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REDEFINE INCOME FUND
Redefine Income Fund delivers a total return of 34.5% in its final year
Unaudited interim results for the six months ended 28 February 2001
Consolidated Income Statement
The audited comparatives are for the first six months from date of listing
Unaudited Audited
6 months to 6 months to
28 Feb 2001 31 Aug 2000
R000's R000's
Revenue
Revenue
Property portfolio 55,250 56,838
Listed securities portfolio 47,779 46,262
103,029 103,100
Operating costs - property portfolio 13,994 13,458
Administration costs 5,384 4,163
Operating profit 83,651 85,479
Capital profit on disposal
Capital profit on disposal
of properties 74 -
Capital profit on disposal of
listed securities 1,823 1,529
Profit from operations 85,548 87,008
Interest received 972 1,558
Profit before finance charges 86,520 88,566
Finance charges 44,479 48,236
Profit before taxation 42,041 40,330
Taxation - -
Profit attributable to linked
Unitholders 42,041 40,330
Linked unit distributions 40,143 38,801
First quarter 19,988 -
Second quarter 20,155 -
Third quarter - 19,032
Fourth quarter - 19,769
Profit after distribution 1,898 1,529
Transfer to non-distributable
Reserve 1,898 1,529
Reserve 1,898 1,529
Retained profit for the period - -
Actual number of linked units in
issue (000's) 237,114 232,582
Weighted number of linked
units in issue (000's) 235,764 222,537
Earnings per linked unit (cents) 17.83 18.12
Headline earnings per linked
unit (cents) 17.03 17.44
Distribution per linked
unit (cents) 17.00 17.00
Consolidated Balance Sheet
The audited comparatives are for the first six months from date of listing
Unaudited Audited
6 months to 6 months to
28 Feb 2001 31 Aug 2000
R000's R000's
Assets
Non-current assets 1,214,232 1,198,174
Property portfolio 611,260 588,132
Property portfolio 611,260 588,132
Listed securities portfolio 602,972 610,042
Current assets 35,742 30,852
Trade and other receivables 17,455 13,857
Debtors for property sales 491 1,250
Cash and cash equivalents 17,796 15,745
Total assets 1,249,974 1,229,026
Equity and liabilities
Capital and reserves 473,424 462,505
Linked unit capital 469,997 460,976
Non-distributable reserve 3,427 1,529
Non-current liabilities 724,182 724,318
Interest-bearing liabilities 689,456 641,964
Non-interest bearing liabilities 34,726 82,354
Current liabilities 52,369 42,203
Interest-bearing liabilities 16,639 16,917
Trade and other payables 15,275 5,217
Provision for maintenance 300 300
Unitholders for distribution 20,155 19,769
Total equity and liabilities 1,249,974 1,229,026
Condensed consolidated cash flow statement
The audited comparatives are for the first six months from date of listing
Unaudited Audited
6 months to 6 months to
28 Feb 2001 31 Aug 2000
R000's R000's
Cash effects from operating
Activities 7,941 9,732
Cash generated from operations 91,205 75,442
Net financing costs -43,507 -46,678
Distribution costs -39,757 -19,032
Cash effects of investing activities -14,497 -1,196,198
Cash effects of investing activities -14,497 -1,196,198
Net property acquisitions -23,390 -587,685
Net listed securities
disposals/(acquisitions) 8,893 -608,513
Cash effects from financing
Activities 8,607 1,202,211
Linked units issued 9,021 460,975
Borrowings (repaid)/raised -414 741,236
Net movement in cash and
cash equivalents 2,051 15,745
Opening cash and cash equivalents 15,745 -
Closing cash and cash equivalents 17,796 15,745
Condensed consolidated statement of changes in equity
The audited comparatives are for the first six months from date of listing
Unaudited Audited
6 months to 6 months to
28 Feb 2001 31 Aug 2000
R000's R000's
Balance at beginning of period 462,505 -
Issue of linked units - private placement - 58,000
Issue of linked units - acquisition
of property portfolios 6,350 399,769
Issue of linked units - acquisition
of listed securities
portfolios 2,735 7,000
Preliminary expenses written-off -64 -3,793
Transfer to non-distributable reserve 1,898 1,529
Transfer to non-distributable reserve 1,898 1,529
473,424 462,505
Commentary
Review of results
During the interim review period ending 28 February 2001, the focus was on
consolidating asset management strategies, adding value to the property
portfolio and preparing non-core properties for subsequent disposal.
Revenue of R103m was consistent with the R103m earned in the previous six
months to 31 August 2000. Redefine's hybrid investment structure continued to
deliver healthy income streams, with the property portfolio contributing R55m
and the listed securities portfolio R48m. Operating and administrative costs
were higher at R19m. This was partially due to increased expenditure in
enhancing the standard of finish of certain of the properties.
enhancing the standard of finish of certain of the properties.
Administration costs were higher, in part reflecting an increase in asset
management fees arising from the underlying increase in Redefine's net asset
value.
Deferred vendor payment settlement
During the period under review, Redefine paid deferred liabilities totalling
R48m to vendors of property acquired during initial property portfolio
assembly. Payment was met through effective asset management strategies and by
partial conversion of non interest-bearing debt into interest-bearing debt.
The full cost of meeting deferred liability obligations has been factored into
Redefine's budgets and the Board is confident there will be no dilution in
Redefine's profitability.
Property portfolio rationalisation
In keeping with its policy of continuously re-evaluating the property
portfolio, Redefine disposed of two properties in the review period and has
since purchased two further properties for R17,5m.
Listed Security Investments
Investment in Compass Holdings has been increased by R5,7m while the total
holding in Richway Retail Properties has been sold. Redefine is now invested
in 12 listed counters. A substantial rerating of the listed property sector
has resulted in Redefine's investment therein increasing by 12,8 percent from
R604m to R681m, representing an increase in NAV of 33 cents per linked unit,
without taking account of any potential increase in the value of the property
portfolio.
Liquidity
It is pleasing to note a marked rise in volume of trades in Redefine linked
units during the review period, with strong evidence that individual investors
units during the review period, with strong evidence that individual investors
as well as investment funds are active buyers. In the review period, 46m
linked units were traded on the JSE, representing an annualised 38 percent of
the total number of linked units in issue.
Interest rate management and debt restructuring
Close attention to interest rate management has resulted in a saving on
finance charges of 8 percent. Utilising the R150 long bond as a yardstick,
further interest rate swaps have been introduced to lower the overall cost of
medium and long-term borrowings. The existing R450m swap, maturing on 31
January 2002, has been replaced on maturity by further forward starting swaps
to take advantage of current attractive long-term interest rates. Seventy
percent of Redefine's total long-term debt is covered over a rolling two-year
period by interest rate swaps.
Prospects
The Board is confident that Redefine will maintain annualised income growth in
excess of the inflation rate. Opportunities to increase and enhance Redefine's
assets are continually being evaluated. In this regard linked unitholders'
attention is drawn to the cautionary announcement published on Wednesday, 28
March 2001.
Interest Distribution No 4
Interest Distribution No 4
Linked unitholders are advised that Interest Distribution No. 4, in respect of
the quarter 1 December 2000 to 28 February 2001, of 8,5 cents per linked unit
is hereby declared.
Payment will be made to linked unitholders registered in the books of the
company at close of business on 12 April 2001. Cheques will be posted on or
about 30 April 2001. By order of the Board
Wolf Cesman, Chairman
Peter Penhall Chief Executive Officer
Johannesburg
27 March 2001
REDEFINE INCOME FUND LIMITED. 2 ARNOLD ROAD, ROSEBANK, JOHANNESBURG. PO BOX
91656, AUCKLAND PARK, 2006, SOUTH AFRICA. TELEPHONE +27 11 283 0055 EMAIL:
redefine@corpbank.co.za INTERNET ADDRESS http://www.redefine.co.za
DIRECTORS: W Cesman*. E Ellerine*. J Kron*. M Wainer*. Registration No.
99/18591/06 non executive*
NEWS RELEASE
REDEFINE INCOME FUND DELIVERS A TOTAL RETURN ON INVESTMENT OF 34.5 PERCENT IN
ITS FIRST YEAR
REDEFINE INCOME FUND, the R1,2-billion property loan stock (PLS) company, has
announced Distribution No 4 of 8,5 cents per linked unit for the quarter
ended February 28, 2001, and indicated that it is on track to maintain an
annualised income growth better than inflation and in keeping with its initial
projections.
CEO Peter Penhall said the distribution, released with interim results to
February 28, 2001, equated to a return on investment of 17 percent on the
initial issue price of R2,00 per linked unit at listing on February 23, 2000
and a total return (income and capital) of 34,5 percent in its first year.
Overall, profit attributable to linked unitholders for the interim period rose
four percent to R42,041-million (August 31, 2000: R40,330-million).
Redefine, the only PLS listed on the Johannesburg Securities Exchange to have
the distinction of a Fitch A+ investment rating and to have led the way in
the distinction of a Fitch A+ investment rating and to have led the way in
paying unit holders quarterly, posted revenue of R103-million for the interim
period, consistent with R103-million revenue generated in the six months to
financial year-end August 31, 2000.
Redefine is also the only listed hybrid PLS with revenue-earning investments
split between a directly-owned property portfolio of R611,3-million and
R603-million in 12 listed property loan stock companies and property unit
trusts.
Penhall said the property portfolio had delivered revenue of R55,3-million for
the interim period (August 31, 2000: R55,2-million) and the listed securities
portfolio R47,8-million (August 31, 2000: R46,3-million).
Operating and administration costs were higher at R19,4-million (August 31,
2000: R17,6-million). This was partially due to increased expenditure in
enhancing the standard of finish of certain of the properties. Administration
costs were higher, in part reflecting an increase in asset management fees
arising from the underlying increase in Redefine's net asset value.
Penhall said the achievement of matching key budget targets had been
satisfactory, given the focus in the review period on asset management, adding
value to the property portfolio, and preparing non-core properties for
subsequent disposal.
subsequent disposal.
The benefits of this value-adding attention would begin to be reflected in
results in the second half of the financial year ended August 31, 2001. Penhall
said interest rate management and debt restructuring had received close
attention during the interim period, resulting in a significant saving in
finance charges.
Deferred vendor payment settlement
During the interim period, Redefine paid deferred liabilities totalling
R47,6-million to vendors of property acquired during initial assembly of the
directly-owned portfolio.
Penhall said: "Payment has been met through a combination of effective asset
management strategies and a partial conversion of non interest-bearing debt
into interest-bearing debt. Coming late in the review period, these payments
had little effect on results for the interim period.
"We have factored the full cost of meeting our obligations relating to
deferred vendor liabilities into our budgets, and we are confident that there
will be zero dilution in profit attributable to unitholders."
Listed Security Investments
During the review period, investment in Compass Holdings was increased and the
total holding in Richway Retail Properties was sold. Redefine has investments
in 12 listed property counters.
Between listing on February 23, 2000, and the close of the interim review
period, the listed property sector has been substantially re-rated.
Redefine's investment in this sector has increased by 12,8 percent from
R604-million to R681-million, representing an increase in net asset value of
33 cents per linked unit, without taking account of any potential increase in
the value of the directly-owned property portfolio.
the value of the directly-owned property portfolio.
Liquidity
Penhall said it was pleasing to note a marked rise in volumes of trades in
Redefine linked units, with strong evidence that individual investors as well
as investment funds are active buyers.
In the review period, 46-million linked units were traded on the JSE,
representing an annualised 38 percent of the total number of linked units in
issue.
Property portfolio rationalisation
In keeping with its policy of continuously re-evaluating the property
portfolio, Redefine sold two properties in the review period and has since
purchased two further properties for R17,5-million.
"In terms of a cautionary announcement (published on Wednesday, March 28,
2001), Redefine has concluded an agreement, subject to certain suspensive
conditions, to dispose of a portfolio of properties for a total consideration
of R130-million, the effect of which will be income enhancing to the Fund,"
Penhall said.
Two-year rolling interest rate swops
"Utilising the R150 long bond as a yardstick, we have effected further
interest rate swaps as a significant risk management tool to bring down the
interest rate swaps as a significant risk management tool to bring down the
overall cost of borrowings in both the medium and long term.
"We now have a strategy in place in terms of which 70 percent of our total
long-term debt will be covered over a rolling two-year period by interest rate
swaps.
"The existing R450-million swap, maturing on January 31, 2002, has been
replaced on maturity by several individual forward starting swaps in order to
take advantage of the currently attractive long-term interest rates. Through
this strategy, we will enjoy a significant drop in the cost of
interest-bearing debt."
Prospects
Penhall said: "We continue to evaluate acquisition opportunities as they
arise, and remain confident our growth targets in relation to asset base and
income will be met. Redefine continues to offer investors a low risk, high
yielding return."
Ends
Website address: http://www.redefine.co.za
Issued by Far Out Communication cc
Communication and Editorial Consultants
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