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VPF
VPF
VPF - VPIF - Abridged consolidated financial statements for the six months ended
30 June 2011
Vunani Property Investment Fund Limited
(Registration number: 2005/019302/06)
(formerly Vunani Property Investment Fund Proprietary Limited)
ISIN: ZAE000157459
JSE code: VPF
("VPIF")
ABRIDGED CONSOLIDATED FINANCIAL STATEMENTS (Prepared by M de Lange, CFO)
FOR THE SIX MONTHS ENDED 30 JUNE 2011
Audited Audited
Group statement of financial Group Group
position
30 June 31 December
2011 2010
Assets R R
Non-current assets 791 476 583 784 380 510
Investment property 782 436 543 776 522 427
Plant and equipment 5 938 457 4 535 304
Other non-current assets 3 101 583 3 322 779
Current assets 10 139 094 12 668 467
Trade and other receivables 6 164 605 7 782 634
Cash and cash equivalents 3 974 489 4 885 833
Total assets 801 615 677 797 048 977
Equity and liabilities
Equity 285 929 456 292 849 397
Ordinary share capital 142 560 142 560
Retained earnings 8 282 016 24 020
Non-distributable reserve 277 504 880 292 682 817
Debentures 142 417 440 142 417 440
Linked unit holders` interest 428 346 896 435 266 837
Liabilities
Other non-current liabilities 344 378 961 331 064 788
Other financial liabilities 298 504 858 283 210 071
Deferred tax 45 874 103 47 854 717
Current liabilities 28 889 820 30 717 352
Current portion of other 7 355 143 7 355 143
financial liabilities
Trade and other payables 21 534 677 23 362 209
Total liabilities 373 268 781 361 782 140
Total equity and liabilities 801 615 677 797 048 977
Units in issue 57 024 000 14 256 000
Net asset value per unit 751.2 3 053.2
(cents)
Net tangible asset less deferred tax 831.6 3 388.9
value per unit (cents)
GROUP STATEMENT OF
COMPREHENSIVE INCOME
for the six months ended 30 Audited Audited
June 2011
Group Group
6 months to 12 months to
30 June 31 December
2011 2010
R R
Revenue - investment property 55 868 513 103 753 654
income
Straightline effect of leases 328 443 892 514
Other income 441 71 766
Property expenses (24 283 942) (39 088 429)
Operating income 31 913 455 65 629 505
Finance income 232 341 486 817
Finance cost amortisation (1 986 594) -
Finance costs (15 203 865) (34 158 204)
Net operating income 14 955 337 31 958 118
Fair value adjustments (7 505 304) 109 780 687
Profit before denture interest 7 450 033 141 738 805
and taxation
Trust distributions - net (6 493 975) (9 943 353)
rental income
Debenture interest (9 856 613) (20 428 821)
Net (loss)/ income before (8 900 555) 111 366 631
taxation
Income tax expense 1 980 614 (15 822 370)
Total comprehensive (6 919 941) 95 544 261
(loss)/income for the period
Total comprehensive (loss)/income for the period
attributable to:
Equity holders of the group (6 919 941) 95 544 261
Basic and diluted earnings per 16.54 220.81
unit (cents)
Basic and diluted (12.14) 167.55
(loss)/earnings per share
(cents)
GROUP STATEMENT OF CHANGES IN
EQUITY
for the six months ended 30 June
2011
Ordinary Non- (Accumulated Total
share capital distributable loss)/
reserve retained
earnings
R R R R
Balance at 31 142 560 197 637 828 (475 252) 197 305 136
December 2009
Total - - 95 544 261 95 544 261
comprehensive
income for the
year
Transfer to non- - 95 044 989 (95 044 989) -
distributable
reserve
Balance at 31 142 560 292 682 817 24 020 292 849 397
December 2010
Total - - (6 919 941) (6 919 941)
comprehensive
loss for the
period
Transfer from non- - (15 177 937) 15 177 937 -
distributable
reserve
Balance at 30 142 560 277 504 880 8 282 016 285 929 456
June 2011
GROUP STATEMENT OF CASH FLOWS
for the six months ended 30 June Audited Audited
2011
Group Group
6 months to 12 months to
30 June 31 December
2011 2010
R R
Cash flows from operating activities
Cash generated by operations 26 666 021 62 274 570
Finance income 232 341 486 817
Finance costs (15 203 865) (34 158 204)
Debenture interest (9 856 613) (20 428 821)
Net cash inflow from operating 1 837 884 8 174 362
activities
Cash flows from investing activities
Additions to plant and equipment (2 411 825) (2 781 688)
Additions to investment property (5 792 150) (1 670 217)
Additions to other non current (554 619) (2 265 974)
assets
Net cash outflow from investing (8 758 594) (6 717 879)
activities
Cash flows from financing activities
Advance of other financial 6 009 366 726 507
liabilities
Net cash inflow from financing 6 009 366 726 507
activities
Net (decrease)/increase in cash and (911 344) 2 182 990
cash equivalents
Cash and cash equivalents at the 4 885 833 2 702 843
beginning of the period
Cash and cash equivalents at the end 3 974 489 4 885 833
of the period
Reconciliation of headline and
diluted headline earnings per unit
- Total comprehensive (6 919 941) 95 544 261
(loss)/income attributable to equity
holders:
Adjust for:
- Trust distributions - net 6 493 975 9 943 353
rental income
- Debenture interest 9 856 613 20 428 821
Revaluation of investment property
- Gross revaluation 206 477 (109 780 687)
- Deferred tax (28 907) 15 369 296
Headline earnings per unit 9 608 218 31 505 044
shareholder
Reconciliation of earnings and
diluted earnings per unit:
- Total comprehensive (6 919 941) 95 544 261
(loss)/income attributable to equity
holders:
Adjust for:
- Trust distributions - net 6 493 975 9 943 353
rental income
- Debenture interest 9 856 613 20 428 821
Earnings per unit shareholder 9 430 647 125 916 435
Headline and diluted headline 16.54 220.81
earnings per unit (cents)
BASIS OF PRESENTATION
These audited consolidated financial
statements have been prepared in
accordance with the Listing
Requirements of the JSE Limited, the
recognition and measurement
requirements of International
Financial Reporting Standards (IFRS),
presentation and disclosure
requirements of IAS34, the AC 500
series issued by the Accounting
Practices Board and the requirements
of the Companies Act of South Africa,
2008 (as amended) and Companies
Regulations, 2011. The accounting
policies as set out in the audited
financial statements for the six
months ended 30 June 2011 are in terms
of IFRS and have been consistently
applied when compared to the previous
accounting period. These consolidated
financial statements incorporate the
financial statements of the company
and its subsidiaries that in substance
are controlled by the Group. Results
of subsidiaries are included from the
effective date of acquisition up to
the effective date of disposal. All
significant transactions and balances
between Group enterprises are
eliminated on consolidation.
EVENTS AFTER THE REPORTING DATE
Subsequent to year end, VPIF acquired
an additional property, Athol Ridge
Office Park as well as the entire
share capitals of Cedar Park
Properties 31 Proprietary Limited
("Cedar Park") and Pacific Eagle
Investments 204 Proprietary Limited
("Pacific Eagle") from Vunani
Properties Proprietary Limited. VPIF
listed on the Main Board of the
Johannesburg Stock Exchange Limited on
11 August 2011. VPIF raised R448 338
271 through the issue of 63,594,081
new units. As per the Pre Listing
Statement published on 18 July 2011,
the proceeds were utilised to settle
outstanding debt, pay for listing
costs, and the purchase considerations
for the acquisitions mentioned above.
The remaining debt after settlement
equates to a loan to value of
approximately 8.86%. The loan to value
is defined as the outstanding debt to
the value of the investment property.
The details of the acquired properties
are as follows:
Property Name: Athol Ridge Cedar Park Pacific Eagle
Registered legal Erven 132, 133, Unit 18 of Erf 1570,
description: 134, the Greenstone Hill 1571, 1572,
remaining extent Office Park, Ext 1573 and 1574
of erf 135, 22, Erf 1836 and
Portion 1 of erf 1837
135, Portion 3 of
erf 184 and
Portion 4 of erf
184, Athol
Extension 12 and
erf 6, Simba
Township,
Registration
Division IR
Region: Gauteng Gauteng Western Cape
Sector: Commercial Commercial Commercial
Vacancy: Nil Nil Nil
Gross lettable 8 577 1 807 2 223
area (GLA):
Property Buildings/Offices Buildings/ Buildings/
description and Offices Offices
use:
AUDIT REPORT
The Group`s auditors KPMG Inc. have
issued an unmodified audit opinion on
the complete set of audited financial
statements for the six months ended 30
June 2011. Their audit report is
available for inspection at the
registered office of the company.
STATEMENT ON GOING CONCERN
The directors have made an assessment
of the group`s ability to continue as
a going concern and have no reason to
believe the business will not be a
going concern in the year ahead.
CHANGE IN YEAR END
During the year, the company changed
its year end from 31 December to 30
June. These financial statements are
for the six months ended 30 June 2011.
INTRODUCTION
During the review period, Vunani
Properties Investment Fund Limited
(VPIF) continued to deliver on its
strategy of strengthening its
financial position and improving our
distributions through tight management
of its assets and continual
refurbishment of the buildings.
The company`s ultimate aim since
formation was to list the fund and
much of the first six months of 2011
was devoted to this activity. This
goal was achieved with resounding
success post the reporting date on 11
August 2011.
OPERATING ENVIRONMENT
The 2011 business year commenced as
the euphoria of the FIFA Soccer World
Cup started to wear off. Domestic
consumer indebtedness was at record
levels touching 80% equivalent of
personal disposable income resulting
in sustained sluggish domestic demand,
while uncompetitive exchange rates and
depressed European demand hampered
exports.
The South African economy managed to
recover somewhat and eventually
rendered GDP growth of 2,8%. However,
the global economic downturn has
exerted pressure on rentals and
vacancies across the office sector. In
addition, tenants were affected by
steep increases in overhead costs
(electricity charges and municipal
rates) which consequently resulted in
a weaker office rental demand as
business owners chose to consolidate.
Hands-on management resulted in high
tenant retention and low vacancy rate
across the portfolio.
The year ahead is seen as challenging
with the recovery in the office sector
being slower than expected. VPIF`s
strategic decision to focus on its
chosen niche of A and B+ grade office
properties, combined with its
experience in refurbishments,
positions it well to take advantage of
the expected office sector recovery in
the medium term.
FINANCIAL POSITION
During the six months under review,
VPIF continued to deliver an
attractive distribution of R16 350 588
with underlying lease escalations in
excess of 8.5%. The compounded total
return since inception remained solid
at 34.3% per annum with capital growth
at 15.7% and distribution growth of
18.6%.
The property portfolio was
independently valued and the book
value increased by 1% from R776 522
427 to R782 436 543 with the
completion of some of the
refurbishment projects. Net rental and
related revenue for the review period
increased by 7.69%, whilst property
related expenses increased by 15%.
Other operating expenses increased by
8.6% after removing listing costs.
This resulted in an operating profit
for the year of R14,955 377. The net
cost to income ratio (net of
recoveries) is 23.9%.
The Fund`s debt remained relatively
low at a 39.1% loan to value. During
the period management broke the fixed
debt at 11.88% and re-fixed it at
9.95% for 5 years. It is the strategy
of the Fund not to take interest rate
risk.
SEGMENTAL REPORTING
The group has six reportable segments
based on the geographic split of the
country which are the group`s
strategic business segments. For each
strategic business segments, the
group`s CEO reviews internal
management reports on at least a
monthly basis. All segments are
located in South Africa. There are no
single major customers.
The following summary describes the operations in each of
the group`s reportable segments:
6 month ended 30 Head Office Gauteng Kwa-Zulu Sub Total
June 2011 Natal
R R R R
Revenue - - 47 550 209 1 561 713 49 111 922
Investment
property income
Straightline 328 443 - - 328 443
effect of leases
Other income - 441 - 441
Property (4 032 814) (17 266 766) (354 144) (21 653 724)
expenses
Operating income (3 704 371) 30 283 884 1 207 569 27 787 082
Net operating (20 767 412) 30 383 486 1 207 653 10 823 727
income
Fair value (7 505 304) - - (7 505 304)
adjustments
Reportable
segment
(loss)/profit
before debenture
interest and tax
(28 272 716) 30 383 486 1 207 653 3 318 423
Reportable 4 006 817 685 388 396 24 606 801 714 002 014
segment assets
Reportable (357 716 671) (14 414 186) (123 215) (372 254
segment 072)
liabilities
6 month ended 30 Northern Western Eastern Total
June 2011 Province Cape Cape
R R R R
Revenue - 470 092 4 859 183 1 427 316 55 868 513
Investment
property income
Straightline - - - 328 443
effect of leases
Other income - - - 441
Property (84 957) (2 236 450) (308 810) (24 283 941)
expenses
Operating income 385 135 2 622 733 1 118 506 31 913 456
Net operating 385 249 2 624 467 1 121 896 14 955 339
income
Fair value - - - (7 505 304)
adjustments
Reportable
segment
(loss)/profit
before debenture
interest and tax
385 249 2 624 467 1 121 896 7 450 035
Reportable 7 718 227 57 357 593 22 537 842 801 615 676
segment assets
Reportable (42 140) (419 405) (553 164) (373 268
segment 781)
liabilities
12 months ended Head Office Gauteng Kwa-Zulu Sub Total
31 December 2010 Natal
R R R R
Revenue - - 87 986 033 2 659 015 90 645 048
Investment
property income
Straightline 892 514 - - 892 514
effect of leases
Other income - 71 766 - 71 766
Property (4 316 000) (29 262 667) (664 800) (34 243 467)
expenses
Operating income (3 423 486) 58 795 132 1 994 215 57 365 861
Net operating (37 235 817) 58 936 128 1 994 212 23 694 523
income
Fair value 109 780 687 - - 109 780 687
adjustments
Reportable
segment
(loss)/profit
before debenture
interest and tax
72 544 870 58 936 128 1 994 212 133 475 210
Reportable 5 013 206 681 550 742 24 185 334 710 749 282
segment assets
Reportable (344 271 278) (16 737 017) (101 641) (361 109
segment 936)
liabilities
12 months ended Northern Western Eastern Total
31 December 2010 Province Cape Cape
R R R R
Revenue - 900 986 9 578 372 2 629 247 103 753 653
Investment
property income
Straightline - - - 892 514
effect of leases
Other income - - - 71 766
Property (138 305) (4 050 932) (655 724) (39 088 428)
expenses
Operating income 762 681 5 527 440 1 973 523 65 629 505
Net operating 762 759 5 526 338 1 974 499 31 958 119
income
Fair value - - - 109 780 687
adjustments
Reportable
segment
(loss)/profit
before debenture
interest and tax
762 759 5 526 338 1 974 499 141 738 806
Reportable 7 520 637 56 140 516 22 638 542 797 048 977
segment assets
Reportable (42 042) (356 044) (274 118) (361 782
segment 140)
liabilities
MANAGEMENT
VPIF is fortunate to have retained the
same leadership team since its
formation five years ago. Their
collective experience and commitment
has undoubtedly proved beneficial to
the establishment and growth of VPIF
and we are confident that they will
prove their worth once again after the
listing of VPIF on the JSE.
PROSPECTS
The board believes that the office
market is currently near its lowest
ebb, thereby creating embedded value
for incoming investors. Office
property rentals are expected to rise
disproportionately in the medium term
as the current oversupply is absorbed
and the lack of new developments
impacts on rentals.
VPIF will continue to utilise its BEE
rating to retain Government tenants
and selectively acquire new Government
tenanted buildings, based on sound
investment fundamentals. The high
proportion of single tenant and
National Government or listed tenants
is expected to underpin strong cash
flows.
APPRECIATION
We would like to thank our fellow
directors and board members for their
strategic direction and tireless
dedication in taking VPIF to market.
Equally important is the support we
received from our tenants and business
partners.
Statements contained throughout this
announcement regarding the prospects
of the group have not been reviewed or
reported on by the group`s external
auditors.
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given to unit holders
that the annual general meeting of
unit holders of the Company will be
held in the boardroom, Vunani House,
151 Katherine Street, Sandton at 10:00
on Thursday 3 November 2011.
Sandton
30 September 2011
Sponsor
Grindrod Bank Limited
Date: 03/10/2011 07:06:02 Produced by the JSE SENS Department.
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