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Apr 20, 2006:
The recently released McGregor BFA financial performance and financial position report which has tracked the results of all SA listed companies over the last five years, ranks Spearhead Property Holdings of Cape Town in the twelfth position overall – and Spearhead emerges as the highest ranked of all South Africa's real estate companies.
"The rating," said Mike Flax, CEO of Spearhead, "is quite possibly the most meaningful ever compiled in South Africa because, for this evaluation, BFA's Prof Leon Brummer developed a weighted average composite financial ratio index. This takes into account
· return on equity
· operating profit margin
· current ratio
· total asset turnover and
· debt to equity ratio.
"According to the financial analyst, Marc Hasenfuss, the new rating system cuts out many of the anomalies experienced in several previous surveys and is likely, he feels, to be a better guide to future prospects."
Asked to explain Spearhead's continued good performance since listing in 1999, Flax said that the company benefited from five "back to basics" factors.
"Firstly," he said, "we are focussed on Cape Town where 95% of our assets are now based. The insider knowledge we have of the market here gives us the ability to see opportunities ahead of others.
"Secondly, we run with the lowest possible overheads: our financial and development staff and property management overhead costs comprise only 12% of our total income.
"Thirdly, we encourage staff to acquire shares in the company by purchase or as part of their remuneration package. This aligns their interests with those of the company – and we forbid them to have any conflicting interests.
"Fourth, unlike most property loan stock companies, we are active developers, not just landlords. Last year 15% of our income was generated by development profits.
"Fifth, our operating staff are almost all young. On our board we have older experienced members whose wisdom we have come to rely on but here in the office the average age is just on 35."
Currently, added Flax, Spearhead's portfolio stands at R1,6 billion and should reach R2 billion before 2007 Right now, he said, R800 million worth of development and purchases are in the pipeline.
Flax predicted that "with a little luck on the performances of our new developments and a lot of application by staff" Spearhead will move up into the top ten of overall performers within the next year.
