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MARTPROP PROPERTY FUND - UNAUDITED INTERIM RESULTS AND DISTRIBUTION DECLARATION
Martprop Property Fund
Share code: MTP ISIN code: ZAE000037271
Unaudited Interim Results and Distribution Declaration
www.martprop.co.za
The directors of Marriott Property Fund Managers Limited, management company of
Martprop Property Fund (Martprop) submit their report on the unaudited results
of the Martprop group for the six months ended 31 January 2004.
CONSOLIDATED BALANCE SHEET
31.01.2004 31.01.2003 31.07.2003
(R000) (Unaudited) (Unaudited) (Audited)
Assets
Non-current assets
Investment properties
1 411 289 1 234 110 1 319 251
Current assets
Trade and other receivables
18 755 17 726 12 270
Cash resources and short-term
investments 103 389 5 133 9 074
TOTAL ASSETS 1 533 433 1 256 969 1 340 595
Unitholders" funds and liabilities
Unitholders" funds 1 408 750 1 155 546 1 178 277
Non-current liabilities
Interest-bearing borrowings 18 211 8 429 65 644
Interest rate swap derivative
2 350 - 2 700
Deferred capital gains tax
2 795 1 987 2 459
Current liabilities
Trade and other payables
8 443 14 083 10 759
Deferred capital gains tax
4 022 - 3 834
Distributions payable
88 862 76 924 76 922
TOTAL UNITHOLDERS" FUNDS AND
LIABILITIES 1 533 433 1 256 969 1 340 595
CONSOLIDATED Six months Six months Year to
INCOME STATEMENT to to
% 31.01.2004 31.01.2003 31.07.2003
(R000) Note change (Unaudited) (Unaudited) (Audited)
Revenue (rental
income) 108 317 91 925 196 210
Net property
income 17,4% 88 791 75 663 158 936
Interest received 1 687 5 450 5 491
Interest paid (5 595) (1 663) (5 016)
Surplus/(deficit)
on revaluation
of interest rate
swap derivative 350 - (2 700)
Fund expenses (4 100) (2 611) (5 777)
Headline earnings 81 133 76 839 150 934
Capital
(deficit)/surplus
on disposal
of investment
properties (1 568) 281 72
Write-up/(down)
on revaluation
of investment
properties 50 776 (27 089) 2 984
Deferred capital
gains tax (524) (1 296) (5 602)
Net profit 129 817 48 735 148 388
Units in issue
(000) 725 184 641 016 641 016
Units in issue -
weighted (000) 669 377 641 016 641 016
Net headline
earnings -
weighted
(cents per unit) 1.1 12,12 11,99 23,55
Net profit -
weighted (cents
per unit) 1.1 19,39 7,60 23,15
Net distributable
income (cents per
unit) 1.1 2,1% 12,25 12,00 24,00
CONSOLIDATED STATEMENT OF CHANGES Six months Six months Year to
to to
IN UNITHOLDERS" FUNDS 31.01.2004 31.01.2003 31.07.2003
(R000) (Unaudited) (Unaudited) (Audited)
Unitholders" funds at beginning of period
1 178 277 1 183 735 1 183 735
Capital movements 230 508 (28 104) (6 600)
Write-up/(down) on revaluation of
investment properties
50 776 (27 089) 2 984
Capital (deficit)/surplus on disposal
of investment
properties (1 568) 281 72
Deferred capital gains tax
(524) (1 296) (5 602)
Surplus/(deficit) on revaluation of
interest rate
swap derivative 350 - (2 700)
Loss in investment property companies
carried forward
(1 311) - (1 354)
84 167 903 units issued
189 518 - -
Transfer to revenue of distribution
prepaid received
on units issued (6 733) - -
Maintenance reserves
Net transfers (from)/to maintenance
reserves
(35) (85) 1 142
Revenue movements - - -
Net profit 129 817 48 735 148 388
Transfers (to)/from capital
(47 723) 28 104 6 600
Net transfers from/(to) maintenance
reserves 35 85 (1 142)
Transfer from capital of distribution
prepaid received
6 733 - -
Available for distribution
88 862 76 924 153 846
Distribution attributable to
unitholders
(88 862) (76 924) (153 846)
Unitholders" funds at end of period
1 408 750 1 155 546 1 178 277
ABRIDGED CONSOLIDATED Six months Six months Year to
to to
CASH FLOW STATEMENT 31.01.2004 31.01.2003 31.07.2003
(R000) (Unaudited) (Unaudited) (Audited)
Cash inflows from operating activities
Net profit for the period
129 817 48 735 148 388
Adjustment for:
Interest received (1 687) (5 450) (5 491)
Interest paid 5 595 1 663 5 016
Write-(up)/down on revaluation of
investment
properties net of capital gains tax
(50 252) 28 385 2 618
Capital deficit/(surplus) on disposal
of investment properties
1 568 (281) (72)
(Surplus)/deficit on revaluation of
interest rate
swap derivative (350) - 2 700
Operating profit before working capital
changes 84 691 73 052 153 159
Working capital changes (8 752) 5 231 7 314
Cash generated from operations
75 939 78 283 160 473
Interest received 1 687 5 450 5 491
Interest paid (5 595) (1 663) (5 016)
Distributions paid (76 971) (78 215) (155 087)
Net cash (outflow)/inflow from operating
activities
(4 940) 3 855 5 861
Cash outflow from investing activities
(42 830) (87 791) (143 070)
Cash inflow from financing activities
(Decrease)/increase in interest bearing
borrowings
(47 433) 8 430 65 644
Units issued 182 785 - -
Distribution pre-payment received
6 733 - -
Net increase/(decrease) in cash
94 315 (75 506) (71 565)
Cash resources at beginning of period
9 074 80 639 80 639
Cash resources at end of period
103 389 5 133 9 074
OTHER INFORMATION Six months Six months Year to
to to
31.01.2004 31.01.2003 31.07.2003
(R000) (Unaudited) (Unaudited) (Audited)
Debt funding facility (R000)
Loan facility 350 000 350 000 350 000
Less: Facility utilised 18 211 8 429 65 644
Drawdown on facility
35 711 82 660 137 144
Facility repaid, available for
re- advance
(17 500) (74 231) (71 500)
Facility available at end of period
331 789 341 571 284 356
Adjusted for future capital commitments
and
proceeds on disposal (58 918) (102 063) (49 010)
Capital commitments
(115 527) (117 485) (147 894)
Proceeds on disposal
56 609 15 422 98 884
Anticipated available loan facility
272 871 239 508 235 346
Capital cash 38 106 2 524 3 556
Vacancy factor (based on lettable area)
5% 7% 7%
Valuation analysis (cents per unit)
Net asset value (including interim
distribution
yet to be paid) 207 192 196
Listed market price 222 181 215
Premium/(discount) to net asset value
7% (6%) 10%
Capitalised interest (R000)
798 - -
NOTES TO THE FINANCIAL STATEMENTS
1. This interim report has been prepared using accounting policies which are
in accordance with Statements of Generally Accepted Accounting Practice and are
consistent with those applied in preparation of the audited financial statements
for the year ended 31 July 2003.
1.1 Headline earnings and distribution attributable to unitholders
31.01.2004 31.01.2003 31.07.2003
(Unaudited) (Unaudited) (Audited)
R000 CPU R000 CPU R000 CPU
Net profit
(earnings) - 129 817 19,39 48 735 7,60 148 388 23,15
(weighted CPU)*
Adjustments for:
Capital
deficit/(surplus)
on disposal
of investment
properties 1 568 0,23 (281) (0,04) (72) (0,01)
Write-(up)/down
on revaluation
of investment
properties net of
capital gains (50 252) (7,50) 28 385 4,43 2 618 0,41
tax
Headline earnings
- (weighted CPU)* 81 133 12,12 76 839 11,99 150 934 23,55
(Surplus)/deficit
on revaluation of
interest rate
swap derivative (350) (0,06) - - 2 700 0,42
Net transfers
from/(to)
maintenance
reserves 35 - 85 0,01 (1 142) (0,18)
Losses in
investment
property
companies carried
forward 1 311 0,19 - - 1 354 0,21
Distributable
income - 82 129 12,25 76 924 12,00 153 846 24,00
(weighted CPU)*
Distribution pre-
payment received 6 733
Distribution
attributable to
unitholders+ 88 862 12,25 76 924 12,00 153 846 24,00
*Weighted earnings, weighted headline earnings and weighted distributable income
are based on a weighted number of units of 669 376 793 units for the six months
to 31 January 2004.
+Distribution per unit is based on 725 183 772 units in issue at 31 January
2004.
1.2 Comparative results
The comparative results have been re-classified for disclosure purposes.
1.3 Primary operational segments for the six months ended 31 January 2004
Business Industrial Office Retail Fund Group
segment
Income
statement
Revenue 72 678 17 311 18 328 - 108 317
Net property 63 444 9 934 15 413 88 791
income
Interest 1 019 184 279 205 1 687
received
Interest paid - - - (5 595) (5 595)
Fund expenses - - - (4 100) (4 100)
Surplus on
revaluation of
interest rate
swap derivative - - - 350 350
Net capital
deficit on
disposal
of investment
properties (591) (977) - - (1 568)
Write-
up/(down) on
revaluation
of investment
properties 46 982 (326) 4 120 - 50 776
Deferred
capital gains (331) (81) (112) - (524)
tax
Net profit 110 523 8 734 19 700 (9 140) 129 817
Balance sheet
Investment
properties 1 023 439 161 600 226 250 - 1 411 289
Current 50 912 11 545 16 398 43 289 122 144
assets
Total assets 1 074 351 173 145 242 648 43 289 1 533 433
Interest
bearing - - - 18 211 18 211
borrowings
Interest rate
swap derivative - - - 2 350 2 350
Deferred
capital gains 6 116 314 387 - 6 817
tax
Current
liabilities 2 264 874 (1 462) 6 767 8 443
Distribution
payable - - - 88 862 88 862
Total 8 380 1 188 (1 075) 116 190 124 683
liabilities
Acquisition
of investment
property 79 725 - - - 79 725
COMMENTS
Results
The directors of the management company are pleased to report an interim
distribution of 12,25 cents per unit for the six month period to 31 January
2004. This distribution represents growth of 2,1% over that of the comparable
period last year (2003: 12,00 cents per unit). The results were enhanced by the
acquisition of two properties for R79,7 million and the disposal of fifteen
properties for R60,9 million since August 2003, together with new equity of
R182,8 million raised in December 2003, the details of which are set out later
in this commentary.
The property portfolio continues to perform in line with management"s
expectations and net property income before finance costs has grown by 17,4%
over the comparable six month period. This growth is mainly due to net
acquisitions of some R137,0 million since January 2003 and a higher occupancy
level in the portfolio of 95% from 93%.
Property portfolio
The property portfolio was revalued at 31 January 2004 at R1,4 billion, an
increase of 4,5% over the comparable portfolio as at year-end and 8,7% over the
valuation as at 31 January 2003. The strengthening values can be ascribed to
both growth in property income as well as to the firming of capitalisation rates
in the period under review.
The demand for good quality space and consequent rental growth has maintained
the performance of the Fund"s properties, despite the resilience of the local
currency relative to the US dollar and the dampening effect this has had on the
performance of export-driven industrialists. Vacancies have declined from 7% to
5% in the six-month period, due to the take up of space as well as the activity
in the portfolio, reinforcing management"s views that the quality of the
portfolio will continue to underpin earnings growth.
Coupled with the improving market conditions, management"s active asset
management efforts have contributed to the focus on long-term security of income
through the investment in well-located and functional properties. Martprop has
acquired two new warehousing and distribution facilities located in Gauteng, for
R63,1 million and R16,6 million respectively. The first is a 30 000 m2 warehouse
in Jet Park let to the Fuel group on a ten year lease, which was acquired at a
net initial yield of 13,1% and the second is a 7 700 m2 warehouse in Aeroport
let to companies in the Grass group and which was acquired at a net yield of
12,8%. In addition, some R20 million has been committed to date to two
developments in Stellenbosch and Centurion respectively. The Stellenbosch
development is a community shopping centre of 12 000 m2 scheduled for completion
in October 2004 at a total estimated cost of R79 million and at Centurion,
Martprop is constructing a 10 000 m2 distribution warehouse for Pharmaceutical
Healthcare Distributors (Pty) Ltd at a total estimated cost of R24 million, due
to be completed in August 2004. Together with S A Retail Properties Ltd,
Martprop is about to embark on the redevelopment of the jointly owned Tokai Pick
"n Pay Centre in Cape Town. Martprop"s undivided half share of this development
amounts to R20 million.
Fifteen properties were sold in the six-month period, for a combined net selling
price of R60,9 million and at a small loss to their combined carrying values.
These disposals bring further focus to the Fund"s portfolio and, specifically,
include a number of underperforming office buildings. The application of the
capital proceeds from these sales into properties with sound growth prospects
will be of immediate benefit to unitholders.
3. Capital raising
In November 2003, Martprop"s management approached the capital markets to raise
new equity so as to discharge current debt and strengthen the Fund"s market
capitalisation. The re-rating of Martprop"s unit price facilitated the issue of
the new units at a price which reflected a premium to the Fund"s net asset value
and virtually no discount to the then ruling price, thereby ensuring that there
was no dilution of existing unitholders" equity. The total equity, at a price of
220 cents per unit together with a notional distribution prepayment of 8 cents
per unit, amounting to R189,5 million net of issue costs, was raised with effect
from 1 December 2003. The prepaid distribution of R6,7 million compensates
unitholders at the date of issue in respect of the income for the four months to
30 November 2003, included in the distribution for the six months to 31 January
2004, as a consequence of the new units ranking pari-passu with the existing
units from the date of issue. The total number of units in issue has increased
from 641 015 869 to 725 183 772.
4. Borrowings
Consequent to the capital raising referred to above, Martprop"s gearing at 31
January 2004 amounted to R18,2 million or 1,3% of the value of the portfolio. In
terms of the permissible gearing level of 30% of portfolio value, Martprop has
further debt capacity of some R400 million.
5. Restructure of the Fund
As reported to unitholders in the 2003 Annual Report, the transfer of certain
properties from the subsidiary fixed property companies to the Fund itself is
underway. The effective date of these transfers is 1 August 2003 and the
registration of transfer of title is anticipated prior to the Fund"s year-end.
Unitholders will benefit from cost economies and any future gain on the sale of
the properties will be exempt from both capital gains tax and secondary tax on
companies in the Fund.
6. Future prospects
The property market and, in particular, the industrial sector has performed well
and management is of the view that Martprop"s reconstructed portfolio is well
positioned to yield growing distributions to unitholders.
DISTRIBUTION DECLARATION AND IMPORTANT DATES
Notice is hereby given of the declaration of distribution no. 18 in respect of
the income distribution period 1 August 2003 to 31 January 2004. The
distribution amounts to 12,25 cents per unit.
Last date to trade cum distribution Thursday, 18 March 2004
Units will trade ex-distribution Friday, 19 March 2004
Record date to participate in the distribution Friday, 26 March 2004
Payment of distribution Monday, 29 March 2004
Unit certificates may not be dematerialised or re-materialised between Friday,
19 March 2004 and Friday, 26 March 2004 both days inclusive.
BY ORDER OF THE BOARD
MARRIOTT PROPERTY SERVICES (PTY) LIMITED
SECRETARIES
27 February 2004
Registered office
Marriott at Kingsmead
Kingsmead Office Park
Durban 4001
PO Box 207
Durban 4000
Transfer secretaries
Computershare Limited
9th Floor, 70 Marshall Street
Johannesburg 2001
PO Box 61051
Marshalltown 2107
Tel: (011) 370-5000
Marriott Property Fund Managers Limited
Exchange Sponsors (Pty) Limited
Date: 26/02/2004 04:35:18 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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