| Tue 30 May 2006, 10:00 | | Metboard - Audited Results for the year |
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MPL
MPL
Metboard - Audited Results for the year ended 31 March 2006 and distribution
declaration
Metboard Properties Limited
Registration no: 1998/005425/06
JSE share code: MPL
ISIN code: ZAE000014874
("Metboard" or "the company")
AUDITED RESULTS
for the year ended 31 March 2006 and distribution declaration
- final distribution increased by 10,8% to 24,0 cents
- annual distribution of 43,8 cents up 9,0%
- 97,9% total return to unitholders for the year
- property assets of R2,177 billion
- reduced vacancy levels of 1,5%
INCOME STATEMENT
Audited Audited
31 March 31 March
2006 2005
R"000 R"000
Revenue 274 965 240 980
Contractual rental income 262 054 233 016
Straight line lease accrual 12 911 7 964
Property expenses (43 596) (41 910)
Net property income 231 369 199 070
Fund expenses (16 958) (9 845)
Net operating income before 214 411 189 225
interest
Interest received 1 714 9 852
Interest paid (81 580) (80 381)
Net operating income after 134 545 118 696
interest
Profit/(loss) on disposal of 691 (1 568)
investment properties
Fair value adjustments 276 421 119 954
- investment properties 307 897 149 328
- straight line lease accrual (12 911) (7 964)
- interest bearing debt (18 565) (17 024)
- debenture capital (4 386)
Net profit before debenture 411 657 237 082
interest and taxation
Debenture interest paid (122 876) (110 891)
Net profit before taxation 288 781 126 191
Taxation (45 419) (22 879)
- Current (74) (69)
- Deferred (45 345) (22 810)
Net profit for the year 243 362 103 312
Reconciliation of earnings to
headline earnings and
distributable earnings
Net profit for the year 243 362 103 312
Headline earnings adjustments (254 142) (119 198)
- Fair value adjustment - (307 897) (149 328)
investment properties
- Fair value adjustment - 12 911 7 964
straight line lease accrual
- Deferred taxation on fair value 42 773 20 598
adjustments
- Deferred taxation on CGT losses (1 238)
not recognised in previous years
- (Profit)/loss on disposal of (691) 1 568
properties
Headline loss attributable to (10 780) (15 886)
shareholders
Debenture interest 122 876 110 891
Headline earnings attributable to 112 096 95 005
linked unitholders
Distributable earnings adjustments 10 907 15 999
- Fair value adjustment - 18 565 17 024
interest bearing debt
- Fair value adjustment - 4 386
debenture capital
- Straight line lease accrual (9 167) (5 654)
(net of deferred taxation)
- Interest and penalties on VAT 958
dispute
- Net effect of capitalisation of 551 243
leasehold properties
Distributable earnings 123 003 111 004
Weighted average number of linked 280 229 118 259 915 375
units in issue
Distribution per linked unit 43,80 40,17
(cents)
Earnings per share (cents) 86,84 39,75
Earnings per linked unit (cents) 130,69 82,41
Headline earnings per linked unit 40,00 36,55
(cents)
Distributable earnings per linked 43,89 42,71
unit (cents)
BALANCE SHEET
Audited Audited
31 March 31 March
2006 2005
R"000 R"000
Assets
Investment properties 2 177 065 1 847 959
Investment properties for 2 120 841 1 804 646
accounting purposes
Straight line lease accrual 56 224 43 313
Current assets 38 596 39 290
Total assets 2 215 661 1 887 249
Equity and liabilities
Linked unitholders" interest 1 234 430 986 031
Shareholders" equity 391 971 147 012
Non-current liabilities - 842 459 839 019
debentures
Non-current liabilities 881 520 784 467
Interest bearing debt 782 064 733 033
Other non-current liabilities 99 456 51 434
Current liabilities 99 711 116 751
Total equity and liabilities 2 215 661 1 887 249
Number of linked units in issue 280 819 801 279 672 996
Net asset value per linked unit 440 353
(cents)
STATEMENT OF CHANGES IN EQUITY
Non
Share Share distributable Retained
capital premium reserves income Total
R"000 R"000 R"000 R"000 R"000
Balance at 1 April
2004
As previously 2 291 570 54 368 37 57 266
reported
Adjustments (13 393) (1 587) (14 980)
- straight line (5 126) (5 126)
lease accrual
- capitalisation (8 267) (1 587) (9 854)
of leasehold
properties
Restated balance at 2 291 570 40 975 (1 550) 42 286
1 April 2004
Shares issued 506 1 019 1 525
Net profit for the 103 312 103 312
year
Transfer of fair 105 009 (105
value adjustments 009)
Transfer of loss on (1 568) 1 568
disposal
Dividends (111) (111)
Balance at 1 April 2 797 1 589 144 416 (1 790) 147 012
2005
Shares issued 11 1 709 1 720
Net profit for the 243 362 243 362
year
Transfer of fair 244 052 (244
value adjustments 052)
Transfer of profit 691 (691)
on disposal
Dividends (123) (123)
Balance at 31 March 2 808 3 298 389 159 (3 294) 391 971
2006
ABRIDGED CASH FLOW STATEMENT
Audited Audited
31 March 31 March
2006 2005
R"000 R"000
Cash generated by operations 203 330 191 547
Net financing costs (79 866) (70 529)
Taxation paid (93) (28)
Distributions to linked (116 206) (98 506)
unitholders
Cash flows from operating 7 165 22 484
activities
Cash flows from investing (20 518) (375 777)
activities
Cash flows from financing 3 302 340 597
activities
Net decrease in cash and cash (10 051) (12 696)
equivalents
Cash and cash equivalents at 25 135 37 831
beginning of the year
Cash and cash equivalents at end 15 084 25 135
of the year
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The annual financial statements are prepared in accordance with International
Financial Reporting Standards (IFRS) and the requirements of the South African
Companies Act. These results have been audited by PKF (Jhb) Inc. and their
unqualified audit opinion is available for inspection at the company"s
registered office.
In order to comply with the international interpretation of IAS17 - Leases,
rental income from leases with escalation clauses is brought into account on a
smoothed, straight line basis over the period of the relevant leases. To avoid
double counting, the fair value adjustment to investment properties has been
reduced by the straight line lease accrual. Further, the company has adopted the
classification alternative offered in IAS40 - Investment Property in respect of
long-term operating leases of property. In terms of this statement, the property
interests held under the leases have been classified and accounted for as
investment properties. The comparative figures have been restated accordingly.
All other accounting policies used are consistent with those applied in the
annual financial statements for the year ended 31 March 2005.
The company"s directors believe that accounting for lease income on a straight
line basis is misleading and does not fairly represent the results of the
operations of the company. The directors emphasise that the "straight line lease
accrual" revenue reflected in the income statement has not been earned by the
company and is not due to the company.
The changes referred to above have no effect on the company"s distributions or
distributable earnings, either in the current period or in future periods. The
effect on the prior year earnings, headline earnings and net asset value per
linked unit is as follows:
31 March 2005
Earnings per linked unit (cents) - as 83,00
previously reported
Prior year adjustment - straight line lease (0,44)
accrual
Prior year adjustment - capitalisation of (0,15)
leasehold properties
Earnings per linked unit (cents) - restated 82,41
Headline earnings per linked unit (cents) - as 34,47
previously reported
Prior year adjustment - straight line lease 2,18
accrual
Prior year adjustment - capitalisation of (0,10)
leasehold properties
Headline earnings per linked unit (cents) - 36,55
restated
Net asset value per linked unit (cents) - as 358
previously reported
Prior year adjustment - straight line lease (2)
accrual
Prior year adjustment - capitalisation of (3)
leasehold properties
Net asset value per linked unit (cents) - 353
restated
FINANCIAL RESULTS OF THE COMPANY
The year under review has seen solid growth in returns to Metboard linked
unitholders. The final distribution increased by 10,8% to 24,0 cents per linked
unit. Distributable earnings increased by 10,8% to R123,0 million from R111,0
million in 2005.
Revenue and net property income, before accounting for the straight line lease
accrual, increased by 12,5% and 14,3% respectively over the comparative period.
This is mainly as a result of property acquisitions, the disposal of
underperforming properties, a reduction in vacancies and normal rental
escalations.
The increase in fund expenses was largely due to the increase in asset
management fees which is a function of the increased market capitalisation of
the company, VAT disallowances (see note below) and transaction costs in respect
of the offer made by Growthpoint Properties Limited ("Growthpoint"). Due to the
limited number of linked units issued during the year, antecedent interest
received has decreased significantly.
The value of investment properties increased by R307,9 million based on the
discounted cash flow valuation performed on the entire portfolio as at 31 March
2006. This revaluation of 16,5% is a result of the improved yields that
industrial properties are currently trading at. In accordance with IAS39, the
company revalues the interest bearing debt at each reporting period. The mark to
market fair value adjustment as at 31 March 2006 resulted in a charge to the
income statement of R18,6 million. As the fair value adjustments on investment
properties and interest bearing debt are unrealised, they have no impact on
Metboard"s distributable income.
DISTRIBUTION
The final distribution per linked unit for the six months ended 31 March 2006
increased by 10,8% to 24,0 cents compared to a final distribution of 21,67 for
the comparable period. The total distribution of 43,8 cents for the year ended
31 March 2006 represents an increase of 9% compared to the total distribution of
40,17 cents for the year ended 31 March 2005.
INVESTMENT PROPERTIES
As at 31 March 2006, the portfolio consisted of 164 properties with a carrying
value of R2,177 billion. During the year, the company disposed of 17 non-core,
underperforming properties for R72,7 million. The company acquired five
properties at a cost of R63,1 million during the year.
Metboard"s properties have a gross lettable area of 1 420 592m2. Vacancies have
reduced from 35 304m2 at 31 March 2005 to 21 619m2 at 31 March 2006. Vacancies
account for 1,5% of gross lettable area. Vacant space for the year to 31 March
2006 is reconciled as follows:
% 2006 % 2005
vacancy m2 vacancy m2
Vacant space at beginning of 2,4 35 304 5 65 915
year
Leases expired in the year 294 807 395 649
Renewals during the year (242 000) (323 283)
New lettings during the year (56 880) (94 768)
Vacancies in buildings on 339 1 290
acquisition
Vacancies in buildings sold (9 951) (9 499)
Vacant space at end of year 1,5 21 619 2,4 35 304
The renewal rate for expiring leases was 82,1% (2005: 81,7%) for the year under
review.
An ongoing capital expenditure programme is in place to ensure that the property
portfolio remains well maintained and in good lettable condition. During the
year, R30,1 million was spent on capital improvements and an amount of R43,3
million has been budgeted for improvements during the next financial year.
At 31 March 2006, the property portfolio can be analysed as follows:
BUILDING TYPE BY VALUE
Manufacturing (13%)
Industrial parks/mini units (24%)
Light industrial (14%)
Retail/motor warehouses (8%)
Warehousing (41%)
GEOGRAPHICAL SPREAD BY VALUE
Gauteng other (43%)
Greater Johannesburg (20%)
KwaZulu-Natal (13%)
Western Cape (22%)
Other (2%)
BORROWINGS AND CASH RESOURCES
At 31 March 2006, total borrowings amounted to R782,1 million. The nominal value
of the borrowings amounted to R728,2 million and the mark to market adjustment
of the fixed debt had a carrying value of R53,9 million at 31 March 2006. The
weighted average cost of finance amounts to 10,9% (2005: 11,9%). Borrowings
represent 35,9% of the value of the property portfolio and 33,5% if the mark to
market adjustment is ignored. The interest rates have been fixed in respect of
84,0% of the borrowings for periods ranging from two to six years.
SHARE AND DEBENTURE CAPITAL
During the year, Metboard issued 1 146 805 linked units as part settlement on
the acquisition of the Foreshore property acquired. The balance of the purchase
consideration was settled in cash.
VALUE-ADDED TAX ("VAT")
The company has lodged an appeal against the disallowance by SARS of the input
VAT on expenses relating to transaction costs on acquisitions and corporate
activities. Metboard has agreed with a request from SARS to hold the matter in
abeyance until the hearing of a similar matter in the Tax Court later in the
year. The disputed amount is not considered material and has been fully provided
for in the financial results for the year.
METBOARD LINKED UNIT INVESTMENT RETURN AND TRADEABILITY
Metboard"s linked units closed at a record high of 710 cents on 31 March 2006,
an increase of 86,4% on the 381 cents closing price at the end of the previous
year. The linked units achieved a remarkable capital and income return of 97,9%
for the year ended 31 March 2006.
Metboard"s linked units traded actively on the JSE Limited ("JSE"). A total of
177,7 million units traded for R908,5 million during the year, equating to 63,4%
of the weighted average number of linked units in issue.
OFFER BY GROWTHPOINT
The Growthpoint offer affords Metboard unitholders substantial benefits without
the dilution of earnings. The overwhelming majority of Metboard"s unitholders,
excluding Growthpoint, present and voting at the scheme meeting held on 24 April
2006 accepted the offer. Subject to the requisite Competition Authorities
approval being obtained, it is anticipated that the scheme will be implemented
in August 2006, effective 30 June 2006.
PROSPECTS
Metboard has delivered growth of 9,0% in annual distributions for the reporting
period. Due to the implementation of the scheme of arrangement with Growthpoint,
Metboard unitholders can expect a special interim distribution for the quarter
ended 30 June 2006. It is envisaged that this special distribution will be the
last distribution by Metboard as a JSE listed company and will be paid to
unitholders before the implementation of the scheme in August 2006.
DECLARATION OF DIVIDEND AND INTEREST PAYMENT
Notice is hereby given of the final dividend declaration number 19 of 0,024
cents per share and debenture interest payment number 119 of 23,976 cents per
debenture for the period 1 October 2005 to 31 March 2006 ("the final
distribution").
The final distribution of 24,0 cents per linked unit will be payable to Metboard
linked unitholders in accordance with the abbreviated timetable set out below:
2006
Last date to trade "cum" the final distribution Thursday, 15 June
Linked units commence trading "ex" the final Monday, 19 June
distribution
Record date to participate in the final distribution Friday, 23 June
Payment of the dividend and debenture interest Monday, 26 June
No dematerialisation or rematerialisation of linked unit certificates may take
place between Monday, 19 June 2006 and Friday, 23 June 2006, both days
inclusive.
By order of the board
R Krabbenhoft
Secretary
30 May 2006
Directors
D Kuper (Chairman), EK de Klerk*, NT Govender*, F N Haslett, S Hackner, HS
Herman, SR Leon, GZ Liebenberg, S Maitisa, HSP Mashaba, LN Sasse
(*Executive director)
Transfer secretaries
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107
Sponsor
Investec Bank Limited
Managed by
Investec Property Group
Investec Bank Limited
Registration No: 1969/004763.06
100 Grayston Drive, Sandown, Sandton, 2146
PO Box 78979
Sandton, 2146
Member of
Property Loan Stock Association
Date: 30/05/2006 10:00:21 AM Produced by the JSE SENS Department
