Exceeding even the most optimistic of their own forecasts, Spearhead Property Holdings, the JSE Securities Exchange listed property loan stock company, on 12th February announced that profits for the half year to December 31st are 52% up on the corresponding period in the previous year while distribution will be 21% higher.

The market had already had an opportunity to assimilate this significant improvement because, adhering to Stock Exchange rulings, Spearhead had on 29th January published a trading update indicating that distribution would be up by between 10% and 30%.

This is the third time that Spearhead have been obliged to publish a trading update announcing significantly improved profits - and the eighth consecutive period since listing in 1999 that they have increased distributions against the trend. There has, in fact, never been a half year period since listing in which their distributions did not rise.

"These days," said Mike Flax, the Chief Executive of the company, "we are thought by many to be the top most consistent performer in the real estate sector."

The recent successes, said Flax, have stemmed from a combination of increased trading activity in 2003, most of it highly successful, and the lower interest rates, which, he said, have helped all property companies this year.

As before, however, Flax emphasised that Spearhead's real strength lies in its tight management, all of whom, he said, are "goal congruent" with the company and its shareholders' objectives and are not influenced by any other agenda or interests.

"This, we believe, is the right way to structure any property fund. >From the outset we have had a policy of eliminating conflicting interests from the management and directors' goals. In addition, their own significant shareholding in Spearhead (26% in all) makes it very much in their own interest to see that the company's bottom line is always a good one."

A further fact that had kept Spearhead "on the right road", said Flax, had been its Western Cape focus. About 90% of its portfolio is now in the Western Cape, he said, and this has proved a blessing as the Cape property market has been buoyant.

Over the last two years, he added, Spearhead had made a name for itself as skilled property developer and trader but its main objective remains to build up a quality Western Cape property portfolio, the returns of which will improve year by year. Most of the development and upgrading that Spearhead has undertaken so far, Flax said, had been done for long term holding purposes.

Investments which have resulted in a good performance in the Spearhead property portfolio this year have been:

· the R50 million Spearhead Business Park at Montague Gardens where to date 20 000 m2 have been rented at price levels varying from R32 to R60 per m2 - and where a further 12 000 m2 will be brought on stream before the end of 2004.

· the South Seas residential project in what was formerly No 121 Beach Road at Mouille Point. Here Spearhead is in partnership with Fair Cape and achieved a record sell out on all 70 apartments that were made available

–ten were held back for sale at a later date. Transfer of the completed apartments will take place from June this year onwards.

· the Wembley Square residential project in Gardens. This R140 million development was launched and all but sold out in December last year and units here will start coming on stream from April 2005 onwards.

· Eagle Park (formerly Siltek House) purchased in 2003 and upgraded since then. Here 6 000 m2 have now been fully let in six months.

· the Ottery Hypermarket where an upgrade was undertaken and 2 000 m2 of retail space added to the existing 30 000m2.

Many "worthwhile" projects coming on stream over the next two years, said Flax, will make a significant difference to Spearhead's bottom line.

Turnover and profits for the coming half year should, he said, be up by between 10% and 20%.

Flax cautioned, however, that South Africa remains a volatile trading environment and that the current favourable interest rates could change to have a negative impact on the property sector and on Spearhead.

Flax said that within the next twelve months Spearhead could be involved in the purchase and/or development of a further R 250 million worth of space, particularly in the retail and office sectors. Once again, however, the focus will be kept on the Western Cape.

"Our target now," he said, "is to build up a portfolio of R 1 billion before the end of 2005. As we have said before, growth has to be controlled and carefully budgeted for - but the larger one becomes, the easier it is to continue to grow. We want to assure shareholders that our policy remains to pursue earnings per unit rather than turnover growth and that we will be extremely selective in all our purchase and development activities."