PPR 201703060053A Unaudited Condensed Interim Financial Results for the Six Months Ended 31 December 2016 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 2016 and Dividend Declaration Financial Highlights - Gross property revenue up 7.3% in a challenging market to R31.9 million - Net Asset value of 1 177 cents per share - Market value of property portfolio R6 043 per m2 - Cash reserves of R73.3 million available to source potential additions to portfolio. - Payment of the Group’s first Special Dividend to shareholders of 89.54 cents per share Operational Highlights - Acquisition of Parktown Towers in Johannesburg for R90.2 million with CAVI Group as tenant with a 10-year head lease - Acquisition of an additional 5.219% in Summit Place, Pretoria for R11.4 million increasing the Group’s holding to 37.951%(June 2016: 32.732%) - Investment of a further R20 million into associate company Belle Isle in respect of a new amalgamated property investment fund - Purchase of vacant erven in Eagle Canyon area with view to rezone and develop into a mixed-use retail centre - Commencement of rezoning and feasibility studies on our Mamelodi, Dobsonville and Soshunguwe properties with intent to develop retail centres in the medium- to long- term - Gearing of 24.2% maintained at well below mandated level of 35% after the Parktown acquisition 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 currently comprises 18(2015: 16) strategically located properties, situated primarily in the Gauteng geographic area. The total Gross Lettable Area (‘GLA’) of the invested properties is 79 735m2 with a value of R 481.8 million. The board of directors (‘Board’) is pleased to announce the interim results for the six months ended 31 December 2016. These results reflect a 7.3% increase over the December 2015 period in respect of gross property rental revenue. Property expenses were substantially lower due to a deferment of certain planned maintenance expenditure as well as lower municipal costs due to the disposal of our Selby property. Maintenance expenditure is expected to increase in the second half of the year to preserve the asset value of the property portfolio. Corporate expense increased, due to once-off commission and finance-raising fees arising from the acquisition of the Parktown property. The underlying portfolio continues to perform well. The Group experienced the benefit of its acquisition of the remaining 49% equity not held by it in Secunda Value Mart in June 2016. Rental income during the 2017 year will reflect a strong growth in the retail sector. In addition, the acquisition of the Parktown property will increase the Group’s weighting in the Commercial sector to around 20%. As at 31 December 2016 the property portfolio reflected a 21% (December 2015: Nil) vacancy due to our major tenant, Larimar, vacating three of the properties they previously occupied. One of these was successfully tenanted in October 2016. Management continues to be actively focused on resolving the vacancies on the remaining properties, which may include the disposal of these properties. These assets are seen as non-core in the Group’s portfolio. The lease expiry profile is reflected in the table below. The expiry profile for the period ending June 2017 is represented largely by the Larimar Group. Management has successfully renegotiated leases on these properties with leases of between 18 to 60 months concluded. Rates per m2 increased for all properties. Lease Expiry Profile – GLA Year % Cumulative GLA(m2) Monthly Rentals – – – Vacancies 21.0 21.0 16 641 2017 32.9 53.9 22 734 2018 8.9 62.8 61 66 2019 8.5 71.3 58 81 2020 onwards 28.7 100 28 313 Total 100 100 79 735 Basis of accounting The unaudited condensed interim financial results for the six months ended 31 December 2016 and comparative information have been prepared in accordance with and containing information required by IAS 34 - Interim Financial Reporting and the information required by the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee; the Listings Requirements of JSE Limited and the relevant sections of the South African Companies Act, 2008 (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 2016. These interim results have not been audited or reviewed by the Company’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 Company is pleased to report that gross property revenue for the six months ended 31 December 2016, including straight-line income adjustments, increased by 7,3% to R31.9 million compared to R29.8 million for the six months ended 31 December 2015 ("the comparable period"). This reporting period is the first where the full operating results for the Group’s 100% owned subsidiary, Secunda Value Mart, has been included in the published results. Property expenses decreased by 29.9% over the comparable period. This was due to a deferred spend on our preventative maintenance policy for several of our older properties, as well as lower municipal costs due to the sale of our Selby property. Maintenance and refurbishment costs are expected to continue to be high in the second half of the year, as there are substantial upgrades required to several of our older properties on a health and safety level as well as roofing renovation projects. Administration expenses increased by 25.5% over the comparable period due to certain "once- off" expenses resulting from the acquisition of the Parktown property. Investment income was consistent with the comparable period in 2015. Associated companies reflected a loss of R3.4 million (2015: R117 000 loss) due to interest expenses now accounted for in the Summit Place development. Profit for the year after taxation decreased by 1.9% to R16.7 million (2015: R17.0 million). The directors’ valuation of the Group’s property portfolio as at 31 December 2016 was R5.2 million (2015: R2.5 million). Trade and other receivables decreased by 67.4 % from June 2016 as our major tenant, Larimar, is no longer in arrears as to contractual rentals as well as once off sundry receivables relating to the completion of the Corridor Hill development being finalised. There has been a slight deterioration in collections from a portion of our other tenant base, due to the stagnant general economy placing cash flow pressures on these tenants. However, overall receivable results were satisfactory. Cash reserves were down at R72.3 million (June 2016: R153.6 million) as a result of the payment of the special dividend to shareholders and settlement of the purchase of the 49% in Secunda Value Mart. Loan liabilities increased marginally from R100.2 million at June 2016 to R102 million. Segmental analysis The table within this report summarises by segment, the performance for the six months ended 31 December 2016. 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 were undertaken in the review period. As announced on SENS on 27 October 2016 and approved by shareholders at a General meeting on 20 December 2016, the Group acquired a commercial property in the Parktown area of Johannesburg for R90.26 million. The property is occupied by a national tenant, CAVI, with a 10 year fully-repairing head lease at favourable rates. This acquisition will substantially increase the Group’s weighting in the Commercial sector which has been underweighted for the past two years. As mentioned elsewhere in this report the Group intends to increase its investment in Belle Isle, an associate company, to protect its interests in this entity. Valuation of property portfolio It is the Group’s policy to value the entire investment property portfolio on an annual basis by an independent external valuer. The next independent external valuation will be as at 30 June 2017. In addition, the property portfolio is valued by the directors on a six-monthly basis. The directors have valued the Group’s investment portfolio at 30 December 2016 at R481.9 million, an increase of R22.1 million or 4.8% on the external valuation as at 30 June 2016. This valuation was based on a review of current market sales and purchase transactions in each property’s location as well as reasonable judgments 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. Directors’ actual revaluation was a R5.2 million increase (2015: R2.5 million increase). Included in the increase of R22.1 million is the purchase of land in the Eagle Canyon area for future development, as well as completion costs of the Corridor Hill development. Borrowings and capital commitments The Company has borrowings as at 31 December 2016 of R102.1 million (June 2016: R100.2 million). There are no capital commitments as at the reporting date. The reflected borrowings relate entirely to the acquisition of the Secunda Value Mart and Corridor Hill properties. Changes to the Board There have been no changes to the Board since the last reporting date. Subsequent events The Group has invested an additional R20 million in one of its associates, Belle Isle Investments (‘Belle Isle’). This was done to protect the Group’s equity holding in Belle Isle because of an amalgamation Belle Isle has concluded. Belle Isle has amalgamated with three other property-owning entities to create a single property portfolio, consisting of commercial and retail properties. As a result of this amalgamation, the Group’s holding in the enlarged entity has decreased from 27.5% to 20.9%. There have been no other significant reportable subsequent events between 31 December 2016 and the 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 year. Management will continue to focus on growing the portfolio, with the two strategies being to dispose of non-core and poorly- performing portfolio assets and replace them with higher grade, suitably-tenanted properties, as well as a more active approach, to rezone and develop, alongside suitable partners, certain properties where value can be unlocked. Payment of interim distribution - ordinary interim dividend number 55 Notice is hereby given that the Board has declared an interim gross cash dividend ("the dividend") for the six-months ended 31 December 2016 of 6 cents per ordinary share (December 2015: 10 cents per ordinary share). The dividend is payable to shareholders recorded in the register of the Company at close of business on Friday, 31 March 2017. 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 44 672 279 (2015: 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: Last date to trade share cum dividend Tuesday, 28 March 2017 Shares trade ex-dividend Wednesday, 29 March 2017 Record Date Friday, 31 March 2017 Payment date Monday, 3 April 2017 Share certificates may not be dematerialised or rematerialised between Wednesday, 29 March 2017 and Friday, 31 March 2017, both days inclusive. On behalf of the Board BC Carleo JE Smith Chief Executive Officer Chief Financial Officer 6 March 2017 Condensed statement of financial position Unaudited Audited Unaudited 31 Dec 30 June 31 Dec 2016 2016 2015 R’000 R’000 R’000 ASSETS Non-current assets Net investment property 476 011 454 071 470 708 Gross investment property 481 961 459 878 474 210 Straight-line rental (5 950) (5 807) (3 502) income adjustment Other non-current assets Straight-line rental 5 950 4 492 1 591 income asset Furniture, fittings 100 96 106 computer equipment and motor vehicles Investment in associates 111 997 102 076 126 679 Total non-current assets 594 058 560 735 599 084 Current assets 77 886 171 826 99 710 Straight-line rental - 1 314 1 911 income asset Trade and other 5 507 16 904 7 014 receivables Cash and cash equivalents 72 379 153 608 90 785 Total assets 671 944 732 561 698 794 Equity and liabilities Equity attributable to 525 733 512 145 555 503 owners of the parent Stated capital 101 969 101 969 101 969 Accumulated profit 423 764 410 176 453 534 Non-controlling interest - - 29 070 Total equity 525 733 512 145 584 573 Non-current liabilities 139 588 135 810 102 405 Deferred taxation 37 540 37 859 36 448 Loan liabilities 102 048 97 951 65 957 Current liabilities 6 623 84 606 11 816 Dividend Payable - 40 000 - Trade and other payables 6 477 31 811 7 149 Loan Liabilities - 2 292 2 985 Taxation payable 146 10 503 1 682 Total equity and 671 944 732 561 698 794 liabilities Condensed statement of comprehensive income Unaudited Audited Unaudited six months year six months ended ended ended Dec 2016 June 2016 Dec 2015 R’000 R’000 R’000 Property rental revenue 50 352 27 469 24 328 Operating cost recoveries 4 381 14 381 6 761 Straight-line rental income accrual 143 1 022 (1 285) Gross property revenue 31 993 65 755 29 804 Property expenses (6 474) (17 617) (9 233) Net profit from property operations 25 519 48 138 20 571 Corporate administration expenses (4 032) (10 185) (3 213) Investment and other income 2 296 8 754 2 256 Share of associates’ profits(loss) (3 142) (5 942) (117) Operating profit before finance costs 20 641 40 765 19 497 Finance costs (3 603) (6 820) (2 512) Operating profit before capital items 1 7038 33 945 16 985 Profit(loss) on sale of associates and investments (4 850) – - - - Profit before fair value adjustments 17 038 29 095 16 985 Fair value adjustments 5 043 11 284 3 785 Gross change in fair value investment property 5 186 12 306 2 500 Straight-line rental adjustment (143) (1 022) 1 285 Net profit before taxation 22 081 40 379 20 770 Taxation (5 367) (19 259) (3 731) Profit for the year 16 714 21 120 17 039 Attributable to owners of parent 16 714 20 787 17 161 Attributable to non- controlling interest - 333 (122) Other Comprehensive income - – – Total comprehensive income for the year 16 714 21 120 17 039 Attributable to owners of parent 16 714 20 787 17 161 Attributable to non- controlling interest - 333 (122) Earnings and diluted earnings per share (cents) 37.4 46.5 38.3 Earnings and headline earnings per share are calculated on a weighted average number of shares in issue of 44 672 279 (2015: 44 672 279). Condensed statement of cash flow Unaudited Audited Unaudited 31 Dec 30 June 31 Dec 2016 2016 2015 R’000 R’000 R’000 Cash flow generated from operating activities (53 051) 5 932 2 226 Net cash generated from operations 7 416 28 368 10868 Finance Costs (3551) (6 820) - Investment income 2 255 6 009 2 256 Taxation paid (16 044) (10 457) (4 197) Dividends paid (43 127) (11 168) (6 701) Cash flow utilised in investing activities (29 984) 12 806 (44 625) Additions and improvement to investment property (16 898) (37 254) (32 289) Acquisition of furniture, fittings, computer equipment and motor vehicles (23) (27) (12) Cash from joint operation/business combinations - 1 288 – Proceeds on sale investment property 61 076 – Acquisition of interest in investment property - – – Repayments received on loans to associates - 2 758 - Additions to and loans to associates (13 063) (15 035) (12 324) Cash flow from financing activities 1 806 31 219 29 533 Payments made on borrowings - (11 292) - Proceeds received on borrowings 1 806 42 511 29 533 Net increase(decrease) in cash and cash equivalents (81 229) 49 957 (12 866) Cash and cash equivalents at beginning of period 153 608 103 651 103 651 Cash and cash equivalents at end of period 72 379 153 608 90 785 Condensed statement of changes in equity Attributable to owners of the parent Non- controlli ng Stated Accumulated Shareholders’ interest capital profit interest Total Total R’000 R’000 R’000 R’000 R’000 GROUP Balance at 1 July 2015 101 969 443 074 545 043 26 780 571 823 Total comprehensive income for the year - 17 039 17 039 - 17 039 Dividend paid (6 701) (6 701) - (6 701) Non- Controlling interest recognised in - - - 2 412 2 412 respect of subsidiaries Share of profit to non- Controlling interest - 122 122 (122) - Balance at 31 December 2015 101 969 453 534 555 503 29 070 584 573 Balance at 1 July 2015 101 969 443 074 545 043 26 780 571 823 Total comprehensive income – 20 787 20 787 333 21 120 Additional loans advanced by minority shareholders increasing Non- Controlling Interest – – – 2 483 2 483 Change in % ownership under common control – (3 712) (3 712) (29 596) (33 308) Retained earnings on acquisition of joint operation – 1 195 1 195 – 1 195 Dividends paid – (51 168) (51 168) – (51 168) Balance at 1 July 2016 101 969 410 176 512 145 – 512 145 Total comprehensive income - 16 714 16 714 - 16 714 Dividends - (3 126) (3 126) - (3 126) Balance at 31 December 2016 101 969 423 764 525 733 - 525 733 Reconciliation of group net profit to headline earnings Unaudited Unaudited six Audited six months year months ended ended ended Dec 16 Jun 16 Dec 15 R’000 R’000 R’000 RECONCILIATION OF GROUP NET PROFIT TO HEADLINE EARNINGS Earnings per share 16 714 20 787 17 161 Adjusted for: Net change in fair value of investment property (5 043) (12 306) (2 500) Tax effects of fair value adjustments property 1 130 2 757 Equity accounting earnings of associates and joint operations - 1 833 465 Tax effect of equity accounting - 970 117 Loss(Profit) on disposal of assets - 4 850 (22) Compensation from third party’s insurance payouts received - (41) – Capital gain on disposal of investment property - 6 394 - Change in deferred tax balance due to tax rate change - 5 782 – Headline earnings and diluted earnings 12 801 31 026 15 221 Headline earnings per share (cents) 28.7 85.1 34.1 Earnings and headline earnings per share are calculated on a weighted average number of shares in issue of 44 672 279 (2015: 44 672 279). Segmental Analysis for the six months Industrial Retail Commercial Corporate Total ended 31 Dec 2016 R’000 R’000 R’000 R’000 R’000 Extract from the statement of comprehensive income Property revenue and recoveries 18 253 12 424 1 173 - 31 850 Straight-line rental income accrual 648 (505) - - 143 Property expenses (5 621) (465) (388) - (6 474) Segmental Results 13 280 11 454 785 25 519 Extract from the statement of financial position Non-Current assets Net Investment properties 228 989 220 613 26 409 476 011 Other non-current assets - 73 058 38 939 99 111 997 Current assets Straight-line rental income asset 3 722 2 228 - 5 950 Trade and other receivables 3 175 1 477 - 855 5 507 Cash and cash equivalents - - - 72 379 72 379 Non-Current liabilities - - - 102 048 102 048 Current Liabilities - - - Taxation payable - - - 146 146 Trade and other payables 3 158 - - 3 319 6 477 for the six months Industrial Retail Commercial Corporate Total ended 31 Dec 2015 R’000 R’000 R’000 R’000 R’000 Extract from the statement of comprehensive income Property revenue and recoveries 23 355 5 145 2 589 – 31 089 Straight -line rental income accrual (1 044) (241) – (1 285) Property expenses (7 251) (1 464) (518) – (9 233) Segmental Results 15 060 3 440 2 071 – 20 571 Extract from the statement of financial position Non-Current assets Net Investment properties 282 422 166 997 21 289 – 470 708 Other non- current assets 1 082 53 437 73 751 106 128 376 Current Assets Straight-line rental income asset 1 619 204 88 – 1 911 Trade and other receivables 1 622 2 405 – 2 987 7 014 Cash and cash equivalents – - – 90 785 90 785 Non- Current Liabilities – 65 957 – 36 448 102 405 Current Liabilities Taxation payable – - – 1 682 1 682 Trade and other payables 1 888 1 709 – 3 673 7 149 Corporate information COMPANY SECRETARY TRANSFER SECRETARIES Acorim Proprietary Limited Computershare Investor Services 2nd Floor, North Block Proprietary Limited Hyde Park Office Tower 70 Marshall Street Corner 6th Road and Jan Smuts Johannesburg 2001 Avenue Hyde Park 2196 AUDITORS LEGAL ADVISORS Mazars Werksmans 54 Glenhove Road 155 5th Street Melrose Estate 2196 Sandown Johannesburg P O Box 10015 Sandton 2196 PRINCIPAL BANKERS INVESTOR RELATIONS AND REGISTERED OFFICE Absa Bank Limited James Smith 160 Main Street 91 Protea Road Johannesburg 2000 Chislehurston Sandton 2196 +27 11 883 8650 james@putprop.co.za SPONSORS LISTING INFORMATION Merchantec Capital Putprop Limited was listed on the 2nd Floor, North Block JSE Limited on 4 July 1988 Hyde Park Office Tower JSE code: PPR Corner 6th Road and Jan Smuts Sector: Financial – Real Estate Avenue Hyde Park 2196 Date: 06/03/2017 04:29:00 Produced by the JSE SENS Department. 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