SPEARHEAD PROPERTY HOLDINGS LIMITED
Registration Number: 1996/005827/06
Share Code: SPE ISIN: ZAE000019162
SPEARHEAD REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2003
* Basic earnings per linked unit up 52%
* Distribution per linked unit up 21%
"Spearhead continues its fine record of nine straight increases in bi-annual
distributions with another 21% increase per linked unit."
ABRIDGED CONSOLIDATED INCOME STATEMENT
6 months ended 6 months ended Year ended
31 Dec 2003 31 Dec 2002 30 June 2003
Reviewed Unaudited Audited
% change R000's R000's R000's
REVENUE 38 43 059 31 285 58 651
Operating income 28 774 20 564 44 120
Profit on sale of investment
property 3 213 – –
31 987 20 564 44 120
Less: Depreciation 559 495 1 036
Goodwill amortised – 485 16 488
Interest rate swaps –
marked to market 485 – 5 500
Net finance costs 10 582 10 004 20 304
Profit from operations 20 361 9 580 792
Profit share from trusts 11 – –
Profit on disposal of shares
in joint venture – – 346
Profit (loss) from associate 18 – (19)
Profit before revaluation 20 390 9 580 1 119
Revaluation of investment
properties – – 20 958
Profit before debenture interest
and taxation 113 20 390 9 580 22 077
Debenture interest 15 227 9 187 23 581
Profit/(Loss) before taxation 5 163 393 (1 504)
Income taxation expense 734 65 1 886
Net profit/(loss) for the period 4 429 328 (3 390)
Linked units in issue
(weighted average) 19 002 063 13 977 258 14 693 941
Basic earnings per linked
unit (cents) 52 103,44 68,08 137,41
Headline earnings/(loss) per
linked unit (cents) 2,18 5,82 (33,69)
Core earnings per linked
unit (cents) 15 82,32 71,54 153,24
Distribution per linked unit (cents) 21 80,00 66,00 142,00
abridged consolidated cash flow statement
6 months ended 6 months ended Year ended
31 Dec 2003 31 Dec 2002 30 June 2003
Reviewed Unaudited Audited
R000's R000's R000's
Cash generated from operations
before working capital changes 21 455 20 367 44 450
Working capital changes (61 427) (12 871) (15 673)
Net finance costs (16 544) (19 707) (39 258)
Cash flows from operating activities (56 516) (12 211) (10 481)
Cash flows from investing activities (32 081) (619) 5 259
Cash flows from financing activities 47 918 (2 923) 29 862
Net (decrease)/increase in cash and
cash equivalents (40 679) (15 753) 24 640
Cash and cash equivalents at
beginning of period 41 854 17 214 17 214
Cash and cash equivalents at
end of period 1 175 1 461 41 854
abridged consolidated balance sheet
6 months ended 6 months ended Year ended
31 Dec 2003 31 Dec 2002 30 June 2003
Reviewed Unaudited Audited
R000's R000's R000's
Non current assets 409 880 361 384 377 488
Property, plant and equipment 4 440 5 287 5 106
Investment properties 381 782 328 870 340 479
Goodwill – 16 003 –
Other financial assets 21 596 10 629 30 097
Deferred taxation 2 062 595 1 806
Current assets 78 258 11 629 57 647
Trade and other receivables 20 435 10 168 14 621
Investments held for trading 56 648 – –
Cash and cash equivalents 1 175 1 461 43 026
Total assets 488 138 373 013 435 135
Equity and liabilities
Equity and Non current liabilities 465 168 359 279 414 385
Capital and reserves 33 554 37 265 29 704
Debentures 186 531 136 400 184 783
Linked unitholders' interest 220 085 173 665 214 487
Interest bearing borrowings 233 379 183 898 189 735
Interest rate swap derivative 5 985 – 5 500
Deferred taxation 5 719 1 716 4 663
Current liabilities 22 970 13734 20 750
Trade and other payables 6 203 4 475 5 168
Bank overdraft – – 1 172
Receiver of revenue 822 72 80
Unitholders for distribution 15 945 9 187 14 330
Total equity and liabilities 488 138 373 013 435 135
movement in unitholders' funds
6 months ended 6 months ended Year ended
31 Dec 2003 31 Dec 2002 30 June 2003
Reviewed Unaudited Audited
R000's R000's R000's
Unitholders' interest at
beginning of period 29 704 36 858 36 858
Net profit for the period 4 429 328 (3 390)
Issue of linked units – – 47
Issue costs (4) – (711)
Treasury linked units disposed
of by subsidiary – (1) 2
Discount on debentures 678 166 87
Recoupment of discount on debentures (1 253) (86) (3 189)
Unitholders' interest at end of period 33 554 37 265 29 704
reconciliation of earnings to headline earnings
Profit Profit
before after
taxation Taxation taxation
R000's R000's R000's
Earnings for the period 5 163 734 4 429
Adjusted for:
Fair value adjustment of investments (2 317) (695) (1 622)
Interest rate swap – Marked to market 485 146 339
Profit on disposal of investment
properties (3 213) (482) (2 731)
Headline earnings 118 (297) 415
Weighted average linked units
in issue 19 002 063 – 19 002 063
Headline earnings per linked
units (cents) 0,62 – 2,18
reconciliation of headline earnings to core earnings
Profit Profit
before after
taxation Taxation taxation
R000's R000's R000's
Headline earnings 118 (297) 415
Distribution to linked unitholders 15 227 – 15 227
Core earnings 15 345 (297) 15 642
Weighted average linked units
in issue 19 002 063 – 19 002 063
Core earnings per linked units 80,75 – 82,32
abridged segmental information
Property Management Unallocated Total
R000's R000's R000's R000's
Revenue 42 796 263 – 43 059
Net profit 34 254 1 501 (31 326) 4 429
Segment revenue and expenses:
Revenue and expenses that are directly attributable to a segment are
allocated to those segments. Expenses not directly attrributable to a
segment are allocated to the unallocated result segment.
notes
Accounting Policies
1. The financial statements have been prepared in accordance with South
African Statements of Generally Accepted Accounting Practice. The principal
accounting policies adopted in the preparation of these financial statements
are consistent with those of the prior year.
2. The application of AC 133 (Financial Instruments – Recognition and
measurement) requires that interest rate swaps be marked to market at
balance sheet date. This statement requires that unrealised profits or
losses be accounted for in the income statement but will have no effect on
distribution per unit.
3. Core earnings has been introduced which is an accurate reflection of the
group's cash profits for the year available for distribution.
4. Revenue represents rentals, management fees and commission from tenants
and owners, development income and share trading income.
Revenue
Rentals 31 842 31 285 54 151
Share trading 6 717 – –
Property development income 4 500 – 4 500
43 059 31 285 58 651
These results have been reviewed by the company's auditors, Fisher Hoffman
PKF (Newlands) Inc, and the report is available for inspection at the
company's registered office.
comment
The board is pleased to announce the following results for the 6 months
ended 31 December 2003.
Financial Performance
Profit before debenture interest distributions rose by 113% over the
corresponding period of last year, due to a combination of stronger trading
activities and lower financing costs.
This resulted in far stronger basic earnings per linked unit growing by 52%.
This positive profit result has allowed a 21% increase in the interim
distribution per linked unit to 80 cents per linked unit and continues
Spearhead's fine record of 9 straight increases in bi-annual distributions
since listing in 1999. The ongoing performance of the company has been
noticed by the Investment community ranking Spearhead top amongst the listed
real estate funds in a number of categories.
Property portfolio activity
The pursuit of the goal of being singularly focused on the Western Cape
property market saw further disposals of Gauteng properties including Sammy
Marks Shopping Centre (Portion 3) for R37 million and Hyde Park Auto for
R11,7 million (transfer of Hyde Park was effected 30 January 2004). This
leaves only two properties owned outside of the Western Cape and it is
expected that they will be disposed of before financial year-end resulting
in Spearhead becoming the only listed Cape property specialist.
De Wet Centre in Stellenbosch was disposed of during the period for R14,75
million at a profit of R3,2 million on the carrying value and R5,75 million
on original cost.
A number of properties were acquired during the period:
Wynberg Mews was acquired at a cost of R15 million. It consists of an office
park of four buildings in the heart of the southern suburb of Wynberg.
Sun Valley Mall in Noordhoek was acquired in a joint venture for R21
million. It comprises a 5,000-m2 Pick 'n Pay with various other line shops.
A planned redevelopment will take place later this year.
An industrial park in Gardens was acquired in joint venture for R22 million.
Part of the property is being demolished and a 180 unit residential block
called Wembley Square will be constructed. The remainder of the property
will be redeveloped for up-market commercial and retail space.
Phase 2 construction of the Spearhead business park development in Montague
Gardens is complete and the Park is now 90% let with tenants including
Caltex Oil and Samsung Electronics. Final completion of the R50 million park
is expected before the end of 2004.
Occupancy levels rose to 94% at the end of the period, up from 93% at the
end of June 2003.
The properties were not revalued at the end of the period but a
comprehensive exercise will be undertaken in June 2004 at financial year-end
and a significant uplift is expected due to the hardening of capitalisation
rates.
Trading and Development activities
Spearhead, being internally managed and staffed is fully equipped to be
active in the property development industry across the commercial, retail,
industrial and residential categories.
Besides development for long-term holding purposes, the company is also
involved with two very successful joint-venture residential sectional-title
developments: South Seas in Moullie Point and Wembley Square in Gardens.
Both have been predominately pre-sold off-plan and are in various stages of
completion. Neither has been accounted for yet through the Income Statement
but could impact on the June 2004, 2005 and 2006 profits.
As part of the disposal proceeds of some Gauteng properties, Spearhead has
accepted part-payment in listed linked-units of companies such as Shops For
Africa and Prima Property Trust. Other scrip has been accumulated for
strategic reasons and the company held a significant percentage of Arnold
Properties at year-end.
The strategy is to dispose of the listed property securities at the
appropriate time.
An unrealised profit of R2,3 million was accounted for on marking to market
the various scrip holdings at 31 December 2003.
Prospects
Spearhead is budgeting real growth for the second half-year period when the
fruits of some of the company's development activity should start
contributing handsomely to profits.
The underlying portfolio should also continue to strengthen and with planned
portfolio additions coming through, it should underpin profit growth for the
next few years.
The important absence of any conflict of interest amongst Spearhead's
experienced management team and their property trading skills will also
translate into ongoing and sustainable earnings and save any major increase
in interest rates should see the company continue to outperform its peer
group.
Distribution declaration no. 9
Notice is hereby given of the declaration of distribution no. 9 which
amounts to 80 cents per linked unit, in respect of the six months to 31
December 2003. The last date to trade cum distribution will be Friday, 5
March 2004 and the linked units will commence trading ex distribution from
Monday, 8 March 2004, with the record date being Friday, 12 March 2004.
Payment will be effected on Monday, 15 March 2004.
Linked unit certificates may not be dematerialised or rematerialised from
Monday, 8 March 2004 to Friday, 12 March 2004, both days inclusive.
On behalf of the Board
M Kaplan M N Flax Sponsor:
Chairman Chief Executive Officer Bridge Capital Services (Pty) Limited
Cape Town
11 February 2004
For these results and more information on the company, see:
www.spearheadprop.com
SPEARHEAD PROPERTY HOLDINGS LIMITED
Registration Number: 1996/005827/06
Share Code: SPE ISIN: ZAE000019162
Registered Office:
3rd Floor, The Spearhead
42 Hans Strijdom Avenue
Foreshore
Cape Town, 8001.
Transfer Secretaries:
Computershare Limited
70 Marshall Street
Johannesburg 2001
PO Box 61051
Marshalltown, 2107.
Directors: M Kaplan* (Chairman), MN Flax (Chief Executive Officer),
JE Allie, DB Fabian*, A Groll*, L Hoffman, H Schreuders*,
F van Hoogstraten*, DM Wilder *Non-executive
Publisher: Spearhead Property
Source: Spearhead Property
