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DIV
DIV
DIV - Diversified - Unaudited interim results and distribution
announcement for the six months to 31 December 2006
Diversified Property Fund Limited
Incorporated in the Republic of South Africa
Reg no 2005/029685/06
Share code DIV ISIN ZAE000072369
"Diversified" or "the company"
Unaudited interim results and distribution announcement for the six
months to 31 December 2006
DIRECTORS` COMMENTARY
A distribution of 30,96 cents per linked unit was declared for the six
months to 31 December 2006. Annualised, this constitutes a pleasing
16,15% growth over the distribution of 39,98 cents per linked unit for
the 9 months to 30 June 2006. This growth can be attributed primarily to
the strong performance of the industrial portfolio and lower interest
cost from the reduction in borrowings. A further contributing factor is
the disposal of non-core assets at lower yields than the yields on
acquisitions made during the period. This is despite the fact that the
properties acquired are of a better quality than the properties sold.
ACQUISITIONS AND DEVELOPMENTS
Pick `n Pay New Redruth
This 11 400 m2 convenience and value centre was acquired at a yield of
9,5%. The centre is fully let and all tenants apart from Meltz and Black
Steer are trading. These tenants are scheduled to open in April 2007.
The anchors, Pick `n Pay and Woolworths corporate stores, have advised
that their stores are trading well ahead of budget.
Montague Business Park
Diversified has acquired a 25% stake in this 61,5 ha site in partnership
with Improvon Properties and Acucap Properties. Transfer of the land was
effected in December 2006. Plans for the layout of the site have been
completed and submitted to Council. The infrastructure development is
scheduled to commence in April 2007.
Market Square Grahamstown
Council approval was obtained and construction of the 2 000 m2 GLA
extension, let to JET stores, Sheet Street, PEP stores and Clear Vision
Optometrist, has commenced. Completion is scheduled for
September 2007.
Isando Business Park
The re-development of the Allied building, let to Maxiprest Tyres in
terms of a 7-year lease, was completed within budget in December 2006.
Sterkspruit Plaza
A 68% interest in this 8,7 ha site was acquired at a cost of
R4,3 million. Retail rights have been approved for 70% of the site and
approval of rights for the remaining portion is imminent. Tenant
interest is strong and plans are currently being drawn up for an
18 000 m2 shopping centre.
FORTRESS ASSET MANAGERS
Fortress Asset Managers, a wholly owned subsidiary of Diversified,
obtained approval from the Financial Services Board to establish a
management company to manage an international unit trust, the "Fortress
REIT Fund". This fund invests mainly in the international REIT market.
The unit trust attracted investments totalling
R39 million (including R10 million from Diversified) since the launch in
November 2006. Two hedge funds were launched in December 2006 and
immediately attracted R35 million in investments, including
R10 million from Diversified. Although there is a strong demand for
this product no further investments will be accepted at this stage.
Diversified and Madison Property Fund Managers have made application to
the JSE Limited and the Financial Services Board for the listing of a
property based Exchange Traded Fund (ETF) to be listed on the JSE. It is
anticipated that the ETF will be listed within the next six months.
DISPOSALS
Erf 114 Spartan (a portion of Steel Road) was sold for R5,6 million
against a book value of R3,8 million. Transfer was effected after the
interim reporting period. Ingwe Road and Crown Minis were sold for R9,5
million and R9,3 million as against book values of R6,4 million and R7,7
million respectively. Negotiations are currently in progress for the
sale of the remainder of Steel Road as well as the Edendale and Forge
Road properties.
PROSPECTS
Diversified will continue to dispose of smaller properties and to re-
invest the proceeds in new retail developments. In addition to the
current pipeline of developments, negotiations are at an advanced stage
for the acquisition of stakes in further retail developments.
Diversified remains well positioned for growth during the remainder of
the 2007 financial year.
Consolidated income statements
Unaudited Audited
6 months 9 months
ended ended
31 Dec 2006 30 Jun 2006
R`000 R`000
Net rental and related income 47 561 61 530
Gross rental income 67 411 78 803
Amortised lease escalations 3 063 5 954
Property operating expenses (22 913) (23 227)
Total distribution income from 735 1 712
investments
Distribution income from investments 735 1 712
Profit on disposal of investments and
investment property 1 608 679
Profit on disposal of investment 48 -
property
Profit on disposal of investments 1 560 679
Fair value gains on investments and
investment property 47 937 185 226
Fair value gain on investment property 44 177 191 229
Fair value adjustment resulting from
amortised lease escalations (3 063) (5 954)
Fair value gain/(loss) on investment 6 823 (49)
Administrative expenses (979) (1 524)
Other expenses (10 925) (5 172)
Listing costs - (1 365)
Profit before net finance costs 85 937 241 086
Net finance costs (42 958) (50 026)
Finance income
Interest from the purchase trust 3 323 3 621
Fair value adjustment on interest rate
swaps - 2 513
Interest on linked units issued cum
distribution 3 474 3 236
Finance costs
Interest on borrowings (5 045) (14 025)
Fair value adjustment on interest rate
swaps (1 486) -
Interest to linked debenture holders
- interim (43 224) (12 492)
- final - (32 879)
Profit before income tax 42 979 191 060
Income tax expense (13 882) (55 194)
Profit for the period attributable to
equity holders 29 097 135 866
Basic earnings per share (cents) 20,84 129,46
Basic earnings per linked unit (cents) 51,80 172,69
Headline earnings per linked unit 26,63 44,63
(cents)
Reconciliation of profit for the period to headline earnings and
distribution
Unaudited Audited
6 months 9 months
ended ended
31 Dec 2006 30 Jun 2006
R`000 R`000
Basic earnings (shares) 29 097 135 866
Interest to linked debenture holders 43 224 45 371
Basic earnings (linked units) 72 321 181 237
Adjusted for: (35 139) (134 402)
- fair value gain on investment (44 177) (191 229)
property
- fair value gain/(loss) on (6 823) 49
investments
- profit on disposal of investment (48) -
property
- profit on disposal of investments (1 560) (679)
- impairment of goodwill 3 587 1 918
- income tax effect 13 882 55 539
Headline earnings 37 182 46 835
Fair value adjustment on interest rate
swaps 1 486 (2 513)
Listing costs - 1 365
Other 4 556 (316)
Distributable income 43 224 45 371
Less: Distribution declared (43 224) (45 371)
Income not distributed - -
Diluted earnings per share is the same as earnings per share as there
are no dilutory instruments in issue.
Basic earnings per share, basic earnings per linked unit and headline
earnings per linked unit are based on the weighted average of
139 611 389 (30 June 2006: 104 949 441) linked units in issue.
A distribution of 30,96 cents per linked unit will be paid to
unitholders on 5 March 2007.
Consolidated balance sheets
Unaudited Audited
31 Dec 2006 30 Jun 2006
R`000 R`000
ASSETS
Non-current assets 1 244 388 1 039 493
Investment property 1 054 737 901 095
Investment property under development 69 763 47 634
Investments 39 986 25 553
Loans to the purchase trust 79 902 65 211
Current assets 41 459 47 342
Investment property available-for-sale 24 316 35 948
Trade and other receivables 17 129 11 316
Cash and cash equivalents 14 78
Total assets 1 285 847 1 086 835
EQUITY AND LIABILITIES
Total equity attributable to equity 252 879 191 354
holders
Share capital 1 396 1 215
Share premium 86 501 54 276
Non-distributable reserves 164 982 135 863
Retained earnings - -
Liabilities
Total liabilities 1 032 968 895 481
Non-current liabilities 964 967 849 608
Linked debentures 670 135 582 938
Interest-bearing borrowings 218 828 207 299
Deferred tax 76 004 59 371
Current liabilities 68 001 45 873
Trade and other payables 24 323 13 325
Linked debenture interest payable 43 240 32 885
Income tax payable 438 (337)
Total equity and liabilities 1 285 847 1 086 835
Abridged statements of cash flows
Unaudited Audited
6 months 9 months
ended ended
31 Dec 2006 30 Jun 06
R`000 R`000
Cash (outflow)/inflow from operating
activities (178) 44 207
Cash outflow from investing activities (131 041) (822 199)
Cash inflow from financing activities 131 155 778 070
Movement in cash and cash equivalents (64) 78
Cash and cash equivalents at beginning
of period 78 -
Cash and cash equivalents at end of 14 78
period
Cash and cash equivalents consist of:
Current accounts 14 78
Consolidated statements of changes in equity
Non-
distri-
Audited Issued Share butable Retained
for the 9 months ended capital premium reserves earnings Total
30 June 2006 R`000 R`000 R`000 R`000 R`000
Balance at 1 October
2005
Issue of units
- Issue of 88 559 007
units on
6 October 2005 886 16 571 17 457
- Issue of 7 407 500
units on
4 November 2005 74 3 998 4 072
- Issue of 795 000
units on
15 November 2005 8 429 437
- Issue of 22 380 000
units on
22 March 2006 224 25 777 26 001
- Issue of 2 319 000
units on
7 April 2006 23 2 922 2 945
Share premium discount 4 582 4 582
Units acquired by The
Diversified
Unit Purchase Trust (3) (3)
Profit on units issued
by The Diversified
Unit Purchase Trust (3) (3)
Profit for the year 135 866 135 866
Transfer to reserves 135 863 (135 863) -
Balance at 30 June
2006 1 215 54 276 135 863 - 191 354
Unaudited
for the six months
ended 31 December 2006
Issue of units
- Issue of 14 705 882
units on
17 October 2006 147 26 564 26 711
- Issue of 3 445 000
units on
16 November 2006 34 5 658 5 692
Issue of units held by
The Diversified Unit
Purchase Trust 3 3
Profit on units issued
by The Diversified
Unit Purchase Trust 22 22
Profit for the period 29 097 29 097
Transfer to reserves 29 097 (29 097) -
Balance at 31 December
2006 1 396 86 501 164 982 - 252 879
Non-distributable reserves comprise those profits and losses that are
not distributable to unitholders and are made up of mainly revaluation
adjustments on investment assets, profits or losses on the disposal of
investments and profits and losses resulting from activities other than
the group`s investment in property and investments.
NOTES
1. PREPARATION
This interim report has been prepared in accordance with International
Financial Reporting Standards (IFRS) and the requirements of the
Companies Act (Act 61 of 1973) and was not audited or reviewed by the
company`s auditors.
2. SUMMARY OF FINANCIAL PERFORMANCE
31 Dec 06 30 Jun 06 31 Dec 05
Net asset value per linked
unit 661 cents 638 cents 499 cents
Distribution per linked unit 30,96 cents 27,07 cents 12,91 cents
Gearing ratio* 21,1% 23,9% 34,9%
Units in issue 139 611 389 121 460 507 96 761 507
*The gearing ratio is calculated by dividing the total gearing by the
investment in non-current assets excluding loans to the purchase trust.
3. GEARING
Amount Interest % of
Expiry R`million rate borrowings
October 2008 50,0 9,28% 20,4%
October 2010 50,0 9,56% 20,4%
September 2012 50,0 10,36% 20,4%
Hedged borrowings 150,0 9,73% 61,2%
Prime linked borrowings# 95,3 10,80% 38,8%
Total gearing## 245,3 10,15% 100,0%
# Based on the current prime lending rate of 12,50%
## Total gearing comprises the level of external interest-bearing
borrowings should current liabilities be liquidated and current assets
be realised.
Gearing is calculated as follows:
- Interest-bearing borrowings 218,8
- Current liability 68,0
- Current assets (41,5)
Total gearing 245,3
4. LEASE EXPIRY PROFILE AND SECTORAL COMPOSITION
Lease expiry (based on gross rentals)
Vacant 5,5%
Dec 07 5,9%
Dec 08 11,8%
Dec 09 20,7%
Dec 10 19,8%
Dec 11 10,5%
>Dec 11 25,8%
SECTORAL COMPOSITION BY PROPERTY VALUE
Commercial 4,7%
Retail 56,9%
Industrial 38,4%
5. PAYMENT OF INTERIM DISTRIBUTION
The board has approved and notice is hereby given of an interim
distribution (distribution no 3) of 30,96 cents per linked unit for the
six months ended 31 December 2006.
The last date to trade linked units cum distribution will be Friday, 23
February 2007 and trading will commence ex distribution on Monday, 26
February 2007. The record date to participate in the distribution will
be Friday, 2 March 2007.
Linked unit certificates may not be dematerialised or rematerialised
between Monday, 26 February 2007 and Friday, 2 March 2007, both days
inclusive.
Payment of the distribution will be made to linked unitholders on
Monday, 5 March 2007. In respect of dematerialised linked unitholders,
the distribution will be transferred to the Central Securities
Depository Participant accounts/broker accounts on Monday, 5 March 2007.
Certificated linked unitholders` distribution payments will be posted on
or about Monday, 5 March 2007.
By order of the board
David Lewis Jacques van Wyk
Managing director Financial director
Johannesburg
7 February 2007
Directors: Mike Tshishonga (Chairman)# Hayden Bamford Des de Beer
David Lewis Holden Marshall# Gugu Mazibuko# Marius Muller
David Savage# Manosagaran Subramanien# Nomatembo Tambo#
Andrew Teixeira Jacques van Wyk Djurk Venter#
Company secretary: Abraham Bornman #Independent non-executive
Business address: 4th Floor Rivonia Village Rivonia Boulevard
Rivonia 2191
Transfer office: Link Market Services South Africa (Pty) Ltd
11 Diagonal Street Johannesburg 2001
Date: 07/02/2007 17:37:13 Produced by the JSE SENS Department.
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