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PUTPROP LIMITED - Unaudited Condensed Interim Financial Results for the six months ended 31 December 2015

Release Date: 04/03/2016 07:05
Code(s): PPR     PDF:  
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Unaudited Condensed Interim Financial Results for the six months ended 31 December 2015

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”)

Unaudited Condensed Interim Financial Results
for the six months ended 31 December 2015 and Dividend Declaration

Financial Highlights

• Gross property revenue up 10% to R29.8 million

• Net asset value of 1 308.3 cents per share

• Annual escalation on contractual rental income for new leases
  maintained at 8% in difficult rental market

• Inclusion of Secunda Value Mart in Group’s financial reporting

• Market value per m2 of property portfolio up 28.4% to R5 835 per
  m2

Non-financial highlights

Successful completion of Phase 2 of Secunda Value Mart

No Vacancies as at 31 December 2015

81% Listed / Large tenant base

Summary of financial performance

                              Unaudited       Unaudited   Audited
                             Six months      Six months      Year
                                 31 Dec          31 Dec   30 June
                                   2015            2014      2015
                                  R’000           R’000     R’000

 Profit attributable to
 equity holders (R’000)            17 161        17 991    64 798

 Net asset value per share
 (cents)                           1 308.3      1 407.7   1 219.0

 Distribution per share
 (cents)                               10            11        26

 Headline earnings per
 share (cents)                       34.1          43.1      85.1

Commentary

Overview

Putprop is a property investment company, listed on the Main Board
of the JSE Limited (‘JSE’) under the real estate sector. The
company offers investors an opportunity to participate in an
industrial sector dominated, JSE listed property company.

The portfolio currently comprises 16 strategically located
properties, located primarily in the Gauteng geographic area. The
total Gross Lettable Area (‘GLA’) of the invested properties is 81
259m2 with a value of R474.2 million.

The board of directors (‘Board’ or ‘directors’) is pleased to
announce the interim results for the period ended 31 December
2015. These results reflect a 10.0% increase over the previous
period in respect of gross property rental revenue. Property
expenses were substantially higher due to maintenance spend on
certain of our older properties. This was necessary to preserve
the asset value and will continue to be an area of focused
management attention. Corporate expense increases remained within
the parameters set by management. Profit attributable to equity
holders decreased marginally by 4.6% over December 2014. The
underlying portfolio continues to perform well.

During this period the Group successfully concluded the sale of
its Selby property to the City of Johannesburg for a consideration
of R65 million. Transfer is expected to take place in February
2016. This property was one of those to be vacated in December
2015.

As detailed elsewhere in this report the Group’s major tenant,
Larimar Limited (‘Larimar’), which accounts for 81% of the
contractual rental income received, did not renew leases on six of
the properties they currently tenant. The loss of this tenant will
have a impact on the Group’s 2016 June results.

The Group has concluded lease agreements on the remaining
properties occupied by Larimar with the Putcoton property having a
60 month term and the remaining properties a 12 month term, with
an option to renew for a further 12 months. Our Montana property
was successfully tenanted in December for a 36 month term.
Management will focus its attention aggressively to find suitable
long term contractual rentals for those properties vacated with
acceptable yields.

We will continue with our refurbishment and maintenance programs
in order to protect the value of our property assets and enhance
our earnings going forward.

As at 31 December 2015 the property portfolio reflected a nil
vacancy level. However, as announced to shareholders in the
Group’s June 2015 published results, our major tenant, Larimar,
has not renewed leases on six of the properties currently
occupied. On one of these, the Selby depot, the Group has
concluded a transaction with the City of Johannesburg for the sale
of this property for R65 million (refer to SENS announcement
released on 14 September 2015). Transfer is expected by end
February 2016. Of the remaining five properties, the Mamelodi
depot has been leased to Autopax on a three month contract on
favourable terms with an option to renew on a rolling three month
basis. Larimar has indicated they wish to continue occupying the
properties they have given notice on for an additional three
months, from January to March 2016. Management, as stated above,
is actively focused on obtaining tenants for these properties once
Larimar vacates. As a result the vacancy level will increase to
18 053m2 or 23.5 % from 3 640 m2 or 4.7 % in December 2014.

                          Vacant          Vacant/
                  Total   31 Dec          Monthly      Vacant
                    GLA     2015          rentals      31 Dec
                   (m2)                1 Jan 2016        2014
                                %      %  GLA (m2)          %
Office                –         –                           –
Retail                –         –                           –
Industrial                      –   23.5    18 053        4.7
Total                 –         –   23.5    18 053        4.7

Lease Expiry Profile – GLA
Year                           %    Cumulative    GLA(m2)
Monthly Rentals                –              –           –
Vacancies                      –              –           –
2016                         66.6          66.6       54 110
2017                         14.6          81.2       11 867
2018                         4.7           86.6       3 827
2019 onwards                 14.1           100       11 455
Total                        100            100       81 259



Basis of accounting
The condensed unaudited interim financial results for the six
months ended 31 December 2015 and comparative information have
been prepared in accordance with and containing information
required by IAS 34 - Interim Financial Reporting and the
information required by the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee; the Listings
Requirements of JSE Limited and the relevant sections of the South
African Companies Act, 2008 (Act 71 of 2008), as amended.

The accounting policies applied in the preparation of these
condensed financial statements, which are based on reasonable
judgements and estimates in terms of International Financial
Reporting Standards (‘IFRS’) and are consistent with those applied
in the annual financial statements for the year ended 30 June
2015.

These interim results have not been audited or reviewed by the
company’s auditors.

These statements have been prepared under the supervision of James
E Smith B.Sc., BAcc, CIEA, the Financial Director of the company.

The directors take full responsibility for the preparation of
these interim financial statements.

These interim financial statements are available for inspection at
Putprop’s registered office.

Financial results
The director’s report that gross property revenue for the six
months ended 31 December 2015, including straight-line income
adjustments, increased by 10% to R29.8 million compared to R27.1
million for the six months ended 31 December 2014 (“the comparable
period”).

This reporting period is the first where the operating results for
the Group’s subsidiary, Secunda Value Mart has been included in
the published results.

Property expenses increased by 23.5% over the comparable period.
This was due to an increased spend on our preventative maintenance
policy for several of our older properties. This program had been
scheduled for completion by June 2015 but was delayed. Maintenance
and refurbishment costs are expected to continue to be high in the
second half of the year, as there are substantial upgrades needed
to several of our older properties on a health and safety level as
well as roofing renovation projects. Administration expenses
increased by 2.9% over the comparable period due to strict cost
saving measures implemented. The period to June 2016 is likely to
see an increase over this reporting period for corporate expenses.
Investment income increased due to high cash reserves resulting
from the rights issue undertaken in 2015.

The Group reflected a small loss in respect of contributions
received from its investments in associated companies. This arose
due to higher than expected costs in its investment in Summit
Place, phase 2. Tenanting for this phase was completed towards the
end of this reporting period and a positive contribution is
expected for the next reporting period.
Profit for the year after taxation deceased by 5.3% to R17.0
million (2014: 17.9 million). This was as a result of the increase
in property expenses noted above as well as a conservative
approach to the directors valuation of the Group’s property
portfolio as at 31 December 2015 - an increase of 2.5 million
(2014: R5.8 million increase).

Trade and other receivables increased marginally from December
2014. Our major tenant, Larimar, is no longer in arrears as to
contractual rentals. There has been a slight deterioration in
collections from certain of our tenant base, due to the stagnant
general economy placing cash flow pressures on several tenants.

Management is focused on remedial actions where necessary. The
Group’s subsidiary has added to the receivables balance
outstanding, but payments are made in terms of the Group’s
collection policy.

Segmental analysis
The table within this report summarises by segment, the
performance and position for the six months ended 31 December
2015. 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.

Acquisitions, expansions and refurbishments
Although the Group actively investigated many possible
opportunities, no properties met the Group’s investment guidelines
and criteria.

A refurbishment and workshop extension was approved for our
Putcoton property based on Larimar renewing their lease for an
additional five years. No other capital projects are planned.
Refurbishments of the older properties will, as mentioned,
continue under a planned maintenance programme during the second
half of the year.

Valuation of property portfolio
It is the Group’s policy to value the entire investment property
portfolio on an annual basis by an independent external valuer.
The next independent external valuation will be as at 30 June
2016. In addition, the property portfolio is valued by the
directors on a six monthly basis. The directors have valued the
Group’s investment portfolio at 30 December 2015 at R 474.2
million, an increase of R 34.8 million or 7.9% on the external
valuation at 30 June 2015. Secunda Value Mart is mainly
responsible for this increase. This valuation was based on a
review of current market sales and purchase transactions in the
property’s location as well as reasonable judgments and estimates
made by the directors. The effects of any acquisitions made during
the year of acquisition are not included in any revaluation. The
Board has taken a conservative approach in respect of its
valuation of the Industrial property portfolio as at this
reporting date with reference being made to the Larimar tenanted
properties, within the industrial segment.

Borrowings and capital commitments
The company has borrowings as at 31 December 2015 of R68.9 million
(December 2014: R Nil). There are no capital commitments as at the
reporting date. The reflected borrowings relate entirely to the
acquisition of Secunda Value Centre.

Changes to the Board
Mr. Kurawone Chihota, Ms. Nonkululeko Ntshona, and Mr. Mark
Gemmill resigned from the Board as independent, non-executive
directors, and Mrs. Anna Novello as executive director effective
from 3 November 2015. Mr. Paul Nucci and Mr. Daniele Torricelli
were appointed as independent non-executive directors with effect
from 3 December 2015. In addition they were also appointed members
of the Audit and Risk Committee.

Subsequent to the close of this reporting period of 31 December
2015, Mr. Johann van Zyl resigned as non-executive Acting Chairman
of the Board, with effect from 29 January 2016 and Mr. Hayden
Hartley was appointed as an independent non-executive director and
member of the Audit and Risk Committee with effect from 17
February 2016.

We thank Messrs. Van Zyl, Chihota and Gemmill and Ms. Ntshona for
their valuable experience, considerable contributions and guidance
over the past period. Shareholders are advised that Mr. Daniele
Torricelli has been appointed Chairman of the Board effective from
3 February 2016.

Subsequent events
There have been no other significant reportable subsequent events
between 31 December 2015 and the release of this report.

Prospects
Trading conditions during the next reporting period are expected
to continue to be challenging. The property market both locally
and internationally is expected to remain subdued in the second
half of the year. We will continue to focus on growing the
portfolio, with the possibility of joint ventures with partners
with similar strategies still under consideration.

Proposed Delisting and Scheme of Arrangement
Shareholders were advised on 8 September 2015 on SENS that the
Board was considering delisting the Group from the Johannesburg
Stock Exchange. The Delisting would be implemented through a
scheme of arrangement that would involve the repurchase of all
shares (and subsequent cancellation of these shares) not held by
Carleo Enterprises Proprietary Limited, the Group’s largest
shareholder. Further cautionary announcements in this regard were
issued on 4 November 2015 and 29 January 2016, confirming that
this process is still ongoing. Shareholders are advised that the
process is close to finalisation and an offer to repurchase those
shares affected will be forthcoming in the near future.

Payment of interim distribution - ordinary interim dividend number
53

Notice is hereby given that the Board has declared an interim
gross cash dividend (“the dividend”) for the six months ended 31
December 2015 of 10 cents per ordinary share (December 2014: 11
cents per ordinary share).

The dividend is payable to shareholders recorded in the register
of the company at close of business on Friday, 1 April 2016.

The current local Dividend Withholding Tax (‘DWT’) rate is 15%.
The gross local dividend amount is 10.00 cents per share for
shareholders exempt from paying DWT whilst the net local dividend
payable is 8.50 cents per share for shareholders liable to pay
DWT. The issued share capital of Putprop is 44 672 279 (2014: 28
792 961) shares.

Putprop’s income tax reference number is 9100097717. This dividend
is payable from income reserves.

The salient dates relating to the dividend are as follows:

Last date to trade share cum dividend   Wednesday, 23 March 2016
Shares trade ex-dividend                Thursday, 24 March 2016
Record Date                             Friday, 1 April 2016
Payment date                            Monday, 4 April 2016

Share certificates may not be dematerialised or rematerialised
between Thursday, 24 March 2016 and Friday, 1 April 2016, both
days inclusive.

On behalf of the Board

BC Carleo                         JE Smith
Chief Executive Officer           Chief Financial Officer

3 March 2016

Condensed statement of financial position

                                     Unaudited      Audited     Unaudited
                                        31 Dec      30 June        31 Dec
                                          2015         2015          2014
                                         R’000        R’000         R’000
ASSETS
Non-current assets
Net investment property                470 708      434 634      336 829
Gross investment property              474 210      439 419      342 601
Straight-line rental income
adjustment                             (3 502)      (4 785)      (5 772)
Other non-current assets

Straight-line rental
income asset                             1 591        2 874        4 315
Furniture, fittings computer
equipment and motor vehicles               106          116           48
Investment in associates               126 679      114 473       92 171
Total non-current assets               599 084      552 097      433 363
Current assets                          99 710      111 881       15 107
Straight-line rental income asset        1 911        1 911        1 457
Trade and other receivables              7 014        6 319        5 521
Cash and cash equivalents               90 785      103 651        8 129
Total assets                           698 794      663 978      448 470
Equity and liabilities
Equity attributable to owners of
the parent                             555 503      545 043      405 328
Stated capital                         101 969      101 969        4 146
Accumulated profit                     453 534      443 074      401 182
Non-controlling interest                29 070       26 780            –

Total equity                           584 573      571 823      405 328
Non-current liabilities                102 405       73 682       35 374
Deferred taxation                       36 448       36 914       35 374
Loan liabilities                        65 957       36 768            –
Current liabilities                     11 816       18 473        7 768
Trade and other payables                 7 149       14 250        5 912
Loan Liabilities                         2 985            –            –
Taxation payable                         1 682        1 682        1 856

Total equity and liabilities           698 794      663 978      448 470
Net asset value per ordinary           1 308.3      1 219.0      1 407.7
share (cents)

Number of shares in issue. 2015: 44 672 279 (2014: 28 792 961).

Condensed statement of comprehensive income

                                Unaudited       Audited    Unaudited
                               six months          year   six months
                                    ended         ended        ended
                                 Dec 2015     June 2015     Dec 2014
                                    R’000         R’000        R’000
Contractual rental revenue -
investment properties              24 328        42 519      20 603
Operating cost recoveries           6 761        12 533       6 407
Straight-line rental income
accrual                           (1 285)         (916)          71
Gross property revenue             29 804        54 136      27 081
Property expenses                 (9 233)     (14 958)      (7 479)
Net profit from property
operations                         20 571        39 178      19 602
Corporate administration
expenses                          (3 213)       (5 848)     (3 121)
Investment and other income         2 256         2 629         434
Share of associates’ profits        (117)        13 167       1 114
Operating profit before
finance costs                      19 497        49 126      18 029
Finance costs                     (2 512)         (889)           –
Operating profit before
capital items                      16 985        48 237      18 029
Profit on sale of associates            –           800           –
and investments purchase
Gain on bargain                         –        10 918           –

Profit before fair value
adjustments                        16 985        59 955      18 029
Fair value adjustments              3 785        17 391       5 679
Gross change in fair value
investment property                 2 500        16 475       5 750
Straight-line rental
adjustment                          1 285           916        (71)
Net profit before taxation         20 770        77 346      23 708
Taxation                          (3 731)      (12 874)     (5 717)
Profit for the year                17 039        64 472      17 991

Attributable to owners
of parent                          17 161        64 798      17 991
Attributable to non-
controlling interest                (122)         (326)           –
Other Comprehensive income              –             –           –

Total comprehensive income for
the year                           17 039        64 472      17 991
Attributable to owners
of parent                          17 161        64 798      17 991
Attributable to non-
controlling interest                (122)         (326)           -

Earnings and diluted earnings
per share (cents)                    38.3         193.9        62.5
Headline earnings per share
(cents)                              34.1          85.1        43.1

Earnings and headline earnings per share are calculated on a
weighted average number of shares in issue of 44 672 279 (2014:
28 792 961). There is no dilution.

Condensed statement of cash flow
                                  Unaudited       Audited   Unaudited
                                     31 Dec       30 June      31 Dec
                                       2015          2015        2014
                                      R’000         R’000       R’000
Cash flow generated from
operating activities                  2 226        26 477       9 869
Net cash generated from
operations                           10 868        44 064      18 748
Investment income                     2 256         2 629         631
Taxation paid                       (4 197)      (10 119)     (4 328)
Dividends paid                      (6 701)      (10 097)     (5 182)
Cash flow utilised in
investing activities               (44 625)     (104 519)    (46 722)
Additions and improvement to
investment property                (32 289)      (68 127)    (21 587)
Acquisition of furniture,
fittings, computer equipment
and motor vehicles                     (12)          (81)           –
Cash on business combination             –        (6 773)           –
Proceeds on sale investment
property                                 –          5 700           –
Acquisition of interest in
investment property                      –             –     (17 446)
Acquisition of and loans to
associates                         (12 324)      (35 238)     (7 739)
Cash flow from
financing activities                 29 533       136 661           –
Proceeds from issue of share
capital                                            97 823           –
Proceeds received on
borrowings                           29 533        38 838           –
Net increase(decrease) in cash
and cash equivalents               (12 866)        58 619    (36 903)
Cash and cash equivalents at
beginning of period                 103 651        45 032      45 032
Cash and cash equivalents at
end of period                        90 785       103 651       8 129


Condensed statement of changes in equity


                       Attributable to owners of
                              the parent
                                  Accumu-    Share        Non-
                        Stated      lated holders’ controlling
                       capital     profit interest    interest         Total
                         R’000      R’000    R’000       R’000         R’000
GROUP
Balance at 1 July
2014                     4 146    388 373   392 519          –       392 519
Total comprehensive
income for the year           –    17 991    17 991          –        17 991
Dividends paid                –   (5 182)   (5 182)          –       (5 182)
Balance at
31 Dec 2014              4 146    401 182   405 328          –       405 328
Balance at
1 July 2015            101 969    443 074   545 043     26 780       571 823
Total comprehensive
income(loss)for the
year                          –    17 039    17 039          –        17 039
Non-controlling
interest recognised
in respect of
subsidiary                    –         –         –      2 412         2 412
Share of
profit/(loss) to
non-controlling
interest                      –       122       122      (122)            –
Dividends paid                –   (6 701)   (6 701)         –       (6 701)
Balance at
31 Dec 2015             101 969   453 534   555 503     29 070      584 573

Reconciliation of group
net profit to headline earnings

                               Unaudited    Audited Unaudited
                              six months       year six months
                                   ended      ended      ended
                                  Dec-15     Jun-15     Dec-14
                                   R’000       R’000     R’000
Earnings attributable to
equity holders                    17 161     64 798     17 991
Adjusted for:
Net change in fair value of
investment property               (2 500)   (16 475)   (5 750)
Bargain purchase                        –   (10 918)         –
Tax effects of fair value
adjustments property                 465       3 064     1 070
Equity accounted earnings
of associates                        117    (14 088)   (1 114)
Tax effect of equity
accounting                          (22)       2 627       207
Profit on disposal of
investment property                    –       (800)         –
Capital gain on disposal of
investment property                    –         216         –
Headline earnings and
diluted earnings                  15 221     28 424     12 404
Headline earnings per share
(cents)                             34.1        85.1      43.1

Earnings and headline earnings per share are calculated on a
weighted average number of shares in issue of 44 672 279 (2014: 
28 792 961). There is no dilution.

Segmental Analysis

for the six      Industrial    Retail Commercial   Corporate   Total
months
ended 31 Dec
2015                  R’000     R’000     R’000       R’000    R’000
Extract from
the statement
of
comprehensive
income
Property
revenue and
recoveries           23 355     5 145     2 589          –    31 089
Straight -line
rental income
accrual             (1 044)     (241)                    –   (1 285)
Property
expenses            (7 251)   (1 464)     (518)          –   (9 233)
Segmental
Results              15 060     3 440     2 071          –    20 571

Extract from
the statement
of financial
position
Non-Current
assets
Net Investment
properties         282 422    166 997    21 289          –   470 708
Other non-
current assets       1 082     53 437    73 751        106   128 376
Current Assets
Straight-line
rental income
asset                1 619        204        88          –     1 911
Trade and
other
receivables            1 622    2 405         –      2 987     7 014
Cash and cash
equivalents                –        -         –     90 785    90 785
Non- Current
Liabilities                –   65 957         –     36 448   102 405
Current
Liabilities
Taxation
payable                  –         -         –       1 682     1 682
Trade and
other payables       1 888     1 709         –       3 673     7 270




for the six      Industrial   Retail Commercial   Corporate    Total
months ended
31 Dec 2014          R’000     R’000     R’000       R’000     R’000
Extract from
the statement
of
comprehensive
income
Property
revenue and
recoveries          22 595     2 673     1 743           -    27 010
Straight-line
rental income
accrual                 31        49       (9)           -        71
Property
expenses           (6 006)     (853)     (621)           -   (7 479)
Segmental
Results             16 620     1 869     1 113                19 602

Extract from
the statement
of financial
position
Non-Current
assets
Net Investment
properties         267 080    43 481    26 268               336 829
Other non-
current assets       3 543    53 684    39 259          48    96 534
Current assets
Straight-line
rental income
asset               11 651       204        88                 1 457
Trade and
other
receivables          5 010       133         -         378     5 521
Cash and cash
equivalents              -         -         -       8 129     8 129
Non-Current
liabilities              -         -         -      35 374    35 374
Current
Liabilities              -         -         -
Taxation
payable                  -         -         -       1 856     1 856
Trade and
other payables       2 409         -         -       3 503     5 912

Corporate information

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”)

Physical / Registered and
Postal Address
Putprop House 91 Protea Road
Chislehurston, Sandton, 2196

Telephone: +27 11 883 8650
Facsimile: +27 11 301 4387
email: info@putprop.co.za
www.putprop.co.za

Company Secretary
Acorim Proprietary Limited
2nd Floor, North Block
Hyde Park Office Tower
Corner 6th Road and
Jan Smuts Avenue
Hyde Park 2196

Transfer Secretaries
Computershare Investor Services Proprietary Limited
70 Marshall Street
Johannesburg 2001
Directors
Bruno Carleo
(Chief Executive Officer)
James Smith
(Chief Financial Officer)
Paul Nucci *^
Daniele Torricelli*^
(Chairman)
Hayden Hartley*^
* Independent
^ Non-executive

Investor Relations
James Smith
91 Protea Road,
Chislehurston
Sandton 2196
+27 11 883 8650

Sponsors
Merchantec Capital
2nd Floor, North Block
Hyde Park Office Tower
Corner 6th Road and
Jan Smuts Avenue
Hyde Park 2196

Date: 04/03/2016 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

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