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Abridged Condensed Consolidated Results for the year ended 30 June 2014 and Cautionary Announcement
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 Condensed Consolidated Results for the year ended 30 June 2014 and Cautionary Announcement
This abridged consolidated group financial statements for the year ended 30 June 2014 has been
extracted from the audited annual financial statements upon which Mazars Inc. have issued an
unqualified audit report, but is not itself audited. The directors take full responsibility for the
preparation of the abridged financial statements and confirm that the financial information has been
correctly extracted from the underlying annual financial statements. The group annual financial
statements are available for inspection at the Company’s registered office.
FINANCIAL HIGHLIGHTS
Gross property revenue up 7% to R40 million
Property expenses decreased by 17%
Operating profit increased by 62% to R54.5 million
Associate companies contribution to profits increased to R19.4 million
Increase in net asset value per share of 18.4% to 1 363 cents per share
Annual escalations on contracted rental income maintained at over 8% in a difficult rental market
Statements of financial position
as at 30 June 2014
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
ASSETS
Non-current assets
Net investment property 309 564 276 855 309 564 276 855
Gross investment property 315 264 281 396 315 264 281 396
Straight-line rental income adjustment (5 700) (4 541) (5 700) (4 541)
Other non-current assets
Straight-line rental income asset 4 243 4 307 4 243 4 307
Furniture, fittings computer
equipment and motor vehicles 64 75 64 75
Investment in associates 66 068 50 728 43 945 47 976
379 939 331 965 357 816 329 213
Current assets
Straight-line rental income asset 1 457 234 1 457 234
Trade and other receivables 8 736 1 693 8 736 1 693
Cash and cash equivalents 45 032 31 785 45 032 31 785
55 225 33 712 55 225 33 712
Total assets 435 164 365 677 413 041 362 925
Equity and liabilities
Capital and reserves
Share capital 4 146 4 146 4 146 4 146
Accumulated profit 388 373 327 228 366 250 324 476
392 519 331 374 370 396 328 622
Non-current liabilities
Deferred taxation 34 279 27 661 34 279 27 661
34 279 27 661 34 279 27 661
Current liabilities
Trade and other payables 6 804 5 143 6 804 5 143
Taxation payable 1 562 1 499 1 562 1 499
8 366 6 642 8 366 6 642
Total equity and liabilities 435 164 365 677 413 041 362 925
STATEMENTS OF COMPREHENSIVE INCOME
for the year ended 30 June 2014
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
Property revenue 38,901 38 875 38 901 38 875
Straight-line rental income accrual 1,158 (1 419) 1 158 (1 419)
Gross property revenue 40,059 37 456 40 059 37 456
Property expenses (1 671) (2 016) (1 671) (2 016)
Net profit from property operations 38 388 35 440 38 388 35 440
Corporate administration expenses (5 300) (4 830) (5 300) (4 830)
Investment and other income 2 063 1 477 2 063 1 477
Share of associates’ profits 19 371 1 597 - –
Operating profit before capital items 54 522 33 684 35 151 32 087
Profit on sale of associate 282 – 282 –
Impairment provision
associate company write back - 763 - 763
Profit before fair value adjustments 54 804 34 447 35 433 32 850
Fair value adjustments 32 697 32 269 32 697 32 269
Gross change in fair value
investment property 33 855 30 850 33 855 30 850
Straight-line rental adjustment (1 158) 1 419 (1 158) 1 419
Net profit before taxation 87 501 66 716 68 130 65 119
Taxation (15 991) (16 615) (15 991) (16 615)
Profit attributable to
ordinary shareholders 71 510 50 101 52 139 48 504
Other comprehensive income – – – –
Total comprehensive income
attributable to ordinary shareholders 71 510 50 101 52 139 48 504
Earnings and diluted
earnings per share (cents) 248.3 174.0 -
Statements of cash flows
for the year ended 30 June 2014
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
Cash flow generated from
operating activities 8 973 17 770 8 973 17 770
Net cash generated from operations 26 585 37 228 26 585 37 228
Investment income 2 063 1 054 2 063 1 054
Taxation paid (9 310) (10 146) (9 310) (10 146)
Dividends paid (10 365) (10 366) (10 365) (10 366)
Cash flow utilised in
investing activities 4 274 (280) 4 274 (280)
Improvement to investment property (12) (273) (12) (273)
Acquisition of furniture, fittings
computer equipment and motor vehicles (25) (7) (25) (7)
Proceeds on sale of associate 5 393 5 393
Acquisition of associates (1 082) (1 082)
Net increase/(decrease) in
cash and cash equivalents 13 247 17 490 13 247 17 490
Cash and cash equivalents
at beginning of year 31 785 14 295 31 785 14 295
Cash and cash equivalents
at end of year 45 032 31 785 45 032 31 785
Statements of changes in equity
for the year ended 30 June 2014
Share Accumulated
capital profit Total
R’000 R’000 R’000
GROUP
Balance at 1 July 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
Total comprehensive income – profit – 71 510 71 510
Dividends paid – (10 365) (10 365)
Balance at 30 June 2014 4 146 388 373 392 519
COMPANY
Balance at 1 July 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
Total comprehensive income – profit – 52 139 52 139
Dividends paid – (10 365) (10 365)
Balance at 30 June 2014 4 146 366 250 370 396
Basis of preparation and Statement of compliance
The accounting policies applied in the preparation of these abridged condensed consolidated financial
statements, 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 2013. These abridged condensed consolidated
financial statements as set out in this report have been prepared in terms of IAS 34 – Interim
Financial Reporting, the Companies Act, 2008 (Act 71 of 2008), as amended, the SAICA Financial
Reporting Guides, as issued by the Accounting Practices Committee and Financial Reporting
Pronouncements as issued by Financial Reporting Standards Council and the Listings Requirements of
the JSE Limited. These abridged condensed consolidated results must be read in conjunction with the
most recently issued financial statements for the year ended 30 June 2014, which will be posted to
shareholders on or about 25 September 2014. These accounting policies have been applied consistently
with the previous year.
These financial statements comprise the financial statements of Putprop Limited, its subsidiary
companies and equity accounted associates, together referred to as the Group. These statements have
been prepared on an historical cost basis, except for measurement at fair value of investment
properties, and incorporate the principal accounting policies set out below. The financial statements
are presented in South African Rands and denominated in thousands (R’000). The accounting policies
are consistent with the previous year except for where new policies have been adopted.
These abridged consolidated group financial statements for the year ended 30 June 2014 has been
extracted from the audited annual financial statements upon which Mazars Inc. have issued an
unqualified audit report, but is not itself audited. The directors take full responsibility for the
preparation of the abridged financial statements and confirm that the financial information has been
correctly extracted from the underlying annual financial statements. The group annual financial
statements are 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. Shareholders 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.
The abridged condensed consolidated 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.
The 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 local property sector’s operating environment remains challenging with new market forces and
variables evident in the trading year. Rising interest rates, bond market weakness with higher
yields, as well as downward pressure on the local currency all played a part in reducing property
yields.
INTRODUCTION
On behalf of the board of directors (the “Board”), we are pleased to report to our shareholders and
other stakeholders on the 27th annual results of the Group for the year ended 30 June 2014.
As our history shows, Putprop has delivered steadily over the past decade in terms of returns,
profitability and distributions. Our approach has been one of conservative growth with our primary
objective of building a quality portfolio with strong contractual cash flows resulting in long-term
sustainability and capital appreciation over this period. Our dividend distribution policy, with our
27th consecutive payout continues to be consistent.
Operating conditions remained difficult with rising vacancies, longer collection times and a
deterioration of rental escalations on new leases and renewals.
The local office sector remains under severe pressure with record high vacancy rates and low yields.
Vacancies in prime areas of some key nodes have shown increases of over 200%. Putprop’s exposure is
marginal at present in this sector.
Industrial property performance continued to be strong both for the sector and Putprop. There is some
pressure on manufacturing but due to the nature of our current tenant base being mainly logistical
there was little effect on the Company.
Retailers continue to experience strong demand in the sector.
Competition for stable, low risk tenants remains fierce with resultant downward pressure on both new
rentals and existing renewals. With substantial increases both on fixed and consumption (electricity,
water and sewerage) charges levied by municipalities and Eskom, the trend of these costs not being
fully recovered from tenants increased. Profitability experienced downward pressure as a result.
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.
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 31.1% on Putprop’s profit before taxation with headline
earnings flat at 86.3 cents per share (2013: 86.8 cents per share). Group net profit was up by 42.74%
to R71.5 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. Our
interest in our associated companies Belle Isle Investments Proprietary Limited and Pilot Peridot One
Proprietary Limited, contributed substantially to this result with associated income increasing to
R19.4 million. (2013: R1.6 million)
The Group again actively pursued potential acquisitions during the year in terms of its long-term
objective of diversifying its property portfolio further into commercial and retail properties and
also of reducing the risk of its dependence on its major tenant, Larimar Limited. A commercial
property, Bank City in Potchefstroom, was acquired in June 2014 (transfer effective July 2014) and is
the Group’s first foray outside the Gauteng area. The Board continues to insist on stringent
parameters being met before an investment is made.
The directors have decided to declare a final dividend of 18 cents per share payable after
30 June 2014 (30 June 2013: 18 cents) as further set out in the notes below. The total declared
dividend for the year is 36 cents per share (2013: 36 cents).
Reconciliation of group net profit to headline earnings
GROUP GROUP GROUP GROUP
2014 2014 2013 2013
R’000 Cents R’000 Cents
per share per share
Net profit for the period 71 510 248.4 50 101 174.0
Adjusted for:
Net change in fair value of investment property (33 855) (117.6) (30 850) (107.1)
Tax effects of fair value adjustments 6 297 21.9 5 738 19.9
Equity accounting earnings of associates (23 124) (80.3) – –
Tax effect of equity accounting 4 301 14.9 – –
Profit on disposal associate (282) (1.0) – –
Headline earnings and diluted earnings 24 847 86.3 24 989 86.8
Earnings and headline earnings per share are calculated on a weighted average number of shares in
issue of 28 792 961 (2013: 28 792 961). There is no dilution.
PROPERTY PORTFOLIO
At 30 June 2014 our property portfolio consisted of 15 (2013: 15) properties, situated primarily in
the Johannesburg and Pretoria metropolitan areas of Gauteng valued at R315.2 million
(2013: R281.3 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 (“GLA”) of 74 993 m2
(2013: 74 993 m2). No properties were disposed of during the year. Bank City, a commercial office
block in Potchefstroom, North West Province was purchased in June with transfer effective on
10 July 2014 into the Group’s name. This will increase our GLA to 77 332 m2.
SEGMENTAL INFORMATION
Retail Commercial Industrial Corporate Total
R’000 R’000 R’000 R’000 R’000
30 June 2014
Segment revenue
Contractual rental income 4 446 560 33 895 – 38 901
Straight-line rental adjustment 144 (2) 1 016 – 1 158
Total revenue 4 590 558 34 911 – 40 059
Segmental result
Share of associates profits 14 085 5 286 - - 19 371
Operating profit/(loss) 18 486 5 757 33 516 (5 300) 52 459
Investment and other
income received – – – 2 063 2 063
Fair value adjustments to
investment properties 3 600 355 29 900 – 33 855
Profit on sale associate 282 – – – 282
Straight line rental adjustment (144) 2 (1 016) – (1 158)
Net profit/(loss) before tax 22 224 6 114 62 400 (3 237) 87 501
Other information
Property assets 44 000 4 900 266 364 – 315 264
Furniture, fittings and
computer equipment – – – 64 64
Investment in associates 34 699 31 369 – – 66 068
Trade and other receivables – – 3 538 5 198 8 736
Cash and cash equivalents – – – 45 032 45 032
Segment assets 78 699 36 269 269 902 50 294 435 164
Trade and other payables – – 2 733 4 071 6 804
Segment liabilities – – 2 733 4 071 6 804
Retail Commercial Industrial Corporate Total
SEGMENTAL INFORMATION
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)
Other income – – – 423 423
Total revenue 4 612 459 32 385 423 37 879
Segmental result
Share of associated profits 1 597 - - 1 597
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
One of the Group’s tenants, Larimar 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 continues to have substantial cash resources of R45 million (2013: R31.8 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. Included in the cash resources of
R45 million as at 30 June 2014, is an irreversible Letter of Guarantee to the value of R16.5 million,
for the purchase of Bank City, Potchefstroom.
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 1.2% to 1.7% for the
2015 year. Trading conditions in the year ahead are expected to remain challenging.
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.
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 continue
distributions to shareholders in the coming year.
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting (“annual general meeting”) of shareholders of
Putprop will be held at 11:00 on Monday, 3 November 2014 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 of the Company are entitled to participate in and vote at the
annual general meeting is Friday, 24 October 2014. Accordingly, the last day to trade Putprop shares
in order to be recorded in the Register to be entitled to vote will be Friday, 17 October 2014.
BOARD CHANGES
As committed to in the June 2013 results, an additional independent non-executive director was
appointed during this year. This now brings the Company in line with the guidelines and
recommendations of King III where the Board should consist of a majority of non-executive directors,
the majority of which should be independent. Johann van Zyl was appointed in October 2013 bringing to
the Group extensive financial and property experience. 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. The Board is of
the opinion that additional appointments may be necessary in the short term to cater for future
succession planning as well as meeting the demands mentioned above.
SUBSEQUENT EVENTS AND CAUTIONARY ANNOUNCEMENT
The Board has, subsequent to 30 June 2014, approved the acquisition of a 51% holding in a company
developing a 10 000 m2 retail site in Secunda (“Acquisition”). An initial investment of R16 million
has been allocated. Shareholders are advised to exercise caution when dealing in the Company’s
securities until a further announcement in respect of the conclusion of the Acquisition is made.
In addition, the Group continues to investigate, together with a listed property fund, the future
development of three of its properties. These properties are situated in urban areas where the
possibility of developing value retail centres exists. The Group also acquired a fully tenanted
commercial property, situated in Potchefstroom, North West Province, Bank City. Payment and transfer
occurred on 10 July 2014.
DECLARATION OF FINAL DIVIDEND NO 50
The Board is pleased to announce the declaration of a dividend of 18 cents per ordinary share in
respect of the year ended 30 June 2014 (2013: 18 cents), thus bringing the total dividend payable for
the year to 36 cents (2013: 36 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 (2013: 28 792 961) ordinary shares in issue; the total dividend amount payable
is R5 182 732 (2013: R5 182 732). Putprop’s tax reference number is 9100097717.
The salient dates are as follows:
Declaration date Monday, 15 September 2014
Last date to trade to participate Friday, 10 October 2014
Trading commences ex dividend Monday, 13 October 2014
Record date Friday, 17 October 2014
Date of payment Monday, 20 October 2014
Share certificates may not be dematerialised or rematerialised between Monday, 13 October 2014 and
Friday, 17 October 2014, both days inclusive.
On behalf of the Board
A B Adrian B C Carleo
Chairman Chief Executive Officer
15 September 2014
Directorate
A B Adrian*^ (Chairman), B C Carleo (Chief Executive Officer), J E Smith (Financial) (British),
A L Carleo-Novello, J Van Zyl^, P Senatore*^, P Nucci*^ *Independent ^Non-executive
Registered Office
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
Date: 15/09/2014 12:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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