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ABT
ABT
ABT - Ambit Properties Limited - Reviewed financial results and distribution
for the year ended 30 September 2007
AMBIT PROPERTIES LIMITED
Registration number: 2001/007003/06
Share code: ABT
ISIN code: ZAE000051645
Reviewed financial results and distribution
for the year ended 30 September 2007
highlights
distribution growth up 10,1%
total return for year up 48,5%
occupancy level up 98,8%
group income statement
Year ended Year ended
30 September 2007 30 September 2006
Reviewed Audited
Notes R`000 R`000
Revenue 123 338 103 620
Rental - cash flows
inherent in leases 118 447 99 813
Rental - straight-line
adjustment 4 891 3 807
Property expenses (29 076) (25 239)
Net rental income from
properties 94 262 78 381
Interest income from
associate 15 391 9 868
Interest income 391 266
Amortisation of debenture
premium 3 597 1 776
Finance costs (27 324) (23 902)
Administrative expenses (6 541) (5 266)
Corporate expenses (2 665) (2 026)
Profit before fair value
adjustments 77 111 59 097
Change in fair value of
investment properties 212 644 93 450
- As per valuations 217 535 97 257
- Straight-line
adjustment (4 891) (3 807)
Profit on disposal of
investment properties - 72
Profit before debenture
interest and taxation 289 755 152 619
Share of associate
company`s after tax
profits 17 792 12 465
Debenture interest to
linked unitholders (68 623) (53 425)
Debenture interest paid (74 868) (55 199)
Less: Prepaid
distribution received 6 245 1 774
Profit before taxation 238 924 111 659
Taxation (59 261) (28 125)
Net profit 179 663 83 534
Earnings per linked unit
(cents) (weighted) 3.2 119,20 76,21
Earnings per share
(cents) (weighted) 3.2 86,25 46,48
Distribution per linked
unit (cents) 3.2 32,60 29,60
condensed group balance sheet
30 September 2007 30 September 2006
Reviewed Audited
Notes R`000 R`000
ASSETS
Non-current assets
Investment properties 4.2 1 090 638 809 329
- At valuation 1 110 750 824 550
- Straight-line
adjustment (20 112) (15 221)
Investment in associate 4.4 128 719 110 927
Rental receivable -
straight-line adjustment 16 745 14 551
Total non-current assets 1 236 102 934 807
Current assets
Trade and other
receivables 4.5 27 097 6 446
Cash and cash equivalents 50 077 56 128
Total current assets 77 174 62 574
Non-current assets held
for sale 4.2 73 200 -
TOTAL ASSETS 1 386 476 997 381
EQUITY AND LIABILITIES
Share capital and
reserves 373 210 193 115
Non-current liabilities 963 745 765 714
Debentures 413 383 335 669
Debenture premium 103 843 49 586
Interest-bearing
borrowings 4.6 322 700 315 960
Deferred taxation
liability 123 819 64 499
Total current liabilities 49 521 38 552
TOTAL EQUITY AND
LIABILITIES 1 386 476 997 381
condensed group cash flow statement
30 September 2007 30 September 2006
Reviewed Audited
R`000 R`000
OPERATING ACTIVITIES
Cash generated by operating
activities 62 238 70 105
Interest income 15 782 10 134
Finance costs (27 324) (23 902)
Distributions paid to linked
unitholders (57 622) (49 360)
Cash (outflow)/inflow from
operating activities (6 926) 6 977
INVESTING ACTIVITIES
Acquisition of investment properties (136 000) (79 850)
Improvements to investment properties (5 865) (1 753)
Proceeds on disposal of investment properties - 25 382
Acquisition of/increase in holding
in associate company - (15 518)
Cash (outflow) from investing activities (141 865) (71 739)
FINANCING ACTIVITIES
Linked units issued 136 000 43 200
Interest-bearing borrowings raised 6 740 48 761
Cash inflow from financing activities 142 740 91 961
(Decrease)/Increase in cash and
cash equivalents (6 051) 27 199
Cash and cash equivalents at
beginning of year 56 128 28 929
CASH AND CASH EQUIVALENTS AT END OF YEAR 50 077 56 128
condensed group statement of changes in equity
Share Distributable
capital reserves
Reviewed R`000 R`000
Balance at 30 September 2005 1 738 330
Shares issued during the period 127 -
Net profit attributable to linked unitholders - 83 534
Transfer to non-distributable reserves - (83 500)
Balance at 30 September 2006 1 865 364
Shares issued during the period 432 -
Net profit attributable to linked unitholders - 179 663
Transfer to non-distributable reserves - (179 663)
Balance at 30 September 2007 2 297 364
Non-
distributable
reserves Total
Reviewed R`000 R`000
Balance at 30 September 2005 107 386 109 454
Shares issued during the period - 127
Net profit attributable to linked unitholders - 83 534
Transfer to non-distributable reserves 83 500 -
Balance at 30 September 2006 190 886 193 115
Shares issued during the period - 432
Net profit attributable to linked unitholders - 179 663
Transfer to non-distributable reserves 179 663 -
Balance at 30 September 2007 370 549 373 210
Commentary
1. OTHER INFORMATION Reviewed Audited
30 September 2007 30 September 2006
Linked units in issue 229 657 439 186 482 837
Weighted average linked units 208 295 318 179 707 418
Net asset value (cents per linked unit)
(prior to distribution) 404 326
Listed market price (cents per linked unit) 450 325
Premium/(discount) to net asset value (%) 11,4 (0,3)
To fund the acquisition of the Navigator portfolio, 43 174 603 units were
issued during the year at a price of 315 cents per unit. In addition, 15,5
cents per unit was received in respect of the interim distribution paid and
14,7 cents per unit was received in respect of the final distribution to be
paid.
2. REVIEW BY INDEPENDENT AUDITORS
These preliminary financial results have been reviewed by Deloitte &
Touche, Ambit`s auditors. Their unmodified review report is available at
Ambit`s registered office.
3. NOTES TO THE FINANCIAL STATEMENTS
3.1 Basis of preparation and accounting policies
This preliminary report has been prepared in accordance with IAS 34:
Interim financial reporting and using accounting policies in
compliance with International Financial Reporting Standards and the
Companies Act in South Africa and is consistent with the prior year.
Ambit has adopted all the statements and interpretations issued during
the current year by the International Accounting Standards Board
("IASB"), however the result of adopting these new standards and
interpretations did not have any significant impact on the financial
results.
3.2 Earnings and headline earnings
Earnings and headline earnings for the year are based on the weighted
Average number of linked units in issue for the year and calculated as
follows:
Reviewed
30 September 2007
R`000 Cents per unit
Profit (earnings) per share 179 663 86,25
Debenture interest 68 623 32,95
Profit (earnings) per linked unit 248 286 119,20
Amortisation of debenture premium (3 597) (1,73)
Capital surpluses (net of deferred
taxation) (172 593) (82,86)
Headline earnings per linked unit 72 096 34,61
Debenture interest (68 623) (32,95)
Headline earnings per share 3 473 1,67
Reconciliation to undistributed
earnings:
Debenture interest 68 623 32,95
Rental straight-lining
(net of deferred tax) (3 473) (1,67)
Distributable earnings 68 623 32,95
Debenture interest (68 623) (32,95)
Undistributed income - -
Distribution per linked unit in issue 32,60
Audited
30 September 2006
R`000 Cents per unit
Profit (earnings) per share 83 534 46,48
Debenture interest 53 425 29,73
Profit (earnings) per linked unit 136 959 76,21
Amortisation of debenture premium (1 776) (0,99)
Capital surpluses (net of deferred
taxation) (79 015) (43,97)
Headline earnings per linked unit 56 168 31,25
Debenture interest (53 425) (29,73)
Headline earnings per share 2 743 1,52
Reconciliation to undistributed
earnings:
Debenture interest 53 425 29,73
Rental straight-lining
(net of deferred tax) (2 703) (1,50)
Distributable earnings 53 465 29,75
Debenture interest (53 425) (29,73)
Undistributed income 40 0,02
Distribution per linked unit in issue 29,60
3.3 Primary business segments - all amounts exclude straight-line adjustments
Retail Office
30 September 2007 R`000 R`000
Rental - cash flows inherent in leases 66 700 32 262
Net rental income from properties 50 282 23 508
Fair value adjustment 97 175 84 184
Investment properties - at valuation* 675 950 321 600
30 September 2006
Rental - cash flows inherent in leases 55 556 25 818
Net rental income from properties 41 257 18 011
Fair value adjustment of investment properties 58 270 18 861
Profit on disposal of investment properties (29) 77
Investment properties - at valuation 487 950 190 200
Industrial Group
30 September 2007 R`000 R`000
Rental - cash flows inherent in leases 19 485 118 447
Net rental income from properties 15 581 89 371
Fair value adjustment 36 176 217 535
Investment properties - at valuation* 186 400 1 183 950
30 September 2006
Rental - cash flows inherent in leases 18 439 99 813
Net rental income from properties 15 306 74 574
Fair value adjustment of investment properties 20 126 97 257
Profit on disposal of investment properties 24 72
Investment properties - at valuation 146 400 824 550
* including non-current assets held for sale
4. COMMENTS
4.1 Results
Ambit`s distribution for the half year to 30 September 2007 has increased
by 10,9% to 17,30 cents per unit (cpu) (2006: 15,60 cpu). The total
distribution for the year is R68,6 million or 32,60 cpu (2006: 29,60 cpu)
representing an increase of 10,1% on 2006. The market price of units
traded on the JSE Limited at 30 September 2007 was 450 cents which
represents a premium to net asset value of 11,4% and an increase of 38,5%
over the year (2006: 325 cpu). Combined with the growth in the listed
market price of 125 cpu a total return of 48,5% has been achieved.
Summarised operating results
(excluding non-cash flow items) 2007 2006
R`000 % change R`000
Core portfolio 82 029 11% 74 108
Rental income 110 480 12% 99 033
Property expenses (28 451) 14% (24 925)
Additions 7 342 -
Disposals - 466
Operating income from investment
properties 89 371 74 574
Portfolio expenses (9 206) (7 381)
Asset management fee (4 714) (3 904)
Corporate and administrative
expenses (4 492) (3 477)
Profit from investment properties 80 165 67 193
Interest income from associate 15 391 9 868
Interest income 391 266
Finance costs (27 324) (23 902)
Profit 68 623 53 425
Prepaid distribution received 6 245 1 774
Distributable profit 74 868 55 199
Ratio of property expenses to
rental income (%) 25,75 2% 25,17
The core portfolio, representing properties held for 12 comparative months,
reflects growth of 11%. Revenue increased by 12% and property expenses by 14%.
The increase in property expenses is due to a slight increase in maintenance
expenditure. The marginal increase in the operating costs to rental income
ratio to 25,75% is still very favourable to the IPD benchmark of 31,8% as
reported at 31 December 2006. This ratio has consistently been between 25% and
26% since Ambit`s inception.
The asset management fee is calculated on the market capitalisation plus
long-term borrowings of the company. The increase is due to the acquisitions
during the year.
The increase in corporate and administrative expenditure is due to the
company`s move from Durban to Johannesburg and the enlarged Board of directors.
4.2 Property portfolio
The property portfolio of 34 properties was valued by independent
valuers CB Richard Ellis as at 30 September 2007. The portfolio
comprises (by value) 57% retail, 27% offices and 16% industrial
properties and is predominantly located in Gauteng (67%).
The portfolio valuation of R1,184 million before the straight-line
rentaladjustment and inclusive of the assets identified to be sold,
reflects an increase of 43,5% on the 2006 valuation of R825 million.
The growth of R359 million is due to the acquisition of seven
properties at a cost of R136
million; capital expenditure of R6 million and a valuation surplus of
R217 million. The valuation surplus largely arose as a result of a
general improvement in capitalisation rates and increased market
rentals.
The company has embarked on a programme to dispose of several smaller
properties with a combined value of R73 million. The properties have
accordingly been classified as assets held for sale. These properties
will beisposed of provided the required sale price is achieved.
During the year a portfolio (Navigator portfolio) of seven properties
Was acquired at an initial yield of 10,8% and a cost of R136 million
before
portfolio costs. The acquisition was funded by way of the issue of new
Ambit linked units at a price of 315 cpu.
The pre-leasing of the Link retail development at Old Main Road,
Pinetown, in which Ambit is a 50% owner, is progressing and the
construction of Phase 1 has commenced at a contract price of R24,9
million to Ambit. The cost of the total 18 800 m2 retail development
is estimated at R59,1 million (50%) and the forecast yield is 10.2%.
4.3 Letting activity
Tenant retention on lease expiry had been maintained at a high level
of 89%.Across the portfolio renewal rentals have increased. The space
vacated by the 11% of tenants not renewing on expiry was let to new
tenants. New leases were concluded with the result that the vacancy
level dropped to 1,2% at 30
September 2007 from last year`s 3,5%.
4.4 Oryx investment - equity accounted associate
Ambit`s 26,4% investment in Oryx Properties Limited increased in value by
R17,8 million to R128,7 million due to the increase in net asset value of
Oryx to 882 cpu (2006: 778 cpu ). The investment in Oryx has performed well
in the current year, and recent trades at a premium to net asset value
indicates further value to Ambit.
4.5 Net asset value
The revaluations of investment properties have given rise to a fair
market adjustment of R217,5 million. Current assets increased mainly
due to the Oryx half-year distribution only received in early October
2007 and the prepayment of expenditure.
The net asset value, before making provision for the debenture
interest payable but after providing for deferred taxation at 29% on
the fair market adjustment, is 404 cpu, an increase of 24% on 2006
(326 cpu).
4.6 Borrowings
At 30 September 2007 Ambit`s debt level was R322,7 million (2006:
R315,9 million), which represents a long-term debt to non-current
assets ratio of 24,7% (2006: 33,8%). Of this debt 74% (2006: 58%) is
subject to fixed interest agreements for periods from 2007 to 2012.
The average interest rate as at 30 September 2007 was 10,1% (2006:
9,7%) following the interest rate increases during 2007. Surplus cash
is invested at Ambit`s variable borrowing rate of 200
basis points below prime.
4.7 Liquidity
38% of the units in issue traded during the financial year.
4.8 Related party transactions
Ambit is managed by Ambit Management Services (Pty) Ltd.
This company, which is owned by Absa Bank Limited, is considered a
related party.
All transactions with these parties are concluded on an arm`s length
basis with market related terms and conditions.
4.9 Directorate
NBS Harris was re-appointed as Chief Executive Officer until 30 June
2008. DL Brown resigned as Chairman on 31 May 2007 and JH Beare was
appointed as independent non-executive Chairman of the Board in his
place. DJ Brits, SL Rai and IB Skosana, were appointed as non -
executive directors during the year and J de Beer as alternate
director to NBS Harris.
4.10 Post balance sheet events - Acquisitions
4.10.1 African Alliance Portfolio
It was announced on 20 August 2007 that the major suspensive
conditions to this transaction had been met. In terms of
this transaction Ambit will acquire a portfolio of five
commercial properties for a consideration of R690 million to
be settled by way of an issue of new Ambit linked units to
be issued at a price of 370 cpu. The portfolio will be
acquired at a property yield of 9% before
portfolio costs. Transfers are imminent.
As a result of this acquisition 39% of Ambit`s linked units
in issue will be held by previously disadvantaged parties.
Cape Empowerment Trust will become a 22% shareholder in
Ambit Management Services (Pty) Ltd.
4.10.2 11 Diagonal Street and West Street Parkade
It was announced on 17 October 2007 that Ambit had entered
into an agreement with Absa Bank Limited to acquire the 11
Diagonal Street and West Street Parkade properties, subject
to various suspensive conditions, for a consideration of
R303,5 million. The portfolio will be acquired at a yield of
9,25% before portfolio costs and will be settled by way of
the issue of new Ambit linked units to be issued at a price
of 425 cpu. The vacant shops and unlet parking bays at the
West Street Parkade property will be let as soon after the
effective date as possible and once fully let, this
property`s yield is estimated at 11,5% and the overall yield
on t his portfolio will be 9,7%.
4.10.3 Abseq portfolio
It was announced on 19 October 2007 that Ambit had entered
into an agreement with Absa Bank Limited, Equity Estates and
others to acquire a portfolio of 18 premium quality
decentralised properties, subject to various suspensive
conditions, for a consideration of R1 036,9 million. The
portfolio will be acquired at a yield of 7,8% before
portfolio costs and will be settled by way of the issue of
192 298 589 new Ambit linked units to be issued at a price
of 425 cpu and cash.
Post these acquisitions Ambit will have 71% of its
portfolion in offices, 23% in retail and 6% in industrial.
4.10.4 Capital commitments
Authorised capital improvements still to be spent on
investment properties totals R29 million with R25 million
earmarked for the first phase of the Link
development. The balance of the project is subject to
approval following the successful conclusion of the leasing
program. The remaining R4 million will be spent on Park
Meadows Mall.
4.11 Prospects
The property market continues to perform well but in particular the
office market is expected to show good growth. Ambit is well
structured to benefit from the sector`s performance. Management
continues to seek quality investment opportunities to grow the
portfolio and increase distribution growth.
5. DECLARATION OF DISTRIBUTION
Notice is hereby given of distribution Number Seven amounting to 17,3 cpu
interest on debentures, for the six -month period to 30 September 2007.
Last date to trade cum distribution Friday, 23 November 2007
Units will trade ex distribution Monday, 26 November 2007
Record date to participate in the distribution Friday, 30 November 2007
Payment of distribution Monday, 3 December 2007
Linked unit certificates may not be dematerialised or re-materialised
between Monday, 26 November 2007 and Friday, 30 November 2007, both days
inclusive.
On behalf of the Board
JH Beare NBS Harris
Chairman Chief Executive Officer
8 November 2007
Directors: JH Beare (Chairman)+, DJ Brits+, RR Emslie, NBS Harris
(Chief Executive Officer)*, IN Mkhari+, SL Rai, IB Skosana+, F Uys+
Alternate directors: RD Jeffery, J de Beer* *executive +independent
Registered Office
Ambit Properties Limited
First Floor, 4 Fricker Road, Illovo Boulevard, Illovo 2196
Postal Address
PO Box 618, Melrose Arch 2076
Auditors
Deloitte
Deloitte & Touche Chartered Accountants (SA)
Registered Accountants and Auditors
Sponsor
Exchange
sponsors
Transfer secretaries
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