| Wed 11 Dec 2002, 18:12 | | Primegro Properties Limited - Reviewed Results For |
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PRIMEGRO PROPERTIES LIMITED - REVIEWED RESULTS FOR THE YEAR ENDED 31 OCTOBER
2002
PRIMEGRO PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
Registration Number 1998/018436/06
Share code: PMG ISIN: ZAE000022620
Reviewed results for the year ended 31 October 2002
Highlights
* Portfolio doubles in size to R2,4 billion.
* Final distribution of 46,15 cents per linked unit.
* Full year distribution of 89,15 cents per linked unit.
* Vacancies reduced to 4,6%.
* Gross rental income grows 77% to R340 million.
* Operating profit up 88% to R251 million.
Condensed Consolidated Income Statement
Reviewed Audited
Year ended Year ended
31 October 31 October
2002 2001
Distribution per unit to unitholders cents cents
- interest 88,97 89,82
- dividend 0,18 0,18
Total distribution for year 89,15 90,00
- interim 43,00 43,00
- final 46,15 47,00
R`000 R`000
Revenue 348 245 191 573
- from rentals 339 939 191 573
- sundry 8 306 -
Operating costs (97 031) (58 210)
Operating profit 251 214 133 363
Finance income 9 155 1 861
Swap option 5 642 -
Interest received 3 513 1 861
Profit before interest paid 260 369 135 224
Interest paid (141 754) (77 273)
Profit after interest and
before non-cash adjustments 118 615 57 951
Non-cash adjustments (44 689) 107 777
Interest adjustment for nil coupon financing (28 515) (27 876)
Revaluation of investment properties (15 767) 136 003
Revaluation of property, plant and equipment (57) -
Goodwill amortised (350) (350)
Profit before taxation and debenture
interest 73 926 165 728
Debenture interest distributed (117 931) (57 809)
(Loss)/Profit before taxation (44 005) 107 919
Taxation credit/(charge) 2 252 350
Normal - current (256) (34)
Normal - deferred 219 384
Capital gains taxation - deferred 2 289 -
Net (loss)/profit after taxation (41 753) 108 269
Condensed Consolidated Cash Flow Statement
Reviewed Audited
Year ended Year ended
31 October 31 October
2002 2001
R`000 R`000
Cash flow from operating activities
Cash receipts from tenants 332 467 196 417
Cash paid to suppliers and employees (67 463) (53 589)
Cash generated from operations 265 004 142 828
Sundry revenue 8 306 -
Interest received 9 155 1 861
Interest paid (141 754) (77 273)
Taxation paid (52) (482)
Distribution to unitholders (81 982) (45 225)
Net cash inflow from operating activities 58 677 21 709
Cash flow from investing activities
Acquisition of investment properties (1 260 729) (503 061)
Acquisition of property, plant and equipment (997) (4 639)
Proceeds on disposal of property, plant
and equipment 85 44
Net cash outflow from investing activities (1 261 641) (507 656)
Cash flow from financing activities
Proceeds from issue of shares 129 447 3 810
Proceeds from issue of "B" debentures 397 465 132 501
Proceeds from issue of non-interest
bearing liabilities 122 159 123 699
Redemption of non-interest bearing liabilities (26 744) (17 851)
Interest bearing long-term liabilities 581 649 242 678
Net cash inflow from financing activities 1 203 976 484 837
Net (increase)/decrease in cash and
cash equivalents 1 012 (1 110)
Cash and cash equivalents at beginning of year 2 129 3 239
Cash and cash equivalents at end of year 3 141 2 129
Condensed Consolidated Balance Sheet
Reviewed Audited
31 October 31 October
2002 2001
R`000 R`000
ASSETS
Non-current assets
Investment properties 2 430 610 1 228 058
Property, plant and equipment 5 138 5 472
Goodwill 5 971 6 321
Deferred taxation 14 419 5 549
Current assets 24 013 15 530
Trade and other receivables 20 872 13 401
Cash at bank 3 141 2 129
Total assets 2 480 151 1 260 930
EQUITY AND LIABILITIES
Capital and reserves
Share capital 133 635 4 188
Non-distributable reserve 166 150 202 284
Retained income 32 28
299 817 206 500
Preference share capital 7 7
Class "B" debentures 722 204 324 738
Linked unitholders` interest 1 022 028 531 245
Non-current liabilities 1 283 434 650 924
Interest bearing 1 130 873 549 224
Non-interest bearing 152 561 101 700
Current liabilities 174 689 78 761
Trade and other payables 50 629 21 748
Current portion of long-term loan 57 402 26 744
Taxation payable 204 -
Linked unitholders for interest and dividends 66 454 30 269
Total equity and liabilities 2 480 151 1 260 930
Linked units in issue (fully diluted) 144 730 188 64 406 292
Net asset value per linked unit (cents) 706 825
Condensed Consolidated Statements of Changes in Equity
Reviewed Audited
Year ended Year ended
31 October 31 October
2002 2001
R`000 R`000
Share capital and premium
Balance at beginning of year 4 188 385
Issue of shares 129 447 3 803
Balance at end of year 133 635 4 188
Preference share capital
Balance at beginning of year 7 -
Issue of shares - 7
Balance at end of year 7 7
Non-distributable reserve
Balance at beginning of year 202 284 88 604
(Deficit)/surplus on revaluation
of investment properties (15 767) 136 003
Capital gains tax - deferred 8 651 5 050
Zero coupon financing (28 515) (27 876)
(Deficit)/surplus on revaluation of property,
plant and equipment (503) 503
Balance at end of year 166 150 202 284
Retained income
Balance at beginning of year 28 4
(Loss)/profit for the year (41 753) 108 269
Transfer from/(to) non-distributable reserve 41 993 (108 127)
Ordinary dividend (236) (118)
Balance at end of year 32 28
Reconciliation of earnings per linked unit
(Loss)/profit for period (41 753) 108 269
Debenture interest 117 931 57 809
Basic earnings 76 178 166 078
Revaluation of investment properties 15 767 (136 003)
Revaluation of property, plant and equipment 57 -
Amortisation of goodwill 350 350
Capital gains tax - deferred (2 289) -
Headline earnings 90 063 30 425
Interest charge relating to zero coupon financing 28 515 27 876
Distributable earnings 118 578 58 301
cents cents
Basic headline earnings for distribution
purposes per linked unit 89,68 90,52
Fully diluted earnings for distribution
purposes per linked unit 89,18 90,18
Basic headline earnings per linked unit 72,98 48,56
Fully diluted headline earnings per linked unit 72,55 48,38
Basic earnings per linked unit 61,73 265,08
Fully diluted earnings per linked unit 61,37 264,06
Weighted average linked units in issue for
distribution purposes 132 226 947 64 406 292
Fully diluted weighted average linked units
in issue for distribution purposes 132 962 043 64 648 094
Weighted average linked units in issue 123 403 324 62 651 906
Fully diluted weighted average linked
units in issue 124 138 420 62 893 708
Linked units in issue at year end 143 995 092 64 406 292
DECLARATION OF DIVIDEND AND INTEREST PAYMENT NO. 6
Notice is hereby given that dividend No. 6 of 0,0923 cents (2001: 0,094
cents) per ordinary share and interest of 46,0577 cents (2001: 46,906 cents) per
debenture totalling 46,15 cents per linked unit (2001: 47,0 cents) have been
declared payable to linked unitholders registered in accordance with the
settlement procedures of STRATE. The last date to trade cum entitlement is
Friday, 3 January 2003. The units will commence trading ex-entitlement on
Monday, 6 January 2003.
The record date will be Friday, 10 January 2003.
Payment will be effected on Monday, 13 January 2003.
No dematerialisation of linked unit certificates may take place between
Monday, 6 January 2003 and Friday, 10 January 2003 both days inclusive
Where applicable, the amounts will be electronically transferred to
certificated linked unitholders` bank or building society accounts on Monday, 13
January 2003. In the absence of suitable mandates, dividend cheques dated
Monday, 13 January 2003 will be posted at the risk of the recipient to linked
unitholders on that day. Dematerialised linked unitholders will have their
account at their CSDP or broker credited on Monday, 13 January 2003.
Unitholders are advised that only linked unitholders are entitled to the
dividend and interest payment No.6 and that the deferred linked unitholders are
not entitled to such dividend and interest payment. Deferred linked unitholders
are advised to consult the terms upon which the deferred linked units were
issued to them in order to determine when they will become entitled to dividend
and interest payments.
By order of the Board
Primegro Property Administrators (Pty) Limited
Secretary
NOTES
Accounting Policies: The accounting policies conform with the Statements of
South African Generally Acceptable Accounting Practice and the Companies Act of
South Africa 1973, and have been consistently applied.
The financial statements are prepared on a going concern basis and reflect
historical cost, adjusted by the revaluation of investment properties and the
discounted valuation of nil coupon financing instruments.
Certain prior year figures have been restated for comparability purposes,
where appropriate.
Review Report: The results have been reviewed by the joint auditors, Deloitte
& Touche and Schnaid Rubin & Co. Their unqualified review report is available at
the company`s registered office.
Capital expenditure: Expenditure amounting to R34 million has been authorised
for the improvement of certain properties, inter alia, Primegro Business Park
and Longbeach Mall. These developments will be financed by way of existing
facilities.
Guarantees: Guarantees amounting to R2,8 million have been issued for
municipal deposits.
COMMENTARY
Distribution
It is gratifying to declare a total distribution of 89 cents per linked unit
achieved in difficult economic conditions characterised by interest rate
increases totalling 4% during the period under review. The resultant unforeseen
rise in the cost of finance negatively impacted on the anticipated growth in
distributions. Nevertheless, the payout in the financial year to 31 October 2002
falls just short of the prior year distribution of 90 cents per linked unit
declared in a more favourable economic climate.
The distribution is based on headline earnings for distribution purposes of
89,68 cents per linked unit as compared with 90,52 cents per linked unit a year
previously.
Property investments
The acquisition in January 2002 of the sought after Richway shopping centre
portfolio effectively doubled the size of Primegro. The contribution to the
results from this source produced a more than satisfactory return on investment.
The results flowing from the larger, enhanced quality portfolio bear no
direct comparison in a number of key ratios with those delivered during the
financial year ended 31 October 2001.
Performance during the review period was bolstered by the underlying strength
of the Richway properties offering solid, predictable and sustainable revenue
streams from a tenant base substantially represented by national household
retail names on long leases.
It is generally accepted that Primegro owns one of the best and largest
quality portfolios of investment retail properties in the listed Real Estate
sector, with the emphasis as much on long leases as on location.
The portfolio comprises 74 percent retail, 16 percent offices and 10 percent
commercial properties. The lease profile shows that, based on gross income, 25
percent of leases extend beyond September 2006.
The low vacancy factor contributes to the strength of the portfolio.
Calculated as a percentage of gross revenue, vacancies reduced from 6,1 percent
in January 2002 to 4,6 percent at the end of October 2002. This pleasing outcome
is the result of close attention given by Primegro`s in-house letting teams to
tenant retention in a highly competitive market.
The entire portfolio was independently valued at R2,4 billion as at 31
October 2002.
Financial Results
The inherent value of this asset base is reflected in the 81,3 percent
increase in gross income to R348 million in the financial year to 31 October
2002, as opposed to the prior year`s revenue of R192-million.
Operating profit showed an 88,3 percent increase to R251,2 million against
R133,4 million for the previous financial year.
This represents an improvement in operating margin from 69,6 percent to 72,1
percent.
A prudent policy of fixing interest rates in respect of most of the company`s
borrowings substantially cushioned the impact of the rates increases. Ten
percent of the Richway acquisition price of R1,2 billion is deferred and is
payable, interest free, in four equal instalments commencing in January 2003.
Mainly because the Richway acquisition is funded 50 percent by way of a mortgage
loan, interest paid during the year under review increased 83 percent to R141,7
million from the prior year cost of R77,3 million.
The application of accounting statements AC 133 and AC 135 resulted in the
interest adjustment for nil coupon financing, of R28,5 million (2001: R27,9
million). Investment properties were written down by R15,8 million to reflect
fair value in terms of accounting statement AC 135. This write down in the value
is attributable mainly to the higher capitalisation rates currently prevailing
in the market, despite the overall increase in net property income in Primegro`s
portfolio. These accounting adjustments are technical in nature and have no
effect on the cash distributions.
Prospects
In terms of the Richway portfolio acquisition, the vendors received 23
million Primegro linked units. These units qualified for participation in
distributions for the first time in the second half of the 2002 financial year
and will only rank fully for distributions in 2003.
Provided the improvement in the domestic economy now under way is sustained,
there is a reasonable expectation of interest rates being lowered during the
course of 2003. This will be beneficial to the property sector as a whole and to
Primegro in particular, given the company`s relatively high retail component.
Derek Greenberg Martin Ettin
Joint Managing Director Joint Managing Director
Johannesburg, 11 December 2002
(Incorporated in the Republic of South Africa)
Registration Number 1998/018436/06
Executive Directors:
M. Ettin (Joint Managing Director),
D. Greenberg (Joint Managing Director),
L. Levinsohn
Non-executive Directors:
J.F. Marais (Chairman), P. Fechter, R. Harman,
E. Loubser, J. Molobela, J. Strydom
Date: 11/12/2002 05:48:43 PM Produced by the JSE SENS Department
