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Emira - Unaudited interim financial results and further cautionary announcement
EMIRA PROPERTY FUND
(A property fund created under the Emira Property Scheme, registered in terms of
the Collective Investment Schemes Control Act)
Share code: EMI & ISIN: ZAE000050712
("Emira")
- Distributions per PI 36,44c year-on-year growth +11,7%
- 6-month value traded R673 million an annualised percentage of 58,8%
- 6-month total return 216c or 30,1%
- Vacancies decline from 6,0% to 5,2%
UNAUDITED INTERIM FINANCIAL RESULTS FOR THE SIX-MONTHS ENDED 31 DECEMBER 2005
AND FURTHER CAUTIONARY ANNOUNCEMENT
ABRIDGED INCOME STATEMENT
Six-months Six-months Year
ended ended ended
31 Dec 2005 31 Dec 2004 30 June 2005
Unaudited Unaudited Audited
Restated Restated
R"000 R"000 R"000
Revenue 217 415 203 207 407 088
Property expenses (67 395) (54 096) (113 292)
Administration expenses (6 667) (5 916) (1 250)
Management expenses (6 867) (4 759) (10 590)
Depreciation (3 517) (3 416) (6 464)
Net income from property
rental operations 132 969 135 020 264 592
Fair value adjustments (9 195) (26 967) 240 124
Change in fair value of
investment properties - - 280 810
Change in fair value as a
result of deferring upfront
lease costs (1 060) (4 877) (8 017)
Change in fair value as a
result of future rental
escalations (8 135) (22 090) (32 669)
Profit on sale of investment
property 5 1 369 11 179
Maintenance fund expenses (577) (1 379) (1 827)
Listing costs - - (104)
Operating profit 123 202 108 043 513 964
Financing costs (22 877) (16 692) (45 662)
Interest received 847 2 090 3 554
Net profit for the period 101 172 93 441 471 856
Reconciliation between earnings
and headline earnings:
Net profit for the period 101 172 93 441 471 856
Adjusted for:
Change in fair value of
investment properties - - (280 810)
Change in fair value as a
result of deferring upfront
lease costs 1 060 4 877 8 017
Change in fair value as a
result of future rental
escalations 8 135 22 090 32 669
Profit on sale of investment
property (PI) (5) (1 369) (11 179)
Headline earnings per
participatory interest (PI) 110 362 119 039 220 553
Reconciliation of headline
earnings to distribution per PI:
Headline earnings 110 362 119 039 220 553
Adjusted for:
Allowance for future
rental escalations (8 135) (22 090) (32 669)
Change in fair value as a
result of deferring upfront
lease costs (1 060) (4 877) (8 017)
Unrealised loss on interest
rate swaps 2 560 - 11 757
Maintenance fund expenses 577 1 379 1 827
Amortised borrowing costs 219 148 296
Distribution payable to PI
holders 104 523 93 599 193 747
Distribution per PI (cents) 36,44 32,63 67,55
ABRIDGED BALANCE SHEET
at 31 December 2005
Six-months Six-months Year
ended ended ended
31 Dec 2005 31 Dec 2004 30 June 2005
Unaudited Unaudited Audited
Restated Restated
R"000 R"000 R"000
Assets
Non-current assets
Investment properties 2 332 302 1 887 468 2 215 059
Allowance for future rental
escalations 40 834 22 090 32 669
Unamortised upfront lease
costs 13 105 10 309 12 046
2 386 241 1 919 867 2 259 774
Current assets
Accounts receivable 75 3 195 31 757
Investments - 23 670 -
Cash 4 220 8 769 9 252
4 295 35 634 41 009
Total assets 2 390 536 1 955 501 2 300 783
Equity and liabilities
PI holders" capital 1 785 255 1 501 589 1 788 606
Non-current liabilities
Interest-bearing debt 444 273 325 207 364 141
Current liabilities
Short-term portion of
long-term interest-bearing
debt 1 950 1 950 1 867
Accounts payable 40 218 33 156 34 257
Derivative liabilities 14 317 - 11 757
Provision for distributions
to PI holders 104 523 93 599 100 155
161 008 128 705 148 036
Total equity and liabilities 2 390 536 1 955 501 2 300 783
STATEMENT OF CHANGES IN EQUITY
for the six-months ended 31 December 2005
Non-
Participatory distributable Retained
interest reserve earnings Total
R"000 R"000 R"000 R"000
Balance at
1 July 2005 1 425 094 363 981 (469) 1 788 606
Net profit for
the period - - 101 172 101 172
Distribution to
PI holders - - (104 523) (104 523)
Unrealised loss
on interest rate
swaps - (2 560) 2 560 -
Transfer of
maintenance
fund expenses to
non-distributable
reserve - (577) 577 -
Profit on sale of
investment
property - 5 (5) -
Balance at
31 December 2005 1 425 094 360 849 (688) 1 785 255
ABRIDGED CASH FLOW STATEMENT
for the six-months ended 31 December 2005
Six-months Six-months Year
ended ended ended
31 Dec 2005 31 Dec 2004 30 June 2005
Unaudited Unaudited Audited
Restated Restated
R"000 R"000 R"000
Cash generated by rental
operations 164 357 104 699 196 087
Net finance cost (19 470) (14 602) (30 351)
Distribution to PI holders (100 155) (79 714) (173 306)
Cash flow from operating
activities 44 732 10 383 (7 570)
Additions to/purchase of
investment properties (128 384) (25 024) (104 693)
Purchase of furniture and
fittings (4 601) (2 127) (8 984)
Decrease/(increase) in
maintenance fund - 434 24 104
Proceeds on disposal of
investment property 3 006 6 764 40 455
Net cash utilised in investing
activities (129 979) (19 953) (49 118)
Issue of PI - - 8 750
Cash raised from borrowings 80 132 14 229 53 163
Increase in short-term portion
of borrowings 83 83 -
Net cash from financing
activities 80 215 14 312 61 913
Net change in cash and cash
equivalents (5 032) 4 742 5 225
Cash and cash equivalents at
beginning of period 9 252 4 027 4 027
Net change in cash and cash
equivalents 4 220 8 769 9 252
Basis of preparation
The financial statements have been prepared in accordance with International
Financial Reporting Standard ("IFRS") IAS 34 (Interim Financial Reporting) and
in compliance with the Listing Requirements of the JSE Limited ("JSE"). The
accounting policies comply with IFRS.
These are the Fund"s first IFRS condensed Interim Financial Statements and the
comparative figures have accordingly been restated. The disclosure required by
IFRS 1 (First-time Adoption of IFRS) reflecting the reconciliation from South
African Statements of Generally Accepted Accounting Practice ("SA GAAP") is set
out below:
SEGMENTAL INFORMATION
Retail Office Industrial Other Total
Primary segment R"000 R"000 R"000 R"000 R"000
Revenue 80 047 104 889 32 479 - 217 415
Revenue 75 725 103 031 30 524 - 209 280
Allowance for future
rental escalations 4 321 1 858 1 955 - 8 135
Segmental result
Net income from
property rental
operations 50 020 67 347 23 314 (7 712) 132 969
Income from property
operations 50 068 66 240 23 313 (7 712) 131 909
Amortisation of
upfront lease costs (48) 1 107 1 - 1 060
Depreciation 662 2 449 406 - 3 517
Other information
Investment
properties 810 234 1 204 093 330 421 659 2 345 407
Total assets 827 981 1 221 849 338 722 1 984 2 390 536
Accounts payable 12 174 18 172 4 419 5 453 40 218
Capital expenditure 17 133 114 538 1 238 76 132 985
Geographical segments
Revenue
- Gauteng 59 165 84 481 18 389 - 162 035
- Western and
Eastern Cape 5 593 5 983 5 141 - 16 717
- KwaZulu-Natal - 14 425 8 949 - 23 374
- Free State 12 839 - - - 12 839
- North West 2 450 - - - 2 450
80 047 104 889 32 479 - 217 415
Total assets
- Gauteng 601 488 959 885 195 029 (500) 1 755 902
- Western and
Eastern Cape 77 774 77 634 57 300 1 495 214 203
- KwaZulu-Natal - 184 330 86 393 235 270 958
- Free State 128 558 - - 754 129 312
- North West 20 161 - - - 20 161
827 981 1 221 849 338 722 1 984 2 390 536
RELATED PARTIES AND RELATED PARTY TRANSACTIONS
Momentum Group is the majority PI holder. At 31 December 2005, Momentum owned
40% of the Fund"s PIs and the remaining 60% were widely held.
The following transactions were carried out with related parties:
Six-months Six-months Year
ended ended ended
31 Dec 2005 31 Dec 2004 30 June 2005
Unaudited Unaudited Audited
R"000 R"000 R"000
Strategic Real Estate Managers
(Pty) Limited
Expenditure comprising: asset
management fee 6 867 4 759 10 590
Relationship: Associated company
of the FirstRand Group
Rand Merchant Bank, a division
of FirstRand Bank Limited
Borrowings 304 125 226 125 226 125
Net finance cost 12 996 11 469 23 166
Relationship: Associated company
of the FirstRand Group
RMB Properties (Pty) Limited
Expenditure comprising: property
management fee and letting
commissions 12 078 9 203 22 683
Relationship: Associated company
of the FirstRand Group
The above transactions were carried out on commercial terms and conditions no
more favourable than those available in similar arm"s length dealings at market-
related rates.
CHANGE IN ACCOUNTING POLICIES
OPERATING LEASES
Upfront lease expenditure under operating leases is now recognised on a
straight-line basis over the lease term in accordance with IAS 17 (International
Accounting Standard 17).
COMMENTARY
The Board of Directors of Strategic Real Estate Managers (STREM) (Proprietary)
Limited is pleased to announce a distribution of 36,44 cents per Emira PI for
the six-months to 31 December 2005. This represents growth in distributions of
11,7% on the previous comparable period.
Emira PI holders enjoyed a healthy total return of 30,1% during the six-months
to 31 December 2005, comprising capital appreciation of 25% and an income return
of 5,1%. The percentage of total PIs in issue that traded in the same period
equated to 58,8% on an annualised basis.
The investment market continues to be exceptionally competitive, with very few
quality properties available at attractive yields. PI holders are referred to
the cautionary announcement below, which states that Emira is in negotiations in
respect of a potential transaction, which may have an impact on the price at
which its PIs trade.
FINANCIAL RESULTS
The six-months to December 2005 saw buoyant conditions in both the listed and
physical property markets. Vacancies declined further and healthy rental growth
was seen in numerous areas. The positively geared acquisitions made by Emira
during the previous financial year and in the period in question also
contributed to the growth in income.
Emira"s weighted average cost of interest remained extremely competitive,
although the absolute value of interest paid during the period rose sharply as a
result of various debt-funded purchases mentioned above and in the tables below.
The rising share price during the period and the increased number of units in
issue contributed to the 44,3% year-on-year increase in asset management fees.
Interest received declined on a comparative basis as a result of the declining
short-term interest rates and the maintenance fund being shifted into the access
facility, and out of an interest-earning account.
ACQUISITIONS AND DISPOSALS
After lengthy delays in the transfer process, 122 Pybus Road and Lincolnwood
Office Park were eventually registered in Emira"s name, while 100 Armstrong
contributed for the majority of the period in question.
PROPERTIES TRANSFERRED TO EMIRA DURING THE SIX MONTHS TO DECEMBER 2005
Purchase
Property Sector Location GLA (m2) price (R"000)
100 Armstrong Office La Lucia Ridge 2 880 25 000
122 Pybus Road Office Sandton CBD 5 299 15 750
Lincolnwood Office
Park Office Woodmead 10 911 55 750
Total 96 500
PROPERTIES TRANSFERRED TO EMIRA DURING THE SIX MONTHS TO DECEMBER 2005
Forward Effective
Property yield (%) date Tenants
100 Armstrong 11,1 11 July 2005 Imperial Bank
(Pty) Ltd
SAP Africa
(Pty) Ltd
122 Pybus Road 11,1 20 Oct 2005 Rennies Travel
(Pty) Ltd
Lincolnwood Office Park 12,2 20 Oct 2005 SA Rail Commuters
Corporation Ltd
Total
Motorola was the single property transferred out of the Fund during the period,
while Mafikeng Game and Grinaker Electronics await transfer. Emira has recently
received all requisite guarantees from the purchaser of Grinaker Electronics and
documents are to be lodged imminently.
DISPOSALS
Properties transferred out of Emira during the six months to December 2005
Valuation
June 2004
Property Sector Location GLA (m2) (Rm)
Motorola Office Midrand 719 2,4
DISPOSALS
Properties sold by Emira but yet to be transferred out of the Fund
Sale price Forward
Property (Rm) yield (%)
Mafikeng Game 20,7 15,9
Grinaker Electronics 7,0 1,6
VACANCIES
Vacancies declined from 6,0% to 5,2% during the period, with the largest
percentage decline being in the industrial sector, which declined from 4,7% to
2,7%. Offices declined somewhat during the period, while retail vacancies
remained flat. Stripping out the vacant space attributable to Grinaker
Electronics, vacancies would decline to 4,8%.
June 2005 Vacancy Dec 2005 Vacancy
GLA (m2) June 2005 % GLA (m2) Dec 2005 %
Industrial 174 286,3 8 269,8 4,7 174 256,2 4 729 2,7
Office 238 016,6 23 090,8 9,7 253 079,2 23 156 9,0
Retail 151 057,0 2 263,4 1,5 151 053,8 2 492 1,7
563 359,9 33 624,0 6,0 578 389,2 30 377 5,2
DEBT
Emira"s debt facilities remain as at June 2005, with the properties transferred
during the period having been funded out of the Fund"s existing access facility.
Rate (%) Term Amount (Rm) % of debt
1 Debt - Floating Prime -2 N/A 107,4 20,6
2 Debt - Fixed 9,24 September 2007 100,0 19,2
3 - Fixed 9,76 November 2006 126,1 24,2
4 - Fixed 10,21 November 2008 100,0 19,2
5 - Fixed 11,26 October 2009 88,5 17,0
TOTAL 9,76* 522,0 100
Emira has engaged in additional interest rate swaps to extend facility 3 above:
6 Debt - Fixed 10,76 Dec 06 to Nov 11 63,0 12,1
10,41 Dec 06 to Nov 11 63,1 12,1
*Weighted average cost of debt assuming prime at 10,5%.
PROSPECTS
Assuming a stable economy and property market for the remainder of the financial
year, and excluding the impact of the potential transaction referred to below,
the STREM Board aims to achieve distributions of between 74 and 75 cents are
achievable in the twelve months to June 2006.
FURTHER CAUTIONARY ANNOUNCEMENT
Further to the cautionary announcements released on SENS on 23 November 2005 and
on 3 January 2006, holders of PIs in Emira are advised that the Fund has entered
into discussions in respect of a potential transaction, which may have an effect
on the price at which its PIs trade on the JSE Limited. Accordingly, PI holders
are advised to exercise caution when dealing in their PIs until such time as a
further announcement regarding the potential transaction is published.
DISTRIBUTION
Notice is hereby given that a cash distribution of 36,44 cents per PI has been
declared payable to PI holders payable on 6 March 2006.
Last day to trade cum distribution Thursday, 23 February 2006
PIs trade ex distribution Friday, 24 February 2006
Record date Friday, 3 March 2006
Payment date Monday, 6 March 2006
PI certificates may not be dematerialised or rematerialised between Friday, 24
February 2006 and Friday, 3 March 2006 (both days inclusive).
By order of the Board
C Middlemiss Ben van der Ross James Templeton
Company Secretary Chairman Chief Executive Officer
Sandton
8 February 2006
Property Fund Manager: Strategic Real Estate Managers (Pty) Limited
Directors of the fund manager
B J van der Ross (Chairman)*, J W A Templeton (Chief Executive Officer), L
Barnard*, L Basson*, M S B Neser*, W K Schultze *Non-executive
director
Registered address: 3 Gwen Lane, Sandton, 2146
Merchant bank and sponsor: Rand Merchant Bank (A division of FirstRand Bank
Limited)
Transfer secretaries: Computershare Investor Services 2004 (Proprietary)
Limited, 70 Marshall Street, Johannesburg, 2001 (POBox 61051, Marshalltown,
2107)
www.emira.co.za
Date: 09/02/2006 05:15:13 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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