| Wed 1 Nov 2006, 17:51 | | SA Retail Properties - Unaudited Interim Results a |
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SRL
SRL
SA Retail Properties - Unaudited Interim Results and Distribution Announcement
for the period ended 30 September 2006
SA RETAIL PROPERTIES
(Reg. No. 1999/025764/06)
Share Code: SRL
ISIN Number: ZAE000034328
Website: www.saretail.co.za
Unaudited Interim Results and Distribution Announcement
for the period ended 30 September 2006
- Distributions up 13,7%
- Low exposure to interest rate movement
- Property portfolio exceeds R2 billion
Balance Sheet (R"000)
Unaudited Unaudited Audited
30.09.2006 30.09.2005 31.03.2006
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ASSETS
Non-current assets
Investment properties 1 973 635 1 534 320 1 788 198
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At valuation 2 032 860 1 595 878 1 846 210
Prepaid letting commission 4 768 4 089 4 173
Rental straight line adjustment (63 993) (65 647) (62 185)
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Rental receivable
- straight line adjustment 57 853 65 011 53 929
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2 031 488 1 599 331 1 842 127
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Current assets
Net receivables 30 792 23 625 39 348
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Trade and other receivables 24 652 22 989 31 092
Rental receivable
- straight line adjustment 6 140 636 8 256
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Cash resources and short-term
investments 9 678 120 862 62 555
Properties classified as
held for sale 172 021 - 33 439
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212 491 144 487 135 342
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TOTAL ASSETS 2 243 979 1 743 818 1 977 469
=======================================
EQUITY AND LIABILITIES
Capital and reserves 564 126 304 447 405 647
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Non-current liabilities
Debentures 1 219 407 1 154 483 1 154 210
Fair value of Put obligation 18 656 15 833 17 722
Interest bearing borrowings 138 508 66 070 129 543
Deferred taxation 207 762 119 341 157 685
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1 584 333 1 355 727 1 459 160
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Current liabilities
Trade payables 8 260 9 242 4 138
Other payables - - 22 224
South African Revenue Services 3 3 3
Linked unitholders for distribution 87 257 74 399 86 297
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95 520 83 644 112 662
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TOTAL EQUITY AND LIABILITIES 2 243 979 1 743 818 1 977 469
=======================================
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Income Statement (R"000)
Unaudited Unaudited Audited
01.04.2006 01.04.2005 01.04.2005
to to to
Notes 30.09.2006 30.09.2005 31.03.2006
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Revenue 134 724 116 390 229 800
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Contractual lease revenue 132 916 111 705 231 443
Straight line adjustment on leases 1 808 4 685 (1 643)
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=======================================
Net rental income from properties 89 511 73 842 149 293
Straight line adjustment on
operating lease (1 623) - -
Interest earned 1 723 5 291 9 947
Finance costs (2 112) (3) -
Capital profit/(loss) on disposal of
investment properties 809 (700) (728)
---------------------------------------
Net profit before fair value adjustments 88 308 78 430 158 512
Write up on revaluation of
investment properties 208 494 79 146 226 796
---------------------------------------
As per valuation 210 302 83 831 225 153
Adjusted for rental straight
line adjustment (1 808) (4 685) 1 643
---------------------------------------
Deficit on revaluation of Put
obligation (934) (3 715) (5 604)
---------------------------------------
Net profit before debenture interest
and taxation 295 868 153 861 379 704
Debenture interest (87 288) (74 425) (160 727)
---------------------------------------
Net profit before taxation 208 580 79 436 218 977
Taxation (50 078) (68 988) (104 165)
---------------------------------------
Net profit attributable to
linked unitholders 158 502 10 448 114 812
=======================================
Earnings per share (cents) 2.2 69,23 4,63 50,83
(weighted)
=======================================
Diluted earnings per share
(cents) 2.2 69,23 4,63 50,83
(weighted)
=======================================
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Distribution per linked
unit (cents) 2.2
Interest 37,46 32,94 71,16
Dividend 0,01 0,01 0,02
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Total 37,47 32,95 71,18
=======================================
Headline (loss)/earnings
per share (cents) 2.2 (0,18) 0,48 1,45
(weighted)
=======================================
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Cash Flow Statement (R"000)
Unaudited Unaudited Audited
01.04.2006 01.04.2005 01.04.2005
to to to
30.09.2006 30.09.2005 31.03. 2006
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OPERATING ACTIVITIES
Cash received from tenants 138 761 104 545 216 096
Cash paid to suppliers and employees (65 241) (42 727) (63 718)
---------------------------------------
Cash generated by operating activities 73 520 61 818 152 378
Interest earned 1 723 5 291 9 947
Distributions to linked unitholders
- Interest (86 326) (82 861) (157 278)
- Dividend (23) (35) (45)
Finance costs (2 112) (3) -
Taxation paid (3) - (6)
---------------------------------------
Net Cash (Outflow)/Inflow (13 221) (15 790) 4 996
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INVESTING ACTIVITIES
Acquisition of investment properties (66 687) (10 529) (29 213)
Improvements to investment properties (80 768) (47 278) (171 066)
Disposal of investment properties 33 334 89 481 89 475
---------------------------------------
Net Cash (Outflow)/Inflow (114 121) 31 674 (110 804)
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FINANCING ACTIVITIES
Debentures issued and costs 65 500 - (88)
Increase in interest bearing borrowings 8 965 42 576 106 049
---------------------------------------
Net Cash Inflow 74 465 42 576 105 961
---------------------------------------
---------------------------------------
Net (decrease)/increase in cash
and cash equivalents (52 877) 58 460 153
Cash and cash equivalents at
beginning of the period 62 555 62 402 62 402
---------------------------------------
CASH AND CASH EQUIVALENTS AT
END OF THE PERIOD 9 678 120 862 62 555
=======================================
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Statement of Changes in Equity (R"000)
Share Non
Capital & Distributable Distributable
Premium Reserves Reserves Total
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Balance at 31 March 2004 33 238 21 675 (21 191) 33 722
Prepaid distribution
received - - 9 350 9 350
Net profit attributable
to linked unitholders - - 250 993 250 993
Transfer to
non-distributable reserves - 236 094 (236 094) -
Dividend distributed - - (43) (43)
-------------------------------------------------
Balance at 31 March 2005 33 238 257 769 3 015 294 022
Net profit attributable
to linked unitholders - - 111 670 111 670
Transfer to
non-distributable reserves - 124 230 (124 230) -
Dividend distributed - - (45) (45)
-------------------------------------------------
Balance at 31 March 2006 33 238 381 999 (9 590) 405 647
Net profit attributable
to linked unitholders - - 158 502 158 502
Transfer to
non-distributable reserves - 158 807 (158 807) -
Dividend distributed - - (23) (23)
-------------------------------------------------
Balance at
30 September 2006 33 238 540 806 (9 918) 564 126
=================================================
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1. Other Information Unaudited Unaudited Audited
01.04.2006 01.04.2005 01.04.2005
to to to
30.09.2006 30.09.2005 31.03.2006
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Linked units in issue 232 993 391 225 873 826 225 873 826
Weighted average linked
units in issue 228 947 299 225 873 826 225 873 826
Net asset value
(cents per linked unit) 803 679 728
(including distribution
yet to be paid)
Listed market price
(cents per linked unit) 1 030 940 975
Premium to net asset value 28,3% 38,6% 33,9%
Vacancy factor
(based on lettable area) 2,7% 1,4% 2,3%
Interest capitalised during
the period (R"000) 5 793 1 431 7 344
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2. NOTES TO THE FINANCIAL RESULTS
2.1 Accounting policies
The interim financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) and the South African
Companies Act, 1973. The accounting policies are consistent with those of the
previous financial year. The condensed interim financial statements have been
prepared in accordance with IAS 34. All IFRS and IFRC interpretations issued and
effective as at 30 September 2006 have been applied.
2.2 Earnings, diluted earnings, headline earnings and distributable earnings
The earnings and headline earnings for the period 1 April 2006 to 30 September
2006 are calculated as follows:
30 September 2006 30 September 2005
Cents Cents
R"000 (Weighted) R"000 (Weighted)
-------------------------------------------------
Earnings and diluted
earnings per share 158 502 69,23 10 448 4,63
Net surplus on revaluation
of investment properties
(net of deferred taxation) (158 116) (69,06) (10 053) (4,45)
(Profit)/Loss on disposal
of investment property (809) (0,35) 700 0,30
-------------------------------------------------
Headline (loss)/earnings
per share (423) (0,18) 1 095 0,48
Debenture interest 87 288 38,12 74 425 32,95
-------------------------------------------------
Headline earnings per
linked unit 86 865 37,94 75 520 33,43
Straight line adjustment on
operating lease expense 1 623 0,71 - -
Deficit on revaluation
of Put obligation 934 0,41 3 715 1,64
Deferred taxation (2 111) (0,92) (4 787) (2,12)
-------------------------------------------------
Distributable earnings
per linked unit 87 311 38,14 74 448 32,95
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-------------------------------------------------
Distributable earnings per
linked unit (units in issue) 87 311 37,47 74 448 32,95
-------------------------------------------------
Distributable earnings are not impacted by the surplus on revaluation of the Put
obligation (IAS 39 fair value adjustment) and straight line adjustment on
leases, which are included in earnings and headline earnings per linked unit.
2.3 Interest bearing borrowings
The company as at 30 September 2006 had borrowings amounting to R138,5 million
or 6,1% of asset value. These borrowings attract interest at prime less 2,3% per
annum.
2.4 Segment results
On a primary basis, the Company operates in the following geographical areas of
South Africa:
Gauteng, KwaZulu-Natal and Western Cape.
It is the Company"s philosophy to invest only in retail property, therefore the
Company can only report on a primary segment.
Period end 30 September 2006
Western
KwaZulu-Natal Gauteng Cape Corporate Total
R"000 R"000 R"000 R"000 R"000
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INCOME STATEMENT
Revenue (external) 69 125 48 666 16 931 2 134 724
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Contractual lease
Revenue 69 220 46 798 16 896 2 132 916
Straight line
Adjustment (95) 1 868 35 - 1 808
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Segment result
Net rental income 48 333 34 577 11 610 (5 009) 89 511
Straight line
adjustment on
operating lease (1 623) - - - (1 623)
Interest received 448 132 68 1 075 1 723
Finance costs - - - (2 112) (2 112)
Capital
profit/(loss) on
disposal of
investment properties 1 223 (414) - - 809
Write up on
revaluation of
investment property 117 826 83 148 7 520 - 208 494
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As per valuation 117 731 85 016 7 555 - 210 302
Adjustment for
rental straight line 95 (1 868) (35) - (1 808)
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Revaluation of
Put Obligation - - - (934) (934)
Debenture interest (48 869) (32 829) (11 636) 6 046 (87 288)
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117 338 84 614 7 562 (934) 208 580
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Other information
Investment properties 1 165 985 698 221 109 429 - 1 973 635
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At valuation 1 185 960 733 450 113 450 - 2 032 860
Prepaid letting
Commission 1 968 2 404 396 - 4 768
Rental straight line
Adjustment (21 943) (37 633) (4 417) - (63 993)
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Current and other
long term assets 35 280 82 089 155 676 (2 701) 270 344
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Excluding rental
straight line
adjustment 13 337 44 456 151 259 (2 701) 206 351
Rental straight
line adjustment 21 943 37 633 4 417 - 63 993
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Total segment assets 1 201 265 780 310 265 105 (2 701) 2 243 979
=========================================================
Debentures* - - - 1 219 407 1 219 407
Interest bearing
Borrowing - - - 138 508 138 508
Fair value of Put
Obligation - - - 18 656 18 656
Deferred taxation 111 241 87 897 13 466 (4 842) 207 762
Current liabilities 58 510 36 433 12 928 (12 351) 95 520
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Total segment
liabilities 169 751 124 330 26 394 1 359 378 1 679 853
=========================================================
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Acquisition of
investment property - 66 687 - - 66 687
=========================================================
*Due to the nature of debentures, segmentation could not be allocated in any
meaningful manner.
Segment revenue and expenses
Revenue and expenses that are directly attributable to properties in the
particular region are allocated to those regions. Expenses not directly
attributable to a region are allocated to the corporate segment.
Segment assets and liabilities
Segment assets include all operating assets used by a region and consist
principally of property assets, trade receivables, cash and cash equivalents.
Segment liabilities include all operating liabilities of a region and consists
principally of outstanding accounts. Assets and liabilities not directly
attributable to a particular region are allocated to the corporate segment.
2.5 Issued Share Capital
At the beginning of the year there were 225 873 826 linked units in issue. A
further 7 119 565 units were issued on 14 July 2006 for the acquisition of
Willow Way Shopping Centre.
2.6 Commitments
Guarantees
Guarantees in lieu of municipal service deposits amount to R3,0 million (2005:
R3,0 million).
Capital expenditure
Capital expenditure amounting to R77,3 million has been authorised for
redevelopment and improvements of existing properties. This expenditure will be
funded by existing facilities.
Property disposals
Investment properties to the value of R172,0 million have been approved for
disposal.
2.7 Related party
No further material related parties have been identified in relation to those
disclosed in the 2006 annual report.
2.8 Post balance sheet events
1 211 602 linked units were issued on 17 October 2006 for the acquisition of
Summer Cottage. For more information on this transaction and other post Balance
Sheet events refer to note 3.2 and 3.5.
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3. COMMENTARY ON RESULTS
3.1 Results
S A Retail"s distributable income for the six months ending 30 September 2006
amounts to 37,47 (30.09.2005: 32,95) cents per linked unit which represents a
13,71% growth in distributions over the comparable period.
3.2 Property portfolio
3.2.1 Acquisitions and disposals
Willow Way Shopping Centre was acquired on 14 July 2006 for R65,5 million at an
initial yield of 9,1%. This strategic investment in Lynnwood Road, Pretoria, is
an 8 140 m2 convenience shopping centre anchored by a 2 564 m2 SuperSpar with a
lease to 2014. 7 119 565 linked units were issued, at 920 cents per linked unit,
in settlement of the transaction.
Five acquisition proposals with an investment value of R1,2 billion have been
approved by the S A Retail board during the period under review. These remain
subject to various suspensive conditions. These include:
- Dube Village Shopping Centre, a R43,3 million investment anchored by a
Shoprite Checkers on a long lease in Kwa Mashu, Durban. Acquired at an
investment return of 10,25% in year one, this 7 300 m2 centre is anchored by a 2
330 m2 Shoprite store and 75% of the tenants are national operators including
Nedbank, S A Post Office, Dunns, KFC, Pep, OK Furniture, Jet and Standard Bank.
- Summer Cottage in Fourways at a capital cost of R10,9 million and an initial
yield of 9,0%.
- Axiz IBG in Midrand at a capital cost of R92,0 million and an initial yield of
9,5%.
- Hubyeni Shopping Centre at an estimated capital cost of R86,0 million and an
agreed initial yield of 9,5%. This 12 684 m2 development is expected to open on
1 April 2007 at which date S A Retail will take ownership. Tenant demand is
extremely positive with 92% tenant commitment five months before opening. More
than 70% of tenants already signed are national chains including Spar, Tops,
Jetmart, Pep, FNB, Standard Bank, JD Group, Ellerines, S A Post Office, etc.
This investment is the first of a number of turnkey shopping centre projects
anchored by Spar which S A Retail has the opportunity to acquire in terms of a
tri-partheid memorandum of understanding between Spar, Kerr Developments and S A
Retail. The total value of these investment opportunities, which will arise over
the next four years, is estimated to be approximately R700,0 million.
- The Sharemax portfolio of properties for R995,8 million. Unitholders are
referred to the cautionary announcement dated 4 October 2006 where it was
reported that S A Retail had entered into agreements with Sharemax Investments
(Pty) Limited to acquire a number of investment properties. The S A Retail board
approved the acquisition of the said portfolio at a special board meeting on 22
August 2006. The acquisition remains conditional upon S A Retail linked
unitholder approval, shareholder approval from the respective sellers and the
required statutory approvals. A circular detailing the effects of the
transaction will be distributed to S A Retail unitholders shortly.
The following property disposals were effected during the period under review:
- The basement area of Knowles Shopping Centre was sectionalised and transferred
to the tenant on 11 July 2006 at a price of R2,8 million (50% undivided share).
- Kyalami Crescent was transferred on 17 August 2006 at a price of R30,7 million
and an exit yield of 9,8%.
3.2.2 Developments
The following developments were completed, or were in the course of
construction, during the six month reporting period ending 30 September 2006:
Umlazi Mega City, a 31 000 m2 regional shopping centre, developed jointly by S A
Retail and S A Corporate Real Estate Fund at a total cost of R165,0 million and
a projected initial yield of 11,25%, opened on 1 April 2006. This development is
expected to contribute positively to S A Retail"s earnings in the current
financial year.
Construction commenced in November 2005 on the 8 363 m2 Kings Road Value Centre
in Pinetown, Durban, in partnership with Vukile Property Fund. The current
estimated total capital outlay is R59,0 million with an anticipated initial
yield of 10,7% in the first year. This investment, adjacent S A Retail and
Vukile"s successful R350,0 million Pine Crest Shopping Centre has been branded
Pine Walk Centre and will be anchored by a
2 500 m2 SuperSpar and a number of S A"s leading national tenants. The centre is
scheduled to open on 1 November 2006.
The redevelopment of the Bluff Shopping Centre, incorporating an additional 7
500 m2 of bulk at a capital commitment of R78,0 million, is scheduled for
opening on 1 November 2006. The 19 475 m2 redevelopment is 100% let and the
estimated total net income of R12,6 million is 17% ahead of budget. The quality
of the centre is such that it has been possible to generate a very competitive
demand for all the retail space with a consequent favourable return on cost of
10,4%, well above the approved budget of 9,5%.
On 19 June 2006 construction commenced on a R12,5 million freestanding
development on the western portion of the Bluff Shopping Centre site. The
building is pre-let to First National Bank, Ocean Basket, Butchers Block and
Papa Giovanni"s and the estimated return in year 1 is 13,1%. The project is
scheduled for completion on 24 November 2006.
The redevelopment of Highland Mews Shopping Centre, increasing the existing
centre from 12 670 m2 to 16 676 m2 at a capital cost of R41,0 million was
completed in October 2006. The return on cost on the new extension is 10,5%
against a budget of 9,4% and save for two small shops the centre is 100% let.
The extension and upgrade has resulted in a vast improvement on the previously
dated mall. The introduction of new national stores with their latest
specifications has given life to a centre which could otherwise have become
obsolescent in the face of competition from the new regional mall in Witbank.
3.2.3 Vacancy factor and expense to income ratio
The vacancy factor of the portfolio at 30 September 2006 was 2,7% (2005: 1,4%).
The expense to income ratio at 30 September 2006 was 31,3% (2005: 32,3%) this
compares favourably to the Sapix benchmark of 32,87%. These continue to remain
favourable.
3.3 Valuations
In conformity with IFRS the portfolio is valued at each reporting date. The
portfolio was revalued by directors, using a discounted cash flow basis, at R2,2
billion resulting in a surplus of R210,3 million. This amount, net of deferred
tax, has been transferred to non-distributable reserve. In terms of the
Company"s accounting policy, 1/3 of the properties are valued independently on a
rotational basis. Broll CB Richard Ellis, who are registered with the South
African Council of Valuers were appointed as independent valuers. The valuation
of the portion of properties independently valued was 3% lower than that of the
directors.
3.4 Fair value of Put obligation and Call right
In conformity with IAS 39 the accounting statement on financial instruments, the
Put obligation and Call right that exists between S A Retail and Whirlprops 33
(Pty) Ltd has been fair valued at 30 September 2006.
Put obligation
The fair value of the Put obligation that Whirlprops 33 (Pty) Ltd has on S A
Retail at 30 September 2006 on the assumption that the Put obligation will be
exercised by Whirlprops 33 (Pty) Ltd in November 2011 is a shortfall of R18,6
million (8,0 cents per linked unit).
The fair value of the derivative liability has been increased from R17,7 million
to R18,6 million and this movement has been reflected through the Income
Statement. The increase in the fair value would have no impact on the
distributable income.
All the covenants relating to Whirlprops 33 (Pty) Ltd were maintained during the
period under review.
Call right
It is not the intention of management to exercise the Call right that it has on
Whirlprops 33 (Pty) Ltd in the future as doing so would result in a dilution of
the company"s earnings and net asset value. This is reviewed on an ongoing
basis.
3.5 Prospects
Management have once again given its full attention to proactively pursuing
value add development work which will enhance the profile and critical mass of
the portfolio and provide favourable earnings enhancing returns. The major
development projects referred to in this announcement are expected to contribute
positively to S A Retail"s earnings in 2007 and 2008.
Coupled with this investment activity, the Company is well positioned to take
advantage of continued consumer confidence and increased tenant trading
densities in the portfolio. Trading densities do however tend to be influenced
by movement in interest rates.
Management has made considerable progress towards concluding arrangements with
Black Economic Empowerment ("BEE") partners and expect to make announcements in
this regard, once agreements have been finalised.
The S A Retail board is confident that these partners have excellent Broad Base
BEE profiles, proven track records and will play a meaningful role in furthering
the Company"s growth and transformation objectives.
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4. DECLARATION OF DIVIDEND AND INTEREST PAYMENT NUMBER 11
Notice is hereby given that dividend number 11 of 0,01 cents per ordinary share
and interest of 37,46 cents per debenture totalling 37,47 cents per linked unit
have been declared in respect of the income distribution period 1 April 2006 to
30 September 2006.
Last date to trade cum distribution Friday 17 November 2006
Units will trade ex distribution Monday 20 November 2006
Record date to participate in the distribution Friday 24 November 2006
Payment of the dividend and debenture interest Monday 27 November 2006
Linked unit certificates may not be dematerialised or re-materialised between
Monday 20 November 2006 and Friday 24 November 2006, both days inclusive.
BY ORDER OF THE BOARD
S A RETAIL PROPERTIES LIMITED
1 November 2006
Registered office Transfer secretaries
Marriott at Kingsmead Computershare Investor Services 2004
(Proprietary) Limited
Kingsmead Office Park 70 Marshall Street,
Durban, 4001 Johannesburg, 2001
Postal Address: Postal address:
P O Box 207 P O Box 61051
Durban, 4000 Marshalltown, 2107
Tel: (031) 366 1111 Tel: (011) 370 7700
MARRIOTT EXCHANGE
CORPORATE PROPERTY SPONSORS
Property Asset Managers Sponsor
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Date: 01/11/2006 05:52:42 PM Produced by the JSE SENS Department
