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Summarised audited consolidated financial statements and cash dividend for the 12 months ended 28 February 2022
NEWPARK REIT LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2015/436550/06)
JSE share code: NRL
ISIN: ZAE000212783
(Approved as a REIT by JSE)
(“Newpark” or “the company” or “the group”)
SHORT-FORM ANNOUNCEMENT:
SUMMARISED AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND CASH
DIVIDEND DECLARATION
for the 12 months ended 28 February 2022
AT A GLANCE
REVENUE decreased to R110,0 million (DOWN 1,6%)
FUNDS FROM OPERATIONS increased to R46,6 million (UP 16,8%)
TOTAL DIVIDEND increased to 46,91 cents per share (UP 17,63%)
NET ASSET VALUE PER SHARE decreased to R8,45 (DOWN 4,5%)
LOAN-TO-VALUE RATIO improved to 33,6% (UP from 34,6%)
HEADLINE EARNINGS PER SHARE increased to 51,20 cents (UP 116,9%)
EARNINGS PER SHARE increased to 26,88 cents (UP 57,3%)
NATURE OF BUSINESS
Newpark is a property holding and investment company that holds
high-quality commercial and industrial properties.
INVESTMENT STRATEGY
Whilst Newpark’s mandate is relatively broad, the focus remains on
securing property assets that deliver strong underlying cash
flows. Three of Newpark’s four assets are buildings that are let
to single tenants of good credit quality on secure leases. This
provides a high degree of stability to Newpark’s cash flows,
whilst the remaining asset allows for upside potential via asset
management activities. The intention is to continue with the
current portfolio of stable, income producing properties and to
supplement it with some additional assets that offer value.
PROPERTY PORTFOLIO
Newpark’s property portfolio consists of four properties. Two are
located in the heart of Sandton, Gauteng, namely the JSE Building
which has 18 163 m² of gross lettable area (“GLA”) and an
adjoining mixed-use property known as 24 Central, which has 15 641
m² of GLA. A further property is situated in Linbro Business Park
which has 12 387 m² of GLA and the fourth property is situated in
Crown Mines and has 11 277 m² of GLA. The combined valuations of
these properties, prepared by the registered property valuer, are
performed annually at the group’s year-end. The latest valuation
as at 28 February 2022 was R1,33 billion.
COMMENTARY ON RESULTS
The company’s board of directors (“board”) is pleased to present
the group’s results for the year under review.
Newpark’s vision is to build a portfolio of high-quality property
assets that is capable of withstanding economic stress, and yet is
able to offer attractive returns from both a capital and income
perspective. The solid underpin provided by a combination of
assets that have sound property fundamentals and a high-quality
tenant mix, has proven its worth amidst very difficult operating
conditions. Focus on growing the portfolio over the past two years
has been secondary to management of the existing assets, and
whilst potential acquisitions were considered, Newpark was unable
to find the value that it required in order to execute on any
transactions.
Newpark’s balance sheet continues to remain financially healthy
with a satisfactory gearing level with a loan-to-value ratio of
33,6% (F2021: 34,6%).
The challenging economic environment coupled with the outlook on
future rental rates, continues to impact valuations, particularly
in the office and retail space, and has resulted in a net
decrease in fair value of the portfolio of R24 million at
28 February 2022.
Largely as a result of active asset management on the retail
component of 24 Central, the group’s vacancies decreased during
the period to 10,6% (F2021: 13,5%).
Other than the replacement of certain tenants that ceased trading
in the mixed-use segment, the tenant profile has remained largely
the same with the majority of the tenants (72%) in the portfolio
having leases that are renewable in 2025 and 2026.
Revenue for the financial year ended 28 February 2022 (“the
financial year”) was R110,0 million (F2021: R111, 8 million), down
1,6%. Operating profit before fair value adjustments was R77,3
million (F2021: R82,9 million), down 6,8% (F2021: down 7,0%).
After allowing for fair value adjustments and the net cost of
finance, the total comprehensive profit for the financial year was
R26,88 million (F2021: R17,09 million), up 57,3% (F2021: up
40,5%), representing earnings of 26,884 cents per share (“cps”)
(F2021: 17,089 cps). The total dividend for the financial year is
46,91 cps (F2021: 39,88 cps), 17,63% over the 39,88 cps declared
in the prior year.
Cash generated from operations for the financial year increased by
18,22% from R80,4 million to R95,1 million, mainly as a result of
rental escalation, reduced vacancies and reduced impact of COVID-
19 on operations.
OUTLOOK
Newpark will continue to focus on the management of its existing
assets and will remain alert to any potential acquisitions that
are in keeping with the stated strategy. The group is well-
positioned to capitalise on opportunities that are likely to
present themselves in a suppressed real estate market.
The group is budgeting for growth in funds from operations per
share (“FFOPS”) for the year ending 28 February 2023 of in excess
of 15%, being at least 53,61 cps compared to the FFOPS for the
year ended 28 February 2022 of 46,63 cps. A corresponding increase
in the dividend per share for the year ending 28 February 2023 is
budgeted.
The forecast is based on the assumption that no further
deterioration in the macro-economic environment will prevail, no
material tenant default will occur, operating cost increases will
not exceed inflation and no changes will be made to the property
portfolio. This forecast has not been audited or reviewed by the
company’s auditors.
FUNDING
A refinance of Newpark’s facilities was carried out in February
2021, aligning the funding to the underlying investment profile.
For the financial year ended 2022, 80% of the interest rate risk
had been hedged with interest rate swaps expiring between 2022 and
2024, with the balance of the interest rate risk being hedged
through a zero-cost collar. This strategy has limited Newpark’s
ability to immediately benefit from the unforeseen decrease in
interest rates brought about by the deterioration in economic
conditions as a consequence of the COVID-19 pandemic. From 1 June
2022 for the next 24 months, 65% of Newpark’s borrowings will be
hedged at an average rate of 6,52% per annum before banker’s
margin. The board has noted that this is below the previously
stated target of 70%, but after considering Newpark’s relatively
low gearing ratio of 34% and the current unfavourable hedging
environment, the board is comfortable with the current level of
hedging and will continue to monitor the position.
CHANGES TO THE BOARD OF DIRECTORS
During the year we said farewell to Howard Turner who retired as
an independent non-executive director and chairman of the Audit
and Risk and Social and Ethics Committees on 24 November 2021, and
Dries Ferreira who resigned as the financial director with effect
from 10 January 2022 in order to pursue a new opportunity. Howard
and Dries both provided valuable input in their roles over a
number of years and we wish them well for the future.
Roy Campbell (appointed 25 November 2021) and Alan Wilson
(appointed 1 January 2022) joined the board to replace Howard and
Dries, respectively, and we look forward to benefitting from the
insights that they bring with their experience.
CASH DIVIDEND DECLARATION
The board has approved and notice is hereby given of the final
gross cash dividend of 25,24943 cents per share for the year ended
28 February 2022.
The dividend is payable to Newpark’s shareholders in accordance
with the timetable set out below:
2022
Last date to trade cum dividend Tuesday, 7 June
Shares trade ex dividend Wednesday, 8 June
Record date Friday, 10 June
Payment date Monday, 13 June
Share certificates may not be dematerialised or rematerialised
between Wednesday, 8 June 2022 and Friday, 10 June 2022, both days
inclusive.
The dividend will be transferred to dematerialised shareholders’
CSDP accounts/broker accounts on Monday, 13 June 2022.
Certificated shareholders’ dividend payments will be paid to
certificated shareholders’ bank accounts on or about Monday,
13 June 2022.
In accordance with Newpark’s status as a 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 dividend will be
deemed to be a dividend for South African tax purposes, in terms
of section 25BB of the Income Tax Act.
The dividend received by or accrued to South African tax residents
must be included in the gross income of such shareholders and will
not be exempt from income tax (in terms of the exclusion to the
general dividend exemption, contained in paragraph (aa) of section
10(1)(k)(i) of the Income Tax Act) because it is a dividend
distributed by a REIT. This dividend is, however, exempt from
dividend withholding tax in the hands of South African tax
resident shareholders, provided that the South African resident
shareholders submitted the following forms to their Central
Securities Depository Participant (“CSDP”) or broker, as the case
may be, in respect of uncertificated shares, or the company, in
respect of certificated shares:
a) a declaration that the dividend is exempt from dividends tax;
and
b) a written undertaking to inform the CSDP, broker or the
company, as the case may be, should the circumstances
affecting the exemption change or the beneficial owner cease
to be the beneficial owner,
both in the form prescribed by the Commissioner for the South
African Revenue Service. Shareholders are advised to contact their
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.
Dividends received by non-resident shareholders will not be
taxable as income and instead will be treated as an ordinary
dividend which is exempt from income tax in terms of the general
dividend exemption in section 10(1)(k)(i) of the Income Tax Act.
Any dividends received by a non-resident from a REIT will be
subject to dividend withholding 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 shareholders. Assuming dividend withholding tax
will be withheld at a rate of 20%, the net dividend amount due to
non-resident shareholders is 20,19954 cents per share. A reduced
dividend withholding rate in terms of the applicable DTA, may only
be relied upon if the non-resident shareholder, has submitted 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) a declaration that the dividend is subject to a reduced rate
as a result of the application of a DTA; and
b) a written undertaking to inform their CSDP, broker or the
company, as the case may be, should the circumstances
affecting the reduced rate change or the beneficial owner
cease to be the beneficial owner,
both in the form prescribed by the Commissioner for the South
African Revenue Service. Non-resident shareholders are advised to
contact their 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, if applicable.
Shares in issue at the date of declaration of dividend:
100 000 001.
Newpark’s income tax reference number: 9114003149.
By order of the board
18 May 2022
The above announcement is a summary of information in the full
announcement and does not contain full or complete details and is
the responsibility of the directors. Any investment decisions by
investors and/or shareholders should be based on the full
announcement which is available on
https://senspdf.jse.co.za/documents/2022/jse/isse/NRLE/YE22.pdf
and published on the company’s website on
http://www.newpark.co.za/pdf/annual_reports/FY2022FYRA.pdf
on 18 May 2022. The full announcement is also available at the
company’s registered office (51 West Street, Houghton, Gauteng,
2198) for inspection, at no charge, during office hours on any
business day at the registered offices of the company and at the
offices of the designated advisor, Java Capital (6th Floor,
1 Park Lane, Wierda Valley, Sandton, 2196). Copies of the full
announcement may be requested by email to info@newpark.co.za.
The annual financial statements including the audit opinion of the
external auditor, BDO South Africa Incorporated, is available on
the company’s website on
http://www.newpark.co.za/pdf/annual_reports/FY2022AFS.pdf.
The valuation of investment properties was noted as a key audit
matter. An unmodified audit opinion has been issued on the audited
consolidated financial statements for the financial year ended
28 February 2022.
NEWPARK REIT LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2015/436550/06)
JSE share code: NRL
ISIN: ZAE000212783
(Approved as a REIT by JSE)
(“Newpark” or “the company” or “the group”)
DIRECTORS:
S Shaw-Taylor (Chairperson) **, SP Fifield (Chief Executive
Officer), AJ Wilson (Financial Director), DT Hirschowitz *,
KM Ellerine *, BD van Wyk *, RC Campbell **, TS Sishuba **
* Non-executive director
** Independent non-executive director
Date: 18-05-2022 08:00:00
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