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Unaudited consolidated interim results for the six months ended 30 June 2023 and changes to the Board
Resilient Reit Limited
Incorporated in the Republic of South Africa
Registration number: 2002/016851/06
JSE share code: RES ISIN: ZAE000209557
Bond code: BIRPIF
LEI: 378900F37FF47D486C58
(Approved as a REIT by the JSE)
("Resilient" or "the Company" or "the Group")
www.resilient.co.za
Unaudited consolidated interim results for the six months ended 30 June 2023
and changes to the Board
Nature of the business
Resilient is a retail-focused Real Estate Investment Trust ("REIT") listed
on the JSE Limited ("JSE"). Its strategy is to invest in dominant retail
centres with a minimum of three anchor tenants and let predominantly to
national retailers. A core competency is its strong development skills
which support new developments and the reconfiguration of existing malls to
adapt to structural changes in the market. Resilient also invests directly and
indirectly in offshore property assets.
The Company's focus is on regions with strong growth fundamentals. Resilient
generally has the dominant offering in its target markets with strong grocery
and flagship fashion offerings.
Distributable earnings and dividend declared
The Board has declared a dividend of 203,22 cents per share for the six
months ended June 2023. This interim dividend is in line with the dividend
of 203,98 cents per share for 2H2022 but below the 234,05 cents per share
for 1H2022. The main reasons for the decline in distributable earnings are
higher interest rates as well as lower distributions from investee companies.
It is Resilient's policy to acquire interest rate caps "at market".
Distributable earnings were negatively impacted where long-standing interest
rate caps did not provide full protection. Interest rates have
increased by 475 basis points since January 2022. All but one interest rate
cap are currently providing protection against the higher interest rates.
Hammerson did not declare a dividend in respect of 2H2022 and its dividend
in respect of 1H2023 was based on a payout ratio of 65% of its adjusted
earnings. This is below industry best practice of at least 85% and impacted
Resilient's distribution on its holding as well as through its investment
in Lighthouse.
Commentary on results
South Africa
This interim period has been characterised by continued loadshedding and
the acceleration of initiatives to deal with this challenge. Resilient
continues to emphasise keeping malls and tenants open for trade through
periods of loadshedding. Growth in comparable sales has improved from the
2,9% reported for the four months to April to 3,6% for the six months ended
June 2023. Foot traffic during this interim period increased by 6,3%. On a
rolling 12-month basis, comparable sales increased by 6,4% till June 2023.
The South African property portfolio recorded comparable net property
income ("NPI") growth of 5,8% for the reporting period. NPI was impacted by
Resilient's pro rata share of the unrecoverable cost of diesel and generator
servicing costs of R9,1 million and R2,2 million, respectively (1H2022:
R1,4 million and R0,5 million, respectively).
Tenants remaining in occupation renewed expiring leases at rentals on average
5,1% higher than under the expired leases. Leases concluded with new tenants
were on average 30,8% higher than the rentals of the outgoing
tenants. In total, rentals for renewals and new leases increased on average
by 9,6%.
Resilient owns 27 retail centres with a gross lettable area of 1,2 million
square metres. Resilient's pro rata share of the vacancy in the portfolio was
1,9% at June 2023. This includes vacancies created to facilitate the
introduction of new tenants at Tzaneng Mall and Jabulani Mall.
France
Resilient owns a 40% interest in Retail Property Investments SAS ("RPI") in
partnership with Lighthouse. RPI is the owner of four regional malls in France.
France has been negatively affected by tenant failures and receiverships
accelerated by the state ceasing its COVID-19 related financial support. A
number of national tenants did not recover from COVID-19. Most of these
businesses had private equity capital structures. Administrative procedures in
France are challenging resulting in delays of up to 12 months to recover
the space from failing tenants. Good progress has been made with reletting
this space to international retailers. The full year impact of the tenant
failures and administrative delays is forecast to be approximately
EUR0,5 million (Resilient's share) for 2023.
The acquisition of the land immediately surrounding Rivetoile has been
finalised. This land will facilitate the expansion of the ground floor and
improve the access and flow of the mall. The project is scheduled to commence
in 3Q2023 with completion in 2Q2024.
Property valuations
Resilient's full property portfolio is subject to an independent external
valuation annually at year-end. In order to accommodate minority shareholders,
Arbour Crossing, Galleria Mall and Tzaneen Lifestyle Centre were valued by
Quadrant Properties Proprietary Limited at June 2023. Resilient's share of the
positive revaluation of these malls was R49,4 million (+2,1%). Following the
elections in Nigeria, a new President took office and substantial economic
changes, including the abolition of a petrol subsidy and the parallel exchange
rate, were introduced. These changes have had a significant negative impact on
the Nigerian economy and exchange rates. As a result, the Board requested an
updated valuation. This valuation, performed by CBRE Excellerate, resulted
in a devaluation of the Nigerian assets by USD12,9 million (Resilient's share).
Energy projects
Since the first solar installation at The Grove Mall in 2016, the Board has
been concerned about the substantial challenges in the cost and supply of
electricity. Resilient has been an industry leader in solar and battery
installations and has been proactive in ensuring uninterrupted trading during
periods of loadshedding. In partnership with its tenants, Resilient has
installed 167 in-store battery systems to date. In addition, several tenants
have been connected to reliable backup generators.
The local authorities have been slow in implementing the amended regulations
relating to solar installations announced by the President.
Approvals have, however, recently been received from the Mbombela Local
Authority to expand the solar installation at I'langa Mall from 1,37MWp to
4,37MWp and from the Madibeng Municipality for the increase of the
installation at Brits Mall from 1,44MWp to 3,94MWp. Approval has also been
received from the National Energy Regulator of South Africa to expand the solar
installations at Galleria Mall and Arbour Crossing from 1,45MWp to
5,98MWp and 1,43MWp to 2,98MWp, respectively. Tshwane Municipality
continues to delay approvals affecting the planned additional installations
at Mams Mall, The Grove Mall and Soshanguve Crossing.
In the current period, the largest rooftop solar installation in
South Africa, being the 6,81MWp installation at Boardwalk Inkwazi and the
1,03MWp installation at Tzaneen Crossing were completed. In addition,
the installed capacity at Mall of the North and The Crossing Mokopane was
expanded from 1,33MWp to 5,23MWp and 1,17MWp to 2,03MWp, respectively. The
current installed capacity of 45,8MWp will increase to 59,3MWp by the end
of December 2023.
Resilient has trialled different batteries for an extended period to determine
the most effective systems for the Group's requirements. The Board has approved
the expansion of the battery system at The Grove Mall from 1,35MWh to 6,0MWh
and at Irene Village Mall from 0,75MWh to 4,0MWh. Battery installations for
Boardwalk Inkwazi, Mall of the North, Diamond Pavilion, Kathu Village Mall,
Highveld Mall and I'langa Mall are being evaluated.
The roll-out of solar installations and batteries is central to Resilient's
strategy of managing operating costs which will ensure the competitiveness of
its malls and benefit its tenants. Although battery installations are
capital-intensive, the benefits are compelling. These benefits include
arbitrage, peak-shaving and loadshedding mitigation. Arbitrage includes
utilising grid power to charge batteries during low-cost, off-peak periods and
discharging this power during high cost, peak periods. Peak-shaving reduces the
demand from the grid during peak periods which also attract the highest rates.
Sufficient battery capacity will allow the continued use of solar power during
periods of loadshedding.
Solar energy has a substantial positive impact on the achievement of
Resilient's ESG. Based on Resilient's pro rata ownership, 20,4% of its
electricity consumption was produced from solar installations during the month
of June 2023. This is on schedule to increase to 27,7% by year-end.
To date, Resilient has invested R564 million in solar and battery installations
with a further R463 million approved and included in capital commitments.
Listed portfolio
While Hammerson's results were well received by the market, the Board's
priority remains focused on Resilient's energy initiatives and funding its
capital commitments while retaining conservative leverage.
Resilient's 200 268 486 Hammerson shares had an average cost of R3,73 per
share. During the reporting period, 58 568 486 Hammerson shares were sold at an
average price of R6,08 per share raising proceeds of R356 million. A further
103 863 163 Hammerson shares were sold for R626 million (average price of
R6,03 per share) after the reporting period.
Financial performance
Unaudited Restated
for the for the
six months six months
ended ended
Jun 2023 Jun 2022 Movement
IFRS information
Total revenue (R'000) 1 765 778 1 621 321 144 457
Basic earnings per
share (cents) 232,08 499,78 (267,70)
Diluted earnings per
share (cents) 231,18 497,94 (266,76)
Headline earnings per
share (cents) 276,13 225,47 50,66
Diluted headline earnings
per share (cents) 275,06 224,64 50,42
Dividend (cents per share) 203,22 234,05 (30,83)
Net asset value per share (R) 59,95 54,16 5,79
Management accounts information
Net asset value per share (R) 62,81 58,23 4,58
Loan-to-value ratio
("LTV") (%)* 36,1 32,1 4,0
Gross property expense ratio (%) 38,1 35,0 3,1
Percentage of direct and
indirect property assets
offshore (%) 24,0 21,3 2,7
* The LTV ratio is 34,9% taking into account the proceeds of R626 million
from the disposal of Hammerson shares since the reporting date.
Changes to the Board
Des de Beer has advised the Board of his intention to formally retire as
chief executive officer at the end of 2023. Des will remain on the Board as
a non-independent non-executive director thereafter. Johann Kriek has been
appointed by the Board as the CEO elect.
With effect from 15 August 2023, Barry Stuhler has been appointed to the Board
as a non-independent non-executive director. Barry is well-known to the South
African investment market as former CEO of Property Fund Managers Limited, the
asset manager of Capital Property Fund, and Pangbourne Properties Limited.
Barry brings extensive property experience to the Board. The appointments have
been made in accordance with Resilient?s Nomination Policy.
Prospects
There are numerous uncertainties in the current economic environment
including the cost of electricity (including diesel usage), varying levels
of loadshedding, inflation and dividends from investee companies. Based on
Resilient's current assumptions, the Board forecasts that the dividend for
FY2023 will be approximately R4,00 per share. This is based on the assumptions
that there is no further deterioration of the macroeconomic environment, that
no major corporate failures will occur and that tenants will be able to absorb
the rising utility costs and municipal rates. This forecast and prospects
have not been audited, reviewed or reported on by Resilient's auditor.
Payment of interim dividend
The Board has approved and notice is hereby given of an interim dividend of
203,22000 cents per share for the six months ended 30 June 2023.
The dividend is payable to Resilient shareholders in accordance with the
timetable set out below:
Last date to trade cum dividend Tuesday, 5 September 2023
Shares trade ex dividend Wednesday, 6 September 2023
Record date Friday, 8 September 2023
Payment date Monday, 11 September 2023
Share certificates may not be dematerialised or rematerialised between
Wednesday, 6 September 2023 and Friday, 8 September 2023, both days inclusive.
In respect of dematerialised shareholders, the dividend will be transferred to
the Central Securities Depository Participant accounts/broker accounts
on Monday, 11 September 2023. Certificated shareholders' dividend payments will
be posted on or about Monday, 11 September 2023.
Dividend tax treatment
In accordance with Resilient's status as a REIT, shareholders are advised
that the dividend of 203,22000 cents per share for the six months ended
30 June 2023 ("the dividend") meets the requirements of a "qualifying
distribution" for the purposes of section 25BB of the Income Tax Act, 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 provide 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 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 above-mentioned 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 distribution 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 shareholder.
Assuming dividend withholding tax will be withheld at a rate of 20%, the
net dividend amount due to non-resident shareholders is 162,57600 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) 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 ceases 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 above-mentioned 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 this dividend: 365 204 738
Resilient's income tax reference number: 9579269144
This short-form announcement is the responsibility of the directors and is only
a summary of the information in the full announcement and does not include full
or complete details. The information regarding the tax treatment of the
dividend is included in the full announcement. The full announcement has been
released on SENS and is available on the JSE website at
https://senspdf.jse.co.za/documents/2023/JSE/isse/RESE/HYJun23.pdf,
and on the Company's website at https://www.resilient.co.za/financials. The
full announcement is available for inspection at the registered offices
of the Company or its sponsor or through a secure electronic manner at the
election of the person requesting inspection, at no charge, during office
hours. Any investment decision should be based on the full announcement
available on the Company's website.
By order of the Board
Des de Beer Monica Muller
Chief executive officer Chief financial officer
Johannesburg
15 August 2023
Directors
Alan Olivier (chairman); Stuart Bird; Des de Beer*; Des Gordon;
Johann Kriek*; Dawn Marole; Monica Muller*; Protas Phili; Thando Sishuba;
Barry van Wyk
* Executive director.
Company secretary
Hluke Mthombeni CA(SA)
Registered address
4th Floor, Rivonia Village, Rivonia Boulevard, Rivonia, 2191
Transfer secretaries
JSE Investor Services Proprietary Limited
5th Floor, One Exchange Square, Gwen Lane, Sandown, 2196
Sponsor
Java Capital Trustees and Sponsors Proprietary Limited, 6th Floor,
1 Park Lane, Wierda Valley, Sandton, 2196
Debt sponsor
Rand Merchant Bank (a division of FirstRand Bank Limited)
1 Merchant Place, corner of Fredman Drive and Rivonia Road, Sandton, 2196
Date: 15-08-2023 05:15:00
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