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Fortress short-form announcement for the year ended 30 June 2019
Fortress REIT Limited
Incorporated in the Republic of South Africa
Registration number: 2009/016487/06
JSE share code: FFA ISIN: ZAE000248498
JSE share code: FFB ISIN: ZAE000248506
Bond company code: FORI
("Fortress" or "the group" or "the company")
(Approved as a REIT by the JSE)
Fortress short-form announcement for the year ended 30 June 2019
2019 highlights
- Total shareholder returns of +48,7% per Fortress A share and -8,7% per
Fortress B share.
- Increase in net asset value of +1,4% from December 2018.
- Maintained LTV ratio at 32%.
- Exited non-core investments totalling R3,4 billion.
- Completed developments amounting to R1,4 billion.
- Repurchased R543 million of Fortress B shares.
- Conclusion of PwC report on historical property transactions and share
dealings.
- The unwinding of the Siyakha Trusts structure and concluding a new black
economic empowerment transaction.
- Successfully refinancing debt facilities and accessing the debt capital
markets at favourable rates.
Capital structure and nature of business
Fortress is a Real Estate Investment Trust ("REIT") with internal asset
management and two classes of listed shares offering investors different
risk and reward profiles. The Fortress A ordinary share (share code:
FFA, "FFA") has a preferential right to distribution of income and to
capital participation upon winding up, which is calculated as the 60-day
volume weighted average traded price on the JSE. The Fortress B ordinary
share (share code: FFB, "FFB") has entitlement to the residual distributable
income and capital participation upon winding up. Both share classes have
equal voting rights per share.
We are the largest owner and developer of core, premium-grade logistics real
estate in South Africa. We also own a retail portfolio of 61 commuter-oriented
shopping centres (including co-owned properties).
In addition to our property portfolio, we also have a 23,9% interest in NEPI
Rockcastle plc ("NEPI Rockcastle"), valued at R18,1 billion, and an effective
11,1% interest (excluding treasury shares) in Resilient REIT Limited ("Resilient"),
valued at R2,5 billion at 30 June 2019.
Summary of financial performance
Jun 2019 Jun 2018 % change
Dividend per share
- FFA (cents) 148,35 141,77 4,6
- FFB (cents) 155,50 179,00 (13,1)
International financial reporting standards ("IFRS") information
Jun 2019 Jun 2018 % change
Revenue from direct property
operations (R'000) 3 413 832 3 389 915 0,7
Total revenue (including revenue
from investments) (R'000) 3 628 427 3 633 404 (0,1)
Net asset value (R'million) 34 897 36 951 (5,6)
Net asset value per FFA share (Rand) 19,77 16,26 21,6
Net asset value per FFB share (Rand) 11,78 16,54 (28,8)
Basic earnings/(loss) per share
- FFA (cents) 116,83 (216,76) 153,9
Basic earnings/(loss) per share
- FFB (cents) 116,83 (216,76) 153,9
Headline earnings per share
- FFA (cents) 104,12 19,7 428,3
Headline earnings per share
- FFB (cents) 104,12 19,7 428,3
Management accounts information
Jun 2019 Jun 2018 % change
Loan-to-value ratio 32,2% 31,8% *
Net asset value (R'million) 35 673 36 951 (3,5)
Net asset value per FFA share (Rand) 19,77 16,26 21,6
Net asset value per FFB share (Rand) 11,80 16,54 (28,7)
Direct property portfolio
(completed buildings) (R'million) 26 341 26 190 0,6
Property under development (R'million) 3 827 4 013 (4,6)
Non-core direct property
disposals (R'million) 803 1 699 (52,7)
Listed equity portfolio 20 621 22 076 (6,6)
Vacancy based on GLA 7,2% 7,4% *
* % change not meaningful to disclose.
2019 final dividends declared
The board has approved, and notice is hereby given of final dividends of
73,62000 cents per FFA share and 78,01000 cents per FFB share for the six months
ended 30 June 2019. The dividends are payable to Fortress shareholders in
accordance with the timetable set out below:
Last date to trade cum dividend Monday, 23 September 2019
Shares trade ex dividend Wednesday, 25 September 2019
Record date Friday, 27 September 2019
Payment date Monday, 30 September 2019
Share certificates may not be dematerialised or rematerialised between Wednesday,
25 September 2019 and Friday, 27 September 2019, both days inclusive. In respect
of dematerialised shareholders, the dividend will be transferred to the CSDP
accounts/broker accounts on Monday, 30 September 2019. Certificated shareholders'
dividend payments will be deposited on or about Monday, 30 September 2019. An
announcement informing shareholders of the tax treatment of the dividends will
be released separately on SENS.
Prospects
The low-growth South African economy is set to continue on its current trajectory
in the medium term. The focus will continue to be on proactively managing the
vacancies in the portfolio and disposing of the non-core portfolio of assets. We
are actively seeking new opportunities for growth in order to provide shareholders
with superior returns on equity.
For the coming financial year we forecast the following:
- Total distributable income to increase by approximately 1%;
- Distribution on the FFA share to increase by the lower of CPI or 5% to
approximately 155,8 cents per share; and
- Distribution per FFB share of between 148 and 153 cents per share which is below
previous forecasts due to impairments of a total of R590 million taken on
development land at 30 June 2019 and the dividend methodology of capitalising
interest on developments at the lower of cost or fair value for distribution purposes.
The forecast for the year ending 30 June 2020 is based on the application of a
consistent distribution methodology and on the following assumptions:
Macroeconomic
- The macroeconomic environment will not deteriorate further;
- The current political landscape will not change dramatically; and
- South Africa's sovereign rating will remain investment grade (as rated
by Moody's) and the outlook will not deteriorate.
Fortress-specific
The aforementioned macroeconomic factors will also have an impact on the
assumptions below given the diversity of our portfolio:
- Contractual escalations and market-related renewals will be achieved with no
major change in vacancy rates;
- No major corporate failures will occur;
- Tenants will be able to absorb the recovery of rising utility costs
and municipal rates;
- Distributions from NEPI Rockcastle and Resilient will be in line with their
guidance communicated to the market; and
- There is no material adverse change in the value of our investment property
under development which includes our strategic land holdings.
This short-form announcement is only a summary of the information in the full
announcement and does not contain full or complete details of the financial results
that were published on SENS on 2 September 2019, and is the responsibility of
Fortress' board of directors. The information in this short-form announcement has
been extracted from the 2019 provisional audited summarised consolidated audited
financial statements, but has not itself been audited. Any investment decisions
should be based on consideration of the full announcement published on Fortress'
website:
https://cmsignition.co.za/download/files_1184/Fortressyearendresults30June2019.pdf
and available on the JSE's website at:
https://senspdf.jse.co.za/documents/2019/jse/isse/FFAE/ye2019.pdf
A copy of the full announcement is available for inspection during business hours
at the registered offices of Fortress or its sponsors, Java Capital and Nedbank
Limited, acting through its Corporate and Investment Banking Division. Such
inspection will be at no charge and investors may request a copy of Fortress'
2019 provisional audited summarised consolidated audited financial statements
from tamlyn@fortressfund.co.za.
By order of the board
Steven Brown Ian Vorster
Chief executive officer Chief financial officer
Johannesburg
2 September 2019
Fortress REIT Limited
Block C, Cullinan Place,
Cullinan Close, Morningside, 2196
(PO Box 138, Rivonia, 2128)
Date: 03/09/2019 07:05:00
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