| Fri 6 May 2005, 18:04 | | S A Retail Properties - Reviewed Results And Distr |
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S A Retail Properties - Reviewed Results And Distribution Announcement For The
Release Date: 06/05/2005 17:54:19 Code(s): SRL
S A Retail Properties - Reviewed results and distribution announcement for the
year ended 31 March 2005 and renewal of cautionary
S A Retail Properties
(Reg. No. 1999/025764/06)
Share Code: SRL
ISIN Number: ZAE000034328
Website: www.saretail.co.za
REVIEWED RESULTS AND DISTRIBUTION ANNOUNCEMENT FOR
THE YEAR ENDED 31 MARCH 2005 AND RENEWAL OF CAUTIONARY
- Ranked number 1 by `The listed Property Review` with a total return of 71,9%
- Distribution up by 5%
- Vacancy factor reduced to 1,5%
- Property portfolio value exceeds R1,5 billion
BALANCE SHEET (R`000) Note Reviewed Audited
2005 2004
ASSETS
Non-current assets
Investment properties 1 544 420 1 077 730
Current assets
Trade and other receivables 19 918 12 279
Cash resources and short term investments 62 402 13 426
82 320 25 705
TOTAL ASSETS 1 626 740 1 103 435
EQUITY AND LIABILITIES
Capital and reserves
Share capital and reserves 297 340 36 124
Non-current liabilities
Debentures 3.6 1 154 858 864 140
Derivative - fair value of Put option 12 118 32 450
Interest bearing borrowings 23 494 -
Deferred taxation 47 066 6 433
1 237 536 903 023
Current liabilities
Trade and other payables 9 014 8 301
Property acquisition obligation - 95 413
Taxation 3 4
Linked unitholders for distribution 82 847 60 570
91 864 164 288
TOTAL EQUITY AND LIABILITIES 1 626 740 1 103 435
INCOME STATEMENT (R`000) Notes Reviewed Audited
2005 2004
Revenue 214 107 162 695
Net rental income from properties 139 489 109 039
Interest earned 3 200 5 947
Finance costs (1 429) (211)
Capital profit on disposal of investment
properties 48 -
Net profit before fair value adjustments 141 308 114 775
Revaluation of investment properties 281 342 41 517
Surplus/(deficit) on revaluation of Put
option 20 332 (5 950)
Net profit before debenture interest and
taxation 442 982 150 342
Debenture interest 3.2 (150 435) (114 560)
Net profit before taxation 292 547 35 782
Taxation (40 638) (6 339)
Net profit attributable to linked
unitholders 251 909 29 443
Headline earnings per linked unit (cents) 3.3 79,43 62,52
(weighted)
Earnings per linked unit (cents) 3.3 197,84 82,81
(weighted)
Distribution per linked unit (cents) 3.3
Interest 69,18 65,86
Dividend 0,02 0,04
Total 69,20 65,90
STATEMENT OF CHANGES IN EQUITY (R`000)
Share
Share Premium &
Capital Reserves Total
Balance at 31 March 2003 2 33 249 33 251
Adjustment to opening balance
- Transitional provision in terms of
AC 133 in respect of fair value
of Put option at 31 March 2003 - (26 500) (26 500)
Restated opening balance at 31 March 2003 2 6 749 6 751
Net profit - 29 443 29 443
Dividend distributed - (70) (70)
Balance at 31 March 2004 2 36 122 36 124
Prepaid distribution received - 9 350 9 350
Net profit - 251 909 251 909
Dividend distributed - (43) (43)
2 297 338 297 340
CASH FLOW STATEMENT (R`000)
Reviewed Audited
Notes 2005 2004
OPERATING ACTIVITIES
Cash received from tenants 206 468 161 144
Cash paid to suppliers and employees (73 947) (52 315)
Cash generated by operating activities 132 521 108 829
Interest earned 3 200 5 947
Distributions to linked unitholders (128 201) (82 048)
Finance costs (1 429) (211)
Taxation paid (6) (8)
6 085 32 509
INVESTING ACTIVITIES
Acquisition of investment properties (313 339) (65 152)
Disposal of investment properties 56 082 -
Improvements to investment properties (23 456) (9 794)
(280 713) (74 946)
FINANCING ACTIVITIES
Debentures issued 254 904 31 483
Debentures issued at a premium 36 446 -
Debenture issue expenses (590) (1 913)
Distribution prepaid received 9 350 -
Increase in interest bearing
borrowings 23 494 -
323 604 29 570
Net decrease in cash and cash
equivalents 48 976 (12 867)
Cash and cash equivalents
at beginning of the year 13 426 26 293
62 402 13 426
CASH AND CASH EQUIVALENTS AT END OF
THE YEAR
1. OTHER INFORMATION
Reviewed Audited
31.03.2005 31.03. 2004
- Linked units in issue 225 873 826 174 893 039
- Weighted average linked units in
issue 203 365 682 173 890 299
- Net asset value (cents per linked
unit) 680 549
(including distribution yet to be
paid)
- Listed market price(cents per
linked unit) 875 565
- Premium to net asset value 28,7% 2,9%
- Vacancy factor (based on lettable
area) 1,5% 4,6%
(excluding re-development property)
2. REVIEW BY INDEPENDENT AUDITORS
S A Retail`s auditors, KPMG Inc., have reviewed these preliminary financial
results. The unqualified review report is available at S A Retail`s registered
office.
3. NOTES TO THE FINANCIAL RESULTS
3.1 Accounting policies
These financial results are prepared in accordance with South African Statements
of Generally Accepted Accounting Practice and are consistent with those applied
in the preparation of the audited financial results for the previous year. The
accounting statement on financial instruments AC133 has been applied, but has
had no impact on distributable income recorded below.
3.2 Debenture interest
The payment of debenture interest has included the receipt of the prepaid
distribution received of R9,4 million, which is shown in the statement of
changes in equity. The prepaid distribution received arose on the issue of new
linked units.
3.3 Earnings, headline earnings and distribution per linked unit The earnings,
headline earnings and distributions per linked unit for the period 1 April 2004
to 31 March 2005 are calculated as follows:
2005 2004
Cents Cents
R`000 per linked R`000 per linked
unit unit
(Weighted) (Weighted)
Net profit 251 909 123,87 29 443 16,93
Debenture interest 150 435 73,97 114 560 65,88
Earnings 402 344 197,84 144 003 82,81
Net surplus on
revaluation of
investment properties
(net of deferred
capital gains
taxation) (240 756) (118,39) (35 290) (20,29)
Profit on disposal of
investment property (48) (0,02) - -
Headline Earnings 161 540 79,43 108 713 62,52
Distributable earnings are not impacted by the revaluation of the Put option
(AC133 fair value adjustment), which is included in earnings and headline
earnings per linked unit.
3.4 Interest bearing borrowings
The company as at 31 March 2005 had on balance sheet borrowings amounting to
R23,4 million or 1,5%. These borrowings attract interest at a current variable
rate of 9% per annum
3.5 Segment results
On a primary basis, the Company operates in the following geographical areas of
South Africa:
Gauteng; Kwa-Zulu Natal; Western Cape and Mpumalanga
It is the Company`s investment philosophy to invest only in retail property,
therefore the Company can only report on a primary segment.
Year end
31 March 2005
KwaZulu
-Natal Gauteng Western Cape
R`000 R`000 R`000
Income statement
Revenue (external) 83 793 95 733 26 731
Regional result
Net operating income 58 520 60 804 17 148
Interest received 234 241 67
Finance costs - - -
Profit on disposal
of investment properties - - 48
Surplus on revaluation
of investment property 124 911 105 071 43 610
Revaluation
of Put option - - -
Debenture interest - - -
183 665 166 116 60 873
Other information
Investment properties 663 050 614 500 208 000
Current assets 6 722 16 448 3 658
Total assets 669 772 630 948 211 658
Debentures - - -
Derivative - fair value
of Put option - - -
Interest bearing borrowings - - -
Deferred taxation 21 251 15 412 7 059
Current liabilities 5 655 5 004 2 673
Total liabilities 26 906 20 416 9 732
Acquisition of
investment property 190 197 - 27 729
Mpuma-
langa Corporate Total
R`000 R`000 R`000
Income statement
Revenue (external) 7 850 - 214 107
Regional result
Net operating income 9 104 (6 087) 139 489
Interest received 19 2 639 3 200
Finance costs - (1 429) (1 429)
Profit/(loss) on disposal
of investment properties - - 48
Surplus on revaluation
of investment property 7 750 - 281 342
Revaluation
of Put option - 20 332 20 332
Debenture interest - (150 435) (150 435)
16 873 (134 980) 292 547
Other information
Investment properties 58 870 - 1 544 420
Current assets 463 55 029 82 320
Total assets 59 333 55 029 1 626 740
Debentures - 1 154 858 1 154 858
Derivative - fair value
of Put option - 12 118 12 118
Interest bearing borrowings - 23 494 23 494
Deferred taxation 2 840 504 47 066
Current liabilities 560 77 972 91 864
Total liabilities 3 400 1 268 946 1 329 400
Acquisition of
investment property - - 217 926
3.6 Issue of units
In order to fund acquisitionS and capital expenditure the following units were
issued.
- 18 002 359 linked units on 1 April 2004 at a price of 530 cents per
linked unit
- 15 052 022 linked units on 16 August 2004 at a price of 530 cents per
linked unit
- 13 882 288 linked units on 8 March 2005 at a price of 680 cents per
linked unit
- 4 044 118 linked units on 18 March 2005 at a price of 680 cents per
linked unit.
3.7 Contingent liabilities and commitments
Guarantees
Guarantees in lieu of municipal service deposits amount to R2,6 million (2004:
R1,9 million).
Capital expenditure
Capital expenditure amounting to R140,5 million has been authorised for
redevelopment and improvements of existing properties. This expenditure will be
funded through existing resources.
Value added taxation investigation
The ccompany has responded to a questionaire from the South African Revenue
Services.Should a financial oblgigation arise, it will be immaterial.
4.COMMENTARY ON RESULTS AND PORTFOLIO
4.1 Results
S A Retail`s distributable income for the year ended 31 March 2005 increased to
69,20 cents per linked unit (2004:65,90c). This represents growth of 5,0% over
the prior year.
The Listed Property Review has recently reported S A Retail as the top
performing property fund for the 12 months ended 31 March 2005 with a total
return of 71,87%.
4.2 Property portfolio
The vacancy factor of the portfolio at 31 March 2005 was 1,5% (2004:4,6%). The
expense to income ratio at year-end was 31,8% (2004: 29,9%). These are
favourable.
During the period under review to 31 March 2005, the company took transfer of
investment properties to the value of R286,4 million. In April 2004, a 50%
undivided share of Sanlam Centre, Pinetown was acquired for R96,2 million. On 15
September 2004, a 50% undivided share of Musgrave Centre, Durban was acquired
for R190,2 million. Furthermore, Paradys Park Shopping Centre in Brackenfell,
Cape Town, was purchased on 1 April 2005 for R27,7 million.
These acquisitions have enhanced S A Retail`s exposure to premium regional
shopping centres which are showing strong rental growth. This is as a result of
the large national tenant composition and strong demand for space in these fully
let shopping centres.
The 38 000m2 Sanlam Centre, Pinetown is anchored by majors and nationals
occupying 84% of the gross lettable area including Pick `n Pay, Woolworths and
Game. The 40 000 m2 Musgrave Centre, is one of Durban`s premier shopping
destinations with a 70% composition of national tenants including Pick `n Pay,
Woolworths, Stuttafords, Truworths and Ster Kinekor.
In addition to this investment acquisition activity, S A Retail has commenced
the construction of two community shopping centres in KwaZulu Natal with a
capital commitment of R124 million. These include the development of Umlazi Mega
City, in partnership with Martprop Property Fund, at an estimated total capital
cost of R150 million and the construction of Kings Road Shopping Centre,
opposite Sanlam Centre Pinetown, in partnership with Vukile Property Fund
Limited, at an estimated total capital cost of R49 million.
Umlazi Mega city is a 27 000m2 development that will offer Umlazi residents a
premier quality shopping centre anchored by a SuperSpar and Woolworths. Kings
Road Value Centre will be an 8,000m2 convenience centre adjacent to Sanlam
Centre, Pinetown which is currently jointly owned by S A Retail and Vukile
Property Fund Limited.
Significant upgrades and developments that commenced during the period under
review include a R6,0 million refurbishment of East Rand Galleria; a 6 230m2
extension and refurbishment to Highland Mews, Witbank, in partnership with
Martprop Property Fund at total estimated cost of R34 million; and the
completion of Phase I and Phase II at Tokai Shopping Centre in Cape Town at a
capital cost of R48,9 million, also in partnership with Martprop Property Fund.
During the 12 months under review to 31 March 2005, S A Retail disposed of six
properties that no longer met with the company`s investment philosophy. The sale
of these properties realised R172 million. This is consistent with the company`s
asset management strategy to pro-actively dispose of non-core assets with
limited growth prospects and to accelerate diversification into regional
shopping centres. These disposal properties include The Circle, Somerset West,
Witbank Centre & Checkers, Witbank; Rondebosch Shopping Centre, Cape Town;
Florida Junction, Johannesburg; Cambridge Downs, Sandton; and Kyalami Downs,
Midrand.
On 30 March 2005 S A Retail announced a transaction with Martprop Property Fund
(`Martprop transaction`), subject to certain regulatory approvals, to dispose of
an undivided quarter share in fourteen retail properties for a total
consideration of R174,1 million to Martprop, and also to acquire from Martprop
an undivided half share in eight retail properties for a total consideration of
R121,4 million.
On 4 May 2005 S A Retail advised unitholders that the JSE Securities Exchange
South Africa (`JSE`) has ruled that the Martprop transaction is a category 1 and
related party transaction. The company is considering these rulings and has
requested clarity from the JSE in order to determine whether to appeal against
these rulings.
4.3 Valuations
In conformity with Generally Accepted Accounting Practice, the portfolio is
valued at each reporting date. 14 properties were valued by CB Richard Ellis at
a total value of R696,6 million and the remaining 12 properties were valued by
Motseng Marriott Property Services (Pty) Ltd, at R847,8 million. The directors
have accepted these valuations. The property portfolio has accordingly been
valued at R1 544,4 million and the surplus R240,8 million, net of deferred tax,
has been transferred to the non-distributable reserves.
4.4 Deficit on revaluation of fair value of Put commitment and Call option
In terms of AC133, the accounting statement on financial instruments, the Put
commitment and Call option that exists between S A Retail and Whirlprops 33
(Pty) Ltd has been fair valued at 31 March 2005.
Put option commitment
The fair value of the Put option that Whirlprops 33 (Pty) Ltd has on S A Retail
at 31 March 2005 on the assumption that the Put option will be exercised by
Whirlprops 33 (Pty) Ltd in November 2011 is a shortfall of R12,1 million (5,4
cents per linked unit or 0,8%). The accounting standard requires the potential
unrealised liability to be recognised on balance sheet and the movement through
the income statement.
This treatment has had no effect on distributable income.
Call option commitment
It is not the intention of management to exercise the Call option that it has on
Whirlprops 33 (Pty) Ltd in the immediate future because doing so would be
dilutionary on both the company`s net asset value and earnings.
4.5 Prospects
South Africa`s major national retailers and line shop operators performed
admirably in the twelve months to 31 March 2005. The outlook for retail property
continues to remain favourable given the current stable interest rate
environment and with strong consumer demand the company continues to deliver
steady earnings growth in the short to medium term.
The company intends, subject to any necessary regulatory authority, to continue
the expansion of the property portfolio as and when appropriate investment
opportunities arise and is currently considering additional investment in
regional and convenience shopping centres which satisfy the company`s investment
criteria.
4.6 Hyprop Investments Limited (`Hyprop`) Firm intention to make an offer to
unitholders of S A Retail
The board of directors of S A Retail were advised on 31 March 2005 of Hyprop`s
firm intention to make an offer to the linked unitholders of S A Retail to
acquire all the linked units in S A Retail not already owned by Hyprop (`Hyprop
Offer`). On 5 May 2005 Hyprop announced an amendment to the Hyprop ofer to
incorporate a cash alternative and further advised that the Hyprop offer would
open on 9 May 2005.
In terms of the requirements of the Securities Regulation Panel Code on Mergers
and Takeovers S A Retail has appointed independent financial advisors to advise
on the fair and reasonableness of the Hyprop offer and will revert to
unitholders in due course.
4.7 Renewal of Cautionary
Unitholders are advised to continue to exercise caution in dealing in the units
of S A Retail until such time that S A Retail makes a further announcement with
regard to the Martprop transaction and/or the Hyprop offer.
5. DECLARATION OF DIVIDEND AND INTEREST PAYMENT NUMBER 8
Notice is hereby given that dividend number 8 of 0,01 cents per ordinary share
and interest of 36,69 cents per debenture totalling 36,70 cents per linked unit
have been declared in respect of the income distribution for the period 1
October 2004 to 31 March 2005.
Last date to trade cum distribution Friday,20 May 2005
Units will trade ex distribution Monday,23 May 2005
Record date to participate in the distribution Friday,27 May 2005
Payment of the dividend and debenture interest Monday,30 May 2005
Linked unit certificates may not be dematerialised or re-materialised between
Monday 23 May 2005 and Friday, 27 May 2005, both days inclusive.
BY ORDER OF THE BOARD
S A RETAIL PROPERTIES LIMITED
6 May 2005
Registered Office
Marriott at Kingsmead
Kingsmead Office Park
Durban, 4001
P O Box 207
Durban, 4000
Tel: (031) 366 1111
Auditors
KPMG Inc.
20 Kingsmead Boulevard,
Kingsmead Office Park,
Durban,4001
P O Box 1496
Durban, 4000
Tel (031) 327 6000
Transfer secretaries
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street,
Johannesburg, 2001
P O Box 61051
Marshalltown, 2107
Tel: (011) 370 7700
Property Asset Managers
