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Directors’ Commentary Introduction Ascension is a REIT focusing on centrally located commercial office buildings in South Africa with a strong focus towards government and other empowerment sensitive tenants. The two month period saw a shift in the company’s strategic management with the appointment of a new management team effective 01 October 2015. The group achieved distributable earnings of R39.81 million for the 2 month period ended 31 August 2015 (30 June 2015: R222.8 million). This represents an increase of 10.2% on the B share distribution when compared to a 2 month equivalent period in the previous financial year. Change in year end Ascension shareholders are advised that the company has changed its financial year end from 30 June to 31 August with effect from 31 August 2015 in order to align it to the year end of the holding company. Dividend declaration The board has approved and notice is hereby given of final dividends (dividends no 5) of 7.33250 cents per A share and 4.55967 cents per B share for the 2 months ended 31 August 2015. The dividends are payable to Ascension shareholders in accordance with the timetable set out below: Last date to trade cum dividend Friday, 13 November 2015 Shares trade ex dividend Monday, 16 November 2015 Record date Friday, 20 November 2015 Payment date Monday, 23 November 2015 Share certificates may not be dematerialised or rematerialised between Monday, 16 November 2015 and Friday, 20 November 2015, both days inclusive. In respect of dematerialised shareholders, the dividends will be transferred to the CSDP accounts/broker accounts on Monday, 23 November 2015. Certificated shareholders’ dividends payments will be posted on or about Monday, 23 November 2015. An announcement informing shareholders of the tax treatment of the dividends will be released separately on SENS. Property portfolio At 31 August 2015 the portfolio (including investment properties and properties under development) consisted of 29 properties valued at R3.83 billion, with a total gross lettable area (“GLA”) of 316 570m². This translates to an average building value of R132.15 million. The sectoral profile of the portfolio is 83.1% offices, 7.6% retail and 9.3% other. The group does not own any retail focused properties and the retail components are typically ground floor areas of office buildings. The total portfolio is 63.9% tenanted by government in line with Ascension’s strategic focus on this market. Total vacancies have decreased to 5.84%. The weighted average rental escalation remains healthy at 8.6%. Borrowings The company’s borrowings at 31 August 2015 amounted to R1.56 billion at a weighted average rate of 8.08% per annum. Borrowings of R483 million have been fixed at an all-in rate of 7.35% until 1 December 2015. Furthermore, R500 million of borrowings are subject to a three-month JIBAR interest rate cap at 6.72%. The interest rate cap expires on 13 January 2017. Prospects Despite tough domestic economic conditions, the company believes that it has a defensive portfolio and that the quality of its assets, together with healthy lease and escalation profiles, should ensure that the group continues to deliver good returns to its shareholders. Condensed Consolidated Statement of Profit and other Comprehensive Income for the 2 months ended 31 August 2015 Audited Audited 31 August 2015 30 June 2015 2 months 12 months R’000 R’000 R’000 Revenue 83 369 412 333 Contractual rental income 67 362 365 895 Straight-line lease income adjustment 16 007 46 438 Property operating expenses net of recoveries (5 341) (35 481) Net property rental and related income 78 028 376 852 Other income 36 1 039 Operating expenses (1 568) (4 233) Asset management fees (3 170) (18 535) Operating profit 73 326 355 123 Finance income 664 3 563 Fair value adjustments (32 675) (42 368) Finance costs (18 395) (91 812) Profit before distribution to shareholders and taxation 22 920 224 506 Interest on debentures - (222 796) Profit before taxation 22 920 1 710 Taxation - - Profit for the year 22 920 1 710 Other comprehensive income - - Total comprehensive income for the year 22 920 1 710 Total comprehensive income attributable to shareholders 22 920 1 710 Basic and diluted earnings per share (cents) 3.34 0.25 Headline and diluted headline earnings per share (cents) 8.04 4.84 Basic and diluted earnings per A share (cents) 3.34 42.15 Headline and diluted headline earnings per A share (cents) 8.04 46.74 Basic and diluted earnings per B share (cents) 3.34 25.06 Headline and diluted headline earnings per B share (cents) 8.04 29.65 Ascension Properties Limited (Incorporated in the Republic of South Africa) (Registration number: 2006/026141/06) JSE share code: AIA ISIN: ZAE000204566 (Approved as a REIT by the JSE) (“Ascension” or “the company” or “the fund” or “the group”) Reconciliation between earnings, headline earnings and distributable earnings Audited Audited 31 August 2015 30 June 2015 2 months 12 months R’000 R’000 R’000 Reconciliation between earnings, headline earnings and distributable earnings Profit for the period 22 920 1 710 Amortisation of discount on debentures - 728 Fair value adjustment to investment properties 32 165 30 727 Headline earnings attributable to shareholders 55 085 33 165 Adjusted for: Debenture Interest - 222 796 Adjusted headline earning attributable to shareholders 55 085 255 961 Adjusted for: Straight-line lease income adjustment (16 007) (46 438) Fair value adjustment on interest rate derivatives 511 11 641 Amortisation of bond raising fees 220 1 632 Distributable earnings attributable to shareholders 39 808 222 796 Less: dividend declared A share - (129 405) B share - (93 391) Earnings available for distribution 39 808 - Total distribution per share for the period Distribution per A share (cents) - 41.90 Distribution per B share (cents) - 24.81 Number of A shares at period end 308 860 859 308 860 859 Number of B shares at period end 376 359 014 376 359 014 Weighted average number of A shares in issue 308 860 859 308 860 859 Weighted average number of B shares 1 in issue 376 359 014 376 359 014 - The calculation of basic and fully diluted earnings per share is based on earnings of R22.92 million (30 June 2015: R1.71 million) and a weighted average number of 685 219 873 (30 June 2015: 685 219 873) shares in issue throughout the financial period. - The calculation of headline earnings and diluted headline earnings per share is based on a headline earnings of R55.08 million (30 June 2015: R33.17 million) and a weighted average number of 685 219 873 (30 June 2015: 685 219 873) shares in issue throughout the financial period. Condensed Consolidated Statement of Financial Position at 31 August 2015 Audited Audited 31 August 2015 30 June 2015 2 months 12 months R’000 R’000 Assets Non-current assets Investment property 3 832 400 3 832 400 Property, plant & equipment 76 12 Interest rate derivative 4 021 4 532 3 836 497 3 836 944 Current assets Trade and other receivables 50 953 58 320 Cash and cash equivalents 16 380 50 276 67 333 108 596 Total assets 3 903 830 3 945 540 Equity and Liabilities Equity Stated Capital 1 727 146 322 603 Retained income 574 761 551 841 2 301 907 874 444 Non-current liabilities – Debenture capital - 1 404 543 Total shareholders’ interest 2 301 907 2 278 987 Liabilities Other non-current liabilities Other financial liabilities 1 426 656 1 499 981 1 426 656 1 499 981 Current liabilities Other financial liabilities 136 548 - Trade and other payables 38 719 50 936 Shareholders for distribution - 115 636 175 267 166 572 Total liabilities 1 601 923 3 071 096 Total equity and liabilities 3 903 830 3 945 540 Number of A shares in issue 308 860 859 308 860 859 Number of B shares in issue 376 359 014 376 359 014 TNAV and NAV per combined share * 335.0 – TNAV and NAV per A share (cents) # 545.0 569.3 TNAV and NAV per B share (cents) 164.3 169.1 * Net asset value includes total equity attributable to equity holders # 60-day volume weighted average trading price at reporting date limited to net asset value Condensed Consolidated Statement of Cash Flows for the two months ended 31 August 2015 Audited Audited 31 August 2015 30 June 2015 2 months 12 months R’000 R’000 Cash generated from operations 52 471 300 656 Finance income 664 3 563 Finance costs (18 175) (89 452) Net cash from operating activities 34 960 214 767 Purchase of investment property and cost improvements (16 158) (109 989) Purchase of financial assets (65) - Net cash from investing activities (16 223) (109 989) Proceeds from other financial liabilities 63 003 121 210 Distributions paid (115 636) (214 874) Net cash from financing activities (52 633) (93 664) Total cash movement for the period (33 896) 11 114 Cash at the beginning of the period 50 276 39 162 Total cash at the end of the period 16 380 50 276 Condensed Consolidated Statement of Changes in Equity for the two months ended 31 August 2015 R’000 Stated Retained Total capital income equity Group Balance at 30 June 2014 322 603 550 131 872 734 Total comprehensive income for the year ended 30 June 2015 - 1 710 1 710 Balance at 30 June 2015 322 603 551 841 874 444 Conversion of capital structure 1 404 543 - 1 404 543 Total comprehensive income for the 2 months ended 31 August 2015 - 22 920 22 920 Balance at 31 August 2015 1 727 146 574 761 2 301 907 Notes 1.Basis of preparation and accounting policies The audited condensed consolidated financial statements for the 2 months ended 31 August 2015 are prepared in accordance with the requirements of the JSE Listings Requirements for provisional reports and the requirements of the Companies Act of South Africa. The JSE Listings Requirements require provisional reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. These financial statements have been prepared by Lebogang Semono, CA (SA), General Manager Finance. All accounting policies applied in the preparation of these audited condensed results are in terms of IFRS and are consistent with those applied in the prior year. There were no new standards adopted in the two month period. The directors are not aware of any matters or circumstances arising subsequent to 31 August 2015 that require any additional disclosure or adjustment to the financial statements, other than as disclosed in this announcement. These audited condensed consolidated financial results for the period ended 31 August 2015 have been audited by Grant Thornton Johannesburg Partnership, who expressed an unmodified audit opinion thereon. A copy of the auditor’s report is available for inspection at the company’s registered office together with the financial statements identified in the auditor’s report. The auditor’s report does not necessarily report on all the information contained in this announcement. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor’s engagement they should obtain a copy of the auditor’s report together with the accompanying financial information from the issuer’s registered office. The directors take full responsibility for the preparation of these results and confirm that the financial information has been correctly extracted from the underlying financial statements. 2. Debt facilities Loan expiry (R’000) Maturity Date Nominal amount Interest rate Investec Bank Limited 13 March 2018 526 805 Prime – 0.50% Standard Bank of SA 31 August 2017 160 035 Prime – 1.50% Standard Bank of SA 31 August 2017 392 911 3-month JIBAR + 1.80% Nedbank 7 March 2019 152 901 Prime – 1.50% Nedbank 12 September 2016 151 034 Prime – 1.50% Nedbank 18 July 2016 26 216 Prime – 1.50% Nedbank 23 April 2018 45 083 Prime – 0.85% Nedbank 30 August 2016 34 187 Prime – 1.50% Nedbank 30 August 2016 25 976 Prime – 1.50% Nedbank 28 June 2016 50 169 Prime – 1.50% The weighted average cost of debt at 31 August 2015 is 8.08% (30 June 2015: 8.08%). 3. Interest rate derivatives Average Facility all-in swap Rate (R million) rate Expiry date Interest rate swap 3-month JIBAR 5,55% 483 7.35% 1-Dec-15 Interest rate cap 3-month JIBAR 6,72% 500 – 13-Jan-17 4. Trade and other receivables Audited Audited 31-Aug-15 30-Jun-15 2 months 12 months R’000 R’000 Trade receivables (net of impairment provisions) 23 412 34 909 Debtor accruals (including consumption charges not yet invoiced) 11 416 9 650 Deposits 1 471 1 548 Amounts due on acquisition adjustment accounts 885 827 Sundry debtors, prepayments and VAT 13 769 11 386 50 953 58 320 5. Lease expiry profile (Based on GLA) TOTAL OFFICE RETAIL OTHER Vacant 5.8% 6.5% 0.0% 1.5% Monthly 1.5% 1.7% 0.1% 1.0% 31/08/2016 29.4% 30.5% 5.7% 40.2% 31/08/2017 4.7% 4.4% 3.2% 8.1% 31/08/2018 19.8% 21.4% 16.4% 8.6% 31/08/2019 14.0% 15.9% 2.4% 4.2% 31/08/2020 12.8% 10.7% 9.2% 36.3% After 31/08/2020 12.0% 8.9% 62.7% 0.1% 100.0% 100.0% 100.0% 100.0% 6. Tenants: Government vs. non-government Based on monthly Based on GLA contracted revenue Government 63.9% 60.0% Non-Government 36.1% 40.0% Total 100.0% 100.0% 7. Operating segments The group classifies segments based on the type of property i.e. Commercial, Retail, Industrial and Other. Properties can be mixed use properties. In this instance, the property will be classified according to its principle use. Accordingly, the group only has one reporting segment, namely Commercial property as the principle use of all properties in the portfolio is for commercial office space. Most of the buildings do have a small retail component (normally at street level), but this seldom exceeds 10% of the total GLA per building. 8. Changes to the board of directors Following engagement and required dispensation obtained from the JSE regarding the appointment of a new CEO, Kameel Keshav currently the Chief Financial Officer of Rebosis Property Fund Limited, has taken on the role of CEO of Ascension along with maintaining his role at Rebosis. This change to the board has taken effect from 01 October 2015. Shareholders are also advised that Mr N Gugushe has been appointed as an independent non-executive director to the board with effect from 27 October 2015. The board has embarked on a process to make the appointment of a new financial director. A further announcement in this regard will be released on SENS in due course. By order of the board Johannesburg 27 October 2015 Directors S Ngebulana (Chairman) / K Keshav * / Dr M Renene / M Burton / N Gugushe/ H Takolia * (executive director) Company secretary M Ndema Business address 3rd Floor, Palazzo Towers West, Montecasino Boulevard, Forways, 2191 Transfer secretaries Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg, 2001 Sponsor Java Capital, 6A Sandown Valley Crescent, Sandton, 2196 Audited Condensed Consolidated Financial Results for the 2 month period ended 31 August 2015 and dividend declaration DIVIDEND DECLARATION 7.33 cents per A share 4.56 cents per B share DIVIDEND GROWTH 5.0% on the A share 10.3% on the B share VACANCIES Reduced to 5.8% from 6.5% GEOGRAPHIC SPREAD BY GLA Gauteng 54.2% Western Cape 40.6% Mpumalanga 5.2% SECTORAL SPREAD BY GLA Office 83.1% Retail 7.6% Industrial 9.3% TENANT PROFILE GOVERNMENT VS. NON-GOVERNMENT Government 63.9% Non-government 36.1% 29 BUILDINGS at a total value of R3,83 billion at 31 August 2015 Office 8.3% Retail 7.4% Other 7.6% Weighted average escalation by sector Office R102.01 Retail R120.27 Other R47.37 Average rental per m 2 Gauteng 57.4% Western Cape 39.7% Mpumalanga 2.9% Geographical spread by GMR Office 92.9% Retail 0.0% Other 7.1% Vacancy attributable to sector by GLA
