Capital Property Fund Ltd FY 2013 results

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Capital Property Fund Ltd FY 2013 results

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Capital Property Fund Ltd FY 2013 results

  1. 1. www.capitalproperty.co.za (“Capital” or “the Fund”) Share code CPL ISIN ZAE000001731 CONSOLIDATED STATEMENT OF FINANCIAL POSITION Audited Dec 2013 R'000 Audited Dec 2012 R’000 ASSETS Non-current assets 22 118 799 20 082 071 Investment property 15 241 095 15 910 791 Straight-lining of rental revenue adjustment 399 104 154 523 Investment property under development 1 045 365 870 009 Investments 3 824 693 1 788 434 Investment in associate companies 1 608 542 1 358 314 Current assets 473 173 257 577 Investment property held for sale 183 286 – Straight-lining of rental revenue adjustment 1 306 – Trade and other receivables 261 056 243 524 Cash and cash equivalents 27 525 14 053 Total assets 22 591 972 20 339 648 EQUITY AND LIABILITIES Capital of Fund 16 575 133 13 963 835 Trust capital 9 273 620 9 273 620 Non-distributable reserves 7 301 513 4 690 215 Retained earnings – – Total liabilities 6 016 839 6 375 813 Non-current liabilities 3 707 238 4 379 852 Interest-bearing borrowings 3 693 171 3 643 718 Deferred tax 14 067 736 134 Current liabilities 2 309 601 1 995 961 Trade and other payables 653 929 635 072 Unitholders for distribution 643 437 586 550 Taxation payable 2 488 – Interest-bearing borrowings 1 009 747 774 339 Total equity and liabilities 22 591 972 20 339 648 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Audited for the year ended Dec 2013 R'000 Audited for the year ended Dec 2012 R’000 Net rental and related revenue 1 592 019 1 446 479 Recoveries and contractual rental revenue 2 057 585 2 140 307 Straight-lining of rental revenue adjustment 245 887 29 110 Rental revenue 2 303 472 2 169 417 Property operating expenses (711 453) (722 938) Distributable income from investments 193 901 73 822 Fair value gain on investment property and investments 1 475 978 1 496 665 Fair value gain on investment property 813 418 930 742 Adjustment resulting from straight-lining of rental revenue (245 887) (29 110) Fair value gain on investments 908 447 595 033 Gain on disposal of portion of associates 39 353 62 218 Administrative expenses (92 975) (91 030) Income from associates 102 248 189 255 – non-distributable 44 302 117 907 – distributable 57 946 71 348 Profit before net finance costs 3 310 524 3 177 409 Net finance costs (126 568) (413 082) Finance income 242 529 13 334 Fair value adjustment on derivatives 233 470 12 231 Interest received 9 059 1 103 Finance costs (369 097) (426 416) Interest paid on borrowings (380 995) (408 112) Capitalised interest 82 135 56 855 Fair value adjustment on derivatives (70 237) (75 159) Profit before income tax 3 183 956 2 764 327 Income tax 642 545 (199 778) Profit for the year attributable to equity holders 3 826 501 2 564 549 Total comprehensive income for the year 3 826 501 2 564 549 Basic earnings per unit (cents)* 238,12 159,59 *The Fund has no dilutionary instruments in issue. RECONCILIATION OF PROFIT FOR THE YEAR TO HEADLINE EARNINGS AND DISTRIBUTABLE INCOME Audited for the year ended Dec 2013 R'000 Audited for the year ended Dec 2012 R’000 Profit for the year attributable to equity holders 3 826 501 2 564 549 Adjusted for: (1 201 684) (812 044) – Fair value gain on investment property (813 418) (930 742) – Adjustment resulting from straight-lining of rental revenue 245 887 29 110 – Fair value adjustment on investment property of associates – (80 464) – Income tax effect (634 153) 170 052 Headline earnings 2 624 817 1 752 505 Reconciliation of profit for the year to amount available for distribution Profit for the year attributable to equity holders 3 826 501 2 564 549 Straight-lining of rental revenue adjustment (245 887) (29 110) Fair value gain on investment property (813 418) (930 742) Adjustment resulting from straight-lining of rental revenue 245 887 29 110 Fair value gain on investments (908 447) (595 033) Gain on disposal of portion of associates (39 353) (62 218) Income from associates – non-distributable (44 302) (117 907) Fair value adjustment on derivatives (163 233) 62 928 Income tax (642 545) 199 778 Distributable income 1 215 203 1 121 355 Less: distribution declared (1 215 203) (1 121 355) Interim (571 766) (534 805) Final (643 437) (586 550) Income not distributed – – Headline earnings per unit (cents) 163,34 109,06 Basic earnings per unit is 238,12 cents (2012:159,59 cents).The calculation of the basic earnings per unit is based on a weighted average number of units in issue during the year of 1 606 986 279 (2012:1 606 986 279) and earnings of R3 826,501 million (2012:R2 564,549 million). Headline earnings per unit is 163,34 cents (2012:109,06 cents).The calculation of headline earnings per unit is based on a weighted average number of units in issue during the year of 1 606 986 279 (2012:1 606 986 279) and headline earnings of R2 624,817 million (2012:R1 752,505 million). CONSOLIDATED STATEMENT OF CASH FLOWS Audited for the year ended Dec 2013 R'000 Audited for the year ended Dec 2012 R’000 Cash inflow/(outflow) from operating activities 93 731 (29 373) Cash outflow from investing activities (365 120) (398 350) Cash inflow from financing activities 284 861 377 377 Increase/(decrease) in cash and cash equivalents 13 472 (50 346) Cash and cash equivalents at beginning of year 14 053 64 399 Cash and cash equivalents at end of year 27 525 14 053 Cash and cash equivalents consist of: Current accounts 27 525 14 053 CONSOLIDATED STATEMENT OF CHANGES IN UNITHOLDERS’INTEREST Audited Trust capital R'000 Non– distributable reserves R'000 Retained earnings R'000 Total R'000 Balance at 31 December 2011 9 273 620 3 247 021 – 12 520 641 Total comprehensive income for the year 2 564 549 2 564 549 Transfer to non-distributable reserves 1 443 194 (1 443 194) – Distribution (1 121 355) (1 121 355) Balance at 31 December 2012 9 273 620 4 690 215 – 13 963 835 Total comprehensive income for the year 3 826 501 3 826 501 Transfer to non-distributable reserves 2 611 298 (2 611 298) – Distribution (1 215 203) (1 215 203) Balance at 31 December 2013 9 273 620 7 301 513 – 16 575 133 PREPARATION,ACCOUNTING POLICIES AND AUDIT OPINION The summarised audited consolidated financial statements have been prepared in accordance with the requirements of the JSE Limited Listings Requirements for provisional reports, the requirements of the Companies Act of South Africa applicable to summary financial statements, and the Collective Investment Schemes Control Act (Act 45 of 2002). The Listings Requirements require provisional reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS),the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council, and to also, as a minimum, contain the information required by IAS 34, Interim Financial Reporting.The accounting policies applied in the preparation of the consolidated financial statements, from which the summarised consolidated financial statements were derived, are in terms of IFRS and are consistent with the accounting policies applied in the preparation of the previous consolidated financial statements, with the exception of the adoption of new and revised standards which became effective during the period. This report was compiled under the supervision of Rual Bornman CA(SA), the financial director. The directors are not aware of any matters or circumstances arising subsequent to 31 December 2013 that require any additional disclosure or adjustment to the financial statements. The auditors, Deloitte & Touche, have issued their opinion on the group’s financial statements for the year ended 31 December 2013.The audit was conducted in accordance with International Standards on Auditing.They have issued an unmodified audit opinion.These summarised consolidated provisional financial statements have been derived from the group financial statements and are consistent, in all material respects, with the group financial statements. A copy of their audit report is available for inspection at the Fund’s registered office. The auditor’s report does not necessarily report on all of the information contained in this announcement. Unitholders are therefore advised that in order to obtain a full understanding of the nature of the auditor’s engagement, they should obtain a copy of that report together with the accompanying financial information from Capital’s registered address. SUMMARY OF FINANCIAL PERFORMANCE Dec 2013 Jun 2013 Dec 2012 Jun 2012 Distribution per unit (cents) 40,04 35,58 36,50 33,28 Units in issue 1 606 986 279 1 606 986 279 1 606 986 279 1 606 986 279 Net asset value R10,31 R9,29 R8,69 R7,93 Intererst-bearing debt to asset ratio* 20,8% 21,3% 21,7% 22,8% *The interest-bearing debt to asset ratio is calculated by dividing interest-bearing borrowings by total assets. FACILITIES Expiry Facility R' million Margin over Jibar 2014 1 000 1,07% 2015 1 062 1,35% 2016 1 300 1,51% 2017 1 750 1,58% 2018 520 1,53% 5 632 1,42% The all-in weighted average cost of borrowings at 31 December 2013 was 8,27%. SWAP PROFILE Expiry R' million Average swap/ CAP rate 2015 300 7,68% 2016 600 8,11% 2017 700 7,22% 2018 800 7,68% 2019* 800 6,64% 2020 400 7,27% 2021 200 7,65% Total 3 800 7,40% *Includes a cap of R200 million. SECTORAL SPLIT Based on GLA Book value Logistics 74% 58% Industrial 5% 3% Offices 14% 27% Retail 6% 11% Other 1% 1% 100% 100% LEASE EXPIRY PROFILE Based on GLA Rental revenue Vacant 5,1% Dec 14 26,2% 26,1% Dec 15 22,1% 22,5% Dec 16 19,9% 19,6% Dec 17 11,4% 12,5% Dec 18 10,5% 12,4% >Dec 18 4,8% 6,9% 100,0% 100,0% SEGMENTAL ANALYSIS Audited Dec 2013 R'000 Audited Dec 2012 R’000 Segmental revenue – recoveries and contractual rental revenue Logistics 1 080 005 1 051 191 Industrial 90 532 74 933 Offices 589 648 653 129 Retail 270 256 311 488 Other 27 144 49 566 Total 2 057 585 2 140 307 Property operating expenses Logistics (359 781) (349 803) Industrial (48 702) (35 800) Offices (193 067) (216 267) Retail (103 288) (109 948) Other (6 615) (11 120) Total (711 453) (722 938) Segmental revenue – rental revenue Logistics 1 120 286 1 064 020 Industrial 86 936 75 899 Offices 612 285 654 546 Retail 327 942 323 773 Other 156 023 51 179 Total 2 303 472 2 169 417 Profit for the year Logistics 1 236 736 1 156 134 Industrial 27 468 75 728 Offices 575 681 627 915 Retail 271 889 421 829 Other 47 776 66 505 Corporate 1 666 951 216 438 Total 3 826 501 2 564 549 CAPITAL COMMITMENTS Audited Dec 2013 R'000 Audited Dec 2012 R’000 Authorised and contracted 606 695 555 212 Authorised and not yet contracted 40 542 58 355 647 237 613 567 INCOME DISTRIBUTION Notice is hereby given that a cash distribution of 40,04 cents interest per unit, being number 61 for Capital Property Fund, has been declared in respect of the period 1 July 2013 to 31 December 2013 and is payable to unitholders recorded in the books of Capital at the close of business on the record date,Friday 21 February 2014. Unitholders are advised that the last day to trade cum distribution will be Friday 14 February 2014.The units will trade ex distribution from Monday 17 February 2014. Payment will be made on Monday 24 February 2014. Unit certificates may not be dematerialised or rematerialised during the period Monday 17 February 2014 to Friday 21 February 2014, both days inclusive. •••• visual IGNITION 011 888 5511 DIRECTORS’COMMENTARY Nature of the business Capital is a Real Estate Investment Trust (“REIT”) and is the owner of the largest A-grade logistics portfolio in South Africa. Capital’s investment portfolio also includes A and B-grade offices, a small portfolio of retail properties and a portfolio of listed securities. Distributable earnings In line with guidance, Capital’s distribution increased by 8,37% to 75,62 cents per unit for the year ended 31 December 2013.The distribution for the final six months of the financial year is 40,04 cents per unit, an increase of 9,70% over the previous comparable period. Strategy Capital’s strategy is to invest in and develop A-grade logistics facilities and premium grade offices in the major metropolitan areas.The South African office market is currently characterised by high vacancies, increasing supply from developers and rising operating costs. Average municipal rates in Capital’s office portfolio now exceeds R17/m² and this is impacting negatively on both net income and valuations. The board is of the opinion that this market will remain distressed for a number of years, making it difficult to achieve acceptable returns. As a result Capital has reduced its exposure to offices from 23,7% of total assets at 31 December 2012 to the current 20,1%. Capital continues to reduce its exposure to smaller retail properties and to re-invest the proceeds in its development pipeline.Through redevelopment and sales,progress continues with the reduction in exposure to industrial buildings designed for manufacturing purposes.Manufacturing properties now comprise only R559 million of total assets. Capital’s offshore investments have increased significantly and now constitute 13,3% of total assets compared with 4,5% at 31 December 2012 based on market value. The board is of the opinion that the political and economic conditions in South Africa will remain challenging and that Capital is well structured to perform in this environment. Review Net income from the core property portfolio increased by 5,5% compared with the previous financial year. The core office portfolio achieved a solid growth of 6,6%, however, this was off the low base with high vacancies in 2012. The vacancy in Fourways Office Park was reduced to 21,8% following its refurbishment. The core logistics portfolio performance (58,0% of the property portfolio) was negatively affected by the early renewal of 118 Brakpan Road and the re-letting of 39 Galaxy Avenue at lower rentals. This portfolio nonetheless achieved growth of 5,4%. Following the refurbishment and re-letting of Thrupps Illovo Centre and Pineslopes Shopping Centre, where Checkers commenced trading in November 2013,the income from the core retail portfolio increased by 6,9%. In line with Capital’s strategy of continually refreshing its portfolio, new buildings with a gross lettable area (“GLA”) of 49 852m² were completed in 2013 and existing buildings with a GLA of 29 352m² are being rebuilt or extensively refurbished. Capital benefitted from a strong performance of its listed holdings. The distributions from New Europe Property Investments plc (“Nepi”) and Rockcastle Global Real Estate Company Limited were further increased by the sharp devaluation in the Rand. The R14 million cost of Capital’s R200 million interest rate cap was expensed against this additional unbudgeted income. Capital has always conservatively hedged its interest rate exposure. At the financial year end, 80,8% of Capital’s borrowings were hedged with an average expiry of 4,4 years. Corporate Restructuring and REIT status Capital has been approved as a REIT with effect from 1 January 2014.In line with a proposed industry initiative under the SA REIT Association, Capital intends converting to a corporate REIT, 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 major advantage of REIT status is tax certainty regarding the flow-through of pre-tax income to investors and relief from capital gains tax on the disposal of investment property and qualifying investments. Capital provided deferred tax at the income tax rate on the recoupment of capital allowances claimed on investment property as well as the fair value adjustment on the investment in Nepi. Acquisitions and Developments Further progress has been made with the pipeline of new logistics developments and additional land was acquired to extend the development pipeline. The following developments were completed: Description % owned 100% GLA Yield Completion Raceway Industrial Park 100% 21 345m² 9,7% Jul 13 16 Industry Road 100% 11 182m² 8,2% Oct 13 N1 Business Park 20% 7 355m² 9,1% May 13 N1 Business Park 20% 5 300m² 9,2% Nov 13 Montague Business Park 25% 6 332m² 9,0% Jul 13 Montague Business Park 25% 4 466m² 8,5% Dec 13 Montague Business Park 25% 1 686m² 8,3% Aug 13 14 Fitzmaurice Epping 100% 3 368m² 9,2% Apr 13 The following new developments have commenced: Description % owned 100% GLA Estimated yield Estimated completion Raceway Industrial Park 100% 40 750m² 9,0% Jun 14 Montague Business Park 25% 19 840m² 8,1% Jul 14 N1 Business Park 20% 12 907m² 9,9% Jan 14 Capital owns the following land for future developments: Description % owned 100% GLA Intended use Estimated commence- ment Clairwood Logistics Park 100% 350 000m² Logistics Sep 14 Sandton Offices* 80% 60 000m² P-grade offices Sep 14 Tradeport City Deep 100% 52 000m² Logistics May 14 Linbro Park 100% 30 000m² Logistics Feb 14 Linbro Park 100% 30 000m² Logistics Jun 14 Pomona 100% 20 000m² Logistics May 14 *Acquisition unconditional,not yet transferred. The following redevelopments have commenced: Description % owned Redevelopment GLA Estimated yield Estimated completion Noursepack Epping 2 100% 17 634m² 8,5% Jun 14 14 Fitzmaurice Avenue Epping 2 100% 11 718m² 8,5% Jun 14 DISPOSALS Capital sold three large portfolios of properties. Seven properties were sold to Tower Property Fund Limited (“Tower”) for a consideration of R161 million in cash and R171 million in Tower shares. Three properties were sold to Delta Property Fund Limited (“Delta”) for R300 million and settled 75% in cash and 25% in Delta shares. A further six properties were sold to Dipula Income Fund Limited and the full R559 million was received in cash. The following properties were sold in 2013: Property name Sales proceeds R’000 Valuation at 31 Dec 2012 R’000 Exit yield Effective date Menlyn Dealership 250 000 236 700 9,1% 11 Feb 13 Leeuwkop Road Sunninghill 184 020 164 700 8,8% 1 Dec 13 Gezina Galleries 159 330 152 600 9,8% 19 Jul 13 Ziyabuya Shopping Centre 116 000 110 000 9,7% 4 Jul 13 Woodmead Super Value Mall 104 660 101 200 9,1% 31 Jul 13 3 Simba Road Sunninghill^ 82 950 59 200 8,7% 1 Jan 14 Shoprite Centre Pretoria North 76 640 70 600 9,0% 15 Jul 13 Blackheath Pavilion 70 500 63 900 9,6% 15 Jul 13 382 Jan Smuts Avenue Craighall 68 215 56 300 9,0% 1 Jul 13 63 Wierda Road East Wierda Valley 63 500 46 600 8,5% 30 Apr 13 The Braides 57 935 62 000 9,1% 1 Jul 13 Constantia View Office Park 56 477 52 000 9,1% 1 Jul 13 3 River Road Bruma 45 558 44 900 9,1% 1 Jul 13 135 Musgrave Road 45 307 40 600 9,2% 1 Jul 13 31 Beacon Road Florida North 42 612 37 800 9,1% 1 Jul 13 5 Simba Road Sunninghill^ 33 030 26 100 8,7% 1 Jan 14 1211 Umgeni Road Stanford Hill^ 32 500 51 000 5,5% Transfer date Woodmead Square 31 900 27 700 9,4% 31 Jul 13 30 Impala Road Chiselhurston^ 24 500 24 400 8,2% 9 Jan 14 Liberty Redlands Pietermaritzburg 22 600 21 200 8,5% 6 Sep 13 Willowvale 15 979 17 900 9,2% 1 Jul 13 Cascades Office Park Pietermaritzburg 15 800 15 400 9,5% 29 Aug 13 Total 1 600 013 1 482 800 ^ Held for sale at 31 December 2013. VACANCIES AND ARREARS Vacancies remained unchanged at 5,1% compared with 30 June 2013.Logistics and industrial vacancies increased to 4,8% (4,3% at 30 June 2013),office vacancies decreased to 8,0% (9,5% at 30 June 2013) and retail vacancies reduced to 3,6% (5,2% at 30 June 2013) based on gross lettable area. There was no material change in arrears and bad debts are well provided for. EQUITY INVESTMENTS December 2013 December 2012 Number of shares Market value R’000 Number of shares Market value R’000 Rockcastle Global Real Estate Company Limited 121 705 087* 1 703 871 11 650 000 117 665 New Europe Property Investments plc 16 024 304 1 297 969 15 041 719 797 211 Resilient Property Income Fund Limited 16 200 000 899 100 16 200 000 835 758 Fortress Income Fund Limited B 96 000 000 878 400 96 000 000* 672 000 Fortress Income Fund Limited A 23 200 000 341 040 34 200 000* 499 320 Ascension Properties Limited A^ 42 750 000 190 238 91 592 255* 404 838 Ascension Properties Limited B 45 600 000 114 000 61 824 772* 132 923 Delta Property Fund Limited^ 8 204 677 70 971 4 500 000 37 800 Tower Property Fund Limited^ 4 021 474 32 976 – – 5 528 565 3 497 515 *Equity accounted. ^ Subsequent to the financial year end, Capital sold its stakes in Delta, Tower and 32 274 150 Ascension Properties Limited A shares. FUNDING Capital increased the size of its DMTN Programme from R2 billion to R3 billion and R1,8 billion of notes were in issue at 31 December 2013.Capital had R715 million available on existing bank facilities at year end. OUTLOOK The quality of Capital’s property portfolio places it in the position to achieve solid growth in a difficult macro- economic environment.Capital should continue to benefit from the strong growth of its listed securities,particularly the Rand hedge counters. Based on forecast exchange rates of R10 to the US Dollar and R13,75 to the Euro, the board anticipates that Capital will achieve growth in distributions of approximately 9% for the 2014 financial year. This forecast has not been reviewed or reported on by Capital’s auditors. The forecast is based on the assumption 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 and rates and taxes. Budgeted rental income was based on contractual escalations and anticipated market related renewals and re-lets. By order of the board Barry Stuhler Rual Bornman Managing director Financial director 29 January 2014 Provisional summarised audited consolidated financial statements fortheyear ended 31 December 2013 Registered office 4th Floor, Rivonia Village, Rivonia Boulevard, Rivonia, 2191 (PO Box 2555, Rivonia, 2128) 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. On 27 January 2014, Jan Potgieter was appointed as an independent non-executive director. Directors Willy Ross (chairman)*, Barry Stuhler (managing director), Iraj Abedian*, Rual Bornman, Andries de Lange, David Lewis, Protas Phili*, Jan Potgieter*, Andrew Teixeira, Banus van der Walt*,Tshiamo Vilakazi*,Trurman Zuma* Fareed Wania (alternate to Andrew Teixeira). *Independent non-executive director

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