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The office portfolio consists of 14 buildings which are of a size and so located as to be attractive to a diversity of government tenants. These buildings are mainly single-tenanted buildings let to the National Department of Public Works under long leases providing for average escalations of 8,6%. The office portfolio represents a sovereign underpin to a substantial portion of Rebosis’ earnings, shielding it from private sector risks such as tenant insolvency and default – material risks in the context of sluggish economic growth and constrained consumer spend. The company’s only industrial property is a specialised single-tenanted industrial warehouse with a triple net lease escalating at 7,0% which expires in December 2019. This year the top 10 properties by value represented 80% of portfolio net income and 81% of value. The expiry profile by gross lettable area is as follows: 31 Aug 2016 31 Aug 2017 31 Aug 2018 31 Aug 2019 Beyond Retail 13% 9% 19% 15% 43% Office 7% 21% 22% 8% 42% Industrial 0% 0% 0% 100% 0% Total portfolio 9% 15% 20% 15% 41% VACANCIES • Retail vacancies have reduced from 4,1% to 3,1% due to increased tenant demand. • Office vacancies have increased from 1,31% to 3,2% as a result of delayed letting of Revenue building (PMB) that was previously warranted since acquisition. This space is under negotiation with a new tenant. • Overall vacancies have hence increased from 2,4% to 3,1%. ACQUISITIONS On 14 April 2015, the group made two acquisitions. It acquired shopping centres at Burton-upon-Trent and Middlesbrough by acquiring the whole of the issued share capital of Burton Investments Limited and Middlesbrough Holdings Limited. The transaction is accounted for as a single business combination as this was carried out simultaneously, from one ultimate vendor and completed on the same day. In accordance with its accounting policy the group has determined that this acquisition was a business combination. The costs of acquisition which have been recognised in the Consolidated Income Statement are R32,1 million. On 31 August 2015, Rebosis acquired an effective 59% controlling interest in Ascension Properties Limited (“Ascension”). The acquisition of the controlling interest was effected by a scheme of arrangement on 17 August 2015, whereby Rebosis acquired the entire issued B share capital of Ascension that Rebosis does not already own. The purchase consideration was an exchange of 23 549 new Rebosis ordinary shares for every 100 Ascension B shares held by way of a scheme of arrangement, an effectiv of R53.8 million. The following summarises the amounts of assets acquired and liabilities assumed at each acquisition date: Fair value of assets acquired Burton-upon- Trent and Middlesbrough R’000 Ascension R’000 Total R’000 Investment property 3 659 261 3 832 400 6 995 974 Derivative instruments – 4 021 4 021 Property, plant and equipment – 76 76 Deferred tax 7 543 – 6 522 Trade and other receivables 101 642 50 593 138 466 Cash and cash equivalents 25 431 16 380 38 366 Long-term interest-bearing borrowings – (1 426 656) (1 426 656) Short-term portion of interest-bearing borrowings – (136 548) (136 548) Trade and other payables (2 870 190) (38 719) (2 520 110) Total identifiable net assets 923 687 2 301 547 3 100 111 The acquired businesses contributed revenues of R109,0 million and profit after tax of R19,2 million to the group for the year ended 31 August 2015. Had the acquisitions been effective on 1 September 2014 the contribution to revenue would have been R30,9 million and profit after tax would have been R46,4 million. FUNDING At 31 August 2015, Rebosis’ borrowings increased to R3,6 billion as a result of the investment of New Frontier, property acquisitions and the increase in our holding in Ascension. The weighted average cost of borrowings increased from 7,9% to 8,2% for the period under review – largely due to higher interest rates. In May 2015 we succeeded in raising R430 million under a new domestic medium term note programme, attracting an A-rating. The total debt book now enjoys hedged cover of 74,0%. Post-year end events has now positioned this at 75,2%. With an increase in the number of shares during the year from 386 531 577 to 518 169 396 and strong investments made, gearing declined from 38,0% to 36,5%. PAYMENT OF DISTRIBUTION Distribution number 10 of 14,41779 cents per share for the two months ended 31 August 2015 will be paid to the shareholders in accordance with the abbreviated timetable set out below: 2015 Declaration date Wednesday, 28 October Last day to trade cum distribution Friday, 13 November Securities trade ex distribution Monday, 16 November Record date Friday, 20 November Payment date Monday, 23 November An announcement relating to the tax treatment of the distribution will be released separately on SENS. BASIS OF PREPARATION The reviewed condensed consolidated financial statements are prepared in accordance with 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. The accounting policies applied in the preparation of the condensed consolidated financial statements are in terms of IFRS and are consistent with those applied in the previous consolidated annual financial statements. These financial results have been prepared under the supervision of the Chief Financial Officer, K Keshav, CA(SA). Except for the new standards adopted as set out below, all accounting policies applied in the preparation of these reviewed condensed consolidated provisional financial results are in terms of IFRS and are consistent with those applied in the prior year. Rebosis adopted the following amendments to standards during the year: • IAS 16 Property, Plant and Equipment • IAS 24 Related-party disclosures • IFRS 3 Business Combinations • IFRS 8 Operating Segments • IAS 40 Investment Property 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 results have been reviewed by the company’s auditors, Grant Thornton Johannesburg Partnership. Their unqualified review opinion is available for inspection at the registered office of the company. These condensed consolidated financial statements for the year ended 31 August 2015 have been reviewed by Grant Thornton Johannesburg Partnership, who expressed an unmodified review conclusion. A copy of the auditor’s review 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 review report does not necessarily report on all the information contained in this announcement/ financial results. 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 review report together with the accompanying financial information from the issuer’s registered offices. 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. POST-BALANCE SHEET EVENTS Rebosis participated in an equity raise post-financial year-end to the total value of R750 million. This was hedged through debt and equity. The equity component of R200 million raised was cum dividend for Rebosis. A further R58 million equity was raised post-year-end by the company. PROSPECTS The domestic economy remains weak and together with a rising interest rate cycle and energy costs, the outlook looks moderate. The board is of the view that distribution per share for FY16 will grow between 7% to 9% above that of FY15. This forecast has not been reviewed or reported on by the company’s auditors. By order of the Board 28 October 2015 FOR THE YEAR ENDED 31 AUGUST 2015 REBOSIS PROPERTIES LIMITED (“Rebosis” or the “company”) (Registration number 2010/003468/06) (Approved as a REIT by the JSE) JSE share code: REB ISIN: ZAE000156147 COMPANY SECRETARY M Ndema TRANSFER SECRETARIES Computershare Investor Services Proprietary Limited REGISTERED OFFICE 3rd Floor, Palazzo Towers West, Montecasino Boulevard, Fourways, 2191 (PO Box 2972, Northriding, 2162) SPONSOR Java Capital DIRECTORS ATM Mokgokong* † (Chairperson), SM Ngebulana (CEO), K Keshav (CFO), AM Mazwai* † , WJ Odendaal* † , NV Qangule* † KL Reynolds*, TSM Seopa* † *Non-executive † Independent INVESTMENT HIGHLIGHTS SUMMARISED REVIEWED RESULTS CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW Group Company For the year ended 31 August 2015 R’000 For the year ended 31 August 2014 R’000 For the year ended 31 August 2015 R’000 For the year ended 31 August 2014 R’000 Cash flows from operating activities (136 733) 31 282 (148 811) 31 474 Cash outflows from investing activities (915 218) (1 561 098) (1 278 358) (1 561 528) Cash inflows from financing activities 1 177 985 1 539 131 1 434 128 1 539 131 Net movement in cash and cash equivalents 126 034 9 315 7 659 9 077 Effect of translation (97) – – – Acquired through business combination 36 – – – Cash and cash equivalents at the beginning of the year 48 856 39 535 48 612 39 536 Cash and cash equivalents at the end of the year 174 823 48 850 56 271 48 612 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Group Company Reviewed for the year ended 31 August 2015 R’000 Audited for the year ended 31 August 2014 R’000 Reviewed for the year ended 31 August 2015 R’000 Audited for the year ended 31 August 2014 R’000 Balance at 31 August 2014 1 832 554 1 382 698 1 832 554 1 382 698 Issue of shares 914 938 143 307 914 938 143 307 Conversion of capital structure 3 110 918 – 3 110 918 – Profit for the year (4 397) 306 549 541 673 306 549 FCTR 109 757 – – – Non-controlling interest 1 577 354 – – – Balance at 31 August 2015 7 541 124 1 832 554 6 400 083 1 832 554 STATEMENT OF FINANCIAL POSITION Group Company Reviewed as at 31 August 2015 R’000 Audited as at 31 August 2014 R’000 Reviewed as at 31 August 2015 R’000 Audited as at 31 August 2014 R’000 ASSETS Non-current assets 14 669 283 7 714 435 9 968 630 7 714 446 Investment property 14 555 401 6 856 000 7 038 700 6 856 000 Listed property securities – 597 592 1 164 973 597 592 Loans to group companies – – 1 179 999 – Unlisted investments – – 478 757 150 000 Goodwill 95 703 95 703 95 703 95 703 Intangibles – 149 983 – – Derivative instruments 17 671 14 617 10 071 14 617 Property, plant and equipment 508 540 427 534 Current assets 337 196 137 926 113 890 137 131 Trade and other receivables 162 373 89 076 57 619 88 519 Cash and cash equivalents 174 823 48 850 56 271 48 612 15 006 479 7 852 361 10 082 520 7 851 577 EQUITY AND LIABILITIES Equity 7 541 124 1 832 554 6 400 083 1 832 554 Stated capital 5 079 588 1 053 732 5 079 588 1 053 732 Reserves 774 425 778 822 1 320 495 778 822 Foreign currency translation reserve 109 757 – – – Total equity attributable to equity shareholders of the Company owners of parent 5 963 770 1 832 554 6 400 083 1 832 554 Non-controlling interests 1 577 354 – – – Non-current liabilities 6 143 331 5 115 544 2 611 081 5 115 544 Debentures – 2 806 219 – 2 806 219 Interest-bearing borrowings 6 141 651 2 301 017 2 609 925 2 301 017 Derivative instruments 1 156 8 308 1 156 8 308 Deferred taxation 524 – – – Current liabilities 1 322 024 904 263 1 071 356 903 479 Short-term portion of interest-bearing borrowings 1 122 790 642 824 986 242 642 824 Trade and other payables 191 371 64 503 85 114 63 719 Unitholders for distribution – 196 936 – 196 936 Current tax payable 7 863 – – – Total equity and liabilities 15 006 479 7 852 361 10 082 520 7 851 577 Gearing ratio (%) 48,4 38,0 36,5 38,0 COMMENTARY INTRODUCTION Rebosis is a JSE listed real estate investment trust (REIT) that owns 19 properties comprising of 4 dominant shopping centres, 14 large office buildings let on long term leases and an industrial property. It has a 62% interest in New Frontier (NF), which owns 2 dominant shopping centres in the UK. Rebosis also owns 59% of Ascension Property Fund, a JSE Listed REIT. Despite a tough domestic economic environment we are pleased to announce an exciting set of results. FINANCIAL RESULTS Rebosis has declared a dividend of 57,95 cents per share for the six months ended 31 August 2015. With a distribution of 52,46 cents per share for the six months ended 28 February 2015, this amounts to total distribution of 110,41 cents for the year, an increase of 11,0%. This exceeds the 8% to 10% guidance communicated at the half year and is based on a continuing strong performance on portfolio fundamentals as well as increased income from acquisitions. Property expenses were again well contained with the net cost to income ratio declining to 13,3%. PROPERTY PORTFOLIO At year-end assets under management were valued at R9,8 billion (2014: R7,6 billion). The value of the Rebosis investment property portfolio was R7,0 billion (2014: R6,9 billion) while our effective 59% holding in Ascension Properties Limited and 62% in New Frontier Properties Limited represented listed property securities of R2,7 billion (2014: R598 million). The investment property portfolio for Rebosis of 19 properties is illustrated in the following graphs in terms of sectoral and geographical splits. VALUE 43% 55% 2% SECTORAL BY Retail Office Industrial GLA 40% 56% 4% SECTORAL BY Retail Office Industrial Eastern Cape Gauteng KwaZulu-Natal North West GLA 27% 66% 4% GEOGRAPHIC BY 3% Our retail portfolio consists of four high-quality, dominant regional shopping malls with strong anchor national tenants delivering income streams escalating at 7,5%. This year an expansion and tenant-mix optimisation programme at East London’s Hemingways Mall, the largest centre in the portfolio, was completed, positioning the mall for exceptional growth. A bridge linking the two sections of the Bloed Street Mall was successfully completed, with new exciting national tenants. Distribution growth Growth in assets under management Net income growth Reduction of cost to income ratio Total return in UK New Frontier Investment Consolidated group assets OUR PORTFOLIO KEY INDICATORS AT 31 AUGUST 2015 NUMBER OF PROPERTIES PORTFOLIO VALUATION (R’000) GROSS LETTABLE AREA (M²) VALUE PER M² (R) • Specialised single tenant industrial warehouse • Triple net lease expiring on 31 December 2019 • Lease underpinned by the international parent company which is listed on the Paris Stock Exchange • Average escalation of 7,0% • 4 high growth dominant regional malls • Includes Hemingways Mall, East London’s largest retail centre • 85% national tenant profile • Average escalation of 7,5% 1 141 000 18 954 7 439 INDUSTRIAL 14 3 762 500 232 133 16 208 • 14 large properties well located in nodes attractive to government tenants • Let primarily to National Department of Public Works under long leases • Average escalation of 8,0% • Shielded from private sector e.g. tenant cash flow and insolvency-related default OFFICE 4 3 096 000 163 303 18 959 RETAIL 11,0 % to 110,41 cents per share 29,5 % to R9,847 billion 8,0 % to R603,8 million 3,0 % to 13,3% 34,6 % R15 billion STATEMENT OF COMPREHENSIVE INCOME Group Company Reviewed for the year ended 31 August 2015 R’000 Audited for the year ended 31 August 2014 R’000 Reviewed for the year ended 31 August 2015 R’000 Audited for the year ended 31 August 2014 R’000 REVENUE Property portfolio 1 009 880 855 946 910 256 855 946 Rental income 896 124 747 837 796 500 747 837 Listed property securities income 60 262 48 107 60 260 48 107 Straight-line rental income accrual 53 494 60 002 53 494 60 002 Net income from facilities management agreement 21 051 17 891 21 051 17 891 Management fees received 18 891 9 812 14 679 6 801 Sundry income 1 707 729 941 729 Total revenue 1 051 529 884 378 946 927 881 367 Property expenses (226 735) (207 290) (214 680) (207 290) Administration and corporate costs (111 831) (34 138) (33 405) (31 120) Net operating profit 712 963 642 950 698 842 642 957 Gain on bargain purchase 53 756 – – – Impairment of goodwill (236 072) – – – Changes in fair values 136 935 227 687 442 810 227 687 Profit from operations 667 582 870 637 1 141 652 870 644 Finance charges (282 078) (185 104) (222 304) (185 111) Finance charges – secured loans (289 587) (186 170) (265 208) (186 170) Interest received – other 7 509 1 066 42 904 1 059 Profit before taxation 385 504 685 533 919 348 685 533 Debenture interest (377 675) (378 984) (377 675) (378 984) Profit before taxation 7 829 306 549 541 673 306 549 Taxation (13 499) – – – Total (loss)/profit for the year (5 670) 306 549 541 673 306 549 Profit from discontinued operations 1 009 – – – Total (loss)/profit for the year (4 661) 306 549 541 673 306 549 Other comprehensive income Items that may be recycled to profit and loss Foreign currency translation reserve 177 226 – – – Total comprehensive income 172 565 306 549 541 673 306 549 Total (loss)/profit attributable to: Owners of the parent (4 397) 306 549 541 673 306 549 Non-controlling interests (264) – – – (Loss)/profit for the year (4 661) 306 549 541 673 306 549 Total comprehensive income attributable to: Owners of the parent 105 360 306 549 541 673 306 549 Non-controlling interests 67 225 – – – Total comprehensive income for the year 172 565 306 549 541 673 306 549 Reconciliation of earnings and distributable earnings (Loss)/income for the year attributable to equity holders (4 661) 306 549 541 673 306 549 Debenture interest 377 675 378 984 377 675 378 984 Change in fair value of properties (net of deferred taxation) (80 189) (304 400) (51 304) (304 400) Impairment of goodwill 236 072 – – – Gain on bargain purchase (53 756) – – – Headline profit attributable to shareholders 475 141 381 133 846 816 381 133 Change in fair value of derivatives 3 193 – Straight-line rental income accrual (53 494) (60 002) Pre-acquisition distribution of Ascension linked units – (27 015) Amortisation of intangibles – 1 499 Antecedent dividend*** 29 112 5 419 Anticipated Distribution from listed REIT subsidiary**** 79 714 – Antecedent interest on anticipated distribution from listed REIT subsidiary 33 696 – Corporate transaction costs 323 4 022 Structuring fee amortisation 6 241 4 135 Distributable earnings attributable to shareholders 572 130 384 405 Number of shares in issue as at 31 August 2015 493 363 078 386 531 577 493 363 078 386 531 577 Weighted average number of shares in issue 424 011 545 379 617 629 424 011 545 379 617 629 Basic and diluted earnings per share (cents) (1,09) 80,75 124,16 80,75 Headline profit per share (cents) 112,06 100,40 199,72 100,40 Distributable earnings per share (cents) 110,41 99,45 110,41 99,45 Year-on-year distribution growth (%) 11,02 9,00 11,02 9,00 * Shares of 24 806 318 were issued post 31 August 2015. ** Distributable earnings per share calculated on incorporation of post-period shares issued of 24 806 318 (cum distribution). *** Antecedent dividend includes post-period shares issued of 24 806 318 (cum distribution). ***** In terms of the South African REIT Association Best Practice, Rebosis has become entitled at year-end to the anticipated distributions of its listed REIT subsidiaries. Accordingly an adjustment is made at year-end to match the anticipated income of the distribution with the period to which the distribution relates. In the determination of distributable earnings adjustment the group elects to make adjustment for the antecedent dividend arising as result of the issue of shares during the period for which the entity did not have full access to the cash flow from such issue.
