| Thu 19 Aug 2010, 12:00 | | PAP - Pangbourne Properties Limited - Condensed audited consolidated financial |
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PAP
PAP
PAP - Pangbourne Properties Limited - Condensed audited consolidated financial
statements for the year ended 30 June 2010
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")
CONDENSED AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE
2010
Directors` commentary
RESULTS
Pangbourne`s final distribution for the six months to 30 June 2010 amounted to
76,88 cents per linked unit. This represents an increase of 9,59% over the 70,15
cents per linked unit for the six months to 30 June 2009. Accordingly, the total
distribution for the year ended 30 June 2010 was 147,08 cents per linked unit
which is an increase of 10,05% over the 133,65 cents per linked unit
distribution for the year ended 30 June 2009.
REVIEW
Pangbourne`s growth this year can be attributed to operational efficiencies, an
emphasis on tenant retention and firm control of arrears and bad debts.
Competition for tenants has resulted in reduced rentals in certain areas as
competitors with exposure to speculative developments attempt to tenant
buildings at any cost. This should normalise over time.
Of further fundamental concern is the state of many of the local authorities in
areas where Pangbourne`s properties are located. Many of these authorities are
no longer reading utility meters, which has increased Pangbourne`s operating
costs and resulted in capital expenditure on installing meters that can be read
and managed remotely. Rates and utility expenses have also increased sharply
with no concomitant improvement in service delivery. These increases are
affecting net rentals achievable by all property owners.
OPERATIONS
The stringent processes, procedures and documentation introduced in 2008
continue to yield benefits. Although arrears increased marginally, they remain
firmly under control and are expected to decline in the new financial year.
REFURBISHMENT, REDEVELOPMENT AND MAINTENANCE
The comprehensive programme of maintenance to address the historical backlog has
largely been completed. The refurbishment and upgrading of existing buildings,
however, is ongoing. Current projects in the industrial portfolio include the
refurbishment of the external facade and creation of rentable hardstand at 45
Richard Cart Road in Mobeni, and the conversion of 2 Drakensberg Road,
Longmeadow, from multi-tenanted B-grade to single tenanted A-grade warehousing.
In the office portfolio, the projects completed during the period were the
modernisation and repainting of the external facades and the redoing of the
internal common areas including the foyers and lift lobbies at Oxford Manor in
Illovo, and the complete external refurbishment of Choice House in Bryanston
which is now ready to be re-tenanted. Current retail projects include the
redevelopment of Thrupps Centre to change the retail layout and reposition it
for its target market, a major refurbishment of Pineslopes Shopping Centre
including redesigning Casino View`s restaurant offering and the tenanting of N1
Value Centre in Cape Town with a Fruit & Veg City grocery anchor, all of which
will be completed by December 2010. The introduction of Dischem and Ster Kinekor
into Boardwalk Shopping Centre in Richards Bay to consolidate the centre`s
dominant position in the region has been completed.
VACANCIES
Approximately 13,9% of the existing leases expired during the period to the end
of June in terms of gross lettable area. Total vacancies have been marginally
reduced from 6,7% in December 2009 to 6,6% at 30 June 2010. The office market
remains weak with 10,9% of the space vacant at the end of June 2010 compared to
8,3% at December 2009. Retail vacancies increased slightly to 4,0% from 3,9%
mainly as a result of the redevelopment of Pineslopes Shopping Centre and
increased vacancies in the line shops in the smaller retail centres.
The increase in both office and retail vacancies was offset by the decrease in
the industrial portfolio vacancies which fell to 6,7% at
30 June 2010 from 7,4% in December 2009. Vacancies in the portfolio are expected
to increase during the next financial year.
ENIGMA
The remaining 28% of Enigma was acquired in August 2009 for R60,1 million. The
Enigma portfolio consists of 14 properties with 51 tenants and was acquired at
an average yield of 9%. The flagship property in this portfolio is the A-grade
Edward Nathan Sonnenberg office block located in the Sandton CBD.
SECURITISATION
Pangbourne repaid R470 million of the Series One securitisation programme in
October 2009. Simultaneously with this repayment, the property portfolio held as
security was restructured and properties to the value of R500 million were
released.
The Series Two securitisation programme continues to be a limiting factor in
actively asset managing the property portfolio. Management intends aggressively
addressing this issue with a view to reducing the size of the programme and
restructuring the portfolio of properties currently held as security.
VALUATIONS
The entire property portfolio was independently valued by Quadrant Properties.
There were no significant adjustments to valuation capitalisation rates. The net
asset value per unit increased from R15,48 at December 2009 to R16,18 at June
2010.
DISPOSALS
In October 2009 the group sold 56 properties to Fortress Income Fund Limited
("Fortress") for R998,2 million. Pangbourne received 58 621 875 Fortress A
units, 58 621 875 Fortress B units and R412 million in cash as consideration. In
addition, non-core properties to the value of R51,1 million were sold and
transferred during the period:
Book Net sale
value price
Property R`000 R`000
Shakas Head Industrial Estate 7 950 8 500
10 Enterprise Close 6 750 9 138
5 & 7 Ravenscraig Road 32 280 33 450
Total 46 980 51 088
Pangbourne has concluded a sale agreement for the following property, which
was not yet transferred at 30 June 2010:
Book Sale
value price
Property R`000 R`000
Willowbridge 283 000 283 000
ACQUISITIONS
Pangbourne acquired Atterbury`s shareholding in the Raceway Industrial Park
development companies for R28,5 million effective 1 July 2010. Pangbourne now
owns 24 ha of fully serviced and zoned industrial land in Raceway. Raceway
Industrial Park has already attracted numerous corporate users including
Massmart, LG Electronics, Mr Price and City Couriers. The construction of
additional on-ramps and off-ramps currently in progress is expected to further
enhance the desirability of the node. It is Pangbourne`s objective to develop up
to 71 000 m2 of A-grade warehouses in the park and sell the remaining land to
third parties.
Pangbourne purchased the remaining 50% of 1 Indianapolis Drive, a 5 965 m2 A-
grade industrial warehouse in Raceway Industrial Park, for R29,4 million at a
capitalisation rate of 8,23%.
A 1 487 m2 office block in Fourways Office Park was acquired for R14,8 million
at a forward yield of 10%. Pangbourne already owns the other nine buildings in
this office park and will now be able to manage the park more cost effectively.
EQUITY INVESTMENTS
Pangbourne currently holds 21,9 million A units and 58,0 million B units in
Fortress. The remaining holding in Fortress A units will be sold over the next
year.
Pangbourne`s entire holding in Capital Property Fund was sold during the
financial year.
CAPITAL STRUCTURE
Gearing has been reduced to 32,8% from 36,2% in December 2009, and Pangbourne is
now appropriately geared. New facilities totalling R1,3 billion have been
accepted to replace facilities expiring in the next six months.
Pangbourne currently has R1 061 million in unutilised facilities to take
advantage of any attractive buying opportunities which may arise.
PROSPECTS
Pangbourne`s strategy is to continue with the process of improving the quality
of the portfolio through aggressive asset management and upgrading, redeveloping
and refurbishing properties where appropriate. Pangbourne`s reduced gearing and
the planned restructuring of the Series Two securitisation programme will
facilitate these initiatives.
Increased competition for tenants from other landlords in some areas, poor
fundamentals of certain properties in Pangbourne`s portfolio and the increase in
operating costs have all put severe pressure on rentals during the last twelve
months which is affecting growth going forward. While the board expects
macroeconomic conditions to remain difficult for the 2011 financial year, the
board is nonetheless confident that Pangbourne will achieve growth in
distributions of between six and eight percent. This statement has not been
reviewed or reported on by Pangbourne`s auditors.
By order of the board
Barry Stuhler Jacques van Wyk
Managing director Financial director
Johannesburg
18 August 2010
Consolidated statement of financial position
Audited Audited
Jun 2010 Jun 2009
R`000 R`000
ASSETS
Non-current assets 11 709 169 10 937 277
Investment property 10 555 103 9 525 282
Straight-lining of rental revenue adjustment 193 518 142 775
Investment property under development 248 068 237 249
Investments 338 511 303 806
Investment in and loans to associates 75 529 279 433
Loans 298 440 448 732
Current assets 502 291 1 283 618
Investment property held for sale 283 000 998 215
Loans 43 161 8 579
Trade and other receivables 108 497 197 279
Cash and cash equivalents 67 633 79 545
Total assets 12 211 460 12 220 895
EQUITY AND LIABILITIES
Total equity attributable to equity holders 4 737 736 4 351 518
Share capital 4 055 4 034
Share premium 2 206 732 2 181 285
Non-distributable reserves 2 526 949 2 166 199
Retained earnings - -
Total liabilities 7 473 724 7 869 377
Non-current liabilities 6 010 839 6 382 665
Linked debentures 1 824 821 1 815 011
Interest-bearing borrowings 3 286 043 3 855 544
BEE instrument 122 192 -
Deferred tax 777 783 712 110
Current liabilities 1 462 885 1 486 712
Trade and other payables 425 363 395 655
Linked debenture interest payable 311 761 282 939
Income tax payable 1 832 2 192
Interest-bearing borrowings 723 929 805 926
Total equity and liabilities 12 211 460 12 220 895
Consolidated statement of comprehensive income
Audited Audited
for the for the
year ended year ended
Jun 2010 Jun 2009
R`000 R`000
Net rental and related revenue 1 009 084 886 808
Recoveries and contractual rental revenue 1 409 560 1 310 046
Straight-lining of rental revenue adjustment 50 743 (16 947)
Rental revenue 1 460 303 1 293 099
Property operating expenses (451 219) (406 291)
Distributable income from investments 10 706 31 666
Fair value gain on investment property
and investments 607 141 51 653
Fair value gain on investment property 519 600 59 446
Adjustment resulting from straight-lining
of rental revenue (50 743) 16 947
Fair value gain/(loss) on investments 138 284 (24 740)
Fair value loss on BEE instrument (122 192) -
Other income - 11 010
Administrative expenses (39 242) (46 225)
Net recognition of goodwill 9 238 -
Loss on sale of subsidiaries - (65 262)
Income from associates 33 462 11 323
Profit before net finance costs 1 508 197 880 973
Net finance costs (1 043 451) (1 217 685)
Finance income 54 374 91 855
Interest from loans 53 655 85 182
Interest on linked units issued cum
distribution 719 6 673
Finance costs (1 097 825) (1 309 540)
Interest paid on borrowings (447 493) (534 519)
Capitalised interest 26 294 48 473
Fair value adjustment on interest rate swaps (81 724) (291 100)
Interest to linked debenture holders
- interim (283 141) (249 455)
- final (311 761) (282 939)
Profit/(loss) before income tax expense 464 746 (336 712)
Income tax expense (103 996) 140 981
Profit/(loss) for the year attributable
to equity holders 360 750 (195 731)
Total comprehensive income/(loss) for the year 360 750 (195 731)
Basic earnings per share (cents) 89,20 (49,17)
Basic earnings per linked unit (cents) 236,30 84,57
Diluted earnings per share (cents) 81,87 (49,17)
Diluted earnings per linked unit (cents) 216,87 77,52
Reconciliation of profit/(loss) for the year to headline earnings and
distributable income
Audited Restated
for the for the
year ended year ended
Jun 2010 Jun 2009
R`000 R`000
Basic earnings (shares) - profit/(loss) for
the year attributable to equity holders 360 750 (195 731)
- interest to linked debenture holders 594 902 532 394
Basic earnings (linked units) 955 652 336 663
Adjusted for: (368 992) (65 387)
- fair value gain on investment property (468 857) (76 393)
- net recognition of goodwill (9 238) -
- loss on sale of subsidiaries - 65 262
- income tax effect 109 103 (54 256)
Headline earnings per linked unit 586 660 271 276
Fair value loss on BEE instrument 122 192 -
Adjustment resulting from straight-lining
of rental revenue (50 743) 16 947
Fair value (gain)/loss on investments (138 284) 24 740
Fair value adjustment on interest rate swaps 81 724 291 100
Consolidation adjustment for BEE (2 877) 14 655
Post-acquisition reserves from associate
companies 1 337 -
Other - 401
Income tax effect (5 107) (86 725)
Distributable income 594 902 532 394
Less: distribution declared (594 902) (532 394)
Income not distributed - -
Headline earnings per share (cents) (2,04) (65,59)
Headline earnings per linked unit (cents) 145,06 68,14
Diluted headline earnings per share (cents) (2,04) (65,59)
Diluted headline earnings per linked unit
(cents) 133,13 62,46
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 404 426 028 (2009: 398 088 528) shares/linked units in issue during
the year.
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 440 655 837 (2009: 434 318 337) shares/linked units in
issue during the year.
Abridged consolidated statement of cash flows
Audited Audited
for the for the
year ended year ended
Jun 2010 Jun 2009
R`000 R`000
Cash (outflow)/inflow from operating activities (39 199) 297 156
Cash inflow from investing activities 1 149 988 126 573
Cash outflow from financing activities (1 122 701) (571 180)
Decrease in cash and cash equivalents (11 912) (147 451)
Cash and cash equivalents at the beginning
of the year 79 545 226 996
Cash and cash equivalents at the end
of the year 67 633 79 545
Cash and cash equivalents consist of:
Cash on call iro securitisation 62 994 59 086
Current accounts 4 639 20 459
67 633 79 545
Consolidated statement of changes in equity
Attributable to equity holders of the group
Non-
Share Share distributable Retained
capital premium reserves earnings Total
Group R`000 R`000 R`000 R`000 R`000
Balance at
30 June 2008 3 852 2 020 264 2 376 869 - 4 400 985
Issue of linked
units 182 161 021 161 203
Loss on linked units
issued by the
Pangbourne Unit
Purchase Trust to
employees
(116) (116)
Loss on linked units
disposed of by the
Pangbourne Unit
Purchase Trust
(14 823) (14 823)
Disposal of
subsidiary -
Total comprehensive
loss for the year
(195 731) (195 731)
Transfer to non-
distribu-table
reserves (195 731) 195 731 -
Balance at
30 June 2009 4 034 2 181 285 2 166 199 - 4 351 518
Issue of
2 180 000 linked
units on 17 March
2010 21 25 447 25 468
Total comprehensive
income for the year
360 750 360 750
Transfer to non-
distribu-table
reserves 360 750 (360 750) -
Balance at
30 June 2010 4 055 2 206 732 2 526 949 - 4 737 736
Consolidated statement of changes in equity (continued)
Minority Total
interest equity
Group R`000 R`000
Balance at
30 June 2008 255 039 4 656 024
Issue of linked
units 161 203
Loss on linked units
issued by the
Pangbourne Unit
Purchase Trust to
employees
(116)
Loss on linked units
disposed of by the
Pangbourne Unit
Purchase Trust
(14 823)
Disposal of
subsidiary (255 039) (255 039)
Total comprehensive
loss for the year
(195 731)
Transfer to non-
distribu-table
reserves -
Balance at
30 June 2009 - 4 351 518
Issue of
2 180 000 linked
units on 17 March
2010 25 468
Total comprehensive
income for the year
360 750
Transfer to non-
distribu-table
reserves -
Balance at
30 June 2010 - 4 737 736
Notes
1 PREPARATION AND AUDIT OPINION
The condensed audited consolidated financial statements have been prepared in
accordance with the framework concepts and the measurement and recognition
requirements of IFRS, the AC500 standards as issued by the Accounting Practices
Board, the information as required by IAS34: Interim Financial Reporting, the
JSE Listings Requirements and the South African Companies Act. The condensed
audited financial statements have been prepared using accounting policies that
comply with IFRS and which are consistent with those applied in the prior year.
Headline earnings for June 2009 has been restated to include the fair value
adjustments on investments and to exclude the loss on sale of subsidiaries.
The group previously disclosed profit or loss on disposal of investment property
and investments separately from the fair value adjustments on these items. To
better reflect the nature of these transactions, these amounts are now combined
into the respective fair value adjustment lines in the statement of
comprehensive income. Deloitte & Touche has audited the financial information
set out in this report. Their unmodified audit report is available for
inspection at the group`s registered address.
2 SUMMARY OF FINANCIAL PERFORMANCE - UNAUDITED
Jun 2010 Dec 2009 Jun 2009 Dec 2008
Distribution per
linked unit (cents) 76,88 70,20 70,15 63,50
Units in issue 441 745 837 439 565 837 439 565 837 429 070 837
Property operations
Net asset value* R16,22 R15,30 R15,02 R14,61
Gearing ratio** 28,8% 32,0% 34,0% 38,0%
Units in issue 441 745 837 439 565 837 439 565 837 429 070 837
Consolidated
Net asset value* R16,18 R15,48 R15,17 R14,70
Gearing ratio** 32,8% 36,2% 38,1% 41,3%
Units in issue 405 516 028 403 336 028 403 336 028 392 841 028
*Net asset value includes total equity attributable to equity holders and
linked debentures.
**The gearing ratio is calculated by dividing interest-bearing borrowings by
total assets.
2.1 To comply with financial reporting requirements the group will account for
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 In total 36 229 809 linked units were issued to BEE partners and Pangbourne
is standing surety for the funding obligations of BEE partners in acquiring
these units. In terms of IFRS the issue did not take place and the essence of
the transaction was that the BEE shareholders received a right/option to acquire
linked units in Pangbourne at a future date at a predetermined price. As a
consequence, the issue of linked units has been eliminated in the preparation of
these financial statements. The right/option the BEE shareholders have acquired
has a value of R122 192 000 (2009: nil). The value of this right/option will be
considered on an ongoing basis and changes in its fair value are accounted for
through profit and loss.
The following table indicates the effect of the BEE transaction on the group
financial statements (the column "Property operations" indicates Pangbourne`s
results had the BEE transaction been accounted for as an issue for value):
BEE Property
Consolidated partners operations
Jun 2010 R`000 R`000 R`000
Statement of comprehensive income
Fair value loss on BEE instrument (122 192) 122 192 -
Finance costs
- interest paid on borrowings (447 493) 50 410 (397 083)
- interest to linked debenture
holders (311 761) (53 287) (365 048)
Statement of financial position
Current assets
Trade and other receivables 108 497 (304) 108 193
Total equity attributable to
equity holders
Share capital 4 055 362 4 417
Share premium 2 206 732 309 379 2 516 111
Non-distributable reserves 2 526 949 130 678 2 657 627
Non-current liabilities
Linked debentures 1 824 821 163 035 1 987 856
Interest-bearing borrowings
(non-current and current) 4 009 972 (498 415) 3 511 557
BEE instrument 122 192 (122 192) -
Current liabilities
Trade and other payables 425 363 (11 004) 414 359
Linked debenture interest payable 311 761 27 853 339 614
3 GEARING
Amount Amount % of
Expiry R`million R`million Rate borrowings
Interest rate swaps
August 2011 100,0 7,35% 2,8%
September 2011 100,0 10,33% 2,8%
October 2011 130,0 10,26% 3,7%
December 2011 200,0 8,55% 5,7%
May 2012 200,0 8,49% 5,7%
October 2012 10,0 8,22% 0,3%
August 2013 100,0 8,05% 2,8%
September 2013 400,0 9,85% 11,4%
October 2014 460,0 9,36% 13,1%
April 2015 300,0 8,26% 8,5%
September 2015 200,0 9,61% 5,7%
August 2016 200,0 8,51% 5,7%
September 2016 400,0 8,42% 11,4%
September 2017 50,0 8,45% 1,4%
Interest rate cap
October 2012 140,0 10,75%
Interest rate floor 4,0%
October 2012 140,0 9,40%
Securitised loan
July 2012 1 190,0 10,36% 33,9%
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.
Hedged borrowings 4 040,0 140,0 118,9%
Variable rate borrowings (668,4) (18,9%)
Total gearing* 3 511,6 10,99% 100,0%
*Total gearing comprises the level of external interest-bearing borrowings,
excluding those of BEE partners.
4 LEASE EXPIRY PROFILE - UNAUDITED
Based on Based on
rentable contractual
Lease expiry area rental income
Vacant 6,6% -
June 2011 27,6% 29,2%
June 2012 17,7% 18,4%
June 2013 20,5% 22,2%
June 2014 7,4% 8,2%
June 2015 7,9% 9,0%
>June 2015 12,3% 13,0%
Total 100,0% 100,0%
5 SEGMENTAL ANALYSIS
Jun 2010 Jun 2009
Rental income R`000 R`000
Commercial 298 021 196 425
Industrial 633 123 619 169
Retail 487 374 437 897
Other 41 785 39 608
Total 1 460 303 1 293 099
Profit before net finance costs
Commercial 370 920 170 039
Industrial 775 888 437 279
Retail 270 753 283 297
Other 60 380 72 586
Corporate 30 256 (82 228)
Total 1 508 197 880 973
6 PAYMENT OF FINAL DISTRIBUTION
The board has approved and notice is hereby given of a final interest
distribution (distribution no 48) of 76,88 cents per linked unit for the six
months ended 30 June 2010. The last date to trade linked units cum distribution
will be Friday, 3 September 2010 and trading will commence ex distribution on
Monday, 6 September 2010. The record date to participate in the distribution
will be Friday, 10 September 2010.
Linked unit certificates may not be dematerialised or rematerialised between
Monday, 6 September 2010 and Friday, 10 September 2010, both days inclusive.
Payment of the distribution will be made to linked unitholders on Monday, 13
September 2010.
In respect of dematerialised linked unitholders, the distribution will be
transferred to the Central Securities Depository Participant accounts/broker
accounts on Monday, 13 September 2010. Certificated linked unitholders`
distribution payments will be posted on or about Monday, 13 September 2010.
Directors
Dr Iraj Abedian (chairman) Barry Stuhler* (managing director)
Des de Beer (alternate: Vuso Majija) Gerard de Rauville
Ryan Falkenberg Craig Hallowes* Bryan Hopkins Annalese Manickum
Dave Savage Thando Sishuba Jacques van Wyk* Trurman Zuma
(*Executive)
Company secretary
Wiko Serfontein
Registered address
3rd Floor Rivonia Village Rivonia Boulevard Rivonia 2191
(PO Box 4392 Rivonia 2128)
Transfer secretaries
Link Market Services South Africa (Proprietary) Limited
11 Diagonal Street Johannesburg 2001
Sponsor
Java Capital
Date: 19/08/2010 12:00:01 Produced by the JSE SENS Department.
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