Wrap Text
PMM - Premium Properties Limited - Unaudited results of the group for the six
months ended 31 August 2011
PREMIUM PROPERTIES LIMITED and its subsidiaries
(Incorporated in the Republic of South Africa)
(Registration number 1994/003601/06)
Share code: PMM ISIN: ZAE000009254
("Premium" or "the Group" or "the Company")
UNAUDITED RESULTS OF THE GROUP FOR THE SIX MONTHS ENDED 31 AUGUST 2011
- Distribution of 55,8 cents per linked unit
- Investment assets exceed R4,0 billion
- Increase in net asset value by 2,8% to 1 585 cents per linked unit
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six months six months year to
% 31 August 31 August 28 February
R`000 Change 2011 2010 2011
Revenue 251 143 218 801 452 575
earned on contractual
basis 14,3 250 646 219 312 452 075
straight-line lease
adjustment 497 (511) 500
Operating costs (108 136) (88 590) (180 947)
Net rental income from
properties 143 007 130 211 271 628
earned on contractual
basis 9,0 142 510 130 722 271 128
straight-line lease
adjustment 497 (511) 500
Administrative costs (11 573) (9 975) (20 474)
Depreciation (854) (1 459) (2 215)
Operating profit 9,9 130 580 118 777 248 939
Profit on sale of
investment properties - - 14 629
Fair value adjustments of
investment properties 98 734 97 701 119 420
gross fair value adjustment 99 231 97 190 119 920
attributable to
straight-line lease adjustment (497) 511 (500)
Investment income 7 022 7 048 28 114
Interest received 1 001 488 1 316
Associate
share of after-tax profit 5 192 2 002 5 606
fair value adjustment/capital
reserves (1 823) 435 14 218
interest and management fees 2 652 4 123 6 974
Profit before finance costs 5,7 236 336 223 526 411 102
Finance costs 28,1 (74 412) (58 103) (103 569)
Interest on borrowings (53 542) (57 473) (122 534)
Interest capitalised 2 041 8 016 12 160
Fair value adjustments on
interest rate derivatives (22 911) (8 646) 6 805
Profit before
amortisation of
debenture premium (2,1) 161 924 165 423 307 533
Amortisation of debenture
premium 11 605 4 906 9 611
Profit before debenture
interest 173 529 170 329 317 144
Debenture interest 14,5 (87 040) (75 995) (151 050)
Profit before taxation 86 489 94 334 166 094
Taxation charge
Deferred taxation (7 547) (11 114) (20 124)
Total comprehensive income
for the year attributable
to equity holders (5,1) 78 942 83 220 145 970
Weighted linked units in
issue (`000) 156 773 130 106 130 106
Linked units in issue (`000) 156 773 130 106 156 773
Basic earnings per share
(cents) (21,3) 50,4 64,0 112,2
Diluted earnings per
share (cents) (21,3) 50,4 64,0 93,1
Basic earnings per linked
unit (cents) (13,5) 105,9 122,4 228,3
Diluted earnings per
linked unit (cents) (13,5) 105,9 122,4 189,5
Distribution per linked
unit (cents)
Dividends 0,28 0,29 0,58
Interest 55,52 58,41 116,32
Total (4,9) 55,80 58,70 116,90
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Audited
31 August 28 February
R`000 2011 2011
ASSETS
Non-current assets 4 088 136 3 830 602
Investment properties 3 787 862 3 533 075
Property, plant and equipment 10 316 11 015
Lease costs 12 690 13 874
Operating lease assets 25 380 24 883
Investment in associate 251 888 247 755
Current assets 27 465 432 552
Total assets 4 115 601 4 263 154
EQUITY AND LIABILITIES
Share capital and reserves 1 728 782 1 650 294
Share capital and premium 4 472 4 472
Non-distributable reserve 1 679 113 1 600 915
Retained earnings 45 197 44 907
Non-current liabilities 2 031 471 2 247 853
Debentures and premium 756 161 767 766
Interest-bearing borrowings 1 045 174 1 257 495
Deferred taxation 230 136 222 592
Current liabilities 355 348 365 007
Interest-bearing 188 933 182 602
Non-interest-bearing 79 375 91 617
Linked unitholders for distribution 87 040 90 788
Total equity and liabilities 4 115 601 4 263 154
Linked units in issue (`000) 156 773 156 773
Net asset value per linked unit (cents) 1 585 1 542
Net asset value per linked unit (cents)
- before providing for deferred tax 1 732 1 684
Loan to investment value ratio (%) 30,2 37,6
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
six months six months year to
31 August 31 August 28 February
R`000 2011 2010 2011
CASH FLOW FROM OPERATING
ACTIVITIES
Net rental income from properties 130 083 119 288 248 439
Adjustment for:
Depreciation and amortisation 2 972 1 459 9 115
Working capital changes 81 917 19 502 (82 415)
Cash generated from operations 214 972 140 249 175 139
Investment income 3 653 4 611 8 290
Finance costs (51 501) (57 473) (110 374)
Distribution to linked
unitholders paid (91 243) (77 023) (137 662)
Net cash inflow from
operating activities 75 881 10 364 (64 607)
CASH FLOW FROM INVESTING
ACTIVITIES
Investing activities (157 909) (116 894) (390 149)
Disposal of investment property - - 32 612
Net cash outflow used in
investing activities (157 909) (116 894) (357 537)
CASH FLOW FROM FINANCING
ACTIVITIES
Issue of new units - - 381 273
(Increase)/Decrease in
interest-bearing borrowings (228 900) 99 584 354 204
Net cash (utilised for)/generated
from financing activities (228 900) 99 584 735 477
NET (DECREASE)/INCREASE IN CASH
AND CASH EQUIVALENTS (310 928) (6 946) 313 333
Cash and cash equivalents at
beginning of year 298 080 (15 253) (15 253)
Cash and cash equivalents at end of
year (12 848) (22 199) 298 080
DISTRIBUTABLE EARNINGS
The following additional information is provided and is aimed at disclosing to
the users the basis on which the distributions are calculated.
Unaudited
six months
% 31 August
R`000 Change 2011
Revenue
earned on contractual basis 14,3 250 646
Operating costs (108 136)
Net rental income from properties 9,0 142 510
Administrative costs (11 573)
Depreciation (854)
Operating profit 9,1 130 083
Investment income
Interest received 1 001
Investment income - associate 7 844
Distributable profit before
finance costs 10,3 138 928
Finance costs 4,1 (51 501)
Unitholders` distributable earnings 14,4 87 427
Weighted linked units in issue (`000) 156 773
Distributable earnings per linked
unit (cents) (5,1) 55,8
Distribution per linked unit (cents) (4,9) 55,8
Unaudited Audited
six months year to
31 August 28 February
R`000 2010 2011
Revenue
earned on contractual basis 219 312 452 075
Operating costs (88 590) (180 947)
Net rental income from properties 130 722 271 128
Administrative costs (9 975) (20 474)
Depreciation (1 459) (2 215)
Operating profit 119 288 248 439
Investment income
Interest received 488 1 316
Investment income - associate 6 125 12 580
Distributable profit before
finance costs 125 901 262 335
Finance costs (49 457) (110 374)
Unitholders` distributable earnings 76 444 151 961
Weighted linked units in issue (`000) 130 106 130 106
Distributable earnings per linked
unit (cents) 58,8 116,8
Distribution per linked unit (cents) 58,7 116,9
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Capital Fair value
R`000 capital reserve reserve
Balance at
28 February 2010 2 507 46 046 1 423 080
Total comprehensive income for the year - - -
Issue of new units 1 965 - -
Transfer to capital - deemed
debenture premium - 9 611 -
Dividends paid - - -
Fair value adjustments
Investment properties,
net of deferred taxation - - 103 060
Associate, net of deferred tax - - 14 218
Interest rate derivatives,
net of deferred tax - - 4 900
Balances at
28 February 2011 4 472 55 657 1 545 258
Total comprehensive income
for the year - - -
Transfer to capital - deemed
debenture premium - 11 605 -
Dividends paid - - -
Fair value adjustments
Investment properties,
net of deferred taxation - - 84 911
Associate, net of deferred tax - - (1 822)
Interest rate derivatives,
net of deferred tax - - (16 497)
Balances at 31 August 2011 4 472 67 262 1 611 851
Retained
R`000 earnings Total
Balance at 28 February 2010 31 104 1 502 737
Total comprehensive income for the year 145 970 145 970
Issue of new units - 1 965
Transfer to capital - deemed debenture premium (9 611) -
Dividends paid (378) (378)
Fair value adjustments
Investment properties, net of deferred taxation (103 060) -
Associate, net of deferred tax (14 218) -
Interest rate derivatives, net of deferred tax (4 900) -
Balances at 28 February 2011 44 907 1 650 294
Total comprehensive income for the year 78 942 78 942
Transfer to capital - deemed
debenture premium (11 605) -
Dividends paid (454) (454)
Fair value adjustments
Investment properties,
net of deferred taxation (84 911) -
Associate, net of deferred tax 1 822 -
Interest rate derivatives, net of deferred tax 16 497 -
Balances at 31 August 2011 45 197 1 728 782
RECONCILIATION - EARNINGS TO DISTRIBUTABLE EARNINGS
Unaudited Unaudited Audited
six months six months year to
% 31 August 31 August 28 February
R`000 Change 2011 2010 2011
Earnings attributable to
equity holders 78 942 83 220 145 970
Amortisation of deemed
debenture premium (11 605) (4 906) (9 611)
Sale of investment property - - (14 629)
Fair value adjustments
associate, net of deferred tax 1 822 (435) (14 218)
investment properties,
net of deferred tax (84 911) (84 023) (102 701)
Headline (loss)/earnings before
debenture interest (15 752) (6 144) 4 811
Debenture interest 87 040 75 995 151 050
Headline earnings attributable to
linked unitholders 71 288 69 851 155 861
Straight-line lease
adjustment, net of deferred tax (358) 368 (359)
Fair value adjustment on
interest rate derivatives,
net of deferred tax 16 497 6 225 (4 900)
Deferred taxation adjustments - - 1 359
Distributable earnings 87 427 76 444 151 961
Headline earnings per
linked unit (cents) (15,3) 45,5 53,7 119,8
NOTES TO THE FINANCIAL STATEMENTS
The unaudited condensed financial statements have been prepared in accordance
with International Accounting Standards IAS 34 and AC 500 standard as issued by
the Accounting Practices Board, the Listings Requirements of the JSE Limited and
the requirements of the South African Companies Act. The accounting policies
adopted are consistent in all material respects with those applied in the
financial statements for the year ended 28 February 2011.
Related party: City Property Administration (Proprietary) Limited is responsible
for the property and asset management of the Group.
Subsequent events: There have been no significant subsequent events that require
reporting.
Contingent liability: Premium has issued guarantees of R1,6 million in favour of
City of Tshwane Metropolitan Municipality for the provision of services to its
subsidiaries. Premium has provided a suretyship to Nedbank Property Finance,
which at 31 August 2011 amounted to R224,2 million, in favour of its associate
company, IPS Investments (Proprietary) Limited.
DIRECTOR`S COMMENTARY
Review of results
The total distribution per linked unit for the six months of 55,8 cents per
linked unit represents a decrease of 4,9% on that paid in the previous
corresponding period. Local trading conditions remained challenging with
tenants` total cost of occupation increasing as utility costs and assessment
rates increased significantly. Whilst our commercial leases do provide for the
recovery of the cost of utilities and rates and taxes, these increased costs
impact negatively on new rentals on expiry of leases. Our residential leases do
not provide for the recovery of rates and taxes.
Rental income and net rental income increased by 14,3% and 9,0% respectively,
compared with the comparable period. The core portfolio, representing those
properties held for six comparable months and with no major development
activity, reflects rental income growth of 3,5%. The residential portfolio,
which represents 29,5% of the portfolio by rental income, achieved growth of
6,2%, underpinned by low vacancies and strong demand for affordable and secure
accommodation. Property expenses increased to 43,1% (2011: 40,4%) with a
significant increase in repairs and maintenance, assessment rates and utilities
expenses.
Arrears and doubtful debt provisions remain at acceptable levels and no
significant deterioration is anticipated. A saving in finance costs was achieved
due to the reduction in borrowings following a R400 million rights issue which
was concluded on 28 February 2011.
This was partially offset by the increased costs of funding as a result of
interest rate swaps entered into at a premium to the weighted average cost of
floating interest rates, in order to fix interest rates in a low interest rate
environment.
Property and investment portfolio
A number of projects have now commenced and should have a positive impact on
earnings in the medium to longer term. These include the upgrade of the Perm
Building, Die Meent, Pavillion and the mixed use properties Silway and Savyon.
The distribution was negatively impacted by the vacancies at City Centre and The
Fields office block. The retail component of The Fields Phase II is also largely
vacant however 6 111 m2 of office space has recently been let at a rental of
R135 per m2. The lease will commence on 16 January 2012.
As anticipated the performance of IPS was negatively impacted by the phased take
up of its mixed use developments Kempton Place and Tali`s Place. The residential
development situated in Arcadia, Pretoria, is due for completion in November
2011, at a total cost of R46,0 million. An increase in income from IPS is
forecast for the next six-month period.
Details of the Premium portfolio`s vacancies as at 31 August 2011 are as
follows:
31 August 28 February
2011 2011
Offices and Commercial (%) 12,2 16,3
Retail (%) 3,6 3,7
Industrial (%) 2,7 2,6
Residential (%) 0,3 0,5
Total (%) 18,8 23,1
Most of the properties remained fully let, however a number of properties under
development or those which were recently upgraded had high vacancies. In recent
years certain properties were acquired by Premium with large vacancies and for
little or no consideration for the vacant space and that offered redevelopment
activity. As the opportunities arise the potential of these vacancies is being
realised.
During the year four properties were acquired and transferred for a total
purchase price of R111,2 million. These include Metropolitan in the Pretoria
CBD, Motor City Strydom Park, Motor City Capital Park and a mixed use building
which is situated in the Johannesburg CBD. The aggregate initial yield on these
properties is 9,5%.
Debt
Premium`s gearing at 31 August 2011 was 30,2% of the total value of the
portfolio against 37,6% at 28 February 2011. Premium has entered into various
swap interest rate agreements as set out below. As a result the interest rates
on 62,2% of debt have been fixed for periods of between two years and seven
years. As at 31 August 2011, the annual weighted cost of debt was 9,4%.
Details of borrowings are as follows:
Nominal Interest
R`000 amount rate %
Fixed rate borrowings expiry
May 2013 142 118 12,80
May 2018 160 000 12,15
302 118 12,48
Swap maturity
May 2017 50 000 9,47
June 2017 50 000 9,32
July 2017 50 000 8,94
August 2017 100 000 8,70
September 2017 50 000 9,31
January 2018 50 000 9,43
August 2018 100 000 9,00
450 000 9,11
Total hedged borrowings 752 118 10,79
Variable rate borrowings 452 250 8,25
Total borrowings 1 204 368 9,40
Revaluation of property portfolio
It is the Group`s policy to perform directors` valuations of all the properties
on a six-monthly basis and at year-end. At the year-end one-third of the
properties is valued by external valuers.
The increase in the directors` valuation of the portfolio by R98,7 million to
R3,836 billion represents an increase of 2,7%.
Directorate
Unitholders are referred to the SENS release on 2 September 2011 advising that
Mr Alec Wapnick resigned from the board of Premium as executive chairman, with
effect from 30 September 2011. A visionary and exceptional man, during his 55
years in the property industry, Mr Wapnick created amongst others, Premium and
Octodec, which have combined assets of R7 billion. The Board wishes to express
its profound gratitude and appreciation to the Chairman for his immeasurable
contribution to the growth and development of the Company. Mr Wapnick has been a
guiding force within the Company, which has benefited from his mentoring
leadership and wise counsel. His passion, integrity, fair and considered
approach and his work ethic have been an example to all with whom he has worked.
Jeffrey Wapnick who has made a tremendous contribution to the growth and
development of Premium in his capacity as Managing Director of the Company will
continue in his current capacity.
Sharon Wapnick, who has been a non-executive director on the board of Premium
since 1994, and who has a wealth of experience in the property industry assumed
the position of non-executive Chairman with effect from 1 October 2011.
Prospects
Premium will continue to focus on the upgrading of properties and this should
provide investors with improved distributions in the medium to longer term.
It is anticipated that the growth in the economy will remain subdued in the
short term.
Notwithstanding this environment, and barring unforeseen events, Premium
anticipates that the distributable income for the forthcoming six months should
improve.
Unitholders are advised that the abovementioned information has not been
reviewed nor reported on by the Company`s auditors.
DECLARATION OF DIVIDEND 35 AND INTEREST PAYMENT ("the distribution")
Notice is hereby given that dividend number 35 of 0,28 cents (2011: 0,29 cents)
per ordinary share together with interest of 55,52 cents per debenture (2010:
58,41 cents) has been declared for the period 1 March 2011 to 31 August 2011,
payable to linked unitholders recorded in the register on Friday, 18 November
2011. The last date to trade "CUM" distribution is Friday, 11 November 2011. The
units will commence trading "EX" distribution on Monday, 14 November 2011.
Payment date will be Monday, 21 November 2011.
No dematerialisation or rematerialisation of linked unit certificates may take
place between Monday, 14 November 2011 and Friday, 18 November 2011, both days
inclusive.
By order of the Board
S Wapnick J P Wapnick
(Chairman) (Managing Director)
21 October 2011
Directors
S Wapnick (Chairman), J P Wapnick* (Managing), A K Stein* (Financial),
M J Holmes#, M Z Pollack#, D P Cohen# *Executive director
#Independent non-executive director
Registered office
CPA House
101 Du Toit Street, Pretoria, 0002
PO Box 15, Pretoria, 0001
Tel: (012) 319 8811
Fax: (012) 319 8812
Transfer secretaries
Computershare Investor Services (Pty) Limited
(Registration number 2000/006082/06)
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Tel: (011) 370 7700
Fax: (011) 688 7712
Date: 21/10/2011 09:30:48 Supplied by www.sharenet.co.za
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