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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
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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.