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ABT
ABT
ABT - Ambit Properties - Reviewed financial results and distribution
for the year ended 30 September 2008
Ambit Properties Limited
Registration number: 2001/007003/06
Share code: ABT ISIN code: ZAE000051645
Our property assets have doubled in the past year
Reviewed financial results and distribution
for the year ended 30 September 2008
Highlights
- Distribution growth 12%
- Total investments up to R2,6 billion
- BEE compliance goals exceeded
CONDENSED GROUP BALANCE SHEET
30 September 30 September
2008 2007
Reviewed Audited
Notes R`000 R`000
ASSETS
Non-current assets
Investment properties 4.2 2 339 923 1 090 638
- At valuation 2 388 753 1 110 750
- Straight-line adjustment (48 830) (20 112)
Investment in associate 4.4 133 075 128 719
Rental receivable - straight-line 42 566 16 745
adjustment
Total non-current assets 2 515 564 1 236 102
Current assets
Investment in listed property 8 486 -
fund
Trade and other receivables 22 921 27 097
Cash and cash equivalents 152 207 50 077
Total current assets 183 614 77 174
Non-current assets held for sale 4.2 58 450 73 200
TOTAL ASSETS 2 757 628 1 386 476
EQUITY AND LIABILITIES
Share capital and reserves 549 429 373 210
Non-current liabilities 2 054 804 963 745
Debentures 908 230 413 383
Debenture premium 636 342 103 843
Interest-bearing borrowings 4.7 362 475 322 700
Deferred taxation liability 147 757 123 819
Current liabilities 153 395 49 521
Debenture interest 96 975 40 099
Trade and other payables 35 985 9 422
Guarantee deposit 20 435 -
TOTAL EQUITY AND LIABILITIES 2 757 628 1 386 476
CONDENSED GROUP INCOME STATEMENT
30 September 30 September
2008 2007
Reviewed Audited
R`000 R`000
Revenue 257 745 123 338
- Rental - cash flows inherent in leases 229 027 118 447
- Rental - straight-line adjustment 28 718 4 891
Property expenses (48 109) (29 076)
Net rental income from properties 209 636 94 262
Interest income from investments 13 459 15 391
Interest income 2 556 391
Amortisation of debenture premium 24 665 3 597
Finance costs (22 894) (27 324)
Administrative expenses (18 605) (9 206)
Profit before fair value adjustments 208 817 77 111
Change in fair value of investment and 138 849 212 644
investment properties
- As per valuations 169 077 217 535
- Straight-line adjustment (28 718) (4 891)
- Fair value adjustment on listed (1 510) -
property investment
Profit on disposal of investment 1 197 -
properties
Fair value adjustment on interest rate (377) -
swap
Share of associate company`s after tax 4 356 17 792
profits
Profit before debenture interest and 352 842 307 547
taxation
Debenture interest - linked unitholders (155 434) (68 623)
Debenture interest paid (181 225) (74 868)
Less: Prepaid distributions received and 25 791 6 245
refunded
Profit before taxation 197 408 238 924
Taxation (23 938) (59 261)
Net profit 173 470 179 663
Earnings per linked unit (cents) 74,08 119,20
(weighted)
Headline earnings per linked unit (cents) 39,36 34,61
(weighted)
Distribution per linked unit (cents) 36,50 32,60
RECONCILIATION OF PROFIT FOR THE YEAR TO HEADLINE EARNINGS AND TO DISTRIBUTABLE
INCOME
30 September 30 September
2008 2007
Reviewed Audited
R`000 R`000
Profit (earnings) after taxation - 173 470 179 663
attributable to linked unitholders
Debenture interest 155 434 68 623
Total earnings - linked units 328 904 248 286
Capital surpluses net of deferred tax (125 130) (154 801)
Change in fair value of investment (123 933) (154 801)
properties
Profit on disposal of investment (1 197) -
properties
Amortisation of debenture premium (24 665) (3 597)
Share of associate company`s after tax (4 356) (17 792)
profits
Headline earnings - linked units 174 753 72 096
Rental straight-line adjustment - net (20 677) (3 473)
of deferred tax
Change in fair value of listed property 1 087 -
investment - net of deferred tax
Change in fair value of interest rate 271 -
swaps - net of deferred tax
Distributable income 155 434 68 623
Less: Debenture interest (155 434) (68 623)
Income not distributed - -
CONDENSED GROUP CASH FLOW STATEMENT
30 September 30 September
2008 2007
Reviewed Audited
R`000 R`000
OPERATING ACTIVITIES
Cash generated by operating activities 214 507 62 238
Interest income 16 015 15 782
Finance costs (22 894) (27 324)
Distributions paid to linked (98 558) (57 622)
unitholders
Cash inflow/(outflow) from operating 109 070 (6 926)
activities
INVESTING ACTIVITIES
Improvements and capitalised costs to (46 766) (5 865)
investment properties
Acquisition of investment in listed (9 996) -
property fund
Proceeds on disposal of investment 10 047 -
properties
Cash outflow from investing activities (46 715) (5 865)
FINANCING ACTIVITIES
Interest-bearing borrowings raised 39 775 6 740
Cash inflow from financing activities 39 775 (6 740)
Increase/(decrease) in cash and cash 102 130 (6 051)
equivalent
Cash and cash equivalents at beginning of 50 077 56 128
year
CASH AND CASH EQUIVALENTS AT END OF YEAR 152 207 50 077
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Non-
Share Distributable distributable
capital reserves reserves Total
Reviewed R`000 R`000 R`000 R`000
Balance at 30 1 865 364 190 886 193 115
September 2006
Shares issued 432 - - 432
during the period
Net profit - 179 663 - 179 663
attributable to
linked unitholders
Transfer to non- - (179 663) 179 663 -
distributable
reserves
Balance at 30 2 297 364 370 549 373 210
September 2007
Shares issued 2 749 - - 2 749
during the period
Net profit - 173 470 - 173 470
attributable to
linked unitholders
Transfer to non- - (173 470) 173 470 -
distributable
reserves
Balance at 30 5 046 364 544 019 549 429
September 2008
COMMENTARY
1. OTHER INFORMATION
30 September 30 September
2008 2007
Reviewed Audited
Linked units in issue 504 572 357 229 657 439
Weighted average linked units 443 965 149 208 295 318
Net asset value (cents per linked 434 405
unit)(prior to distribution)
Listed market price (cents per linked 375 450
unit)
(Discount)/premium to net asset value (13,6) 11,1
(%)
To fund the acquisition of the African Alliance portfolio, 186 486 487 units
were issued at 370 cents per unit ("cpu"). A further 71 411 765 units were
issued during the year at a price of 425 cpu to fund the acquisition of 11
Diagonal Street and West Street Parkade. In September 2008 17 016 666 linked
units were issued for the acquisition of the Resolution Health property at 360
cpu.
Prepaid distributions were received on all these acquisitions for distributions
the vendors were not entitled to.
2. REVIEW BY INDEPENDENT AUDITORS
These provisional financial results have been reviewed by Deloitte & Touche,
Ambit Properties Limited`s ("Ambit") auditors. Their unmodified review report is
available at Ambit`s registered office.
3. NOTES TO FINANCIAL STATEMENTS
3.1 Basis of preparation and accounting policies
This provisional report complies with International Accounting Standard 34 -
Interim Financial Reporting as well as with Schedule 4 of the South African
Companies Act and the disclosure requirements of the JSE Limited`s Listings
Requirements.
The provisional report has been prepared using accounting policies that comply
with International Financial Reporting Standards. The accounting policies are
consistent with those applied in the financial statements for the year ended 30
September 2007, except for the following changes:
- Adoption of IFRS 7 - Financial Instruments: Disclosure;
- Adoption of IAS 1 Amendment - Capital Disclosure
3.2 Primary business segments - all amounts exclude straight-line adjustments
Retail Office Industrial Group
30 September 2008 R`000 R`000 R`000 R`000
Rental - cash flows 84 607 122 629 21 791 229 027
inherent in leases
Net rental income from 64 023 99 160 17 735 180 918
properties
Fair value adjustment 58 697 63 017 47 363 169 077
Profit on disposal of - (3) 1 200 1 197
investment properties
Investment properties - 837 253 1 379 000 230 950 2 447 203
at valuation*
30 September 2007 R`000 R`000 R`000 R`000
Rental - cash flows 66 700 32 262 19 485 118 447
inherent in leases
Net rental income from 50 282 23 508 15 581 89 371
properties
Fair value adjustment of 97 175 84 184 36 176 217 535
investment properties
Investment properties - 675 950 321 600 186 400 1 183 950
at valuation
* including non-current assets held for sale
4. COMMENTS
4.1 Results
Ambit`s distribution for the half year to 30 September 2008 has increased by
11,0% to 19,20 cents per unit (cpu) (2007: 17,30 cpu). The total distribution
for the year is 36,50 cpu (2007: 32,60 cpu) representing an increase of 12,0%
over 2007.
The market price of the units traded on the JSE at 30 September 2008 was 375 cpu
(2007: 450 cpu) which represents a discount to net asset value of 13,6%.
Summarised operating results (excluding non-cash flow items)
2008 % change 2007
R`000 R`000
Core portfolio 91 321 12 81 320
Rental income 122 274 12 109 287
Property expenses (30 953) 11 (27 967)
Additions 89 231 8 051
Disposals 366 -
Operating income from investment 180 918 89 371
properties
Administrative expenses (18 605) (9 206)
Profit from investment properties 162 313 80 165
Interest income 16 015 15 782
Finance costs (22 894) (27 324)
Profit 155 434 68 623
Prepaid distribution received and 25 791 6 245
refunded
Distributable profit 181 225 74 868
Distribution per unit (cpu) 36,50 32,60
Ratio of property expenses to rental 25,31 (2) 25,75
income for core portfolio (%)
The core portfolio, representing properties held for 12 months in both financial
periods, reflects net property income growth of 12%. Revenue increased by 12%
and property expenses by 11%. The property expense to rental income ratio of
25,31% (2007: 25,75%) reflects an improvement over 2007. The ratio for the
overall portfolio reduced from 24,6% in 2007 to 21,0% in 2008 due to the nature
of the leases acquired.
The net income from additions is a result of the acquisitions listed in note 4.2
and the net income from disposals is included until date of transfer.
Administrative expenses increased largely due to an increase in the asset
management fee of R3,4 million resulting from the increased market
capitalisation; professional fees totalling R3,4 million incurred on
acquisitions, mainly towards the Abseq portfolio, and other items attributable
to the enlarged portfolio. The announced Abseq acquisition was not concluded due
to the current market volatility and increased interest rates.
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, partially offset by the lower market price of the units during the
year.
The lower finance costs resulted from the capitalisation of R4,3 million of
interest on The Link project and proactive cash management. Guarantees were
utilised to achieve savings on the costs of long-term borrowings, following a
restructuring of the obligations of the vendors of the African Alliance
portfolio. This restructuring also resulted in an amount of R7,5 million
received for a refund of distributions for the benefit of unitholders and R20,4
million for the completion of tenant installation work.
4.2 Property portfolio
The property portfolio of 40 properties has an office sector bias with (by
value) 56% office, 35% retail and 9% industrial and is predominantly located in
Gauteng (71%). The portfolio was valued by independent valuers CB Richard Ellis
as at 30 September 2008 at R2,447 million (2007: R1,184 million) inclusive of
the non-current assets held for sale of R58,5 million (2007: R73,2 million). The
valuation of the R2,4 billion property portfolio represents an average forward
yield of 9,6% compared to 9,7% in the previous financial year. The core
portfolio (excluding additions during the year) showed an increase in value of
10,4% over the previous year largely due to increased rentals. Capitalisation
rates vary between 7,75% and 12%.
The portfolio valuation of R2,447 million before the straight-line rental
adjustment and inclusive of the assets identified to be sold, reflects an
increase of 107% on the 2007 valuation of R1,184 million. The growth of R1,263
million is made up of the following:
R million
Acquisition of African Alliance portfolio 690
Acquisition of 11 Diagonal and West Street Parkade 304
properties
Acquisition of Resolution Health property 62
Total acquisitions 1 056
Disposals (9)
Capital expenditure 47
Revaluation surplus 169
1 263
The R47 million spent on capital expenditure includes R22,9 million of
development costs on The Link in Pinetown; R14,7 million in capital and
transaction costs on the new acquisitions and R4,2 million on the revamp of Park
Meadows Mall. The revaluation surplus of R169 million is largely due to an
increase in market rentals.
The Metcash property in Brits was sold for R5,6 million realising a capital
profit of R1,2 million over the carrying value of R4,4 million and the Mahogany
Court property was sold for R6 million which equated to the carrying value.
Several smaller properties have been earmarked for sale and have been classified
as such on the balance sheet at a value of R58,5 million.
Phase 1 of The Link development in Pinetown has been completed during the past
year with Jack`s Hardware (4 063m2) and Tile Africa
(2 095m2) trading from July 2008. Phase 2 is substantially complete. Phase 3
will commence once a lease has been concluded with a prospective tenant. Ambit
has a 50% share in this development which will have a total estimated rentable
area of 17 797m2. The estimated final project cost to Ambit will be R59,5
million. The projected initial yield for this project is 10,2%.
4.3 Letting activity
During the year leases in respect of 7% by rentable area (21 345m2) expired and
of these 84% (17 926m2) were successfully renewed and most of the balance re-
let. Across the portfolio renewal rentals generally continue to increase. As a
result of strong leasing activity the portfolio has a 97,7% (2007: 98,8%)
occupancy. The total gross lettable area increased from 185 679m2 to 307 118m2
due to the acquisitions listed above. In the year ahead 19% of the portfolio`s
contractual income expires, largely in the office and industrial sectors.
4.4 Investment in associate - Oryx Properties Limited
Ambit`s 26,4% interest in Oryx Properties Limited ("Oryx") increased in value by
R4,4 million to R133,1 million due to the increase in net asset value of Oryx to
907 cpu (2007: 882 cpu). The market price of the Oryx units at 1 250 cpu is well
in excess of the net asset value which is indicative of future value to Ambit.
4.5 Listed property investment
During September 2008 Ambit acquired 3 611 000 units in listed property unit
trust SA Corporate Real Estate Fund at an average price of 278 cents per unit
which represents a 25% discount to net asset value. This investment was funded
from the proceeds from the disposal of the two properties as described in note
4.2 as well as surplus cash. The distribution received in September 2008 and due
again in March 2009 will be for the benefit of unitholders.
4.6 Net asset value
The revaluation of investment properties has given rise to a fair value
adjustment of R169,1 million (2007: R217,5 million).
The net asset value, before making provision for the debenture interest payable
but after providing for deferred taxation, is 434 cpu, an increase of 7,2% on
2007 (405 cpu).
4.7 Borrowings
At 30 September 2008 Ambit`s long-term debt was R362,5 million (2007: R322,7
million), which represents a long-term debt to non-current assets ratio of 14,1%
(2007: 24,7%). Of this debt 63% (2007: 74%) is subject to fixed interest rate
agreements for periods from 2009 to 2014. The average interest rate at 30
September 2008 was 11,30% (2007: 10,11%). Surplus cash is invested at Ambit`s
variable borrowing rate of 200 basis points below the prime rate.
4.8 Units in issue and liquidity
At year end Ambit had 504 572 357 (2007: 229 657 439) linked units in issue.
This increase is due to all the acquisitions described in notes 1 and 4.2 being
funded by way of the issue of linked units. During the year 61 169 384 (2007: 81
640 154) linked units traded.
4.9 Related party transactions
Ambit is managed by Ambit Management Services (Pty) Limited, which is owned by
Absa Bank Limited.
All transactions with both these parties are concluded on an arm`s length basis
with market related terms and conditions.
4.10 BEE and transformation
During the year, in line with the Group`s commitment to BEE, Ambit acquired five
buildings for R690 million, from African Alliance/Cape Empowerment Trust Limited
(a black owned company) and others. The purchase consideration was settled by
way of the issue of linked units. This increased the total BEE unitholding in
Ambit to in excess of 30%.
Ambit has been independently rated in terms of the Broad Based Black Economic
Empowerment Strategy generic scorecard and has been assessed as a level 5
contributor which is an 80% recognition level and BEE compliant.
4.11 Directorate
Mr Nick Harris retired on 30 June 2008 as CEO but he remains as a non-executive
director on Ambit`s board.
Mr Kelly Clinton was appointed as CEO and director and Mr Joe de Beer as COO and
director with effect from 1 July 2008. Mr Jeremy de Villiers was appointed as
alternate director to Mr Shaun Rai with effect from 13 August 2008.
4.12 Post balance sheet events
Acquisition
Since year-end, a purchase agreement in respect of a 4 249m2 stand in the
planned Gauteng Business Park in Clayville was signed for a purchase price of
R2.5 million.
Disposal
A sale agreement has been concluded to dispose of 94 Moore Road in Durban for a
consideration of R4,7 million representing a yield of 9,7%. The property was
acquired in January 2004 for R1,9 million and had a fair value of R4,6 million
at 30 September 2008.
4.12.1Capital commitments
Authorised capital commitments still to be spent on investment properties totals
R14,8 million with R7 million due on Park Meadows for roadworks and the building
of new stores and R7,8 million on The Link development. The balance of the Link
project is subject to approval following the successful conclusion of the
leasing programme.
4.13 Prospects
Given the turbulent times that we find ourselves in management confirms their
commitment to four broad objectives, namely:
- Focus on the basics. Let the space, collect the rent, all administration up
to-date, maintain the properties and retain tenants.
- Extract maximum value from the assets. Look for opportunities to add value
to our existing properties by means of "out of the box thinking".
- Buy value. Assess every offer that comes our way and take advantage of the
"buyer`s market".
- Limit risk. Proactively manage property, tenant, interest rate, credit and
liquidity risks.
We believe that this four pronged strategy will result in security of income,
increased distributions and improved net asset value for the benefit of
unitholders.
5. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Further to the cautionary announcement dated 20 August 2008 and renewed on 1
October 2008, linked unitholders are advised that Ambit has discontinued the
negotiations referred to which could have had a material effect on the unit
price of Ambit`s securities. Unitholders need no longer exercise caution when
dealing in Ambit linked units.
6. DECLARATION OF DISTRIBUTION
Notice is hereby given of distribution number nine amounting to 19,2 cpu
interest on debentures, for the six month period to 30 September 2008.
Last date to trade cum distribution Friday, 21 November 2008
Units will trade ex distribution Monday, 24 November 2008
Record date to participate in the Friday, 28 November 2008
distribution
Payment of distribution Monday, 1 December 2008
Linked unit certificates may not be dematerialised or rematerialised between
Monday, 24 November 2008 and Friday, 28 November 2008, both days inclusive.
On behalf of the Board
JH Beare KF Clinton
Chairman Chief Executive Officer
6 November 2008
Directors:
JH Beare (Chairman)+, KF Clinton (Chief Executive Officer)*,
DJ Brits+, J de Beer (Chief Operations Officer)*, RR Emslie,
NBS Harris, IN Mkhari+, SL Rai, IB Skosana+, F Uys+
Alternate directors:
RD Jeffery, J de Villiers
*executive +independent
Registered office:
Ambit Properties Limited, First Floor, World Wide House, 29 Impala Road,
Chislehurston, Sandton, 2196
Postal address:
PO Box 618, Melrose Arch, 2076
Auditors:
Deloitte & Touche Chartered Accountants (SA)
Sponsors:
Grindrod Bank Limited
Transfer secretaries:
Computershare Investor Services (Pty) Limited
http://www.ambitprops.co.za
Date: 06/11/2008 15:22:01 Produced by the JSE SENS Department.
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