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OCT
OCT
OCT - Octodec - Reviewed Results Of The Group For The Year Ended 31 August 2008
and dividend declaration
OCTODEC INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1056/002868/06)
Share code: OCT & ISIN: ZAE000005104
("Octodec" or "the company")
NOTICE TO LINKED UNITHOLDERS: Reviewed results of the group for the year ended
31 August 2008
- Distribution up by 15.4% to 122,6 cents per linked unit
- Increase in net asset value by 5.9% to 1556 cents
- Total investments exceed R2,3 billion
ABRIDGED CONSOLIDATED INCOME STATEMENT
% Changes Reviewed year Audited year
to 31 August to 31 August
2008 2007
Revenue 272,954 223,035
- earned on contractual basis 19.1% 269,535 226,333
- straight line lease adjustment 3,419 (3,298)
Operating costs (101,634) (79,792)
Net rental income from properties 171,320 143,243
- earned on contractual basis 14.6% 167,901 146,541
- straight line lease adjustment 3,419 (3,298)
Administrative expenses (12,438) (10,219)
Depreciation (721) (656)
Income before investment income 19.5% 158,161 132,368
Investment income 50,768 32,928
- Interest received 1,514 1,204
- Investment income - listed 10,486 7,683
investments
- Investment income - associate (1,568) 17
share of after tax (loss)/profit
fair value adjustment / capital 27,342 18,610
reserves
interest and dividends 12,994 5,414
Income before finance costs 26.4% 208,929 165,296
Finance costs 3.3% (66,624) (64,499)
Income before debenture interest 41.2% 142,305 100,797
and capital profits
Trading profit and other capital - 2,771
items
Fair value adjustment of
investment properties
- net revaluation 78,481 241,858
- gross revaluation 81,900 238,560
- attributable to straight line (3,419) 3,298
lease adjustment
Amortisation of deemed debenture 11,074 4,010
premium
Income before debenture interest (33.6%) 231,860 349,436
Debenture interest 27.1% (108,943) (85,737)
Income before taxation (53.4%) 122,917 263,699
Taxation charge (13,072) (63,535)
- Deferred taxation (11,522) (61,988)
- Normal taxation (1,550) (1,547)
Income attributable to linked 109,845 200,164
unitholders
Linked units in issue - (`000) 89,297 89,297
Weighted linked units in issue - 89,297 78,975
(`000)
Earnings per share - (cents)* (51.5%) 123.0 253.5
Earnings per linked unit - (32.3%) 245.0 362.0
(cents)*
Headline earnings per linked unit 24.6% 142.3 114.2
- (cents)*
* Based on the weighted number of
unit in issue
Distribution per linked unit
(cents)
- Dividends 0.60 0.53
- Interest 122.00 105.67
Total 15.4% 122.60 106.20
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
R`000 Reviewed year Audited year
to 31 August to 31 August
2008 2007
CASH FLOW FROM OPERATING ACTIVITIES
Net rental income from properties 154,742 137,863
Adjustment for :
- Depreciation 721 656
- Working capital changes 8,739 (6,283)
Cash generated from operations 164,202 132,236
Investment income and interest received 24,994 14,301
Finance costs (66,624) (64,499)
Taxation paid (1,658) (772)
Distribution to linked unitholders paid (101,620) (75,763)
Net cash inflow from operating activities 19,294 5,503
CASH FLOW FROM INVESTING ACTIVITIES
Investing activities (106,542) (132,901)
Increase in investments and loans to (56,459) (28,476)
associate
Proceeds from disposal of investment - 3,573
properties
Net cash outflow used in investing (163,001) (157,804)
activities
CASH FLOW FROM FINANCING ACTIVITIES
Issue of linked units - 199,203
Increase/(decrease) in interest bearing (52,409)
borrowings
Net cash generated from financing 142,397 146,794
activities
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,310) (5,507)
Cash and cash equivalents at beginning of (9,327) (3,820)
year
Cash and cash equivalents at end of year (10,637) (9,327)
DISTRIBUTABLE EARNINGS
The following additional information is provided and is aimed at disclosing to
the users the basis on which the distributions are calculated.
R`000 % Changes Reviewed year Audited year
to 31 August to 31 August
2008 2007
Revenue
- earned on contractual 19.1% 269,535 226,333
basis
Operating costs (101,634) (79,792)
Net rental income from 14.6% 167,901 146,541
properties
Administrative expenses (12,438) (10,219)
Depreciation (721) (656)
Income before investment 14.1% 154,742 135,666
income
Investment income
- Interest received 1,514 1,204
- Interest received - - 2,738
prepaid distribution
- Investment income - 110.4% 11,426 5,431
associate
- Investment income - listed 36.5% 10,486 7,683
investments
Distributable income before 16.7% 178,168 152,722
finance charges
Finance charges 3.3% (66,624) (64,499)
Distributable income before 26.4% 111,544 88,223
taxation
Taxation charge (1,550) (1,454)
Unitholders distributable 26.8% 109,994 86,769
earnings
Trading profit - 2,198
Unitholders distributable 23.6% 109,994 88,967
earnings
Earnings distributed (`000) 23.1% 109,443 88,867
Linked units in issue - 89,297 89,297
(`000)
Distribution per linked unit 15.4% 122.60 106.2
(cents)
ABRIDGED CONSOLIDATED BALANCE SHEET
R`000 Reviewed year Audited year
to 31 August to 31 August
2008 2007
ASSETS
Non-current assets 2,397,634 2,152,906
Investment properties, plant and 2,058,559 1,877,070
equipment - Investment properties
- Plant and equipment 4,782 1,969
Investment properties - straight line 26,107 22,688
lease adjustment
Investment - listed securities 146,663 132,742
- associate company 161,523 118,437
Current assets 20,023 22,520
Total assets 2,417,657 2,175,426
EQUITY AND LIABILITIES
Share capital and Reserves 994,081 906,500
Share capital and premium 58,295 47,221
Non-distributable reserve 903,355 829,938
Retained profit 32,431 29,341
Non - current liabilities 1,307,715 1,166,166
Debentures capital and premium 395,031 406,105
Interest bearing borrowings 640,105 495,543
Deferred tax liability 272,579 264,518
Current liabilities 115,861 102,760
Interest bearing 27,943 28,683
Non - interest bearing 33,714 27,696
Linked unitholders 54,204 46,381
Total equity and liabilities 2,417,657 2,175,426
Linked units in issue (`000) 89,297 89,297
Net asset value per linked unit (cents) 1,556 1,470
Net asset value per linked unit (cents) - 1,861 1,766
before deferred tax
ABRIDGED STATEMENT OF CHANGES IN EQUITY
R`000 Share Non- Distribu- Total
capital and Distribu- table
premium table reserve
reserve
Balance at 1 September 42,224 599,156 28,046 669,426
2006
Net income attributable 200,164 200,164
to ordinaryshareholders
Issue of linked units 987 987
Reallocation of deemed 4,010 (4,010) -
debenture premium
Dividends paid (392) (392)
Adjustment to valuation 36,315 36,315
of listed investment,
net of deferred Capital
Gains Tax
Transfer to non-
distributable reserve
Capital profit on 481 (481) -
disposal of investment
property
Fair value adjustment
of investment
properties
- associate, net of 18,610 (18,610) -
deferred tax
- investment 175,376 (175,376) -
properties, net of
deferred tax
Balances at 31 August 47,221 829,938 29,341 906,500
2007
Net income attributable 109,845 109,845
to ordinary
shareholders
Reallocation of deemed 11,074 (11,074) -
debenture premium
Dividends paid (500) (500)
Adjustment to valuation (21,764) (21,764) (21,764)
of listed investment,
net of deferred Capital
Gains Tax
Fair value adjustment
of investment
properties
- investment 67,839 (67,839) -
properties, net of
deferred tax
- associate, net of 27,342 (27,342) -
deferred tax
Balances at 31 August 58,295 903,355 32,431 994,081
2008
RECONCILIATION - EARNINGS TO DISTRIBUTABLE EARNINGS
Reviewed Reviewed Audited Audited year
year to 31 year to 31 year to to 31 August
August 2008 August 2008 31 August 2007 cents
R`000 cents 2007
R`000
Earnings per share 109,845 123.0 200,164 253.5
Add: debenture 108,943 122.0 85,737 108.5
interest per linked
unit
Earnings per linked 218,788 245.0 285,901 362.0
unit
Trading profits and - - (2,771) (3.5)
other capital items
Fair value
adjustments
- associate, net of (27,342) (30.6) (18,610) (23.6)
deferred tax
- investment (64,420) (72.1) (174,328) (220.7)
properties, net of
deferred tax
Headline earnings per 127,026 142.3 90,192 114.2
linked unit
Straight line lease (2,463) 2,342
adjustment
Deferred taxation (3,495) (4,493)
adjustments
Interest received - - 2,738
prepaid distribution
Amortisation of (11,074) (4,010)
deemed debenture
premium
Trading profit - 2,198
Distributable 109,994 88,967
earnings
SEGMENTAL INFORMATION
Analysis by property usage - 2008
Industrial Office Retail Commercial
Revenue
Rentals and 40,693 42,130 122,850 55,561
recoveries
Management fee
Straight-line 264 2,268 609 326
lease adjustment
Total Revenue 40,957 44,398 123,459 55,887
Net rental income 23,579 24,412 71,184 32,194
from properties
Assets
Investment 319,133 354,355 908,946 437,180
Properties
Plant and 65 951 2,075 501
Equipment
Other Assets
Total Assets 319,198 355,306 911,021 437,681
Analysis by
property usage -
2007
Revenue
Rentals and 30,665 22,794 113,333 51,871
recoveries
Management fee
Straight-line (1146) 312 (1,112) (1,380)
lease adjustment
Total Revenue 29,519 23,106 112,221 50,491
Net rental income 17,898 15,194 67,729 29,435
from properties
Assets
Investment 260,073 209,020 963,567 419,080
Properties
Plant and 14 264 1402 155
Equipment
Other Assets
Total Assets 260,087 209,284 964,969 419,235
SEGMENTAL INFORMATION
Analysis by property usage - 2008
Residential Corporate Total
unallocated
Revenue
Rentals and 6,584 267,818
recoveries
Management fee 1,717 1,717
Straight-line (48) 3,419
lease adjustment
Total Revenue 6,536 1,717 272,954
Net rental income 3,816 2,976 158,161
from properties
Assets
Investment 65,052 2,084,666
Properties
Plant and 1,190 - 4,782
Equipment
Other Assets 328,209 328,209
Total Assets 66,242 328,209 2,417,657
Analysis by
property usage -
2007
Revenue -
Rentals and 6,350 225,013
recoveries
Management fee 1,320 1,320
Straight-line 28 (3,298)
lease adjustment
Total Revenue 6,378 1,320 223,035
Net rental income 3,308 -1,196 132,368
from properties
Assets
Investment 48,018 1,899,758
Properties
Plant and 134 1969
Equipment
Other Assets 273,699 273,699
Total Assets 48,152 273,699 2,175,426
NOTES TO THE FINANCIAL STATEMENTS
The condensed consolidated reviewed financial statements have been prepared in
accordance with the requirements of the Companies Act (Act 61 of 1973). The
results have been prepared and presented in accordance with International
Accounting Standards IAS34, 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 2007 except for amendments to
IAS1 - Presentation of Financial Statements and IFRS 7 - Financial Instruments:
Disclosures. These standards affect financial statement disclosures and have no
impact on the Group`s financial results for the year.
In order to comply with International Financial Reporting Standards, deferred
taxation on the fair value adjustment of investment property has been provided
at the company income taxation rate which is currently 28% and not at the
Capital Gains Tax rate of 14%, 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: The company has issued guarantees of R1 690 000 and R582
000 to the Tshwane Metropolitan Municipality and City Power - Johannesburg
respectively for the provision of services to its subsidiaries. The company has
given surety to Nedbank Property Finance, which at year end amounted to R62 640
000, in favour of its associate company, IPS Investments (Pty) Limited.
Independent review by external auditors - These condensed consolidated financial
statements have been reviewed by our auditors Deloitte and Touche. A copy of
their unmodified opinion is available for inspection at the company`s registered
office.
COMMENTS
Review of results
Notwithstanding the challenging trading conditions, the directors of Octodec are
pleased to report that the company has once again achieved excellent growth in
distributions to linked unitholders. Rental income and net rental income
increased by 19.1% and 14.6% respectively.
Octodec paid an interim distribution of 61,6 cents per linked unit. The total
distribution per linked unit for the year of 122,6 cents (2007: 106,2 cents)
represents an increase of 15.4% on that paid in the previous corresponding
period.
A substantial saving in finance costs was achieved as a result of the issue of
additional units towards the end of the previous financial year. This together
with the benefits of the redevelopment of properties, favourable renewal of
leases and strict expense control have all contributed to the growth in
distributable earnings. The core portfolio, representing those properties held
for 12 comparable months, reflects rental income growth of 8,7%. The retail
portfolio which comprises five quality shopping centres, continued to enjoy
growth in rental income, although at a slower rate than previous years.
Bad debt increased during the period from 1.5% to 1.7% of revenue. Management
continues to focus on the policies and procedures relating to the collection of
rent.
Octodec continued to unlock the value of its Johannesburg and Pretoria CBD
portfolios by the redevelopment and refurbishment thereof. Construction was
completed at Fine Art to refurbish this mixed use property at a cost of R10
million. The residential component of the property is close to being fully let.
The Tiny Town residential development, which is situated adjacent to the Union
Buildings is due to commence shortly.
During the year under review three properties were purchased and transferred for
an aggregate cost of R86 million. These purchases are Rentmeester, an office
block situated in Val-de-Grace, Pretoria, Union Club, a residential block
situated in the Johannesburg CBD and 39 Rudolph Street in Sunderland Ridge.
Interest income and dividends received from IPS, increased to R13 million due to
the strong performance of the portfolio as well as the advance of additional
funds to IPS to fund IPS`s growth. IPS`s property portfolio is valued in an
amount of in excess of R790 million. IPS has a committed residential
development pipeline to build 977 units of residential accommodation at a total
cost of R339 million. The majority of these units will be built at Kempton City
in Kempton Park, Tayob Towers and Corporation Place in the Johannesburg CBD.
Vacancies at 31 August 2008 amounted to 19.4% of total lettable area which is in
line with the previous financial year. Further details are set out below:
31 August 2008 31 August 2007
Offices 9.4% 9.9%
Retail 1.5% 2.0%
Commercial 4.9% 3.0%
Industrial 3.6% 4.2%
TOTAL 19.4% 19.1%
A large percentage of the vacancies are in respect of properties recently
acquired or undergoing redevelopment or refurbishment. A number of these
properties were acquired with large vacancies and where little or no
consideration was paid for the vacant space.
BORROWINGS
During the period the borrowings increased by R142,4 million, as a result of the
advance of further funds to IPS, purchases of investment properties and
development costs incurred. Octodec`s gearing at the end of the period under
review was 28% as against 24% at 31 August 2007. The group remains financially
sound with facilities available in excess of R230 million to fund future cash
flow requirements.
Interest rates in respect of 81% of borrowings at 31 August 2008 have been fixed
at an average interest rate of 11% maturing at various dates ranging from
October 2008 to April 2018.
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 R81,9 million, increasing net asset value
by 5.9% after accounting for deferred tax.
PROSPECTS
The difficult retail trading environment is expected to continue and will impact
on distribution growth. International markets are depressed and the effects
continue to spill over into the domestic economy. Rental growth is expected to
slow and higher operating costs and interest are expected to impact on
profitability. Despite this, the board believes that distributable earnings will
be on a par with, if not better than the previous year.
DECLARATION OF DIVIDEND 37 AND INTEREST PAYMENT
("the distribution")
Notice is hereby given that dividend number 37 of 0.30 cents (2007: 0.26 cents)
per ordinary share together with interest of 60,70 cents per debenture (2007:
51.94 cents), for the six months 1 March 2008 to 31 August 2008 has been
declared, payable to linked unitholders recorded in the register on Friday, 14
November 2008. The last date to trade "CUM" distribution is Friday, 7 November
2008. The units will commence trading "EX" distribution on Monday, 10 November
2008. Payment date will be Monday, 17 November 2008.
No dematerialisation or rematerialisation of linked unit certificates may take
place between Monday, 10 November 2008 and Friday, 14 November 2008, both days
inclusive.
By order of the Board.
City Property Administration (Proprietary) Limited
23 October 2008
A WAPNICK JP 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
(Proprietary) Limited
(Reg. No: 2004/003647/07)
70 Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107
Tel: (011) 370 7700 Fax: (011) 688 7712
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")
Date: 23/10/2008 13:00:10 Produced by the JSE SENS Department.
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