The restructure at JSE-listed Resilient during a tumultuous 2018 has seen the Real Estate Investment Trust (Reit) report a decline in distribution for its half-year ending December 31 2018, which was released after markets closed on Friday.
Resilient, which is being investigated by the Financial Sector Conduct Authority (FSCA) on allegations of share-price manipulation and insider trading, declared a dividend per share (DPS) of 263.66 cents for the interim period. This was down by almost 43 cents compared to the corresponding period in 2017.
In its JSE Sens statement on Friday, Resilient noted that the dividend is not comparable to that of the prior interim period, as a result of the distribution of Fortress B shares to Resilient shareholders in May 2018. It added that, “as a consequence there is no inclusion of any income relating to this investment in the period under review”.
Resilient described the operational performance of its portfolio as “sound”. However, it also notes that if the effect of the Fortress B distribution in the comparative period is eliminated, then the dividend for it half-year to December 2018 only declined by 2.25%.
“Fortress B” refers to its long-time stake in JSE-listed Fortress Reit, which was part of the Resilient stable of companies, including Nepi Rockcastle and Greenbay (now renamed Lighthouse). The unbundling of its stake in Fortress came in the wake of questions by some industry analysts and fund managers regarding Resilient’s many cross holdings.
For its latest interims, the group also excluded interest income from its loans to BEE venture, the Siyakha Trust, which also involved Fortress and was questioned by industry commentators.
Resilient is set to host its investor presentation on its latest results in Johannesburg on Tuesday. Its dividends for the full year are also set to drop in line with its restructuring.
But, in its Sens statement, Resilient says with economic conditions in South Africa remaining challenging, distribution is forecast to be between 530 cents and 550 cents per share for its full 2019 financial year. Resilient’s total dividend for its 2018 financial year came in at 565.44 cents per share.
Resilient, which focuses on dominant regional shopping centres largely in secondary nodes around South Africa, owns 28 retail centres with a total gross lettable area of 1.17 million square metres. Vacancies in its portfolio came in at just 1.8% for the interim period, while 4.7% in sales growth was achieved. The group’s loan-to-value (LTV) ratio was a low 25.7% at the close of its half-year.
Commenting on the results, Ahmed Motara, a portfolio manager and analyst at Stanlib, says while Resilient had a tumultuous year with regards to corporate governance last year, operationally it delivered a good performance amid tough local conditions.
“Operationally, this is one of the better results in the retail property sector. Yes Resilient did deliver lower DPS, but a big chuck of Fortress was taken out of its distributions. The restructure last year will also be felt in its full year results, with lower DPS anticipated. However, it’s not unreasonable to expect DPS to grow again next year by even 5%, as the group have one of the best retail portfolios,” he adds.
Motara says: “The unknown is Edcon, not just for Resilient but the whole retail property sector. It also remains to be seen what will come out of the FSCA investigation into Resilient, but I believe it has already been priced in. Resilient’s shares lost 54% of its value last year, but is up around 7% this year to date.”
Nesi Chetty, head of Property Investments at Momentum, says: “Resilient probably has the strongest balance sheet in the market now, with a very low LTV around 25%… The organic operational performance of the business was good. They are still dominating portions of the lower end retail market.”
He adds: “One must remember that in its latest results, it is not a like-for-like DPS comparison to the previous half year. There were two events that they stripped out from the base. DPS was down because of the non-inclusion of distribution from Fortress, which was unbundled. In addition, the group did not recognise the interest on Siyakha due to the restructure.”
Resilient’s share price rout last year saw more than R100 billion being wiped off the value of the group and its related companies. It also resulted in the FTSE/JSE South African Property Index sliding more than 25% in the sector’s worst performance in almost two decades.
In its Sens results statement Resilient’s Board reiterated “it has done everything reasonable within its power to investigate allegations of wrongdoing by the company, its employees and directors”.
It notes further: “To date, no allegations have been substantiated by third parties and our own independent investigations have not revealed any wrongdoing on the part of the company, its employees and directors… We will continue to assist and support the FSCA and look forward to the swift conclusion of their investigation.”