This was said recently by Mike Flax, Chief Executive Officer of Spearhead.
Mariette Warner, Head of Fund Management for the Standard Bank’s Property Portfolio, said that "Spearhead has since listing in 1999 proved themselves to be one of the most astute of South African property management teams with a sustained income growth that places them in the top three companies in this sector on the JSE Securities Exchange". Recent results, she said, could quite possibly qualify them to be the top performer in this sector.
"Spearhead," she said, "has consistently performed well above the average for their sector. In the next two to three years it seems probable that they will achieve a real growth of 6 to 7% per annum as against a projected 3 to 5% growth for this sector."
In the second half of 2003 Spearhead made a profit of R20,4 million on a turnover of R43 million. The basic earnings per unit were 52% up on the corresponding period of the previous year. Distributions were, therefore upped by 21% to 80c per linked unit.
An index graph supplied by Ms Warner to Spearhead shows Spearhead’s results to be well ahead of other major performers in this sector such as Atlas, Grayprop and Growthpoint and significantly up on the average for the property sector.
Flax has commented that the good results were caused by a combination of increased trading and lower interest rates. These factors, he said, had been capitalised on by the Spearhead management which he described as "totally focussed and goal congruent with the company’s interests and not influenced by any outside agendas or interests". (The management of Spearhead in fact holds 26% of the company’s equity.)
Investments which had resulted in a good performance this year, said Flax, had 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 129 Beach Road at Mouille Point. Here Spearhead is in partnership with Fair Cape and achieved a fast sell out on all 90 apartments. Transfer of the completed apartments will take place from June this year. Spearhead expect to account for their share of the profits in the 2005 financial year.
the Wembley Square residential project in Gardens. This R140 million development was launched and all but sold out in December last year and units completed 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.
Turnover and profits for the coming year, Flax predicted, should be up by a further 10 to 20% year on year. Many "worthwhile" projects, he said, will be coming on stream in the next two years and in the next twelve months Spearhead could be involved in the purchase of a further R250 million worth of space, mostly in the retail, office and industrial sectors. Once again, however, the focus will remain on the Western Cape where already over 90% of the portfolio is located.
"Our target now," said Flax, "is to build up a portfolio of R1 billion before the end of 2005. Growth has always to be controlled and never undertaken purely for its own sake but, as one grows, it becomes easier to grow still further."
Flax reminded shareholders that although Spearhead is now recognised as a shrewd property developer and trader, its primary aim remains to build up a quality Western Cape portfolio on which the returns will improve year by year. Most of the development and upgrading done by Spearhead has, said Flax, been undertaken for long term holding purposes.
