| Thu 26 Feb 2009, 16:46 | | PAP - Pangbourne - Unaudited Consolidated Interim Financial Report For The Six |
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PAP
PAP
PAP - Pangbourne - Unaudited Consolidated Interim Financial Report For The Six
Months Ended 31 December 2008
Pangbourne Properties Limited
Incorporated in the Republic of South Africa
Registration no. 1987/002352/06
Share code: PAP ISIN: ZAE000005252
("Pangbourne" or "the company" or "the group")
UNAUDITED CONSOLIDATED INTERIM FINANCIAL REPORT FOR THE SIX MONTHS ENDED 31
DECEMBER 2008
DIRECTORS` COMMENTARY
DISTRIBUTABLE INCOME
Pangbourne`s interim distribution for the six months to 31 December 2008
amounted to 63,50 cents per unit. This represents an increase of 10,43% over the
57,50 cents per unit distribution for the six months to 31 December 2007.
The distribution for this interim period includes R11,4 million development
profits and fees, being 4,2% of the distribution. It is the board`s stated
objective only to distribute recurring property income. This will be achieved in
the June 2010 financial year.
CORPORATE ACTION
The group sold its interest in bridging finance and bond origination business,
Aspire Financial Services, for R95 million in November 2008. This business was
inappropriate for a listed property company. The sale was fortuitous given the
credit crisis and continued deterioration of the economy. Proceeds from the sale
were applied against borrowings.
The holding in Monyetla Property Fund Limited was sold to Capital Property Fund
("Capital"). Pangbourne received 65 426 558 units in Capital as consideration.
Capital is a larger and more liquid fund and gives Pangbourne the flexibility to
reduce its holding over time.
Pangbourne has had discussions with its partners in the unlisted Enigma Property
Fund with a view to either acquire the interest of its partners, alternatively
to dispose of its entire investment. No agreement could be reached on price.
OPERATIONAL EFFICIENCIES
The outsourcing of the property management function to JHI has been successful.
The anticipated operating efficiencies and benefits from the reduction in the
overhead structure have been better than expected. The management team has been
strengthened and focus on skills development is a high priority. Pangbourne is
benefiting from the intense focus on the property portfolio. Pangbourne adopted
the accounting and management systems utilised by the Resilient and Capital
groups, resulting in significantly improved functionality and reliability.
CAPITAL STRUCTURE
In a difficult macroeconomic environment, Pangbourne successfully arranged a new
loan facility totalling R1,44 billion with Absa Bank. This facility enabled the
group to consolidate various loans with different structures and terms to
Pangbourne, Siyathenga and iFour. The additional R635 million cash raised has
placed Pangbourne in a position to fully repay the R470 million securitised loan
tranche due in October 2009.
The Culemborg motor dealership development in Cape Town was sold for R249,5
million and transferred in December 2008. The property has additional commercial
rights and Pangbourne is entitled to a further consideration should these rights
be utilised. The sale enabled Pangbourne to unwind the convertible loan
structure in which this property was held. Pangbourne has no further exposure to
any similar "tax structures".
THE PROPERTY PORTFOLIO
Developments
Pangbourne developments include the following:
1 Hobart Square, a 6 450 m2 office development in Bryanston is being developed
at a cost of R83 million. This development is due for completion in April 2009.
2 Maple Road Industrial Park is a 20 000 m2 industrial development in Pomona
near O.R. Tambo International Airport. This development costing R84 million will
be completed at the end of February 2009.
3 Midi-units at Raceway. Pangbourne owns 50% of this 6 000 m2 industrial
development situated on the former Gosforth Park race track. The development was
completed in December 2008 at a cost of R32,5 million.
4 Prospecton Phase II. This 7 000 m2 redevelopment and refurbishment in Durban
was completed in October 2008 at a cost of R41 million. The property is fully
let.
5 Greenbushes, Port Elizabeth. The basic infrastructure and gate house have been
completed on this large industrial site at a cost of R7,5 million. A R28 million
midi-unit development has commenced and will be completed during April 2009. The
vacant land has recently been released for sale.
6 Equinox Mall, Jeffreys Bay. This 15 604 m2 retail development in the centre of
the town was funded by iFour at a cost of R150 million. The anchor tenant,
Shoprite Checkers, is trading ahead of their budget. The Jeffreys Bay market has
been oversupplied with retail developments and management anticipate high
vacancies for the foreseeable future.
7 Nongoma Shopping Centre in Kwa-Zulu Natal was developed with R80 million
finance from iFour. The project ran into considerable difficulties as a result
of the involvement of an inexperienced developer. It is anticipated that
Pangbourne will be compelled to take ownership of the centre in due course,
which may result in a capital loss.
The existing portfolio
The entire property portfolio has been subject to an aggressive programme of
refurbishment and maintenance to address the historical backlog. This will
assist Pangbourne to attract new tenants and to retain existing tenants. Whilst
the securitisation structure is limiting, industrial minis and smaller
industrial properties that do not fit the current portfolio strategy will be
sold when market conditions permit. In line with Pangbourne`s focus on
industrial and commercial properties, retail properties will be sold over time.
Current vacancies have reduced to 3,8% from the June 2008 level of 4,4%. General
market conditions have deteriorated due to the supply of new developments and a
decline in the economy. Management is nonetheless confident that the improved
condition of the properties and aggressive marketing campaigns will limit any
increases in vacancies.
Disposals
The following properties were transferred during the period under review:
Book value Sales price
Building (R`000) (R`000)
Culemborg, Cape Town 209 965 249 457
25 Wellington Road, Parktown 34 000 34 000
16 Pressburg Road, Founders Hill 11 500 11 500
659 Electron Avenue, Isando 7 293 7 738
Acquisitions
The board has set a target gearing level of 40% or below. Acquisition
opportunities will not be actively pursued until this target is reached.
OUTLOOK
After a difficult period of corporate activity and restructuring, Pangbourne is
now in a position to produce superior results.
CONSOLIDATED BALANCE SHEETS
Unaudited Audited Restated
31 Dec 2008 30 Jun 2008 31 Dec 2007
R`000 R`000 R`000
ASSETS
Non-current assets 11 725 804 12 159 323 6 867 785
Investment property 9 373 617 10 713 398 4 826 696
Straight-lining of rental income
adjustment 110 958 179 569 68 075
Investment property under
development 818 986 475 577 308 852
Investment in and loans to
associates 349 957 356 958 1 352 937
Investments 390 921 - -
Loans 681 365 426 606 298 837
Property, plant and equipment - 7 215 12 388
Current assets 640 719 1 634 015 359 829
Loans - 62 118 -
Investment property held for sale 405 819 520 188 -
Trade and other receivables 170 867 824 713 346 629
Cash and cash equivalents 64 033 226 996 13 200
Total assets 12 366 523 13 793 338 7 227 614
EQUITY AND LIABILITIES
Total equity attributable to
equity holders 4 007 521 4 400 985 2 354 279
Share capital 3 929 3 852 2 737
Share premium 2 083 919 2 020 264 1 133 474
Non-distributable reserves 1 919 673 2 376 869 1 218 068
Retained earnings - - -
Minority interest - 255 039 225 247
Total liabilities 8 359 002 9 137 314 4 648 088
Non-current liabilities 6 527 847 7 041 327 4 410 719
Linked debentures 1 767 784 1 733 246 1 201 892
Interest-bearing borrowings 4 018 510 4 450 674 3 006 546
Deferred tax 741 553 857 407 202 281
Current liabilities 1 831 155 2 095 987 237 369
Trade and other payables 485 533 356 907 70 706
Linked debenture interest payable 249 455 244 786 63 623
Income tax payable 1 184 14 600 1 522
Interest-bearing borrowings 1 094 983 1 479 694 101 518
Total equity and liabilities 12 366 523 13 793 338 7 227 614
CONSOLIDATED INCOME STATEMENTS
Unaudited Audited Restated
6 months year 6 months
ended ended ended
31 Dec 2008 30 Jun 2008 31 Dec 2007
R`000 R`000 R`000
Net rental and related income 413 908 455 374 235 434
Recoveries and contractual
rental income 661 010 624 477 305 471
Straight-lining of rental income
adjustment (44 626) 14 688 13 353
Rental income 616 384 639 165 318 824
Property operating expenses (202 476) (183 791) (83 390)
Minority share of distributable
earnings - (19 695) -
Distributable income from
investments 16 757 - -
Profit on disposal of investments
and investment property 39 746 11 467 864
Profit on disposal of investment
property 39 746 7 527 864
Profit on disposal of investments - 3 940 -
Fair value gains on investments
and investment property 19 646 1 094 321 102 728
Fair value gain on investment 116 081
property - 1 109 009
Adjustment resulting from straight-
lining of rental
income 44 626 (14 688) (13 353)
Fair value loss on investments (24 980) - -
Other income 7 702 68 460 72 068
Administrative expenses (31 277) (90 332) (74 816)
Net recognition/(impairment)
of goodwill - 137 652 (45 693)
Impairment of intangible asset - (23 924) (23 924)
Loss on sale of subsidiary (35 030) - -
Deconsolidation of Monyetla
Property Fund Limited (30 232) - -
Income/(loss) from associate
companies 11 682 223 984 (19 172)
Profit before net finance costs 412 902 1 857 307 247 489
Net finance costs (967 314) (327 342) (129 967)
Finance income 53 483 324 782 74 598
Interest from loans 51 257 22 692 74 598
Fair value adjustment on
interest rate swaps - 152 226 -
Interest on linked units issued
cum distribution 2 226 149 864 -
Finance costs (1 020 797) (652 124) (204 565)
Interest on borrowings (270 877) (233 126) (137 011)
Fair value adjustment on
interest rate swaps (500 465) - (1 777)
Fair value adjustment on
bond option - (17 256) (4 202)
Interest to linked debenture (249 455) (401 742) (61 575)
holders
(Loss)/profit before income tax (554 412) 1 529 965 117 522
Income tax 97 332 (267 092) (53 336)
(Loss)/profit for the period (457 080) 1 262 873 64 186
Attributable to:
Equity holders of the company (457 080) 1 222 838 64 037
Minority interest - 40 035 149
(457 080) 1 262 873 64 186
Basic earnings per share (cents) (116,35) 371,14 23,39
Basic earnings per linked unit
(cents) (52,85) 493,07 45,88
Diluted earnings per share (cents) (106,53) 340,17 21,52
Diluted earnings per linked unit
(cents) (48,39) 451,93 42,21
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributab
le to
equity
holders of
the group
Non-
Share Share distributable Retained
capital premium reserves earnings
Unaudited R`000 R`000 R`000 R`000
Balance at 30 June 2007 2 392 812 750 - 1 154 031
Issue of units 264 218 424
Units issued to the
Pangbourne Unit Purchase
Trust 81 102 300
Change in ownership in
subsidiary
Profit for the period 64 037
Transfer to non-
distributable reserves 1 218 068 (1 218 068)
Balance at 31 December
2007 2 737 1 133 474 1 218 068 -
Issue of units 1 239 1 076 118
Units issued to BEE
partners eliminated (124) (189 328)
Change in ownership in
subsidiary
Profit for the period 1 158 801
Transfer to non-
distributable reserves 1 158 801 (1 158 801)
Balance at 30 June 2008 3 852 2 020 264 2 376 869 -
Units issued to the
Pangbourne Unit Purchase
Trust 77 63 655
Loss on units issued by (116)
the Pangbourne Unit
Purchase Trust to
employees
Deconsolidation/disposal
of subsidiaries
Loss for the period (457 080)
Transfer to non-
distributable reserves (457 080) 457 080
Balance at 31 December
2008 3 929 2 083 919 1 919 673 -
Minority Total
Total interest equity
Unaudited R`000 R`000 R`000
Balance at 30 June 2007 1 969 173 222 471 2 191 644
Issue of units 218 688 218 688
Units issued to the Pangbourne
Unit Purchase Trust
102 381 102 381
Change in ownership in
subsidiary - 2 627 2 627
Profit for the period 64 037 149 64 186
Transfer to non-distributable
reserves - -
Balance at 31 December 2007 2 354 279 225 247 2 579 526
Issue of units 1 077 357 1 077 357
Units issued to BEE partners
eliminated (189 452) (189 452)
Change in ownership in
subsidiary - (10 094) (10 094)
Profit for the period 1 158 801 39 886 1 198 687
Transfer to non-distributable
reserves - -
Balance at 30 June 2008 4 400 985 255 039 4 656 024
Units issued to the Pangbourne
Unit Purchase Trust
63 732 63 732
Loss on units issued by the
Pangbourne Unit Purchase
Trust to employees (116) (116)
Deconsolidation/disposal of
subsidiaries - (255 039) (255 039)
Loss for the period (457 080) - (457 080)
Transfer to non-distributable
reserves - -
Balance at 31 December 2008 4 007 521 - 4 007 521
RECONCILIATION OF (LOSS)/PROFIT FOR THE PERIOD TO HEADLINE EARNINGS AND
DISTRIBUTABLE INCOME
Unaudited Audited Restated
6 months year 6 months
ended ended ended
31 Dec 2008 30 Jun 2008 31 Dec 2007
R`000 R`000 R`000
Basic earnings (shares) -
(loss)/profit for the period
attributable to equity holders (457 080) 1 222 838 64 037
- interest to linked debenture
holders 249 455 401 742 61 575
Basic earnings (linked units) (207 625) 1 624 580 125 612
Adjusted for: (156 724) (952 424) 19 361
- fair value gain on investment
property (44 626) (1 094 321) (102 728)
- fair value loss on investments 24 980 - -
- profit on disposal of investment
property (39 746) (7 527) (864)
- profit on disposal of
investments - (3 940) -
- (net recognition)/impairment of
goodwill - (137 652) 45 693
- impairment of intangible asset - 23 924 23 924
- income tax effect (97 332) 267 092 53 336
Headline earnings (364 349) 672 156 144 973
Profit for the period attributable
to minorities - 40 035 149
Adjustment resulting from straight-
lining of rental income 44 626 (14 688) (13 353)
Fair value adjustment on interest
rate swaps 500 465 (152 226) 1 777
Fair value adjustment on bond
option - 17 256 4 202
Consolidation adjustment for BEE
partners 15 142 2 009 15 144
Restructuring costs - 17 168 -
Loss on sale of subsidiary 35 030 - -
Deconsolidation of Monyetla
Property Fund Limited 30 232 - -
Post-acquisition reserves from
associate companies (11 682) (177 263) 19 172
Consolidation adjustment for
Monyetla Property Fund Limited - - (4 011)
Net loss of a subsidiary - (2 646) -
Other (9) (59) -
Distributable income 249 455 401 742 168 053
Less: Distribution declared (249 455) (401 742) (168 053)
Income not distributed - - -
Headline earnings per share
(cents) (156,25) 82,07 30,46
Headline earnings per linked unit
(cents) (92,75) 204,01 52,95
Diluted headline earnings per
share (cents) (143,05) 75,22 28,03
Diluted headline earnings per (84,92) 186,98 48,72
linked unit (cents)
Basic earnings per share, basic earnings per linked unit, headline
earnings per share and headline earnings per linked unit are based on the
weighted average of 392 841 028 (30 Jun `08: 329 479 609; 31 Dec `07: 273
793 190) shares/linked units in issue during the period.
Diluted earnings per share, diluted earnings per linked unit, diluted
headline earnings per share and diluted headline earnings per linked unit
are based on the weighted average of 429 070 837 (30 Jun `08: 359 478
798; 31 Dec `07: 297 561 759) shares/linked units in issue during the
period.
Abridged consolidated cash flow statements
Unaudited Audited Restated
6 months year 6 months
ended ended ended
31 Dec 2008 30 Jun 2008 31 Dec 2007
R`000 R`000 R`000
Cash inflow/(outflow) from
operating activities 221 323 (174 660) (41 188)
Cash outflow from investing
activities (135 254) (2 997 073) (1 188 266)
Cash (outflow)/inflow from
financing activities (249 032) 3 373 114 1 217 039
(Decrease)/increase in cash and
cash equivalents (162 963) 201 381 (12 415)
Cash and cash equivalents at
beginning of period 226 996 25 615 25 615
Cash and cash equivalents at
end of period 64 033 226 996 13 200
Cash and cash equivalents consist
of:
Current accounts 64 033 226 996 13 200
Notes
1 Preparation
The consolidated interim 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 IAS34 and the
requirements of the Companies Act (Act 61 of 1973). The accounting policies
adopted are consistent with those of the prior period. The 31 December 2007
information has been restated to reflect the change in accounting policy
relating to revenue (revenue includes only property related income and utility
recoveries whereas all fees are included in other income) and the transfer of
retained earnings to non-distributable reserves. This report was not audited or
reviewed by the company`s auditors.
2 Summary of financial performance
2.1 To comply with financial reporting requirements, the group will consolidate
entities that do not form part of its operations, do not operate under its
operating policies and whose businesses, risk profiles and debt levels are not
comparable to that of its own.
Disclosure under "Property operations" excludes Panya Investments (Pty) Ltd,
Meago Siyam Investments (Pty) Ltd and Tokoloho Investments (Pty) Ltd ("BEE
partners").
2.2 Pangbourne signed sureties in favour of banks with regards to the funding
of BEE partners. The BEE partners collectively hold 36 229 809 linked units in
Pangbourne.
The following table indicates the effect of consolidating BEE partners into the
group financial statements (the column "Property operations" indicates
Pangbourne`s results had the BEE partners not been consolidated):
BEE Property
Consolidated partners operations
31 December 2008 R`000 R`000 R`000
Income statement
Financing costs
- Interest on borrowings (270 877) 38 147 (232 730)
- Fair value adjustment on
interest rate swaps (500 465) 15 005 (485 460)
- Interest to linked debenture
holders (249 455) (23 005) (272 460)
Income tax expense 97 332 4 044 101 376
Balance sheet
Current assets
- Trade and other receivables 170 867 135 767 306 634
Share capital 3 929 362 4 291
Share premium 2 083 919 309 379 2 393 298
Non-distributable reserves 1 919 673 19 192 1 938 865
Non-current liabilities
- Linked debentures 1 767 784 163 035 1 930 819
- Interest-bearing borrowings
(non-current and current) 5 113 493 (365 839) 4 747 654
- Deferred tax 741 553 (6 629) 734 924
Current liabilities
- Trade and other payables 485 533 (6 738) 478 795
- Linked debenture interest
payable 249 455 23 005 272 460
Historical performance 31 Dec 2008 30 Jun 2008 31 Dec 2007
Distribution per linked unit
(cents) 63,50 63,43 57,50
Units in issue 429 070 837 421 395 837 297 561 759
Property operations
Net asset value* R14,61 R15,64 R12,91
Gearing ratio** 40,3% 36,7% 37,9%
Units in issue 429 070 837 421 395 837 297 561 759
Consolidated
Net asset value* R14,70 R15,93 R12,99
Units in issue 392 841 028 385 166 028 273 793 190
*Net asset value includes total equity attributable to equity holders and linked
debentures.
**The gearing ratio is calculated by dividing the total gearing by the
investment in non-current assets.
The 31 December 2007 net asset value and gearing calculation assumes that the
investments in iFour and Siyathenga were carried at cost.
3 GEARING
Amount Amount Fixed % of
Expiry R`million R`million rate borrowings
Interest rate swaps
January 2009 100,0 11,24% 2,12%
October 2009 10,0 9,05% 0,21%
January 2010 200,0 10,73% 4,23%
October 2010 200,0 10,45% 4,23%
January 2011 100,0 10,33% 2,12%
September 2011 100,0 10,33% 2,12%
October 2011 130,0 10,26% 2,75%
December 2011 200,0 8,55% 4,23%
September 2013 400,0 9,85% 8,47%
October 2014 460,0 9,36% 9,74%
September 2015 200,0 9,61% 4,23%
Pangbourne pays the fixed rate and receives the 3-month Jibar floating
rate on the swaps.
Interest rate cap
October 2012 140,0 10,75%
Interest rate floor 2,96%
October 2012 140,0 9,40%
Securitised loan
July 2012 1 190,0 8,85% 25,20%
The securitised loan is shown as nominal annual compounded quarterly and
is inclusive of lending margin, amortised upfront costs and ongoing
management fees payable to the securitisation administrators, trustees,
rating agency and other external costs. The interest rate applicable to
the securitisation loan is of a stepped nature and will increase from
8,85% to 10,36% in July 2010.
Hedged borrowings 3 290,0 140,0 72,61%
Variable rate borrowings 1 293,7 27,39%
Total gearing* 4 723,7 100,00%
*Total gearing comprises the level of external interest-bearing
borrowings, excluding those of BEE partners, should current liabilities
be liquidated and current assets be realised.
31 Dec 30 Jun 31 Dec
2008 2008 2007
Gearing is calculated as
follows: R`million R`million R`million
Interest-bearing borrowings 5 113,5 5 930,4 3 108,1
Interest-bearing borrowings
of BEE partners (365,8) (463,4) (291,6)
Current liabilities 736,2 616,3 135,9
Current liabilities of BEE
partners 16,3 (14,5) (9,6)
Current assets (640,7) (1 634,0) (359,8)
Current assets of BEE
partners (135,8) 22,8 16,8
Total gearing 4 723,7 4 457,6 2 599,8
4 Lease expiry profile and segmental analysis
Based on
Based on contractual
rentable rental
Lease expiry area income
Vacant 3,8% -
June 2009 13,8% 12,2%
June 2010 15,5% 17,0%
June 2011 16,7% 20,5%
June 2012 17,1% 15,5%
June 2013 15,5% 17,4%
June 2014 5,7% 6,2%
>June 2014 11,9% 11,2%
Total 100,0% 100,0%
5 Segmental analysis
31 Dec 2008 30 Jun 2008 31 Dec 2007
Rental income R`000 R`000 R`000
Commercial 119 696 116 244 58 990
Industrial 271 364 457 163 222 064
Retail 201 596 62 197 37 770
Other 23 728 3 561 -
Total 616 384 639 165 318 824
31 Dec 2008 30 Jun 2008 31 Dec 2007
Profit before net finance costs R`000 R`000 R`000
Commercial 78 154 160 472 42 829
Industrial 223 435 1 262 173 254 875
Retail 136 869 132 272 37 823
Other 59 822 2 305 3 500
Corporate (85 378) 300 085 (91 538)
Total 412 902 1 857 307 247 489
6 Payment of interim distribution
The board has approved and notice is hereby given of an interim interest
distribution (distribution no. 45) of 63,50 cents per linked unit for the six
months ended 31 December 2008.
The last date to trade linked units cum distribution will be Friday, 13 March
2009 and trading will commence ex distribution on Monday, 16 March 2009. The
record date to participate in the distribution will be Friday, 20 March 2009.
Linked unit certificates may not be dematerialised or rematerialised between
Monday, 16 March 2009 and Friday, 20 March 2009, both days inclusive.
Payment of the distribution will be made to linked unitholders on Monday, 23
March 2009.
In respect of dematerialised linked unitholders, the distribution will be
transferred to the Central Securities Depository Participant accounts/broker
accounts on Monday, 23 March 2009. Certificated linked unitholders` distribution
payments will be posted on or about Monday, 23 March 2009.
By order of the board
Barry Stuhler Jacques van Wyk
Managing director Financial director
Johannesburg
24 February 2009
Directors
Dr Iraj Abedian (chairman), Barry Stuhler* (managing director), Des de Beer
(alternate: Vuso Majija), Ryan Falkenberg, Craig Hallowes*, Bryan Hopkins,
Annalese Manickum, Marius Muller*, Dave Savage, Ndhlabole Shongwe, Thando
Sishuba, Jacques van Wyk*, Trurman Zuma, (*Executive)
Company secretary
Abraham Bornman
Registered address
3rd 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 (Pty) Ltd
Date: 26/02/2009 16:46:05 Produced by the JSE SENS Department.
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