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ACP
ACP
Acucap - Reviewed Interim Results for the 6 months ended 30 September 2006
and payment of debenture interest
Acucap Properties Limited
Reg no. 2001/021725/06
Share Code: ACP
ISIN : ZAE000037651
Reviewed Interim Results for the 6 months ended 30 September 2006 and
payment of debenture interest
Abridged Balance Sheet
30 September 31 March 30 September
2006 2006 2005
R"000 R"000 R"000
Assets
Property Assets 2 576 743 2 369 706 1 889 758
Investment 2 493 767 2 303 302 1 833 091
properties
Long term receivable 59 832 60 961 53 855
Short term 4 507 3 152 2 812
receivable
Investment 2 558 106 2 367 415 1 889 758
properties and
related receivables
Other property 18 637 2 291 -
assets
Other non current 104 442 94 095 66 098
assets
Loans in respect of 103 307 93 284 65 620
unit purchase scheme
Property, plant and 457 452 478
equipment
Deferred tax asset 678 359 -
Other current assets 46 672 18 059 58 277
Properties 13 998 - 28 584
classified as held
for sale
Short term 3 002 - 216
receivable
Properties 17 000 - 28 800
classified as held
for sale and related
receivables
Trade and other 21 749 17 377 28 924
receivables
Cash and cash 7 923 682 553
equivalents
Total assets 2 727 857 2 481 860 2 014 133
Equity and
liabilities
Shareholders" 842 474 775 640 514 979
interest
Share capital and 141 593 86 712 71 940
share premium
Non-distributable 736 394 716 534 471 683
reserve
Accumulated loss (35 513) (27 606) (28 644)
Non current 1 790 891 1 615 522 1 417 759
liabilities
Debentures 734 878 685 203 673 116
Financial 773 378 651 936 564 226
liabilities
Deferred tax 282 635 278 383 180 417
liabilities
Current liabilities 94 492 90 698 81 395
Trade and other 20 405 17 631 16 349
payables
Financial - 10 000 10 000
liabilities
Tax payable - 2 506 1 796
Debenture interest 74 087 60 561 53 250
payable
Total equity and 2 727 857 2 481 860 2 014 133
liabilities
Abridged Income Statement
for the 6 months ended
30 September 2006
6 months year 6 months
ended ended ended
30 September 31 March 30 September
2006 2006 2005
R"000 R"000 R"000
Revenue 121 302 213 045 106 915
- Contractual 118 075 195 695 96 682
- Straight lining 3 227 17 350 10 233
Net operating expenses (15 693) (21 621) (10 766)
Profit before fair
value adjustments,
interest and taxation 105 609 191 424 96 149
Fair value adjustment 13 288 575 705 237 044
to investment
properties
Profit before interest 118 897 767 129 333 193
and taxation
Interest received 8 426 7 542 3 563
Interest paid
- Debenture holders (74 087) (53 250) (53 250)
- interim
- Debenture holders - - (60 557) -
final
- Other (44 847) (65 677) (34 392)
Profit before taxation 8 389 595 187 249 114
Taxation (3 932) (170 187) (71 869)
Profit for the period 4 457 425 000 177 245
Reconciliation of profit for the
period to headline (loss)/ earnings
Profit for the 4 457 425 000 177 245
period
Fair value (13 288) (575 705) (237 044)
adjustment to
investment
properties
Profit on disposal - (1 580) (1 185)
of investment
properties
Profit on disposal - (654) (654)
of listed
investments
Tax effects 3 854 167 278 68 902
Headline (loss)/ (4 977) 14 339 7 264
earnings - shares
Interest paid to 74 087 113 807 53 250
debenture holders
Headline earnings - 69 110 128 146 60 514
linked units
Cents Cents Cents
Earnings per share 6.40 629.98 264.31
Headline earnings 99.30 189.95 90.24
per linked unit
Interest 91.26 167.32 79.03
Distribution per
linked unit
- Interim 91.26 79.03 79.03
- Final - 88.29 -
Abridged Cash flow
statement
for the 6 months ended 30
September 2006
6 months year 6 months
ended ended ended
30 September 31 March 30 September
2006 2006 2005
R"000 R"000 R"000
Cash flows from operating
activities
Cash generated by 108 354 169 473 71 757
operations
Income tax paid (2 506) (3 083) (3 083)
Interest received 8 426 7367 3563
Interest paid (105 408) (170 369) (87 642)
Net cash inflows/ 8 866 3 388 (15 405)
(outflows) from operating
activities
Cash (outflows)/ inflows (217 623) (93 303) 39 930
from investing activities
Cash inflows/ (outflows) 215 998 68 874 (45 695)
from financing activities
Net cash inflows/ 7 241 (21 041) (21 170)
(outflows) for the period
Cash and cash equivalents 682 21 723 21 723
at beginning of period
Cash and cash equivalents 7 923 682 553
at end of period
Abridged Statement of
changes in equity
for the 6 months ended
30 September 2006
Shares Share Share Non Accumu- Total
issued capital Premium Distri- lated
butable loss
Reserve
Number R"000 R"000 R"000 R"000 R"000
Balance 66 578 953 67 66 550 297 458 ( 29 169) 334 906
at 31
March
2005
Issue of 800 000 - 5 967 - - 5 967
800 000
shares
in June
2005
Share - - (644) - - (644)
issue
costs
Profit - - - - 177 245 177 245
for the
period
Change - - - (2 495) - (2 495)
in fair
value of
cash
flow
hedge
Transfer - - - 176 720 (176 720) -
to non-
distribu
table
reserve
Balance 67 378 953 67 71 873 471 683 (28 644) 514 979
at 30
Septembe
r 2005
Issue of 860 000 1 10 225 - - 10 226
860 000
shares
in
December
2005
Issue of 350 000 1 4 630 - - 4 631
350 000
shares
in March
2006
Share - - (85) - - (85)
issue
costs
Profit - - - - 247 755 247 755
for the
period
Change - - - (1 866) - (1 866)
in fair
value of
cash
flow
hedge
Transfer - - - 246 717 (246 717) -
to non-
distribu
table
reserve
Balance 68 588 953 69 86 643 716 534 (27 606) 775 640
at 31
March
2006
Issue of 7 620 994 8 97 770 - - 97 778
7 620
994
treasury
shares
in June
2006
Consolid (7 620 994) (8) (97 770) - - (97 778)
ation of
deemed
treasury
shares
Issue of 500 000 1 5 335 - - 5 336
500 000
shares
in July
2006
Issue of 4 046 000 4 44 927 - - 44 931
4 046
000
shares
in
August
2006
Issue of 426 440 - 5 441 - - 5 441
426 440
shares
in
August
2006
Profit - - - - 4 457 4 457
for the
period
Change - - - 7 496 - 7 496
in fair
value of
cash
flow
hedge
Share - - (827) - - (827)
issue
costs
Transfer - - - 12 364 (12 364) -
to non-
distribu
table
reserve
Balance 73 561 393 74 141 519 736 394 (35 513) 842 474
at 30
Septembe
r 2006
COMMENTS
1. REVIEW OF RESULTS AND OPERATIONS
The six month period under review has seen a sharp divergence between the
performance of the financial market for listed property and that of the
underlying physical property market. Global inflationary concerns and lower
risk tolerance led to an emerging market sell-off that started around the
middle of May and was followed in South Africa by a pre-emptive tightening
of monetary policy when the SA Reserve Bank lifted its repo rate by 50 basis
points on 8 June 2006. This was the first interest rate movement in 14
months, and signalled the start of an upturn in the interest rate cycle.
Financial markets reacted adversely to interest-sensitive sectors, and
punished listed property companies across the board. The SA listed property
index had lost 37% of its May value by mid July. A second 50 basis point
increase in the repo rate on 3 August 2006 was widely expected and had
little effect on the markets as listed property staged a recovery. This
recovery was assisted by a moderate reversal of the direction of long-term
interest rates that had peaked close to 9% and have since receded as
concerns about aggressive increases in short-term interest rates moderated.
The reduction in government borrowings announced in the recent budget
revisions will help reduce pressure in the bond market.
By contrast with this weakening trend on financial markets, physical
property has continued to perform very well. The June property company
reporting season revealed some unexpectedly high distribution growth rates,
and to some extent this helped to calm the markets, showing that good
economic growth fundamentals remained intact.
Consistent with this trend, Acucap is able to report a pleasing 15.48%
growth in distributions over the same period last year. The lease renewal
details set out under point 12 below give further evidence of the firmness
of the underlying demand for space and Acucap sees little evidence of
negative reversionary pressures in its portfolio. In particular, the retail
sector has continued to show good growth and expectations of flattening
rentals have not materialised. Provided the South African economy continues
to grow at the expected rate of 4%, these sound property fundamentals should
persist.
2. ACQUISITIONS AND DISPOSALS
Improvon industrial JV Montague Gardens
In its March 2006 results, Acucap announced a change in its industrial
strategy, in terms of which the company would work with reputable developers
to procure new investment opportunities offering critical mass in
distribution-orientated industrial growth nodes. The first such joint
venture was the acquisition of an undivided 20% share in a 38 hectare
industrial site in Midrand with the Improvon Group (`Improvon") and Capital
Property Fund.
On 9 June 2006, Acucap announced a second industrial land joint venture,
once again with Improvon as lead partner and this time including Diversified
Property Fund Limited as an equal 25% holder with Acucap in a 61.53 hectare
zoned industrial site adjacent to Montague Gardens, Cape Town. The site was
acquired at a total cost of R260 million. Its size and prime location, as
well as the fact that it is already zoned and has its bulk infrastructure in
place, will give this property a significant and unique position in the Cape
Town industrial market going forward.
Metcash East London
This property was sold on 26 May 2006 for R17m, considerably in excess of
its appraised value of R13.8m. Although tenanted by Metcash on a lease
running to 30 June 2011, the property was no longer deemed to meet the
company"s quality and long-term growth criteria. Transfer is expected to
take place at the end of October.
3. DEVELOPMENTS WITHIN THE PROPERTY PORTFOLIO
Festival Mall
Game has taken beneficial occupation of a new 6,500m2 store that was
added at the north side of the mall, and they are due to commence trading on
schedule in mid-November. As part of this extension, a new 842 bay parking
deck has been added. A deal has also been concluded with Ster Kinekor for
Acucap to build a new 8 screen cinema complex that will be positioned close
to entrance 4 near the centre of the mall, and construction is due to
commence in January 2007. This will take the combined gross lettable area
(GLA) of the mall to approximately 77,000m2.
Key West
A deal has been concluded to extend this mall by the addition of a new
4,500m2 Game store. Construction is due to commence in November this year,
with beneficial occupation for Game scheduled to take place at the end of
November 2007.
Warwick Centre
The reburbishment of this centre is due for completion on schedule at
the end of October 2006. The retail component is anchored by the Foschini
Group on new 7 year tenure. The old office component has been substantially
re-modelled, with one of the floors converted to parking bays, and a central
core opened up through the remaining offices, providing a complete change of
ambience and functionality, and lifting the new 1,540m2 office component to
an `A" grade specification. The entire office section has been leased to a
single tenant.
Rondebosch Village
Phases 1 and 2 of this re-development are complete, with the last of
the major tenants, Clicks, having taken occupation of their new store. The
final phase, due to commence in the first quarter of 2007, will see the
construction of a parking deck providing an additional 92 parking bays.
Hillcrest Corner
The acquisition of a 58% interest in the development being undertaken
jointly with Shoprite Properties was announced on 30 August 2006.
Construction is well advanced, and the 19,400m2 centre is due to open in
April 2007. National tenants will occupy over 73% of the centre by GLA, and
they include Checkers, Woolworths, the Truworths group, the Foschini group,
and Dischem.
4. ATLAS TRANSACTION
On 23 October 2006, Acucap announced that it had acquired a 33%
interest in Atlas Properties Limited for R331,390,143, effective 30 November
2006. Through its holding in Atlas, Acucap will gain an exposure to assets
that complement its own portfolio, in particular some good quality Cape
retail assets.
5. DISTRIBUTION
The Board has approved interim distribution number 11 of 91.26 cents
per linked unit for the period from 1 April 2006 to 30 September 2006.
6. BORROWINGS
The company"s weighted average actual interest expense was 11.56% for the
period, down from 11.84% for the same period last year.
The average fixed rate going forward is 10.73% and full details are set out
in the table below.
Amount % of total Rate (nacm) Expiry of fixed
(R million) borrowings rates
50 8.43% 9.89% Apr-08
100 16.86% 12.40% May-08
60 10.12% 9.61% Aug-09
75 12.65% 9.86% Apr-10
50 8.43% 10.26% Sep-11
50 8.43% 13.20% Mar-12
120 20.24% 9.95% Oct-13
72.5 12.23% Prime less 2.30%
(facility R446m)
15.5 2.61% 1 month jibar plus
1.40% (facility R50m)
593.0 100.00%
The company has fixed the interest rate on 85.1% (2005: 89.54%) of its
borrowings with unexpired terms varying between 20 months and 7 years.
The Financial liabilities figure of R773 378 000 in the balance sheet
includes an amount of R182 736 056 due by CShell 299 (Pty) Limited to
Nedbank Limited in respect of Acucap"s BEE transaction with Thesele Group,
referred to in 11 below. Acucap Properties Limited has signed as surety for
the loan, which bears interest at a rate of prime less 1.8%.
7. VACANCIES
Portfolio vacancies amount to 4.6% by gross rental income and 4.5% by GLA.
Much of this has come about through the recent acquisition of the Checkers
Hyperama in Roodepoort, which was purchased with a line shop vacancy of
approximately 8,600m2 of retail space. Construction is underway to refurbish
the vacant parts of the Hyperama building, with work due to be completed by
April next year. Excluding the effects of the vacancy at the Checkers
Hyperama building, the residual portfolio vacancies amount to 2.0 % by gross
rental income and 1.8 % by GLA.
8. LEASE EXPIRY PROFILE
The lease expiry profile (by rental income) is reflected below, and it
includes the effects of the activities referred to in section 2 and 3 of
this results announcement:
2007 2008 2009 2010 2011 2012 and
thereafter
Large 1.0% 3.4% 5.6% 12.5% 5.7% 28.3%
national
tenants
Other 0.3% 2.4% 2.7% 5.3% 1.6% 2.8%
national,
franchisees
etc
Other 3.8% 8.4% 5.2% 4.2% 2.8% 4.1%
TOTAL 5.0% 14.2% 13.5% 22.0% 10.1% 35.1%
9 LIQUIDITY
In the six months to 30 September 2006, trade in Acucap linked units has
amounted to an annualised 45.6% of the weighted average number of units in
issue. The performance of the Acucap unit price relative to the PLS index is
shown below:
Acucap index PLS index Acucap unit
price (cents)
31-Mar-06 100% 100% 2720
18-Apr-06 100% 98% 2730
28-Apr-06 104% 99% 2830
15-May-06 103% 97% 2800
31-May-06 101% 94% 2735
15-Jun-06 97% 89% 2630
30-Jun-06 81% 81% 2200
14-Jul-06 78% 77% 2126
31-Jul-06 81% 80% 2200
15-Aug-06 83% 84% 2270
31-Aug-06 88% 89% 2400
15-Sep-06 87% 85% 2365
29-Sep-06 90% 88% 2452
Details of the company"s unit holder spread are shown below :
September March
06 06
Total number of unit holders 1 162 1 129
Number of unit holders owning > 5% of 3 3
units in issue
Number of institutions controlling 10% to 1 3
15% of units in issue
Number of institutions controlling > 15% 2 1
of units in issue
Percentage of units controlled by largest 15.3 % 17.35%
institution
Percentage of units held by public 82.6% 76.31%
unitholders
10. COST TO INCOME RATIO
six months to 30- six months to 30-
9-06 9-05
Cost category
Net direct operating 8,489 6,015
costs
Property administration 2,411 2,064
fees
Asset management costs 2,918 2,723
Indirect administration 1,875 1,803
costs
Total costs 15,693 12,605
Contractual rental 118,075 96,682
income
Cost to income ratio 13.3% 13.0%
Costs remain well controlled. Indirect administration costs tend to be
weighted towards the first half of the financial year, and the overall ratio
is expected to decline below 13% for the full year to 31 March 2007.
11. BLACK ECONOMIC EMPOWERMENT
Acucap"s empowerment deal with Thesele Group became unconditional on 1
September 2006, and Thesele chairman Sello Moloko was appointed to the
Acucap board on 5 September 2006. Acucap remains involved in a number of on-
going BEE initiatives aimed at addressing not only equity ownership, but
also enterprise development, procurement, skills development and building
more representative governance and management structures.
12. LEASE RENEWALS
The pattern of lease renewals (in Gross Lettable Area) for the six month
review period is reflected in the table below.
G L A Warwick - lettable Expiries and Renewals
31-03- area converted to termin-ations
2006 parking
Total 304 311 (1 933) (30 461) 17 330
- let 297 186 (524) (35 499) 17 330
- 7 125 (1 409) 5 038 0
vacant
New leases Properties Properties G L A 30-9-
purchased sold 2006
13 129 31 889 (5 238) 329 027
17 986 23 209 (5 238) 314 450
(4 857) 8 680 0 14 577
A table of lease renewal details is set out below, showing all leases which
have expired in the last six months, the rentals on expiry, and the renewal
rentals. The intention of this table is to give an indication of
reversionary effects on the Acucap portfolio over the current reporting
period.
Expiries Average Average Renewals Average Average
and through escalation / new through escalati
termin- rent at rate for leases rent for on rate
ations expiry / expiring / (m2) renewals for
(m2) termin- termin- / new renewals
ation ating leases / new
leases leases
Regional 8,989 60.05 8.9% 9,701 90.38 8.3%
retail
Community 947 69.51 8.5% 947 86.34 8.5%
retail
Neighbourho 12,535 70.57 8.8% 13,077 78.82 7.9%
od & other
retail
Offices 8,100 83.57 10.8% 7,352 68.20 8.2%
Industrial 4,928 18.42 10.8% 4,239 20.77 8.6%
Total 35 499 35 316
The table shows significant upward reversions across all retail sectors.
Industrial rentals have also shown good growth. The apparent decline in
office rentals is due to the early termination of a specific lease, with the
vacant space remaining unlet at the end of the period, distorting the
average through rental. For Acucap"s office portfolio as a whole, the
average through rental is considered to be close to market.
13. ACUCAP UNIT PURCHASE TRUST
During the period under review, the remuneration committee approved the
issue of 500 000 linked units to employees participating in the Acucap Unit
Purchase Trust. The unit issues were made at the respective 30 day volume
weighted average prices at the dates of issue, and they brought the total
number of linked units issued to the Acucap Unit Purchase Trust at 30
September 2006 to 5,51 million.
14. SEGMENT RESULTS
6 months 6 months
ended 30 ended 30
September September
2006 2005
R"000 R"000
Retail
Revenue 88 277 77 438
Net operating (8 796) (5 574)
expenses
Profit before 79 481 71 864
fair value
adjustments
Fair value 12 882 193 291
adjustment of
investment
properties
Segment result 92 363 265 155
Offices
Revenue 25 472 21 763
Net operating (1 766) (1 318)
expenses
Profit before 23 706 20 445
fair value
adjustments
Fair value 551 35 548
adjustment of
investment
properties
Segment result 24 257 55 993
Industrial
Revenue 7 553 7 714
Net operating (210) (3)
expenses
Profit before 7 343 7 711
fair value
adjustments
Fair value (145) 8 205
adjustment of
investment
properties
Segment result 7 198 15 916
Reconciliation to
operating profit in
the income statement
Revenue 121 302 106 915
Allocated operating (10 772) (6 895)
expenses
Unallocated operating (4 921) (3 871)
expenses
Profit before 105 609 96 149
fair value
adjustments
Fair value 13 288 237 044
adjustment of
investment
properties
Operating profit 118 897 333 193
for the period
15. PROSPECTS
The board of Acucap expects the South African economy to grow at a
satisfactory rate while it makes the necessary adjustments to inflationary
pressures and higher interest rates. For the full year to March 2007, Acucap
expects to remain a top quartile performer in terms of growth in
distributions, delivering results comparable with those achieved over the
last two financial years.
16. PAYMENT OF DEBENTURE INTEREST
Notice is hereby given that interim distribution number 11 of 91.26 (ninety
one comma two six) cents per linked unit has been approved in respect of the
six month period ended 30 September 2006. The last date to trade the linked
units cum distribution is Friday, 17 November 2006 and the record date will
be Friday, 24 November 2006. The linked units will start trading ex-
distribution from Monday, 20 November 2006. Distributions will be made to
unit holders on Monday 27 November 2006.
Linked unit certificates may not be dematerialised or rematerialised between
Monday 20 November 2006 and Friday 24 November 2006 both days inclusive.
17. BASIS OF PREPARATION AND REVIEW OPINION
The interim financial statements are prepared in accordance with
International Financial Reporting Standards (IFRS), as well as the
requirements of the Companies Act in South Africa, and on a basis consistent
with the company"s most recent annual financial statements.
KPMG Inc. has reviewed the interim financial information set out in this
report. Their unqualified review report is available for inspection at the
company"s registered office.
On behalf of the Board
BS KANTOR PA THEODOSIOU
(Chairman) (Managing Director)
27 October 2006
Registered Office
Suite A11 Westlake Square
Westlake Drive
Westlake
CAPE TOWN
Transfer secretaries:
Computershare Investor Services 2004 (Pty) 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, MS Moloko, JH Rens*, B
Stevens, NDC Whale
* Executive
Date: 27/10/2006 11:07:19 AM Produced by the JSE SENS Department
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