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Condensed consolidated unaudited interim financial results and dividend distribution statement
Safari Investments RSA Limited
Registration number: 2000/015002/06
Approved as a REIT by the JSE Limited
JSE share code: SAR ISIN: ZAE000188280
Country of incorporation: Republic of South Africa
(7 July 2000)
Income tax reference number: 9012/264/14/0
("Safari" or the "company" or the "group")
Condensed consolidated unaudited interim financial results
and dividend distribution statement
for the period ended 30 September 2018
The condensed consolidated interim financial statements are unaudited.
The Financial Director, Mr WL Venter, was responsible for the preparation
of these unaudited financial statements, executed by the Financial Manager,
Mr MC Basson.
Our vision
To be a leading mid-cap REIT driving sustained growth, and returns above
market average, through selective property investments, thereby creating
value for all our stakeholders.
Our mission
Building a property portfolio that offers:
- To our investors: Investments that deliver long-term income and capital growth
- To our communities: Social and environmental sustainability
- To our tenants and their clients: Highly sought-after assets
- To our employees: A secure and sustainable future
Our values
- Quality: Unlocking and delivering high-quality assets
- Innovation: Finding opportunities in the market through creative thinking
- Improvement: Making a difference for the better of our stakeholders
- Integrity: Acting honestly and ethically in all that we do
Our strategic goals
- To grow, diversify and mature a specialised portfolio of premium commercial
property investments
- To achieve sustainable income and capital growth through the application
of quality management within our property portfolio
- To continually improve the quality of the Safari brand through a renewed
focused approach to investor relations and brand marketing
Income-generating retail portfolio
for the period ended 30 September 2018
Denlyn Atlyn Mnandi Thabong
Geographic Mamelodi, Atteridge- Atteridge- Sebokeng,
Gauteng ville, ville,
Gauteng Gauteng
Trading since 2003 2006 2015 2007
Total built area 43 450m2 41 200m2 10 550m2 43 100m2
Occupation levels 100% 100% 98% 99%
National tenants 90% 91% 74% 88%
Number of shops 109 95 31 104
Annual trading
density/m2
September 2018 R45 100/m2 R31 000/m2 R22 800/m2 R29 000/m2
Soweto
The Platz Private Day
Victorian am Meer Hospital
Geographic Heidelberg, Swakopmund Soweto,
Gauteng Namibia Gauteng
Trading since 1997 2016 2016
Total built area 15 400m2 29 500m2 2 817m2
Occupation levels 97% 94% 100%
National tenants 97% 81% 100%
Number of shops 40 70 N/A
Annual trading density/m2
September 2018 R46 500/m2 R22 100/m2 N/A
Portfolio highlights
Portfolio vacancy rate 2%
Portfolio National (GLA) 88%
Average trading density for the portfolio 33 200m2
Total built m2 of property portfolio 186 017m2
Condensed consolidated statement of financial position
as at 30 September 2018
Unaudited Reviewed Audited
30 September 30 September 31 March
2018 2017 2018
Notes R'000 R'000 R'000
Assets
Non-current assets
Investment property 1 2 790 629 2 501 727 2 638 538
Fair value of
investment property 2 843 930 2 541 185 2 681 628
Operating lease asset (53 301) (39 458) (43 090)
Loans to shareholders 45 582 42 871 45 166
Operating lease asset 2 53 099 38 322 42 350
Deferred tax 11 128 - 16 908
2 900 438 2 582 920 2 742 962
Current assets
Inventories 3 169 649 193 188 169 649
Loans to shareholders 2 5 919 7 660 8 149
Trade and other receivables 6 17 719 23 381 15 331
Operating lease asset 2 202 1 136 740
Cash and cash equivalents 6 199 3 427 2 948
199 688 228 792 196 817
Total assets 3 100 126 2 811 712 2 939 779
Equity and liabilities
Equity
Stated capital 4 2 087 636 2 088 293 2 087 928
Share-based payment reserve 5 - 49 800 49 800
Retained income 462 195 412 163 427 053
2 549 831 2 550 256 2 564 781
Liabilities
Non-current liabilities
Interest-bearing borrowings 7 513 027 139 680 335 245
Deferred tax 15 858 26 265 18 535
528 885 165 945 353 780
Current liabilities
Trade and other payables 6 20 593 15 787 20 655
Interest-bearing borrowings 7 817 950 563
Bank overdraft - 78 774 -
21 410 95 511 21 218
Total liabilities 550 295 261 456 374 998
Total equity and liabilities 3 100 126 2 811 712 2 939 779
Condensed consolidated statement of profit or loss
and other comprehensive income
for the period ended 30 September 2018
Unaudited Reviewed
Six months Six months Audited
ended ended Year ended
30 September 30 September 31 March
2018 2017 2018
Notes R'000 R'000 R'000
Revenue 136 392 121 668 248 649
Property revenue 8 126 181 117 650 240 999
Operating lease 2 10 211 4 018 7 650
Other income 604 4 144 5 743
Other operating expenses 9 (39 081) (32 582) (70 892)
Operating profit 97 915 93 230 183 500
Investment income 2 932 630 3 446
Finance costs (9 710) (33 361) (37 431)
Share-based payment expense 5 - (49 800) (49 800)
Fair value adjustments - - 15 186
Gross fair value adjustments 1 - - 22 836
Operating lease - - (7 650)
Impairment of inventory - - (5 035)
Profit before taxation 91 137 10 699 109 866
Taxation (3 104) (3 161) 21 477
Profit for the period 88 033 7 538 131 343
Other comprehensive income - - -
Total comprehensive
income for the period 88 033 7 538 131 343
Basic earnings per share (cents) 34,94 3,61 57,04
Diluted earnings per share (cents) 28,29 3,43 49,51
Condensed consolidated statement of changes in equity
for the period ended 30 September 2018
Share-
based
Share payment Retained Total
capital reserve income equity
R'000 R'000 R'000 R'000
Balance at
1 April 2017 1 187 088 - 476 453 1 663 541
Profit for the year - - 131 343 131 343
Other comprehensive income - - - -
Total comprehensive
income for the year - - 131 343 131 343
Shares issued through
capitalisation dividend 2 853 - - 2 853
Private placement 152 000 - - 152 000
Private placement 756 600 - - 756 600
Capital raising fee on
shares paid for and
issued in the current
period (10 613) - - (10 613)
Share-based payment - 49 800 - 49 800
REIT distribution paid - - (180 743) (180 743)
Total contributions by
and distributions to owners
of company recognised
directly in equity 900 840 49 800 (180 743) 769 897
Balance at
31 March 2018 (Audited) 2 087 928 49 800 427 053 2 564 781
Profit for the period - - 88 033 88 033
Other comprehensive income - - - -
Total comprehensive
income for the period - - 88 033 88 033
Share repurchase (292) - - (292)
Reallocation of capital
reserve - (49 800) 49 800 -
REIT distribution paid - - (102 691) (102 691)
Total contributions by
and distributions to
owners of company
recognised directly in
equity (292) (49 800) (52 891) (102 983)
Balance at 30 September
2018 (Unaudited) 2 087 636 - 462 195 2 549 831
Condensed consolidated statement of cash flows
for the period ended 30 September 2018
Unaudited Reviewed
Six months Six months Audited
ended ended Year ended
30 September 30 September 31 March
2018 2017 2018
R'000 R'000 R'000
Net cash used in operating
activities
Cash generated from operations 85 254 61 781 179 844
Investment income 2 932 630 3 445
Finance costs (9 710) (33 361) (37 434)
REIT distribution paid (102 691) (68 975) (177 891)
Tax received - 1 638 1 638
Net cash used in operating
activities (24 215) (38 287) (30 398)
Cash used in investing activities
Purchase and development of
investment property (152 091) (80 179) (201 802)
Net cash used in investing
activities (152 091) (80 179) (201 802)
Cash flows from financing activities
Proceeds on share issue - 898 352 897 988
Reduction of share capital or
buyback of shares (292) - -
Proceeds from interest-bearing
borrowings 296 136 145 682 447 970
Repayment of interest-bearing
borrowings (118 100) (909 061) (1 016 171)
Proceeds from bank overdraft - 79 704 72 900
Repayment of bank overdraft - (24 387) (96 357)
Advance on shareholders' loan 1 813 (50 531) (53 316)
Net cash from financing activities 179 557 139 759 253 014
Total cash movement for the period 3 251 21 293 20 814
Cash at the beginning of the period 2 948 (17 866) (17 866)
Total cash and cash equivalents at
the end of the period 6 199 3 427 2 948
Explanatory notes to the condensed consolidated statement of financial position
and condensed consolidated statement of comprehensive income
1. It is the group's policy to have the investment property portfolio
valued on an annual basis by an independent valuator. The previous valuation
was done on 31 March 2018 and the next valuation will be done on 31 March 2019.
These valuations are considered to be Level 3 on the fair value hierarchy as
per IFRS 13 Fair Value Measurement. There have been no movements of inputs
between fair value hierarchy levels nor have there been any changes in the
methods of valuation as mentioned above. If the valuator were to increase both
the capitalisation and discount rates by 0,50%, the total valuation would
decrease by R122 600 000. If the valuer were to decrease both the capitalisation
and discount rates by 0,50% the total valuation would increase by R137 300 000.
If the valuer were to increase the long-term vacancy provision by 1,00%, the
total valuation would decrease by R20 400 000. If the valuer were to decrease
the long-term vacancy provision by 1,00% the total valuation would increase by
R20 300 000. The construction of the Nkomo Village Shopping Centre in
Atteridgeville, and capital expenditure on tenant mix improvements such as the
replacement of Edgars with a Boxer Superstore in Thabong Shopping Centre in
Sebokeng, resulted in a 6% increase in the value of investment property
since 31 March 2018. The construction costs are financed by the R900 million
Absa facility (interest-bearing borrowings).
2. The majority of leases are for three to ten years and the average effective
escalation rate is 7%.
3. As part of the Platz am Meer mixed-use development, Safari Investments
Namibia Proprietary Limited developed 36 luxury seafront apartments and offices
together with a shopping centre. The entire development will be incorporated
into a sectional title scheme with 39 units consisting of 36 apartments, one
office unit and two commercial units, which is trading as the Platz am Meer
Shopping Centre. In this regard, 36 close corporations and one additional
private company were incorporated in which these units will vest. A
proportionate allocation of the development cost of the land was transferred
to these close corporations and private company and the intention is to
allocate the development cost of the properties to the close corporations
and private company when the sectional title scheme registration occurs.
The person/s acquiring the apartments or office units will then acquire the
membership or shares in the close corporation or private company
respectively. Currently, Safari Investments Namibia Proprietary Limited
holds 100% of the shares in the private company known as Platz am Meer
Property One Proprietary Limited and through its nominee Mr DC Engelbrecht,
Chief Executive Officer, the membership in all 36 close corporations.
4. In the 2019 financial year, Safari will distribute a minimum of 75% of
its taxable earnings to the shareholders as per the REIT requirements,
and the shareholders will be liable for the tax on the profit distributed.
5. On initial recognition, being 28 August 2017, the date on which the funded
shares of 59 210 526 subscription shares were issued, a once-off IFRS 2 charge
of R49,8 million and corresponding share-based payment reserve was recognised.
Consequently, the subscription shares issued to Southern Palace in terms of
the Sanlam-funded specific issue have not been treated as issued for
accounting purposes.
6. Trade and other receivables mainly consist of debtors and VAT receivable
from the Revenue Service. Trade and other payables consist of deposits
(tenants) held, income received in advance and accrued expenses.
7. The bulk of the current and non-current liabilities relate to the facility
currently being utilised to finance acquisitions, the project development of
the Nkomo Village Shopping Centre and improvements at existing properties as
mentioned in note 1.
8. The September 2018 interim property revenue increased by 7% compared to
the September 2017 interim figure. The increase is a result of annual rental
escalations, low vacancy rates and an improved tenant mix.
9. The September 2018 interim property-specific expenses, as a percentage of
property-specific income, was 25% compared to 24% in September 2017. The
September 2018 interim total expenses as a percentage of total income was
29% compared to 27% in September 2017.
Condensed consolidated segmental report
for the period ended 30 September 2018
Atteridgeville Mamelodi Sebokeng
R'000 R'000 R'000
30 September 2018
Turnover (external) 35 628 39 843 33 568
Reportable segment profit before
investment revenue, fair value
adjustments and finance costs 29 135 33 871 23 712
Unallocated reportable segment
profit before investment revenue,
fair value adjustments and
finance costs - - -
Profit before investment revenue,
fair value adjustments and
finance costs - - -
Segment assets 966 868 790 256 508 303
Unallocated assets - - -
Total assets 966 868 790 256 508 303
Segment liabilities 5 905 3 345 4 583
Unallocated liabilities - - -
Interest-bearing borrowings - - -
Total liabilities 5 905 3 345 4 583
Other segment items
Interest revenue (external) - - -
Unallocated interest revenue - - -
Investment revenue - - -
Fair value adjustments - - -
Interest expense - - -
Unallocated interest expense - - -
Finance costs - - -
Recon-
Heidelberg Namibia ciliation Total
R'000 R'000 R'000 R'000
30 September 2018
Turnover (external) 11 017 14 165 2 171 136 392
Reportable segment
profit before investment
revenue, fair value
adjustments and
finance costs 8 101 8 763 - 103 582
Unallocated reportable
segment profit before
investment revenue,
fair value adjustments
and finance costs - - (5 668) (5 668)
Profit before investment
revenue, fair value
adjustments and finance
costs - - - 97 915
Segment assets 167 975 512 700 - 2 946 102
Unallocated assets - - 154 024 154 024
Total assets 167 975 512 700 154 024 3 100 126
Segment liabilities 477 3 186 - 17 496
Unallocated liabilities - - 18 955 18 955
Interest-bearing borrowings - - 513 844 513 844
Total liabilities 477 3 186 532 799 550 295
Other segment items
Interest revenue (external) (4) 130 - 126
Unallocated interest revenue - - 2 806 2 806
Investment revenue (4) 130 2 806 2 932
Fair value adjustments - - - -
Interest expense - - - -
Unallocated interest expense - - 9 710 9 710
Finance costs - - 9 710 9 710
for the period ended 30 September 2017
Atteridgeville Mamelodi Sebokeng
R'000 R'000 R'000
30 September 2017 (Reviewed)
Turnover (external) 31 041 36 507 23 938
Reportable segment profit
before investment revenue, fair
value adjustments and finance
costs 24 574 31 733 15 449
Unallocated reportable segment
profit before investment revenue,
fair value adjustments
and finance costs - - -
Profit before investment
revenue, fair value adjustments
and finance costs - - -
Segment assets 694 496 692 781 507 426
Unallocated assets - - -
Total assets 694 496 692 781 507 426
Segment liabilities 4 140 3 050 4 321
Unallocated liabilities - - -
Interest-bearing borrowings - - -
Total liabilities 4 140 3 050 4 321
Other segment items
Interest revenue (external) 12 6 13
Unallocated interest revenue - - -
Investment revenue 12 6 13
Fair value adjustments - - -
Interest expense - - -
Unallocated interest expense - - -
Finance costs - - -
Recon-
Heidelberg Namibia ciliation Total
R'000 R'000 R'000 R'000
30 September 2017 (Reviewed)
Turnover (external) 10 740 17 241 2 201 121 668
Reportable segment profit
before investment revenue,
fair value adjustments
and finance costs 8 156 13 454 - 93 366
Unallocated reportable
segment profit before
investment revenue, fair
value adjustments and
finance costs - - (136) (136)
Profit before investment
revenue, fair value
adjustments and
finance costs - - - 93 230
Segment assets 157 740 628 222 - 2 680 665
Unallocated assets - - 131 047 131 047
Total assets 157 740 628 222 131 047 2 811 712
Segment liabilities 644 81 016 - 93 171
Unallocated liabilities - - 27 655 27 655
Interest-bearing borrowings - - 140 630 140 630
Total liabilities 644 81 016 168 715 261 456
Other segment items
Interest revenue (external) - - - 31
Unallocated interest revenue - - 599 599
Investment revenue - - 599 630
Fair value adjustments - - - -
Interest expense - - - -
Unallocated interest expense - - 33 361 33 361
Finance costs - - 33 361 33 361
Notes to the financial statements
for the period ended 30 September 2018
1. Earnings per share
Unaudited Reviewed
Six months Six months Audited
ended ended Year ended
30 September 30 September 31 March
2018 2017 2018
Earnings used in the calculation
of basic earnings per share
(R'000) 88 033 7 538 131 343
Ordinary shares in issue at
year-end ('000) 251 925 251 975 251 975
Weighted average number of
ordinary shares ('000) 251 962 208 656 230 253
Headline earnings (R'000) 88 033 7 538 108 507
Diluted weighted average number
of shares ('000) 311 172 219 657 265 293
Basic earnings per share (cents) 34,94 3,61 57,04
Diluted earnings per share (cents) 28,29 3,43 49,51
Basic headline earnings per
share (cents) 34,94 3,61 47,13
Diluted headline earnings per
share (cents) 28,29 3,43 40,90
Headline earnings reconciliation
Basic earnings (profit after
tax) (R'000) 88 033 7 538 131 343
Gains and losses from the
adjustment to the fair value of
non-current assets (R'000) - - (22 836)
88 033 7 538 108 507
2. Related parties
Relationships
Subsidiaries Safari Investments Namibia
Proprietary Limited (100% owned)
Common directorship/ Safari Retail Proprietary Limited
trusteeship/membership Safari Developments Pretoria Proprietary Limited
Safari Developments Swakopmund Proprietary Limited
Matla Quantity Surveyors Proprietary Limited
Pace Construction Proprietary Limited
WDB Investment Holdings
Close corporations Cosmos Management CC
controlled by common MDM Architects CC
director Fanus Kruger Consulting CC
Unaudited Reviewed
Six months Six months Audited
ended ended Year ended
30 September 30 September 31 March
2018 2017 2018
R'000 R'000 R'000
Related party transactions
Services rendered by/purchases
from related parties
Safari Developments Pretoria
Proprietary Limited 131 001 35 095 104 551
Safari Developments Swakopmund
Proprietary Limited 5 356 55 390 66 042
Safari Retail Proprietary Limited 1 880 940 1 332
Pace Construction Proprietary Limited 18 1 066 -
Fanus Kruger Consulting CC 5 80 80
Safari Hold Proprietary Limited 325 375 465
Close corporations controlled by
common director Cosmos Management CC 4 339 3 430 6 854
MDM Architects CC 908 69 429
3. Net asset value per share
Unaudited Reviewed
Six months Six months Audited
ended ended Year ended
30 September 30 September 31 March
2018 2017 2018
Total assets (R'000) 3 100 126 2 811 712 2 939 779
Total liabilities (R'000) (550 295) (261 456) (374 998)
2 549 831 2 550 256 2 564 781
Ordinary shares in issue for
NAV calculation ('000) 311 136 311 186 311 186
Net asset value per share (cents) 819,52 819,53 824,20
Tangible net asset value (cents) 819,52 819,53 824,20
Notes to the condensed consolidated unaudited financial statements
Basis of preparation
The preparation of the group's interim financial results for the six months
ended 30 September 2018 was the responsibility of the Financial Director,
Mr WL Venter, executed by the Financial Manager, Mr MC Basson and have not
been audited nor reviewed by the group's auditor, Deloitte & Touche. The
condensed consolidated interim financial statements are prepared in accordance
with International Financial Reporting Standards, IAS 34 Interim Financial
Reporting, the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Reporting Pronouncements as issued by the
Financial Reporting Standards Council, and the requirements of the Companies
Act of South Africa. The accounting policies applied in the preparation of
these interim financial statements are in terms of International Financial
Reporting Standards and are consistent with those applied in the previous
consolidated annual financial statements.
Financial statements
The group's interim financial results for the six months ended
30 September 2018 were not audited nor reviewed by the group's auditor,
Deloitte & Touche. The directors take full responsibility for the preparation
of the interim consolidated financial statements and were approved by the
Board of Directors on 14 November 2018.
New standards and interpretations
The accounting policies of the group have been applied consistently with
the policies as presented in the consolidated financial statements for
the year ended 31 March 2018.
Events during and subsequent to the reporting period
Events during the financial period
On 11 July 2018 a cash distribution of 33 cents per share was declared
and paid to shareholders.
At the annual general meeting held on 31 July 2018, all resolutions were passed.
Mr AE Wentzel and Dr M Minnaar were re-elected as non-executive directors
who retired by rotation in terms of the memorandum of incorporation and,
being eligible, offered themselves for re-election. Mr C Roberts and
Ms LL Letlape were appointed as independent non-executive directors and
Mr DC Engelbrecht was appointed as an executive director by way of separate
resolutions. It was further resolved that the directors of the company be
authorised, by way of a general authority, to issue a maximum of 15% of the
issued share capital from the authorised but unissued shares in the capital of
the company for cash. The shareholders also passed a non-binding advisory vote
on the company's remuneration policy, as well as the 2018 implementation report
on the company's remuneration policy, which is available for inspection on the
company's website.
On 7 September 2018, the Board of Safari approved the acquisition of a
letting enterprise known as Thornhill Shopping Centre ("Thornhill") in
Polokwane with a gross built area of 13 374m2. Thornhill is a well-established
convenient neighbourhood retail centre boasting 90% national tenants with
sustainable growth in trading densities. The acquisition is in line with
Safari's growth strategy of expanding its property portfolio.
During 2018 Safari issued an interest and capital guarantee to the amount of
R455 million for the loan facility provided to Southern Palace Capital. The
funding is secured by a pledge and cession in favour of Sanlam over the
subscription shares held by Southern Palace Capital. Safari entered into an
Acknowledgement of Claim and Reversionary Pledge and Cession Agreement with
Southern Palace Capital whereby Southern Palace Capital irrevocably and
unconditionally agrees to indemnify Safari for the full amount paid by Safari
on account of the borrower's obligations under the guarantees issued by Safari.
Events subsequent to the financial period
In the 31 March 2018 annual financial statements (note 33), it was disclosed
that notice was received that a cross default was triggered on the senior
facility (Southern Palace Capital Proprietary Limited ("Southern Palace")
share subscription transaction) where Safari is the guarantor for the interest
and capital portions of the facility provided to Southern Palace Capital for
the purchase of Safari shares during August 2017. During October 2018, the
cross default was rectified through the sale of 13 million Safari shares held
under pledge by Sanlam Life Insurance Limited (acting through its Sanlam
Capital Markets Division).
The retirement tendered by Francois Marais as Chief Executive Officer with
immediate effect was accepted. Francois was appointed as Non-executive Chairman
of the Board. As a result, the Board has decided to accelerate the succession
plan as communicated to shareholders through SENS during September 2018 and
appointed Dirk Engelbrecht as the Chief Executive Officer. Dr Philip Snyman,
the current Chairman of the Board will remain as an independent non-executive
board member.
At the Board meeting held on 14 November 2018 the Board of directors of
Safari resolved the following:
- A gross cash interim distribution of 26 cents per ordinary share was declared
and will be paid during December 2018 after complying with the solvency and
liquidity requirements as stated in the Companies Act 71 of 2008. Refer to the
Dividend Distribution Declaration below.
- Pieter van Niekerk (LLB) was appointed as the Group Company Secretary by the
Board with effect from 14 November 2018.
- Tenant mix improvements at Denlyn Shopping Centre to accommodate Woolworths
and McDonalds in order to strengthen market dominance in the Mamelodi region was
approved with a total capital expenditure of R14 047 686.
- A hedging policy was adopted by the Board subject to finalisation of the
security SPV structure currently in process. Further information will be
published in due course.
Shareholders are furthermore referred to the SENS announcement on 10 September
2018 with regards to the acquisition of Thornhill Shopping Centre in Polokwane.
This acquisition is in line with Safari's growth strategy of expanding its
property portfolio through acquisitions of quality retail centres which will
fit into their existing specialised, high quality asset portfolio. Competition
Commission approval was received during September 2018 and Safari effectively
took over the management of the centre with effect from 1 October 2018.
Confirmation of registration of the transfer of the property is expected in
November 2018 and will be communicated via SENS.
A special general meeting of shareholders was held on 13 November 2018 where
all special resolutions were passed and shareholders are referred to the
SENS announcement dated 13 November 2018.
Board commentary
Profile
Safari Investments RSA Limited ("Safari"), with a total asset base of
R3,1 billion, is a retail-focused Real Estate Investment Trust ("REIT")
listed on the Johannesburg Stock Exchange Limited ("JSE") main board under
the property section.
Safari aims to invest in quality income-generating property and revenue
is generated through sustainable rental income. There were no significant
changes to the nature of the business during the financial period
under review.
Property portfolio
The property portfolio includes six established income-generating retail
centres, of which three are serving as regionals in their areas. These
include Denlyn in Mamelodi, Pretoria (43 450m2); Atlyn (41 200m2) and Mnandi
(10 550m2) in Atteridgeville, Pretoria; Thabong in Sebokeng, Johannesburg
(43 100m2); The Victorian in Heidelberg (15 400m2) and Platz am Meer in
Swakopmund, Namibia (29 500m2). Safari also owns a private day-hospital
(2 800m2) in Soweto with Advanced Health Limited as its tenant. Safari
invests in solar panels at several of its retail centres, including Denlyn,
Atlyn, Mnandi and Platz am Meer. During 2016 Safari also acquired six
properties situated in Lynnwood, Pretoria, with an aggregate land size
of 1,3 hectares which is held for future development. There are residential
units on some of these properties for which occupation rent is charged.
Safari owns four vacant stands adjacent to Thabong Shopping Centre in
Sebokeng for expansion possibilities.
Bulk reserve (retail and other): Thabong: ± 10 000m2
Platz am Meer: ± 10 000m2
Nkomo Village: ± 20 000m2
Lynnwood: ± 13 000m2
Letting activity
Safari's vacancy factor in its portfolio as at 30 September 2018 was 2%
(2017: 1%) of the total income-generating space. The average annual
rental escalation percentage for the period was 7% (2017: 8%).
At Mnandi we welcomed Kit Kat Cash & Carry in the current reporting period
and they are trading above expectation, enhancing the overall trading
of the centre.
At Sebokeng the Edgars store closed down due to Edcon restructuring.
Boxer Superstore opened for trading on 24 September 2018 in the Edgars
space. This is the first Boxer Superstore in the Johannesburg South
region and was exceptionally well received by the community. Their
performance for the first month of trade exceeded their expectations
and proved to be a valuable additional anchor for the Thabong
Shopping Centre.
At Denlyn McDonalds was secured and will open for trade before the 2018
festive season. In addition, Woolworths will open its first Mamelodi store
in Denlyn in quarter one 2019. These additions further strengthen Denlyn
as the preferred and dominant centre in Mamelodi.
Current projects
Nkomo Village Shopping Centre, Atteridgeville
The construction of Nkomo Village Shopping Centre is on schedule. The
centre will commence trading on 22 November 2018. The centre is anchored
by Pick n Pay and Boxer Superstore, and brings other national tenants such
as McDonalds, Builders Warehouse, Food Lovers Market, The Gym Company and
Roots Butchery to the Atteridgeville community for the first time. We look
forward to an exciting new addition to the property portfolio.
Financial performance
Headline earnings increased from R7,5 million to R88 million compared
with the same period for the previous year. The increase is mostly as a
result of the once-off IFRS 2 charge in the 2018 financial year.
Property revenue increased by 7% and distributable income increased
by 36% compared to the same period for the previous year.
Funding
Safari currently has a secured loan facility of R900 million of which
R250 million is ring-fenced in terms of the Absa guarantee provided on
the Southern Palace transaction. Currently the interest-bearing debt
represents 17% of the total value of property assets ("LTV") and the
cost of finance is at the prime lending rate less 1,05%.
Safari is in the process of setting up a security SPV and securing
additional funding. A hedging policy was adopted to be implemented on
all future funding. More information will be communicated to shareholders
once the process is finalised.
Credit rating
During September 2018 Safari received its fourth credit rating from Global
Credit Rating Co. ("GCR"):
- Normal long term BBB(ZA)
- National short term A2(ZA)
- Rating outlook Positive
Prospects
The Board is committed to maximising the rental income streams with the
proactive letting strategy focused on national tenants, and minimising the
operating expenditure through quality management within our property
portfolio. In Namibia the tough economic environment remains a concern as
business sentiment continues to deteriorate and the increased cost of living
places continued pressure on the general population. The Board has placed
a renewed focus on this asset and has made changes to the management
thereof to strengthen the management with proper due care for sustainable
long-term growth.
The Board will focus on opportunities in order to achieve sustainable
long-term, recurring distributable earnings.
Any forecast in the results has not been reviewed or reported on by
the independent external auditors and is the sole responsibility of
the Board.
By order of the Board
22 November 2018
Distribution statement
Six months Six months Audited
ended ended Year ended
30 September 30 September 31 March
2018 2017 2018
R'000 R'000 R'000
Revenue (including recoveries) 136 996 125 266 254 392
Lease smoothing effect (10 211) (4 018) (7 650)
Expenses (39 081) (32 582) (70 892)
Net interest (6 778) (32 815) (33 985)
Interest income 2 932 546 3 446
Interest expense (9 710) (33 361) (37 431)
Antecedent dividends - 3 634 31 360
Distributable earnings 80 926 59 485 173 225
Actual number of shares
sharing in dividend 311 136 016 211 632 986 311 185 616
Weighted number of shares in
issue 311 172 335 201 250 472 265 292 803
Distributable income per
share (cents) 26 30 65
Distribution per share from
capital reserves (cents) - 5 3
Total distribution per share (cents) 26 35 68
The weighted number of shares was used to calculate distributable income per
share. The reason for the reduced interim distributable income per share
compared to the September 2017 interim period is the share issue during 2018
where 119 552 633 shares were issued at R7,60 per share and the fact that
antecedent dividends resulting from the share issue were included in the
calculation of distributable income per share for the 2018 interim and final
distributions. The weaker than expected performance of the Platz Am Meer
shopping centre and the delay in the sale of the residential units at the
Platz Am Meer development in Swakopmund also limited the distributable income
per share for the six months ending 30 September 2018. Taking the current
economic climate in South Africa and Namibia into account, Safari decided
not to distribute from capital reserves as this will ensure long-term
sustainability and faster future growth of distributable income per share.
We forecast an increase of between 8% and 10% in the interim distributable
income per share for the period ending 30 September 2019. The forecast is
based on current long-term lease agreement escalations and the current
number of shares issued.
Interim dividend distribution declaration
Shareholders are advised that after careful consideration and adherence
to the solvency and liquidity requirements as stated in the Companies Act
71 of 2008, the Board of Directors of Safari has approved and declared a
gross cash interim dividend distribution of 26 cents per ordinary share
for the period ended 30 September 2018 to be paid during December 2018.
Shareholders will not be able to elect to reinvest the cash distribution
in return for ordinary shares. The distribution is based on revenue as
per the disclosed distribution statement and the Board's decision not
to distribute from capital reserves.
Salient dates and times
The following salient dates and times are applicable to the
interim distribution:
Last day to trade cum dividend distribution Tuesday, 11 December 2018
Shares trade ex-dividend distribution Wednesday, 12 December 2018
Record date Friday, 14 December 2018
Payment date Tuesday, 18 December 2018
Notes
Shares may not be dematerialised or rematerialised between the commencement
of trade on Wednesday, 12 December 2018 and the close of trade on Friday,
14 December 2018, both days inclusive.
In terms of REIT legislation, at least 75% of the distributable earnings
must be distributed in every financial year. The total distribution for
the financial year consists of this interim cash dividend distribution of
26 cents to be paid in December 2018 and a final cash dividend distribution
to be declared in June 2019.
Tax implications
In accordance with Safari's status as a Real Estate Investment Trust
("REIT"), shareholders are advised that the dividend meets the
requirements of a "qualifying distribution" for the purposes of section 25BB
of the Income Tax Act, No 58 of 1962 ("Income Tax Act").
The dividends on the shares will be deemed to be dividends for South
African tax purposes in terms of section 25BB of the Income Tax Act.
Tax implications for South African resident shareholders
If resident shareholders have not submitted the above-mentioned
documentation to confirm their status as South African residents,
they are advised to contact their CSDP, or broker, as the case may
be, to arrange for the documents to be submitted prior to the payment
of the dividend.
Tax implications for non-resident shareholders
Dividends received by non-resident shareholders from a REIT will not
be taxable as income and instead will be treated as ordinary dividends
which are exempt from income tax in terms of the general dividend
exemption in section 10(1)(k)(i) of the Income Tax Act. With effect from
1 January 2014, any dividend received by a non-resident from a REIT will
be subject to dividend tax at 20%, unless the rate is reduced in terms of
any applicable agreement for the avoidance of double taxation ("DTA")
between South Africa and the country of residence of the non-resident
shareholder. Assuming dividend tax will be withheld at a rate of 20%, the
net distribution amount due to non-resident shareholders is 20,8 cents
per share. A reduced dividend withholding rate in terms of the applicable
DTA may only be relied on if the non-resident shareholder has provided the
following forms to their CSDP or broker, as the case may be, in respect of
uncertificated shares, or the company, in respect of certificated shares:
- A declaration that the dividend is subject to a reduced rate as a result
of the application of a DTA; and
- A written undertaking to inform the CSDP, broker or the company, as the
case may be, should the circumstances affecting the reduced rate change
or the beneficial owner ceases to be the beneficial owner, both in the
form prescribed by the Commissioner for the South African Revenue
Service.
If applicable, non-resident shareholders are advised to contact the CSDP,
broker or the company, as the case may be, to arrange for the
abovementioned documents to be submitted prior to payment of the dividend
if such documents have not already been submitted.
Other information
The ordinary issued share capital of Safari is 311 136 016 ordinary
shares of no par value.
Pretoria
22 November 2018
Corporate information
Registered address and place of business
342 The Rand Street, Lynnwood, Pretoria 0081
Tel: +27 (0) 12 365 1889
Fax: +27 (0) 86 272 1313
Email: info@safari-investments.com
Website: www.safari-investments.com
Auditor
Deloitte & Touche Partner: J Van der Walt Riverwalk Office Park, Block B
41 Matroosberg Road, Ashlea Gardens, Pretoria 0081
Commercial banker
Absa Bank Limited
(Registration number: 1986/004794/06) Absa Towers East
170 Main Street, Johannesburg 2001
PO Box 7735, Johannesburg 2000
Group company secretary
Pieter van Niekerk LLB
342 The Rand Street, Lynnwood, Pretoria
Postal: 342 The Rand, Lynnwood Pretoria 0081
Corporate adviser
Fanus Kruger Consulting Proprietary Limited
(Registration number: 2015/324537/07)
67 Brink Street, Rustenburg 0299
Board of directors
FJJ Marais (Non-executive Chairman)
DC Engelbrecht (Chief Executive Officer)
WL Venter (Executive: Financial Director)
K Pashiou (Executive: Operations Director)
Dr JP Snyman (Independent Non-executive Director)
FN Khanyile (Independent Non-executive Director)
LL Letlape (Independent Non-executive Director)
Dr M Minnaar (Independent Non-executive Director)
CR Roberts (Independent Non-executive Director)
AE Wentzel (Lead Independent Non-executive Director)
Independent valuer
Mills Fitchet (Tvl) CC
(Registration number: CK 89/40464/23) No 17 Tudor Park,
61 Hillcrest Avenue Oerder Park, Randburg 2115
PO Box 35345, Northcliff 2115
Legal advisers
Weavind & Weavind Incorporated
Block E, Glenfield Office Park
361 Oberon Street, Faerie Glen
Pretoria 0081
Tel: +27 (0) 12 346 3098
Sponsor
PSG Capital Proprietary Limited
(Registration number: 1951/002280/06)
1st Floor, Ou Kollege Building
35 Kerk Street, Stellenbosch 7599
PO Box 7403, Stellenbosch 7599
Transfer secretaries Computershare Investor Services
Proprietary Limited
(Registration number: 2004/003647)
Rosebank Towers, 15 Biermann Avenue Rosebank 2196
PO Box 61051, Marshalltown 2107
Visit our investor relations link on our website for more information
and financial updates, profiles and news.
www.safari-investments.com/investor-relations/
Key contacts
If you are interested in investing with us or want more information
on our investment opportunities, contact:
Talana Smith
Investor relations officer
Tel: +27 (0) 12 365 1889
Email: talana@safari-retail.com
Willem Venter
Financial Director
Safari Investments RSA Limited
Tel: +27 (0) 12 365 1889
Email: willem@safari-investments.com
Date: 22/11/2018 09:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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