| Tue 23 Aug 2005, 14:42 | | RESULTS FOR THE YEAR ENDED 30 JUNE 2005 |
|
iFOUR Properties Limited - Reviewed results for the year ended 30 June 2005
iFour Properties Limited
(Incorporated in the Republic of South Africa)
(Registration number 2001/016118/06)
Share code: IFR
ISIN: ZAE000039236
(`the company`)
REVIEWED RESULTS FOR THE YEAR ENDED 30 JUNE 2005
- DISTRIBUTION INCREASED BY 5,1% TO 82,00 CENTS
- TOTAL RETURN TO UNITHOLDERS OF 61%
- FIRST COMMERCIAL MORTGAGE BACKED SECURITISATION IN SOUTH AFRICA
- OCCUPANCIES OF 94,8%
- PORTFOLIO INCREASED TO R1,98 BILLION
1. OVERVIEW
In line with the company`s stated commitment to deliver sustainable annual
growth in distributions to its unitholders, the distribution for 2005 was
increased by 5% from 78 cents last year to the forecast 82 cents.
The 38% growth in gross rental income is a result of the iFour acquisition
strategy that commenced in the previous year.
Other income consists mainly of transaction fees paid by Pangbourne Properties
Limited in respect of asset management provided by iFour to Pangbourne on its
acquisition of the eThekwini property portfolio.
2. SECURITISATION AND BORROWINGS
The company successfully concluded the first Commercial Mortgage Backed
Securitisation in South Africa in November 2004. The advantage of this form of
debt financing includes the diversification of funding sources and, in the
longer term, the lowering of cost of debt finance.
The securitisation programme resulted in the repayment of R320 million and R480
million of borrowings from Standard Bank and Absa Bank respectively, which was
funded by way of an issue of bonds which are listed on the Bond Exchange of
South Africa.
The company`s aggregate borrowings of R991 million represent a loan-to-value
ratio of 50% which is in line with the company`s stated policy not to exceed a
ratio of 55%.
3. PORTFOLIO REVIEW
The property portfolio increased in value from R1,7 billion in June 2004 to
R1,98 billion at 30 June 2005. Six properties to the value of R152,8 million
(four of which are in the retail sector) were transferred during the year. Eight
buildings valued at R78,3 million, which did not meet the company`s investment
criteria, were disposed of. A net profit of R3,3 million was made on the
disposals.
In terms of the company`s accounting policy, one third of the portfolio was
valued by an external valuer and the remainder valued by directors. Valuations
were done on a 10-year discounted cash flow, using a risk-free rate adjusted for
property risk. Additional adjustments are made for tenant risk, building
factors, vacancies, rental reversions to market, property costs, tenant
installations and capital expenditure. The portfolio appreciated by R179
million. The largest revaluation component was attributable to the retail
sector.
4. APPLICATIONS OF INTERNATIONAL ACCOUNTING STANDARDS
The application of international accounting standards to the property loan stock
structure, which is unique to South Africa, has led to certain anomalies,
specifically relating to deferred taxation and the straight-line method of
calculating lease income.
The directors are of the opinion that AC 102 - Taxation permits the provision
for deferred taxation on the surplus arising from the revaluation of investment
properties to be calculated at the capital gains tax rate of 14,5%. The auditors
have insisted that the normal tax rate of 29% must be applied, or their opinion
would be qualified, and 29% has accordingly been used. The effect of the higher
deferred taxation rate is the reduction of the net asset value of the company by
R31,2 million.
The accounting statement with respect to operating leases requires operating
lease receipts to be aggregated and divided by the lease term in order to obtain
the straight-line monthly income to be recognised. A similar exercise is not
required for building expenses. The resulting income recognition does not match
cash flows or escalating building expenses.
To assist investors in determining the distributable earnings of iFour, we have
included an investor`s distributable earnings calculation, which has been
reconciled back to international accounting standards.
5. PROSPECTS
Provided the current sound fundamentals of the economy can be maintained with
low interest rates prevailing, the prospects for the company remain positive.
This will support the property industry and will enable iFour to continue to
expand and at the same time deliver growth in distributions to linked
unitholders.
6. DISTRIBUTION DECLARATION PER LINKED UNIT
Notice was given of the declaration of the final distribution of 43,0 cents per
linked unit for the year ended 30 June 2005 in an announcement dated 28 June
2005. Linked unitholders are also referred to the announcement dated 16 February
2005 in which the interim distribution of
39,0 cents per unit for the six months ended 31 December 2004 was announced. The
aggregate distribution for the financial year ending 30 June 2005 is therefore
82,0 cents per linked unit (2004: 78,0 cents).
DISTRIBUTION TIMETABLE
Event Date
a. Last date to trade cum distribution Friday, 23 September 2005
b. Linked units trade ex distribution Monday, 26 September 2005
c. Record date for unitholders to
participate in the distribution Friday, 30 September 2005
d. Payment of distribution to
unitholders Monday, 3 October 2005
e. Linked unit certificates may not be dematerialised or rematerialised between
Monday, 26 September 2005 and Friday, 30 September 2005 (both days inclusive)
On behalf of the board
JJ Groenewald 2nd Floor
Secretary 382 Jan Smuts Avenue, Craighall, Johannesburg
22 August 2005
For more information go to our website www.ifour.co.za
Directors: AJWL Richards (Chairman), JL Nunes (Managing)*, AMA Campbell, Dr CP
de Leeuw, JAA Diepenbroek, JB Gibbon, RC Johnson (British), KM Mokoape, EPM
Moses, UJ van der Walt *Executive
INVESTORS` DISTRIBUTABLE EARNINGS
This investor information insertion is aimed at disclosing to the users the
basis on which the distribution was calculated.
A reconciliation has been included to illustrate the accounting adjustments
which were not taken into account in calculating the distribution.
Year ended Year ended
30 June 30 June
R`000 2005 2004
Revenue 313 144 229 441
Gross rentals received 306 424 221 580
Other income 6 720 7 861
Net property portfolio costs (76 355) (58 163)
Administrative costs (excluding
amortisation of bond and debenture costs) (8 383) (6 208)
Interest received 5 501 2 893
Interest paid (excluding
securitisation costs amortised (111 428) (80 927)
Securitisation profit retention (538) -
Linked unitholders` distributable earnings 121 941 87 036
Weighted average linked units and shares
in issue 148 420 642 111 387 953
Linked unitholders` distributable
earnings per linked unit (cents) 82,16 78,14
Distribution per linked unit -
declared (cents) 82,00 78,00
Number of linked units in issue 150 764 924 143 457 981
RECONCILIATION BETWEEN LINKED UNITHOLDERS`
DISTRIBUTABLE EARNINGS TO PROFIT
FOR THE YEAR
Linked unitholders` distributable earnings 121 941 87 036
Net revaluation of investment properties 150 866 (21 931)
Straight-line operating lease adjustment 27 810 22 614
Net profit on disposal of investment
properties 3 343 -
Movement of fair value in interest
rate swaps (62 404) (8 438)
Amortisation of bond and debenture costs (4 209) (1 226)
Debenture interest distributed to
unitholders (121 940) (88 320)
Securitisation profit retention 538 -
Taxation (43 685) 5 737
Net profit/(loss) for the year 72 260 (4 528)
RETURN TO UNITHOLDERS
Share price at 1 July (cents) 615 530
Share price at 30 June (cents) 910 615
Capital return (cents) 295 85
Distributions for the year (cents) 82 78
Total return (cents) 377 163
Total return for the year (%) 61 31
12-month high (cents) 940 670
12-month low (cents) 610 520
ABRIDGED CONSOLIDATED GROUP INCOME STATEMENT
Year ended Year ended
30 June 30 June
R`000 2005 2004
Revenue 306 424 221 580
Straight-line operating lease adjustment 27 810 22 614
Other income 6 720 7 861
Net property portfolio costs (76 355) (58 163)
Administrative costs (9 874) (7 434)
Profit from operations 254 725 186 458
Net revaluation of investment properties 150 866 (21 931)
Attributable to straight-line operating
lease adjustment (27 810) (22 614)
Revaluation of investment properties 178 676 683
Net profit on disposal of investment
properties 3 343 -
Earnings before financing costs
and taxation 408 934 164 527
Interest received 5 501 2 893
Interest paid (114 146) (80 927)
Movement of the fair value of interest
rate swaps (62 404) (8 438)
Debenture interest distributed
to unitholders (121 940) (88 320)
Earnings/(loss) before taxation 115 945 (10 265)
Taxation (43 685) 5 737
Earnings/(loss) for the year 72 260 (4 528)
*Where necessary, comparative figures have
been adjusted to conform to changes in
presentation in the current year
Reconciliation between earnings/(loss)
and headline earnings
Earnings/(loss) for the year 72 260 (4 528)
Adjusted for:
Revaluation of investment properties
net of taxation (107 115) (18 641)
Net profit on disposal of investment
properties net of taxation (2 858) -
Debenture transaction and securitisation
costs amortised 4 208 1 226
Headline loss for shareholders (33 505) (21 943)
Debenture interest 121 940 88 320
Headline earnings for linked unitholders 88 435 66 377
Earnings per linked unit (cents) 130,84 75,23
Headline earnings per linked unit (cents) 59,58 59,59
Diluted earnings per linked unit (cents) 130,84 75,11
Diluted headline earnings per linked unit
based on 148 420 642 units
(2004: 111 565 147 units) (cents) 59,58 59,50
Net asset value per linked unit (cents) 559 507
Earnings/(loss) per share (cents) 48,69 (4,07)
Diluted earnings/(loss) per share 48,69 (4,06)
Headline loss per share (cents) (22,57) (19,70)
Diluted headline loss per share based on
148 420 642 units
(2004: 111 565 147 units) (cents) (22,57) (19,67)
Net asset value per share (cents) 116 65
SEGMENTAL INFORMATION
Primary
segment R`000 Industrial Office Retail
Revenue 100 867 105 142 92 868
Straight-line operating
lease adjustment 9 621 7 689 10 498
Segment results
Profit from operations 80 509 73 151 69 419
SEGMENTAL INFORMATION (continued)
Primary Corporate
segment R`000 Other unallocated Total
Revenue 7 547 - 306 424
Straight-line operating
lease adjustment 2 - 27 810
Segment results
Profit from operations 6 990 24 656 254 725
Segment revenue and expenses
Revenue and expenses that are directly attributable to a segment are allocated
to those segments.
Items not directly attributable to a segment are allocated to the corporate
segment.
ABRIDGED CONSOLIDATED GROUP BALANCE SHEET
30 June 30 June
R`000 2005 2004
ASSETS
Non-current assets
Investment properties** 1 980 200 1 721 574
Equipment, furniture and fittings 81 104
Loans to share trust participants 16 113 11 592
Deferred taxation - 2 130
Current assets
Accounts receivable and prepayments 18 881 24 563
Bank balances and cash 56 078 20 671
Total assets 2 071 353 1 780 634
EQUITY AND LIABILITIES
Share capital and reserves
Share capital and premium 80 640 70 843
Retained earnings 94 542 22 282
Non-current liabilities
Debenture capital 668 306 633 629
Interest-bearing borrowings 965 553 776 475
Fair value of interest rate swaps 87 842 8 438
Deferred taxation 40 774 -
Current liabilities
Accounts payable and accruals 59 460 44 174
Amounts due to vendors - 1 100
Taxation 786 106
Current portion of interest-bearing
borrowings 8 543 113 301
Unitholders for distribution 64 907 53 544
Total equity and liabilities 2 071 353 1 723 892
** The effect of the straight-line operating lease adjustment of R27,810k (2004:
R22,614k) is included in the value of investment properties. The cumulative
effect of the straight-line operating lease adjustment included in investment
properties is R68,468k (2004: R40,658k)
ABRIDGED CONSOLIDATED GROUP CASH FLOW STATEMENT
Year ended Year ended
30 June 30 June
R`000 2005 2004
Cash flow from operating activities
Cash generated from operations
before distributions to unitholders 143 804 100 968
Distributions to unitholders (110 577) (57 331)
Net cash inflow from operating
activities 33 227 43 637
Cash flow from investing activities
Additions to investment properties (158 260) (614 378)
Additions to equipment, furniture
and fittings (6) (112)
Proceeds from the sale of investment
properties 81 653 -
Decrease in amounts payable for
acquisitions (16 942) -
Increase in loan to share trust
participants (1 948) (342)
Net cash outflow in investing
activities (95 503) (614 832)
Cash flow from financing activities
Issue of ordinary share capital
and debentures net of transaction
costs (109) 80 516
Decrease in amounts due to vendors - (27 092)
Increase in long-term borrowings 882 068 627 826
Less: repaid during the year (784 276) (132 752)
Net cash inflow from financing
activities 97 683 548 498
Net increase /(decrease) in cash and
cash equivalents 35 407 (22 697)
Cash and cash equivalents at the
beginning of the year 20 671 43 368
Cash and cash equivalents at the end
of the year 56 078 20 671
CONSOLIDATED GROUP STATEMENT OF CHANGES IN EQUITY
Share Share Retained
R`000 capital premium earnings Total
Balance at 1 July 2003 58 21 849 26 810 48 717
Linked units issued to vendors 79 46 443 - 46 522
Share issue costs - (1 933) - (1 933)
Issue of treasury units 6 4 341 - 4 347
Loss for the year after
distributions and taxation - - (4 528) (4 528)
Balance at 30 June 2004 143 70 700 22 282 93 125
Units issued 7 9 853 - 9 860
Share issue costs - (63) - (63)
Profit for the year after
distributions and taxation - - 72 260 72 260
Balance at 30 June 2005 150 80 490 94 542 175 182
ACCOUNTING POLICIES
The financial statements are prepared in accordance with South African
Statements of Generally Accepted Accounting Practice and are consistent with
those applied in prior periods.
Adjustments were made in the current and prior period to recognise revenue on a
straight-line basis over the lease term in accordance with AC105 and circular
7/2005 issued by the South African Institute of Chartered Accountants. The
changes that were made to the opening balance of retained earnings, the balance
sheet and income statement were offset by the change in the fair value of
investment properties and had no net impact on opening retained earnings.
PricewaterhouseCoopers Inc has reviewed the financial information for the year
ended 30 June 2005 and their report is available for inspection at the company`s
registered office.
Date: 23/08/2005 02:41:11 PM
Produced by the JSE SENS Department
