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Unaudited Condensed Interim Financial Results for the Six Months Ended 31 December 2018 and Dividend Declaration
Putprop Limited
Incorporated in the Republic of South Africa
(Registration number 1988/001085/06)
Share code: PPR ISIN: ZAE000072310
("Putprop" or "the Company" or "the Group")
Unaudited Condensed Interim Financial Results
for the six months ended 31 December 2018
and Dividend Declaration
Financial Highlights
Property rental revenue decrease limited to under 6% despite
the large current vacancy profile
Headline earnings per share (HEPS) increased
from 18.67 cents to 23.91 cents
Net Asset Value of 1 280 cents per share
Annual escalation on contractual rental income maintained
above 7% in difficult rental market
Market value per m2 of property portfolio up 5% to R7 396 per m2
(December 2017: 7055m2)
Operational Highlights
Dividend distribution of 6 cents per share, the 30th consecutive
year of dividend pay-outs to shareholders
Further reduction in concentration of contractual rental
income from a single tenant to 34% from 38%
Contractual lease expiry profile reflects 58.1% of Group?s contractual
rentals expiring in three or more years ensuring a stable future income flow
Successful conclusion of the buyback of 775 000 of the Group?s shares from
various shareholders
Strategic Positioning and Business Model
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
Commentary
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 79
702m2 (June 2018 : 79 702m2) 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 ended 31 December 2018. These results reflect a 5.8% decrease over the period ended 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 2019. 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 ended 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
amended.
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 ended 30 June 2018.
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.
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
Financial results
The Group reports that gross property revenue for the six months ended 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: R240 000 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 18.67 cents to 23.91 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 2018. 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 ended % Cumulative GLA(m2)
Monthly Rentals 0 0 0
Vacancies 30.5 30.5 24 326
2019 4.8 35.3 3 826
2020 6.6 41.9 5 303
2021 20.9 62.8 16 699
2022 onwards 37.2 100 29 548
Total 100 100 79 702
Segmental analysis
The table within this report summarises by segment, the performance for the six months ended 31
December 2018. 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.
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 2019. 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 2018. 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 2018. Ms A Carleo-Novello was appointed as an executive director effective from 1 July
2018. 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 2019. Transfer will
take place in early March 2019.
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 12 000m? - 15 000m? 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 e concluded before the next reporting
period 30 June 2019.
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 ended 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 2019.
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 43 897
279 (2018: 44 672 279) shares.
Putprop?s income tax reference number is 9100097717. This dividend is payable from income reserves.
The salient dates relating to the dividend are as follows:
Declaration date Thursday, 7 March 2019
Last date to trade share cum dividend Tuesday, 2 April 2019
Shares trade ex-dividend Wednesday, 3 April 2019
Record Date Friday, 5 April 2019
Payment date Monday, 8 April 2019
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 JE Smith
Chief Executive Officer Chief Financial Officer
7 March 2019
Condensed statement of financial position
Unaudited Audited Unaudited
31 Dec 30 June 31 Dec
2018 2018 2017
R?000 R?000 R?000
ASSETS
Non-current assets
Net investment property 570 262 573 865 568 186
Gross investment property 591 878 592 900 582 066
Straight-line rental income adjustment (21 616) (19 035) (13 880)
Other non-current assets
Straight-line rental income asset 21 204 18 355 13 880
Furniture, fittings, computer equipment
and motor vehicles 32 43 60
Investment in associates 134 864 121 697 133 104
Loans to associates 7 458 5 458 5 458
Cumulative redeemable preference
shares in associate 35 891 35 273 32 783
Total non-current assets 769 711 754 691 753 471
Current assets 7 290 11 545 13 840
Straight-line rental income asset 412 680 -
Taxation receivable 1 709 911 839
Trade and other receivables 3 366 6 476 8 611
Cash and cash equivalents 2 215 3 478 4 390
Total assets 777 413 766 236 767 311
Equity and liabilities
Capital and Reserves
Stated capital 98 148 101 969 101 969
Accumulated profit 464 066 461 199 464 099
Total equity 562 214 563 168 566 068
Non-current liabilities 185 824 190 627 189 191
Deferred taxation 46 553 46 232 42 855
Loan liabilities 139 271 144 395 146 336
Current liabilities 29 375 12 441 12 052
Trade and other payables 8 273 5 697 10 674
Bank Overdraft 17 599 - -
Loan Liabilities 3 431 6 744 1 378
Taxation payable 72 - -
Total equity and liabilities 777 413 766 236 767 311
Condensed statement of comprehensive income
Unaudited Unaudited
six Audited six
months year months
ended ended ended
Dec June Dec
2018 2018 2017
R?000 R?000 R?000
Property rental revenue 29 171 62 411 31 278
Operating cost recoveries 6 431 10 560 6 542
Gross property revenue 35 602 72 971 37 820
Property expenses (10 662) (19 966) (9 430)
Net profit from property operations 24 940 53 005 28 390
Corporate administration expenses (4 872) (8 852) (4 607)
Investment and other income 472 4 312 255
Share of associates? profits/(losses) 1 516 (18 657) (241)
Operating profit before finance costs 22 056 29 808 23 797
Finance costs (7 480) (15 135) (7 682)
Operating profit before capital items 14 576 14 673 16 115
Profit before fair value adjustments 14 576 14 673 16 115
Fair value adjustments (5 980) 1 319 (4 912)
Net profit before taxation 8 596 15 992 11 203
Taxation (2 595) (9 036) (4 028)
Profit and total comprehensive
income for the year 6 001 6 956 7 175
Earnings and diluted
earnings per share (cents) 13.48 15.57 16.1
Condensed statement of cash flow
Unaudited Audited Unaudited
31 Dec 30 June 31 Dec
2018 2018 2017
R?000 R?000 R?000
Cash flow generated from operating activities 9 004 7 571 10 012
Net cash generated from operations 22 537 29 772 24 199
Finance costs (7 480) (15 135) (7 682)
Investment income 75 4 079 255
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) 1 650 -
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 - 4 500 -
Net decrease in cash and cash equivalents (18 862) (22 012) (21 099)
Cash and cash equivalents at
beginning of period 3 478 25 490 25 490
Cash and cash equivalents at end of period (15 384) 3 478 4 391
Condensed statement of changes in equity
Accumu-
lated Share-
Stated holders?
capital Profit interest Total
R?000 R?000 R?000 R?000
Balance at 1 July 2017 101 969 460 051 562 020 562 020
Total comprehensive income - 7 175 7 175 7 175
Dividend Paid - (3 127) (3 127) (3 127)
Balance at 31 December 2017 101 969 464 099 566 068 566 068
Balance at 1 July 2018 101 969 460 051 562 020 562 020
Total comprehensive income - 6 955 6 955 6 955
Dividends paid - (5 807) (5 807) (5 807)
Balance at 1 July 2018 101 969 461 199 563 168 563 168
Total comprehensive income - 6 001 6 001 6 001
Share Buy Back (3 821) (3 821) (3 821)
Dividends - ( 3 127) (3 127) (3 127)
Balance at 31 December 2018 98 148 464 066 562 214 562 214
Reconciliation of group net profit to headline earnings
Unaudited Unaudited
six Audited six
months year months
ended ended ended
Dec June Dec
2018 2018 2017
R?000 R?000 R?000
Reconciliation of group net
profit to headline earnings
Earnings per share 6 001 6 956 7 176
Adjusted for:
Net change in fair value of
investment property 5 980 (1 319) 1 500
Tax effects of fair value
adjustments property (1 339) 296 (336)
Equity accounting earnings of
associates and joint operations - 26 230 -
Tax effect of equity accounting - (5 876) -
Capital gain on disposal of
investment property - 307 -
Headline earnings and diluted earnings 10 642 26 594 8 340
Headline earnings per share (cents) 23.91 59.53 18.67
Weighted average number of shares in issue 44 508 901 (2018: 44 672 279).
Segmental Analysis
for the six months ended 31 Dec 2018
Industrial Retail Commercial Corporate Total
R?000 R?000 R?000 R?000 R?000
Extract from the statement
of comprehensive income
Property revenue
and recoveries 12 347 12 894 7 780 - 33 021
Straight-line rental income accrual 159 1 017 1 405 - 2 581
Property expenses (6 602) (2 422) (1 638) - (10 662)
Segmental Results 5 904 11 489 7 547 - 24 940
Extract from the statement
of financial position
Non-Current assets
Net Investment properties 220 969 222 665 126 628 - 570 262
Other non-current assets - 70 008 108 205 32 178 245
Straight-line rental income asset 7 527 11 717 2 372 - 21 204
Current assets - - - - -
Straight-line rental income asset 412 - - - 412
Trade and other receivables 914 1 483 285 684 3 366
Taxation receivable - - - 1 709 1 709
Cash and cash equivalents - - - 2 215 2 215
Non-Current liabilities - 126 036 59 788 - 185 824
Current Liabilities
Trade and other payables 3 261 1 785 255 2 972 8 273
Bank overdraft - - - 17 599 17 599
for the six months ended
31 Dec 2017
Extract from the statement of comprehensive income
Property revenue
and recoveries 15 755 11 492 7 161 - 34 408
Straight-line rental
income accrual 1 042 585 1 785 - 3 412
Property expenses (5 800) (2 265) (1 365) - (9 430)
Segmental Results 10 997 9 812 7 581 - 28 390
Extract from the statement
of financial position
Non-Current assets
Net Investment properties 231 002 227 012 124 052 - 582 066
Other non-current assets - 63 922 107 423 60 171 405
Current Assets - - - - -
Straight-line rental income asset 6 211 5 725 1 944 - 13 880
Trade and
other receivables 4 482 3 080 227 822 8 611
Cash and cash equivalents - - - 4 390 4 390
Non-Current Liabilities - 128 937 60 204 - 189 191
Current Liabilities
Trade and other payables 6 159 1 138 - 3 377 10 674
CORPORATE INFORMATION
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 10015
Sandton 2196
INVESTOR RELATIONS AND REGISTERED OFFICE
James Smith
91 Protea Road
Chislehurston
Sandton 2196
+27 11 883 8650
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
Date: 07/03/2019 04:31:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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