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CPL
CPL
CPL - Capital - Unaudited interim financial report for the six months ended 30
June 2007
Capital Property Fund
("Capital" or the "Fund")
Share Code: CPL
ISIN: ZAE000001731
(A portfolio in Capital Property Trust Scheme, a Collective Investment Scheme in
Property established in terms of the Collective Investment Schemes Control Act,
No 45 of 2002 managed by Property Fund Managers Limited ("PFM"))
(Incorporated in the Republic of South Africa)
(Registration No. 1980/009531/06)
UNAUDITED INTERIM FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2007
BALANCE SHEETS
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 Jun 30 Jun 31 Dec
2007 2006 2006
R`000 R`000 R`000
ASSETS
Non-current assets 2 308 284 1 453 557 2 124 165
Investment property 2 259 277 1 427 555 2 100 770
Straight-lining of rental
income adjustment 49 007 26 002 23 395
Current assets 121 713 42 943 175 579
Investment property held
for sale - 31 692 157 915
Trade and other receivables 18 550 11 066 17 504
Cash and cash equivalents 103 163 185 160
Total assets 2 429 997 1 496 500 2 299 744
EQUITY AND LIABILITIES
Total equity attributable
to unitholders 2 175 331 1 280 161 1 743 089
Trust capital 1 337 586 833 003 909 060
Non-distributable reserves 788 738 421 156 805 723
Retained earnings 49 007 26 002 28 306
Non-current liabilities 40 715 72 886 255 680
Interest-bearing borrowings - 49 667 212 686
Deferred tax 40 715 23 219 42 994
Current liabilities 213 951 143 453 300 975
Trade and other payables 115 085 70 134 208 012
Unitholders for distribution 96 587 69 510 76 315
Income tax payable 2 279 - -
Bank overdraft - 3 809 16 648
Total equity and liabilities 2 429 997 1 496 500 2 299 744
INCOME STATEMENTS
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 Jun 30 Jun 31 Dec
2007 2006 2006
R`000 R`000 R`000
Net rental and related income 128 131 80 006 172 497
Recoveries and contractual
rental income 146 709 108 624 235 192
Straight-lining of rental
income adjustment 20 701 1 159 3 463
Rental income 167 410 109 783 238 655
Property operating expenses (39 279) (29 777) (66 158)
Profit on disposal of
investment property 42 784 266 4 496
Fair value gains on
investment property (20 701) (1 159) 404 912
Fair value gain on
investment property - - 408 375
Fair value adjustment
resulting
from straight-lining of
rental
income adjustment (20 701) (1 159) (3 463)
Administrative expenses (8 141) (5 787) (12 587)
Profit before net finance costs 142 073 73 326 569 318
Net finance costs 1 014 (3 550) (12 342)
Finance income 616 - 1 218
Fair value adjustment on
interest rate swap 3 716 - (1 729)
Interest on units issued
cum distribution 11 710 - 2 818
Interest on borrowings (15 028) (3 550) (14 649)
Profit before income tax 143 087 69 776 556 976
Income tax expense - - (19 775)
Deferred taxation 2 279 - (19 775)
Capital gains taxation (2 279) - -
Profit for the period 143 087 69 776 537 201
Basic earnings per unit (cents) 29,78 18,20 136,92
Diluted earnings per unit 29,78 18,20 136,92
(cents)
Headline earnings per unit 25,18 18,43 37,61
(cents)
Weighted average number of
units
in issue 480 531 383 449 186 392 342 043
928
Net asset value per unit 453 334 434
(cents)
Number of units in issue 480 531 383 449 186 401 234 900
928
Reconciliation of profit for
the
period to headline earnings and
distributable income
Basic earnings 143 087 69 776 537 201
Adjusted for: (22 083) 893 (389 633)
- fair value gain on
investment property 20 701 1 159 (404 912)
- profit on disposal of
investment property (42 784) (266) (4 496)
- income tax effect - - 19 775
Headline earnings 121 004 70 669 147 568
Straight-lining of income (20 701) (1 159) (3 463)
adjustment
Fair value adjustment on
interest
rate swaps (3 716) - 1 729
Distributable income 96 587 69 510 145 834
CONSOLIDATED STATEMENTS OF CHANGES IN UNITHOLDERS` INTEREST
Capital of Trust 1 337 586 833 003 909 060
Balance at beginning of 909 060 832 737 832 737
the year
Issue of units 385 742 - 71 827
Net profit on disposal 42 784 266 4 496
of property
Revaluation reserve 788 738 421 156 805 723
Balance at beginning of 805 723 422 315 422 315
the year
Transfer (to)/from
distributable reserve (16 985) (1 159) 383 408
Undistributed income 49 007 26 002 28 306
Balance at beginning of 28 306 24 843 24 843
the year
Net income for the period 143 087 69 776 537 201
Net transfers to trust
capital
and non-distributable (25 799) 893 (387 904)
reserves
Income distributions (96 587) (69 510) (145 834)
Total unitholders` interest 2 175 331 1 280 161 1 743 089
ABRIDGED CONSOLIDATED CASH FLOW STATEMENTS
Net cash inflow from
operating activities 67 229 54 836 191 353
Net cash outflow from
investing activities (120 634) (27 498) (411 725)
Net cash inflow/(outflow) from
financing activities 173 056 (21 374) 213 472
Net increase/(decrease) in cash
and cash equivalents 119 651 5 964 (6 900)
Cash and cash equivalents
at the beginning of the year (16 488) (9 588) (9 588)
Cash and cash equivalents
at the end of the year 103 163 (3 624) (16 488)
CAPITAL COMMITMENTS
Authorised and contracted 276 053 42 481 134 920
Authorised and not yet 13 209 400 1 300
contracted
SEGMENTAL ANALYSIS
Total income
Retail 40 189 39 332 86 218
Offices 62 484 36 781 77 505
Industrial 64 737 33 670 74 932
Total 167 410 109 783 238 655
Profit for the period
Retail 51 302 29 252 173 919
Offices 55 875 25 596 219 232
Industrial 44 409 25 021 189 341
Corporate (8 499) (10 093) (45 291)
Total 143 087 69 776 537 201
INCOME DISTRIBUTIONS
Amount available for
distribution per unit (cents) 20,10 18,13 37,15
Distribution per unit (cents) 20,10 18,13 37,15
Interim 20,10 18,13 18,13
Final - - 19,02
The interim distribution of 20,10 cents, being number 48 for Capital Property
Fund, has been declared in respect of the income distribution period 1 January
2007 to 30 June 2007.
COMMENTARY
Preparation and accounting policies
The interim financial statements are prepared in accordance with International
Financial Reporting Standards (IFRS) as well as the requirements of the
Companies Act (Act 61 of 1973) and the Collective Investments Schemes Control
Act (Act 45 of 2002). The policies are consistent with those applied in the most
recent annual financial statements of the Fund. The interim financial statements
have not been audited or reviewed by the Fund`s auditors.
Distributable earnings
Capital`s distributable earnings for the interim period ended 30 June 2007
amounted to 20,10 cents per unit. This represents an increase of 10,87 % over
the 18,13 cents per unit distribution for the interim period ended 30 June 2006.
Commentary on results
Capital`s quality portfolio paid off with strong growth in distributions. The
quality of the portfolio was further upgraded with the acquisition of modern
industrial and office properties in sought-after locations, such as Longmeadow,
Meadowdale, Midrand, Sunninghill and Centurion. This bodes well for future
growth.
The portfolio is performing well with renewals and re-lettings exceeding
budgeted expectations. Vacancies remain low at 1,6% and demand for quality
industrial and office space continues unabated.
Building costs continue to rise ahead of escalations and core CPI, which is
positive for future rental increases at lease expiry.
Borrowings
In the current interest rate sensitive environment, the proceeds on the sale of
the non-core properties were applied to extinguish debt. The impact of the
reduction of debt has enhanced the Fund`s overall yield.
The property portfolio
Acquisitions
In total, 19, mostly single tenanted buildings with tenants including ABB,
Digistics, Distell, Eskom and Siemens (now Nokia Siemens Networks) were acquired
since the last financial year-end for a total consideration of R663 million. All
new purchases were in the Gauteng region, which has solid growth prospects and
makes the portfolio more efficient to manage. More than 60% of the portfolio`s
value is now located in Gauteng.
The industrial joint venture in Midrand with Improvon is proceeding well. The
fencing, gatehouse, services and internal roadways are nearing completion, and
construction has started on the first warehouse pre-let to a multi-national
corporation.
Details of acquisitions effective prior to 30 June 2007
Name Price Location GLA
R`000
Albert Amon Road 50,519 Meadowdale 7,070
33 Angus Crescent 43,514 Longmeadow 7,427
Platinum Road 40,068 Longmeadow 7,985
Cnr Director and Megawatt Road 29,278 Spartan 5,216
Covora Road 28,700 Jet Park 9,197
86 Tsessebe Crescent 27,661 Coporate Park 6,434
Burry Koen 25,376 Jet Park 10,028
Citrus Street 24,193 Laser Park 6,834
Ayshire Avenue 21,604 Longmeadow 4,912
Milkyway Road 19,359 Crown 3,865
Cranberry Street 18,856 Laser Park 5,649
Koornhof Road 16,511 Meadowdale 3,027
45 Angus Crescent 16,471 Longmeadow 4,064
Megawatt Road 14,243 Spartan 2,757
Mc Carthy Drive 12,497 Isando 5,071
Director Road 8,600 Spartan 1,675
397,450 91,211
Details of acquisitions not yet effective at 30 June 2007
Siemens 121,000 Centurion 10,522
Leeuwkop Road 98,657 Sunninghill 8,558
City Deep Hi-tech 46,000 City Deep 18,126
265,657 37,206
663,107 128,417
Disposals
Capital positioned itself defensively by disposing of 16 non-strategic
properties for R275 million resulting in a capital profit of R43 million
compared to the December 2006 valuations.
Details of property disposals
Book value Net
31 Dec 2006 proceeds
Name R`000 R`000
Kuils River 45 300 57 270
The Ridge 38 000 40 900
Sifon Park 18 400 22 746
Alberton Crossing 16 800 20 153
Arbeid Street 14 500 15 685
Edgars Belville 14 100 15 327
Vana Road 13 700 17 295
PnP Kroonstad 12 250 13 635
Shoprite Westonaria 9 250 10 316
New Road 9 200 11 138
Eastgate Mini Factories 8 200 8 177
139 6th Street 7 700 10 252
9 Grenville 6 600 8 368
Sales House Johannesburg 5 800 11 207
Checkers Standerton 5 698 6 222
66 Silverstone 5 629 5 815
231 127 274 506
Sectoral split (BASED ON BOOK VALUE)
Office - 36%
Retail - 18%
Industrial - 46%
Lease expiry
Vacant - 1,6%
31/12/2007 - 6,1%
31/12/2008 - 27,2%
31/12/2009 - 25,7%
31/12/2010 - 18,1%
31/12/2011 - 6,1%
31/12/2012 - 10,2%
Thereafter - 5,0%
Growth drivers in the portfolio
The growth fundamentals for the portfolio are strong as normal escalations are
expected to remain above CPI. Further, Capital has a number of positive
reversions due for renewal in the future, which will add to the rental base
going forward.
As the stock of strategic properties has become harder to find, Capital will
continue to partner with top developers in the office and industrial sectors to
gain access to development pipelines in strong growth areas.
The retail component of the Fund has been reduced in terms of the total
portfolio and this is in line with Capital`s strategy to focus on the industrial
and office sectors going forward.
Prospects
Strong economic growth accompanied by increases in building costs bodes well for
rising rentals and capital growth for commercial real estate in South Africa. In
the industrial sector these factors are further positively influenced by a
shortage of zoned land in good locations.
Capital is expected to continue to provide strong growth in distributions for
the foreseeable future.
Profit distribution
Notice is hereby given that a cash distribution of 20,10 cents per unit, being
number 48 for Capital Property Fund, has been declared in respect of the period
1 January 2007 to 30 June 2007 and is payable to the unitholders recorded in the
books of Capital at the close of business on the record date, Friday 24 August
2007. Unitholders are advised that the last day to trade "cum" the distribution
will be Friday 17 August 2007. The units will trade "ex" the distribution as
from Monday 20 August 2007. Payment will be made on Monday 27 August 2007. Unit
certificates may not be dematerialised or rematerialised during the period
Monday 20 August 2007 to Friday 24 August 2007, both days inclusive.
By order of the Board
31 July 2007
Johannesburg
Registered office 4th Floor Rivonia Village 3 Mutual Road 2191 (PO Box
2555 Rivonia 2128)
Transfer secretaries Computershare Investor Services 2004 (Proprietary)
Limited 70 Marshall Street Johannesburg 2001 (PO Box 61051 Marshalltown
2107)
Share Code CPL ISIN ZAE000001731 ("Capital" or "the Fund" or "the Group")
www.capitalproperty.co.za
Date: 01/08/2007 17:00:58 Produced by the JSE SENS Department.
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