Vividend Income Fund Ltd FY 2013 results

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Vividend Income Fund Ltd FY 2013 results

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Vividend Income Fund Ltd FY 2013 results

  1. 1. (“Vividend” or “the company”) R EVIEWED C O NDE NSE D FI NANC I AL RE SULT S f o r t he ye ar e n de d 3 1 au g u s t 2 0 1 3 Highlights 5 0,00 cents per linked unit • full year distribution above forecast expectations • R 2,0 billion R 401 million Notes 190 616 8 086 198 702 (41 706) 156 996 (12 460) 144 536 7 018 (40 428) (2 095) 9 749 118 780 (106 417) 12 363 11 295 23 658 50,00 27,00 23,00 10,97 99 344 (8 086) (1 944) (5 074) 646 2 095 106 417 Reconciliation – earnings to distributable earnings Basic earnings are reconciled to headline earnings as follows: Earnings attributable to equity shareholders Fair value adjustment – investment property, net of deferred taxation Amortisation of debenture discount/premium Headline earnings before debenture interest Debenture interest Headline earnings attributable to linked unitholders Fair value adjustment – financial instruments, net of deferred taxation Straight-line lease income adjustment, net of deferred taxation Capital costs Distributable earnings attributable to linked unitholders Headline earnings per linked unit (cents) (75 311) – (75 311) 191 075 149 131 106 417 51 590 54 827 cents 50,00 50,00 Distributable earnings per linked unit Distribution per linked unit (7 405) (28 520) 8 701 430 2 761 75 311 (106 417) – (106 417) 267 678 215 586 Distribution to linked unitholders Interim Final 75 311 25 631 49 680 cents 50,50 50,50 Investment property 2 029 741 1 360 662 Fair value of investment property for accounting purposes 2 011 357 1 350 364 18 384 10 298 6 113 – 240 346 95 264 Trade and other receivables 68 543 14 069 Cash and cash equivalents 171 803 81 195 2 276 200 1 455 926 45 299 21 640 3 2 EQUITY AND LIABILITIES Shareholders’ interest Ordinary share capital 21 638 931 874 1 379 335 953 514 751 908 413 149 Other non-current financial liabilities 751 839 401 785 69 11 364 Deferred taxation liability Current liabilities 2, 3 18 395 (21 558) 430 (2 733) 75 311 72 578 6 265 (6 293) 2 761 75 311 48,67 Total R’000 1 1 – 2 1 – 3 3 243 – 18 395 21 638 – 23 658 45 296 3 244 1 18 395 21 640 1 23 658 45 299 INTRODUCTION Vividend is a property loan stock company listed on the JSE Limited (JSE) under Financial – Real Estate Holdings, with a market capitalisation at 31 August 2013 of R1 330 million and a portfolio of 21 directly owned properties valued at R2 029 million. The company’s primary objective is to identify value and value enhancing opportunities within target sectors of the South African property market by using defined investment strategies that have a goal of creating a diverse and stable portfolio of assets capable of generating secure, consistent and continually escalating free cash flows. Linked unitholders are entitled, through the debenture portion of their linked units, to the after-tax profits of the company, excluding capital profits and losses and after adjusting for all non-cash items. The interest entitlement is calculated and accrues to linked unitholders on the last days of February and August of each year and is payable within 90 days of accrual date, or such shorter period as prescribed in the JSE Listings Requirements. The company does not distribute capital profits. Sectorial spread by value Sectorial spread by value Sectorial spread by GLA Sectorial spread by GLA Commercial Commercial 41% 41% 59% 59% HIGHLIGHTS FOR THE PERIOD Financial results The distribution per linked unit for the year ended 31 August 2013, being 50,00 cents, is a) 1% higher than the forecasted distribution per linked unit, being 49,5 cents, published in Forecast A of Appendix 2 of the Combined Claw-back and Rights Issue Circular dated 13 May 2013 (“the Rights Issue Circular”), Forecast A of the Rights Issue Circular being the appropriate forecast to apply given the results of the Combined Claw-back and Rights Issue b) 1% lower than the actual distribution for the comparable period ended 31 August 2012, being 50,50 cents. Net property income The increase in revenue was due, in most part, to a) the inclusion of revenue from the Sasol Kent Street Properties which transferred into the name of the company on 10 December 2012 and b) contractual rental escalations within the property portfolio, which were 7,53% as at 31 August 2013. Earnings associated with the property portfolio were below forecast expectations due to a) the delay in the transfer of the Access Park Property and b) the sale of the George Metro Property. This underperformance was offset by additional investment income derived from surplus cash holdings obtained, in most part, from the Combined Claw-back and Rights Issue (“the Rights Issue”). The ratio of property expenses to revenue decreased from 28,2% to 21,0% due to a) the inclusion of two material triplenet leases into the property portfolio, being the Sasol Kent Street Properties b) various cost-saving initiatives implemented within the property portfolio relating to common area utility consumption and c) a deceleration of repairs and maintenance expenditure within the property portfolio. Other operating expenses were maintained at 6,3% of revenue. Fair value adjustments Revaluation of the property portfolio at 31 August 2013 resulted in an upward revision of R10 million to R2 029 million. Interest-bearing borrowings were fair valued downwards by R8,9 million using the yield curve, as applied to the applicable swaps, at 31 August 2013 while the introduction of a put and call option over the 10% of the Access Park Property not owned by Vividend at 31 August 2013 resulted in a net option liability of R3,87 million. Finance costs Finance costs increased by 233% to R40,43 million (2012: R12,46 million). This was due to the introduction of bank facilities secured by the company to facilitate the growth in the property portfolio. Arrears At 31 August 2013, tenant arrears amounted to R5,0 million (2012: R4,1 million) with a provision of R3,0 million (2012: R2,0 million) having been raised for potential bad debts. For the year ended 31 August 2013, the bad debts expense amounted to R0,2 million (2012: R1,8 million). 24,50 27,00 Aug ’12 Feb ’13 Aug ’13 Interim Final Retail Commercial R’000 R’000 Head office R’000 Total R’000 190 616 Net property income 93 391 – 4 528 3 558 – 8 086 96 949 – 198 702 71 493 Total revenue 97 225 101 753 Revenue, excluding straight-line lease income adjustment Straight-line lease income adjustment 85 503 – 156 996 2 011 357 Assets 1 207 872 803 485 – Straight-line lease income adjustment 10 940 7 444 – 18 384 Other assets 10 144 9 642 226 673 246 459 1 228 956 820 571 226 673 2 276 200 Investment property Total assets Total liabilities (13 778) (22 828) (2 194 295) (2 230 901) Statement of comprehensive income August 2012 72 579 54 615 – 4 744 2 661 – 7 405 Total revenue 77 323 57 276 – 134 599 Net property income 53 500 43 147 – 96 647 1 350 364 Straight-line lease income adjustment 127 194 Assets 685 529 664 835 – Straight-line lease income adjustment Investment property 6 412 3 886 – 10 298 Other assets 5 052 6 628 83 584 95 264 Total assets 696 993 675 349 83 584 1 455 926 Total liabilities (16 667) (19 519) (1 398 100) (1 434 286) Retail Commercial Total % of total 89 263 Analysis by usage 34 216 38 268 Number of properties Current portion of other non-current financial liabilities 49 175 1 315 Linked unitholders for interest 61 566 49 680 2 276 200 1 455 926 267 768 191 075 cents cents Net asset value per linked unit 515 499 Vacant 6 630 12 073 18 703 9 Net asset value per linked unit, excluding deferred tax liability 515 505 Month to month 5 435 7 180 12 615 6 Total equity and liabilities Linked units in issue (000’s) Finance costs 223 124 161 930 14 911 3 428 18 339 8 29 210 13 120 42 330 20 128 386 87 544 215 930 100 Total % of total GLA available Lease expiry profile to 31 August (GLA) Retail Commercial 20 676 9 320 29 996 14 29 325 11 750 41 075 19 36 2016 33 195 44 744 77 939 2017 10 628 846 11 474 5 22 496 1 632 24 128 11 128 385 87 545 215 930 100 Total Weighted average lease duration (years) 2,98 2,62 2,84 7,47 7,63 7,53 9 749 6 323 (40 428) (12 147) (48 734) 44 687 Reconciliation of vacant GLA Vacant as at 1 September 2012 Retail Commercial Total – – 19 647 Expired during the period 680 – Acquired during the period 3 706 4 386 17 592 37 239 (25 986) 16 251 (5 512) – (649 314) (800 950) (659 049) (806 462) 349 014 386 047 47 860 1 315 401 517 415 000 – (6 640) Net cash inflow from financing activities 798 391 795 722 Net increase in cash and cash equivalents 90 608 33 947 Cash and cash equivalents at the beginning of the year 81 195 47 248 171 803 81 195 Vacancy levels The company’s vacancy levels, as a percentage of total gross lettable area (GLA), as at 31 August, were: Retail % Commercial % 2012 2,0 0,4 2013 3,1 5,6 Re-let during the period (9 061) (1 318) (10 379) Tenanted during the period New acquisitions of business undertakings Cash and cash equivalents at the end of the year GLA occupied by B tenants GLA occupied by C tenants Weighted average lease escalation (%) Net cash (outflow)/inflow from operating activities Expenses on issue of linked units 9 63 (61 424) Cash flows from investing activities Proceeds from the issue of linked units 18 703 136 558 100 506 (49 995) Current loans raised 12 073 58 923 76 476 (94 531) Disposal of investment property 6 630 77 635 GLA occupied by A tenants (146 648) Distributions to linked unitholders Investment in investment property 21 2017 2012 R’000 Cash flows from operating activities Investment income Vacant GLA 9 2014 2013 R’000 Cash generated from operations 12 2015 Statement of cash flows Non-current loans raised Directors’ commentary Feb ’12 144 957 Cash flows from financing activities Retained earnings R’000 9,96 Feb ’11 23,00 Trade and other payables Net cash outflow from investing activities Balance at 1 September 2011 Shares issued Total comprehensive income Balance at 31 August 2012 Shares issued Total comprehensive income Balance at 31 August 2013 Retail Retail 45 296 1 334 036 Retained income 26,00 Revenue, excluding straight-line lease income adjustment Non-current liabilities – debentures Cash paid to suppliers 23 658 (13 824) 646 10 480 106 417 116 897 (2 567) (10 008) 2 095 106 417 54,22 Ordinary share capital R’000 Vividend prelim leaflet_7204_V12_23Oct_RT.indd 1 1 360 662 Total assets 23,29 Statement of comprehensive income August 2013 2 035 854 Current assets 2013 Segmental analysis Non-current assets Other non-current assets Aug ’11 0 2012 2012 R’000 ASSETS Straight-line lease income adjustment 531 247 2011 Interim 518 500 0 Final 2013 R’000 Cash received from tenants Statement of changes in equity 60% 60% Successful Reit conversion as from 1 September 2013 Other non-current liabilities 118 780 1 361 1 000 10 Linked unitholders’ interest 2 DISTRIBUTION PER LINKED UNIT Calculation of distributable earnings Profit before debenture interest and taxation Adjusted for: Straight-line lease income adjustment Fair value adjustment – investment property Fair value adjustment – financial instruments Amortisation of debenture discount/premium Capital costs Distributable earnings Distribution comprises: Debenture interest Ordinary dividend Total distribution Linked units in issue (000’s) Weighted average linked units in issue (000’s) 40% 40% R EIT 2012 R’000 127 194 7 405 134 599 (37 952) 96 647 (8 537) 88 110 19 819 (12 147) (2 761) 6 323 99 344 (75 311) 24 033 (5 638) 18 395 50,50 24,50 26,00 12,33 1 536 1 500 20 Statement of financial position 2013 R’000 2 030 30 investment in new properties during the year Revenue, excluding straight-line lease income adjustment Straight-line lease income adjustment Revenue Property expenses Net property income Other operating expenses Operating profit Fair value adjustments Finance costs Capital costs Investment income Profit before debenture interest and taxation Debenture interest Profit before taxation Taxation Total comprehensive income Distribution per linked unit (cents) Interim Final Basic earnings and diluted earnings per share (cents) 2 000 40 loan to value ratio • R 649 million Statement of comprehensive income 50 33,32% • capital raised via Combined Claw-back and Rights Offer • property portfolio 60 Rm 2 500 (7 662) (4 880) (12 542) GLA vacant as at 31 August 2013 6 630 12 074 18 704 Analysis by m² Retail Commercial Gross rental per m² per month 83,78 85,24 Total 84,34 Notes to the financial statements 1. Basis of preparation The reviewed condensed results have been prepared in accordance with the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guide as issued by the Accounting Practices Committee, the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the presentation and disclosure requirements of IAS 34: Interim Financial Reporting, the requirements of the Companies Act 2008, as amended, and the JSE Listings Requirements. This report was compiled under the supervision of Robert Amoils CA(SA), the financial director. Baker Tilly SVG has issued an unqualified opinion on the reviewed financial results for the year ended 31 August 2013. Their report is available for inspection at the company’s registered office. The company’s accounting policies as set out in the audited financial statements for the year ended 31 August 2012 have been consistently applied in the current year. 2. Basic, diluted and headline earnings per share The directors are of the view that the disclosure of earnings per share, while obligatory in terms of IAS 33: Earnings per Share, and the JSE Listings Requirements, is not meaningful to investors as the shares are traded as part of a linked unit and all the revenue earnings are distributed in the form of debenture interest. Total % 2,4 8,7 The increase in the vacancy levels within the property portfolio were due, in most part, to a) the expiry of a material lease within the Owl Street Milpark Property on 1 May 2013 and b) the expiry of the head lease provided by the Vendors of the Vusani Property Portfolio on 31 August 2012. Acquisitions, disposals and commitments Vividend concluded a) the Sasol Kent Street Acquisition on 10 December 2012 for a total purchase consideration of R155 million, which added 15 872 m2 of Commercial GLA to the property portfolio and b) the Access Park Acquisition on 27 August 2013 for a total purchase consideration of R494 million, which added 18 763 m2 of Retail GLA to the property portfolio. No other property acquisitions were concluded by the company during the reporting period. The company disposed of the George Metro Property on 29 July 2013 for a consideration of R16,7 million, which eliminated 7 097 m2 of Retail GLA from the property portfolio. As at 31 August 2013, the company has capital commitments outstanding in respect of approved redevelopment expenditure of R46,7 million. These commitments will be financed from available cash resources and existing bank facilities. In terms of the Asset Management Agreement concluded on 27 October 2010, the company is committed to acquire the Asset Manager on 18 November 2015 for an amount equivalent to 4% of the enterprise value of the company. Borrowings As at 31 August 2013 the loan to value ratio (LTV) of the company, which is measured by dividing the nominal value of interest-bearing borrowings (net of cash not allocated to linked unitholders at 31 August 2013) by the fair value of property assets was 33,32% (2012: 26,67%). The increase in gearing is a result of bank facilities secured by the company to facilitate the growth in the property portfolio. The company’s unutilised bank facilities as at 31 August 2013 amounted to R27,9 million. Share and debenture capital The authorised share capital of the company is R50 000, divided into 5 000 000 000 ordinary shares of R0,00001 each. Each ordinary share is linked to a variable rate debenture of R4,99999 each. The ordinary shares and debentures trade as linked units on the JSE. In terms of the debenture trust deed, the interest payable on the debenture component of the linked unit is equal to after-tax profits of the company, excluding capital profits and losses and after adjusting for all non-cash items. Rights issue In terms of the Rights Issue Circular, the company issued a) 54 004 710 linked units to Joint Underwriters on 26 April 2013 at R5,30 per linked unit and b) 22 597 461 linked units to unitholders other than the Joint Underwriters on 3 June 2013 at R5,40 per linked unit. Post the Rights Issue there are 267 677 607 linked units in issue (2012: 191 075 436). Net asset value The net asset value per linked unit increased by 2,0% to R5,15 (2012: R5,05) due to a) the upward revaluation of the property portfolio as at 31 August 2013 and b) an Issue Price of R5,40 applicable to the Rights Issue. The Tangible Net Asset Value per linked unit increased by 3,2% to R5,15 (2012: R4,99) due to a) the upward revaluation of the property portfolio as at 31 August 2013 b) an Issue Price of R5,40 applicable to Rights Issue and c) favourable tax dispensations applicable to gains made by Real Estate Investment Trusts on the sale of investment property which resulted in the elimination of deferred taxation liabilities applicable to the revaluation of property assets above their base cost. Prospects Should a) existing economic conditions continue to prevail and b) the property portfolio perform in line with current forecast expectations, the distribution per linked unit for the year ended 31 August 2014 is expected to be in line with Forecast A in Appendix 2 of the Rights Issue Circular, being 50,00 cents per linked unit. Declaration of interest distribution number 6 Notice is hereby given that interest of 23,00 cents per linked unit has been declared, in accordance with the debenture trust deed, for the period 1 March 2013 to 31 August 2013, payable to linked unitholders recorded in the register of the company on Friday, 15 November 2013. The last day to trade cum distribution will be Friday, 8 November 2013 and trading will commence ex distribution on Monday, 11 November 2013. In respect of dematerialised linked unitholders, the distribution will be transferred to the Central Security Depository Participant accounts or brokers’ accounts on Monday, 18 November 2013. Certificated linked unitholder distribution payments will be posted on or about Monday, 18 November 2013. No dematerialisation or rematerialisation of linked units may take place between Monday, 11 November 2013, and Friday, 15 November 2013, both days inclusive. By order of the board Vividend Income Fund Limited 23 October 2013 addition, headline earnings include fair value adjustments for financial instruments and accounting adjustments In required to account for lease income on a straight-line basis, as well as other non-cash accounting adjustments that do not affect distributable earnings. The calculation of distributable earnings and the distribution per linked unit as set out above is more meaningful. 3. Headline earnings per linked unit terms of Circular 3/2012, issued by SAICA, the fair value adjustments on investment property are added back in In the calculation of headline earnings per linked unit. The Circular does not make provision for the fair value adjustment on other non-current financial assets and liabilities. 4. Subsequent events Linked unitholders are referred to the announcement released on SENS on Monday, 22 July 2013, advising linked unitholders that the company had entered into an acquisition agreement (“the BEKA Industrial Parks Acquisition Agreement”), which, if successfully concluded, would result in Vividend acquiring the properties and associated letting enterprises commonly known as BEKA Industrial Parks (“the BEKA Industrial Parks Properties”) situated in Clayville Gauteng, Penral Park Durban and Hilton Township Bloemfontein (“the BEKA Industrial Parks Acquisition”) for a purchase consideration of R145 million. In terms of the BEKA Industrial Acquisition Agreement, the effective date of the BEKA Industrial Parks Acquisition shall be the date of transfer of the BEKA Industrial Parks Properties into the name of the company, which, subject to fulfilment of the conditions precedent, is currently expected on or about 1 January 2014. addition, linked unitholders are referred to the announcement released on SENS on Monday, 24 June 2013, In advising linked unitholders that Vividend’s application to the JSE Limited (JSE) for Real Estate Investment Trust (REIT) status was approved by the JSE. Accordingly, Vividend will qualify as a REIT with effect from the commencement of its next financial year, being 1 September 2013. Directors KK Combi (Chairman)#, A Jacobson (Chief Executive Officer), R Amoils (Financial Director), A Witt, AB Rubenstein*, M Sandak-Lewin*, M Jacobson*, G Rabinowitz*, S Slom#, B Bank# * Non-executive # Independent Registered office Unit 6 Rozenhof Office Court 20 Kloof Street, Gardens, Cape Town 8001 Postnet Suite 137, Private Bag X1, Vlaeberg 8018 Transfer secretaries Link Market Services South Africa Proprietary Limited Asset manager Vividend Management Group Proprietary Limited Sponsor PSG Capital Proprietary Limited VIVIDEND INCOME FUND LIMITED (Incorporated in the Republic of South Africa under registration number 2010/003232/06) JSE code: VIF ISIN: ZAE000150918 GREYMATTER FINCH # 7204 • Total property assets Distribution per linked unit Cents www.vividend.co.za 2013/10/24 1:23 PM

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