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Redefine Income Fund - Audited results for the year ended 31 August 2005
REDEFINE INCOME FUND
Redefine Income Fund Limited
Registration No: 1999/018591/06
Share code: RDF & ISIN Code: ZAE000023503
("Redefine" or "the Company")
AUDITED RESULTS FOR THE YEAR ENDED 31 AUGUST 2005
* Distributions up 15% to 36.80 cents per linked unit
* NAV per linked unit up 60% to R4,43
* Total assets up 39% to R4,0 billion
* Gearing down to 39% from 52%
CONSOLIDATED INCOME STATEMENT
Audited Audited
31 Aug 2005 31 Aug 2004
R000 R000
Revenue
Property portfolio 290 616 259 840
Contractual rental income 262 757 238 953
Straight-line rental income 27 859 20 887
adjustment
Listed security portfolio 147 983 181 705
438 599 441 545
Operating costs - property portfolio 61 320 78 342
Administration costs 22 827 18 069
Operating profit 354 452 345 134
Net capital gain on non-current 833 935 192 936
assets
Provision against straight-lining of (27 859) (20 887)
rental income
Interest rate swap termination costs (97 784) -
Profit from operations 1 062 744 517 183
Interest received 4 693 3 572
Profit before finance charges 1 067 437 520 755
Finance charges 150 197 181 983
Profit before taxation 917 240 338 772
Taxation 28 357 -
Profit attributable to linked 945 597 338 772
unitholders
HEADLINE EARNINGS AND DISTRIBUTIONS
Profit attributable to linked 945 597 338 772
unitholders
Net capital gain on non-current (833 935) (192 936)
assets
Headline earnings 111 662 145 836
Interest rate swap termination costs 69 427 -
#Gross 97 784 -
#Taxation (28 357) -
Total distributions 181 089 145 836
#First quarter 39 173 32 068
#Second quarter 44 050 36 622
#Third quarter 46 317 38 227
#Fourth quarter 51 549 38 919
Actual number of linked units in 500 719* 474 705*
issue (000)
Weighted number of linked units in 489 274* 455 262*
issue (000)
Earnings per linked unit (cents) 193.27 74.41
Headline earnings per linked unit 22.82 32.03
(cents)
Distribution per linked unit (cents) 36.80 32.00
* Excludes 5 866 500 treasury units
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Audited Audited
31 Aug 2005 31 Aug 2004
R000 R000
Balance at beginning of period 1 314 901 994 503
Net issue of linked units 76 545 155 700
Issue expenses written-off (1 125) (542)
Revaluation of interest rate swap (34 620) (27 696)
Deferred interest rates hedging loss 97 784 -
removed from equity and reported in
net profit
Profit attributable to linked 945 597 338 772
unitholders
Distributions to linked unitholders (181 089) (145 836)
2 217 993 1 314 901
CONSOLIDATED BALANCE SHEET
Audited Audited
31 Aug 2005 31 Aug 2004
R000 R000
ASSETS
Non-current assets 3 938 569 2 694 514
Property portfolio at valuation 2 035 961 1 345 043
Property under development at cost 53 872 -
Straight-line rental income - -
adjustment
Straight-lining of rental income 42 378 15 817
Provision against straight-lining (42 378) (15 817)
of rental income
Listed security portfolio 1 848 736 1 349 471
Current assets 67 432 196 936
Trading securities 492 492
Straight-line rental income - -
adjustment
Straight-lining of rental income 29 156 27 859
Provision against straight-lining (29 156) (27 859)
of rental income
Receivables 31 844 128 470
Cash and cash equivalents 35 096 67 974
Total assets 4 006 001 2 891 450
EQUITY AND LIABILITIES
Capital and reserves 2 217 993 1 314 901
Linked unit capital 1 114 056 1 038 636
Non-distributable reserve 1 103 937 339 429
Deferred interest rate hedging loss - (63 164)
Non-current liabilities 1 685 563 1 508 084
Interest-bearing liabilities 1 554 875 1 410 477
Interest rate swaps - 63 164
Deferred capital gains tax 130 688 34 443
Current liabilities 102 445 68 465
Interest-bearing liabilities - 5 587
Payables 50 896 23 959
Linked unitholders for distribution 51 549 38 919
Total equity and liabilities 4 006 001 2 891 450
Net asset value per linked unit (cents) 442.96 276.99
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Audited Audited
31 Aug 2005 31 Aug 2004
R000 R000
Cash effects from operating activities 53 739 43 315
Cash generated from operations 367 702 355 370
Net financing costs (145 504) (178 411)
Linked unit distributions paid (168 459) (133 644)
Cash effects of investing activities (203 064) (93 732)
Net property acquisitions (416 627) (181 234)
Net listed security disposals 213 563 87 502
Cash effects from financing activities 116 447 121 532
Linked units issued 75 420 155 158
Net movement in borrowings 41 027 (33 626)
Net movement in cash and cash (32 878) 71 115
equivalents
Opening cash and cash equivalents 67 974 (3 141)
Closing cash and cash equivalents 35 096 67 974
Audit opinion
The independent auditors PKF (Jhb) Inc. have audited the financial statements
from which these results have been extracted. Their unqualified report is
available for inspection at the company"s registered office.
Basis of preparation
The financial statements have been prepared in accordance with South African
Statements of Generally Accepted Accounting Practice and accounting policies
consistent with those applied in the annual financial statements of the previous
year except for recognition of rental income. In line with the latest
interpretation of AC 105 - Leases, property revenue reflects income recognised
on a straight-line basis. Provision has been made against the resultant asset as
the value of the asset is effectively included in the fair value of the property
portfolio. The change in accounting policy does not have a material effect on
the financial statements.
COMMENTS
Financial results
Redefine made interest distributions totalling 26.5 cents per linked unit for
the three quarters ended
31 May 2005.
The Board has approved an interest distribution of 10.3 cents per linked unit
for the quarter ended 31 August 2005.
Total interest distributions of 36.8 cents per linked unit for the year exceed
distributions for the previous year by 15%.
Non-current assets at 31 August 2005 have increased by 46.17% to R3,9 billion.
The Net Asset Value (NAV) per linked unit is R4,43 (2004: R2.77)
Valuation of property portfolio
The property portfolio was revalued by independent external valuers. The value
of the portfolio increased by R745 million over the year.
Deferred capital gains taxation of R177 million has been provided in respect of
the revaluation surplus.
Property acquisitions
During the year under review the following were acquired:
Property Location/s GLA Purchase Price Yield
(m2) R000 (%)
Collins Gauteng/ 59 729 255 489 10.7
Portfolio (9) KwaZulu-Natal
90 Rivonia Sandton 14 270 113 319 10.6
Road
Rosebank Arena Rosebank 12 163 39 541 12.0
Riverside Nelspruit 9 390 37 705 12.3
Value Mart
90 Grayston Sandton 4 400 34 720 11.1
Drive
480 774
Southcoast Shelly Beach 29 249 54 708 * n/a
Mall (50% 535 482
undivided
share)
* Cost of acquisition and development costs
Property Disposals
During the year under review the following were disposed of:
Property Location/s GLA Net Proceeds Carrying value
(m2) R000 R000
Old Town Square Cape Town 10 353 24 458 25 000
Western Cape Cape Town 12 782 34 798 35 000
Portfolio (4)
Corporate Park Midrand 3 894 14 894 14 955
Shopping Centre
Fountain Place Cape Town 5 603 9 027 2 235
Trimtech Pretoria 6 669 5 698 10 500
12 Rivonia Road Sandton 1 845 12 105 12 500
Lyons House Benmore 1 644 12 731 12 941
Saambou Randburg 1 143 2 637 2 800
Sandown Motors Midrand 4 133 14 194 12 214
Boumat Bryanston 595 3 948 3 540
Bernie Street Kya Sands - 800 745
(vacant land) 135 290 132 430
Property portfolio
The property portfolio comprises 53.06% (2004: 49.92%) of Redefine"s total non-
current assets.
The net effect of acquisitions and sales during the year reduced the number of
properties to 72.
Sectoral spread by revenue comprises 56% commercial, 24% retail and 20%
industrial.
32 161 m2 of vacant space was leased and existing leases in respect of 37 524 m2
were renewed during the year under review.
The lease expiry profile has continued to improve and outperform the sector
average with 57% of leases expiring in 2009 and beyond.
At 31 August 2005, 97.2% of the property portfolio was leased (2004: 94.7%).
Listed securities portfolio
Redefine"s listed securities portfolio increased by R499,3 million (37%) to
R1,85 billion after acquisitions of R241,3 million, disposals of R272,1 million
and an increase in value of
R530,1 million
Borrowings
In accordance with the strategy to reduce gearing to below 45% Redefine"s
borrowings of R1,55 billion represents a gearing ratio of 39.48%, a substantial
reduction from 52.35% in August 2004.
R64,6 million cash, surplus to Redefine"s immediate requirements, has been
deposited temporarily into an access facility.
Prior to 1 July 2005 Redefine hedged its interest rate exposure by means of
interest rate swaps. These swaps were terminated as of 30 June 2005 at a cost of
R97,8 million and Redefine entered into fixed rate loan agreements. The hedging
loss previously deferred in equity was removed from equity and reported in net
profit on termination of the swaps. This expense was adjusted in determining
distributions. The breakage cost was financed by an increase in borrowings.
Redefine"s average all-in interest rate is 10.05% and 83.61% of borrowings are
fixed for periods of three, five, seven and ten years.
Post balance sheet events
Agreements have been concluded for the sale of 18 Hurlingham Road, 22 Hurlingham
Road, 24 Hurlingham Road, 44 Wierda Road, Alcom House, ERP.Com, Stand 36 Kyalami
Park and Woodmead 4 & 5 for a total consideration of R57,3 million (valuation
R55,4 million). Transfer of the properties is expected to be registered by end
October 2005.
Redefine has acquired an additional 1,5 million units in Martprop Property Fund
for R4,8 million.
Redefine supported a transaction in terms of which Hyprop Investments Limited
made an offer to acquire SA Retail Properties Limited linked units from unit
holders holding SA Retail units. Hyprop issued 1 Hyprop linked unit for every
2,7 SA Retail linked units arising from which Redefine obtained an additional
20,7 million Hyprop linked units.
Redefine has supported a transaction between ApexHi Properties Limited and Prima
Property Trust in terms of which holders of Prima units will receive 5.9 ApexHi
"A" and 5.9 ApexHi "B" units for every 100 Prima units held. As a result
Redefine will receive an additional 12,3 million ApexHi "A" and 12,3 million
ApexHi "B" units.
Liquidity
Redefine is one of the most liquid counters in the listed property sector with
56% of its total linked units traded during the year under review.
Prospects
The Board anticipates that interest distributions per linked unit for the year
ending 31 August 2006 will increase by at least 10% compared with the year ended
31 August 2005. This forecast has not been reviewed or reported on by Redefine"s
auditors.
Interest distribution
Unitholders are advised that interest distribution No. 22 in respect of the
period 1 June 2005 to 31 August 2005 of 10.3 cents per linked unit has been
declared.
* The last date to trade cum interest Friday, 21 October 2005
* Linked units will trade ex interest Monday, 24 October 2005
* Record Date Friday, 28 October 2005
* Payment of interest distribution No. 22 Monday, 31 October 2005
Unitholders may not dematerialise or re-materialise their linked units between
Monday, 24 October 2005 and Friday, 28 October 2005, both days inclusive.
Wolf Cesman, Chairman
Brian Azizollahoff, Chief Executive Officer
Johannesburg
10 October 2005.
REDEFINE INCOME FUND LIMITED
2 Arnold Road, Rosebank, Johannesburg. P O Box 1731, Parklands, 2121, South
Africa.
Telephone +27 11 283 0110 E-mail: mail@redefine.co.za
Directors: B Azizollahoff+ (CEO), L Barnard*, W Cesman* (Chairman), C Clarke*, E
Ellerine*, D Perton*+, S Shaw-Taylor*, M Wainer*
*non-executive +British
Company secretary: Probity Business Services (Pty) Ltd. Suite 204, 20 Baker
Street, Rosebank, 2196. Telephone: +27 11 327 7146
www.redefine.co.za
Date: 07/10/2005 05:50:19 PM Supplied by www.sharenet.co.za
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