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ApexHi - Audited Results For The Year Ended 30 June 2005 And Quarterly
Distribution declaration For The Three Months Ended 30 June 2005
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`)
AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2005 AND QUARTERLY DISTRIBUTION
DECLARATION FOR THE THREE MONTHS ENDED 30 JUNE 2005
Highlights
* Market capitalisation increased by 52% to R4,1-billion
* Growth in combined unit
price of 37%
* Distribution per B unit increased by 9% to 120,50 cents
These results have been audited 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 year
ended 30 June 2005 as follows:
INCOME STATEMENT
2005 2004
R`000 R`000
Revenue 763 710 600 820
Property expenses (217 613) (170 645)
Administrative expenses (36 656) (26 484)
Letting cost amortisation (8 592) (6 012)
Profit from operations 500 849 397 679
Finance costs (119 244) (94 478)
Interest income 20 851 21 242
Investment income 7 133 -
Profit before debenture interest 409 589 324 443
Debenture interest (409 589) (324 443)
Profit before capital items - -
Capital items 582 791 75 032
Change in fair value of
investment properties 574 678 70 212
Net surplus on disposal
of investment properties 8 113 4 820
Profit before taxation 582 791 75 032
Taxation (77 333) (1 269)
Net profit after taxation 505 458 73 763
Earnings, headline earnings and
distribution
Reconciliation between earnings and
headline earnings:
Net profit after taxation 505 458 73 763
Adjusted for:
Change in fair value of investment
properties - net of taxation (497 345) (68 943)
Net surplus on disposal of
investment properties (8 113) (4 820)
Headline earnings - shares - -
Debenture interest 409 589 324 443
Headline earnings - units 409 589 324 443
Weighted average Distribution Earnings Headline
earnings
number of units per unit per unit per unit
(cents) (cents) (cents)
A unit 184 085 061 102,00 239,29 102,00
B unit 184 085 061 120,50 257,79 120,50
Total - year to
30 June 2005 222,50 497,08 222,50
A unit 152 499 647 102,00 126,18 102,00
B unit 152 499 647 110,75 134,93 110,75
Total - year to
30 June 2004 212,75 261,11 212,75
ACCOUNTING POLICIES
The 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 investments are
classified as available for sale investments and are measured at market value
at balance sheet date. Unrealised gains or losses arising from fair value
adjustments are recognised directly in equity until the disposal of the
investment at which time the accumulated gain or loss previously included in
equity is included in the net profit or loss for the period.
Revenue comprises rentals and operating cost recoveries recognised in
accordance with the payment terms stipulated in the relevant lease agreements.
There is no material difference between this basis and the accounting for
rentals on a straight line basis in accordance with AC105/IAS17, as the
company has a large number of tenants and a well balanced lease expiry
profile.
Municipal cost recoveries were previously classified as revenue. These
recoveries are now off-set against the municipal charge to which they relate.
CONDENSED BALANCE SHEET
2005 2004
R`000 R`000
ASSETS
Non-current assets
Investment properties 4 050 042 2 976 157
Listed investment 101 433 -
Current assets 227 268 182 570
Total assets 4 378 743 3 158 727
EQUITY AND LIABILITIES
Share capital and reserves 1 201 871 531 964
Non-current liabilities 2 958 191 2 455 963
Debenture capital 1 707 993 1 563 997
Deferred taxation 87 861 8 342
Interest bearing borrowings 1 162 337 883 624
Current liabilities 218 681 170 800
Total equity and liabilities 4 378 743 3 158 727
Net asset value per unit (cents)
Number of units Share Debenture Total
A unit 189 776 988 316,66 540,00 856,66
B unit 189 776 988 316,66 360,00 676,66
Total - 30 June 2005 633,32 900,00 1 533,32
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
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 8 191 463
Net profit for year
Realised accumulated
net write - down of investment
properties sold (1 587)
Net surplus on disposal of
investment properties 4 820
Transfer to fair
value reserve -
investment properties
Balance at 30 June 2004 34 409 781 5 614
Issue of ordinary shares 4 151 556
Net profit for year
Realised accumulated
net write - up of investment
properties sold 1 489
Net surplus on disposal of investment
properties 8 113
Transfer to fair
value reserve -
investment properties
Increase in fair value of listed
investment
Balance at 30 June 2005 38 561 337 15 216
Fair value 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 191 471
Net profit for year 73 763 73 763
Realised accumulated
net write - down of investment
properties sold 1 587 -
Net surplus on disposal of
investment properties (4 820) -
Transfer to fair
value reserve -
investment properties 68 943 (68 943) -
Balance at 30 June 2004 128 756 (12 221) 531 964
Issue of ordinary shares 151 560
Net profit for year 505 458 505 458
Realised accumulated
net write - up of investment
properties sold (1 489) -
Net surplus on
disposal of investment
properties (8 113) -
Transfer to fair
value reserve -
investment properties 497 345 ( 497 345) -
Increase in fair value of listed
investment 12 889 12 889
Balance at 30 June 2005 637 501 (12 221) 1 201 871
CASH FLOW STATEMENT
2005 2004
R`000 R`000
OPERATING ACTIVITIES
Cash generated from operations 528 574 422 730
Finance costs (119 244) (94 478)
Interest income 20 851 21 242
Investment income 7 133 -
Debenture interest paid (395 008) (298 567)
Net cash generated from
operating activities 42 306 50 927
INVESTING ACTIVITIES
Purchase of investment properties
including capitalised improvements,
transaction and letting costs (646 376) (828 351)
Net proceeds on disposal of
investment properties 149 011 30 152
Purchase of listed investment (86 358) -
Net cash utilised in
investing activities (583 723) (798 199)
FINANCING ACTIVITIES
Issue of A and B units 295 556 575 939
Interest bearing borrowings raised 278 713 218 532
Net cash generated from
financing activities 574 269 794 471
Net increase in cash at bank 32 852 47 199
Cash at bank at the beginning of year 139 462 92 263
Cash at bank at the end of year 172 314 139 462
SEGMENTAL INFORMATION
Business segments - 30 June 2005
Office Retail Industrial
R`000 % R`000 % R`000 %
Revenue 357 233 47 354 174 46 52 020 7
Property expenses (105 290) 49 (100 951) 46 (11 372) 5
Administrative
expenses
Letting cost
amortisation (6 885) 80 (1 505) 18 (202) 2
Segment
operating result 245 058 45 251 718 47 40 446 8
Finance costs (22) (131) (94)
Interest income 397 273 18
Investment income
Segment operating
results before
debenture
interest 245 433 46 251 860 47 40 370 7
Debenture interest
Segment operating
results before
capital items 245 433 251 860 40 370
Change in fair
value of
investment
properties 262 610 281 779 30 289
Net surplus on
disposal of
investment
properties 7 894 (83) 302
515 937 46 533 556 48 70 961 6
Other information
Investment
properties 1 643 636 2 141 316 265 090
Other assets 20 196 21 943 3 049
Total assets 1 663 832 40 2 163 259 53 268 139 7
Total liabilities 32 930 37 091 4 344
Total
investment Corporate Land
properties costs trading Total
R`000 R`000 R`000 R`000
Revenue 763 427 283 763 710
Property expenses (217 613) - (217 613)
Administrative
expenses - (36 578) (78) (36 656)
Letting cost
amortisation (8 592) (8 592)
Segment
operating result 537 222 (36 295) (78) 500 849
Finance costs (247) (118 997) (119 244)
Interest income 688 20 163 20 851
Investment income 7 133 7 133
Segment operating
results before
debenture
interest 537 663 (127 996) (78) 409 589
Debenture interest - (409 589) (409 589)
Segment operating
results before
capital items 537 663 (537 585) (78) -
Change in fair
value of
investment
properties 574 678 574 678
Net surplus on
disposal of
investment
properties 8 113 8 113
1 120 454 (537 585) (78) 582 791
Other information
Investment
properties 4 050 042 4 050 042
Other assets 45 188 283 482 31 328 701
Total assets 4 095 230 283 482 31 4 378 743
Total liabilities 74 365 3 102 507 - 3 176 872
Geographical segments - 30 June 2005
Property Letting cost
Revenue expenses amortisation
R`000 R`000 R`000
Major Metropolitan
Inner Cities
Johannesburg 148 410 (38 772) (1 089)
Pretoria 82 480 (18 112) (2 850)
Durban 74 128 (28 956) (723)
Cape Town 14 360 (2 065) (175)
Bloemfontein 18 403 (6 262) (178)
337 781 (94 167) (5 015)
Other areas
Johannesburg area 79 967 (20 626) (250)
Cape Town area 41 698 (11 539) (468)
Germiston 35 003 (7 438) (13)
Nelspruit area 14 522 (2 446) -
Port Elizabeth 31 071 (10 449) (139)
Braamfontein 32 147 (13 516) (944)
Pretoria area 19 020 (6 371) (304)
Polokwane 16 887 (3 977) (150)
Durban area 17 580 (7 615) (486)
Pietermaritzburg 13 298 (3 875) (19)
Alberton 9 655 (2 317) -
Klerksdorp 14 283 (4 412) (5)
Vaal Triangle 9 490 (2 669) -
Kimberley 6 501 (1 851) -
Other 84 524 (24 345) (799)
425 646 (123 446) (3 577)
763 427 (217 613) (8 592)
% of total
Segment Investment properties
operating result properties investment
R`000 R`000
Major Metropolitan
Inner Cities
Johannesburg 108 549 561 069 14
Pretoria 61 518 474 967 12
Durban 44 449 333 783 8
Cape Town 12 120 89 400 2
Bloemfontein 11 963 76 400 2
238 599 1 535 619 38
Other areas
Johannesburg area 59 091 451 520 11
Cape Town area 29 691 279 100 7
Germiston 27 552 235 300 6
Nelspruit area 12 076 176 699 4
Port Elizabeth 20 483 162 450 4
Braamfontein 17 687 128 704 3
Pretoria area 12 345 102 900 3
Polokwane 12 760 102 650 3
Durban area 9 479 84 930 2
Pietermaritzburg 9 404 73 460 2
Alberton 7 338 62 192 2
Klerksdorp 9 866 60 150 1
Vaal Triangle 6 821 48 300 1
Kimberley 4 650 37 700 1
Other 59 380 508 368 12
298 623 2 514 423 62
537 222 4 050 042 100
RELATED PARTY TRANSACTIONS
During the year, 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.
2005 2004
R`000 R`000
Board representation,
financier and unit holder:
Standard Bank
Bond administration fees 2 262 1 700
Non-executive directors` fees 50 50
Finance costs 118 389 87 521
Borrowings 1 162 337 883 624
Rivonia Square was purchased from
Standard Bank Properties
for R63,0-million settled by the issuing of
4 117 647 ApexHi A and B units at a combined
price of R15,30. At the date of transfer the
combined unit price was R20,07.
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) 22 649 14 754
The beneficiaries of the trust
at 30 June 2005 are:
Madison Property Fund Managers* 76% 57%
ApexHi Executive Directors 24% 18%
Mvelaphanda Holdings 0% 25%
*The shareholders of Madison
Property Fund Managers
at 30 June 2005 are:
Standard Bank Properties 30% 50%
M Wainer 25% 25%
W E Cesman 25% 25%
S Shaw-Taylor 20% 0%
M Wainer, W E Cesman and S Shaw-Taylor
were directors of ApexHi Properties
Ltd throughout the year.
The agreement between the company
and the trust shall remain in force until
30 June 2012, after which either
party may give six months` written notice
of termination. 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.
Madison Property Fund Managers
Commission paid - Shops for Africa acquisition 375 -
COMMENTS
RESULTS
The fourth quarter`s distribution on the B unit has been increased by 1,0 cent
to 31,50 cents whilst the distribution on the A unit has been maintained (in
accordance with the basis on which the A unit is entitled to participate).
This brings the total distribution for the year to 120,50 cents (9% increase
from 30 June 2004) per B unit and 102,00 cents (no increase from 30 June 2004)
per A unit.
Summarised operating results for the year
2005 % 2004
R`000 change R`000
Operating profit:
Investment Properties 537 505 28 419 851
Core portfolio 453 392 37 332 086
Additions during the year 42 772 48 815
Disposals during the year 10 109 3 489
Disposals post balance sheet 31 232 35 461
Corporate costs and
administrative expenses (36 656) 65 (22 172)
Profit from operations 500 849 26 397 679
Finance costs (119 244) 26 (94 478)
Interest income 20 851 (2) 21 242
Investment income 7 133 -
Distributable profits 409 589 26 324 443
Weighted average number of
units in issue 184 085 061 152 499 647
Distribution per unit (cents) 222,50 5 212,75
A unit 102,00 0 102,00
B unit 120,50 9 110,75
The 28% increase in profits from investment properties is mainly as a result
of the `core` portfolio (representing properties held for a full year and not
sold since year end) increasing by 37%. This growth was mainly as a result of
the 36 acquisitions during the 2004 financial year coming on stream for a full
financial year, most notably the Shops for Africa portfolio. During the 2005
financial year 25 properties were acquired at an average yield before gearing
of 14%. The total purchase consideration of R557,1 million was settled by the
issue of 11,19 million A and B units at an average combined price of R15,58
and R371 million in cash.
19 properties were sold at an average yield of 12,7%. The proceeds of R149,0
million were used to reduce floating debt currently bearing interest at 9,5%.
A surplus on carrying value of R8,1 million and R9,6 million on the original
cost was recorded.
The 65% increase in corporate costs is mainly as a result of increased asset
management fees due to the R557,1 million acquisitions during the year and the
strengthening of the ApexHi unit price. The combined unit price increased by
37% from a close of R15,70 on 30 June 2004 to a close of R21,44 on 30 June
2005.
Finance costs increased by 26% as borrowings increased by 32% from R883,6
million to R1,16 billion, of which 83% - or R965,2 million - has been fixed.
The floating debt of R196,8 million currently bears interest at 9,5% per
annum. The weighted average all inclusive rate of the borrowings decreased
from 12,01% at 30 June 2004 to 10,74% in 2005 mainly as a result of the
reduction in repo-rate, reduction in ApexHi`s risk margin and the
renegotiation of rates on some of the fixed-term borrowings.
Despite cash balances increasing by 24% year on year, interest income reduced
by 2%. During the 2004 financial year, there was a R136 million general issue
of units for cash. The cash was invested in the money market until it was
utilised for yield enhancing acquisitions. This resulted in abnormally high
interest income for 2004. In addition, money market rates declined in line
with repo-rate reductions.
Investment income represents interest distributions received from the MICC
investment. This yielded an annualised return of 12%.
PROPERTY PORTFOLIO
At end June 2005, the property portfolio comprised a total of 244 properties
worth R4,05 billion, with a lettable area of 1,97 million m2 and 221,208m2
(11%) vacant. The retail portion of the lettable portfolio has grown from 35%
to 40%, while the office portion has reduced from 47% to 44%.
LETTING ACTIVITY
Total Unlettable Lettable
area area area
m2 m2 m2
Portfolio as at 1 July 2004 1 960 801 40 591 1 920 210
Properties acquired 191 507 191 507
Properties sold (147 023) (23 894) (123 129)
Reclassification:
vacant to unlettable 20 059 (20 059)
Reclassification:
unlettable to vacant (4 093) 4 093
2 005 285 32 663 1 972 622
Decrease in vacancy
Leases expired during year
Total lettings during year
- Renewals
- New lettings
Portfolio as at 30 June 2005 2 005 285 32 663 1 972 622
Vacant
area Let area
m2 % m2 %
Portfolio as at 1 July 2004 271 610 14 1 648 600 86
Properties acquired 16 567 9 174 940 91
Properties sold (43 275) 35 (79 854) 65
Reclassification:
vacant to unlettable (20 059)
Reclassification:
unlettable to vacant 4 093
228 936 12 1 743 686 88
Decrease in vacancy (7 728) 7 728
Leases expired during year 422 382 (422 382)
Total lettings during year (430 110) 430 110
- Renewals (314 395) 74 314 395
- New lettings (115 715) 115 715
Portfolio as at 30 June 2005 221 208 11 1 751 414 89
Vacancies have improved by 3% to 11% for the year and this equates to a net
decrease in vacancies of 7 728m2. The improved position is mainly as a result
of changes in the portfolio arising from acquisitions and disposals of
properties and a 10 year lease having been concluded with The Johannesburg
City Council which took the 10 514m2 of vacant space in 61 Jorissen Street.
The Council, in terms of its lease, will occupy the entire building of 18
500m2 in time.
VALUATION OF PROPERTIES BY EXTERNAL VALUERS
In accordance with the company`s accounting policy, the portfolio has been
valued by external registered valuers as at 30 June 2005. The valuation of the
portfolio at R4,05 billion has given rise to a fair value surplus in the
income statement of R574,7 million, representing a 16,5% increase in value.
LIQUIDITY AND TRADING VOLUMES
ApexHi`s liquidity continues to remain well above the sector average, with 59%
of the company`s units in issue being traded during the year. 102,7 million A
units were traded, equating to 56% of the weighted average units in issue,
while 116,2 million B units, equating to 63% were traded in the same period.
POST BALANCE SHEET EVENTS
Acquisitions
Building Location Sector Price Cash
R`000 R`000
Glenrand MIB* Randburg Offices 155 000 31 000
Capital portfolio* Gauteng Industrial/ 62 000 62 000
(12 buildings) Kwa-Zulu Natal office/
Eastern Cape retail
123 Malan Street Rustenburg Offices/retail 19 500 19 500
Sanburn Benoni Offices 15 550 15 550
Department of King Williams Offices 8 000 4 000
Education Town
260 050 132 050
Number
of
Building Location Sector units Issue
issued price
R
Glenrand MIB* Randburg Offices 6 048 780 20,50
Capital portfolio* Gauteng Industrial/
(12 buildings) Kwa-Zulu Natal office/
Eastern Cape retail
123 Malan Street Rustenburg Offices/retail
Sanburn Benoni Offices
Department of King Williams Offices 198 020 20,20
Education Town
6 246 800
Initial
yield
Building Location Sector before
gearing
%
Glenrand MIB* Randburg Offices 12,0
Capital portfolio* Gauteng Industrial/ 14,0
(12 buildings) Kwa-Zulu Natal office/
Eastern Cape retail
123 Malan Street Rustenburg Offices/retail 12,6
Sanburn Benoni Offices 13,1
Department of King Williams Offices 13,5
Education Town
12,7
* approval by Competition Commission required
Disposals
Building Location Net selling price
R`000
37 Sauer Street Johannesburg inner city Offices 55 550
Sage Life Towers Johannesburg inner city Offices 44 450
30 Simmonds Street Johannesburg inner city Offices 14 400
Traduna Port Elizabeth inner city Offices/retail 9 000
Loveday House Johannesburg inner city Offices 2 500
Group 5 Wynberg Johannesburg Industrial 6 750
Fabcos Johannesburg inner city Offices 7 100
City Block Johannesburg inner city Industrial 1 200
140 950
Surplus/(deficit)
Building Location on original cost
R`000
37 Sauer Street Johannesburg inner city Offices -
Sage Life Towers Johannesburg inner city Offices 6 650
30 Simmonds Street Johannesburg inner city Offices 7 100
Traduna Port Elizabeth inner city Offices/retail 278
Loveday House Johannesburg inner city Offices (2 532)
Group 5 Wynberg Johannesburg Industrial 3 622
Fabcos Johannesburg inner city Offices 4 774
City Block Johannesburg inner city Industrial 377
20 269
Building Location Selling
yield
%
37 Sauer Street Johannesburg inner city Offices 22
Sage Life Towers Johannesburg inner city Offices 19
30 Simmonds Street Johannesburg inner city Offices 22
Traduna Port Elizabeth inner city Offices/retail 13
Loveday House Johannesburg inner city Offices 0
Group 5 Wynberg Johannesburg Industrial 11
Fabcos Johannesburg inner city Offices 8
City Block Johannesburg inner city Industrial 13
19
PRIMA TRANSACTION
On 21 July 2005 it was announced that ApexHi approved the acquisition of the
entire property portfolio of Prima Property Trust for a purchase price of
R996,2 million, subject to Prima unit holder approval and a number of
regulatory approvals.
The purchase price will be settled by the issue of 37 989 144 ApexHi A units
and 37 989 144 ApexHi B units at R20 per combined unit and payment of R236,4
million in cash
Portfolio after the post balance sheet event acquisitions and disposals
referred to above and assuming the necessary approvals are obtained regarding
the Prima transaction.
At 30 June After
2005 % %
Property portfolio (R`000) 4 050 042 5 165 301
Gearing (R`000) 1 162 337 1 413 814
% gearing 29 27
Number of units in issue 189 776 988 234 012 932
Number of properties 244 423
Lettable area (m2) 1 972 622 2 339 077
- Retail 784 707 40 995 750 43
- Office 872 107 44 921 774 39
- Industrial 315 808 16 421 553 18
- Vacancies 221 208 240 669
- Retail 54 681 64 085
- Office 145 677 153 734
- Industrial 20 850 22 850
Vacancy % 11 10
FUTURE PROSPECTS
ApexHi will continue to acquire yield enhancing properties in addition to the
recent Prima acquisition, dispose of underperforming properties where
opportunities to make significant profits present themselves and fix interest
rates at lower levels. This, combined with growth in income from the existing
portfolio, should ensure distributions of between R2,35 and R2,40 per combined
unit for the 2006 financial year. It is anticipated that the A unit holders
will participate for the first time in the increased distribution during the
second half of the year. This forecast has not been reviewed or reported on by
ApexHi`s auditors.
DISTRIBUTION
The board has resolved that unit holders are entitled to receive interest
distribution number 17 in respect of the quarter 1 April 2005 to 30 June 2005
of 25,50 cents (2004: 25,50 cents) per A unit and 31.50 cents (2004: 29,00
cents) per B unit.
- Last date to trade cum interest Friday, 19 August 2005
- Units will trade ex interest Monday, 22 August 2005
- Record date Friday, 26 August 2005
- Payment of interest distribution number 17 Monday, 29 August 2005
There may be no dematerialisation or re-materialisation of the A and B units
between Monday, 22 August 2005 and Friday, 26 August 2005, both dates
inclusive.
By order of the Board
G G L Leissner
Chief Executive Officer
Johannesburg
4 August 2005
DIRECTORS: M Wainer (Chairman), G G L Leissner* (Chief Executive Officer),
J F Bihl#, W E Cesman, D J Feinblum*, W M Kirchmann#, A Rehman#, C van Wyk*
* Executive #Independent
A presentation on the company`s results will be held in Johannesburg on
Wednesday, 17 August 2005.
For further information please contact Collette McRobert on (011) 880-2271.
Date: 04/08/2005 05:24:36 PM
Produced by the JSE SENS Department
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