| Mon 31 Mar 2003, 17:54 | | Fairvest Property Holdings Limited - Audited Resul |
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Fairvest Property Holdings Limited
(Formerly Glocash Investments Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1998/005011/06)
Share code: FVT ISIN: ZAE000034658
("Fairvest" or "the group" or "the Company")
Audited Results For The Year Ended 30 September 2002 and Further Cautionary
Group income statement
12 months 6 months
ended ended
30 Sept 2002 30 Sept 2001
R"000 R"000
Revenue 46 110
Operating costs - property portfolio 15 275
Operating costs - administration 2 007 87
Operating profit/(loss) 28 828 (87)
Change in fair value of
investment properties 533 -
Profit/(loss) before interest 29 361 (87)
Interest received 355 532
Profit before finance charges 29 716 445
Finance charges 18 991 -
Income before taxation 10 725 445
Taxation 949 -
Profit attributable to linked
unit holders 9 776 445
Headline earnings
and distributions
Profit attributable to
linked unit holders 9 776
Change in fair value of
investment properties (533)
Profit on sale of a business (3 600)
Goodwill written-off 3 258
Headline earnings and distributions 8 901
Interim distribution 6 191
Final distribution 2 710
Earnings and net asset
value per linked unit
Number of linked units in issue 98 262 654
Weighted average number of
linked units in issue 98 262 654
Earnings per linked unit (cents) 9,9
Headline earnings per linked
unit before distribution (cents) 9,1
Distribution per linked unit (cents) 9,1
Net asset value per linked unit (cents) 116,3
Group balance sheet
12 months 6 months
ended ended
30 Sept 2002 30 Sept 2001
R"000 R"000
ASSETS
Non-current assets 317 772
Tangible assets 307 856
Investments 9 916
Current assets 8 141 7 640
Total assets 325 913 7 640
EQUITY AND LIABILITIES
Linked unit holders" equity
and reserves 114 256 7 551
Ordinary share capital 983 881
Debenture capital 983
Debenture premium 104 745
Distributable reserves/
(accumulated loss) 875 (168)
Non-distributable reserve 6 670 6 838
Non-current liabilities
Mortgage loans 163 882
Deferred tax 790
Current liabilities 46 985 89
Total equities and liabilities 325 913 7 640
Abridged group cash flow statement
12 months 6 months
ended ended
30 Sept 2002 30 Sept 2001
R"000 R"000
Cash flows from operating activities 481 445
Cash generated from operations 25 467 89
Finance charges (18 991)
Interest received 355 532
Taxation paid (159) (176)
Distribution to linked unit holders (6 191)
Net cash outflows from
investing activities (337 182)
Net cash inflows from
financing activities 329 298
(Decrease)/increase in cash
and cash equivalents (7 403) 445
Cash and cash equivalents
at beginning of period 7 640 7 195
Cash and cash equivalents
at end of period 237 7 640
Group statement of changes in equity
Non-
Debe- Debe- Distri- distri-
Share Share nture nture butable butable
capital premium capital premium reserve reserve Total
R"000 R"000 R"000 R"000 R"000 R"000 R"000
Balance at 1 April 2001 881 - - - (613) 6 838 7 106
Profit for period - - - - 445 - 445
Balance at 1 October 2001 881 - - - (168) 6 838 7 551
Write-off pre-acquisition
losses - - - - 168 (168) -
Share consolidation and
par value reduction (781) 682 99 - - - -
Linked units issued to
vendors 868 - 868 103 791 - - 105 527
Linked units to be
cancelled 15 - 16 2 269 - - 2 300
Listing costs and issue
costs written-off - (682) - (1 315) - - (1 997)
Profit attributable to
linked unit holders - - - - 9 776 - 9 776
Distributions to linked
unit holders - - - - (8 901) - (8 901)
Balance at
30 September 2002 983 - 983 104 745 875 6 670 114 256
OVERVIEW OF FINANCIAL RESULTS
The financial statements are prepared in accordance with South African
Statements of Generally Accepted Accounting Practice and the requirements of the
Companies Act in South Africa.
Grant Thornton Kessel Feinstein have audited the financial information set
out in this report. Their unqualified audit report is available for inspection
at the Company"s registered office.
The Board of Directors of Fairvest is pleased to present the audited
financial results of the group for the year ended 30 September 2002.
The results for the 6 months ended 30 September 2001 are not comparable as
Fairvest was a cash shell at that date. The Company listed the portfolio on the
JSE Securities Exchange South Africa on 20 December 2001.
The profit attributable to linked unit holders is R9 776 000 or 9,9 cents per
linked unit. Goodwill amounting to R3 162 000 has been written-off since the
publication of the reviewed results on 31 December 2002. However, this has not
effected the headline earnings reported at that time and the amount of the
distribution to the linked unit holders.
In spite of the unfavourable property market conditions, high interest rates
and the late transfer of a substantial portion of the property portfolio on 30
September 2002, the group has achieved headline earnings of 9,1 cents per linked
unit.
The earnings exclude a fee of R5 450 000 which is payable to Fairvest upon
the approval by shareholders of the disposal of a portfolio of properties
referred to in the table below.
This represents a net income yield of 16,5% on the current market price.
THE PORTFOLIO PERFORMANCE
At financial year-end the property portfolio, including the Gorfil properties
transferred on 30 September 2002, was R307 721 533. However, the group"s
property portfolio totalled R226 684 000 until the last day of the financial
year on which the Gorfil Portfolio was transferred.
The turnover for the period under review was R46 110 000 (R21 026 000 to 31
March 2002).
The net property yield on the property investments at cost was 12,6%.
The finance costs during the financial year were R18 991 000.
The total expense ratio was 37,5% leaving an operating margin of 62,5%. Most
of the expenditure in respect of maintenance and repairs occurred during the
first eight months of the financial year and concentrated on properties
subsequently disposed of. It is therefore expected that the operating margin
will increase above 70% during the current financial year.
The operating margin was achieved in spite of the existing vacancies in
certain properties, most of which have now been disposed of.
Subsequent to the financial year end agreement was reached for the disposal of
the following properties:
Selling Price
R
Proprint House - Durban 8 904 000
Kempton City - Kempton Park 37 100 000
Mangrove - Durban 11 448 000
Mitri House - Durban 2 459 200
Nedbank Circle - Durban 16 055 270
Ambassador - Durban 2 013 940
77 980 410
The disposal will, upon approval by shareholders, result in a fee payable to
Fairvest of R5 450 000. In this event, the Board will consider payment of a
special distribution to linked unit holders equal to the above amount.
The vacancy factor of the portfolio at September 2002 was 15,2% of the gross
lettable area.
The following property transactions were cancelled during the financial year:
1. Duro Pressings - Aeroton;
2. Duro Pressings - Port Elizabeth;
3. Duro Pressings - Babalegi;
4. The Goodman Galleries - Rosebank.
A revised agreement has been finalised in order to reinstate the acquisition
of The Goodman Galleries property, which is held by Avonshore (Pty) Limited.
The transfer and bond registration of the North Downs office property in
Bryanston is currently being finalised.
The Gorfil Property Portfolio was transferred to the group on 30 September
2002.
The cost of this portfolio was R81 037 000. The group, however, did not
receive any income from this portfolio during the financial year.
The loss of net rental income as a result of the aforesaid late transfer,
which involved 11 deeds offices countrywide, is estimated at approximately R4
million.
INTEREST RATE MANAGEMENT
The group was listed during December 2001 when interest rates started
increasing in tandem with the then decline of the Rand. Although it is an
accepted strategy of Fairvest to fix 75% of the cost of its borrowings, it
became apparent that it was to the benefit of the group not to fix the borrowing
rate in light of the sudden peak of the interest rate cycle.
The recent performance of the Rand and long-term interest rates indicate that
it will soon be possible for Fairvest to fix the vast majority of its interest
bearing debt at lower levels.
As a consequence of the interest rate increases during 2002, the headline
earnings of the group were adversely affected to the extent of approximately
R5,5 million.
MANAGEMENT
The financial management of Fairvest was transferred from Durban to
Johannesburg in June 2002, while the property management of Fairvest was
transferred in July 2002 to Primo Property Services (Pty) Limited. The DRP
Administration business was disposed of for R3,6 million and the goodwill on its
acquisition amounting to R3,2 million was written-off.
PROSPECTS
The group anticipates that the acquisition of the property portfolio
contained in the announcement of 12 November 2002, together with the underlying
strength of the remaining Fairvest Portfolio, will contribute to enhanced
earnings during the forthcoming financial year.
DISTRIBUTION
A distribution of 2,9 cents per linked unit for the six months ended 30
September 2002 was announced in the provisional results announcement which
appeared in the press on 31 December 2002.
FURTHER CAUTIONARY ANNOUNCEMENT
Fairvest linked unit holders are advised that the negotiations announced on
12 November 2002, involving the acquisition of a property portfolio totalling
R276 million, are proceeding and a detailed announcement will be made in April
2003.
Further negotiations with another listed property company are also in
progress.
These transactions will have a positive impact on earnings and may enhance
the price of the Company"s linked units.
Accordingly, Fairvest linked unit holders are advised to continue exercising
caution when dealing in the Company"s linked units until a further announcement
is made.
By order of the Board
Sandton Sponsor:
27 March 2003 LPC Manhattan Sponsors (Pty) Limited
