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OCT
OCT
OCT - Octodec Investments Limited and its subsidiaries - Unaudited results of
the group for the six months ended 28 February 2010
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")
UNAUDITED RESULTS OF THE GROUP
For the six months ended 28 February 2010
- Distribution up by 4,7% to 65,1 cents per linked unit
- Net asset value of 1 637 cents per linked unit
- Total investments exceed R2,6 billion
Consolidated Statement of Comprehensive Income
Unaudited Unaudited Audited
Six months Six months Year to
% 28 February 28 February 31 August
R`000 Change 2010 2009 2009
Revenue 158 490 156 508 321 824
- earned on contractual 7,6 159 432 148 135 311 447
basis
- straight line lease (942) 8 373 10 377
adjustment
Operating costs (67 756) (59 226) (130 275)
Net rental income from 90 734 97 282 191 549
properties
- earned on contractual 3,1 91 676 88 909 181 172
basis
- straight line lease (942) 8 373 10 377
adjustment
Administrative expenses (7 621) (6 182) (11 536)
Depreciation (1 273) (323) (1 307)
Operating profit (9,8) 81 840 90 777 178 706
Fair value adjustments of 59 858 (7 637) (98 324)
investment properties
Investment income 29 507 26 798 64 493
- Interest received 680 632 1 446
- listed investment 8 881 6 386 13 262
- associate
- share of after tax profit 3 705 1 585 3 635
- fair value adjustment/ 12 720 13 805 36 902
capital reserves
- interest and dividends 3 521 4 390 9 248
Finance costs 4,0 (41 196) (39 619) (80 132)
Amortisation of deemed 5 335 5 335 10 669
debenture premium
Profit on sale of investment - - 1 534
property
Profit before debenture 135 344 75 654 76 946
interest
Debenture interest 4,7 (57 847) (55 266) (114 533)
Profit/(loss) before 77 497 20 388 (37 587)
taxation
Taxation charge (16 717) (2 726) 29 475
- Deferred taxation (16 498) (2 550) 30 142
- Normal taxation (221) (176) (667)
Total comprehensive income 60 780 17 662 (8 112)
for the period attributable
to equity holders
Weighted linked units in 89 297 89 297 89 297
issue (`000)
Linked units in issue (`000) 89 297 89 297 89 297
Basic and diluted earnings 244,1 68,1 19,8 (9,1)
per share (cents)
Basic and diluted earnings 62,7 132,8 81,7 119,2
per linked unit (cents)
Distribution per linked unit
(cents)
Dividends 0,32 0,31 0,64
Interest 64,78 61,89 128,26
Total 4,7 65,10 62,20 128,90
Consolidated Statement of Financial Position
Unaudited Audited
28 February 31 August
R`000 2010 2009
ASSETS
Non-current assets 2 611 071 2 428 105
Investment properties 2 127 015 2 003 782
Property, plant and equipment 24 388 14 847
Operating lease assets 35 542 36 484
Listed investment 185 204 154 039
Investment - equity accounted 238 922 218 953
Current assets 37 533 48 507
Total assets 2 648 604 2 476 612
EQUITY AND LIABILITIES
Share capital and reserves 1 082 852 1 006 889
Share capital and premium 74 299 68 964
Non-distributable reserves 965 671 894 374
Distributable reserves 42 882 43 551
Non-current liabilities 1 355 865 1 265 777
Debentures and premium 379 028 384 362
Long term borrowings 736 036 659 632
Deferred taxation 240 801 221 783
Current liabilities 209 887 203 946
Interest bearing borrowings 109 000 95 260
Non-interest bearing 43 040 49 419
Linked unit holders 57 847 59 267
Total equity and liabilities 2 648 604 2 476 612
Linked units in issue (`000) 89 297 89 297
Net asset value per linked unit (cents) 1 637 1 558
Net asset value per linked unit (cents) - 1 907 1 806
before providing for deferred tax
Loan to investment value ratio (%) 32,4 31,1
Consolidated Statement of Cash Flows
Unaudited Unaudited Audited
Six months Six months Year to
28 February 28 February 31 August
R`000 2010 2009 2009
CASH FLOW FROM OPERATING ACTIVITIES
Net rental income from properties 82 782 82 404 168 339
Adjustment for:
- Depreciation 1 273 323 1 307
- Working capital changes 14 917 (4 337) (12 336)
Cash generated from operations 98 972 78 390 157 310
Investment income 13 082 11 408 23 956
Finance costs (41 196) (39 619) (80 132)
Taxation paid (221) (876) (1 311)
Distribution to linked unit holders (59 561) (54 472) (110 015)
paid
Net cash inflow/(outflow) from 11 076 (5 169) (10 192)
operating activities
CASH FLOW FROM INVESTING ACTIVITIES
Investing activities (90 898) (58 935) (89 453)
Proceeds from disposal of - - 12 600
investment properties
Net cash outflow used in investing (90 898) (58 935) (76 853)
activities
CASH INFLOW FROM FINANCING
ACTIVITIES
Increase in interest bearing 116 404 62 005 71 610
borrowings
Net cash generated from financing 116 404 62 005 71 610
activities
NET INCREASE/(DECREASE) IN CASH AND 36 582 (2 099) (15 435)
CASH EQUIVALENTS
Cash and cash equivalents at (26 072) (10 637) (10 637)
beginning of period
Cash and cash equivalents at end of 10 510 (12 736) (26 072)
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 28 February 31 August
R`000 Change 2010 2009 2009
Revenue
- earned on contractual 7,6 159 432 148 135 311 447
basis
Operating costs (67 756) (59 226) (130 275)
Net rental income from 3,1 91 676 88 909 181 172
properties
Administrative expenses (7 621) (6 182) (11 536)
Depreciation (1 273) (323) (1 307)
Operating profit 0,5 82 782 82 404 168 329
Investment income
- Interest received 680 632 1 446
- Interest received - 8 881 6 386 13 262
listed investment
- Investment income - 7 226 5 975 12 883
associate
Distributable profit 4,4 99 569 95 397 195 919
before finance costs
Finance costs 4,0 (41 196) (39 619) (80 132)
Distributable income 4,7 58 373 55 778 115 787
before taxation
Taxation charge (221) (176) (667)
Unit holders distributable 4,6 58 152 55 602 115 120
earnings
Linked units in issue 89 297 89 297 89 297
(`000)
Distributable earnings per 4,6 65,1 62,3 128,9
linked unit (cents)
Distribution per linked 4,7 65,1 62,2 128,9
unit (cents)
Consolidated Statement of Changes in Equity
Revalua- Distri-
Share Capital tion butable
R`000 capital reserve reserve reserve Total
Balance at 1 58 295 12 050 908 653 35 851 1 014 849
September 2008
Total comprehensive (8 112) (8 112)
income for the year
Reallocation of 10 669 (10 669) -
deemed debenture
premium
Dividends paid (545) (545)
Adjustment to 697 697
valuation of listed
investment, net of
deferred tax
Sale of investment 1 534 (1 534) -
properties
Fair value
adjustments
- investment (65 461) 65 461 -
properties, net of
deferred taxation
- associate, net of 36 902 (36 902) -
deferred tax
Balance at 31 68 964 13 584 880 791 43 550 1 006 889
August 2009
Total comprehensive 60 780 60 780
income for the
period
Reallocation of 5 335 (5 335) -
deemed debenture
premium
Dividends paid (295) (295)
Adjustment to 15 478 15 478
valuation of listed
investment, net of
deferred tax
Fair value
adjustments
- investment 43 098 (43 098) -
properties, net of
deferred taxation
- associate, net of 12 720 (12 720) -
deferred tax
Balance at 28 74 299 13 584 952 087 42 882 1 082 852
February 2010
Reconciliation - Earnings to Distributable Earnings
Unaudited Unaudited Audited
Six months Six months Year to
28 February 28 February 31 August
R`000 2010 2009 2009
Earnings/(losses) attributable to 60 780 17 662 (8 112)
equity holders
Amortisation of deemed debenture (5 335) (5 335) (10 669)
premium
Profit on sale of investment - - (1 534)
properties
Fair value adjustments
- associate, net of deferred tax (12 720) (13 805) (36 902)
- investment properties, net of (43 098) 7 843 65 461
deferred tax
Headline earnings before (373) 6 365 8 244
debenture premium
Debenture interest 57 847 55 266 114 533
Headline earnings attributable to 57 474 61 631 122 777
linked unit holders
Straight line lease adjustment 678 (6 029) (7 471)
net of deferred tax
Deferred taxation adjustments - - (185)
Distributable earnings 58 152 55 602 115 121
attributable to linked unit
holders
Headline earnings per linked unit 64,4 69,0 137,5
(cents)
Segmental Information
Analysis by property usage Industrial Office Retail Commercial
February 2010 R`000 R`000 R`000 R`000
Revenue
Rentals and recoveries 23 356 33 694 58 941 36 960
Management fee
Straight line operating (55) (1 392) (201) 682
lease adjustment
Total revenue 23 301 32 302 58 740 37 642
Net rental income from 13 867 19 039 31 286 21 922
properties
Assets
Investment properties 311 585 411 106 853 471 519 821
Plant and equipment 127 7 021 11 600 4 000
Other assets
Total assets 311 712 418 127 865 071 523 821
Corporate
Analysis by property usage Residential unallocated Total
February 2010 R`000 R`000 R`000
Revenue
Rentals and recoveries 5 682 158 633
Management fee 799 799
Straight line operating 24 (942)
lease adjustment
Total revenue 5 706 799 158 490
Operating profit 2 734 (7 008) 81 840
Assets
Investment properties 66 574 2 162 557
Plant and equipment 1 640 24 388
Other assets 461 659 461 659
Total assets 68 214 461 659 2 648 604
Notes to the Financial Statements
The unaudited 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 Listings
Requirements of the JSE Limited. The accounting policies adopted and methods
of computation are consistent with those applied in the financial statements
for the year ended 31 August 2009.
Related party - City Property Administration (Proprietary) Limited is
responsible for the property and asset management of the group.
Subsequent events - There have been no subsequent events that require
reporting.
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 has provided a suretyship to Nedbank Property Finance, which at 28
February 2010 amounted to R181,4 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 or audited by our auditors
Deloitte & Touche.
Comments
Review of results
The total distribution per linked unit for the six months of 65,10 cents
(2009: 62,2 cents) represents an increase of 4,7% on that paid in the previous
corresponding period.
Rental income and net rental income increased by 7,6% and 3,1% respectively.
The growth in rental income was partially offset by an increase in property
expenses, including assessment rates and bad debts.
The challenging retail conditions continued during the period resulting in a
slow take up of vacant space and as a result exerted further downward pressure
on rentals.
The core portfolio, representing those properties held for the prior
comparable six months, reflects rental income growth of 5%. Distributable
income was positively impacted by the reduction in the prime lending rate
during the period.
Property portfolio
Octodec continued to unlock the value of its Johannesburg and Pretoria CBD
portfolios by the redevelopment and refurbishment thereof. Various properties
were upgraded during the period at a total cost of R7,5 million. These
included Killarney Mall, Waverley Plaza and Inner Court.
During the period under review three properties were purchased for an
aggregate purchase price of R59 million. These purchases include two
properties housing McCarthy motor dealerships together with a light industrial
property in Eloff Street, Johannesburg.
Income from IPS increased to R7,2 million due to the strong performance of the
portfolio. IPS`s property portfolio is valued at an amount in excess of R1
billion. IPS has a 50% interest in various joint ventures ("JV"). These
include a JV with Bidvest Property which houses a motor dealership and a JV
with Old Mutual which includes four residential properties. Octodec has an
effective 20% interest in these JVs. The IPS group has a total of 2 732
residential units of accommodation with a committed residential development
pipeline to build in excess of a further 700 units. The majority of these
units will be built at Kempton City in Kempton Park and Lara`s Place situated
in the Johannesburg CBD. Due to the anticipated phased take up of these new
units, a decrease in income from IPS is forecast for the next 12 months.
Vacancies at 28 February 2010 amounted to 18,8% of total lettable area.
Further details are set out below:
28 February 31 August
2010 2009
% %
Offices 9,2 9,7
Retail 2,2 2,0
Commercial 3,4 3,8
Industrial 4,0 5,4
TOTAL 18,8 20,9
The vacant retail space is largely attributable to smaller line shops. A large
percentage of the vacancies are in respect of properties acquired with large
vacancies and where little or no consideration was paid for the vacant space.
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 R91 million, as a result of the
acquisition of properties, the purchase of 919 819 Premium shares and
development costs incurred. Octodec`s gearing at the end of the period under
review was 32,4% of the value of its portfolio against 31,1% at 31 August
2009. The group remains financially sound with facilities available to fund
future cash flow requirements.
Interest rates in respect of 53,8% of borrowings at 28 February 2010 have been
fixed at an average interest rate of 11,7% maturing at various dates ranging
from April 2010 to October 2018.
Revaluation of property portfolio
At each financial year end at least one third of the property portfolio is
valued on a rotational basis by an external valuer, while at the interim stage
directors` valuations are performed by applying market related yields. The
directors` valuation of the portfolio increased by R59,8 million, which gives
rise to a net asset value of 1 637 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.
The board believes that distributable earnings for the second six month period
will be on a par with the distributable earnings reported for the six months
ended 28 February 2010.
DECLARATION OF DIVIDEND 40 AND INTEREST PAYMENT ("the distribution")
Notice is hereby given that dividend number 40 of 0,32 cents (2009: 0,31
cents) per ordinary share together with interest of 64,78 cents per debenture
(2009: 61,89 cents), has been declared for the period 1 September 2009 to 28
February 2010, payable to linked unit holders recorded in the register on
Friday, 21 May 2010. The last date to trade "cum" distribution is Friday, 14
May 2010. The units will commence trading "ex" distribution on Monday, 17 May
2010. Payment date will be Monday, 24 May 2010.
No dematerialisation or rematerialisation of linked unit certificates may take
place between Monday, 17 May 2010 and Friday, 21 May 2010, both days
inclusive.
By order of the board.
A WAPNICK JP WAPNICK
(Chairman) (Managing Director)
22 April 2010
Directors
A Wapnick* (Chairman)
JP Wapnick* (Managing Director)
AK Stein* (Financial)
MJ Holmes
MZ Pollack
S Wapnick+
DP Cohen
* Executive director
Independent non-executive director
+ Non-executive director
Registered Office
CPA House101 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
Property Asset Manager
e-mail address: propworld@cityprop.co.za
website address: www.cityprop.co.za
Date: 22/04/2010 14:47:03 Produced by the JSE SENS Department.
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