ARROW
AWA/AWB - Arrowhead - Unaudited Interim Results for the six months ended 31
March 2012 and Declaration of Distribution
ARROWHEAD PROPERTIES LIMITED
(formerly Nervada Trading 13 (Proprietary) Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2011/000308/06)
JSE code for A-linked units: AWA
ISIN for A-linked units: ZAE000158101
JSE code for B-linked units: AWB
ISIN for B-linked units: ZAE000158119
("Arrowhead" or "the company")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2012 AND DECLARATION
OF DISTRIBUTION
- distribution per linked unit in line with forecast distribution per linked
unit
- acquisitions with a market value in excess of R800 million at an advanced
stage of negotiation
NATURE OF BUSINESS
Arrowhead is a property loan stock company holding a diverse portfolio of
properties in secondary locations throughout South Africa. Its main focus is
paying growing income returns to its investors. This will be achieved through
escalating rentals in terms of leases with tenants, satisfactory renewal of
leases with existing tenants, renting of vacant space within the property
portfolio, managing and reducing, where possible, costs associated with the
property portfolio and by acquiring revenue enhancing properties.
THE LISTING AND THE INITIAL PROPERTY ACQUISITIONS
Arrowhead, an internally managed property income fund, listed on the
Johannesburg Stock Exchange on 9 December 2011 and has a September year end.
Arrowhead is currently the only South African listed property fund to pay
quarterly distributions.
As set out in its pre-listing statement dated 30 September 2011, Arrowhead
initially acquired a portfolio of 89 properties from Redefine Properties Limited
("Redefine") with effect from 1 September 2011, and further agreed to purchase 5
additional properties over which there were pre-emptive rights ("the pre-emptive
properties") and a further 4 properties which were subject to leasehold
obligations ("the leasehold properties").
Arrowhead has received approval to acquire 4 of the pre-emptive properties and
the securing of the approval to transfer the leasehold rights relating to the
leasehold properties to Arrowhead is still underway.
The purchase consideration in respect of the property acquisitions was settled
by a combination of cash and linked units issued to Redefine, which linked units
in Arrowhead were then unbundled to Redefine's linked unitholders.
Redefine, being the sole unitholder in Arrowhead until the listing and
unbundling in December 2011, is entitled to all of Arrowhead's distributable
income until 30 November 2011. Thereafter Arrowhead's distributions are paid to
Arrowhead linked unitholders as reflected in the linked unitholder register, the
first of which was in respect of the 1 month period ended 31 December 2011.
FINANCIAL PERFORMANCE FOR THE SIX MONTHS ENDED 31 MARCH 2012
Revenue (excluding straight line rental income) 108 835
Property expenses (31 531)
Administration and corporate costs (6 699)
Net finance expense (20 686)
Distributable income 49 919
Distributable income payable to Redefine Properties Limited for 21 220
the months of October 2011 and November 2011
Distributable income payable to Arrowhead linked unitholders 7 085
pursuant to the unbundling for the month of December 2011
Distributable income for the quarter ended 31 March 2012 21 614
Summary of financial performance
Unaudited
quarter
ended 31
March 2012
Distribution per A-linked unit (cents) 15,00
Distribution per B-linked unit (cents) 9,68
A-linked units in issue 87 561 123
B-linked units in issue 87 561 123
Net asset value per combined linked unit (cents)* 973.31
Net asset value per A and B linked unit (cents) 437.64
Net asset value per B and B linked unit excluding deferred 458.15
taxation (cents)
Gearing ratio** 42.1%
* Net asset value includes total equity attributable to equity holders and
linked debentures.
**The gearing ratio is calculated by dividing interest-bearing liabilities,
excluding linked debenture liabilities, by investment properties. Surplus cash
is deposited into the company's access debt facilities. At 31 March 2012,
Arrowhead`s net borrowings of R616 million translate to a gearing ratio of 42,1%
with an average interest rate of 9,1% during the period.
Arrowhead's units in issue comprise A and B linked units, with A-linked units
earning the greater of 50% of the distributable income or 15 cents per quarter,
whilst the B-linked units receive the balance of the earnings.
Arrowhead owns a diversified property portfolio of properties located throughout
South Africa. The properties are diverse across the retail, commercial and
industrial portfolios with representation in all provinces in South Africa.
The management of Arrowhead is pleased with the performance of the property
portfolio for the six months ended 31 March 2012 despite the performance of 2
underperforming buildings in the Western Cape, De Goede Hoop and Parc Du Bel.
The De Goede Hoop building is currently unoccupied and the Parc Du Bel building
was tenanted by two government departments, one of which has subsequently
vacated, and a Spur franchisee. The overall letting performance is set out in
the table below:
SIX MONTH LETTING REPORT AS AT 31 MARCH 2012
Total Let m2 vacant m2 Let % Vacant %
Sqr mtrs
At 1 Oct 2011 336960 274971 61989 82% 18%
Additional space acquired 11924 10024 1900 84% 16%
348884 284995 63889 82% 18%
Leases expired during the -54945 54945
period
Leases Renewed 34794 -34794
Vacant space let 18404 -18404
At 31 March 2012 348884 283248 65636 81% 19%
Note : Next quarter confirmed letting - 5202 sqm (Free state) & 2681 sqm
(Northern Cape)
The ratio of property expenses to income at 29% is considered to be
satisfactory.
A third party had administered Arrowhead's electricity management and collection
since the acquisition of its property portfolio until the end of February 2012.
From 1 March 2012 Arrowhead's property managers, JHI, have assumed the
electricity administration.
Included within revenue is an increased electricity recovery due to the movement
in March to the internal electricity administration, in terms of which Arrowhead
through its property managers, JHI, now recovers electricity usage directly from
its tenants. This has also resulted in higher property expenditure.
As set out in Arrowhead's pre-listing statement dated 30 September 2011 ("the
pre-listing statement"), the executive directors have received sign on bonuses,
the effect of which has not been depicted in the forecast to 30 September 2012.
The pre-listing statement included an additional forecast for the period ended
31 September 2011 in which the sign on bonuses had been accounted for.
Finance charges are also lower than originally forecast since the drawdown on
loan facilities took place in the latter part of November. This resulted in
higher distributable income that accrued to Redefine Properties Limited.
Investment properties have increased with the addition of three of the pre-
emptive properties and some capital expenditure on the existing portfolio.
Loans to directors are in respect of the loans granted to the executive
directors to subscribe for linked units in Arrowhead, details of which are set
out in the pre-listing statement. The loans incur interest at 10% and are
repayable by 30 September 2014.
Trade and other payables include distributable income and interest due to
Redefine in respect of the period ended 30 September 2011, prior to the listing
and unbundling of Arrowhead.
PROPERTY ACQUISITIONS
In line with Arrowhead's stated intention of increasing the size of its property
portfolio the company has concluded the acquisition of the building known as the
Business Centre with effect from 3 April 2012 for a purchase consideration of
R28 715 140 at a yield of 10,54%.
As announced on SENS on 16 March 2012 Arrowhead has concluded an agreement to
acquire a portfolio of office properties from Growthpoint Properties Limited for
an aggregate purchase consideration of R167 648 829 at a yield of 11%. The
acquisition is subject to the approval of the Competition Authorities.
As further announced on SENS on 3 May 2012 Arrowhead has concluded term sheets
or are at an advanced stage of negotiations in respect of acquisitions totalling
in aggregate around R660 million at an average yield in excess of 10,7%.
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2012
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Forecast
31 March 2012 30 September
2012#
R'000 R'000
Rental income 108 835 222 328
Straight-line rental income accrual 5 502 9 670
Total revenue 114 337 231 998
Property expenses (31 531) (62 141)
Administration and corporate costs (6 699) (13 515)
Net operating profit 76 107 156 342
Sign on bonuses (13 545) -
Profit from operations 62 562 156 342
Net finance charges (24 322) (61 497)
Loan facility interest (21 182) (62 625)
Shareholders interest (3 637) -
Finance income 495 1 128
(Loss)/Profit before debenture interest and 38 238 94 845
taxation
Debenture interest (49 919) (85 175)
(Loss)/Profit before taxation (11 681) 9 670
Taxation - (2 708)
(Loss)/Profit for the year after taxation (11 681) 6 962
Other comprehensive income - -
Total comprehensive (loss)/income for the (11 681) 6 962
year attributable to equity holders
Reconciliation of (loss)/earnings, headline (11 681) 6 962
(loss)/earnings and distributable earnings
(Loss)/Profit for the year attributable to
equity holders
Debenture interest 49 919 85 175
(Loss)/Earnings - -
Headline (loss)/earnings attributable to 38 238 92 137
linked unitholders
Straight-line rental income accrual (net of (5 501) (6 962)
deferred taxation)
Sign on bonuses 13 545 -
Listing expenses - -
Finance charges on finance lease liability 3 637 -
Distributable earnings attributable to 49 919 85 175
linked unit holders
#As per the pre-listing statement dated 30 September 2011
Number of A-linked units in issue 87 561 123 86 571 739
Number of B-linked units in issue 87 561 123 86 571 739
Total number of linked units 175 122 246 173 143 478
Weighted average number of A-linked units in 86 200 399 86 571 739
issue
Weighted average number of B-linked units in 86 200 399 86 571 739
issue
Basic and headline (loss)/profit per A share (13.55) 53.21
(cents)
Basic and headline (loss)/profit per B share (13.55) 53.21
(cents)
Distributable earnings payable to Redefine Income fund Limited 21 220
for the months of October 2011 and November 2011
Distribution payable to Arrowhead Linked Unit Holders pursuant to 7 085
the unbundling for the Month of December 2011
A linked units 5 Cents
B linked units 3.09 Cents
Distribution for the quarter ended 31 March 2012 21 614
A linked units 15 Cents
B linked units 9.68 Cents
CONDENSED STATEMENT OF FINANCIAL POSITION
Reviewed Audited
31 March 30 September
2011 2011
R'000 R'000
ASSETS
Non-current assets 1 474 684 1 440 630
Investment property 1 465 457 1 440 592
Property, Plant and Equipment 817 38
Loans to Directors 8 410 -
Current assets 31 468 21 233
Trade and other receivables 10 149 19 427
Cash and cash equivalents 14 660 1 806
Value Added Tax 6 659
Total assets 1 506 152 1 461 863
EQUITY AND LIABILITIES
Equity (1 789) 625 283
Share capital - -
Units to be issued - 623 518
Share based payment reserve 8 127 -
Reserves (9 916) 1 765
Non-current liabilities 1 420 292 813 445
Debentures and debenture premium held by 768 186 -
linked unitholders
Deferred taxation 35 928
Interest-bearing liabilities 616 177 813 445
Current liabilities 87 649 23 135
Distributions payable 49 919
Trade and other payables 37 730 23 135
Total equity and liabilities 1 506 152 1 461 863
Net asset value per A and B linked unit 437.64 -
(cents)
Net asset value per B and B linked unit 458.15 -
excluding deferred taxation (cents)
CONDENSED STATEMENT OF CHANGES IN EQUITY
Stated Share based
capital/ payment
Share capital reserve
R'000 R'000
Balance at 1 October 2010 - -
Total comprehensive income for the year - -
Units to be issued 623 518 -
Balance at 30 September 2011 623 518 -
Share based payments - 8 127
Transfer to debenture capital (623 518) -
Total comprehensive income for the period
Balance at 31 March 2012 - 8 127
Accumulated Total equity
Profit/(Loss)
R'000 R'000
Balance at 1 October 2010 - -
Total comprehensive income for the year 1 765 1 765
Units to be issued - 623 518
Balance at 30 September 2011 1 765 625 283
Share based payment - 8 127
Transfer to debenture capital - (623 518)
Total comprehensive income for the period (11 681) (11 681)
Balance at 31 March 2012 (9 916) (1 789)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
Quarter ended
31 March 2012
R'000
Cash flows from operating activities 65 554
Cash generated from operations
Cash outflows from investing activities (20 428)
Cash inflows/(outflows) from financing activities (32 272)
Net movement in cash and cash equivalents 12 854
Cash and cash equivalents at the beginning of the year 1 806
Cash and cash equivalents at the end of the year 14 660
BASIS OF PREPARATION
The results for the six months ended 31 March 2012 have not been audited or
reviewed by the company`s independent auditors. The financial statements have
been prepared in accordance with the requirements of International Financial
Reporting Standards, the AC 500 series of interpretations, IAS 34: Interim
Financial Reporting, the JSE Listings Requirements and the requirements of the
South African Companies Act, 2008. These results have been prepared under the
supervision of Imraan Suleman CA(SA), Arrowhead's Chief Financial Officer.
The accounting policies adopted are consistent with those applied in the prior
period.
PAYMENT OF DISTRIBUTIONS FOR THE QUARTER ENDED 31 MARCH 2012
The Board has approved and notice is hereby given of the cash interest
distributions (distribution number 2) of 15,00 cents per A-linked unit and 9,68
cents per B-linked unit for the quarter ended 31 March 2012 in accordance with
the abbreviated timetable set out below:
2012
Last date to trade cum distribution Friday, 25 May
Linked units trade ex distribution Monday, 28 May
Record date Friday, 1 June
Payment date Monday, 4 June
Linked unit certificates may not be dematerialised or rematerialised between
Monday, 28 May 2012 and Friday, 1 June 2012, both days inclusive.
PROSPECTS
Arrowhead is confident that it will deliver on the distribution forecast as set
out in its pre-listing statement dated 30 September 2011. The company is also
confident that it will implement the property acquisitions that are in the
process of being finalised and implemented, and of identifying additional
acquisitions in the short to medium term.
By order of the Board
9 May 2012
Directors: T Adler* (Chairperson), G Leissner (CEO), I Suleman(CFO),
M Kaplan (COO), L Brehm*, M Nell*, E Stroebel*
* Independent non-executive
All directors are South African
Registered office: 42 Wierda Road West, Wierda Valley, 2196
Transfer secretaries: Computershare Investor Services (Proprietary) Limited
Sponsor: Java Capital
Company secretary: Probity Business Services (Proprietary) Limited
Website: www.arrowheadproperties.co.za
Date: 09/05/2012 16:39:11 Produced by the JSE SENS Department.
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