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OCT
OCT
OCT - Octodec - Reviewed Results Of The Group For The Year Ended 31 August 2007
Octodec Investments Limited and its subsidiaries.
(Incorporated in the Republic of South Africa)
(Registration number 1056/002868/06)
Share code: OCT & ISIN: ZAE000005104
("Octodec" or "the company")
REVIEWED RESULTS OF THE GROUP FOR THE YEAR ENDED 31 AUGUST 2007
Distribution up by 19.7% to 106,20 cents per linked unit
Increase in net asset value by 30.8% to 1471 cents per linked unit
Total investments exceed R2,1 billion
CONDENSED CONSOLIDATED INCOME STATEMENT
Reviewed Audited
% year to year to
R`000 Changes 31 Aug 2007 31 Aug 2006
Revenue 221,715 182,199
- earned on contractual basis 25.1% 225,013 179,866
- straight line lease (3,298) 2,333
adjustment
Operating costs (78,473) (63,376)
Net rental income from 143,242 118,823
properties
- earned on contractual basis 25.8% 146,540 116,490
- straight line lease (3,298) 2,333
adjustment
Administrative expenses (10,218) (8,091)
Depreciation (656) (641)
Income before investment 20.2% 132,368 110,091
income
Investment income 32,928 46,125
- Interest received 1,204 734
- Investment income - listed 7,683 5,126
investments
- Investment income
- associate
share of after tax 17 (1,545)
profit/(loss)
fair value adjustment/capital 18,610 36,150
reserves
interest and dividends 5,414 5,660
Income before finance costs 5.8% 165,296 156,216
Finance costs 37.4% (64,499) (46,926)
Income before debenture (7.8%) 100,797 109,290
interest and capital profits
Trading profit and other 2,771 377
capital items
Fair value adjustment of
investment properties
- net revaluation 241,858 254,194
- gross revaluation 238,560 256,527
- attributable to straight 3,298 (2,333)
line lease adjustment
Amortisation of deemed 4,010 3,566
debenture premium
Income before debenture (4.9%) 349,436 367,427
interest
Debenture interest 24.0% (85,737) (69,147)
Income before taxation (11.6%) 263,699 298,280
Taxation charge (62,579) (72,960)
- Deferred taxation (61,032) (71,725)
- Normal taxation (1,547) (1,235)
Income attributable to 201,120 225,320
shareholders
Linked units in issue - (`000) 89,298 78,345
Weighted linked units 78,975 78,345
in issue - (`000)
Earnings per share - (cents)* (11.5%) 254,7 287,6
Earnings per linked unit (3.4%) 363,2 375,9
-(cents)*
Headline earnings per linked 19.1% 114,2 95,9
unit - (cents)*
* Based on the weighted number
of unit in issue
Distribution per linked unit
(cents)
- Dividends 0,53 0,44
- Interest 105,67 88,26
Total 19.7% 106,20 88,70
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Reviewed Audited
% year to year to
R`000 Changes 31 Aug 2007 31 Aug 2006
Cash flow from operating
activities
Net rental income from 137,788 107,758
properties
Adjustment for:
- Depreciation 656 641
- Working capital changes (6,283) (1,394)
Cash generated from 132,161 107,005
operations
Investment income and 14,301 11,520
interest received
Finance costs (64,499) (46,926)
Taxation paid (679) (703)
Distribution to linked (75,763) (61,581)
unitholders paid
Net cash inflow from 5,521 9,315
operating activities
Cash flow from investing
activities
Investing activities (132,901) (116,302)
Increase in investments and (28,493) (34,481)
loans to associate
Proceeds from disposal of 3,572 757
investment properties
Net cash outflow used in (157,822) (150,026)
investing activities
Cash flow from financing
activities
Issue of linked units 199,203 -
(Decrease)/increase in (52,409) 141,544
interest bearing borrowings
Net cash generated from 146,794 141,544
financing activities
Net (decrease)/increase in (5,507) 833
cash and cash equivalents
Cash and cash equivalents at (3,820) (4,653)
beginning of year
Cash and cash equivalents at (9,327) (3,820)
end of year
SEGMENTAL INFORMATION
Corpo-
Resi- rate
Indus- Commer- den- unallo-
R`000 trial Office Retail cial tial cated Total
Analysis by
property usage
- 2007
Revenue
Rentals and 30,665 22,794 113,333 51,871 6,350 - 225,013
recoveries
received
Straight line - - - - - (3,298)
lease (3,298)
adjustment
Total revenue 30,665 22,794 113,333 51,871 6,350 221,715
(3,298)
Income before 19,044 13,526 68,841 30,343 2,875 132,368
investment (2,261)
income
Assets
Investment 259,058 195,719 981,018 421,036 44,896 - 1,901,727
properties
Other assets - - - - - 273,700
(unallo-cated) 273,700
Total assets 259,058 195,719 981,018 421,036 44,896 2,175,427
273,700
Analysis by
property usage
- 2006
Revenue
Rentals and 20,940 15,498 100,322 36,397 5,093 - 178,250
recoveries
received
Management fee - - - - - 1,616 1,616
Straight line - - - - - 2,333 2,333
lease
adjustment
Total revenue 20,940 15,498 100,322 36,397 5,093 3,949 182,199
Income before 13,800 10,444 67,899 22,980 2,801 110,091
investment (7,833)
income
Assets
Investment 214,637 122,458 864,622 298,130 34,074 - 1,533,921
properties
Other assets - - - - - 178,492
(unallo-cated) 178,492
Total assets 214,637 122,458 864,622 298,130 34,074 1,712,413
178,492
Reviewed Audit
31 August 31 August
R`000 2007 2006
Assets
Non-current assets 2,152,906 1,695,523
Investment
properties, plant
and equipment
- Investment 1,877,070 1,505,820
properties
- Plant and 1,969 2,115
equipment
Investment 22,688 25,986
properties -
straight line
lease adjustment
Investment - 132,742 83,127
listed securities
- associate 118,437 78,475
company
Current assets 22,521 16,890
Total assets 2,175,427 1,712,413
Equity and
liabilities
Share capital and 907,455 669,426
Reserves
Share capital and 47,221 42,224
premium
Non-distributable 829,960 599,156
reserve
Retained profit 30,274 28,046
Non-current 1,177,210 965,523
liabilities
Debentures capital 406,105 211,899
and premium
Interest bearing 507,543 557,253
borrowings
Deferred tax 263,562 196,371
liability
Current 90,762 77,464
liabilities
Interest bearing 16,682 13,806
Non-interest 27,699 27,643
bearing
Linked unitholders 46,381 36,015
Total equity and 2,175,427 1,712,413
liabilities
Linked units in 89,298 78,345
issue (`000)
Net asset value 1,471 1,125
per linked unit
(cents)
Net asset value 1,766 1,376
per linked unit
(cents) - before
deferred tax
CONDENSED STATEMENT OF CHANGES IN EQUITY
Share Non-dis- Distrib-
capital and tributable utable
R`000 premium reserve reserve Total
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 377 (377) -
on disposal of
investment
property
Fair value
adjustment of
investment
properties
- associate, net 36,150 (36,150) -
of deferred tax
- investment 182,150 (182,150) -
properties, net
of deferred tax
Balance at 1 42,224 599,156 28,046 669,426
September 2006
Net income 201,120 201,120
attributable to
ordinary
shareholders
Issue of linked 987 987
units
Reallocation of 4,010 (4,010) -
deemed debenture
premium
Dividends paid (393) (393)
Adjustment to 36,315 36,315
valuation of
listed
investment, net
of deferred
Capital Gains
Tax
Trading profit 503 (503) -
and other
capital items,
after tax
Fair value
adjustment of
investment
properties
- investment 175,376 (175,376) -
properties, net
of deferred tax
- associate, net 18,610 (18,610) -
of deferred tax
Balance at31 47,221 829,960 30,274 907,455
August 2007
DISTRIBUTABLE EARNINGS
The following additional information is provided and is aimed at
disclosing to the users the basis on which the distributions are
calculated.
% year to year to
R`000 Changes 31 Aug 2007 31 Aug 2006
Revenue
Rent earned on contractual 25.1% 225,013 179,866
basis
Operating costs (78,473) (63,376)
Net rental income from 25.8% 146,540 116,490
properties
Administrative expenses (10,218) (8,091)
Depreciation (656) (641)
Income before investment 25.9% 135,666 107,758
income
Interest received 1,204 734
Interest received - prepaid 2,738 -
distribution
Investment income - associate 32.0% 5,431 4,115
Investment income - listed 49.9% 7,683 5,126
investments
Distributable income before 29.7% 152,722 117,733
finance charges
Finance charges 37.4% (64,499) (46,926)
Distributable income before 88,223 70,807
taxation
Taxation charge (1,454) (1,235)
Unit holders distributable 24.7% 86,769 69,572
earnings
Trading profit 2,198 -
Unit holders distributable 27.9% 88,967 69,572
earnings
Distribution per linked unit 19.7% 106,20 88,70
(cents)
Earnings distributed (`000) 88,919 69,453
RECONCILIATION - EARNINGS TO DISTRIBUTABLE EARNINGS
Reviewed Reviewed Audited Audited
year to year to year to year to
31 Aug 2007 31 Aug 2007 31 Aug 2006 31 Aug 2006
R`000 cents R`000 cents
Income 201,120 254,7 225,320 287,6
attributable
to
shareholders
Add: debenture 85,737 108,5 9,147 88,3
interest per
linked unit
Earnings - 286,857 63,2 294,467 375,9
linked
unitholders
Trading (2,678) (3,4) (377) (0,5)
profits and
other capital
items after
tax
Fair value
adjustments
- associate, (18,610) (23,6) (36,150) (46,1)
net of
deferred tax
- investment (175,376) (222,0) (182,827) (233,4)
properties,
net of
deferred tax
Headline 90,193 114,2 75,113 95,9
earnings -
linked
unitholders
Straight line 2,341 (1,656)
lease
adjustment,
after tax
Deferred (4,493) (319)
taxation
adjustments
Interest 2,738 -
received -
prepaid
distribution
Amortisation (4,010) (3,566)
of deemed
debenture
premium
Trading profit 2,198 -
Distributable 88,967 69,572
earnings -
linked
unitholders
NOTES TO THE FINANCIAL STATEMENTS
The reviewed financial statements on which these results are based have been
prepared in accordance with International Financial Reporting Standards (IFRS)
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.
In compliance with IFRS, 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.
Contingent liability: as at 31 August 2007 there are no material contingent
liabilities.
The results have been reviewed by Deloitte & Touche, whose unmodified review
report is available for inspection at the company`s registered office.
COMMENTS
Review of results
The directors of Octodec are pleased to report that the company has once again
produced strong growth in distributions to linked unitholders. The total return
for the year taking capital growth and distributions into account was 59%.
The total distribution per linked unit for the year of 106,2 cents (2006: 88,7
cents) represents an increase of 19.7% on that paid in the previous year. Costs
of new borrowings, which are higher than the initial yields on properties
purchased, as well as the Sildale Park development which was not fully let
during the period, had a negative effect on distribution growth. The dilutionary
effect of the issue of new units also reduced the growth. Rental income and net
rental income increased by 25.1% and 25.8% respectively. Trading profit and
other capital items include a trading profit amounting to R2,2 million and a
capital profit on the disposal of investment properties of R0,6 million. The
trading profit has been distributed to unitholders.
Favourable renewals of leases, strict expense control as well as favourable
trading conditions have all contributed to the growth in distributable earnings.
Net rental income before taking properties acquired and developed into account,
recorded an increase of 15%.
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 growth in rental income amounts to 11%.
Acquisitions and developments
The Sildale Industrial Park development was completed during the year at a cost
of R13,1 million. The letting of these light industrial units is progressing
well and due to the strong demand the development of additional units is
planned.
Octodec continues to unlock the value of its Johannesburg and Pretoria CBD
portfolios by the redevelopment and refurbishment thereof. Construction at
Registry House to convert this office block to multi-use retail/light industrial
facilities was completed at the year end, at a cost of R9,9 million.
The Tiny Town residential development, which is situated adjacent to the Union
Building, is due to commence in March 2008. The total cost of the project is in
excess of R100 million.
During the period under review six properties were purchased and transferred for
an aggregate of R96,7 million. These purchases include Elephant House, Inner
Court and Anderson Place which are all situated in the Johannesburg CBD and two
light industrial properties situated in Johannesburg. Rentmeester an office
block situated in Pretoria was purchased but not yet transferred for a
consideration of R48 million.
In line with the strategy to invest in Premium Properties Limited, Octodec
acquired 549 975 linked units at an aggregate cost of R12,98 per linked unit.
Issue of new units
During the period 10 952 903 units were issued at a price of
1851 cents which includes a notional distribution pre-payment of 25 cents. These
units were placed with selected institutions and investors. The proceeds of R199
million are to be utilised to fund redevelopment and expansion opportunities. In
the short term the proceeds will be utilised to reduce borrowings and will
result in an interest saving at a rate of approximately 11.5%. An amount of R2,7
million was received as a prepaid distribution.
Borrowings
Following the receipt of the proceeds from the issue of linked units, the
borrowings decreased to R524,2 million. Octodec`s gearing ratio at the end of
the period under review was 24% as against 34% at 31 August 2006. The group has
facilities in excess of R220 million available to fund future cash flow
requirements.
Interest rates in respect of 86% of borrowings at 31 August 2007 have been
fixed. The weighted average interest rate at 31 August 2007 was 10.6% with fixed
borrowings maturing at various dates ranging from November 2007 to November
2010.
Revaluation of property portfolio
The directors` valuation of the portfolio, taking into account prevailing market
rentals, occupation levels and capitalisation rates increased by R239 million,
contributing to the increase in net asset value of 30.8%. At each financial year
end at least one-third of the property portfolio is valued on a rotational basis
by an external valuer.
The valuations have been assessed at audit committee and board level and are
substantially the same as the values reported by the external valuers.
Prospects
With the South African economic outlook remaining positive for property,
management is optimistic that the company will continue to grow earnings on par
with, if not better than, the market average.
DECLARATION OF DIVIDEND NO. 35 AND INTEREST PAYMENT ("the distribution")
The board has approved and notice is hereby given that dividend number 35 of
0,26 cents (2006: 0,23 cents) per ordinary share together with interest of 51,94
cents per debenture (2006: 45,79 cents), for the period 1 March 2007 to 31
August 2007 has been declared, payable to linked unitholders recorded in the
register on Friday, 16 November 2007. The last date to trade "CUM" distribution
is Friday, 9 November 2007. The units will commence trading "EX" distribution on
Monday, 12 November 2007. Payment date will be Monday, 19 November 2007.
No dematerialisation or rematerialisation of linked unit certificates may take
place between Monday, 12 November 2007 and Friday, 16 November 2007, both days
inclusive.
By order of the Board.
City Property Administration (Proprietary) Limited
18 October 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 House,
101 du Toit Street Pretoria, 0002
PO Box 15, Pretoria 0001
Tel: (012) 319-8811
Fax: (012) 319-8812
Transfer Secretaries
Computershare Investor Services 2004 (Pty) 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: 18/10/2007 15:59:53 Produced by the JSE SENS Department.
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