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Acucap - Reviewed Interim Results for the 6 months ended 30 September 2005
ACUCAP PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2001/021725/06)
Share code: ACP & ISIN: ZAE000037651
("Acucap" or "the company")
Reviewed Interim Results for the 6 months ended 30 September 2005
30 31 March 30
September 2005 September
2005 2004
R"000 R"000 R"000
Abridged Balance Sheet
Assets
Property Assets 1 884 098 1 665 622 1 043 479
Investment 1 827 215 1 618 859 999 751
properties
Long term receivable 54 024 43 690 39 389
Short term 2 859 3 073 4 339
receivable
Other non current assets 66 098 51 805 70 127
Unit purchase trust 65 620 51 462 -
loans
Listed Investments - - 54 723
Furniture, fixtures 478 343 248
and equipment
Goodwill - - 15 156
Other current assets 63 937 96 020 36 917
Accounts receivable 34 584 21 992 27 764
Properties 28 800 23 250 9 050
classified as held for
sale
Listed Investments - 29 055 -
Cash and cash * 553 21 723 103
equivalents
Total assets 2 014 133 1 813 447 1 150 523
Equity and liabilities
Shareholders" interest 514 979 334 906 97 652
Share capital and 71 940 66 617 10 820
share premium
Non-distributable 471 683 297 458 99 371
reserve
Accumulated loss (28 644) (29 169) (12 539)
Non current liabilities 1 417 759 1 336 703 998 718
Debentures 673 116 665 124 541 166
Loans * 564 226 561 236 421 015
Deferred tax 180 417 110 343 36 537
Current liabilities 81 395 141 838 54 153
Accounts payable 16 349 15 309 13 268
Loans 10 000 72 000 -
Tax payable 1 796 3 083 2 163
Debenture interest 53 250 51 446 38 722
payable
Total equity and 2 014 133 1 813 447 1 150 523
liabilities
* Note: Cash and cash equivalents and Loans have been restated
to exclude available loan facilities
Abridged Income Statement
for the 6 months ended 30
September 2005
6 months year 6 months
ended ended ended
30 31 March 30
September 2005 September
2005 2004
R"000 R"000 R"000
Revenue 106 915 159 407 * 76 077 *
- Contractual 96 682 152 198 71 903
- Straight lining 10 233 7 209 4 174
Net operating expenses ( 10 766) ( 24 134) ( 8 640)
Profit before fair value 96 149 135 273 67 437
adjustments
Revaluation of investment 237 044 252 287 * ( 3 350) *
properties
Operating profit 333 193 387 560 64 087
Interest received 3 563 12 891 4 207
Interest paid
- Debenture holders - interim ( 53 250) ( 38 722) ( 38 722)
- Debenture holders - final - ( 51 445) -
- Other ( 34 392) ( 55 860) ( 28 636)
Profit before tax 249 114 254 424 936
Taxation ( 71 869) ( 72 107) 2 094
Net profit for the period 177 245 182 317 3 030
* Note: Revenue and revaluations have been restated to include the
straight lining of rental adjustment
Reconciliation of Headline
profit to net profit
Net profit for the period 177 245 182 317 3 030
Revaluation of investment ( 237 ( 252 3 350
properties 044) 287)
Profit on disposal of ( 1 185) ( 941) ( 78)
investment properties
Profit on disposal of listed ( 654) ( 9 415) -
investments
Impairment of intangible asset - 15 210 -
Tax effects 68 902 71 629 ( 3 304)
Headline profit 7 264 6 513 2 998
Interest paid to debenture 53 250 90 167 38 722
holders
Headline linked unit earnings 60 514 96 680 41 720
Cents Cents Cents
Earnings per share 264.31 338.50 5.88
Headline earnings per linked 90.24 179.50 80.93
unit
Interest Distribution per 79.03 148.75 71.48
linked unit
- Interim 79.03 71.48 71.48
- Final - 77.27 -
Abridged Cash flow statement
for the 6 months ended 30
September 2005
6 months year 6 months
ended ended ended
30 31 March 30
September 2005 September
2005 2004
R"000 R"000 R"000
Cash flows from operating
activities
Cash generated by operations 71 757 149 097 57 908
Income tax paid ( 3 083) ( 439) -
Interest received 3 563 12 891 4 207
Interest paid ( 87 642) ( 146 ( 67 358)
027)
Net cash (outflows) / inflows ( 15 405) 15 522 ( 5 243)
from operating activities
Cash inflows / (outflows) from 39 930 ( 437 ( 77 508)
investing activities 888)
Cash (outflows) / inflows from ( 45 695) 443 265 82 030
financing activities
Net cash (outflows) / inflows ( 21 170) 20 899 ( 721)
for the period
Cash and cash equivalents at 21 723 824 824
beginning of period
Cash and cash equivalents at 553 21 723 103
end of period
* Note: Cash and cash equivalents and Loans have been restated to
exclude available loan facilities
Abridged Statement of changes in equity
for the 6 months ended 30
September 2005
Shares Share Share Non Distri- Accumu- Total
issued capital Premium butable lated
Reserve loss
Number R"000 R"000 R"000 R"000 R"000
Balance at 31 50 170 50 3 350 93 653 ( 14 82
March 2004 782 916) 137
Issue on 30 4 000 4 7 416 - - 7
July 2004 000 420
Net profit - - - - 3 030 3
for the 030
period
Increase in - - - 5 065 - 5
fair value of 065
listed
investments
Transfer to - - - 653 ( 653) -
non-
distributable
reserve
Balance at 30 54 170 54 10 766 99 371 ( 12 97
September 782 539) 652
2004
Issues 3 665 4 10 260 - - 10
January 2005 369 264
Issues March 8 742 9 45 524 - - 45
2005 802 533
Net profit - - - - 179 287 179
for the 287
period
Increase in - - - 1 305 - 1
fair value of 305
listed
investments
Change in - - - 865 865
fair value of
cash flow
hedge
Transfer to - - - 195 917 ( 195 -
non- 917)
distributable
reserve
Balance at 31 66 578 67 66 550 297 458 ( 29 334
March 2005 953 169) 906
Issue on 17 800 - 5 323 - - 5
June 2005 000 323
Net profit - - - - 177 245 177
for the 245
period
Change in - - - ( 2 495) - ( 2
fair value of 495)
cash flow
hedge
Transfer to - - - 176 720 ( 176 -
non- 720)
distributable
reserve
Balance at 30 67 378 67 71 873 471 683 ( 28 514
September 953 644) 979
2005
COMMENTS
1. REVIEW OF RESULTS AND OPERATIONS
The interim financial statements are prepared in accordance with International
Financial Reporting Standards (IFRS), as well as the requirements of the
Companies Act in South Africa, and on a basis consistent with the company"s most
recent annual financial statements.
KPMG Inc. has reviewed the interim financial information set out in this report.
Their unqualified review report is available for inspection at the company"s
registered office.
Acucap has built its corporate and asset management strategies around the core
objective of delivering sustainable growth in distributions per linked unit, and
the results for the six months to the end of September 2005 have seen these
distributions grow by 10.56% over the same period last year. Favourable economic
conditions and strong property fundamentals across all sectors have provided
much of the impetus for this growth, although Acucap"s business model is
considered sufficiently robust to withstand less favourable circumstances and
still deliver real growth in distributions on a sustainable basis.
2. ACQUISITIONS AND DISPOSALS
No new assets were acquired in the six months under review. Subsequent to the
end of the period, an agreement was concluded for the acquisition of the East
Rand Value Mall, details of which were announced on SENS on 27 October 2005.
Work commenced on a substantial refurbishment of the recently acquired
Rondebosch Shopping Centre, with completion of the first phase scheduled for the
end of the year. The approved capital commitment for the completion of the first
phase of this project was R4.62 million as at 30 September 2005. Planning is
also advanced on a refurbishment of the Warwick Centre in Claremont, due to
commence in the second half of the financial year.
Two properties were disposed of during the period. The Pick `n Pay Centre in
Vredenburg, disclosed as Properties classified as held for sale, was sold to a
Cape syndication fund, and the Pick `n Pay Centre in Newton Park, transferred on
30th September 2005, was sold to Diversified Property Fund. Both of these assets
were acquired as part of a package which centred around the purchase of an
undivided share of The Bridge Shopping Centre in Port Elizabeth. Together with
the Greenacres Shopping Centre, The Bridge forms an integral part of Port
Elizabeth"s primary regional retail node, where the combined GLA exceeds
80,000m2, and it is Acucap"s stated intention to increase its share in The
Bridge, which is considered a core asset. The two properties that have been sold
were not considered core.
The acquisition and disposal activities leave the fund with a portfolio of 23
properties, consistent with its strategy of focusing on a smaller number of high
value assets.
3. DISTRIBUTION
The Board has approved interim distribution number 9 of 79.03 cents per
linked unit for the period from 1 April 2005 to 30 September 2005.
4. BORROWINGS
The company has fixed the interest rate on 74.1 % (2004: 70%) of its facilities
with unexpired terms varying between 15 months and 6? years as follows :
Amount % of total Rate (nacm) Expiry of fixed
rates
(R facilities
million)
120.0 17.6% 12.32% January 2007
100.0 14.7% 12.71% May 2008
50.0 7.3% 9.89% April 2008
60.0 8.8% 9.61% August 2009
50.0 7.3% 13.88% October 2009
75.0 11.1% 9.86% April 2010
50.0 7.3% 13.51% March 2012
126.5 18.6% Prime less 1.65%
50.0 7.3% 1 month jibar +
1.75%
681.5 100.0%
The company"s weighted average total borrowing cost was 11.3 % for the period,
down from 11.6% at the end of the same period last year. The loan agreement
with Absa in an amount of R25m was cancelled in the period under review. The
company uses the prime linked borrowings as an access facility to minimize
interest. Unutilised loan facilities at 30 September 2005 amounted to R117m
compared to R146m at 31 March 2005 and R124m at 30 September 2004.
5. VACANCIES
Vacancies amount to 2.7 % of the portfolio by gross rental income, and 2.0 % by
gross lettable area (GLA). This is the seventh consecutive reporting cycle in
which Acucap has been able to present vacancy statistics below 3%, and the
company expects to maintain its low vacancy pattern over the longer term.
6. LEASE EXPIRY PROFILE
The lease expiry profile is reflected below :
vacancy Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11
National 0.0% 11.2% 3.8% 8.3% 10.8% 25.5% 40.2%
tenants
Other 0.0% 23.6% 11.9% 23.9% 5.8% 14.2% 12.9%
Total 2.7% 15.7% 6.7% 13.9% 9.0% 21.5% 30.5%
7. LIQUIDITY
In the six months to 30 September 2005, trade in Acucap linked units has
amounted to an annualized 31.3 % of the weighted average number of units in
issue. The performance of the Acucap unit price relative to the PLS index is
shown below :
PLS Index Acucap unit
price
31-Mar-05 100% 100%
15-Apr-05 105% 103%
29-Apr-05 104% 101%
16-May-05 104% 105%
31-May-05 107% 111%
15-Jun-05 108% 117%
30-Jun-05 110% 114%
15-Jul-05 114% 118%
29-Jul-05 115% 118%
15-Aug-05 121% 122%
31-Aug-05 123% 131%
15-Sep-05 125% 135%
30-Sep-05 125% 137%
Details of the company"s unit holder spread are shown below :
September 05 March 05
Total number of unit holders 1 104 1 113
Number of unit holders owning > 5% of 4 3
units in issue
Number of institutions controlling 10% to 1 4
15% of units in issue
Number of institutions controlling > 15% 2 1
of units in issue
Percentage of units controlled by largest 19.5 % 18.08%
institution
Percentage of units held by public 74.5% 75.9%
unitholders
8. INDEPENDENT VALUATIONS
The listed property sector has gone through a period of positive re-rating in
yields, and to a large extent this has been mirrored by a sharp decline in
commercial property capitalisation rates. As a result, historical valuation
figures have lagged the market substantially and led to an extreme widening of
the premium to NAV in many listed funds. In order to provide a more realistic
assessment of NAV, Acucap has commissioned independent valuations of its top
five retail assets by value, its top five office assets by value, and all three
of the fund"s industrial properties, in aggregate comprising 82.7% of its
portfolio by value as at the end of the last financial year.
Schedule of investment properties
revalued
Carrying Carrying
Value Value
30-9-2005 31-3-2005
R"000 R"000
Retail 1 268 200 1 055 850
Festival Mall, Kempton Park 628 500 535 000
Keywest, Krugersdorp 425 000 340 000
The Village Square, 114 000 96 000
Randfontein
Sunward Centre, Boksburg 61 000 48 350
N1 Motorcity, Goodwood 39 700 36 500
Offices 244 300 206 000
Atterbury Office Park, 64 800 49 000
Menlyn, Pretoria
Nautica, Granger Bay, Cape 50 500 45 000
Town
The Village, Faerie Glen, 41 500 38 000
Pretoria
SA Weather Services, Pretoria 46 000 38 000
Colliers, Illovo 41 500 36 000
Industrial 124 500 115 500
Tellumat, Retreat, Cape Town 56 000 53 000
Epping Industrial Park, Cape 33 000 33 500
Town
City Deep Mini Units, 35 500 29 000
Johannesburg
1 637 000 1 377 350
The interim revaluation resulted in a surplus of R237 million, and Acucap"s NAV
increased from R15.02 to R17.63 per linked unit.
The board of Acucap has also adopted a policy in terms of which a sample of the
independent valuations received at the end of each reporting cycle are subject
to a peer review by an independent third party valuer. For the period under
review, 2 properties were subject to peer review, and the review valuations
concurred with those of the fund"s independent valuers.
9. BLACK ECONOMIC EMPOWERMENT
Acucap has committed itself to a program that will lead to full
compliance with the relevant BEE codes and charter. Significant
emphasis has been placed on identifying BEE partners with whom Acucap
believes it can build sustainable long-term relationships, and who can
make a meaningful contribution to the successful operation of the business.
Management has made good progress towards this objective, and further
announcements will follow as Acucap advances its BEE initiatives.
10. STRAIGHT LINE RECOGNITION OF LEASE INCOME
The change in the manner of recognising lease income has arisen as a result of a
change in interpretation of IAS 17 (AC 105) by South African entities in order
to align the South African practice with that applied internationally. The
effect of the revised interpretation is that operating lease receipts have now
been recognised on a straight-line basis over the lease term, and not as cash is
received. There has been an offsetting effect to the change in fair value of
investment property in the income statement, and the required adjustment has
been made as required by IAS 8 (AC 103) with the necessary restatement of
comparative figures.
The effect on Acucap, which has a long lease expiry profile, is that income has
now been recognized for accounting purposes even though it has not yet been
received. Accounting income for the six months to September 2005 has increased
by R10.2 million (2004: R4.2m) with a corresponding offset against revaluation
adjustments.
This change in the application of statement IAS 17 (AC 105) has no effect on
Acucap"s cash flow or on the distributions payable by Acucap to its linked
unitholders in terms of the Debenture Trust Deed.
11. ACUCAP UNIT PURCHASE TRUST
On 3 June 2005, the remuneration committee approved the issue of 800,000 linked
units to Gavin Jones, a member of the executive team. The units were issued at
the 30 day volume weighted average price of R17.45, and were listed by the JSE
Securities Exchange on 17 June 2005. This brought the total number of linked
units issued to the Acucap Unit Purchase Trust at 30 September 2005 to 3.8
million.
12. SEGMENTAL RESULTS
6 months 6 months
ended 30 ended 30
September September
2005 2004
R"000 R"000
Retail
Revenue 77 438 53 423
Net operating (5 574) (4 540)
expenses
Revaluation of 193 291 (3 576)
investment
properties
Operating profit 265 155 45 307
Offices
Revenue 21 763 17 007
Net operating (1 318) (1 273)
expenses
Revaluation of 35 548 (383)
investment
properties
Operating profit 55 993 15 351
Industrial
Revenue 7 714 5 647
Net operating (3) 347
(expenses) /
income
Revaluation of 8 205 609
investment
properties
Operating profit 15 916 6 603
Reconciliation to
operating profit in
the income statement
Revenue 106 915 76 077
Allocated operating (6 895) (5 466)
expenses
Unallocated operating (3 871) (3 174)
expenses
Revaluation of 237 044 (3 350)
investment
properties
Operating profit 333 193 64 087
for the period
13. PROSPECTS
The household sector, which accounts for over 60% of GDP, has underpinned the
strong performance of the South African economy, and as long as interest rates
remain stable, this pattern looks set to continue. Trading updates from the
major retailers confirm the healthy state of the retail sector, and the recently
announced GDP growth of 5% in the second quarter of 2005 is an encouraging sign
as the government"s economic growth task team works on strategies to target a 6%
growth rate by 2010.
Property fundamentals remain sound across all sectors of the commercial market,
and the board expects distributions per linked unit for the full year to be
around 10% higher than they were in the year to 31 March 2005. This forecast has
not been reviewed or reported on by Acucap"s auditors.
14. PAYMENT OF DEBENTURE INTEREST
Notice is hereby given that interim distribution number 9 of 79.03
(seventy nine comma nought three) cents per linked unit has been
approved in respect of the six month period ended 30 September 2005.
The last date to trade the linked units cum distribution is Friday, 2 December
2005 and the record date will be Friday, 9 December 2005. The linked units will
start trading ex-distribution from Monday, 5 December 2005. Distributions will
be made to unit holders on Monday 12 December 2005.
Linked unit certificates may not be dematerialised or rematerialised between
Monday 5 December and Friday 9 December 2005 both days inclusive.
On behalf of the Board
BS KANTOR PA THEODOSIOU
(Chairman) (Managing Director)
28 October 2005
Registered Office
Suite A11 Westlake Square
Westlake Drive
Westlake
CAPE TOWN
Transfer secretaries:
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street
JOHANNESBURG
http://www.acucap.co.za
info@acucap.co.za
Directors: Prof BS Kantor (Chairman), PA Theodosiou* (Managing Director), FM
Berkeley, D de Beer, RC Frolich, MJ Lindeque, JH Rens*, B Stevens,
NDC Whale, CB Hallowes (alternate to D de Beer)
* Executive
Date: 28/10/2005 07:05:30 AM Produced by the JSE SENS Department
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