Wrap Text
Reviewed provisional results of the group for the year ended 28 February 2013
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”)
REVIEWED PROVISIONAL RESULTS OF THE GROUP
for the year ended 28 February 2013
- Distribution up by 9,0% to 126,2 cents per linked unit
- Investment assets of R4,7 billion
- Presence established in the debt capital market
- Increase in net asset value by 7,2% to 1 696 cents per linked unit
- Weighted average cost of debt reduced to 8,7%
CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
Year to Year to
% 28 February 29 February
R’000 Change 2013 2012
Revenue 585 918 529 510
earned on contractual basis 10,7 575 112 519 570
straight-line lease adjustment 10 806 9 940
Operating costs (253 238) (222 327)
Net rental income from properties 332 680 307 183
earned on contractual basis 8,3 321 874 297 243
straight-line lease adjustment 10 806 9 940
Administrative costs (27 514) (22 325)
Depreciation (1 412) (1 492)
Operating profit 7,2 303 754 283 366
Profit on sale of investment properties 851 3 872
Investment income 39 239 19 472
Interest received 1 856 3 533
Associate
share of after-tax profit 16 733 10 823
fair value adjustment/capital reserves 15 246 (201)
interest and management fee 5 404 5 317
Finance costs 6,7 (118 880) (111 464)
Interest on borrowings (125 200) (114 174)
Interest capitalised 6 320 2 710
Fair value adjustments of investment properties 204 860 161 168
Fair value adjustments on interest rate derivatives (20 133) (15 785)
Amortisation of debenture premium 23 797 23 053
Profit before debenture interest 433 488 363 682
Debenture interest 9,0 (196 860) (180 634)
Profit before taxation 236 628 183 048
Taxation charge
Current taxation (190) –
Deferred taxation (31 961) (97 257)
Total comprehensive income for the year attributable to
equity holders 138,3 204 477 85 791
Weighted linked units in issue (‘000) 156 773 156 773
Linked units in issue (‘000) 156 773 156 773
Basic and diluted earnings per share (cents) 138,4 130,4 54,7
Basic and diluted earnings per linked unit (cents) 50,7 256,0 169,9
Distribution per linked unit (cents)
Dividends 0,63 0,58
Interest 125,57 115,22
Total 9,0 126,20 115,80
CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION
Reviewed Audited
28 February 29 February
R’000 2013 2012
ASSETS
Non-current assets 4 691 091 4 281 368
Investment properties 4 320 082 3 965 296
Property, plant and equipment 8 111 9 523
Lease costs 16 744 11 808
Operating lease assets 45 629 34 823
Investment in associate 300 525 259 918
Current assets 30 044 31 465
Non-current assets held for sale 7 770 –
Total assets 4 728 905 4 312 833
EQUITY AND LIABILITIES
Share capital and reserves 1 938 728 1 735 191
Share capital and premium 4 472 4 472
Non-distributable reserve 1 898 505 1 692 388
Retained earnings 35 751 38 331
Non-current liabilities 1 626 491 2 106 105
Debentures and premium 720 916 744 713
Interest-bearing borrowings 524 655 1 032 565
Derivative financial instruments 29 113 8 980
Deferred taxation 351 807 319 847
Current liabilities 1 163 686 471 537
Interest-bearing 955 537 275 202
Non-interest-bearing 104 883 102 741
Linked unit holders for distribution 103 266 93 594
Total equity and liabilities 4 728 905 4 312 833
Linked units in issue (‘000) 156 773 156 773
Net asset value per linked unit (cents) 1 696 1 582
Net asset value per linked unit (cents) – before providing
for deferred tax 1 921 1 786
Loan to investment value ratio (%) 31,6 30,5
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
Reviewed Audited
Year to Year to
28 February 29 February
R’000 2013 2012
CASH FLOW FROM OPERATING ACTIVITIES
Net rental income from properties 292 948 273 426
Adjustment for
Depreciation and amortisation 7 197 6 820
Working capital changes 2 725 107 105
Cash generated from operations 302 870 387 351
Investment income 7 260 8 850
Finance costs (118 880) (111 464)
Distribution to linked unit holders paid (188 129) (178 722)
Net cash inflow from operating activities 3 122 106 015
CASH FLOW FROM INVESTING ACTIVITIES
Investing activities (181 346) (280 137)
Disposal of investment property 5 153 8 155
Net cash outflow used in investing activities (176 193) (271 982)
CASH FLOW FROM FINANCING ACTIVITIES
Increase in interest-bearing borrowings 172 937 (137 915)
Net cash generated/(utilised in) from financing activities 172 937 (137 915)
NET DECREASE IN CASH AND CASH EQUIVALENTS (135) (303 882)
Cash and cash equivalents at beginning of year (5 802) 298 080
Cash and cash equivalents at end of year (5 937) (5 802)
DISTRIBUTABLE EARNINGS
The following additional information is provided and is aimed at disclosing to the users the basis on which the distributions are calculated.
Reviewed Audited
Year to Year to
% 28 February 29 February
R’000 Change 2013 2012
Revenue
earned on contractual basis 10,7 575 112 519 570
Operating costs (253 238) (222 327)
Net rental income from properties 8,3 321 874 297 243
Administrative costs (27 514) (22 325)
Depreciation (1 412) (1 492)
Operating profit 7,1 292 948 273 426
Investment income
Interest received 1 856 3 533
Investment income – associate 22 137 16 140
Distributable profit before finance costs 8,1 316 941 293 099
Finance costs 8,7 (118 880) (111 464)
Unit holders distributable earnings 9,0 198 061 181 635
Weighted linked units in issue (’000) 156 773 156 773
Distributable earnings per linked unit (cents) 9,0 126,3 115,9
Distribution per linked unit (cents) 9,0 126,2 115,8
RECONCILIATION – EARNINGS TO DISTRIBUTABLE EARNINGS
Reviewed Audited
Year to Year to
28 February 29 February
R’000 2013 2012
Earnings attributable to equity holders 204 477 85 791
Amortisation of debenture premium (23 797) (23 053)
Profit on sale of investment property, net of tax (320) (3 872)
Fair value adjustments
associate (15 246) 201
investment properties (204 860) (161 168)
deferred tax 38 106 101 143
Headline and diluted loss before debenture interest (1 640) (958)
Debenture interest 196 860 180 634
Headline and diluted earnings attributable to linked
unit holders 195 220 179 676
Straight-line lease adjustment, net of deferred tax (7 761) (7 157)
Fair value adjustment on interest rate derivatives 14 496 11 367
Taxation adjustments (3 894) (2 251)
Distributable earnings 198 061 181 635
Headline earnings per linked unit (cents) 8,7 124,5 114,6
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN EQUITY
Share Capital Fair value Retained
R’000 capital reserve reserve earnings Total
Balance at 28 February 2011 4 472 55 657 1 545 258 44 907 1 650 294
Total comprehensive income for the year 85 791 85 791
Transfer to capital reserve –
Debenture premium amortised 23 053 (23 053) –
Profit on sale of investment properties 13 496 (13 496) –
Dividends paid (894) (894)
Reserves of associate (201) 201 –
Transfer of fair value adjustments
Investment properties, net of deferred taxation 60 025 (60 025) –
Interest rate derivatives, net of deferred tax (4 900) 4 900 –
Balances at 29 February 2012 4 472 92 206 1 600 182 38 331 1 735 191
Total comprehensive income for the year 204 477 204 477
Transfer to capital reserve –
Debenture premium amortised 23 797 (23 797) –
Profit on sale of investment properties 320 (320) –
Dividends paid (940) (940)
Reserves of associate 15 246 (15 246) –
Fair value adjustments
Investment properties,
net of deferred taxation 166 754 (166 754) –
Balances at 28 February 2013 4 472 116 323 1 782 182 35 751 1 938 728
SEGMENTAL INFORMATION
The group earns revenue in the form of property rentals. On a primary basis the group is organised into four major operating segments:
– Office
– Retail
– Industrial
– Residential
2013 2012
Rental income by sector R'000 % R'000 %
Offices 113 527 24,6 96 842 23,0
Retail 171 968 37,2 155 515 37,0
Industrial 43 883 9,5 43 846 10,4
Residential 132 343 28,7 124 540 29,6
Total rental income 461 721 100,0 420 743 100,0
Recoveries 113 391 98 827
Revenue 575 112 519 570
Further segment results cannot be allocated on a reasonable basis due to the “mixed use” of certain of the properties. It is the company’s investment philosophy to
invest only in properties situated in the Gauteng area, therefore the company has not reported on a geographical basis.
NOTES TO THE FINANCIAL STATEMENTS
Basis of preparation
The condensed consolidated financial information has been prepared in accordance with the framework, concepts and the measurement and recognition requirements of
International Financial Accounting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting
Pronouncements as issued by Financial Reporting Standards Council, the JSE Listings Requirements and the requirements of the South African Companies Act (71 of 2008),
as amended.
These condensed consolidated results were prepared under supervision of Mr AK Stein CA(SA), in his capacity as group financial director.
The accounting policies adopted and methods of computation are consistent with those applied in the financial statements for the year ended 29 February 2012.
Related party: City Property Administration (Proprietary) Limited is responsible for the property and asset management of the group.
Commitments: Premium has capital commitments in an amount of R97,9 million relating to various redevelopments of properties as well as the purchase consideration of
R114,9 million, for the property acquired as referred to in this announcement.
Subsequent events: There have been no significant subsequent events that require reporting.
Contingent liability
Premium has issued guarantees of R5,0 million to City of Tshwane Metropolitan Municipality for the provision of services to its subsidiaries. Premium has provided a
suretyship to Nedbank Property Finance, in favour of its associate company, IPS Investments Proprietary Limited. At 28 February 2013 the suretyship amounted to
R224,2 million.
Auditor’s review
The condensed provisional financial information for the year ended 28 February 2013 has been reviewed by the group’s auditors, Grant Thornton. A copy of their
unmodified review report is available for inspection at the company’s registered office. The auditor’s report does not necessarily cover all of the information
contained in this financial report. Unitholders are therefore advised that in order to obtain a full understanding of the nature of the auditor’s work they should
obtain a copy of that report together with the accompanying financial information from the registered office of the company.
DIRECTORS’ COMMENTARY
Review of results
All rental income received by the group, less operating costs and interest on debt, is distributed bi-annually. The group does not distribute capital profits.
Premium has delivered a total distribution for the year ended 28 February 2013 of 126,2 cents per linked unit, representing growth in distributions to linked unit
holders of 9,0%. The interim distribution was 60,0 cents per linked unit with a final distribution of 66,2 cents per linked unit. The growth in the unit price from
R15,00 at 29 February 2012 to R18,95 at 28 February 2013 provided investors with capital growth of 26,3% for the year. The distribution of 126,2 cents per linked
unit accounts for an income yield of 8,4% with a total return of 34,7% for the year.
Rental income and net rental income increased by 10,7% and 8,3% respectively, compared with the prior year. Economic and trading conditions and consumer confidence
continued to remain challenging during the financial period. The core portfolio, representing those properties held for the 12 prior comparable months with no major
development activity, reflects rental income growth of 7,3%. The residential portfolio, comprising 28,7% of the portfolio by rental income, achieved core growth in
rental income of 6,7%. This was underpinned by low vacancies and strong demand for affordable and secure accommodation. Bad debt write-offs and provisions increasing
during the period from 0,9% to 1,0% of total tenant income. Arrears and doubtful debt provisions remain at acceptable levels and no significant deterioration is
anticipated. Despite rapidly escalating utilities charges, the percentage of cost recovery from tenants has been maintained during the year. These escalating charges
have, however, impacted on the total occupancy costs of tenants.
A saving in finance costs was achieved due to the establishment of a R1 billion Domestic Medium-term Note Programme during March 2012 as well as a decrease in the
prime lending rate.
Property and investment portfolio
Premium had five major projects under construction during the year. The total cost of these projects is approximately R196,1 million of which an amount of R145,8
million had been spent by 28 February 2013.
Details of these projects are:
- The upgrade of the Pavillion in Sunnyside, Pretoria. Construction of this 2 350m² retail property was completed in March 2012. To date, leases in respect of more
than 90% of the gross lettable area have been entered into. The total cost of this project is R8,3 million.
- The upgrade of the Protea Towers office block in the Pretoria CBD at a total cost of R15,9 million. Construction commenced in June 2011 and was completed in July
2012.
- The upgrade of Centre Walk’s (Die Meent) 5 258m² retail component situated in the Pretoria CBD. To date, leases in respect of more than 95% of the gross lettable
area have already entered into at favourable rentals, with Pick n Pay as an anchor tenant. The project was completed in November 2012 at a cost of R43,2 million.
- The redevelopement of the mixed-use property, Silver Place (Silway), situated in Silverton, Pretoria. The first phase of this project, consists of the creation of
104 new residential units, was completed in April 2012. The second phase, consists of an upgrade of the existing residential units, was completed in December 2012.
The total cost of this project is R59,7 million.
- The construction of an additional residential block at The Fields in Hatfield, Pretoria. This project, which is progressing well, will create a further 87
residential units and 87 parking bays at an estimated cost of R68,9 million. The project is scheduled for completion in November 2013 and is expected to yield a
return of 8,3% once fully let.
Premium has concluded an agreement for the acquisition of The Hangar in Centurion for a purchase consideration of R114,9 million. The property, comprising six blocks
of residential accommodation, will further enhance Premium’s residential property portfolio. The effective date of the acquisition is conditional upon the fulfilment
of various conditions precedent the fulfilment of which is expected to occur during June 2013.
Premium’s investment in IPS provided strong growth with profits earned from its associate company, excluding capital profits, increasing to R22,1 million. This is an
increase of 37,2% on the prior year.
The performance of IPS was positively impacted by the improved occupancy levels achieved during the year at the mixed-use developments of Kempton Place, Craig’s Place
and Tali’s Place.
Vacancies in the Premium portfolio at 28 February 2013 including properties held for redevelopment amounted to 20,4% of total lettable area. Details of these
vacancies with reference to their sectoral spread are set out in the table below:
Properties
Total held for Core
vacancies redevelopment vacancies
% % %
28 February 2013
Offices 12,8 (3,4) 9,4
Retail 3,3 (1,5) 1,8
Industrial 2,4 – 2,4
Residential 1,9 (1,6) 0,3
Total 20,4 (6,5) 13,9
29 February 2012
Offices 12,5 (5,2) 7,3
Retail 5,0 (2,3) 2,7
Industrial 2,4 (0,8) 1,6
Residential 0,9 (0,7) 0,2
Total 20,8 (9,0) 11,8
Significant progress has been made in letting some of the retail and office space at The Fields. 6 296 m2 of office space has recently been let at a rental of R135
per m2. The lease commenced on 1 April 2013. Most of the properties remained fully let. As anticipated a number of properties under development or those which were
recently upgraded for example, Centre Walk (Die Meent), had high vacancies. In recent years certain properties for example, Fedsure House, were acquired by Premium
with large vacancies and for little consideration for the vacant space which offered redevelopment opportunities. As the opportunities arise the potential of these
vacancies is being realised.
Debt
Premium’s loan to value ratio at 28 February 2013 was 31,6% of the total value of the investment portfolio as against 30,5% at 29 February 2012. Premium entered into
various fixed interest rate and swap rate agreements which are set out below. As a result, the interest rates on 51,0% of debt have been fixed with expiry dates from
May 2013 to August 2018. As at 28 February 2013, the weighted average annual cost of debt was 8,7%, with unutilised banking facilities in an amount in excess of
R552,9 million.
In March 2012, Premium debuted in the local bond market with an issue of R196 million 90-day commercial paper under its R1 billion Domestic Medium-term Note Programme.
As at the date of this report, the following are in place:
All-in pricing
over 3 months
Amount Jibar
PMM02 – 1 year issuance expiring on 13 June 2013 R100 million 6,415%
PMM06 – 1 year issuance expiring on 24 January 2014 R90 million 6,281%
PMM07 – 3,5 month issuance expiring on 13 June 2013 R150 million 5,583%
Borrowings
Nominal Interest
amount rate
R’000 %
Fixed rate borrowings expiry
May 2013 142 118 12,80
May 2018 160 000 12,15
302 118 12,46
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 9,10
Total hedged borrowings 752 118 10,45
Variable rate borrowings 721 947 6,90
Total borrowings 1 474 065 8,70
Revaluation of property portfolio
It is the group’s policy to perform directors’ valuations of all the properties at the interim stage and at year-end. At the year-end one-third of the properties are
valued by external valuers on a rotational basis. The directors’ valuation of the portfolio increased by R204,9 million to R4,4 billion, giving rise to an increase in
net asset value of 7,2% to 1 696 cents per linked unit.
Prospects
Premium is considering a number of redevelopment opportunities of existing properties which should enhance the quality of the property portfolio and result in
sustainable growing distributions.
It is anticipated that the growth in the local economy will remain subdued in the short term. Notwithstanding this environment, and barring unforeseen events,
Premium anticipates that the growth in distributions per linked unit for the next financial year should be in line with the sector average growth rate.
Unit holders are advised that the abovementioned information has not been reviewed nor reported on by the company’s auditors.
DECLARATION OF DIVIDEND 38 AND INTEREST PAYMENT
(“the distribution”)
Notice is hereby given that dividend number 38 of 0,33 cents (2012: 0,30 cents) per ordinary share (out of income reserves) and interest of 65,87 cents per debenture
(2012: 59,70 cents) has been declared for the period 1 September 2012 to 28 February 2013, payable to linked unit holders recorded in the register on Friday,
17 May 2013. The last date to trade “CUM” distribution is Friday, 10 May 2013. The units will commence trading “EX” distribution on Monday, 13 May 2013.
Payment date will be Monday, 20 May 2013.
No dematerialisation or rematerialisation of linked unit certificates may take place between Monday, 13 May 2013 and Friday, 17 May 2013, both days inclusive.
The dividend component of the distribution is subject to dividend withholding tax at 15%. In determining dividend withholding tax, secondary tax on companies (“STC”)
credits must be taken into account. The STC credits utilised as part of this declaration amount to R517 351.2597 being 0,33 cents per share, and consequently no dividend
withholding tax is payable by shareholders. Shareholders will receive the dividend of 0,33 cents per share.
The number of linked units in issue at the date of this declaration is 156 773 109 and the company’s tax reference number is 9660/013/64/1.
By order of the board
S WAPNICK JP WAPNICK
(Chairman) (Managing director)
25 April 2013
Directors: S Wapnick (Chairman), JP Wapnick* (Managing), AK Stein* (Financial), MZ Pollack , D Cohenˆ , PJ Strydom•
Non-executive director *Executive director •Independent non-executive director ˆLead independent non-executive director
Registered office: CPA House, 101 Du Toit Street, Pretoria 0002, PO Box 15, Pretoria 0001, Tel: 012 319 8781 Fax: 012 319 8812
Transfer secretaries: Computershare Limited (Registration number: 2000/006082/06), 70 Marshall Street, Johannesburg 2001, PO Box 61051, Marshalltown 2107,
Tel: 011 370 7700, Fax: 011 688 7712
Property administrator and asset manager: City Property Administration (Pty) Ltd; email: premium@cityprop.co.za
www.premiumproperties.co.za
Date: 25/04/2013 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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