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Unaudited condensed consolidated interim results for the six months ended 31 August 2017
ASCION LIMITED
Incorporated in the Republic of South Africa
(Registration Number 2014/182931/06)
ISIN: ZAE000198289
Share code: ACS
("Acsion" or "the Company" or "the Group")
UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2017
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
Six months Six months Year ended
31 August 31 August 29 February
2017 2016 2017
R'000 R'000 R'000
Assets
Non-current assets
Investment property 5 722 995 4 461 505 5 508 737
Plant and equipment 64 150 161 576 75 915
Operating lease asset 124 675 121 692 137 894
Goodwill 625 464 625 464 625 464
Prepayments 350 744 362 536 350 744
Investment in associate 1 150 917 1 150
Other financial assets 11 786 13 134 12 855
Deferred taxation 10 210 - 10 210
6 911 174 5 746 824 6 722 969
Current assets
Operating lease asset 1 997 8 463 2 128
Loans to group companies 1 068 1 401 963
Current taxation receivables 325 1 106 331
Trade and other receivables 37 006 20 731 24 814
Cash and cash equivalents 44 972 47 487 16 527
85 368 79 188 44 763
Non-current assets held for sale 52 001 76 382 66 639
Total assets 7 048 543 5 902 394 6 834 371
Equity and liabilities
Equity
Share capital 3 969 670 3 974 979 3 973 725
Retained income 1 449 878 718 344 1 386 711
Equity attributable to owners of the company 5 419 548 4 693 323 5 360 436
Non-controlling interest 37 510 10 438 36 015
Total equity 5 457 058 4 703 761 5 396 451
Liabilities
Non-current liabilities
Deferred tax 1 038 329 793 256 1 038 331
Other financial liabilities 459 012 266 523 287 599
1 497 341 1 059 779 1 325 930
Current liabilities
Operating lease liability - - 13
Current taxation payable 11 194 4 110 11 193
Loans from shareholders 506 506 506
Other financial liabilities 8 532 65 325 13 451
Provisions 2 363 3 930 3 218
Trade and other payables 71 037 64 983 83 609
Dividends payable 512 - -
94 144 138 854 111 990
Total liabilities 1 591 485 1 198 633 1 437 922
Total equity and liabilities 7 048 543 5 902 394 6 834 371
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Unaudited Unaudited Audited
Six months Six months Year ended
31 August 31 August 29 February
2017 2016 2017
R'000 R'000 R'000
Revenue 266 964 247 365 524 792
Other operating income 5 356 2 343 7 410
Other operating expenses (112 098) (98 292) (204 995)
Operating profit 160 222 151 416 327 207
Investment income 11 225 541 2 729
Finance costs (25 298) (9 785) (23 026)
Profit from associate - - 232
Profit on sale of non-current assets held for sale 667 2 473 1 180
Fair value adjustments - - 804 224
Amortisation - (4 074) -
Profit before taxation 146 816 140 571 1 112 546
Taxation (32 784) (22 140) (300 171)
Profit for the period 114 032 118 431 812 375
Other comprehensive income - - -
Total comprehensive income for the period 114 032 118 431 812 375
Profit (loss) attributable to:
Owners of the parent 112 537 118 439 786 806
Non-controlling interest 1 495 (8) 25 569
114 032 118 431 812 375
Total comprehensive income (loss) attributable to:
Owners of the parent 112 537 118 439 786 806
Non-controlling interest 1 495 (8) 25 569
114 032 118 431 812 375
Reconciliation between earnings and headline earnings
Basic earnings 112 533 118 439 786 806
Adjusted for: (517) (1 244) (601 430)
Fair valuation adjustment - - (625 143)
Amortisation - (4 074) -
Non-controlling interest relating to fair value adjustment - - 24 541
Impairment of investment property - - 84
Gain on non-current assets held for sale - - (916)
Profit on sale of plant and equipment (667) 2 473 4
Taxation effect 150 357 -
Headline earnings 112 016 117 195 185 376
Earnings per share
Per share information
Basic and diluted earnings per share (cents) 28.6 30.0 199.5
Headline earnings per share (cents) 28.4 29.7 47.0
Net asset value per share (excluding deferred taxation) (cents) 1 637.9 1 391.1 1 620.5
Dividend per share (cents) 12.5 - -
Proposed dividend per share (cents) - - 12.5
Weighted number of shares 394 219 306 394 447 019 394 373 156
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
Six months Six months Year ended
31 August 31 August 29 February
2017 2016 2017
R'000 R'000 R'000
Cash flows from operating activities
Cash generated from operations 159 919 157 344 346 000
Investment income received 11 225 541 2 729
Finance costs paid (25 298) (9 785) (23 026)
Taxation paid (32 775) (23 003) (57 868)
Net cash from operating activities 113 071 125 097 267 835
Cash flows from investing activities
Purchase of plant and equipment (203) (83 359) (11 294)
Proceeds on sale of plant and equipment - - 4
Development costs of investment property (214 259) (149 531) (378 644)
Repayment of loans to group associate companies 1 069 260 -
Decrease in financial assets - 203 482
Proceeds on sale of non-current assets held for sale 15 305 - 30 324
Additions to non-current assets held for sale - - (1 656)
Net cash flow from non-current assets held for sale - 13 986 -
Net cash used in investing activities (198 088) (218 441) (360 784)
Cash flows from financing activities
Purchase of treasury shares (4 055) (503) (1 757)
Increase in other financial liabilities 166 493 125 046 94 248
Proceeds of loans to group associate company (118) - 697
Dividends paid (48 858) - -
Net cash from financing activities 113 462 124 543 93 188
Total cash movement for the period 28 445 31 199 239
Cash at the beginning of the period 16 527 16 288 16 288
Total cash at end of the period 44 972 47 487 16 527
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Total equity
Total attributable Non-
Share Treasury share Retained to owners of controlling Total
capital shares capital income the company interest equity
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Group
Balance at 1 March 2016 3 979 956 (4 474) 3 975 482 599 905 4 575 387 10 446 4 585 833
Profit for the period - - - 118 439 118 439 (8) 118 431
Purchase of treasury shares - (503) (503) - (503) - (503)
Balance at 31 August 2016 3 979 956 (4 977) 3 974 979 718 344 4 693 323 10 438 4 703 761
Profit for the period - - - 668 367 668 367 25 577 693 944
Purchase of treasury shares - (1 254) (1 254) - (1 254) - (1 254)
Balance at 28 February 2017 3 979 956 (6 231) 3 973 725 1 386 711 5 360 436 36 015 5 396 451
Profit for the period - - - 112 537 112 537 1 495 114 032
Dividends paid - - - (49 370) (49 370) - (49 370)
Purchase of treasury shares - (4 055) (4 055) - (4 055) - (4 055)
Balance at 31 August 2017 3 979 956 (10 286) 3 969 670 1 449 878 5 419 548 37 510 5 457 058
GEOGRAPHIC AND TENANT PROFILES
The existing income generating investment properties consist of eight predominantly retail developments strategically located in Gauteng, Mpumalanga and Limpopo with an aggregate gross lettable
area ("GLA") of 237 800 m2 (2017H1: 219 000 m2). The tenant profile by GLA comprises 73% national tenants (2017H1: 71%), 13% semi-national (2017H1: 13%) and 14% line and other franchises (2017H1:
16%).The tenant profile is separated into national and semi-national tenants to indicate the exposure Acsion has to direct head office leases and individual franchises. Exposure to national and
semi-national tenants as a percentage of GLA is at 86% (2017H1: 84%). Line shops and other franchises are carefully vetted by Acsion's leasing division to promote maximum dwelling time and footfall
in each centre, underpinning trading densities and the overall sustainability of tenants' lease terms.
Tenant profile Tenant profile Sector profile Sector profile Geographic profile Geographic profile
by GLA by Revenue by GLA by Revenue by Revenue by GLA
National 73% 65% Retail - metropolitan 63% 69% Gauteng 70% 66%
Semi-national 13% 16% Retail - rural 34% 30% Limpopo 14% 16%
Line and other frachises 14% 19% Light - industrial 3% 1% Mpumalanga 16% 18%
COMMENTARY
ABOUT ACSION
Acsion ("the Group" or "the Company") is a property manager, developer and owner which is listed on the Johannesburg Stock Exchange ("JSE"). Acsion is differentiated from Real Estate Investment
Trusts ("REITs") in the listed property sector as it focuses on the delivery of superior net asset value ("NAV") growth. NAV growth drivers include enhancing existing properties, completing the
communicated development pipeline and obtaining additional future development opportunities. To a lesser extent, the Group derives capital growth from selling completed developments and
purchasing existing properties.
The Group's development function and "value-engineering" approach to development, significantly enhances returns to shareholders. Value engineering focuses on optimising upfront feasibility
studies, planning, designing and constructing in an innovative and more cost-effective way, resulting in lower construction costs, without compromising on quality.
OPERATIONAL UPDATE
Acsion was in the process of constructing the Acsiopolis (Benmore, Sandton) and Mall@55 (Monavoni, Gauteng) developments during the six months under review. The development and leasing of Mall@55
progressed well and was successfully opened in September 2017. The Acsiopolis development is progressing on schedule and as at August 2017, six parking levels and two commercial levels have been
completed. Development planning on the extension of Mall@Lebo (Lebowakgomo, Limpopo) as well as a small extension at Mall@Carnival (Brakpan, Gauteng) to incorporate Planet Fitness is underway.
The re-letting of phase III of Mall@Carnival has been concluded and the necessary alterations are underway. Trading is anticipated to commence before the festive season.
FINANCIAL RESULTS
Revenue for the Group for the six months ended 31 August 2017 was R267.0 million (2017H1: R247.4 million). The reported increase was 7.9%. Other income supplemented rental revenue by R5.4 million
(2017H1: R2.4 million). Operating expenses increased by 14.0% year on year. The increase results to a large extent from additional operational costs associated with the opening of Mall@Moutsiya
(Walkraal, Limpopo) in August 2016 and Mall@Mfula (Piet Retief, Mpumalanga) in November 2016. The installed solar plants at Mall@Reds, Mall@Carnival, Mall@Mfula and Mall@Emba continues to perform
well and support the group in enhancing its cost recovery margin.
The increase in net finance costs from R9.2 million in the first half of the 2017 financial year to R14.0 million during the first half of the 2018 financial year, can mainly be attributed to the
continued development of Acsiopolis and the completion of Mall@55. The dividend paid in July 2017 also contributed to the increase in gearing. Gearing for the group remains low at 7.1% (2017H1:
5.9%). Despite the continuous development undertaken and the dividend distribution in July 2017, the gearing remained relatively low which is testament to the strong cash flow generating ability
of the group. The Group continues to aggressively manage its cash resources.
Headline earning per share decreased marginally to 28.4 cents (2017H1: 29.7 cents).
The financial position of the Group remains very strong. Investment property (which includes elements of plant and equipment, and the operating lease asset) is carried at R5.896 billion (2017H1:
R4.753 billion). Non-current assets held for sale is carried at fair value of R52.0 million (2017H1: R76.4 million). Total property under control of the Group therefore increased by a respectable
23.1% year on year.
Prepayments consist of two developments acquired during the formation of Acsion, Acsiopolis and Mall@Maputo. The construction of Acsiopolis is continuing well and the opening is set for 2019. The
development of Mall@Maputo is currently on hold due to the weak economy in Mozambique. This delay is welcomed as it is management's opinion that the Mozambican economy will improve in line with
the strengthening of the resources market and yield more acceptable returns to the Group.
Goodwill equates to R625.5 million and considering the robustness and extent of the development pipeline, no impairment was required.
Group liquidity is considered to be adequate. Due to the Group's cash management policy, mortgage bonds are prepaid and these funds are available on demand to the group.
NAV per share (excluding deferred taxation) for the six months ended 31 August 2017 increased by 17.7% from 1 391.1c in August 2016 to 1 637.9c.
TREASURY SHARE PURCHASE
The Group repurchased 580 581 (2017H1: 65 142) shares during the six months ended August 2017 and currently holds these as treasury shares. The decision to repurchase shares was made as the share
price was trading significantly below the reported NAV of the Company. These shares were purchased at approximately 57.3% below the reported NAV per share (excluding deferred taxation) as at
31 August 2017.
VACANCY LEVELS AND LEASE EXPIRY PROFILE
Strategic vacancies are maintained in order to accommodate potential tenant relocations and to support lease optimisation. The weighted vacancy (by GLA) for the portfolio as at August 2017 was
7.3% (2017H1: 6.6%) and the Group is focused on reducing this percentage to more acceptable levels. As at the time of this report, the weighted vacancy (by GLA) was reduced to 5.4%. The weighted
average lease expiry profile by GLA for the portfolio decreased to 3.0 years (2017H1: 3.7 years). The decline is mainly attributable to the lease renewal dates of Mall@Carnival phase 2 that are
not evenly spread over the average lease term. The Group is, however, not concerned about this decline and the Group is confident that tenants will be retained on lease renewal.
DEVELOPED INVESTMENT PROPERTY PORTFOLIO
The developed investment properties as at 31 August 2017 consisted of the eight properties (Valued as at 28 February 2017:) detailed below.
Property name Directors/independent Value/m2 Percentage of
valuation (R'mil) GLA (excluding bulk, total portfolio
February 2017 (m2) where applicable) by value (%)
Mall@Carnival 2 375 87 750 27 066 46.5
Mall@Reds(*) 1 180 54 350 21 711 23.1
Mall@Emba 521 24 500 21 265 10.2
Mall@Lebo(*) 421 23 500 17 915 8.3
Mall@Mfula 244 18 700 13 048 4.8
Mall@Moutsiya 164 14 500 11 310 3.2
Moreleta Square(*) 163 8 500 19 176 3.2
Simarlo Rainbow(*) 37 6 000 6 200 0.7
Total developed investment portfolio 5 105 237 800 21 468 100.0
The above properties are trading at an average annualised net operating yield of approximately 7.4% (2017H1: 8.1%). As at February 2017 the net operating yield was reported as 7.2%.
Properties under construction
Directors/ Value/m2
independent (excluding bulk,
valuation GLA where applicance) Anticipated
Developments nearing completion R'mil M2 R opening
Acsiopolis 388 67 000 5 794 Jan 2019
Mall@55(*) (%) 108 15 000 7 180 Sep 2017
Trade55 123 10 000 12 325 Negotiating
Total developments under construction 619 92 000 6 730
* Independently valued
% Completed in September 2017
Acsiopolis, Benmore, has been designed as a twenty storey mixed use development, situated in the heart of Sandton. The land footprint measures approximately one hectare and is located and
accessed via Benmore road. Mixed use development rights totalling 70 000 m2 have been obtained. The current design however allows for a total development of 67 000 m2 of which the majority
of the rights have been earmarked for residential use which supports Acsion's strategy of sectoral diversification. Approximately 35 000 m2 will be available as executive apartments,
26 000 m2 is earmarked for short term residential rental units, 5 000 m2 will be utilised for retail purposes and 1 000 m2 for office use. Acsiopolis will also offer six levels of parking
equating to approximately 1 400 basement parking bays, some of which will be on-grade parking for the retail units which is expected to further enhance convenience for shoppers and residents
alike.
In addition to vehicular access, Acsiopolis has been designed to take into consideration the evolving public transport systems in Sandton to accommodate the integration of pedestrian
accessibility and bus rapid transit (BRT) routes. Construction of the development is progressing as scheduled and as at August 2017, six levels of parking and two levels of commercial space
had been completed. This development is the largest single phase development the Group has undertaken. All the residential units are to be owned and operated in-house by Anaprop Property
Management.
Mall@55 Phase I, consists of a 15 000 m2 convenience shopping centre in Monavoni, Gauteng. It is located on an extremely busy arterial route accessible from the N14 freeway and the
R55 provincial route. This development is ideal for a value/convenience/lifestyle centre, which is underrepresented in the Monavoni area. After initial delays in obtaining the required road
infrastructure development approvals, the construction progressed well and the completion date of September 2017 was achieved.
Trade 55 Phase I, will comprise of a 10 000 m2 large ("big box") retail centre. Special commercial rights were obtained for this development. This development has been delayed in order to obtain
better rentals for this prime development site. This development is located on an extremely busy arterial route accessible from the N14 freeway and the R55 provincial route and across from the
Mall@55 site. Trade 55's value offering will be complementary to that of Mall@55. It is anticipated that construction of this development will only commence in 2018.
PROPERTIES HELD FOR SALE
Hyde Park Terrace, a high end residential development of units ranging from 350 m2 to 540 m2 under roof, is situated in Hyde Park, Sandton, approximately 500 m from Hyde Park shopping centre. The
development is nearly sold out with six (2017H1: nine) completed houses and eight (2017H1: Nil) vacant stands still available for sale.
FUTURE DEVELOPMENTS AND DEVELOPMENT OPPORTUNITIES
Acsion continuously evaluates a consistent stream of new opportunities and is in advanced discussions on certain projects to further enhance capital growth in the coming five years. At the date
of these interim results, the following future development opportunities, amongst others, were being considered by Acsion:
Mall@Lebo, our highly successful development in Lebowakgomo, Limpopo is to be extended by approximately 5 000 m2. The Group is in the process of finalising certain applications whilst the leasing
of the proposed extension is finalised.
Mall@55 has approximately 20 000 m2 of bulk available. The successful opening of the development in September 2017 further justified an extension of up to 15 000 m2 which will include fast food
outlets in the near future. Planning regarding this extension is underway.
Mall@Carnival's extension of approximately 2 500 m2 is planned for this super regional shopping centre in Brakpan, Gauteng and should commence shortly.
Mamahlodi Gardens is an affordable housing development in Walkraal, Limpopo with a total land size of 40 hectares. Acsion has formed a partnership with local residents and the local municipality
to approach prospective buyers with access to housing subsidies from the Department of Human Settlements. Proclamation of the land is completed with all services (water, sewage and electricity)
already secured. Plans to construct up to 515 residential units for sale are supported by a shortage of affordable housing in the Walkraal area. The market price will range between R300 000 and
R350 000 per unit. The development will be demand driven and will be supplementary to the Mall@Moutsiya development. The Group is currently in negotiations with various parties to bring this
aspect of the development to fruition. The Group is also considering alternative uses for the basket of rights to complement the mall and residential node.
Mall@Frankfort was intended to comprise an 8 000 m2 shopping centre in Frankfort, Free State. Interest from a potential anchor tenant has not been secured to date and the Group has impaired the
insignificant carrying value of this potential development until sufficient interest has been secured.
The Mall@Maputo development will be located in northern Maputo and will be adjacent to the main Maputo ring road, with a total land size of 8.9 hectares. A memorandum of understanding was
originally signed with the Mozambican Ministry of Sport to develop a 50 000 m2 shopping centre. Subsequently, the Group decided to acquire an alternative land parcel adjacent to the existing land
parcels which now requires an additional agreement with the Ministry of Interior to be concluded. The Group have been in constant negotiations with the Ministry of Interior and a final draft
contract has been negotiated.
With Offices@Lusaka, Acsion aims to take advantage of Zambia's growing economy and limited available infrastructure for multinational companies. Negotiations with a local land owner to co-develop
up to 20 000 m2 of office space are currently underway. The site is located in close proximity to Manda Hill Shopping Mall and alongside to Stanbic's Lusaka offices.
Metropolis Mall@Larnaka is the Group's first exciting international retail development. The Group has signed a leasehold agreement over land in Larnaka, Cyprus. The lease is a 33 year lease with
two options to renew of 33 years each. The Group intends to develop a 40 000 m2 retail centre. Local authorities are in the process of evaluating the traffic and environmental impact prior to the
necessary approvals being granted. The Group trusts that all approvals would have been obtained by the end of 2017 after which the construction will commence. The Group is very excited about its
first development project in Europe and this development promises to yield returns that meet or exceed the Group's investment criteria.
NEW INITIATIVES
Acsion's first solar installation was installed at Mall@Emba and generates 1 MW of electricity. The plant was commissioned in October 2015. As a result of the success with this plant the Group
has also successfully installed solar plants at Mall@Reds, Mall@Carnival and Mall@Mfula. Total generating capacity is now at 9 MW for these developments. The Group is pleased with the profit
generated by these installations. The Group has decided that, subject to appropriate pricing of import items and ESKOM or council electricity tariff structures, that each sizeable development
will deploy a solar plant to aid in lowering the operating costs of the development. To this extent several other plants are planned for the remaining developments.
PROSPECTS
Acsion's Board remain confident that the Group's growth objectives can be achieved despite the challenging economic environment. The Group remains focused on the completion of its secured
development pipeline over the next three years.
DIVIDEND
It has always been the Groups' policy not to declare any dividends. The Board of Directors decided, however, to propose a dividend of 12.5 cents per share for the 2017 financial year pursuant to
an intention to increase trade in the shares and taking account of the Group's low gearing. The proposed dividend was approved after year end and was paid to shareholders in July 2017. The board
is currently considering another dividend for the financial year end 2018.
SEGMENTAL REPORTING
Due to the current investment property portfolio exposure being heavily weighted to retail, the chief operating decision maker considers the operations to be a single operating segment and as
such reviews financial information on this basis. Segment reporting as required in terms of IFRS 8: Operating segments is, therefore, not applicable to the Group at this stage.
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The reviewed provisional condensed consolidated financial statements are prepared in accordance with the requirements of the JSE Listings Requirements and the requirements of the Companies Act 71
of 2008 of South Africa. The unaudited interim results have been prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial
Reporting Standards (IFRS), at a minimum, IAS 34: Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as
issued by the Financial Reporting Standards Council.
The accounting policies applied in the preparation of the unaudited condensed consolidated interim results are consistent with those applied in the 2017 unaudited condensed consolidated interim
results.
These results have been prepared using the historical cost convention, except for investment properties, which are measured at fair value, and certain financial instruments, which are measured at
either fair value or amortised cost.
These unaudited condensed consolidated interim results were prepared under the supervision of Pieter Scholtz CA(SA), M.Com (Tax) in his capacity as Chief Financial Officer.
By order of the Board
Centurion, 17 October 2017
D Green K Anastasiadis
(Chairman) (Chief Executive Officer)
Directors: D Green (Chairman)*, K Anastasiadis (CEO), P Scholtz (CFO), S Griesel*, PD Sekete*, T Jali* (*Independent non-executive)
Registered office: Mall@Reds, 1st Floor, Corner of Rooihuiskraal and Hendrik Verwoerd Drives, Rooihuiskraal, Ext 15, Centurion
Postal address: PO Box 569, Wierda Park, 0149
Registration number: 2014/182931/06
Transfer secretaries: Computershare Investor Services Proprietary Limited, Rosebank Towers, 15 Biermann Avenue, Rosebank 2192, Johannesburg 2001
Sponsor: Nedbank Corporate and Investment Banking Limited
JSE share code: ACS
ISIN code: ZAE000198289
Company secretary: CMA Incorporated
Date: 17/10/2017 05:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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