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PAP
PAP
Pangbourne Properties Limited - Unaudited Financial Results For The Six Months
Ended 31 December 2005
Pangbourne Properties Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/002352/06)
Share code: PAP ISIN: ZAE 000005252
("Pangbourne or the company")
UNAUDITED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2005
Issued share capital
199 300 430 (30 June 2005: 188 973 270) ordinary shares of
1 cent each
Issued debentures
1 793 703 870 (30 June 2005: 1 684 090 827) unsecured variable
rate subordinated debentures of 50 cents each
Issued combined units
199 300 430 (30 June 2005: 188 973 270)
Weighted average combined units
190 433 075 (30 June 2005:179 080 833)
Total 6-month return of 27%
5,6% increase in distribution to 47,00 cents
Occupancies at 94,86%
Total assets R2,7 billion
COMMENTARY
RESULTS
Pangbourne has shown substantial total return to combined unit holders. The
Company has declared a 5,6% (2004 : 4,7%) increase in its interim distribution
to 47,00 cents per combined unit, while the combined unit price has increased
from R10,30 at 30 June 2005 to R12,60 at 31 December 2005. This gives a total
return to investors for the six months ended 31 December 2005 of 27%. While this
is a short-term measurement, Pangbourne"s 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.
Property management
The Company"s occupancy factor at 31 December 2005 was 94,86%, compared to
95,75% at 30 June 2005. For the Pangbourne type of portfolio, this is
considered fully let. Pangbourne"s historically short lease expiry profile has
protected it against negative market reversions and has enabled the Company to
take advantage of the high demand for industrial space. The buoyant property
market has enabled Pangbourne to improve the largest lease expiry profile from
one to three years.
Asset Management
The highlight for the period has been the acquisition of the R1 404 million
Transnet Retirement Funds Property Trust ("TRFPT") portfolio ("the
acquisition"). There are 48 properties in the TRFPT portfolio, comprising 440
000 m2 of gross lettable area. Combined unitholders" attention is drawn to the
announcements dated 14 December 2005 and 1 February 2006 and the circular posted
on 13 February 2006 setting out further information on the acquisition and
containing notices of general meetings. . The acquisition is still subject to
Competition Commission and Pangbourne combined unitholders" approval at the
general meetings. With the purchase of the TRFPT portfolio, Pangbourne will
have improved the overall quality and reduced the overall age of the entire
portfolio. The acquisition also gives Pangbourne the opportunity to dispose of
smaller buildings that no longer meet its investment criteria without affecting
its distributions.
Certain properties acquired from Paramount Properties Limited were classified as
trading properties. These properties have subsequently been sold for a profit of
R3,1 million and this profit has been included in distributable earnings. In
addition to these trading properties, 10 investment properties that no longer
met the investment criteria of Pangbourne were sold during the current financial
year for a profit of R300 000. In addition to the purchase of the TRFPT
portfolio, 32 properties were purchased from unrelated vendors for an aggregate
consideration of R232 million during the period under review.
In the current property market, with very little stock available, it was decided
to actively develop any vacant land currently held and on-sell where appropriate
to either associated companies or external parties. Pangbourne undertook a
development on non-revenue producing land and upon completion it was sold in a
fully tenanted form to iFour Properties Limited, at a development profit of R5,4
million.
Pangbourne successfully listed Siyathenga Property Fund Limited ("Siyathenga")
on 5 August 2005 and, ahead of the property charter, concluded Pangbourne"s
first black economic empowerment deal with Yard Capital (Proprietary) Limited
("Yard"), resulting in Yard holding 6,15% of Pangbourne"s combined units in
issue.
Valuation of properties
Each year at year-end, one third of the properties are valued on a rotational
basis by an independent external valuer registered as a professional valuer in
terms of the Property Valuers Profession Act, 2000 (Act 47 of 2000). In
addition, the board has decided that, from the current year, the portfolio will
also be valued internally each year at the interim date. Valuations have been
consistently applied on a discounted cashflow 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 have been assessed at executive committee, audit
committee and board level for rationale, consistency and accuracy. As at 31
December 2005, the total revaluation of the portfolio resulted in a R60 million
increase from the year ended 30 June 2005 to R1 719 million.
Prospects
The acquisition of the TRFPT portfolio and the subsequent cashflows which will
be generated as a result thereof, create opportunities for Pangbourne to grow
its portfolio and to assist in the growth of the specialised funds in which it
holds strategic stakes. This will not only increase the asset base under
management, but will also create market-related transaction fees and income from
the portfolios acquired to achieve the objective of increasing distributions
above inflation.
It is the Company"s goal to make a final distribution for the financial year
ending 30 June 2006 that will reflect an increase of no less than that
represented by the interim distribution. .
On behalf of the board
P L Campbell C M Hutchison 24 February
Chairman Chief Executive Officer 2006
2nd Floor
Pangbourne House
382 Jan Smuts Avenue
Craighall, 2196
Directors: P L Campbell (Chairman), C M Hutchison* (CEO),
J A A Diepenbroek*, J B Gibbon, C K Hickling, B D Hopkins,
D J Kennedy*, Y K N Molefi, A J W L Richards*, B M H Tsita.
Secretary: J J Groenewald *Executive
RECONCILIATION BETWEEN EARNINGS AND HEADLINE LOSS
Profit
before
taxation Taxation
Cents Cents
per per
R"000 unit R"000 unit
Profit/(loss) 83 948 44,08 (13 164) (6,92)
Adjustments
Revaluation of investment
properties (47 241) (24,81) 6 850 3,60
Net goodwill amortised and
realised - - - -
Net profit on disposal of
investment properties (324) (0,18) 47 0,03
Adjustments for
associates (217 234) (114,07) 153 927 80,83
Headline loss (180 851) (94,98) 147 660 77,54
RECONCILIATION BETWEEN EARNINGS AND HEADLINE LOSS (continued)
Profit Six months
after to
taxation 31.12.04
Cents Cents
per per
R"000 unit R"000 unit
Profit/(loss) 70 784 37,16 (6 975) (3,89)
Adjustments
Revaluation of investment
properties (40 391) (21,21) - -
Net goodwill amortised and
realised - - (3 794) (2,13)
Net (profit)/loss on
disposal of
investment properties (277) (0,15) 651 0,36
Adjustments for
associates (63 307) (33,24) 1 649 0,91
Headline loss (33 191) (17,44) (8 469) (4,75)
Six months to Year to
31.12.05 31.12.04 30.06.05
Diluted and non-diluted (loss)/
earnings and distribution
per combined unit
Headline (loss) /earnings per
combined unit (cents) (17,44) (4,75) 23,52
Distribution per combined
unit (cents) 47,00 44,50 96,00
Diluted and non-diluted
earnings/ (loss) and
distribution per share
Earnings/(loss) per share before
equity portion of
debenture interest
(cents) 37,16 (3,89) 165,59
Distribution per share
(cents) 0,92 0,87 1,91
R"000
Distributions to
combined unitholders
Debenture interest
debt portion 44 032 40 930 83 448
Debenture interest
equity portion 47 803 37 094 87 062
Dividends 1 837 1 561 3 412
Total distribution 93 672 79 585 173 922
ADDITIONAL INFORMATION FOR INVESTORS
for the six months ended 31 December 2005
Compliance with International Financial Reporting Standards (IFRS), 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.
The information set out in the table below has been disclosed to assist readers
in determining the basis on which the Interim distribution per weighted average
number of combined units in issue was calculated.
A reconciliation has been included showing the accounting adjustments that were
not taken into account in calculating the interim distribution.
DISTRIBUTABLE EARNINGS
Six months ended Year to
R"000 31.12.05 31.12.04 30.06.05
Revenue 246 852 160 007 355 408
Net building costs (26 721) (24 216) (43 869)
Administrative costs (80 213) (30 746) (58 365)
Net profit on disposal
of investments
held-for-trade - 2 251 1 051
Interest received 7 915 6 780 12 350
Finance costs (57 791) (35 105) (94 150)
Cash share of profit
from associates - 835 2 300
South African normal
taxation and STC (230) (195) (812)
Minority interest (1 876) - (969)
Consolidation adjustment
re BEE finance costs 1 609 - -
Distributable earnings 89 545 79 611 172 944
Investors distributable
earnings per combined unit
Weighted average number
of combined units in
issue ("000) 190 433 178 751 179 081
Distributable earnings
per combined unit (cents) 47,02 44,54 96,57
Opening combined unit price
(cents) 1030 720 720
Closing combined unit price
(cents) 1260 875 1030
Distribution (cents) 47 44,5 96
Total return (%) 27 28 56
RECONCILIATION TO PROFIT/(LOSS) FOR THE PERIOD
Distributable earnings 89 545 79 611 172 944
Revaluation of investment
properties 60 012 - 226 561
Unrealised revaluation
of listed investments
held-for-trade 3 167 - -
Goodwill - amortised - (1 418) -
- realised - - (1 235)
Negative goodwill
- amortised and realised - 5 212 -
Net profit/(loss) on
disposal of investment
properties 324 (767) 5 461
Movements in fair value
of interest rate swaps (19 890) (48 310) (24 888)
Amortisation of
intangible asset (2 440) (2 440) (4 878)
Non-cash portion of
profit from associates - - 42 384
(Loss)/profit on sale of
portion of subsidiary (133) - 304
Profit before taxation
and distribution to
combined unitholders
(excluding
normal taxation, STC
and equity earnings) 130 585 31 888 416 653
Debenture interest
- debt portion (44 032) (40 930) (83 448)
Amortised debenture
interest (3 102) (1 298) (2 700)
Profit/(loss) before
taxation (excluding
normal taxation, STC
and equity earnings) 83 451 (10 340) 330 505
Taxation 928 14 493 (9 685)
Notional taxation reversed
in statement of changes
in equity (13 862) (11 128) (25 247)
Minority interest 1 876 - 969
Consolidation adjustment
re BEE finance costs (1 609) - -
Profit/(loss) for the
period 70 784 (6 975) 296 542
Net asset value per unit
with iFour and Siyathenga
investment carried at
market value including
debenture debt portion
(cents) 970 687 931
SEGMENTAL INFORMATION
Property
Property stock Transfer
R"000 Property stock invest- duty
Primary segment management trading ments finance
Revenue
Rentals 174 054 - - -
Fees 18 045 - - 4 804
Investment income - - 36 141 -
Total revenue 192 099 - 36 141 4 804
Segment results
Profit before taxation
and distribution to
combined unitholders 85 388 3 167 36 141 1 828
85 388 3 167 36 141 1 828
SEGMENTAL INFORMATION (continued)
Bridg- Agents
R"000 ing com- Corpo-
Primary segment finance mission rate Total
Revenue
Rentals - - - 174 054
Fees 8 834 3 656 1 318 36 657
Investment income - - - 36 141
Total revenue 8 834 3 656 1 318 246 852
Segment results
Profit before taxation 3 362 1 391 (195) 131 082
and distribution to
combined unitholders
3 362 1 391 (195) 131 082
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.
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Six months ended Year to
R"000 31.12.05 31.12.04 30.06.05
Cash generated from
operations 68 977 100 264 209 664
Net finance costs (49 876) (28 325) (81 800)
Investment income 36 141 27 006 58 775
Taxation paid (260) (206) (820)
Cash flows from operating
activities before
distribution to
combined unitholders 54 982 98 739 185 819
Distributions to
combined unitholders (94 431) (87 450) (167 125)
Cash flows from operating
activities (39 449) 11 289 18 694
Cash flows from investing
activities 349 189 (429 022) (787 996)
Cash flows from financing
activities (332 127) 419 089 790 247
Net (decrease)/increase
in cash and cash
equivalents (22 387) 1 356 20 945
Cash and cash equivalents
at beginning of period 30 017 9 072 9 072
Cash and cash equivalents
at end of period 7 630 10 428 30 017
ABRIDGED CONSOLIDATED INCOME STATEMENT
Six months ended Year to
R"000 31.12.05 31.12.04 30.06.05
Revenue 246 852 160 007 355 408
Straight-line operating
lease adjustment 12 771 487 3 076
Profit from rental income,
investment income and
fees received 152 689 105 532 256 250
Net profit on disposal
of investments
held-for-trade - 2 251 1 051
Net trading profit 152 689 107 783 257 301
Net revaluation of
investment properties 47 241 (487) 223 485
Attributable to
straight-line operating
lease adjustment (12 771) (487) (3 076)
Gross revaluation of
investment properties 60 012 - 226 561
Revaluation of investments
held-for-trade 3 167 - -
Goodwill amortised and
realised - (1 418) (1 235)
Negative goodwill
amortised and realised - 5 212 -
Net profit/(loss) on
disposal of investment
properties 324 (767) 5 461
Profit before interest
and taxation 203 421 110 323 485 012
Interest received 7 915 6 780 12 350
Finance costs (57 791) (35 105) (94 150)
Movement in fair value of
interest rate swaps (19 890) (48 310) (24 888)
Amortisation of intangible
assets (2 440) (2 440) (4 878)
(Loss)/profit on sale of
portion of subsidiary (133) - 304
Profit before taxation
and distribution to
combined unitholders 131 082 31 248 373 750
Debenture interest
- debt portion (44 032) (40 930) (83 448)
Amortised debenture
interest (3 102) (1 298) (2 700)
Profit/(loss) before
taxation 83 948 (10 980) 287 602
Taxation 698 14 298 (10 497)
Notional taxation reversed
in statements of changes
in equity* (13 862) (11 128) (25 247)
Share of profit from
associates - 835 44 684
Profit/(loss) for the
period 70 784 (6 975) 296 542
Attributable to:
Equity holders of the
company 68 908 (6 975) 295 899
Minority interest 1 876 - 643
70 784 (6 975) 296 542
*IFRS 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 R14 million has been
raised, which provision is reversed in the statement of changes in equity where
the equity portion of interest is reflected.
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation
The unaudited interim financial report has been prepared in accordance with
International Financial Reporting Standards ("IFRS"), IAS34 - Interim Financial
Reporting and the requirements of the South African Companies Act 1973, as
amended.
There has been no impact on the income statement for prior years due to the
adoption of IFRS, the only impact on the balance sheet has been the writing off
of goodwill to opening retained earnings.
IFRS 1 - First-time adoption of International Financial Reporting Standards has
been applied in the preparation of the interim financial report.
No adjustments were required to the amounts previously in the annual financial
statements and to the opening IFRS balance sheet at 1 July 2004. Adjustments
were made to the comparative period to comply with IAS 17 - Leases which had no
impact on opening retained earnings.
The accounting policies are consistent with those applied for the year ended 30
June 2005 except for goodwill, which policy has been adjusted to comply with
IFRS.
2. Related party transactions
Related party transactions concluded during the reporting period were concluded
at arm"s length terms as would be negotiated between unrelated willing parties.
3. Siyathenga wholly-owned
Siyathenga was a wholly owned subsidiary in the prior financial year. On
listing, Pangbourne"s holding has been diluted to 43%, and has been accounted
for accordingly.
ABRIDGED CONSOLIDATED BALANCE SHEET
As at
R"000 31.12.05 31.12.04 30.06.05
ASSETS
Non-current assets
Direct and indirect
investment in property 2 307 345 1 946 256 2 561 194
Investment properties* 1 719 376 1 525 279 2 107 591
Investments in and loans
to associates 587 969 420 977 453 603
Equipment, furniture
and fittings 7 859 8 567 8 242
Goodwill - 6 383 6 566
Negative goodwill - (23 617) -
Intangible asset 4 066 8 944 6 506
Long-term loans 9 373 3 805 9 248
Deferred taxation assets 33 090 29 441 2 918
Loans for purchase scheme
units 70 715 72 239 78 564
Current assets
Investment properties
held-for-trade 3 021 - 18 918
Receivables 128 601 137 429 143 312
Other receivables 67 286 30 046 31 769
Current portion of
long-term loans 4 179 1 039 4 494
Investments held-for-
trade 36 067 3 856 -
Bank and cash 7 630 10 428 30 017
Total assets 2 679 232 2 234 816 2 901 748
EQUITY AND LIABILITIES
Capital and reserves 717 630 359 984 693 928
Debentures debt portion 699 512 663 224 696 410
Minority interest 2 215 - 339
Non-current liabilities
Other interest-bearing
borrowings 952 866 954 206 1 250 743
Fair value of interest
rate swaps 54 705 60 316 36 894
Deferred taxation
liabilities 84 142 57 085 54 287
Current liabilities
Payables 68 578 45 126 56 263
Current portion of
interest-bearing
borrowings 3 489 12 682 16 030
Combined unitholders
for distribution 96 095 82 193 96 854
Total equity and
liabilities 2 679 232 2 234 816 2 901 748
Net debt excluding
debenture debt portion:
income-earning assets (%) 39,0 47,3 46,6
Net asset value per unit
and including debenture
debt-portion (cents) 744 585 776
*The effect of the straight-line operating lease adjustment of
R12 771 000 (June 2005: R3 076 000) is included in the value of Investment
properties. The cumulative effect of the straight-line operating lease
adjustment included in Investment properties is
R31 836 000 (June 2005: R19 065 000).
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended Year to
R"000 31.12.05 31.12.04 30.06.05
Balance at beginning of
period 687 362 387 420 416 249
- as previously stated 693 928 387 420 387 420
- IFRS 3 write-off of
goodwill amortisation to
opening retained
earnings (6 566) - -
- IFRS 3 Transitional
adjustment - - 28 829
Arising on acquisition/
issue of treasury combined units
during the period (2 453) 3 199 16 655
Arising on issue of combined units
during the period (409) - 27 330
Minority share of
profits (1 876) - (643)
Profit/(loss) for the
period 70 784 (6 975) 296 542
Reversal of notional
taxation on debenture
interest - equity portion 13 862 11 128 25 247
Distribution to
combined unitholders:
debenture interest
- equity portion (47 803) (37 094) (87 062)
Distribution to
combined unitholders:
dividend portion (1 837) (1 561) (3 412)
Net profit on disposal of
investments available-
for-sale - 3 022 3 022
Deferred taxation on
profit of disposal of
investments available
-for-sale - (453) -
Realised prior year
marked to market on sale
of treasury combined units - 1 298 -
Balance at end of period 717 630 359 984 693 928
DISTRIBUTION DECLARED PER COMBINED UNIT
Notice is hereby given of the declaration of a distribution of
47 cents per combined unit, comprising dividend number 39 of
0,9215 cents per share and interest on debentures calculated at 46,0785 cents
per combined unit.
Timetable of events
Event Date
a. Last date to trade "cum" distribution Thursday, 6 April 2006
b. Combined units trade "ex" distribution Friday, 7 April 2006
c. Record date for combined unitholders
to participate in the distribution Thursday, 13 April 2006
d. Payment of distribution to
combined unitholders Tuesday, 18 April 2006
e. Combined unit certificates may not be Friday, 7 April 2006 to
dematerialised or rematerialised Thursday, 13 April 2006
(both days inclusive)
www.pangbourne.co.za
Craighall
27 February 2006
Date: 27/02/2006 03:50:17 PM Produced by the JSE SENS Department
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