The Company, which is differentiated from traditional Real Estate Investment Trusts (REITs) focusses on delivering superior net asset value (NAV) growth mainly by enhancing existing properties and completing value accretive developments. For the six months under review, Acsion achieved net asset value (NAV) growth excluding deferred tax, of 18% on the prior year period, representing R13.91 per share
Pieter Scholtz, Chief Financial Officer commented: “We are encouraged by these excellent results, achieved in tough economic times.
“Our performance is underpinned by a resilient portfolio as well as our ongoing diligence when it comes to asset management fundamentals. The team successfully negotiated an average 7.8% increase in rental escalations, launched phase III at Mall@Carnival - our flagship asset - and reduced operating costs by approximately 10%.”
Acsion listed on the JSE in December 2014, one of four current pure development plays in the sector. The seven predominantly retail properties from which the Company derives income are independently valued at R4.162 billion, unchanged from the February 2016 valuations as it is Acsion’s policy to revalue investment properties at year-end only.
Net profit after tax attributable to ordinary shareholders of R118,4 million was declared, equating to basic and diluted weighted earnings per share of 30 cents and weighted headline earnings per share of 29.7 cents for the reporting period.
The Company remains largely ungeared, with a loan-to-value ratio of 5.9% (H1 2015:5.5%) as funding costs increased in line with expectations to R9.8 million on the back of developments underway and is expected to increase further as the Group delivers on its growth targets.
“With the share price trading significantly below the reported net asset value of the Company, the board made the decision to repurchase some 65 142 shares at a discount of approximately 36% in the open market during the period,” Scholtz added.
The developed portfolio’s weighted average lease expiry by gross lettable area (GLA) reduced slightly to 3.68 years (H1 2015:4.87 years) mainly as a result of the once-off phase II extension of Mall@Carnival. Management expects this ratio to normalise over time as lease renewals spread out and additional investment properties are added to the developed portfolio.
Vacancies in the developed portfolio (including some strategic vacancies) tracked marginally upwards from 5.05% in the prior year corresponding period to 6.6%, mainly as a result of the inclusion of Mall@Moutsiya (which was completed during the review period) and where some tenants had not taken beneficial occupation at the time of opening.
Construction of Acsiopolis, Acsion’s flagship twenty story mixed use development in Benmore is progressing according to plan and is set for completion in 2019. The main contractor has completed the foundations and retaining walls and will commence with the first level of parking in November 2016.
Other pipeline developments in hand include Mall@55 Phase I, a 15 000m2 convenience shopping centre in Monavoni, Gauteng. The exceptional location on intersection of the N14 highway with the R55 provincial route positions the development well for a value/convenience/lifestyle centre which is underrepresented in the catchment area. Bulk earthworks is expected to commence in November 2016.
Acsion’s Mall@Mfula is expected to open at the end of November 2016 and consists of a 17 300m2 shopping centre with an anticipated 70% national tenancy. Mall@Mfula will provide a complete formal retail offering in Piet Retief.
In line with its proven track record of township mall development and management, Acsion is also extending Mall@Lebo. Planning of phase II has commenced and the associated rights have been secured. Phase I carries no vacancies and the extension of some 8 000m2 is on the back of strong tenant demand.
Other pipeline development opportunities have been identified such as Offices@Lusaka, a co-development in Zambia with up to 20 000m2 of office space and Mall@Maputo where Acsion has entered into a formal agreement with the Mozambican Ministery of Interior to develop a shopping centre of up to 50 000m2. The Company remains cognisant of the current economic climate in Mozambique and development will only commence once the situation has been reassessed.
“Going forward, we will continue to focus on the completion of the developments in hand, as well as value accretive projects in our existing portfolio.
“Our value engineering approach will continue to differentiate Acsion as we deliver on these large scale developments, realising superior growth for our investors,” Scholtz concluded.
