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SPE
SPE
Spearhead reviewed interim results for the six months ended 31 December 2005
SPEARHEAD PROPERTY HOLDINGS LIMITED
Registration number: 1996/005827/06
Share code: SPE
ISIN: ZAE000019162
Spearhead reviewed interim results for the six months ended 31 December 2005
* 13.7% growth in distributions per unit
* 30.4% growth in revenue
* Market Capitalisation exceeds R1 billion for the first time in January 2006
* 13% compound average annual growth in distributions per unit since listing
in 1999
Comments
Financial review
This half-year has been another good period for Spearhead where unitholders
have enjoyed exceptional capital growth and continued increases in their
distributions.
A combination of ongoing finance cost savings as well as effective cost control
over operating expenditures and better operating cost recoveries, resulted in
the 13.7% increase in distributions over the equivalent period of last year.
This continues Spearhead"s fine tradition of double-digit distribution growth
that has been in evidence since its listing in 1999 and that has made it one of
South Africa"s top performing listed property companies of the new millennium.
Reliance on trading profits from developments has been reduced substantially
with less than 10% of revenues from such sources. High-quality annuity income
streams are now driving Spearhead"s growth into the future.
Revenue increased by 30.4% and was achieved predominantly through the
acquisition of new investment properties during the period and this will
increase substantially when the Pier Place purchase and some new investment
properties under development are absorbed into the portfolio.
Ongoing top performance
Spearhead was again ranked amongst the top-performing listed real estate
companies on the JSE Limited for the calendar year 2005, based on total returns
to linked unitholders, coming in 6 out of 37. This follows on its top place
finish in 2004. Measured over a five-year period, Spearhead ranks in the top
two.
This recognition is particularly gratifying given the competition from larger
and longer-established companies in the sector. The continued specialisation
into the lucrative Cape Town market has paid dividends with Spearhead becoming
a dominant regional force.
Following some vendor linked-unit placements in early January 2006, the number
of issued units has now increased to 36.2m units and has resulted in the market
capitalisation of Spearhead exceeding R1 billion for the first time.
It is also important to note that Spearhead was the first and remains the only
listed property fund to comply with the minimum 25% equity ownership of the
proposed Property Charter.
Property portfolio activity
Spearhead"s portfolio was enhanced by the following acquisitions, all in the
greater Cape Town area:
* Pier Place in Cape Town"s CBD, comprising 13 000 square metres of offices
and 1 700 square metres of retail space, housing Vodacom in 80% of the area
on a long-term lease. It was purchased for R137m on a 10.8% yield. Transfer
was effected in January 2006.
* Sterling House - This Edward Street, Tygervalley property was acquired on a
10% forward yield. It comprises total lettable area of 3 500 square metres
and is contiguous to a number of other buildings owned by Spearhead on this
high-profile strip. Transfer was effected in January 2006.
* HK Manufacturing - This R11m industrial property on the Ring Road in Parow
Industria has been transferred into the portfolio. Total area is 9 350
square metres of which half is currently vacant. It should offer
approximately a 12% yield on successful letting of the vacancy.
* Ottery Land - 3.3 hectares of land in front of our Ottery Hyper Centre has
been acquired at a price of R250 per square metre, to develop a 7 000 square
metre retail value centre.
Properties acquired but not yet transferred include:
* The Forum - Adjacent to Sterling Place on Edward Street. It is a single
tenant, five-year triple net lease offering a forward yield of 9.7% with a
cost of R6.5m.
* Berg River Textiles, Paarl - This deal has been finalised to acquire the
35 000 square metre, vacant Berg River textiles factory complex in Paarl
from Seardel for R18m. The property will be redeveloped as a high-security
industrial park.
* Goede Hoop Park, Bellville - This R12.4m property houses the Department of
Water Affairs on a five-year lease. The property is adjacent to our Parc Du
Bel property which houses the same tenant.
* Broadlands Stud farm, Somerset West - This well-known farm was acquired for
R12m in joint venture with Kine Homes. The property will be subdivided into
an equestrian estate and plots sold off.
* Bonwit Building, Salt River - This 16 000 square metre landmark was
purchased for R33m and will be redeveloped for commercial and office use.
The portfolio ended 2005 with a 5% vacancy, slightly up on June 2005. This was
as a result of the purchase of some properties with existing vacancies, however
with the rising rental market, the vacancy presents an opportunity for
enhancing income growth.
Development activity
Spearhead is continuing with its programme of constructing and holding, as
investment properties, a number of retail, office, and industrial buildings and
complexes.
The main developments in this category are:
* Convention Centre Office Tower, an A-grade office tower adjacent to Cape
Town"s Convention Centre. Work has commenced on the 17 000 square metre,
R200m landmark. Expected completion is mid-2007.
* Sable Square Outlets Shopping Village, opposite Century City, Milnerton: a
25 000 square metre complex on a prime corner site. Completion of Phase 1 is
expected in September this year.
* Wembley Square Commercial: a 12 000 square metre, R95m complex in Gardens
providing shops, offices and a gym. The tenants include Virgin Active and
Johnnic Group. The development has been completed and is fully let offering
a 10.2% starting yield.
* Old Oak Shopping Centre, in Tygervalley: a redevelopment of 4 000 square
metres of shops, including a new- generation Spar store has been completed
and is trading successfully.
* Ottery Hypermarket redevelopment, providing additional retail space of 3 000
square metres has been completed.
* Blue Downs Shopping Centre, in an historically disadvantaged suburb of Cape
Town, comprising 8 500 square metres of retail space, with Shoprite and
Sasol as anchor tenants has been completed and is trading successfully
providing a 12.5% starting yield.
* Knowledge Park, in Century City: a R100m extension of 11 000 square metres
of office space to an existing complex. Completion of Phase 2 is expected in
December this year.
Residential developments
Wembley Square Residential, a handsome addition to the skyline in Gardens, has
been completed successfully together with joint venture partner, Faircape.
The Oasis, a luxury Retirement Resort complex on 5 hectares in Century City has
begun construction in joint venture with Harries Projects. This complex will
eventually have seven blocks and should accumulate sales in excess of R1
billion over the next four years.
Prospects
Spearhead is expecting another good year in line with its historical track
record.
The existing portfolio of properties and new developments should contribute
handsomely to the bottom line over the next few years and subject to the GDP
growth continuing and interest rates staying at current levels, double-digit
growth in distributions is anticipated.
Distribution declaration no. 13
Notice is hereby given of the declaration of distribution no. 13 in respect of
the six months to 31 December 2005, amounting to 108 cents per linked unit
(2004: 95 cents per unit).
The last date to trade cum distribution is Friday, 10 March 2006
Linked units will commence trading
ex-distribution on Monday, 13 March 2006
Record date is Friday, 17 March 2006
Payment of distributions takes place on Monday, 20 March 2006
Linked unit certificates may not be
dematerialised or Monday, 13 March 2006, to
rematerialised from Friday, 17 March 2006,
both days inclusive.
On behalf of the Board
M KAPLAN M N FLAX Sponsor: BRIDGE CAPITAL
Chairman Chief Executive Officer
Cape Town
21 February 2006
View the results at: www.spearheadprop.com
Abridged consolidated income statement
6 months ended 6 months ended Year ended
31 Dec 2005 31 Dec 2004 30 June 2005
% Reviewed Reviewed Audited
Change R000"s R000"s R000"s
REVENUE 30.4 72 984 55 963 112 319
Amortised
lease
escalations 4 764 5 323 8 877
Operating
income 43 121 39 165 67 167
Profit on sale
of listed
property
securities 1 780 3 611 6 155
Fair value
adjustments
of listed
property
securities 548 - 4 077
Profit on
sale of
investment
properties 613 135 135
50 826 48 234 86 411
Less:
Depreciation (81) (72) (269)
Goodwill
amortised - (22) -
Interest rate
swaps -
marked to
market
profit/(loss) 1 678 (3 556) (6 214)
Interest paid (17 106) (13 385) (28 072)
Profit before
debenture
interest 35 317 31 199 51 856
Debenture
interest 29 750 19 834 44 280
Profit after
debenture
interest 5 567 11 365 7 576
Revaluation of
investment
properties - - 153 316
Profit before
taxation 5 567 11 365 160 892
Income
taxation
expense 2 365 3 456 19 476
Net profit
for the
period 3 202 7 909 141 416
Linked units
in issue
(weighted
average) 27 433 581 20 352 932 22 093 501
Basic
earnings per
linked unit
(cents) 120.11 136.30 840.50
Headline
earnings
per linked
unit (cents) 118.73 135.85 242.94
Distribution
per linked unit
(cents) 13.7 108.00 95.00 200.00
Abridged consolidated cash flow statement
6 months ended 6 months ended Year ended
31 Dec 2005 31 Dec 2004 30 June 2005
Reviewed Reviewed Audited
R000"s R000"s R000"s
Cash generated from
operations
before working capital
changes 14 023 21 621 65 310
Working capital changes 42 325 (2 593) 557
Net finance costs (11 462) (7 430) (49 831)
Cash flows from
operating activities 44 886 11 598 16 036
Cash flows to investing
activities (106 508) (92 533) (247 701)
Cash flows from
financing activities 92 407 77 805 229 314
Net increase/(decrease)
in cash and cash
equivalents 30 785 (3 130) (2 351)
Cash and cash
equivalents at beginning
of period 652 3 003 3 003
Cash and cash
equivalents at end of
period 31 437 (127) 652
Abridged consolidated balance sheet
As at As at As at
31 Dec 2005 31 Dec 2004 30 June 2005
Reviewed Reviewed Audited
R000"s R000"s R000"s
Non-current assets 1 025 744 592 875 936 555
Investment properties 825 423 516 410 807 698
Property, plant and equipment 109 255 25 641 42 302
Goodwill - 65 -
Loans receivable 45 410 13 437 45 660
Straight-line rental income
accrual 43 826 35 509 39 062
Tenant installations 1 830 1 813 1 833
Current assets 68 480 62 233 60 476
Trade and other receivables 18 819 11 831 12 663
Tenant installations 1 714 1 556 1 692
Short-term portion of loans
receivable 2 998 16 850 10 760
Listed property securities
held for trading 12 223 31 479 34 318
Cash and cash equivalents 32 726 517 1 043
Total assets 1 094 224 655 108 997 031
Equity and liabilities
Equity and non-current
liabilities 1 035 785 616 388 924 566
Capital and reserves 307 836 123 278 297 809
Debentures 275 125 211 539 269 417
Linked unitholders" interest 582 961 334 817 567 226
Interest-bearing borrowings 402 754 253 678 307 723
Interest rate swap derivative 7 265 6 285 8 943
Deferred tax 42 805 21 608 40 674
Current liabilities 58 439 38 720 72 465
Trade and other payables 16 449 13 245 21 769
Provisions - - 2 610
Current portion of long-term
borrowings 9 411 2 859 21 957
Bank overdraft 1 289 644 391
Receiver of revenue 312 1 447 80
Unitholders for distribution 30 978 20 525 25 658
Total equity and liabilities 1 094 224 655 108 997 031
Net asset value per linked
unit (rands) 20.77 14.36 20.63
Consolidated statement of changes in equity
6 months ended 6 months ended Year ended
31 Dec 2005 31 Dec 2004 30 June 2005
Reviewed Reviewed Audited
R000"s R000"s R000"s
Capital and reserves
Unitholders" interest as
previously stated 297 809 80 899 80 899
Adjustment in respect of
amortised lease
escalations - 21 130 21 130
Unitholders" interest at
beginning of
period restated 297 809 102 029 102 029
Net profit for the period 3 202 7 909 141 416
Issue of shares 6 100 11 512 47 976
Share issue costs (263) - (731)
Shares disposed
of/(acquired by)
subsidiary 251 - (2 674)
Revaluation of property,
plant and equipment - - 9 912
Recoupment profit/(loss)
of discount
on debentures 737 1 828 (119)
Unitholders" interest at
end of period 307 836 123 278 297 809
Reconciliation of basic earnings to headline earnings per linked unit
Profit before Income Net profit for
taxation Taxation the period
R000"s R000"s R000"s
Earnings for the period 5 567 (2 365) 3 202
Debenture interest 29 750 - 29 750
35 317 (2 365) 32 952
Basic earnings per linked
unit (cents) 128.74 120.11
Adjusted for:
Profit on disposal of
investment properties (613) 234 (379)
Headline earnings for the
period 34 704 (2 131) 32 573
Weighted average linked units
in issue 27 433 581 27 433 581
Headline earnings per linked
unit (cents) 126.50 118.73
Abridged segmental information
Industrial Retail Office Corporate Total
R000"s R000"s R000"s R000"s R000"s
Revenue -
contractual basis
and development
income 12 667 26 105 22 442 7 006 68 220
Amortised lease
escalations 4 764
72 984
Segmental result 6 859 15 530 14 612 (33 799) 3 202
Notes
1. Accounting Policies
The financial statements have been prepared in accordance with International
Financial Reporting Standards. The principal accounting policies adopted in the
preparation of these financial statements are consistent with those of the
prior year.
These interim results have been reviewed by the company"s auditors, PKF
(Newlands) Inc, and their unqualified report is available for inspection at the
company"s registered office.
6 months ended 6 months ended Year ended
31 Dec 2005 31 Dec 2004 30 Jun 2005
Reviewed Reviewed Audited
R000"s R000"s R000"s
2. Revenue
Rentals and recoveries 61 080 43 140 94 358
Development income 7 140 7 500 9 084
Amortised lease escalation 4 764 5 323 8 877
72 984 55 963 112 319
3. Investment properties and property, plant and equipment
Investment properties and property, plant and equipment have not been revalued
for the interim financial periods.
4. Comparative figures
Lease escalation receivables have been reclassified as non-current assets.
SPEARHEAD PROPERTY HOLDINGS LIMITED:
Registered Office: 3rd Floor, The Spearhead, 42 Hans Strijdom Avenue,
Foreshore, Cape Town, 8001
Registration number: 1996/005827/06 Share code: SPE & ISIN: ZAE000019162
Directors: M Kaplan* (Chairman), M N Flax (Chief Executive Officer), J E Allie,
D M Wilder, A Groll*, L Hoffman, K L Manala*, A Varachhia*, H Schreuders*,
F van Hoogstraten*, D B Fabian* *Non-executive
Transfer Secretary: Computershare Investor Services 2004 (Pty) Limited,
Ground Floor, 70 Marshall Street, Johannesburg, 2001 PO Box 61051,
Marshalltown, 2107
Date: 21/02/2006 03:26:25 PM Produced by the JSE SENS Department
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