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PMM
PMM
PMM - Premium Properties Limited - Unaudited results of the group for the six
months ended 31 August 2010
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")
UNAUDITED RESULTS OF THE GROUP FOR THE SIX MONTHS ENDED 31 AUGUST 2010
Distribution up by 13,1% to 58,70 cents per linked unit
Assets exceed R3,5 billion
Increase in net asset value by 3,8% to 1 363 cents
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
% six months six months Year to
Change 31 August 31 August 28 February
R`000 2010 2009 2010
Revenue 218 801 198 204 407 720
- earned on a contractual 10,8 219 312 197 944 409 128
basis
- straight line lease (511) 260 (1 408)
adjustment
Operating costs (88 590) (82 472) (168 042)
Net rental income from 130 211 115 732 239 678
properties
- earned on a contractual 13,2 130 722 115 472 241 086
basis
- straight line lease (511) 260 (1 408)
adjustment
Administrative costs (9 975) (8 285) (17 147)
Depreciation (1 459) (883) (2 050)
Operating profit 11,5 118 777 106 564 220 481
Fair value adjustments of 97 701 70 913 193 833
investment properties net
fair value adjustment
- gross fair value 97 190 71 173 192 425
adjustment
- attributable to straight 511 (260) 1 408
line lease adjustment
Investment income 7 048 31 778 53 433
- Interest received 488 974 1 885
- Investment income - 2 002 3 653 7 756
associate share of after
tax profit
- fair value 435 22 418 34 555
adjustment/capital reserves
- interest and dividends 4 123 4 733 9 237
Profit before finance 6,8 223 526 209 255 467 747
charges
Finance costs 20,7 (58 103) (48 137) (96 188)
- Interest on borrowings (57 473) (50 045) (102 654)
- Interest capitalised 8 016 1 908 6 466
- Fair value adjustments on (8 646) - -
interest rate derivatives
Profit before amortisation 2,7 165 423 161 118 371 559
of debenture premium
Amortisation of debenture 4 906 4 806 9 611
premium
Profit before debenture 170 329 165 924 381 170
interest
Debenture interest 13,1 (75 995) (67 187) (143 833)
Profit before taxation 94 334 98 737 237 337
Taxation charge
- Deferred taxation (24 223) (19 856) (48 673)
Total comprehensive income 70 111 78 881 188 664
for the year attributable
to equity holders
Weighted linked units in 130 106 130 106 130 106
issue (`000)
Linked units in issue 130 106 130 106 130 106
(`000)
Basic and diluted earnings (11,1) 53,9 60,6 145,0
per share (cents)
Basic and diluted earnings 112,3 112,3 255,6
per linked unit (cents)
Distribution per linked
unit (cents)
Dividends 0,29 0,26 0,55
Interest 58,41 51,64 110,55
Total 13,1 58,70 51,90 111,10
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Audited
31 August 28 February
R`000 2010 2010
ASSETS
Non-current assets 3 528 576 3 305 497
Investment properties 3 229 538 3 005 380
Property, plant and equipment 54 572 36 812
Operating lease assets 23 872 24 383
Investment in associate 220 594 238 922
Current assets 35 632 26 667
Total assets 3 564 208 3 332 165
EQUITY AND LIABILITIES
Share capital and reserves 1 379 818 1 310 084
Share capital and premium 2 507 2 507
Non-distributable reserve 1 345 934 1 276 473
Retained earnings 31 377 31 104
Non-current liabilities 1 612 535 1 499 611
Debentures and premium 393 163 398 069
Interest bearing borrowings 822 339 728 733
Deferred taxation 397 033 372 810
Current liabilities 571 855 522 469
Interest bearing 401 749 371 474
Non-interest bearing 93 734 73 972
Linked unitholders for distribution 76 372 77 023
Total equity and liabilities 3 564 208 3 332 166
Linked units in issue (`000) 130 106 130 106
Net asset value per linked unit (cents) 1 363 1 313
Net asset value per linked unit (cents)
- before providing for deferred tax 1 668 1 599
Loan to investment value ratio (%) 34,7 33,3
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
six months six months Year to
31 August 31 August 28 February
R`000 2010 2009 2010
CASH FLOW FROM OPERATING
ACTIVITIES
Net rental income from properties 119 288 106 304 221 889
Adjustment for:
- Depreciation 1 459 883 2 050
- Working capital changes 19 502 (9 308) 8 672
Cash generated from operations 140 249 97 879 232 611
Investment income 4 611 5 707 11 123
Finance costs (57 473) (50 045) (102 654)
Distribution to linked unit (77 023) (64 142) (131 668)
holders paid
Net cash (outflow)/inflow from 10 364 (10 601) 9 412
operating activities
CASH FLOW FROM INVESTING
ACTIVITIES
Investing activities (116 894) (105 614) (239 185)
Net cash outflow used in investing (116 894) (105 614) (239 185)
activities
CASH FLOW FROM FINANCING
ACTIVITIES
Increase in interest bearing 99 584 119 479 230 422
borrowings
Net cash generated from financing 99 584 119 479 230 422
activities
NET (DECREASE)/INCREASE IN CASH (6 946) 3 264 649
AND CASH EQUIVALENTS
Cash and cash equivalents at (15 253) (15 902) (15 902)
beginning of year
Cash and cash equivalents at end (22 199) (12 638) (15 253)
of year
RECONCILIATION - EARNINGS TO DISTRIBUTABLE EARNINGS
Unaudited Unaudited Audited
% six months six months Year to
change 31 August 31 August 28 February
R`000 2010 2009 2010
Earnings attributable to 70 111 78 881 188 664
equity holders
Amortisation of deemed (4 906) (4 806) (9 611)
debenture premium
Fair value adjustments
- associate, net of (435) (22 418) (34 555)
deferred tax
- investment properties, (70 202) (51 130) (145 229)
net of deferred tax
Headline (loss)/earnings (5 432) 527 (731)
before debenture interest
Debenture interest 75 995 67 187 143 833
Headline earnings 70 563 67 714 143 102
attributable to linked
unit holders
Straight-line lease 368 (187) 1 014
adjustment
Fair value adjustments on 6 225 - -
interest rate
derivatives, net of
deferred tax
Deferred taxation (712) - 463
adjustments
Distributable earnings 76 444 67 527 144 579
Headline earnings per 56,4 52,0 110,8
linked unit (cents)
DISTRIBUTABLE EARNINGS
The following additional information is provided and is aimed at disclosing to
the users the basis on which the distributions are calculated.
Unaudited Unaudited Audited
% six months six months Year to
Change 31 August 31 August 28 February
R`000 2010 2009 2010
Revenue
- earned on contractual 10,8 219 312 197 944 409 128
basis
Operating costs (88 590) (82 472) (168 042)
Net rental income from 13,2 130 722 115 472 241 086
properties
Administrative costs (9 975) (8 285) (17 147)
Depreciation (1 459) (883) (2 050)
Operating profit 12,2 119 288 106 304 221 889
Investment income
- Interest received 488 974 1 885
- Investment income - 6 125 8 386 16 993
associate
Distributable profit before 8,9 125 901 115 664 240 767
finance charges
Finance charges 2,7 (49 457) (48 137) (96 188)
Unit holders distributable 13,2 76 444 67 527 144 579
earnings
Linked units in issue 130 106 130 106 130 106
(`000)
Distributable earnings per 13,2 58,8 51,9 111,1
linked unit (cents)
Distribution per linked 13,1 58,7 51,9 111,1
unit (cents)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Fair
Share Capital value
R`000 capital reserve reserve
Balance at 1 March 2009 2 507 36 435 1 055 423
Total comprehensive income for the
year
Transfer to capital - deemed 9 611
debenture premium
Dividends paid
Fair value adjustments
Investment properties, net of 140 449
deferred taxation
Associate, net of deferred tax 34 555
Balances at 28 February 2010 2 507 46 046 1 230 427
Total comprehensive income for the
year
Transfer to capital - deemed 4 906
debenturepremium
Dividends paid
Fair value adjustments
Investment properties, net of 70 345
deferred taxation
Associate, net of deferred tax 435
Interest rate derivatives, net of (6 225)
deferred tax
Balances at 31 August 2010 2 507 50 952 1 294 982
Retained
R`000 earnings Total
Balance at 1 March 2009 27 771 1 122 136
Total comprehensive income for the 188 664 188 664
year
Transfer to capital - deemed (9 611) -
debenture premium
Dividends paid (716) (716)
Fair value adjustments
Investment properties, net of (140 449) -
deferred taxation
Associate, net of deferred tax (34 555) -
Balances at 28 February 2010 31 104 1 310 084
Total comprehensive income for the 70 111 70 111
year
Transfer to capital - deemed (4 906) -
debenture premium
Dividends paid (377) (377)
Fair value adjustments
Investment properties, net of (70 345) -
deferred taxation
Associate, net of deferred tax (435) -
Interest rate derivatives, net of 6 225 -
deferred tax
Balances at 31 August 2010 31 377 1 379 818
Gearing
Nominal Interest
R`000 amount rate %
Fixed rate borrowings expiry
November 2010 140 000 11,01
May 2013 142 119 12,80
May 2018 160 000 12,15
442 119 12,00
Swap maturity
May 2017 50 000 9,47
June 2017 50 000 9,32
July 2017 50 000 8,94
August 2017 100 000 8,70
250 000 9,02
Total hedged borrowings 692 119 10,92
Variable rate borrowings 500 950 9,06
Total borrowings 1 19 3 069 10,14
Fair value adjustments on interest rate 8 646
derivatives
Total gearing 1 201 715
NOTES TO THE FINANCIAL STATEMENTS
The unaudited condensed financial report has been prepared in accordance with
International Accounting Standards IAS 34, the listings requirements of the JSE
Limited and the requirements of the Companies Act 61 of 1973, as amended and is
consistent in all material respects with those applied in the financial
statements for the year ended 28 February 2010.
These interim results have not been audited or reviewed by the Group`s external
auditors.
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 Tshwane Metropolitan Municipality for the provision of
services to its subsidiaries. The Company has provided a suretyship to Nedbank
Property Finance, which at 31 August 2010 amounted to R219,0 million, in favour
of its associate company, IPS Investments Limited.
COMMENTS
Review of results
Premium has continued to perform well despite operating in a weak economic
environment and has delivered growth in distributions for the six months ended
31 August 20010 of 13,1% compared to the comparable prior year period. The Group
continued to benefit from the substantial investments made over several years in
the growth of the CBDs as the location of these properties has placed it at an
advantage in this sector of the market.
Rental income and net rental income increased by 10,8% and 13,2% respectively,
compared with the comparable period.
The distribution growth was positively impacted by the mixed-use Hatfield
development due to the much improved occupancy levels achieved during the
period.
Property portfolio
Premium has continued to focus on its strategic objective of acquiring and
redeveloping properties in the Pretoria and Johannesburg CBDs and surrounding
areas. During the period four properties were acquired but not transferred for a
total purchase price of R205,5 million. These properties are situated in the
Pretoria and Johannesburg CBDs and include Lister Medical Centre, Empisal and
Shoprite Pretoria. A further two properties were acquired and transferred during
the period for a total purchase price of R8,3 million. These are situated in the
Pretoria CBD. An amount of R135,9 million was spent on various projects and
upgrades including phase II of the Hatfield development and an office block of
Die Meent.
The conversion of Lara`s Place was completed in June 2010 and the letting to
date is in line with expectations.
Phase II of the Hatfield development is due for completion in December. This
includes a four level parking garage, 6 811mSquared of "A" grade offices, 2
160mSquared of retail space as well as a City Lodge hotel. The cost of the
project is R280 million.
Rental arrears at 31 August 2010 amounted to R14,9 million (28 February 2010:
R17,6 million) against which a provision for doubtful debts of R6,1 million (28
February 2010: R6,4 million) has been raised.
The performance of IPS was impacted by the anticipated phased take up of
residential units at the mixed-use developments Kempton Place and Ricci`s Place.
Ricci`s Place was completed in November 2009 and phases I and II of the Kempton
development were completed in October 2009 and October 2010 respectively. The
residential component of Kempton Place is currently 54% let.
Vacancies at 31 August 2010 amounted to 25,2% of total lettable area (31 August
2009: 21,8%). Vacancies have increased due to a slow down in economic activity
during the period which is affecting the letting of vacant space. A large
percentage of the vacancies is in respect of properties that are undergoing
redevelopment or that were recently acquired.
Further details of the vacancies are as follows:
31 August 31 August
2010 2009
Offices (%) 13,2 12,6
Retail (%) 3,8 4,0
Commercial (%) 2,7 3,4
Industrial (%) 1,5 1,2
Residential (%) 1,6 0,6
TOTAL (%) 22,8 21,8
Borrowings
During the period borrowings increased by R115,2 million, primarily due to the
amounts spent on phase II of The Fields and other acquisitions and upgrades.
Premium`s gearing at 31 August 2010 was 34,7% of the total value of the
portfolio as against 33,3% at 28 February 2010. Interest rates in respect of
58,0% of borrowings as at 31 August 2010 have been fixed maturing at various
dates ranging from September 2010 to April 2018. Premium`s current all inclusive
interest rate is 10,1%.
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 are valued
by external valuers. The increase in the directors` valuation of the portfolio
by R97,7 million to R3,3 billion represents an increase of 3,0%. This upward
revaluation contributed to the increase in the net asset value per unit of 3,8%
to 1 363 cents.
Prospects
The second half of the current financial year will be negatively impacted by
increased costs of funding as a result of interest rate swaps entered at a
premium to floating interest rates. The Company will continue to benefit from
upgrades and redevelopment activities. The board believes that distributable
earnings for the second six month period should be on par with the distributable
earnings reported for the six months ended 31 August 2010.
Unit holders are advised that the abovementioned information has not been
reviewed or reported on by the Company`s auditors.
DECLARATION OF DIVIDEND 31 AND INTEREST PAYMENT
("the distribution")
Notice is hereby given that dividend number 33 of 0,29 cents (2009: 0,26 cents)
per ordinary share together with interest of 58,41 cents per debenture (2010:
51,64 cents) has been declared for the period 1 March 2010 to 31 August 2010,
payable to linked unitholders recorded in the register on Friday, 19 November
2010. The last date to trade "cum" distribution is Friday, 12 November 2010. The
units will commence trading "ex" distribution on Monday, 15 November 2010.
Payment date will be Monday, 22 November 2010.
No dematerialisation or rematerialisation of linked unit certificates may take
place between Monday, 15 November 2010 and Friday, 19 November 2010, both days
inclusive.
By order of the Board
A Wapnick JP Wapnick
(Chairman) (Managing Director)
21 October 2010
Directors
A Wapnick* (Chairman)
JP Wapnick* (Managing)
AK Stein* (Financial)
MJ Holmes#
MZ Pollack#
S Wapnick+
DP Cohen#
* 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 (Pty) Limited
(Reg. No: 2000/006082/06)
70 Marshall Street Johannesburg 2001
PO Box 61051 Marshalltown 2107
Tel: (011) 370 7700
Fax: (011) 688 7712
Date: 21/10/2010 12:30:01 Produced by the JSE SENS Department.
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