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MCP
MCP
MICC Property Income Fund Limited - Unaudited Interim Consolidated Results
MICC Property Income Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2003/013404/06)
JSE CODE: MCP
NSX CODE: MCO
ISIN: ZAE000050175
("MICC")
UNAUDITED INTERIM CONSOLIDATED RESULTS
for the six months ended 30 September 2006
ABRIDGED GROUP INCOME STATEMENT
Unaudited Audited
6 months 6 months 18 months
ended ended ended
30 September 30 September 31 March
2006 2005 2006
R"000 R"000 R"000
Property revenue 79 393 94 431 287 936
Straight-line rental income
accrual (286) 2 739 5 629
Gross property revenue 79 107 97 170 293 565
Property expenses (27 643) (31 875) (98 328)
Net profit from property
operations 51 464 65 295 195 237
Administrative expenses (979) (721) (5 979)
Investment income 4 122 850 2 073
Operating profit before
finance costs 54 607 65 424 191 331
Finance costs (26 591) (28 732) (86 018)
Net profit before debenture
interest 28 016 36 692 105 313
Debenture interest (27 126) (30 140) (94 711)
Net profit before fair value
changes 890 6 552 10 602
Capital profit on disposal of
assets 36 172 - -
Fair value adjustments 10 875 43 025 201 139
Gross change in fair value of
investment properties 10 589 45 764 206 768
Straight-line rental income
adjustment 286 (2 739) (5 629)
Net profit before taxation 47 937 49 577 211 741
Taxation (4 134) (11 675) (58 010)
Net profit 43 803 37 902 153 731
Unaudited Audited
6 months 6 months 18 months
ended ended ended
30 September 30 September 31 March
2006 2005 2006
Cents Cents Cents
Reconciliation of net per per per
profit to headline linked linked linked
earnings R"000 unit R"000 unit R"000 unit
Attributable profit
after taxation 43 803 65.39 37 902 56.58 153 731 229.47
Adjusted for:
Gross change in fair
value of investment
properties (10 589)(15.81) (45 764)(68.31)(206 768)(308.64)
Straight-line rental
accrual net of
deferred taxation (286) (0.43) 2 312 3.45 3 997 5.97
Capital profit (36 172)(53.99) - - - -
Deferred taxation on
gross change in fair
value adjustment of
investment properties 3 492 5.21 10 196 15.22 58 523 87.36
Debenture interest -
current year 27 126 40.49 30 140 44.99 94 711 141.37
Headline earnings of
linked units 27 374 40.86 34 786 51.93 104 194 155.53
Straight-line rental
accrual net of
deferred taxation 286 0.43 (2 312) (3.45) (3 997) (5.97)
Retained income/
(Accumulated loss)
from prior year 3 234 4.83 664 0.99 (599) (0.89)
Available for
distribution 30 894 46.12 33 138 49.47 99 598 148.67
Distribution for the
period 27 132 40.5 30 140 45.0 94 732 141.4
Total number of linked
units in issue 66 992 698 66 992 698 66 992 698
Weighted average
number of linked
units in issue 66 992 698 66 992 698 66 992 698
Interest Dividend
distribution distribution
Distribution to MICC to linked to linked
Unitholders Total unitholders unitholders
Cents Cents
per per
linked linked
R"000 R"000 unit R"000 unit
Current year - First 27 132 27 126 40.5 6 -
ABRIDGED GROUP BALANCE SHEET
Unaudited Audited
At At At
30 September 30 September 31 March
2006 2005 2006
R"000 R"000 R"000
ASSETS
Non-current assets 899 964 1 094 822 954 053
Investment properties 846 034 1 039 134 901 919
Investment properties - at
fair value 856 243 1 050 981 910 312
Straight-line rental income
adjustment (10 209) (11 847) (8 393)
Other non-current assets 53 930 55 668 52 134
Straight-line rental income
asset 10 209 11 847 8 393
Furniture, fittings and computer
equipment 84 204 104
Goodwill 43 637 43 637 43 637
Current assets 72 647 28 379 30 615
Trade and other receivables 12 622 7 146 7 812
Taxation - 155 -
Cash and cash equivalents 60 025 21 078 22 803
Non-current assets held for sale 65 625 - 244 770
Investment properties 65 538 - 242 581
Investment properties at fair
value 65 625 - 244 770
Straight-line rental income
adjustment (87) - (2 189)
Straight-line rental income asset 87 - 2 189
Total assets 1 038 236 1 123 201 1 229 438
EQUITY AND LIABILITIES
Equity and reserves 250 555 181 948 244 208
Share capital 67 67 67
Share premium 32 373 32 373 32 373
Reserves 218 115 149 508 211 768
Non-current liabilities 727 825 890 892 930 353
Linked debentures and premium 301 467 301 467 301 467
Interest bearing borrowings 301 623 502 445 502 445
Deferred taxation 124 735 86 980 126 441
Current liabilities 59 856 50 361 54 877
Trade and other payables 20 740 14 301 13 171
Tenant deposits 6 126 5 913 6 869
Taxation payable 5 858 - 670
Linked unitholders for
distribution 27 132 30 147 34 167
Total equity and liabilities 1 038 236 1 123 201 1 229 438
ABRIDGED GROUP CASH FLOW STATEMENT
Unaudited Audited
6 months 6 months 18 months
ended ended ended
30 September 30 September 31 March
2006 2005 2006
R"000 R"000 R"000
CASH (UTILISED BY)/FLOWING
FROM OPERATING ACTIVITIES (3 846) 1 809 8 098
Cash generated from operations 52 807 58 331 182 428
Investment and other income 4 122 850 2 073
Finance costs (26 591) (28 732) (86 018)
Distributions paid (34 167) (27 801) (84 745)
Taxation paid (17) (839) (5 640)
CASH FLOW GENERATED BY/
(UTILISED IN) INVESTING
ACTIVITIES 241 890 (2 330) (6 938)
CASH FLOW FROM FINANCING
ACTIVITIES (200 822) - -
Net increase/(decrease) in cash
and cash equivalents 37 222 (521) 1 160
Cash and cash equivalents at the
beginning of the year 22 803 21 599 21 643
Cash and cash equivalents at the
end of the period 60 025 21 078 22 803
ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 September 2006
Non-
Distri-
Share Share butable Retained
Capital Premium Reserves income Total
R"000 R"000 R"000 R"000 R"000
Restated balance at
31 March 2005 67 32 373 109 614 1 999 144 053
Balance at 31 March
2005 as previously
reported 67 32 373 124 636 1 594 158 670
Change in accounting
policy - deferred
taxation on
revaluation of
investment properties - - (14 617) - (14 617)
Change in rate of
taxation applied - - (405) 405 -
Net profit for the
period - - - 37 902 37 902
Transfer to non-
distributable reserves - - 35 135 (35 135) -
Dividend distribution - - - (7) (7)
Balance at 30 September
2005 67 32 373 144 749 4 759 181 948
Restated balance at
30 September 2005 67 32 373 144 749 4 759 181 948
Balance at 30 September
2005 as previously
reported 67 32 373 164 464 3 829 200 733
Change in accounting
policy - deferred
taxation on revaluation
of investment properties - - (19 715) - (19 715)
Change in accounting
policy - straight-line
rental income accrual - - - 930 930
Net profit for the
period - - - 64 030 64 030
Prior year consolidation
adjustments - - - (1 768) (1 768)
Transfer to non-
distributable
reserve - - 63 785 (63 785) -
Dividend distribution - - - (2) (2)
Balance at 31 March 2006 67 32 373 208 534 3 234 244 208
Balance at 31 March 2006 67 32 373 208 534 3 234 244 208
Net profit for the
period - - - 43 803 43 803
Net change in fair
value of investment
properties - - 7 097 (7 097) -
Net change in fair value
of investment
properties sold - - (37 450) - (37 450)
Capital profit on sale
of fellow subsidiary
transferred to non-
distributable reserve - - 548 (548) -
Net realised capital
profit on sale of
investment properties
transferred to non-
distributable reserve - - 35 623 (35 623) -
Dividend distribution - - - (6) (6)
Balance at 30 September
2006 67 32 373 214 352 3 763 250 555
COMMENTS
1. BASIS OF PREPARATION
The unaudited abridged interim financial statements for the six months ended 30
September 2006, as well as the comparative information, have been prepared in
terms of International Financial Reporting Standards (IFRS). The results also
comply with IAS34 (Interim Financial Reporting) and the relevant sections of the
South African Companies Act 1973, as amended.
2. FINANCIAL RESULTS FOR MICC
MICC"s net profit before tax, debenture interest and fair value adjustment
amounted to R 28,0 million for the six months ended 30 September 2006 compared
to the R 36,7 million for the same period in the previous year, a decrease of
24%.
Property revenue decreased due to the loss of income as a result of the sale of
numerous buildings. This reduction in revenue income will be partly offset by
savings in finance costs. The overall vacancy of the MICC portfolio as a
percentage of gross rentals has decreased from 6.1% at 30 September 2005 to 5.0%
at 30 September 2006.
SUMMARY OF FINANCIAL PERFORMANCE
30 September 30 September 31 March
2006 2005 2006
Net asset value attributable
to equity holders of MICC
per linked unit 824 cents 722 cents 815 cents
Distribution per linked unit 40.5 cents 45.0 cents 141.4 cents
(6 months) (6 months) (18 months)
Loan to value ratio 32.7% 47.8% 43.5%
The Board has approved an interim distribution of 40,5 cents per linked unit for
the period from 1 April 2006 to 30 September 2006, a decrease of 10% over the
comparable period.
3. ACQUISITION OF MICC PROPERTY INCOME FUND LIMITED ("MICC") BY VUKILE PROPERY
FUND LIMITED
The company issued a SENS announcement on 4 May 2006, advising that a linked
unitholder owning 9 825 MICC linked units (representing 0.01% of MICC"s total
issued capital), filed an application with the High Court on Friday 28 April
2006 opposing Vukile"s invoking of section 440K. Vukile intends opposing such
application. A date for the hearing of the application has not yet been
determined. Accordingly, the listing of MICC"s linked units on the JSE and the
Namibian Stock Exchange was not terminated on Friday, 5 May 2006, but will
continue to be suspended until further notice.
Vukile currently owns 98.9% of MICC"s issued linked units.
4. BORROWINGS
The salient terms of the bank funding are as follows:
DETAILS OF INTEREST BEARING BORROWINGS - 31 March 2006
Fixed Rate Loans
Nedbank
Amount R251 million
Date of repayment November 2011
Term 5 Years
Fixed Interest Rate 10.66 %(NACQ)
Repayment Terms Interest only, monthly in arrears.
Capital on maturity
ABSA Bank
Facility R251 million
Amount R188.5 million (current draw down:
R50.6 million)
Date of repayment July 2011
Term 5 Years
Variable Interest Rate 3 month JIBAR plus 1.4%
Repayment Terms Interest only, monthly in arrears.
Capital on maturity
Interest rate swap
In July 2006 the group had entered into interest rate swaps whereby the variable
rate loans had been converted to fixed rate 5 year debt as follows:
Swap 1 Swap 2 Total
Nominal value 100 88.5 188.5
Swap period 5 years 5 years
Maturity date July 2011 July 2011
Rate (NACQ) 10.40% 10.36%
ABSA Bank
Amount R62.7 million (current draw down: R Nil)
Date of repayment July 2011
Variable Interest Rate Prime less 1.5%
Swaption
Option style European call option
Option seller ABSA Bank Limited
Notional amounts R62.7 million
Strike rate (NACQ) 8.70%
Premium R533,300
Exercise date 11 July 2007
Maturity date July 2008
Financial Covenants
Loan to investment property
valuation ratio 50% (currently 32.7%)
Interest cover ratio 1.8:1 times(currently 2.1:1)
Security Secured by way of mortgage bonds over
the investment properties
5. PROPERTY PORTFOLIO
5.1 The MICC property portfolio currently comprises 27 properties with a gross
lettable area of 286 816m2.
5.2. DISPOSALS
Purchase Price Sale Price Expected/actual
Name of Property R000 R000 transfer date
Relyant House 5 500 7 177 November 2006
Halifax Road 19 973 22 290 November 2006
Randburg Trustbank Centre 17 100 18 390 November 2006
Pietermaritzburg Heritage
House 12 600 11 565 November 2006
Bethlehem Maluti Square 10 100 6 203 November 2006
Total 65 273 65 625
6. VALUATION OF PORTFOLIO
The MICC portfolio has been valued by the directors of MICC and Sanlam
Properties (Proprietary) Limited, at R918.95 million as at 30 September 2006.
This represents an increase of 1.4% over the valuation of the comparable
properties at 31 March 2006.
7. SEGMENTAL ANALYSIS
Industrial Commercial Retail Corporate Total
R000 R000 R000 R000 R000
Group income for
the six months
ended 30 September
2006
Rental income 9 073 12 781 57 539 - 79 393
Straight-line income
adjustment (33) (46) (207) - (286)
Property expenses (2 996) (5 875) (18 772) - (27 643)
Net profit from
property operations 6 044 6 860 38 560 - 51 464
Group balance sheet at
30 September 2006
Non-current assets 83 595 60 415 755 870 84 899 964
Non-current assets
held for sale 29 467 36 158 - - 65 625
Current assets 8 184 6 991 54 715 2 757 72 647
Current liabilities 3 251 2 777 21 736 32 092 59 856
Segment assets and liabilities
Segment assets include all operating assets and consist principally of
investment properties, receivables and cash. Assets not directly attributable to
a particular segment are allocated to the corporate segment. Segment liabilities
include all operating liabilities of a segment and consist principally of
outstanding accounts. Segment assets and liabilities do not include goodwill,
deferred and other taxes.
8. SHARE CAPITAL AND DEBENTURES
Each linked unit comprises 1 share of 0.1 cent (and a share premium of 49.9
cents) linked to one debenture of R 4.50. Interest payable on one debenture is
4 500 times greater than the dividend payable per share.
The company had 66 992 698 linked units in issue at 30 September 2006.
9. PAYMENT OF DEBENTURE INTEREST AND DIVIDEND
Notice is hereby given of an interim distribution amounting to 40.5 cents per
unit, for the six month period to 30 September 2006. The distribution comprises
interest on debentures of 40.49 cents per unit and a dividend of 0.01 cents per
unit.
Last date to trade cum distribution Friday, 8 December 2006
Linked units trade ex distribution Monday, 11 December 2006
Record date for unitholders to
participate in the distribution Friday, 15 December 2006
Payment of distribution to unitholders Monday, 18 December 2006
Linked unit certificates may not be dematerialised or re-materialised between
Monday, 11 December 2006 and Friday, 15 December 2006, both days inclusive.
On behalf of the Board
Hardie Joubert Gerhard van Zyl
Chairman Director
13 November 2006
Roodepoort
Sponsor: Bridge Capital Services (Pty) Limited, Woodmead, Johannesburg
Namibian Sponsor: Irwin, Jacobs, Green & Associates (Pty) Limited, Member of NSX
Non-executive directors: SG Joubert (Chairman), AB du Toit, WJ Kruger, G van
Zyl, MJ Potts
Registered office: 2nd floor Meersig Building, Constantia Boulevard, Constantia
Kloof, 1709.
Company Secretary: EL Yates
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited,
Marshalltown, Johannesburg.
Investor and media relations: Contact Helen McKane on vukile@dpapr.com, or Tel:
011 728-4701.
Date: 13/11/2006 02:00:13 PM Produced by the JSE SENS Department
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