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Audited consolidated annual financial statements, cash dividend and outlook for the 12 months ended 29 February 2024
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")
AUDITED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS, CASH DIVIDEND
AND OUTLOOK FOR THE 12 MONTHS ENDED 29 FEBRUARY 2024
AT A GLANCE
REVENUE increased to R130,9 million (UP 3,3%)
FUNDS FROM OPERATIONS increased to R81,1 million (UP 20,70%)
TOTAL DIVIDEND increased to 70,37 cents per share (UP 4,73%)
NET ASSET VALUE PER SHARE decreased to R6,03 (DOWN 32,47%)
LOAN-TO-VALUE RATIO deteriorated to 41,4% (UP from 30,9%)
HEADLINE EARNINGS PER SHARE decreased to 52,40 cents (DOWN 19,11%)
EARNINGS PER SHARE decreased to a loss per share of 222,28 cents
(DOWN 270,13%)
NATURE OF BUSINESS
Newpark is a property holding and investment company that holds
high-quality commercial and industrial properties.
INVESTMENT STRATEGY
Newpark's investment strategy is to seek well-located prime
commercial, industrial and retail properties in South Africa,
which provide a high-quality, sustainable earnings base with the
potential for capital appreciation within the medium to long-term.
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 533m2 of gross lettable area ("GLA") and an adjoining
mixed-use property known as 24 Central, which has 16 526m2 of GLA.
A further property is situated in Linbro Business Park, which has
13 713m2 of GLA and the fourth property is situated in Crown Mines
and has 11 277m2 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 29 February 2024 was R1,12 billion.
COMMENTARY ON RESULTS
Newpark has a loan-to-value ratio of 41,1% (F2023: 30,9%) The
loan-to-value ratio was negatively impacted, primarily by a
reduction in the value of the JSE property.
The positive impact of the capital investment and extended lease
at the Linbro Park property were off-set by the change in
valuation of the other properties with the overall result being a
fair value decrease of R274,7 million (19,9%) relative to the
value of the assets in the previous year. It is noted that the
board had determined to rotate valuers and appointed Broll
Valuation and Advisory Services (Pty) Ltd to undertake the
valuations for the current financial year.
Revenue for the financial year ended 29 February 2024 ("the
financial year") was R130,9 million (F2023: R126,7 million), up
3,3%. Operating profit before fair value adjustments was R96,9
million (F2023: R88,6 million), up 9,5% (F2023: up 14,6%). After
allowing for fair value adjustments and the net cost of finance,
the total comprehensive loss for the financial year was R222,3
million (F2023: profit R130,7 million), down 270,1% (F2023: up
386,0%), representing negative earnings of 222,28 cents per share
("cps") (F2023: positive 130,65cps).
Rental escalations, operating cost efficiencies and improved
debtor recoveries resulted in cash generated from operations for
the financial year increasing by 31,1% from R95,7 million to
R125,5 million.
The board declared a final cash dividend of 35,37 cps (F2023:
42,19 cps). The total dividend for the financial year is 70,37 cps
(F2023: 67,19 cps), representing 86,8% of funds from operations
("FFO"), and an increase of 4,72% over the 67,19 cps declared in
respect of the prior year (F2023: 100,0% of FFO).
FUNDING
Funding from the revolving credit facility was utilised during the
year to finance capital costs for extensions and solar power
installations at the Linbro Park and at 24 Central properties,
which resulted in greater lettable areas and enhanced income
levels at both properties. The board has decided to retain a
portion of FFO generated during the year to fund a portion of the
capital expenditure.
The increased borrowings arising from capital expenditure coupled
with the decrease in property valuations resulted in an increase
in the Secured Properties Loan-to-Value ratio to 42,5% at year-
end. Whilst the ratio is above the requirement of 40,0% in terms
of the group's debt agreements, Newpark's lender has agreed to
condone the ratio excess to 31 August 2024, at which date the loan
terms will be subject to a further review. All other debt
covenants have been met.
Newpark's hedged borrowings are contracted at an average interest
rate of 6,52% per annum before banker's average margin of 1,99%,
with 60,1% of Newpark's borrowings hedged at year-end. The hedges
will mature in June 2024 and November 2024 and Newpark will
replace these hedges during the course of the year to ensure that
the exposure to interest rate risk is limited appropriately.
OUTLOOK
Newpark will continue to focus on the management of its existing
assets with the lease renewal of the JSE property lease a key
management priority. 43% of leases by GLA are due to expire in
2026 and 2027, of which the JSE property lease comprises 31%.
The group will remain alert to any potential acquisitions that are
in keeping with its stated investment strategy.
The group is budgeting FFOPS for the year ending 28 February 2025
to be between 50,00 and 60,11 cents per share, being a decrease of
between 25,9% and 38,4% of FFOPS for the financial year of 81,11
cents. The forecast FFOPS takes into account the impact of a
budgeted negative rental reversion on renewal of the JSE property
lease.
The dividend per share for the year ended 28 February 2025 is
budgeted to be in line with the FFOPS for that year.
The forecast is based on the assumption that no further
deterioration in the macro-economic environment will prevail, no
material tenant default will occur,the lease of the major office
tenant is renewed during the year, operating cost increases will
not exceed inflation and no changes will be made to the property
portfolio. This forecast has not been audited, reviewed or
reported on by Newpark's auditor.
CASH DIVIDEND DECLARATION
The board has approved and notice is hereby given of the final
gross dividend of 35,36890 cents per share for the year ended
29 February 2024.
The dividend is payable to Newpark's shareholders in accordance
with the timetable set out below:
2024
Last date to trade cum dividend Tuesday, 4 June
Shares trade ex dividend Wednesday, 5 June
Record date Friday, 7 June
Payment date Monday, 10 June
Share certificates may not be dematerialised or rematerialised
between Wednesday, 5 June 2024 and Friday, 7 June 2024, both days
inclusive.
The dividend will be transferred to dematerialised shareholders'
CSDP accounts/broker accounts on Monday, 10 June 2024.
Certificated shareholders' dividend payments will be paid to
certificated shareholders' bank accounts on or about Monday,
10 June 2024.
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 ceases
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 28,2951 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.
The audited consolidated annual financial statements for the 12
months ended 29 February 2024 including the audit opinion of the
external auditor, BDO South Africa Incorporated, which set out the
key audit matters and the basis for its unmodified opinion, are
available on the company's website on
http://www.newpark.co.za/pdf/annual_reports/FY2024AFS.pdf.
By order of the board
16 May 2024
This results announcement is the responsibility of the directors
and is only a summary of information in the audited consolidated
annual financial statements for the 12 months ended 29 February
2024 ("2024 AFS") and does not contain full or complete details.
Any investment decisions by investors and/or shareholders should
be based on the 2024 AFS which is available on
https://senspdf.jse.co.za/documents/2024/jse/isse/NRLE/YEres24.pdf
and published on the company's website on
http://www.newpark.co.za/pdf/annual_reports/FY2024AFS.pdf
on 17 May 2024.
DIRECTORS:
S Shaw-Taylor (Chairperson) **, AF Benatar (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 of publication: 17 May 2024
Sponsor
Java Capital
Date: 17-05-2024 02:00:00
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