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rnold Property Fund Limited - Unaudited Results For The Period From 1 July 2002
Release Date: 06/03/2003 17:15:22 Code(s): ARP
Arnold Property Fund Limited - Unaudited Results For The Period From 1 July 2002
To 31 December 2002
Arnold Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2001/011887/06)
Share code: ARP ISIN code: ZAE000031720
("A-Prop" or "the Company")
UNAUDITED RESULTS FOR THE PERIOD FROM 1 JULY 2002 TO 31 DECEMBER 2002
INCOME STATEMENT
Audited
Six months Four-month Ten-month
ended period to period to
31 Dec 31 Dec 30 June
2002 2001 2002
(R`000) (R`000) (R`000)
Revenue 76 307 49 512 125 146
Operating expenses
- property operating costs (20 784) (11 610) (32 174)
- management fees (2 001) (1 057) (3 312)
- administration and overhead costs (535) (530) (338)
Net profit from operations 52 987 36 315 89 322
Net finance costs (34 433) (23 537) (58 682)
Net profit before debenture interest 18 554 12 778 30 640
Debenture interest paid/payable (18 554) (12 778) (30 640)
Net profit before taxation and capital items - - -
Unrealised surplus on revaluation
of investment properties at the
financial year end - - 5 505
Taxation - - (675)
Net profit for the period - - 4 830
Number of linked units 168 626 123 125 555 065 125 399 065
Distribution per linked unit (cents) 11,0 10,2 24,4
Forward yield based on a
200 cent linked unit (%) 11,0% 15,0% 14,6%
BALANCE SHEET
Assets
Investment properties 932 653 823 160 842 065
Current assets 32 875 20 305 16 278
Total Assets 965 528 843 465 858 343
Unit holders` funds and liabilities
Share capital and share premium 2 393 12 367 12 369
Debenture capital 303 527 225 999 225 718
Revaluation reserve 4 830 - 4 830
Interest bearing borrowings 602 761 539 979 537 130
Other long-term liabilities 16 302 41 892 10 057
Current liabilities 17 161 10 450 50 245
Unit holders for interest distribution 18 554 12 778 17 994
Total unit holders` funds and liabilities 965 528 843 465 858 343
Net asset value per linked unit (cents) 184,3 189,8 193,7
ABRIDGED CASH FLOW STATEMENT
Cash flow from operating activities (23 940) 17 220 28 803
Cash flow from investing activities (90 588) (823 160) (836 560)
Cash flow from financing activities 121 715 820 237 811 587
Change in cash and cash equivalents 7 187 14 297 3 830
Cash and cash equivalents at
beginning of period 3 830 - -
Cash and cash equivalents at
end of period 11 017 14 297 3 830
CHANGES IN UNIT HOLDERS` INTEREST
Unit holders` interest at the
beginning of the period 242 917 - -
Changes in share capital and
share premium (9 976) 12 367 12 369
Changes in debentures 77 809 225 999 225 718
Changes in revaluation reserve - - 4 830
Net income for the period 18 554 12 778 30 640
Interest distributed and distributable (18 554) (12 778) (30 640)
Unit holders` interest at the end
of the period 310 750 238 366 242 917
PRIMARY OPERATIONAL SEGMENTS
for the six months ended 31 December 2002
KwaZulu- Western
Gauteng Natal Cape Other Total
Revenue - rental income 33 936 24 999 14 679 2 693 76 307
Operating expenses (10 299) (8 630) (3 864) (527) (23 320)
Net finance costs (13 674) (9 556) (8 817) (2 386) (34 433)
Net Profit 9 963 6 813 1 998 220 18 554
Total assets 400 942 278 941 224 737 60 909 965 528
Total liabilities (284 369) (168 955) (158 747) (42 707)(654 778)
Net assets 116 573 109 986 65 990 18 202 310 750
NOTES
The interim results have been prepared in accordance with South African
Statements of Generally Accepted Accounting Practice. The accounting policies
used in their preparation are consistent with those used in the annual financial
statements for the year ended 30 June 2002.
1. REVIEW OF OPERATIONS
1.1 Review of Results
A-Prop`s net income before distribution to unit holders for the period 1
July 2002 to 31 December 2002 results in earnings of 11,0 cents per linked unit.
This represents a decline of 24,6 per cent over the annualised distribution for
the period ended 30 June 2002.
The reason for the decline in earnings can be attributed to two principal
factors:
Market conditions
- general market conditions remained extremely tough, both in the
oversupplied office market as well as across the balance of the property
portfolio. Interest rates, which had risen sharply in the first half of 2002,
remained high. These factors coupled with higher tenant failures and shrinking
tenant requirements have led to higher vacancies and lower rentals on lease
renewals, the impact of which is compounded by the high costs of filling
vacancies and renewing existing leases;
Deferred payments
- the financial structure utilised by the Company at the time of listing,
whereby a portion of the purchase price on acquisitions was deferred for payment
to future periods, would have required growth in net income of greater than 4
per cent in the year to 30 June 2003 so as not to have a dilutory effect on
earnings. At the time of listing it was reasonably expected that this
requirement would be met. However, with the decline in income levels, the impact
of the additional borrowings raised and additional linked units issued to meet
deferred payment obligations has resulted in a dilution in earnings per linked
unit.
The impact of the deferred payments has accounted for 3,6 cents, or 50 per
cent of the decline in earnings.
In addition, whereas the increase in interest rates in the first quarter of
2002 only affected earnings for a portion of the 2002 financial year, it has
impacted on earnings for the entire period under review.
1.2 Property portfolio
During the period the Company made acquisitions amounting to R96,199
million. These acquisitions were funded partly by way of additional borrowings
of R41,519 million and partly through the issue of 28,366 million linked units.
An additional amount of 1,922 million linked units are to be issued to the
vendors in January 2004 and 1,922 million in January 2005. The acquisitions have
increased the value of A-Prop`s property portfolio to R932,6 million.
1.3 Lease renewals and vacancies
As stated above, general market conditions have remained extremely tough,
which creates pressure on rental renewals. It remains the Company`s policy to
retain tenants wherever possible, even at the expense of short-term earnings.
Vacancy levels are at 8 per cent. Whilst this is higher than the 6 per cent
level at year-end, it is below the market average.
2. A-PROP UNITS
Liquidity remained high in the A-Prop linked units with 91,924 million units
having traded during the period under review. This represents 55 per cent of the
linked units in issue at 31 December 2002.
3. INTEREST RATE MANAGEMENT
Market indications are that interest rates have peaked and are likely to
start declining from the middle of this calendar year. The Company has adopted a
conservative approach to its interest rate management and has fixed 93 per cent
of its debt funding, of which 90 per cent has been fixed for periods of three
years or longer.
Interest cover for the period was 1,54 times.
4. PROSPECTS
Whilst general economic conditions are expected to improve on the back of a
stronger Rand and lower interest rates, conditions in the property sector are
expected to remain tough for the rest of this calendar year, with the
improvement in the economy in general only impacting favourably on the property
market from the beginning of 2004. Pending this improvement, A-Prop`s management
will continue to pursue strategies designed to maximise rental income and to
improve the fund`s cost to income ratio. Consideration is being given to
disposing of under performing properties and to streamlining management
functions, all with a view to positioning A-Prop to deliver improved earnings.
Earnings for the second six months of the financial year are expected to
remain under pressure.
5. INTEREST DISTRIBUTION - NUMBER 3
Unit holders are advised that Distribution Number 3 in respect of the period
1 July 2002 to 31 December 2002 of 11,0 cents per unit has been declared.
Last date to trade cum interest Thursday, 20 March
Date units commence trading ex-interest Monday, 24 March
Record date Friday, 28 March
Payment date Monday, 31 March
Unit holders may not dematerialise or rematerialise their units between
Monday, 24 March 2003 and Friday, 28 March 2003, both days inclusive.
By order of the Board
P J A CUNNINGHAM R M KAPLAN
Chairman Managing Director
Johannesburg
6 March 2003
Date: 06/03/2003 05:15:08 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
