LETLOLE LA RONA : AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 30 JUNE 2023

LETLOLE LA RONA LIMITED AUDITED FINANCIAL RESULTS

FOR THE YEAR ENDED 30 JUNE 2023

Highlights

Letlole La Rona Limited,

incorporated in the Rebublic of Botswana. Registration Number- BW00001394482

Share Code- letlole ISIM: BW 000 000 1015

Registered Office: 1st Floor, Peelo Place, Plot 54366, CBD P.O. Box 700ABG, Gaborone, Botswana

Tel: [phone]; Fax: [phone]

Independent Auditors: Grant Thornton,

Plot 50370, Fairgrounds Acumen Park,

P.O. Box 1157, Gaborone

Revenue 5%

Operating 17% Profit

Profit

Before 13%

Tax

InvestmentPortfolio 15%

Net

Asset 8%

Value

Distribution 7%

Share price closed at P2.50

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 3O JUNE 2023

						AUDITED			AUDITED
BWP					Jun-2023			Jun-2022
Continuing Operations					102,146,703			97,526,385
Revenue
Contractual revenue					98,731,227			95,565,255
Straight line lease rental adjustment					59,458			(1,035,333)
Operating cost recoveries					3,356,018			2,996,463
Other income					1,612,156			274,771
Movement in credit loss allowances					1,508,589			(1,963,290)
Other non operating gains					10,897,813			393,837
Property related expenses					(9,821,667)			(8,906,951)
Administrative expenses					(31,889,850)			(23,709,391)
Operating Profit					74,453,744			63,615,361
Finance Income					20,734,401			8,347,962
Finance costs					(34,476,270)			(21,318,596)
Share of profit from equity accounted investments					12,509,443			23,880,957
Profit before fair value adjustment					73,221,318			74,525,683
Fair value adjustment of investment properties					46,097,737			31,200,958
As per valuation					46,261,978			30,165,625
Straight line lease adjustment					(164,240)			1,035,333
Profit Before Tax					119,319,055			105,726,641
Taxation					(18,136,185)			(9,837,958)
Profit from continuing operations					101,182,870			95,888,683
Profit from discountinued operations					9,118,449			2,985,609
Total Comprehensive Income for the year					110,301,319			98,874,292
Number of linked units in issue at end of the year					280,000,000			280,000,000
Weighted average number of linked units in issue					280,000,000			280,000,000
Earnings per linked unit (Thebe)					43.72			39.34
Earnings per linked unit is calculated based on the average
number of linked units in issue and total					122,397,798			110,153,252
comprehensive income for the year, adjusted by the taxation
on debenture interest credited to the statement
of changes in equity of:
Distribution per linked unit (Thebe)					19.74			18.41
Dividends per linked unit (Thebe)					0.10			0.10
Debenture interest per linked unit (Thebe)					19.64			18.31
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
						AUDITED			AUDITED
BWP					Jun-2023			Jun-2022
ASSETS
Non-current assets					967,983,900			1 003,397,520
Investment properties
Loan to associate company					99,224,484			-
Operating lease asset					20,716,721			20,552,481
Right of use asset					98,348			703,540
Investment in associates					234,624,422			217,086,735
Other receivable					-			26,620,370
Investments at fair value					6,250,000			6,250,000
Property, plant & equipment					1,607,628			1,143,274
Deferred tax					12,843,591			12,271,077
Deferred taxation recoverable - related party					3,200,048			3,302,144
Total Non- Current Assets					1,346,549,142			1,291,327,141
Current assets					2,992,181			1,911,591
Taxation refundable
Trade and other receivables					6,091,038			7,179,720
Cash and cash equivalents					66,797,614			142,273,660
Total Current Assets					75,880,833			151,364,971
Non-current assets held for sale					96,500,000			-
Total Assets					1,518,929,975			1,442,692,112
EQUITY AND LIABILITIES
Capital and reserves					2,718,884			2,718,884
Stated capital
Debentures-Linked units					405,113,547			405,113,547
Retained income					505,885,904			438,752,106
Total equity and liabilities					913,718,335			846,584,537
Liabilities
Non-current liabilities					476,346,426			471,257,982
Borrowings
Deferred taxation					69,626,596			63,116,473
Lease liability					-			126,200
Total non- current liabilities					545,973,022			534,500,655
Current liabilities					29,764,000			28,084,000
Debenture interest and dividend payable
Trade and other payables					24,111,238			27,940,730
Current portion of borrowings					5,237,180			4,860,172
Current portion of lease liability					126,200			722,018
Total current liabilities					59,238,618			61,606,920
Total equity and liabilities					1,518,929,975			1,442,692,112
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2023
		Stated		Debentures		Retained			Total
BWP		capital				Income
Balance at 30 June 2021		2,718,884		405,113,547		380,146,853			787,979,284
Total comprehensive income for the year		-		-		98,874,292			98,874,292
Dividends declared		-		-		(280,000)			(280,000)
Debenture interest declared		-		-		(51,268,000)			(51,268,000)
Taxation attributable to debenture interest		-		-		11,278,960			11,278,960
Balance at 30 June 2022		2,718,884		405,113,547		438,752,105			846,584,536
Total comprehensive income for the year		-		-		110,301,319			110,301,319
Dividends declared		-		-		(280,000)			(280,000)
Debenture interest declared		-		-		(54,984,000)			(54,984,000)
Taxation attributable to debenture interest		-		-		12,096,480			12,096,480
Balance at 30 June 2023		2,718,884		405,113,547		505,885,904			913,718,335

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2023

						AUDITED		AUDITED
BWP					Jun-2023		Jun-2022
Cash flows from operating activities					119,319,055		105,726,641
Profit before taxation from continuing operations
Profit/(loss) before taxation from discontinued operations					9,118,449		2,985,609
Adjustments for:					(46,268,986)		(25,073,474)
Fair value adjustment of investment properties
Share of profit from equity accounted investments					(12,509,443)		(23,880,957)
(Profit)/Loss on sale of plant & equipment					35,722		26,108
Finance costs					34,476,270		21,318,596
Finance Income					(20,734,401)		(8,347,962)
Depreciation expense					1,372,579		1,433,475
Movement in credit loss allowances					(1,508,589)		1,963,290
Movements in operating lease assets					(164,240)		1,062,042
Operating income before working capital changes					83,136,416		77,213,368
Working capital changes					2,597,271		(2,927,335)
Decrease in trade and other receivables
Increase/(decrease) in trade and other payables					(3,829,492)		8,959,753
Taxation paid					(1,080,590)		(297,570)
Net cash generated from operating activities					80,823,605		82,948,215
Cash flows (used in)/from investing activities					(14,817,394)		(19,592,286)
investment properties refurbishments
Investment in associates					(8,108,689)		(153,938,581)
Distribution from associates					3,080,445		2,904,420
Other receivable					26,620,370		(26,620,370)
Finance income					20,734,401		8,347,962
Acquisition of property, plant & equipment					(1,271,345)		(444,327)
Sale of property, plant & equipment					3,881		-
Loan to associate company					(99,224,484)		-
Net cash used in investing activities					(72,982,815)		(189,343,182)
Cash flows used in financing activities					(2,534,548)		(3,625,214)
Repayment of borrowings
Borrowings raised					8,000,000		247,469,946
Finance costs					(34,476,270)		(21,318,596)
Payment of lease liability					(722,018)		(640,573)
Dividends and debenture interest paid					(53,584,000)		(49,956,760)
Net cash used in financing activities					(83,316,836)		171,928,803
Net increase in cash and cash equivalents					(75,476,046)		65,533,838
Cash and cash equivalents at beginning of the year					142,273,660		76,739,821
Cash and cash equivalents at end of the year					66,797,614		142,273,660
SEGMENTAL REPORTING	Corporate	Commercial	Industrial	Residential	Total
BWP		& Retai
SEGMENTAL STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2023 - AUDITED
Segment revenue	-	20,662,003	81,481,700	-	102,146,703
Other income	12,733	44,756	1,554,667	-	1,612,156
Movement in Credit loss allowances	1,508,589	-	-	-	1,508,589
Other non operating gains	10,897,813	-	-	-	10,897,813
Property related expenses	(557,748)	(2,079,621)	(7,184,298)	-	(9,821,667)
Administrative expenses	(30,303,976)	(292,992)	(1,292,882)	-	(31,889,850)
Operating profit		(18,442,590)	18,334,146	74,562,188	-	74,453,744
Finance income	20,734,401	-	-	-	20,734,401
Finance costs	(21,565,387)	(10,342,868)	(2,568,015)	-	(34,476,270)
Share of profit from equity accounted investments	12,509,443	-	-	-	12,509,443
Fair value gain on investment property net of adjustment	-	7,062,559	39,035,178	-	46,097,737
resulting from straight lining
Tax expense	(18,136,185)	-	-	-	(18,136,185)
Profit from continuing operations		(24,900,318)	15,053,837	111,029,350	-	101,182,870
Discontinued operations	-	5,631,025	-	3,487,424	9,118,449
Profit from discontinued operations
Profit for the period		(24,900,318)	20,684,862	111,029,350	3,487,424	110,301,319
		Corporate	Commercial	Industrial	Residential	Total
BWP		& Retail
SEGMENTAL STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2022 - AUDITED
Segment revenue	-	18,861,947	78,664,438.	-	97,526,385
Other income	148,430	64,814	61,527	-	274,771
Movement in Credit loss allowances	(1,963,290)	-	-	-	(1,963,290)
Other non-operating gains	393,837	-	-	-	393,837
Property related expenses	(1,320,169)	(2,440,401)	(5,146,381)	-	(8,906,951)
Administrative expenses	(23,232,312)	(165,237)	(311,842)	-	(23,709,391)
Operating profit	(25,973,504)	16,321,122	73,267,742	-	63,615,360
Finance income	8,347,962	-	-	-	8,347,962
Finance costs	(9,003,025)	(10,265,412)	(2,050,159)	-	(21,318,596)
Share of profit from equity accounted investments	23,880,957	-	-	-	23,880,957
Fair value gain on investment property net of adjustment	-	8,058,835	23,142,123	-	31,200,958
resulting from straight lining
Tax expense	(9,837,958)	-	-	-	(9,837,958)
Profit from continuing operations
(12,585,568)	14,114,545	94,359,706	-	95,888,684
Discontinued operations	-	(223,680)	-	3,209,289	2,985,609
Profit from discontinued operations
Profit for the period		(12,585,568)	13,890,866	94,359,706	3,209,289	98,874,292
		Corporate	Commercial	Industrial	Residential	Total
BWP		& Retail
SEGMENTAL STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023 - AUDITED
Investment property including operating lease asset	-	223,847,133	764,853,488	-	988,700,621
Non-current assets held for sale	-	49,300,000	-	47,200,000	96,500,000
Other assets	431,157,853	507,772	1,962,155	101,573	433,729,354
Total Assets	431,157,853	273,654,905	766,815,643	47,301,573	1,518,929,975
AS AT 30 JUNE 2022 - AUDITED	-	259,990,000	716,760,001	47,200,000	1,023,950,001
Investment Property including operating lease asset
Other assets	410,408,355	683,707	7,441,165	208,884	418,742,111
Total Assets	410,408,355	260,673,707	724,201,166	47,408,884	1,442,692,112

Note: All liabilities of the company fall under the corporate segment.

1. OPERATIONAL OVERVIEW

Our portfolio of real estate assets has shown signs of recovery from stagnation in vacancy rates recorded in the first half of the financial year. The vacancy rate dropped from 3.1% in the first half to 1.2% post year end, demonstrating management's continued efforts of optimising portfolio performance. Monthly collections have improved post COVID, and this has consequently led to an improvement in the provision for bad debts. The portfolio registered a growth of 12.9%, and this growth was driven by the acquisition of a 30% stake in Orbit Africa Logistics (OAL) in Kenya, as well as increased valuations which were driven by a reduction in the capitalization rate owing to a drop in inflation and improved investor confidence in the property market as well as the reduction in vacancy rates. Our lease expiry profile stands at 3.2 years and is expected to improve significantly on the back of renewals by some tenants who are looking to renew for a period of five to seven years. The company's weighted average lease escalation averaged about 7%.

2. FINANCIAL PERFORMANCE

The company delivered a solid set of financial results for the year ended 30 June 2023. Revenue from continuing operations increased by 5% to close at P102 million on the back of rental escalations, increased operating cost recoveries, and relatively low vacancy rates. The company benefitted from the appreciation of the USD against the BWP and recorded a foreign exchange gain of P11 millon on the OAL shareholder loan.

Cost management remains a focus area for management and indeed the Board. While the company recorded a significant increase in operating expenses, it was crucial to fill some key strategic positions to enable the execution of the company's strategic objectives.

Our investment in JTTM Properties, a company which owns Rail Park Mall, (a 32, 000sqm prime commuter mall situated in the heart of Gaborone bus and taxi terminus ) has continued to show strong performance, with the full impact of the acquisition being realised in the current year. The improvement in economic and trading conditions, investor confidence, as well as improvements in occupancy rates have resulted in higher valuations which bolstered the company's fair value gains for the year.

The company recorded a profit before tax (from continuing operations) of P119.3 million, which represents a growth of 12.9% against prior year.

The improvement in collections, where the average monthly collection rate was just over 100%, and the prudent cash management led to a strong cashflow position which enabled the company to pay distributions to linked unit holders.

The company's share price closed the year at P2.50 relative to P3.00 in the previous year. This drop in the share price is no reflection of the companies fundamentals but rather a sell down by one of the key shareholders as they were exiting their investment in the company.

3. DISTRIBUTION

Unit holders are advised that the Board of Directors declared a final distribution of 10.63 thebe per linked unit on 22 June 2023 in respect of the financial year ended 30 June 2023, comprising of a dividend of 0.05 thebe and debenture interest of 10.58 thebe per linked unit.

This brought the total distribution declared in the 2022/2023 financial year to P55,264,000.00 (being a dividend of 0.10 thebe per share and interest of 19.64 thebe per linked unit).

Year to June	2023	2022
Linked units in issue	280m	280m
Earnings per linked unit	43.72 Thebe	39.34 Thebe

The declared distribution was paid to linked unit holders registered in the books of the company as at the close of business on 21 July 2023. The Transfer Secretary executed the distribution on 02 August 2023. In line with the requirements of the Botswana Income Tax Act (CAP 52.01), withholding tax at the applicable rate was deducted by the company from interest paid to unit holders unless they were specifically exempted.

4. INVESTMENT PORTFOLIO

Sectoral Spread 30-Jun-23*

3%

31%

	62%			Retail
			3%	Commercial
			Leisure
				Industrial
			1%	Residential
				*Includes assets held for sale
1500		Investment Property (BWP mil.)	1425
1400				1241
1200	970	961	1022
1000
778	780
800

600

400

200

0

2017

2018

2019

2020

2021

2022

2023

*Includes assets held for sale

5. BASIS OF PREPARATION

The summarised financial results have been prepared by applying the recognition and measurement criteria in accordance with the International Financial Reporting Standards and interpretations issued by the IFRICS Interpretations Committee. In preparing the underlying financial statements from which these summarised financial results were extracted, all International Financial Reporting Standards and International Financial Reporting Interpretations Committee interpretations issued and effective for annual periods ended 30 June 2023 have been applied.

In the preparation of the summarised financial results, the company has applied key assumptions concerning the future and other inherent uncertainties in recording various assets and liabilities. These assumptions were applied consistently to the financial results for the year ended 30 June 2023. The assumptions are subject to ongoing review and possible amendments. Grant Thornton (the Company's independent auditors) have audited the consolidated financial statements of Letlole La Rona Limited from which the summarised financial statements have been derived and have expressed an unmodified audit opinion on the consolidated financial statements. This results announcement has further been reviewed by the Company's auditors. The audit opinion will be made available for inspection at the Company's registered office.

6. OUTLOOK

During the period review, the Company launched its refined Go-to-Africa strategy. This strategy sets the tone for growth in the best interest of the Company and its stakeholders. It seeks to diversify and optimise the Company's portfolio and enhance stakeholder value and sustainable investment returns. In line with this refined strategy, we remain committed to expanding and optimising our Botswana portfolio while exploring value accretive opportunities in the African continent in a risk adjusted basis. We have recently issued an announcement for the acquisition of an additional 25% stake in JTTM Properties. The investment case for the transaction is supported by strong fundamentals of the underlying asset and this will go a long way in providing sustainable returns to our investment portfolio.

We believe that the economic recovery post covid provides opportunities for various sectors of the economy. We will continue to explore opportunities for balance sheet growth and explore funding options that can be deployed to fund our growth strategy.

7. GOVERNANCE

The Board of Directors recognises the need to conduct the business of the Company with utmost integrity and in accordance with generally accepted practices and endorses the internationally accepted principles of Corporate Governance and public responsibility.

8. EVENTS AFTER REPORTING PERIOD

The company has entered into a sale agreement with Botswana Railways Organisation for the acquisition of an additional stake of 25% in JTTM by LLR. This transaction follows the initial acquisition of a 32.8% stake in JTTM in November 2021. The transaction, when successfully concluded, will result in LLR being the majority shareholder in JTTM with shaholding of 57.8%. The conclusion of the transaction is subject to certain conditions precedent to the Sale of Linked Units Agreement, one of which is the regulatory approval of the transaction by the Competition and Consumer Authority (CCA).

9. BOARD CHANGES

The Board is pleased to announce the appointment of Ms. Katso Gaobakwe, Mr. Boikanyo Kgosidintsi and Mr. Zola Lupondwana to the Board, effective the 29th of June 2023. The Board also appointed Mr. Khuto Balosang as substantive Chairman effective the 1st of November 2022, taking over from Mr. Oteng Keabetswe who had been interim Chairman from the 14th of December 2021.

Ms. Katso Gaobakwe - Non-Executive Director

Ms. Katso Gaobakwe is currently employed by Botswana Development Corporation (BDC) as an Investment Principal. She is a fellow member of the Association of Chartered and Certified Accountants (ACCA) and the Botswana Institute of Chartered Accountants (BICA), and has completed a Masters in Finance and Investment. Ms. Gaobakwe has also completed a Management Development Program with the University of Stellenbosch Business School. She is a director in several companies within the BDC portfolio.

Mr. Boikanyo Kgosidintsi - Independent Non-Executive Director

Mr. Boikanyo Kgosidintsi is the former Chief Executive Officer of Western Life Insurance Botswana. He was previously Group Head of Investor Relations at Letshego Holdings Limited, a position he held from 2014 until 2021. Mr. Kgosidintsi is a lawyer by profession, with an LLB degree from the University of Botswana and has broad African capital markets experience, having been involved in structuring, execution, and marketing of debt capital market raisings. Mr. Kgosidintsi is the Chairman of the Botswana Bond Market Association.

Mr. Zola Lupondwana - Independent Non-Executive Director

Mr. Lupondwana is a debt, equity investment and financial management professional with over two decades experience in investment analysis and portfolio management in the listed and unlisted investments in South Africa. Mr. Lupondwana has over a decade experience in wholesale property finance of transactions in the residential housing market and has previously worked in asset management at a leading investment management company - Allan Gray Limited, where he set up Allan Gray's business in Botswana. He is a member of the South African Institute of Chartered Accountants (SAICA), the Institute of Chartered Accountants in England & Wales (ICAEW) and is a Chartered Financial Analyst. He also holds a Bachelor of Commerce in Accounting from the University of Botswana.

On the 8th of March 2023, Grit issued an announcement to the market of its intention to divest from LLR. The transaction was concluded on the 20th of June 2023. As a result, the Grit's representatives on the board of LLR stepped down on the 30th of June 2023. These Directors include Ms. Bronwyn Knight, Mr. Oteng Keabetswe and Mr. Donald Borthwick.

Mr Mervin Muller and Mr Gregory Pearson ceased being members of the board on 14 December 2022 after shareholders voted against the ratification of Mr Muller's appointment and the re-election of Mr Pearson.

10. MANAGEMENT CHANGES

The Board is pleased to announce the following appointments to the Executive team of LLR:

Ms. Chandada Masendu- Kusane - Chief Property Officer

Ms Masendu-Kusane joined LLR on the 12th of June 2023 as the Chief Property Officer. She is a seasoned and experienced real estate executive, with a Master of Science degree in Real Estate, a Bachelor of Science degree in Property Studies, and is a Certified Project Management Professional and is a PRINCE 2 Practitioner. Her experience covers property development, project management, asset management, valuations, and investment. She has experience in both executive and non- executive leadership of listed and non-listed companies in Botswana. Her career has been spent in commercial banking and local real estate markets. She has worked for First National Bank, Stanbic Bank, Khumo Properties and RDCP. Before joining LLR, she was an executive director at Minnacle Properties.

Ms. Lesego Keitsile - Head of Investments

Ms. Keitsile joined LLR on the 12th of May 2023 as the Head of Investments. She is an investment professional with over 12 years' experience in investments and portfolio management. She holds an MSc in Finance and Investments from London School of Business and Finance, a certificate in Executive Leadership from the University of Oxford, a Certificate in Enterprise Risk Management from the University of Stellenbosch, BA (Hons) Finance, Accounting and Management from the University of Nottingham and a Management Development Program from the University of Stellenbosch. Ms. Keitsile has previously worked at the Motor Vehicle Accident (MVA) Fund as Head of Investments and Grant Thornton Botswana as a Business Consultant.

Mr. Baalakani Nlumbile resigned from the position of Chief Property Officer in May 2023 to pursue other interests.

The Board is confident that under the leadership of the current Board and Management, the Company will be able to deliver on its strategic intent which seeks to optimise and diversify the Company's portfolio, drive balance sheet growth, and enhance stakeholder value and sustainable investor returns.

By Order of the Board

Mr. Khuto Balosang	Ms. Kamogelo Mowaneng
Chairman	Chief Executive Officer

Registration Number- BW00001394482

Directors: K. Balosang (Chairperson)| B. Kgosidintsi | K. Gaobakwe | M. Maphane | Z. Lupondwana