| Thu 23 Feb 2006, 11:49 | | Martprop Property Fund - Interim results |
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Martprop Property Fund - Interim results
Martprop Property Fund
Share code: MTP
ISIN code: ZAE000037271
UNAUDITED INTERIM RESULTS AND DISTRIBUTION DECLARATION
- Acquisitions and developments
- Capital invested to date R210,8 million
- Contracted R265,3 million
- Vacancy factor 1%
- Reduced cost of finance
- Debt to property value ratio 16%
The directors of Marriott Property Fund Managers Limited, management company of
Martprop Property Fund (Martprop) submit their report on the unaudited results
of the Martprop group for the six months ended 31 January 2006.
CONSOLIDATED BALANCE SHEET
31.01.2006 31.01.2005 31.07.2005
(R000) (Unaudited) (Unaudited) (Audited)
Restated Restated
Assets
Non-current assets
Investment property 2 183 474 1 666 096 1 902 184
At valuation 2 255 820 1 723 138 1 960 782
Straight line rental adjustment (72 346) (57 042) (58 598)
Rental receivable straight line
adjustment 59 287 44 050 46 085
Current assets
Trade and other receivables 43 767 32 271 39 914
Rental receivable straight line
adjustment 13 059 12 992 12 513
Cash resources and short-term investments 64 993 21 177 66 529
TOTAL ASSETS 2 364 580 1 776 586 2 067 225
Unitholders" funds and liabilities
Unitholders" funds 1 884 119 1 525 301 1 774 925
Non-current liabilities
Interest bearing borrowings 337 600 127 500 155 000
Interest rate swap derivative 466 2 375 1 602
Deferred capital gains taxation 14 016 3 343 11 763
Current liabilities
Trade and other payables 36 710 24 138 25 738
Capital gains taxation and secondary
taxation on companies 1 021 3 281 3 905
Distributions payable 90 648 90 648 94 292
TOTAL UNITHOLDERS" FUNDS AND LIABILITIES 2 364 580 1 776 586 2 067 225
CONSOLIDATED INCOME STATEMENT
Six months Six months Year
to to to
31.01.2006 31.01.2005 31.07.2005
(R000) Note (Unaudited) (Unaudited) (Audited)
Restated Restated
Rental income 121 172 116 917 239 086
Straight line rental adjustment 13 752 2 889 1 556
Revenue 134 924 119 806 240 642
Net property income 121 162 103 845 205 051
Interest received 2 296 3 898 4 440
Interest paid (10 527) (7 571) (15 805)
Surplus/(deficit) on revaluation
of interest rate swap derivative 1 136 (258) 514
Fund expenses (8 531) (6 915) (9 242)
Deferred taxation on straight line
rental adjustment (178) (194) (57)
Headline earnings 1.1 105 358 92 805 184 901
Capital (deficit)/surplus on
disposal of investment properties (3 192) (848) 1 154
Write-up on revaluation of
investment properties 99 752 109 930 369 534
Revaluations 113 504 112 819 371 090
Straight line rental adjustment
valuation (13 752) (2 889) (1 556)
Taxation on property revaluation (2 076) (1 077) (10 881)
On capital transactions (2 254) (1 271) (10 938)
Straight line rental adjustment 178 194 57
Net profit 199 842 200 810 544 708
Units in issue (000) 725 184 725 184 725 184
Headline earnings per unit (cents)
Prior to straight line rental
adjustment 12,66 12,43 25,29
Straight line rental adjustment 1,87 0,37 0,21
After straight line rental
adjustment 1.1 14,53 12,80 25,50
Net profit per unit (cents) 1.1 27,56 27,69 75,11
(Prior to and after straight line
rental adjustment)
Distributable income per unit
(cents) 1.1 12,50 12,50 25,50
CONSOLIDATED STATEMENT OF CHANGES IN UNITHOLDERS" FUNDS
Six months Six months Year
to to to
31.01.2006 31.01.2005 31.07.2005
(R000) Note (Unaudited) (Unaudited) (Audited)
Restated Restated
Unitholders" funds at beginning of
period 1 774 925 1 395 250 1 395 250
Prior year deferred taxation on
straight line rental adjustment 1.2 - 19 889 19 889
Restated balance at beginning of
period 1 774 925 1 415 139 1 415 139
Capital movements 109 194 110 442 361 820
Write-up on revaluation of
investment properties 99 752 109 930 369 534
Capital (deficit)/surplus on
disposal of investment properties (3 192) (848) 1 154
Taxation on property revaluation (2 076) (1 077) (10 881)
Surplus/(deficit) on revaluation
of
interest rate swap derivative 1 136 (258) 514
Straight line rental adjustment
net of taxation 13 574 2 695 1 499
Maintenance reserves
Net transfers from maintenance
reserves - (280) (2 034)
Revenue movements - - -
Net profit 199 842 200 810 544 708
Transfers to capital (109 194) (110 442) (361 820)
Net transfers from maintenance
reserves - 280 2 034
Available for distribution 90 648 90 648 184 922
Distribution attributable to
unitholders (90 648) (90 648) (184 922)
Unitholders" funds at end of
period 1 884 119 1 525 301 1 774 925
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Six months Six months Year
to to to
31.01.2006 31.01.2005 31.07.2005
(R000) (Unaudited) (Unaudited) (Audited)
Restated Restated
Cash inflows from operating activities
Net profit for the period 199 842 200 810 544 708
Adjustment for:
Interest received (2 296) (3 898) (4 440)
Interest paid 10 527 7 571 15 805
Write-up on revaluation of investment
properties net of taxation (97 676) (108 853) (358 653)
Taxation on straight line rental
adjustment 178 194 57
Capital deficit/(surplus) on disposal
of investment properties 3 192 848 (1 154)
(Surplus)/deficit on revaluation of
interest rate swap derivative (1 136) 258 (514)
Operating profit before working capital
changes 112 631 96 930 195 809
Working capital changes and taxation (9 517) (23 109) (28 614)
Cash generated from operations 103 114 73 821 167 195
Interest received 2 296 3 898 4 440
Interest paid (10 527) (7 571) (15 805)
Distributions paid (94 292) (90 648) (181 107)
Net cash inflow/(outflow) from
operating activities 591 (20 500) (25 277)
Cash outflow from investing activities (184 727) (163 982) (141 353)
Cash inflow from financing activities
Increase in interest bearing borrowings 182 600 127 500 155 000
Net decrease in cash (1 536) (56 982) (11 630)
Cash resources at beginning of period 66 529 78 159 78 159
Cash resources at end of period 64 993 21 177 66 529
OTHER INFORMATION
Six months Six months Year
to to to
31.01.2006 31.01.2005 31.07.2005
(R000) (Unaudited) (Unaudited) (Audited)
Restated Restated
Debt funding facility
Loan facility 750 000 350 000 350 000
Additional debt funding capacity - - 238 000
Less: Facility utilised (337 600) (127 500) (155 000)
Drawdown on facility (355 600) (197 500) (197 500)
Facility repaid, available for
re-advance 18 000 70 000 42 500
Facility available at end of period 412 400 222 500 433 000
Adjusted for future capital commitments
and proceeds on disposal (265 297) (86 937) (348 853)
Capital commitments (265 297) (153 200) (382 968)
Expected proceeds on disposal - 66 263 34 115
Anticipated available loan facility 147 103 135 563 84 147
Capital cash 164 7 161 33 533
Vacancy factor (based on lettable area) 1% 3% 2%
Valuation analysis (cents per unit)
Net asset value (including interim
distribution yet to be paid) 272 223 258
Listed market price 335 288 291
Capitalised interest (R000) 1 810 1 483 311
NOTES TO THE FINANCIAL STATEMENTS
1. This group interim report has been prepared for the first time in accordance
with International Financial Reporting Standards - IFRS 1 and IAS 34: Interim
Financial Reporting. The adoption of IFRS has not resulted in any adjustments to
previously reported results. The policies applied are consistent with those used
in the prior period. The comparative figures have been restated in order to give
effect to the prior year adjustment referred to in note 1.2.
1.1 Headline earnings and distribution attributable to unitholders
31.01.2006 31.01.2005 31.07.2005
(Unaudited) (Unaudited) (Audited)
Restated Restated
R000 CPU* R000 CPU* R000 CPU*
Net profit (earnings) 199 842 27,56 200 810 27,69 544 708 75,11
Adjustments for:
Capital
deficit/(surplus) on
disposal
of investment 3 192 848 (1 154)
properties
Write-up on revaluation
of
investment properties
net of taxation (97 (108 853) (358 653)
676)
Headline earnings 105 358 14,53 92 805 12,80 184 901 25,50
(Surplus)/deficit on
revaluation of interest
rate swap derivative (1 136) 258 (514)
Net transfers from
maintenance reserves - 280 2 034
Adjusted for straight
line rental adjustment
net
of taxation (13 (2 695) (1 499)
574)
Distributable income 90 648 90 648 184 922
Distribution
attributable to 90 648 12,50 90 648 12,50 184 922 25,50
unitholders
*Based on 725 183 772 units in issue throughout all reporting periods.
1.2 Prior year adjustment
In the prior year deferred taxation was provided on the straight line rental
adjustment for properties owned by the Fund. Confirmation that the Fund is
deemed to be a vesting trust for taxation purposes requires that no deferred
taxation should be provided on the straight line rental adjustment for
properties owned by the Fund. The financial statements of the prior period have
been restated to reflect this change. The effect of the restatement on the
financial statements is summarised below:
Six months to Six months to Year to
31.01.2006 31.01.2005 31.07.2005
(R000) (Unaudited) (Unaudited) (Unaudited)
Restated Restated
Unitholders" funds at beginning of
period - 19 899 19 899
Net profit for the period - - 544
- 19 899 20 443
This adjustment has not been audited.
1.3 Primary operational segments for the six months ended 31 January 2006
Business segment (R000) Industrial Office Retail Corporate Group
Income statement
Rental income 79 087 12 177 29 908 - 121 172
Straight line rental
adjustment 2 838 3 989 6 925 - 13 752
Revenue 81 925 16 166 36 833 - 134 924
Net property income 74 460 13 576 33 126 - 121 162
Interest received - - - 2 296 2 296
Interest paid - - - (10 527) (10 527)
Surplus on revaluation
of interest rate swap
derivative - - - 1 136 1 136
Fund expenses - - - (8 531) (8 531)
Deferred taxation on
straight line
rental adjustment 214 27 (419) - (178)
Capital deficit on
disposal of
investment properties (672) (2 470) (50) - (3 192)
Write-up on revaluation
of investment
properties net of 87 295 3 033 7 348 - 97 676
taxation
Net profit 161 297 14 166 40 005 (15 626) 199 842
Balance sheet
Investment property 1 390 643 195 232 597 599 - 2 183 474
At valuation 1 437 240 204 929 613 651 - 2 255 820
Straight line rental
adjustment (46 597) (9 697) (16 052) - (72 346)
Current and other long
term assets 75 100 15 759 30 154 60 093 181 106
Excluding rental
straight line
adjustment 28 503 6 062 14 102 60 093 108 760
Rental straight line
adjustment 46 597 9 697 16 052 - 72 346
Total assets 1 465 743 210 991 627 753 60 093 2 364 580
Interest bearing
borrowings - - - 337 600 337 600
Interest rate swap
derivative - - - 466 466
Current liabilities 5 703 1 633 7 151 22 223 36 710
Taxation 14 333 226 478 - 15 037
Distribution payable - - - 90 648 90 648
Total liabilities 20 036 1 859 7 629 450 937 480 461
COMMENTS
1. Commentary
In line with management"s expectations, the Fund"s property portfolio has shown
sound performance in the first half of the financial year. Buoyed by the much
improved fundamentals in the local property market, vacancies in the portfolio
have declined to 1% of the total lettable area and the industrial portfolio is
currently fully let. Market rentals in both the industrial and office sectors
continue to show growth and this, together with the sustained retail sector
performance, is positive.
Distributable income for the six months to 31 January 2006 amounts to R90,6
million or 12,50 cents per unit. Notwithstanding the steady rental growth from
the balance of the portfolio, the reversion to market of two substantial leases
which had escalated beyond market over the last ten years, has inhibited
earnings growth in Martprop in the current financial year.
The lease over 425 West Street Durban, which still has ten years to run, was
subject to a market review resulting in net property income in the first six
months declining by R3,2 million over the same period last year. This property
is located in a dynamic retail node where trading densities are improving and is
let to a blue-chip national retailer. With escalation and turnover rates in line
with market norms, this investment will show sustained income growth for the
balance of the lease.
The final distribution for this financial year will reflect the improving market
conditions and strengthening rentals and will be approximately 8% higher than
this interim distribution.
2. Funding
Martprop"s loan facility with Nedbank Limited has been re-negotiated and the
Fund now enjoys one of the lowest costs of finance in the sector without the
setup costs and inflexibility of securitised debt. The terms of the R750
million facility, which can be accessed subject only to the prescribed 30%
gearing limit applicable to PUT"s, are at prime less 2,3% for variable rate
funding and at an all-in margin of 1,3% for fixed rate debt.
The revised rates were applicable from 1 November 2005 and, while the Fund"s
limited debt exposure curtailed the positive impact of these lower funding rates
in the first half, unitholders will enjoy the benefits of the lower costs as the
acquisitions and developments come on stream in the second half of 2006.
3. Portfolio activity
During the period under review Martprop concluded the acquisition of six
properties for a total of R158,1 million, details of which are set out below, as
well as the disposal of ten properties for R39,6 million.
Four warehousing properties in Gauteng were acquired in the first half of the
year. Picpack Grindrod have signed a five year lease on a 17 000m2 warehouse in
Jet Park, which was acquired for R35,25 million at a yield of 11,4%. A 9 700m2
warehouse leased to Chemserve was bought for R19,3 million at an initial yield
of 10,25%. An 18 000m2 warehouse leased to a division of Super Group was
purchased for R53,0 million at an initial yield of 9,75% and a 6 500m2 warehouse
leased to Cobra Watertech was acquired for R12,4 million at a yield of 11,5%.
Turner and Townsend House, located in Illovo Boulevard, Johannesburg, was
acquired for R26,8 million at an initial yield of 9,75%.
An office building leased predominantly to the Standard Bank, which is adjacent
Martprop"s Colony Shopping Centre in Hillcrest, KwaZulu Natal, was acquired for
R12,0 million at a yield of 10%. This investment will facilitate the future
extension of the Colony.
Ten properties were sold for a total of R39,6 million. These comprised eight
industrial properties and two office blocks, all of which had been identified
for disposal due to the limitations on future income or capital growth. The
process of re-aligning the Fund"s portfolio has now largely been completed and
it is expected that the sales activity will slow down going into the next
financial year.
The development of Umlazi MegaCity, a 28 000m2 sub-regional shopping centre, in
conjunction with S A Retail Properties Limited is nearing completion. The
centre, which is substantially let to national retailers, is due to open at the
end of March 2006 and will generate an initial yield in the order of 12%. The
total cost of the development is some R160,0 million.
Martprop is also undertaking a warehousing development for the Fuel Group in
Cape Town, which will provide 18 000m2 of distribution space for various
divisions of the tenant. This development will be completed at the end of June
2006 at a cost of R59,0 million and will yield 10,5% on opening.
Extensions to Highland Mews in Witbank are also underway in conjunction with S A
Retail. The new space will accommodate various stores within the Foschini Group
and the centre now boasts all the fashion retailers represented in Witbank. The
total project cost is R41,5 million and will return 10% on completion.
4. Revaluation
The property portfolio was independently valued on a discounted cashflow basis
at R2,26 billion as at 31 January 2006. The directly comparable standing
portfolio increased in value by 24,5% from the same period last year.
The weighted average residual capitalisation rate of the portfolio is 10,4%,
reflecting a forward yield of 10%. The Board anticipates that these values will
show further appreciation in the second half of the year, given the continuing
strength in the direct property market and the current demand for commercial
property as an investment.
5. Prospects
With the base of the rentals in the portfolio now substantially in line with
market and, on the assumption that conditions in the local economy and direct
property market continue, management expects the property portfolio to generate
distribution growth in the 2007 financial year in the order of 8%. Forecasts
contained in this announcement have not been audited.
DISTRIBUTION DECLARATION AND IMPORTANT DATES
Notice is hereby given of the declaration of distribution no. 22 in respect of
the income distribution period 1 August 2005 to 31 January 2006. The
distribution amounts to 12,50 cents per unit.
Last date to trade cum distribution Thursday, 16 March 2006
Units will trade ex-distribution Friday, 17 March 2006
Record date to participate in
the distribution Friday, 24 March 2006
Payment of distribution Monday, 27 March 2006
Unit certificates may not be dematerialised or rematerialised between Friday,
17 March 2006 and Friday, 24 March 2006 both days inclusive.
MARRIOTT PROPERTY SERVICES (PTY) LIMITED
SECRETARIES
23 February 2006
MARRIOTT PROPERTY FUND MANAGERS LTD
Registered office Transfer secretaries Sponsor
Marriott at Kingsmead Computershare Investor Services Exchange Sponsors
2004 (Pty) Limited (Pty) Limited
Kingsmead Office Park 9th Floor, 70 Marshall Street 39 First Avenue
Durban Johannesburg Hyde Park
4001 2001 2196
PO Box 207 PO Box 61051 PO Box 411216
Durban 4000 Marshalltown 2107 Craighall
Tel: (031) 366-1111 Tel: (011) 370-5000 2024
www.martprop.co.za
Date: 23/02/2006 11:49:17 AM Produced by the JSE SENS Department
