Unaudited Condensed Interim Financial Results. for the six months ended 31 December and Dividend Declaration

Transcription

1 Condensed Interim Financial Results for the six months 31 December 2018 and Dividend Declaration

2 Contents 2 Financial Highlights 3 Operational Highlights 4 Strategic Positioning and Business Model 5 Commentary 9 Portfolio Review 10 Condensed statement of financial position 11 Condensed statement of comprehensive income 12 Condensed statement of cash flow 13 Condensed statement of changes in equity 13 Reconciliation of Group net profit to headline earnings 14 Segmental Analysis 15 Corporate information Putprop Limited Incorporated in the Republic of South Africa (Registration number 1988/001085/06) Share code: PPR ISIN: ZAE ( Putprop or the Company or the Group )

3 2 3 Financial Highlights Operational Highlights 1 Property rental revenue decrease limited to under 6% despite the large current vacancy profile 1 Dividend distribution of 6 cents per share, the 30th consecutive year of dividend pay-outs to shareholders 2 Headline earnings per share (HEPS) increased from cents to cents 2 Further reduction in concentration of contractual rental income from a single tenant to 34% from 38% 3 Net Asset Value of cents per share 3 Contractual lease expiry profile reflects 58.1% of Group s contractual rentals expiring in three or more years ensuring a stable future income flow 4 Annual escalation on contractual rental income maintained above 7% in difficult rental market 4 Successful conclusion of the buyback of of the Group s shares from various shareholders 5 Market value per m2 of property portfolio up 5% to R7 396 per m2 (December 2017: 7055 per m2)

4 4 5 Strategic Positioning and Business Model Commentary Continue to broaden our geographic exposure into all of the provinces Focus aggressively on the Group s vacancy profile and manage the lease expiry profile of the portfolio Optimise our profit before tax and growth in shareholder distributions Broaden our contractual tenant base so as to minimise risk of overdependence on a limited number of tenants Achieve and maintain balanced exposures to the industrial, retail and commercial segments of the property sector Maintain a strong statement of financial position with limited application and exposure to gearing to the extent that such gearing enhances returns Contract with financially sound tenants on a long lease basis in order to ensure sustainable income streams Preserve and enhance our properties with a structured on-going maintenance and upgrading programme R591.8 million m 2 19 Overview Putprop is a property investment company, listed on the Main Board of the JSE Limited ( JSE ) under the real estate sector. The Company offers investors an opportunity to participate in the industrial, commercial, and retail sectors of a JSE listed property company. The portfolio comprises 17 (June 2018: 17) strategically located properties, situated primarily in the Gauteng geographical area. The total Gross Lettable Area ( GLA ) of the invested properties is m 2 (June 2018 : m 2 ) with a value of R591.8 million (June 2018: R592.9 million) The board of directors of Putprop ( Board ) is pleased to announce the interim results for the six months 31 December These results reflect a 5.8% decrease over the period 31 December 2017 ( the comparable period ) in respect of gross property rental revenue. Property expenses were higher than the previous year but in line with management s forecasted increase. The increase resulted from higher operating costs in our joint operation and subsidiary company s operations. Maintenance expenditure was contained on all properties in the Groups portfolio. Maintenance is expected to remain constant in the second half of the financial year. Increases in corporate expenses were within budgeted parameters. The underlying portfolio continues to perform satisfactorily. As at 31 December 2018, the property portfolio reflected a 30.5% vacancy rate (December 2017: 13.2%). As noted under subsequent events in this report, the vacancy rate will decrease substantially in the next reporting period due to the confirmed sale of two properties in late February The vacancy rate will then decrease to 17.9%, which comprises a single industrial property, Dubigeon. Management, which continues to be actively focused on resolving this vacancy, has identified it as a non-core property. This property continues to be marketed for disposal. Development properties As noted to shareholders in the SENS announcements of 17 October 2018, 28 November 2018, 15 January 2019 and 26 February 2019 Putprop has entered into discussions with McCormick Property Development Proprietary Limited in respect of a potential joint venture and shareholders will be notified should binding agreements be entered into. Basis of accounting The unaudited condensed interim financial results for the six months 31 December 2018 and the comparative information have been prepared in accordance with and containing the information required by IAS 34 - Interim Financial Reporting and the information required by the Listings Requirements of the JSE Limited and the relevant sections of the South African Companies Act (Act 71 of 2008), as am Properties Tenants Total GLA Total Asset Value The accounting policies applied in the preparation of these condensed financial statements, which are based on reasonable judgements and estimates, are in accordance with International Financial Reporting Standards ( IFRS ) and are consistent with those applied in the annual financial statements for the year 30 June These interim results have not been audited or reviewed or reported on by the Group s auditors. These statements have been prepared under the supervision of James E Smith B.Sc., B. Acc, CIEA, the Financial Director of the Company. 2 The directors take full responsibility for the preparation of these interim financial statements. These interim financial statements are available for inspection at Putprop s registered office.

5 6 7 Commentary (Continued) Commentary (Continued) Financial results The Group reports that gross property revenue for the six months 31 December 2018, including straight-line income adjustments, decreased by 5.8% to R35.6 million (December 2017: R37.8 million). Property expenses however increased by 13.1% over the comparable period. High holding costs of the vacant properties, including security costs combined with under-recoveries of fixed municipal costs on these properties, contributed to this increase. Net property income reflected a decrease of 12.1% from R28.4 million to R24.9 million. Administration expenses increased by 5.7% over the comparable period. Associated companies reflected a profit of R1.5 million (December 2017: R loss) this arose from one of our associates Belle Isle Investments reflecting the profit effects of the amalgamation of three other properties into Belle Isle, not present in the December 2017 reported figures. Profit before finance charges decreased by 7.3% from R23.8 million in the comparable period to R22.0 million. Headline Earnings Per Share (HEPS) however, increased by 28.1% from cents to cents per share. The directors valuation of the Group s property portfolio as at 31 December 2018 was R3.4 million downwards (December 2017: R1.5 million up). This downward adjustment was considered necessary in order to accommodate certain of the older properties situated in less affluent areas as well as to accommodate the effect of the Group s vacancy profile. Trade and other receivables improved by R3.1 million from June 2018, largely due to our biggest tenant adhering to the payment terms of the lease contract. There has been a slight deterioration in collections from certain of our other tenant base, due to the stagnant general economy placing cash flow pressures on these tenants. However, overall receivables management going forward is expected to be satisfactory. Cash reserves decreased to R2.2 million from R3.5 million as at 30 June In addition, the Group availed itself of an overdraft facility. An overdraft of R17.5 million (June 2018: Nil) is reflected for this reporting period. This arose from additional investments made in two associated companies, Pilot Peridot and Belle Isle. The sale of two of the Group s non-core properties failed to materialise in this period as previously forecast, necessitating the use of the overdraft facility. The facility is short term and will be cleared once the sale of properties is complete. Loan liabilities were unchanged during the period under review. The lease expiry profile is reflected in the table below. Lease Expiry Profile GLA Calendar Year % Cumulative GLA(m 2 ) Monthly Rentals Vacancies onwards Total Valuation of property portfolio It is the Group s policy to value the entire investment property portfolio on a bi-annual basis; a director s internal valuation as at the December reporting period and by an independent external valuer as at June 2019, the Group s year end. The next independent external valuation will be as at 30 June The directors have valued the Group s investment portfolio as at 31 December 2018 at R591.8 million, a net movement downwards of R3.5 million on the external valuation performed as at 30 June This director s valuation is based on a review of current market sales and purchase transactions in each property s location as well as reasonable judgements and estimates made by the directors. The effect of any acquisition made during the year of acquisition are not included in any revaluation. The Board has taken a conservative approach in respect of its six-monthly valuation of the property portfolio as at this reporting date, resulting in a devaluation of R3.5 million. (December 2017: R1.5 million increase). This decrease was considered necessary due to certain non-core properties becoming problematic in terms of vacancies and future possible contractual rentals. Borrowings and capital commitments The Company has borrowings as at 31 December 2018 of R142.7 million (June 2018: R146.4 million). There are no capital commitments as at the reporting date (June 2018: R6.0 million). The reported borrowings relate entirely to the acquisition of the Secunda Value Mart, Corridor Hill and Cavi properties. Changes to the Board Mr G Van Heerden and Mrs R Styber were appointed as independent non-executive directors effective from 1 July Ms A Carleo-Novello was appointed as an executive director effective 1 July There were no other changes to the Board since the last reporting date. Subsequent events The sale of Lea Glen 2 and Lea Glen 3, two of the Group s vacant non-core assets, has now been successfully concluded. Binding offers were concluded towards the end of February Transfer will take place in early March There have been no other significant reportable subsequent events between 31 December 2018 and the date of release of this report. Prospects Trading conditions during the next reporting period are expected to continue to be challenging. The property market both locally and internationally is expected to remain subdued in the second half of the financial year. Our strategies of disposing of non-core and poorly-performing portfolio assets, combined with the development, alongside suitable partners, of certain properties situated in densely populated urban areas remain. This process should result in unlocking value for shareholders. The property situated in Mamelodi has been identified as the first property to be developed, with a retail centre of approximately m² m² envisaged. As noted under development properties in this report, discussions are still ongoing to conclude a suitable agreement with McCormick Property Development (Propriety) Limited. This is expected to be conducted before the next reporting period 30 June Segmental analysis The table within this report summarises by segment, the performance for the six months 31 December Segment assets include all operating assets used by a segment and consist of investment properties, receivables and cash. Assets not directly attributable to a segment are allocated to the corporate segment. Segment liabilities include all operating liabilities of a segment and consist principally of outstanding accounts. Acquisitions, expansions, and refurbishments No major refurbishments or acquisitions were undertaken in the review period.

6 8 9 Commentary (Continued) Portfolio Review Payment of interim distribution - ordinary interim dividend number 59 Notice is hereby given that the Board has declared an interim gross cash dividend ( the dividend ) for the six months 31 December 2018 of 6 cents per ordinary share (December 2017: 6 cents per ordinary share). The dividend is payable to shareholders recorded in the register of the Company at close of business on Friday, 5 April The current local Dividend Withholding Tax ( DWT ) rate is 20%. The gross local dividend amount is 6.00 cents per share for shareholders exempt from paying DWT whilst the net local dividend payable is 4.8 cents per share for shareholders liable to pay DWT. The issued share capital of Putprop is (2018: ) shares. Putprop s income tax reference number is This dividend is payable from income reserves. Last date to trade share cum dividend Shares trade ex-dividend Record Date Payment date Large national tenants, listed tenants, governments and major franchises. B Medium sized national tenants, franchises and medium to large C All other tenants that do not fall into GRADE: GRADE: GRADE: The salient dates relating to the dividend are as follows: Declaration date A These include Standard Bank, Liberty Group, SuperGroup and Massmart. professional firms. TENANT PROFILE BY GROSS LETTABLE AREA (%) A 29.0 B 66.0 C 5.0 the above two categories. Thursday, 7 March 2019 Tuesday, 2 April 2019 Wednesday, 3 April 2019 Friday, 5 April 2019 Portfolio Value By Sector () Contractual Rent By Sector (% of gross rentals) Monday, 8 April Share certificates may not be dematerialised or rematerialised between Wednesday, 3 April 2018 and Friday, 5 April 2018, both days inclusive On behalf of the Board BC Carleo Chief Executive Officer 7 March 2019 JE Smith Chief Financial Officer Tenant Profile By Gross Rental (%) Sectoral Profile (% of gross lettable area) 29.8 C 10.3 B 59.9 RETAIL A COMMERCIAL 53.6 INDUSTRIAL

7 10 11 Condensed statement of financial position Condensed statement of comprehensive income ASSETS Non-current assets 31 Dec 2018 Audited 30 June Dec 2017 Net investment property Gross investment property Straight-line rental income adjustment (21 616) (19 035) (13 880) Other non-current assets Straight-line rental income asset Furniture, fittings, computer equipment and motor vehicles Investment in associates Loans to associates Cumulative redeemable preference shares in associate Total non-current assets Current assets Straight-line rental income asset Taxation receivable Trade and other receivables Cash and cash equivalents Total assets Equity and liabilities Capital and Reserves Stated capital Accumulated profit Total equity Non-current liabilities Deferred taxation Loan liabilities Current liabilities Trade and other payables Bank Overdraft Loan Liabilities Taxation payable Total equity and liabilities six months Dec 2018 Audited year June 2018 six months Dec 2017 Property rental revenue Operating cost recoveries Gross property revenue Property expenses (10 662) (19 966) (9 430) Net profit from property operations Corporate administration expenses (4 872) (8 852) (4 607) Investment and other income Share of associates profits/(losses) (18 657) (241) Operating profit before finance costs Finance costs (7 480) (15 135) (7 682) Operating profit before capital items Profit before fair value adjustments Fair value adjustments (5 980) (4 912) Net profit before taxation Taxation (2 595) (9 036) (4 028) Profit and total comprehensive income for the year Earnings and diluted earnings per share (cents)

8 12 13 Condensed statement of cash flow Condensed statement of changes in equity 31 Dec 2018 Audited 30 June Dec 2017 Cash flow generated from operating activities Net cash generated from operations Finance costs (7 480) (15 135) (7 682) Investment income Taxation paid (3 001) (5 338) (3 633) Dividends paid (3 127) (5 807) (3 127) Cash flow utilised in investing activities (16 655) (30 055) (29 207) Additions and improvement to investment property (2 378) (2 255) (1 157) Additions to investments in associates (12 277) Loan advances to associates - (25 608) (24 208) Loans advanced on interest bearing loans to associates (2 000) (3 842) (3 482) Cash flow (utilised)/generated from financing activities (11 211) 472 (1 904) Share buy back (3 821) - - Payments made on borrowings (7 390) (4 028) (1 904) Proceeds received on borrowings Net decrease in cash and cash equivalents (18 862) (22 012) (21 099) Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period (15 384) Stated Accumulated Shareholders capital Profit interest Total Balance at 1 July Total comprehensive income Dividend Paid - (3 127) (3 127) (3 127) Balance at 31 December Balance at 1 July Total comprehensive income Dividends paid - (5 807) (5 807) (5 807) Balance at 1 July Total comprehensive income Share Buy Back (3 821) (3 821) (3 821) Dividends - ( 3 127) (3 127) (3 127) Balance at 31 December Reconciliation of group net profit to headline earnings Reconciliation of group net profit to headline earnings six months Dec 2018 Audited year June 2018 six months Dec 2017 Earnings per share Adjusted for: Net change in fair value of investment property (1 319) Tax effects of fair value adjustments property (1 339) 296 (336) Equity accounting earnings of associates and joint operations Tax effect of equity accounting - (5 876) - Capital gain on disposal of investment property Headline earnings and diluted earnings Headline earnings per share (cents) Weighted average number of shares in issue (2018: ).

9 14 Segmental Analysis for the six months 31 Dec 2018 Corporate information Industrial Retail Commercial Corporate Total Extract from the statement of comprehensive income Property revenue and recoveries Straight-line rental income accrual Property expenses (6 602) (2 422) (1 638) - (10 662) Segmental Results Extract from the statement of financial position Non-Current assets Net Investment properties Other non-current assets Straight-line rental income asset Current assets Straight-line rental income asset Trade and other receivables Taxation receivable Cash and cash equivalents Non-Current liabilities Current Liabilities Trade and other payables Bank overdraft for the six months 31 Dec 2017 Extract from the statement of comprehensive income Property revenue and recoveries Straight-line rental income accrual Property expenses (5 800) (2 265) (1 365) - (9 430) Segmental Results Extract from the statement of financial position Non-Current assets Net Investment properties Other non-current assets Current Assets Straight-line rental income asset Trade and other receivables Cash and cash equivalents Non-Current Liabilities Current Liabilities Trade and other payables COMPANY SECRETARY Acorim Proprietary Limited 2nd Floor, North Block Hyde Park Office Tower Corner 6th Road and Jan Smuts Avenue Hyde Park 2196 AUDITORS Mazars 54 Glenhove Road Melrose Estate 2196 Johannesburg PRINCIPAL BANKERS Absa Bank Limited 160 Main Street Johannesburg 2000 SPONSORS Merchantec Capital 2nd Floor, North Block Hyde Park Office Tower Corner 6th Road and Jan Smuts Avenue Hyde Park 2196 TRANSFER SECRETARIES Computershare Investor Services Proprietary Limited Rosebank Towers 15 Biermann Avenue, 2196 Rosebank, Johannesburg, 2196 P O Box 61051, Marshalltown, 2107 LEGAL ADVISORS Werksmans 155 5th Street Sandown P O Box Sandton 2196 INVESTOR RELATIONS AND REGISTERED OFFICE James Smith 91 Protea Road Chislehurston Sandton james@putprop.co.za LISTING INFORMATION Putprop Limited was listed on the JSE Limited on 4 July 1988 JSE code: PPR Sector: Financial Real Estate

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