Fountainhead Property Trust FY 2012 results

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Fountainhead Property Trust FY 2012 results

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Fountainhead Property Trust FY 2012 results

  1. 1. SUMMARY OF AUDITED FINAL RESULTS for the year ended 30 September 2012 The Directors of Fountainhead Property Trust Management Limited, the Manager of Fountainhead Property Trust, submit their report on the audited results of Fountainhead Property Trust for the year ended 30 September 2012. These financial statements have been summarised from the audited financial statements on which KPMG Inc. have issued an unmodified audit opinion and which are available for inspection at Fountainhead Property Trust Management Limited’s registered office. STATEMENT OF FINANCIAL POSITION     30 September 2012 R’000 30 September 2011 R’000 ASSETS Property assets 10 794 992 8 815 317 Investment properties 10 477 200 8 529 779 Straight-line lease accrual 317 792 285 538 Current assets 454 612 454 562 Trade and other receivables 93 653 70 453 Cash and cash equivalents 360 959 384 109 Total assets 11 249 604 9 269 879 UNITHOLDERS’ FUNDS AND LIABILITIES Unitholders’ funds 8 062 932 7 776 713 Capital of the fund 2 874 030 2 874 030 Capital reserve 609 810 574 903 Fair value reserve 4 261 240 4 042 182 Retained earnings 317 852 285 598 Non-current liabilities Interest-bearing liability 1 983 205 355 940 Current liabilities 1 203 467 1 137 226 Trade and other payables 129 885 123 783 Interest-bearing liability 750 000 693 000 Unitholders for distribution 323 582 320 443 Total unitholders’ funds and liabilities 11 249 604 9 269 879 STATEMENT OF COMPREHENSIVE INCOME     30 September 2012 R’000 30 September 2011 R’000 Revenue 1 074 471 902 263 Contractual rental income 1 042 217 879 745 Straight-line lease adjustment 32 254 22 518 Expenses (261 998) (228 904) Administrative expenses (59 564) (44 982) Property operating expenses (202 434) (183 922) Operating profit 812 473 673 359 Net finance costs (131 079) (54 395) Interest received 23 750 27 703 Interest paid (154 829) (82 098) Profit on disposal of investment properties 11 786 13 869 Fair value adjustments to investment properties 242 179 80 544 Profit for the year 935 359 713 377 Total comprehensive income for the year 935 359 713 377 Basic/diluted earnings per unit (cents) 80.45 66.36 Headline earnings and distribution income reconciliation Profit for the year 935 359 713 377 Adjusted for: Profit on disposal of investment properties (11 786) (13 869) Fair value adjustments to investment properties (242 179) (80 544) Headline earnings 681 394 618 964 Less: Straight-line lease adjustment (32 254) (22 518) Distribution income 649 140 596 446 Headline earnings per unit (cents) 58.60 57.58 Distribution per unit (cents) 55.83 55.27 Interim distribution per unit (cents) 28.00 27.71 Final distribution per unit (cents) 27.83 27.56 Weighted average units in issue 1 162 709 748 1 075 038 515 Units in issue at year-end 1 162 709 748 1 162 709 748 STATEMENT OF CASH FLOWS     30 September 2012 R’000 30 September 2011 R’000 Cash effects from operating activities Profit for the year 935 359 713 377 Adjusted for: Straight-line lease adjustment (32 254) (22 518) Interest received (23 750) (27 703) Interest paid 154 829 82 098 Profit on disposal of investment property (11 786) (13 869) Fair value adjustments to investment properties (242 179) (80 544) Operating profit before changes in working capital 780 219 650 841 Trade and other receivables increased (23 200) (16 579) Trade and other payables increased/(decreased) 6 103 (2 418) Cash generated from operations 763 122 631 844 Interest received 23 750 27 703 Interest paid (154 829) (82 098) Income distributions (646 002) (589 424) Cash outflows from operating activities (13 959) (11 975) Cash effects from investing activities Additions to investment properties (1 741 205) (870 730) Proceeds from disposal of investment properties 47 749 112 388 Cash outflows from investing activities (1 693 456) (758 342) Cash effects from financing activities Interest-bearing liabilities raised 1 684 265 355 940 Interest-bearing liabilities repaid – (532 000) Issue of units – 1 000 000 Rights offer expenses – (13 141) Cash inflows from financing activities 1 684 265 810 799 Net (decrease)/increase in cash and cash equivalents (23 150) 40 482 Cash and cash equivalents at the beginning of the year 384 109 343 627 Cash and cash equivalents at the end of the year 360 959 384 109 STATEMENT OF CHANGES IN UNITHOLDERS’ FUNDS     (R’000) Capital of the fund Capital reserve Fair value reserve Retained earnings Total unitholders’ funds Balance as at 1 October 2010 1 933 354 513 837 4 008 835 263 080 6 719 106 Total comprehensive income for the year   Profit and total comprehensive income for the year – – – 713 377 713 377 Transactions with unitholders, recorded directly in equity   Profit and fair value reserve realised on sale of property transferred to capital reserve – 61 066 (47 197) (13 869) – Fair value adjustment on investment properties transferred to fair value reserve – – 80 544 (80 544) – Issue of units 953 817 – – 46 183 1 000 000 Rights offer expenses (13 141) – – – (13 141) Income distributions – – – (642 629) (642 629) Total transactions with unitholders 940 676 61 066 33 347 (690 859) 344 230 Balance as at 30 September 2011 2 874 030 574 903 4 042 182 285 598 7 776 713 Total comprehensive income for the year   Profit and total comprehensive income for the year – – – 935 359 935 359 Transactions with unitholders, recorded directly in equity   Profit and fair value reserve realised on sale of properties transferred to capital reserve – 34 907 (23 121) (11 786) – Fair value adjustment on investment properties transferred to fair value reserve – – 242 179 (242 179) – Income distributions – – – (649 140) (649 140) Total transactions with unitholders – 34 907 219 058 (903 105) (649 140) Balance as at 30 September 2012 2 874 030 609 810 4 261 240 317 852 8 062 932 COMMENTARY 1. BASIS OF PREPARATION AND ACCOUNTING POLICIES The results have been prepared in accordance with International Financial Reporting Standards (IFRS), the AC 500 series issued by the Accounting Practices Board, the requirements of the Collective Investment Schemes Control Act and the JSE Limited. The accounting policies are consistent in all material respects with those applied in prior years. The annual results have been prepared under the supervision of Aaron Suckerman ACCA (UK). 2. INCOME DISTRIBUTION PER UNIT Fountainhead Property Trust has declared a distribution of 27.83 cents per unit for the six  months ended 30 September 2012 which, combined with the distribution of 28  cents for the half year ended 30  March  2012, results in a total distribution of 55.83  cents per unit for the year ended 30 September 2012. The total distribution is 1% ahead of the prior year. Included in the current year’s distribution is the reversal of prior year municipal accruals of R11.6 million and the dilutive effect of expensing the borrowing costs on the redevelopment of Blue Route Mall. The core portfolio excluding properties acquired, properties disposed of, or properties under development showed growth of 4.25% with contractual rental showing muted growth of 4% primarily due to tougher market conditions and negative reversions on lease renewals. 3. INTEREST-BEARING LIABILITIES Term Loan 1 – a R750 000 000 interest only facility at a rate of three-month JIBAR plus 1.98% repayable by 30 June 2015. A total of R685 544 278 of this facility has been utilised. Term Loan 2 – a R250 000 000 interest only facility fixed at a rate of 11.39% until 15 February 2013, reverting thereafter to a floating rate interest only facility of three-month JIBAR + 1.55%. This facility is repayable by 30 June 2013. The facility has been fully utilised. Term Loan 3 – a R200 000 000 interest only facility at a rate of three-month JIBAR +1.68%. This facility is repayable by 30 June 2013. The facility has been fully utilised. Term Loan 4 – the Blue Route Mall Development Loan Facility – a R935 000 000 interest only facility floating at a rate of one-month JIBAR + 2.60% until 31 May 2015. This facility is repayable by 31 May 2015. To date R777 660 689 has been drawn from the facility. R350 000 000 of the facility has been fixed at 8.42% until 31 May 2015. Since 1 April 2012, interest on R626 990 332 was capitalised, representing the spend to date when the mall commenced trading. Interest payments on further capital expenditure as from 1 April 2012 will be capitalised until the project completion date, which is estimated to be in January 2013. Term Loan 5 – a R600 000 000 interest only facility floating at a rate of one-month JIBAR + 2.39% until 28 February 2016. A total of R520 000 000 of this facility has been utilised. R500 000 000 of this facility has been fixed at a rate of 8.72% until 29 May 2015. Term Loan 6 – a R220 000 000 interest only facility at a rate of three-month JIBAR +1.71%. This facility is repayable by 30 June 2013. This facility has been fully utilised. Term Loan 7 – a R80 000 000 interest only facility at a rate of three-month JIBAR +1.66%. This facility is repayable by 30 June 2013. This facility has been fully utilised. The Board is reviewing interest rate hedging instruments with a view to taking advantage of the current low interest rate environment by increasing the percentage of debt that is hedged to a minimum of 65%. Based on preliminary discussions, the risk of new facilities not being granted is minimal due to the low gearing of the Trust. 4. MAJOR CAPITAL PROJECTS Blue Route Mall The mall was opened on 29 March 2012 and was 99% let at the time. The mall is trading in line with expectations and has been well received by tenants and shoppers. On-grade parking for an additional 2 000 parking bays is currently under construction and is due for completion in early 2013 bringing this phase of the project to final completion. During the year an application for additional bulk was submitted to allow for future expansion of the mall. The additional parking bays under construction will allow for future expansion of the mall. Bryanston Shopping Centre A R32 million refurbishment is underway at Bryanston Shopping Centre. The centre will receive a major facelift with all ceilings and floors being replaced and entrances enhanced. The refurbishment is due for completion in November 2012. The total refurbishment will be marginally enhancing to earnings. Centurion Mall A R19 million refurbishment is underway which includes an upgrade of the spine area and capital replacement of the skylights. The refurbishment is due for completion in November 2012. This capital expenditure will enhance the overall appeal of the mall. 5. ACQUISITIONS AND DISPOSALS The Trust purchased the following properties during the year: Sector Building name Location Price Initial yield Transfer date Retail Centurion Mall 25% undivided share Centurion, PTA R751 519 364 7.10% 15 December 2011 Retail Centurion Boulevard Centurion, PTA R366 000 000 8.20% 27 March 2012 Office Cedarwood Bryanston, JHB R77 843 799 9.00% 4 January 2012 The Trust sold the following properties during the year: Sector Building name Location Transfer date Selling price Valuation Profit on sale Industrial Medsave House Strijdom Park, JHB 3 October 2011 2 446 000 2 446 000 – Industrial 4 Walter Place Watervalpark, Mayville 18 April 2012 27 352 730 22 536 643 4 816 087 Office Wierda Mews 41 Wierda Road, Wierda Valley 3 April 2012 17 949 963 10 979 681 6 970 282 Essex Park realised net proceeds of R30.2 million with registration of transfer occurring subsequent to year end. 6. SEGMENTAL INFORMATION Year ended September 2012 Year ended September 2011 Revenue Rm Net income Rm % of total Revenue Rm Net income Rm % of total Retail 735 583 90 621 482 81 Office 186 156 24 143 116 20 Industrial 88 70 11 85 68 11 Specialised 33 33 5 31 31 5 Corporate – (192) (30) – (101) (17) Total 1 042 650 100 880 596 100 7. VACANCY LEVELS Vacancy levels in terms of rentable area were as follows: Sector 30 September 2012 % 30 September 2011 % Retail 6.5 7.0 Office 7.1 10.2 Industrial 8.0 7.3 Specialised – – Total 6.7 7.4 By value, the vacancies equated to 3.5% of the rent roll for September 2012, compared with 4.9% at 30 September 2011. The retail component has a vacancy of 6.5% primarily located at Brightwater Commons and the offices at Centurion Mall, also known as Die Anker. The office component has a vacancy of 7.1% which is primarily in Grayston Ridge and AMR Office Park. The industrial component has a vacancy of 8%, primarily at Supreme Industrial Park and the Jet Park mini-units. 8. PORTFOLIO VALUATIONS The composition of the Trust’s portfolio, as valued by the independent valuer, Rode and Associates CC, as at 30 September 2012, is as follows: Sector Value Cents/ Forward % of portfolio (Rm) unit EY (%) 2012 2011 Retail 8 226 707 8,0% 76 72 Office 1 680 145 9,7% 16 18 Industrial 541 47 12,1% 5 7 Specialised 348 30 10,4% 3 3 Total property 10 795 929 8,5% 100 100 Interest-bearing liabilities (2 733) (235) Net current assets 1 – Net asset value 8 063 694 9. LEASE EXPIRY PROFILE The lease expiry profile by rentable area as at 30 September 2012 is as follows (m2 ): 120 000 100 000 80 000 60 000 40 000 20 000 0 2012 2013 2014 2015 2016 >2016 ■ Retail ■ Offices ■ Industrial ■ Specialised 10. PROSPECTS Based on difficult trading conditions being experienced, the temporary dilution of Blue Route Mall, the effect of hedging the debt and further committed capital expenditure of approximately R98 million, it is anticipated that distributions for 2013 will be unchanged compared with the year ended 30  September 2012. Distributions for the year ending 30  September 2014 are expected to show an increase of 7,2%. This forecast has not been reviewed or reported on by Fountainhead Property Trust’s auditor. 11. CHANGES TO THE BOARD OF DIRECTORS The following resignations occurred during the year: Stewart Shaw-Taylor and Donald Samuel Ogbu effective 24 August 2012 and Anton Raubenheimer effective 30 September 2012. The following appointments were made during the year: Andrew J Konig and Bernard Nackan effective 20 September 2012. 12. APPOINTMENT OF CHIEF EXECUTIVE OFFICER Alex Phakathi has been appointed as Chief Executive Officer effective 7 September 2012. 13. CHANGE TO THE TRUSTEE During November 2011, Absa Bank Limited (Absa ) issued a notice of intention to resign as Trustee under the Collective Investment Schemes Control Act. The extension of the notice period expires on 16 November 2012. FirstRand Bank Limited has been appointed to replace Absa as Trustee. The appointment is subject to approval by the Financial Services Board (FSB). 14. RENEWAL OF CAUTIONARY ANNOUNCEMENT On 28 September 2012, the Board received a proposal from Redefine Properties Limited to acquire the Trust’s property portfolio other than Orion Place, Gail Industrial Park and Precision House for a purchase consideration that will result in unitholders receiving 3 Hyprop units and 62.5 Redefine units for every 100 Fountainhead units. On 23 October 2012, the Board received a proposal from Growthpoint Properties Limited to acquire the Trust’s property portfolio in return for a combination of cash and Growthpoint units that will result in unitholders receiving 35 Growthpoint units for every 100 Fountainhead units currently held and Growthpoint will discharge all of the existing borrowings in the Trust. There are a number of conditions precedent to these two offers as well as regulatory and commercial issues. The Board has constituted an independent sub-committee which, together with its advisors, will consider the proposals in the light of the practicalities of each and present these to the Board. 15. INCOME DISTRIBUTION ANNOUNCEMENT Notice is hereby given of distribution number 59 of 27.83 cents per unit for the six months ended 30 September 2012. The source of distribution is net income from property rentals. The distribution is not regarded as a dividend and therefore no dividend withholding tax is payable on the distribution amount. The last date to trade cum distribution will be Friday, 16 November 2012. The units of Fountainhead Property Trust will commence trading ex-distribution on Monday, 19 November 2012 and the record date will be Friday, 23 November 2012. The distribution will be paid on Monday, 26 November 2012. Unit certificates may not be dematerialised or rematerialised between Monday, 19 November 2012 and Friday, 23 November 2012, both dates inclusive. BY ORDER OF THE BOARD Fountainhead Property Trust Management Limited (Registration number 1983/003324/06) Johannesburg 31 October 2012 Website: www.fountainheadproperty.co.za Transfer secretaries Computershare Investor Services (Proprietary) Limited 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) Secretary Broll Property Group (Pty) Limited, Broll House 27 Fricker Road, Illovo, Johannesburg, 2196 (PO Box 1455, Saxonwold, 2132) Registered office Redefine Place, 2 Arnold Road, Rosebank Johannesburg (PO Box 1731, Parklands, 2121) Short name: FPT Share code: FPT ISIN: ZAE000097416 Directors WM Kirchmann (Chairman), VA Christian AJ Konig, HY Laher, B Nackan, JD Rainier, DS Savage Chief Executive Officer MA Phakathi Sponsor The Standard Bank of South Africa Limited * Final distribution of 27.83 cents per unit * Market capitalisation of R9.4 billion * NAV of R6.94 per unit up 3.7% * Completion of Blue Route Mall * Renewal of cautionary * Vacancies reduced to 6.7%

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