| Fri 23 May 2008, 15:28 | | VKE - Vukile Property Fund Limited - Audited resu |
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VKE
VKE
VKE - Vukile Property Fund Limited - Audited results and distribution
announcement for the year ended 31 March 2008
Vukile Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2002/027194/06)
JSE Share code: VKE & ISIN: ZAE000056370
NSX Share code: VKN
("Vukile" or "the company")
AUDITED RESULTS
and distribution announcement for the year ended 31 March 2008
* Net profit for distribution up 23.2%
* Annual distribution increased by 15%
* Acquisitions and developments total R256m
* Vacancy level reduced further
1 Basis of preparation
The audited financial statements for the year ended 31 March 2008 have been
prepared in terms of International Financial Reporting Standards (IFRS) and
relevant sections of the South African Companies Act 1973, as amended. The
accounting policies applied are consistent with those applied in the previous
year.
The financial statements have been audited by Grant Thornton, whose unqualified
audit report is available for inspection at the company`s registered office.
2 Financial results
The group`s net profit available for distribution amounted to R264.6 million for
the year ended 31 March 2008 compared to the R214.8 million for the previous
year, an increase of 23.2%. If acquisitions and disposals are excluded, on a
"like for like" basis, group net property revenue increased by 12% from 2007 to
2008.
The increase in group corporate administration expenditure from R12 million to
R20.9 million was primarily due to:
- A higher long-term incentive bonus of R3.3 million (2007: R1 million)
recognised in the income statement according to the relevant accounting
standard, as part of a long-term conditional incentive scheme realisable in June
2010.
- A R1.3 million short term bonus payment that related to the previous year`s
results.
- A short-term bonus accrual of R4 million for the current year (2007: R1
million), payable over a two-year period.
Group finance costs, net of interest income, have reduced by R12.1 million, from
R126.9 million to R114.8 million, largely as a result of the utilisation of the
proceeds from property sales to repay debt in the first half of the year. The
optimal use of surplus cash within the group during the year has also assisted
in reducing the cost of debt.
Summary of group financial performance
March March %
2008 2007 change
Headline earnings of linked units (Rm) 270 230 17.4
Available for distribution (cents per
linked unit) 89.54 77.56 15.4
Net asset value attributable to equity
holders of parent per linked unit (cents) 890 803 10.8
Distribution per linked unit (cents) 88.25 76.75 15.0
Loan to value ratio 27.9% 29.9% (6.7)
The net asset value per linked unit increased by 10.8% from R8.03 per linked
unit as at 31 March 2007 to R8.90 per linked unit as at 31 March 2008.
3 Distributions
The board of directors has approved a final distribution of 48.0 cents per
linked unit for the six months to 31 March 2008, an increase of 17.0% over the
comparable six month period. The distribution for the full year ended 31 March
2008 is 88.25 cents per linked unit, an increase of 15% over the previous year`s
distribution of 76.75 cents per linked unit. The 11.5 cents per linked unit
increase in distributions year-on-year is made up as follows:
Cents per
linked unit
Contributions to increased rental income
- Reduction in vacancies and increased rentals 17.8
- Additional rentals from property acquisition 4.2
- Other 2.0
24.0
Less: Increase in property expenditure (4.4)
Income foregone on properties sold in prior year (4.1)
Net increase in group property revenue 15.5
Net finance costs reduced by 4.1
The income foregone of 4.1 cents per linked unit
referred to above was compensated for by the reduction
in net finance costs of an equivalent amount as the
proceeds of the previous year`s property disposals were
utilised to reduce borrowings.
Increased administrative expenses (as outlined in
paragraph 2 above), taxation and retained income (3.5)
Adjustment for an increase in weighted average
number of linked units in issue (4.6)
Net increase in distribution 11.5
4 Borrowings
The group`s long-term debt is hedged using interest rate swap agreements for
periods expiring during the next two to four years. 99.2% of all interest
bearing debt has been hedged at year-end at a weighted average rate of 10.27%
per annum. Changes in interest rates will, therefore, have minimal impact on
the group`s cost of debt over the next two years.
The company`s borrowing capacity is, in terms of its articles of association,
not limited. The board policy is to limit gearing to 45%. The group`s gearing
ratio at the end of the financial year was 27.9%. The group has unutilised bank
facilities of R400 million available to fund acquisitions, redevelopments and
expansion opportunities.
5 Group property portfolio
The property portfolio currently comprises 74 properties with a gross lettable
area of 911 907m2.
At 31 March 2008, the portfolio`s vacancy (measured as a percentage of gross
rentals) was 2.8% compared to 2.9% at 31 March 2007.
Midrand Allandale reflected a 22.3% vacancy at year-end due to the expansion of
5 650m2 which is still in the process of being let. If this vacancy is excluded
then the year end vacancy, as a percentage of gross rentals, reduces to 2.4%.
6 Acquisitions, developments and disposals
Acquisitions and developments:
- The development of a 5 650m2 mini factory and warehousing complex on
undeveloped land at Vukile`s existing Allandale Park mini factory complex in
Midrand was completed, on schedule, in November 2007 at a capital outlay of
R17.2 million, with an anticipated net initial yield of 10.4%.
- The development of a 12 359m2 shopping centre at Moratiwa Crossing, district
Jane Furse, Limpopo Province was completed in November 2007 at a cost of R61.5
million, with a net initial yield of 9.5%. Vukile holds an 86.5% share in this
centre.
- A 4 394m2 "A" grade office complex located in West Street Houghton was
acquired on 4 September 2007 at a total capital outlay of R33.5 million, with an
initial yield of 9.2%.
- The group acquired BPI House in Windhoek for approximately R110 million with
effect from 1 July 2007. BPI House is an A-grade office and retail complex in
the heart of the Windhoek CBD. It has a total gross lettable area of 12 915m2
and a blue-chip tenant line-up which includes the Government of Namibia, Pick n
Pay, Truworths, Dunns, Engen and Mobile Telecom Company. The anticipated yield
is 9.1% in the first year.
- An A-grade office building complex, with a gross lettable area of 3 480m2, as
well as an undeveloped erf measuring 2 263m2 located in Lynnwood Road Pretoria,
was acquired in March 2008 at a total capital outlay of R34.0 million, with a
net initial yield of 8.6% in the first year.
The cost of acquisitions and developments for the year ended 31 March 2008
amounted to R256 million.
Disposals:
As part of Vukile`s ongoing process to improve the quality of its portfolio, the
following non-core property was disposed of during the year:
Directors`
valuation
at Net
Purchase 31 March sales
Price 2007 price Transfer
Building R000 R000 R000 date
Hallmark Building 80 693 66 997 78 046 08/03/14
7 Valuation of portfolio
Valuations
The accounting policies of the company require that the entire portfolio be
valued every six months to fair market value by the directors. One half of the
portfolio will be valued every six months, on a rotational basis, by registered
independent third party valuers.
The directors have valued the group`s property portfolio at R4.32 billion as at
31 March 2008. This is R455 million (11.8%) higher than the valuation at 31
March 2007.
The external valuations by JHI Real Estate Limited and Old Mutual Property Group
(Pty) Ltd at 31 March 2008 of 53% of the total portfolio, amount to R160.5
million (7.0%) more than the directors` valuations of the same properties.
8 Segmental analysis
Segment assets and liabilities
Segment assets include all operating assets used by a segment and consist
principally of investment properties, receivables and cash. Assets not directly
attributable to a particular segment are allocated to the corporate segment.
Segment liabilities include all operating liabilities of a segment and consist
principally of outstanding accounts. Segment assets and liabilities do not
include deferred taxes.
Segmental analysis
Industrial Commercial Retail
Group income for the year
ended 31 March 2008 R000 R000 R000
Property revenue 88 643 187 468 336 616
Straight-line rental income
accrual 1 288 3 265 2 673
Property expenses (35 350) (56 558) (116 943)
Net profit from property operations 54 581 134 175 222 346
Group balance sheet at 31 March 2008
Non-current assets
Investment properties 640 918 1 210 479 2 354 009
Other non-current assets 34 512 64 939 100 533
Investment properties held for sale 53 450 - -
Current assets 6 163 11 682 27 130
Trade and other receivables 2 738 5 207 13 894
Cash and cash equivalents 1 236 2 339 4 965
Straight line rental asset 2 189 4 136 8 271
Non-current liabilities 415 478 784 698 1 525 995
Current liabilities 15 472 29 260 60 882
Trade and other payables 15 472 29 260 60 882
Linked unitholders - - -
Taxation payable - - -
Corporate Total
Group income for the year ended 31 March 2008 R000 R000
Property revenue 612 727
Straight-line rental income accrual 7 226
Property expenses (208 851)
Net profit from property operations 411 102
Group balance sheet at 31 March 2008
Non-current assets
Investment properties 4 205 406
Other non-current assets 199 984
Investment properties held for sale - 53 450
Current assets 32 869 77 844
Trade and other receivables - 21 839
Cash and cash equivalents 32 869 41 409
Straight line rental asset - 14 596
Non-current liabilities - 2 726 171
Current liabilities 151 110 256 724
Trade and other payables 9 200 114 814
Linked unitholders 141 864 141 864
Taxation payable 46 46
9 Capital commitments
The company is authorised and has contracted to develop:
- An additional warehouse of 1 750m2 plus offices of 840m2 on the existing
Courier IT premises in Spartan (Hellman International), at a cost of R14.5
million.
- The conversion of 3 420m2 of Oshakati Game centre, together with a 1 529m2
extension at a capital outlay of R30.7 million.
The company is authorised, but has not yet contracted, to:
- Develop a 1 594m2 extension of the Dobsonville shopping centre at a cost of
R12.6 million.
- Upgrade shopping centres, replace chillers and expend other minor capex at a
cost of R27.5 million.
Other commitments
Guarantees in lieu of municipal service deposits, amount to R6.3 million (2007:
R11.5 million).
10 Related party transactions
The following related party transactions have been entered into:
Amounts
owed to
Amount related
paid parties
2008 2008
Related party Type of transaction R000 R000
Sanlam Limited(1) Sale of property,
lease rentals 33 254 -
Sanlam Properties (Pty) Ltd Asset management
Amount due was paid in and other fees
April 2008 16 934 1 791
Gensec Property Services Property management
Limited trading as JHI fees, letting
Amount due was commission and
paid in April 2008 other fees 18 062 942
MCH Properties (Pty) Ltd Expansion of
Phoenix Plaza and
Dobsonville development
costs - -
Kuper Legh Property Property management
Group fee, letting
Amount due was paid in commission and
April 2008 other fees 5 002 346
Khulela Properties (Pty) Investment fee,
Ltd sales commission
and due diligence fees 2 200 -
Amounts
owed to
Amount related
paid parties
2007 2007
Related party R000 R000
Sanlam Limited(1) - -
Sanlam Properties (Pty) Ltd
Amount due was paid in April 2008 16 259 1 396
Gensec Property Services Limited trading as JHI
Amount due was paid in April 2008 22 241 4 261
MCH Properties (Pty) Ltd 73 041 -
Kuper Legh Property Group
Amount due was paid in April 2008 2 919 671
Khulela Properties (Pty) Ltd - -
(1) Sold by African Life Assurance Company Limited, a subsidiary of Sanlam
Limited.
Sanlam Properties (Pty) Ltd is a subsidiary of Sanlam Limited which held 74 555
531 of the issued linked units of Vukile Property Fund Limited at 31 March 2008.
Sanlam Limited also holds a minority shareholding in Gensec Property Services
Limited, trading as JHI. Sanlam Properties (Pty) Ltd has a majority
shareholding in Khulela Properties (Pty) Ltd. Kuper Legh Property Group is
controlled by an individual who is also a significant unitholder in Vukile.
11 Prospects
In spite of the general slowdown in the economy, higher interest rates, the
electricity crisis and the slowdown in retail sales, property fundamentals
remain fairly strong. This is a result of the robust economic growth of the
past years and a general shortage of space in the market, which is evidenced by
low vacancies and record distribution growth. We therefore anticipate that
trading conditions will, although not as good as the year under review, remain
positive. We do expect the higher interest rate environment to have a negative
effect on the growth of portfolio income over the short to medium term. Taking
all this into account we remain optimistic that there could still be further
upward pressure on rentals which has allowed us to budget for reasonable growth
in distributions in the forthcoming year.
12 Payment of debenture interest and dividend
Notice is hereby given of a distribution amounting to 48.00 cents per linked
unit for the year ended 31 March 2008. The distribution comprises interest on
debentures of 47.90 cents per linked unit and a dividend of 0.10 cents per
linked unit.
Last date to trade cum distribution Thursday, 12 June 2008
Linked units trade ex distribution Friday, 13 June 2008
Record date for unitholders to
participate in the distribution Friday, 20 June 2008
Payment of distribution to unitholders Monday, 23 June 2008
Linked unit certificates may not be dematerialised or re-materialised between
Friday 13 June 2008 and Friday 20 June 2008, both days inclusive.
On behalf of the board
AD Botha G van Zyl
Chairman Chief executive
Roodepoort
23 May 2008
GROUP INCOME STATEMENT for the year ended 31 March 2008
2008 2007
R000 R000
Property revenue 612 727 553 480
Straight-line rental income accrual 7 226 22 100
Gross property revenue 619 953 575 580
Property expenses (208 851) (195 751)
Net profit from property operations 411 102 379 829
Administrative expenses (20 914) (12 032)
Investment and other income 9 262 12 122
Operating profit before finance costs 399 450 379 919
Finance costs (124 059) (139 022)
Net profit before debenture interest 275 391 240 897
Debenture interest (260 292) (213 088)
Net profit before capital items 15 099 27 809
Capital items
Profit/(loss) on sale of re-valued properties 11 051 (5 878)
Amortisation of debenture premium 544 416
Negative goodwill arising on acquisition of
MICC subsidiary 297 -
Fair value adjustments 222 424 436 068
Gross change in fair value of investment
properties 229 650 458 168
Straight-line rental income adjustment (7 226) (22 100)
Net profit before taxation 249 415 458 415
Taxation (52 165) (137 273)
Net profit 197 250 321 142
Attributable to:
Linked unitholders of the company 197 250 320 639
Minority - 503
197 250 321 142
Reconciliation: headline earnings and distributable earnings
2008 2008 2007
R000 Cents R000
per
linked
unit
Attributable profit after taxation 197 250 66.74 320 639
Adjusted for:
Net change in fair value of investment
properties (222 424) (75.26) (436 068)
Total tax effects of adjustments 46 782 15.83 127 161
Total minority interest of adjustments - - 96
Negative goodwill arising on the
acquisition of MICC House
Namibia (Pty) Ltd (297) (0.10) -
(Profit)/loss on sale of re-valued
properties (11 051) (3.74) 5 878
Amortisation of debenture premium (544) (0.18) (416)
Debenture interest 260 292 88.07 213 088
Headline earnings of linked units 270 008 91.36 230 378
Adjusted for:
Straight-line rental accrual net of
minority interest and deferred
taxation (5 362) (1.81) (15 577)
Available for distribution 264 646 89.55 214 801
Distribution to unitholders 260 824 212 839
Interest 260 292 212 406
Dividend 532 433
Total number of linked units in
issue (000) 295 551 295 551
Weighted average number of
linked units in issue (000) 295 551 276 927
Earnings (cents per linked unit) 154.81 192.49
Headline earnings (cents
per linked unit) 91.36 83.19
GROUP BALANCE SHEET as at 31 March 2008
31 March 31 March
2008 2007
R000 R000
ASSETS
Non-current assets 4 405 390 3 937 807
Investment properties 4 205 406 3 810 296
Investment properties - at fair value 4 277 548 3 876 332
Straight-line rental income adjustment (72 142) (66 036)
Other non-current assets 199 984 127 511
Straight-line rental income asset 57 546 51 206
Furniture, fittings and computer equipment 141 205
Available-for-sale financial assets 10 153 -
Derivative financial instruments 55 845 -
Goodwill 76 299 76 100
Current assets 77 844 223 382
Straight-line rental asset 14 596 14 830
Trade and other receivables 21 839 21 541
Cash and cash equivalents 41 409 187 011
Non current assets held for sale 53 450 -
Investment properties 52 777 -
Investment properties at fair value 53 450 -
Straight-line rental income adjustment (673) -
Straight-line rental income asset 673 -
Total assets 4 536 684 4 161 189
EQUITY AND LIABILITIES
Equity and reserves 1 095 851 836 137
Share capital 2 956 2 956
Share premium 17 341 17 341
Reserves 1 075 554 815 840
Non-current liabilities 3 184 109 3 079 211
Linked debentures and premium 1 535 427 1 535 971
Other interest bearing borrowings 1 190 744 1 127 403
Derivative financial instruments - 7 720
Deferred taxation 457 938 408 117
Current liabilities 256 724 245 841
Trade and other payables 105 614 93 883
Short term bank finance 9 200 26 529
Taxation payable 46 4 253
Linked unitholders for distribution 141 864 121 176
Total equity and liabilities 4 536 684 4 161 189
ABRIDGED GROUP CASH FLOW STATEMENT for the year ended 31 March 2008
2008 2007
R000 R000
Cash flows from operating activities 34 118 19 276
Cash generated from operations 393 864 349 089
Finance costs (124 059) (139 022)
Investment and other income 9 262 12 122
Distributions paid (240 136) (195 469)
Taxation paid (4 813) (7 444)
Cash flows (utilised in)/generated
from investing activities (225 732) 236 081
Cash flows generated from/
(utilised in) financing activities 46 012 (148 023)
Net (decrease)/increase in cash and
cash equivalents (145 602) 107 334
Cash and cash equivalents at the
beginning of the year 187 011 79 677
Cash and cash equivalents at the
end of the year 41 409 187 011
STATEMENT OF CHANGES IN EQUITY for the year ended 31 March 2008
Share Non-
Capital distri-
and share butable Retained
premium reserves income
R000 R000 R000
Group
Balance at 31 March 2006 16 078 450 798 5 390
Linked units issued in
acquiring property 4 219 - -
Increased holding in business
combination acquired previously - - -
Revaluation of interest rate swaps - 39 446 -
Net profit for the year - - 320 639
Change in fair value of
investment properties - 458 168 (458 168)
Deferred taxation on change in fair
value of investment properties - (127 366) 127 366
Deferred tax on straight-line
rental accrual - (6 561) 6 561
Allocation of change in fair
value of investment properties
in respect of minorities - (535) 535
Transfer from non-distributable reserves - (5 878) 5 878
Dividend distribution - - (433)
Balance at 31 March 2007 20 297 808 072 7 768
Revaluation of interest rate swaps - 62 996 -
Net profit for the year - - 197 250
Change in fair value of
investment properties - 229 650 (229 650)
Deferred taxation on change in fair
value of investment properties - (46 781) 46 781
Deferred tax on straight-line
rental accrual - (1 864) 1 864
Transfer to non-distributable reserves - 11 347 (11 347)
Dividend distribution - - (532)
Balance at 31 March 2008 20 297 1 063 420 12 134
Minority
Interest Total
R000 R000
Group
Balance at 31 March 2006 10 473 482 739
Linked units issued in acquiring property - 4 219
Increased holding in business
combination acquired previously (10 976) (10 976)
Revaluation of interest rate swaps - 39 446
Net profit for the year 503 321 142
Change in fair value of investment properties - -
Deferred taxation on change in fair
value of investment properties - -
Deferred tax on straight-line rental accrual - -
Allocation of change in fair value of investment
properties in respect of minorities - -
Transfer from non-distributable reserves - -
Dividend distribution - (433)
Balance at 31 March 2007 - 836 137
Revaluation of interest rate swaps - 62 996
Net profit for the year - 197 250
Change in fair value of investment properties - -
Deferred taxation on change in fair value of
investment properties - -
Deferred tax on straight-line rental accrual - -
Transfer to non-distributable reserves - -
Dividend distribution - (532)
Balance at 31 March 2008 - 1 095 851
JSE sponsor: Barnard Jacobs Mellet (Pty) Ltd, Illovo, Sandton
NSX sponsor: IGG Securities (Pty) Ltd, Windhoek, Namibia
Executive directors: G van Zyl (CEO), MJ Potts (Financial director). Non-
executive directors: AD Botha (Chairman), S Bernic, HSC Bester, PJ Cook, PS
Moyanga, JM Hlongwane, M Serebro and UJ van der Walt
Registered office: 2nd floor Meersig Building, Constantia Boulevard, Constantia
Kloof, 1709.
Company Secretary: EL Yates
Transfer secretaries: Link Market Services South Africa (Pty) Ltd, Johannesburg
Investor and media relations: Contact Helen McKane on vukile@dpapr.com, or Tel:
011 728-4701.
www.vukileprops.co.za
Date: 23/05/2008 15:28:22 Produced by the JSE SENS Department.
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