| Thu 13 Feb 2003, 17:05 | | Spearhead Property Holdings Limited - Interim Resu |
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SPEARHEAD PROPERTY HOLDINGS LIMITED
Registration Number: 1996/005827/06
Share Code: SPE ISIN: ZAE000019162
3-YEAR REVIEW & Interim Results for the six months ended 31 December 2002
HIGHLIGHTS
* Profit before debenture interest up 6%
* Distribution per linked unit up 5%
Spearhead has proven to be one of the top performers in the Real Estate sector
of the JSE Securities Exchange South Africa, over its three-year track record as
a listed company.
The company has given its shareholders in excess of a 25% compound combined
return (income yield + capital growth) per annum.*
While yesterday`s blue chips have declined in value and Spearhead`s competitors
in the Real Estate Sector have lagged, Spearhead has proven the benefit of
having in-house management focused solely on the company`s best interests. The
specialisation in the Western Cape has also paid off handsomely as has the
entrepreneurial flair of the company`s executives.
This single-minded drive combined with other factors such as lower cost of
finance, the Lukhanyo empowerment joint venture and lucrative developments
coming to fruition, will see Spearhead maintaining its leadership role in the
industry.
* Assume Spearhead unit purchased on 3rd January 2000 and held until
31st December 2002
ABRIDGED CONSOLIDATED INCOME STATEMENT
6 months ended 6 months ended Year ended
31 Dec 2002 31 Dec 2001 30 June 2002
% Unaudited Unaudited Audited
Change R000`s R000`s R000`s
REVENUE 2.81% 31 285 30 431 52 832
Operating income 20 564 20 034 39 282
Before: Depreciation 495 546 1 105
Goodwill amortised 485 485 970
Net finance costs 10 004 9 969 19 693
Profit before revaluation 9 580 9 034 17 514
Revaluation of
investment properties - - 5 297
Profit before
debenture interest 6.04% 9 580 9 034 22 811
Debenture interest 9 187 8 907 17 592
Profit before taxation 393 127 5 219
Income taxation
expense/(income) 65 (191) 374
Net profit for the period 328 318 4 845
Linked units
in issue (weighted average) 13 977 258 14 138 635 13 528 889
Earnings per linked
unit (cents) 4.34% 68.08 65.25 165.84
Headline earnings per
linked unit (cents) 4.14% 71.54 68.70 133.86
Distribution per
linked unit (cents) 4.76% 66.00 63.00 125.50
RECONCILIATION OF BASIC EARNINGS TO HEADLINE EARNINGS
6 months ended 6 months ended Year ended
31 Dec 2002 31 Dec 2001 30 June 2002
R000`s R000`s R000`s
Basic earnings 9 515 9 225 22 437
Earnings 9 580 9 034 22 811
Taxation (65) 191 (374)
Goodwill amortised 485 485 970
Revaluation of investment
properties - - (5 297)
Headline earnings 10 000 9 710 18 110
ABRIDGED CONSOLIDATED BALANCE SHEET
31 Dec 2002 31 Dec 2001 30 June 2002
Unaudited Unaudited Audited
R000`s R000`s R000`s
Non current assets 361 760 323 934 358 646
Property, plant and equipment 334 533 306 042 337 046
Goodwill 16 003 16 973 16 488
Other financial assets 10 629 225 4 786
Deferred taxation 595 694 326
Current assets 11 253 21 937 26 338
Trade and other receivables 10 168 10 247 9 124
Cash and cash equivalents 1 085 11 690 17 214
Total assets 373 013 345 871 384 984
Equity and liabilities
Equity and Non-current liabilities 359 279 329 228 359 840
Capital and reserves 37 265 31 891 36 858
Debentures 136 400 138 559 137 132
Linked unitholders` interest 173 665 170 450 173 990
Interest-bearing borrowings 183 898 157 750 184 611
Deferred taxation 1 716 1 028 1 239
Current liabilities 13 734 16 643 25 144
Trade and other payables 4 475 7 612 16 302
Receiver of revenue 72 124 97
Unitholders for distribution 9 187 8 907 8 745
Total equity and liabilities 373 013 345 871 384 984
Net asset value per linked unit
including goodwill (rands) 3.03% 12.43 12.06 12.86
Net asset value per linked unit
excluding goodwill (rands) 3.96% 11.28 10.85 11.64
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
6 months ended 6 months ended Year ended
31 Dec 2002 31 Dec 2001 30 June 2002
Unaudited Unaudited Audited
R000`s R000`s R000`s
Cash generated from operations
before working capital changes 20 367 19 255 38 991
Working capital changes (12 871) (19 906) (8 017)
Net finance costs (19 707) (19 218) (37 936)
Cash flows from operating activities (12 211) (19 869) (6 962)
Cash flows from investing activities (995) (7 059) (34 198)
Cash flows from financing activities (2 923) 14 953 34 709
Net decrease in cash and
cash equivalents (16 129) (11 975) (6 451)
Cash and cash equivalents
at beginning of period 17 214 23 665 23 665
Cash and cash equivalents
at end of period 1 085 11 690 17 214
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Distri-
Share Share butable
Capital Premium Reserve Total
R000`s R000`s R000`s R000`s
Balance at 30 June 2001 129 716 33 886 34 731
Issue of shares 12 - - 12
Net profit for the period - - 318 318
Recoupment of discount on debentures - - (3 170) (3 170)
Balance at 31 December 2001 141 716 31 034 31 891
Shares disposed of by subsidiary (1) - - (1)
Net profit for the period - - 4 527 4 527
Discount on debentures - - 968 968
Recoupment of discount on debentures - - (662) (662)
Realisation of foreign exchange gain - - 135 135
Balance at 30 June 2002 140 716 36 002 36 858
Shares disposed of by subsidiary (1) - - (1)
Net profit for the period - - 328 328
Discount on debentures - - 166 166
Recoupment of discount on debentures - - (86) (86)
Balance at 31 December 2002 139 716 36 410 37 265
COMMENT
The board is pleased to announce the following results for the 6 months ended 31
December 2002.
Financial Performance
Profit before debenture interest distributions rose by 6.04% over the
corresponding period of last year, due to a combination of tight cost control
and better rental and operating cost recoveries.
This has allowed a 4.76% increase in the interim distribution per linked unit to
66 cents per linked unit and continues Spearhead`s fine record of 7 straight
increases in bi-annual distributions since listing
in 1999.
Portfolio activity
One property was acquired during the period namely the vacant Siltek Park in
Montague Gardens, adjacent to Century City, Cape Town. It has subsequently been
redeveloped into Eagle Park and is now fully let to tenants such as LG
Electronics and Eagle Freight. The total cost is approximately R8.8m and
provides a yield of over 15% to Spearhead.
Phase 1 construction of the Spearhead Business Park development in Montague
Gardens is complete and the Park is now 70% let with tenants including Caltex
Oil and Samsung Electronics. Final completion of the R50m Park is expected in
February 2004.
The construction of the National Prosecuting Authority Building on Buitengracht
Street is also proceeding well and will be completed on budget prior to the end
of June 2003.
Both Lakeside Centre and Lindum Lodge were sold during the period at prices in
excess of their carrying values. The company will receive approximately R18m
from the disposals and will utilise the cash to fund the new Business Park
development.
Occupancy levels dropped to 92% at the end of the period, down from 94.5% for
the corresponding period last year. This was due to a combination of the new
space developed and a generally sluggish letting market. Action to reduce
vacancies has begun and will bear fruit before the end of the financial year.
Debt management
The gearing ratio of the company at the end of the current period was a
comfortable 51.43%.
Two new swap contracts were entered into which have the effect of fixing the
interest rates on R100m of the debt portfolio at 13.3% until January 2008.
Additional interest rate swap contracts will be struck when opportune in order
to provide the company with a 70% hedge over total debt.
Average cost of finance has also been reduced to 14.5% from 15.5% previously.
Lukhanyo-Spearhead Joint Venture
A new empowerment business has been formed in joint venture with the Lukhanyo
Group under the management of Monde Mbeta. The main focus of the venture is to
unlock new opportunities in respect of commercial, industrial and retail
property emanating from the public sector unbundling, as well as developing
skills transference in the company.
It has already made inroads in this area and could become a meaningful part of
Spearhead`s activities into the future.
Prospects
Although our competitors are reporting declines in income, it is expected that
Spearhead`s reduced cost of finance will help boost profits for the full year
and into the medium-term future.
The combination of solid GDP growth in the Western Cape and cheaper finance
should achieve real growth in profits and distributions in the second half of
the year.
The absence of any conflict of interest amongst Spearhead`s experienced
management team and the quality of its Cape assets will also translate into
ongoing and sustainable earnings.
Accounting policies
The financial information has been presented in accordance with the South
African Statements of Generally Accepted Accounting Practice. The accounting
policies are consistent with those used in the prior year.
Distribution declaration no. 7
Notice is hereby given of the declaration of distribution no. 7 in respect of
the six months to 31 December 2002 which amounts to 66 cents per unit.
Last date to trade cum distribution Friday, 7 March 2003
Units will commence trading ex distribution Monday, 10 March 2003
Record date Friday, 14 March 2003
Payment date Monday, 17 March 2003
Unit certificates may not be dematerialised or rematerialised from Monday, 10
March 2003 to Friday, 14 March 2003, both days inclusive.
On behalf of the Board
M KAPLAN
Chairman
MN FLAX
Chief Executive Officer
Cape Town
13 February 2003
For more information on the company, see: www.spearheadprop.com
SPEARHEAD PROPERTY HOLDINGS LIMITED
Registration Number: 1996/005827/06
Share Code: SPE ISIN: ZAE000019162
Registered Office:
1st Floor, The Spearhead
42 Hans Strijdom Avenue,
Foreshore,
Cape Town, 8001
Transfer Secretaries:
Computershare Investor Services Limited,
70 Marshall Street,
Johannesburg 2001,
PO Box 61051,
Marshalltown, 2107
Directors:
M Kaplan* (Chairman), MN Flax (Chief Executive Officer),
JE Allie, DB Fabian*, A Groll*, L Hoffman, H Schreuders*,
F van Hoogstraten*, DM Wilder
*Non-executive
Date: 13/02/2003 04:30:00 PM Produced by the JSE SENS Department
