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OCT
OCT
OCT-Octodec - Unaudited Results of the Group: Six Months Ended 28 February 2007
Octodec Investments Limited and its subsidiaries.
(Incorporated in the Republic of South Africa)
(Registration number 1956/002868/06)
Share code: OCT & ISIN: ZAE000005104
("Octodec" or "the company")
NOTICE TO LINKED UNITHOLDERS
UNAUDITED RESULTS OF THE GROUP FOR THE SIX MONTHS ENDED 28 FEBRUARY 2007
Distribution up by 27,1% to 54 cents per linked unit
Increase in net asset value by 18,3% to 1330 cents
Total investments exceed R1,9 billion
ABRIDGED CONSOLIDATED INCOME STATEMENT
Unaudited
six months Audited year
to
% Unaudited 28 Feb 31 Aug
R`000 Changes six months 2007 2006
Revenue 106,041 84,539 182,199
- earned on contractual 24.5% 105,163 84,450 179,866
basis
- straight line lease 878 89 2,333
adjustment
Operating costs (33,007) (30,851) (63,376)
Net rental income from 73,034 53,688 118,823
properties
- earned on contractual 34.6% 72,156 53,599 116,490
basis
- straight line lease 878 89 2,333
adjustment
Administrative expenses (5,265) (3,142) (8,091)
Depreciation (297) (275) (641)
Income before investment 34.2% 67,472 50,271 110,091
income
Investment income 14,099 30,691 46,125
- Interest received 518 364 734
- Investment income - 3,520 2,025 5,126
listed
- Investment income -
equity earnings 573 654 (1 545)
fair value adjustment/ 7,111 25,564 36,150
interest & dividends 2,377 2,084 5,660
Income before finance 0.8% 81,571 80,962 156,216
costs
Finance costs 44.4% (30,522) (21,136) (46,926)
Income before debenture -14.7% 51,049 59,826 109,290
interest and capital
profits
Capital (loss)/profit on - 8 377
disposals of investment
properties
Fair value adjustment of
investment properties
- net revaluation 186,340 195,081 254,194
- gross revaluation 187,218 195,170 256,527
- attributable to (878) (89) (2,333)
straight line lease
adjustment
Amortisation of deemed 1,783 1,783 3,566
debenture premium
Income before debenture -6.8% 239,172 256,698 367,427
interest
Debenture interest 27.1% (42,095) (33,132) (69,147)
Income before taxation -11.8% 197,077 223,566 298,280
Taxation charge (54,943) (57,240) (72,960)
- Deferred taxation (54,293) (56,573) (71,725)
- Normal taxation (650) (667) (1,235)
Income attributable to 142,134 166,326 225,320
linked unitholders
Linked units in issue - 78,345 78,345 78,345
(`000)
Earnings per share - -14.5% 181.4 212.3 287.6
(cents)
Earnings per linked unit -7.6% 235.2 254.6 375.9
- (cents)
Headline earnings per 26.7% 57.2 45.2 95.9
linked unit - (cents)
Distribution per linked
unit (cents)
Dividends 0.27 0.21 0.44
Interest 53.73 42.29 88.26
Total 27.1% 54.00 42.50 88.70
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
% six months six months year to
R`000 Changes 28 Feb 2006 28 Feb 2007 31 Aug 2006
Cash flow from operating
activities
Net rental income from 67,769 50,922 107,758
properties
Adjustment for :
- Depreciation 297 275 641
- Working capital changes (4,183) 5,631 (1,394)
Cash generated from 63,883 56,828 107,005
operations
Investment income and 6,415 4,474 11,520
interest received
Finance costs (30,522) (21,136) (46,926)
Taxation paid (940) (242) (703)
Distribution to linked (36,195) (28,282) (61,581)
unit holders paid
Net cash inflow from 2,641 11,642 9,315
operating activities
Cash flow from investing
activities
Investing activities (58,336) (13,878) (116,302)
Increase in investments (6,001) (6,219) (34,481)
and loans to associate
Proceeds from disposal of - - 757
investment properties
Net cash outflow used in (64,337) (20,097) (150,026)
investing activities
Cash flow from financing 61,099 15,658 141,544
activities
Net (decrease) / increase (597) 7,203 833
in cash and cash
equivalents
Cash and cash equivalents (3,820) (4,653) (4,653)
at beginning of period
Cash and cash equivalents (4,417) 2,550 (3,820)
at end of period
RECONCILIATION - EARNINGS PER SHARE TO HEADLINE EARNINGS PER LINKED UNIT
Unaudited Unaudited Audited
% six months six months year to
Cents Changes 28 Feb 2006 28 Feb 2007 31 Aug 2006
Earnings per share 181.4 212.3 287.6
Add: debenture interest 53.7 42.3 88.3
per linked unit
Earnings per linked unit 235.1 254.6 375.9
Profit on disposal of 0.0 (0.0) (0.5)
investment properties
Straight line lease 1.1 0.1 3.0
adjustment
Fair value adjustments
- associate, net of (9.1) (32.6) (46.1)
deferred tax
- investment properties, (169.9) (176.9) (236.4)
net of deferred tax
Headline earnings per 57.2 45.2 95.9
linked unit
ABRIDGED CONSOLIDATED BALANCE SHEET
Unaudited Audited
28 February 31 August
R`000 2007 2006
Assets
Non-current assets 1,978,271 1,695,523
Investment properties 1,750,397 1,505,820
Plant and equipment 1,918 2,115
Investment properties - straight line lease 26,864 25,986
adjustment
Investment - listed securities 108,255 83,127
- associate company 90,837 78,475
Current assets 20,456 16,890
Total assets 1,998,727 1,712,413
Equity and Liabilities
Share capital and Reserves 832,225 669,426
Share capital and premium 44,008 42,224
Non-distributable reserve 759,157 599,156
Retained profit 29,060 28,046
Non - current liabilities 1,082,519 965,523
Debentures capital and premium 210,115 211,899
Interest bearing borrowings 618,204 557,253
Deferred tax liability 254,199 196,371
Current liabilities 83,983 77,464
Interest bearing 14,593 13,806
Non - interest bearing 27,295 27,643
Linked unitholders 42,095 36,015
Total equity and liabilities 1,998,727 1,712,413
Linked units in issue (`000) 78,345 78,345
Net asset value per linked unit (cents) 1,331 1,125
Net asset value per linked unit (cents) - before 1,655 1,376
deferred tax
ABRIDGED STATEMENT OF CHANGES IN EQUITY
R`000 Share Non-distri- Distri- Total
capital and butable butable
premium reserve reserve
Balance at 1 38,658 367,698 25,275 431,631
September 2005
Net income 225,320 225,320
attributable to
ordinary shareholders
Reallocation of 3,566 (3,566) -
deemed debenture
premium
Dividends paid (306) (306)
Adjustment to 12,781 12,781
valuation of listed
investment, net
of deferred Capital
Gains Tax
Transfer to non-
distributable reserve
Capital profit on 377 (377) -
disposal of
investment property
Fair value adjustment
of investment
properties
- associate, net of 36,150 (36,150) -
deferred tax
- investment 182,150 (182,150) -
properties, net of
deferred tax
Balances at 1 42,224 599,156 28,046 669,426
September 2006
Net income 142,134 142,134
attributable to
ordinary shareholders
Reallocation of 1,783 (1,783) -
deemed debenture
premium
Dividends paid (180) (180)
Adjustment to 20,843 20,843
valuation of listed
investment, net
of deferred Capital
Gains Tax
Fair value adjustment
of investment
properties
- investment 132,047 (132,047) -
properties, net of
deferred tax
- associate, net of 7,111 (7,111) -
deferred tax
Balances at 28 44,007 759,157 29,059 832,223
February 2007
DISTRIBUTABLE EARNINGS
The following additional information is provided and is aimed at disclosing to
the users the basis on which the distributions
Unaudited Unaudited Audited
% six months six months year to
R`000 Changes 28 Feb 2007 28 Feb 2006 31 Aug 2006
Revenue
- earned on contractual 24.5% 105,163 84,450 179,866
basis
Operating costs (33,007) (30,851) (63,376)
Net rental income from 34.6% 72,156 53,599 116,490
properties
Administrative expenses (5,265) (3,142) (8,091)
Depreciation (297) (275) (641)
Income before investment 32.7% 66,594 50,182 107,758
income
Investment income
- Interest received 519 365 734
- Investment income - 7.8% 2,950 2,737 4,115
associate
- Investment income - 73.8% 3,520 2,025 5,126
listed investments
Distributable income 33.0% 73,583 55,309 117,733
before finance charges
Finance charges 44.4% (30,522) (21,136) (46,926)
Distributable income 43,061 34,173 70,807
before taxation
Taxation charge (650) (667) (1,235)
Unit holders distributable 26.6% 42,411 33,506 69,572
earnings
Linked units in issue - 78,345 78,345 78,345
(`000)
Distributable earnings per 26.6% 54.1 42.8 88.8
linked unit - (cents)
Distribution per linked 27.1% 54.0 42.5 88.7
unit (cents)
NOTES TO THE FINANCIAL STATEMENTS
The unaudited interim financial statements have been prepared in accordance with
International Financial Reporting Standards and the requirements of the
Companies Act (Act 61 of 1973). The results have been prepared and presented in
accordance with IAS 34, Interim Financial Reporting. The accounting policies
adopted and methods of computation are consistent with those applied in the
financial statements for the year ended 31 August 2006.
In order to comply with International Accounting Standard IAS 17, rental income
from leases is recognised on a straight-line basis over the period of the lease.
In order to avoid an overstatement of assets the fair value of investment
properties has been reduced by the cumulative straight-line rental accrual.
Deferred taxation on the fair value adjustment of investment property has been
provided at the company income taxation rate which is currently 29% and not at
the Capital Gains Tax rate of 14,5%, which would be payable if properties were
sold.
Related party: City Property Administration (Proprietary) Limited is responsible
for the property and asset management of the group.
COMMENTS
Review of results
The directors of Octodec are pleased to report that the company has once again
produced excellent growth in distributions to linked unitholders. Rental income
and net rental income increased by 24,5% and 34,6% respectively.
The total distribution per linked unit for the six months of 54 cents (2006:
42,5 cents) represents an increase of 27,1% on that paid in the previous
comparable period.
The redevelopment of properties, favourable renewals of leases, strict expense
control as well as extremely favourable trading conditions have all contributed
to the growth in distributable earnings.
The retail portfolio which comprises five quality shopping centres, continued to
enjoy strong growth in earnings due to favourable renewals and contractual
rental escalations. The redevelopment of Killarney Mall which was successfully
completed in October 2005 at a cost of R97 million as well as the refurbishment
of Gezina Stad resulted in much improved rentals and these shopping centres are
now well tenanted.
Octodec continues to unlock the value of its Johannesburg and Pretoria CBD
portfolios by the redevelopment and refurbishment thereof. Construction has
commenced at Registry House to convert this office block to multi-use warehouse
facilities at a cost of R9 million.
During the period under review three properties were purchased and transferred
for an aggregate of R34 million. These purchases include Elephant House situated
in the Johannesburg CBD and two light industrial properties situated in
Johannesburg. An additional eight properties have been purchased but not yet
transferred for an aggregate consideration of R133 million. These include Inner
Court and Anderson Place in the Johannesburg CBD, as well as Rentmeester in
Pretoria.
The Sildale Industrial Park development was completed during the period at a
cost of R20 million. Due to the strong demand for these light industrial units
the development of additional units totalling 5000 m2 is planned.
Borrowings
During the period the borrowings increased by R62 million, as a result of
acquisitions of investment properties and development costs. Octodec`s gearing
at the end of the period under review was 32% as against 34% at 31 August 2006.
The company has available facilities to fund future cash flow requirements.
Interest rates in respect of 71% of borrowings at 28 February 2007 have been
fixed at an average weighted interest rate of 10,5% maturing at various dates
ranging from November 2007 to November 2010.
Revaluation of property portfolio
At each financial year end at least one-third of the property portfolio is
valued on a rotational basis by an external valuer. The directors` valuation of
the portfolio, taking into account prevailing market rentals, occupation levels
and capitalisation rates increased by R187 million, increasing net asset value
by 18% after accounting for deferred tax.
Prospects
With property fundamentals remaining strong, management is optimistic that the
company will continue to grow earnings on par with, if not better than, the
market average, due to its continued focus on unlocking the value of the
portfolio as well as the expected continuation of a favourable economic
environment.
DECLARATION OF DIVIDEND NO. 34 AND INTEREST PAYMENT ("the distribution")
Notice is hereby given that dividend number 34 of 0,27 cents (2006: 0,21 cents)
per ordinary share together with interest of 53,73 cents per debenture (2006 :
42,29 cents), for the period 1 September 2006 to 28 February 2007 has been
declared, payable to linked unitholders recorded in the register on Friday, 18
May 2007. The last date to trade "CUM" distribution is Friday, 11 May 2007. The
units will commence trading "EX" distribution on Monday, 14 May 2007. Payment
date will be Monday, 21 May 2007.
No dematerialisation or rematerialisation of linked unit certificates may take
place between Monday, 14 May 2007 and Friday, 18 May 2007, both days inclusive.
By order of the Board.
City Property Administration (Proprietary) Limited
25 April 2007
A Wapnick J P Wapnick
(Chairman) (Managing director)
Directors
A Wapnick* (Chairman), JP Wapnick* (Managing director), MJ Holmes#, MZ Pollack#,
S Wapnick+
* Executive director
# Independent non-executive director
+Non-executive director
Registered Office
CPA Housep, 101 du Toit Street, Pretoria, 0002
PO Box 15, Pretoria 0001
Tel: (012) 319-8811
Fax: (012) 319-8812
Transfer Secretaries
Computershare Limited
(Reg. No: 2000/006082/06)
70 Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107
Tel: (011) 370-7700
Fax: (011) 688-7712
Date: 25/04/2007 15:57:01 Produced by the JSE SENS Department.
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