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Emira - Interim financial results for the six months ended 31 December 2004
EMIRA PROPERTY FUND
(A property fund created under the Emira Property Scheme, registered in terms of
the Collective Investment Schemes Control Act)
Share code: EMI ISIN: ZAE000050712
(`Emira`)
- 11% increase in distribution over previous 6 months
- Distributions for 6 months 32,63 cents
- 12 month total returns 43%
- Vacancies decline from 6,1% to 5,7%
INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2004
ABRIDGED INCOME STATEMENT
Unaudited Audited Unaudited
six months seven months one month
ended ended ended
31 Dec 2004 30 June 2004 31 Dec 2003
R`000 R`000 R`000
Revenue 181 117 179 669 23 166
Property expenses (58 973) (60 843) (7 822)
Administration and
management expenses (10 675) (10 940) (1 766)
Depreciation (3 416) (3 004) (285)
Net income from property
rental operations 108 053 104 882 13 293
Change in fair value of
investment properties - 86 906 -
Maintenance fund expenses (1 379) (1 330) -
Listing costs - (345) (264)
Profit on sale of investment
property 1 369 - -
Operating profit 108 043 190 113 13 029
Financing costs (16 692) (20 669) (2 826)
Interest received 2 090 8 046 2 172
Net profit for the period 93 441 177 490 12 375
***
Reconciliation between
earnings and headline earnings:
Net profit for the period 93 411 177 490 12 375
Adjusted for:
Change in fair value of
investment properties - (86 906) -
Profit on sale of investment
property (1 369) - -
Headline earnings per
participatory interest 92 072 90 584 12 375
Reconciliation of headline
earnings to distribution
per participatory interest:
Headline earnings 92 072 90 584 12 375
Adjusted for:
Amortised borrowing costs 148 173 -
Maintenance fund expenses 1 379 1 330 -
Interim distributions paid
to PI holders - (12 373) -
Distribution payable to
participatory interest
holders 93 599 79 714 12 375
Distribution per
participatory interest 32,63 29,29* 4,72
*For the six month period ended 30 June 2004
ABRIDGED BALANCE SHEET
Unaudited Audited Unaudited
six months seven months one month
ended ended ended
31 Dec 2004 30 June 2004 31 Dec 2003
R`000 R`000 R`000
Assets
Non-current assets
Investment properties 1 886 623 1 866 799 1 374 902
Plant and equipment 33 244 34 228 18 736
1 919 867 1 901 027 1 393 638
Current assets
Account receivables and
prepayments 3 195 4 269 6 963
Investments 23 670 24 104 -
Cash 8 769 4 027 332 671
35 634 32 400 339 634
Total assets 1 955 501 1 933 427 1 733 272
Equity and liabilities
Participatory interest
holders` capital 1 501 589 1 501 747 1 301 207
Non-current liabilities
Interest bearing debt 325 207 310 978 386 784
Current liabilities
Short-term portion of long-term
interest bearing debt 1 950 1 867 2 492
Accounts payable 32 656 39 121 30 414
Provision for distributions
to participatory interest
holders 93 599 79 714 12 375
128 705 120 702 45 281
Total equity and liabilities 1 955 501 1 933 427 1 733 272
STATEMENT OF CHANGES IN EQUITY
Non-
Participatory distributable Retained
interest reserve earnings Total
R`000 R`000 R`000 R`000
Balance at
1 July 2004 1 416 344 85 576 (173) 1 501 747
Net profit for
the period - - 93 441 92 941
Distribution to
PI holders - - (93 599) (93 599)
Transfer of
maintenance fund
expenses to
non-distributable
reserve - (1 379) 1 379 -
Profit on sale
of investment
property - 1 369 (1 369) -
Balance at
31 December
2004 1 416 344 85 566 (321) 1 501 589
ABRIDGED CASH FLOW STATEMENT
Unaudited Audited Unaudited
six months seven months one month
ended ended ended
31 Dec 2004 30 June 2004 31 Dec 2003
R`000 R`000 R`000
Cash generated by rental
operations 104 699 141 063 36 458
Net finance cost (14 602) (12 623) (654)
Distribution to participatory
interest holders (79 714) (12 373) -
Cash flow from operating
activities 10 383 116 067 35 804
Additions to/purchase of
investment properties (25 024) (1 779 893) (1 374 902)
Purchase of furniture and
fittings (2 127) (37 232) (18 450)
Decrease/(increase) in
maintenance fund 434 (24 104) -
Proceeds on disposal of
investment property 6 764 - -
Net cash utilised in
investing activities (19 953) (1 841 229) (1 393 352)
Issue of participatory
interest - 1 426 468 1 310 668
Cash utilised for listing
costs - (10 124) (9 725)
Cash raised from borrowings 14 229 310 978 389 276
Increase in short-term
portion of borrowings 83 1 867 -
Net cash from financing
activities 14 312 1 729 189 1 690 219
Net increase in cash
And cash equivalents 4 742 4 027 332 671
Cash and cash equivalents at
beginning of period 4 027 - -
Net change in cash and cash
equivalents 8 769 4 027 332 671
ACCOUNTING POLICIES
The financial statements are prepared in accordance and comply with South
African Statements of Generally Accepted Accounting Practice. The accounting
policies are consistent with those used in the preparation of the financial
statements for the seven months ended 30 June 2004.
SEGMENTAL INFORMATION
Retail Office Industrial Other Total
Primary segment R`000 R`000 R`000 R`000 R`000
Revenue
Revenue 60 871 91 149 29 097 - 181 117
Segmental result
Operating profit 36 221 57 651 20 529 (6 358) 108 043
Depreciation 399 2 077 440 500 3 416
Other information
Investment
properties 659 088 965 258 295 502 19 1 919 867
Total assets 660 558 967 215 294 305 33 423 1 955 501
Accounts payable 9 424 13 412 4 189 5 631 32 656
Capital
expenditure 12 874 13 488 770 19 27 151
Geographical segments
Revenue
Total assets
- Gauteng 42 714 75 165 17 359 - 135 238
- Western and
Eastern Cape 5 332 6 779 4 467 - 16 578
- KwaZulu-Natal - 9 205 7 271 - 16 476
- Free State 10 680 - - - 10 680
- North West 2 145 - - - 2 145
60 871 91 149 29 097 - 181 117
Total assets
- Gauteng 454 754 757 949 168 929 25 435 1 407 067
- Western and
Eastern Cape 75 588 78 237 49 743 3 387 206 955
- KwaZulu-Natal - 131 029 75 633 2 373 209 035
- Free State 110 052 - - 2 228 112 280
- North West 20 164 - - - 20 164
660 558 967 215 294 305 33 423 1 955 501
Related parties and related party transactions
Emira`s major PI holder is Momentum Group Limited. At 31 December 2004, Momentum
owned 48% of the fund`s participatory interest and the remaining 52% of the
participatory interests are widely held.
The following transactions were carried out with related parties:
Unaudited Audited Unaudited
six months seven months one month
ended ended ended
31 Dec 2004 30 June 2004 31 Dec 2003
R`000 R`000 R`000
Strategic Real Estate
Managers (Pty) Limited
Expenditure comprising:
asset management fee 4 759 5 240 785
Relationship: Associated
company of the FirstRand Group
Rand Merchant Bank, a division
of FirstRand Bank Limited
Expenditure comprising:
advisory fee - 1 500 1 500
Borrowings 226 125 312 044 389 276
Net finance cost 11 469 12 450 654
Relationship: Associated
company of the FirstRand Group
RMB Properties (Pty)
Limited 5 916 13 762 5364
Expenditure comprising:
property management fee
and letting commissions 5 916 9 762 1 364
Promoters fee - 4 000 4 000
Relationship: Associated
company of the FirstRand Group
Momentum Group Limited
Purchase of properties
at listing - 43 208 43 208
Purchase of Boundary
Terraces - 56 100 56 100
Relationship: Major
PI holder
Hawley Road Developments
(Pty) Limited
Purchase of properties at
listing - 57 347 57 347
Relationship: Associated
company of the FirstRand Group
Momentum Property Investments
(Pty) Limited
Purchase of properties at
listing - 769 620 769 620
Purchase of Strathmore Park - 16 300 -
Purchase of Safecash
Technologies - 1 500 -
Relationship: Associated company of the FirstRand Group
The above transactions were carried out on commercial terms and conditions no
more favourable than those available in similar arms-length dealings at market
related rates.
COMPARISON TO PRE-LISTING FORECAST
Results Pre-listing
31 Dec 2004 Statement
Revenue 181 117 165 177
Property expenses (58 973) (63 035)
Administration and management expenses (10 675) (9 841)
Depreciation (3 416) (4 552)
Net income from property rental
operations 108 053 102 764
Interest paid (16 692) (11 952)
Interest received 2 090 -
Profit on sale of investment property 1 369 -
Maintenance fund expenses (1 379) -
Net profit for the period 93 441 83 715
Participatory interests in issue 286 828 772 272 133 684
Earnings per participatory interest 32,58 30,76
Headline earnings per participatory
interest 32,10 30,76
Distribution earnings per participatory
interest 32,63 30,76
Market capitalisation (R`000) 1 871 288 1 360 668
Market value of investment properties
(R`000) 1 919 367 1 564 954
Net asset value per participatory
interest (cents) 526 496
Listed market price (cents per unit) 655 500
Premium to net asset value (%) 24,0 1,0
Average vacancy factor (%) 5,7 10,1
COMMENTARY
Financial Results
Strategic Real Estate Managers (Pty) Limited is pleased to announce a
distribution of 32,63 cents for the interim six-month period ended 31 December
2004. This brings the total distribution for the 12 months to December 2004 to
61,92 cents, whichrepresents an 11% increase on the previous six months and is
5,4% higher than the forecast for this period made at listing in November 2003.
This was achieved despite the delay in the transfer of a number of properties
subsequent to listing and is attributable to the inclusion of income from these
properties for the full six months and the earnings enhancing acquisitions made
in the first half of 2004.
Acquisitions and disposals
Emira`s committed debt facilities have reached the maximum 30% level which is
permitted by the Collective Investment Schemes Act. As a result, acquisitions
will need to be funded through a combination of debt and equity. Despite the
firming in capitalisation rates and a shortage of quality properties, making
earnings enhancing acquisition opportunities increasingly difficult to source,
efforts are ongoing in this regard.
The following movements in the portfolio took place during the period: two
office buildings in Derby Downs Office Park, Westville were acquired; Electron
Place in Isando and Waterford Place in Century City were disposed of at a
healthy premium to book value. Non-refundable deposits for Waterford Place have
been lodged and the transfer process is underway.
Property Type Price Forward GLA Book Tenants
Yield Value
Acquisitions
Derby Downs Office R12,5 12,8% 2 225 - Ivory
million
Systems,
McCarthy
Retail, Lafarge
Disposals
Electron
Place Industrial R6,9 2,6% 9 221 R5,2 PG Autoglass
million million
Waterford
Place Office R35,0 8,9% 3 800 R24,1 Century
million million City Ltd
Letting
Vacancies declined as a percentage of total GLA from 6,1% in June 2004 to 5,7%
in December. This represented the net reduction of close to 3 000 m2 of vacant
space.
June 2004 December 2004
GLA m2 % Vacant GLA m2 % Vacant
Offices 16 532 7,0 21 964 9,3
Retail 3 959 2,8 3 007 2,1
Industrial 14 015 7,6 6 551 3,7
Total 34 506 6,1 31 521 5,7
Debt
As at 31 December 2004 Emira had a total debt facility available of R585
million, of which R522 million has been utilised, split into six tranches as
follows:
Rate Term Amount % of Debt
Debt -
Floating Prime N/A 107,4 20,6
- 2%
Debt - Fixed 9,35% September 2005 100,0 19,2
- Fixed 9,76% November 2006 126,1 24,1
- Fixed 10,21% November 2008 100,0 19,2
- Fixed 11,39% May 2005 - October 2009 78,7 15,0
- Fixed 10,20% October 2009 9,8 1,9
Total 9,87%* 522,0 100
*Weighted average cost of debt assuming prime at 11,0%.
The remaining portion of the facility is to be used for the purchase of
Lincolnwood and Phybus Road, the purchase of which is suspensive on the signing
of a lease by a tenant.
Directorate
Mr B T Jackson resigned as a non-executive director of Strategic Real Estate
Managers (Pty) Limited effective 11 January 2005.
Prospects
Distribution growth in the coming six-months is going to be driven by organic
growth from the existing portfolio, cost savings and yield enhancing
acquisitions. The outlook for the remainder of the financial year is positive,
although the rate of growth in distributions is not expected to be at the same
rate as that experienced in the previous six months.
Distribution
Notice is hereby given that a cash distribution of 32,63 cents per participatory
interest has been declared payable to participatory interest holders payable on
7 March 2005.
Last day to trade `cum` distribution Friday, 25 February 2005
Participatory interest trade `ex`
distribution Monday, 28 February 2005
Record date Friday, 4 March 2005
Payment date Monday, 7 March 2005
Participatory interest certificates may not be dematerialised or rematerialised
between Monday, 28 February 2005 and Friday, 4 March 2005, both days inclusive.
By order of the Board
C Middlemiss
Company secretary
James Templeton Warren Schultze
Chief executive officer Director
Sandton
9 February 2005
Property Fund Manager: Strategic Real Estate Managers (Pty) Limited
Directors of the fund manager: B J van der Ross (Chairman)*, J W A Templeton
(Chief executive officer),
L Barnard*, L Basson*, M S B Neser*, W K Schultze *Non-executive director
Registered address: 6 Protea Place South, Sandton, 2146
Transfer secretaries: Computershare Investor Services 2004 (Pty) Ltd, 70
Marshall Street, Johannesburg, 2001
Merchant bank and sponsor
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