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PAP
PAP
Pangbourne - Audited financial results for the year ended 30 June 2006
Pangbourne Properties Limited ("Pangbourne")
(Incorporated in the Republic of South Africa)
(Registration number 1987/002352/06)
Share code: PAP & ISIN: ZAE000005252
Audited financial results for the year ended 30 June 2006
- 7,3% increase in distribution to 103,00 cents
- Occupancies up to 96,5%
- Total annual return of 26,5%
- 10 year annualised return of 39%
Issued share capital
- 243 719 765 (2005: 188 973 270) ordinary shares of 1 cent each
Issued debentures
- 2 175 036 282 (2005: 1 684 090 827) unsecured variable rate debentures of
50 cents each
Issued combined units
- 243 719 765 (2005: 188 973 270)
Weighted average combined units
- 205 235 904 (2005: 179 080 833)
Consolidated income statement
Year to Year to
R"000 30 June 2006 30 June 2005
Revenue 489 451 362 097
Straight-line operating lease adjustment 22 281 3 076
511 732 365 173
Net building costs 63 915 43 869
Administration costs 76 191 58 365
Cost of trading and developed
properties sold 40 584 6 689
Profit from rental income, investment
revenues and fees 331 042 256 250
Net revaluation of investment properties 354 823 223 485
Attributable to straight-line
operating lease adjustment (22 281) (3 076)
Gross revaluation of investment
properties 377 104 226 561
Unrealised revaluation of listed
investment held-for-trade 8 152 -
Net profit on disposal of investments
held-for-trade 1 034 1 051
Goodwill - realised - (1 235)
Goodwill - written off** (156 199) -
Net profit on disposal of
investment properties 55 562 5 461
Amortisation of intangible asset (4 878) (4 878)
Fair value adjustment on units
issued during the year** (150 861) -
(Loss)/profit on sale of portion
of subsidiary (133) 304
Profit before financing costs and
taxation 438 542 480 438
Interest received 14 395 12 350
Finance costs (113 884) (94 150)
Movements in fair value of
interest rate derivatives 14 878 (24 888)
Profit before taxation and
distribution to unitholders 353 931 373 750
Debenture interest - debt portion (100 140) (83 448)
Total distribution to combined
unitholders (216 722) (173 922)
Debenture interest - equity portion,
disclosed in statements of changes
in equity*** 112 332 87 062
Dividends - disclosed in statements
of changes in equity*** 4 250 3 412
Amortised debenture interest (3 147) (2 700)
Profit before taxation 250 644 287 602
Taxation (33 466) (10 497)
Taxation reversed in statements
of changes in equity* (32 576) (25 247)
Share of profit from associates 79 826 44 684
Profit for the year 264 428 296 542
Attributable to:
Equity holders of the parent 263 128 295 899
Minority interest 1 300 643
264 428 296 542
Basic and diluted earnings per
combined unit (cents) 128,83 165,59
Distribution per combined unit (cents) 103,00 96,00
* Provision for taxation including, the provision for tax which is
reversed in the statement of changes in equity, is made in accordance
with International Financial Reporting Standards (IFRS).
** This relates to a fair value adjustment on the difference between the
agreement price and the fair value of units given up in associates to
acquire a portfolio of properties from Transnet Retirement Funds
Property Trust (TRFPT).
Consolidated balance sheet
As at As at
30 June 30 June
R"000 2006 2005
ASSETS
Non-current assets 3 570 926 2 677 460
Direct and indirect investment in
property 3 411 728 2 561 194
Investment properties 2 929 538 2 107 591
Land held for development 22 564 -
Investment properties held-for-sale (225 434) -
Investments and loans in associates 685 060 453 603
Equipment, furniture and fittings 10 249 8 242
Goodwill - 6 566
Intangible asset 1 628 6 506
Long-term loans 7 031 9 248
Deposits held 5 698 4 222
Deferred tax asset 1 355 2 918
Loans to participants of the Unit
Purchase Trust 133 237 78 564
Current assets 613 295 224 288
Trading properties 73 095 18 918
Investment properties held-for-sale 225 434 -
Accounts receivable 173 286 127 972
Pre-payments 18 101 11 072
Other receivables 52 765 31 769
Current portion of long-term loans 4 260 4 494
Current portion of deferred interest - 46
Investment held-for-trade 41 052 -
Bank balances and cash 25 302 30 017
Total assets 4 184 221 2 901 748
EQUITY AND LIABILITIES
Capital and reserves 1 471 055 693 928
Share capital and premium 585 899 166 073
Accumulated profits 743 555 382 220
Debentures equity portion*** 141 601 145 635
Debentures debt portion*** 890 224 696 410
Combined unitholders" interest 2 361 279 1 390 338
Minority interest 1 639 339
Non-current liabilities
Other interest-bearing borrowings 1 462 405 1 250 743
Fair value of interest rate derivatives 22 016 36 894
Deferred tax liability 83 814 54 287
Current liabilities 253 068 169 147
Accounts payable and accruals 101 256 55 492
Current portion of interest-bearing
borrowings 22 500 16 030
Taxation 2 424 771
Combined unitholders for dividends
and interest 126 888 96 854
Total equity and liabilities 4 184 221 2 901 748
Net asset value per unit (cents)
including debenture debt portion 1 151 776
GEARING
Net debt excluding debenture debt
portion:
Income earning assets (%) 33,0 45,9
*** The split of debentures between debt and equity portions, does not
represent the legal substance of the debentures, but has been done in
order to comply with IFRS.
Reconciliation between earnings and headline earnings
for the year ended 30 June 2006
Profit before Taxation
taxation
Cents per Cents per
R"000 unit R"000 unit
Profit after share of
profit from associates 330 470 161,01 (66 042) (32,18)
Adjustments
Revaluation of
investment properties (354 823) (172,89) 51 449 25,07
Net goodwill written off 156 199 76,11 - -
Net profit on disposal of
investment properties (55 562) (27,08) 8 057 3,93
Adjustments for associates (110 784) (53,97) 38 729 18,88
Headline (loss)/profit
per combined unit (34 500) (16,82) 32 193 15,70
Profit after Year ended
taxation 30 June 2005
Cents per Cents per
R"000 unit R"000 unit
Profit after share of
profit from associates 264 428 128,83 296 542 165,59
Adjustments
Revaluation of
investment properties (303 374) (147,82) (191 080) (106,70)
Net goodwill written off 156 199 76,11 1 235 0,69
Net profit on disposal
of investment properties (47 505) (23,15) (4 669) (2,60)
Adjustments for associates (72 055) (35,09) (59 924) (33,46)
Headline (loss)/profit
per combined unit (2 307) (1,12) 42 104 23,52
Year to Year to
30 June 2006 30 June 2005
Headline (loss)/earnings and
distribution per
combined unit
Headline (loss)/earnings per
combined unit (cents) (1,12) 23,52
Distribution per
combined unit (cents) 103,00 96,00
Diluted and non-diluted
earnings and distribution
per combined unit (cents)
Earnings per combined unit
before equity portion of
debenture interest (cents) 128,83 165,59
Distribution per
combined unit (cents) 2,07 1,91
Segmental information
for the year ended 30 June 2006
Listed
Property investment Trading
Primary segment (R"000) management stock trading properties
Revenue
Rentals 277 581 - -
Financing fees - - -
Management fees 43 715 - -
Interest distributions - - -
Sale of developed
properties 32 900 - -
Sale of trading properties - - 17 000
Total revenue 354 196 - 17 000
Segment results 656 737 1 034 3 881
Property Transfer Bridging
Stock duty finance
investments finance
Revenue
Rentals - - -
Financing fees - 9 520 23 484
Management fees - - -
Interest distributions 77 015 - -
Sale of developed
properties - - -
Sale of trading
properties - - -
Total revenue 77 015 9 520 23 484
Segment results (79 184) 3 770 9 302
Agents"
commission Corporate Total
Revenue
Rentals - - 277 581
Financing fees 8 236 - 41 240
Management fees - - 43 715
Interest distributions - - 77 015
Sale of developed
properties - - 32 900
Sale of trading
properties - - 17 000
Total revenue 8 236 - 489 451
Segment results 3 263 (244 872) 353 931
Segmental information
for the year ended 30 June 2005
Listed
Property investment Trading
Primary segment (R"000) management stock trading properties
Revenue
Rentals 246 055 - -
Financing fees - - -
Management fees 14 060 - -
Interest distributions - - -
Sale of trading properties - - 12 600
Total revenue 260 115 - 12 600
Segment results 412 054 1 051 5 911
Property Transfer Bridging
Stock duty finance
investments finance
Revenue
Rentals - - -
Financing fees - 10 113 13 173
Management fees - - -
Interest distributions 58 775 - -
Sale of trading properties - - -
Total revenue 58 775 10 113 13 173
Segment results 58 775 4 361 5 680
Agents"
commission Corporate Total
Revenue
Rentals - - 246 055
Financing fees 7 321 - 30 607
Management fees - - 14 060
Interest distributions - - 58 775
Sale of trading properties - - 12 600
Total revenue 7 321 - 362 097
Segment results 3 156 (117 238) 373 750
Condensed consolidated statement of changes in equity
Year to Year to
30 June 30 June
R"000 Class 2006 2005
Balance at beginning
of year - as
previously stated 694 267 387 420
- IFRS 3 Transitional
adjustment AP (6 566) 28 829
Arising on issue and
repurchase of treasury
units during the year (2 455) 16 655
Arising on issue of
units during the year SP 270 533 27 330
Fair value adjustment
on units issued
during the year SP 150 861 -
Minority share of
current year profits (660) -
Profit on sale of portion
of subsidiary - (304)
Profit for the year AP 264 428 296 542
Reversal of taxation
on debenture interest
- equity portion AP 32 576 25 247
Distribution to unitholders:
debenture interest
- equity portion AP (112 332) (87 062)
Distribution to unitholders:
dividend portion AP (4 250) (3 412)
Net profit on disposal
of investments
available for sale AP 90 278 3 022
Capital gains tax on
sale of units AP (2 218) -
Fair value adjustment of
investments available
for sale AP 98 232 -
1 472 694 694 267
Note: AP = Accumulated profit; SP = Share capital and premium.
Condensed consolidated cash flow statement
Year to Year to
30 June 30 June
R"000 2006 2005
Cash generated from operations 201 158 209 664
Interest received 14 395 12 350
Finance costs (113 884) (94 150)
Investment income 77 015 58 775
Taxation paid (3 498) (820)
Net cash inflow from operating activities 175 186 185 819
Distributions to unitholders (186 688) (167 125)
Cash flows from operating activities (11 502) 18 694
Cash flows from investing activities (769 223) (787 996)
Cash flows from financing activities 786 432 790 247
Net increase in cash and cash equivalents 5 707 20 945
Cash and cash equivalents at
beginning of year 30 017 9 072
Deconsolidation of Siyathenga (10 422) -
Cash and cash equivalents at end of year 25 302 30 017
Additional information for investors (unaudited)
Compliance with 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. 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 (unaudited)
for the year ended 30 June 2006
R"000 2006 2005
Revenue
Rentals received 277 581 246 055
Financing fees received 41 240 30 607
Facilitation fees received 15 070 -
Promoters fees received 8 000 -
Management fees received 20 645 14 060
Interest 77 015 58 775
Profit on sale of trading properties 3 880 5 911
Selling price of trading properties 17 000 12 600
Cost of trading properties (13 120) (6 689)
Profit on sale of developed properties 5 436 -
Selling price of developed properties 32 900 -
Cost of developed properties (27 464) -
Net building costs (63 915) (43 869)
Administration costs (76 191) (58 365)
Net profit on disposal
of investments held-for-trade 1 034 1 051
Interest received 14 395 12 350
Finance costs (113 884) (94 150)
Cash share of profit from associates - 2 300
SA normal taxation and STC (3 936) (812)
Minority interest (1 489) (969)
Consolidation adjustment
for BEE finance costs 7 337 -
Distributable earnings 212 218 172 944
Weighted average number of
combined units in issue ("000) 205 236 179 081
Distributable earnings per
combined unit (cents) 103,40 96,57
Reconciliation to profit for the year (unaudited)
for the year ended 30 June 2006
Group
R"000 2006 2005
Distributable earnings 212 218 172 944
Gross revaluation of investment
properties 377 104 226 561
Unrealised revaluation of
investment held-for-trade 8 152 -
Goodwill realised - (1 235)
Goodwill written off (156 199) -
Net profit on disposal of
investment properties 55 562 5 461
Amortisation of intangible asset (4 878) (4 878)
Movement in fair value of interest
rate derivatives 14 878 (24 888)
Fair value adjustment on units
issued during the year (150 861) -
Non-cash portion of profits
from associate 79 826 42 384
(Loss)/profit on sale of
portion of subsidiary (133) 304
Profit before taxation and
distribution to unitholders 435 669 416 653
Debenture interest - debt portion (100 140) (83 448)
Amortised debenture interest (3 147) (2 700)
Profit before taxation 332 382 330 505
Taxation (29 530) (9 685)
Taxation reversed in statement
of changes in equity (32 576) (25 247)
Minority interest 1 489 969
Consolidation adjustment
for BEE finance costs (7 337) -
Profit for the year 264 428 296 542
Notes to the financial statements
1. Basis of preparation
The financial statements have been prepared in accordance with IFRS, IAS 34
- Interim Financial Reporting and the requirements of the Companies Act of
South Africa 1973, as amended.
IFRS 1 - First-time adoption of IFRS has been applied in the preparation of
the group annual financial statements.
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.
The accounting policies are consistent with those applied for the year
ended 30 June 2005 except for goodwill, where the 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
Siyathenga was a wholly owned subsidiary in the prior financial year. On
listing, Pangbourne"s holding was diluted and at year-end was 42% which has
been accounted for accordingly.
Distribution declared per combined unit
On 28 June 2006 notice was given of the declaration of a distribution of 56,0
cents per combined unit, comprising dividend number 40 of 1,098 cents per share
and interest on debentures calculated at 54,902 cents per combined unit.
Timetable of events
Event Date
a. Last date to trade
cum distribution Friday, 6 October 2006
b. Combined units trade
ex distribution Monday, 9 October 2006
c. Record date for unitholders
to participate in distribution Friday, 13 October 2006
d. Payment of distribution
to unitholders Monday, 16 October 2006
e. Combined unit certificates
may not be rematerialised
or dematerialised, Monday, 9 October 2006 to
both days inclusive Friday, 13 October 2006
f. Annual general meeting Wednesday, 18 October 2006 at 10:00
at the Company"s registered office
Related-party transactions
Transactions between the Company and its subsidiaries, which are related parties
of the Company, have been eliminated on consolidation and are not disclosed in
this note. Details of transactions between the Group and other related parties
are disclosed below.
All transactions were conducted at arm"s length.
Trading transactions
Day-to-day management of the iFour Properties Limited and Siyathenga Property
Fund Limited portfolios has been carried out by Pangbourne Properties Limited.
Pangbourne Properties Limited owns 37% of iFour Properties Limited and 42% of
Siyathenga Property Fund Limited.
The following amounts have been earned from iFour Properties Limited:
2006 2005
R"000 R"000
- Management fees 13 153 12 463
- Directors" fees 375 300
- Sales of developed property in
return for shares in
Paramount Properties Limited 32 900 -
46 428 12 763
The following distribution has been
earned from iFour Properties Limited:
- Interest distributions received 58 660 58 775
The following amount is owed by
iFour Properties Limited: 509 3 868
The following amounts have been earned from Siyathenga Property Fund Limited:
- Introduction and facilitation fees 15 070 -
- Promoter"s fees 8 000 -
- Management fees 7 042 -
- Directors" fees 265 66
30 377 66
The following distribution has been earned from Siyathenga Property Fund
Limited:
- Interest distributions received 17 114 -
The following amount is owed by
Siyathenga Property Fund Limited: 15 482 -
Purchase of the Crescent Shopping Centre
by 100%-held subsidiary,
Siyathenga Properties One (Pty) Limited,
from UCIC (Pty) Limited - 176 120
The following fees specific to
the TRFPT transaction that were
capitalised to investment
properties were paid to a former director:
Success fee 3 510 -
Consulting fee 760 -
4 270 -
Contingent liabilities
The Company has signed a suretyship in favour of a bank in respect of a loan of
R58 000 000 made by the bank to the Pangbourne Unit Purchase Trust.
In terms of a lease entered into on 1 April 1995, the Company is liable to
compensate one of its tenants for improvements effected by the tenant to the
fixed property, if the lease is cancelled before the contractual expiry thereof
on 31 March 2015. The amount of compensation is based on R3 200 000, the amount
expended by the tenant, reducing proportionately over the period of the lease.
The Company"s obligation in this regard is covered by a mortgage bond registered
over the Company"s fixed property with a book value of R19 350 000.
Commitments
There are contracted commitments for capital expenditure of R145 305 000 (2005:
R23 430 000). These will be funded from the Group"s resources.
The operating lease commitment for a subsidiary`s premises amounts to R129 546
for the next 12 months.
Subsequent events
Pangbourne recently announced the proposed acquisition of a 40,6% stake in the
Calulo property fund. The transaction is subject to competition commission
approval and thereafter a compulsory offer has to be made to minority
unitholders of Calulo. It is envisaged that Calulo will serve as the specialised
office fund in the multi-fund strategy. Pangbourne will assist in the growth of
assets in the funds as well as the placing of further equity to improve
liquidity and investor appeal in the funds.
IFRS 7 - Financial Instruments: Disclosures
This standard is effective for the Group from the year ending 30 June 2008. The
standard adds certain new disclosures about financial instruments to those
currently required by IAS 32 - Financial Instruments: Disclosure and
Presentation. The Standard also replaces the disclosures currently required by
IAS 30 Disclosures in the Financial Statements of Banks and Similar Financial
Institutions. The Group is in the process of evaluating the effects of the new
Standard.
The circular dated 13 February 2006 relating to the acquisition of a portfolio
of properties from TRFPT included a forecast for the three months ending 30 June
2006. This forecast has been materially achieved.
The consolidated financial statements for the year have been audited by Deloitte
& Touche and their accompanying unqualified report, as well as their unqualified
audit report on this set of financial information, is available for inspection
at the Company"s registered office.
Commentary
Results
Pangbourne continues to deliver growth ahead of inflation to its combined
unitholders. Distributions increased by 7,3% from 96 cents per unit to 103 cents
per unit and, added to the growth in unit price from R10,30 to R12,00, providing
a total annualised return to investors of 26,5%. The property and investment
portfolio has increased from R2,9 billion to R4,2 billion and properties under
management total R7,2 billion, supporting sustainable growth in annuity income
in the future.
Property management
Occupancy of 96,5% reflects the buoyant property market and, with replacement
costs of buildings still not being matched by current rental levels, there are
no signs of this abating.
Asset management
Pangbourne has continued its aggressive growth strategy, having successfully
listed Siyathenga Property Fund in August 2005, followed by the black
empowerment deal with Yard Capital who acquired a 6,15% stake in Pangbourne on
the back of a R125 million property acquisition. Structuring the transaction as
a vendor placement enabled Pangbourne to effect an empowerment deal which was
not dilutionary to unitholders. The acquisition of the Transnet Retirement
Funds Property Trust ("TRFPT") portfolio for R1,4 billion enabled Pangbourne to
significantly grow the assets of both Pangbourne and Siyathenga with quality,
yield-enhancing properties.
Pangbourne recently announced the proposed acquisition of a 40,6% stake in the
Calulo property fund. The transaction is subject to Competition authorities
approval and thereafter a compulsory offer has to be made to minority
unitholders of Calulo. It is envisaged that Calulo will serve as the specialised
office fund in the multi-fund strategy.
In addition to the TRFPT portfolio and the Yard Capital vendor placing for
properties, Pangbourne acquired 19 buildings for R147 million. During the year
22 buildings were sold for R111 million.
Valuations
One sixth 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) every six months. 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 have been assessed at executive committee,
audit committee and board level for rationale, consistency and accuracy. The
result of the revaluation process was an increase of R377 million to the
property portfolio.
Strategy
Pangbourne"s strategy is to have an associated house of specialised property
funds. This strategy provides Pangbourne with annuity income from its directly
held properties, from service contracts with the specialised funds and from the
distributions received from the strategic holdings. In addition to the annuity
income, this strategy gives Pangbourne the opportunity of warehousing properties
for the specialised funds, or partnering with reputable developers, in order to
assist in the growth of the associated funds. Pangbourne maintains gearing at
levels of around 33% which enables it to move quickly in the market to take
advantage of any opportunities that arise.
Prospects
Pangbourne"s objective is to increase growth in distributions. In looking at
Pangbourne"s trading for the forthcoming year it is believed that this is
achievable.
P L Campbell, Chairman
C M Hutchinson, CEO
31 August 2006
Directors: P L Campbell (Chairman), J B Gibbon, C K Hickling,
B D Hopkins, C M Hutchison (CEO)*, W J Midgley*, D J Kennedy*,
Y K N Molefi, A J W L Richards*, B M H Tsita, R N Wesselo*
*Executive
Secretary: J J Groenewald
382 Jan Smuts Avenue, Craighall, 2196
Transfer secretaries:
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street, Johannesburg, 2000
PO Box 61051, Marshalltown, 2107
Date: 31/08/2006 03:36:22 PM Produced by the JSE SENS Department
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