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OCT
OCT
OCT - Octodec - Unaudited results of the group for the six months
ended 28 February 2009
OCTODEC INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1956/002868/06)
Share code: OCT & ISIN: ZAE000005104
("Octodec")
NOTICE TO LINKED UNITHOLDERS: Unaudited results of the group for the six months
ended 28 February 2009
- Distribution up by 1% to 62,20 cents per linked unit
- Net asset value of 1559 cents
- Total investments exceed R2,4 billion
Abridged consolidated income statement
Unaudited Unaudited Audited
six months six months year to
% 28 February 29 February 31 August
R`000 Changes 2009 2008 2008
Revenue 156,508 143,046 272,954
- earned on 11.4% 148,135 133,017 269,535
contractual
basis
- straight 8,373 10,029 3,419
line lease
adjustment
Operating (59,227) (49,056) (101,634)
costs
Net rental 97,281 93,990 171,320
income from
properties
- earned on 5.9% 88,908 83,961 167,901
contractual
basis
- straight 8,373 10,029 3,419
line lease
adjustment
Administrative (6,182) (6,753) (12,438)
expenses
Depreciation (323) (327) (721)
Profit before 4.4% 90,776 86,910 158,161
investment
income
Investment 26,798 31,770 50,768
income
- Interest 632 827 1,514
received
- Investment 6,386 4,589 10,486
income -
listed
securities
- Investment 1,585 (480) (1,568)
income -
associate
share of after
tax profit/
(loss)
fair value 13,805 21,504 27,342
adjustment/
capital
reserves
interest and 4,390 5,330 12,994
dividends
Profit before (0.9%) 117,574 118,680 208,929
finance
charges and
capital profit
Fair value
adjustments of
investment
properties
- net (7,637) 94,589 78,481
revaluation
- gross 736 104,618 81,900
revaluation
- attributable (8,373) (10,029) (3,419)
to straight
line lease
adjustment
Amortisation 5,335 7,523 11,074
of deemed
debenture
premium
Profit before 115,272 220,792 298,484
finance
charges
Finance 26.7% (39,619) (31,270) (66,624)
charges
Profit before 75,653 189,522 231,860
debenture
interest
Debenture 1.0% (55,266) (54,739) (108,943)
interest
Profit before 20,387 134,783 122,917
taxation
Taxation (2,726) (21,473) (13,072)
charge
- Deferred (2,550) (20,617) (11,522)
taxation
- Normal (176) (856) (1,550)
taxation
Profit 17,661 113,310 109,845
attributable
to linked
unitholders
Linked units 89,297 89,297 89,297
in issue
(`000)
Earnings per (84.4%) 19,8 126,9 123,0
share (cents)
Earnings per (56.6%) 81,7 188,2 245,0
linked unit
(cents)
Headline (3.8%) 75,0 77,9 142,3
earnings per
linked unit
(cents)
Distribution
per linked
unit (cents)
Dividends 0,31 0,30 0,60
Interest 61,89 61,30 122,00
Total 1.0% 62,20 61,60 122,60
Abridged consolidated cash flow statement
Unaudited Unaudited Audited
six months six months year to
% 28 February 29 February 31 August
R`000 Changes 2009 2008 2008
CASH FLOW FROM
OPERATING
ACTIVITIES
Net rental 82,403 76,881 154,742
income from
properties
Adjustment for:
- Depreciation 323 327 721
- Working (4,337) 3,045 8,738
capital changes
Cash generated 78,389 80,253 164,201
from operations
Investment 11,408 10,746 24,994
income
Finance costs (39,619) (31,270) (66,624)
Taxation paid (876) (1,368) (1,657)
Distribution to (54,472) (46,613) (101,620)
linked
unitholders paid
Net cash (5,170) 11,748 19,294
(outflow)/inflow
from operating
activities
CASH FLOW FROM
INVESTING
ACTIVITIES
Investing (58,935) (98,196) (163,001)
activities
Net cash outflow (58,935) (98,196) (163,001)
used in
investing
activities
CASH INFLOW FROM
FINANCING
ACTIVITIES
Increase in 62,005 79,153 142,397
interest bearing
borrowings
Net cash 62,005 79,153 142,397
generated from
financing
activities
NET DECREASE IN (2,100) (7,295) (1,310)
CASH AND CASH
EQUIVALENTS
Cash and cash (10,637) (9,327) (9,327)
equivalents at
beginning of
period
Cash and cash (12,737) (16,622) (10,637)
equivalents at
end of period
Distributable earnings
The following additional information is provided and is aimed at disclosing to
the users the basis on which the distributions are calculated.
Unaudited Unaudited Audited
six months six months year to
% 28 February 29 February 31 August
R`000 Changes 2009 2008 2008
Revenue
- earned on 11.4% 148,135 133,017 269,535
contractual
basis
Operating (59,227) (49,056) (101,634)
costs
Net rental 5.9% 88,908 83,961 167,901
income from
properties
Administrative (6,182) (6,753) (12,438)
expenses
Depreciation (323) (327) (721)
Profit before 7.2% 82,403 76,881 154,742
investment
income
Investment
income
- Interest 632 827 1,514
received
- Interest 6,386 4,589 10,486
received -
listed
securities
- Investment 5,975 4,850 11,426
income -
associate
Distributable 9.5% 95,396 87,147 178,168
profit before
finance
charges
Finance 26.7% (39,619) (31,270) (66,624)
charges
Distributable (0.2%) 55,777 55,877 111,544
income before
taxation
Taxation (176) (856) (1,550)
charge
Unitholders 1.1% 55,601 55,021 109,994
distributable
earnings
Linked units 89,297 89,297 89,297
in issue -
(`000)
Distributable 1.1% 62,3 61,6 123,2
earnings per
linked unit -
(cents)
Distribution 1.0% 62,2 61,6 122,6
per linked
unit (cents)
Abridged consolidated balance sheet
Reviewed Audited
28 February 29 February
2009 2008
ASSETS
Non - current assets 2,461,562 2,397,634
Investment properties 2,086,636 2,058,559
Property, plant and equipment 6,692 4,782
Investment properties - straight line 34,480 26,107
lease adjustment
Investment - Listed securities 135,853 146,663
Investment - associated company 197,901 161,523
Current assets 23,268 20,023
Total assets 2,484,830 2,417,657
EQUITY AND LIABILITIES
Share capital and reserves 1,002,177 994,081
Share capital and premium 63,630 58,295
Non-distributable reserve 896,600 899,935
Retained profit 41,947 35,851
Non - current liabilities 1,377,739 1,307,715
Debentures capital and premium 389,696 395,031
Interest bearing borrowings 714,427 640,105
Deferred taxation 273,616 272,579
Current liabilities 104,914 115,861
Interest bearing 17,714 27,944
Non - interest bearing 31,934 33,069
Taxation liability - 644
Linked unitholders 55,266 54,204
Total equity and liabilities 2,484,830 2,417,657
Linked units in issue (`000) 89,297 89,297
Net asset value per linked unit (cents) 1,559 1,556
Net asset value per linked unit (cents) 1,865 1,861
- before deferred tax
Statement of changes in equity
Share
capital Capital Revalua- Distribut-
and
R`000 premium reserve tion able Total
Balance at 47,221 12,050 817,888 29,341 906,500
1 September
2007
Profit 109,845 109,845
attributable
to ordinary
shareholders
Reallocation 11,074 (11,074) -
of deemed
debenture
premium
Dividends (500) (500)
paid
Adjustment (21,764) - (21,764)
to valuation
of listed
investment,
net of
deferred tax
at Capital
Gains Tax
rate
Fair value
adjustments
- Investment 64,419 (64,419) -
properties,
net of
deferred
taxation
- associate, 27,342 (27,342) -
net of
deferred tax
Balances at 58,295 12,050 887,885 35,851 994,081
31 August
2008
Profit 17,661 17,761
attributable
to ordinary
shareholders
Reallocation 5,335 (5,335) -
of deemed
debenture
premium
Dividends (268) (268)
paid
Adjustment (9,297) (9,297)
to valuation
of listed
investment,
net of
deferred tax
Fair value
adjustments
- Investment (7,843) 7,843 -
properties,
net of
deferred
taxation
- associate, 13,805 (13,805) -
net of
deferred tax
Balances at 63,630 12,050 884,550 41,947 1,002,177
28 February
2009
Reconciliation - earnings to distributable earnings
Unaudited Unaudited Audited
six months six months Year to
28 February 29 February 31 August
R`000 2009 2008 2008
Earnings per share 17,661 113,310 109,845
Add: debenture 55,266 54,739 108,943
interest per linked
unit
Earnings per linked 72,927 168,049 218,788
unit
Fair value adjustments
- associate, net of (13,805) (21,504) (27,342)
deferred tax
- investment 7,843 (76,942) (64,420)
properties, net of
deferred tax
Headline earnings per 66,965 69,603 127,026
linked unit
Straightline lease (6,029) (7,221) (2,463)
adjustment net of
deferred tax
Deferred taxation - 162 (3,495)
adjustments
Amortisation of deemed (5,335) (7,523) (11,074)
debenture premium
Distributable earnings 55,601 55,021 109,994
Notes to Financial Statements
The condensed consolidated financial statements have been prepared in accordance
with requirements of the Companies Act 61 of 1973, as amended. The results have
been prepared and presented in accordance with International Accounting
Standards IAS34, Interim Financial Reporting and the JSE requirements. The
accounting policies adopted and methods of computation are consistent with those
applied in the financial statements for the year ended 31 August 2008.
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
provided a suretyship to Nedbank Property Finance, which at 28 February 2009
amounted to R77,8 million in favour of its associate company, IPS Investments
(Pty) Limited.
Independent review by external auditors: These condensed consolidated financial
statements have not been reviewed by our auditors Deloitte and Touche.
COMMENTS
Review of results
Trading conditions in the retail property market deteriorated further during the
period as a result of a slowing economy.
Rental income and net rental income increased by 11.4% and 5.9% respectively.
The core portfolio, representing those properties held for 12 comparable months,
reflects rental income growth of 4.4%. The growth of the rental income of the
retail portfolio which makes up more than 50% of the total rental income was at
1%.
Octodec continued to unlock the value of its Johannesburg and Pretoria CBD
portfolios by the redevelopment and refurbishment thereof. An amount of R28
million will be spent on the upgrade of the Inner Court property located in the
Johannesburg CBD. A lease with a government tenant was concluded for 10 000m2 of
office space. Various other properties were upgraded during the period at a
total cost of R17 million. These included Woodmead Value Mart, Waverley Plaza
and the residential property, Tiny Town.
Income from IPS increased to R5,9 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 50% interest in various joint ventures (JV). These include a
JV with Bidvest which houses a motor dealership developed at a total cost of R38
million and at an effective yield of 11% and a JV with Old Mutual which includes
four residential properties. The average yield of these properties is in excess
of 14%. Octodec has an effective 20% interest in these JV`s. IPS has a committed
residential development pipeline to build 1085 units of residential
accommodation at a total cost in excess of R400 million. The majority of these
units will be built at Kempton City in Kempton Park, Tayob Towers and
Corporation Place in the Johannesburg CBD.
The total distribution per linked unit for the six months of 62,20 cents (2008:
61,6 cents) represents an increase of 1% on that paid in the previous
corresponding period.
Vacancies at 28 February 2009 amounted to 22.7% of total lettable area.
Further details are set out below:
28 February 2009 31 August 2008
Offices 10.5% 9.4%
Retail 1.8% 1.5%
Commercial 4.5% 4.9%
Industrial 6.0% 3.6%
TOTAL 22.7% 19.4%
The vacant retail space is largely attributable to smaller line shops. 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. A slow down in economic activity during the period is
affecting the letting of vacant space. It is taking longer than anticipated to
let vacant space and more difficult to increase rentals on renewal of leases.
Octodec continues to pursue investment and redevelopment opportunities that will
enhance the overall quality of the portfolio.
Borrowings
During the period the borrowings increased by R62 million as a result of the
advance of further funds to IPS and development costs incurred. Octodec`s
gearing at the end of the period under review was 29.7% as against 27.9% at 31
August 2008. The group remains financially sound with facilities in excess of
R180 million available to fund future cash flow requirements.
Interest rates in respect of 73.7% of borrowings at 28 February 2009 have been
fixed at an average interest rate of 11.6% maturing at various dates ranging
from November 2009 to October 2018.
Revaluation of property portfolio
The directors have valued the property portfolio by applying market related
yeilds. 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 increased by R0,76 million, which gives rise to a net asset
value of 1559 cents per unit.
Prospects
Challenging market conditions have influenced the demand for space, causing a
slower take up of vacancies and slowing of rental growth. The Company does not
expect trading conditions to improve significantly during the next six months.
Despite this, the Company will benefit from the much improved performance of its
Johannesburg CBD property, Inner Court, as well as the recent reductions in
interest rates. The board believes that distributable earnings for the second
six month period will be on a par with, if not better than the distributable
earnings reported for the six months ended 28 February 2009.
DECLARATION OF DIVIDEND 38 AND INTEREST PAYMENT
("the distribution")
Notice is hereby given that dividend number 38 of 0,31 cents (2008: 0,30 cents)
per ordinary share together with interest of 61,89 cents per debenture (2008:
61.30 cents), has been declared for the period 1 September 2008 to 28 February
2009, payable to linked unitholders recorded in the register on Friday, 22 May
2009. The last date to trade "CUM" distribution is Friday, 15 May 2009. The
units will commence trading "EX" distribution on Monday, 18 May 2009. Payment
date will be Monday, 25 May 2009.
No dematerialisation or rematerialisation of linked unit certificates may take
place between Monday, 18 May 2009 and Friday, 22 May 2009, both days inclusive.
By order of the Board.
A WAPNICK JP WAPNICK
(Chairman) (Managing Director)
23 April 2009
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 5200
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")
CITY PROPERTY
Property Asset Manager
e-mail address: propworld@cityprop.co.za
website address: www.cityproperty.co.za
Member of the Property Loan Stock Association
Date: 23/04/2009 13:16:01 Produced by the JSE SENS Department.
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