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FREEDOM PROPERTY FUND LIMITED - Abridged Audited Consolidated Annual Financial Statements for the year ended 28 February 2018

Release Date: 30/06/2020 13:28:00      Code(s): FDP       PDF(s):    
Abridged Audited Consolidated Annual Financial Statements for the year ended 28 February 2018

FREEDOM PROPERTY FUND LIMITED
Incorporated in the Republic of South Africa
Registration number: 2012/129186/06
Share code: FDP
ISIN: ZAE000185260
(“Freedom” or “the Company” or “the Group”)

SHORT FORM ANNOUNCEMENT: ABRIDGED AUDITED CONSOLIDATED ANNUAL
FINANCIAL STATEMENTS FOR THE YEAR ENDED 28 FEBRUARY 2018

The board of directors of the Company (“the Board”) is pleased to present the audited annual financial results
for the year ended 28 February 2018.

The audited financial results of the Group for the year ended 28 February 2018, as compared to the year
ended 28 February 2017 (“Comparative Period”), are set out below:

• Basic earnings per share decreased from 1,01 cents to a loss per share of 0,41 cents;
• Headline losses per share increased from 0,98 cents to 1,38 cents;
• Shares in issue remained at 1,204,429,031 shares;
• Revenue increased by 7% from R24,579 million to R26,377 million;
• Net profit of R12,095 million decreased to a loss after tax of R4,899; and
• Total assets decreased from R338,260 million to R312,883 million.

No dividends were declared or paid during the period under review or during the Comparative Period.


Auditors: Unqualified audit opinion

The summarised consolidated results of the Group for the year ended 28 February 2018 have not been audited
by the Group’s auditors, Moore Cape Town Inc. However, the annual consolidated financial statements of the
Group for the year ended 28 February 2018 have been audited by Moore Cape Town Inc. An extract from the
audit report contained within the audited annual consolidated financial statements of the Group for the year
ended 28 February 2018 is as follows:

“In our opinion, the consolidated and separate Financial Statements present fairly, in all material respects, the
consolidated and separate financial position of Freedom Property Fund Limited as at 28 February 2018, and its
consolidated and separate financial performance and its consolidated and separate cash flows for the year
then ended in accordance with the International Financial Reporting Standards and the requirements of the
Companies Act of South Africa.

The Impact of the Material Uncertainty related to COVID-19 on Freedom Property Fund Limited’s Ability to
Continue as a Going Concern

We draw attention to note 34 in the financial statements, which indicates that the group incurred a net loss of
R4,899,000 during the year ended 28 February 2018 and as of that date the group’s current liabilities exceeded
its current assets by R30,947,000. As stated in note 34, COVID-19 affects the group and this may result in
certain material uncertainties for the future financial position, performance and cashflows of the group.
We reassessed our risk assessment on going concern and took into account the additional considerations of the
impact of the COVID-19 pandemic on the Group when assessing the going concern conclusion. Management’s
cashflow forecast was challenged by evaluating the reliability of the underlying data generated to prepare the
forecast and determining whether there is adequate support for the assumptions underlying the forecast.
Management expects a decrease in rental recoveries from May 2020 onward and an increase in vacancies due
to tenants’ inability to meet rental obligations. The current economic conditions as a result of the pandemic is
also expected to impact the group’s strategy of disposing of non-core assets. The directors have concluded that
there are material uncertainties that give rise to significant doubt over the Group’s ability to continue as a
going concern. We further assessed the appropriateness of the disclosures in the financial statements
concerning the impact of COVID-19 on the Group’s ability to continue as a going concern.
These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the
group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the consolidated and separate financial statements of the current period. These matters were addressed in
the context of our audit of the consolidated and separate financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter
described in The impact of the material uncertainty related to COVID-19 on Freedom Property Fund Limited’s
ability to continue as a going concern section, we have determined the matters described below to be the key
audit matters to be communicated in our report.

Key Audit Matter                                                        How our audit addressed the key audit matter
Valuation of Investment Properties (consolidated)

The Group holds commercial and residential investment properties,       We have considered whether the valuation methods applied by the
along with vacant land, to the value of R274,604 million at year-       directors and external valuators in the valuation of the investment
end, including the straight-lining accrual and non-current assets       properties, were in line with the criteria prescribed
held for sale. The movement in these properties’ fair value for the     by IFRS. Further consideration was given as to whether the method used is
year amounts to R23,472 million.                                        appropriate to those particular properties subject to the valuation, by
Investment property is measured at their fair values based on           benchmarking it against valuation methods applied to similar listed
valuations obtained from external valuators and the directors. The      property portfolios.
location, zoning, size, exposure, capitalisation rates and occupancy    In assessing the expertise of the external valuers, we have verified their
rates are some of the crucial variables which were considered and       registration with the South African Council for the Properties Valuers
applied in the valuation of investment properties.                      Profession. The considerations surrounding the independence and
For commercial properties the directors and external valuators          objectivity of the external valuers were based on the review of the terms of
have used 3 methods namely, the Net Income Capitalisation               engagement and receipt of a representation from the external valuators’
Method, the Discounted Cash Flow Method and the Comparable              management as to the fee arrangements between the valuers and the
Sales Method in determining the fair value.                             group. We found no evidence to suggest that the objectivity of the valuers
For residential investment properties the directors and external        in their performance of the valuations was compromised.
valuators have used the Net Income Capitalisation Method in the         A meeting was held between ourselves and the independent valuators
valuation of the properties.                                            discussing the valuations and the key assumptions used therein. We
For vacant land the directors and external valuators have used the      inspected the valuation reports for all properties valued externally and
Comparable Sales Method in the valuation of the properties.             tested data inputs in the directors’ valuations.
We consider the valuation of investment properties a matter of          We assessed the accuracy, reliability and completeness of data inputs
most significance to the current year’s audit due to the significance   which was used in the valuation underpinning the relevant investment
of the estimates and judgements involved and the inherent               property.
sensitivity of data whereby a percentage difference in individual       We reviewed the appropriateness of supporting documentation and
yields could result in a material misstatement.                         performed a sensitivity analysis on the significant assumptions made to
                                                                        evaluate the extent of the impact on the value calculated, should the
                                                                        assumptions change by a small percentage.
                                                                        We further assessed the appropriateness of the disclosures in the financial
                                                                        statements concerning the key assumptions to which the valuations are
                                                                        sensitive to.”

Reportable Irregularities:

• As part of section 48(2)(b)(i) of the Companies Act, 71 of 2008 of South Africa (“the Companies Act”) not
  more than 10%, in aggregate, of the number of issued shares of any class of shares of a company may be
  held by, or for the benefit of, all the subsidiaries of that company, taken together and (ii) no voting rights
  attached to those shares may be exercised.

• In May 2017, the Company’s issued share capital of 1,204,429,031 comprised 132,026,953 treasury shares
  (held by Zambesa Investments Proprietary Limited), resulting in a contravention of section 48(2)(b) of the
  Companies Act.

• The Company has contravened s30(1) of the Companies Act by not completing its annual financial
  statements within 6 months of its year end.

This short form announcement is the responsibility of the Board and is only a summary of the abridged
consolidated financial results for the year ended 28 February 2018 (“Full Announcement”) which may be
downloaded from: https://senspdf.jse.co.za/documents/2020/JSE/ISSE/FDP/Feb2018.pdf

The detailed audited consolidated financial results for the year ended 28 February 2018, inclusive of the
Independent Auditors’ report, are available on the Company’s website:
http://www.freedomprop.co.za/wp-content/uploads/2020/01/Freedom-Consol-2018-FINAL.pdf

Any investment decisions by investors and/or shareholders should be based on consideration of the Full
Announcement at the link set out above.

The Full Announcement may also be requested from the Company by contacting info@freedomprop.co.za
during ordinary business hours, for a period of 30 calendar days following the date of this announcement.

Registered office: KWV Building, 57 Main Street, Paarl, Cape Province.

Paarl
30 June 2020

Sponsor: Questco Corporate Advisory Proprietary Limited
First Floor, Yellowwood House, Ballywoods Office Park, 33 Ballyclare Drive, Bryanston

Date: 30-06-2020 01:28:00
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