| Thu 28 Aug 2003, 17:46 | | Martprop Property Fund - Financial Results And Dis |
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Martprop Property Fund - Financial Results And Distribution
Release Date: 28/08/2003 17:03:39 Code(s): MTP
Martprop Property Fund - Financial results and distribution
Martprop Property Fund
Share code: MTP
ISIN code: ZAE000037271
FINANCIAL RESULTS AND DISTRIBUTION
Net distributable income up by 2,1% to 24,00 cents per unit
The directors of Marriott Property Fund Managers Limited, management company of
Martprop Property Fund ("Martprop") submit their report on the reviewed
financial results of the group for the year ended 31 July 2003.
CONSOLIDATED BALANCE SHEET Reviewed Audited
(R000) 2003 2002
Assets
Non-current assets
Fixed property 1 319 251 1 173 125
Current assets
Trade and other receivables 12 270 19 030
Cash resources and short-term investments 9 074 80 639
1 340 595 1 272 794
Unitholders" funds and liabilities
Unitholders" funds 1 178 277 1 183 735
Non-current liabilities
Interest bearing borrowings 65 644 -
Interest rate swap derivative 2 700 -
Current liabilities
Trade and other payables 10 759 10 181
Deferred capital gains tax 6 293 691
Distributions declared and payable 76 922 78 187
1 340 595 1 272 794
CONSOLIDATED INCOME STATEMENT % Reviewed Audited
(R000) change 2003 2002
Revenue (rental income) 196 210 178 626
Net property income 158 936 142 843
Interest received 5 491 8 471
Interest paid (5 016) -
Deficit on revaluation of interest
rate swap derivative (2 700) -
Fund expenses (5 777) (4 938)
Headline earnings 150 934 146 376
Capital surplus/(deficit) on
disposal of properties 72 (1 850)
Write-up/(down) on revaluation of
fixed properties 2 984 (34 800)
Deferred capital gains tax (5 602) (691)
Net profit 148 388 109 035
Units in issue 641 016 641 016
Net headline earnings (cents per
unit) 3,1% 23,55 22,83
Net profit (cents per unit) 36,1% 23,15 17,01
Net distributable income (cents
per unit) 2,1% 24,00 23,50
Notes to the financial statements
1. Accounting policies
The group results have been prepared in accordance with South African Statements
of Generally Accepted Accounting Practice and are consistent with those applied
in the preparation of the audited financial statements for the prior year. The
accounting standard on financial instruments AC 133 has been applied for the
first time in these results, but had no impact on distributions as recorded
below.
2. Earnings, headline earnings and distribution attributable to unitholders
Reviewed Audited
2003 2003 2002 2002
R000 CPU* R000 CPU*
Net profit (earnings) 148 388 23,15 109 035 17,01
Adjustments for:
Capital (surplus)/deficit
on disposal of properties (72) (0,01) 1 850 0,29
Write-down on revaluation
of fixed properties
net of capital gains tax 2 618 0,41 35 491 5,53
Headline earnings 150 934 23,55 146 376 22,83
Deficit on revaluation of
interest rate swap
derivative 2 700 0,42 - -
Net transfers (to)/from
maintenance reserves (1 142) (0,18) 3 223 0,51
Unclaimed distributions
written back - - 88 0,01
Losses in fixed property
companies carried forward 1 354 0,21 961 0,15
Distribution attributable
to unitholders 153 846 24,00 150 648 23,50
*Cents per unit
CONSOLIDATED STATEMENT OF CHANGES Reviewed Audited
IN UNITHOLDERS" FUNDS (R000) 2003 2002
Unitholders" funds at beginning of year 1 183 735 1 225
160
Capital movements (6 600) (38 202)
Write-up/(down) on revaluation of fixed
properties 2 984 (34 800)
Capital surplus/(deficit) on disposal of
fixed properties 72 (1 850)
Deferred capital gains tax (5 602) (691)
Deficit on revaluation of interest rate
swap derivative (2 700) -
Losses in fixed property companies
carried forward (1 354) (961)
Share issue costs refunded - 100
Maintenance reserves 1 142 (3 223)
Transfer to maintenance reserves 2 031 -
Transfer from maintenance reserves (889) (3 223)
Revenue movements - -
Net profit 148 388 109 035
Transfer from capital 6 600 38 302
Unclaimed distributions - 88
Net transfer (to)/from maintenance
reserves (1 142) 3 223
Available for distribution 153 846 150 648
Distributions paid (153 846) (150
648)
Unitholders" funds at end of year 1 178 277 1 183
735
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT Reviewed Audited
(R000) 2003 2002
Cash inflows from operating activities
Net profit for the year 148 388 109 035
Adjustments for:
Interest received (5 491) (8 471)
Interest paid 5 016 -
Write-down on revaluation of fixed
properties net of capital gains tax 2 618 35 491
Capital (surplus)/deficit on disposal of
fixed properties (72) 1 850
Deficit on revaluation of interest rate
swap derivative 2 700 -
Operating profit before working capital
changes 153 159 137 905
Working capital changes 7 314 (8 047)
Cash generated from operations 160 473 129 858
Interest received 5 491 8 471
Interest paid (5 016) -
Distributions paid (155 087) (89 928)
Net cash inflow from operating activities 5 861 48 401
Cash outflow from investing activities (143 070) (9 975)
Net cash inflow from financing activities 65 644 -
Net (decrease)/increase in cash (71 565) 38 426
Cash at beginning of year 80 639 42 213
Cash at end of year 9 074 80 639
Other information Reviewed Audited
2003 2002
Debt funding facility (R000)
Available loan facility 350 000 -
Less: Facility utilised to 31 July 2003 65 644 -
Drawdown on facility to 31 July 2003 137 144 -
Facility repaid, available for re-advance (71 500) -
Facility available at 31 July 2003 284 356 -
Adjusted for future capital commitments (49 010) 7 820
and proceeds on disposal
Capital commitments (147 894) (13
089)
Proceeds on disposal 98 884 20 909
Anticipated available loan facility/
(2002: cash) 235 346 7 820
Capital cash at 31 July 2003 (R000) 3 556 9 292
Vacancy factor (based on lettable area) 7% 7%
Valuation analysis (cents per unit)
Net asset value (including final 196 197
distribution yet to be paid)
Listed market price 215 171
Premium/(discount) to net asset value 10% (13%)
Capitalised interest (R000) - 252
Review by independent auditors
The Fund"s auditors, Deloitte & Touche and David Strachan & Tayler have reviewed
the preliminary financial results of the group for the year ended 31 July 2003.
Their unqualified report is available for inspection from the Fund"s
secretaries.
COMMENTS
1. Results
The directors of the management company are pleased to announce a final
distribution of 12,0 cents per unit, bringing the total distribution for the
year to 24,0 cents per unit (2002: 23,5 cents per unit). An interim distribution
of 12,0 cents per unit was paid in respect of the six months ended 31 January
2003.
The distribution represents a 2,1% increase on that paid last year and has been
achieved in the context of a property environment that continues to show
weakness in certain sectors. The Fund"s industrial portfolio has performed
extremely well and is now exhibiting the robust performance which management has
anticipated. Despite the expiry of leases comprising some 28,0% of the budgeted
gross income of the Fund in the first quarter of the year, and the reversion of
these rentals to market levels, the demand for prime quality warehousing and
distribution space has mitigated against the downside and enabled Martprop to
generate strong returns from these properties.
2. Property portfolio
Management continues to be strongly focused on improving the quality of the
Fund"s assets. During the course of the year fourteen properties were disposed
of for a total selling price of R45,0 million. These disposals comprised two
office blocks in Pretoria, eleven industrial properties and one vacant site. The
sale of the underperforming office buildings and vacant land, in particular,
will have a positive effect on property earnings in the short term. Agreements
have been concluded for the sale of a further 20 properties which no longer meet
Martprop"s investment criteria, including a number of commercial buildings which
have underperformed for several years. These committed disposals amount to R98,9
million.
Fourteen properties were acquired during the year for a total consideration of
R163,3 million. Six of these properties, acquired at a cost of R70,7 million and
at a yield of 14,1%, comprise undivided half shares in a portfolio of community
shopping centres purchased together with S A Retail Properties Limited. These
centres have performed in line with budget and are well positioned to deliver
rental growth as management pursues further redevelopment opportunities. Seven
industrial properties were acquired at a cost of R81,6 million with a commitment
to undertake a further R4,0 million extension to a distribution facility in
Centurion. These acquisitions were made at an average initial yield of 13,2%.
Martprop has also acquired a greenfields site outside Stellenbosch and will
commence the construction of a 12 000 m2 community shopping centre in the last
quarter of 2003 estimated at a total development cost of R73,0 million at an
initial yield of 12,5%. The centre, located in a prime position in close
proximity to a number of secure residential developments, will be anchored by
two top national retailers and will become an upmarket retail destination,
serving the needs of a strong consumer base.
3. Valuations
In conformity with accounting standards, the portfolio is revalued at each
reporting date. It has been revalued at R1,3 billion as at year end which
represents a R3,0 million, or 0,2%, increase in value over the 2002 financial
year, with the value of the portfolio having been written down by R28,4 million
at the half-year period.
4. Borrowings and interest risk management
In line with the Fund"s strategy to grow its portfolio through the most cost
effective means, the group had borrowings of R65,6 million, amounting to 5,0% of
the property portfolio value at 31 July 2003, R50,0 million of the debt has been
fixed at 11,17% until April 2006 through an interest rate swap derivative.
5. AC 133: Financial Instruments - Recognition and Measurement
The application of the accounting standard AC 133, requires that the interest
rate swap currently in place be fair valued and marked to market as at 31 July
2003. Notwithstanding the prudence of fixing the cost of a debt against
potential interest rate volatility and the positive gearing that can be secured
in doing so, the standard requires that the potential unrealised loss be booked
through the income statement. This treatment will have no effect on
distributions as it is considered to be of a capital nature in terms of the
Fund"s Trust Deed and management will therefore continue its policy of prudent
debt management.
6. Restructure of the Fund
In terms of the Collective Investments Schemes Control Act, 2002, the Fund is in
the process of taking transfer of certain properties from its subsidiary, Fixed
Property Companies. This process will result in capital gains tax (CGT) and
secondary tax on companies (STC) being discharged on transfer of these
properties. This restructure process will result in the Fund being able to sell
properties in the future without the CGT or STC liabilities arising. Further
details of this process will be recorded in the annual report.
7. Prospects
The recovery of industrial market rentals and active management of the property
portfolio has positioned Martprop well to continue growing earnings and hence
distributions to unitholders. Further acquisition opportunities are in the
course of negotiation and will enhance both the profile of the Fund and
underlying property earnings.
Management is of the view that unitholders will enjoy earnings growth in the
year ahead.
DISTRIBUTION DECLARATION
Notice is hereby given of the declaration of distribution no 17, amounting to
12,00 cents per unit in respect of the income distribution period 01 February
2003 to 31 July 2003.
Last date to trade cum-distribution Thursday, 18 September 2003
Units will trade ex-distribution Friday, 19 September 2003
Record date to participate in the distribution Friday, 26 September 2003
Payment of the distribution Monday, 29 September 2003
Unit certificates may not be dematerialised or rematerialised between Friday, 19
September 2003 and Friday, 26 September 2003, both days inclusive.
BY ORDER OF THE BOARD
MARRIOTT PROPERTY SERVICES (PTY) LIMITED
SECRETARIES 29 August 2003
Registered office Transfer secretaries
Marriott at Kingsmead Computershare Limited
Kingsmead Office Park 70 Marshall Street
Durban, 4001 Johannesburg, 2001
PO Box 207 PO Box 61051
Durban, 4000 Marshalltown, 2107
Auditors
Deloitte & Touche
2 Pencarrow Crescent, Pencarrow Park
La Lucia Ridge Office Estate
La Lucia, 4051
David Strachan & Tayler
19th Floor, 320 West Street
Durban
4001
Sponsor
Exchange Sponsors (Pty) Limited
39 First Avenue
Hyde Park
2196
