers and employees (8 514) (19 239) (44 466)
Cash generated (utilised) by
operating activities 25 121 11 096 20 476
Interest received 701 904 1 672
Interest paid (29 288) (19 622) (39 961)
Dividends paid (91) (91) (183)
Taxation paid (113) (209) (216)
NET CASH OUTFLOW FROM OPERATING
ACTIVITIES (3 670) (43 922) (18 212)
INVESTING ACTIVITIES
Investments to maintain operations
Proceeds from disposal of property,
plant and equipment - - 36 106
Investment to expand operations
Acquisition of fixed assets (212 795) (42 409) (51 224)
NET CASH OUTFLOW FROM INVESTING
ACTIVITIES (212 795) (6 409) (15 118)
FINANCING ACTIVITIES
Increase in interest bearing
liabilities 203 282 9 970 24 903
Increase in short term borrowing 11 619 - -
NET CASH INFLOW FROM FINANCING
ACTIVITIES 214 901 9 970 24 903
Net decrease in cash and cash
equivalents (1 564) (40 361) (8 427)
Cash and cash equivalents at
beginning of period (1 489) 6 938 6 938
CASH AND CASH EQUIVALENTS AT END
OF PERIOD (3 053) (33 423) (1 489)
Statement of changes in Equity
Unaudited Unaudited Audited
6 months 6 months Year end
31 Dec 2000 31 Dec 1999 30 June 2000
R'000 R'000 R'000
Share capital
Balance at beginning and end
of period 653 653 653
Distributable reserves
Balance at beginning of period 354 289 288
Profit attributable to ordinary
shareholders 154 37 249
Dividends (81) (91) (183)
Balance at end of period 427 235 354
1 080 888 1 007
1. NOTES TO THE FINANCIAL STATEMENTS
1.1. This interim report has been prepared using accounting policies which are
in accordance with Generally Accepted Accounting Practice and are consistent
with those applied in preparation of the audited financial statements for the
year ended 30 June 2000.
1.2. Headline earnings per share for the
6 months ended 31 December 2000
is calculated as follows:
R'000
Earnings per income statement 16 398
Amortisation of a non-recurring
cost incurred in the cancellation of a
property asset management exclusivity
arrangement and matters incidental
thereto, which was concluded prior to
the change of control and the adoption
of the new investment philosophy of
Richway. 194
Headline earnings 16 592
1.3. Capital expenditure/acquisitions during
the period amounted to R212,8 million as
follows:
R-million
50% undivided share in Northgate
Shopping Centre 90,2
Walmer Park Shopping Centre 106,3
Brooklyn Mall 8,7
Other, including costs of acquisition 7,6
212,8
1.4. Interest amounting to R0,53 million has been capitalised to the cost of
properties which consist of vacant land and buildings under construction.
1.5. Guarantees have been issued in lieu of municipal services deposits
amounting to R1,0 million.
1.6. Contracted commitments for the acquisition and development of properties
amount to R718,9 million.
2. OVERVIEW OF RESULTS AND PROSPECTS
The directors are pleased to report that the process of expanding and
reconstructing the Richway property portfolio is well on track.
Rental income for the six months ended 31 December 2000 was 26% higher than for
the comparative period while operating costs increased approximately 3% over
the same period. It should be noted that the adoption of the new investment
philosophy has necessitated the creation of a performance driven executive
management structure that will result in additional operating costs. The
growth in the portfolio and assets under management are projected to
marginalize these additional costs.
The interest charge has increased from approximately R2,1 million to R10,9
million due to the additional long term debt incurred to fund investment
activities, specifically the Northgate Shopping Centre and Walmer Park
acquisitions.
As anticipated, the adoption of the new investment philosophy and expansion of
the portfolio has resulted in the distribution per linked unit holder being
lower than for the comparative period. Management firmly believe that in view
of the quality of the properties acquired and to be acquired, together with the
sound growth prospects linked to such properties, the current dilution will be
temporary and compensated for by way of sustainable growth on an annual basis
going forward.
This view is reflected in the graph below which depicts the forecast growth of
the portfolio over the next five years.
3. REVIEW OF OPERATIONS
3.1. Richway: A Focused Retail Portfolio During the past 12 months the company
has undergone extensive restructuring both operationally, and most
significantly, in the strategic focus of its property portfolio.
This is the result of the implementation of a new strategy adopted by the
directors to reconstruct the portfolio so as to comprise only large, A-grade
retail centres situated in affluent decentralised metropolitan areas.
The implementation of this policy is ongoing, and has seen the successful
acquisition of some premier retail centres in South Africa, providing a sound
basis for consistent future growth.
In addition to this investment activity and growth through acquisitions,
management is utilising its unique combination of specialist shopping centre
and retail expertise to add value to each shopping centre and thus enhance the
yield of the portfolio.
These activities will result in Richway's ongoing construction of a superior
South African retail portfolio having critical mass and focus. Such a policy
will be followed by substantial growing income yields.
3.2. The Portfolio Restructuring:
Acquisitions, disposals and extensions
During the 6 months ended 31 December 2000, Richway took transfer of a 50%
interest in the Northgate Shopping Centre and 100% of Walmer Park Shopping
Centre. Consequently, as at 31 December 2000, the portfolio included the
following core shopping centres:
* Brooklyn Mall, Pretoria;
* A 50% undivided share in Northgate Shopping Centre, Johannesburg. This
centre was acquired with a guaranteed yield of approximately 13,8% for the
first year; and
* Walmer Park, Port Elizabeth which was acquired at a forward yield of
approximately 12%.
As previously announced agreements have also been concluded for the following
acquisitions:
* A 50% undivided share in Kolonnade Shopping Centre, Pretoria. This centre
was acquired with a guaranteed yield of approximately 12% for the first year;
and
* A 58% interest in Century City Centre Limited ("CCCL") which owns the
prestigious Canal Walk Shopping Centre located in Century City, Cape Town ("the
Canal Walk acquisition").
It is anticipated that transfer of the 50% share in Kolonnade to Richway will
be effected in October 2001 upon completion of the current upgrades and
extensions being made to this centre.
As set out in the announcement published
in the press on 22 December 2000, the Canal Walk acquisition is conditional
upon, inter alia, the raising of the requisite funds and Richway linked
unitholder approval in a general meeting, the notice of which is to be
incorporated in the circular to linked unitholders referred to in paragraph 5
below. Canal Walk has been acquired with guaranteed yields over the first four
years of 11,75%, 12% , 12,25% and 13,3% respectively.
In addition to the above acquisitions, extensions and upgrades to the Northgate
Shopping Centre are underway and will add a further 10 760m2 of retail space to
the centre. The extensions are projected to have an initial yield of
approximately 14% and should be completed by the end of September 2001 and
bring the gross lettable area of Northgate to approximately 75 000m2.
Finally, the restructuring has included the disposal of those properties in the
portfolio which do not meet the current investment criteria. As announced on
16 January 2001, this has seen the disposals to date of five properties to
Razorbill Properties (Pty) Limited and a vacant site for a total consideration
of R79,5 million.
A further 11 properties with a total directors' value of approximately R148,5
million currently being actively marketed. In the interim, these properties
earn satisfactory yields.
3.3. The Restructured Portfolio
The drive to refocus the Richway portfolio will, subject to the fulfilment of
all outstanding conditions precedent to the relevant transactions, result in a
portfolio which consists of approximately 345 400 square metres of A-grade
retail space with a total value of approximately R2 billion. These amounts do
not include the non-core properties which are projected to be sold within the
short to medium term.
PROPERTY PORTFOLIO CONTRIBUTION
(based on net rentals)
Canal Walk(19%) Brooklyn(9%)
Kolonnade(11%) Northgate(13%)
Walmer(6%) Non Core(42%)
TENANT MIX
(based on lettable area)
l MAJORS & NATIONALS
l OTHER
3.4. Off-Balance Sheet Funding Arrangements
In conjunction with the expansion and repositioning of the property portfolio,
the directors are considering a number of alternatives to restructure
off-balance sheet financing arrangements in order to bring the related assets
back onto the Richway balance sheet on an earnings enhancing basis. These
pertain specifically to a portion of the Brooklyn Mall shopping centre.
Pursuant to the refinancing, assets with a total value of approximately R250
million will again be reflected on the Richway balance sheet.
4. FURTHER ANNOUNCEMENTS
4.1. Capital Raising
It has been stated that the debt in Richway will not exceed 50% of gross assets
in the short to medium term and shall be reduced off that level. The directors
aim to reduce this level to approximately 35%.
As reported in the announcement published in the press on 22 December 2000,
certain of the funds required for the Canal Walk acquisition are to be raised
by the fresh issue of equity to various institutional and other investors. In
addition, the directors intend to place further linked units for cash to reduce
debt and fund further acquisitions. This will be achieved in a capital raising
exercise set to commence in April 2001.
The results of this placement will be communicated to linked unitholders in the
press soon thereafter.
In order to implement this proposal, the directors will recommend that linked
unitholders approve, in a general meeting, the issue of a maximum of R400
million in linked units at a price to be determined ("the specific issue for
cash").
5. CIRCULAR AND GENERAL MEETING
A circular setting out the details of the transactions and matters ancillary
thereto and incorporating a notice of the general meeting will be sent to
linked unitholders in due course.
6. CAUTIONARY ANNOUNCEMENT
Linked unit holders are advised that Richway is currently involved in
negotiations which, if successfully concluded, could potentially impact on the
price at which the linked units are traded on the JSE. Accordingly, Richway
linked unit holders are advised to exercise caution in trading their linked
units until a further announcement is made.
7. STRATE
The JSE Securities Exchange South Africa's implementation of Share Transactions
Totally Electronic (STRATE) settlement system has commenced and all listed
entities will be required to transfer to STRATE. Accordingly, Richway's planned
dematerialisation is scheduled for 25 June 2001. Linked unitholders will be
kept informed of the developments in this regard.
8. DECLARATION OF DIVIDEND AND INTEREST PAYMENT NO. 13
Notice is hereby given that dividend No. 13 of 0,12 cents (0,14 cents:1999) per
ordinary share and interest of 24,88 cents (27,86 cents: 1999) per debenture,
totalling 25,00 cents per linked unit (28,00 cents:1999) have been declared
payable to linked unitholders, registered in the books of the company at the
close of business on Friday, 30 March 2001. The register of linked unitholders
will be closed from 30 March 2001 to 07 April 2001, both days inclusive.
Payment will be effected on or about 7 April 2001. Linked unitholders are
advised that Ultra Registrars (Pty)Ltd has been appointed as transfer secretary
as from 2 April 2001.
MARRIOT PROPERTY SERVICES
(PROPRIETARY) LIMITED
(SECRETARIES)
15 MARCH 2001
Registered Office
Marriott at Kingsmead, Kingsmead Office Park, Durban, 4001. P O Box 207,
Durban, 4000.
Telephone: (031) 366 1111
Transfer Secretaries
Investment Registrars (Pty) Ltd, Pollack House,
440 Louis Botha Avenue, Highlands North, Johannesburg 2192. P O Box 722,
Highlands
North, 2037.
Telephone: (011) 640 5081
RICHWAY A-GRADE PROPERTY TARGETING PAYING DIVIDENDS
Richway's restructuring over the past year has seen the strategic focus of its
property portfolio shift to exclusively large, A-grade retail centres is
providing a sound basis for consistent future growth, says Richway Retail
Properties Limited CEO Peter Blanckenberg. Announcing headline earnings of
25,41c per linked unit in the interim results for the six months ended 31
December, 2000, Blanckenberg said that in addition to Richway's investment
activity and growth through acquisitions, the company is using its unique
combination of specialist shopping centre and retail expertise to add value to
each shopping centre and thus enhance the yield of the portfolio.
Unaudited revenue over the six months increased by just over R7m to R36 257
000, compared with R29 007 000 over the previous half year.
"During the past year, the company has undergone extensive restructuring both
operationally and, most significantly, in the strategic focus of its property
portfolio," reports Blanckenberg. "This has been the result of the
implementation of a new strategy adopted by the directors to reconstruct the
portfolio so as to comprise only large, A-grade retail centres situated in
affluent decentralised metropolitan areas."
The implementation of this policy is ongoing, and has seen the successful
acquisition of some of the premier retail centres in South Africa, providing a
sound basis for future growth.
"We predict that these activities will continue until Richway has assembled one
of
South Africa's largest property portfolios consisting only of quality retail
centres so as to deliver high yields and sustained growth."
During the six months under review, Richway took transfer of a 50% stake in the
Northgate Shopping Centre and 100% of Walmer Park. As a result, at the end of
2000 the company portfolio comprised:
Brooklyn Mall, Pretoria, a 50% undivided share in Northgate, Johannesburg and
100% in Walmer Park shopping centre, Port Elizabeth. Agreements have also been
concluded for the acquisition of a 50% undivded share in Kolonnade Shopping
Centre, Pretoria and a 58% stake in Century City Centre Limited which owns the
prestigious Canal Walk Shopping Centre in Century City, Cape Town.
"Transfer of Richway's share in Kolonnade should take place in October this
year when upgrades and extensions currently underway are completed," says
Blanckenberg.
It is anticipated that the refocusing of Richway's portfolio will result in
about 345 400 square metres of A-grade retail space with a total value of
around R2bn. This amount does not include the non-core properties which are
projected to be sold within the short to medium term.
Dividend
The company announced a dividend 0,12c (0.14c:1999) per ordinary share and
interest of 24.88c (27.86c:1999) per debenture, totalling 25,00c per linked
unit (28.00c:1999) payable to linked unitholders.
ENDS
ISSUED BY: Bullion PR and Communications
Contact person: Lola Lazarus
Tel: (011) 803-3615
e-mail: lola@bullionpr.com
ON BEHALF OF: Richway Retail Properties
Contact person: Peter Blanckenberg : Chief Executive Officer
Tel: (011) 327-0145
Cell: 082 901 9369
