| Wed 19 Oct 2005, 16:19 | | Octodec - Reviewed results for the year ended 31 A |
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Octodec - Reviewed results for the year ended 31 August 2005
OCTODEC INVESTMENTS LIMITED and its subsidiaries
Incorporated in the Republic of South Africa.
Registration number: 1956/002868/06
Share Code: OCT.
ISIN: ZAE000005104.
("Octodec" or "the company")
NOTICE TO LINKED UNITHOLDERS
REVIEWED RESULTS FOR THE YEAR ENDED 31 AUGUST 2005
The directors report the reviewed results for the year ended 31 August 2005 set
out herein, together with comparisons with the results for the corresponding
year ended 31 August 2004.
Gearing at 34% allowing for further expansion
Net asset value per linked unit up by 58% to 825 cents
Investment properties exceed R1 billion
Distribution up by 12,8%
Distribution per linked unit (cents)
Revenue (rental income - R"m)
Comments
Subject to the comments below, the same accounting policies and methods of
computation have been followed as in the financial statements of 31 August 2004
and are in accordance with South African Statements of Generally Accepted
Accounting Practice applicable to AC127 "Interim Financial Reporting". In August
2005, the South African Institute of Chartered Accountants issued a circular
setting out the method of accounting for rental income in terms of the South
African accounting statement AC105. In order to comply with this circular,
rental income from leases with escalation clauses has been brought into account
on a straight line basis over the period of the lease. The comparative figures
have therefore been restated. In order to avoid an over-statement of assets, the
fair value adjustment of investment properties in the income statement has been
reduced by the straight line lease adjustment. Investment properties in the
balance sheet have been reduced by the cumulative effect of the straight line
lease adjustment.
Investment properties are held as long-term investments to generate revenue.
Should any of these investments be sold, the tax rate applicable would be the
Capital Gains Tax rate, which is currently 14,5%. The company"s auditors have
insisted that the normal tax rate of 29% be applied, which is the rate
applicable to the income earned from the use of the assets. In order to avoid a
qualification of the accounts, provision for deferred tax has been made at 29%.
In the previous year a tax rate of 14,5% was applied and therefore, the prior
year"s comparative figure has been restated as well as the opening retained
income to reflect the higher tax rate. The results have been reviewed by the
company"s auditors, Deloitte & Touche, whose unqualified review report is
available for inspection at the company"s registered office.
Review of Results
The directors of Octodec are pleased to report that the company has continued to
produce sustained growth in earnings to its linked unitholders.
Rental income and net rental income increased by 9,0% and 5,7% respectively,
compared with the previous twelve months period ended 31 August 2004.
Octodec paid an interim distribution of 31,6 cents per linked unit. The total
distribution for the year of 67,7 cents per linked unit (2004: 60,0 cents)
equates to an increase of 12,8% to that paid in the previous corresponding
period.
The benefit of the stable interest rates environment, management"s pro-active
approach to letting as well as unlocking the value of Octodec"s assets by an
ongoing programme of redevelopment and upgrading, resulted in the growth in
earnings and distributions.
As a result of compliance with AC105 the opening retained earnings at 1
September 2003 were increased by R19,7 million. The cumulative effect of the
straight line lease adjustment included in investment properties is R23,7
million (2004: R22,6 million).
The net effect of applying the higher deferred tax rate is a reduction of the
net asset value by R58,9 million.
Property portfolio and investments
Octodec has taken advantage of the buoyant property market by acquiring four
properties in the Johannesburg CBD with a combined value of R21,6 million. In
total, three properties were disposed of which do not contribute to the
company"s longer term strategy with a combined value of R3,5 million.
Octodec"s retail portfolio, which comprises investments in five shopping
centres, Killarney Mall, Woodmead Value Mart, Elardus Park, Waverley Plaza and
Gezina Stad, accounted for 64% of property income. These investments continued
to enjoy strong growth in rental income.
During the year Octodec continued with its development programme comprising of
the following projects:
Killarney Mall
This R90 million redevelopment is due for completion in early November 2005. The
additional 5500 m2 of retail space is well let with 4300m2 being occupied by
Edgars on a 10 year lease. The construction of an additional 430 parking bays is
nearing completion. The yield on the capital outlay is in excess of 11%.
Anke Properties
Construction of 6846-- m2 of industrial property situated in Silvertondale Ext 1
was completed in August 2005. Leases in respect of 62% of the gross lettable
area have already been concluded. The cost amounted to R14 million with an
initial yield in excess of 11%.
Gezina Stad Shopping Centre
Work was completed on the R3 million refurbishment of the shopping centre. This
has already had a significant improvement on the renewals of existing tenant
leases and is fully let.
Vacancies
The vacancy factor at 31 August 2005 was 22,0% of gross lettable area ("GLA") of
325 793m2. This includes the GLA of the properties recently acquired in the
Johannesburg CBD where the office component is currently mothballed until plans
for redeveloping are finalised, as well as the GLA of newly developed space. The
total vacancy factor excluding these vacancies is 13,3% of GLA (2004: 12,7%).
Revaluation of investment properties
In accordance with the company"s accounting policy, the property portfolio has
been valued as at 31 August 2005. Subsequent to the last valuation, long term
interest rates have declined, which had a positive effect on market related
capitalization rates. The directors have valued the portfolio applying market
related capitalization rates resulting in a significant increase in value of
R284,5 million, representing an increase of 32%.
Deferred taxation of R78,4 million has been provided on the revaluation surplus
at the tax rate of 29%.
Other investments
Octodec increased its holding in Premium Properties Limited to 6,2% of the total
units in issue. This investment is measured at market value at balance sheet
date. Unrealised gains from fair value adjustments, after providing for deferred
tax, amounted to R17,4 million.
Borrowings
At 31 August 2005 Octodec"s borrowings amounted to R425,5 million which
represents a 34% debt-to-property and investment value ratio. At 31 August 2005,
interest rates had been fixed in respect of 36% of borrowings with expiry dates
ranging from November 2006 to November 2007. Subsequent to year end a further
R150 million of long term borrowings was fixed for a period of three years at a
rate of 9,77%. Fixed loans therefore now represent 72% of borrowings. The
weighted average rates of borrowings has decreased from 12,4% at 31 August 2004
to a current 10,3%.
Prospects
Over the last year extensive work has been done to enhance the quality of the
portfolio. This, combined with a positive outlook for the SA economy as well as
a stable interest rate environment and the benefit of the refurbished Killarney
Mall will enable Octodec to continue to deliver good growth in distributions per
linked unit.
Distribution of dividend No. 31 and interest payment ("distribution")
Notice is hereby given that dividend No. 31 of 0,18 cent (2004: 0,15 cent) per
ordinary share together with interest of 35,92 cents per debenture (2004: 30,85
cents), for the period 1 March 2005 to 31 August 2005 has been declared payable
to linked unitholders recorded in the register on Friday, 18 November 2005. The
last date to trade "CUM" distribution is Friday, 11 November 2005. The units
will commence trading "EX" distribution on Monday, 14 November 2005. Payment
date will be Monday, 21 November 2005.
No dematerialisation or rematerialisation of linked unit certificates may take
place between Monday, 14 November 2005 and Friday, 18 November 2005, both days
inclusive.
By order of the Board
City Property Administration (Proprietary) Limited
19 October 2005
A Wapnick J P Wapnick
(Chairman) (Managing director)
ABRIDGED CONSOLIDATED INCOME
STATEMENT
Change Reviewed year Restated year
to 31 Aug 2005 to 31 Aug 2004
% R"000 R"000
Revenue
- earned on contractual basis 9.0 122,536 112,399
- straight line lease adjustment 1,022 2,959
Net property income
- earned on contractual basis 5.7 79,792 75,480
- straight line lease adjustment 1,022 2,959
Interest received 683 3,182
Investment income - listed 3,360 2,544
investments
Investment income - associate 19,629 11,010
- equity earnings 1,653 2,520
- fair value adjustment 14,282 6,162
- interest/fees received 3,694 2,328
Investment income - other 15 11
Capital loss on disposals of (15) (1)
investment properties
Depreciation (550) (510)
Fair value adjustment of investment
properties
- net revaluation 283,492 70,492
- gross revaluation 284,514 73,451
- less: straight line lease (1,022) (2,959)
adjustment
Profit before interest 387,428 165,167
Interest paid (14.5) (34,303) (40,114)
Profit before debenture interest 182.4 353,125 125,053
Debenture interest 20.6 (52,789) (43,764)
Profit before taxation 300,336 81,289
Taxation charge (78,266) (27,825)
Net income after taxation 222,070 53,464
Linked units in issue - (`000) - 78,345 73,163
weighted
Earnings per share - (cents) 287.9 283,5 73,1
Earnings per linked unit - (cents) 164.0 350,8 132,9
Headline earnings per linked unit - 6.6 69,1 64,8
(cents)
Distribution per linked unit (cents)
Dividends 0.32 0.29
Interest 67.38 59.71
Total 12.8 67.70 60.00
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Reviewed year Audited year to
to 31 Aug 2005 31 Aug 2004
R"000 R"000
Cash flow from operating activities
Net rental income from properties 86,570 74,970
Adjustment for :
- Depreciation 550 510
- Working capital changes 2,117 (1,059)
Cash generated from operations 89,237 74,421
Investment income and interest received 698 5,735
Finance costs (34,303) (40,114)
Taxation paid (1,597) (24)
Distribution to linked unit holders paid (48,785) (36,189)
Net cash inflow from operating activities 5,250 3,829
Cash flow from investing activities
Investing activities (136,688) (13,006)
Proceeds from disposal of investment 3,500 800
properties
Net cash outflow used in investing activities (133,188) (12,206)
Cash flow from financing activities 123,461 8,131
Net decrease in cash and cash equivalents (4,477) (246)
Cash and cash equivalents at beginning of (176) 70
period
Cash and cash equivalents at end of period (4,653) (176)
DISTRIBUTABLE EARNINGS
The following additional information Change Reviewed year Audited year
is provided and is aimed at to 31 Aug 2005 to 31 Aug 2004
disclosing
to the users the basis on which the
distributions are calculated.
% R"000 R"000
Revenue
- earned on contractual basis 9.0 122,536 112,399
Net property income 5.7 79,792 75,480
Interest received 683 3,182
Investment income - associate & 17.8 8,707 7,392
listed investments
Investment income - other 15 11
Depreciation (550) (510)
Distributable profit before interest 88,647 85,555
Interest paid (14.5) (34,303) (40,114)
Distributable profit before taxation 19.6 54,344 45,441
Taxation charge (1,261) (979)
Unit holders distributable earnings 19.4 53,083 44,462
Linked units in issue - (`000) - 78,345 73,163
weighted
Distributable earnings per linked 11.5 67.8 60.8
unit - (cents)
Distribution per linked unit (cents) 12.8 67.7 60.0
ABRIDGED CONSOLIDATED BALANCE SHEET
Reviewed year Restated year
to 31 Aug 2005 to 31 Aug 2004
R"000 R"000
Assets
Non-current assets
Investment properties 1,136,337 726,525
Investment properties - straight line lease 23,653 22,631
adjustment
Plant and equipment 2,124 2,041
Investments - listed securities 43,578 21,304
- associated company 33,990 15,438
Current assets 17,646 9,929
Total assets 1,257,328 797,868
Equity and liabilities
Share capital 11,200 11,200
Non-distributable reserve 367,699 129,511
Distributable reserve 25,254 24,187
Ordinary shareholders" interest 404,153 164,898
Debentures 242,923 242,923
Linked unitholders" interest 647,076 407,821
Interest bearing borrowings 420,726 297,812
Deferred taxation 122,479 42,601
Current liabilities - interest bearing 10,777 5,642
- non interest bearing 56,270 43,992
Total equity and liabilities 1,257,328 797,868
Linked units in issue (`000) 78,345 78,345
Net asset value per linked unit (cents) 825 521
ABRIDGED STATEMENT OF CHANGES IN EQUITY
Share Non- Distributable Total
capital Distributable reserve
reserve
R"000 R"000 R"000 R"000
Balance at 1 September 2003 11,096 100,050 1,035 112,181
-
as previously stated
Deferred tax rate adjustment (6,965) (6,965)
Straight line lease (19,672) 19,672 -
adjustment
Net income attributable to 53,464 53,464
ordinary shareholders
Dividends paid (177) (177)
Issue of new linked units 104 104
Transfer to non- 56,098 (49,807) 6,291
distributable reserve
Balances at 1 September 2004 11,200 129,511 24,187 164,898
-
restated
Net income attributable to 222,070 222,070
ordinary shareholders
Dividends paid (249) (249)
Transfer to non-
distributable reserve
- Capital loss on disposal (15) 15 -
of
investment property
Fair value adjustments
- associate, net of deferred 14,282 (14,282) -
tax
- investment properties, net 206,487 (206,487) -
of
deferred tax
Adjustment to value of 17, 434 - 17, 434
listed investment, net of
deferred tax
Balances at 31 August 2005 11,200 367,699 25,254 404,153
RECONCILIATION - EARNINGS PER SHARE TO HEADLINE EARNINGS PER LINKED
UNIT
Reviewed year to Restated year
31 Aug 2005 to 31 Aug2004
Cents Cents
Earnings per share 283.5 73.1
Add: debenture interest per linked unit 67.3 59.8
Earnings per linked 350.8 132.9
unit
Fair value adjustments
- associate, net of deferred tax (18.1) (8.4)
- investment properties, net of (263.6) (59.7)
deferred tax
Headline earnings per linked unit 69.1 64.8
Directors
A Wapnick* (Chairman), J P Wapnick* (Managing director), M J Holmes#, R J
Inggs*, M Z Pollack#, S Wapnick+
*Executive +Non-Executive #Independent non-executive
Registered Office Transfer Secretaries
CPA House Computershare Investor Services 2004 (Pty) Ltd
101 du Toit Street (Registration number 2004/003647/07)
Pretoria, 0002 70 Marshall Street, Johannesburg 2001
P O Box 15, Pretoria, 0001 P O Box 61051, Marshalltown, 2107
Tel: (012) 319 8811 Tel: (011) 370 7700
Fax: (012) 319 8812 Fax: (011) 668 7712
Date: 19/10/2005 04:19:27 PM Produced by the JSE SENS Department
