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CPL
CPL
CPL - Capital Property Fund - Condensed Unaudited consolidated financial
statements for the six months ended 30 June 2010
CAPITAL PROPERTY FUND
MANAGED BY PROPERTY FUND MANAGERS LTD
Share code CPL ISIN ZAE000001731
("Capital" or "the Fund" or "the Group")
CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED
30 JUNE 2010
DIRECTORS` COMMENTARY
1 DISTRIBUTABLE EARNINGS
The distribution of 28,36 cents for the interim period ended 30 June 2010
represents an increase of 10,26% on the distribution of 25,72 cents for the
first six months of the previous financial year.
2 COMMENTARY ON RESULTS
Capital has continued to perform well despite operating in a weak economic
environment. The quality of Capital`s property portfolio has placed it at an
advantage relative to the market as the prime areas in which most of its
properties are located have continued to perform well. Capital has focused on
the flexible utilisation and the general functionality of its properties and
avoided specialised properties. Capital has also focused on properties which are
let to, and remain attractive to, corporate tenants which are less vulnerable to
the economic downturn.
These strategies have resulted in high levels of tenant retention, growth in
rentals and low vacancies being achieved in a difficult property market.
The arrears book has increased marginally but remains firmly under control.
Vacancies increased marginally from 4,4% in December 2009 to 4,6% as at 30 June
2010. This figure excludes 10 380m2 of space which has been let but where
tenants will only take occupation after 30 June 2010. If these lettings are
included, the vacancy percentage reduces to 3,4%.
3 PROPERTY ACQUISITIONS
3.1 IMPROVON INDUSTRIAL PORTFOLIO
Capital took transfer of the five A-grade industrial properties purchased for
R219 million at an initial yield of 9,02% from Improvon, which were acquired in
the previous financial year. Four of the properties are located in Longmeadow
and one in Rustivia on the East Rand.
3.2 MURRAY AND ROBERTS PORTFOLIO
Capital has agreed to acquire two industrial properties in Epping, Cape Town and
one commercial property in Westway Office Park, Westville, from Murray and
Roberts for R82,1 million at an initial forward yield of 10,6%.
3.3 87-89 GOODWOOD ROAD, MAHOGANY RIDGE
Capital has agreed to acquire an A-grade industrial property together with
vacant land of 5 000m2 for R33,6 million at an initial yield of 10,3% in
Mahogany Ridge. Transfer is expected in October 2010.
4 DISPOSALS
A portion of 4th Street Wynberg (portion 1 of erf 473) was sold and transferred
for R9 million at an exit yield of 8.5%. The valuation for this portion as at 31
December 2009 was R5,7 million
Capital owns 25% of the vacant land in Montague Gardens. The consortium has
agreed to sell 6,3 hectares to Eris Property Group for R81,6 million and the
land is to be used for the development of a Makro store. The sale remains
subject to suspensive conditions including the servicing and sub-division of the
portion that has been sold.
5 LISTED EQUITIES
Capital retained its holding of 43 169 000 units in Pangbourne Properties
Limited ("Pangbourne") which equates to 9,8% of Pangbourne`s units in issue.
Capital intends holding these units as a long term strategic investment. Capital
has continued to reduce its holding in New Europe Property Investments plc from
4 362 837 shares to 3 682 500 shares.
6 STRATEGY
Capital`s strategy is to increase its gearing level from the current 19,4% to a
maximum of 30% by acquiring additional A-grade commercial and industrial
properties. In accordance with international best practice, Capital intends
becoming a specialised commercial and industrial Fund owning only A-grade
properties situated in the four major metropolitan areas of Cape Town, Durban,
Johannesburg and Pretoria. Retail properties which currently constitute 10%
(based on book value) of the portfolio and the small exposure to the Eastern
Cape will be disposed of over time.
7 PROSPECTS
Capital expects vacancies and rental levels in the commercial and industrial
markets to remain stable at the current levels for the remainder of the
financial year.
The board is confident that Capital will achieve its previous guidance of growth
in distributions of between 9% and 11% for the 2010 financial year. This
forecast has not been reviewed or reported on by the Fund`s auditors.
By order of the board
Andrew Teixeira Rual Bornman
Managing director Financial director
3 August 2010
Johannesburg
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
UNAUDITED AUDITED UNAUDITED
30 Jun 2010 31 Dec 2009 30 Jun 2009
GROUP R`000 R`000 R`000
ASSETS
Non-current assets 6 322 736 6 090 175 5 030 845
Investment property 5 248 466 5 033 139 4 218 541
Straight-lining of rental revenue
adjustment 76 100 72 319 61 785
Investment property under
development 137 330 126 091 39 752
Investment in associate company - - 119 352
Investments 860 840 858 626 591 415
Current assets 47 410 60 286 384 421
Investment property held for sale - - 353 920
Straight-lining of rental revenue
adjustment - - 7 417
Trade and other receivables 11 347 25 497 22 892
Cash and cash equivalents 36 063 34 789 192
Total assets 6 370 146 6 150 461 5 415 266
EQUITY AND LIABILITIES
Capital of Fund 4 714 306 4 698 372 3 827 092
Trust capital 2 645 963 2 645 963 2 039 442
Non-distributable reserves 2 068 343 2 052 409 1 787 650
Retained earnings - - -
Total liabilities 1 655 840 1 452 089 1 588 174
Non-current liabilities 1 013 900 1 156 652 1 286 539
Interest-bearing borrowings 918 534 1 053 965 1 215 110
Deferred tax 95 366 102 687 71 429
Current liabilities 641 940 295 437 301 635
Trade and other payables 96 744 78 732 73 913
Interest-bearing borrowings 317 202 - 53 666
Unitholders for distribution 203 505 207 093 159 194
Bank overdraft 24 489 9 612 14 862
Total equity and liabilities 6 370 146 6 150 461 5 415 266
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
UNAUDITED AUDITED UNAUDITED
30 Jun 2010 31 Dec 2009 30 Jun 2009
GROUP R`000 R`000 R`000
Net rental and related revenue 242 636 447 516 207 699
Recoveries and contractual rental
revenue 335 771 600 059 280 126
Straight-lining of rental revenue
adjustment 3 781 13 602 10 485
Rental revenue 339 552 613 661 290 611
Property operating expenses (96 916) (166 145) (82 912)
Distributable income from
investments 34 893 49 815 17 336
Fair value gain/(loss) on
investment property and
investments 19 518 293 198 (4 225)
Fair value gain on investment
property 3 045 144 433 30 901
Fair value adjustment resulting
from straight-lining of rental
revenue (3 781) (13 602) (10 485)
Fair value gain/(loss) on
investments 20 254 162 367 (24 641)
Administrative expenses (17 330) (28 665) (13 376)
Share of post acquisition
reserves from associate - 8 493 5 390
Distributable income from
associate - 8 064 4 961
Profit from associate - 429 429
Profit before net finance costs 279 717 770 357 212 824
Net finance costs (67 599) (106 966) (52 493)
Finance income 1 289 8 617 2 594
Interest on units issued cum
distribution - 6 100 1 268
Interest received 1 289 2 517 1 326
Finance costs (68 888) (115 583) (55 087)
Interest on borrowings (60 444) (112 637) (51 521)
Interest capitalised 6 242 7 179 1 986
Fair value adjustment on
interest rate derivatives (14 686) (10 125) (5 552)
Profit before income tax 212 118 663 391 160 331
Income tax expense 7 321 (35 670) (4 462)
Profit for the period
attributable to equity holders 219 439 627 721 155 869
Total comprehensive income for
the period 219 439 627 721 155 869
Basic earnings per unit (cents)* 30,58 93,93 25,18
Headline earnings per unit
(cents)* 29,66 79,69 22,61
*The Fund has no dilutionary instruments in issue
RECONCILIATION OF PROFIT FOR THE PERIOD TO HEADLINE EARNINGS AND DISTRIBUTABLE
INCOME
UNAUDITED AUDITED UNAUDITED
30 Jun 2010 31 Dec 2009 30 Jun 2009
GROUP R`000 R`000 R`000
Profit for the period
attributable to equity holders 219 439 627 721 155 869
Adjusted for: (6 585) (95 161) (15 954)
- Fair value gain on investment
property (3 045) (144 433) (30 901)
- Fair value adjustment resulting
from straight-lining of
rental revenue 3 781 13 602 10 485
- Income tax expense (7 321) 35 670 4 462
Headline earnings 212 854 532 560 139 915
Reconciliation of profit for the
period to amount available for
distribution
Profit for the period
attributable to equity holders 219 439 627 721 155 869
Straight-lining of rental revenue
adjustment (3 781) (13 602) (10 485)
Fair value gain on investment
property (3 045) (144 433) (30 901)
Fair value adjustment resulting
from straight-lining of rental
revenue 3 781 13 602 10 485
Fair value (gain)/loss on
investments (20 254) (162 367) 24 641
Profit from associate - (429) (429)
Fair value adjustment on interest
rate derivatives 14 686 10 125 5 552
Income tax expense (7 321) 35 670 4 462
Distributable income 203 505 366 287 159 194
Distribution declared 203 505 366 287 159 194
Interim 203 505 159 194 159 194
Final - 207 093 -
CONSOLIDATED CASH FLOW STATEMENT
UNAUDITED AUDITED UNAUDITED
30 Jun 2010 31 Dec 2009 30 Jun 2009
GROUP R`000 R`000 R`000
Net cash inflow/(outflow) from
operating activities 10 499 (25 386) (65 435)
Cash outflow from investing
activities (205 873) (875 739) (483 827)
Cash inflow from financing
activities 181 771 933 019 541 309
(Decrease)/increase in cash and
cash equivalents (13 603) 31 894 (7 953)
Cash and cash equivalents at
the beginning of the period 25 177 (6 717) (6 717)
Cash and cash equivalents at
the end of the period 11 574 25 177 (14 670)
CONSOLIDATED STATEMENT OF CHANGES IN UNITHOLDERS` INTEREST
Non-dis
Trust tributable Retained
GROUP capital reserves earnings Total
UNAUDITED R`000 R`000 R`000 R`000
Balance at 31 December 2008 1 981 763 1 790 975 - 3 772 738
Total comprehensive income
for the period 155 869 155 869
Issue of units 57 679 57 679
Transfer to non-
distributable reserves (3 325) 3 325 -
Distribution (159 194) (159 194)
Balance at 30 June 2009 2 039 442 1 787 650 - 3 827 092
Total comprehensive income
for the period 471 852 471 852
Issue of units 606 521 606 521
Transfer to non-
distributable reserves 264 759 (264 759) -
Distribution (207 093) (207 093)
Balance at 31 December 2009 2 645 963 2 052 409 - 4 698 372
Total comprehensive income
for the period 219 439 219 439
Transfer to non-
distributable reserves 15 934 (15 934) -
Distribution (203 505) (203 505)
Balance at 30 June 2010 2 645 963 2 068 343 - 4 714 306
PREPARATION AND ACCOUNTING POLICIES
The condensed consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS), IAS 34, the AC500
Standards, the JSE Listings Requirements, the requirements of the South African
Companies Act and the Collective Investment Schemes Control Act (Act 45 of
2002). The accounting policies are consistent with those applied in the prior
periods. The interim financial statements have not been audited or reviewed by
the Fund`s auditors.
The directors are not aware of any matters or circumstances arising subsequent
to the interim period end that require any additional disclosure or adjustment
to the financial statements.
SUMMARY OF FINANCIAL PERFORMANCE
30 Jun 31 Dec 30 Jun 31 Dec
2010 2009 2009 2008
Distribution per
unit (cents) 28,36 28,86 25,72 25,29
Units in issue 717 578 059 717 578 059 618 949 027 608 949 027
Net asset value R6,57 R6,55 R6,18 R6,20
Gearing ratio* 19,4% 17,1% 23,4% 15,8%
*The gearing ratio is calculated by dividing interest-bearing
borrowings by total assets.
GEARING
Nominal
amount Swap
Swap maturity R`000 rate
Oct 2010 50 000 9,19%
Feb 2011 100 000 7,85%
May 2011 100 000 7,68%
Dec 2011 50 000 8,29%
Feb 2013 100 000 8,18%
Oct 2013 50 000 9,47%
May 2014 100 000 8,60%
May 2014 50 000 8,67%
Aug 2014 (effective Aug 2010) 100 000 7,15%
Jul 2015 (effective Jul 2010) 100 000 7,50%
Aug 2015 50 000 8,39%
850 000 8,11%
Fixed rate borrowings Rate
Jul 2012 144 000 10,30%
Jul 2012 218 000 10,49%
362 000
Total hedged borrowings 1 212 000
Variable rate borrowings 23 736
Total gearing 1 235 736
PROPERTY PORTFOLIO SUMMARY
UNAUDITED
30 Jun 2010 Number of
R`000 properties
Movement in investment property is as follows:
Carrying value at beginning of period 5 105 458 98*
Additions 219 537 5
Disposals (9 000) **
Capital expenditure 5 238
Fair value adjustment (448)
Straight-lining of rental revenue adjustment 3 781
Carrying value at end of period 5 324 566
Movement in investment property under
development is as follows:
Carrying value at beginning of period 126 091 1*
Cost capitalised 4 997
Interest capitalised 6 242
Carrying value at end of period 137 330
Total investment property at 30 June 2010 5 461 896 104
*For number of properties, N1 Business Park is counted as a single
property and is not split between investments and developments.
**Only portion 1 of erf 473 Wynberg was disposed of.
LISTED EQUITY INVESTMENTS
UNAUDITED
30 Jun 2010
Pangbourne New Europe Property
Properties Limited Investments plc
Units/shares 43 169 000 3 682 500
Value (R` 000) 755 889 104 951
SECTORAL SPLIT
GLA Book value
Commercial 26% 45%
Industrial 67% 45%
Retail 7% 10%
100% 100%
LEASE EXPIRY PROFILE
Rental
GLA income
Vacant 4,6% -
Dec 2010 13,5% 15,3%
Dec 2011 24,8% 24,9%
Dec 2012 19,7% 22,8%
Dec 2013 14,1% 14,2%
Dec 2014 13,7% 13,4%
Dec 2015 5,2% 4,5%
> Dec 2015 4,4% 4,9%
100% 100%
SEGMENTAL ANALYSIS
UNAUDITED AUDITED UNAUDITED
30 Jun 2010 31 Dec 2009 30 Jun 2009
R`000 R`000 R`000
Segmental revenue - rental income
Commercial 149 126 294 995 141 539
Industrial 154 643 243 024 102 680
Retail 35 783 75 642 46 392
Total 339 552 613 661 290 611
Profit for the period
Commercial 109 349 265 142 97 978
Industrial 108 894 253 616 95 634
Retail 23 657 59 589 34 503
Corporate (22 461) 49 374 (72 246)
Total 219 439 627 721 155 869
CAPITAL COMMITMENTS
UNAUDITED AUDITED UNAUDITED
30 Jun 2010 31 Dec 2009 30 Jun 2009
R`000 R`000 R`000
Authorised and contracted 126 495 222 482 616 538
Authorised and not yet contracted 92 584 41 638 43 336
219 079 264 120 659 874
PROFIT DISTRIBUTION
Notice is hereby given that a cash distribution of 28,36 cents interest per
unit, being number 54 for Capital Property Fund, has been declared in respect of
the period 1 January 2010 to 30 June 2010 and is payable to the unitholders
recorded in the books of Capital at the close of business on the record date,
Friday, 27 August 2010. Unitholders are advised that the last day to trade cum
distribution will be Friday, 20 August 2010. The units will trade ex
distribution as from Monday, 23 August 2010. Payment will be made on Monday, 30
August 2010. Unit certificates may not be dematerialised or rematerialised
during the period 23 August 2010 to 27 August 2010, both days inclusive.
Registered office
4th Floor, Rivonia Village, Rivonia Boulevard, Rivonia, 2191
(PO Box 2555, Rivonia, 2128)
Transfer secretaries
Link Market Services South Africa (Proprietary) Limited, 16th Floor, 11 Diagonal
Street, Johannesburg, 2001
(PO Box 4844, Johannesburg, 2000)
Sponsor
Java Capital
Company secretary
Kenneth Khumalo
Directors
Willy Ross (chairman)*, Andrew Teixeira (managing director), Rual Bornman,
Rowland Chute*, Jorge da Costa* (alternate: Stefano Contardo), Des de Beer,
Andries de Lange, Protas Phili*, Banus van der Walt*, Tshiamo Vilakazi*, Tracey
Visser
*Independent non-executive director
4 August 2010
Date: 04/08/2010 12:14:02 Produced by the JSE SENS Department.
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