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Apexhi - Reviewed interim results and quarterly distribution declaration
APEXHI PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1999/000238/06)
Share code: APA ISIN: ZAE000033064
Share code: APB ISIN: ZAE000033072
(`ApexHi` or `the company`)
REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2004 AND QUARTERLY
DISTRIBUTION DECLARATION FOR THE THREE MONTHS ENDED 31 DECEMBER 2004
These interim results have been reviewed by the independent auditors, Grant
Thornton. Their unqualified report is available for inspection at the company`s
registered office.
The directors submit their report on the results of the company for the six
months ended 31 December 2004 as follows:
INCOME STATEMENT
Reviewed Audited
six months ended year ended
31 December 31 December 30 June
2004 2003 2004
R`000 R`000 R`000
Revenue 415 708 324 849 685 743
Property expenses (154 572) (120 437) (255 568)
Administrative expenses (15 389) (13 957) (26 484)
Letting cost amortisation (4 004) (2 855) (6 012)
Profit from operations 241 743 187 600 397 679
Finance costs (57 444) (45 010) (94 478)
Interest income 10 358 9 508 21 242
Investment income 1 838 - -
Profit before debenture
interest 196 495 152 098 324 443
Debenture interest (196 443) (151 889) (324 443)
Profit before capital items 52 209 -
Capital items 511 367 (65) 75 032
Change in fair value of
investment properties 510 929 - 70 212
Net surplus/(deficit) on
disposal of investment
properties 438 (65) 4 820
Profit before taxation 511 419 144 75 032
Deferred taxation (73 685) - (1 269)
Net profit after taxation 437 734 144 73 763
Earnings, headline earnings
and distribution
Reconciliation between
earnings and headline
earnings:
Net profit after taxation 437 734 144 73 763
Adjusted for:
Change in fair value of
investment properties - net
of taxation (437 244) - (68 943)
Net (surplus)/deficit on
disposal of investment
properties (438) 65 (4 820)
Headline earnings - shares 52 209 -
Debenture interest 196 443 151 889 324 443
Headline earnings - units 196 495 152 098 324 443
Weighted average Distribution Earnings Headline
/(loss) earnings
number of units per unit per share* per unit
(cents) (cents) (cents)
A unit 179 400 563 51,00 121,98 51,00
B unit 179 400 563 58,50 122,02 58,53
Total - six months
to 31 December 2004 109,50 244,00 109,53
A unit 143 970 616 51,00 (0,02) 51,00
B unit 143 970 616 54,50 0,12 54,65
Total - six months
to 31 December 2003 105,50 0,10 105,65
A unit 152 431 604 102,00 24,18 102,00
B unit 152 431 604 110,75 24,18 110,75
Total - year to 30 June 2004 212,75 48,36 212,75
*Earnings per share represent items of a capital nature, which are not
distributable as debenture interest and in which all units share equally.
Although this disclosure is required in terms of GAAP, it is not meaningful
information as the share is a very small component of the linked unit and it is
the disclosure of the earnings per unit that has relevance whereas the earnings
per share does not.
ACCOUNTING POLICIES
The interim financial statements have been prepared in accordance with South
African Statements of Generally Accepted Accounting Practice. The accounting
policies used in their preparation are consistent with those used in the annual
financial statements for the year ended 30 June 2004. Listed securities are
classified as available for sale investments and are measured at market values
at balance sheet date. Unrealised gains or losses arising from revaluations are
recognised directly in equity until the disposal of the investment at which
time the accumulative gain or loss previously included in equity is included in
the net profit or loss for the period.
CONDENSED BALANCE SHEET
Reviewed Reviewed Audited
31 December 31 December 30 June
2004 2003 2004
R`000 R`000 R`000
ASSETS
Non-current assets
Investment properties 3 771 472 2 365 073 2 976 157
Listed investment 70 827 - -
Current assets 210 949 262 584 182 570
Total assets 4 053 248 2 627 657 3 158 727
EQUITY AND LIABILITIES
Share capital and reserves 1 047 627 376 001 531 964
Non-current liabilities 2 797 739 2 115 557 2 455 963
Debenture capital 1 642 278 1 396 952 1 563 997
Deferred taxation 82 027 7 073 8 342
Interest bearing borrowings 1 073 434 711 532 883 624
Current liabilities 207 882 136 099 170 800
Total equity and liabilities 4 053 248 2 627 657 3 158 727
Net asset value per unit (cents)
Number of units Share Debenture Total
A unit 182 474 885 287,06 540,00 827,06
B unit 182 474 885 287,06 360,00 647,06
Total - 31 December
2004 574,12 900,00 1 474,12
A unit 155 216 606 121,12 540,00 661,12
B unit 155 216 606 121,12 360,00 481,12
Total - 31 December
2003 242,24 900,00 1 142,24
A unit 173 777 398 153,06 540,00 693,06
B unit 173 777 398 153,06 360,00 513,06
Total - 30 June 2004 306,12 900,00 1 206,12
STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 December 2004
Share Share Capital
capital premium reserve
R`000 R`000 R`000
Balance at 1 July 2003 26 218 318 2 381
Issue of ordinary shares 5 109 122
Net profit for the period
Realised accumulated net write-up
of investment properties sold 135
Net deficit on disposal of investment
properties (65
Balance at 31 December 2003 31 327 440 2 451
Balance at 1 July 2004 34 409 781 5 614
Issue of ordinary shares 2 72 668
Net profit for the period
Realised accumulated net write-up
of investment properties sold 9 893
Net surplus on disposal of investment
properties 438
Revaluation of listed investment
Transfer to revaluation reserve
Balance at 31 December 2004 36 482 449 15 945
Revaluation Accumulated Total
reserve loss
R`000 R`000 R`000
Balance at 1 July 2003 58 226 (12 221) 266 730
Issue of ordinary shares 109 127
Net profit for the period 144 144
Realised accumulated net
write-up
of investment properties sold (135) -
Net deficit on disposal of
investment properties 65 -
Balance at 31 December 2003 58 091 (12 012) 376 001
Balance at 1 July 2004 128 756 (12 221) 531 964
Issue of ordinary shares 72 670
Net profit for the period 437 734 437 734
Realised accumulated net
write-up
of investment properties sold (9 893) -
Net surplus on disposal of
investment
properties (438) -
Revaluation of listed investment 5 259 5 259
Transfer to revaluation reserve 437 244 (437 244) -
Balance at 31 December 2004 561 366 (12 169) 1 047 627
CONDENSED CASH FLOW STATEMENT
Reviewed Reviewed Audited
Six months ended Six months ended Year ended
31 December 31 December 30 June
2004 2003 2004
R`000 R`000 R`000
OPERATING ACTIVITIES
Cash from operating
activities 267 635 202 694 422 730
Finance costs (57 444) (45 010) (94 478)
Interest income 10 358 9 508 21 242
Investment income 1 838 - -
Debenture interest paid (190 036) (139 371) (298 567)
Net cash generated
from operating
activities 32 351 27 821 50 927
INVESTING ACTIVITIES
- purchase of
investment properties
including capitalised
improvements,
transaction and
letting costs (394 275) (261 491) (828 351)
- net proceeds on
disposal of investment
properties 107 435 2 449 30 152
- net purchase of
plant and equipment - (13) -
- purchase of listed
investment (65 568) - -
Net cash utilised in
investing activities (352 408) (259 055) (798 199)
FINANCING ACTIVITIES
Issue of A and B units 150 951 326 550 575 939
Interest bearing
borrowings raised 189 810 46 440 218 532
Net cash from
financing activities 340 761 372 990 794 471
Net increase in cash
at bank 20 704 141 756 47 199
Cash at bank at the
beginning of the
period 139 462 92 263 92 263
Cash at bank at the
end of the period 160 166 234 019 139 462
SEGMENTAL INFORMATION
Business segments - 31 December 2004
Office Retail
R`000 % R`000
Revenue 204 542 49 182 084
Property expenses (78 640) 51 (66 714)
Administrative expenses
Letting cost amortisation (3 285) 82 (629)
Segment operating result 122 617 48 114 741
Finance costs (10) (63)
Interest income 233 95
Investment income
Debenture interest
Change in fair value of investment
properties 194 913 304 864
Net surplus/(deficit) on disposal of
investment properties 614 (93)
Segment result 318 367 41 419 544
Other information
Investment properties 1 510 580 40 2 014 939
Listed investment
Current assets 18 981 22 522
Total assets 1 529 561 2 037 461
Total liabilities 24 346 28 576
Industrial
% R`000 %
Revenue 44 29 082 7
Property expenses 43 (9 218) 6
Administrative expenses
Letting cost amortisation 16 (90) 2
Segment operating result 44 19 774 8
Finance costs (40)
Interest income 8
Investment income
Debenture interest
Change in fair value of investment
properties 11 152
Net surplus/(deficit) on disposal of
investment properties (83)
Segment result 55 30 811 4
Other information
Investment properties 53 245 953 7
Listed investment
Current assets 4 124
Total assets 250 077
Total liabilities 4 086
Total
investment Corporate Land
properties costs trading Total
R`000 R`000 R`000 R`000
Revenue 415 708 415 708
Property expenses (154 572) (154 572)
Administrative expenses (15 321) (68) (15 389)
Letting cost amortisation (4 004) (4 004)
Segment operating result 257 132 (15 321) (68) 241 743
Finance costs (113) (57 331) (57 444)
Interest income 336 10 022 10 358
Investment income 1 838 1 838
Debenture interest (196 443) (196 443)
Change in fair value of
investment
properties 510 929 510 929
Net surplus/(deficit) on
disposal of
investment properties 438 438
Segment result 768 722 (257 235) (68) 511 419
Other information
Investment properties 3 771 472 3 771 472
Listed investment 70 827 70 827
Current assets 45 627 153 006 12 316 210 949
Total assets 3 817 099 223 833 12 316 4 053 248
Total liabilities 57 008 2 944 326 4 287 3 005 621
Geographical segments - 31 December 2004
Property Letting cost
Revenue expenses amortisation
R`000 R`000 R`000
Major Metropolitan CBD`s
Johannesburg 92 638 (36 291) (536)
Pretoria 42 626 (11 557) (1 501)
Durban 39 677 (17 737) (269)
Cape Town 8 048 (1 880) (58)
Bloemfontein 10 693 (4 613) (89)
193 682 (72 078) (2 453)
Other areas
Germiston 19 899 (6 493) (6)
Randburg 17 331 (5 876) (47)
Port Elizabeth 16 026 (5 065) (38)
Braamfontein 18 368 (10 295) (421)
Polokwane 8 615 (2 323) (75)
Pietermaritzburg 7 887 (3 310) (9)
Klerksdorp 8 337 (3 307) -
Parow 6 542 (2 350) (149)
Roodepoort 7 649 (3 466) (27)
Vanderbijlpark 4 098 (1 466) -
Edenvale 7 130 (1 181) (13)
Kimberley 3 465 (1 089) -
Other 96 679 (36 273) (766)
222 026 (82 494) (1 551)
415 708 (154 572) (4 004)
% of
Segment segment % of
operating operating Investment total
result result properties investment
R`000 R`000 properties
Major Metropolitan CBD`s
Johannesburg 55 811 22 560 309 15
Pretoria 29 568 12 423 143 11
Durban 21 671 8 343 198 9
Cape Town 6 110 2 84 623 3
Bloemfontein 5 991 2 83 227 2
119 151 46 1 494 500 40
Other areas
Germiston 13 400 5 228 177 6
Randburg 11 408 5 166 504 4
Port Elizabeth 10 923 4 148 871 4
Braamfontein 7 652 3 142 245 4
Polokwane 6 217 2 102 373 3
Pietermaritzburg 4 568 2 68 645 2
Klerksdorp 5 030 2 67 935 2
Parow 4 043 2 67 346 2
Roodepoort 4 156 2 63 788 1
Vanderbijlpark 2 632 1 46 744 1
Edenvale 5 936 2 46 655 1
Kimberley 2 376 1 34 503 1
Other 59 640 23 1 093 186 29
137 981 54 2 276 972 60
257 132 100 3 771 472 100
RELATED PARTY TRANSACTIONS
During the period, the company, in the ordinary course of business, entered
into various transactions with related parties. These transactions occurred
under terms that are no more favourable than those arranged with third parties.
Six months ended Year ended
31 December 30 June
2004 2004
R`000 R`000
Board representation, financier and
unit holder : Standard Bank Properties
Bond administration fees 2 095 1 700
Non-executive director`s fees 25 50
Finance costs 57 143 87 521
Borrowings 1 073 434 883 624
ApexHi - Manco Trust
The trust is the asset manager of the
company.
Certain of the directors of the company are
beneficiaries and/or trustees of the trust.
Asset management fee (0,5% p.a. of the
market
capitalisation plus borrowings of the
company) 10 314 14 754
The beneficiaries of the trust at
31 December 2004 are:
Madison Property Fund Managers* 57% 57%
Mvelaphanda Holdings 25% 25%
ApexHi Executive Directors 18% 18%
*The shareholders of Madison Property
Fund Managers are:
Standard Bank Properties 50% 50%
M Wainer 25% 25%
W E Cesman 25% 25%
The agreement between the company and the trust is for five years commencing 1
July 2002, with six months` notice required thereafter. There are no
performance based incentive fees paid to the trust. The trust bears all salary
and related costs of the staff employed by the company, with the exception of
the chief executive officer.
COMMENTS
Review of results
The first quarter`s distribution of 25,50 cents per A unit has been maintained
in the second quarter in accordance with the basis on which the A units are
entitled to participate in distributions. The distribution per B unit was
increased by 0,50 cents to 29,50 cents. This resulted in a total distribution
for the six months ended 31 December 2004 of 51,00 cents per A unit (no
increase on the comparative period of the previous year) and 58,50 cents per B
unit (7% increase on the comparative period of the previous year).
Property acquisitions and disposals
19 properties were acquired at an average yield before gearing of 16,4%. The
purchase consideration of R 363,8 million was settled by the issue of 5 618 109
combined units at an average combined price of R14,81 and R280,3 million cash.
Seven properties were disposed at an average yield of 15,5% and the net
proceeds of R107,4 million were used to reduce debt.
Property portfolio
The portfolio now comprises a total of 247 properties valued at R3,8 billion
with a gross lettable area of 1 970 281m2 of which 249 459m2 (12,7%) is vacant.
45% of the lettable area comprises offices, 39% retail and 16% industrial.
Valuation of property portfolio
The policy of the company is to revalue the portfolio annually by external
valuers.
The directors are of the opinion that market-derived capitalisation rates are
lower than those applied by the external valuers in the June 2004 valuation. As
a result, the directors have revalued the majority of the portfolio and this
has resulted in an increase in value of R510,9 million or 16%. Deferred
taxation of R73,7 million has been provided on the revaluation surplus at the
capital gains tax rate after set-off of the assessed loss.
The net asset value per unit has increased by 22% from 30 June 2004 to R14,74
per combined unit.
Acquisition of units in MICC Property Income Fund Limited (`MICC`) ApexHi
acquired 9 864 502 MICC units at a cost of R65,6 million settled by the issue
of 2 979 378 ApexHi A and B units at an average price of R18,53 per combined
unit and R10,2 million cash. Based on the projected earnings of 80 cents per
MICC unit, the investment is revenue-enhancing.
In January 2005, following acceptance of the early settlement offer to MICC
shareholders, ApexHi acquired a further 2 744 357 MICC units. The acquisition
cost of R18,6 million was settled by the issue of 987 969 ApexHi A and B units
at a combined price of R18,90.
Together with the 9 864 502 MICC units that were acquired prior to the offer,
ApexHi now owns 12 608 859 MICC units equating to 19% of MICC`s issued share
capital.
It is not the policy of ApexHi to acquire units in other listed funds. The
investment in MICC was acquired for strategic purposes and various options are
currently being investigated.
Letting activity
Total Unlettable Lettable Vacant
area (m2) area (m2) area (m2) area (m2)
Adjusted portfolio as at
1 July 2004 1 957 055 41 359 1 915 696 270 842
Properties acquired 138 285 138 285 11 152
Properties disposed (75 409) (75 409) (19 132)
Reclassification:
vacant to unlettable 8 291 (8 291) (8 291)
2 019 931 49 650 1 970 281 254 571
Net letting position (5 112)
Leases expired
during period 203 964
Total lettings
during period (209 076)
- Renewals (152 063)
- New occupations (57 013)
Portfolio as at
31 December 2004 2 019 931 49 650 1 970 281 249 459
Let
% area (m2) %
Adjusted portfolio as at
1 July 2004 14 1 644 854 86
Properties acquired 8 127 133 92
Properties disposed 25 (56 277) 75
Reclassification:
vacant to unlettable
13 1 715 710 87
Net letting position 5 112
Leases expired
during period (203 964)
Total lettings
during period 209 076
- Renewals 75 152 063
- New occupations 57 013
Portfolio as at
31 December 2004 13 1 720 822 87
Gearing
Total borrowings amount to R1,073 billion equating to 28% of the value of the
property portfolio. R965,2 million of the debt (90%) is currently fixed at a
weighted average all inclusive rate of 11,47% and for an average period of four
years.
Volume of units traded
Liquidity remains one of the highest in the sector, with 33% of the A units and
28% of the B units trading in the first six months of the financial year,
amounting to trading volumes of approximately R1 billion.
Post balance sheet events
Acquisitions
Number
of units
Building Location Sector Price Cash issued
R`000 R`000
Rivonia Square Sandton, Retail 63 000 4 117 647
Shopping Centre Gauteng
Hammanskraal North West Retail 52 233 31 340 1 114 302
Province
Matsamo Mpumalanga Retail 30 410 18 246 648 742
Devonshire Durban, CBD Parking 22 250 22 250
Parking
Telkom Florida, Gauteng Office 22 000 17 000 263 158
Siyabuswa Mpumalanga Retail 13 857 8 425 289 710
Ulundi KwaZulu-Natal Retail 11 500 11 500
(Ulundi)
SA Eagle Krugersdorp, Office 10 500 10 500
Gauteng
225 750 119 261 6 433 559
Initial
Issue yield before
Building Location Sector price gearing
R (%)
Rivonia Square Sandton, Retail 15,30 15
Shopping Centre Gauteng
Hammanskraal North West Retail 18,75 12
Province
Matsamo Mpumalanga Retail 18,75 12
Devonshire Durban, CBD Parking 12
Parking
Telkom Florida, Gauteng Office 19,00 12
Siyabuswa Mpumalanga Retail 18,75 13
Ulundi KwaZulu-Natal Retail 14
(Ulundi)
SA Eagle Krugersdorp, Office 14
Gauteng
16,55 13
Disposals
Building Location Sector Net selling Surplus on Selling
Price original cost yield
R`000 R`000 (%)
37 Sauer Street* JHB, CBD Office 55 550 - 22
Sage Towers* JHB, CBD Office 44 450 6 650 19
30 Simmonds JHB, CBD Office 14 400 7 100 22
Street*
Group 5 Wynberg, Industrial 6 750 3 622 11
Johannesburg
Rand Central JHB, CBD Retail/ 6 406 200 14
Mothballed offices
76 Juta Braamfontein Office 5 500 3 594 2
Bosman JHB, CBD Retail/ 5 029 1 073 14
Mothballed offices
Medical City JHB, CBD Office 3 700 514 14
Beares Wynberg Wynberg, Retail 2 400 700 8
Cape Town
Pinetown Pinetown, Retail 2 200 200 0
KwaZulu-Natal
Main Rd, Wynberg Wynberg, Retail 1 900 873 8
Cape Town
Elzella Polokwane Office 1 200 146 12
City Block JHB, CBD Industrial 1 200 376 11
Hollandia House JHB, CBD Office 900 158 13
151 585 25 206 18
*Disclosed as a post balance sheet event in June 2004. Transfer has not yet
taken place.
Portfolio after post balance sheet acquisitions and disposals After the post
balance sheet acquisitions and disposals referred to above, the portfolio will
comprise 241 properties valued at R3,916 billion with gearing of R1,04 billion
(equating to 27% of the value of the portfolio).
43% of the 1 945 657m2 lettable area comprises offices, 41% retail and 16%
industrial.
PROSPECTS
The distribution per unit for the six months ending 30 June 2005 is expected to
be at least 51,00 cents per A unit and at least 59,00 cents per B unit. This
forecast has not been reviewed or reported on by ApexHi`s auditors.
DISTRIBUTION ANNOUNCEMENT
The board has resolved that unit holders are entitled to receive interest
distribution number 15 in respect of the quarter 1 October 2004 to 31 December
2004 of 25,50 cents per A unit and 29,50 cents per B unit.
- Last date to trade cum interest Friday, 25 February 2005
- Units will trade ex interest Monday, 28 February 2005
- Record date Friday, 4 March 2005
- Payment of interest distribution number 15 Monday, 7 March 2005
There may be no dematerialisation or rematerialisation of the A and B units
between Monday, 28 February 2005 and Friday, 4 March 2005, both days inclusive.
By order of the Board
G G L Leissner Johannesburg
Chief Executive Officer 10 February 2005
DIRECTORS: M Wainer (Chairman),G G L Leissner* (Chief Executive Officer),
J F Bihl#,W E Cesman, D J Feinblum*, W M Kirchmann#,S Shaw-Taylor, C van Wyk*
* Executive #Independent
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