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Spearhead - Reviewed interim results for the six months ended 31 December 2004
SPEARHEAD PROPERTY HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1996/005827/06
Share code: SPE ISIN: ZAE000019162
SPEARHEAD REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2004
* Distribution per linked unit up 19% to 95 cents
* Net asset value per linked unit up 23%
* Total revenue up 23%
* Headline earnings per linked unit up 43%
* Profit from operations up 27%
`Spearhead once again is ranked at the top of the JSE real estate sector based
on total returns to unitholders.`
ABRIDGED CONSOLIDATED INCOME STATEMENT
6 months ended 6 months ended Year ended
31 Dec 2004 31 Dec 2003 30 June 2004
% Reviewed Reviewed Audited
Change R000`s R000`s R000`s
REVENUE 23 50 640 41 322 79 955
Operating
income 39 165 28 774 56 087
Profit on
sale of
investment
properties 135 3 213 1 858
Surplus on
sale of
listed
property
linked units 3 611 - -
Interest rate
swaps -
marked to
market
profit/(loss) (3 556) (485) 2 771
39 355 31 502 60 716
Less:
Depreciation 72 559 143
Goodwill
amortised 22 - -
Share option
costs
expensed - - 2 823
Interest paid 13 385 10 582 24 920
Profit from
operations 27 25 876 20 361 32 830
Profit on
disposal of
shares in
joint venture - - -
Profit share
from trust - 11 -
Profit from
associate - 18 -
Profit before
revaluation 25 876 20 390 32 830
Revaluation
of investment
properties - - 58 274
Profit before
debenture
interest and
taxation 25 876 20 390 91 104
Debenture
interest 19 834 15 227 30 170
Profit before
taxation 6 042 5 163 60 934
Income
taxation
expense 1 859 734 7 301
Net profit
for the
period 4 183 4 429 53 633
Linked units
in issue
(weighted
average) 20 352 932 19 002 063 18 979 416
Basic
earnings per
linked unit
(cents) 14 118.01 103.44 441.55
Headline
earnings per
linked
unit (cents) 43 117.55 82.32 170.15
Distribution
per linked
unit (cents) 19 95.00 80.00 160.00
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
6 months ended 6 months ended Year ended
31 Dec 2004 31 Dec 2003 30 June 2004
Reviewed Reviewed Audited
R000`s R000`s R000`s
Cash generated from
operations
before working capital
changes 21 621 21 455 8 097
Working capital changes (2 593) (61 427) (28 705)
Net finance costs (7 430) (16 544) (16 108)
Cash flows from
operating activities 11 598 (56 516) (36 716)
Cash flows from
investing activities (92 533) (32 081) (44 197)
Cash flows from
financing activities 77 805 47 918 42 324
Net decrease in cash and
cash equivalents (3 130) (40 679) (38 589)
Cash and cash
equivalents at
beginning of period 3 003 41 854 41 592
Cash and cash
equivalents at end of
period (127) 1 175 3 003
ABRIDGED CONSOLIDATED BALANCE SHEET
As at As at As at
31 Dec 2004 31 Dec 2003 30 June 2004
% Reviewed Reviewed Audited
Change R000`s R000`s R000`s
Non-current assets 557 366 409 880 464 743
Investment properties 516 410 381 782 445 202
Property, plant and equipment 25 641 4 440 4 405
Goodwill 65 - -
Loans to group companies - - 1 579
Loans receivable 13 437 19 705 11 905
Tenant installations 1 813 1 891 1 652
Deferred taxation - 2 062 -
Current assets 62 233 78 258 80 871
Trade and other receivables 11 831 19 089 9 268
Tenant installations 1 556 1 346 1 464
Short-term portion of loans
receivable 16 850 - 13 707
Investment in listed property
stocks 31 479 56 648 52 781
Cash and cash equivalents 517 1 175 3 651
Total assets 619 599 488 138 545 614
Equity and liabilities
Equity and non-current
liabilities 580 879 465 168 503 220
Capital and reserves 98 422 33 554 80 899
Debentures 211 539 186 531 182 930
Linked unitholders` interest 309 961 220 085 263 829
Interest-bearing borrowings 253 678 233 379 226 199
Interest rate swap derivative 6 285 5 985 2 729
Deferred taxation 10 955 5 719 10 463
Current liabilities 38 720 22 970 42 394
Trade and other payables 13 245 6 203 11 628
Current portion of long-term
borrowings 2 859 - 14 243
Bank overdraft 644 - 648
Receiver of revenue 1 447 822 80
Unitholders for distribution 20 525 15 945 15 795
Total equity and liabilities 619 599 488 138 545 614
Net asset value per linked
unit (rands) 23 14.36 11.64 13.90
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CAPITAL AND RESERVES
6 months ended 6 months ended Year ended
31 Dec 2004 31 Dec 2003 30 June 2004
Reviewed Reviewed Audited
R000`s R000`s R000`s
Unitholders` interest at
beginning of period 80 899 29 704 29 704
Net profit for the period 4 183 4 429 53 633
Issue of shares 11 512 - -
Share issue costs - (4) (5)
Treasury shares
(acquired)/disposed of
by subsidiary - - (4)
Discount on debentures - 678 -
Recoupment of discount
on debentures 1 828 (1 253) (2 429)
Unitholders` interest at
end of period 98 422 33 554 80 899
RECONCILIATION OF EARNINGS TO HEADLINE EARNINGS PER SHARE
Profit before Profit after
taxation Taxation taxation
R000`s R000`s R000`s
Earnings for the period 6 042 1 859 4 183
Adjusted for:
Goodwill 22 - 22
Profit on disposal of
investment properties (135) (20) (115)
Headline earnings 5 929 1 839 4 090
Weighted average linked units
in issue 20 352 932 20 352 932
Headline earnings per share
(cents) 29.13 20.10
RECONCILIATION OF HEADLINE EARNINGS PER SHARE TO HEADLINE
EARNINGS PER LINKED UNIT
Profit before Profit after
taxation Taxation taxation
R000`s R000`s R000`s
Earnings for the period 5 929 1 839 4 090
Adjusted for:
Debenture interest paid 19 834 19 834
Headline earnings 25 763 1 839 23 924
Weighted average linked units
in issue 20 352 932 20 352 932
Headline earnings per linked
unit (cents) 126.58 117.55
ABRIDGED SEGMENTAL INFORMATION
Property Management Unallocated Total
R000`s R000`s R000`s R000`s
Revenue 50 609 31 - 50 640
Segmental result 18 749 4 272 (18 838) 4 183
Segment revenue and expenses:
Revenue and expenses that are directly attributable to a segment are allocated
to those segments. Expenses not directly attributable to a segment are
allocated to the unallocated result segment.
NOTES
Accounting Policies
1. The financial statements have been prepared in accordance with South African
Statements of Generally Accepted Accounting Practice. The principal
accounting policies adopted in the preparation of these financial statements
are consistent with those of the prior year.
2. Revenue represents rentals, recoveries, management fees and commission from
tenants and owners, development income and share trading income.
6 months ended 6 months ended
31 Dec 2004 31 Dec 2003
Reviewed Reviewed
R000`s R000`s
Revenue
Rentals and recoveries 43 109 36 746
Property development income 7 500 4 500
Management fees 31 76
50 640 41 322
3. Investment properties are revalued annually at year-end and not at the
interim period.
These interim results have been reviewed by the company`s auditors, Fisher
Hoffman PKF (Newlands) Inc, and their unqualified report is available for
inspection at the company`s registered office.
COMMENT
FINANCIAL REVIEW
This has been an exceptionally favourable six-month period for the Spearhead
Group. Increased levels of rental income and other operating income led to a 14%
rise in basic earnings per linked unit, while headline earnings per linked unit
increased by 43%.
A number of the company`s major initiatives came together in delivering these
results. Rental income exceeded the budgeted amount, with turnover contributions
from retail tenants providing much of the lift. Good savings were made in
maintenance costs, although these were offset to some extent by additional
marketing costs and higher staffing costs resulting from an escalated scale of
operations. The interest-rate drop in August 2004 also helped to lower the cost
of borrowings significantly, albeit at the expense of a write-down of R3.6m as
an unrealised adjustment loss on the fair value of interest-rate swap contracts.
Spearhead`s participation in the South Seas residential complex in Mouille
Point, Cape Town, provided a boost of R7.5m to income, with the majority of the
apartments in the complex having been transferred to owners before the end of
December 2004. There is more revenue in store from the remaining 11 apartments,
which should be received before the financial year-end.
The disposal of A and B units in ApexHi Properties Limited contributed to the
surplus on sale of listed property linked units of R3.6m, while there was an
upward adjustment of R2.4m in the fair value of Spearhead`s holdings in
Freestone Property Holdings Limited (formerly Arnold Properties Limited).
TOP PERFORMANCE
Spearhead was ranked the top-performing listed real estate company on the JSE
Securities Exchange SA for the calendar year 2004, based on total returns to
linked unitholders (i.e. distributions plus growth in the value of linked
units). This accolade is particularly welcome in view of the competition from
larger and longer-established companies in the sector.
Spearhead also headed the performance list on the JSE Securities Exchange SA
for total returns to unitholders for the three-year calendar period 2002 -
2004.
PROPERTY PORTFOLIO ACTIVITY
Spearhead`s portfolio was enhanced by the following acquisitions, all in the
greater Cape Town area:
* Bloemhof Building in Tygervalley, comprising 2 400 square metres of offices
and 1 600 square metres of retail space, acquired from the Investec group for
R12m on a 12% yield.
* Maynard Plaza office complex in Wynberg, comprising 11 000 square metres of
office space and 321 under-cover parking bays, on a 10% yield.
* Platinum Park, a new industrial park in Montague Gardens with an additional
12 000 square metres of undeveloped land, acquired for R12m on a 12.5% yield.
* Shoprite Claremont, on Main Road in Claremont, a retail property of 4 600
square metres, acquired for R12.75m on an 11.7% yield.
Contracts were signed for the following properties in Cape Town, with transfer
to follow:
* Manhattan Plaza and Omnipark, neighbouring office and retail properties in
Tygervalley, comprising 7 000 square metres of office space and 270 parking
pays, at a price of R42m and on a yield of 12%.
* Viking Park, a mixed-use retail, office, and industrial complex of 9 000
square metres on Viking Road, Epping, acquired for R29.6m on an 11.5% yield.
* Nampak Epping, an industrial property of 13 000 square metres, with Nampak
installed as a long-lease tenant, acquired for R17.25m on a 12.1% yield.
* Coricraft Epping, housing the head office and manufacturing plant of
Coricraft Couches, acquired for R12m on an 11% yield.
* Edgars Wynberg, a retail property adjacent to Maynard Plaza, with 2 200
square metres of space contracted to the Edgars group on a long lease, acquired
for R7.2m on a yield of 13%.
DEVELOPMENT ACTIVITY
Spearhead is pushing onward with its programme of constructing and holding, as
long-term investments, a number of retail, office, and industrial buildings and
complexes.
The main developments in this category are:
* Sable Square Outlets Shopping Village, opposite Century City, Milnerton: a 25
000 square-metre complex on a prime corner site. It is in the early stages of
construction.
* Wembley Square Commercial: a 12 000 square-metre complex in Gardens providing
shops, offices and a gym. Its retail tenants will include Virgin Active and
Struik Publishers. It is associated with the Wembley Square apartment complex
referred to below.
* Golf-Air Park, in the Airport Industria zone: a 30 000 square-metre
industrial park.
* Old Oak Shopping Centre, in Tygervalley: a redevelopment of 4 000 square
metres of shops, including a new-generation Spar store.
* Ottery Hypermarket redevelopment, providing additional retail space of 3 000
square metres.
* Blue Downs Shopping Centre, in an historically disadvantaged suburb of Cape
Town, comprising 8 500 square metres of retail space, with Shoprite and Sasol
as anchor tenants.
* Knowledge Park, in Century City: an extension of 10 000 square metres of
office space to an existing complex.
RESIDENTIAL DEVELOPMENTS
Outside the mainstream of Spearhead`s policy, but attractive on their own terms
to the company, are two residential projects, both approaching finality. South
Seas is in the last phase of selling. The other project, Wembley Square, which
will be a handsome addition to the skyline in Gardens, is still under
construction. This centrally- situated landmark complex will complement the
commercial development there, setting aspirational lifestyle trends.
BLACK ECONOMIC EMPOWERMENT
On 15 February 2005 Spearhead announced details of three transactions through
which BEE investors acquired a holding of 23% in the linked units of the
company.
The entities participating in these transactions, namely Ngatana Properties,
Abu Varachhia, and the Public Investment Commissioners, together with other
existing black shareholders, will hold more than 25% of the total equity in
Spearhead.
This represents a major and early step forward for Spearhead in meeting the
objectives of the awaited charter for the property industry. The directors are
pleased to welcome the new shareholders to the company, where their expertise
and experience within the industry and with policy issues will be invaluable.
Messrs Lance Manala and Abu Varachhia will shortly be appointed to the board of
Spearhead.
PROSPECTS
Spearhead is projecting another good year, to which we have now had an enviably
strong start.
The existing portfolio of properties and investments should continue to
strengthen and as additional projects, now in execution or being planned, come
to the profit- bearing stage, growth in the rest of the year is likely to be
enhanced. We believe we are on a rising curve which will propel us forward for
several years.
DISTRIBUTION DECLARATION NO. 11
Notice is hereby given of the declaration of distribution no. 11 in respect of
the six months to 31 December 2004, amounting to 95 cents per linked unit
(2003: 80 cents per unit).
The last date to trade cum distribution is Friday, 4 March 2005
Linked units will commence trading ex-distribution on Monday, 7 March 2005
Record date is Friday, 11 March 2005
Payment of distributions takes place on Monday, 14 March 2005
Linked unit certificates may not be dematerialised or
rematerialised from Monday, 7 March 2005, to
Friday, 11 March 2005,
both days inclusive.
On behalf of the Board
M KAPLAN M N FLAX Sponsor:
Chairman Chief Executive Officer BRIDGE CAPITAL
Cape Town
15 February 2005
For more information on the company, see: www .spearheadprop.com
SPEARHEAD PROPERTY HOLDINGS LIMITED:
Registered Office: 3rd Floor,
The Spearhead,
42 Hans Strijdom Avenue,
Foreshore,
Cape Town, 8001
Directors: M Kaplan* (Chairman), M N Flax (Chief Executive Officer),
J E Allie, D M Wilder, A Groll* , L Hoffman, H Schreuders*,
F van Hoogstraten*, D B Fabian*
* non-executive
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Limited,
Ground Floor,
70 Marshall Street,
Johannesburg, 2001
PO Box 61051,
Marshalltown, 2107
Date: 15/02/2005 02:36:29 PM
Produced by the JSE SENS Department
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