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RES
RES
Resilient Property Income Fund Limited - Audited results for the year ended 31
December 2005
Resilient Property Income Fund Limited
(Registration number 2002/016851/06)
Incorporated in the Republic of South Africa
Share code RES ISIN ZAE000043642
Reviewed Abridged Financial Report
Commentary
Directors" report
Resilient"s strategy has been to focus on two segments of the property market.
The principal focus has been investment in dominant retail developments in small
cities and large towns tenanted predominately by national retailers and anchored
by large supermarkets. The second focus was investment in high specification,
secure industrial parks in major transport nodes.
During the past financial year the strategy was altered with the disposal of
Resilient"s portfolio of industrial properties and smaller retail properties to
Diversified Property Fund, a new listed property loan stock company promoted by
Resilient. Resilient"s retail strategy has not changed and has been reinforced
with the acquisition of stakes in four new retail developments in various stages
of construction.
1 Property acquisitions and developments
Murchison Mall
This retail centre in Ladysmith, KwaZulu Natal with a GLA of 15 483 m2 was
purchased for R42,6 million and at a forward yield of 11,5%. The centre"s strong
national tenant profile includes Shoprite, Edgars, Jet Stores, Ackermans, Exact
and Legit. Shoprite have exercised their option to renew their lease for a
further period of 10 years.
Diamond Pavilion
Resilient owns 50% of this 29 500 m2 GLA regional mall in Kimberley. The
developers, Keystone Investments, have guaranteed a commencement yield of 14% on
Resilient"s portion of the development. In addition Resilient has an option to
acquire the remaining 50% based on a yield of 12%. The mall will be anchored by
Edgars, Shoprite and Woolworths and is scheduled for opening in April 2006.
Edgars and Woolworths have already been handed beneficial occupation of their
stores on schedule on 1 December 2005 and 1 January 2006 respectively.
Highveld Mall
Resilient has acquired a 60% undivided share in this 45 000 m2 GLA regional mall
development at an estimated cost of R270 million. The developers have guaranteed
a commencement yield of 10%. The centre will be anchored by Edgars, Pick `n Pay
and Woolworths and will include all major national retailers. The mall is
currently under construction and is scheduled for completion in April 2007.
Jabulani Mall
Subsequent to the financial year-end Resilient announced the acquisition of a
55% undivided share in this 43 500 m2 GLA regional mall being developed at an
estimated cost of R207 million. The mall will be anchored by Edgars, Game,
Shoprite and Woolworths and is scheduled for completion in November 2006. The
developers have guaranteed a commencement yield of 10%.
Northam Shopping Centre
Resilient acquired a 55% interest in this shopping centre scheduled for
completion in April 2006. The first phase of this development measures 13 000 m2
and over 90% of the lettable area will be tenanted by national retailers
including Shoprite, Cashbuild, Jet Stores, Foschini and Ackermans. The first
phase of the development is projected to cost R27 million and yield 12%.
2 Properties disposed
The following properties were sold to Diversified Property Fund:
Valuation
31 Dec 2004 Sold for Profit on disposal
R"000 R"000 R"000
Isando Business Park 90 000 107 250 17 250
City Deep Industrial Park 75 500 96 000 20 500
Vryheid Plaza 24 500 28 300 3 800
Shoprite Vryheid 13 500 15 800 2 300
Taxi Centre Polokwane 19 850 24 200 4 350
Main Road Wynberg 10 400 11 000 600
Jet Park Mini Factories 9 000 12 000 3 000
Jet Stores Queenstown 7 400 9 000 1 600
Chemserve Spartan 7 300 8 600 1 300
Total 257 450 312 150 54 700
Die Meent Gebou
Resilient has entered into negotiations to sell its 17,075% interest in Die
Meent Gebou for R5 976 000.
3 Developments undertaken in the 2005 financial year
The 1 400 m2 extension to Tzaneen Crossing to accommodate Ackermans and CB
Stores was completed at the end of April 2005. The extension to Pick `n Pay
Klerksdorp measuring 2 516 m2 to accommodate Mr Price, Mr Price Home, First
National Bank and Shoe City was completed in July 2005. Nelspruit Plaza was
extended to accommodate a 980 m2 Jet Stores and a freestanding 1 600 m2
Cashbuild. All extensions were completed on schedule and within budget.
4 Developments planned for the 2006 financial year
Construction of the Spar Supermarket at Nelspruit Plaza, which burnt down, is
nearing completion. Resilient took advantage of the opportunity to expand the
size of the store from the previous 2 992 m2 to 3 870 m2. Spar has entered into
a new 10-year corporate lease.
The redevelopment and expansion of Mvusuludzo Mall (previously Masingita Plaza)
is scheduled to commence in March 2006. The current open mall will be enclosed
and extended to accommodate Edgars, Ackermans, Foschini, Total Sports, Exact,
Milady"s, Galaxy and Sheet Street and additional space for Mr Price, Jet Stores
and Truworths.
Planning is in an advanced stage for a 6 500 m2 extension to Tzaneng Mall to
accommodate additional retail space for Edgars, Jet Stores, Mr Price, Foschini,
@ Home, Milady"s, Truworths and Nedbank. In addition four new escalators are
planned to improve access to the roof parking above Game and Woolworths. The
parking will be covered.
Construction has commenced on extensions to Standard Bank and First National
Bank at Limpopo Mall and completion is scheduled for April 2006.
5 Listed investments
Resilient increased its holding in Acucap Properties Limited through its
acquisition of an additional 3 610 589 units in the market at an average price
R16,85.
Resilient was issued with 28 972 000 units in Diversified Property Fund Limited
as part payment for the sale of 9 properties and 12,5 million units in Capital
Property Fund to Diversified at an issue price of R5,00 per linked unit. This
holding was reduced to 17 439 170 units, principally to facilitate the spread
requirements of the JSE Limited on the listing of Diversified.
A total of 51 306 909 units in Capital Property Fund were sold at an average
price of R3,70 and this investment is now accounted for at market value.
Resilient"s equity investments have performed well over the past financial year
and are anticipated to continue to perform well for the foreseeable future.
Although the investments remain strategic in nature these investments have
become yield dilutionary for Resilient. Resilient has a heavy capital commitment
programme with the new acquisitions and the board has accordingly decided to
reduce the holdings during the 2006 financial year.
Gearing
Resilient"s gearing at the end of the financial year was 15.9% as against 35.3%
in the comparable period. The principle reasons for this were the sale of the
portfolio of properties to Diversified Property Fund and the revaluation of the
property and listed securities portfolios. Gearing is projected to increase to
between 30% and 35% once the new developments and acquisitions are brought to
book.
Prospects
Resilient has an excellent pipeline of properties coming on stream, all of which
are strongly yield enhancing. Diamond Pavilion and Northam Shopping Centre are
scheduled to open in April and achieve yields of 14% and 12% respectively.
Jabulani Mall is due to open in November at a guaranteed yield of 10%. The
Witbank Mall is due to open in April 2007 and will not impact on the 2006
results.
The intention is to finance the new investments and extensions from existing
facilities, equity raised from the planned BEE initiative and by reducing
Resilient"s equity investments. The cost of the above sources of capital are
lower than the yield being achieved on the investments.
Considerable expense was incurred by Resilient in the 2005 financial year to
restructure the company"s fixed interest rate profile. In addition the company"s
financiers agreed to reduce margins on their loans.
These initiatives will favourably impact on 2006 financial results.
The board is of the view that Resilient is well positioned for strong growth in
the 2006 financial year and that the company will achieve growth and
distributions per unit exceeding 15%. This forecast has not been reviewed by the
company"s auditors.
Consolidated balance sheet
Reviewed Reviewed Audited
31 Dec 2005 30 Jun 2005 31 Dec 2004
R"000 R"000 R"000
Assets
Investment properties 1 042 589 1 017 609 956 884
Investment properties under
development 84 306 10 807 8 000
Investment in listed associated
companies - 270 941 313 882
Investments in other listed
property securities 765 570 261 724 153 328
Other asset investments 86 133 69 407 54 534
Total non-current assets 1 978 598 1 630 488 1 486 628
Trade and other receivables 18 642 7 040 6 892
Cash and cash equivalents 3 680 85 657 75 719
Total current assets 22 322 92 697 82 611
Total assets 2 000 920 1 723 185 1 569 239
Equity
Issued capital 1 330 1 246 1 230
Share premium 164 775 104 702 96 091
Non-distributable reserves 674 912 256 041 217 943
Retained earnings 10 3 -
Total equity attributable to
equity holders of the company 841 027 361 992 315 264
Liabilities
Linked debenture liabilities 638 224 597 856 590 440
Interest bearing borrowings 195 029 586 264 505 584
Deferred tax liabilities 196 910 84 376 75 340
Total non-current liabilities 1 030 163 1 268 496 1 171 364
Trade and other payables 31 980 23 063 20 786
Linked debenture interest payable 69 361 59 735 54 227
Income tax payable 28 389 9 899 7 598
Total current liabilities 129 730 92 697 82 611
Total liabilities 1 159 893 1 361 193 1 253 975
Total equity and liabilities 2 000 920 1 723 185 1 569 239
Consolidated income statement
Reviewed Reviewed Audited
12 months to 6 months to 12 months to
31 Dec 2005 30 Jun 2005 31 Dec 2004
R"000 R"000 R"000
Gross rental income 174 261 89 445 178 616
Amortised lease escalations (270) 4 437 3 960
Property operating expenses (51 870) (29 371) (61 424)
Net rental and related income 122 121 64 511 121 152
Distribution income from listed
associated company 26 232 17 904 19 088
Distribution income from other
equity investments 28 629 9 625 4 343
Total distribution income 54 861 27 529 23 431
Profit on disposal of investment
properties 55 404 - 29 932
Profit/(loss) on disposal of
other listed property
securities 62 216 11 928 (2 634)
Profit on disposal of
investments 117 620 11 928 27 298
Valuation gains on investment
property 286 497 - 177 720
Valuation adjustment resulting
from amortised lease
escalations 270 (4 437) (3 960)
Valuation gains on listed property
securities 212 103 38 584 29 021
Valuation gains on investments 498 870 34 147 202 781
Valuation adjustment on interest
rate swaps (10 896) - -
Administrative expenses (11 467) (4 616) (7 806)
Other income 3 815 - -
Other expenses (248) (219) (7 876)
Net operating income before net
financing costs 774 676 133 280 358 980
Financing income from the
incentive trust 7 440 3 455 3 569
Interest on units issued cum
distribution 2 310 333 8 800
Interest on borrowings (50 231) (26 876) (44 233)
Interest to linked debenture
holders (129 096) (59 735) (100 958)
Net financing costs (169 577) (82 823) (132 822)
Capital profit from listed
associated company 1 285 1 285 27 047
Profit before tax 606 384 51 742 253 205
Income tax (149 526) (11 337) (71 690)
Profit for the period
attributable to equity
holders of the company 456 858 40 405 181 515
Reconciliation of headline earnings per linked unit
Reviewed Reviewed Audited
12 months to 6 months to 12 months to
31 Dec 2005 30 Jun 2005 31 Dec 2004
Cents Cents Cents
Earnings per share 361,29 32,61 171,27
Interest to linked debenture
holders 102,09 48,21 95,26
Earnings per linked unit 463,38 80,82 266,53
Adjusted for:
- valuation gains on investment
property (226,57) - (167,69)
- valuation gains on listed
property securities (168,75) (32,19) (52,90)
- profit on disposal of investment
properties (43,81) (0,16) (28,24)
- (profit)/loss on disposal of
other listed property
securities (49,20) (9,46) 2,49
- impairment of goodwill - - 7,43
- taxation effect (120,54) 9,15 67,64
(367,80) (32,61) (171,27)
Headline earnings per linked
unit 95,59 48,21 95,26
A distribution of 52,15 cents per linked unit will be paid to unitholders on 13
March 2006.
Earnings per share, earnings per linked unit and headline earnings per linked
unit are based on the weighted average of 126 451 329 (30 June 2005: 123 902
832; 31 December 2004: 105 981 699) linked units in issue.
Consolidated statement of changes in equity
Non-dis-
Reviewed Issued Share tributable Retained
capital premium reserves earnings Total
R"000 R"000 R"000 R"000 R"000
Balance at
1 January 2004 894 26 585 36 389 4 63 872
Issue of units 336 69 524 69 860
Less: Units held by
The Resilient Unit
Purchase Trust (18) (18)
Profit on units held by
The Resilient Unit
Purchase Trust 35 35
Profit for the period 181 515 181 515
Transfer to reserves 181 519 (181 519) -
Balance at
31 December 2004 1 230 96 091 217 943 - 315 264
Issue of units 100 68 768 68 868
Less: Units held by
The Resilient Unit
Purchase Trust (84) (84)
Profit on units held by
The Resilient Unit
Purchase Trust 123 123
Profit for the period 456 858 456 858
Transfer to reserves 456 848 (456 848) -
Balance at
31 December 2005 1 330 164 775 674 912 10 841 027
Abridged consolidated statement of cash flows
Reviewed Reviewed Audited
12 months to 6 months to 12 months to
31 Dec 2005 30 Jun 2005 31 Dec 2004
R"000 R"000 R"000
Cash flows from operating
activities (3 582) 6 900 25 959
Cash flows from investing
activities 127 967 (92 319) (309 692)
Cash flows from financing
activities (196 424) 95 357 311 592
Net increase in cash and cash
equivalents (72 039) 9 938 27 859
Cash and cash equivalents at the
beginning of the period 75 719 75 719 47 860
Cash and cash equivalents at
the end of period 3 680 85 657 75 719
Notes
1 Preparation and review opinion
This reviewed abridged financial report has been prepared in accordance with
International Financial Reporting Standards (IFRS) and the requirements of the
Companies Act (Act 61 of 1973). Prior period adjustments were made to the
opening balance of reserves, the income statement and the balance sheet, to
account for the amortisation of rental escalations applicable to lease income.
The adjustments to both the opening balance of reserves and the balance sheet
were offset by changes in the fair value of investment properties and therefore
had no net impact on the prior year reserves.
KPMG Inc. has reviewed the financial information set out in this abridged
financial report. The unqualified review opinion is available for inspection at
the company"s registered office.
2 Summary of financial performance
31 Dec 05 30 Jun 05 31 Dec 04 30 Jun 04
Net asset value R11,12 R7,70 R7,36 R5,63
Distribution 52,15 cents 47,94 cents 44,08 cents 42,71 cents
Payment dates 13 Mar 06 5 Sep 05 7 Mar 05 6 Sep 04
Gearing ratio 16,00% 37,6% 35,3% 40,6%
Units in issue 133 003 384 124 603 384 123 018 384 109 416 448
3 Interest rate profile
Amount Interest % of
Expiry R"million rate % borrowings
June 2007 75,0 9,04% 24,9%
March 2008 50,0 9,44% 16,5%
April 2008 50,0 9,14% 16,5%
September 2008 50,0 10,77% 16,5%
July 2009 50,0 12,23% 16,5%
July 2009 50,0 9,25% 16,5%
November 2010 65,0 10,70% 21,6%
390,0 10,04% 129,0%
Prime linked (87,6) 8,20%* (29,0)%
Total gearing 302,4 10,57% 100,0%
* Based on the current prime lending rate of 10,50%
4 Distribution
The board has approved and notice is hereby given of a final distribution
(distribution no. 6) of 52,15 cents per linked unit for the 6 months to 31
December 2005.
The last date to trade linked units cum-distribution will be Friday, 3 March
2006 and trading will commence ex-distribution on Monday, 6 March 2006. The
record date to participate in the distribution will be Friday, 10 March 2006.
Linked unit certificates may not be dematerialised or rematerialised between
Monday, 6 March 2006 and Friday, 10 March 2006, both days inclusive.
Payment of the distribution will be made to linked unitholders on Monday, 13
March 2006. In respect of dematerialised linked unitholders, the distribution
will be transferred to the Central Securities Depository Participant
accounts/broker accounts on Monday, 13 March 2006. Certificated linked
unitholders" distribution payments will be posted on or about Monday, 13 March
2006.
By order of the board
Des de Beer Jacques van Wyk
Managing Director Financial Director
Johannesburg
9 February 2006
Registered office: Transfer secretaries:
Second Floor 66 Park Lane Ultra Registrars (Pty) Ltd
Sandown 11 Diagonal Street
Sandton Johannesburg
2196 2001
Directors: AS Nkonyeni (Chairman), JJG da Costa, D de Beer*, MP Greyling, JJ
Kriek*, DJ Lewis*, PP Msweli, MJN Njeke, BL Stuhler#, PA Theodosiou, R Turner,
BD van Wyk, JJ van Wyk*, JN Zidel*
Company secretary: NW Hanekom
# Non-independent non-executive
* Executive director
Date: 10/02/2006 08:23:32 AM Produced by the JSE SENS Department
