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Unaudited Condensed Interim Financial Results for the Six Months Ended 31 December 2017 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 2017 and Dividend Declaration
Financial Highlights
Gross property revenue up 18.2% to R37.8 million in a difficult trading period
Net Asset value of 1267 cents per share, (December 2016 : 1 177 cents per share)
Market value of property portfolio R7 055 per m2 (December 2016: R6 043 per m2)
Operating profit before finance costs increased from R20.6 million to R23.8 million
Operational Highlights
Process of rezoning, installation of services and feasibility
studies on our Mamelodi property, with the intent to develop a
retail centre in the short term continues with meaningful progress
made.
Gearing of 25.4% maintained at well below mandated level of 35%
Dobsonville and Soshunguwe property rezoning and installation of
services continues.
Continuing progress achieved in balancing the Group’s exposure to
the Retail, Commercial and Industrial property segments.
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 comprises 17 (June 2017: 18) strategically located
properties, situated primarily in the Gauteng geographical area.
The total Gross Lettable Area (‘GLA’) of the invested properties
is 82 500m2 (June 2017: 82 890) with a value of R 582.1 million
(June 2017: R582.8 million).
The board of directors of Putprop (‘Board’) is pleased to announce
the interim results for the six months ended 31 December 2017.
These results reflect a 18.2% increase over the period ended 31
December 2016 (‘the comparable period’) in respect of gross
property rental revenue. Property expenses were high due to the
acquisition of the Cavi property as well as higher operating costs
in our joint operation and subsidiary companies’ operations.
Maintenance expenditure was contained on all properties in the
portfolio. However, maintenance is expected to increase in the
second half of the year as a number of properties in the portfolio
are aging. Increases in corporate expenses was within budgeted
parameters. The underlying portfolio continues to perform
satisfactorily.
As at 31 December 2017 the property portfolio reflected a 13.2%
vacancy rate (December 2016: 21%). As noted under Subsequent
events in this report, the vacancy rate will increase in the next
reporting period. Management continues to be actively focused on
resolving the vacancies on these properties, which may include the
disposal of them. These assets are seen as non-core in the Group’s
portfolio.
Basis of accounting
The unaudited condensed interim financial results for the six
months ended 31 December 2017 and the comparative information have
been prepared in accordance with and containing the 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 (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 2017.
These interim results have not been audited or reviewed or
reported on by the Group’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 Group is pleased to report that gross property revenue for the
six months ended 31 December 2017, including straight-line income
adjustments, increased by 18.2% to R37.8 million (December 2016:
R31.9 million).
Property expenses however increased by 45.7% over the comparable
period. High commission costs for the letting of vacant
properties, as well as security expenses on vacant properties,
combined with under-recoveries of fixed municipal costs on these
properties, contributed to this increase.
Net property income still showed an increase of 11.3% from R25.5
million to R28.4 million. Administration expenses reflected an
increase of 14.3% over the comparable period. Associated companies
reflected a loss of R 240 000 (December 2016: R3.1 million loss).
Profit before finance charges for the six months ended 31 December
2017 increased by 15.3% from R20.6 million in the comparable
period to R23.8 million. The directors’ valuation of the Group’s
property portfolio as at 31 December 2017 was R1.5 million
downwards (December 2016: R5.2 million up). This adjustment down
was considered necessary to accommodate certain of the older
properties situated in less affluent areas as well as to
accommodate the effect of the Groups vacancy profile. Trade and
other receivables increased by 40.3% from June 2017, largely due
to a single tenant being in arrears, however, this situation has
been resolved after the end of the period reported on. There has
been a slight deterioration in collections from certain of our
other tenant base, due to the stagnant general economy placing
cash flow pressures on these tenants. However, overall receivables
management going forward is expected to be satisfactory.
Cash reserves decreased to R4.3 million (June 2017: R25.6 million)
due to additional investments made in two associated companies,
Pilot Peridot and Belle Isle. Loan liabilities were unchanged
during the period under review.
The lease expiry profile is reflected in the table below.
Lease Expiry Profile – GLA
Calendar Year ended % Cumulative GLA(m2)
Monthly Rentals 15.8 15.8 13 001
Vacancies 13.2 29.0 10 868
2018 10.7 39.7 8 845
2019 1.9 41.6 1 585
2020 20.9 62.5 17 184
2021 onwards 37.5 100 31 017
Total 100 100 82 500
Segmental analysis
The table within this report summarises by segment, the
performance for the six months ended 31 December 2017. 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.
Valuation of property portfolio
It is the Group’s policy to value the entire investment property
portfolio on a bi-annual basis, a director’s internal valuation as
at the December reporting period and by an independent external
valuer as at June audited published results. The next independent
external valuation will be as at 30 June 2018. The directors have
valued the Group’s investment portfolio as at 31 December 2017 at
R582.1 million, a net movement downwards of R692 000 on the
external valuation performed as at 30 June 2017. This director’s
valuation is based on a review of current market sales and
purchase transactions in each property’s location as well as
reasonable judgements 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, with the
directors’ actual revaluation being a R1.5 million net decrease
(December 2016: R5.2 million increase). This decrease was
considered necessary due to certain non-core properties becoming
problematic in terms of rental and disposal.
Borrowings and capital commitments
The Company has borrowings as at 31 December 2017 of R146.4
million (June 2017: R 146.7 million). There are no capital
commitments as at the reporting date. The reflected borrowings
relate entirely to the acquisition of the Secunda Value Mart,
Corridor Hill and Cavi properties.
Changes to the Board
There have been no changes to the Board since the last reporting
date.
Subsequent events
Larimar Limited, the Group’s major tenant gave notice in July 2017
of its intention to vacate our Dubigeon property located in Brits,
effective end January 2018. This will increase the Group’s vacancy
exposure from 15.8% to 29.0%. Management has focussed on this
property extensively over the past 8-month period but at the time
of reporting has not managed to re-let or sell the property.
Dubigeon has previously been identified as a non-core asset
available for sale.
The Group has acquired an additional 7.753% share in the Summit
Place development for a purchase consideration of R 14.6 million.
This increased the Group’s holding from 53.5% as at 30 June 2017
to 61.2%.
There have been no other significant reportable subsequent events
between 31 December 2017 and the date of 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 financial year. Management’s strategy for the
immediate future is one of consolidation and rationalisation of
its existing property portfolio. Our two strategies of disposing
of non-core and poorly-performing portfolio assets, combined with
the development, alongside suitable partners, of certain
properties situated in densely populated urban areas remain. This
process should result in unlocking value for shareholders. The
property situated in Mamelodi has been identified as the first
property to be developed, with a retail centre of approximately 12
000m² - 15 000m² envisaged.
Prior period error
As at 30 June 2016, Putprop acquired the remaining 49% share in
Secunda Value Centre (Pty) Ltd (previously known as Neo Trend
Khala Cose (Pty) Ltd).
The purchase consideration for the transaction was R22 316 846.
The purchase contract was incorrectly interpreted by the contract
parties.
The contract parties interpreted the purchase consideration to be
for the 49% share equity only.
The purchase consideration was, however, for the 49% share in
equity as well as the shareholder loan accounts with the two
minority shareholders.
The two minority shareholders were Bremer Investments (Pty) Ltd
and Khala Cose Fumani Property
Developers (Pty) Ltd, each previously holding 24.5%.
Further to the above mentioned error, the minority shareholder
loan with Khala Cose Fumani Property
Developers (Pty) Ltd was misstated by R5 060 344.
This is due to the fact that the two minority shareholders agreed
as at 30 June 2016 that Khala Cose
Fumani Property Developers (Pty) Ltd would increase their loan to
be equal in value to that of the minority shareholder loan from
Bremer Investment (Pty) Ltd.
The above mentioned increase as agreed was accounted for by
raising a receivable as at 30 June 2016, which was settled during
the current financial year by Khala Cose Fumani Development (Pty)
Ltd.
The above mentioned errors have no effect on the figures in the
statements of comprehensive income as previously reported and the
error is limited to the 2016 financial year. As such no third
statements of financial positions are presented.
December 2016
Before After
Adjustment Adjustment adjustment
GROUP R’000 R’000 R’000
Statement of Financial Position
Trade and other receivables 5 507 5 060 10 567
Accumulated profit (423 764) (16 375) (440 139)
Non-current loan liabilities (139 588) 11 315 (128 273)
Payment of interim distribution - ordinary interim dividend number 57.
Notice is hereby given that the Board has declared an interim
gross cash dividend (‘the dividend’) for the six months ended
31 December 2017 of 6 cents per ordinary share (December 2016:
6 cents per ordinary share).
The dividend is payable to shareholders recorded in the register
of the Company at close of business on Friday, 6 April 2018.
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 (2016: 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:
Declaration date Monday, 12 March 2018
Last date to trade share cum dividend Tuesday, 3 April 2018
Shares trade ex-dividend Wednesday, 4 April 2018
Record Date Friday, 6 April 2018
Payment date Monday, 9 April 2018
Share certificates may not be dematerialised or rematerialised
between Wednesday, 4 April 2018 and Friday, 6 April 2018, both
days inclusive.
On behalf of the Board
BC Carleo JE Smith
Chief Executive Officer Chief Financial Officer
12 March 2018
Condensed statement of financial position
Unaudited
Unaudited Audited
31 Dec
31 Dec 30 June 2016
2017 2017 Restated
R’000 R’000 R’000
ASSETS
Non-current assets
Net investment property 568 186 571 941 476 011
Gross investment property 582 066 582 758 481 961
Straight-line rental income
adjustment (13 880) (10 817) (5 950)
Other non-current assets
Straight-line rental income
asset 13 880 9 355 5 950
Furniture, fittings, computer
equipment and motor vehicles 60 80 100
Investment in associates 133 104 117 244 111 997
Loans to associates 5 458 1 616 -
Cumulative redeemable preference
shares in associate 32 783 32 783 -
Total non-current assets 753 471 733 019 594 058
Current assets 13 840 33 900 82 946
Straight line rental income
asset - 1 462 -
Taxation Receivable 839 811 -
Trade and other receivables 8 611 6 137 10 567
Cash and cash equivalents 4 390 25 490 72 379
Total assets 767 311 766 919 677 004
Equity and liabilities
Capital and Reserves
Stated capital 101 969 101 969 101 969
Accumulated profit 464 099 460 051 440 139
Total equity 566 068 562 020 542 108
Non-current liabilities 189 191 189 145 128 273
Deferred taxation 42 855 42 434 37 540
Loan liabilities 146 336 146 711 90 733
Current liabilities 12 052 15 754 6 623
Trade and other payables 10 674 12 485 6 477
Loan Liabilities 1 378 2 909 -
Taxation payable - - 146
Total equity and liabilities 767 311 766 919 677 004
Condensed statement of comprehensive income
Unaudited Audited Unaudited
six months year six months
ended ended ended
Dec 2017 June 2017 Dec 2016
R’000 R’000 R’000
Property rental revenue 31 278 57 281 27 612
Operating cost recoveries 6 542 16 584 4 381
Gross property revenue 37 820 73 865 31 993
Property expenses (9 430) (20 074) (6 474)
Net profit from property
operations 28 390 53 791 25 519
Corporate administration expenses (4 607) (7 187) (4 032)
Investment and other income 255 3 788 2 296
Share of associates’
profits(loss) (241) 3 049 (3 142)
Operating profit before finance
costs 23 797 53 441 20 641
Finance costs (7 682) (9 448) (3 603)
Operating profit before capital
items 16 115 43 993 17 038
Profit before fair value
adjustments 16 115 43 993 17 038
Fair value adjustments (4 912) 9 104 5 043
Net profit before taxation 11 203 53 097 22 081
Taxation (4 028) (13 790) (5 367)
Profit and total comprehensive
income for the year 7 175 39 307 16 714
Earnings and diluted earnings per
share (cents) 16.1 87.99 37.4
Condensed statement of cash flow
Unaudited
Unaudited Audited 31 Dec
31 Dec 30 June 2016
2017 2017 Restated
R’000 R’000 R’000
Cash flow generated from
operating activities 10 012 (19 291) (53 051)
Net cash generated from
operations 24 199 53 018 7 416
Finance Costs (7 682) (9 448) (3 551)
Investment income 255 3 475 2 255
Taxation paid (3 633) (20 529) (16 044)
Dividends paid (3 127) (45 807) (43 127)
Cash flow utilised in investing
activities (29 207) (147 202) (29 984)
Additions and improvement to
investment property (1 157) (108 766) (16 898)
Additions to investments in
associates - (36 797) -
Loan advances to associates (24 208) (1616) (13 063)
Loans advanced on interest
bearing loans to associates (3 482)
Acquisition of furniture,
fittings, computer equipment
and motor vehicles - (23) (23)
Cash flow from financing
activities (1 904) 38 375 1 806
Additions to the investment in
subsidiary paid to minority
shareholders - (5942) -
Cash paid to assume the loans
of minority shareholders in the
subsidiary - (16 375) -
Payments made on borrowings (1 904) (4 155) -
Proceeds received on borrowings 64 847 1 806
Net increase(decrease) in cash
and cash equivalents (21 099) (128 118) (81 229)
Cash and cash equivalents at
beginning of period 25 490 153 608 153 608
Cash and cash equivalents at
end of period 4 391 25 490 72 379
Condensed statement of changes in equity
Stated Accumulated Shareholders’
Profit
capital Restated interest Total
R’000 R’000 R’000 R’000
Balance at 1 July 2016 101 969 426 551 528 520 528 520
Total comprehensive
income for the year – 16 714 16 714 16 714
Dividend Paid – (3 126) (3 126) (3 126)
Balance at 31 December 2016 101 969 440 139 542 108 542 108
Balance at 1 July 2016 101 969 426 551 528 520 528 520
Total comprehensive income – 39 307 39 307 39 307
Dividends paid – (5 807) (5 807) (5 807)
Balance at 1 July 2017 101 969 460 051 562 020 562 020
Total comprehensive income - 7 175 7 175 7 175
Dividends - (3 127) (3 127) (3 127)
Balance at 31 December 2017 101 969 464 099 566 068 566 068
Reconciliation of group net profit to headline earnings
Unaudited Audited Unaudited
six months year six months
ended ended ended
Dec 2017 June 2017 Dec 2016
R’000 R’000 R’000
Reconciliation of group net
profit to headline earnings
Earnings per share 7 176 39 307 16 714
Adjusted for:
Net change in fair value of
investment property 1500 (14 115) (5 043)
Tax effects of fair value
adjustments property (336) 3 162 1 130
Equity accounting earnings of
associates and joint operations - (4 352) -
Tax effect of equity accounting - 975 -
Headline earnings and diluted
earnings 8 340 24 977 12 801
Headline earnings per share
(cents) 18.7 55.91 28.7
Segmental Analysis
for the six months ended 31 Dec 2017
Industrial Retail Commercial Corporate Total
R’000 R’000 R’000 R’000 R’000
Extract from the
statement of
comprehensive
income
Property revenue
and recoveries 15 755 11 492 7 161 - 34 408
Straight-line
rental
income accrual 1 042 585 1 785 - 3 412
Property expenses (5800) (2 265) (1 365) - (9 430)
Segmental Results 10 997 9 812 7 581 - 28 390
Extract from the
statement of
financial position
Non-Current assets
Net Investment
properties 231 002 227 012 124 052 - 582 066
Other non-current
assets - 63 922 107 423 60 171 405
Current assets
Straight-line
rental income
asset 6 211 5 725 1944 - 13 880
Trade and other
receivables 4 482 3 080 227 822 8 611
Taxation
receivable - - - 839 839
Cash and cash
equivalents - - - 4 390 4 390
Non-Current
liabilities - - - 189 191 189 191
Current
Liabilities
Trade and other
payables 6 159 1138 - 3 377 10 674
for the six months
ended
31 Dec 2016
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 - 111 997
Current Assets
Straight-line
rental income
asset 3 722 2 228 - - 5 950
Restated Trade and
other receivables 8 235 1 477 - 855 10 567
Cash and cash
equivalents - - - 72 379 72 379
Restated Non-
Current
Liabilities - - - 90 733 90 733
Current
Liabilities 3 158 - - 3 465 6 623
Taxation payable - - - 146 146
Trade and other
payables 3 158 - - 3 319 6 477
Corporate information
COMPANY SECRETARY TRANSFER SECRETARIES
Acorim Proprietary Limited Computershare Investor Services
2nd Floor, North Block Proprietary Limited
Hyde Park Office Tower Rosebank Towers
Corner 6th Road and 15 Biermann Avenue, 2196
Jan Smuts Avenue Rosebank, Johannesburg, 2196
Hyde Park 2196 P O Box 61051, Marshalltown,
2107
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
2nd Floor, North Block the JSE Limited on 4 July 1988
Hyde Park Office Tower JSE code: PPR
Corner 6th Road and Sector: Financial – Real Estate
Jan Smuts Avenue
Hyde Park 2196
Date: 12/03/2018 11:28:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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