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MICC - Reviewed interim consolidated results and distribution announcement
MICC Property Income Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2003/013404/06)
JSE CODE: MCP
NSX CODE: MCO
ISIN: ZAE000050175
REVIEWED INTERIM CONSOLIDATED RESULTS AND DISTRIBUTION ANNOUNCEMENT
for the 12 months ended 30 September 2005
* Distribution increase by 12%
* R4.2 million reduction in administration expenses
ABRIDGED GROUP INCOME STATEMENT
Reviewed Audited
12 months 12 months
ended ended
30 Sept 30 Sept
2005 2004
R000 R000
Property revenue 186 266 182 497
Straight-line rental income
accrual 5 479 6 368
Gross property revenue 191 745 188 865
Property expenses (61 458) (62 334)
Net profit from property
operations 130 287 126 531
Administrative expenses (4 550) (8 696)
Investment and other income 1 804 1 851
Operating profit before
finance costs 127 541 119 686
Finance costs (57 608) (57 066)
Net profit before debenture
interest 69 933 62 620
Debenture interest (60 546) (48 962)
Net profit before fair value
changes 9 387 13 658
Fair value adjustment 100 542 74 606
Gross change in fair value of
investment properties 106 021 80 974
Straight-line rental income
accrual (5 479) (6 368)
Net profit before taxation 109 929 88 264
Taxation (10 691) (19 184)
Net profit 99 238 69 080
Reconciliation of net profit
to headline earnings
Net profit after taxation 99 238 69 080
Adjusted for:
Change in fair value of
investment properties (106 021) (80 974)
Straight line income accrual 5 479 6 368
Deferred taxation
- change in accounting policy
to provide at CGT rate - (10 178)
Deferred taxation
- revaluation of investment
properties 9 537 22 317
Deferred taxation
- straight-line rental income
accrual (855) (930)
Headline earnings attributable
to shareholders 7 378 5 683
Debenture interest
- current 57 929 48 962
- prior year 2 617 -
Headline earnings attributable
to unitholders 67 924 54 645
Headline earnings of linked
units
Total number of linked units
in issue (000) 66 993 66 993
Weighted average number of
linked units in issue (000) 66 993 66 993
Headline earnings per
linked unit (cents) 101.39 81.57
Distribution per linked
unit (cents) 86.50 77.00
ABRIDGED GROUP BALANCE SHEET
Reviewed Audited
as at as at
30 Sept 30 Sept
2005 2004
R000 R000
ASSETS
Investment properties 1 039 134 934 863
Investment properties
- at valuation 1 050 981 941 231
Less: straight-line
rental income adjustment (11 847) (6 368)
Other non-current assets 12 051 6 617
Straight-line rental income
adjustment 11 847 6 368
Furniture, fittings and
equipment 204 249
Current assets 28 379 31 128
Trade and other receivables 7 146 6 619
Taxation 155 -
Cash and cash equivalents 21 078 24 509
Total assets 1 079 564 972 608
EQUITY AND LIABILITIES
Equity and reserves 200 733 101 514
Share capital 67 67
Share premium 32 373 32 373
Reserves 168 293 69 074
Non-current liabilities 828 470 817 494
Linked debentures 301 467 301 467
Interest bearing borrowings 502 445 502 445
Deferred taxation 24 558 13 582
Current liabilities 50 361 53 600
Trade and other payables 14 301 19 287
Tenant deposits 5 913 4 943
Taxation - 5 190
Linked unitholders for
distribution 30 147 24 180
Total equity and liabilities 1 079 564 972 608
ABRIDGED GROUP CASH FLOW STATEMENT
Reviewed Audited
12 months 12 months
ended ended
30 Sept 30 Sept
2005 2004
R000 R000
CASH FLOWS FROM OPERATING
ACTIVITIES 253 48 882
Cash generated from operations 115 715 129 440
Finance costs (57 608) (57 066)
Investment and other income 1 804 1 709
Distributions paid (54 598) (24 788)
Taxation paid (5 060) (413)
CASH FLOWS FROM INVESTING
ACTIVITIES (3 684) (591 821)
CASH FLOWS FROM FINANCING
ACTIVITIES - 567 448
Net (decrease)/increase in cash
and cash equivalents (3 431) 24 509
Cash and cash equivalents at
the beginning of the year 24 509 -
Cash and cash equivalents at
the end of the year 21 078 24 509
ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY
Share Share
capital premium
R000 R000
Balance at 1 October 2003 - -
Linked units issued
in acquiring properties 54 26 837
Linked units issued in terms
of private placing 13 6 593
Offset share issue expenses
against share premium - (106)
Net profit for the year - -
Transfer to fair value reserve - -
Dividends declared - -
Balance at 30 September 2004
as previously reported 67 33 324
Change in accounting policies - (951)
Linked unit issue costs - (951)
Change in accounting policy -
letting commission - -
Deferred taxation on change in
accounting policy - letting
commission - -
Deferred taxation on change in
accounting policy - straight-line
rental income accrual - -
Change in accounting policy -
deferred taxation on revaluation
of investment properties - -
Transfer to fair value reserve - -
Restated balance at
30 September 2004 67 32 373
Balance at 1 October 2004 67 32 373
Net profit for the year - -
Transfer to fair value reserve - -
Dividends declared - -
Balance at 30 September 2005 67 32 373
ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY (CONTINUED)
Non-
distribu-
table Retained
reserves earnings Total
R000 R000 R000
Balance at 1 October 2003 - - -
Linked units issued in
acquiring properties - - 26 891
Linked units issued in
terms of private placing - - 6 606
Offset share issue expenses
against share premium - - (106)
Net profit for the year - 58 636 58 636
Transfer to fair value
reserve 58 657 (58 657) -
Dividends declared - (6) (6)
Balance at 30 September 2004
as previously reported 58 657 (27) 92 021
Change in accounting policies 10 178 266 9 493
Linked unit issue costs - - (951)
Change in accounting policy
- letting commission - 1 708 1 708
Deferred taxation on change
in accounting policy -
letting commission - (512) (512)
Deferred taxation on change
in accounting policy -
straight-line rental income
accrual (930) (930)
Change in accounting policy -
deferred taxation on
revaluation of investment
properties - 10 178 10 178
Transfer to fair value
reserve 10 178 (10 178) -
Restated balance at
30 September 2004 68 835 239 101 514
Balance at 1 October 2004 68 835 239 101 514
Net profit for the year - 99 238 99 238
Transfer to fair value
reserve 95 629 (95 629) -
Dividends declared - (19) (19)
Balance at 30 September 2005 164 464 3 829 200 733
COMMENTS
1 BASIS OF PREPARATION
The results for the 12 months ended 30 September 2005 and comparative
information, have been prepared in terms of International Financial Reporting
Standards (IFRS). The results also comply with IAS34 (Interim Financial
Reporting) and relevant sections of the South African Companies Act 1973 as
amended. Grant Thornton 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. In order to comply with the international
interpretation of IAS17 - Leases, total revenue reflects rental income on a
straight-line basis. The comparative figures have been restated accordingly.
To retain comparability with prior periods, the rental income charged to tenants
and the straight-line rental income accrual have been separately disclosed.
Prior period adjustments, to account for the amortisation of rental escalations
applicable to lease income, were made to the opening balance of reserves, the
income statement and the balance sheet. The adjustments to both the opening
balance of reserves and the balance sheet were offset by changes in the fair
value of investment properties and therefore had no net impact on the prior year
reserves. These adjustments are reflected separately to better represent the
effects of the straight-line rental adjustment in the financial statements.
2 FINANCIAL RESULTS
MICC"s net profit before tax, debenture interest and fair value adjustment
amounted to R69.9 million for the 12 months ended 30 September 2005 compared to
the R62.6 million for the 12 months ended 30 September 2004, an increase of 12%.
Net property revenue of R130 million was 3% higher than the previous twelve
month period. These results have been achieved on the back of a good
performance of the underlying properties, reduced administration expenditure and
deferment of certain expenditure.
The board of MICC, in accordance with policy, has resolved to distribute
substantially all of its distributable income for the year ending 31 March 2006.
Summary of financial performance
Sept Sept
2005 2004
Net asset value per linked unit 750 cents 602 cents
Distribution per linked unit for
the twelve months ended 86.5 cents 77 cents
Loan to property value ratio 48% 53%
The net asset value per linked unit increased by 25% from 30 September 2004 to
30 September 2005.
The board has approved an interim distribution of 45 cents per linked unit for
the period from 1 April 2005 to 30 September 2005.
3 BORROWINGS
The salient terms of the debt funding appear below:
STANDARD
NEDBANK BANK
Amount (R000) 251 222 251 223
Date of repayment Sept 2008 Sept 2006
Term 5 yrs 3 yrs
(exten-
dable to
5 yrs)
Fixed interest
rate 11.66% NACM 11.22% NACM
Repayment terms Capital repayable upon
maturity in full.
Only interest serviced monthly
in arrears
Security Secured by way of mortgage
bonds over the investment properties
4 PROPERTY PORTFOLIO
MICC owns 40 properties with a gross lettable area of 395 322mSquared.
As announced previously, MICC has entered into an agreement with RMB Properties
(PTY) Ltd ("RMBP"), dated 15 September 2005, for the disposal of a property
known as Sandton Sanlam Park, situated at 9 Fredman Drive, Sandton for a cash
consideration of R60.25 million. Sandton Sanlam Park was valued at R48.8
million at 31 March 2005. The disposal is subject to the fulfilment of the
following conditions precedent:
* the conclusion of a due diligence investigation by RMBP to the satisfaction
of RMBP;
* the approval of the Competitions Commission, to the extent necessary; and
* the approval of MICC"s bankers.
The disposal may be utilised by MICC to reduce its funding costs or to fund
acquisitions of property.
5 VALUATION OF PORTFOLIO
The MICC portfolio has been valued by the directors of MICC at R1.051 billion as
at 30 September 2005. This is R49 million (4.9%) higher than the directors"
valuation as at 31 March 2005.
6 SEGMENTAL ANALYSIS
Segment assets and liabilities
Segment assets include all operational assets used by a segment and consist
principally of investment properties, receivables and cash. Assets not directly
attributable to a particular segment are allocated to the corporate segment.
Segment liabilities include all operating liabilities of a segment and consist
principally of outstanding accounts. Segment assets and liabilities do not
include goodwill, deferred and other taxes.
Segmental Analysis for
the 12 months ended Industrial Commercial
30 September 2005 R000 R000
Gross rental revenue and
recoveries 17 921 34 420
Straight line rental income 527 1 012
Property expenses (5 115) (13 320)
Net property revenue 13 333 22 112
Balance Sheet at 30 Sept 2005
Non-current assets 102 632 174 346
Current assets 716 1 317
Current liabilities 320 795
Segmental Analysis (continued)
for the 12 months
ended 30 September Retail Corporate Total
2005 R000 R000 R000
Gross rental revenue
and recoveries 133 925 186 266
Straight line rental
income 3 940 5 479
Property expenses (43 023) (61 458)
Net property revenue 94 842 - 130 287
Balance Sheet at
30 Sept 2005
Non-current assets 774 003 204 1 051 185
Current assets 7 439 18 907 28 379
Current liabilities 14 887 34 359 50 361
The composition of the comparative gross rental revenue and recoveries amount
has been reclassified and restated in accordance with the changes in accounting
policies and treatments as already disclosed. Accordingly R17.1 million of the
gross rental revenue and recoveries for the period ended 30 September 2004 can
be attributed to industrial properties, R54.1 million to commercial properties
and R111.3 million to retail properties, totalling R182.5 million.
Likewise, the net property revenue for the period ended 30 September 2004 of
R126.5 million can be apportioned to the respective segments as follows:
industrial properties R11 million, commercial properties R34.6 million and
retail properties R80.9 million.
7 COMMITMENTS
Guarantees
Guarantees in lieu of municipal service deposits amount to R1.2 million (2004
R1.2 million).
8 SHARE CAPITAL AND DEBENTURES
Each linked unit comprises 1 share of 0.1 cent (and a share premium of 49.9
cents) linked to one debenture of R4.50. Interest payable on one debenture is 4
500 times greater than the dividend payable per share.
The company had 66 992 698 linked units in issue at 30 September 2005.
9 PROSPECTS
Due to the continued strong performance of the underlying properties and the
prospects of a further reduction in vacancies, the directors are of the opinion
that, barring any unforeseen negative occurrences, distributions for the six
month period to 31 March 2006 could exceed those of the previous comparable
period.
10 RELATED PARTY TRANSACTIONS
During the period, the company, in the ordinary course of business, entered into
various transactions with related parties. These transactions occurred on terms
that are no less favourable than those arranged with third parties.
Amounts
Year owing to
ended related
30 Sept parties
2005 at
Nature Company 30 Sept
of expense 2005
expenses R000 R000
Sanlam
Properties Asset
(Pty) management
Ltd fees 3 231 352
Gensec Property
Property management
Services and other
Ltd fees 4 827 1 425
Vukile
Property Management
Fund Limited fees 850 -
11 CHANGE OF YEAR END
MICC has changed its year end to 31 March to bring it in line with that of its
holding company, Vukile Property Fund Limited. The next annual financial
statements will, therefore, cover an 18 month period to 31 March 2006.
12 CAUTIONARY ANNOUNCEMENT
In this regard, unitholders are referred to the joint cautionary announcement
published by Vukile and MICC in the newspapers on 23 November 2005, and are
advised to continue exercising caution when dealing in the company"s linked
units.
13 PAYMENT OF DEBENTURE INTEREST AND DIVIDEND
Notice is hereby given of a distribution amounting to 45 cents per unit, for the
six month period to 30 September 2005. The distribution comprises interest on
debentures of 44.99 cents per linked unit and a dividend of 0.01 cents per
linked unit.
Last date to trade cum
distribution Thursday,8 December 2005
Linked units trade ex
distribution Friday,9 December 2005
Record date for unitholders to
participate in the
distribution Thursday,15 December 2005
Payment of distribution to
unitholders Monday,19 December 2005
Linked unit certificates may not be dematerialised or re-materialised between
Friday 9 December 2005 and Thursday 15 December 2005, both days inclusive.
On behalf of the board
SG Joubert G Van Zyl
Roodepoort
25 November 2005
Sponsor
Bridge Capital Services (Pty) Limited, Woodmead, Johannesburg
NAMIBIAN Sponsor
Irwin, Jacobs, Greene (Pty) Ltd, Member of the NSX
Non-executive directors
SG Joubert (Chairman), W Kruger, M Brey, A Du Toit, J de Beer, G van Zyl, MJ
Potts
Registered office
Meersig Building, Constantia Boulevard, Constantia Kloof, 1709
Transfer secretaries
Computershare Investor Services 2004 (Pty) Limited, Marshalltown, Johannesburg
Investor and media relations
Contact Helen McKane on vukile@dpapr.com, or Tel: 011 728-4701
Company Secretary
EL Yates
Date: 24/11/2005 04:00:18 PM Produced by the JSE SENS Department
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