| Thu 23 Oct 2008, 13:00 | | PMM - Premium Properties Limited - Notice to linked unitholders: Unaudited |
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PMM
PMM
PMM - Premium Properties Limited - Notice to linked unitholders: Unaudited
results of the group for the six months ended 31 August 2008
PREMIUM PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1994/003601/06) Share code: PMM
ISIN: ZAE000009254
("Premium" or "the Group" or "the Company")
NOTICE TO LINKED UNITHOLDERS: Unaudited results of the group for the six months
ended 31 August 2008
DISTRIBUTION UP BY 13.1% TO 45,8 CENTS PER LINKED UNIT
INCREASE IN NET ASSET VALUE BY 5.7% TO 1097 CENTS PER LINKED UNIT
ASSETS EXCEED R2,6 BILLION
LOW DEBT RISK WITH 95% OF BORROWING FIXED
CONDENSED CONSOLIDATED INCOME STATEMENT
R`000 % Change Unaudited Unaudited Audited
six months six months Year to 29
31 Aug 2008 31 Aug 2007 Feb 2008
Revenue 164,450 133,598 274,249
- earned on contractual 24.2% 165,435 133,250 282,398
basis
- straight line lease (985) 348 (8,149)
adjustment
Operating costs (63,613) (48,514) (105,194)
Net rental income from 100,837 85,084 169,055
properties
- earned on contractual 20.2% 101,822 84,736 177,204
basis
- straight line lease (985) 348 (8,149)
adjustment
Administrative expenses (6,746) (6,343) (13,805)
Depreciation (789) (426) (1,064)
Income before investment 19.1% 93,302 78,315 154,186
income
Investment income 14,808 16,124 44,829
- Interest received 1,457 822 2,255
- Investment income -
associate
equity earnings (1,088) (1,676) (2,157)
fair value adjustment/ 5,838 11,500 33,004
capital reserves
interest and dividends 8,601 5,478 11,727
Income before finance 14.5% 108,110 94,439 199,015
charges and capital profit
Fair value adjustments of
investment properties
net revaluation 97,961 120,657 230,927
gross revaluation 96,976 121,005 222,778
straight line lease 985 (348) 8,149
adjustment
Amortisation of deemed 5,713 1,264 5,392
debenture premium
Income before finance 211,784 216,360 435,334
charges
Finance charges 29.0% 43,379 33,626 66,960
Income before debenture 168,405 182,734 368,374
interest
Debenture interest 21.8% 59,290 48,687 105,885
Income before taxation 109,115 134,047 262,489
Taxation charge (27,153) (35,092) (52,679)
- Deferred taxation (27,153) (35,092) (52,700)
- Normal taxation - - 21
Income attributable to 81,962 98,955 209,810
ordinary shareholders
Weighted linked units in 130,106 115,320 122,644
issue - (`000)
Linked units in issue 130,106 127,239 130,106
(`000)
Earnings per share (cents) (19.0%) 63.0 77.8 161.3
Earnings per linked unit (15.2%) 108.6 128.0 242.6
(cents)*
Headline earnings per 14.1% 49.9 43.7 84.2
linked unit (cents)*
*Based on a weighted
number of units in issue
Distribution per linked
unit (cents)
Dividends 0.23 0.20 0.42
Interest 45.57 40.30 84.08
Total 13.1% 45.80 40.50 84.50
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Unaudited six Unaudited six Audited Year
months 31 Aug months 31 Aug to 29 Feb
2008 2007 2008
CASH FLOW FROM OPERATING
ACTIVITIES
Net rental income from 94,286 77,942 162,335
properties
Adjustment for :
- Depreciation 789 426 1,064
- Working capital changes (1,311) (10,423) 34,003
Cash generated from 93,764 67,945 197,402
operations
Investment income 10,058 4,623 13,981
Finance costs (43,379) (33,626) (66,960)
Taxation paid - - 21
Distribution to linked (57,247) (41,489) (93,264)
unitholders paid
Net cash inflow/(outflow) 3,196 (2,547) 51,180
from operating activities
CASH FLOW FROM INVESTING
ACTIVITIES
Investing activities (19,853) (235,188) (393,484)
Net cash outflow used in (19,853) (235,188) (393,484)
investing activities
CASH INFLOW FROM FINANCING
ACTIVITIES
Issue of linked units - 186,223 224,512
Increase in interest bearing 18,054 29,273 115,586
borrowings
Net cash generated from 18,054 215,496 340,098
financing activities
NET INCREASE /(DECREASE) IN 1,397 (22,239) (2,206)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at (17,860) (15,654) 15,654
beginning of year
Cash and cash equivalents at (16,463) (37,893) (17,860)
end of year
DISTRIBUTABLE EARNINGS
The following additional information is provided and is aimed at disclosing to
the users the basis on which the distributions are calculated.
R`000 % Change Unaudited Unaudited Audited
six months six months Year to 29
31 Aug 31 Aug Feb 2008
2008 2007
Revenue
- earned on contractual 24.2% 165,435 133,250 282,398
basis
Operating costs (63,613) (48,514) (105,194)
Net rental income from 20.2% 101,822 84,736 177,204
properties
Administrative expenses (6,746) (6,343) (13,805)
Depreciation (789) (426) (1,064)
Profit before investment 20.9% 94,287 77,967 162,335
income
Investment income
- Interest received 1,457 822 2,255
- Interest received, - 2,590 3,508
prepaid distribution
- Investment income - 7,513 3,802 9,570
associate
Distributable profit before 21.2% 103,257 85,181 177,668
finance charges
Finance charges 29.0% (43,379) (33,626) (66,960)
Distributable income before 16.1% 59,878 51,555 110,708
taxation
Taxation charge - - 21
Unitholders distributable 16.1% 59,878 51,555 110,729
earnings
Linked units in issue - 130,106 127,239 130,106
(`000)
Distributable earnings per 13.6% 46.0 40.5 85.1
linked unit - (cents)
Distribution per linked 13.1% 45.8 40.5 84.5
unit (cents)
CONDENSED CONSOLIDATED BALANCE SHEET
R`000 Unaudited Audited
31 Aug 2008 29 Feb 2008
ASSETS
Non - current assets 2,651,529 2,530,739
Investment properties 2,437,330 2,320,571
Investment properties - straight lining of 28,665 29,651
rental leases
Property, plant and equipment 24,012 19,807
Investments - associated company 161,522 160,710
Current assets 14,789 21,073
Total assets 2,666,318 2,551,812
EQUITY AND LIABILITIES
Share capital and reserves 1,014,425 932,762
Share capital and premium 2,507 2,507
Non-distributable reserve 983,317 901,944
Retained earnings 28,601 28,311
Non - current liabilities 1,517,953 1,478,459
Debentures and premium 412,253 417,966
Interest bearing borrowings 783,997 765,943
Deferred taxation 321,703 294,550
Current liabilities 133,940 140,591
Interest bearing 17,328 18,565
Non - interest bearing 57,023 64,779
Linked unitholders 59,589 57,247
Total equity and liabilities 2,666,318 2,551,812
Linked units in issue (`000) 130,106 130,106
Net asset value per linked unit (cents) 1,097 1,038
Net asset value per linked unit (cents) - 1,344 1,265
before providing for deferred tax
STATEMENT OF CHANGES IN EQUITY
R`000 Share Capital Revalu- Distribu- Total
capital reserve ation table
reserve reserve
Balance at 1 March 1,349 20,757 668,776 31,458 722,340
2007
Issue of linked units 1,158 1,158
Profit attributable 209,810 209,810
to ordinary
shareholders
Reallocation of 5,392 (5,392) -
deemed debenture
premium
Dividends paid (546) (546)
Transfer to non- 207,019 (207,019) -
distributable reserve
Balances at 29 2,507 26,149 875,795 28,311 932,762
February 2008
Profit attributable 81,962 81,962
to ordinary
shareholders
Reallocation of 5,713 (5,713) -
deemed debenture
premium
Dividends paid (299) (299)
Fair value
adjustments
- Investment 69,822 (69,822) -
properties, net of
deferred taxation
- associate, net of 5,838 (5,838) -
deferred tax
Balances at 31 August 2,507 31,862 951,455 28,601
2008 1,014,425
RECONCILIATION - EARNINGS TO DISTRIBUTABLE EARNINGS
R`000 Unaudited six Unaudited six Audited Year
months 31 Aug months 31 Aug to 29 Feb
2008 2007 2008
Earnings per share 81,962 98,955 209,810
Add: debenture interest per 59,290 48,687 105,885
linked unit
Earnings per linked unit 141,252 147,642 315,695
Fair value adjustments
- associate, net of (5,838) (11,500) (33,004)
deferred tax
- investment properties, (70,532) (85,667) (174,015)
net of deferred tax
Headline earnings per linked 64,882 50,475 108,676
unit
Interest received, prepaid - 2,590 3,508
distribution
Straight line lease adjustment 709 (246) 5,867
Deferred taxation adjustments - - (1,930)
Amortisation of deemed (5,713) (1,264) (5,392)
debenture premium
Distributable earnings 59,878 51,555 110,729
NOTES TO FINANCIAL STATEMENTS
The unaudited condensed financial report has been prepared in accordance with
the listings requirements of the JSE Limited, and the requirements of the
Companies Act (Act 61 of 1973) and is consistent in all material respects with
those applied in the financial statements for the year ended 29 February 2008.
The results have been prepared and presented in accordance with International
Accounting Standards (IAS 34), Interim Financial Reporting.
These interim results have not been audited or reviewed by the Group`s external
auditors.
In order to comply with IAS 17, rental income from leases is recognised on a
straight-line basis over the period of the lease. In order to avoid an
overstatement of assets the fair value of investment properties has been reduced
by the cumulative straight-line rental accrual.
In order to comply with International Financial Reporting Standards, deferred
taxation on the fair value adjustment of investment property has been provided
at the company income taxation rate which is currently 28% and not at the
Capital Gains Tax rate of 14.0%, which would be payable if properties were sold.
Related party: City Property Administration (Proprietary) Limited is responsible
for the property and asset management of the group.
Subsequent events: There have been no significant subsequent events that
require reporting.
Contingent liability: The company has issued guarantees of R1,6 million in
favour of City of Tshwne Metropolitan Municipality for the provision of services
to its subsidiaries. The company has given surity to Nedbank Property Finance,
which at year end amounted to R62 640 000, in favour of its associate company,
IPS Investments Limited.
COMMENTS
Review of results
The directors of Premium are pleased to report that the results for the 6 months
ended 31 August 2008 once again reflect the continuation of the Group`s
impressive growth record. The strong performance was a result of the
substantial investments made over several years in the growth of the CBD
portfolio and the upgrades and redevelopment of properties.
Rental income and net rental income increased by 24.2% and 20.2% respectively,
compared with the comparable period. The operating cost ratio increased to 38.5%
largely due to an increase in assessment rates, as well as the high operating
costs at the Hatfield development.
The interim distribution for the period of 45,8 cents (2007 : 40,5 cents)
represents an increase of 13.1% on that paid in the previous corresponding
period.
The continuing strong trading conditions of the residential and office sectors
and management`s pro-active approach to letting resulted in rental increases
excluding acquisitions increasing by 10.9%. The residential portfolio which
comprises 3002 units, continued to deliver strong growth in rental income of
8.1%. This is underpinned by low vacancies and good demand for affordable and
secure accommodation. This combined with keeping costs well under control and
management`s ongoing programme of upgrading and redevelopment, have all
contributed to the increase in distributable earnings per linked unit.
As reported previously, the distribution growth was negatively impacted by the
Hatfield development due to the phased take-up of units as well as the cost of
borrowings which is higher than the yield of the project, and which were
anticipated for a project of this nature. Phase I of the mixed-use Hatfield
development which comprises of 677 residential units as well as 4000m squared of
retail space, should be let by the end of the financial year.
PROPERTY PORTFOLIO
Premium has continued to focus on its strategic objective of acquiring and
redeveloping properties in the Pretoria and Johannesburg CBD`s and surrounding
areas.
An amount of R23 million was spent on various projects and upgrades including
phase II of the Hatfield development, Gilboa and Potsil.
Phase II of the Hatfield development has commenced which includes a four level
parking bay, "A" grade offices and retail space as well as a hotel. The cost of
the project is R332 million with a total lettable area of
28 000m squared.
Premium has a committed residential development pipeline to build in excess of
370 units which includes a residential conversion in the Johannesburg CBD and a
greenfield project in Arcadia Pretoria. The total cost of these projects
amounts to R150 million with a yield of approximately 10%.
Interest income and dividends received from IPS, increased to R7,5 million due
to the strong performance of the portfolio as well as the advance of additional
funds to IPS to fund IPS`s growth. IPS`s property portfolio is valued in an
amount of in excess of R790 million. IPS has committed to a residential
development program to build an aggregate of 977 units of residential
accommodation at a total cost of R339 million. The majority of these units will
be built at Kempton City in Kempton Park, Tayob Towers and Corporation House in
the Johannesburg CBD.
Vacancies at 31 August 2008 amounted to 22.2% of total lettable area
(28 February 2008: - 22.2%). A large percentage of the vacancies are in respect
of properties recently acquired or currently undergoing redevelopment or
refurbishment. A number of these properties were acquired with large vacancies
and little or no consideration was paid for the vacant space.
Further details of the vacancy are as follows:
31 August 2008 29 February
2008
Offices 10.6% 10.5%
Retail 4.4% 4.2%
Commercial 2.0% 1.1%
Industrial 2.6% 3.5%
Residential 2.6% 2.9%
TOTAL 22.2% 22.2%
GEARING
Premium`s gearing at 31 August 2008 was 30% as against 31% at 29 February 2008.
Interest rates in respect of 95% of borrowings at 31 August 2008 have been fixed
at an average interest rate of 11.4% maturing at various dates ranging from
April 2009 to April 2018.
REVALUATION OF PROPERTY PORTFOLIO
It is the Group`s policy to perform directors` valuations of all the properties
on a six monthly basis. At the year end one-third of the properties is valued
by external valuers. The increase in the valuation of the portfolio by R97,0
million to R2,5 billion represents an increase of 4.1%. This upward
revaluation contributed to the increase in the net asset value per unit of 5.7%
to 1097 cents.
PROSPECTS
The difficult trading environment which is impacted by a slowing economy and
reduced consumer spending is expected to continue in the short to medium term,
however the residential and office letting market is expected to remain buoyant.
Distribution growth to 29 February 2009 will be negatively impacted by the
Hatfield development. The benefit of this development will impact positively on
distribution growth in 2010 and beyond. Provided market conditions do not
deteriorate significantly, Premium expects to deliver further growth in
distribution for the year ending 28 February 2009.
DECLARATION OF DIVIDEND NO. 29 AND INTEREST PAYMENT ("the distribution")
Notice is hereby given that dividend number 29 of 0,23 cents (2007: 0,20
cents) per ordinary share together with interest of 45,57 cents per debenture
(2007: 40,30 cents), has been declared for the period 1 March 2008 to 31 August
2008, payable to linked unitholders recorded in the register on Friday, 14
November 2008. The last date to trade "CUM" distribution is Friday, 7 November
2008. The units will commence trading "EX" distribution on Monday, 10 November
2008. Payment date will be Monday, 17 November 2008.
No dematerialisation or rematerialisation of linked unit certificates may take
place between Monday, 10 November 2008 and Friday, 14 November 2008, both days
inclusive.
By order of the Board.
City Property Administration (Proprietary) Limited
23 October 2008
A Wapnick J P Wapnick
(Chairman) (Managing director)
Directors: A Wapnick* (Chairman), JP Wapnick* (Managing director),
MJ Holmes*, MZ?Pollack*, S?Wapnick?
* Executive director * Independent non-executive director ?Non-executive
director
Registered Office
CPA House,
101 du Toit Street, Pretoria, 0002
PO Box 15, Pretoria 0001
Tel: (012) 319 8811 Fax: (012) 319 8812
Transfer Secretaries
Computershare Investor Services
(Proprietary) Limited
(Reg. No: 2004/003647/07)
70 Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107
Tel: (011) 370 7700 * Fax: (011) 688 7712
Premium Properties Limited and its subsidiaries (Incorporated in the Republic of
South Africa) (Registration number 1994/003601/06) Share code: PMM ISIN:
ZAE000009254
("Premium" or "the Group" or "the Company")
Date: 23/10/2008 13:00:13 Produced by the JSE SENS Department.
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