Capital Property Fund Ltd HY 2013 results

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Capital Property Fund Ltd HY 2013 results

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Capital Property Fund Ltd HY 2013 results

  1. 1. Condensed UNaudited consolidated INTERIM financial statements for the SIX MONTHS ended 30 JUNE 2013 (“Capital” or “the Fund”) Share code CPL ISIN ZAE000001731 CONSOLIDATED STATEMENT OF FINANCIAL POSITION Unaudited Jun 2013 R'000 Audited Dec 2012 R’000 Unaudited Jun 2012 R'000 ASSETS Non-current assets Investment property Straight-lining of rental revenue adjustment Investment property under development Investments Investment in associate companies 20 209 838 14 946 544 136 744 979 578 4 146 972 – 20 082 071 15 910 791 154 523 870 009 1 788 434 1 358 314 18 429 247 15 783 116 122 029 473 148 1 230 656 820 298 Current assets Investment property held for sale Straight-lining of rental revenue adjustment Trade and other receivables Cash and cash equivalents 1 150 984 873 888 17 226 251 230 8 640 257 577 – – 243 524 14 053 271 818 – – 187 277 84 541 Total assets 21 360 822 20 339 648 18 701 065 The property portfolio performed marginally ahead of budget with respect to both rentals and expenses. The listed portfolio performed well ahead of budget, particularly the investments in New Europe Property Investments plc and Rockcastle Global Real Estate Company Limited where distributions benefited from the depreciation in the Rand. Capital has R1,771 billion in offshore investments and at 30 June 2013 R1,100 billion of this currency exposure was hedged. EQUITY AND LIABILITIES Capital of Fund Trust capital Non-distributable reserves Retained earnings 14 932 894 9 273 620 5 659 274 – 13 963 835 9 273 620 4 690 215 – 12 750 572 9 273 620 3 476 952 – The logistics properties which constitute 53% of the property portfolio continued to perform well with reduced vacancies and the only significant negative reversion related to 118 Brakpan Road. The lease on this property which is let to DHL was due to expire in November 2013. The decision was taken to bring forward the renewal date with rentals reduced to market in exchange for an effective six year renewal. Conditions in the manufacturing sector, however, remained difficult and rental renewals remained under pressure. Industrial buildings now constitute only 3% of the property portfolio. Total liabilities 6 427 928 6 375 813 5 950 493 Non-current liabilities Interest-bearing borrowings Deferred tax 4 833 714 4 078 142 755 572 4 379 852 3 643 718 736 134 2 893 904 2 365 316 528 588 Current liabilities Trade and other payables Unitholders for distribution Taxation payable Interest-bearing borrowings 1 594 214 546 355 571 766 6 645 469 448 1 995 961 635 072 586 550 – 774 339 3 056 589 626 560 534 805 2 911 1 892 313 Total equity and liabilities 21 360 822 20 339 648 18 701 065 DIRECTORS’ COMMENTARY NATURE OF THE BUSINESS Capital owns the largest portfolio of A-grade logistics facilities in South Africa. In addition the portfolio includes A and B-grade offices, a small retail portfolio and listed securities. STRATEGIC DIRECTION The Fund has continued to reduce its exposure to smaller retail and office properties and to invest in the development of new A-grade logistics facilities. The investments in logistics facilities have now been separately reported on from the industrial properties which are only suitable for manufacturing. Capital will retain an exposure to prime and A-grade office blocks in well sought after nodes. DISTRIBUTABLE EARNINGS Capital’s interim distribution of 35,58 cents per unit for the period ended 30 June 2013 represents an increase of 6,91% over the 33,28 cents for the interim period ended 30 June 2012. REVIEW In a challenging office market characterised by aggressive rental discounting and extended rent free periods, Capital’s portfolio performed well. Capital continued to upgrade and redevelop its office portfolio in order to retain existing tenants and reduce vacancies. The largest vacancy, Fourways Office Park, is undergoing a major upgrade which has already had a positive impact on the tenancy. Capital was awarded the best performing office portfolio by IPD for 2012. Following the sale of six buildings to Dipula Income Fund Limited, effective 1 July 2013, Capital’s retail exposure has been further reduced. The redevelopment of Pineslopes Shopping Centre, a mixed use development, has resulted in an improved tenant mix including Checkers as an additional anchor. Checkers will take occupation in October this year. Food Lovers Market, which opened at The Crescent, Umhlanga in May 2013 is trading well and has further increased the foot count and total retail sales for the centre. In line with a proposed industry initiative under the SA REIT Association, Capital intends converting to a corporate Real Estate Investment Trust, as a result of which it would no longer be subject to the Collective Investment Schemes Control Act (Act 45 of 2002). In addition, and as previously announced by way of SENS published on 5 April 2013, the board has in principle agreed to the internalisation of the management of Capital. The board of Property Fund Managers Limited considers it optimal to implement the conversion and internalisation simultaneously. These changes are subject to various regulatory and unitholder approvals. The timing of this process is currently uncertain and unitholders will be kept updated by SENS announcements. ACQUISITIONS AND DEVELOPMENTS Capital’s major focus is the acquisition of well-located land for the development of logistics facilities. An additional 12ha of prime land was acquired for R80,3 million in Linbro Park, Gauteng. The environmental approvals and re-zoning processes at the 76,6ha Clairwood Logistics Park are progressing well. The following developments have been completed: % owned 100% 20% 100% % owned 100% 100% 20% 20% 25% 25% 25% 25% Description Raceway Industrial Park N1 Business Park 14 Fitzmaurice Epping 100% GLA (m2) 21 345m2 7 355m2 3 368m2 100% GLA (m2) 40 750m2 11 182m2 12 907m2 5 300m2 4 476m2 3 807m2 2 491m2 1 605m2 Yield 9,7% 9,1% 9,2% Completion date Jul 13 May 13 Apr 13 Estimated yield 9,0% 8,0% 9,9% 9,2% 8,5% 8,0% 8,0% 9,9% Estimated completion date Jun 14 Sep 13 Nov 13 Nov 13 Nov 13 Aug 13 Aug 13 Aug 13 100% GLA Intended (m2) use 350 000m2 Logistics 60 000m2 P-grade offices 52 000m2 Logistics Logistics 30 000m2 30 000m2 Logistics Estimated commencement date Sep 14 Feb 14 Oct 13 Feb 14 Oct 13 Distributable income from investments % owned 100% 80% 100% 100% 100% 64 500 73 822 29 506 1 496 665 930 742 (29 110) 595 033 267 698 8 951 3 384 255 363 Gain on disposal of portion of associates Administrative expenses Income from associates – non-distributable – distributable 45 690 (47 919) 83 918 44 302 39 616 62 218 (91 030) 189 255 117 907 71 348 21 758 (43 984) 34 835 – 34 835 3 177 409 1 010 291 1 524 730 Net finance costs Finance income Fair value adjustment on derivatives Interest received Finance costs Interest paid on borrowings Capitalised interest Fair value adjustment on derivatives 54 122 206 624 201 762 4 862 (152 502) (182 669) 39 633 (9 466) (413 082) 13 334 12 231 1 103 (426 416) (408 112) 56 855 (75 159) (262 227) 603 – 603 (262 830) (209 050) 19 033 (72 813) Profit before income tax expense Income tax expense Profit for the period attributable to equity holders 1 578 852 (38 027) 1 540 825 2 764 327 (199 778) 2 564 549 748 064 16 672 764 736 1 540 825 2 564 549 764 736 95,88 159,59 47,59 *The Fund has no dilutionary instruments in issue. RECONCILIATION OF PROFIT FOR THE PERIOD TO HEADLINE EARNINGS AND DISTRIBUTABLE INCOME The following re-developments are planned for the remainder of 2013: % owned 100% Description Noursepack Epping 2 100% GLA (m2) 14 571m2 Estimated yield 8,5% Estimated completion date Mar 14 Capital acquired a 20 725m logistics facility for R67,5 million in Epping 2, Western Cape at a yield of 10,0%. 2 DISPOSALS The following properties were sold during 2013: Property name Menlyn Dealership Gezina Galleries Ziyabuya Shopping Centre Woodmead Super Value Mall# Shoprite Centre Pretoria North Blackheath Pavilion 382 Jan Smuts Avenue Craighall* 63 Wierda Road East Wierda Valley The Braides* Constantia View Office Park* 3 River Road Bruma* 135 Musgrave Road Durban* 31 Beacon Road Florida North* Woodmead Square# Willowvale* Sales proceeds R’000 250 000 159 330 116 000 104 660 76 640 70 500 68 215 63 500 57 935 56 477 45 558 45 307 42 612 31 900 15 979 1 204 613 Valuation at 31 Dec 2012 R’000 236 700 152 600 110 000 101 200 70 600 63 900 56 300 46 600 62 000 52 000 44 900 40 600 37 800 27 700 17 900 1 120 800 Exit yield 9,1% 9,8% 9,7% 9,1% 9,0% 9,6% 9,0% 8,5% 9,1% 9,1% 9,1% 9,2% 9,1% 9,4% 9,2% Effective date 11 Feb 13 19 Jul 13 4 Jul 13 Transfer date 15 Jul 13 15 Jul 13 1 Jul 13 30 Apr 13 1 Jul 13 1 Jul 13 1 Jul 13 1 Jul 13 1 Jul 13 Transfer date 1 Jul 13 VACANCIES AND ARREARS Vacancies improved from 5,9% at 31 December 2012 to 5,1% at 30 June 2013. Logistics and industrial vacancies decreased to 4,3% (31 Dec 2012: 4,5%), office vacancies decreased to 9,5% (31 Dec 2012: 13,6%) and retail vacancies increased to 5,2% (31 Dec 2012: 4,9%) based on gross lettable area. One percent of the retail vacancies relate to the re-development of Pineslopes Shopping Centre. There was no material change in arrears and bad debts are well provided for. 2 564 549 (812 044) (930 742) 29 110 (80 464) 170 052 764 736 (20 717) (8 951) (3 384) – (8 382) Headline earnings 1 473 070 1 752 505 744 019 Dec 2012 Jun 2012 Dec 2011 35,58 1 606 986 279 R9,29 21,3% 36,50 1 606 986 279 R8,69 21,7% 33,28 1 606 986 279 R7,93 22,8% 34,27 1 606 986 279 R7,79 22,2% *The interest-bearing debt to asset ratio is calculated by dividing interest-bearing borrowings by total assets. FACILITIES June 2013 Number of units/shares 13 250 000 65 670 000 16 200 000 96 000 000 23 100 000 44 200 000 53 500 000 Market value R’000 887 618 883 262 870 588 816 000 339 570 210 834 139 100 4 146 972 * uring the period portions of the investments in Fortress Income Fund Limited and Ascension Properties Limited were D disposed of and, as a result, are no longer equity accounted and are now reflected as investments. Capital increased the size of its DMTN programme from R2 billion to R3 billion and the aggregate notes in issue at 30 June 2013 were R1,765 billion. At 30 June 2013, Capital had R958 million available to draw on existing bank facilities. The forecast is based on the assumptions that a stable macro-economic environment will prevail, no major corporate failures will occur and that tenants will be able to absorb the recovery of rising utility costs. Budgeted rental income was based on contractual escalations and anticipated market related renewals. By order of the board Barry Stuhler Rual Bornman Managing director Financial director 31 July 2013 www.capitalproperty.co.za 465 500 1 062 – 3 050 520 5 597 0,21% 1,53% 1,37% – 1,70% 1,52% 1,49% R' million Average swap/CAP rate 200 600 800 700 800 700 200 4 000 7,87% 7,97% 8,21% 7,22% 7,68% 6,45% 6,32% 7,48% GLA 71% 4% 16% 8% 1% 100% Book value 53% 3% 29% 14% 1% 100% 2013 2014 2015 2016 2017 2018 Expiry *Includes a CAP of R200 million. SECTORAL SPLIT Based on Logistics Industrial Offices Retail Other LEASE EXPIRY PROFILE Based on Vacant Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 Dec 17 GLA 5,1% 14,1% 23,2% 22,0% 15,7% 9,5% 10,4% 100,0% Rental revenue 12,7% 23,7% 21,6% 17,8% 12,2% 12,0% 100,0% SEGMENTAL ANALYSIS Unaudited Jun 2013 R'000 Audited Dec 2012 R’000 Unaudited Jun 2012 R'000 Logistics 503 722 1 051 191 509 473 Industrial 43 855 74 933 35 964 Offices 292 438 653 129 330 543 Retail 142 755 311 488 155 378 Other 14 381 49 566 24 069 Total 997 151 2 140 307 1 055 427 (162 726) Segmental revenue – recoveries and contractual rental revenue 1 540 825 553 (79 884) (553) (644 914) (45 690) (44 302) (192 296) 38 027 571 766 (571 766) (571 766) – 2 564 549 (29 110) (930 742) 29 110 (595 033) (62 218) (117 907) 62 928 199 778 1 121 355 (1 121 355) (534 805) (586 550) 764 736 3 384 (8 951) (3 384) (255 363) (21 758) – 72 813 (16 672) 534 805 (534 805) (534 805) – – – 91,67 109,06 46,30 Logistics (160 577) (349 803) Industrial (22 589) (35 800) (18 135) Offices (103 871) (216 267) (109 874) Retail (52 346) (109 948) (55 014) Other (4 031) (11 120) (5 816) Total (343 414) (722 938) (351 565) 509 677 Segmental revenue – rental revenue Logistics 508 033 1 064 020 Industrial 44 230 75 899 38 676 Offices 284 443 654 546 324 485 Retail 152 670 323 773 155 463 Other 7 228 51 179 23 742 Total 996 604 2 169 417 1 052 043 340 590 Profit for the period Logistics 343 094 1 156 134 Industrial 21 267 75 728 20 337 Offices 224 557 627 915 211 946 Headline earnings per unit is 91,67 cents (Dec 2012: 109,06 cents; Jun 2012: 46,30 cents). The calculation of headline earnings per unit is based on a weighted average number of units in issue during the period of 1 606 986 279 (Dec 2012: 1 606 986 279; Jun 2012: 1 606 986 279) and headline earnings of R1 473,070 million (Dec 2012: R1 752,505 million; Jun 2012: R744,019 million). Retail 134 359 421 829 121 687 Other 10 350 66 505 18 253 807 198 216 438 51 923 1 540 825 2 564 549 764 736 Unaudited Jun 2013 R'000 Audited Dec 2012 R’000 Unaudited Jun 2012 R'000 575 150 46 518 555 212 58 355 637 443 174 926 621 668 613 567 812 369 ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS Unaudited for the six months ended Jun 2013 R'000 Net cash inflow/(outflow) from operating activities Cash outflow from investing activities Cash inflow from financing activities (Decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period Cash and cash equivalents consist of: Cash on call iro securitisation Current accounts 43 559 (178 505) 129 533 (5 413) 14 053 8 640 – 8 640 8 640 Audited Unaudited for the year for the six ended months ended Dec 2012 Jun 2012 R’000 R'000 (29 373) (398 350) 377 377 (50 346) 64 399 14 053 12 640 (209 447) 216 949 20 142 64 399 84 541 – 14 053 14 053 53 280 31 261 84 541 CONSOLIDATED STATEMENT OF CHANGES IN UNITHOLDERS’ INTEREST OUTLOOK The reduction in vacancies bodes well for distribution growth for the remainder of the financial year. In addition, Capital’s listed investments are all projected to perform ahead of the 2013 budget. The distributions for the full financial year are forecast to increase from 4% to 7% to between 6% and 9%. This forecast has not been reviewed or reported on by Capital’s auditors. Margin over Jibar Basic earnings per unit is 95,88 cents (Dec 2012: 159,59 cents; Jun 2012: 47,59 cents). The calculation of basic earnings per unit is based on a weighted average number of units in issue during the period of 1 606 986 279 (Dec 2012: 1 606 986 279; Jun 2012: 1 606 986 279) and earnings of R1 540,825 million (Dec 2012: R2 564,549 million; Jun 2012: R764,736 million). FUNDING Standard Bank has approved a new five year facility to replace the R520 million facility that expired during the period. Facility R' million Expiry Property operating expenses – Income not distributed Jun 2013 Distribution per unit (cents) Units in issue Net asset value Interest-bearing debt to asset ratio* Corporate Total EQUITY INVESTMENTS New Europe Property Investments plc Rockcastle Global Real Estate Company Limited Resilient Property Income Fund Limited Fortress Income Fund Limited B linked units* Fortress Income Fund Limited A linked units* Ascension Properties Limited A linked units* Ascension Properties Limited B linked units* 1 540 825 (67 755) (79 884) (553) – 12 682 Headline earnings per unit (cents) *Purchase price payable R161 million in cash and R171 million in shares in Tower Property Fund Limited. #Not yet transferred. Audited Unaudited for the year for the six ended months ended Dec 2012 Jun 2012 R’000 R'000 Profit for the period attributable to equity holders Adjusted for: – Fair value gain on investment property – Adjustment resulting from straight-lining of rental revenue – Fair value adjustment on investment property of associates – Income tax effect Reconciliation of profit for the period to amount available for distribution Profit for the period attributable to equity holders Straight-lining of rental revenue adjustment Fair value gain on investment property Adjustment resulting from straight-lining of rental revenue Fair value gain on investments Gain on disposal of portion of associates Income from associates – non-distributable Fair value adjustment on derivatives Income tax expense Distributable income Less: distribution declared Interim Final SUMMARY OF FINANCIAL PERFORMANCE 2014 2015 2016 2017 2018 2019* 2020 700 478 1 055 427 (3 384) 1 052 043 (351 565) 725 351 79 884 553 644 914 Unaudited for the six months ended Jun 2013 R'000 The interim financial statements have not been audited or reviewed by the Fund’s auditors. 1 446 479 2 140 307 29 110 2 169 417 (722 938) Fair value gain on investment property and investments Fair value gain on investment property Adjustment resulting from straight-lining of rental revenue Fair value gain on investments Basic earnings per unit (cents)* The directors are not aware of any matters or circumstances arising subsequent to 30 June 2013 that require any additional disclosure or adjustment to the financial statements. SWAP PROFILE Total comprehensive income for the period Land available for future developments: Description Clairwood Logistics Park Sandton Offices Tradeport City Deep Linbro Park Linbro Park 653 190 997 157 (553) 996 604 (343 414) The accounting policies adopted are consistent with those applied in the prior periods. Audited Unaudited for the year for the six ended months ended Dec 2012 Jun 2012 R’000 R'000 Profit before net finance costs The following developments have commenced: Description Raceway Industrial Park 16 Industry Road N1 Business Park N1 Business Park Montague Business Park Montague Business Park Montague Business Park Montague Business Park Net rental and related revenue Recoveries and contractual rental revenue Straight-lining of rental revenue adjustment Rental revenue Property operating expenses The interim condensed unaudited consolidated financial statements have been prepared in accordance with the measurement and recognition requirements of IFRS, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the information required by IAS 34: Interim Financial Reporting, the JSE Listings Requirements, the requirements of the South African Companies Act and the Collective Investment Schemes Control Act (Act 45 of 2002). This report was compiled under the supervision of Rual Bornman CA(SA), the financial director. The overall cost of borrowings at 30 June 2013 was 8,62%. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Unaudited for the six months ended Jun 2013 R'000 PREPARATION AND ACCOUNTING POLICIES Unaudited Balance at 31 December 2011 Total comprehensive income for the period Transfer to non-distributable reserves Distribution Balance at 30 June 2012 Total comprehensive income for the period Transfer to non-distributable reserves Distribution Balance at 31 December 2012 Total comprehensive income for the period Transfer to non-distributable reserves Distribution Balance at 30 June 2013 Trust capital R'000 9 273 620 Non– distributable reserves R'000 3 247 021 229 931 9 273 620 3 476 952 1 213 263 9 273 620 4 690 215 969 059 9 273 620 5 659 274 CAPITAL COMMITMENTS Authorised and contracted Authorised and not yet contracted INCOME DISTRIBUTION Notice is hereby given that an interim cash distribution of 35,58 cents interest per unit, being number 60 for Capital Property Fund, has been declared in respect of the period 1 January 2013 to 30 June 2013 and is payable to the unitholders recorded in the books of Capital at the close of business on the record date, Friday 23 August 2013. Unitholders are advised that the last day to trade cum distribution will be Friday 16 August 2013. The units will trade ex distribution from Monday 19 August 2013. Payment will be made on Monday 26 August 2013. Unit certificates may not be dematerialised or rematerialised during the period 19 August 2013 to 23 August 2013, both days inclusive. Registered office 4th Floor, Rivonia Village, Rivonia Boulevard, Rivonia, 2191 (PO Box 2555, Rivonia, 2128) Retained earnings R'000 – 764 736 (229 931) (534 805) – 1 799 813 (1 213 263) (586 550) – 1 540 825 (969 059) (571 766) – Total R'000 12 520 641 764 736 – (534 805) 12 750 572 1 799 813 – (586 550) 13 963 835 1 540 825 – (571 766) 14 932 894 Transfer secretaries Link Market Services South Africa Proprietary Limited 13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2001 (PO Box 4844, Johannesburg, 2000) Sponsor Java Capital Company secretary Inge Pick CA(SA) Changes to the board of directors On 13 February 2013, Des de Beer resigned from the board and David Lewis was appointed as an executive director. Effective 15 April 2013, Fareed Wania was appointed as an alternate director to Andrew Teixeira. Directors Willy Ross (chairman)*, Barry Stuhler (managing director), Iraj Abedian*, Rual Bornman, Andries de Lange, David Lewis, Protas Phili*, Andrew Teixeira, Banus van der Walt*, Tshiamo Vilakazi*, Trurman Zuma*, Fareed Wania (alternate to Andrew Teixeira) *Independent non-executive director 3681 visual IGNITION 011 888 5511

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