To view the PDF file, sign up for a MySharenet subscription.

PUTPROP LIMITED - Unaudited Condensed Interim Financial Results for the Six Months Ended 31 December 2016 and Dividend Declaration

Release Date: 06/03/2017 16:29
Code(s): PPR     PDF:  
Wrap Text
Unaudited Condensed Interim Financial Results for the Six Months Ended 31 December 2016 and 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”)

Unaudited Condensed Interim Financial Results
for the six months ended 31 December 2016 and Dividend Declaration

Financial Highlights
  - Gross property revenue up 7.3% in a challenging market to
    R31.9 million
  - Net Asset value of 1 177 cents per share
  - Market value of property portfolio R6 043 per m2
  - Cash reserves of R73.3 million available to source potential
    additions to portfolio.
  - Payment of the Group’s first Special Dividend to shareholders
    of 89.54 cents per share

Operational Highlights
  - Acquisition of Parktown Towers in Johannesburg for R90.2
    million with CAVI Group as tenant with a 10-year head lease
  - Acquisition of an additional 5.219% in Summit Place, Pretoria
    for R11.4 million increasing the Group’s holding to
    37.951%(June 2016: 32.732%)
  - Investment of a further R20 million into associate company
    Belle Isle in respect of a new amalgamated property
    investment fund
  - Purchase of vacant erven in Eagle Canyon area with view to
    rezone and develop into a mixed-use retail centre
  - Commencement of rezoning and feasibility studies on our
    Mamelodi, Dobsonville and Soshunguwe properties with intent
    to develop retail centres in the medium- to long- term
  - Gearing of 24.2% maintained at well below mandated level of
    35% after the Parktown acquisition


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 the industrial,
commercial and retail sectors of a JSE listed property company.

The portfolio currently comprises 18(2015: 16) strategically located
properties, situated primarily in the Gauteng geographic area. The
total Gross Lettable Area (‘GLA’) of the invested properties is 79 735m2 
with a value of R 481.8 million.

The board of directors (‘Board’) is pleased to announce the interim
results for the six months ended 31 December 2016. These results
reflect a 7.3% increase over the December 2015 period in respect of
gross property rental revenue. Property expenses were substantially
lower due to a deferment of certain planned maintenance expenditure
as well as lower municipal costs due to the disposal of our Selby
property. Maintenance expenditure is expected to increase in the
second half of the year to preserve the asset value of the property
portfolio. Corporate expense increased, due to once-off commission
and finance-raising fees arising from the acquisition of the Parktown
property. The underlying portfolio continues to perform well.

The Group experienced the benefit of its acquisition of the remaining
49% equity not held by it in Secunda Value Mart in June 2016. Rental
income during the 2017 year will reflect a strong growth in the
retail sector. In addition, the acquisition of the Parktown property
will increase the Group’s weighting in the Commercial sector to
around 20%.

As at 31 December 2016 the property portfolio reflected a 21%
(December 2015: Nil) vacancy due to our major tenant, Larimar,
vacating three of the properties they previously occupied. One of
these was successfully tenanted in October 2016. Management
continues to be actively focused on resolving the vacancies on the
remaining properties, which may include the disposal of these
properties. These assets are seen as non-core in the Group’s
portfolio.

The lease expiry profile is reflected in the table below. The expiry
profile for the period ending June 2017 is represented largely by
the Larimar Group. Management has successfully renegotiated leases
on these properties with leases of between 18 to 60 months concluded.
Rates per m2 increased for all properties.


Lease Expiry Profile – GLA

Year                                  %    Cumulative         GLA(m2)

Monthly Rentals                       –             –              –
Vacancies                          21.0          21.0         16 641
2017                               32.9          53.9         22 734
2018                                8.9          62.8          61 66
2019                                8.5          71.3          58 81
2020 onwards                       28.7           100         28 313
Total                               100           100         79 735


Basis of accounting

The unaudited condensed interim financial results for the six months
ended 31 December 2016 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, 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 2016.
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., B. Acc, 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 Company is pleased to report that gross property revenue for the
six months ended 31 December 2016, including straight-line income
adjustments, increased by 7,3% to R31.9 million compared to R29.8 million 
for the six months ended 31 December 2015 (“the comparable
period”).

This reporting period is the first where the full operating results
for the Group’s 100% owned subsidiary, Secunda Value Mart, has been
included in the published results.

Property expenses decreased by 29.9% over the comparable period.
This was due to a deferred spend on our preventative maintenance
policy for several of our older properties, as well as lower
municipal costs due to the sale of our Selby property. Maintenance
and refurbishment costs are expected to continue to be high in the
second half of the year, as there are substantial upgrades required
to several of our older properties on a health and safety level as
well as roofing renovation projects. Administration expenses
increased by 25.5% over the comparable period due to certain “once-
off” expenses resulting from the acquisition of the Parktown
property. Investment income was consistent with the comparable
period in 2015.

Associated companies reflected a loss of R3.4 million (2015: R117 000 loss) 
due to interest expenses now accounted for in the Summit Place development.

Profit for the year after taxation decreased by 1.9% to R16.7 million
(2015: R17.0 million). The directors’ valuation of the Group’s
property portfolio as at 31 December 2016 was R5.2 million (2015: R2.5 million).

Trade and other receivables decreased by 67.4 % from June 2016 as
our major tenant, Larimar, is no longer in arrears as to contractual
rentals as well as once off sundry receivables relating to the
completion of the Corridor Hill development being finalised. There
has been a slight deterioration in collections from a portion of our
other tenant base, due to the stagnant general economy placing cash
flow pressures on these tenants. However, overall receivable results
were satisfactory.

Cash reserves were down at R72.3 million (June 2016: R153.6 million)
as a result of the payment of the special dividend to shareholders
and settlement of the purchase of the 49% in Secunda Value Mart.
Loan liabilities increased marginally from R100.2 million at June 2016 
to R102 million.


Segmental analysis

The table within this report summarises by segment, the performance
for the six months ended 31 December 2016. Segment assets include
all operating assets used by a segment and consist of investment
properties, receivables, and cash. Assets not directly attributable
to a 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

No major refurbishments were undertaken in the review period.
As announced on SENS on 27 October 2016 and approved by shareholders
at a General meeting on 20 December 2016, the Group acquired a
commercial property in the Parktown area of Johannesburg for R90.26 million.

The property is occupied by a national tenant, CAVI, with a 10 year
fully-repairing head lease at favourable rates. This acquisition
will substantially increase the Group’s weighting in the Commercial
sector which has been underweighted for the past two years.

As mentioned elsewhere in this report the Group intends to increase
its investment in Belle Isle, an associate company, to protect its
interests in this entity.


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 2017. 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 2016 at R481.9 million, an increase of R22.1 million 
or 4.8% on the external valuation as at 30 June 2016. This
valuation was based on a review of current market sales and purchase
transactions in each property’s location as well as reasonable
judgments and estimates made by the directors. The effect of any
acquisition made during the year of acquisition are not included in
any revaluation. The Board has taken a conservative approach in
respect of its six-monthly valuation of the property portfolio as
at this reporting date. Directors’ actual revaluation was a R5.2 million 
increase (2015: R2.5 million increase). Included in the
increase of R22.1 million is the purchase of land in the Eagle Canyon
area for future development, as well as completion costs of the
Corridor Hill development.


Borrowings and capital commitments

The Company has borrowings as at 31 December 2016 of R102.1 million
(June 2016: R100.2 million). There are no capital commitments as at
the reporting date. The reflected borrowings relate entirely to the
acquisition of the Secunda Value Mart and Corridor Hill properties.


Changes to the Board

There have been no changes to the Board since the last reporting
date.


Subsequent events

The Group has invested an additional R20 million in one of its
associates, Belle Isle Investments (‘Belle Isle’). This was done to
protect the Group’s equity holding in Belle Isle because of an
amalgamation Belle Isle has concluded. Belle Isle has amalgamated
with three other property-owning entities to create a single property
portfolio, consisting of commercial and retail properties. As a
result of this amalgamation, the Group’s holding in the enlarged
entity has decreased from 27.5% to 20.9%. There have been no other
significant reportable subsequent events between 31 December 2016
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. Management will continue to focus on growing the portfolio,
with the two strategies being to dispose of non-core and poorly-
performing portfolio assets and replace them with higher grade,
suitably-tenanted properties, as well as a more active approach, to
rezone and develop, alongside suitable partners, certain properties
where value can be unlocked.


Payment of interim distribution - ordinary interim dividend number
55

Notice is hereby given that the Board has declared an interim gross
cash dividend (“the dividend”) for the six-months ended 31 December 2016 
of 6 cents per ordinary share (December 2015: 10 cents per ordinary share).

The dividend is payable to shareholders recorded in the register of
the Company at close of business on Friday, 31 March 2017.

The current local Dividend Withholding Tax (‘DWT’) rate is 20%. The
gross local dividend amount is 6.00 cents per share for shareholders
exempt from paying DWT whilst the net local dividend payable is 4.8
cents per share for shareholders liable to pay DWT. The issued share
capital of Putprop is 44 672 279 (2015: 44 672 279) 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        Tuesday, 28 March 2017
Shares trade ex-dividend                     Wednesday, 29 March 2017
Record Date                                  Friday, 31 March 2017
Payment date                                 Monday, 3 April 2017

Share certificates may not be dematerialised or rematerialised
between Wednesday, 29 March 2017 and Friday, 31 March 2017, both
days inclusive.
On behalf of the Board



BC Carleo                             JE Smith
Chief Executive Officer               Chief Financial Officer


6 March 2017

Condensed statement of financial position
                              Unaudited         Audited     Unaudited
                                 31 Dec         30 June        31 Dec
                                   2016            2016          2015
                                  R’000           R’000         R’000
 ASSETS
 Non-current assets
 Net investment property        476 011         454 071       470 708
 Gross investment property      481 961         459 878       474 210
 Straight-line rental           (5 950)         (5 807)       (3 502)
 income adjustment
 Other non-current assets
 Straight-line rental             5 950           4 492         1 591
 income asset
 Furniture, fittings                100              96           106
 computer equipment and
 motor vehicles
 Investment in associates       111 997       102   076     126   679
 Total non-current assets       594 058       560   735     599   084
 Current assets                  77 886       171   826      99   710
 Straight-line rental                 -         1   314       1   911
 income asset
 Trade and other                  5 507          16 904         7 014
 receivables
 Cash and cash equivalents       72 379         153 608        90 785

Total assets                    671 944         732 561       698 794

Equity and liabilities
Equity attributable to          525 733         512 145       555 503
owners of the parent
Stated capital                  101 969         101 969       101 969
Accumulated profit              423 764         410 176       453 534
Non-controlling interest              -               -        29 070
Total equity                    525 733         512 145       584 573
Non-current liabilities         139 588         135 810       102 405
Deferred taxation                37 540          37 859        36 448
Loan liabilities                102 048          97 951        65 957
Current liabilities               6 623          84 606        11 816
Dividend Payable                      -          40 000             -
Trade and other payables          6 477          31 811         7 149
Loan Liabilities                      -           2 292         2 985
Taxation payable                    146          10 503         1 682

Total equity and                671 944         732 561       698 794
liabilities

Condensed statement of comprehensive income
                                  Unaudited         Audited     Unaudited
                                 six months            year    six months
                                      ended           ended         ended
                                   Dec 2016       June 2016      Dec 2015
                                      R’000           R’000         R’000
Property rental revenue                              50 352
                                      27 469                       24 328
Operating cost recoveries              4 381         14 381         6 761
Straight-line rental income
accrual                                  143          1 022       (1 285)
Gross property revenue                31 993         65 755        29 804
Property expenses                     (6 474)      (17 617)       (9 233)
Net profit from property
operations                            25 519         48 138        20 571
Corporate administration
expenses                              (4 032)      (10 185)       (3 213)
Investment and other income             2 296         8 754         2 256
Share of associates’
profits(loss)                         (3 142)       (5 942)         (117)
Operating profit before
finance costs                          20 641        40 765        19 497
Finance costs                         (3 603)       (6 820)       (2 512)
Operating profit before
capital items                         1 7038         33 945        16 985
Profit(loss) on sale of
associates and investments                          (4 850)             –
                                             -            -             -
Profit before fair value
adjustments                           17 038         29 095        16 985
Fair value adjustments                 5 043         11 284         3 785
Gross change in fair value
investment property                     5 186        12 306         2 500
Straight-line rental
adjustment                              (143)       (1 022)         1 285
Net profit before taxation             22 081        40 379        20 770
Taxation                              (5 367)      (19 259)       (3 731)
Profit for the year                    16 714        21 120        17 039
Attributable to owners of
parent                                 16 714        20 787        17 161
Attributable to non-
controlling interest                           -        333         (122)
Other Comprehensive income                     -          –             –
Total comprehensive income for
the year                               16 714        21 120        17 039
Attributable to owners of
parent                                 16 714        20 787        17 161
Attributable to non-
controlling interest                        -           333         (122)
Earnings and diluted earnings
per share (cents)                        37.4          46.5          38.3

Earnings and headline earnings per share are calculated on a
weighted average number of shares in issue of 44 672 279 (2015: 44 672 279).

Condensed statement of cash flow
                                   Unaudited       Audited    Unaudited
                                      31 Dec       30 June       31 Dec
                                        2016          2016         2015
                                       R’000         R’000        R’000
Cash flow generated from
operating activities                (53 051)         5 932        2 226
Net cash generated from
operations                             7 416        28 368        10868
Finance Costs                         (3551)       (6 820)            -
Investment income                      2 255         6 009        2 256
Taxation paid                       (16 044)      (10 457)      (4 197)
Dividends paid                      (43 127)      (11 168)      (6 701)
Cash flow utilised in
investing activities                (29 984)        12 806     (44 625)
Additions and improvement to
investment property                 (16 898)      (37 254)     (32 289)
Acquisition of furniture,
fittings, computer equipment
and motor vehicles                      (23)          (27)         (12)
Cash from joint
operation/business
combinations                               -         1 288            –
Proceeds on sale investment
property                                            61 076            –
Acquisition of interest in
investment property                        -             –            –
Repayments received on loans
to associates                              -         2 758            -
Additions to and loans to
associates                          (13 063)      (15 035)     (12 324)
Cash flow from financing
activities                             1 806        31 219       29 533
Payments made on borrowings                -      (11 292)            -
Proceeds received on
borrowings                             1 806        42 511       29 533
Net increase(decrease) in
cash and cash equivalents           (81 229)        49 957     (12 866)
Cash and cash equivalents at
beginning of period                  153 608       103 651      103 651
Cash and cash equivalents at
end of period                         72 379       153 608       90 785

Condensed statement of changes in equity

                    Attributable to owners of the parent
                                                            Non-
                                                       controlli
                                                              ng   
                   Stated  Accumulated  Shareholders’   interest
                  capital       profit       interest      Total      Total
                    R’000        R’000          R’000      R’000      R’000

GROUP
Balance at 1
July 2015         101 969      443 074        545 043     26 780    571 823

Total
comprehensive
income for the
year                    -       17 039         17 039          -     17 039

Dividend paid                  (6 701)        (6 701)          -    (6 701)

Non-
Controlling
interest
recognised in           -            -              -      2 412     2 412
respect of
subsidiaries

Share of
profit to non-
Controlling
interest                -          122            122      (122)         -

Balance at 31
December 2015     101 969      453 534        555 503     29 070   584 573

Balance at 1
July 2015         101 969      443 074        545 043     26 780   571 823
Total
comprehensive
income                  –       20 787         20 787        333    21 120

Additional
loans advanced
by minority
shareholders
increasing

Non-
Controlling
Interest                –           –               –      2 483     2 483

Change in %
ownership
under common                                                         
control                 –     (3 712)         (3 712)   (29 596)  (33 308)

Retained
earnings on
acquisition of
joint
operation               –       1 195          1 195           –     1 195
                                                                      
Dividends paid          –    (51 168)       (51 168)           –  (51 168)

Balance at 1
July 2016         101 969     410 176        512 145           –   512 145

Total
comprehensive
income                  -      16 714         16 714           -    16 714

Dividends               -     (3 126)        (3 126)           -   (3 126)

Balance at 31
December 2016     101 969     423 764        525 733           -   525 733



Reconciliation of group net profit to headline earnings
                                           Unaudited                Unaudited
                                                 six      Audited         six
                                              months         year      months
                                               ended        ended       ended
                                              Dec 16       Jun 16      Dec 15
                                               R’000       R’000        R’000
RECONCILIATION OF GROUP NET PROFIT TO
HEADLINE EARNINGS
Earnings per share                            16 714      20 787      17 161

Adjusted for:

Net change in fair value of investment
property                                      (5 043)   (12 306)     (2 500)

Tax effects of fair value adjustments
property                                       1 130       2 757


Equity accounting earnings of associates
and joint operations                               -       1 833          465

Tax effect of equity accounting                    -         970          117

Loss(Profit) on disposal of assets                 -       4 850         (22)

Compensation from third party’s
insurance payouts received                         -        (41)            –

Capital gain on disposal of investment
property                                           -       6 394            -

Change in deferred tax balance due to
tax rate change                                    -       5 782            –

Headline earnings and diluted earnings        12 801      31 026       15 221

Headline earnings per share (cents)             28.7        85.1         34.1

Earnings and headline earnings per share are calculated on a
weighted average number of shares in issue of 44 672 279 (2015: 44 672 279).


Segmental Analysis

for the six months Industrial   Retail Commercial Corporate     Total
ended 31 Dec 2016       R’000    R’000      R’000     R’000     R’000

Extract from the
statement of
comprehensive
income

Property revenue
and recoveries         18 253   12 424      1 173         -    31 850

Straight-line
rental income
accrual                   648    (505)          -         -       143

Property expenses     (5 621)    (465)      (388)         -   (6 474)
Segmental Results      13 280   11 454        785              25 519

Extract from the
statement
of financial
position

Non-Current assets

Net Investment
properties            228 989  220 613    26 409              476 011

Other non-current
assets                      -   73 058    38 939         99   111 997

Current assets

Straight-line
rental income
asset                   3 722    2 228         -                5 950

Trade and other
receivables             3 175    1 477         -        855     5 507

Cash and cash
equivalents                 -        -         -     72 379    72 379

Non-Current
liabilities                 -        -         -    102 048   102 048

Current
Liabilities                 -        -         -

Taxation payable            -        -         -        146       146

Trade and other
payables                3 158        -         -      3 319     6 477

for the six months  Industrial    Retail Commercial Corporate     Total
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     7 149
Corporate information

COMPANY SECRETARY                  TRANSFER SECRETARIES
Acorim Proprietary Limited         Computershare Investor Services
2nd Floor, North Block             Proprietary Limited
Hyde Park Office Tower             70 Marshall Street
Corner 6th Road and Jan Smuts      Johannesburg 2001
Avenue
Hyde Park 2196

AUDITORS                           LEGAL ADVISORS
Mazars                             Werksmans
54 Glenhove Road                   155 5th Street
Melrose Estate 2196                Sandown
Johannesburg                       P O Box 10015
                                   Sandton 2196

PRINCIPAL BANKERS                  INVESTOR RELATIONS AND
                                   REGISTERED OFFICE
Absa Bank Limited                  James Smith
160 Main Street                    91 Protea Road
Johannesburg 2000                  Chislehurston
                                   Sandton 2196
                                   +27 11 883 8650
                                   james@putprop.co.za

SPONSORS                           LISTING INFORMATION
Merchantec Capital                 Putprop Limited was listed on the
2nd Floor, North Block             JSE Limited on 4 July 1988
Hyde Park Office Tower             JSE code: PPR
Corner 6th Road and Jan Smuts      Sector: Financial – Real Estate
Avenue
Hyde Park 2196

Date: 06/03/2017 04:29:00 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.

Share This Story