| Wed 6 Dec 2006, 17:43 | | Paramount - Audited results to 31 October 2006 and |
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PRA
PRA
Paramount - Audited results to 31 October 2006 and distribution announcement
PARAMOUNT PROPERTY FUND LIMITED
(Reg No. 1945/019928/06)
Share code PRA & ISIN ZAE000028577
AUDITED RESULTS TO 31 OCTOBER 2006
AND DISTRIBUTION ANNOUNCEMENT
Audited Audited
October 2006 October 2005
Notes R"000 R"000
CONSOLIDATED INCOME STATEMENT
Revenue 1 268 345 211 243
Trading income 197 845 127 705
Fair value adjustments 2 125 942 121 545
Interest received 4 789 4 090
Surplus on disposal of investment properties 4 558 9 470
Depreciation (983)
Interest paid on borrowings (116 016) (76 487)
Income before taxation 217 118 185 340
Taxation (12 364) (13 645)
Income before distribution 204 754 171 695
Distribution to unitholders (128 807) (62 864)
Net profit for the year 75 947 108 831
Linked units in issue ("000) 244 967 116 270
Weighted average linked units in issue ("000) 192 436 113 069
Earnings per linked unit (cents) 106 152
Headline earnings per linked unit (cents) 49 45
Core earnings per linked unit (cents) 61 63
Fully diluted earnings per linked unit (cents) 104 137
Fully diluted headline earnings per linked
unit (cents) 48 41
Earnings per share 39 96
Headline earnings per share (18) (10)
Distribution per linked unit (cents) 61.0 54.5
Earnings, Headline earnings and Core earnings per share and per linked unit The
earnings, headline earnings and core earnings calculations are based on the
weighted number of linked units ranking for distribution of 192 436 050 (2005:
113 069 208).
Earnings and headline earnings per share are obligatory in terms of accounting
standards, but are not meaningful to investors as the shares are traded as part
of a linked unit and all distributions are in the form of interest on the
debenture portion of the linked unit.
Earnings per linked unit of R205 754 000 (2005: R171 695 000) is calculated on
the net income before debenture interest but after taxation.
Headline earnings per linked unit is calculated on the net income before
debenture interest but after taxation and headline reconciling items.
Core earnings per linked unit is calculated by adding to headline earnings,
realised surpluses on disposal of investment properties (net of capital gains
tax), distribution prepayments received, amortisation of debenture discount and
profit on realisation of investments previously recognised as equity (net of
taxation). This calculation is provided for the benefit of stakeholders as the
directors are of the opinion that it provides a more accurate reflection of the
group"s cash profits for the year.
The fully diluted earnings and headline earnings per linked unit is calculated
on 197 419 749 (2005: 125 493 675) linked units, being all the linked units in
issue as well as all the B debentures to be converted between November 2006 and
October 2008, and the net income of R204 754 000 (2005: R171 695 000) before
debenture interest but after taxation.
EARNINGS RECONCILIATION
Earnings attributable to shareholders 75 947 108 831
Headline reconciling items (110 797) (120 474)
Headline earnings attributable to shareholders (34 850) (11 643)
Earnings attributable to shareholders 75 947 108 831
Distribution to unitholders 128 807 62 864
Earnings attributable to linked unitholders 204 754 171 695
Revaluation surplus (124 116) (122 863)
Taxation of revaluation surplus 17 997 14 601
Amortised lease escalations (14 970) (5 796)
Taxation of amortised lease escalations 4 341 1 681
Accounting surplus on disposal of
investment properties (4 558) (9 470)
Taxation on disposal of investment properties 661 1 373
Impairment of goodwill 9 848 -
Headline earnings attributable to
linked unitholders 93 957 51 221
Headline earnings per linked unit (cents) 49 45
Headline earnings 93 957 51 221
Realised surplus on disposal of
investment properties 13 887 19 223
Taxation on disposal of investment properties (705) (2 787)
Derivative financial instruments (12 956) -
Taxation on derivative financial instruments 3 757 -
Amortisation of debenture discount 1 282 1 318
Distribution prepayment received 18 009 2 102
Core earnings 117 231 71 077
Core earnings per linked unit (cents) 61 63
One ordinary share and one A debenture are defined as one linked unit.
ABRIDGED CONSOLIDATED BALANCE SHEET
Investment properties 2 763 337 1 247 554
Amortised lease escalations 40 097 25 127
Goodwill - 451
Cash at bank 21 811 75 566
Listed property investments 8 614 -
Derivative financial assets 15 988 -
Other current assets 56 896 43 290
Total assets 2 906 743 1 391 988
Total ordinary shareholders" funds 395 000 153 394
A debenture holders 1 029 627 449 208
B debenture holders 3 23 755 60 339
Interest-bearing borrowings 1 264 846 667 385
Deferred taxation 37 661 18 058
Unitholders for distribution 36 745 18 022
Derivative financial instruments 3 032 -
Current liabilities 116 077 25 582
Total equity and liabilities 2 906 743 1 391 988
Net asset value per linked unit (cents) 582 519
Fully diluted net asset value per linked
unit (cents) 579 516
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Income before taxation 217 118 185 340
Adjustments for:
Interest received (4 789) (4 090)
Interest paid on borrowings 116 016 76 487
Depreciation - 983
Provisions raised/(reversed) 286 (650)
Surplus on disposal of investment property (4 558) (9 470)
Derivative financial instruments (12 956) -
Impairment of goodwill 9 848 -
Amortisation of debenture discount 1 282 1 318
Revaluation of investment properties (124 116) (122 863)
Amortised lease escalations (14 970) (5 796)
Operating profit before working capital changes 183 161 121 259
Working capital changes 64 681 (4 201)
Cash generated from operations 247 842 117 058
Interest received 4 789 4 090
Interest paid on borrowings (116 016) (76 487)
Taxation paid (442) (5)
Net cash inflow from operating activities 136 173 44 656
Net cash outflow from investing activities (1 387 109) (36 157)
Net cash inflow from borrowing activities 597 461 52 733
Net cash inflow from capital raising activities 599 720 8 771
(53 755) 70 003
Cash and cash equivalents at beginning of
the year 75 566 5 563
Cash and cash equivalents at end of the year 21 811 75 566
Capital Expenditure
At the financial year-end the company and the group had capital commitments
totalling R236.3 million (2005: R839.5 million), in respect of properties
acquired.
These commitments are being met from bank loans, the issuing of nil (2005: 71
873 676) new linked units and existing cash resources.
In addition there are capital commitments for R9.6 million (2005: R5.5 million)
in respect of the redevelopment of and completion of extensions to existing
buildings and R460.6 million of redevelopments have been approved by the board,
but not yet contracted. These commitments will be funded from approved bank
loans and existing cash resources.
Non-
Share Share distributable Distributable
capital premium reserves reserves
STATEMENT OF CHANGES
IN EQUITY (R"000)
Balance at 1/11/2004 9 208 9 015 40 21 313
Increase in share capital 2 419
Net increase in share premium 2 568
Issue of A debentures
Amortisation of debenture discount
Profit for the year 108 831
Balance at 31/10/2005 11 627 11 583 40 130 144
Increase in share capital 12 870
Net increase in share premium 54 381
Issue of A debentures
Amortization of debenture discount
Revaluation listed investments
Profit for the year 75 947
Balance at 31/10/2006 24 497 165 964 40 206 091
Linked
Revaluation A unit
reserve Equity Debentures total
STATEMENT OF CHANGES
IN EQUITY (R"000)
Balance at 1/11/2004 39 576 350 249 390 657
Increase in share capital 2 419 2 419
Net increase in share
premium 2 568 2 568
Issue of A debentures 97 641 97 641
Amortisation of debenture
discount 1 318 1 318
Profit for the year 108 831 108 831
Balance at 31/10/2005 0 153 394 449 208 603 434
Increase in share capital 12 870 12 870
Net increase in share
premium 154 381 154 381
Issue of A debentures 579 137 579 137
Amortization of debenture
discount 1 282 1 282
Revaluation listed
investments (1 592) (1 592) (1 592)
Profit for the year 75 947 75 947
Balance at 31/10/2006 (1 592) 395 000 1 029 627 1 425 459
Industrial Office Retail
ABRIDGED SEGMENTAL INFORMATION (R"000)
2006
Revenue (excluding straight-line lease
adjustments) 54 288 127 677 69 467
Net expenses (8 571) (22 648) (15 529)
Segmental trading income 45 717 105 029 53 938
2005
Revenue (excluding straight-line lease
adjustments) 38 844 84 779 36 141
Net expenses (7 712) (17 596) (6 405)
Segmental trading income 31 132 67 183 29 736
Corporate Total
ABRIDGED SEGMENTAL INFORMATION (R"000) 2006
Revenue (excluding straight-line lease adjustments) 1 943 253 375
Net expenses (23 752) (70 500)
Segmental trading income (21 809) 182 875
2005
Revenue (excluding straight-line lease adjustments) 45 683 205 447
Net expenses (51 825) (83 538)
Segmental trading income (6 142) 121 909
The group"s primary segments for segmental reporting purposes are
industrial,office, retail and corporate. Revenue and expenses that are directly
attributable to a segment are allocated to those segments. Revenue and expenses
not directly attributable to a segment are allocated to the corporate segment.
Audited Audited
October 2006 October 2005
R"000 R"000
NOTES
1) Revenue represents rental income and
development trading income:
Rental income 251 432 159 764
Straight-line lease income adjustment 14 970 5 796
Sale of inventories 1 943 45 683
268 345 211 243
2) Fair value adjustments
Revaluation of investment property 124 116 122 863
Permanent impairment of goodwill (9 848) -
Debenture discount amortised (1 282) (1 318)
Derivative financial instruments 12 956 -
125 942 121 545
3) The B debentures are convertible into linked units in five equal tranches,
commencing in January of the year following issue. The new linked units
participate in all distributions from the date of conversion. The company
discontinued issuing B debentures in 2002 and 4 983 699 debentures remain with
the final conversion due in January 2008.
Accounting Policies
The financial statements have been prepared on the historical cost basis, except
for investment properties which are carried at their fair value. The financial
statements have been prepared in compliance with International Financial
Reporting Standards.
Audit Report
These results have been audited by the company"s auditors, Ernst & Young
Registered Auditors Inc., and their unqualified audit reports on the results and
the annual financial statements from which these results have been extracted are
available for inspection at the company"s registered office.
Comments
RETURNS
Distributions for the year to 31 October 2006 increased by 12% over 2005,
exceeding the forecast of 8%. Unitholders who held their units for the full year
experienced a return of nearly 50% for the second consecutive year, 10,3%
earnings and 39% capital appreciation.
PROPERTY ACTIVITIES
In line with the Group"s policy of active asset management two smaller
properties which were not regarded as being part of the long-term core portfolio
were disposed of. These sales generated profits before taxation of R4.56
million, and core earnings before taxation of R13.88 million. As part of the
strategy of growing the fund by the acquisition of good quality properties, the
group took transfer of ten properties announced at the end of 2005 at a cost of
R839.5 million. A further thirteen properties with a value of R493.7 million
were acquired and transferred during the year, while contracts for the
acquisition of a further four properties with a value of R229.5 million were
signed before the year-end. Two of these properties have already been
transferred to the group, with the transfer of the remaining properties expected
to be completed by January 2007.
The value of the group"s investment properties totalled R2 803 434 million at
year-end and will increase to R3 032 934 million after transfer of these
properties.
A total of 104 300 m2 of space was let during the 2006 financial year,
representing 17% of the portfolio"s total lettable space. Of this, 47 800 m2
related to new lettings and 56 500 m2 to renewals of existing leases. The
vacancy rate of the portfolio was less than 3.0% at year-end.
NET ASSET VALUE
Investment properties that generate income are carried at fair value based on
valuations by professional independent valuators, less the cumulative straight-
line rental adjustment. The valuators have appropriate qualifications and
extensive experience in property valuations. Fair value is determined by
discounting expected future cash flows at appropriate market interest rates.
Valuations are carried out on an annual basis. This year"s valuation resulted in
an increase in the portfolio value of R139.1 million, before taking into account
the straight-line rental adjustment. As a consequence net asset value per linked
unit rose to R5.82 at year-end.
DEBT MANAGEMENT
The group"s gearing level dropped during the course of the year from 55.2% to
44.1%. The restructure of the group"s debt funding, referred to in last year"s
report has been completed, and during the year conduit funding was utilised in
respect of R500 million of debt, resulting in reduced cost of borrowings.
PROSPECTS
The restructured balance sheet, lower gearing costs and the current strong
demand for space bode well for the group"s performance going forward.
Subsequent Events
On 20 October 2006 Growthpoint Properties Ltd announced that it had acquired a
41.9% interest in Paramount and would be extending a mandatory offer to
minorities on the same terms and conditions as it had acquired its interest. A
circular to linked unitholders is in the final stages of preparation and will be
posted early next week.
Declaration of Distribution
Notice is hereby given that the board of directors has declared a final
distribution of 15 cents per linked unit in respect of the year ended 31 October
2006. The distribution will be paid on Tuesday, 2 January 2007.
To comply with the procedures of STRATE, the distribution timetable is as
follows:
last day to trade linked units cum
distribution Wednesday, 20 December 2006
linked units commence trading ex
distribution Thursday, 21 December 2006
record date Friday, 29 December 2006
pay date Tuesday, 2 January 2007
Linked unit certificates may not be dematerialised or rematerialised between
Thursday, 21 December 2006 and Friday, 29 December 2006.
By order of the Board
SPIRE PROPERTY SERVICES (PTY) LTD Cape Town
Secretaries 6 December 2006
Registered office
Tannery Park, 23 Belmont Road
Rondebosch 7700
PO Box 155, Rondebosch 7701
Transfer secretaries
Computershare Investor Services 2004 (Pty) Ltd
70 Marshall Street, Johannesburg 2001. P O Box 61051, Marshalltown 2107
DIRECTORS: A D Dalling (Chairman)#, R C Squire-Howe (Managing), J A Bester#,
R R Emslie*, R D Jeffery*, F J Jenkings, B H Kerswill, A A Maresky,
A D P Ovenstone*, G P Phillips*, R S Schur#.
* Non-executive #Independent non-executive
PARAMOUNT PROPERTY FUND LIMITED (Reg No. 1945/019928/06)
Share code PRA ISIN ZAE000028577
Date: 06/12/2006 05:43:24 PM Produced by the JSE SENS Department
