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ACP
ACP
Acucap - Audited Results for the year ended 31 March 2006
ACUCAP PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2001/021725/06)
Share code: ACP & ISIN: ZAE000037651
("Acucap" or "the company")
Annual Distribution 12.5%
Final Distribution 14.3%
Property portfolio value from R1.7 billion to R2.4 billion
Net asset value 42% from R15.02 to R21.30
Audited Results for the year ended 31 March 2006
Balance sheet
at 31 March 2006
2006 2005
R"000 R"000
Assets
Property assets 2 369 706 1 670 689
Investment properties 2 303 302 1 623 926
Long term receivable 53 215 43 690
Short term receivable 10 898 3 073
Investment properties and 2 367 415 1 670 689
related receivables
Other property assets 2 291 -
Other non-current assets 94 095 51 805
Loans in respect of unit 93 284 51 462
purchase scheme
Property, plant and equipment 452 343
Deferred tax assets 359 -
Other current assets 18 059 90 953
Trade and other receivables 17 377 16 925
Properties classified as held - 23 250
for sale
Listed investments - 29 055
Cash and cash equivalents 682 21 723
Total assets 2 481 860 1 813 447
Equity and liabilities
Shareholders" interest 775 640 334 906
Share capital and share premium 86 712 66 617
Non-distributable reserve 716 534 297 458
Accumulated loss ( 27 606) ( 29 169)
Non current liabilities 1 615 522 1 336 703
Debentures 685 203 665 124
Financial liabilities 651 936 561 236
Deferred tax liabilities 278 383 110 343
Current liabilities 90 698 141 838
Trade and other payables 17 631 15 309
Financial liabilities 10 000 72 000
Tax payable 2 506 3 083
Debenture interest payable 60 561 51 446
Total equity and liabilities 2 481 860 1 813 447
2006 2005
R"000 R"000
Income statement
for the year ended 31 March 2006
Revenue 213 045 159 407
- Contractual 195 695 152 198
- Straight lining 17 350 7 209
Net operating expenses ( 21 621) ( 24 134)
Profit before fair value 191 424 135 273
adjustments, interest and
taxation
Fair value adjustment to 575 705 252 287
investment properties
Profit before interest and 767 129 387 560
taxation
Interest received 7 542 12 891
Interest paid
- debentures ( 113 807) ( 90 167)
- other ( 65 677) ( 55 860)
Profit before taxation 595 187 254 424
Taxation ( 170 187) ( 72 107)
Profit for the year 425 000 182 317
Reconciliation of headline 2006 2005
profit to net profit
R"000 R"000
Profit for the year 425 000 182 317
Fair value adjustment of ( 575 705) ( 252 287)
investment properties
Profit on disposal of investment ( 1 580) ( 941)
properties
Profit on disposal of listed ( 654) ( 9 415)
investments
Impairment of intangible asset - 15 210
Tax effects 167 278 71 629
Headline earnings - shares 14 339 6 513
Interest paid to debenture 113 807 90 167
holders
Headline earnings - linked units 128 146 96 680
Cents Cents
Headline earnings per share 21.26 12.09
Headline earnings per linked 189.95 179.50
unit
Earnings per share 629.98 338.50
Interest distribution per linked
unit
- interim 79.03 71.48
- final 88.29 77.27
Distribution per linked unit 167.32 148.75
Abridged cash flow statement
for the year ended 31 March 2006
2006 2005
R"000 R"000
Cash flows from operating
activities
Cash generated by operations 169 473 136 840
Income tax paid ( 3 083) ( 439)
Interest received 7 367 11 390
Interest paid ( 170 369) ( 131 130)
Net cash inflow from operating 3 388 16 661
activities
Net cash outflow from investing ( 93 303) ( 439 027)
activities
Net cash inflow from financing 68 874 443 265
activities
Net cash (outflow)/inflow for ( 21 041) 20 899
the year
Cash and cash equivalents at 21 723 824
beginning of year
Cash and cash equivalents at end 682 21 723
of year
Statement of
changes in
equity
for the year
ended 31 March
2006
Share Share Non Accumulated Total
capital premium distributable loss
reserve
R"000 R"000 R"000 R"000 R"000
Balance at 31 50 3 350 93 653 ( 14 916) 82 137
March 2004
Issue of 4 000 4 8 036 - - 8 040
000 shares in
July 2004
Issue of 3 665 4 10 479 - - 10 483
369 shares in
January 2005
Issue of 8 742 9 45 730 - - 45 739
802 shares in
March 2005
Share issue - ( 1 - - ( 1 045)
costs 045)
Profit for the - - - 182 317 182 317
year
Increase in - - 6 370 - 6 370
fair value of
listed
investments
Change in fair - - 865 - 865
value of cash
flow hedge
Transfer to - - 196 570 ( 196 570) -
non-
distributable
reserve
Balance at 31 67 66 550 297 458 ( 29 169) 334 906
March 2005
Issue of 800 1 5 967 - - 5 968
000 shares in
June 2005
Issue of 860 1 10 225 - - 10 226
000 shares in
December 2005
Issue of 350 - 4 630 - - 4 630
000 shares in
March 2006
Share issue - ( 729) - - ( 729)
costs
Profit for the - - - 425 000 425 000
year
Change in fair - - ( 4 361) - ( 4 361)
value of cash
flow hedge
Transfer to - - 423 437 ( 423 437) -
non-
distributable
reserve
Balance at 31 69 86 643 716 534 ( 27 606) 775 640
March 2006
COMMENTS
1. REVIEW OF RESULTS AND OPERATIONS
The financial statements are prepared in accordance with International
Financial Reporting Standards (IFRS), applied consistently with the
prior period, and the requirements of the Companies Act in South
Africa. KPMG Inc. has audited the financial information set out in
this report. Their unqualified audit report is available for
inspection at the company"s registered office.
One of the most notable features of the listed property sector in the
past year has been the very strong distribution growth rates achieved.
The weighted average growth in distributions for funds that reported
in the last 12 months was 10.27%, with 12% marking the threshold for
top quartile performance. These historically high growth rates have
been underpinned by the continued strong performance of the South
African economy, with demand for space across the retail, office and
industrial sectors driving rentals upwards and vacancy levels lower.
The latest IPD vacancy data for listed funds in respect of the year to
December 2005 shows retail vacancy declining from 3.48% to 3.35%,
office vacancy from 9.90% to 6.42% and industrial vacancy from 2.63%
to 1.92%, an indication that many listed funds have enjoyed windfall
gains as a result of vacancy take-up. In addition, the geared funds
have benefited from lower average borrowing costs under the dual
influence of margin compression and the repricing of maturing fixed
rate loans to current market levels.
Strong distribution growth has led to yields on listed property funds
firming more aggressively than the yield on ten-year Government bonds.
In the three year period from December 2002 to December 2005, the long
bond yield declined from 10.55% to 7.43%, while over the same period,
the SA Listed Property Index yield firmed from 13.63% to 7.02%, with
the yield differential between listed property and bonds now
reflecting a discount of 0.41%.
The firming in listed property yields has been accompanied by a
continued decline in direct property capitalisation rates over the
last year, with the result that for the second year in succession,
capital growth at 18.1% has exceeded the income return of 10.3% on all
property surveyed by the IPD South Africa Property Index.
2. DISTRIBUTION
The Board has approved a final distribution of 88.29 cents per linked
unit for the period from 1 October 2005 to 31 March 2006.
Distributions per linked unit for the full year therefore increased by
12.5% over the prior year from 148.75 cents to 167.32 cents. The final
distribution of 88.29 cents per linked unit is 14.3% higher than last
year"s final distribution of 77.27 cents per linked unit. These
results are consistent with the guidance that the company has provided
to the market during the year.
Contribution by sector to the annual distribution is set out in the
table below :
2006 2005
Retail 72% 67%
Offices 20% 24%
Industrial 8% 9%
Net Property 100% 100%
income
3. ACQUISITIONS AND DEVELOPMENTS
3.1 Checkers Hyperama Roodepoort
On 23 November 2005, Acucap reached agreement with Old Mutual
Life Assurance Company (SA) Limited to acquire the above
property, situated on Hendrik Potgieter Road, Roodepoort, for
R54.6 million. Transfer of the property into the name of Acucap
was registered on 25th April 2006. The property is 168 610m2 in
extent, and comprises a Checkers Hyperama and House & Home of 15
400m2, with associated line shops of 10 365m2. The acquisition
price represents a cost of R2 119 per m2 of retail GLA, and even
though the centre is 22% vacant, its initial acquisition yield is
9.25%, with substantial upside. The property is situated in the
growing Hendrik Potgieter retail node, and Acucap is advancing
plans for a redevelopment of the asset that will not only result
in a take-up of the vacant space, but will reconfigure the GLA
resulting in the creation of a more comprehensive retail
offering. The Hyperama continues to trade strongly, and this will
underpin the redevelopment of the property.
3.2 Improvon Industrial JV Midrand
Acucap has adopted a strategy of working with reputable
developers to procure new investment opportunities, and in
pursuit of this strategy, the company entered into an agreement
on 3 November 2005 to acquire an undivided 20% share in a 38
hectare industrial site in Midrand. The site is well situated on
the Ben Schoeman highway, with good access and visibility, and it
will be particularly suitable for large scale distribution users.
The lead party in the joint venture is Improvon, one of Gauteng"s
foremost industrial developers, and it is intended that the site
be developed in four phases, the first of which will commence in
the latter part of 2006. On completion, the property is expected
to have a value of between R700 and R800 million.
3.3 Aon House, Illovo Boulevard
On 10 April 2006, subsequent to Acucap"s year end, an agreement
was concluded to acquire Aon House on Fricker Road, Illovo
Boulevard. This is a high quality single tenant office building,
of a standard consistent with the rest of Acucap"s select office
exposure. The lease with Aon South Africa runs to November 2011,
and the property was acquired for R92.9 million on an initial
yield of 10%.
3.4 Capital commitments
In addition to the above, authorised and contracted capital
commitments amount to R80 million. The addition of a new Game
store and related line shops at Festival Mall accounts for R60
million of this amount, with R13 million relating to the
redevelopment of the Warwick Centre at Claremont, and R7 million
to phase 2 of the Rondebosch Village refurbishment.The average
yield on capital commitments is expected to be approximately 9%
4. BORROWINGS
The group achieved an average borrowing cost of 10.67% (2005: 12.19%)
for the year. At 31 March 2006, 77% (2005: 67%) of borrowings were
subject to fixed interest rates, with a weighted average fixed
interest rate expiry of approximately 2.75 years (2005: 3.6 years).
The group borrowing capacity amounts to R1.3 billion (2005:R916
million), being 55% of the valuation of the properties. Existing group
facilities amount to R1 billion (2005:R532 million), and facilities
utilised at year end amounted to R652 million (2005:R561 million),
reflecting a gearing ratio of 28%.
Amount % of total Rate (nacm) Expiry of fixed
rates
(R facilities
million)
120.0 12.0% 12.01% January 2007
100.0 10.0% 12.40% May 2008
50.0 5.0% 9.89% April 2008
60.0 6.0% 9.61% August 2009
50.0 5.0% 13.57% October 2009
75.0 7.4% 9.86% April 2010
50.0 5.0% 13.20% March 2012
326.0 32.6% Prime less 2.30%
120.0 12.0% 1 month jibar +
1.05%
50.0 5.0% 1 month jibar +
1.40%
1 001.0 100.0%
5. VACANCIES
Vacancies amount to 2.9% of the portfolio by gross rental income, and
2.3% by GLA. None of this vacancy is `hard core" in nature, and most
of the vacancy occurs where Acucap is engaged in redevelopment or
refurbishment activities on specific properties.
`6. LEASE EXPIRY PROFILE
The lease expiry profile reflected below shows an average expiry of 4
years, with more than 35% of all leases expiring in the March 2011
year and beyond.
2007 2008 2009 2010 2011 2012
large national 3.3% 3.5% 5.8% 12.9% 4.7% 21.8%
tenants
other national, 1.4% 2.5% 2.7% 5.4% 1.7% 2.0%
franchisees etc
other 7.1% 8.7% 4.6% 3.9% 3.0% 2.0%
total 11.8% 14.8% 13.1% 22.2% 9.5% 25.8%
7. COST TO INCOME
The company"s cost to income ratio is analysed in the table below :
2006 2005
R"000 R"000
Cost category
Net direct 10 824 8 775
operating costs
Property 4 066 3 626
administration
fees
Asset management 5 994 5 079
costs
Indirect 2 971 1 800
administration
costs
Total costs 23 855 19 280
Contractual 195 695 152 198
rental income
Cost to income 12.2% 12.7%
ratio
The company has once again demonstrated a tight control over its cost
structures, and it has also benefited from the year to March 2006 being its
first full year of in-house asset management. The company will continue to
place emphasis on the efficient management of the business with a view to
further enhancing distribution growth.
8. LIQUIDITY
In the year to 31 March 2006, trade in Acucap linked units has
amounted to 35.7% of the weighted average number of units in issue,
and the monthly distribution of the volume traded is shown in the
accompanying table:
2004 y/e 2005 y/e 2006 y/e
April
1,005,807 1,576,200 2,776,063
May
615,401 1,862,446 654,484
June
2,177,598 2,322,921 1,043,778
July
1,455,272 1,884,005 1,262,328
August
715,801 2,236,413 2,999,009
September
2,090,174 6,817,666 1,754,594
October
2,705,424 1,555,747 3,823,015
November
4,367,479 2,512,322 2,160,213
December
2,662,304 3,945,744 2,198,194
January
442,042 1,603,799 2,632,583
February
802,545 1,005,811 1,734,074
March
1,260,722 4,070,050 1,027,861
Total
20,300,569 31,393,124 24,066,196
Details of the company"s unit holder spread are shown below :
31 March 31 March
2006 2005
Total number of unit holders 1 129 1 113
Number of unit holders owning > 5% of 3 3
units in issue
Number of institutions controlling 10% to 2 3
15% of units in issue
Number of institutions controlling > 15% 1 1
of units in issue
Percentage of units controlled by largest 17.4% 18.1%
institution
Percentage of units held by public 76.3% 74.7%
unitholders
9. PROPERTY PORTFOLIO REVALUATION
Acucap"s entire property portfolio was revalued by its independent
valuers at 31 March 2006, using either the capitalisation of net
income method, or the discounted cash flow method, or a combination of
these where appropriate. The portfolio increased in value from R1.7
billion at the end of March 2005 to R2.4 billion at the end of the
current year. The increase in the portfolio value, together with the
effects of acquisitions made during the year, resulted in a 42% growth
in the NAV per linked unit from R15.02 at 31 March 2005 to R21.30 at
31 March 2006.
The independent valuations were once again subject to a third party
peer review, and the review valuations concurred with those of the
fund"s independent valuers.
10. SEGMENTAL RESULTS
2006 2005
R"000 R"000
Retail
Segment Revenue (external 154 601 106 723
customers)
Net operating expenses (11 611) ( 10 375)
Profit before fair value 142 990 96 348
adjustments
Fair value adjustment of 444 682 200 936
investment properties
Segmental results 587 672 297 284
Offices
Segment Revenue (external 43 052 38 313
customers)
Net operating expenses (2 192) ( 1 404)
Profit before fair value 40 860 36 909
adjustments
Fair value adjustment of 93 245 39 689
investment properties
Segmental results 134 105 76 598
Industrial
Segment Revenue (external 15 392 14 371
customers)
Net operating revenue 493 330
Profit before fair value 15 885 14 701
adjustments
Fair value adjustment of 37 778 11 662
investment properties
Segmental results 53 663 26 363
Reconciliation to net profit
for the year in the income
statement
Revenue 213 045 159 407
Allocated operating expenses (13 310) ( 11 449)
Allocated profit before fair 199 735 147 958
value adjustments
Fair value adjustment of 575 705 252 287
investment properties
Allocated operating profit 775 440 400 245
Unallocated operating (8 311) 2 525
(expenses) / income
Impairment of intangible - ( 15 210)
asset
Profit before interest and 767 129 387 560
taxation
Interest received 7 542 12 891
Interest paid
- debentures (113 807) ( 90 167)
- other (65 677) ( 55 860)
Profit before taxation 595 187 254 424
Taxation (170 187) ( 72 107)
Net profit for the year 425 000 182 317
Capital expenditure on
investment properties
2006 2005
R"000 R"000
Retail
Purchase price 118 500 344 350
Other capital expenses 29 862 61 333
148 362 405 683
Offices
Purchase price - 35 500
Other capital expenses 298 7 405
298 42 905
Industrial
Purchase price - 46 000
Other capital expenses 56 254
56 46 254
Total
Purchase price 118 500 425 850
Other capital expenses 30 216 68 992
148 716 494 842
11. PROSPECTS
Acucap has maintained its focus on building a quality portfolio capable of
delivering sustainable growth in distributions per unit. This purpose is
underpinned by a transparent and cost efficient structure, and by a strong
alignment of interests between management and unit holders, with management
owning 8.6% of the units in issue at year end.
The South African economic outlook remains positive for property, with
stable interest rates, CPIX expected to remain within the 3% to 6% target
range, and Government showing a strong commitment to economic growth.
Under these circumstances, the board expects Acucap to show continued
growth in distributions in the year ahead.
12. PAYMENT OF DEBENTURE INTEREST
Notice is hereby given that a final distribution number 10 of 88,29 (eighty
eight comma two nine) cents per linked unit has been approved in respect of
the six month period ended 31 March 2006. The last date to trade the linked
units cum distribution is Friday, 2 June 2006 and the record date will be
Friday, 9 June 2006. The linked units will start trading ex-distribution
from Monday 5 June 2006. Distributions will be made to unit holders on
Monday 12 June 2006.
Linked unit certificates may not be dematerialised or rematerialised
between Monday 5 June and Friday 9 June 2006 both days inclusive.
On behalf of the Board
BS KANTOR PA THEODOSIOU
(Chairman) (Managing Director)
19 May 2006
Registered Office
Suite A11 Westlake Square
Westlake Drive
Westlake
CAPE TOWN
Transfer secretaries:
Computershare Investor Services 2004 (Proprietary) Limited
70 Marshall Street
JOHANNESBURG
http://www.acucap.co.za
info@acucap.co.za
Share Code: ACP
ISIN : ZAE 000037651
Directors: Prof BS Kantor (Chairman), PA Theodosiou* (Managing Director),
FM Berkeley, D de Beer, RC Frolich, MJ Lindeque, JH Rens*, B Stevens, NDC
Whale, C B Hallowes (Alternate to D de Beer)
* Executive
Date: 19/05/2006 07:00:21 AM Produced by the JSE SENS Department
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