| Fri 29 Aug 2008, 7:05 | | PAP - Pangbourne Properties Limited - Reviewed abridged consolidated financial |
|
PAP
PAP
PAP - Pangbourne Properties Limited - Reviewed abridged consolidated financial
results for the year ended 30 June 2008
Pangbourne Properties Limited
(Incorporated in the Republic of South Africa)
Registration No. 1987/002352/06
Share code: PAP
ISIN: ZAE000005252
("Pangbourne")
REVIEWED ABRIDGED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 30 JUNE 2008
Commentary
1. Distributable earnings
Pangbourne`s distribution for the year ended 30 June 2008 amounted to 120,93
cents per unit. This represents an increase of 6,08% over the 114,00 cents per
unit distribution for the year ended 30 June 2007.
2. Review
Restructuring of the Pangbourne Group occurred during the financial year as
mandated by unitholders at the last general meeting. The result has been a
change to the board of directors, company structure and significant change in
executive management. Property management has been outsourced to Gensec Limited
trading as JHI. The new management has been active in the dismantling of the
previous "Octopus" structure.
Management has adopted best practice with respect to the appropriate levels of
disclosure to the market regarding the breakdown of and commentary on financial
figures, particularly on the components of Pangbourne`s income streams and its
distribution. Pangbourne`s reliance on non-core income from fee generative
activities, such as development profits, property management fees, asset
management fees and fees from sales and purchases of properties, will be phased
out over time in order to have as little effect on unitholders as possible. It
is the intention of management to eliminate reliance on non-recurring income as
soon as possible.
The disappointing growth in Pangbourne`s distribution for the year under review
is attributable to the dismantling of the "Octopus", and to the move away from
its previous reliance on non-recurring income towards sustainable, core rental
income generated from investment properties. Contributions to Pangbourne`s
income from some of the tentacles of the "Octopus" were unsatisfactory, with
Aspire producing less than 10% of budgeted income and the Enigma partnership, in
which Pangbourne has invested over R160 million, producing no returns.
Considerable progress has been made in reducing the high levels of rental
arrears within the Pangbourne Group. Strict new policies and procedures were
introduced and significant amounts of uncollectable arrears have been written
off. These operational changes bode well for the future. The moratorium on non-
urgent property maintenance and refurbishments has been lifted and a
comprehensive maintenance programme has been instituted.
In line with the strategy of refocusing Pangbourne as a focused real estate
fund, certain under-performing properties have been sold at yield enhancing
levels. The entire portfolio of properties has been valued by an external valuer
as at 30 June 2008. The original Pangbourne portfolio of properties has
appreciated significantly in value against the book value. However, most of the
property acquisitions and developments undertaken by Pangbourne over the past
two years have disappointed as feasibilities were not met and many of these
properties have had significant write downs in value.
As part of the restructuring of Pangbourne, the outstanding units in iFour
Properties Limited ("iFour") and Siyathenga Property Fund Limited ("Siyathenga")
were acquired by Pangbourne and both companies were delisted. IFour`s
unitholders and Siyathenga`s unitholders received 70 093 878 linked units and 53
740 209 linked units respectively in Pangbourne. The remaining tentacles of the
"Octopus" will be addressed over the next two years.
Pangbourne`s overweight investment position in the industrial and commercial
sectors has contributed positively to the distribution despite the difficult
macroeconomic environment. The industrial property market has continued to
perform well, against the backdrop of high building costs, limited new supply of
quality industrial stock and continued strong demand for quality space.
Vacancies in well-located offices have also reduced substantially and this has
resulted in upward pressure being placed on office market rentals.
3. The portfolio
Acquisitions and completed developments
21 properties and completed developments with a total value of R1 129 million
were acquired during the financial year.
Disposals
In total, 152 properties (including vacant land), with a total value of R1 469
million were disposed of during the past financial year, made up as follows:
- 73 properties with a total value of R911 million were sold and transferred
during the financial year.
- 49 properties with a total value of R454 million were sold, but have not yet
transferred.
- 30 properties with a total value of R104 million were sold during the
financial year and transferred after year end.
Developments
Some of the developments undertaken during the year, are not yet completed and
are listed below:
Building Sector Value Size Status
Hobart Office R82,8 million 6 450 m2 Completion Apr 2009
Square,
Bryanston
Raceway Midi-Industria R29,2 million at 13 661 m2 Start Mar/Apr 2008
Unit, l 11,8% yield
Gosforth
Park
Prospecton, Industria R65 million 14 500 m2 Phase 1: Dec 2007
Durban l Phase 2: Oct 2008
Greenbushes Industria Infrastructure and 5 600 m2 Completed by March
Midway l gate house commenced 2009
Units, Port at a cost of R7,3
Elizabeth million, and the Midi-
unit development will
commence at a cost of
R28,3 million
Equinox Retail R146,8 million 15 604 m2 Opening end Nov
Mall, 2008
Jeffreys Bay
The available bulk of 65 000 m2 at the Tradeport industrial development in City
Deep will be utilised as opportunities arise.
Refurbishments
The refurbishment of the retail centre, Gezina Galleries, Pretoria, has been
completed at a cost of R32,8 million. The refurbishment of The Crescent in
Umhlanga was completed in November 2007 at a cost of R12,7 million. This was
done in order to accommodate Hi-Fi Corporation and generally to upgrade the
centre. Willowbridge Lifestyle Centre in Tyger Valley, Cape Town, added a Pro
Shop and Harley Davidson retail outlets at a cost of R36,6 million. Pangbourne`s
stake in the centre is 75%. N1 City in Cape Town is being refurbished at a cost
of R12,4 million. Completion will be in November 2008. The facade and walkways
were upgraded to allow for an easier flow of customers.
4. Prospects
Although some weakening in the retail, industrial and commercial property market
is expected during the next twelve months, the rentals for the bulk of the
industrial portfolio are significantly below market levels. The favourable lease
expiry profile, along with quality tenants, should largely protect Pangbourne
from any deterioration in the macroeconomic environment. These facts, coupled
with the attractive fixed rates for the majority of Pangbourne`s borrowings,
place Pangbourne in a position to achieve stronger earnings growth for the 2009
financial year.
By order of the board
Barry Stuhler (managing director)
Jacques van Wyk (financial director)
26 August 2008
Johannesburg
Consolidated balance sheet
Reviewed Restated
30 June 2008 30 June
R`000 2007
R`000
ASSETS
Non-current assets 12 221 441 5 512 291
Investment property 10 713 398 4 132 653
Straight-lining of rental income adjustment 179 569 58 450
Investment property under development 475 577 -
Investment in and loans to associates 356 958 1 053 977
Intangible assets - 23 924
Goodwill - 45 693
Loans 488 724 184 677
Property, plant and equipment 7 215 12 917
Current assets 1 571 897 522 293
Investment property held for sale 520 188 142 512
Trade and other receivables 824 713 354 166
Cash and cash equivalents 226 996 25 615
Total assets 13 793 338 6 034 584
EQUITY AND LIABILITIES
Total equity attributable to equity holders 4 403 129 1 969 173
Share capital 3 852 2 392
Share premium 2 166 608 812 750
Non-distributable reserves 2 232 669 -
Retained earnings - 1 154 031
Minority interest 255 039 222 471
Total liabilities 9 135 170 3 842 940
Non-current liabilities 7 039 183 3 348 460
Linked debentures 1 586 902 937 405
Interest-bearing borrowings 4 450 674 2 260 942
Deferred tax 1 001 607 150 113
Current liabilities 2 095 987 494 480
Trade and other payables 356 907 110 792
Linked debenture interest payable 244 786 151 476
Income tax payable 14 600 43 964
Interest-bearing borrowings 1 479 694 188 248
Total equity and liabilities 13 793 338 6 034 584
Consolidated income statement
Reviewed Restated
for the for the
year ended year ended
30 June 2008 30 June
R`000 2007
R`000
Net rental and related income 455 374 361 261
Recoveries and contractual rental income 624 477 513 529
Straight-lining of rental income adjustment 14 688 17 104
Rental income 639 165 530 633
Property operating expenses (183 791) (169 372)
Minority share of distributable earnings (19 695) -
Profit on disposal of investments and 11 467 10 074
investment property
Profit on disposal of investment property 7 527 8 343
Profit on disposal of investments 3 940 1 731
Fair value gain on investment property 1 094 321 278 383
Fair value gain on investment property 1 109 009 295 487
Adjustment resulting from straight-lining of (14 688) (17 104)
rental income
Other income 68 460 73 235
Administrative expenses (90 332) (103 399)
Net negative goodwill recognised 44 393 -
Impairment of intangible assets (23 924) -
Other expenses - (12 214)
Income from associates 173 043 186 653
Profit before net finance costs 1 713 107 793 993
Net finance costs (327 342) (259 285)
Finance income 324 782 202 862
Interest from loans 22 692 121 812
Fair value adjustment on interest rate swaps 152 226 81 050
Interest on linked units issued cum 149 864 -
distribution
Finance costs (652 124) (462 147)
Interest on borrowings (233 126) (201 764)
Fair value adjustment on bond option (17 256) -
Interest to linked debenture holders (401 742) (260 383)
Profit before income tax 1 385 765 534 708
Income tax expense (267 092) (156 364)
Profit for the year 1 118 673 378 344
Attributable to:
Equity holders of the company 1 078 638 368 859
Minority interest 40 035 9 485
Total 1 118 673 378 344
Basic earnings per share (cents) 339,53 152,82
Diluted earnings per share (cents) 311,19 257,99
Basic earnings per linked unit (cents) 461,46 152,82
Diluted earnings per linked unit (cents) 422,95 257,99
Reconciliation of profit for the year to headline earnings and distributable
income
Reviewed Restated
for the for the
year ended year ended
30 June 2008 30 June
R`000 2007
R`000
Basic earnings (shares) - profit for the year 1 118 673 378 344
attributable to equity holders
- interest to linked debenture holders 401 742 260 383
Basic earnings (linked units) 1 520 415 638 727
Adjusted for: (859 165) (132 093)
- fair value gain on investment property (1 094 321) (278 383)
- profit on disposal of investment property (7 527) (8 343)
- profit on disposal of investments (3 940) (1 731)
- net negative goodwill recognised (44 393) -
- impairment of intangible asset 23 924 -
- income tax effect 267 092 156 364
Headline earnings 661 250 506 634
Adjustment resulting from straight-lining of (14 688) (17 104)
rental income
Fair value adjustment on interest rate swaps (152 226) (81 050)
Fair value adjustment on bond option 17 256 -
Consolidation adjustment for BEE 2 009 22 906
Restructuring costs 17 168 -
Post-acquisition reserves from associates (126 322) (186 653)
Net loss of an associate (2 646) -
Other (59) 15 650
Distributable income 401 742 260 383
Less: Distribution declared (401 742) (260 383)
Income not distributed - -
Headline earnings per linked unit (cents) 200,70 204,63
Diluted headline earnings per linked unit 183,95 204,63
(cents)
Basic earnings per share, basic earnings per linked unit and headline earnings
per linked unit are based on the weighted average of 329 479 609 (30 Jun 07: 247
579 797) shares/linked units in issue during the year.
Diluted earnings per share, diluted earnings per linked unit and diluted
headline earnings per linked unit are based on the weighted average of 359 478
798 (30 Jun 07: 247 579 797) shares/linked units in issue during the year.
Consolidated statement of changes in equity
Attributable to equity holders of
the company
Share Share Non- Retained Total Minorit Total
capital premium distribu earnings R`000 y equity
R`000 R`000 table R`000 interes R`000
reserves t
R`000 R`000
Restated
Balance at 30
June 2006
As previously 2 255 583 644 743 555 1 329 454 1 639 1 331
stated 093
Transfer of (3 671) (3 671) (3 671)
amortised
debenture
interest
Transfer of 141 601 45 280 186 881 208 499 395 380
debenture
equity portion
Restated 2 255 721 574 788 835 1 512 664 210 138 1 722
balance 802
Issue of units 251 207 241 207 492 207 492
Units issued (114) (120 (120 165) (120
to BEE 051) 165)
initiatives
eliminated
Fair value 3 986 3 986 3 986
adjustment on
units issued
during the
year
Change of 1 545 1 545 5 643 7 188
ownership in
subsidiary
Dividends paid (5 208) (5 208) (2 795) (8 003)
Profit for the 368 859 368 859 9 485 378 344
year
Balance at 30 2 392 812 750 1 154 031 1 969 173 222 471 2 191
June 2007 644
Reviewed
Issue of units 1 503 1 307 1 309 137 1 309
634 137
Units issued (124) (56 (56 200) (56 200)
to BEE 076)
initiatives
eliminated
Units issued 81 102 300 102 381 102 381
to the
Pangbourne
Unit Purchase
Trust
Change in (7 467) (7 467)
ownership in
subsidiary
Profit for the 1 078 638 1 078 638 40 035 1 118
year 673
Transfer to 2 232 (2 232
non- 669 669)
distributable
reserves
Balance at 30 3 852 2 166 2 232 - 4 403 129 255 039 4 658
June 2008 608 669 168
Non-distributable reserves comprise those profits and losses that are not
distributable to unitholders and are made up of mainly revaluation adjustments,
profits or losses on the disposal of investment property and other non-
distributable balances.
Abridged consolidated cash flow statement
Reviewed Restated
for the for the
year ended year ended
30 June 30 June
2008 2007
R`000 R`000
Cash outflow from operating activities (174 660) (46 854)
Cash outflow from investing activities (2 997 073) (718 480)
Cash inflow from financing activities 3 373 114 765 647
Increase in cash and cash equivalents 201 381 313
Cash and cash equivalents at beginning of year 25 615 25 302
Cash and cash equivalents at end of year 226 996 25 615
1. Preparation and review opinion
This abridged consolidated financial report has been prepared in accordance with
the recognition and measurement criteria of International Financial Reporting
Standards (IFRS), the presentation and disclosure requirements of IAS 34, the
JSE Listings Requirements and the requirements of the Companies Act (Act 61 of
1973). The accounting policies adopted are consistent with those of the prior
year with the exception of the changes discussed in note 3. Deloitte & Touche
has reviewed the financial information set out in this abridged report in
accordance with International Standards on Review Engagements (ISRE 2410). Their
unmodified review opinion is available for inspection at the group`s registered
address.
2. Acquisition of iFour and Siyathenga
During the year the company purchased the remaining units in iFour Property Fund
Limited for R925,3 million and Siyathenga Property Fund Limited for R709,4
million on 9 June 2008. The net asset value was R1,7 billion in iFour and R1,1
billion in Siyathenga consisting mainly of investment property. This resulted in
net negative goodwill of R90,8 million.
3. Change in accounting policy
In the previous year, fees received from financing operations and facilitation
transactions, property and asset management fees, interest received and proceeds
on the sale of trading properties and investments held for sale were disclosed
as revenue. These have been reclassified as other income. Only property related
income is now shown as revenue.
4. Adoption of new trust deed and valuation of investment property
During the current year, Pangbourne adopted a new trust deed in terms of which
99.9% of earnings must be distributed to unitholders. This differed from the
previous trust deed which required a minimum distribution of 10% of the face
value of the debentures. The premium arising on the issue of linked units under
the new trust deed is disclosed as share premium.
At year-end, the company fair valued the entire property portfolio using an
external valuer. This will be done annually. This is a change from the previous
method in terms of which one-third of the property portfolio was valued
externally and the balance valued by directors every six months.
5. Summary of financial performance
30 Jun 08 31 Dec 07 30 Jun 07 31 Dec 06
Distribution per linked unit 63,43 57,50 62,00 52,00
(cents)
Units in issue 421 395 837 297 561 269 853 250 167
759 792 199
Net asset value R14,21 R13,21** R13,57** R12,25**
Gearing ratio* 42,4% 44,1% 42,0% 36,5%
*The gearing ratio is calculated by dividing the total gearing by the investment
in non-current assets excluding loans and property, plant and equipment.
**The net asset value per unit includes the iFour and Siyathenga investments
carried at market value and also includes the debenture debt portion.
6. Gearing
Interest rate hedges
Description Expiry R`million Interest
rate
Interest rate swaps 2009 financial 295 9,38%
year
Interest rate swaps 2010 financial 255 10,31%
year
Interest rate swaps 2011 financial 300 10,41%
year
Interest rate swaps 2012 financial 130 10,26%
year
Interest rate swaps/collars 2013 financial 1 075 9,69%
year
Interest rate swaps 2015 financial 460 9,36%
year
Total interest rate derivatives 2 515 9,77%
Fixed rate loans 2013 financial 617 8,66%
year
Total interest rate hedges 3 132 9,55%
Interest rates are shown as nominal annual compounded quarterly (similar to
three month Jibar).
Interest rates for derivatives are the base rates, excluding lending margin.
Interest rates on fixed rate loans are inclusive of lending margin and costs and
will increase to 10,17% in July 2010.
Cost of funding
R`million Interest % of
rate gearing
Fixed rate securitised debt - Loan 1 470 11,20% 9,5%
Fixed rate securitised debt - Loan 2 470 10,87% 9,5%
Fixed rate securitised debt - Loan 3 1 551 8,85% 31,1%
Total securitised debt 2 491 9,67% 50,1%
Hedged bank funding 641 10,98% 12,9%
Total hedged funding 3 132 9,94% 63,0%
Variable rate gearing 1 843 13,45% 37,0%
Total gearing 4 975 11,24% 100,0%
Interest rates are shown as nominal annual compounded quarterly and based on a
prime lending rate of 15,50% and a three month Jibar rate of 12,375% as at 30
June 2008. Interest rates are inclusive of lending margin, amortised upfront
costs and, in the case of securitised debt, ongoing management fees payable to
the securitisation administrators, trustees, rating agency and other external
costs.
The interest rate applicable to the third securitisation loan is of a stepped
nature and will increase from 8,85% to 10,36% in July 2010.
Gearing is calculated as follows:
30 June 30 June
2008 2007
R`million R`million
- Interest-bearing borrowings 4 451 2 261
- Current liabilities 2 096 494
- Current assets (1 572) (522)
Total gearing 4 975 2 233
7. Lease expiry profile and segmental analysis
Lease expiry (based on contractual rental income) %
June 09 24,4
June 10 16,1
June 11 19,3
June 12 12,8
June 13 15,5
June 14 2,5
>June 14 9,4
Total 100,0
Reviewed Restated
for the for the
year ended year ended
30 June 30 June
2008 2007
R`000 R`000
Segmental revenue - rental income
Commercial 116 244 6 518
Industrial 457 163 515 764
Other 3 561 26
Retail 62 197 8 325
Total 639 165 530 633
Profit for the year before net finance costs
Commercial 160 472 (1 347)
Industrial 1 262 056 649 650
Other 2 305 (133)
Retail 132 387 (183)
Corporate 155 887 146 006
Total 1 713 107 793 993
Sectoral split (based on book value)
Commercial 19,3%
Industrial 49,9%
Other 1,9%
Retail 28,9%
Total 100,0%
8. Capital commitments
Reviewed Restated
for the for the
year ended year ended
30 June 30 June
2008 2007
R`000 R`000
Authorised and contracted 283 734 741 831
Authorised and not yet contracted 5 195 -
Total 288 929 741 831
9. Profit distribution
Notice is hereby given that a cash distribution of 63,43 cents per unit, being
distribution number 44 for Pangbourne Properties Limited, has been declared
payable to the unitholders recorded in the books of Pangbourne at the close of
business on the record date, being Friday, 19 September 2008.
Unitholders are advised that the last day to trade cum distribution will be
Friday, 12 September 2008. The units will trade ex distribution from Monday, 15
September 2008. The distribution payment will be made on Monday, 22 September
2008. Unit certificates may not be dematerialised or rematerialised between
Monday, 15 September 2008 and Friday, 19 September 2008, both days inclusive.
Directors
Iraj Abedian (chairman), Des de Beer* (alternate: Vuso Majija), Ryan Falkenberg,
Craig Hallowes*, Bryan Hopkins, Leslie Maasdorp (alternate: Yogesh Narsing),
Annalese Manickum, Marius Muller*, Dave Savage, Ndhlabole Shongwe, Thando
Sishuba,
Barry Stuhler*, Jacques van Wyk* (*Executive)
Company secretary
Abraham Bornman
Registered address
4th Floor, Rivonia Village, Rivonia Boulevard, Rivonia, 2191
Transfer secretaries
Computershare Investor Services (Pty) Ltd, 70 Marshall Street, Johannesburg,
2001
PO Box 61051, Marshalltown, 2107
Sponsor
Java Capital (Proprietary) Limited
Date: 29/08/2008 07:05:07 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.
