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CPL - Capital Property Fund - Abridged Unaudited Interim Financial Report For
The Six Months Ended 30 June 2008
Capital Property Fund
("Capital" or the "Fund" or the "Group")
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)
ABRIDGED UNAUDITED INTERIM FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 JUNE
2008
CONSOLIDATED BALANCE SHEETS
Unaudited Audited Unaudited
30 Jun 31 Dec 30 Jun
2008 2007 2007
R`000 R`000 R`000
ASSETS
Non-current assets 3 225 583 3 211 420 2 308 284
Investment property 3 019 443 3 009 277 2 259 277
Straight-lining of rental income 50 782 46 020 49 007
adjustment
Investment property under 31 265 31 981 -
development
Investment in associate company 124 093 124 142 -
Current assets 13 128 45 440 121 713
Investment property held for sale - 30 463 -
Straight-lining of rental income - 287 -
adjustment
Trade and other receivables 12 991 14 476 18 550
Cash and cash equivalents 137 214 103 163
Total assets 3 238 711 3 256 860 2 429 997
EQUITY AND LIABILITIES
Capital of Fund 2 827 215 2 826 755 2 175 331
Trust capital 1 382 567 1 382 567 1 337 586
Non-distributable reserves 1 444 648 1 444 188 788 738
Retained earnings - - 49 007
Total liabilities 411 496 430 105 254 666
Non-current liabilities 239 699 252 053 40 715
Interest-bearing borrowings 186 053 196 491 -
Deferred tax 53 646 55 562 40 715
Current liabilities 171 797 178 052 213 951
Trade and other payables 41 385 46 978 115 085
Unitholders for distribution 113 003 109 803 96 587
Income tax payable - 2 279 2 279
Bank overdraft 17 409 18 992 -
Total equity and liabilities 3 238 711 3 256 860 2 429 997
CONSOLIDATED INCOME STATEMENTS
Unaudited Audited Unaudited
6 months 12 months 6 months
ended ended ended
30 Jun 31 Dec 30 Jun
2008 2007 2007
R`000 R`000 R`000
Net rental and related income 131 241 242 260 128 131
Recoveries and contractual rental income 172 129 299 773 146 709
Straight-lining of rental income 4 475 18 000 20 701
adjustment
Rental income 176 604 317 773 167 410
Property operating expenses (45 363) (75 513) (39 279)
Profit on disposal of investment 513 42 784 42 784
property
Fair value (loss)/gain on investment (4 475) 528 688 (20 701)
property
Fair value gain on investment property - 546 688 -
Fair value adjustment resulting from (4 475) (18 000) (20 701)
straight-lining of rental income
adjustment
Administrative expenses (8 445) (15 961) (8 141)
Share of post-acquisition reserves from 857 1 147 -
associate
Distributable income from associate 4 929 1 147 -
Loss from associate (4 072) - -
Profit before net finance costs 119 691 798 918 142 073
Net finance (cost)/income (8 144) 1 851 1 014
Finance income
Fair value adjustment on interest 2 103 4 907 3 716
rate swaps
Interest received - - 616
Interest on units issued cum - 14 114 11 710
distribution
Finance costs
Interest on borrowings (10 247) (17 170) (15 028)
Profit before income tax 111 547 800 769 143 087
Income tax 1 916 (14 847) -
Profit for the period attributable to 113 463 785 922 143 087
equity holders
Basic earnings per unit (cents)* 22,52 159,69 29,78
Headline earnings per unit (cents)* 22,93 46,59 25,18
*The Fund has no dilutionary instruments in issue.
ABRIDGED CONSOLIDATED CASH FLOW STATEMENTS
Unaudited Audited Unaudited
6 months 12 months 6 months
ended ended ended
30 Jun 31 Dec 30 Jun
2008 2007 2007
R`000 R`000 R`000
Net cash (outflow)/inflow from operating (5 156) (119 611) 67 229
activities
Net cash inflow/(outflow) from investing 17 100 (370 618) (120 634)
activities
Net cash (outflow)/inflow from financing (10 438) 487 939 173 056
activities
Net increase/(decrease) in cash and cash 1 506 (2 290) 119 651
equivalents
Cash and cash equivalents at the (18 778) (16 488) (16 488)
beginning of the period
Cash and cash equivalents at the end of (17 272) (18 778) 103 163
the period
CONSOLIDATED STATEMENT OF CHANGES IN UNITHOLDERS` INTEREST
Unaudited Audited Unaudited
30 Jun 31 Dec 30 Jun
2008 2007 2007
R`000 R`000 R`000
Trust Capital 1 382 567 1 382 567 1 337 586
Balance at beginning of period 1 382 567 909 060 909 060
Issue of units - 504 134 385 742
Transfer of prior periods` profit - (30 627) -
and losses on disposal of investment
property
Profit on disposal of investment - - 42 784
property
Non-distributable reserves 1 444 648 1 444 188 788 738
Balance at beginning of period 1 444 188 805 723 805 723
Transfer from/(to) retained earnings 460 638 465 (16 985)
Retained earnings - - 49 007
Balance at beginning of period - 28 306 28 306
Profit for the period 113 463 785 922 143 087
Transfer to non-distributable (460) (607 838) (25 799)
reserves and trust capital
Distribution (113 003) (206 390) (96 587)
Total 2 827 215 2 826 755 2 175 331
RECONCILIATION OF PROFIT FOR THE PERIOD TO HEADLINE EARNINGS AND DISTRIBUTABLE
INCOME
Unaudited Audited Unaudited
6 months 12 months 6 months
ended ended ended
30 Jun 31 Dec 30 Jun
2008 2007 2007
R`000 R`000 R`000
Basic earnings 113 463 785 922 143 087
Adjusted for: 2 046 (556 625) (22 083)
- Fair value loss/(gain) on investment 4 475 (528 688) 20 701
property
- Profit on disposal of investment (513) (42 784) (42 784)
property
- Income tax effect (1 916) 14 847 -
Headline earnings 115 509 229 297 121 004
Reconciliation of profit for
the period to amount available
for distribution
Profit for the period 113 463 785 922 143 087
Fair value gain on investment property - (546 688) -
Fair value gain on interest rate swaps (2 103) (4 907) (3 716)
Profit on disposal of investment property (513) (42 784) (42 784)
Loss from associate 4 072 - -
Income tax (1 916) 14 847 -
Distributable income 113 003 206 390 96 587
Distribution declared 113 003 206 390 96 587
- Interim 113 003 96 587 96 587
- Final - 109 803 -
CAPITAL COMMITMENTS
R`000 R`000 R`000
Authorised and contracted 25 119 3 058 276 053
Authorised and not yet contracted 72 542 82 209 13 209
Total 97 661 85 267 289 262
SEGMENTAL ANALYSES
R`000 R`000 R`000
Segmental revenue -
rental income
Commercial 76 318 127 078 62 484
Industrial 74 487 131 964 64 737
Retail 25 799 58 731 40 189
Total 176 604 317 773 167 410
Profit for the period
Commercial 55 926 314 944 55 875
Industrial 51 953 369 028 44 409
Retail 18 887 132 589 51 302
Corporate (13 303) (30 639) (8 499)
Total 113 463 785 922 143 087
GEARING
Nominal
amount Rate
Swap maturity R`000 %
August 2008 50 000 9,70%
October 2009 50 000 9,22%
October 2010 50 000 9,19%
150 000
Cap maturity
July 2013 50 000 11,55%
50 000
Hedged borrowings 200 000
SECTORAL SPLIT
(based on book value)
Commercial 44,0%
Industrial 43,0%
Retail 13,0%
100,0%
LEASE EXPIRY PROFILE (based on contractual rental income)
December 2008 11,2%
December 2009 24,7%
December 2010 29,0%
December 2011 9,4%
December 2012 16,8%
December 2013 3,8%
Thereafter 5,1%
100,0%
SUMMARY OF FINANCIAL PERFORMANCE
30 Jun 31 Dec 30 Jun 31 Dec
2008 2007 2007 2006
Distribution per unit 22,43 21,79 20,10 19,02
(cents)
Units in issue 503 801 503 801 480 531 401 234
158 158 928 900
Net asset value 5,61 5,61 4,53 4,34
Gearing ratio (%)** 10,7% 10,2% 4,0% 15,9%
**The gearing ratio is calculated by dividing the total gearing
(interest-bearing borrowings plus current liabilities less current
assets) by non-current assets.
COMMENTARY
1 Preparation and accounting policies
The summarised consolidated interim financial statements have been prepared
in accordance with the recognition and measurement criteria of
International Financial Reporting Standards (IFRS) and the presentation and
disclosure requirements of IAS 34, the requirements of the Companies Act of
South Africa (Act 61 of 1973) and the Collective Investment Schemes Control
Act (Act 45 of 2002). The accounting policies adopted are consistent with
those of the prior period. 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 2008
amounted to 22,43 cents per unit. This represents an increase of 11,59%
over the 20,10 cents per unit distribution for the interim period ended 30
June 2007.
3 Commentary on results
Capital`s strategy of focusing on industrial and commercial properties has
placed the Fund in a position to achieve strong growth in distributions
despite a challenging macroeconomic environment. The industrial property
market continued to perform well with limited new supply of quality
industrial stock and continued firm demand, particularly from companies
supporting the mining and electricity supply sectors of the economy.
Vacancies of well-located commercial properties have been substantially
taken up and this is placing upward pressure on office market rentals.
Building a quality portfolio has paid off with strong growth in
distributions.
4 The property portfolio
The portfolio is performing well with renewals and relettings exceeding
budgeted expectations notwithstanding the weakening macroeconomy. Vacancies
remain low at 1,1%.
4.1 Acquisitions and Developments
Two warehouse and office developments of 4 070 m2 and 2 092 m2 were
completed at N1 Business Park, Midrand at an initial yield of 10,5%.
The joint venture consortium will be developing an additional 8 000 m2
on the site at a projected yield of 10%. Capital owns 20% of this
development.
Construction of a 3 514 m2 warehouse development on an unutilised
portion of land in Surprise Park, Pinetown commenced in June 2008. As
there is no land cost, the development is projected to yield 11,5%.
Capital did not acquire any properties in the past six months as
sellers of quality industrial properties have not adjusted their price
expectations to be in line with the current economic environment.
An area showing value at present is the listed property sector which
has been trading at substantial discounts to net asset value and at
significantly higher yields than can be achieved in direct property
investments. As As a result of recent legislative amendments Property
Unit Trusts are, within certain limitations, permitted to invest in
listed property funds. Investments in listed property stocks will be
considered in future.
4.2 Disposals
Two properties, Main Street Somerset West and Palm Centre Centurion,
which were held for sale at 31 December 2007, transferred in February
2008. Unit 5 of 31 Indianapolis Street, a sectional title unit in
Kyalami, was sold for R1,5 million. Capital has accepted an offer of
R12,325 million for McCarthy Drive, an office block in
Pietermaritzburg.
5 Prospects
Although some weakening in the industrial and commercial property market is
expected during the next reporting period, Capital`s growth prospects
remain strong with positive rental reversions anticipated in the 2008 and
2009 financial years. The Fund`s strong tenant profile together with its
low level of gearing and favourable lease expiry profile will shield the
Fund from a deterioration in the macroeconomic environment.
6 Profit distribution
Notice is hereby given that a cash distribution of 22,43 cents per unit,
being distribution number 50 for Capital Property Fund, has been declared
payable to the unitholders recorded in the books of Capital at the close of
business on the record date, being Friday, 22 August 2008.
Unitholders are advised that the last day to trade cum distribution will be
Friday, 15 August 2008. The units will trade ex distribution from Monday, 18
August 2008. The distribution payment will be made on Monday, 25 August 2008.
Unit certificates may not be dematerialised or rematerialised between Monday, 18
August 2008 and Friday, 22 August 2008, both days inclusive.
By order of the Board
29 July 2008
Johannesburg
Registered office: 4th Floor, Rivonia Village, 3 Mutual Road, 2191
(PO Box 2555, Rivonia, 2128)
Transfer secretaries: Computershare Investor Services (Proprietary) Limited, 70
Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Sponsor: Java Capital (Proprietary) Limited
Company secretary: Abraham Bornman
Directors: Willy Ross (Chairman)*, Rowland Chute*, Jorge da Costa*,
Des de Beer, Andries de Lange, Protas Phili*, Barry Stuhler#,
Andrew Teixeira (Managing director), Tshiamo Vilakazi*, Tracey Visser
*Independent non-executive director
#Non-independent non-executive director
Date: 31/07/2008 17:10:02 Supplied by www.sharenet.co.za
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