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VKE
VKE
VKE - Vukile Property Fund Limited - Unaudited interim results and distribution
announcement for the six months ended 30 September 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
Unaudited interim results and distribution announcement for the six months ended
30 September 2008
- Interim distribution increased by 9.6%
- R251 million new leases/ renewals concluded
- Expansion/upgrade projects totalling R91.3m completed/underway
1 Basis of preparation
The unaudited abridged interim financial statements for the six months ended 30
September 2008, and comparative information, have been prepared in terms of IAS
34 (Interim Financial Reporting) and relevant sections of the South African
Companies Act 1973, as amended. The accounting policies applied are in
accordance with International Financial Reporting Standards (IFRS) and are
consistent with those applied in the most recent audited financial statements.
These unaudited interim results have not been reviewed or reported on by
Vukile`s auditors.
2 Financial results
The directors of Vukile are pleased to report that the distribution for the six
months ended 30 September 2008 has increased by 9.6% to R130.3 million as
compared to R118.9 million for the comparable period. The group`s net rental
income, exclusive of straight-line rental accruals and based on a stable
portfolio (excluding acquisitions and sales), has increased by 7.2% over the
comparable period.
Summary of financial performance
Sept Sept March
2008 2007 2008
Net asset value per linked 831 892 890
unit (cents)
Distribution per linked unit 44.10 40.25 88.25
(cents)
Loan to value ratio (%) 30.6 28.4 27.9
The net asset value per linked unit decreased by 6.6% from R8.90 at 31 March
2008 to R8.31 at 30 September 2008.
The board has approved an interim distribution of 44.10 cents per linked unit
for the six months ended 30 September 2008, an increase of 9.6% or 3.85 cents
per linked unit over the comparable period.
The increase in the distribution of 3.85 cents per linked unit is made up as
follows:
Cents per
linked
unit
Contribution to increased rental income 8.9
Reduction in vacancies and increased rentals 5.0
Additional rentals from property acquisitions 2.2
Higher recoveries of electricity and rates 1.7
and taxes
Less: Increase in property expenditure (4.8)
Higher electricity and rates and taxes (2.1)
charges
Larger number of renovation projects (2.2)
Other (0.5)
Net increase in group property revenue 4.1
Net increase in finance costs (1.6)
Full six months interest on developments and (1.6)
acquisitions
Reduction in administrative expenses/other 1.4
Net increase in distribution 3.9
3 Borrowings
The group`s long-term debt is hedged using interest rate swap agreements for
periods expiring between two and four years.
Due to the fact that 95.7% of the group`s debt is hedged or fixed until November
2010 and beyond, changes in interest rates will have little impact on the
group`s current cost of debt.
The group has taken advantage of the current inverted yield curve to enter into
two forward starting interest rate swaps to cover the R462 million debt maturing
in November 2010 as follows:
- R240 million swap commencing in November 2010 and maturing in November 2015
at a rate of 8.28%*
- R222 million swap commencing in November 2010 and maturing in November 2014
at a rate of 8.85%*
* Excludes the bank margin, currently at 1.4%.
4 Property portfolio
The property portfolio currently comprises 74 properties with a gross lettable
area of 911 907m2.
The sectoral spread by gross rentals comprises 25% commercial, 59% retail and
16% industrial.
During the six month period under review, new leases and renewals with a total
area of 115 579m2 and a contract value of R251 million were concluded. Since 1
October 2008 leases and renewals with a total area of 7 640m2 and a contract
value of R24.5 million have been concluded.
Bad debt write offs have been below expectations for the six month period. The
provision for doubtful debts at 30 September 2008 is R4.2 million (R4.5 million
at 31 March 2008) which is considered adequate at this stage.
The vacancy profile (% of gross rentals) below indicates that the overall
vacancy percentage has increased slightly from 2.8% on 31 March 2008 to 2.9% on
30 September 2008.
Valuations
The directors have valued the group`s property portfolio at R4.1 billion as at
30 September 2008. This is 5.2% lower than the directors` valuation as at 31
March 2008. Consistent with past practice, the directors value the properties
utilising the discounted cashflow methodology and the lower valuation at 30
September 2008 compared to 31 March 2008 is mainly due to higher capitalisation
rates and lower future growth expectations.
The external valuation by JHI Real Estate Limited and Old Mutual Property Group
(Pty) Ltd of 48% of the total portfolio is R469 million (19.1%) higher than the
directors` valuation of the same properties at 30 September 2008.
5 Acquisitions, developments and other capital projects
The following expansion projects have been completed within the anticipated time
period and within budget:
Property Date Capita Fore-
of l cast
com- expend- initia
pletio iture l
n (R000) yield
(%)
Oshakati Game Centre Nov 08 24 275 7.5
Courier IT Warehouse Oct 08 14 300 9.6
Nelspruit Truworths Oct 08 8 700 9.5
Total 47 275 8.5
The following major revamps/income protecting capital projects are currently
underway:
Property Estimated Budgeted
date of capital
completion expenditur
e
(R000)
Dobsonville Shopping Centre May 09 16 700
Durban Phoenix Plaza April 09 27 300
Total 44 000
6 Segmental analysis
Group income Industrial Comm- Retail Corp- Total
for the six R000 ercial R000 orate R000
months ended R000 R000
30 September
2008
Rental income 49 405 91 123 180 888 - 321 416
Straight line 703 1 545 1 374 - 3 622
rental income
Property (19 101) (28 646) (69 450) - (117 197)
expenses
Net profit 31 007 64 022 112 812 - 207 841
from property
operations
Group balance
sheet at 30
September
2008
Non-current
assets
Investment 673 327 1 167 191 2 189 420 - 4 029 938
properties
Other non- 33 413 60 822 89 379 7 276 190 890
current
assets
Current
assets
Straight-line 685 1 077 2 963 - 4 725
rental income
asset
Trade and 3 841 6 477 13 700 1 766 25 784
other
receivables
Taxation - - - 85 85
Cash and cash 1 242 2 377 5 262 39 493 48 374
equivalents
Non-current 482 528 865 025 1 379 307 - 2 726 860
liabilities
Current
liabilities
Trade and 23 720 42 242 69 657 28 064 163 683
other
payables
Linked - - - 130 130 338
unitholders 338
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.
7 Prospects
The recent turmoil on world financial markets will inevitably have a negative
effect on South Africa. Although there are signs that inflation has reached a
turning point and that interest rates may start declining in the first half of
2009, there will be a slow-down in economic growth which will, in time, have a
negative effect on rental growth. The news is not all bad, however. Vacancies
are still at very low levels and limited new stock is coming onto the market.
This will ensure that there will continue to be a demand for space, which will
support rental levels.
Taking the above into account, the board remains confident that the outlook
given in the March 2008 annual report, namely that we are expecting reasonable
growth in distributions, is still applicable.
8 Payment of debenture interest and dividend
Notice is hereby given of a distribution amounting to 44.10 cents per linked
unit, for the six month period to 30 September 2008. The distribution comprises
interest on debentures of 44.01 cents per linked unit and a dividend of
0.09 cents per linked unit.
Last date to trade cum Thu, 11 December 2008
distribution
Linked units trade ex Fri, 12 December 2008
distribution
Record date for unitholders to Fri, 19 December 2008
participate in the distribution
Payment of distribution to Mon, 22 December 2008
unitholders
Linked unit certificates may not be dematerialised or re-materialised between
Friday, 12 December 2008 and Friday, 19 December 2008, both days inclusive.
ABRIDGED GROUP INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008
Unaudited Unaudited Audited
30 Sept 30 Sept 31 March
2008 2007 2008
R000 R000 R000
Property revenue 321 416 295 140 612 727
Straight-line rental 3 622 6 918 7 226
income accrual
Gross property 325 038 302 058 619 953
revenue
Property expenses (117 197) (102 891) (208 851)
Net profit from 207 841 199 167 411 102
property operations
Administrative (8 865) (10 516) (20 914)
expenses
Investment and other 4 658 5 268 9 262
income
Operating profit 203 634 193 919 399 450
before finance costs
Finance costs (64 228) (60 105) (124 059)
Net profit before 139 406 133 814 275 391
debenture interest
Debenture interest (130 072) (118 717) (260 292)
Net profit before 9 334 15 097 15 099
capital items
Capital items
Profit on sale of re- - - 11 051
valued properties
Amortisation of 356 410 544
debenture premium
Negative goodwill - - 297
arising on
acquisition of MICC
subsidiary
Net profit before 9 690 15 507 26 991
fair value
adjustments
Fair value (262 169) 319 421 222 424
adjustments
Gross change in fair (258 547) 326 339 229 650
value of investment
properties
Straight-line rental (3 622) (6 918) (7 226)
income adjustment
Net (loss)/profit (252 479) 334 928 249 415
before taxation
Taxation 98 221 (97 744) (52 165)
Net (loss)/profit (154 258) 237 184 197 250
after taxation
Reconciliation: headline earnings and distributable earnings
Unaudited Unaudited Audited
30 Sept 30 Sept 31 March
2008 2007 2008
R000 R000 R000
Attributable (154 258) 237 184 197 250
(loss)/profit after
taxation
Adjusted for:
Net change in fair 262 169 (319 421) (222 424)
value of investment
properties
Total tax effects of (101 014) 93 293 46 782
adjustments
Negative goodwill - - (297)
arising on the
acquisition of
MICC House Namibia
(Pty) Ltd
Profit on sale of re- - - (11 051)
valued properties
Amortisation of (356) (410) (544)
debenture premium
Debenture interest 130 072 118 717 260 292
Headline earnings of 136 613 129 363 270 008
linked units
Straight-line rental (3 622) (4 936) (5 362)
accrual net of
deferred taxation
Available for 132 991 124 427 264 646
distribution
Distribution to
unitholders
Interest 130 072 118 717 260 292
Dividend 266 242 532
Total distribution 130 338 118 959 260 824
Total number of 295 551 295 551 295 551
linked units in issue
(000)
Weighted average 295 551 295 551 295 551
number of linked
units in issue (000)
(Loss)/earnings per (8.18) 120.42 154.81
linked unit (cents)
Headline earnings per 46.22 43.77 91.36
linked unit (cents)
Available for 45.00 42.10 89.55
distribution per
linked unit (cents)
ABRIDGED GROUP BALANCE SHEET AS AT 30 SEPTEMBER 2008
Unaudited Unaudited Audited
30 Sept 30 Sept 31 March
2008 2007 2008
R000 R000 R000
ASSETS
Non-current assets 4 220 828 4 485 148 4 405 390
Investment properties 4 029 938 4 276 797 4 205 406
Investment 4 106 375 4 349 752 4 277 548
properties - at
fair value
Straight-line (76 437) (72 955) (72 142)
rental income
adjustment
Other non-current 190 890 208 351 199 984
assets
Straight-line rental 71 712 57 904 57 546
income asset
Investment properties - 51 937 -
under development
Furniture, fittings 137 173 141
and computer
equipment
Available-for-sale 7 139 - 10 153
financial asset
Derivative financial 35 603 22 038 55 845
instruments
Goodwill 76 299 76 299 76 299
Current assets 78 968 88 325 77 844
Straight-line rental 4 725 15 051 14 596
income asset
Trade and other 25 784 26 145 21 839
receivables
Taxation 85 - -
Cash and cash 48 374 47 129 41 409
equivalents
Non-current assets - 14 448 53 450
held for sale
Investment properties - 14 151 52 777
Straight-line rental - 297 673
income asset
Total assets 4 299 796 4 587 921 4 536 684
EQUITY AND
LIABILITIES
Equity and reserves 920 351 1 101 336 1 095 851
Non-current 3 085 424 3 230 469 3 184 109
liabilities
Linked debentures and 1 535 071 1 535 560 1 535 427
premium
Other interest 1 191 789 1 189 713 1 190 744
bearing borrowings
Deferred taxation 358 564 505 196 457 938
Current liabilities 294 021 256 116 256 724
Trade and other 109 888 90 524 105 614
payables
Short-term bank 53 795 46 402 9 200
finance
Taxation payable - 231 46
Linked unitholders 130 338 118 959 141 864
for distribution
Total equity and 4 299 796 4 587 921 4 536 684
liabilities
ABRIDGED GROUP CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008
Unaudited Unaudited Audited
30 Sept 30 Sept 31 March
2008 2007 2008
R000 R000 R000
CASH FLOW FROM (4 725) (8 400) 34 118
OPERATING ACTIVITIES
Cash generated from 197 993 172 301 393 864
operations
Finance costs (64 228) (60 105) (124 059)
Investment and other 4 658 5 268 9 262
income
Distributions paid (141 864) (121 176) (240 136)
Taxation paid (1 284) (4 688) (4 813)
CASH FLOW FROM (33 950) (213 665) (225 732)
INVESTING ACTIVITIES
CASH FLOW FROM 45 640 82 183 46 012
FINANCING ACTIVITIES
Net 6 965 (139 882) (145 602)
increase/(decrease)
in cash and cash
equivalents
Cash and cash 41 409 187 011 187 011
equivalents at the
beginning of the
period
Cash and cash 48 374 47 129 41 409
equivalents at the
end of the period
STATEMENT OF CHANGES IN GROUP EQUITY TO 30 SEPTEMBER 2008
Share Non- Retaine Total
capital distri- d R000
and butable income
share reserves R000
premium R000
R000
Balance at 31 March 20 297 808 072 7 768 836 137
2007
Revaluation of - 28 257 - 28 257
interest rate swaps
Net profit for the - - 237 184 237 184
period
Change in fair value - 326 339 (326 -
of investment 339)
properties
Deferred taxation on - (95 276) 95 276 -
change in fair value
of
investment properties
and straight-line
rental accrual
Dividend distribution - - (242) (242)
Balance at 30 20 297 1 067 13 647 1 101
September 2007 392 336
Revaluation of - 34 739 - 34 739
interest rate swaps
Net profit for the - - (39 (39
period 934) 934)
Change in fair value - (96 689) 96 689 -
of investment
properties
Deferred taxation on
change in fair value
of
investment properties - 46 631 (46 -
and straight-line 631)
rental accrual
Transfer to non- - 11 347 (11 -
distributable 347)
reserves
Dividend distribution - - (290) (290)
Balance at 31 March 20 297 1 063 12 134 1 095
2008 420 851
Revaluation of - (20 202) - (20
interest rate swaps 202)
Net profit for the - - (154 (154
period 258) 258)
Change in fair value - (258 258 547 -
of investment 547)
properties
Deferred taxation on - 101 014 (101 -
change in fair value 014)
of
investment properties
and straight-line
rental accrual
Revaluation of - (774) - (774)
available-for-sale
financial asset
Dividend distribution - - (266) (266)
Balance at 30 20 297 884 911 15 143 920 351
September 2008
On behalf of the board
A D Botha G van Zyl
Chairman Chief Executive
Roodepoort
24 November 2008
JSE sponsor: Barnard Jacobs Mellet Corporate Finance (Pty) Ltd, Illovo, Sandton
NSX sponsor: IJG 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, JM
Hlongwane, PS Moyanga, MH 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, Sandton,
Johannesburg
Investor and media relations: Contact Helen McKane at vukile@dpapr.com, or Tel:
011 728-4701.
www.vukileprops.co.za
Date: 24/11/2008 12:15:01 Produced by the JSE SENS Department.
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