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Pangbourne - Audited financial results for the year ended 30 June 2005
Pangbourne Properties Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/002352/06)
Share code: PAP & ISIN: ZAE000005252
(`Pangbourne`)
Audited financial results for the year ended 30 June 2005
For more information and full details of the SENS announcement, please visit our
website: www.pangbourne.co.za
* 5% increase in distribution to 96,00 cents
* Occupancies up to 96,00%
* Total annual return of 56%
* Successful listing of Siyathenga Property Fund
Issued share capital 188 973 270 (2004: 178 256 514)
- ordinary shares of 1 cent each
Issued debentures 1 700 759 430 (2004: 1 604 308 626)
- unsecured variable rate debentures of 50 cents each
Issued combined units 188 973 270 (2004: 178 256 514)
Weighted average combined units 179 080 833 (2004: 176 130 961)
Abridged consolidated income statement
Year to Year to
R`000 30 June 2005 30 June 2004
Revenue 355 408 291 907
Straight-line operating lease
adjustment 3 076 3 896
Profit from rental income, investment
income and fees received 256 250 201 809
Net profit on disposal of investments
held-for-trade 1 051 15 831
Net trading profit 257 301 217 640
Net revolution of investement
Properties 223 485 32 847
Attributable to straight-line
operating lease adjustment (3 076) (3 896)
Gross revaluation of investment
properties 226 561 36 743
Revaluation of investments
held-for-trade - 1 683
Goodwill amortised and realised (1 235) (11 559)
Negative goodwill amortised and
realised - 28 307
Net loss on disposal of investment
properties 5 461 14 703
Amortisation of intangible assets (4 878) (3 253)
Profit on piecemeal disposal of
subsidiary 304 -
Profit before financing costs
and taxation 480 438 280 368
Interest received 12 350 13 269
Finance costs (94 150) (64 321)
Movement in fair value of interest
rate derivatives (24 888) (949)
Profit before taxation and
distribution to unitholders 373 750 228 367
Debenture interest - debt portion (83 448) (81 860)
Amortised debenture interest (2 700) (2 316)
Profit before taxation 287 602 144 191
Taxation (10 497) 6 934
Notional taxation reversed in
statements of changes in equity * (25 247) (23 136)
Share of profit from associates 44 684 3 710
Profit for the year 296 542 131 699
*GAAP requires that the company segregate its debentures and debenture interest
into debt and equity components in the balance sheet, income statement and
statement of changes in equity. This gives rise to a profit in the income
statement in respect of which a notional tax charge of R25 million has been
raised, which provision is reversed in the statement of changes in equity where
the equity portion of interest is reflected.
Abridged consolidated balance sheet
As at As at
R`000 30 June 2005 30 June 2004
ASSETS
Non-current assets
Direct and indirect investment
in property 2 580 112 1 495 034
Investment properties 2 126 509 1 100 223
Investments in and loans to
associates 453 603 394 811
Equipment, furniture and fittings 8 242 8 454
Goodwill 6 566 7 801
Negative goodwill - (28 829)
Intangible asset 6 506 11 384
Long-term loans 9 248 3 836
Deferred taxation assets 2 918 3 528
Loans to participants of the
Unit Purchase Trust 78 564 78 971
Current assets
Receivables 143 312 89 122
Other receivables 31 769 78 875
Current portion of long-term loans 4 494 1 090
Investments held-for-trade - 23 290
Bank and cash 30 017 9 072
Total assets 2 901 748 1 781 628
EQUITY AND LIABILITIES
Capital and reserves 693 928 387 420
Debentures debt portion 696 410 661 926
Minority interest 9 339 -
Other interest-bearing borrowings 1 241 743 523 462
Fair value of interest rate
derivatives 36 894 12 006
Deferred taxation liabilities 54 287 45 212
Current liabilities
Payables 56 263 32 712
Current portion of interest-bearing
borrowings 16 030 28 833
Unitholders for distribution 96 854 90 057
2 901 748 1 781 628
Net debt excluding debenture
debt portion: income earning
assets (%) 45,90 33,90
Net asset value per unit and including
debenture debt portion (cents) 776 612
Reconciliation between earnings and headline earnings
For the year ended 30 June 2005
Profit before taxation Taxation
Cents Cents
R`000 per unit R`000 per unit
Profit after share
of profit from
associates 332 286 185,55 (35 744) (19,96)
Adjustments
Revaluation of investment
properties (223 485) (124,80) 32 405 18,10
Net goodwill realised 1 235 0,69 - -
Net profit on disposal of
investment properties (5 461) (3,05) 792 0,45
Adjustments for
associates (83 830) (46,81) 23 906 13,35
Headline earnings per
combined unit 20 745 11,58 21 359 11,94
Reconciliation between earnings and headline earnings (continued)
For the year ended 30 June 2005
Profit after Year ended
taxation 30 June 2004
R`000 Cents per R`000 Cents per
Profit after share of
profit from associates 296 542 165,59 131 699 74,77
Adjustments
Revaluation of investment
properties (191 080) (106,70) (27 920) (15,85)
Net goodwill realised 1 235 0,69 (16 748) (9,51)
Net profit on disposal of
investment properties (4 669) (2,60) (12 497) (7,09)
Adjustments for
associates (59 924) (33,46) (4 116) (2,32)
Headline earnings per
combined unit 42 104 23,52 70 418 40,00
Year to Year to
30 June 2005 30 June 2004
Diluted and non-diluted
earnings and distribution
per combined unit
Headline earnings per
combined unit (cents) 23,52 40,00
Distribution per combined unit (cents) 96,00 91,50
Diluted and non-diluted earnings
and distribution per share
Earnings per share before equity
portion of debenture interest (cents) 165,59 74,77
Distribution per share (cents) 1,90 1,81
R`000
Distributions to combined unitholders
Debenture interest debt portion 83 448 81 860
Debenture interest equity portion 87 062 77 120
Dividends 3 412 3 180
Total distribution 173 922 162 160
Segmental information
R`000 Property Property
stock Property Transfer
management trading investment finance
Primary segment
Revenue
Rentals 246 055 - - -
Fees 14 060 - - 10 113
Investment income - - 58 775 -
Profit on sale of
trading properties 5 911 - - -
Total revenue 266 026 - 58 775 10 113
R`000
Segment results
Profit before
taxation and
distribution to
unitholders 417 965 1 051 58 775 4 361
417 965 1 051 58 775 4 361
Segmental information (continued)
R`000 Bridging Agent`s
finance commision Corporate Total
Primary segment
Revenue
Rentals - - - 246 055
Fees 13 173 7 321 - 44 667
Investment income - - - 58 775
Profit on sale of
trading properties - - - 5 911
Total revenue 13 173 7 321 - 355 408
R`000
Segment results
Profit before
taxation and
distribution to
unitholders 5 680 3 156 (117 238) 373 750
5 680 3 156 (117 238) 373 750
Segment revenue and expenses
Revenue and expenses that are directly attributable to a segment are allocated
to those segments. Expenses not directly attributable to a segment are allocated
to the corporate segment.
Revenue and expenses that are directly attributable to a segment are allocated
to those segments. Expenses not directly attributable to a segment are allocated
to the corporate segment.
Abridged consolidated statement of changes in equity
Year to Year to
R`000 30 June 2005 30 June 2004
Balance at beginning of year 387 420 297 959
-AC 140 Transitional adjustment 28 829
Arising on issue of treasury units
during the year 16 655 16 276
Arising on issue of units during
the year 27 330 -
Minority share of current year
profits (643) -
Profit for the year 296 542 131 699
Reversal of notional taxation on
debenture interest - equity portion 25 247 23 136
Distribution to unitholders:
debenture interest - equity portion (87 062) (77 120)
Distribution to unitholders:
dividend portion (3 412) (3 180)
Net profit/(loss) on disposal of
investments available-for-sale 3 022 (1 350)
Balance at end of year 693 928 387 420
Abridged consolidated cash flow statement
As at As at
R`000 30 June 2005 30 June 2004
Cash generated from operations 209 664 68 000
Net finance costs (81 800) (51 052)
Investment income 58 775 49 402
Taxation paid (820) (228)
Cash flows from operating activities
before distribution to unitholders 185 819 66 122
Distributions to unitholders (167 125) (158 327)
Cash flows from operating activities 18 694 (92 205)
Cash flows from investing activities (787 996) 23 256
Cash flows from financing activities 790 247 66 347
Net increase/(decrease) in cash and
cash equivalents 20 945 (2 602)
Cash and cash equivalents at
beginning of year 9 072 11 674
Cash and cash equivalents at end
of year 30 017 9 072
Additional information for investors (Unaudited)
Compliance with SA Statements of GAAP, which are in the process of being
harmonised with IAS, and their application on the property loan stock structure,
which is unique to South Africa, has made it difficult for users to interpret
these financial statements. This investor information insertion is aimed at
disclosing to the users the basis on which the distribution per weighted average
number of combined units in issue, was calculated.
A reconciliation has been included to illustrate the accounting adjustments
which were not taken into account in calculating the distribution.
Distributable earnings
for the year ended 30 June 2005
Group
2005 2004
R`000 R`000
Revenue 355 408 291 907
Net building costs (43 869) (44 779)
Administrative costs (58 365) (49 215)
Net profit on disposal of investments
held-for-trade 1 051 15 831
Non-cash portion of profit on disposal
of loans - (2 200)
Interest received 12 350 13 269
Finance costs (94 150) (64 321)
Cash share of profit from associates 2 300 1 347
STC on dividend declared/Taxation (812) (411)
Outside shareholders (969) -
Distributable earnings 172 944 161 428
Investor distributable earnings per
combined unit
Weighted average number of combined
units in issue (`000) 179 081 176 131
Distributable earnings per combined
unit (cents) 96,57 91,66
Opening share price 1 July 2004 7,20 6,90
Closing share price 30 June 2005 10,30 7,20
Distribution per unit 0,96 0,92
Total return 56% 18%
Reconciliation to profit for the year
Group
2005 2004
R`000 R`000
Distributable earnings 172 944 161 428
Revaluation of investment properties 226 561 36 743
Revaluation of investments held-for-trade - 1 683
Goodwill amortised and realised (1 235) (11 559)
Negative goodwill amortised and realised - 28 307
Net profit on disposal of investment
properties 5 461 14 703
Non cash portion of profit on disposal
of loans - 2 200
Movement in fair value of interest
rate derivatives (24 888) (949)
Amortisation of intangible asset (4 878) (3 253)
Non-cash portion of profits from associate 42 384 2 363
Profit on piecemeal disposal of subsidiary 304
Profit before taxation and distribution
to unitholders (excluding STC and
equity earnings) 416 653 231 666
Debenture interest - debt portion (83 448) (81 860)
Amortised debenture interest (2 700) (2 316)
Profit before taxation (excluding STC
and equity earnings) 330 505 147 490
Taxation* (34 932) (15 791)
Outside shareholders` interest 969
Profit for the year 296 542 131 699
Net asset value per unit with iFour Properties Limited
carried at market value (cents)
excluding negative goodwill and including
debenture debt portion 931 642
Distribution declared per combined unit
On 28 June 2005 notice was given of the declaration
of a distribution of 51,5 cents per combined
unit, comprising dividend number 38
of 1,0098 cents per share and interest
on debentures calculated at 50,4902 cents
per combined unit.
Timetable of events
Event Date
a. Last date to trade cum distribution Friday, 30 September 2005
b. Combined units trade ex distribution Monday, 3 October 2005
c. Record date for unitholders to
participate in the distribution Friday, 7 October 2005
d. Payment of distribution to unitholders Monday, 10 October 2005
e. Combined units may not be dematerialized
or rematerialised Between Monday, 3 October 2005 and
Friday, 7, October 2005 (both days
inclusive)
Results
Pangbourne has shown substantial growth in its annual distribution as well as
share price from the previous year. The annual distribution has increased from
91,5 cents to 96,0 cents per combined unit, while the share price has moved from
R7,20 on 1 July 2004 to R10,30 as at 30 June 2005. This gives a total return to
investors for the financial year of 56%. Although this is a short-term
measurement our assets are of a long-term nature and the strategy of Pangbourne
is to create a solid asset base from which it can produce sustainable earnings
into the future at a rate exceeding inflation. Our track record speaks for
itself with a total annualised return to combined unitholders of 19% over the
past 10 years.
Occupancies
Our occupancy factor as at 30 June 2005 has increased to 96,00% from the
previous year`s occupancy of 93,8%. In the previous year`s we stated that for
the Pangbourne type of portfolio this is fully let and this remains the case
during the current year. Pangbourne`s historically short lease expiry profile
has protected it against negative market reversions and has enabled us to take
advantage of the high demand for industrial space.
Asset management
With the R125 million acquisition of 15 buildings from Paramount at an 11,47%
yield, Pangbourne has improved the overall quality of its portfolio. The
acquisition has also given Pangbourne the opportunity to sell smaller buildings
that no longer meet its investment criteria without affecting its distributions.
Certain properties, as identified in the circular to shareholders, for the
acquisition of the Strupot portfolio were classified as trading properties.
These properties have subsequently been sold at a profit of R5,9 million, this
profit has been included in distributable earnings. In addition to the trading
properties, 23 investment properties that no longer met the investment criteria
of Pangbourne were sold during the current financial year at a profit of R5,3
million. The total sales value of the properties sold amounted to R71 million
and this was used in part to fund the acquisition of Pineslopes and the balance
of The Crescent shopping centre for Siyathenga Property Fund Limited.
Valuation of properties
Each year one-third of the properties are valued on a rotational basis by a
member of the Institute of Valuers. The entire portfolio is, however, valued
each year by the directors. Valuations have been consistently applied on a
discounted cash flow basis, using a risk-free rate adjusted for a property risk
factor. Further allowances are made for, amongst others, vacancies, rental
reversions to market, tenant installations and capital expenditure. The
valuations are tested at executive committee, audit committee and board
level for rationale, consistency and accuracy. The total revaluation of the
portfolio has resulted in a R226 million increase in value resulting in a total
value of R2 126 million. The market value of the investment in iFour is
currently R672 million.
Debt management
With the favourable and stable interest rate environment coupled with the demand
for property the Pangbourne board has elected to raise the internal gearing
limits from 40% to 50% of income producing assets in order to assist management
in the growth of distributions and implementation of the strategy of specialised
funds.
Transformation
Combined unitholders are advised that Pangbourne is at an advanced stage in
discussions with an empowerment company, Yard Capital (Pty) Limited, in a first
step towards meeting the equity ownership targets set out in the draft Property
Sector Transformation Charter (`the proposed transaction`);
It is expected that such a proposed transaction will provide Pangbourne with
broader property acquisition opportunities. The proposed transaction should have
no material effect on the traded price of the company and should also have no
material impact on distributions in the short to medium term. The transaction
has been approved in principle by the board, subject to all conditions precedent
being met.
Further details of the transaction and a proposal to extend participation
therein to staff, will be announced in due course.
Conclusion
The executive focus remains one of increasing distributions at a rate exceeding
that of inflation, thereby increasing value for unitholders, and each
transaction that is contemplated in Pangbourne is measured against this vision.
P L Campbell, Chairman
A M A Campbell, CEO
26 August 2005
These results have been audited by Deloitte & Touche in accordance with GAAP and
their unqualified audit report is available for inspection at the registered
office of Pangbourne.
Directors: P L Campbell (Chairman), A M A Campbell* (CEO),
J A A Diepenbroek*, J B Gibbon, C K Hickling, B D Hopkins,
C M Hutchison*, D J Kennedy*, Y K N Molefi, A J W L Richards*,
B M H Tsita. *Executive
Secretary: J J Groenewald
Date: 31/08/2005 03:51:17 PM
Produced by the JSE SENS Department
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