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PAP
PAP
PAP - Pangbourne - Unaudited financial results: six months ended 31 Dec 2006
Pangbourne Properties Limited
("Pangbourne" or "the Company")
(Incorporated in the Republic of South Africa)
(Registration number 1987/002352/06)
Share code: PAP
ISIN: ZAE000005252
UNAUDITED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2006
- 10,6% increase in distribution to 52,00 cents
- Occupancies at 97,29%
- Total half-year return of 24%
- Total assets - R4,5 billion
Issued share capital
246 635 621 (30 June 2006: 243 719 765) ordinary shares of 1 cent each
Issued debentures
2 219 720 589 (30 June 2006: 2 175 036 282) unsecured variable rate debentures
of 50 cents each
Issued combined units
246 635 621 (30 June 2006: 243 719 765)
Weighted average combined units
242 963 325 (30 June 2006: 205 235 904)
COMMENTARY
RESULTS
Pangbourne has delivered a total return of 24% to combined unit holders, for the
six months ended 31 December 2006. The company declared a 10,6% increase
in its interim distribution to 52,00 cents per combined unit, thereby
demonstrating the continuing improvement in the growth of distributions.
The unit price increased from R12,00 as at 30 June 2006 to R14,35 as at
31 December 2006.
PROPERTY MANAGEMENT
The Company`s occupancy factor as at 31 December 2006 remained high at 97,29%
(97,5% 30 June 2006). The growth in rental, primarily in the industrial
and office sectors, is encouraging for the future growth in
distributions. In addition, Pangbourne has strengthened its lease expiry
profile, extending the majority of leases to expire over 3 to 5 years.
ASSET MANAGEMENT
One of the highlights for the period has been the acquisition of 63,3% of Calulo
Property Fund Limited ("Calulo"), which has increased properties under
management by R507 million. It is management`s intention to utilise
Calulo as a foundation for the launching of Pangbourne`s focused office
fund. A quality office portfolio of approximately R500 million is
expected to be sold into Calulo before June 2007.
Certain properties acquired as part of larger portfolios, which did not meet
Pangbourne`s investment criteria, were treated as trading properties, and
were sold for a profit of R3,6 million.
This profit has been included in distributable earnings.
Sixteen investment properties which were considered to be functionally obsolete
or located in deteriorating areas were sold for R142,3 million. This
equated to a loss against valuation of R1,1 million, but a cash profit of
R42,2 million.
Pangbourne has a pipeline of high quality industrial, office and retail
developments totalling approximately R1,5 billion. The completion of
these developments is expected to take place over a period of 24 months.
All these developments improve the quality of the portfolio and the
ability of the fund to grow distributions. The retail and office
developments will be on sold to the Pangbourne associated specialised
funds at the appropriate time, on an arm`s length basis.
VALUATION OF PROPERTIES
Since 30 June 2006 there has been a 4% increase in the overall valuation of the
property portfolio. 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 principally,
vacancies, rental reversions to market, tenant installations and capital
expenditure. One sixth of the portfolio has been valued by external
valuers, with the balance being valued internally. The valuations have
been assessed by the executive committee, audit committee and by the
board for rationale, consistency and accuracy.
PROSPECTS
Despite the increases in interest rates in recent months the commercial property
market remains buoyant. Provided this trend continues, growth in
distributions is targeted to be maintained at the same level for the
second half of the year.
On behalf of the board
P L Campbell Chairman
C M Hutchison Chief Executive Officer
23 February 2007
RECONCILIATION BETWEEN EARNINGS AND HEADLINE EARNINGS
Profit before taxation Taxation
Cents Cents
per per
R`000 unit R`000 unit
Profit after
share of profit
from associates 167 924 69,11 (35 219) (14,50)
Adjustments
Revaluation of
investment
properties (54 036) (22,25) 7 835 3,23
Net goodwill 15 101 6,22 - -
written off
Net
loss/(profit)
on disposal
of investment 1 132 0,47 (164) (0,07)
properties
Adjustments for
associates (30 033) (12,36) 8 407 3,47
Headline
earnings
as per
International
Financial
Reporting
Standards 100 088 41,19 (19 141) (7,87)
RECONCILIATION BETWEEN EARNINGS AND HEADLINE EARNINGS
Profit after taxation Six months to 31.12.05
Cents per Cents per
R`000 unit R`000 unit
Profit after
share of
profit
from 132 705 54,61 70 784 37,16
associates
Adjustments
Revaluation
of investment
properties (46 201) (19,02) (40 391) (21,21)
Net goodwill 15 101 6,22 - -
written off
Net
loss/(profit)
on disposal
of investment 968 0,40 (277) (0,15)
properties
Adjustments
for
associates (21 626) (8,89) (63 307) (33,24)
Headline
earnings
as per
International
Financial
Reporting
Standards 80 947 33,32 (33 191) (17,44)
Six Six Year
months months
to to to
R`000 31.12.06 31.12.05 30.06.06
Diluted and non-diluted earnings
and distribution
per combined unit 33,32 (17,44) (1,12)
Distribution per combined unit 52,00 47,00 103
(cents)
Diluted and non-diluted earnings
and distribution per share
Earnings per share before equity
portion of debenture
interest (cents) 54,61 37,16 128,83
Distribution per share (cents) 1,03 0,92 2,07
Distributions to combined
unitholders
Debenture interest debt portion 55 964 44 032 100 140
Debenture interest equity portion 69 773 47 803 112 332
Dividends 2 514 1 837 4 250
Total distribution 128 251 93 672 216 722
ADDITIONAL INFORMATION FOR INVESTORS
for the period ended 31 December 2006
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
provided to assist readers to determine 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 Six months Year
ended ended to
R`000 31.12.06 31.12.05 30.06.06
Revenue 281 952 246 852 489 451
Rentals received 182 297 124 154 277 581
Financing fees received 20 084 18 612 41 240
Facilitation fees received - - 15 070
Promoter fees received - 8 000 8 000
Management fees received 12 445 10 045 20 645
Interest 37 926 36 141 77 015
Profit on sale of trading 3 615 3 880 3 880
properties
- Selling price of trading 29 200 17 000 17 000
properties
- Cost of trading (25 585) (13 120) (13 120)
properties
Profit on sale of developed - 5 436 5 436
properties
- Selling price of - 32 900 32 900
developed properties
- Cost of developed - (27 464) (27 464)
properties
Net building costs (30 024) (26 721) (63 915)
Administrative costs (47 013) (39 629) (76 191)
Net profit on disposal of 7 249 - 1 034
investments held-for-trade
Realisation of prior year 8 152 - -
revaluation of listed
investment held-for-trade
Interest received 9 458 7 915 14 395
Finance costs (77 251) (57 791) (113 884)
South African normal (602) (230) (3 936)
taxation and STC
Minority interest (450) (1 876) (1 489)
Consolidation adjustment 6 086 1 609 7 337
for BEE finance costs
Distributable earnings 131 972 89 545 212 218
Investors` distributable
earnings per combined unit
Weighted average number of 242 963 190 433 205 236
combined units in issue
Distributable earnings per 54,32 47,02 103,40
combined unit (cents)
Opening share price (cents) 1 200 1 030 1 030
Closing share price (cents) 1 435 1 260 1 200
Distribution (cents) 52 47 103
Total return 24% 27% 27%
RECONCILIATION TO PROFIT FOR THE PERIOD
Distributable earnings 131 972 89 545 212 218
Revaluation of investment 60 701 60 012 377 104
properties
Unrealised revaluation of - 3 167 8 152
listed investments held-for-
trade
Realisation of prior year (8 152) - -
revaluation of listed
investment held-for-trade
Goodwill written off (15 101) - (156 199)
Net (loss)/profit on (1 132) 324 55 562
disposal of investment
properties
Amortisation of intangible (2 273) (2 440) (4 878)
asset
Movements in fair value of 29 856 (19 890) 14 878
interest rate derivatives
Fair value adjustment on (3 986) - (150 861)
units issued during the
year
Non-cash portion of profit 38 802 - 79 826
from associates
Loss on sale of portion of - (133) (133)
subsidiary
Profit before taxation and 230 687 130 585 435 669
distribution to unitholders
Debenture interest - debt (55 964) (44 032) (100 140)
portion
Amortised debenture (1 765) (3 102) (3 147)
interest
Profit before taxation 172 958 83 451 332 382
Taxation (14 383) 928 (29 530)
Taxation reversed in (20 234) (13 862) (32 576)
statement of changes in
equity
Minority interest 450 1 876 1 489
Consolidation adjustment (6 086) (1 609) (7 337)
for BEE finance costs
Profit for the period 132 705 70 784 264 428
Net asset value per unit
with iFour Properties
Limited, Calulo and
Siyathenga Property Fund
("Siyathenga") investment
carried at market value 1 225 970 931
including debenture debt
portion (cents)
SEGMENTAL INFORMATION
Listed
invest- Property
Property ments Trading stock
R`000 manage- stock proper- invest-
Dec - 06 ment trading ties ments
Primary segment
Revenue
Rentals 182 297 - - -
Financing fees - - - -
Management fees 12 445 - - -
Promoter fees - - - -
Interest distributions - - - 37 926
Sale of developed - - - -
properties
Sale of trading properties - - 29 200 -
Total revenue 194 742 - 29 200 37 926
Segment results
Profit before taxation and
distribution to combined
unitholders 130 134 7 249 3 615 37 926
130 134 7 249 3 615 37 926
Dec - 05
Primary segment
Revenue
Rentals 124 154 - - -
Financing fees - - - -
Management fees 10 045 - - -
Promoter fees 8 000 - - -
Interest distributions - - - 36 141
Sale of developed 32 900 - - -
properties
Sale of trading properties - - 17 000 -
Total revenue 175 099 - 17 000 36 141
Segment results
Profit before taxation and
distribution to combined
unitholders 84 675 3 880 36 141
84 675 3 880 36 141
SEGMENTAL INFORMATION
Trans-
fer Bridg- Agents`
R`000 duty ing com- Corpo-
Dec - 06 finance finance mission rate Total
Primary segment
Revenue
Rentals - - - - 182 297
Financing fees 3 349 10 898 4 547 - 18 794
Management fees - - - 1 290 13 735
Promoter fees - - - - -
Interest - - - - 37 926
distributions
Sale of developed - - - - -
properties
Sale of trading - - - - 29 200
properties
Total revenue 3 349 10 898 4 547 1 290 281 952
Segment results
Profit before
taxation and
distribution to
combined
unitholders 1 480 4 817 2 010 (380) 186 851
1 480 4 817 2 010 (380) 186 851
Dec - 05
Primary segment
Revenue
Rentals - - - - 124 154
Financing fees 4 804 8 834 3 656 1 318 18 612
Management fees - - - - 10 045
Promoter fees - - - - 8 000
Interest - - - - 36 141
distributions
Sale of developed - - - - 32 900
properties
Sale of trading - - - - 17 000
properties
Total revenue 4 804 8 834 3 656 1 318 246 852
Segment results
Profit before
taxation and
distribution to
combined
unitholders 1 828 3 362 1 391 (195) 131 082
1 828 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.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Six months Six months Year
ended ended to
R`000 31.12.06 31.12.05 30.06.06
Cash generated from 214 423 68 977 201 158
operations
Net finance costs (67 793) (49 876) (99 489)
Investment income 37 926 36 141 77 015
Taxation paid (802) (260) (3 498)
Cash flows from operating
activities before
distribution to 183 754 54 982 175 186
unitholders
Distributions to (128 349) (94 431) (186 688)
unitholders
Cash flows from operating 55 405 (39 449) (11 502)
activities
Cash flows from investing (278 182) 349 189 (769 223)
activities
Cash flows from financing 220 701 (332 127) 786 432
activities
Net (decrease)/increase in (2 076) (22 387) 5 707
cash and cash equivalents
Cash and cash equivalents 25 302 30 017 30 017
at beginning of period
Deconsolidation of - - (10 422)
Siyathenga
Cash and cash equivalents 23 226 7 630 25 302
at end of period
DISTRIBUTION DECLARED PER COMBINED UNIT
Notice is hereby given of the declaration of 52 cents per combined unit,
comprising dividend number 41 of 1,0196 cents per share and interest on
debentures calculated at 50,9804 cents per combined unit.
Timetable of events
Event Date
a. Last date to trade cum Wednesday, 4 April 2007
distribution
b. Combined units trade ex Thursday, 5 April 2007
distribution
c. Record date for unitholders to Friday, 13 April 2007
participate in the distribution
d. Payment of distribution to Monday, 16 April 2007
unitholders
e. Combined unit certificate may not Thursday, 5 April 2007 to
be rematerialised or
dematerialised
Friday, 13 April 2007
CONDENSED CONSOLIDATED INCOME STATEMENT
Six months Six months Year
ended ended to
R`000 31.12.06 31.12.05 30.06.06
Revenue 281 952 246 852 489 451
Straight-line operating 6 665 12 771 22 281
lease adjustment
288 617 259 623 511 732
Net building costs 30 024 26 721 63 915
Administration costs 47 013 80 213 76 191
Cost of trading and 25 585 - 40 584
developed properties sold
Profit from rental income,
investment income
and fees received 185 995 152 689 331 042
Net revaluation of 54 036 47 241 354 823
investment properties
Attributable to straight- (6 665) (12 771) (22 281)
line operating lease
adjustment
Gross revaluation of 60 701 60 012 377 104
investment properties
Unrealised revaluation of - 3 167 8 152
listed investment held-for-
trade
Net profit on disposal of 7 249 - 1 034
investment held-for-trade
Goodwill - written off (15 101) - (156 199)
Net (loss)/profit on (1 132) 324 55 562
disposal of investment
properties
Amortisation of intangible (2 273) (2 440) (4 878)
asset
Fair value adjustment on (3 986) - (150 861)
units issued during the
year
Loss on sale of portion of - (133) (133)
subsidiary
Profit before financing 224 788 200 848 438 542
costs and taxation
Interest received 9 458 7 915 14 395
Finance costs (77 251) (57 791) (113 884)
Movement in fair value of 29 856 (19 890) 14 878
interest rate derivatives
Profit before taxation and 186 851 131 082 353 931
distribution to
unitholders
Debenture interest - debt (55 964) (44 032) (100 140)
portion
Total distribution to (128 251) (93 672) (216 722)
combined unitholders
Debenture interest -
equity portion, disclosed
in statements
of changes in equity 69 773 47 803 112 332
Dividends - disclosed in 2 514 1 837 4 250
statements of changes in
equity
Amortised debenture (1 765) (3 102) (3 147)
interest
Profit before taxation 129 122 83 948 250 644
Taxation (14 985) 698 (33 466)
Taxation reversed in (20 234) (13 862) (32 576)
statements of changes in
equity*
Share of profit from 38 802 - 79 826
associates
Profit for the period 132 705 70 784 264 428
Attributable to:
Equity holders of the 132 255 68 908 263 128
company
Minority interest 450 1 876 1 300
132 705 70 784 264 428
*Provision for taxation, including the provision for tax which is
reversed in the statement of changes in equity, is made in accordance
with IFRS.
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation
The unaudited interim financial report has been prepared in accordance
with IFRS, IAS 34 - Interim Financial Reporting and the requirements of
the South African Companies Act 1973, as amended.
The accounting policies are consistent with those applied for the year
ended 30 June 2006.
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.
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.
3. 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.
4. Capital commitments
There are contracted commitments for capital expenditure of
R1 336 317 747 (2006: R22 305 000). These will be funded from the group`s
resources.
The operating lease commitment for a subsidiary`s premises amounts to R64
773 for the next six months.
5. Subsequent events
In management`s opinion there have been no material adjusting or non-
adjusting events that have occurred after 31 December 2006.
6. Investments
During the current year the Company acquired 63,35% in Calulo which is
equity accounted based on a committed dilution programme that will result
in them becoming an associate by year-end 30 June 2007.
CONDENSED CONSOLIDATED BALANCE SHEET
As at As at As at
R`000 31.12.06 31.12.05 30.06.06
Assets
Non-current assets
Direct and indirect 3 810 317 2 307 345 3 411 728
investment in property
Investment properties* 3 118 829 1 719 376 2 929 538
Land held for development 27 984 - 22 564
Investment properties held- (229 535) - (225 434)
for-sale
Investments in and loans 893 039 587 969 685 060
to associates
Equipment, furniture and 11 369 7 859 10 249
fittings
Fair value of interest 7 840 - -
rate swaps
Intangible asset 15 835 4 066 1 628
Long-term loans 4 083 9 373 7 031
Deposits held 6 291 3 829 5 698
Deferred taxation assets 1 056 33 090 1 355
Loans for purchase scheme 150 738 70 715 133 237
units
Current assets
Trading properties 43 895 3 021 73 095
Investment properties held- 229 535 - 225 434
for-sale
Receivables 160 750 124 772 169 286
Prepayments 23 326 14 287 18 101
Other receivables 65 950 52 999 56 765
Current portion of long- 720 4 179 4 260
term loans
Investments held-for-trade - 36 067 41 052
Bank and cash 23 226 7 630 25 302
Total assets 4 554 931 2 679 232 4 184 221
EQUITY AND LIABILITIES
Capital and reserves 1 601 223 717 630 1 471 055
Debentures debt portion 905 680 699 512 890 224
Minority interest 2 089 2 215 1 639
Other interest-bearing 1 640 375 952 866 1 462 405
borrowings
Fair value of interest - 54 705 22 016
rate swaps
Deferred taxation 97 911 84 142 83 814
liabilities
Current liabilities
Payables 143 640 67 837 101 256
Current portion of 35 000 3 489 22 500
interest-bearing
borrowings
Taxation 2 223 741 2 424
Unitholders for 126 790 96 095 126 888
distribution
4 554 931 2 679 232 4 184 221
Net debt excluding
debenture debt portion:
income-earning assets (%) 39,21% 39,00% 33,00%
Net asset value per unit 1 032 744 1 151
including debenture debt
portion (cents)
*The effect of the straight-line operating lease adjustment of
R6 665 000 (June 2006: R22 281 000) is included in the value of
Investment properties. The cumulative effect of the straight-line
operating lease adjustment included in Investment properties is R48 011
000 (June 2006: R41 346 000).
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months Six months Year
ended ended to
R`000 31.12.06 31.12.05 30.06.06
Balance at beginning of 1 471 055 687 362 687 701
period
Minority interest 1 639 - -
- as previously stated 1 471 055 693 928 694 267
- IFRS 3 transitional - (6 566) (6 566)
adjustment
Arising on issue and 43 891 (2 453) (2 455)
repurchase of treasury
shares during the year
Arising on issue of units - (409) 270 533
during the year
Fair value adjustment on 3 986 - 150 861
units issued during the
year
Minority share of current - (1 876) (660)
year profits
Minority interest - - (1 639)
Profit for the period 132 705 70 784 264 428
Reversal of notional 20 234 13 862 32 576
taxation on debenture
interest - equity portion
Distribution to (69 773) (47 803) (112 332)
unitholders: debenture
interest - equity portion
Distribution to (2 514) (1 837) (4 250)
unitholders: dividend
portion
Net profit on disposal of - - 90 278
investments available-for-
sale
Capital gains tax on sale - - (2 218)
of units
Fair value adjustment of - - 98 232
investment available-for-
sale
Balance at end of period 1 601 223 717 630 1 471 055
2nd Floor, Pangbourne House, 382 Jan Smuts Avenue, Craighall, 2196
Directors:
P L Campbell (Chairman), C M Hutchison* (CEO), J B Gibbon, C K Hickling, B D
Hopkins, D J Kennedy*, W J Midgley*, Y K N Molefi, A J W L Richards*, B M
H Tsita, R N Wesselo*.
Secretary: J J Groenewald
*Executive
Date: 23/02/2007 12:21:01 Produced by the JSE SENS Department.
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