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IFR
IFR
IFR -iFour -Unaudited Interim Financial Report:Six Months Ended 31 December 2006
iFour Properties Limited
(Incorporated in the Republic of South Africa)
(Registration number 2001/016118/06)
Share code: IFR & ISIN: ZAE000039236
("iFour" or "the company")
UNAUDITED INTERIM FINANCIAL REPORT
FOR THE SIX MONTHS ENDED 31 DECEMBER 2006
- 8,4% INCREASE IN INTERIM DISTRIBUTION PER LINKED UNIT
- OCCUPANCIES OF 98,3%
- Portfolio REVALUED UPWARDS by 7,6% to R2,5 BILLION
INVESTORS` DISTRIBUTABLE EARNINGS
This investor information is aimed at disclosing the basis on which the
distribution was calculated.
Restated
Six months Six months Audited
ended ended Year ended
R`000 31 Dec 06 31 Dec 05 30 Jun 06
Net profit for the period 132 751 92 925 210 935
Non cash flow adjustments:
Revaluation of investment (176 834) (145 902) (248 748)
properties
Net (profit)/loss on (10 211) 737 487
disposal of investment
properties
Movement in the fair value
of derivative
financial instruments 267 9 307 (43 821)
Movement in the fair value
of financial assets at fair
value through profit or loss 1 133 - (201)
Administration expenses - 555 554 1 110
debenture costs amortised
Interest paid - 1 716 1 716 3 433
securitisation expenses
amortised
Amortisation of deemed (1 591) (1 591) (3 182)
debenture premium
Taxation - deferred 52 640 42 312 78 975
Debenture interest 67 844 62 567 131 178
distributed to unitholders
Taxation - normal and - - 1 012
capital gains
Linked unitholders 68 270 62 625 131 178
distributable earnings
Weighted average linked 150 764 924 150 764 924 150 764 828
units and shares in issue
Linked unitholders
distributable earnings
per linked unit (cents) 45,28 41,54 87,01
Distribution per linked unit 45,00 41,50 87,00
- declared (cents)
Number of linked units in 150 764 924 150 764 924 150 764 924
issue
RETURN TO UNITHOLDERS
12 months 12 months
ended ended
31 Dec 06 31 Dec 05
Opening unit price - 1 January (cents) 1 105 795
Closing unit price - 31 December (cents) 1 185 1 105
Capital return (cents) 80 310
Income return (cents) 90,5 84,5
Total return (cents) 170,5 394,5
Total return for the period (%) 15,4% 49,6%
Interim period high (cents) 1 225 1 105
Interim period low (cents) 940 900
COMMENTARY ON RESULTS
1. Distribution to Unitholders
The directors are pleased to announce that the distribution has been
increased from 41,5 cents in the previous interim period to 45 cents for
the six months to 31 December 2006.
This 8,4% (2005: 6,4%) increase in distribution on the previous
comparable period is in line with the company`s strategy and history of
delivering sustainable growth in distribution to its unitholders.
The total return delivered to unitholders for the 12-month period ended
31 December 2006 was 15,4%.
2. Financial Review
Revenue increased by 12,8% to R177,6 million compared to the previous
interim reporting period. This increase is higher than the average
rental escalations due to property acquisitions and capital projects.
A profit of R2 million was realised through the disposal of Paramount
Properties` linked units, which were acquired as part consideration from
the sale of a property in the previous year.
The cost to income ratio of the portfolio has increased from 23,4% to
25,7%. This is attributable to the increased retail component of the
portfolio and additional provisions for the impairment of receivables.
Interest paid increased by 13,9% to R64,3 million mainly as a result of
the acquisition of properties, capital projects and the increase in the
interest rates.
3. Portfolio Review
Property Portfolio Reconciliation
No. of Value Area
Properties
R Million m2
30 June 2006 104 2 398,0 544 053
Acquisitions - 26,9 2 310
Disposals (11) (91,6) (38 820)
Capital Projects - 4,3 976
Revaluation December - 176,8 -
2006
31 December 2006 93 2 514,4 508 519
Acquisitions
During the six months to 31 December 2006, the 2 310 m2 second phase of Palm
Springs Shopping Centre was acquired by the company at a cost of R26,9
million. This strengthened the shopping centre by the inclusion of new
national tenants: Standard Bank, First National Bank, Capitec Bank,
Lewis Stores and Best Electric.
Disposals
In line with the company`s strategy of maintaining the quality of the portfolio
11 properties were disposed of for R101,8 million generating a book
profit of R10,2 million and a cash profit of R25,3 million. These
properties no longer met the company`s long-term investment criteria.
Capital Projects
This expenditure of R4,3 million relates mainly to the completion of the Grand
Central Shopping Centre expansion to accommodate Jet and the upgrade of
Morone Mall Shopping Centre in Burgersfort.
Revaluation
The value of the portfolio appreciated by R176,8 million from June 2006 which
represents a 7,6% increase in the portfolio. This increase resulted from
the continued improvement in property market fundamentals and the
underlying quality of the company`s properties.
Future acquisitions and disposals
The company purchased 2 Drakensberg Road effective 1 January 2007 for R30,6
million. This 7 076 m2 light industrial warehouse consisting of seven
units is situated in Longmeadow Business Estate, Gauteng. The building
is fully tenanted with two leases expiring in April 2008 and the balance
extending to
June 2010.
The company has disposed of three properties where transfer is still pending,
being 24 Sturdee, Kathea House and Kent Road Three. These properties
were sold for R23,4 million.
Occupancies
Occupancy levels increased from 97,3% at 30 June 2006 to 98,3% at 31 December
2006. The high occupancy level is expected to continue.
Lease expiry profile
The lease expiry profile of the company continues to look favourable. 29% of
leases expire beyond December 2010 and no more than 18% of leases expire
in any earlier period. This is in line with the company`s strategy of
having no more than 20% of leases expiring in any one year.
4. Borrowings
The loan to value ratio of 43,8% remains well within the company`s
gearing limit of 55%. This provides the opportunity to acquire more
properties without having to issue additional linked units. The hedging
profile has not changed significantly since June 2006 with 72,7% of
borrowings being fixed beyond September 2009. In addition, the company
has entered into short-term interest rate swap agreements for a portion
of it`s borrowings to minimise the impact of further rate increases to
year end.
5. NIB Finance Structure
Three properties, purchased as part of a portfolio of properties
acquired on the listing of iFour, had been financed by way of a funding
structure with NIB and Nedbank. The properties have appreciated by R52
million since their acquisition to a current value of R141 million.
The company has been advised by Nedbank that SARS intend to assess the
transactions in a manner contrary to that initially envisaged. This may
result in an additional cost to iFour. The directors based on the
information available are of the opinion that the above is not expected
to have a material impact on future distributions of the company.
6. Prospects
The continued strength of the property market should enable iFour to
expand its property portfolio and ensure that continued sustainable
growth in distributions is delivered to unitholders. iFour will continue
to pursue opportunities for expansion of it`s investments in retail
centres in outlying suburbs and rural towns in terms of its stated
strategy. Several acquisitions are close to realisation.
7. Distribution Declaration per Linked Unit
Notice is hereby given that a distribution of 45,00 cents (2005: 41,50
cents) has been declared and approved by the board of directors for the
period ended 31 December 2006. Please refer to the "Investors
distributable earnings" insert for the basis of the calculation of
distributable earnings.
On behalf of the board
J J Groenewald 2nd Floor,
Secretary 382 Jan Smuts Avenue Craighall 20 February 2007
DISTRIBUTION TIMETABLE
Event Date
a. Last date to trade cum distribution Thursday, 29 March 2007
b. Linked units trade ex distribution Friday, 30 March 2007
c. Record date for unitholders to Thursday, 5 April 2007
participate in the distribution
d. Linked unit certificate may not be Friday, 30 March 2007
dematerialised to
or rematerialised between (both days Thursday, 5 April 2007
inclusive)
e. Payment of distribution to Tuesday, 10 April 2007
unitholders
CONDENSED CONSOLIDATED GROUP INCOME STATEMENT
Restated Audited
Six months Six months Year
ended ended ended
R`000 31 Dec 06 31 Dec 05 30 Jun 06
Revenue 177 643 157 497 324 474
Straight-line operating 4 407 (857) 9 743
lease adjustment
Other income 2 151 358 2 116
Net property portfolio costs (45 582) (36 816) (76 338)
Administrative expenses (6 605) (5 833) (11 496)
Operating profit 132 014 114 349 248 499
Net revaluation of 172 427 146 759 239 005
investment properties
Attributable to straight- (4 407) 857 (9 743)
line operating lease
adjustment
Revaluation of investment 176 834 145 902 248 748
properties
Net profit/(loss) on 10 211 (737) (487)
disposal of investment
properties
Earnings before financing 314 652 260 371 487 017
costs and taxation
Interest received 2 722 1 627 4 773
Interest paid (64 330) (56 478) (117 774)
Movement in the fair value
of derivative
financial instruments (267) (9 307) 43 821
Movement in the fair value
of financial assets at
fair value through profit or (1 133) - 1 081
loss
Amortisation of deemed 1 591 1 591 3 182
debenture premium
Debenture interest (67 844) (62 567) (131 178)
distributed to unitholders
Earnings before taxation 185 391 135 237 290 922
Taxation - deferred (52 640) (42 312) (78 975)
Taxation - normal and - - (1 012)
capital gains
Earnings for the period 132 751 92 925 210 935
Reconciliation between
earnings and headline
earnings
R`000
Earnings for the period 132 751 92 925 210 935
Adjusted for:
Net revaluation of (122 423) (104 199) (169 694)
investment properties net of
taxation
Net (profit)/loss on
disposal of investment
properties net of taxation (8 730) 630 416
Amortisation of listing,
debenture, mortgage and
securitisation expenses 2 271 2 270 4 543
Headline profit/(loss) for 3 869 (8 374) 46 200
shareholders
Debenture interest 67 844 62 567 131 178
distributed to unitholders
Headline earnings for linked 71 713 54 193 177 378
unitholders
Earnings per linked unit 133,05 103,14 226,92
(cents)
Headline earnings per linked 47,57 35,95 117,65
unit (cents)
Diluted earnings per linked 133,05 103,14 226,92
unit (cents)
Diluted headline earnings
per linked unit based on
150 764 924 units (2005: 150 47,57 35,95 117,65
764 924 units) (cents)
Earnings per share (cents) 88,05 61,64 139,91
Diluted earnings per share 88,05 61,64 139,91
Headline profit/(loss) per 2,57 (5,55) 30,64
share (cents)
Diluted headline
profit/(loss) per share
based on
150 764 924 units (2005: 150 2,57 (5,55) 30,64
764 924 units) (cents)
SEGMENTAL INFORMATION
Primary segment
R`000 Retail Industrial Office Other Corporate Total
Revenue 70 264 52 990 50 403 3 986 - 177 643
Straight-line
operating
lease
adjustment 3 068 292 1 076 (29) - 4 407
Segment
results
Earnings
before
financing
costs and 135 986 92 769 81 492 8 859 (4 454) 314 652
taxation
Segment revenue and expenses
Revenue and expenses that are directly attributable to a segment are allocated
to those segments. Items not directly attributable to a segment are
allocated to the corporate segment.
CONDENSED CONSOLIDATED GROUP BALANCE SHEET
Restated Audited
R`000 31 Dec 06 31 Dec 05 30 Jun 06
ASSETS
Non-current assets
Investment properties 2 408 389 2 172 612 2 212 548
Straight-line 82 618 67 611 78 211
operating lease
adjustment
Investment properties 2 491 007 2 240 223 2 290 759
at fair value
Equipment, furniture 94 94 77
and fittings
Loans to Unit Purchase 15 328 16 202 16 160
Trust participants
Current assets
Investment properties 23 460 - 107 273
held for sale
Financial assets at - - 5 102
fair value through
profit or loss
Accounts receivable - - 36 000 -
disposals
Trade and other 31 515 27 372 34 556
receivables
Cash and cash 68 985 13 613 53 533
equivalents
Total assets 2 630 389 2 333 504 2 507 460
EQUITY
Capital and reserves
Share capital and 12 765 9 583 10 819
premium
Retained earnings 433 455 185 876 302 295
LIABILITIES
Non-current
liabilities
Debenture capital and 737 846 739 917 738 882
premium
Borrowings 749 959 958 337 1 104 503
Derivative financial 44 288 97 149 44 021
instruments
Deferred income tax Note 172 389 83 085 119 749
liabilities 3
Current liabilities
Borrowings 350 189 9 796 57 508
Trade and other 61 492 58 889 59 946
payables
Accounts payable for - 127 424 -
acquisition
Current income tax - 786 1 012
liabilities
Unitholders for 68 006 62 662 68 725
distribution
Total equity and 2 630 389 2 333 504 2 507 460
liabilities
Net asset value per 785 620 698
linked unit (cents)
Net asset value per 296 130 208
share (cents)
CONDENSED CONSOLIDATED GROUP CASH FLOW STATEMENT
Restated Audited
Six months Six months Year
ended ended ended
R`000 31 Dec 06 31 Dec 05 30 Jun 06
Cash utilised in operating (7 803) (11 234) (12 407)
activities
Cash inflow/(outflow) in 86 479 (23 552) (173 669)
investing activities
Cash (outflow)/inflow from (63 224) (7 679) 183 531
financing activities
Increase/(decrease) in cash 15 452 (42 465) (2 545)
and cash equivalents
Cash and cash equivalents at
the beginning
of the period 53 533 56 078 56 078
Cash and cash equivalents at
the end
of the period 68 985 13 613 53 533
CONDENSED CONSOLIDATED GROUP STATEMENT OF CHANGES IN EQUITY
Share Share Retained
R`000 capital premium earnings Total
Balance at 1 July
2005
(as previously 150 80 490 94 542 175 182
reported)
Profit for the - - 91 334 91 334
period after
distributions and
taxation
Balance at 31
December 2005
(as previously 150 80 490 185 876 266 516
reported)
IFRS adjustment -
transfer to deemed
debenture
premium and - (71 057) - (71 057)
respective
amortisation
Balance at 31 150 9 433 185 876 195 459
December 2005
(restated)(note 4)
Treasury units held - (355) - (355)
by consolidated
entities
Transfer of deemed - 1 591 (1 591) -
debenture premium
Profit for the - - 118 010 118 010
period after
distributions and
taxation
Balance at 30 June 150 10 669 302 295 313 114
2006 (Audited)
Transfer of
amortisation of
deemed debenture
premium - 1 591 (1 591) -
Disposal of
treasury units held
by consolidated
entities - 355 - 355
Profit for the - - 132 751 132 751
period after
distributions and
taxation
Balance at 31 150 12 615 433 455 446 220
December 2006
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation
The unaudited interim financial report has been prepared in
accordance with International Financial Reporting Standards
("IFRS"), IAS34 - Interim Financial Reporting and the requirements
of the Companies Act in South Africa. The basis of preparation is
consistent with the group`s most recent annual financial
statements.
2. Related party transactions
Related party transactions concluded during the reporting period
were concluded at arm`s length terms as would be negotiated between
unrelated willing parties.
3. Deferred income tax liabilities
In compliance with IFRS, deferred taxation on the property
revaluations has been provided at the normal taxation rate of 29%
and not at the capital gains taxation rate of 14,5% that will
actually be paid.
4. Restatement of comparatives
In compliance with IFRS, the December 2005 comparatives have been
restated. Where linked units are issued at a premium, the premium
net of share issue expenses is allocated to debenture capital
premium. The deemed debenture premium is amortised through the
income statement over the life of the debentures, and each year the
amount amortised is transferred to share capital and premium
through the statement of changes in equity. This adjustment has no
cash flow implications.
Directors: A J W L Richards (Chairman), J L Nunes (Managing)*, Dr C P de Leeuw,
J B Gibbon, C M Hutchison, R C Johnson (British), K M Mokoape, E P M
Moses, U J van der Walt
* Executive
For more information go to our website www.ifour.co.za
Date: 21/02/2007 14:49:00 Produced by the JSE SENS Department.
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