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Vukile - Unaudited Interim Results And Distribution Announcement
Vukile Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2002/027194/06)
JSE code: VKE ISIN: ZAE000056370
UNAUDITED INTERIM RESULTS AND DISTRIBUTION ANNOUNCEMENT
for the six months ended 30 September 2005
* Distribution up 8.3% on strong property performance
* Overall vacancy rate decreased to 3.8% of gross rentals
* R80 million expansion and upgrading project launched
* Securitisation will impact positively on future results
ABRIDGED GROUP INCOME STATEMENT
Unaudited Reviewed Audited
six six year
months months year
ended ended ended
30 Sept 30 Sept 31 Mar
05 04 05
R000 R000 R000
Property revenue 275 196 169 461 400 954
Straight-line rental
income accrual 13 797 13 396 26 348
Gross property revenue 288 993 182 857 427 302
Property expenses (95 599) (57 499) (137 992)
Net profit from
property operations 193 394 125 358 289 310
Administrative expenses (5 595) (1 829) (9 320)
Investment and other
income 1 313 - 2 438
Operating profit
before finance costs 189 112 123 529 282 428
Finance costs (73 981) (48 489) (110 865)
Net profit before
debenture interest 115 131 75 040 171 563
Debenture interest (94 518) (61 413) (149 582)
Net profit before fair
value changes 20 613 13 627 21 981
Fair value adjustment 161 765 8 113 262 891
Gross change in fair
value of investment
properties 175 562 21 509 289 239
Straight-line rental
income adjustment (13 797) (13 396) (26 348)
Net profit before
taxation 182 378 21 740 284 872
Taxation (28 149) (3 311) (37 416)
Net profit 154 229 18 429 247 456
Attributable to:
Linked unitholders
of the company 143 375 18 429 233 032
Minority Shareholders 10 854 - 14 424
154 229 18 429 247 456
RECONCILIATION OF NET
PROFIT TO HEADLINE EARNINGS
Attributable profit
after taxation 143 375 18 429 233 032
Adjusted for:
Change in fair value of
investment properties (175 562) (21 509) (289 239)
Straight-line rental
accrual net of deferred
taxation 11 766 11 453 22 528
Deferred taxation on
change in fair value
adjustment of investment
properties 22 298 3 226 38 063
Debenture interest net
of minority interest 86 982 61 413 145 721
Minority interest in
revaluation surplus net
of deferred taxation 10 063 - 14 210
Headline earnings of
linked units 98 922 73 012 164 315
Adjusted for straight-
line rental accrual net
of deferred taxation (11 766) (11 453) (22 528)
Earnings available
for distribution 87 156 61 559 141 787
Proposed distribution
for six months ended
30 September 2005 87 162 - -
Total number of linked
units in issue (000) 268 189 202 741 268 189
Weighted average number
of linked units in
issue (000) 268 189 202 741 221 192
Headline earnings
per linked unit (cents) 36.89 36.01 74.29
Distribution per linked
unit (cents) 32.50 30.0 61.5
ABRIDGED GROUP CASH FLOW STATEMENT
Unaudited Reviewed Audited
six six year
months months ended
30 Sept 30 Sept 31 Mar
05 04 05
R000 R000 R000
CASH FLOWS FROM
OPERATING ACTIVITIES (6 018) 113 979 127 066
Cash generated from
operations 152 086 162 468 301 004
Finance costs (73 981) (48 489) (110 865)
Investment and other
income 1 313 - 2 438
Distributions paid (84 480) - (65 399)
Taxation paid (956) - (112)
CASH FLOWS FROM
INVESTING ACTIVITIES (13 043) (1 900 357) (2 231 193)
Acquisition of and
improvements to
investment properties (9 761) (1 899 511) (1 905 276)
Additional business
combination acquired (3 225) - (314 611)
Cash and cash
equivalents acquired - - (11 052)
Acquisition of
furniture, fittings
and computer equipment (57) (846) (254)
CASH FLOWS FROM
FINANCING ACTIVITIES 19 095 1 791 816 2 128 188
Proceeds from the issue
of linked units - 1 004 125 1 329 819
Interest bearing
borrowings raised 19 095 787 691 798 369
Net increase in cash
and cash equivalents 34 5 438 24 061
Cash and cash
equivalents at the
beginning of the
period 24 061 - -
Cash and cash
equivalents at the end
of the period 24 095 5 438 24 061
ABRIDGED GROUP BALANCE SHEET
Unaudited Reviewed Audited
30 Sept 30 Sept 31 Mar
05 04 05
R000 R000 R000
ASSETS
Non-current assets 3 338 154 1 921 849 3 152 674
Investment properties 3 281 105 1 907 624 3 109 579
Investment properties
- at valuation 3 321 250 1 921 021 3 135 927
Straight-line rental
income adjustment (40 145) (13 397) (26 348)
Other non-current
assets 57 049 14 225 43 095
Straight-line rental
income adjustment 40 145 13 397 26 348
Furniture, fittings and
computer equipment 402 828 461
Goodwill 16 502 - 16 286
Current assets 45 931 22 700 46 725
Trade and other
receivables 21 836 17 262 22 664
Cash and cash
equivalents 24 095 5 438 24 061
Total assets 3 384 085 1 944 549 3 199 399
EQUITY AND LIABILITIES
Equity and reserves 422 865 7 556 268 037
Share capital 2 682 2 027 2 682
Share premium 13 009 8 667 13 009
Reserves 349 452 (3 138) 208 121
Minority shareholders"
interest 57 722 - 44 225
Non-current
liabilities 2 813 538 1 805 876 2 766 518
Linked debentures 1 389 486 993 432 1 391 463
Interest bearing
borrowings 1 319 910 787 691 1 300 815
Interest rate swap
liability 22 426 21 442 20 562
Deferred taxation 81 716 3 311 53 678
Current liabilities 147 682 131 117 164 844
Trade and other
payables 44 690 36 117 57 619
Tenant deposits 15 830 9 578 15 760
Vendor loans - 23 883 6 985
Linked unitholders
for distribution 87 162 61 539 84 480
Total equity and
liabilities 3 384 085 1 944 549 3 199 399
ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY
Unaudited Share
six months capital
ended and share
30 Sept premium Reserves
05 R000 R000
Linked units issued in
acquiring properties 20 513 -
Linked units issued in
acquiring MICC 6 306 -
Share issue expenses (11 128) -
Acquisition of business
combination - -
Net income recognised
directly in equity - (20 562)
- Cash flow hedges - (33 391)
- Less: transferred to
income statement - 12 829
Net profit for the year - 233 032
Change in fair value of
investment properties - 289 239
Deferred taxation on
change in fair value
of investment properties - (38 063)
Allocation of revaluation
of properties in respect of
minorities - (14 210)
Minorities" share of post
acquisition distribution - -
Transfer from
pre-acquisition
reserves - (9 084)
Other - (72)
Dividend distribution - -
Deferred taxation differential
on straight-line rental
income - (4 319)
Allocation of deferred
tax on straight-lining of
rental income to minorities - 339
Balance at 1 April 2005 15 691 203 268
Increase in business
combination acquired
previously - -
Net income recognised
directly in equity - (1 864)
- Cash flow hedges - (9 739)
- Less: transferred to income
statement - 7 875
Net profit for the period - 143 375
Change in fair value of
investment properties - 175 562
Deferred taxation on change
in fair value of investment
properties - (22 298)
Deferred taxation on straight-
line rental income - (3 631)
Allocation of revaluation of
properties in respect of
minorities - (10 063)
Minorities" share of post
acquisition distribution - -
Transfer to capital reserve - 5 072
Dividend distribution - -
Balance at 30 September 2005 15 691 346 046
ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY (CONTINUED)
Unaudited
six months
ended Retained Minority
30 Sept earnings interest Total
05 R000 R000 R000
Linked units issued in
acquiring properties - - 20 513
Linked units issued in
acquiring MICC - - 6 306
Share issue expenses - - (11 128)
Acquisition of business
combination - 26 279 26 279
Net income recognised
directly in equity - - (20 562)
- Cash flow hedges - - (33 391)
- Less: transferred
to income statement - - 12 829
Net profit for the year 233 032 14 424 247 456
Change in fair value of
investment properties (289 239) - -
Deferred taxation
on change in fair value
of investment
properties 38 063 - -
Allocation of revaluation
of properties in respect
of minorities 14 210 - -
Minorities" share of post
acquisition distribution - 3 861 3 861
Transfer from
pre-acquisition reserves 9 084 - -
Other - - (72)
Dividend distribution (297) - (297)
Deferred taxation
differential on straight-
line rental income - - (4 319)
Allocation of deferred
tax on straight-lining
of rental income to
minorities - (339) -
Balance at 1 April 2005 4 853 44 225 268 037
Increase in business
combination acquired
previously (2) (1 032) (1 034)
Net income recognised
directly in equity - - (1 864)
- Cash flow hedges - - (9 739)
- Less: transferred
to income statement - - 7 875
Net profit for the
period 143 375 10 854 154 229
Change in fair value of
investment properties (175 562) - -
Deferred taxation on
change in fair value
of investment properties 22 298 - -
Deferred taxation on
straight-line rental
income 3 631 - -
Allocation of revaluation
Of properties in respect
of minorities 10 063 -
Minorities" share of post
acquisition distribution - 3 675 3 675
Transfer to capital
reserve (5 072) - -
Dividend distribution (178) - (178)
Balance at
30 September 2005 3 406 57 722 422 865
COMMENTS
1. BASIS OF PREPARATION
The results for the six 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. 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
were made to the opening balance of reserves, the income statement and the
balance sheet, to account for the amortisation of rental escalations applicable
to lease income. 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 FOR VUKILE
Vukile"s net profit before tax, debenture interest and fair value adjustment
amounted to R115 million for the six months ended 30 September 2005 compared to
R75 million for the six months ended 30 September 2004. MICC contributed R33.9
million to net profit before tax, debenture interest and fair value adjustment
for the six month period ended 30 September 2005. Excluding MICC"s
contribution, the increase on a comparable basis amounted to 8.2%. These results
have been achieved on the back of a strong performance of the underlying
properties and a decrease in the overall vacancy of the portfolio as a
percentage of gross rentals, from 4.1% on 30 September 2004 to 3.8% on 30
September 2005. This also compares well with the vacancy of 4.13% as at 31
March 2005.
The board of Vukile, 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 Mar
05 04 05
Net asset value
attributable to equity
holders of parent per
linked unit 654 cents 494 cents 603 cents
Distribution per
linked unit 32.50 cents 30.0 cents 31.5 cents
Loan to value
ratio 39.7% 41% 41.5%
The net asset value per linked unit increased by 32.5% from R4.94 per linked
unit as at 30 September 2004 to R6.55 per linked unit as at 30 September 2005.
The board has approved an interim distribution of 32.50 cents per linked unit
for the period from 1 April 2005 to 30 September 2005, an increase of 8.3% over
the comparable period.
3. ACQUISITION OF MICC PROPERTY INCOME FUND LIMITED ("MICC")
Vukile owned 75.003% of MICC"s issued linked units at 30 September 2005.
Vukile"s objective of acquiring the balance of the MICC issued linked units, and
thereafter delisting the company, remains unchanged and good progress is being
made in this regard.
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.
4. BORROWINGS
The salient terms of the debt funding are as follows:
STANDARD
Vukile ABSA NEDBANK BANK
Amount (R000) 254 722 254 722 254 722
Additional access
facility (R000) 25 000 25 000 25 000
Date of repayment June June June
2007 2007 2007
Term 3 yrs 3 yrs 3 yrs
(extendable (extendable
to 5 yrs) to 5 yrs)
Variable
interest rate 3 month 3 month 3 month
JIBAR JIBAR JIBAR
plus plus plus
200 bps 200 bps 200 bps
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
STANDARD
MICC NEDBANK BANK
Amount (R000) 251 222 251 223
Date of repayment September September
2008 2006
Term 5 yrs 3 yrs
(extendable
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
JIBAR - Johannesburg Interbank Agreed Rate
NACM - Nominal Annual Compounded Monthly
5. INTEREST RATE SWAPS
As at 30 September 2005, Vukile had entered into interest rate swap agreements
up to a three year period whereby 100% of its JIBAR variable interest rate loans
had been converted to fixed rate debt at an all in average rate of 11.16%
(NACM).
6. POST BALANCE SHEET EVENT: SECURITISATION PROJECT
Vukile launched a R2 billion commercial mortgage backed securitisation (CMBS)
programme, arranged by ABSA, to refinance its existing bank debt on 31 October
2005. The first issuance under the programme comprises five and seven year
floating rate notes for a total of R770 million. The floating rate notes have
been converted into fixed rate exposure for Vukile by way of interest rate
swaps. The securitisation notes have been rated by Moody"s Investor Services.
The overall cost of Vukile"s debt, taking all upfront, ongoing and hedging costs
to implement the programme into account, has reduced from 11.16% NACM previously
to 10% NACM after the implementation of the securitisation programme. Had
Vukile"s securitisation programme been in place for the March 2005 financial
year, earnings and headline earnings per linked unit would have been
approximately 5% higher than reported.
7. PROPERTY PORTFOLIO
The Vukile property portfolio currently comprises 52 properties with a gross
lettable area of 676 961m2. MICC owns 40 properties with a gross lettable area
of 395 322m2.
8. DEVELOPMENTS
Vukile announced on 6 October 2005 that its board of directors had approved
capital expenditure of approximately R80 million on expanding and upgrading its
Phoenix Plaza and Dobsonville shopping centres. The gross lettable area of
Phoenix Plaza is to be increased by approximately 3 500m2 and that of
Dobsonville by nearly 5 000m2. Sanlam Properties (Pty) Ltd has been appointed
as turnkey developer for the projects, which are expected to deliver an initial
yield of approximately 11%. Construction is anticipated to commence in January
2006 and should be completed by August 2006.
9. VALUATION OF PORTFOLIO
The directors have valued the Vukile property portfolio at R2.27 billion as at
30 September 2005. This is R136 million and 6.4% higher than the directors"
valuation as at 31 March 2005.
The MICC portfolio has been valued by the directors of MICC at R1.051 billion as
at 30 September 2005. This is
R49 million and 4.9% higher than the directors" valuation at 31 March 2005.
10. SEGMENTAL ANALYSIS
Industrial Commercial
R000 R000
Group income statement for the
six months ended 30 Sept 05
Rental income 49 026 103 091
Straight line rental income 2 423 5 199
Property expenses (17 208) (35 260)
Net profit from property
operations 34 241 73 030
Group balance sheet at
30 Sept 05
Non-current assets 500 901 1 042 483
Current assets 6 389 7 162
Current liabilities 7 751 11 898
SEGMENTAL ANALYSIS (CONTINUED)
Retail Corporate Total
R000 R000 R000
Group income for the six
months ended 30 Sept 05
Rental income 123 079 - 275 196
Straight line rental
income 6 175 - 13 797
Property expenses (43 131) - (95 599)
Net profit from property
operations 86 123 - 193 394
Group balance sheet at
30 Sept 05
Non-current assets 1 777 866 16 904 3 338 154
Current assets 11 564 20 816 45 931
Current liabilities 31 021 97 012 147 682
Segment assets and liabilities
Segment assets include all operating 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.
11. COMMITMENTS
Guarantees
Guarantees in lieu of municipal service deposits amount to R7.2 million (2004
R6.0m).
Capital Expenditure
Capital expenditure amounting to R80 million has been authorised for
redevelopment and improvements of existing properties. This expenditure will be
funded from existing cash resources and debt facilities.
12. SHARE CAPITAL AND DEBENTURES
Each linked unit comprises 1 share of one cent (and a share premium of nine
cents) linked to one debenture of
490 cents. Interest payable on one debenture is 490 times greater than the
dividend payable per share.
The company had 268 189 490 linked units in issue at 30 September 2005.
13. DIRECTORS
It is with regret that we note Keith Bothongo"s resignation, for personal
reasons, effective 6 October 2005. The board appreciates the excellent
contribution by Keith to the company"s affairs during his period as a director.
14. PROSPECTS
Although the expected benefits from the securitisation of Vukile"s bank debt
will only contribute for 5 months of the current financial year, it will make a
positive contribution to the second half and full year results.
Vukile has delivered growth of 8.3% in distributions for the reporting period.
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, the distribution for the six
month period ending 31 March 2006 will show similar growth to that experienced
for the six months ended 30 September 2005.
15. RELATED PARTY TRANSACTIONS
During the period, the group, 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.
Six months
ended
Nature of 30 Sept 05
Group expense (R000)
Sanlam Asset management fees/
Properties lease rentals/
(Pty) Ltd IT costs 5 418
Gensec Property management/
Property lease commissions and
Services Ltd other fees 8 595
Kuper Legh
Property
Services Property management
Group (Pty) Ltd and other fees 1 503
MCH Properties Fees payable in
(Pty) Ltd respect of
acquisition of MICC 17
At 30 Sept 05
Amounts
owing to
related
Nature parties
Group expense (R000)
Sanlam Properties
(Pty) Ltd Asset management fees
/IT costs 1 121
Gensec Property
Services Limited Lease commissions/
property management fees 4 379
16. PAYMENT OF DEBENTURE INTEREST AND DIVIDEND
Notice is hereby given of a distribution amounting to 32.50 cents per unit, for
the six month period to 30 September 2005. The distribution comprises interest
on debentures of 32.43 cents per unit and a dividend of .07 cents per unit.
Last date to trade cum
distribution Thursday, 15 December 2005
Linked units trade ex
distribution Monday, 19 December 2005
Record date for unitholders
to participate in the
distribution Friday, 23 December 2005
Payment of distribution to
unitholders Tuesday, 27 December 2005
Linked unit certificates may not be dematerialised or re-materialised between
Monday 19 December 2005 and Friday 23 December 2005, both days inclusive.
On behalf of the board
AD Botha G van Zyl
Chairman Chief Executive Officer
Roodepoort 28 November 2005
Sponsors:
Bridge Capital Services (Pty) Limited, Woodmead, Johannesburg
Executive directors:
G van Zyl (CEO), MJ Potts (Financial Director).
Non-executive directors:
AD Botha (Chairman), S Bernic, HSC Bester, PJ Cook, PS Moyanga and M Serebro
Company Secretary:
EL Yates
Registered office:
2nd floor 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.
Website : www.vukileprops.co.za
Date: 28/11/2005 12:25:21 PM Produced by the JSE SENS Department
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