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ACP
Acucap - Audited final results for the year ended 31 March 2005
Acucap Properties Limited
Incorporated in the Republic of South AfricaRegistration number 2001/021725/06
JSE Code: ACP
ISIN : ZAE000037651
`Acucap` or `the company`Audited Final Results for the year ended 31 March 2005
Balance sheet
at 31 March 2005
2005 2004 R`000 R`000
Assets
Non current assets 1 717 1 067
427 900Investment properties 1 665 1 067
622 900
Employee unit purchase 51 462 -
trust loansFurniture, fixtures and 343 -
equipment
Current assets 241 132 073
784Accounts receivable 21 992 14 114
Properties classified as held 23 250 -
for sale
Listed investments 29 055 -Cash and cash equivalents 167 117 959
487
Total assets 1 959 1 199
211 973Equity and liabilities
Shareholders` interest 334 82 137
906
Share capital and share 66 617 3 400premium
Non-distributable reserve 297 93 653
458
Accumulated loss ( 29 ( 14 169) 916)
Non current liabilities 1 482 1 044
467 606
Debentures 665 501 206 124
Loans 707 503 500
000
Deferred tax 110 39 900 343
Current liabilities 141 73 230
838
Accounts payable 15 309 5 940Loans 72 000 30 741
Tax payable 3 083 -
Debenture interest 51 446 36 549
payableTotal equity and 1 959 1 199
liabilities 211 973
Income statement
for the year ended 31 March2005
2005 2004
R`000 R`000
Revenue 152 137 988 198
Net operating expenses ( 24 ( 16
134) 571)
Profit before fair value 128 121 417adjustments 064
Revaluation of investment 259 80 610
properties 496
Operating profit 387 202 027 560
Interest received 12 891 3 553
Interest paid
- debentures ( 90 ( 70 167) 407)
- other ( 55 ( 54
860) 640)
Profit before taxation 254 80 533 424
Taxation ( 72 ( 23
107) 897)
Net profit for the year 182 56 636 317
Reconciliation of headline profit
to net profit
Profit for the 182 56 636 year 317
Revaluation of ( 259 ( 80
investment properties 496) 610)
(Profit) / loss on disposal ( 941) 400 of investment properties
Profit on disposal of listed ( 9 -
investments 415)
Impairment of 15 210 - intangible asset
Tax effects 73 719 23 897
Headline earnings 1 394 323
Interest paid to 90 167 70 407 debenture holders
Headline linked unit 91 561 70 730
earnings
Cents CentsEarnings per share 338.50 119.17
Headline earnings per 2.59 0.68
share
Headline earnings per 169.99 148.83linked unit
Interest distribution per
linked unit
- interim 71.48 67.60 - final 77.27 72.85
Distribution per linked 148.75 140.45
unit
Statement of changes in equityfor the year ended 31
March 2005
Share Share Non Accumulated Total
capital premium distributable loss reserve
R`000 R`000 R`000 R`000 R`000
Balance at 31 40 356 37 339 ( 15 238) 22 497
March 2003Issue of 10 10 2 768 - - 2 778
449 369 shares
in June 2003
Issue of 86 - 226 - - 226500 shares in
February 2004
Net profit for - - - 56 636 56 636
the yearTransfer to - - 56 314 ( 56 314) -
non-
distributable
reserveBalance at 31 50 3 350 93 653 ( 14 916) 82 137
March 2004
Issue of 4 000 4 7 416 - - 7 420
000 shares inJuly 2004
Issue of 3 4 10 260 - - 10 264
665 369 shares
in January2005
Issue of 8 742 9 45 524 - - 45 533
802 shares in
March 2005Net profit for - - - 182 317 182 317
the year
Increase in - - 6 370 - 6 370
fair value oflisted
investments
Change in fair - - 865 - 865
value of cashflow hedge
Transfer to - - 196 570 ( 196 570) -
non-
distributablereserve
Balance at 31 67 66 550 297 458 ( 29 169) 334 906
March 2005
Abridged cash flowstatement
for the year ended 31
March 2005
2005 2004 R`000 R`000
Cash flows from operating
activities
Cash generated by 149 122 854operations 097
Income tax paid ( 439) -
Interest received 12 891 3 553
Interest paid ( 146 ( 125 027) 047)
Net cash inflow from 15 522 1 360
operating activities
Cash outflows from ( 437 ( 75investing activities 888) 040)
Cash inflows from 471 164 498
financing activities 894
Net cash inflow 49 528 90 818for the year
Cash and cash equivalents 117 27 141
at beginning of year 959
Cash and cash equivalents 167 117 959at end of year 487
COMMENTS
1. REVIEW OF RESULTS AND OPERATIONS
The financial statements are prepared in accordance with International FinancialReporting Standards (IFRS), applied consistently with the prior period, and the
requirements of the Companies Act in South Africa. KPMG Inc. has audited the
financial information set out in this report. Their unqualified audit report is
available for inspection at the company`s registered office.As an asset class, property has sustained its strong performance over this last
year. Total returns, as measured by the IPD South Africa Property Index, reached
their highest level in five years at 25.9% to December 2004, with each of the
retail, office and industrial sectors posting record total returns. Retailproperty continued to outperform the other two sectors with a total return of
26.1%, but industrial property made its strongest showing in recent years with a
return of 24.5%, even exceeding its strong resurgence of the prior year. Total
returns from offices were lower at 16.7%, still well ahead of the 9.9% averagefor the last five years, and supporting the general perception that the office
market has worked through the worst effects of the supply overhang that has
hampered its recent performance.
The strong performance of the local property market has been underpinned by thesound state of the economy, where disciplined monetary policy and a slightly
expansionary fiscal policy have achieved a good balance between containing
inflation and encouraging growth. Declining long bond rates have continued to
lead down both listed property yields and direct property capitalisation rates,with the result that for the first time in five years, capital growth has
exceeded the income return on all property surveyed by the IPD South Africa
Property Index.
The marked decline in capitalisation rates over the last year has beenaccompanied by an acute shortage in the availability of investment grade
property, and listed property companies have increasingly found themselves
working with credible developers to procure new investment assets. This trend
has seen the listed property sector starting to fill the space vacated byinstitutional investors some years ago, and it is likely that the trend will
continue for the foreseeable future.
Acucap has worked successfully with such developers, and one of the company`s
major initiatives during the year was the acquisition of Festival Mall, Acucap`snew regional retail centre in Kempton Park. This initiative centred around
completing the redevelopment and re-tenanting of the existing Kempton Park
Hyperama, constructing a new 4,500m2 link between the existing centre and the
new 40,000m2 mall developed by Keystone Investments, and taking transfer of thenew portion, leaving Acucap with a single 65,000m2 regional shopping centre. The
development was completed during the year, and the mall opened on 26 October
2004. Transfer of the new portion took place on 19 May 2005.
Since opening, trade at Festival Mall has consistently exceeded the expectationsof its retail tenants, and the board expects this property to deliver strong and
sustained growth as the centre claims a prominent role in the East Rand retail
market.
As a second major initiative, Acucap has taken advantage of the buoyant propertymarket to refresh its portfolio by disposing of those assets which it felt would
not contribute to the company`s strategy in the longer-term. In their place it
has acquired other properties more closely aligned to Acucap`s strategy of
delivering sustainable growth in distributions per unit through a diversifiedportfolio of good quality properties. In this regard, the group disposed of 8
properties with a combined value of R158 million, and acquired four new
properties with a combined value of R97 million. The most significant
acquisition was an undivided 17.8% share in The Bridge, part of Port Elizabeth`sdominant Greenacres regional retail shopping precinct, and Acucap would like to
gradually increase its interest in this asset as opportunities arise to acquire
additional undivided shares under pre-emptive rights.
Average borrowing costs declined from 12.76% in 2004 to 12.19% for the currentyear, and hedging activities after the year end have resulted in the rate
reducing further to 11.23%. Net income from the property portfolio increased by
8.9% over the previous 12 months, while indirect expenses increased by only
2.6%, mainly due to the acquisition by Acucap of its management company. Thisresulted in a reduction of asset management fees from the previous contractual
basis to a cost basis. Capital raising activities saw a 27% increase in the
number of linked units in issue, and distributions per linked unit for the full
year therefore increased by 5.9% over the prior year from 140.45 cents to 148.75cents. The final distribution of 77.27 cents per linked unit is 6.1% higher than
last year`s final distribution of 72.24 cents per linked unit. These results are
consistent with the growth prospects expressed by the board in last year`s
results announcement.2. DISTRIBUTION
The Board has approved a final distribution of 77.27 cents per linked unit
for the period from 1 October 2004 to 31 March 2005.
3. BORROWINGSAt 31 March 2005, 71% (2004: 75%) of borrowings were subject to fixed interest
rates, with a weighted average fixed interest rate expiry of approximately 3.6
years (2004: 3.5 years). The group borrowing capacity amounts to R916 million
(2004:R587 million), being 55% of the valuation of the properties. Existinggroup facilities amount to R532 million (2004:R504 million), and facilities
utilised at year end amounted to R386 million (2004:R386 million). Subsequent to
year end, the facility increased to R707million, and the facility utilisation to
R573 million, giving a gearing ratio of 35%. The additional facilities resultedin the average borrowing cost declining to 11.23%, with the percentage subject
to fixed rates remaining at 71%, and the weighted average fixed rate expiry
increasing to 3.7 years.
4. VACANCIESVacancies amount to 2.4% of the portfolio by gross rental income, and 2% by GLA.
Vacancies have remained at these low levels since listing, and management
regards the present vacancy rate as normal and sustainable for the Acucap
portfolio.5. LEASE EXPIRY PROFILE
The lease expiry profile reflected below shows an average expiry of 5
years, with more than 48% of all leases expiring after 31 March 2009.
2006 2007 2008 2009 2010 after 31-3-2010 vacancy
Other 2.4% 39.5% 14.1% 22.3% 3.5% 12.2% 8.3%
National 14.7% 4.6% 8.0% 9.2% 26.7% 36.9%
tenantsTOTAL 2.4% 22.2% 7.5% 12.3% 7.2% 21.5% 27.0%
LIQUIDITY
In the year to 31 March 2005, trade in Acucap linked units has amounted to 58.3%
of the weighted average number of units in issue, and the monthly distributionof the volume traded is shown in the accompanying table :
2004 y/e 2005 y/e
April 1,005,807 1,576,200
May 615,401 1,862,446 June 2,177,598 2,322,921
July 1,455,272 1,884,005
August 715,801 2,236,413
September 2,090,174 6,817,666 October 2,705,424 1,555,747
November 4,367,479 2,512,322
December 2,662,304 3,945,744
January 442,042 1,603,799 February 802,545 1,005,811
March 1,260,722 4,070,050
TOTAL 20,300,569 31,393,124
Details of the company`s unit holder spread are shown below : 31 March 31 March
2005 2004
Total number of unit holders 1 113 996
Number of unit holders owning > 5% of 3 4 units in issue
Number of institutions controlling 10% 3 4
to 15% of units in issue
Number of institutions controlling > 15% 1 1 of units in issue
Percentage of units controlled by 18.1 21.7%
largest institution
Percentage of units held by public 74.7% 69.0% unitholders
During the year, the company successfully completed private placements of
7.7m linked units at an average price of R13.73 per linked unit ex-distribution.
7. PROPERTY PORTFOLIO REVALUATION Acucap`s entire property portfolio was revalued by its independent valuers
at 31 March 2005, using either the capitalization of net income method, or the
discounted cash flow method, or a combination of these where appropriate. The
portfolio increased in value from R1,068 million at the end of March 2004 toR1,665 million at the end of the current year. The increase in the portfolio
value, together with the effects of acquisitions made during the year, resulted
in a 29% growth in the NAV per linked unit from R11.63 at 31 March 2004 to
R15.02 at 31 March 2005.8. DEBT SECURITISATION
Acucap has appointed FirstRand Bank Limited, acting through its Rand
Merchant Bank division, as the arranger for its proposed debt securitisation
initiative. This initiative will be undertaken jointly with Resilient PropertyIncome Fund in order to achieve the necessary transaction scale, and the first
issue under the proposed note program is likely to take place in the current
financial year.
9. SEGMENTAL RESULTS 2005 2004
R`000 R`000
Retail
Revenue 104 556 101 332 Net operating expenses ( 10 375) ( 9 895)
Profit before fair value 94 181 91 437
adjustments
Revaluation of 203 103 62 362 investment properties
Operating profit 297 284 153 799
Offices
Revenue 35 354 29 949 Net operating expenses ( 1 404) ( 1 349)
Profit before fair value 33 950 28 600
adjustments
Revaluation of 42 648 7 404 investment properties
Operating profit 76 598 36 004
Industrial
Revenue 12 288 6 707 Net operating revenue 330 1 206
Profit before fair value 12 618 7 913
adjustments
Revaluation of 13 745 10 844 investment properties
Operating profit 26 363 18 757
Reconciliation to net
profit for the year in the income statement
Total Total
Revenue 152 198 137 988
Operating expenses ( 8 924) ( 16 571) Impairment of intangible ( 15 210) -
asset
Profit before fair value 128 064 121 417
adjustments Revaluation of 259 496 80 610
investment properties
Operating profit 387 560 202 027
Interest received 12 891 3 553 Interest paid
- debentures ( 90 167) ( 70 407)
- other ( 55 860) ( 54 640)
Profit before taxation 254 424 80 533 Taxation ( 72 107) ( 23 897)
Net profit for the year 182 317 56 636
Capital expenditure on
investment properties Retail
Purchase price 344 350 -
Other capital expenses 61 333 7 638
405 683 7 638 Offices
Purchase price 35 500 29 995
Other capital expenses 7 405 5 751
42 905 35 746 Industrial
Purchase price 46 000 43 000
Other capital expenses 254 1 656
46 254 44 656 Total
Purchase price 425 850 72 995
Other capital expenses 68 992 15 045
494 842 88 04010. PROSPECTS
Over the last three years, extensive work has been done to enhance the
quality of the Acucap portfolio through a process of upgrading and redeveloping
key assets, combined with selected acquisitions and the disposal of non-coreproperties. The board has also implemented transparent and cost efficient
management structures, primarily through internalising the asset management
function and outsourcing all agency activities. Lastly, the implementation of
the Acucap Unit Purchase Trust has built a close alignment between the interestsof management and unit holders.
This, combined with a positive outlook for the South African economy, stable
interest rates and benign inflation, will enable Acucap to deliver an expected
growth in distributions per unit of between 9% and 10% in the year to 31 March2006. This forecast has not been reviewed by KPMG Inc.
11. PAYMENT OF DEBENTURE INTEREST
Notice is hereby given that a final distribution number 8 of 77.27 (seventy
seven comma two seven) cents per linked unit has been approved in respect of thesix month period ended 31 March 2005. The last date to trade the linked units
cum distribution is Friday 3 June 2005 and the record date will be Friday 10
June 2005. The linked units will start trading ex-distribution from Monday 6
June 2005. Distributions will be made to unit holders on Monday 13 June 2005.Linked unit certificates may not be dematerialised or rematerialised between
Monday 6 June 2005 and Friday 10 June 2005 both days inclusive.
On behalf of the Board
BS KANTOR PA THEODOSIOU(Chairman) (Managing Director)
19 May 2005
Registered Office
Suite A11 Westlake SquareWestlake Drive
Westlake
CAPE TOWN
Transfer secretaries:Computershare Investor Services 2004 (Proprietary) Limited
70 Marshall Street
JOHANNESBURG
http://www.acucap.co.zainfo@acucap.co.za
Share Code: ACP
ISIN : ZAE 000037651
Directors: Prof BS Kantor (Chairman), PA Theodosiou* (Managing Director), FMBerkeley, D de Beer, RC Frolich, MJ Lindeque, HJ Mocke, JH Rens*, B Stevens, NDC
Whale
* ExecutiveDate: 19/05/2005 05:00:24 PM Produced by the JSE SENS Department
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