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PUTPROP LIMITED - Abridged audited condensed results for the year ended 30 June 2012, notice of AGM and final dividend declaration

Release Date: 20/09/2012 11:10
Code(s): PPR     PDF:  
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Abridged audited condensed results for the year ended 30 June 2012, 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”)

Abridged audited condensed results for the year ended 30 June 2012,
notice of annual general meeting and final dividend declaration

Report highlights:
   - Reduction in tenant vacancies in difficult trading conditions from
     3.4% of gross lettable area to under 1%;
   - Dividend payouts maintained for the 25th consecutive year;
   - Ranked 74 in Financial Mail’s 200 Top Performers in 2012;
   - Acquisition of a 25% shareholding in Summit Place, Centurion, a
     40 000m2 mixed use retail and commercial development;
   - Associate companies contribute to profit for first time; and
   - Increase in net asset value of 8.0% to 1013 cents per share.

Statements of Financial Position as at 30 June 2012

                                        GROUP                   COMPANY
                                 2012        2011           2012       2011
                                R’000       R’000           R’000     R’000
ASSETS
Non-current assets
Investment properties           244 312         237 000     244 312     237 000
Other non-current assets
Straight-line rental income
asset                             2 292           3 685       2 292       3 685
Furniture, fittings and
computer equipment                  113             119         113         119
Investment in associates and
subsidiaries                     48 369           3 769      47 213       3 769
Other investments                     –           7 098           –       7 098
                                295 086         251 671     293 930     251 671
Current assets
Straight-line rental income
asset                             3   670         5   977     3   670     5   977
Trade and other receivables       6   580         4   724     6   580     4   724
Cash and cash equivalents        14   295        28   847    14   295    28   847
                                 24   545        39   548    24   545    39   548
Total assets                    319   631       291   219   318   475   291   219
EQUITY AND LIABILITIES
Capital and reserves
Share capital                     4 146           4 146       4 146       4 146
Accumulated profit              287 493         266 063     286 337     266 063
                                291 639         270 209     290 483     270 209
Non-current liabilities
Deferred taxation                21 065          15 385      21 065      15 385
                                  21 065          15 385     21 065       15 385
Current liabilities
Trade and other payables           5   301         5 070      5   301     5 070
Taxation payable                   1   626           555      1   626       555
                                   6   927         5 625      6   927     5 625
Total equity and liabilities     319   631       291 219    318   475   291 219

Statements of Comprehensive Income for the year ended 30 June 2012

                                         GROUP                   COMPANY
                                  2012        2011          2012        2011
                                 R’000       R’000          R’000      R’000
Property revenue                  39 445       36 969        39 445      36 969
Straight-line rental income
accrual                          (3 700)         (1 960)    (3 700)     (1 960)
Gross property revenue            35 745          35 009     35 745      35 009
Property expenses                (2 766)         (3 803)    (2 766)     (3 803)
Net profit from property
operations                        32 979          31 206     32 979       31 206
Corporate administration
expenses                         (4 479)         (3 689)    (4 479)     (3 689)
Investment and other income        1 793           1 457      1 793       1 457
Share of associates profits        1 156               –          –           –
Operating profit before
capital items                     31 449          28 974     30 293       28 974
Loss on sale of investment
properties                         (700)               –      (700)            –
Impairment provision
associate company write back       4 338               –      4 338            –
Profit before fair value
adjustments                       35 087       28 974        33 931       28 974
Fair value adjustments            11 600       28 035        11 600       28 035
Net profit before taxation        46 687       57 009        45 531       57 009
Taxation                        (16 619)     (12 859)      (16 619)     (12 859)
Profit attributable to
ordinary shareholders             30 068          44 150     28 912       44 150
Other comprehensive income             –               –          –            –
Total comprehensive income
attributable to ordinary
shareholders                      30 068          44 150     28 912       44 150
Earnings and diluted earnings
per share (cents)                  104.4           153.3            –          –

Statements of Cash Flows for the year ended 30 June 2012

                                         GROUP                  COMPANY
                                 2012         2011          2012       2011
                                 R’000       R’000          R’000     R’000
Cash flow generated from
operating activities              13 908         10 271      13 908       10 271
Net cash generated from           30 621         28 032      30 621       28 032
operations
Investment and other income         1 793      1 457       1 793      1 457
Taxation paid                     (9 868)    (9 141)     (9 868)    (9 141)
Dividends paid                    (8 638)   (10 077)     (8 638)   (10 077)
Cash flow utilised in
investing activities             (28 460)    10 443    (28 460)       10 443
Improvement to investment
properties                          (666)      (483)       (666)        (483)
Acquisition of furniture,
fittings and computer
equipment                            (42)      (104)        (42)        (104)
Acquisition and development
of investment properties          (4 546)          –     (4 546)           –
Proceeds on sale of
investment properties               8 800    11 800       8 800       11 800
Acquisition of associates        (32 006)     (770)    (32 006)        (770)
Net (decrease)/increase in
cash and cash equivalents        (14 552)    20 714    (14 552)       20 714
Cash and cash equivalents at
beginning of year                  28 847      8 133      28 847        8 133
Cash and cash equivalents at
end of year                        14 295    28 847       14 295      28 847

Statement of Changes in Equity for year ended 30 June 2012

                                  Share        Accumulated
                                  capital      profit         Total
                                  R’000        R’000          R’000
GROUP
Balance at 1 July 2010            4 146        231 990        236 136
Total comprehensive income   –
profit                            –            44 150         44 150
Dividends paid                    –            (10 077)       (10 077)
Balance at 30 June 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
COMPANY
Balance at 1 July 2010            4 146        231 990        236 136
Total comprehensive income   –
profit                            –            44 150         44 150
Dividends paid                    –            (10 077)       (10 077)
Balance at 30 June 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


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 condensed results, which are based on reasonable judgments 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 2011. 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 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 2012,
which have been posted to shareholders on 21 September 2012. These
accounting policies have been applied consistently with the previous
year.

These abridged audited condensed results have been prepared under the
supervision of James 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

The year 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, with wild swings being the norm, in all listed share
markets, locally and internationally. All of this was overshadowed by the
turmoil in Europe, with Greece, Spain and Italy placing enormous pressure
on the continued successful survival of the single Euro currency.

The South African listed property sector,   however, seemed immune to all
of the global influences, with the listed    property index reporting high
growth during this review period. Market     capitalisation of the sector
increased substantially to R125 billion     as a result of institutional
demand.

Operating conditions remained difficult with rising vacancies, longer
collection times and a deterioration of rental escalations on new leases
and renewals. Prevailing rentals have come under pressure as has demand
for rental space in all of the segments in which we operate.
Putprop was not immune to the effects of these market conditions, we are
however fortunate to have a stable portfolio of mainly listed national
tenants, allowing greater protection against the factors mentioned above.

Although the year under review presented challenges for Putprop, the
group produced results that again showed an increase in operating profit
before our capital adjustments in respect of our property portfolio
revaluations.

Financial results

As a result of difficult trading conditions, the review period has
resulted in Putprop not achieving its profit performance of recent years
due largely to the challenges referred to above, with net profit before
tax decreasing from R57 million to R46.7 million. Headline earnings,
however, increased slightly to R21.3 million from R19.0 million or 74.1
cents per share (2011: 66.1 cents).

The group again actively pursued acquisitions during the year in terms of
its long-term objective of diversifying its property portfolio further
into industrial and commercial properties and reducing the risk of its
dependence on its major tenant, Putco Limited.

Again the quality of properties offered for acquisition in this period
was low.

Reconciliation of headline earnings

                                       Audited             Audited
                                       30 June             30 June
                                          2012        %       2011
                                         R’000   Change      R’000
Reconciliation of headline
earnings
Net profit for the period               30 068   (31.4)     44 150
Adjusted for:
Loss on disposal of investment
property                                   700    170.0    (1 000)
Net change in fair value of
investment properties                 (11 600)   (58.5)   (28 035)
Taxation effect of fair value
adjustments                              2 158   (45.1)      3 925
Headline earnings and diluted
earnings                                21 326    12.1.     19 040
Shares in issue (weighted
average number) (millions)              28 793      0.0     28 793
Dividends paid per share
(cents)                                   33.0     10.0       30.0
Headline earnings per share
(cents)                                   74.1     12.1       66.1
Net asset value per share              1 013.0      7.9      938.5
(cents)



Property portfolio
At 30 June 2012 our property portfolio consisted of 15 (2011: 15)
properties, situated primarily in the Johannesburg and Pretoria
metropolitan areas of Gauteng valued at R244 million (2011: R237
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 (2011: 76 948m2). One property was
disposed of during the year. The property did not form part of our
identified core portfolio, and no longer satisfied the group’s investment
policies and strategies. The group purchased an industrial property
during the reporting period.

Segmental analysis

The table below summarises by segment the position for the year ended 30
June 2012.

Segment assets include all operating assets used by a segment and consist
of investment properties, receivables and cash. Assets not directly
attributable to a particular segment are allocated to the corporate
segment. Segment liabilities include all operating liabilities of a
segment and consist principally of outstanding accounts.

                     Retail   Commercial   Industrial   Corporate    Total
                      R’000        R’000        R’000       R’000    R’000
30 June 2012
Segmental 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   205 266          -   244 312
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    211 191     14 379   313 556
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.

30 June 2011
Segment revenue
Contractual rental
income                3 456      1 377    32 136          -   36 969
Straight-line
rental adjustment        34      (211)   (1 783)          -   (1 960)
Total revenue         3 490      1 166    30 353          -    35 009
Segmental result
Operating
profit/(loss)         2 898      1 298    27 010    (3 689)   27 517
Investment and
other income
received                   -         -         -      1 457    1 457
Fair value
adjustments to
investment
properties           (1 200)   (3 000)    32 235          -   28 035
Net profit/(loss)
before tax            1 698    (1 702)    59 245    (2 232)   57 009
Other information
Property assets      32 600      9 500   194 900          -   237 000
Investments in
associates            3 769          -         -          -    3 769
Trade and other
receivables              198         -     2 314      2 212    4 724
Cash and cash
equivalents               -          -         -     28 847    28 847
Segment assets       36 567      9 500   197 214     31 059   274 340
Trade and other
payables                124          1 652    1 503      1 891    5 070
Segment
liabilities             124          1 652    1 503      1 891    5 070


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 fairly large cash resources (2012: R14.3 million; 2011:
R28.8 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.

The Detpak property acquisition, reported to shareholders in July 2011,
has, due to unforeseen circumstances, been cancelled.

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 2.5% for the 2013 year. Trading conditions
in the year ahead are expected to continue 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.

The group has held renegotiations with Putco, our major tenant, with
respect to the leases expiring in December 2012 (86.1% of the groups
leases expire in 2013). Indications are, that a rental reduction of
approximately 11% to 13% will result.

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.

Dividend cover is expected to be in the range of two to four times, in
terms of the group’s future distributions.

Based on management’s experience, the property sector may have bottomed
out, as vacancy levels have shown improvement. Recovery will however be
slow, with modest growth predicted for the next 12 months.

Borrowings and capital commitments
The company has no borrowings as at 30 June 2012 nor has it any capital
commitments at that date.

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 Wednesday, 7 November 2012 at
the registered office of the company at 91 Protea Road, Chislehurston,
Sandton.

The board of directors of the company 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 are entitled to participate in and vote at
the annual general meeting is Friday, 26 October 2012. Accordingly, the
last day to trade Putprop shares in order to be recorded in the Register
to be entitled to vote will be Friday, 19 October 2012.

Directorate

There have been no changes in the composition of the board of directors
during the current period.

Subsequent events

There have been no significant subsequent events between the period 30
June 2012 and the release of this report, 21 September 2012.

Dividend declaration

The board is pleased to announce the declaration of a cash dividend of 18
cents per ordinary share in respect of the year ended 30 June 2012 (2011:
15 cents), thus bringing the total dividend payable for the year to 33
cents (2011: 30 cents).

Additional information:
This is a dividend as defined in the Income Tax Act, 1962, and is payable
from income reserves. The South African dividend tax (“DT”) 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 DT is 15.3
cents per share, while the gross amount is 18 cents per share to those
shareholders who are exempt from DT.

There are 28 792 961 (2011: 28 792 961) ordinary shares in issue; the
total dividend amount payable is R5 182 732 (2011: R4 318 944). The
company’s tax reference number is 9100/097/71/7

The salient dates are as follows:

Declaration date                             Thursday, 20 September 2012
Last date to trade to participate            Friday, 5 October 2012
Trading commences ex dividend                Monday, 8 October 2012
Record date                                  Friday, 12 October 2012
Date of payment                              Monday, 15 October 2012

Share certificates may not be dematerialised or rematerialised between
Monday 8 October 2012 and Friday 12 October 2012, both days inclusive.
Certificates for exemption due to the group by Monday 8 October 2012.

Audit report
These abridged audited condensed results for the year ended 30 June 2012
have been audited by the company’s auditors, Mazars, whose unmodified
audit report is available at the company’s registered office as detailed
below.

On behalf of the board
20 September 2012

A B Adrian                             B Carleo
Chairman                               Chief Executive Officer

Directorate

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 Address
91 Protea Road
Chislehurston
Sandton, 2196

Share Transfer Secretaries
Computershare Investor Services (Proprietary) Limited
70 Marshall Street
Marshalltown
(PO Box 61051, Marshalltown, 2107)

Sponsor
Merchantec Capital
2nd Floor, North Block, Hyde Park Office Tower
Corner 6th Road and Jan Smuts Ave
Hyde Park, 2196
(PO Box 41480, Craighall, 2124)

Auditors
Mazars
5 St. David’s Place
Parktown 2193

Date: 20/09/2012 11:10:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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