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CPL - Capital - Audited Results and Distribution Declaration
Capital Property Fund
Managed by Property Fund Managers Ltd
Share code: CPL & ISIN: ZAE000001731
("Capital" or "the Fund" or "the Group")
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006 AND DISTRIBUTION
DECLARATION
The directors of Property Fund Managers Limited, the management company of
Capital, announce that the final audited consolidated results of the Fund
for the year ended 31 December 2006 are as follows:
Abridged consolidated income statements
Audited Audited
Year ended Year ended
31 December 31 December
2006 2005
Consolidated income statements R000 R000
Recoveries and contractual rental income 238 010 224 836
Straight-lining of rental income 3 463 7 663
Total income 241 473 232 499
Expenditure (78 745) (81 238)
Operating profit 162 728 151 261
Net financial charges (15 160) (11 186)
- Financial charges (16 378) (12 403)
- Financial income 1 218 1 217
147 568 140 075
Revaluation of investment property 404 912 326 506
Profit on disposal of investment property 4 496 6 972
Profit before taxation 556 976 473 553
Income tax expense
- Deferred capital gains taxation (19 775) (16 622)
Profit for the year 537 201 456 931
RECONCILIATION OF PROFIT FOR THE YEAR
TO HEADLINE EARNINGS AND AMOUNT
AVAILABLE FOR DISTRIBUTION
Profit for the year 537 201 456 931
Transfer to revaluation reserve (385 137) (309 884)
Transfer to trust capital (4 496) (6 972)
Headline earnings 147 568 140 075
Straight-lining of rental income adjustment (3 463) (7 663)
Fair value adjustment of interest rate swaps 1 729 -
Amount available for distribution 145 834 132 412
There are no dilutionary instruments in
issue
Units in issue 401 234 900 383 449 186
Weighted number of units in issue 392 342 043 383 449 186
Headline earnings per unit (cents) 37,61 36,53
Basic earnings per unit (cents) 136,92 119,16
Profit distribution per unit (cents) 37,15 34,53
Net asset value per unit (cents) 434 334
Abridged consolidated balance sheets
Audited Audited
Year ended Year ended
31 December 31 December
2006 2005
R000 R000
Assets
Non-current assets
Investment property 2 124 165 1 409 281
Current assets 175 579 79 787
- Investment property held for sale 157 915 48 202
- Trade and other receivables 17 504 31 495
- Cash on deposit 160 90
Total assets 2 299 744 1 489 068
Unitholders` interest and liabilities
Unitholders` interest 1 743 089 1 279 895
Non-current liabilities 255 680 94 260
- Interest-bearing borrowings 212 686 71 041
- Deferred taxation 42 994 23 219
Current liabilities 300 975 114 913
- Trade and other payables 284 327 105 235
- Bank overdraft 16 648 9 678
Total unitholders` interest and liabilities 2 299 744 1 489 068
Profit distributions
Amount available for distribution per unit 37,15 34,53
(cents)
Distribution per unit (cents) 37,15 34,53
- Interim 18,13 16,52
- Final 19,02 18,01
The final distribution of 19,02 cents, being
number 47 for Capital Property Fund, has
been declared in respect of the income
distribution period 1 July 2006 to 31
December 2006.
Capital commitments
Authorised and contracted 134 920 73 807
Authorised and not yet contracted 1 300 712
Abridged consolidated cash flow statements
Audited Audited
Year ended Year ended
31 December 31 December
2006 2005
R000 R000
Net cash retained from operating activities 191 353 4 506
Net cash (outflow)/inflow from investing
activities (411 725) 95 418
Net cash inflow/(outflow) from financing
activities 213 472 (107 535)
Net decrease in cash and cash equivalents (6 900) (7 611)
Cash and cash equivalents at beginning of
the year (9 588) (1 977)
Cash and cash equivalents at the end of the
year (16 488) (9 588)
Consolidated statements of changes in unitholders` interest
Capital of Trust 909 060 832 737
Balance at beginning of the year 832 737 825 765
Issue of units 71 827 -
Profit on disposal of investment property 4 496 6 972
Revaluation reserve 805 723 422 315
Balance at beginning of the year 422 315 112 431
Transfer from distributable reserve 383 408 309 884
Undistributed income 28 306 24 843
Balance at beginning of the year 24 843 17 180
Profit for the year 537 201 456 931
Net transfers to trust capital and
revaluation reserve (387 904) (316 856)
Profit distributions (145 834) (132 412)
Total unitholders` interest 1 743 089 1 279 895
Segmental information
Retail Offices Industrial Corporate Total
R000 R000 R000 R000 R000
Total income
2006 64 741 98 982 74 932 2 818 241 473
2005 70 965 86 397 75 137 - 232 499
Profit for the
period
2006 157 623 234 856 189 106 (44 384) 537 201
2005 177 385 163 270 155 177 (38 901) 456 931
1 PREPARATION AND ACCOUNTING POLICIES
The financial statements are prepared in accordance with International
Financial Reporting Standards (IFRS), the requirements of the Companies Act
and the Collective Investment Schemes Control Act. KPMG Inc. has audited the
final financial information set out in this report. Their unqualified audit
report is available for inspection at the Fund`s registered office.
2 TOTAL DISTRIBUTION
Capital`s total distribution for the twelve months ended 31 December 2006
amounted to 37,15 cents per unit (2005 - 34,53 cents). This was divided
between the interim distribution of 18,13 cents for the six months ended 30
June 2006, (2005 - 16,52 cents) and the final distribution of 19,02 cents
for the six months ended 31 December 2006 (2005 - 18,01 cents). The total
distribution represents growth of 7,6% over the distribution for the year
ended 31 December 2005.
3 PORTFOLIO COMMENTARY
Introduction
In 2004, the board of directors resolved to reposition Capital to be a
robust, quality growth fund. The decision necessitated aggressive changes to
Capital`s property portfolio. Although this process was facilitated by a
strong property market, the bulk of the properties sold were at higher
yields than new acquisitions. As a result, growth in distributions for the
2006 financial year was limited to 7,6%.
The restructuring process has largely been completed and Capital is now well
positioned for growth. Further planned sales are not expected to be yield
dilutionary. The process has resulted in a reduction in the number of
smaller properties and the sale of older properties. Strategic properties
such as 2 Long Street in Cape Town have however, been retained. The
portfolio is now focused on large, corporate tenanted rather than multi-
tenanted properties. This places Capital in a strong position to weather any
downturn in the property cycle.
Trading conditions in all sectors and geographies of the Capital portfolio
remain positive. The retail centres are participating in the current boom
and the industrial space is fully let. While the office market has been
softer, office buildings in well-located growth nodes, such as Cape Town,
have been improving steadily resulting in a significant decrease in the
vacancies in the office portfolio.
The total value of Capital`s property portfolio at year end was R2,28
billion, an increase of R825 million over the 2005 value. This increase
includes a revaluation of R408 million, acquisitions of R494 million and
disposals of R83 million. This resulted in the number of properties in the
portfolio increasing from 65 to 86.
At the end of December 2006, the sectoral spread of the portfolio by value
was 43% offices, 24% retail and 33% industrial properties. Geographically
55% are located in Gauteng, 29% in the Western Cape, 9% in KwaZulu-Natal
with the balance in the Eastern Cape, Limpopo and Free State.
Vacancies at 31 December 2006
Vacant space in the portfolio at the end of 2006 equated to 1% of the total
floor area, down from 3% in the previous year.
Property acquisitions and initiatives in 2006
Capital acquired the following properties in 2006:
* Capricorn Plaza, Thohoyandou, in Limpopo Province was acquired for the
purchase price of R19 million at a yield in excess of 11%. The retail centre
is anchored by national tenants and adjoins Mutsindo Mall and Resilient`s
Mvusuludzo Mall.
* The Fedbond portfolio of 28 properties was acquired for R320 million with
an effective date of 1 November 2006. Transfer of nine properties totalling
R164,5 million had occurred by 31 December 2006.
* The Medscheme offices in Constantia Kloof were acquired with an effective
date of 1 December 2006 for an amount of R74,7 million at a yield that was
neutral to the Fund. The building has a long lease with 11% rental
escalations, which bodes well for future growth.
* The four industrial units in Corporate Park North were completed during
the year and were valued at R47,5 million against a cost of R34,6 million.
The Midrand industrial joint venture development consisting of 38 hectares
of prime industrial land with highway frontage is continuing. The
installation and construction of services and roads, as well as the boundary
fence has commenced and new lettings have begun. A twelve year lease on a
building of approximately 10 000 m2 has been concluded with a multi-national
corporate tenant.
Ten properties were disposed of and transferred during the course of 2006
for a total value of R82,9 million as part of the divestment by Capital of
non-strategic properties. Sale agreements for the disposal of five
properties, to the value of R157,9 million, were concluded but not yet
transferred as at 31 December 2006, due to certain conditions precedent
still outstanding.
Extensions and refurbishments
Capital commenced or completed various construction and refurbishment
projects during 2006:
2 Long Street, Cape Town
The construction of additional parking through the conversion of the two
lower levels of offices to parking was completed in October 2006. This has
increased the parking ratio by 50%. In addition, the lobbies in the building
have been refurbished and the ground floor reception and retail areas were
reconfigured. The total cost was R18 million.
West Street, Durban
R5 million was spent on the redevelopment of the property. Escalators were
installed to create first floor retail space, that will be occupied by
Ackermans until 2012. The work was completed in April 2006 and Ackermans has
reported exceptional trading in the store. The value of this property has
increased from R15,3 million to R35,8 million.
4 PORTFOLIO VALUATION
The portfolio was valued by Peter Parfitt of Quadrant Property Group,
Professional Associated Valuer. Dip Val MIV (SA) Registration No: 2712/2.
Properties for which agreements of sale were concluded were valued at net
disposal price and those acquired towards the end of the year were valued at
acquisition price.
The portfolio value was R2,28 billion as at 31 December 2006.
5 STRATEGY AND OUTLOOK
The management team has further refined Capital`s strategy to focus on
industrial and office properties and this has been partly achieved by the
purchase of the Fedbond portfolio. This portfolio based on valuation is 49%
industrial, 34% offices with a small retail component of 17% and the
geographic spread is 89% Gauteng, 6% Western Cape and 5% KwaZulu-Natal,
which management believes will provide major upside in terms of growth in
the future. The Fedbond portfolio is fully let and has a good lease expiry
profile.
From a macro-economic point of view, the outlook for 2007 is encouraging
with business confidence at all time highs, and strong demand for space in
the industrial and office sectors.
Building costs are likely to increase well above inflation, and property-
related skills will be at a premium, as the effect of government spending
and infrastructure expansion projects is felt. This will affect the
viability of future developments and put further upward pressure on rentals
in existing space.
The Capital portfolio is well-positioned to take advantage of this rental
growth in its existing portfolio, which is mainly located in the growth
nodes of the Western Cape, Gauteng and KwaZulu-Natal. Further, Capital`s
sectoral weighting has captured much of the growth in all three sectors,
though the retail sector has been particularly buoyant over the last four
years. Going forward, Capital will focus on offices and industrial
properties which are likely to outperform for the foreseeable future.
Capital will also continue to partner with developers who have proven their
abilities in their specific sectors. The benefits of greenfield developments
are apparent in the existing portfolio and Capital will continue to embark
on such projects during this stage of the property cycle.
Management expects 2007 to be a solid year for growth in returns for
unitholders and portfolio enhancements for Capital.
6 INCOME DISTRIBUTION
Notice is hereby given that a cash distribution of 19,02 cents per unit
("the distribution") has been declared payable to the unitholders recorded
in the books of Capital at the close of business on the record date, Friday,
23 February 2007. Unitholders are advised that the last day to trade "cum"
the distribution will be Friday, 16 February 2006. The units will trade "ex"
the distribution as from Monday, 19 February 2007. Payment will be made on
Monday, 26 February 2007. Unit certificates may not be dematerialised or
rematerialised during the period Monday, 19 February 2007 to Friday, 23
February 2007, both days inclusive.
By order of the Board
Johannesburg
31 January 2007
Registered office: 4th Floor, Rivonia Village, 3 Mutual Road, Rivonia, 2191
(PO Box 2555, Rivonia, 2128)
Transfer secretaries: Computershare Investor Services 2004 (Proprietary)
Limited 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown,
2107)
Date: 01/02/2007 17:30:02 Supplied by www.sharenet.co.za
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