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Abridged audited results for the year ended 30 June 2013, notice of AGM and final dividend declaration
PUTPROP LIMITED
Incorporated in the Republic of South Africa
(Registration Number 1988/001085/06)
Share code: PPR ISIN: ZAE000072310
(“Putprop” or “the company” or “the group”)
- Operating profit increased by 7.1% to R33.7 million
- Associate companies contribution to profits increased by 38% to R1.6 million
- Dividend distribution increased by 9.1% to 36 cents per ordinary share for the year
- Ranked 87 in Financial Mail’s 200 top performers of 2013 with a five year pre tax growth of 25.4%
and a dividend yield growth of 6.1%
- Increase in net asset value per share of 13.6% to 1 151 cents per share
STATEMENTS OF FINANCIAL POSITION as at 30 June 2013
Group Company
2013 2012 2013 2012
R’000 R’000 R’000 R’000
ASSETS
Non-current assets
Net investment property 276 855 244 312 276 855 244 312
Gross investment property 281 396 250 274 281 396 250 274
Straight-line rental income adjustment (4 541) (5 962) (4 541) (5 962)
Other non-current assets
Straight-line rental income asset 4 307 2 292 4 307 2 292
Furniture, fittings and computer equipment 75 113 75 113
Investment in associates 50 728 48 369 47 976 47 213
331 965 295 086 329 213 293 930
Current assets
Straight-line rental income asset 234 3 670 234 3 670
Trade and other receivables 1 693 6 580 1 693 6 580
Cash and cash equivalents 31 785 14 295 31 785 14 295
33 712 24 545 33 712 24 545
Total assets 365 677 319 631 362 925 318 475
EQUITY AND LIABILITIES
Capital and reserves
Share capital 4 146 4 146 4 146 4 146
Accumulated profit 327 228 287 493 324 476 286 337
331 374 291 639 328 622 290 483
Non-current liabilities
Deferred taxation 27 661 21 065 27 661 21 065
27 661 21 065 27 661 21 065
Current liabilities
Trade and other payables 5 143 5 301 5 143 5 301
Taxation payable 1 499 1 626 1 499 1 626
6 642 6 927 6 642 6 927
Total equity and liabilities 365 677 319 631 362 925 318 475
STATEMENTS OF COMPREHENSIVE INCOME for the year ended 30 June 2013
Group Company
2013 2012 2013 2012
R’000 R’000 R’000 R’000
Property revenue 38 875 39 445 38 875 39 445
Straight-line rental income accrual (1 419) (3 700) (1 419) (3 700)
Gross property revenue 37 456 35 745 37 456 35 745
Property expenses (2 016) (2 766) (2 016) (2 766)
Net profit from property operations 35 440 32 979 35 440 32 979
Corporate administration expenses (4 830) (4 479) (4 830) (4 479)
Investment and other income 1 477 1 793 1 477 1 793
Share of associates’ profits 1 597 1 156 – –
Operating profit before capital items 33 684 31 449 32 087 30 293
Loss on sale of investment property – (700) – (700)
Impairment provision associate company
write back 763 4 338 763 4 338
Profit before fair value adjustments 34 447 35 087 32 850 33 931
Fair value adjustments 32 269 11 600 32 269 11 600
Gross change in fair value investment
property 30 850 7 900 30 850 7 900
Straight-line rental adjustment 1 419 3 700 1 419 3 700
Net profit before taxation 66 716 46 687 65 119 45 531
Taxation (16 615) (16 619) (16 615) (16 619)
Profit attributable to ordinary shareholders 50 101 30 068 48 504 28 912
Other comprehensive income – – – –
Total comprehensive income attributable
to ordinary shareholders 50 101 30 068 48 504 28 912
Earnings and diluted earnings per share
(cents) 174.0 104.4
STATEMENTS OF CASH FLOWS for the year ended 30 June 2013
Group Company
2013 2012 2013 2012
R’000 R’000 R’000 R’000
Cash flow generated from operating activities 17 770 13 908 17 770 13 908
Net cash generated from operations 37 228 30 748 37 228 30 748
Investment income 1 054 1 666 1 054 1 666
Taxation paid (10 146) (9 868) (10 146) (9 868)
Dividends paid (10 366) (8 638) (10 366) (8 638)
Cash flow utilised in investing activities (280) (28 460) (280) (28 460)
Improvement to investment property (273) (665) (273) (665)
Acquisition of furniture, fittings and computer
equipment (7) (42) (7) (42)
Acquisition and development of investment
properties – (4 546) – (4 546)
Proceeds on sale of investment properties – 8 800 – 8 800
Acquisition of associates – (32 007) – (32 007)
Net increase/(decrease) in cash and cash
equivalents 17 490 (14 552) 17 490 (14 552)
Cash and cash equivalents at beginning of year 14 295 28 847 14 295 28 847
Cash and cash equivalents at end of year 31 785 14 295 31 785 14 295
STATEMENTS OF CHANGES IN EQUITY for the year ended 30 June 2013
Share Accumulated
capital profits Total
R’000 R’000 R’000
GROUP
Balance at 1 July 2011 4 146 266 063 270 209
Total comprehensive income – profit – 30 068 30 068
Dividends paid – (8 638) (8 638)
Balance at 30 June 2012 4 146 287 493 291 639
Total comprehensive income – profit – 50 101 50 101
Dividends paid – (10 366) (10 366)
Balance at 30 June 2013 4 146 327 228 331 374
COMPANY
Balance at 1 July 2011 4 146 266 063 270 209
Total comprehensive income – profit – 28 912 28 912
Dividends paid – (8 638) (8 638)
Balance at 30 June 2012 4 146 286 337 290 483
Total comprehensive income – profit – 48 505 48 505
Dividends paid – (10 366) (10 366)
Balance at 30 June 2013 4 146 324 476 328 622
Comments
Basis of preparation
The financial statements have been prepared on a going concern and historical cost basis, except for
investments and investment properties which are measured at fair value.
The accounting policies applied in the preparation of these abridged audited financial statements,
which are based on reasonable judgements and estimates are, in accordance with International
Financial Reporting Standards (“IFRS”) and are consistent with those applied in the annual financial
statements for the year ended 30 June 2012. These abridged audited condensed financial statements
as set out in this report have been prepared in terms of the Companies Act, 2008 (Act 71 of 2008), as
amended, and the Listings Requirements of the JSE Limited. These abridged audited condensed
results must be read in conjunction with the most recently issued financial statements for the year
ended 30 June 2013, which will be posted to shareholders on 25 September 2013. These accounting
policies have been applied consistently with the previous year.
These abridged audited results have been audited by Mazars and their unmodified audit report is
available for inspection at the registered office of Putprop.
The abridged audited results have been prepared under the supervision of James E Smith, the
Financial Director of Putprop.
Overview
Putprop is a property company which has investments in industrial, retail and commercial properties
and derives its revenue primarily from rental income.
Economic overview and market conditions
As noted by the South African Property Owners Association report released in March this year, the
South African Property Index reflected a 15.2% return for the South African property sector in 2012.
This was substantially up on the 2011 return of 10.3%.
This is the highest return on property in the preceding five years, and reflects on the resilience of
property as an investment option, in the current economic climate. It is a matter of consensus
however, that this return is probably not sustainable, going forward. Industrial and retail property
remains buoyant with strong tenant demand. The commercial sector however remains under severe
pressure with high vacancy rates and low yields. Market capitalisation of the sector increased
substantially to R125 billion as a result of strong institutional demand.
The 2013 financial year again reflected a continuation of the volatile markets of the previous year,
with stagnant economic growth in the developed economies and reduced growth in most emerging
markets.
The political crisis in the Middle East continued to create uncertainty in world markets. Locally,
operating conditions remained difficult with rising vacancies, longer collection times and a
deterioration of rental escalations on new leases and renewals.
Putprop was not immune to the effects of these market conditions; we are however fortunate to have
a stable portfolio of mainly listed national and blue chip tenants, allowing greater protection against
many of the factors mentioned above.
Strategically, Putprop successfully renegotiated leases with its major tenant, Larimar Properties
(Putco Limited), although at a reduced rate and for a shorter tenure.
Results
Although the year under review presented challenges for Putprop, the group produced results that
again showed an increase in operating profit before capital adjustments in respect of our property
portfolio revaluations.
The review period reflects an increase of 42.9% on Putprop’s profit before taxation with headline
earnings increasing from 74.1 cents per share to 86.8 cents per share. Group net profit was up by
66.7% to R50.1 million. The results were extremely pleasing having regard for the effect of the
negotiated reduced rental income stream arising from the new head lease signed with our major
tenant.
The group again actively pursued potential acquisitions during the year in terms of its long-term
objective of diversifying its property portfolio further into industrial and retail properties and reducing
the risk of its dependence on its major tenant, Putco Limited. However no acquisitions materialised for
the review period. The board continues to insist on stringent parameters being met before an
investment is made.
Reconciliation of headline earnings
Audited Audited
30 June % 30 June
2013 Change 2012
Reconciliation of headline earnings
Net profit for the period 50 101 66.7 30 068
Adjusted for:
Loss on disposal of investment property - - 700
Net change in fair value of investment property (30 850) 165.9 (11 600)
Taxation effect of fair value adjustments 5 738 65.9 2 158
Headline earnings and diluted earnings 24 989 17.2 21 326
Shares in issue (weighted average number) (millions) 28 793 0.0 28 793
Dividends paid per share (cents) 30.0 9.1 33.0
Headline earnings per share (cents) 86.8 17.1 74.1
Property portfolio
At 30 June 2013 our property portfolio consisted of 15 (2012: 15) properties, situated primarily
in the Johannesburg and Pretoria metropolitan areas of Gauteng valued at R281.3 million
(2012: R250.3 million). The performance of the investment property portfolio was strong with average
annual property yields of 9%. The portfolio has a total gross lettable area of 74 993m2 (2012: 74
993m2). No properties were acquired or disposed of during the reporting period.
Segmental analysis
Retail Commercial Industrial Corporate Total
R’000 R’000 R’000 R’000 R’000
30 June 2013
Segment revenue
Contractual rental income 4 117 431 34 327 – 38 875
Straight-line rental adjustment 495 28 (1 942) – (1 419)
Share of associates’ profits 1 597 – – – 1 597
Other income – – – 423 423
Total revenue 6 209 459 32 385 423 39 476
Segmental result
Operating profit/(loss) 6 158 396 30 483 (4 407) 32 630
Investment income received – – – 1 054 1 054
Fair value adjustments to investment
properties 5 900 – 24 950 – 30 850
Straight-line rental adjustment – – – 1 419 1 419
Reversal of impairment provision – – – 763 763
Net profit/(loss) before tax 12 058 396 55 433 (1 171) 66 716
Other information
Property assets 40 400 4 546 236 450 – 281 396
Furniture, fittings and computer
equipment – – – 75 75
Investment in associates 25 728 25 000 – – 50 728
Trade and other receivables 375 935 – 383 1 693
Cash and cash equivalents – – – 31 785 31 785
Segment assets 66 503 30 481 236 450 32 243 365 677
Trade and other payables – – 1 786 3 357 5 143
Segment liabilities – – 1 786 3 357 5 143
30 June 2012
Segment revenue
Contractual rental income 3 576 1 210 34 659 – 39 445
Straight-line rental adjustment 905 12 (4 617) – (3 700)
Share of associates profits 1 156 – – – 1 156
Total revenue 5 637 1 222 30 042 – 36 901
Segmental result
Operating profit/(loss) 5 435 272 28 428 (4 479) 29 656
Investment and other income received – – – 1 793 1 793
Fair value adjustments to investment
properties 1 900 – 9 700 – 11 600
Reversal of impairment provision – – – 4 338 4 338
Loss on sale of investment property – (700) – – (700)
Net profit/(loss) before tax 7 335 (428) 38 128 1 652 46 687
Other information
Property assets 34 500 4 546 211 228 – 250 274
Furniture, fittings and computer
equipment – – – 113 113
Investment in associates 23 369 25 000 – – 48 369
Trade and other receivables 571 – 5 925 84 6 580
Cash and cash equivalents – – – 14 295 14 295
Segment assets 58 440 29 546 217 153 14 492 319 631
Trade and other payables 64 – 1 437 3 800 5 301
Segment liabilities 64 – 1 437 3 800 5 301
One of the group’s tenants, Putco Limited, contributes approximately 82% of the total revenue
received. This revenue falls within the industrial segment.
Prospects
Our strategy is to enhance our property portfolio by investing in suitable industrial, retail and
commercial properties to improve our income streams. To this end, the group will continue to actively
pursue the acquisition of additional investments.
The group has substantial cash resources (2013: R31.8 million; 2012: R14.3 million), which, together
with the board’s recent decision to make use of limited gearing, will allow the group to consider
property acquisitions of a more substantial nature.
Looking ahead, we believe property fundamentals will remain relatively stable. Growth in gross
domestic product is forecast by most economists to be in the region of 2.0% to 2.8% for the 2014
year. Trading conditions in the year ahead are expected to remain challenging.
Rental margins will continue to come under pressure, partly due to large increases in electricity and
municipal rate costs for tenants, with the likelihood of a decrease in recovery of such costs. A
deterioration in manufacturing output is also expected.
Going forward it is the group’s intention to continue to uphold its policy of strong tenant retention and
focus on cost controls, whilst maintaining the value of its existing portfolio through aggressive
maintenance and renovation policies. We will strive to establish and build sustainable partnerships
and joint ventures with organisations of a similar philosophy.
To this end the group is in discussions with several parties to investigate the possibility of developing
certain of our geographically well-positioned properties into large retail outlets or residential areas,
with a view to unlocking greater value.
Based on management’s experience, the property sector will continue to grow and show
improvement, however at a lower rate. The board is of the opinion that Putprop will be able to
maintain its current level of distributions to shareholders in the coming year.
Notice of annual general meeting
Notice is hereby given that the annual general meeting of shareholders of Putprop Limited will be held
at 11:00 on Monday, 4 November 2013 at the registered office of the company at 91 Protea Road,
Chislehurston, Sandton.
The board of directors of the company ("the board") has determined that, in terms of section 62(3)(a),
as read with section 59 of the Companies Act, 2008 (Act 71 of 2008), as amended, the record date for
the purposes of determining which shareholders of the company are entitled to participate in and vote
at the annual general meeting is Friday, 25 October 2013. Accordingly, the last day to trade Putprop
shares in order to be recorded in the Register to be entitled to vote will be Friday, 18 October 2013.
Board changes
As reported in the June 2012 results, Putprop’s board does not consist of a majority of independent
non-executive directors. This contravenes the guidelines set out by King III, although the board is of
the opinion the current position does not influence the policy making decisions of the board of
directors. The group has considered various candidates during the year in its endeavours to rectify
this position. As the group grows so does the demand for exceptional standards of corporate
governance, resulting in a need for board members with a high level of property experience as well as
financial skills and independent oversight. A short list of suitable candidates has been presented to
the Nomination Committee as well as to all current board members. An appointment is expected in
the short-term.
Subsequent events
The group has disposed of its 22.81% shareholding in Breaking Waves Investments Proprietary
Limited, an associate company, transfer to effect in August 2013. There are no other significant
subsequent events that may have a material impact on the financial statements at 30 June 2013.
Dividend declaration
The board is pleased to announce the declaration of a gross dividend of 18 cents per ordinary share
in respect of the year ended 30 June 2013 (2012: 18 cents), thus bringing the total dividend payable
for the year to 36 cents (2012: 33 cents).
Additional information:
This is a dividend as defined in the Income Tax Act, 1962, and is payable from income reserves. The
dividend withholding tax (DWT) rate is 15% and no credits in terms of secondary tax on companies
have been utilised. The net amount payable to shareholders who are not exempt from DWT is 15.3
cents per share, while the gross amount is 18 cents per share to those shareholders who are exempt
from DWT. There are 28 792 961 (2012: 28 792 961) ordinary shares in issue; the total dividend
amount payable is R5 182 732 (2012: R5 182 732). Putprop's tax reference number is 9100097717.
The salient dates relating to the dividend are as follows:
Declaration date Friday, 20 September 2013
Last date to trade to participate Friday, 11 October 2013
Trading commences ex dividend Monday, 14 October 2013
Record date Friday, 18 October 2013
Date of payment Monday, 21 October 2013
Share certificates may not be dematerialised or rematerialised between Monday, 14 October 2013
and Friday, 18 October 2013, both days inclusive.
On behalf of the board
20 September 2013
A B Adrian B C Carleo
Chairman Chief Executive Officer
Directorate
A B Adrian*^ (Chairman), B C Carleo (Chief Executive Officer), J E Smith (Financial Director) (British),
A L Carleo-Novello, P Senatore*^, P Nucci*^
*Independent ^Non-executive
Registered Office and Postal Adress
91 Protea Road,
Chislehurston,
Sandton, 2196
Transfer Secretaries
Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg
P O Box 61051,
Marshalltown, 2107
Sponsor
Merchantec Capital
Auditors
Mazars
Date: 20/09/2013 11:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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