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Capital Property Fund - Interim Results and Profit Distribution Declaration
Capital Property Fund
("Capital" or the "Fund")
Share Code: CPL
ISIN: ZAE000001731
(A portfolio in Capital Property Trust Scheme, a Collective Investment Scheme in
Property established in terms of the Collective Investment Schemes Control Act,
No 45 of 2002 managed by Property Fund Managers Limited ("PFM"))
(Incorporated in the Republic of South Africa)
(Registration No. 1980/009531/06)
INTERIM RESULTS AND PROFIT DISTRIBUTION DECLARATION
The directors of Property Fund Managers Limited, management company of Capital,
announce that the interim consolidated results of the Fund for the six months
ended 30 June 2006 are as above.
Abridged consolidated income statements
Restated
Unaudited unaudited Audited
six months six months Year ended
ended 30 June ended 30 June 31 December
2006 2005 2005
R000 R000 R000
Recoveries and contractual rental
income 108 624 113 663 224 836
Straight lining of rental income 1 159 5 258 7 663
Total income 109 783 118 921 232 499
Expenditure 35 564 43 582 81 238
Operating profit 74 219 75 339 151 261
Net finance charges 3 550 6 734 11 186
70 669 68 605 140 075
Revaluation of investment property (1 159) (5 258) 326 506
Net profit on disposal of investment
property 266 4 883 6 972
Profit before taxation 69 776 68 230 473 553
Income tax expense
- Deferred capital gains taxation - - (16 622)
Profit for the period 69 776 68 230 456 931
RECONCILIATION OF PROFIT FOR THE
PERIOD TO HEADLINE EARNINGS AND
AMOUNT AVAILABLE FOR DISTRIBUTION
Profit for the period 69 776 68 230 456 931
Transfer from/(to) revaluation reserve 1 159 5 258 (309 884)
Transfer to trust capital (266) (4 883) (6 972)
Headline earnings 70 669 68 605 140 075
Straight lining of rental income
adjustment (1 159) (5 258) (7 663)
Amount available for distribution 69 510 63 347 132 412
There are no dilutionary instruments
in issue
Units in issue 383 449 186 383 449 186 383 449 186
Headline earnings (cents per unit) 18,43 17,89 36,53
Earnings (cents per unit) 18,20 17,79 119,16
Profit distribution (cents per unit) 18,13 16,52 34,53
Net asset value (cents per unit) 334 250 334
Abridged consolidated balance sheets
Assets
Non-current assets
Investment property 1 453 557 1 091 610 1 409 281
Current assets 42 943 69 018 79 787
- Properties held for sale 31 692 42 100 48 202
- Trade and other receivables 11 066 12 430 31 495
- Cash on deposit 185 14 488 90
Total assets 1 496 500 1 160 628 1 489 068
Unitholders" interest and liabilities
Unitholders" interest 1 280 161 960 259 1 279 895
Non-current liabilities 72 886 107 598 94 260
- Interest-bearing borrowings 49 667 101 001 71 041
- Deferred taxation 23 219 6 597 23 219
Current liabilities 143 453 92 771 114 913
- Trade and other payables 139 644 92 771 105 235
- Bank overdraft 3 809 - 9 678
Total unitholders" interest and
liabilities 1 496 500 1 160 628 1 489 068
Consolidated statements of changes in unitholders" interest
Restated
Unaudited unaudited Audited
six months six months Year ended
ended 30 June ended 30 June 31 December
2006 2005 2005
R000 R000 R000
Capital of Trust 833 003 830 648 832 737
Balance at beginning of the period 832 737 825 765 825 765
Net profit on disposal of property 266 4 883 6 972
Revaluation reserve 421 156 107 173 422 315
Balance at beginning of the period 422 315 112 431 112 431
Transfer (to)/from distributable
reserve (1 159) (5 258) 309 884
Undistributed profit 26 002 22 438 24 843
Balance at beginning of the period 24 843 17 180 17 180
Profit for the period 69 776 68 230 456 931
Net transfers from/(to) trust capital
and non-distributable reserves 893 375 (316 856)
Profit distributions (69 510) (63 347) (132 412)
Total unitholders" interest 1 280 161 960 259 1 279 895
Abridged consolidated cash flow statements
Net cash inflow from operating
activities 54 836 11 107 4 506
Net cash (outflow)/inflow from
investing activities (27 498) 82 933 95 418
Net cash outflow from financing
activities (21 374) (77 575) (107 535)
Net increase/(decrease) in cash
and cash equivalents 5 964 16 465 (7 611)
Cash and cash equivalents at the
beginning of the period (9 588) (1 977) (1 977)
Cash and cash equivalents at the
end of the period (3 624) 14 488 (9 588)
Capital commitments
Authorised and contracted 42 481 104 600 73 807
Authorised and not yet contracted 400 18 000 712
Profit distributions
Amount available for distribution
(cents per unit) 18,13 16,52 34,53
Distribution (cents per unit) 18,13 16,52 34,53
Interim 18,13 16,52 16,52
Final - - 18,01
Segmental analysis
Retail Offices Industrial Corporate Total
Total income
2006 - Interim 39 332 36 781 33 670 - 109 783
2005 - Interim 32 957 46 532 39 432 - 118 921
2005 - Final 70 965 86 397 75 137 - 232 499
Profit for the period
2006 - Interim 29 252 25 596 25 021 (10 093) 69 776
2005 - Interim 22 338 30 084 26 130 (10 322) 68 230
2005 - Final 177 385 163 270 155 177 (38 901) 456 931
Commentary
1 PREPARATION AND ACCOUNTING POLICIES
The interim financial statements are prepared in accordance with International
Financial Reporting Standards (IFRS) as well as the requirements of the
Companies Act (Act 61 of 1973) and the Collective Investments Schemes Control
Act (Act 45 of 2002). The policies are consistent with those applied in the
most recent annual financial statements of the Fund. Comparative figures for the
period ended 30 June 2005 were restated to reflect the different interpretation
of accounting for lease income. The interim financial statements have not been
audited or reviewed by the Fund"s auditors.
2 DISTRIBUTABLE EARNINGS
Capital"s distributable earnings for the interim period ended 30 June 2006
amounted to 18,13 cents per unit. This represents an increase of 9,75% over the
16,52 cents per unit distribution for the interim period ended 30 June 2005.
3 COMMENTARY ON RESULTS
In terms of portfolio performance, trading conditions at the retail centres in
the Capital portfolio remain positive. Industrial space is well let and the
office market has been improving steadily to allow a decrease in the historical
vacancies in the office buildings.
Capital had a number of significant renewals during the period since its last
results, which were concluded at market, or better than market rentals and
escalation rates. Further, Ackermans moved into vacated retail space in 336 West
Street, Durban and started trading in April. A large tenant was also found for
vacated industrial space in Pinetown, KwaZulu-Natal, at an enhanced rental.
Checkers moved into a large warehouse facility in Epping, Western Cape. Current
vacancy levels are 2,8% of the gross lettable area of the portfolio.
Capital"s policy is to revalue properties on an annual basis at the financial
year-end. This was last done at 31 December 2005.
4 THE PROPERTY PORTFOLIO
4.1 Acquisitions
4.1.1 Capricorn Plaza, Thohoyandou
Capital acquired the shopping centre adjacent to their existing Mutsindo Mall in
Thohoyandou for a consideration of R19 million, which is currently in the
process of being transferred. The centre has a strong national tenant profile
with the portion of the Spar not previously owned as an anchor. The consolidated
centre is well located between the major transport nodes in the area and the
tenant profile has been considerably enhanced by the national tenants.
The estimated forward yield on the building is 11,75%, contributing positively
to the overall yield of Capital.
4.1.2 Corporate Park North in Midrand
The R34 million development with Rand Merchant Bank Properties in Corporate Park
North in Midrand, reported in the previous period, has been completed.
The transfer date of the property is expected to be in September 2006, but the
effective date of the transaction was 1 June.
The purchase yield on the property is above 11% and Capital has a rental
guarantee from the developers for the first year. Two leases have been concluded
above the initial rental guarantee and offers have been received on the last two
units.
4.1.3 Joint venture industrial development in Midrand
The ownership agreement has been finalised for the joint venture with Acucap
Properties Limited and Improvon Properties (Proprietary) Limited. There has been
considerable interest from prospective tenants for this 38 hectare industrial
site, which has 152,000 m2 of bulk available for development. The site is very
well situated in relation to some of the major retail distribution centres,
including those of Shoprite, Clicks and the new Woolworths facility that is
under construction, and it enjoys good access and extensive highway frontage.
The first phase of the project will commence in the latter part of 2006, subject
to an appropriate level of pre-letting having been concluded. Road works on the
site have commenced, services are in the process of being installed and supplied
and the entrance to the park is under construction.
4.2 The Fedbond Transaction
Capital has agreed to acquire 29 properties from the Fedbond Participation
Mortgage Bond Managers (Proprietary) Limited (Fedbond), subject to regulatory
approval. This carefully selected portfolio mainly comprises industrial
properties in Corporate Park, Midrand. Capital has also acquired two A-grade
office buildings in Sunninghill, Johannesburg, and one in La Lucia, Durban.
The portfolio is fully let, has a reasonable lease expiry profile and will be
funded from existing and new debt facilities. The purchase price is R325,18
million and is projected to be yield neutral in the short term. The effective
date is expected to be 1 October 2006.
4.3 Sales of properties
The only property sold during this period was a substantially vacant office
block situated at 66 Park Lane in Sandton, which was sold to a private
consortium for a consideration of R15,5 million, against a valuation in December
2005 of R14,6 million.
4.4 Extensions and refurbishments
The refurbishment at 2 Long Street is nearing completion. Once the parking is
complete, this prime property will positively contribute to the quality of the
Capital portfolio and the value of the location for prospective tenants will be
greatly enhanced in this growing residential and commercial node.
The R4,5 million refurbishment of 336 West Street in the Durban CBD to
accommodate a 3,500 m2 Ackermans was completed during the reporting period.
Ackermans has opened and is trading above expectations.
Various smaller works are in progress to upgrade Capital"s properties in line
with its strategy to provide quality space for its tenants.
5 STRATEGY: ENHANCEMENT OF THE QUALITY OF THE PORTFOLIO
Continuing with Capital"s strategy, the overall quality of the portfolio has
been considerably enhanced by the sale of under-performing properties and the
acquisition of the industrial units in Midrand, as well as the Fedbond
properties.
Capital remains cautious when acquiring properties in the current environment
where yields are still low and there is uncertainty as to the extent of future
interest rate increases.
6 OUTLOOK
The acquisition of the large number of properties in the Fedbond portfolio will
take time to be properly assimilated into Capital, but the management team has
considerable experience in this regard. Capital"s management team will continue
to focus on extracting value from the existing portfolio and the Fedbond
acquisitions while looking for new opportunities to acquire and develop
fundamentally sound properties with quality tenants.
Forecast distributable earnings for the year ending 31 December 2006, as
indicated in the results announcement of Capital on 1 February 2006, remains at
37 cents per unit. This forecast has not been reviewed by the auditors.
7 PROFIT DISTRIBUTION
Notice is hereby given that a cash distribution of 18,13 cents per unit, being
number 46 for Capital Property Fund, has been declared in respect of the period
1 January 2006 to 30 June 2006, and is payable to the unitholders recorded in
the books of Capital at the close of business on the record date, Friday 25
August 2006. Unitholders are advised that the last day to trade "cum" the
distribution will be Friday 18 August 2006. The units will trade "ex" the
distribution as from Monday 21 August 2006. Payment will be made on Monday 28
August 2006. Unit certificates may not be dematerialised or rematerialised
during the period Monday 21 August 2006 to Friday 25 August 2006, both days
inclusive.
By order of the Board
1 August 2006
Johannesburg
Date: 03/08/2006 05:05:35 PM Supplied by www.sharenet.co.za
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