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ACUCAP - REVIEWED INTERIM RESULTS FOR THE 6 MONTHS ENDED 30 SEPTEMBER 2004
Acucap Properties Limited
Incorporated in the Republic of South Africa
Registration number 2001/021725/06
JSE Code: ACP
ISIN : ZAE000037651
`Acucap` or `the company`
Reviewed Interim Results for the 6 months ended 30 September 2004
30 31 March 30
September 2004 September
2004 2003
R`000 R`000 R`000
Abridged Balance Sheet
Assets
Non current assets 1 113 606 1 067 900 966 272
Investment properties 1 043 479 1 067 900 966 272
Listed Investments 54 723 - -
Fixed assets 248 - -
Goodwill 15 156 - -
Current assets 160 902 132 073 125 007
Properties available 9 050 - -
for sale
Accounts receivable 27 764 14 114 9 312
Cash and cash 124 088 117 959 115 695
equivalents
Total assets 1 274 508 1 199 973 1 091 279
Equity and liabilities
Shareholders` interest 97 652 82 137 28 962
Non current liabilities 1 122 703 1 044 606 1 021 246
Debentures 541 166 501 206 500 342
Loans 545 000 503 500 503 500
Deferred tax 36 537 39 900 17 404
Current liabilities 54 153 73 230 41 071
Accounts payable 13 268 5 940 7 213
Capital Gains Tax 2 163 - -
Vendors - 30 741 -
Debenture interest 38 722 36 549 33 858
payable
Total equity and 1 274 508 1 199 973 1 091 279
liabilities
Abridged Income Statement
for the 6 months ended 30
September 2004
6 months year 6 months
ended ended ended
30 31 March 30
September 2004 September
2004 2003
R`000 R`000 R`000
Revenue 71 903 137 988 68 204
Net operating expenses ( 8 640) ( 16 571) ( 8 189)
Profit before fair value 63 263 121 417 60 015
adjustments
Revaluation of investment 824 80 610 4 670
properties
Operating profit 64 087 202 027 64 685
Interest received 4 207 3 553 2 869
Interest paid
- Debenture holders - ( 38 722) ( 33 858) ( 33 858)
interim
- Debenture holders - final - ( 36 549) -
- Other ( 28 636) ( 54 640) ( 28 711)
Profit before tax 936 80 533 4 985
Capital Gains Tax ( 2 163) - -
Deferred tax 4 257 ( 23 897) ( 1 401)
Net profit for the period 3 030 56 636 3 584
Reconciliation of Headline
profit to net profit
Net profit for the period 3 030 56 636 3 584
Revaluation of investment ( 824) ( 80 610) ( 4 670)
properties
(Profit) / Loss on disposal of ( 78) 400 -
investment properties
Capital Gains Tax on disposal of 2 163 - -
investment properties
Deferred tax on revaluation ( 4 257) 23 897 1 401
Headline profit 34 323 315
Interest paid to debenture 38 722 70 407 33 858
holders
Headline linked unit earnings 38 756 70 730 34 173
Cents Cents Cents
Headline earnings per linked 75.18 148.83 68.23
unit
Interest Distribution per 71.48 140.45 67.60
linked unit
- Interim 71.48 67.60 67.60
- Final - 72.85 -
Abridged Cash flow statement
for the 6 months ended 30
September 2004
6 months year ended 6 months
ended 30 31 March ended 30
September 2004 September
2004 2003
R`000 R`000 R`000
Cash flows from operating
activities
Cash generated by operations 57 908 122 854 * 64 436
Interest received 4 207 3 553 2 869
Interest paid ( 67 358) ( 125 047) ( 62 569)
Net cash (outflow) / inflow from ( 5 243) 1 360 4 736
operating activities
Cash outflows from investing ( 77 508) ( 44 299) * ( 48 952)
activities
Cash inflows from financing 88 880 133 757 132 770
activities
Net cash inflow for the period 6 129 90 818 88 554
Cash and cash equivalents at 117 959 27 141 27 141
beginning of period
Cash and cash equivalents at 124 088 117 959 115 695
end of period
* Note: The Vendor outstanding balance on 31 March 2004 has been re-
allocated from operating activities to investing activities in the
cash flow for the year ended 31 March 2004.
Abridged Statement of changes in equity
for the 6 months ended 30
September 2004
Shares Share Share Non Accumu- Total
issued capital Premium Distri- lated
butable loss
Reserve
Number R`000 R`000 R`000 R`000 R`000
Balance 39 634 913 40 356 37 339 ( 15 238) 22 497
at 31
March
2003
Issue on 10 449 369 10 2 768 - - 2 778
30 June
2003
Issue on 86 500 - 226 - - 226
16
February
2004
Net - - - 56 636 56 636
profit
for the
year
Transfer - - 56 314 ( 56 314) -
to non-
distribu-
table
reserve
Balance 50 170 782 50 3 350 93 653 ( 14 916) 82 137
at 31
March
2004
Issue on 4 000 000 4 7 416 - - 7 420
30 July
2004
Net - - - 3 030 3 030
profit
for the
period
Revalua- - - 5 065 - 5 065
tion of
listed
invest-
ments
Transfer - - 653 ( 653) -
to non-
distribu-
table
reserve
Balance 54 170 782 54 10 766 99 371 ( 12 539) 97 652
at 30
September
2004
COMMENTS
1. REVIEW OF RESULTS AND OPERATIONS
The interim financial statements are prepared in accordance with International
Financial Reporting Standards (IFRS), as well as the requirements of the
Companies Act in South Africa. Although compliance with IFRS only becomes a
requirement of the JSE Securities Exchange South Africa (JSE) with effect from 1
January 2005, the board of Acucap resolved to implement earlier compliance in
the interests of maintaining financial best practice. The effects of accounting
policy changes resulting from IFRS compliance are not material.
KPMG Inc. has reviewed the interim financial information set out in this report.
Their unqualified review report is available for inspection at the company`s
registered office.
With 69% of the company`s income derived from retail property, Acucap has
continued to benefit from the strong performance of its retail tenants and their
demand for trading space. Under the influence of sustained low inflation and
historically low interest rates, consumers have continued to spend freely,
supported as they have been by the effects of house price increases on their
personal balance sheets. With transfer of the newly completed 45,000m2 Festival
Mall in Kempton Park due to take place early in 2005, Acucap will secure
valuable exposure to the East Rand retail market, balancing its Gauteng retail
exposure with the strongly performing Key West shopping centre in the West Rand.
The office buildings in Acucap`s portfolio have also performed well, with the
average net rental increasing to R67/m2 from R63/m2 in the comparable period
last year. The office vacancy rate of 1.55% is well below the industry average,
and justifies the company`s strategy of investing in selected office buildings
where good quality, nodal location, easy access, high parking ratios and
scarcity of supply have ensured sustainable growth in rental income. The
industrial segment of the portfolio also comfortably met expectations, and the
longer-term outlook for the fund`s industrial properties remains positive under
the influence of steadily improving manufacturing output and increased retail
distribution activity.
Lower interest rates have contributed to reduced borrowing costs, and should the
current climate of low inflation and stable interest rates persist, further
interest savings should accrue as existing fixed rates mature and the weighted
borrowing cost reduces. The weighted average interest cost for the six months
under review was 11.6% and details of the company`s interest rate profile are
set out in section 4 below.
The result of operations over the last six months is that net income from the
property portfolio increased by 5.4% over the same period last year, and the
distribution per linked unit increased by 5.7% to 71.48 cents per linked unit
(2003 : 67.60 cents per linked unit).
2. ACQUISITIONS AND DISPOSALS
Agreements were concluded for the acquisition of four properties during the
period, with transfer to take place after 30 September 2004. All of the
acquisitions were retail properties, and they were consistent with the company`s
retail strategy of acquiring centres that are dominant in their defined market.
The properties acquired were the Rondebosch Shopping Centre in Cape Town, an
undivided 17.7683% share in The Bridge Regional Shopping Centre in Port
Elizabeth, Pick `n Pay Newton Park in Port Elizabeth, and Pick `n Pay Centre in
Vredenburg on the Cape West Coast. The acquisition of Tellumat was announced
previously and transfer took place during the period under review.
Seven properties were sold as they were no longer considered core to the fund`s
strategy. The assets disposed of were Homeworld Centre Randburg, Pretoria North
Shoprite, 6th Avenue Shopping Centre in Port Elizabeth, Lindsay Saker Rosebank,
Imperial Motors Strijdom Park, Montague Place Mossel Bay, and 35 Wale Street
Parking Garage Cape Town. The proceeds on the disposal of these assets was
R134m, and their carrying value was R133m. Based on an historical cost of
R119.3m, there was a realised capital profit of R12.5m after providing for
Capital Gains Tax. The sale proceeds will be applied to further acquisitions as
and when suitable opportunities arise. Transfer of Montague Place, 35 Wale
Street Parking and 6th Avenue had not taken place at 30 September 2004.
The acquisition and disposal activities leave the fund with a portfolio of 25
properties, in line with Acucap`s objective of focusing on a smaller number of
high value properties, where the executive team can effectively apply its
management skills to greatest effect.
3. DISTRIBUTION
The Board has approved interim distribution number 7 of 71.48 cents per
linked unit for the period from 1 April 2004 to 30 September 2004.
4. BORROWINGS
The company has fixed the interest rate on 70% (2003 : 75%) of its borrowings
with unexpired terms varying between 3 months and 7 years as follows :
Amount % of total Rate (nacm) Expiry of fixed
rates
(R million) borrowings
60.0 11.0% 12.16% 3 January 2005
120.0 22.0% 12.79% 2 January 2007
100.0 18.3% 13.29% 15 May 2008
50.0 9.2% 14.38% 8 October 2009
50.0 9.2% 14.01% 31 March 2012
165.0 30.3% Prime less 1.55%
545.0 100.0%
The company`s weighted average total borrowing cost was 11.6% for the period,
down from 13.0% at the end of the same period last year.
5. VACANCIES
Vacancies amount to 2.02% of the portfolio by gross rental income, and 1.82% by
gross lettable area (GLA). The company has maintained vacancy levels well below
industry norms since it listed in March 2002, and management will continue to
build on its positive track record in this critical performance area.
6. LEASE EXPIRY PROFILE
The lease expiry profile is reflected below, and it includes the effects of
the acquisitions and disposals referred to in section 2 of this results
announcement :
Acucap lease expiry by gross
rental income
2008 2009
2005 2006 2007 thereafter
National 6% 16% 7% 5% 11% 55%
tenants
Other 29% 30% 17% 16% 5% 4%
TOTAL 13% 21% 10% 9% 9% 38%
An important feature of the lease expiry profile is that the aggregated expiries
over the next 5 years are made up of a large number of individual retail tenants
spread across Acucap`s strongly performing retail portfolio, with no exposure to
large single tenant expiries. The table below reflects the pattern of expiries
and renewals over the last 12 months :
Expiries and Renewals New Increase
terminations (m2) leases in vacancy
(m2) (m2) (m2)
Retail 27,050 12,097 13,654 1,299
Offices 10,446 8,679 1,622 145
14,513 4,930 9,583 -
Industrial
TOTAL 52,009 25,706 24,859 1,444
LIQUIDITY
In the six months to 30 September 2004, trade in Acucap linked units has
amounted to an annualized 57% of the weighted average number of units in issue.
The performance of the Acucap unit price relative to the PLS index is shown
below :
Acucap unit price relative to the PLS Index
Acucap PLS Index
30-Sep-03 100.0 100.0
31-Oct-03 112.1 112.0
28-Nov-03 117.9 111.1
31-Dec-03 125.0 116.7
30-Jan-04 118.3 110.6
27-Feb-04 116.1 113.0
31-Mar-04 114.7 112.3
30-Apr-04 115.6 114.9
31-May-04 114.7 112.7
30-Jun-04 109.8 113.4
30-Jul-04 115.2 115.8
31-Aug-04 117.9 121.0
30-Sep-04 125.0 122.4
Details of the company`s unit holder spread are shown below :
September 2004 March 2004
Total number of unit holders 1041 996
Number of unit holders owning > 5% of 3 4
units in issue
Number of institutions controlling 10% to 4 4
15% of units in issue
Number of institutions controlling > 15% 1 1
of units in issue
Percentage of units controlled by largest 15.3% 21.7%
institution
Percentage of units held by public 89.0% 69.0%
unitholders
On 30 July 2004, the company successfully completed a private placement of
4,000,000 linked units at a price of R12.00 per linked unit ex-distribution.
8. ACQUISITION OF MANAGEMENT COMPANY
On 20 September 2004, Acucap announced the acquisition of its asset
manager, Acucap Property Management (Pty) Ltd (`the manco`), for a total
consideration of R15.15m. The rationale for the acquisition was set out in the
relevant announcement. Acucap`s core focus is to deliver sustainable growth in
distributions per linked unit to its unit holders, and the company recognizes
the potential conflict of interest inherent in the extensive agency activities
that surround property principals. With the manco having fulfilled its primary
purpose of procuring the listing of Acucap and overseeing the establishment of
appropriate asset management structures, the board of Acucap considered it
appropriate to take the final step in achieving full transparency and alignment
of interests by acquiring the manco.
9. SEGMENTAL RESULTS
6 months ended 6 months ended
30 September 30 September
2004 2003
R`000 R`000
Retail
Revenue 49 847 49 156
Net operating (4 540) (4 193)
expenses
Operating profit 45 307 44 963
Offices
Revenue 16 624 15 763
Net operating (1 273) (1 168)
expenses
Operating profit 15 351 14 595
Industrial
Revenue 5 432 3 285
Net operating 347 350
income
Revaluation of 824 4 670
investment
properties
Operating profit 6 603 8 305
Reconciliation to
operating profit in
the income statement
Revenue 71 903 68 204
Allocated operating (5 466) (5 011)
expenses
Unallocated operating (3 174) (3 178)
expenses
Revaluation on 824 4 670
acquisition of
investment
properties
Operating profit 64 087 64 685
for the period
10. PROSPECTS
Acucap`s strategy remains unchanged, namely to maintain a relatively
overweight position in the retail sector, with centres that dominate their
defined market, to remain relatively underweight in offices, but to invest
selectively in office properties that will augment the fund`s growth prospects,
and to maintain an exposure to a small number of larger industrial parks in
transport nodes.
The company has been active in both acquisitions and disposals during the
period under review, and the portfolio will continue to be optimized for the
purpose of delivering sustainable income growth. Accordingly, the board is
positive about growth prospects for the second half of the financial year, and
as has been the case since Acucap listed, it expects second half growth to
outperform that of the first half.
11. PAYMENT OF DEBENTURE INTEREST
Notice is hereby given that interim distribution number 7 of 71.48 (seventy one
comma four eight) cents per linked unit has been approved in respect of the six
month period ended 30 September 2004. The last date to trade the linked units
cum distribution is Friday 3 December 2004 and the record date will be Friday 10
December 2004. The linked units will start trading ex-distribution from Monday 6
December 2004. Distributions will be made to unit holders on Monday 13 December
2004.
Linked unit certificates may not be dematerialised or rematerialised between
Monday 6 December and Friday 10 December 2004 both days inclusive.
On behalf of the Board
BS KANTOR PA THEODOSIOU
(Chairman) (Managing Director)
28 October 2004
Registered Office
Suite A11 Westlake Square
Westlake Drive
Westlake
CAPE TOWN
Transfer secretaries:
Computershare Investor Services 2004 (Proprietary) Limited
70 Marshall Street
JOHANNESBURG
http://www.acucap.co.za
info@acucap.co.za
Directors: Prof BS Kantor (Chairman), PA Theodosiou* (Managing Director), FM
Berkeley, D de Beer, RC Frolich, MJ Lindeque, HJ Mocke, JH Rens*, B Stevens, NDC
Whale
* Executive
Date: 28/10/2004 04:00:41 PM
Produced by the JSE SENS Department
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