| Fri 23 Oct 2009, 15:00 | | OCT - Octodec - Reviewed Preliminary Results Of The Group For The Year Ended |
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OCT
OCT
OCT - Octodec - Reviewed Preliminary Results Of The Group For The Year Ended
31 August 2009
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")
REVIEWED PRELIMINARY RESULTS OF THE GROUP For the year ended 31 August 2009
Distribution up by 5,1% to 128,9 cents per linked unit
Net asset value of 1 558 cents
Total investments exceed R2,4 billion
Abridged Consolidated Income Statement
Reviewed Audited
Year to Year to
% 31 August 31 August
R`000 Change 2009 2008
(Restated)
Revenue 320 226 272 954
- earned on contractual basis 15,0 309 849 269 535
- straight line lease adjustment 10 377 3 419
Operating costs (130 275) (101 634)
Net rental income from properties 189 951 171 320
- earned on contractual basis 7,0 179 574 167 901
- straight line lease adjustment 10 377 3 419
Administrative expenses (11 536) (12 438)
Depreciation (1 307) (721)
Profit before investment income 12,0 177 108 158 161
Investment income 66 091 50 768
- Interest received 1 446 1 514
- Investment income - listed securities 13 262 10 486
- Investment income - associate share of 3 625 (1 568)
after tax profit/(loss)
fair value adjustment/capital reserves 36 902 27 342
interest and dividends 10 856 12 994
Profit before finance chargesand capital 16,4 243 199 208 929
profit
Fair value adjustments of investment
properties
net fair value adjustment (98 324) 78 481
gross fair value adjustment (87 947) 81 900
attributable to straight line lease (10 377) (3 419)
adjustment
Amortisation of deemed debenture premium 10 669 11 074
Profit on sale of investment property 1 534 -
Profit before finance charges 157 078 298 484
Finance charges 20,3 (80 132) (66 624)
Profit before debenture interest 76 946 231 860
Debenture interest 5,1 (114 533) (108 943)
(Loss)/profit before taxation (37 587) 122 917
Taxation charge 29 475 (9 195)
- Deferred taxation 30 142 (7 645)
- Normal taxation (667) (1 550)
(Loss)/profit attributable to ordinary (8 112) 113 722
shareholders
Weighted linked units in issue (`000) 89 297 89 297
Linked units in issue (`000) 89 297 89 297
Basic and diluted (loss)/earnings per share (107,1) (9,1) 127,4
(cents)
Basic and diluted earnings per linked unit (52,2) 119,2 249,4
(cents)
Headline earnings per linked unit (cents) 5,9 137,5 129,9
Distribution per linked unit (cents)
Dividends 0,64 0,60
Interest 128,26 122,00
Total 5,1 128,90 122,60
Abridged Consolidated Cash Flow Statement
Reviewed Audited
Year to Year to
31 August 31 August
R`000 2009 2008
(Restated)
CASH FLOW FROM OPERATING ACTIVITIES
Net rental income from properties 166 730 154 742
Adjustment for:
- Depreciation 1 307 721
- Working capital changes (12 980) 8 738
Cash generated from operations 155 057 164 201
Investment income 25 564 24 994
Finance costs (80 132) (66 624)
Taxation paid (667) (1 657)
Distribution to linked unit holders paid (110 015) (101 620)
Net cash (outflow)/inflow from operating (10 193) 19 294
activities
CASH FLOW FROM INVESTING ACTIVITIES
Investing activities (89 452) (163 001)
Proceeds from disposal of investment properties 12 600 -
Net cash outflow used in investing activities (76 852) (163 001)
CASH FLOW FROM FINANCING ACTIVITIES
Increase in interest bearing borrowings 71 610 142 397
Net cash generated from financing activities 71 610 142 397
NET DECREASE IN CASH AND CASH EQUIVALENTS (15 435) (1 310)
Cash and cash equivalents at beginning of year (10 637) (9 327)
Cash and cash equivalents at end of year (26 072) (10 637)
Distributable Earnings
The following additional information is provided and is aimed at disclosing
to the users the basis on which the distributions are calculated.
Reviewed Audited
Year to Year to
% 31 August 31 August
R`000 Change 2009 2008
(Restated)
Revenue
- earned on contractual basis 15,0 309 849 269 535
Operating costs (130 275) (101 634)
Net rental income from properties 7,0 179 574 167 901
Administrative expenses (11 536) (12 438)
Depreciation (1 307) (721)
Profit before investment income 7,7 166 731 154 742
Investment income
- Interest received 1 446 1 514
- Interest received - listed securities 13 262 10 486
- Investment income - associate 14 481 11 426
Distributable profit before finance charges 10,0 195 920 178 167
Finance charges 20,3 (80 132) (66 624)
Distributable income before taxation 3,8 115 788 111 543
Taxation charge (667) (1 550)
Unit holders distributable earnings 4,7 115 121 109 993
Linked units in issue (`000) 89 297 89 297
Distributable earnings per linked unit 4,7 128,9 123,2
(cents)
Distribution per linked unit (cents) 5,1 128,9 122,6
Abridged Consolidated Balance Sheet
Reviewed Audited
31 August 31 August
R`000 2009 2008
(Restated)
ASSETS
Non-current assets 2 428 105 2 397 634
Investment properties 2 003 782 2 058 559
Property, plant and equipment 14 847 4 782
Investment properties - straight lining of rental 36 484 26 107
leases
Investment - listed securities 154 039 146 663
Investment - associated company 218 953 161 523
Current assets 48 507 20 023
Total assets 2 476 612 2 417 658
EQUITY AND LIABILITIES
Share capital and reserves 1 006 889 1 014 849
Share capital and premium 68 964 58 295
Non-distributable reserves 894 375 920 703
Retained earnings 43 550 35 851
Non-current liabilities 1 265 777 1 286 947
Debentures and premium 384 362 395 031
Interest bearing borrowings 659 632 640 105
Deferred taxation 221 783 251 811
Current liabilities 203 946 115 861
Interest bearing 95 260 27 944
Non-interest bearing 49 419 33 713
Linked unit holders 59 267 54 204
Total equity and liabilities 2 476 612 2 417 658
Linked units in issue (`000) 89 297 89 297
Net asset value per linked unit (cents) 1 558 1 579
Net asset value per linked unit (cents)
- before providing for deferred tax 1 806 1 861
Statement of Changes in Equity
Share Non-distri- Distri-
capital and butable butable
R`000 premium reserves reserves Total
Balance at 1 September 2007 47 221 829 938 29 341 906 500
Prior year adjustments 16 891 16 891
Profit for the year 113 722 113 722
Transfer to capital - deemed 11 074 (11 074) -
debenture premium
Dividends paid (500) (500)
Adjustment to valuation of (21 764) (21 764)
listed investment, net of
deferred tax
Fair value adjustments
- Investment properties, 68 296 (68 296) -
net of deferred taxation
- associate, net of 27 342 (27 342) -
deferred tax
Balance at 31 August 2008 58 295 920 703 35 851 1 014 849
Balances as previously 58 295 899 935 35 851 994 081
reported
Restatement of 2007 fair 16 891 16 891
value adjustment
Prior year restatement fair 3 877 3 877
value adjustment
Loss for the year (8 112) (8 112)
Transfer to capital - deemed 10 669 (10 669) -
debenture premium
Dividends paid (545) (545)
Adjustment to valuation of 697 697
listed investment, net of
deferred tax
Sale of investment 1 534 (1 534) -
properties
Fair value adjustments
- Investment properties, (65 461) 65 461 -
net of deferred taxation
- associate, net of 36 902 (36 902) -
deferred tax
Balance at 31 August 2009 68 964 894 375 43 550 1 006 889
Reconciliation - Earnings to Distributable Earnings
Reviewed Audited
Year to Year to
31 August 31 August
R`000 2009 2008
(Restated)
(Loss)/earnings attributable to ordinary (8 112) 113 722
shareholders
Amortisation of deemed debenture premium (10 669) (11 074)
Sale of investment properties (1 534) -
Fair value adjustments
- associate (36 902) (27 342)
- investment properties, 90 918 (89 462)
- deferred taxation (25 457) 21 166
Headline earnings before debenture interest 8 244 7 010
Debenture interest 114 533 108 943
Headline earnings 122 777 115 953
Straight line lease adjustment net (7 471) (2 463)
Straight line lease adjustment (10 377) (3 419)
Deferred taxation 2 906 956
Deferred taxation adjustments (185) (3 497)
Distributable earnings 115 121 109 993
Segmental Information
Industrial Office Retail Commercial
Analysis by property usage -
2009
Revenue
Rentals and recoveries 45 147 61 606 131 204 62 988
Straight-line lease adjustment 422 7 518 1 325 1 022
Total revenue 45 570 69 124 132 529 64 010
Net rental income from 28 394 42 190 76 847 38 042
properties
Assets
Investment properties 299 494 396 376 825 640 460 890
Plant and equipment 118 4 991 5 348 3 457
Other assets
Total assets 299 612 401 367 830 988 494 347
Net rental income from
properties
Analysis by property usage -
2008
Revenue
Rentals and recoveries 40 693 42 130 122 850 55 561
Management fee
Straight-line lease adjustment 264 2 268 609 326
Total revenue 40 957 44 398 123 459 55 887
Net rental income from 25 470 31 197 77 321 32 294
properties
Assets
Investment properties 319 133 354 355 908 946 437 181
Plant and equipment 65 951 2 076 501
Other assets
Total assets 319 198 355 306 911 022 437 682
Corporate
Residential unallocated Total
Analysis by property usage -
2009
Revenue
Rentals and recoveries 8 904 309 849
Straight-line lease adjustment 90 10 377
Total revenue 8 994 320 227
Net rental income from 4 151 (12 516) 177 108
properties
Assets
Investment properties 57 866 2 040 266
Plant and equipment 933 14 847
Other assets 421 499 421 499
Total assets 58 799 421 499 2 476 612
Net rental income from
properties
Analysis by property usage -
2008
Revenue
Rentals and recoveries 6 584 267 818
Management fee 1 717 1 717
Straight-line lease adjustment (48) 3 419
Total revenue 6 536 1 717 272 954
Net rental income from 2 939 (11 060) 158 161
properties
Assets
Investment properties 65 051 2 084 666
Plant and equipment 1 189 4 782
Other assets 328 209 328 209
Total assets 66 240 328 209 2 417 657
Notes to the Financial Statements
The condensed consolidated financial statements have been prepared and
presented in accordance with International Accounting Standards IAS 34,
Interim Financial Reporting and the listing requirements of the JSE Limited
and the requirements of the Companies Act 61 of 1973, as amended. The
accounting policies adopted and methods of computation are consistent with
those applied in the financial statements for the year ended 31 August 2008,
except for deferred taxation that is accounted for using a blended tax rate
on the revaluation of investment properties.
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 R1,7 million and
R0,6 million to the Tshwane Metropolitan Municipality and City Power -
Johannesburg respectively for the provision of services to its subsidiaries.
The Company has provided a suretyship to Nedbank Property Finance, which at
31 August 2009 amounted to R161 million in favour of its associate company,
IPS Investments (Pty) Limited ("IPS").
Independent review by external auditors - These condensed consolidated
financial statements have been reviewed by our auditors Deloitte and Touche,
whose unmodified review report is available for inspection at the company`s
registered office.
Subsequent events - There have been no significant subsequent events that
require reporting.
Prior year adjustments - Deferred taxation has been accounted for using a
blended tax rate on the revaluation of investment properties. This splits the
revaluation between land and buildings and calculates deferred tax on
revaluation surpluses on land at the capital gains taxation rate of 14% as
the intention is to recover through sale and on buildings at 28% as the
intention is to recover through use. This is a change from previous years,
but the adjustments have no effect on the distributable income to the unit
holders.
The above resulted in adjustments to 2008 as follows:
Balance sheet items
Decrease in opening deferred tax liabilities (16 891)
Decrease in deferred tax liabilities (3 877)
Increase in transfer to opening fair value reserve 16 891
Increase in transfer to fair value reserve 3 877
Income statement items
Decrease in deferred taxation charge (3 877)
Comments
Review of results
Trading conditions in the retail property market deteriorated further during
the year as a result of a weakening economy. It has become increasingly more
difficult to increase rentals on renewals and new tenants are reluctant to
take on new space.
Rental income and net rental income increased by 15,0% and 7,0% respectively.
Octodec paid an interim distribution of 62,20 cents per linked unit. The
total distribution per linked unit for the year of 128,90 cents (2008: 122,60
cents) represents an increase of 5,1% on that paid in the previous
corresponding period.
The core portfolio, representing those properties held for 12 comparable
months, reflects rental income growth of 2,1%. Octodec`s retail portfolio
comprises 50% of the total portfolio value and is dominated by smaller retail
centres. As a result of challenging market conditions, no growth was achieved
in rental income from the retail portfolio.
Octodec continued to unlock the value of its Johannesburg and Pretoria CBD
portfolios by the redevelopment and refurbishment thereof. During the year an
amount of R25,3 million was spent on the upgrade to the Inner Court property
located in the Johannesburg CBD. A lease with a government tenant was
concluded for 10 000mSquared of office space. Various other properties were
upgraded at a total cost of R35,2 million, which included Waverley Plaza
Shopping Centre, Tiny Town and Protea House.
Income from the associate, IPS increased to R14,5 million due to the strong
performance of the portfolio as well as the advance of additional funds to
IPS to fund its growth. IPS`s property portfolio is valued at an amount in
excess of R1 billion. IPS has a committed residential development pipeline to
build 1085 units of residential accommodation at a total cost in excess of
R480 million. The majority of these units will be built at Kempton City in
Kempton Park and Tayob Towers and Corporation Place in the Johannesburg CBD.
During the year 10 and 39 Rudolph Street and Erf 35 Talkar were sold for a
total consideration of R12,6 million. The total profit amounted to R1,5
million.
Vacancies at 31 August 2009 amounted to 20,9% of the total lettable area.
Further details are set out below:
31 August 28 February
2009 2009
% %
Offices 9,7 10,5
Retail 2,0 1,8
Commercial 3,8 4,5
Industrial 5,4 6,0
TOTAL 20,9 22,7
A large percentage of the vacancies is in respect of properties recently
acquired or undergoing redevelopment or refurbishment. The vacant retail
space is largely attributable to smaller line shops. A slow down in economic
activity during the year is affecting the letting of vacant space. It is
taking longer than anticipated to let vacant space and it is more difficult
to increase rentals on the renewal of leases. The decrease in office
vacancies is mainly due to the letting of Inner Court.
Borrowings
During the period the borrowings increased by R71,6 million as a result of
the advance of further funds to IPS and development and upgrade costs
incurred. Octodec`s gearing at the end of the year under review was 31,1% of
the total value of the portfolio as against 27,9% at 31 August 2008. The
group remains financially sound with facilities available to fund future cash
flow requirements.
Interest rates in respect of 72,6% of borrowings at 31 August 2009 have been
fixed at an average interest rate of 11,5% 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
yields. 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 decreased by R87,9 million, which gives
rise to a net asset value of 1 558 cents per unit.
Investment in Premium Properties
During the period, Octodec increased its holding in Premium to 13,3 million
linked units or 10%. Further, as announced on SENS on Friday, 28 August 2009,
Octodec together with the Wapnick Family have made a partial offer to all
independent Premium linked unit holders to acquire from them up to a maximum
of 10% of their Premium linked units. The offer price is R12,44 per linked
unit. Details of the offer acceptance will be released on SENS on Monday, 26
October 2009.
Prospects
The current economic environment has influenced the demand for space, causing
a slower take up of vacancies and slowing rental growth. Despite this, the
board will endeavor to achieve distributable earnings on a par with the
previous year.
DECLARATION OF DIVIDEND 39 AND INTEREST PAYMENT
("the distribution")
Notice is hereby given that dividend number 39 of 0,33 cents (2008: 0,30
cents) per ordinary share together with interest of 66,37 cents per debenture
(2008: 60,70 cents), has been declared for the period 1 March 2009 to 31
August 2009, payable to linked unit holders recorded in the register on
Friday, 20 November 2009. The last date to trade "cum" distribution is
Friday, 13 November 2009. The units will commence trading "ex" distribution
on Monday, 16 November 2009. Payment date will be Monday, 23 November 2009.
No dematerialisation or rematerialisation of linked unit certificates may
take place between Monday, 16 November 2009 and Friday, 20 November 2009,
both days inclusive.
By order of the Board.
A WAPNICK JP WAPNICK
(Chairman) (Managing Director)
23 October 2009
Directors
A Wapnick* (Chairman)
JP Wapnick* (Managing)
AK Stein* (Financial)
MJ Holmes
MZ Pollack
S Wapnick+
DP Cohen+
* 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
Date: 23/10/2009 15:00:06 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
