| Wed 17 Jul 2002, 0:00 | | Primegro Properties Limited - Interim Report |
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Primegro Properties Limited - Interim Report
PRIMEGRO PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/018436/06)
JSE Share code: PMG ISIN: ZAE000022620
("Primegro")
INTERIM REPORT for the six months ended 30 April 2002
Six months Year ended
ended 30 April 31 October
2002 2001 2001
(Unaudited) (Unaudited) (Audited)
R`000 R`000 R`000
Distribution
Net income distributed
to unitholders
Debenture interest 51 610 27 639 57 809
Dividend 103 55 118
Total 51 713 27 694 57 927
Distribution per linked unit
Cents cents cents
Debenture interest 42,91 42,91 89,82
Dividend 0,09 0,09 0,18
Total 43,00 43,00 90,00
R`000 R`000 R`000
ABRIDGED
CONSOLIDATED INCOME STATEMENT
Revenue 157 121 92 875 193 434
from rentals 148 562 90 871 191 573
from investments 8 559 2 004 1 861
Operating costs (47 272) (27 196) (58 560)
Operating profit 109 849 65 679 134 874
Interest paid (63 326) (37 627) (77 273)
Profit on expiry of interest
option contract 5 641 - -
Interest charge relating to zero
coupon financing (15 682) (7 846) (27 876)
Revaluation of investment
properties 15 682 58 117 136 003
Profit before debenture interest 52 164 78 323 165 728
Debenture interest (51 610) (27 639) (57 809)
Profit before taxation 554 50 684 107 919
Taxation (242) (183) 350
Profit for the period 312 50 501 108 269
Ordinary dividend (103) (55) (118)
Profit for the period after
distribution to unitholders 209 50 446 108 151
R`000 R`000 R`000
ABRIDGED
CONSOLIDATED BALANCE SHEET
ASSETS
Non-current assets
Investment properties 2 352 155 1 105 103 1 228 058
Property, plant and equipment 5 765 5 087 5 472
Goodwill 6 146 6 495 6 321
Deferred taxation 499 115 499
Current assets 35 984 19 795 15 530
Total assets 2 400 549 1 136 595 1 255 880
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 1 199 644 644
Share premium 128 870 2 456 3 544
Revaluation reserve 197 234 138 875 197 234
Retained income 237 179 28
Ordinary shareholders` interest 327 540 142 154 201 450
Preference share capital 222 - 7
Class "B" debentures 712 463 321 387 324 738
Linked unitholders` interest 1 040 225 463 541 526 195
Non-current liabilities 1 242 329 600 489 650 924
Interest bearing 1 070 267 509 898 549 224
Non-interest bearing 172 062 90 591 101 700
Current liabilities 117 995 72 565 78 761
Total equity and liabilities 2 400 549 1 136 595 1 255 880
Linked units in issue
(fully diluted) 144 730 188 64 406 292 64 406 292
Net tangible asset value
per linked unit (cents) 718 710 807
R`000 R`000 R`000
ABRIDGED
CONSOLIDATED CASH FLOW STATEMENT
Cash flow from operating activities
Cash receipts from tenants 125 027 92 085 196 417
Cash paid to suppliers
and employees (29 428) (27 079) (43 169)
Cash generated from operations 95 599 65 006 153 248
Interest received 8 559 2 881 1 861
Interest paid (63 326) (37 627) (77 273)
Profit on expiry of interest
option contract 5 641 - -
Taxation paid (24) (15) (482)
Distribution to unitholders (30 125) (17 467) (45 225)
Net cash inflow from
operating activities 16 324 12 778 32 129
Cash flow from investing activities
Proceeds on disposal of property,
plant and equipment 111 - 44
Acquisition of investment
properties (1 108 415) (284 816) (422 201)
Acquisition of property,
plant and equipment (645) - (6 141)
Net cash outflow from investing
activities (1 108 949) (284 816) (428 298)
Cash flow from financing
activities
Proceeds from issue of shares 124 317 2 715 3 760
Proceeds from issue of debentures 382 561 129 150 148 621
Interest bearing long-term
liabilities 608 364 158 546 258 940
Redemption of Class "A" debentures (25 701) (16 262) (16 262)
Net cash inflow from financing
activities 1 089 541 274 149 395 059
Net (decrease)/increase in cash
and cash equivalents (3 084) 2 111 (1 110)
Cash and cash equivalents at
beginning of period 2 129 3 239 3 239
Cash and cash equivalents at
end of period (955) 5 350 2 129
R`000 R`000 R`000
ABRIDGED CONSOLIDATED
STATEMENT OF CHANGES IN EQUITY
Ordinary share capital
Balance at beginning of period 644 385 385
Issue of shares 555 259 259
Balance at end of period 1 199 644 644
Share premium
Balance at beginning of period 3 544 - -
Issue of shares 125 326 2 456 3 544
Balance at end of period 128 870 2 456 3 544
Revaluation reserve
Balance at beginning of period 197 234 88 604 88 604
Revaluation of investment
properties net of zero
coupon financing - 50 271 108 127
Revaluation of property, plant
and equipment - - 503
Balance at end of period 197 234 138 875 197 234
Retained income
Balance at beginning of period 28 4 4
Profit for the period after
distribution to unitholders 209 50 446 108 151
Transfer to revaluation reserve - (50 271) (108 127)
Balance at end of period 237 179 28
Preference share capital
Balance at beginning of period 7 - -
Issue of shares 215 - 7
Balance at end of period 222 - 7
R`000 R`000 R`000
EARNINGS PER LINKED UNIT
Earnings calculations based
on the following figures:
Profit for the period 312 50 501 108 269
Debenture interest 51 610 27 639 57 809
Basic earnings 51 922 78 140 166 078
Revaluation of investment
properties (15 682) (58 117) (136 003)
Amortisation of goodwill 175 175 350
Headline earnings 36 415 20 198 30 425
Interest charge relating to
zero coupon financing 15 682 7 846 27 876
Distributable earnings 52 097 28 044 58 301
Cents Cents Cents
Basic earnings for distribution
purposes per linked unit 43,32 43,54 93,06
Fully diluted earnings for
distribution purposes per
linked unit 38,32 43,54 92,70
Basic headline earnings per
linked unit 30,28 31,36 48,56
Fully diluted headline earnings
per linked unit 26,78 31,36 48,38
Basic earnings per linked unit 43,17 121,32 265,08
Fully diluted earnings per
linked unit 38,19 121,32 264,06
Linked units Linked units Linked units
Weighted average linked
units in issue 120 263 749 64 406 292 62 651 906
Weighted average fully
diluted linked units
in issue 135 964 150 64 406 292 62 893 708
The weighted average fully diluted number of linked units in issue is arrived at
by adding to the opening number of units in issue the
23 731 343 deferred units issued to Richway, pro-rated for the period from 11
January to 30 April, being the period for which profits from the Richway
properties accrue, plus a further 735 096 units deferred to later dates in terms
of prior transactions.
Notes
1. Accounting policies
The accounting policies of the group conform with Statements of South African
Generally Accepted Accounting Practice. For the previous year ended 31 October
2001, the group adopted accounting statement AC135 for the first time. The
results for the six months ended 30 April 2001 have, accordingly, been restated
on the same basis used to restate the comparative figures for the year ended 31
October 2001, to reflect the revaluation of investment properties and the
interest charge relating to interest-free loan financing. All other policies
have been consistently applied.
2. Capital expenditure
Capital expenditure during the period under review amounted to
R6,9 million. This was financed from existing facilities.
3. Capital commitments
There are no material capital commitments at 30 April 2002.
4. Guarantees
Guarantees issued for municipal deposits at 30 April 2002 amounted to R2,8
million.
Comments on the results
The results for the period were in line with expectations. Vacancies at the
properties continue to be well managed and at 30 April 2002 were 6%, based on
total potential gross income.
The results include for the first time the operating profits from the "ex-
Richway" and "ex IPD" properties described in greater detail in the 2001 annual
report. These profits accrued from 11 January 2002 and 28 November 2001,
respectively.
Interest paid includes interest on the mortgage loans in respect of the above
properties from the same dates.
Investment income includes an amount of approximately R7,5 million interest from
unitholders who took up Primegro linked units placed as part of the financing of
the Richway transaction. This represents their pro rata share of Primegro`s
interim distribution from 1 November 2001 to the date of payment for their
Primegro linked units.
In anticipation of the Richway transaction, in December 2001 Primegro
purchased an option to fix interest rates on R480 million of the mortgage loan
financing. At the expiry of the option contract in January 2002, the company
realised a profit of approximately R5,6 million.
The revaluations and interest adjustments arising from the adoption of the new
accounting statement AC135 are included in profits for the period. These book
entries do not change the cash generated from operations.
Although the properties have not been revalued as at 30 April 2002, the
directors believe that, based on the external valuations of the Richway
properties carried out as at 1 January 2002, the properties will show an upward
revaluation at least equal to R15 682 000, being an amount equal to the interest
charge relating to zero coupon financing.
It should be noted that, in line with accounting statement AC135, the cost of
investment properties at acquisition is reduced by the same amount that zero
coupon financing instruments are written-down to reflect the cash price
equivalent.
In addition to the headline and basic earnings calculations, the calculation
of earnings for distribution purposes is shown beneath the income statement.
Prospects
The substantial growth and improvement in the quality of Primegro`s portfolio
since listing has strengthened the long-term sustainability of income from the
property portfolio. The company is in the same position as other listed property
companies which have recently been reporting lower growth in earnings due to
market forces and more particularly, interest rate increases. The 23 731 343
deferred linked units issued to Richway were converted to linked units and
listed on the JSE Securities Exchange South Africa on 8 May 2002 and participate
in earnings from 1 April 2002. Profits from the Richway properties will be
included for the full six months to 31 October 2002.
Update on Richway transaction
Unitholders are advised that due to delays in transfer of the Longbeach Mall
property, the effective date relating to this property has been changed to
transfer date.
Unitholders are further advised that the Richway vendors have waived their right
to exercise an option to PUT R75 million of Primegro linked units to Primegro.
Amended asset management agreement
On 26 June 2002 the Board of Primegro by majority vote approved an amended
asset management contract ("the Amended Asset Management Contract") with Fixed
Property Asset Management (Pty) Limited, a company in which the executive
directors, D Greenberg, M Ettin and L Levinsohn ("the Interested directors")
have a material interest. The Interested directors recused themselves from
voting at the board meeting held to approve the Amended Asset Management
Contract. The significant changes are:
- the inclusion of confidentiality and restraint undertakings against the
solicitation of Primegro tenants and staff for 12 months after the termination
of this agreement;
- the responsibilities of the Interested directors are clearly set out;
- the term of the contract is 3 years from 30 June 2002 together with a one
year notice period thereafter until year 6 when the notice period reduces to 6
months; and
- the total fees payable are performance based (90% to 130% of 0,3% of the
portfolio`s market value) and are measured annually based on the performance of
Primegro relative to the performance of defined comparable companies. No other
fees or salaries are payable by Primegro to the Interested directors.
Distribution announcement
An interim dividend of 0,086 cents per ordinary share (2001: 0,09 cents) and
interest of 42,914 cents (2001: 42,91 cents) per "B" debenture, totalling 43,0
cents per linked unit (2001: 43,0 cents) was paid on 8 May 2002 as per the
announcement made on 19 April 2002.
By order of the Board
Primegro Property Administrators (Pty) Limited
Secretary
Johannesburg
18 July 2002
Registered office: 18 Rivonia Road, Illovo, Sandton 2196
Private Bag X02, Northlands, 2166
Tel (011) 778 4930
Transfer Secretaries: Ultra Registrars (Pty) Limited
11 Diagonal Street, Johannesburg, 2001
Date: 17/07/2002 05:15:00 PM Produced by the JSE SENS Department
