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VKE
VKE
VKE - Vukile - Unaudited Abridged Interim Results And Distribution
Announcement For The Six Months Ended 30 September 2009
VUKILE PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2002/027194/06)
JSE code: VKE & NSX code: VKN
ISIN: ZAE000056370
("Vukile")
UNAUDITED ABRIDGED INTERIM RESULTS and distribution announcement for the six
months ended 30 September 2009
* Conclusion of agreements for acquisition of asset management business
from Sanlam Properties
* Distribution up 6.6% compared to comparable six months
* New leases and renewals worth R185 million concluded
* Conclusion of agreements with Sanlam for acquisition of R775 million
property portfolio
COMMENTS
1 Basis of preparation
The unaudited abridged interim financial statements for the six months ended
30 September 2009, and comparative information, have been prepared in terms
of IAS34 (Interim Financial Reporting) and relevant sections of the South
African Companies Act 1973, as amended. The adoption of the amendments to
IAS1, "Presentation of Financial Statements", introduces certain changes to
the format and titles of the financial statements. The measurement and
recognition of Vukile Property Fund Limited`s ("Vukile" or "the group" or
"the company") assets, liabilities, income and expenditure remains
unchanged. Comparative information has been re-presented to conform with
this revised standard. 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.
2 Financial results
The directors of Vukile are pleased to report that the distribution for the
six months ended 30 September 2009 has increased by 6.6% to R138.9 million
as compared to R130.3 million for the six months ended 30 September 2008
("the comparable period"). The group`s net rental income, exclusive of
straight-line rental accruals, has increased by 9.8% over the comparable
period. However, part of the increase is attributable to the delay in the
completion of maintenance and refurbishment projects beyond 30 September
2009. If this deferred expenditure is taken into account, the increase in
net revenue over the comparable period reduces to 6.4%. This is in line
with expectations following a period characterised by increasing vacancies
and rising bad debts.
Summary of financial performance
Sept Sept Mar
2009 2008 2009
Net asset value per linked
unit (cents) 910 831 907
Distribution per linked
unit (cents) 47.0 44.1 97.9
Loan to value ratio 32.6% 30.6% 28.5%
The board has approved an interim distribution of 47.0 cents per linked unit
for the six months ended 30 September 2009, an increase of 6.6% or 2.9 cents
per linked unit over the comparable period.
The increase in the distribution of 2.9 cents per linked unit is made up as
follows:
Sept 2009
Cents per
linked unit
Contribution to increased rental income 12.2
Increase in rentals 8.5
Higher recoveries of electricity
and rates and taxes 3.7*
Less: Increase in property expenditure (5.4)
Higher electricity and rates and taxes
charges (5.9)*
Fewer refurbishment projects and
refurbishment projects partly deferred
to post Sept 2009 2.7
Other (2.2)
Net increase in group property revenue 6.8
Net increase in finance costs (1.0)
Increase in administrative expenses/taxation (1.5)
Surplus retained to cover refurbishment
projects still to be completed (1.4)
Net increase in distribution 2.9
* The higher electricity and rates and taxes charges have had a negative
impact on distributable earnings as these charges are not fully recovered
from tenants. Approximately 90% of electricity charges and 70% of rates and
taxes charges are recovered from tenants (government tenants do not pay
rates and taxes).
3 Borrowings
As announced on SENS on 22 September 2009, the company raised R250 million
through its commercial mortgage-backed securitisation programme at an all-in
cost of funding of 10.42%. The term of these notes is 2.7 years. These
funds will be used to redeem debt and to partly fund the R780 million
property acquisition referred to in paragraph 7.
The group`s long-term debt is hedged using interest rate swap agreements for
periods expiring between one and three years.
Due to the fact that 98% 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 cost of debt for the current financial year.
4 Property portfolio
The combined property portfolio currently comprises 74 properties with a
gross lettable area of 920,233 m2.
The sectoral spread by gross rentals comprises 28% commercial, 56% retail
and 16% industrial.
During the six month period under review, new leases and renewals with a
total area of 76,486 m2 and a contract value of R185 million were concluded.
Since 1 October 2009 leases and renewals with a total area of 8,407 m2
(18.4% of the total vacant area) and a contract value of R28.2 million have
been concluded.
Bad debt write offs have been in line with expectations for the six month
period. The provision for doubtful debts at 30 September 2009 is R7.3
million (R6.5 million at 31 March 2009) which is considered adequate at this
stage.
The vacancy profile (% of gross rentals) indicates that the overall vacancy
percentage has increased from 3.2% on 31 March 2009 to 4.5% on 30 September
2009.
Industrial vacancies increased from 3.3% to 7.7% of gross rentals mainly as
a result of new vacancies at Randburg Tungsten, Sony Building and Randburg
Trevallyn. However, 6,343 m2 (33%) of the industrial vacancies have been
let since 1 October 2009.
5 Valuations
The directors have valued the group`s property portfolio at R4.55 billion as
at 30 September 2009. This is marginally higher than the directors
valuation at 31 March 2009. The directors valued the properties utilising
the discounted cashflow methodology.
In terms of the company`s accounting policies, 50% of all properties are
valued every six months on a rotational basis by registered independent
external valuers. The external valuation by JHI Real Estate Limited and Old
Mutual Property Group (Pty) Ltd of approximately 50% of the total portfolio
is R188 million (8.8%) higher than the directors` valuation of the same
properties at 30 September 2009.
6 Acquisitions, developments and other capital projects
The major revamps/income protecting capital projects relating to Dobsonville
Shopping Centre and Phoenix Plaza have been completed within budget and
timeously.
7 Major acquisitions
A SENS announcement dated 29 October 2009 advised unitholders that Vukile
had concluded agreements to purchase 13 properties from the Sanlam Group at
a cost of R780 million which includes transaction costs of R5 million. The
acquisition is subject to the usual conditions precedent, including the
approval of Vukile`s linked unitholders, the regulatory authorities and the
raising of finance.
It is anticipated that the acquisition will be funded as follows:
Rm
Bank debt raised in terms of existing facility 300
Debt raised from Vukile`s securitisation vehicle
in terms of a recent tap 100
The issue of linked units to existing and new
linked unitholders 380
780
8 Segmental analysis
Segmental analysis
Group income for the six months ended 30 September 2009
Indus- Comm-
trial ercial Retail
R000 R000 R000
Property revenue 56 494 101 657 199 291
Straight-line rental
income accrual 194 237 982
Property Expenses (20 972) (36 766) (75 387)
Profit from property
operations 35 716 65 128 124 886
Group balance sheet
at 30 September 2009
Investment properties* 792 105 1 272 754 2 416 959
Other non-current
assets 30 127 51 189 77 225
Current assets
Trade and other
receivables 4 910 7 210 18 578
Cash and cash
equivalents 1 422 1 985 5 925
Non-current
liabilities 534 529 858 881 1 631 012
Current liabilities
Trade and other
payables 15 259 22 697 56 186
Taxation payable - - -
Linked unitholders - - -
Segmental analysis (continued)
Group income for the six months ended 30 September 2009
Corporate Total
R000 R000
Property revenue - 357 442
Straight-line rental income accrual - 1 413
Property Expenses - (133 125)
Profit from property operations - 225 730
Group balance sheet at
30 September 2009
Investment properties* - 4 481 818
Other non-current assets 10 101 168 642
Current assets
Trade and other receivables - 30 698
Cash and cash equivalents 204 479 213 811
Non-current
Liabilities - 3 024 422
Current liabilities
Trade and other payables 17 015 111 157
Taxation payable 3 785 3 785
Linked unitholders 138 909 138 909
* Includes properties held for sale
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.
9 Update on the acquisition of asset management business from Sanlam
Properties
The company announced on 29 October 2009 that the formal agreements had been
concluded regarding:
9.1 The proposed acquisition by Vukile of the property asset management
business of Sanlam Properties directly related to the property asset
management of Sanlam Life`s property portfolio, constituted by the IT
infrastructure and software, furniture and equipment and the take-on of
those employees directly related to said asset management function, from
Sanlam Properties as a going concern;
9.2 A call option granted by Sanlam Life to Vukile to acquire certain
properties valued at approximately R500 million from Sanlam Life; and
9.3 A right of first refusal granted by Sanlam Life to Vukile in respect of
the majority of the remainder of Sanlam Life`s property portfolio.
A circular relating to the above will be posted to linked unitholders on or
about 26 November 2009.
10 Prospects
Trading conditions during the reporting period were difficult and
characterised by increasing vacancies, higher bad debts and very little
scope for higher rentals. More and more companies had to close their doors
and a record number of jobs were lost in the economy.
There are, however, some indications that the economy has turned the corner
and that economic growth is starting to increase, albeit at a slow rate.
Due to the fact that the property cycle lags the general economy, it will
take some time before any economic growth filters through to the property
sector.
The board therefore expects trading conditions to remain difficult for the
remainder of the financial year, but is still of the opinion that reasonable
growth in distributions can be achieved.
11 Payment of debenture interest and dividend
Notice is hereby given of a distribution amounting to 47.0 cents per linked
unit, for the six-month period to 30 September 2009. The distribution
comprises interest on debentures of 46.90 cents per linked unit and a
dividend of 0.10 cents per linked unit.
Last date to trade cum
distribution Thurs, 10 December 2009
Linked units trade ex
distribution Fri, 11 December 2009
Record date for unitholders to
participate in the distribution Fri, 18 December 2009
Payment of distribution Mon, 21 December 2009
Linked unit certificates may not be dematerialised or re-materialised
between Friday, 11 December 2009 and Friday, 18 December 2009, both days
inclusive.
On behalf of the board
AD Botha G van Zyl
Chairman Chief Executive
Roodepoort
23 November 2009
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
30 Sept 30 Sept 31 Mar
2009 2008 2009
R000 R000 R000
Property revenue 357 442 321 416 673 285
Straight-line
rental income accrual 1 413 3 622 6 209
Gross property
revenue 358 855 325 038 679 494
Property expenses (133 125) (117 197) (235 606)
Profit from property
operations 225 730 207 841 443 888
Administrative expenses (10 241) (8 865) (20 137)
Operating profit 215 489 198 976 423 751
Investment and
other income 5 531 4 658 8 712
Finance costs (68 272) (64 228) (131 358)
Profit before
debenture interest 152 748 139 406 301 105
Debenture interest (138 626) (130 072) (288 755)
Profit before
capital items 14 122 9 334 12 350
Capital items
Amortisation of
debenture premium 390 356 1 007
Profit on sale of
revalued properties 1 386 - -
Profit before fair
value adjustments 15 898 9 690 13 357
Fair value
adjustments (6 736) (262 169) 115 504
Gross change in
fair value of
investment
properties (5 323) (258 547) 121 713
Straight-line
rental income
adjustment (1 413) (3 622) (6 209)
Profit/(loss)
before taxation 9 162 (252 479) 128 861
Taxation (4 551) 98 221 (6 297)
Profit/(loss)
for the period after
taxation 4 611 (154 258) 122 564
Other comprehensive
income
Cash flow hedging 3 642 20 202 (72 104)
Current period
gains/(losses) 3 131 17 705 (77 101)
Reclassification
to profit or loss 511 2 497 4 997
Available-for-sale
financial assets 1 795 (774) (621)
Current period losses (1 418) (3 014) (6 488)
Reclassification
to profit or loss 3 213 2 240 5 867
Other comprehensive
income for the period,
net of tax 5 437 19 428 (72 725)
Total comprehensive
income/(loss) for
the period 10 048 (134 830) 49 839
Earnings per share
Basic earnings/(loss)
per share (cents) 48.46 (8.18) 139.17
Diluted earnings/(loss)
per share (cents) 48.46 (8.18) 139.17
Total number of
linked units in
issue (000) 295 551 295 551 295 551
Weighted average
number of linked
units in issue (000) 295 551 295 551 295 551
Reconciliation: headline earnings and distributable earnings
Unaudited Unaudited Audited
30 Sept 30 Sept 31 Mar
2009 2008 2009
R000 R000 R000
Attributable profit/
(loss) for the period
after taxation 4 611 (154 258) 122 564
Adjusted for:
Net change in fair
value of investment
properties 6 736 262 169 (115 504)
Total tax effects
of adjustments (1 597) (101 014) (554)
Profit on sale of
revalued property (1 386) - -
Amortisation of
debenture premium (390) (356) (1 007)
Debenture interest 138 626 130 072 288 755
Headline earnings
of linked units 146 600 136 613 294 254
Straight-line rental
accrual net of
deferred taxation (982) (2 825) (4 348)
Available for
distribution 145 618 133 788 289 906
Distribution to
unitholders
Interest 138 626 130 072 288 755
Dividend 283 266 589
Total distribution 138 909 130 338 289 344
Headline earnings
per linked unit
(cents) 49.60 46.22 99.56
Available for
distribution per
linked unit (cents) 49.27 45.27 98.09
UNAUDITED ABRIDGED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
30 Sept 30 Sept 31 Mar
2009 2008 2009
R000 R000 R000
ASSETS
Non current assets 4 634 414 4 225 553 4 633 552
Investment properties 4 465 772 4 029 938 4 466 707
Investment properties 4 547 106 4 106 375 4 545 731
Straight-line rental
income adjustment (81 334) (76 437) (79 024)
Other non current assets 168 642 195 615 166 845
Straight-line rental
income asset 81 334 76 437 79 024
Development expenditure 908 - 315
Furniture, fittings
and computer equipment 86 137 119
Available-for-sale
financial asset 10 015 7 139 11 088
Derivative financial
instruments - 35 603 -
Goodwill 76 299 76 299 76 299
Current assets 244 509 74 243 89 935
Trade and other
receivables 30 698 25 784 29 128
Taxation - 85 -
Cash and cash equivalents 213 811 48 374 60 807
Non current assets
held for sale 16 046 - -
Total assets 4 894 969 4 299 796 4 723 487
EQUITY AND LIABILITIES
Equity and reserves 1 154 866 920 351 1 145 101
Non-current liabilities 3 486 252 3 085 424 3 258 160
Linked debentures
and premium 1 534 029 1 535 071 1 534 420
Other interest
bearing borrowings 1 471 422 1 191 789 1 245 827
Derivative financial
instruments 18 971 - 16 493
Deferred tax liabilities 461 830 358 564 461 420
Current liabilities 253 851 294 021 320 226
Trade and other payables 111 157 109 888 122 682
Short-term borrowings - 53 795 37 459
Current taxation
liabilities 3 785 - 1 079
Linked unitholders
for distribution 138 909 130 338 159 006
Total equity and
liabilities 4 894 969 4 299 796 4 723 487
UNAUDITED ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
30 Sept 30 Sept 31 Mar
2009 2008 2009
R000 R000 R000
CASH FLOW FROM
OPERATING ACTIVITIES 208 909 196 709 431 702
Profit/(loss) before tax 9 162 (252 479) 128 861
Adjustments 214 276 450 143 294 844
Net changes in
working capital (13 095) 329 9 779
Taxes paid (1 434) (1 284) (1 782)
CASH FLOW FROM
INVESTING ACTIVITIES (16 763) (29 292) (92 086)
CASH FLOW FROM
FINANCING ACTIVITIES (39 142) (160 452) (320 218)
Net increase in cash and
cash equivalents 153 004 6 965 19 398
Cash and cash equivalents
at the beginning
of the period 60 807 41 409 41 409
Cash and cash equivalents
at the end of the period 213 811 48 374 60 807
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY TO 30 SEPTEMBER 2009
Share
capital Available-
and for-sale
share Revaluation financial
premium reserves assets
R000 R000 R000
Balance at 31 Mar 2008 20 297 1 008 170 -
Dividend distribution - - -
Transactions with
owners 20 297 1 008 170 -
Net profit
for the period - - -
Change in fair value
of investment
properties - (258 547) -
Deferred taxation on
change in fair value
of investment
properties and
straight-line rental
accrual - 101 014 -
Other comprehensive
income
Cash-flow hedges - - -
Revaluation of
available-for-sale
financial asset - - (774)
Balance at
30 Sept 2008 20 297 850 637 (774)
Dividend distribution - - -
Transactions
with owners 20 297 850 637 (774)
Net profit for
the period - - -
Change in fair
value of investment
properties - 380 260 -
Deferred taxation
on change in fair
value of investment
properties and
straight-line
rental accrual - (102 321) -
Other comprehensive
income
Revaluation of
available-for-sale
financial asset - - 153
Revaluation of
interest rate swaps - - -
Balance at
31 Mar 2009 20 297 1 128 576 (621)
Dividend distribution - - -
Transactions with
owners 20 297 1 128 576 (621)
Net profit for
the period - - -
Change in fair value
of investment
properties - (5 323) -
Deferred taxation on
change in fair value
of investment properties
and straight-line
rental accrual - 1 597 -
Other comprehensive
income
Revaluation of
available-for-sale
financial asset - - 1 795
Revaluation of
interest rate swaps - - -
Balance at
30 Sept 2009 20 297 1 124 850 1 174
Unaudited consolidated statement of changes in equity to 30 September 2009
(continued)
Cash-flow Retained
Hedges income Total
R000 R000 R000
Balance at
31 Mar 2008 55 250 12 134 1 095 851
Dividend distribution - (266) (266)
Transactions
with owners 55 250 11 868 1 095 585
Net profit
for the period - (154 258) (154 258)
Change in fair value
of investment
properties - 258 547 -
Deferred taxation on
change in fair
value of investment
properties and
straight-line
rental accrual - (101 014) -
Other comprehensive
income
Cash-flow hedges (20 202) - (20 202)
Revaluation of
available-for-
sale financial
asset - - (774)
Balance at
30 Sept 2008 35 048 15 143 920 351
Dividend
distribution - (323) (323)
Transactions
with owners 35 048 14 820 920 028
Net profit
for the period - 276 822 276 822
Change in fair
value of investment
properties - (380 260) -
Deferred taxation
on change in fair
value of investment
properties and
straight-line
rental accrual - 102 321 -
Other comprehensive
Income
Revaluation of
available-for-
sale financial asset - - 153
Revaluation of
interest rate swaps (51 902) - (51 902)
Balance at
31 Mar 2009 (16 854) 13 703 1 145 101
Dividend
distribution - (283) (283)
Transactions
with owners (16 854) 13 420 1 144 818
Net profit for
the period - 4 611 4611
Change in fair
value of investment
properties - 5 323 -
Deferred taxation
on change in fair
value of investment
properties and
straight-line
rental accrual - (1 597) -
Other comprehensive
income
Revaluation of
available-for-sale
financial asset - - 1 795
Revaluation of
interest rate swaps 3 642 - 3 642
Balance at
30 Sept 2009 (13 212) 21 757 1 154 866
JSE sponsor: Barnard Jacobs Mellet Corporate Finance (Pty) Ltd, Illovo,
Sandton
NSX sponsor: IJG Securities (Pty) Ltd, Windhoek, Namibia
Executive directors: G van Zyl (Chief Executive), MJ Potts (Financial
Director).
Non-executive directors: AD Botha (Chairman), 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,
Johannesburg
Investor and media relations: Contact Helen McKane on vukile@dpapr.com, or
Tel: 011 728-4701.
Website: www.vukileprops.co.za
Date: 23/11/2009 12:15:02 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.
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