| Thu 3 May 2012, 7:30 | | RDF/RDFB01 - Redefine Properties Limited - Unaudited results for the six months |
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RDF/RDFB01 - Redefine Properties Limited - Unaudited results for the six months
ended 29 February 2012
REDEFINE PROPERTIES LIMITED
("Redefine" or "the company" or "the group")
Registration number 1999/018591/06
JSE share code: RDF
ISIN: ZAE000143178
Bond code: RDFB01
ISIN: ZAG00094228
Unaudited results for the six months ended 29 February 2012
- Interim distribution of 31,5 cents on track to achieve full year forecast
- Recurring core income up 6,6% on first half 2011
- Significant progress made in improving the quality of the property portfolio
- Presence established in the debt capital market
- Agreement concluded to acquire Fountainhead management company
- International diversification strengthened by increased group holding in
Cromwell
Distributable income analysis
South African Inter- Total
national
R`000 R`000 R`000
Net property income (excluding 933 939 300 993 1 234 932
straight-line rental accrual)
Listed securities income 183 083 - 183 083
Trading income 894 - 894
Hotel income - 133 750 133 750
Fee income 12 443 28 477 40 920
Total revenue 1 130 359 463 220 1 593 579
Administration costs (50 970) (53 400) (104 370)
Interest in associates (excluding
fair value
adjustments) 5 484 70 780 76 264
Net finance costs (325 859) (337 069) (662 928)
Net distributable profit before 759 014 143 531 902 545
taxation
Taxation (253) (9 472) (9 725)
Net profit before distributable 758 761 134 059 892 820
adjustments
Non-controlling interest (excluding
fair value
adjustments) 356 (61 542) (61 186)
759 117 72 517 831 634
Distribution adjustments: 8 312 5 607 13 919
Align consolidated foreign profits - 603 603
with anticipated dividends
Fee income from offshore subsidiary 8 312 - 8 312
Non-distributable costs included in - 5 004 5 004
income statement
Distributable income 767 429 78 124 845 553
Condensed consolidated statements of comprehensive income
Restated/
Unaudited Unaudited Audited
29 February 28 February 31 August
2012 2011 2011
R`000 R`000 R`000
Revenue
Property portfolio 1 568 778 1 443 862 2 754 905
Contractual rental income 1 659 579 1 395 238 2 763 122
Straight-line rental income accrual (90 801) 48 624 (8 217)
Listed securities income 183 083 148 232 342 367
Fee income 40 920 83 394 205 485
Hotel income 133 750 - 157 628
Trading income 894 2 803 36 556
Total revenue 1 927 425 1 678 291 3 496 941
Operating costs (424 647) (318 662) (732 648)
Administration costs (104 370) (137 208) (158 787)
Net operating income 1 398 408 1 222 421 2 605 506
Changes in fair values of investment (340 694) 146 415 532 305
properties, listed securities and
financial instruments
Amortisation of intangibles (50 485) (48 271) (96 808)
Impairment of financial assets, - - (848 713)
property, plant and equipment, and
goodwill
Equity accounted profits/(losses) 32 707 (76 860) (19 988)
Income from operations 1 039 936 1 243 705 2 172 302
Net interest (890 379) (356 032) (937 467)
Interest paid (991 961) (439 599) (1 098 871)
Interest received 101 582 83 567 161 404
Foreign exchange (loss)/gain (17 179) 79 238 1 649
Income before debenture interest 132 378 966 911 1 236 484
Debenture interest (845 553) (832 131) (1 825 321)
(Loss)/profit before taxation (713 175) 134 780 (588 837)
Taxation (344 524) 65 955 25 575
(Loss)/profit for the period/year (1 057 699) 200 735 (563 262)
Other comprehensive income
Exchange differences on translation 205 920 42 157 107 598
of foreign operations
Revaluation of PPE (net of deferred - - 4 644
taxation)
Other comprehensive income for the 205 920 42 157 112 242
period/year, net of deferred taxation
Total comprehensive (loss)/income for (851 779) 242 892 (451 020)
the period/year
(Loss)/profit attributable to:
- Redefine shareholders (511 306) 170 809 (519 311)
- Non-controlling interests (546 393) 29 926 (43 951)
(Loss)/profit for the period/year (1 057 699) 200 735 (563 262)
Total comprehensive (loss)/income
attributable to:
- Redefine shareholders (375 245) 209 477 (267 349)
- Non-controlling interests (476 534) 33 415 (183 671)
Total comprehensive (loss)/income for (851 779) 242 892 (451 020)
the period/year
Condensed consolidated statements of financial position
Restated/
Unaudited Unaudited Audited
29 February 28 February 31 August
2012 2011 2011
R`000 R`000 R`000
ASSETS
Non-current assets 40 366 985 34 247 728 40 036 545
Investment property 28 736 351 22 531 809 28 847 983
Fair value of investment property 27 661 405 21 526 646 27 775 325
for accounting purposes
Straight-line rental income accrual 603 297 750 939 694 099
Properties under development 471 649 254 224 378 559
Listed securities 4 659 369 5 086 701 4 664 346
Goodwill 2 570 534 3 225 473 2 570 534
Intangible assets 1 244 574 1 322 092 1 279 075
Interest in associates and joint 1 833 513 326 950 1 236 726
ventures
Loans receivable 1 222 077 1 505 900 1 323 126
Other financial assets 6 303 4 058 12 938
Guarantee fees receivable - 21 563 21 349
Property, plant and equipment (PPE) 94 264 223 182 80 468
Current assets 1 342 919 1 100 111 1 680 758
Properties held-for-trading 29 109 120 763 31 052
Trade and other receivables 640 868 638 440 742 665
Guarantee fees receivable 21 349 20 669 -
Loans receivable 51 822 - 51 210
Listed security income 146 931 109 459 195 683
Cash and cash equivalents 452 840 210 780 660 148
Non-current assets held-for-sale 2 066 825 788 323 2 646 183
Total assets 43 776 729 36 136 162 44 363 486
EQUITY AND LIABILITIES
Shareholders` interest 15 523 616 16 981 090 17 056 251
Share capital 11 165 049 11 788 301 11 788 301
Reserves 2 639 154 3 446 747 2 996 726
Non-controlling interests (NCI) 1 719 413 1 746 042 2 271 224
Non-current liabilities 20 153 034 17 208 234 22 794 297
Debenture capital 4 659 443 4 831 731 4 831 731
Interest-bearing liabilities 13 465 872 10 894 911 16 166 163
Interest rate swaps 288 673 48 222 358 090
Other financial liabilities 15 170 12 439 11 516
Deferred taxation 1 723 876 1 420 931 1 426 797
Current liabilities 8 012 718 1 946 838 4 425 577
Trade and other payables 874 394 685 222 1 037 126
Interest-bearing liabilities 6 106 020 832 129 2 158 496
Interest rate swaps 134 934 - 49 074
Other financial liabilities 6 323 - -
Taxation payable 45 494 - 187 691
Linked unitholders for distribution 845 553 429 487 993 190
Non-current liabilities held-for- 87 361 - 87 361
sale
Total equity and liabilities 43 776 729 36 136 162 44 363 486
Net asset value per linked unit
(excluding deferred tax
and NCI ) (cents) 752,06 800,50 783,95
Net tangible asset value per linked 609,93 631,08 640,54
unit (excluding deferred tax and
NCI) (cents)
Condensed consolidated statements of cash flow
Restated/
Unaudited Unaudited Audited
29 February 28 February 31 August
2012 2011 2011
R`000 R`000 R`000
Cash generated from operations 1 396 932 1 272 974 2 819 012
Net financing costs (627 111) (356 032) (937 467)
Linked unit distributions paid (993 189) (858 974) (1 288 461)
Payments to non-controlling interests (45 566) (8 432) (47 969)
Net cash (outflow)/inflow from (268 934) 49 536 545 115
operating activities
Net cash outflow from investing (1 020 000) (1 037 534) (2 781 932)
activities
Net cash inflow from financing 1 051 618 656 566 2 284 967
activities
Net movement in cash and cash (237 316) (331 432) 48 150
equivalents
Cash and cash equivalents at 660 148 606 980 606 980
beginning of period/year
Translation effects on cash and cash 30 008 (64 768) 5 018
equivalents of foreign operations
Cash and cash equivalents at end of 452 840 210 780 660 148
period/year
Includes restricted cash of R159 million (31 August 2011: R88 million)
Distributable income reconciliation
Restated/
Unaudited Unaudited Audited
29 February 28 February 31 August
2012 2011 2011
R`000 R`000 R`000
(Loss)/profit for the period/year (511 306) 170 809 (519 311)
attributable to Redefine shareholders
Changes in fair values of properties 688 578 (39 051) (280 558)
(net of deferred taxation)
Changes in fair value of properties 459 067 46 885 (285 141)
Deferred taxation 229 511 (85 936) 4 583
Impairment of PPE and goodwill - - 837 245
Capital gains tax 38 347 - 49 000
Headline earnings attributable to 215 619 131 758 86 376
Redefine shareholders
Debenture interest 845 553 832 131 1 825 321
Headline earnings attributable to 1 061 172 963 889 1 911 697
linked unitholders
Changes in fair values of listed (51 432) (174 851) (311 471)
securities and financial instruments
(net of deferred taxation)
Changes in fair values of listed (118 373) (193 300) (247 164)
securities and financial instruments
Deferred taxation 66 941 18 449 (64 307)
Amortisation of intangibles (net of 50 485 48 271 79 208
deferred taxation)
Impairment of financial assets - - 11 468
Alignment of consolidated foreign 603 19 991 2 694
profits with anticipated dividends
Straight-line rental income accrual 90 801 (48 624) 8 217
Foreign exchange loss/(gain) 17 179 (79 238) (1 649)
Fair value adjustment of associates, (336 571) 60 439 60 915
minorities and interest
Fee income from foreign subsidiary 8 312 - -
Capital write offs included in 5 004 6 387 6 387
administration costs
Swaption - - 10 000
Pre-acquisition income on Hyprop - 35 867 47 855
units acquired in prior period/year
Distributable earnings 845 553 832 131 1 825 321
Six months ended 29 February 845 553 832 131 832 131
Six months ended 31 August - - 993 190
Total distributions 845 553 832 131 1 825 321
Actual and weighted number of linked 2 684 295 2 684 295 2 684 295
units in issue (000) *
Earnings per linked units (cents) 12,45 37,36 48,65
Headline earnings per linked units 39,53 35,91 71,22
(cents)
Distribution per linked units (cents) 31,50 31,00 68,00
Redefine has no dilutionary instruments in issue
*Excludes 5 876 766 treasury units
Condensed consolidated statements of changes in equity
Restated/
Unaudited Unaudited Audited
29 February 28 February 31 August
2012 2011 2011
R`000 R`000 R`000
Restated opening balance 17 056 251 15 801 448 15 801 448
Arrowhead unbundling (623 252) - -
Total comprehensive (loss)/income (851 779) 242 892 (451 020)
for the period/year
Transactions with non-controlling 8 014 83 222 (26 308)
interests
Effective portion of cash flow - 27 029 -
hedges
NCI on acquisition of subsidiaries (65 618) 826 499 -
Issue of capital instrument - - 158 630
Shares issued to NCI - - 1 573 501
Total share capital and reserves 15 523 616 16 981 090 17 056 251
Condensed segmental analysis
Office Retail Indus- Inter- Total
trial national
R`000 R`000 R`000 R`000 R`000
Six months ended 29
February 2012
Contractual rental 612 492 456 973 169 292 420 822 1 659 579
income (excluding
straight-line rental
income accrual)
Operating costs (160 277) (111 473) (33 068) (119 829) (424 647)
Net property income 452 215 345 500 136 224 300 993 1 234 932
Investment property 9 351 279 6 895 041 2 659 702 9 358 680 28 264 702
portfolio (excluding
development
properties)
Six months ended 28
February 2011
Contractual rental 644 577 431 437 173 815 145 409 1 395 238
income (excluding
straight-line rental
income accrual)
Operating costs (160 192) (101 417) (39 483) (17 570) (318 662)
Net property income 484 385 330 020 134 332 127 839 1 076 576
Investment property 8 384 6 941 3 043 3 907 621 22 277 585
portfolio (excluding 578 530 856
development
properties)
Year ended 31 August
2011
Contractual rental 1 255 922 604 358 888 226 410 2 763 122
income (excluding 220
straight-line rental
income accrual)
Operating costs (330 429) (218 184) (62 459) (121 576) (732 648)
Net property income 924 791 704 420 296 429 104 834 2 030 474
Investment property 8 181 6 578 2 540 11 169 28 469 424
portfolio (excluding 042 164 346 872
development
properties)
Commentary
Profile
Redefine is a property loan stock company listed on the Johannesburg Stock
Exchange ("JSE") and manages a diversified portfolio of property assets valued
in excess of R37 billion. The company`s portfolio comprises 243 properties
located in South Africa valued at R20 billion and a R5 billion portfolio of
strategic listed property securities. Redefine is internationally diversified by
way of 206 offshore properties valued at R12 billion, held through Redefine
Properties International Limited ("RIN") and its 70% owned subsidiary Redefine
International P.L.C. ("RI"), which are listed on the JSE and the London Stock
Exchange respectively.
Redefine is committed to being the property owner of choice and the company`s
primary objective is to provide sustained and growing income for investors.
Underscoring this is Redefine`s pursuit of revenue enhancing opportunities that
translate into increasing distributions and the prospect of long-term capital
appreciation for unitholders.
Financial results
Redefine has declared a distribution of 31,50 cents per linked unit for the six
months ended 29 February 2012 (28 February 2011: 31,00 cents). On a like-for-
like recurring income basis, the distribution is 6,6% ahead of the comparable
period, after excluding 2,0 cents from the prior period for the contribution
from the properties unbundled with Arrowhead Properties Limited ("Arrowhead"),
as well as eliminating non-recurring fee income from the current and prior
year`s distributions of 0,7 cents and 0,1 cents per linked unit respectively.
On a geographic basis, South Africa generated 91% of distributable income.
Contractual rental income comprised 81% of total revenue, income from listed
securities 10%, hotel income 7%, and trading and fee income 2%. Operating costs
represent 25,6% (31 August 2011: 26,5%) of contractual rental income, mainly due
to the full period efficiencies arising from the internalisation of property
management.
RIN along with Redefine International Fund Managers Limited, the fund manager of
RI, contributed 3 cents per linked unit to the distribution for the period.
Changes in fair values
The group property portfolio was valued internally at 29 February 2012,
resulting in a net reduction in value of 1,7% (R459 million). The South African
portfolio valuation increased by R260 million, while the offshore portfolio
valuation declined by R719 million, arising mainly from the Wichford legacy
assets in RI. The investment in South African listed securities increased in
value by R11 million. The balance of the changes in fair value mainly relates to
the mark to market of the group`s interest rate swaps.
South African property profile
Portfolio split by tenant type
Multi tenanted 70%
Single tenanted 30%
Total 100%
Sectoral spread by GLA
Office 37
Retail 31
Industrial 32
Total 100
Geographic spread by GLA
Gauteng 60
Western Cape 16
KwaZulu-Natal 12
Other 12
Total 100
South African lease expiry profile
Office Retail Industrial
2012 61 311 77 215 52 272
2013 280 313 199 459 283 376
2014 135 889 104 422 119 540
2015 197 626 153 997 115 806
Beyond 2015 245 414 335 091 265 772
Letting activity: During the review period, leases covering 384,436 m2 were
renewed at an average rental increase of 4,2%. A further 123,609 m2 was let
across the portfolio and together with vacancies from properties disposed of,
the total vacancy level, after adjusting for unlettable space, reduced
marginally by 0,3% to 6,6%. Vacancies are set out below as a percentage of gross
lettable area ("GLA"):
February 2012 August 2011
Office 7,8% *8,9%
Retail 4,9% 4,8%
Industrial 7,0% 6,8%
Total 6,6% *6,9%
*After adjusting for unlettable space
Arrears at the end of February 2012 amounted to R31 million (31 August 2011: R34
million) against which a provision for possible bad debts of R13 million (31
August 2011: R9 million) is held.
Property portfolio strategy
At 29 February 2012, the South African directly managed property portfolio
comprised 243 properties with a total GLA of 3,0 million m valued at R18,9
billion.
Redefine has continued to make significant progress in implementing its strategy
of improving the quality of the core property portfolio, with the average value
per property increasing from R54 million to R78 million.
Acquisitions: Five properties were acquired and transferred during the review
period for an aggregate purchase price of R1,3 billion with a GLA of 110,147 m
at an initial yield of 9,1%. Guarantees totalling R585 million were in issue at
the period end for properties in the process of being transferred. Agreements
concluded with a number of vendors for the acquisition of properties for an
aggregate consideration of R775 million, are subject to Competition Commission
approval.
Disposals: During the period, excluding the Arrowhead portfolio, 15 properties
with a GLA of 98,938 m were sold to various buyers for an aggregate
consideration of R520 million at an average yield of 10,5%.
Unbundling and restructuring: On 9 December 2011 Arrowhead was listed and
unbundled to linked unitholders, facilitating a fast track basis to dispose of
89 properties that no longer fitted with Redefine`s investment criteria. As a
result, Redefine`s net asset value per linked unit (excluding deferred tax and
NCI) reduced by approximately 30 cents.
Fountainhead Property Trust Management Limited ("Fountainhead Manco"): On 29
March 2012 an agreement was concluded to acquire Fountainhead Manco for an
aggregate consideration of R660 million. The acquisition is conditional on all
required regulatory approvals, including approval from the Registrar of
Collective Investment Schemes, the Competition Authorities and the South African
Reserve Bank. Following the conclusion of this transaction, Redefine intends
making an offer to acquire all of the assets of Fountainhead Property Trust
("Fountainhead") in return for new units in Redefine and existing Hyprop
Investments Limited ("Hyprop") units held by Redefine.
The Fountainhead acquisition will be conditional on a due diligence
investigation and all requisite board, trustee and Redefine and Fountainhead
unitholder approvals. Redefine envisages pricing the offer at a level that, on
the distribution of the consideration units, would result in a Fountainhead
unitholder receiving Hyprop and Redefine units with a value at or about the
current `clean` price at which Fountainhead units are trading. The successful
conclusion of this transaction will largely complete Redefine`s objective to
improve the quality of its property portfolio.
Listed securities portfolio
The listed securities portfolio comprises:
February 2012 August 2011
Value Interest Value Interest
held held
R`000 % R`000 %
Hyprop Investments Limited 4 182 616 31,2 4 122 626 45,7
Oryx Properties Limited 293 478 26,4 155 731 26,4
Dipula Income Fund Limited 183 275 25,3 385 989 33,8
4 659 369 4 664 346
Dipula Income Fund Limited ("Dipula"): On 21 April 2011 it was announced that
Redefine had sold its remaining interest in Dipula to a Black Economic
Empowerment consortium. The transaction will take effect after payment of the
distribution on the Dipula units for the income distribution period ended 29
February 2012 and is still subject to the securing of the necessary funding for
the acquisition.
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 has been made to the company`s distributable earnings
for the period to equate the consolidated results from its foreign subsidiaries
for the period to the anticipated dividends.
Interest in associates and joint ventures
This comprises Cromwell Property Group ("Cromwell"), a listed Australian
property trust, together with Redefine`s interest in joint venture property
investments of R26 million. During the period under review, the group
participated in a capital raise by Cromwell which resulted in Redefine taking a
direct 3,9% interest in Cromwell and RI increasing its holding to 23,2%.
Funding
Excluding RI, as at 29 February 2012, Redefine`s local borrowings of R8 billion
represent 32,3% of the value of its local property and listed securities
portfolio. Redefine`s average cost of funding is 9,4% and the interest rates are
fixed on 72% of borrowings for an average period of five years. RI`s borrowings
of R11 billion are all negotiated directly by RI and have no recourse to
Redefine`s South African balance sheet. RI is in the process of restructuring
its maturing facilities.
On 5 September 2011, Redefine made its debut in the local bond market with an
issue of R250 million 90 day Commercial Paper under its R5 billion Domestic
Medium Term Note Programme. This issue has been rolled twice since the initial
issue, achieving an all-in rate of 5,88% on the 2 March 2012 issue. On 27 March
2012 Redefine issued a R500 million three year bond, that was priced at an all-
in rate of 7%.
Moody`s credit rating:
Global long term Baa3
Global short term P-3
National long term A3.za
National short term P-2.za
Change in accounting estimate - Deferred taxation
Redefine has accounted for Capital Gains Tax at the increased rate of 18,67%,
which affects disposals after 1 September 2012. The change in tax rate caused
deferred taxation to increase by R423 million.
Contingencies and commitments
At 29 February 2012, Redefine had guarantees and suretyships in respect of its
BEE initiatives and joint ventures amounting to R209 million and R31 million
respectively. Redefine has commitments outstanding in respect of developments
amounting to R520 million and acquisitions (detailed above).
Prospects
Despite ongoing challenging market conditions, which affect the office
properties sector in particular, Redefine`s core property portfolio is
anticipated to achieve continued growth. The anticipated distribution for the
full year of 64,0 cents per linked unit, is in line with forecast. This forecast
has not been reviewed or reported on by the group`s independent external
auditors.
Debenture interest distribution
Unitholders are advised that interest distribution number 46 of 31,5 cents per
linked unit has been declared for the six months ended 29 February 2012. The
distribution will be payable to Redefine linked unitholders in accordance with
the abbreviated timetable set out below:
2012
Last day to trade "cum" interest distribution Friday, 18 May
Linked units trade "ex" interest distribution Monday, 21 May
Record date Friday, 25 May
Payment date Monday, 28 May
There may be no dematerialisation or rematerialisation of linked units between
Monday, 21 May 2012 and Friday, 25 May 2012, both days inclusive. The next
interest distribution will be for the six months ending 31 August 2012 payable
during November 2012.
Basis of preparation
The results for the six months ended 29 February 2012 have not been reviewed or
audited by the group`s independent external auditors PKF (Jhb) Inc. These
results have been prepared in accordance with International Financial Reporting
Standards, IAS 34 - Interim Final Reporting, the AC500 series issued by the
Accounting Practices Board, JSE Listings Requirements and the requirements of
the South African Companies Act, 2008. The accounting policies adopted in the
preparation of these unaudited results are consistent with those applied in the
preparation of the financial statements for the year ended 31 August 2011.
These financial results have been prepared under the supervision of Andrew Konig
(CA)SA, the financial director of the group.
By order of the Board
Redefine Properties Limited
3 May 2012
Directors: D Gihwala (Chairman), M Wainer* (CEO),
L Brehm, M N Flax, G J Heron, M K Khumalo, A J Konig* (FD), H K Mehta, B Nackan,
D Perton+, D H Rice*+ (COO) *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: 03/05/2012 07:30:01 Produced by the JSE SENS Department.
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