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SA Retail - Unaudited Interim Results and Distribution Announcements
SA Retail Properties Limited
(Reg. No. 1999/025764/06)
Share Code: SRL
ISIN Number: ZAE000034328
Website: www.saretail.co.za
UNAUDITED INTERIM RESULTS AND DISTRIBUTION ANNOUNCEMENT
FOR THE PERIOD ENDED 30 SEPTEMBER 2005
BALANCE SHEET (R"000) Unaudited Unaudited Audited
30.09.2005 30.09.2004 31.03.2005
ASSETS
Non-current assets
Investment properties 1 530 231 1 281 473 1 480 592
At valuation 1 595 878 1 342 434 1 544 420
Rental straight line adjustment (65 647) (60 961) (63 828)
Rental receivable
- straight line adjustment 65 011 56 275 61 875
1 595 242 1 337 748 1 542 467
Current assets
Trade and other receivables 27 714 24 193 21 871
Trade and other receivables 27 078 19 507 19 918
Rental receivable
- straight line adjustment 636 4 686 1 953
Cash resources and
short-term investments 120 862 21 110 62 402
148 576 45 303 84 273
TOTAL ASSETS 1 743 818 1 383 051 1 626 740
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 304 447 156 812 294 022
Non-current liabilities
Debentures 1 154 483 1 029 482 1 154 858
Fair value of Put obligation 15 833 12 902 12 118
Interest bearing borrowings 66 070 81 794 23 494
Deferred taxation 119 341 23 113 50 384
1 355 727 1 147 291 1 240 854
Current liabilities
Trade and other payables 9 242 11 392 9 014
South African Revenue Services 3 3 3
Linked unitholders for distribution 74 399 67 553 82 847
83 644 78 948 91 864
TOTAL EQUITY AND LIABILITIES 1 743 818 1 383 051 1 626 740
INCOME STATEMENT (R"000) Notes Unaudited Unaudited Audited
01.04.2005 01.04.2004 01.04.2004
to to to
30.09.2005 30.09.2004 31.03.2005
Revenue 116 390 99 035 219 502
Contractual lease revenue 111 705 96 507 214 107
Straight line adjustment 4 685 2 528 5 395
Net rental income from properties 73 842 65 204 144 884
Interest earned 5 291 2 103 3 200
Finance costs (3) (334) (1 429)
Capital (loss)/profit on disposal
of investment properties (700) - 48
Net profit before fair value
Adjustments 78 430 66 973 146 703
Write up on revaluation of
investment properties 79 146 104 922 275 947
As per valuation 83 831 107 450 281 342
Adjusted for rental straight line
Adjustment (4 685) (2 528) (5 395)
(Deficit)/surplus on revaluation
of Put obligation (3 715) 19 548 20 332
Net profit before debenture
Interest and taxation 153 861 191 443 442 982
Debenture interest (74 425) (63 949) (150 435)
Net profit before taxation 79 436 127 494 292 547
Taxation 3.1 (68 988) (16 701) (41 554)
Net profit attributable to
linked unitholders 10 448 110 793 250 993
Distribution per linked
unit (cents)
Interest 32,94 32,49 69,18
Dividend 0,01 0,01 0,02
Total 32,95 32,50 69,20
=======================================
Headline earnings per
linked unit (cents) 2.2 33,43 43,71 81,29
Earnings per linked
unit (cents) 2.2 37,58 89,27 197,39
CASH FLOW STATEMENT (R"000) Unaudited Unaudited Audited
01.04.2005 01.04.2004 01.04.2004
to to to
30.09.2005 30.09.2004 31.03.2005
OPERATING ACTIVITIES
Cash received from tenants 104 545 89 279 206 468
Cash paid to suppliers and employees (42 727) (30 740) (73 947)
Cash generated by operating activities 61 818 58 539 132 521
Interest earned 5 291 2 103 3 200
Distributions to linked unitholders (82 896) (60 617) (128 201)
Finance costs (3) (334) (1 429)
Taxation paid - (4) (6)
(15 790) (313) 6 085
INVESTING ACTIVITIES
Acquisition of investment properties (10 529) (285 406) (313 339)
Improvements to investment properties (47 278) (11 661) (23 456)
Disposal of investment properties 89 481 44 400 56 082
31 674 (252 667) (280 713)
FINANCING ACTIVITIES
Debentures issued - 165 342 254 904
Debentures issued at a premium - 9 916 36 446
Debentures issue expenses - - (590)
Increase in interest bearing
Borrowings 42 576 81 794 23 494
Distribution pre-paid received - 3 612 9 350
42 576 260 664 323 604
Net increase in cash
and cash equivalents 58 460 7 684 48 976
Cash and cash equivalents at
beginning of the period 62 402 13 426 13 426
CASH AND CASH EQUIVALENTS AT
END OF THE PERIOD 120 862 21 110 62 402
STATEMENT OF CHANGES IN EQUITY (R"000)
Share
Share Premium &
Capital Reserves Total
Balance at 31 March 2003 2 33 249 33 251
Adjustment to opening balance
- Transitional provision in terms of
AC 133 in respect of fair value of Put
obligation at 31 March 2003 - (26 500) (26 500)
Prior year rental straight line
adjustment (net of deferred taxation) - (1 435) (1 435)
Restated opening balance at 31 March 2003 2 5 314 5 316
Net profit attributable to
linked unitholders - 28 476 28 476
As previously reported - 29 443 29 443
Effect of prior year rental
straight line adjustment - (967) (967)
Dividend distribution - (70) (70)
Balance at 31 March 2004 2 33 720 33 722
Prepaid distribution received - 9 350 9 350
Net profit attributable to
linked unitholders - 250 993 250 993
Dividend distributed - (43) (43)
Balance at 31 March 2005 2 294 020 294 022
Net profit attributable to
linked unitholders - 10 448 10 448
Dividend distributed - (23) (23)
Balance at 30 September 2005 2 304 445 304 447
1. OTHER INFORMATION Unaudited Unaudited Audited
01.04.2005 01.04.2004 01.04.2004
to to to
30.09.2005 30.09.2004 31.03.2005
Linked units in issue 225 873 826 207 947 420 225 873 826
Weighted average linked units
in issue 225 873 826 195 733 074 203 365 682
Net asset value
(cents per linked unit) 679 603 678
(including distribution
yet to be paid)
Listed market price
(cents per linked unit) 940 605 875
Premium to net asset value 38,6% 0,3% 29,1%
Vacancy factor
(based on lettable area) 1,4% 3,9% 2,8%
2. NOTES TO THE FINANCIAL RESULTS
2.1 Accounting policies
The interim financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) and the South African
Companies Act, 1973. These are the first IFRS interim financial statements
released by S A Retail Properties Limited ("S A Retail") and IFRS1 - First-
time adoption of International Financial Reporting Standards has been
applied. The condensed interim financial statements have been prepared in
accordance with IAS 34.
No adjustments were required to the amounts reported previously in the
annual financial statements for the year ended 31 March 2004, 31 March 2005
and to the opening IFRS balance sheet at 1 April 2003, all having been
prepared in accordance with South African Statements of Generally Accepted
Accounting Practice.
2.2 Earnings and headline earnings per linked unit attributable to linked
unitholders
The earnings and headline earnings per linked unit for the period 1 April 2005
to 30 September 2005 are calculated as follows:
30 September 2005 30 September 2004
Cents Cents per
per linked linked unit
R"000 unit R"000 (Weighted)
Net profit attributable
to linked unit holders 10 448 4,63 110 793 56,60
Debenture interest 74 425 32,95 63 949 32,67
Earnings 84 873 37,58 174 742 89,27
Net surplus on revaluation
of investment properties
(net of deferred taxation) (10 053) (4,45) (89 184) (45,56)
Capital loss on
disposal of investment
property 700 0,30 - -
Headline Earnings 75 520 33,43 85 558 43,71
Distributable earnings are not impacted by the deficit on revaluation of
the Put obligation (IAS 39 fair value adjustment), which is included in
earnings and headline earnings per linked unit.
2.3 Interest bearing borrowings
The company as at 30 September 2005 had on balance sheet borrowings
amounting to R66,1 million or 4,3%. These borrowings attract interest at a
current variable rate of 9% per annum.
2.4 Segment results
On a primary basis, the Company operates in the following geographical
areas of South Africa:
Gauteng, Kwa-Zulu Natal and Western Cape.
It is the Company"s investment philosophy to invest only in retail
property, therefore the Company can only report on a primary segment.
Period end
30 September 2005 KwaZulu- Western
Natal Gauteng Cape Corporate Total
R"000 R"000 R"000 R"000 R"000
Income statement
Revenue (external) 52 176 47 996 16 218 - 116 390
Contractual lease revenue 51 041 44 912 15 752 - 111 705
Straight line adjustment 1 135 3 084 466 - 4 685
Regional result
Net rental income from
properties 36 344 33 655 11 288 (7 445) 73 842
Interest received 107 523 36 4 625 5 291
Finance costs - - - (3) (3)
Capital loss on disposal
of investment properties - (700) - - (700)
Write up on revaluation
of investment property 38 599 32 520 8 027 - 79 146
As per valuation 39 734 35 604 8 493 - 83 831
Adjustment for rental
straight line (1 135) (3 084) (466) - (4 685)
Revaluation of Put
Obligation - - - (3 715) (3 715)
Debenture interest - - - (74 425) (74 425)
75 050 65 998 19 351 (80 963) 79 436
Other information
Investment properties 726 009 587 908 216 314 - 1 530 231
At valuation 748 378 626 950 220 550 - 1 595 878
Rental straight line
adjustment (22 369) (39 042) (4 236) - (65 647)
Current and other
long-term assets 32 099 57 720 9 814 113 954 213 587
Excluding rental straight
line adjustment 9 730 18 678 5 578 113 954 147 940
Rental straight line
adjustment 22 369 39 042 4 236 - 65 647
Total assets 758 108 645 628 226 128 113 954 1 743 818
Debentures - - - 1 154 486 1 154 486
Interest bearing
Borrowings - - - 66 070 66 070
Fair value of Put obligation - - - 15 833 15 833
Deferred taxation 119 341 119 341
Current liabilities 6 069 5 974 2 036 69 565 83 644
Total liabilities 6 069 5 974 2 036 1 425 295 1 439 374
Acquisition of investment
Property 10 529 - - - 10 529
2.5 Commitments
Guarantees
Guarantees in lieu of municipal service deposits amount to R3,0 million
(2004: R2,1 million).
Capital expenditure
Capital expenditure amounting to R167,8 million has been authorised for
redevelopment and improvements of existing properties. This expenditure
will be funded by existing cash resources and debt facilities.
3. COMMENTARY ON RESULTS
3.1 Results
S A Retail"s distribution for the six months ending 30 September 2005
amounted to 32,95 (30.09.2004: 32,50) cents per linked unit, which
represents a 1,4% growth in distributions over the comparable period.
Given the portfolio investment activity, whereby S A Retail has disposed of
higher yielding property and acquired lower yielding property with better
growth prospects this growth is considered acceptable. S A Retail has
incurred R3,3 million in costs as a result of the Hyprop Investments
Limited ("Hyprop") offer. These costs have been expensed in the period
under review and the consequence of this has been a 4,5% dilution of
distribution growth. Had the expenses not been incurred, the distribution
growth would have been an increase of 5,9% on the comparable six months
period.
The deferred capital gains taxation has been provided at the rate of 29%
(previously 14,5%) to fall in line with industry practice. Should capital
gains tax become payable upon the disposal of a property this will be
incurred at the actual lower rate and a reversal of the higher provision
will arise. This change in rate provided has no impact on distributable
earnings.
3.2 Hyprop offer to unitholders of S A Retail
The board of directors of S A Retail were advised on 31 March 2005 of
Hyprop"s firm intention to make an offer to the linked unitholders of S A
Retail to acquire all the linked units in S A Retail not already owned by
Hyprop
The Hyprop offer finally closed almost 6 months later on 9 September 2005.
Hyprop had acquired 7% of S A Retail units in the open market prior to the
opening of the offer and 25% from Redefine Income Fund as prior acceptance
of the offer. At the close of the offer Hyprop"s stake in S A Retail stood
at 44%, an additional 12%.
As mentioned above, S A Retail has incurred R3,3 million in costs
pertaining to the Hyprop offer. These are in respect of announcements,
corporate advisory, legal and sponsor fees.
3.3 Property portfolio
During the period of the Hyprop offer, S A Retail has been unable to
conclude new investment activity. Five transactions were unconditional
before the offer was made by Hyprop and were transferred during the period
under review. Paradys Park Shopping Centre in Brackenfell was transferred
to S A Retail on 1 April 2005 for R27,7 million. Florida Junction Shopping
Centre was disposed of on 13 July 2005 for R10,8 million, Kyalami Downs and
Cambridge Downs were disposed of on 21 April 2005 for R53,6 million and
R25,0 million, respectively. Kings Road Value Centre, a development
property mentioned below was transferred on 13 June 2005 for R10,5 million.
In the 2005 financial year, before the Hyprop offer was made, S A Retail
secured R229 million of development activity. The projected average return
on capital invested in these development projects is 10,75% which compares
very favourably to current acquisition yields of comparable retail property
in the market place of 8,5% - 10,0%. This bodes well for earnings growth
and sustainability going forward.
Major development projects currently underway, where S A Retail are
constructing two community shopping centres with a capital commitment of
R105 million, include Umlazi Megacity in partnership with Martprop Property
Fund at an estimated total capital commitment of R155 million and the
construction of Kings Road Value Centre, Pinetown, in partnership with
Vukile Property Fund Limited, at an estimated total capital cost of R55
million. Both projects are progressing very satisfactorily, in line with
the prescribed budget and timetable, and are scheduled to open on 1 April
2006 and 1 October 2006 respectively.
Umlazi Megacity is a 28 000m2 development that will offer Umlazi residents
a premier quality shopping centre anchored by a SuperSpar and Woolworths.
Kings Road Value Centre will be an 8 000m2 convenience centre anchored by a
2 000m2 SuperSpar adjacent to Sanlam Centre, Pinetown, which is currently
jointly owned by S A Retail and Vukile Property Fund Limited.
Significant upgrades and developments that have been progressing during the
period under review include a R6 million refurbishment of East Rand
Galleria; a 6 230m2 extension and refurbishment to Highland Mews, Witbank,
in partnership with Martprop Property Fund at a total estimated cost of R39
million; the completion of phase two at Tokai Junction in Cape Town at a
capital cost of R49 million, also in partnership with Martprop Property
Fund; and a R75 million extension and re-development of Bluff Shopping
Centre, incorporating 8 000m2 of additional bulk occupied by new national
tenants including Woolworths, Mr Price and Edgars.
The vacancy factor of the portfolio at 30 September 2005 was 1,4% (2004:
3,9%). The expense to income ratio for the period was 32,3% (2004: 33,3%).
3.4 Valuations
In conformity with IFRS the portfolio is valued at each reporting date. CB
Richard Ellis, an independent valuer who is registered with the South
African Council of Valuers revalued the portfolio using the discounted cash
flow method. The directors have accepted the independent valuation and
approved the portfolio valuation of R1 595,9 million, a surplus of R83,8
million. This amount, net of deferred capital gains taxation, has been
transferred to non-distributable reserve.
3.5 Fair value of Put obligation and Call right
In terms of IAS 39 The Accounting Statement on Financial Instruments, the
Put obligation and Call right that exists between S A Retail and Whirlprops
33 (Pty) Ltd has been fair valued at 30 September 2005.
Put obligation
The fair value of the Put obligation that Whirlprops 33 (Pty) Ltd has on S
A Retail at 30 September 2005 on the assumption that the Put obligation
will be exercised by Whirlprops 33 (Pty) Ltd in November 2011 is a
shortfall of R15,8 million (7,0 cents per linked unit or 1,03%). The
accounting standard requires the potential unrealised liability to be
recognised on balance sheet.
The fair value of the derivative liability has been increased from R12,1
million to R15,8 million and this movement has been reflected through the
Income Statement. This increase in the fair value has no impact on the
distributable income.
Call right
It is not the intention of the company to exercise the Call right that it
has on Whirlprops 33 (Pty) Ltd in the immediate future as doing so would
result in a dilution of the company"s earnings and net asset value. This
is reviewed on an ongoing basis.
3.6 Prospects
As a consequence of the Hyprop offer S A Retail has incurred R3,3 million
in costs, which have been expensed to income in the period under review.
Furthermore the period has proven difficult for management operationally
and disappointing in that S A Retail"s investment activity has been
curtailed in a period which offered good opportunity.
Management can once again give its full attention to proactively pursue
value add development work which will enhance the profile and critical mass
of the portfolio and provide favourable enhancing returns as well as
appropriate investment opportunities.
4. DECLARATION OF DIVIDEND AND INTEREST PAYMENT NUMBER 9
Notice is hereby given that dividend number 9 of 0,01 cents per ordinary
share and interest of 32,94 cents per debenture totalling 32,95 cents per
linked unit have been declared in respect of the income distribution period
1 April 2005 to 30 September 2005.
Last date to trade cum distribution Friday 18 November 2005
Units will trade ex distribution Monday 21 November 2005
Record date to participate in the distribution Friday 25 November 2005
Payment of the dividend and debenture interest Monday 28 November 2005
Linked unit certificates may not be dematerialised or re-materialised
between Monday 21 November 2005 and Friday 25 November 2005, both days
inclusive.
BY ORDER OF THE BOARD
S A RETAIL PROPERTIES LIMITED
2 November 2005
Registered Office
Marriott at Kingsmead
Kingsmead Office Park
Durban, 4001
P O Box 207
Durban, 4000
Tel: (031) 366 1111
Marriott Corporate Property
Property Asset Managers
Transfer secretaries
Computershare Investor Services 2004 Limited
70 Marshall Street,
Johannesburg, 2001
P O Box 61051
Marshalltown, 2107
Tel: (011) 370 7700
Exchange Sponsors
Sponsor
Date: 02/11/2005 03:00:26 PM Produced by the JSE SENS Department
