| Thu 19 Apr 2012, 10:43 | | PMM - Premium Properties Limited - Reviewed preliminary results of the group for |
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PMM
PMM
PMM - Premium Properties Limited - Reviewed preliminary results of the group for
the year ended 29 February 2012
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")
Reviewed preliminary results of the group for the year ended 29 February 2012
Distribution of 115,8 cents per linked unit
Investment assets of R4,3 billion
Increase in net asset value by 2,6% to 1 582 cents per linked unit
Consolidated statement of comprehensive income
R`000 % Reviewed Audited
change Year to Year to
29 Feb 28 Feb
2012 2011
Revenue 529 510 452 575
earned on contractual basis 14,9 519 570 452 075
straight-line lease adjustment 9 940 500
Operating costs (222 327) (180 947)
Net rental income from properties 307 183 271 628
earned on contractual basis 9,6 297 243 271 128
straight-line lease adjustment 9 940 500
Administrative costs (22 325) (20 474)
Depreciation (1 492) (2 215)
Operating profit 13,8 283 366 248 939
Profit on sale of investment properties 3 872 14 629
Fair value adjustments of investment 161 168 119 420
properties
gross fair value adjustment 171 108 119 920
attributable to straight-line
lease adjustment (9 940) (500)
Investment income 19 472 28 114
Interest received 3 533 1 316
Associate
share of after tax profit 10 823 5 606
fair value adjustment/capital reserves (201) 14 218
Interest 5 317 6 974
Finance costs 22,9 (127 249) (103 569)
Interest on borrowings (114 174) (122 535)
Interest capitalised 2 710 12 161
Fair value adjustments on interest rate (15 785) 6 805
derivatives
Amortisation of debenture premium 23 053 9 611
Profit before debenture interest 363 682 317 144
Debenture interest 19,6 (180 634) (151 050)
Profit before taxation 183 048 166 094
Taxation charge
Deferred taxation (97 257) (20 124)
Total comprehensive income for the year (41,2) 85 791 145 970
attributable to equity holders
Weighted linked units in issue (`000) 156 773 130 106
Linked units in issue (`000) 156 773 156 773
Basic earnings per share (cents) (51,2) 54,7 112,2
Diluted earnings per share (cents) (41,2) 54,7 93,1
Basic earnings per linked unit (cents) (25,6) 169,9 228,3
Diluted earnings per linked unit (cents) (10,3) 169,9 189,5
Distribution per linked unit (cents)
Dividends 0,58 0,58
Interest 115,22 116,32
Total (0,9) 115,80 116,90
Consolidated statement of financial position
R`000 Reviewed Audited
29 Feb 28 Feb
2012 2011
Assets
Non-current assets 4 281 368 3 830 602
Investment properties 3 965 296 3 533 075
Property, plant and equipment 9 523 11 015
Lease costs 11 808 13 874
Operating lease assets 34 823 24 883
Investment in associate 259 918 247 755
Current assets 31 465 432 552
Total assets 4 312 833 4 263 154
Equity and liabilities
Share capital and reserves 1 735 191 1 650 294
Share capital and premium 4 472 4 472
Non-distributable reserve 1 672 425 1 600 915
Retained earnings 58 294 44 907
Non-current liabilities 2 097 125 2 247 851
Debentures and premium 744 713 767 766
Interest bearing borrowings 1 032 565 1 257 495
Deferred taxation 319 847 222 590
Current liabilities 480 517 365 009
Interest bearing 284 182 182 602
Non-interest bearing 102 741 91 619
Linked unit holders for distribution 93 594 90 788
Total equity and liabilities 4 312 833 4 263 154
Linked units in issue (`000) 156 773 156 773
Net asset value per linked unit (cents) 1 582 1 542
Net asset value per linked unit (cents) - before 1 786 1 684
providing for deferred tax
Loan to investment value ratio (%) 30,8 37,6
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 % Reviewed Audited
change Year to Year to
29 Feb 28 Feb
2012 2011
Revenue
Earned on contractual basis 14,9 519 570 452 075
Operating costs (222 327) (180 947)
Net rental income from properties 9,6 297 243 271 128
Administrative costs (22 325) (20 474)
Depreciation (1 492) (2 215)
Operating profit 10,1 273 426 248 439
Investment income
Interest received 3 533 1 316
Investment income - associate 16 140 12 580
Distributable profit before finance costs 11,7 293 099 262 335
Finance costs 1,0 (111 464) (110 375)
Unit holders` distributable earnings 19,5 181 635 151 960
Linked units in issue (`000) 156 773 130 106
Distributable earnings per linked unit (0,8) 115,9 116,8
(cents)
Distribution per linked unit (cents) (0,9) 115,8 116,9
Consolidated statement of cash flows
R`000 Reviewed Audited
Year to Year to
29 Feb 28 Feb
2012 2011
Cash flow from operating activities
Net rental income from properties 273 426 248 439
Adjustment for:
Depreciation and amortisation 6 821 9 112
Working capital changes 107 105 (82 414)
Cash generated from operations 387 352 175 137
Investment income 8 850 8 290
Finance costs (111 464) (110 374)
Distribution to linked unit holders paid (178 722) (137 662)
Net cash inflow from operating activities 106 016 (64 609)
Cash flow from investing activities
Investing activities (280 385) (390 146)
Disposal of investment property 8 400 32 612
Net cash outflow used in investing activities (271 985) (357 534)
Cash flow from financing activities
Issue of new units - 381 273
(Decrease)/increase in interest bearing borrowings (137 914) 354 204
Net cash (utilised in)/generated from financing (137 914) 735 477
activities
Net (decrease)/increase in cash and cash equivalents (303 883) 313 334
Cash and cash equivalents at beginning of year 298 081 (15 253)
Cash and cash equivalents at end of year (5 802) 298 081
Consolidated statement of changes in equity
R`000 Share Capital Fair value Retained Total
capital reserve reserve earnings
Balance at 1 March 2010 2 507 46 046 1 423 080 31 104 1 502
737
Total comprehensive income 145 970 145
970
for the year
Issue of new units 1 965 1 965
Transfer to capital - deemed 9 611 (9 611) -
debenture premium
Dividends paid (378) (378)
Fair value adjustments
Investment properties,
net of deferred taxation 103 060 (103 060) -
Associate, net of
deferred tax 14 218 (14 218) -
Interest rate
derivatives, net of
deferred tax 4 900 (4 900) -
Balances at
28 February 2011 4 472 55 657 1 545 258 44 907 1 650
294
Total comprehensive income 85 791 85 791
for the year
Transfer to capital - deemed 23 053 (23 053) -
debenture premium
Dividends paid (894) (894)
Fair value adjustments
Investment properties,
net of deferred taxation 60 025 (60 025) -
Associate, net of
deferred tax (201) 201 -
Interest rate
derivatives, net of
deferred tax (11 367) 11 367 -
Balances at
29 February 2012 4 472 78 710 1 593 715 58 294 1 735
191
Reconciliation - earnings to distributable earnings
R`000 % Reviewed Reviewed
change Year to Year to
29 Feb 28 Feb
2012 2011
Earnings attributable to equity holders 85 791 145 970
Amortisation of deemed debenture premium (23 053) (9 611)
Sale of investment property (3 872) (14 629)
Fair value adjustments
associate, net of deferred tax 201 (14 218)
investment properties, net of deferred tax (60 025) (102 701)
Headline (loss)/earnings before debenture (958) 4 811
interest
Debenture interest 180 634 151 050
Headline earnings attributable to
linked unit holders 179 676 155 861
Straight-line lease adjustment, net of (7 157) (359)
deferred tax
Fair value adjustment on interest rate 11 367 (4 900)
derivatives, net of deferred tax
Deferred taxation adjustments (2 251) 1 358
Distributable earnings 181 635 151 960
Headline earnings per linked unit (cents) (4,1) 114,6 119,5
Notes to the financial statements
Basis of preparation
The condensed consolidated financial information has been prepared in accordance
with the framework, concepts and the measurement and recognition requirements of
International Financial Reporting Standards (IFRS), the AC 500 standards as
issued by the Accounting Practices Board, the information as required by IAS 34:
Interim Financial Reporting, the JSE Listings Requirements and the requirements
of the South African Companies Act (71 of 2008), as amended.
These condensed consolidated results were prepared under supervision of Mr AK
Stein CA(SA), in his capacity as group financial director.
The accounting policies adopted and methods of computation are consistent with
those applied in the financial statements for the year ended 28 February 2011.
The effective capital gains taxation ("CGT") rate to be applied to the
revaluation of investment properties has increased from 14% to 18,6%, as
announced in the recent 2012 Budget of Treasury. An adjustment relating to prior
years amounting to R70,1 million was made to the current year deferred tax
charge to reflect the increased CGT rate.
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
Premium has issued guarantees of R1,6 million to City of Tshwane Metropolitan
Municipality for the provision of services to its subsidiaries. Premium has
provided a suretyship to Nedbank Property Finance, in favour of its 40% held
associate company, IPS Investments (Proprietary) Limited ("IPS"). At 29 February
2012, the suretyship amounted to R224,2 million.
Auditor`s review
The condensed provisional financial information for the year ended 29 February
2012 was reviewed by the group`s auditors, BDO South Africa Incorporated. The
review was conducted in accordance with ISRE 2410: Review of Interim Financial
Information performed by the Independent Auditor of the Entity. A copy of the
unmodified review report is available for inspection at the company`s registered
office. Any reference to future financial performance in this announcement has
neither been reviewed nor reported on by the company`s auditors.
Directors` commentary
Review of results
All rental income received by the group, less operating costs and interest on
debt, is distributed semi-annually. The group does not distribute capital
profits. Premium has delivered a total distribution for the year ended 29
February 2012 of 115,80 cents per linked unit. The interim distribution is 55,8
cents per linked unit with a final distribution of 60,0 cents per linked unit.
This was achieved in a difficult trading environment with the total cost of
occupation by tenants increasing as utility costs and assessment rates escalated
significantly. While leases provide for the recovery of utility costs and rates
and taxes, these increased costs impact new rentals on expiry of leases.
Rental income and net rental income increased by 14,9% and 9,6% respectively,
compared with the comparable period. The core portfolio representing those
properties held for the previous 12 comparable months with no major development
activity reflects rental income growth of 4,9%. The residential portfolio
comprising 29,6% of the portfolio by rental income, achieved growth of 7,5%.
This was underpinned by low vacancies and strong demand for affordable and
secure accommodation. Property expenses increased to 42,8% of revenue (2011:
40,0%), with bad debt write-offs and provisions increasing during the period
from 0,6% to 0,9% of revenue.
The arrears and doubtful debt provisions remain at acceptable levels and we do
not anticipate significant deterioration. A saving in finance costs was achieved
due to the rights issue undertaken in the previous year as well as the decreases
in the prime lending rate. This was partially offset by the increased costs of
funding due to interest rate swaps entered into at a premium to the weighted
average cost of floating interest rates.
Property and investment portfolio
Premium invests in the retail, residential, office and industrial property
sectors.
Management is focusing on the redevelopment and upgrade of properties to improve
their quality and attract new tenants at higher rentals.
During the year an amount of R102,1 million was spent on the upgrade and
redevelopment of certain properties, including the Perm Building, Die Meent,
Pavillion and the mixed-use properties Silway and Savyon.
Distribution growth is impacted as the City Centre and The Fields office blocks
were partly vacant during the financial year. The Fields office block has
recently been let at a rental of R135/mSquared. The lease will commence on 1
September 2012. Significant progress was made in letting some of the retail
space of The Fields.
Premium`s investment in IPS provided strong earnings growth with profits earned
from the associate company, excluding capital profits, increasing to R16,1
million. This is an increase of 28,3% on the comparable period.
This growth in IPS was positively impacted by the mixed-use development Kempton
Place and Tali`s Place due to the improved occupancy levels achieved during the
year.
Vacancies in the Premium portfolio at 29 February 2012 amounted to 20,8% of
total lettable area and details of these vacancies with reference to their
sectoral spread are set out in the table below.
29 Feb 28 Feb
2012 2011
% %
Offices 12,5 14,8
Retail 5,0 3,7
Commercial and Industrial 2,4 4,1
Residential 0,9 0,5
20,8 23,1
Despite a difficult trading environment vacancies have decreased. Many of the
properties remain fully let. A number of properties under development or that
were recently upgraded, had high vacancies. In recent years, Premium acquired
certain properties with large vacancies and for no or little consideration for
the vacant space which offered redevelopment opportunity. As the opportunities
arise the potential of these vacancies will be realised.
During the year, six properties were acquired and transferred for a total
purchase price of R176,0 million. They were Motor City Strijdom Park, Motor City
Capital Park Pretoria, Metropolitan Building in the Pretoria CBD and Marlborough
House, Empisal and Lusam Mansions in the Johannesburg CBD. Rapanos in Pretoria
West was disposed of and transferred during the period at a profit of R3,9
million.
Borrowings
Premium`s gearing at 29 February 2012 was 30,8% of the total value of the
investment portfolio against 37,6% at 28 February 2011, decreasing largely due
to the rights issue undertaken at the end of the previous financial year.
Premium entered into various fixed interest rate and swap rate agreements as set
out below. As a result, 57,8% of debt has been fixed for periods of between two
years and seven years. As at 29 February 2012, the weighted average annual cost
of debt was 9,1%, with unutilised banking facilities in excess of R356 million.
Premium listed a R1 billion Domestic Medium-term Note Programme during March
2012 and recently issued its first corporate bond at an annual interest rate of
6,13% for the amount of R196 million for three months.
R`000 Nominal Interest rate
amount %
Fixed rate borrowings expiry
May 2013 142 118 12,80
May 2018 160 000 12,15
302 118 12,46
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
September 2017 50 000 9,31
January 2018 50 000 9,43
August 2018 100 000 9,00
450 000 9,10
Total hedged borrowings 752 118 10,40
Variable rate borrowings 549 010 7,90
Total gearing 1 301 128 9,10
Revaluation of the property portfolio
It is the group`s policy to perform a directors` valuation of all the properties
at the interim stage and at year-end. At year-end, one third of the properties
are valued by external valuers. The increase in the directors` valuation of the
portfolio by R161,2 million to R4,0 billion represents an increase of 4,5%.
Directorate changes
Mr Petrus (Pieter) Strydom was appointed to the board as an independent non-
executive director from 6 February 2012. He is a chartered accountant and has
many years` experience. He will also serve as a member of the audit and risk
committees. He brings a wealth of experience to the board from an accounting and
corporate governance perspective, and we look forward to his valued
contribution.
Prospects
The upgrading of the group`s properties will be the major driver for the group
and this should provide investors with improved growth in the medium to longer
term.
It is anticipated that the growth in the economy will remain subdued in the
short term. Notwithstanding this environment, the group is confident that
subject to market conditions not deteriorating further, the company will produce
growth in distributions per linked unit which is on par with the sector average.
Unit holders are advised that the abovementioned information has not been
reviewed or reported on by the company`s auditors.
Declaration of dividend 36 and interest payment
("the distribution")
Notice is hereby given that dividend number 36 of 0,30 cents (2011: 0,29 cents)
per ordinary share (out of income reserves) and interest of 59,70 cents per
debenture (2011: 57,91 cents) was declared for the period 1 September 2011 to 29
February 2012. This is payable to linked unit holders recorded in the register
on Friday, 18 May 2012. The last date to trade cum distribution is Friday, 11
May 2012. The units will commence trading ex distribution on Monday, 14 May
2012. Payment date will be Monday, 21 May 2012.
No dematerialisation or rematerialisation of linked unit certificates may take
place between Monday, 14 May 2012 and Friday, 18 May 2012, both days inclusive.
The dividend component of the distribution is subject to dividend withholding
tax at 15%. In determining dividend withholding tax, secondary tax on companies
("STC") credits must be taken into account. The STC credits utilised as part of
this declaration amount to R470 319, being 0,30 cents per share, and
consequently no dividend withholding tax is payable by shareholders who are
normally not exempt from dividend withholding tax. Shareholders will receive the
dividend of 0,30 cents per share.
The number of linked units in issue at the date of this declaration is 156 773
109 and the company`s tax reference number is 9660/013/64/1.
By order of the board
S Wapnick JP Wapnick
Chairman Managing director
19 April 2012
Directors:
S Wapnick+ (Chairman), JP Wapnick* (Managing), AK Stein* (Financial),
MJ Holmes, MZ Pollack+, DP Cohen, PJ Strydom
* 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
Property Asset Manager:
e-mail: propworld@cityprop.co.za
www.premiumproperties.co.za
Date: 19/04/2012 10:43:06 Produced by the JSE SENS Department.
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