| Wed 12 Sep 2001, 0:00 | | Richway Retail Properties Limited - Audited Result |
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Announcement
Richway Retail Properties Limited
Reg. No. 1994/003602/06
Share Code: RHW
ISIN Code: ZAE000005906
Audited Results and Distribution Announcement for the year ended 30 June
2001, acquisition of 50,1% of Longbeach Mall, and further cautionary
announcement.
CONSOLIDATED BALANCE SHEET 2001 2000
Restated
Notes R'000 R'000
ASSETS
Non-current assets
Investment in fixed properties 847 382 416 053
Investments-unlisted - 3 373
847 382 419 426
Current assets
Trade and other receivables 16 174 3 429
Bank balances and cash 5 636 9 993
21 810 13 422
TOTAL ASSETS 869 192 432 848
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables 12 328 12 174
Taxation 11 25
Unitholders for distribution 15 019 18 448
Bank overdraft - 11 482
27 358 42 129
Interest bearing
liabilities 2.2 489 864 48 168
Capital and reserves
Share capital and reserves 71 350 61 931
Debentures 280 620 280 620
Linked unitholders' interest 351 970 342 551
TOTAL EQUITY AND LIABILITIES 869 192 432 848
CONSOLIDATED INCOME STATEMENT
2001 2000
Notes R'000 R'000
Revenue 95 850 62 927
Net rental income from properties 57 887 38 426
Investment income 1 534 1 672
Net profit before finance costs 59 421 40 098
Finance costs 27 931 3 250
Net profit before debenture interest 31 490 36 848
Debenture interest 31 189 36 549
Net profit before exceptional items 301 299
Exceptional items 2.1 9 394 -
Net profit before taxation 9 695 299
Taxation 120 50
Net profit attributable
to linked unitholders 9 575 249
Distribution per linked
unit (cents) 2.1
Interest 47.76 55.97
Dividends 0.24 0.28
Total 48.00 56.25
Headline earnings per
linked unit (cents) 2.1 48.04 56.35
Earnings per linked unit
(cents) 2.1 62.42 56.35
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non
Share Distributable Distributable
Capital reserves reserves Total
R'000 R'000 R'000 R'000
Balance at 1 July 1999 653 288 - 941
Profit attributable to
ordinary shareholders - 249 - 249
Dividend declared - (183) - (183)
Balance at 30 June 2000 653 354 - 1 007
Restatement of opening
balance due to surplus
on revaluation of
property -Refer to
note 4.2 - - 60 924 60 924
Restated Opening Balance 653 354 60 924 61 931
Profit attributable to
ordinary shareholders - 9 575 - 9 575
Transfer to non-distributable
Reserve - (9 394) 9 394 -
Dividend declared - (156) - (156)
Balance at 30 June 2001 653 379 70 318 71 350
1. OTHER INFORMATION 30 June 2001
* Linked units in issue (2000: 65 302 114) 65 302 114
* Net asset value per linked unit - (cents)
(2000:524) 539
* Listed market price (cents) 398
* Discount to net asset value 26%
* Interest capitalised to the cost of
properties
under construction (R'000) 247
* Guarantees issued in lieu of
municipal deposits (R'000) 1 000
* Contracted commitments for the
acquisition and
development of properties (R'000) 243 462
2. NOTES TO THE FINANCIAL STATEMENTS
This 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, with the exception of the revaluation of
investment properties referred to in note 4.2.
2.1 Distribution and headline earnings attributable to linked unitholders.
The distribution and headline earnings per linked unit for the year ended 30
June 2001 is
calculated as follows:
Cents
R'000 per unit
Net profit attributable to linked unitholders
per income statement 9 575
Add: Debenture interest 31 189
Net Profit attributable to linked unitholders
after exceptional items 40 764 62.42
Adjustment for exceptional items: (9 394) (14.38)
Revaluation surplus in respect of
investment properties (11 596)
Net capital profit on the disposal of
non-core properties (4 685)
Write-off of a non-recurring cost incurred
on the cancellation of an exclusive property
asset management arrangement 3 514
Impairment of investments 3 373
Headline earnings attributable to
linked unitholders 31 370 48.04
Undistributed income for the year (25) (0.04)
Earnings distribution to linked unitholders 31 345 48.00
For the purpose of calculating the headline earnings attributable and
distributable to linkedunitholders, the exceptional items shown above are
deducted from the net profit figure.
2.2 Interest bearing liabilities
The movements in the interest bearing debt over the past year are summarised
as follows and should be read in conjunction with note 4.3 of this
announcement:
R'000
Balance as at 30 June 2000 48 168
Net increase in debt (after disposal
proceeds) to fund acquisitions 183 898
Off-balance sheet debt brought on balance
sheet - Refer note 4.3 257 798
489 864
3. REPORT BACK ON 2001 OBJECTIVES
During the past financial year Richway adopted a number of strategic policy
changes which were to be implemented by management. These were as follows:
* Richway shall grow its net asset value substantially both organically and
acquisitively over the next few years.
The net asset value has increased to 539 cents per linked unit. This has
been largely achieved by growing the investment in fixed properties to some
R847 million through the acquisition of new centres and the subsequent
expansion of these new centres.
* Richway's portfolio shall comprise of only large prime retail centres
situated in affluent decentralised metropolitan areas.
During the year under review, Richway acquired and took transfer of a 50%
undivided share in Northgate Shopping Centre (Johannesburg) and 100% of
Walmer Park Shopping Centre (Port Elizabeth). Agreements have also been
concluded for the acquisition of a 50% undivided share in Kolonnade Shopping
Centre (Pretoria) effective on or about 1 October 2001 and a 50,1% share in
Longbeach Mall (Cape Town). These acquisitions, together with Brooklyn Mall
in Pretoria, bring the total number of prime regional shopping centres in
the Richway portfolio to five.
* Richway shall dispose of properties in the portfolio which do not meet the
above criteria.
To date management has disposed of nine of such properties for a cash
consideration of R132,4 million. The balance of the non-core properties,
representing some R89,7 million in value, is being actively marketed and
various offers are being considered by management for presentation to the
board in due course.
* Richway shall, when appropriate, enter into ownership partnerships in
respect of strategically important shopping centres.
Richway has forged two such partnerships, the first being with Sasol Pension
Fund in respect of the Northgate and Kolonnade shopping centres, and the
second being with Cape of Good Hope Bank in respect of Longbeach Mall.
* Interest rates will be fixed when appropriate.
During the year, Richway fixed approximately R151 million or 30% of its
interest bearing debt for a period of four years. The board of Richway
considers it appropriate for the balance of the interest bearing debt to
remain at a floating rate in the short-term whilst conditions remain
favourable for further interest rate deductions. Richway's management will
continue to carefully monitor interest rate movements carefully and will
seek to fix interest rates when appropriate.
4. COMMENTARY ON RESULTS
4.1 Results
As stated in the interim results announcement published on 15 March 2001,
the implementation of the new investment policies and the resulting
controlled expansion in both the size and improved quality of the portfolio
was anticipated to result in a lower distribution to linked unitholders. In
the circumstances, these results and the distribution are considered highly
satisfactory and management remains confident that in consequence of the
quality of the properties acquired and the sustainable growth inherent in
such properties, the growth prospects for the company remain excellent.
The substantial growth in net assets is reflected in the 52% increase in
revenue and 51% increase in net property rentals. This growth has
inevitably been associated with an increased gearing level and with a higher
head-office operating cost structure, all of which fall within the defined
and stated strategy of the Richway board. This has resulted in a net
decrease in the earnings distributable to linked unitholders for the year
under review.
4.2 Accounting policies and property revaluations
In order to more fairly reflect the net asset value of the company, and in
adopting the new accounting policy (AC135) on investment property
revaluations, all the Richway fixed properties were revalued at
30 June 2001 and 30 June 2000.
The adoption of this new accounting policy has resulted in the restatement
of the prior year balance sheet. In addition, as a result thereof, the
surplus on the revaluation attributable to the current financial year is
reflected in the income statement and has been included under exceptional
items.
4.3 Off-balance sheet funding arrangements
Off-balance sheet funding arrangements amounting to approximately R258
million fall due for re-financing on 31 October 2001. As the directors have
resolved to unwind these arrangements and have secured the necessary funding
to do so, the balance sheet as at 30 June 2001 has been prepared on the
basis that the assets have been refinanced with on-balance sheet debt.
5. ACQUISITION OF AN EFFECTIVE 50.1% INTEREST IN LONGBEACH MALL
5.1 Introduction
Richway linked unitholders are advised that an agreement has been entered
into between Boness Development Phase 3 (Proprietary) Limited ("Boness") and
Beekay 269 Investments (Proprietary) Limited ("Beekay") in terms of which
Beekay will purchase the Longbeach Mall Shopping Centre, from Boness for
R161,5 million. Richway and Toontjiesrivier Landgoed (Eiendoms) Beperk
("TJL"), a subsidiary of Cape of Good Hope Bank, are the only shareholders
of Beekay (Richway 50,1% and TJL 49,9%).
Richway will accordingly acquire an effective 50,1% interest in Longbeach
Mall
for R80,75 million ("the acquisition").
5.2 Purchase Consideration
Beekay will settle the purchase consideration as follows:
* R113,5 million in cash raised from a mortgage secured facility; and
* The balance of R48 million by the issue of Beekay redeemable fixed rate
preference shares
to Cape of Good Hope Bank Limited.
The settlement of the purchase consideration will be done in two tranches:
* A first instalment of R145,35 million on the date of transfer; and
* The balance of R16,15 million within five business days of the date of
final completion of
the Shopping Centre being confirmed by the architect provided this is
after the date of
transfer.
5.3 Guaranteed Rental
Boness has guaranteed the following net rentals:
* 13% on the purchase price for the period from the effective date (1 May
2001)
to 30 April 2002;
* 14,04% on the purchase price for the period 1 May 2002 to 30 April 2003.
5.4 Conditions Precedent
The acquisition is subject, inter alia, to;
* approval by any applicable regulatory bodies; and
* approval by the shareholders of Boness and/or Richway, if applicable.
5.5 Pro Forma Financial Effects
The table below sets out the pro forma financial effects of the acquisition
on the earnings and net tangible asset value (Richway has no intangible
assets) per linked unit based on the audited results of Richway for the
twelve months ended 30 June 2001 and upon the following assumptions:
* the acquisition was implemented on 01 July 2000 for the calculation of the
earnings per
linked unit; and
* the acquisition was implemented as at 30 June 2001 for the calculation of
the net tangible
asset value.
Before the Pro Forma %
Acquisition after the Change
(cents) acquisition (cents)
(cents)
Headline earnings per linked
unit (cents) 48.04 48.17 0.27
Earnings per linked
unit (cents) 62.42 62.55 0.21
Net asset value and
tangible net asset
value per linked unit (cents) 539 539 -
Weighted average linked
units in issue (000's) 65 302 65 302 -
5.6 Circular
A circular to linked unitholders setting out full details of the acquisition
will be
sent to linked unitholders in due course.
6. FURTHER CAUTIONARY ANNOUNCEMENT
Linked unitholders are referred to the cautionary announcement dated 31 July
2001 and are advised that the negotiations referred to therein are still in
progress. Accordingly, linked unitholders are advised to continue to
exercise caution when dealing in their Richway linked units until a further
announcement is made.
7. STRATE
Richway moved to the STRATE settlement system on 25 June 2001. Trading for
electronic settlement commenced on 16 July 2001 and the first electronic
settlement of Richway share trades followed on 23 July 2001.
8. DECLARATION OF DIVIDEND AND INTEREST PAYMENT NO. 14
Notice is hereby given that dividend No. 14 of 0,12 cents (0,14 cents: 2000)
per ordinary share and interest of 22,88 cents (28,11 cents: 2000) per
debenture, totalling 23,00 cents per linked unit (28,25 cents:2000) have
been declared payable to linked unitholders, registered in the books of the
company at the close of business on Friday, 5 October 2001.
The last date to trade cum distribution will be Friday, 28 September 2001
and the linked units will commence trading ex distribution from the
commencement of business on Monday, 1 October 2001. Payment of the dividend
and debenture interest will be effected on or about Monday, 8 October 2001.
BY ORDER OF THE BOARD
11 SEPTEMBER 2001
Registered Office:
Marriott at Kingsmead, Kingsmead Office Park, Durban, 4001
P O Box 207, Durban, 4000. Tel: (031) 366 1111
Transfer Secretaries:
Ultra Registrars (Pty) Ltd, 11 Diagonal Street, Johannesburg, 2001
P O Box 4844 Johannesburg, 2000. Tel: (011) 370 5775
