Headline earnings a unit increased 4 percent to 71c for the six months to December compared with the same period last year, the property loan stock company reported yesterday.

The distribution was up 5 percent to 66c a unit.

Chief executive Mike Flax said a share bought in early 2000 would have enjoyed an annual compound return in excess of 25 percent, keeping ahead of inflation by a comfortable margin.

'In January 2000 our shares were at R6.40. Since then their capital value has grown 44 percent and the yield paid out has been a cumulative 56 percent.'

Flax said a reason Spearhead had been able to outperform its competitors was because it was not exposed to the weak office market in the northern suburbs of Johannesburg or in Sandton. About 85 percent of Spearhead's R400 million portfolio is in the Western Cape, which is traditionally more economically stable than other regions in the country.

Another reason was its diversity, with 48 percent of the portfolio in retail, 32 percent in office space and 20 percent in industrial property. Flax said the office market in Cape Town was also weak relative to other market segments because of consolidation in the financial services and information technology sectors.

He said prospects looked good because the cost of finance had been reduced and new developments coming on stream would contribute significantly to the bottom line.

Two new projects worth R100 million were in development. These included a R50 million investment in phases two and three of a business park in Montague Gardens, where letting was 'doing extremely well', and a 10-year R85 million deal to establish new headquarters for the Scorpions in Buitengracht Street in central Cape Town.

Spearhead has recently reduced its gearing to 51 percent from 55 percent and has tied R100 million of its R170 million debt into improved long-term interest rates at an average of 13 percent.

These reduced rates, which kicked in from January 2003, would bring about R2 million a year in savings, Flax said.

Spearhead's share price responded well to the results, gaining 24c to close at R9.05 yesterday.