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RES
RES
RES - Resilient Property Income Fund - Audited Abridged Financial Report
Resilient Property Income Fund Limited
Incorporated in the Republic of South Africa
Reg no 2002/016851/06
Share code RES & ISIN: ZAE000043642
AUDITED ABRIDGED FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2006
DIRECTORS` COMMENTARY
Resilient`s strategy remains investment in dominant retail developments in
small cities and large towns tenanted predominantly by national retailers
and anchored by large supermarkets. In addition, Resilient owns a portfolio
of listed property securities. The holding in listed property securities is
gradually being reduced to finance new developments and extensions to
existing properties.
The retail trading environment remains buoyant and trading densities in the
Resilient portfolio, particularly in Limpopo Province, are currently
growing significantly faster than rental escalations. This provides
opportunities for increased rentals on expiry of leases and underpins
existing rentals in the event of a slow down in the retail-trading
environment.
1. PROPERTY ACQUISITIONS AND DEVELOPMENTS
Diamond Pavilion
Resilient acquired the remaining 50% interest in Diamond Pavilion,
Kimberley at a cost of R118,3 million with effect from 12 April 2006. A
forward yield of 12,9% was achieved on the entire investment.
A 1 450 m2 GLA freestanding unit is being developed on the site to
accommodate Hi-Fi Corporation. Plans are at an advanced stage for the
development of four cinemas and an additional value retail outlet.
Jabulani Mall
Resilient owns a 55% undivided share in this 43 500 m2 GLA retail centre.
The mall opened on schedule on 26 October 2006 and is trading well. The
mall is anchored by Edgars, Game, Shoprite and Woolworths and was acquired
at an initial yield of 10%.
Northam Shopping Centre
This centre, in which Resilient owns a 55% share, opened on 25 April 2006.
Tenants include Shoprite Checkers, Cashbuild, JET stores, Markhams, Exact
and Ackermans. Subsequent to opening the centre was extended to accommodate
KFC and the SA Post Office.
Highveld Mall
Resilient has a 60% interest in this 45 000 m2 GLA regional mall being
developed in Witbank. The mall is on schedule to open in April 2007 and
will be anchored by Edgars, Pick `n Pay and Woolworths. The developers have
guaranteed a commencement yield of 10%.
The Grove (Equestria Mall)
Resilient and Keystone Investments have entered into a 50/50 joint venture
agreement to develop a mall of 38 500 m2 GLA in the North East of Pretoria.
The mall will be anchored by Edgars, Pick `n Pay and Woolworths and
construction is expected to commence in May 2007. The development is
projected to yield 10% on completion.
Arbour Town
Resilient owns 10% of this 96,9 ha site situated along the N2 highway in
Amanzimtoti. The remaining interest is owned by Keystone Investments
together with BEE partners. In November 2006 rights were approved for a 75
000 m2 regional mall, an 18 000 m2 office park and a 45 000 m2 mixed use
zone. The approval of rights has however been taken on appeal and the
appeal process should be completed before the end of 2007.
2. EXTENSIONS TO EXISTING DEVELOPMENTS
The re-development and extension of Mvusuludzo Mall, Thohoyandou is on
schedule for completion in April 2007. Ackermans, Truworths, Foschini, Mr
Price and Totalsports were open in time for the Christmas trade. Edgars has
taken beneficial occupation of its space and will open in April 2007.
The 5 500 m2 GLA extension to Tzaneng Mall is on schedule for completion in
September 2008. The extension will provide additional retail space for
Edgars, JET stores, Foschini, Milady`s, Mr Price and Truworths.
As a result of strong trading conditions, JET stores exercised its
extension option at Northam Shopping Centre. There is strong demand from
national retailers for additional space and, as a result, a further 7 000
m2 GLA extension is planned. Prospective tenants include inter alia
Foschini, Totalsports, Mr Price and Legit.
A 2 000 m2 GLA extension to Murchison Mall has been approved to accommodate
Foschini, Donna Clair, Studio 88 and Fashion World. Further extensions are
being considered for Nelspruit Plaza, Limpopo Mall, The Crossing in
Mokopane and Rustenburg Plaza. None of these extensions will involve the
acquisition of additional land and hence will be earnings enhancing.
3. PLANNED DEVELOPMENTS
The Village, Klerksdorp
Resilient and local developer Johan Stuyger have acquired a 15 ha site in
the upmarket residential area of Klerksdorp close to Resilient`s Pick `n
Pay Hypermarket. The intention is to obtain retail zoning for the site and
to develop a retail shopping centre with a GLA of approximately 30 000 m2.
Completion of the re-zoning process is expected during the course of the
2008 financial year.
Polokwane Mall
Resilient, in partnership with Flanagan & Gerard and the Moolman and Ayob
Groups, have acquired a 27 ha site in Polokwane. After the sale of a stake
to BEE partners, Resilient will own 48% of the property at a cost of R8,4
million. The intention is to apply for retail zoning and to develop a
regional mall of at least 65 000 m2 GLA. In addition, Resilient spent R9,5
million on the acquisition of a 55% interest in a further 44 ha of land in
the same node with a view to developing a value retail centre.
4. LISTED EQUITIES
Resilient sold a total of 5 986 340 units in Acucap Properties at an
average price of R24,90. The stake in Diversified Property Fund was
increased with the acquisition of 8 801 387 units at an average price of
R6,84. Resilient acquired the remaining 70% shareholding in Property Fund
Managers Limited (PFM) at a cost of R7 million. PFM is the asset manager of
Capital Property Fund. Prior to this acquisition Resilient sold 7 124 855
units in Capital Property Fund at an average price of R4,87. Subsequent to
the PFM acquisition Resilient acquired 10 609 529 units in Capital Property
Fund at an average price of R4,31.
Resilient`s entire holding of 23 249 644 units in Ambit Properties was sold
at an average price of R4,19 per linked unit.
5. PROPERTIES SOLD
Resilient`s 17,075% interest in Die Meent gebou was sold for
R6 million against a book value of R5,5 million. Shoprite Secunda, with a
book value of R41 million was sold for R47 million. Both properties have
been transferred. Resilient has signed an agreement for the sale of its 50%
interest in Woolworths Kimberley for R8,7 million.
6. PROSPECTS
During the 2006 financial year Resilient had the benefit of 9 months of
earnings from Diamond Pavilion and Northam Shopping Centre and 2 months
earnings from Jabulani Mall. Resilient will receive full years` earnings
from these developments during the 2007 financial year. In addition,
Resilient will receive income from the expansion to Mvusuludzo Mall,
Thohoyandou as well as the earnings from Highveld Mall, both scheduled for
opening during April 2007.
All these property developments and extensions yield a minimum of 10% and
are thus earnings enhancing. The Grove and Arbour Town developments will
not impact the 2007 results.
Resilient`s gearing is relatively low at 14,4% (excluding the effect of BEE
SPV). Fixed rates exceeded draw downs by R30,7 million at the end of the
2006 financial year in anticipation of draw down commitments during 2007.
Changes in the interest rate environment will accordingly have limited
impact on Resilient`s performance for the 2007 financial year.
The board is accordingly of the view that Resilient is well positioned for
strong growth in the 2007 financial year.
Abridged consolidated balance sheets
Audited Audited
31 Dec 2006 31 Dec 2005
R`000 R`000
ASSETS
Non-current assets 2 954 294 1 978 598
Investment property 1 937 942 1 042 589
Investment property under development 170 582 84 306
Investments 728 679 765 570
Loans to the purchase trust 115 209 85 080
Property, plant and equipment 1 882 1 053
Current assets 48 992 22 322
Investment property held for sale 8 680 -
Trade and other receivables 31 252 18 642
Cash and cash equivalents 9 060 3 680
Total assets 3 003 286 2 000 920
EQUITY AND LIABILITIES
Total equity attributable to equity 1 332 340 841 027
holders
Share capital 1 419 1 330
Share premium 259 972 164 877
Treasury shares - (102)
Non-distributable reserves 1 070 939 674 912
Retained earnings 10 10
Total liabilities 1 670 946 1 159 893
Non-current liabilities 1 535 768 1 030 163
Linked debentures 681 019 638 416
Treasury debentures - (192)
Interest-bearing borrowings 528 931 195 029
Deferred tax 325 818 196 910
Current liabilities 135 178 129 730
Interest-bearing borrowings 4 600 -
Trade and other payables 29 369 31 980
Linked debenture interest payable 89 668 69 361
Income tax payable 11 541 28 389
Total equity and liabilities 3 003 286 2 000 920
Abridged consolidated income statements
Audited Audited
12 months 12 months
ended ended
31 Dec 2006 31 Dec 2005
R`000 R`000
Net rental and related income 135 076 122 121
Recoveries and contractual rental income 181 988 174 261
Straight-lining of rental income
adjustment 10 163 (270)
Rental income 192 151 173 991
Property operating expenses (57 075) (51 870)
Distribution income from investments
Distribution income from investments 55 682 28 629
Profit on disposal of investments and
investment property 57 490 117 620
Profit on disposal of investment property 5 991 55 404
Profit on disposal of investments 51 499 62 216
Fair value gains on investments and
investment property 445 409 498 870
Fair value gain on investment property 407 938 286 497
Fair value adjustment resulting from
straight-lining of rental income (10 163) 270
Fair value gain on investments 47 634 212 103
Other income 12 887 3 815
Administrative expenses (21 483) (11 467)
Other expenses (9 262) (248)
Income from associated company 37 198 27 517
De-consolidation of The Siyakha Education
Trust (4 470) -
Profit before net finance costs 708 527 786 857
Net finance costs (175 225) (180 473)
Finance income
Interest from the purchase trust 9 338 7 440
Fair value adjustment on interest rate
swaps 7 023 -
Interest on linked units issued cum
distribution 3 903 2 310
Finance costs
Interest on borrowings (30 302) (50 231)
Fair value adjustment on interest rate
swaps - (10 896)
Interest to linked debenture holders
- interim (75 519) (59 735)
- final (89 668) (69 361)
Profit before income tax 533 302 606 384
Income tax expense (137 540) (149 526)
Profit for the year attributable to equity
holders 395 762 456 858
Basic earnings per share (cents) 287,95 361,29
Basic earnings per linked unit (cents) 408,14 463,38
Diluted earnings per linked unit (cents) 378,40 463,38
Reconciliation of profit for the year to headline earnings and distribution
Audited Audited
12 months 12 months
ended ended
31 Dec 2006 31 Dec 2005
R`000 R`000
Basic earnings (shares) 395 762 456 858
Interest to linked debenture holders 165 187 129 096
Basic earnings (linked units) 560 949 585 954
Adjusted for: (368 571) (466 694)
- fair value gain on investment property (407 938) (286 497)
- fair value gain on investment (47 634) (212 103)
- profit on disposal of investment
property (5 991) (55 404)
- profit on disposal of investments (51 499) (62 216)
- impairment of goodwill 6 951 -
- income tax effect 137 540 149 526
Headline earnings 192 378 119 260
Fair value adjustment on interest rate
swaps (7 023) 10 896
Interest paid by BEE SPV (refer note 2.2) 11 976 -
Income received by BEE SPV (refer note 2.2)
(7 240) -
Post-acquisition reserves from associated
company (31 683) (1 285)
De-consolidation of The Siyakha Education
Trust 4 470 -
Other 2 319 235
Distributable income 165 197 129 106
Less: Distribution declared (165 187) (129 096)
Income not distributed 10 10
Headline earnings per linked unit amounts to 139,97 cents (2005: 95,59
cents).
Basic earnings per share, basic earnings per linked unit and headline
earnings per linked unit are based on the weighted average of
137 441 187 (2005: 126 451 329) linked units in issue during the year.
Diluted earnings per linked unit is based on the weighted average of 148
251 998 (2005: 126 451 329) linked units in issue during the year.
A distribution of 63,20 cents per linked unit will be paid to unitholders
on 5 March 2007.
Abridged consolidated statements of changes in equity
for the year ended 31 December 2006
Non-
Distri-
Share Share Treasury butable Retained
capital premium shares reserves earnings Total
Audited R`000 R`000 R`000 R`000 R`000 R`000
Balance at
31 December
2004 1 230 96 109 (18) 217 943 - 315 264
Issue of
units
- Issue of
1 585 000
units
on 22 March
2005 16 7 640 7 656
- Issue of
6 250 000
units
on 23
September
2005 62 43 562 43 624
- Issue of
2 150 000
units
on 11
October
2005 22 15 007 15 029
Share
premium
discount 2 559 2 559
Units
acquired by
The
Resilient
Unit
Purchase
Trust (84) (84)
Profit on
units
issued by
The
Resilient
Unit
Purchase
Trust 121 121
Profit for
the year 456 858 456 858
Transfer to
reserves
456 848 (456 848) -
Balance at
31 December
2005
1 330 164 877 (102) 674 912 10 841 027
Issue of
units
- Issue of
10 810 811
units
on 27 June
2006 108 142 270 142 378
- Issue of
2 815 000
units
on 27
September
2006 28 27 438 27 466
- Issue of
6 060 606
units
on 22
November
2006 61 67 657 67 718
Units
issued by
The
Resilient
Unit
Purchase
Trust 102 - (102)
Units
issued to
BEE SPV
eliminated (108) (142 270) (142 378)
Profit on
units
issued by
The
Resilient
Unit
Purchase
Trust 265 265
Profit for
the year 395 762 395 762
Transfer to
reserves
395 762 (395 762) -
Balance at
31 December
2006
1 419 259 972 - 1 070 939 10 1 332 340
Non-distributable reserves comprise those profits and losses that are not
distributable to unitholders and are made up of mainly revaluation
adjustments on investment assets, profits or losses on the disposal of
investments and profits and losses resulting from activities other than the
group`s investment in properties and investments.
Abridged consolidated statements of cash flows
for the year ended 31 December 2006
Audited Audited
12 months 12 months
ended ended
31 Dec 2006 31 Dec 2005
R`000 R`000
Cash outflow from operating activities (19 143) (3 582)
Cash (outflow)/inflow from investing
activities (452 060) 127 967
Cash inflow/(outflow) from financing
activities 476 583 (196 424)
Increase/(decrease) in cash and cash
equivalents 5 380 (72 039)
Cash and cash equivalents at beginning of
year 3 680 75 719
Cash and cash equivalents at end of year 9 060 3 680
Cash and cash equivalents consist of:
Current accounts 9 060 3 680
NOTES
1. PREPARATION
This abridged report has been prepared in accordance with International
Financial Reporting Standards (IFRS) and the requirements of the Companies
Act (Act 61 of 1973). KPMG Inc. has audited the financial information set
out in this abridged report. Their unqualified audit report is available
for inspection at the group`s registered address.
2. SUMMARY OF FINANCIAL PERFORMANCE
2.1 The group will, in compliance with changing financial reporting
requirements, account for entities that do not form part of its operations,
that do not operate under its operating policies and whose businesses, risk
profiles and debt levels are not comparable to that of its own. Disclosure
under "Property operations" excludes these entities.
2.2 Stakeholders are referred to the meeting of unitholders on 23 June
2006, in which the company obtained a mandate for the implementation of a
strategy that will allow for the investment of BEE Groups in Resilient. For
this purpose, a company Eagle`s Eye Investments (Proprietary) Limited (BEE
SPV), was formed. Resilient has guaranteed the funding obligations of BEE
SPV. 10 810 811 linked units were issued to BEE SPV on 27 June 2006. In
terms of IFRS the issue did not in reality take place and the essence of
the transaction was that the BEE shareholders received a right to acquire
linked units in Resilient at a future date for nil value. As a consequence
the issue of linked units has been eliminated in the preparation of these
financial statements. The current value of the right the BEE shareholders
have acquired that should be charged to the income statement in terms of
IFRS is not considered material. This will be considered on an ongoing
basis. The following table indicates the effect that the BEE transaction
has had on the group financial statements (the column "Property operations"
indicates Resilient`s results had the BEE transaction been accounted for as
an issue for value):
Property
Consolidated BEE SPV operations
R`000 R`000 R`000
Income statement
Finance income
- Interest on linked
units issued cum
distribution 3 903 5 731 9 634
Finance costs
- Interest on borrowings (30 302) 11 976 (18 326)
- Interest to linked
debenture holders (165 187) (12 971) (178 158)
Balance sheet
Share capital 1 419 108 1 527
Share premium 259 972 142 270 402 242
Total non-current
liabilities
- Linked debentures 681 019 51 892 732 911
- Interest-bearing
borrowings (non-current
and current) 533 531 (205 838) 327 693
Total current
liabilities
- Linked debenture
interest payable 89 668 6 832 96 500
2.3 Resilient promoted the formation of The Siyakha Education Trust
(Siyakha), a trust dedicated to black education in South Africa. Property
operations include an adjustment to exclude the impact of consolidating
Siyakha at 30 June 2006. Siyakha is no longer consolidated into the group
as Resilient has been released from its funding guarantees.
31 Dec 06 30 Jun 06 31 Dec 05 30 Jun 05
Distribution per
linked unit 63,20 cents 56,78 cents 52,15 cents 47,94 cents
Distribution
payment date 05 Mar 07 11 Sep 06 13 Mar 06 05 Sep 05
Units in issue 152 689 801 143 814 195 133 003 384 124 603 384
Property
operations
Net asset value R14,49 R12,46 R11,12 R7,70
Gearing ratio* 14,4% 12,5% 16,0% 37,6%
Units in issue 152 689 801 143 744 195 132 963 384 124 553 384
Consolidated
Net asset value R14,19 R11,85 R11,12 R7,70
Units in issue 141 878 990 132 933 384 132 963 384 124 553 384
*The gearing ratio is calculated by dividing the total gearing by the
investment in non-current assets excluding loans to the purchase trust and
property, plant and equipment.
3. GEARING
Amount Interest % of
Expiry R`million rate borrowings
June 2007 75,0 8,69% 18,0%
March 2008 50,0 9,44% 12,0%
April 2008 50,0 8,79% 12,0%
July 2009 50,0 9,25% 12,0%
August 2009 50,0 9,70% 12,0%
November 2010 65,0 10,70% 15,6%
August 2011 50,0 10,46% 12,0%
November 2012 50,0 9,83% 12,0%
Hedged borrowings 440,0 9,59% 105,6%
Prime linked borrowings# (30,7) 10,20% (5,6%)
Total gearing## 409,3 9,55% 100,0%
# Based on the current prime lending rate of 12,50%
## Total gearing comprises the level of external interest-bearing
borrowings, excluding those of BEE SPV, should current liabilities be
liquidated and current assets be realised.
Gearing is calculated as follows: R`million
- Interest-bearing borrowings 533,5
- Interest-bearing borrowings of BEE SPV (205,8)
- Current liabilities 130,6
- Current assets (49,0)
Total gearing 409,3
4. LEASE EXPIRY PROFILE AND SEGMENTAL ANALYSIS
Lease expiry (based on contractual rental income)
Vacant 1,9%
Dec 07 0,1%
Dec 08 6,9%
Dec 09 11,3%
Dec 10 15,1%
Dec 11 17,5%
Dec 12 26,1%
>Dec 12 21,1%
Tenants at Mvusuludzo Mall in Thohoyandou and Tzaneng Mall were vacated for
redevelopment of these centres. These two centres account for 55% of the
current 1,9% vacancy.
Rental Profit before
Geographical area income net finance costs
R`000 R`000
Corporate - 175 676
Gauteng 6 925 32 248
Kwa-Zulu Natal 26 491 59 189
Limpopo 79 467 43 916
Mpumalanga 22 956 108 866
North West 27 884 235 674
Northern Cape 28 428 52 958
192 151 708 527
5. PAYMENT OF FINAL DISTRIBUTION
The board has approved and notice is hereby given of a final distribution
(distribution no 8) of 63,20 cents per linked unit for the six months ended
31 December 2006.
The last date to trade linked units cum distribution will be Friday, 23
February 2007 and trading will commence ex distribution on Monday, 26
February 2007. The record date to participate in the distribution will be
Friday, 2 March 2007.
Linked unit certificates may not be dematerialised or rematerialised
between Monday, 26 February 2007 and Friday, 2 March 2007, both days
inclusive.
Payment of the distribution will be made to linked unitholders on Monday, 5
March 2007. In respect of dematerialised linked unitholders, the
distribution will be transferred to the Central Securities Depository
Participant accounts/broker accounts on Monday, 5 March 2007. Certificated
linked unitholders` distribution payments will be posted on or about
Monday, 5 March 2007.
By order of the board
Des de Beer Andries de Lange
Managing director Financial director
Johannesburg
7 February 2007
Directors
AS Nkonyeni (Chairman) JJG da Costa D de Beer*
A de Lange* 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 *Executive director
Business address
4th Floor Rivonia Village Rivonia Boulevard Rivonia 2191
Transfer office
Link Market Services South Africa (Pty) Ltd 11 Diagonal Street
Johannesburg 2001
Date: 08/02/2007 07:31:01 Produced by the JSE SENS Department.
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