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ING
ING
ING - Ingenuity Property Investments Limited - Unaudited Consolidated Interim
Results for the Six Months Ended 28 February 2009
INGENUITY PROPERTY INVESTMENTS LIMITED
(formerly SA REIT Ltd)
(Incorporated in the Republic of South Africa)
Registration number: 2000/018084/06
Share code: ING
ISIN: ZAE000127411
Unaudited Consolidated Interim Results for the six months ended
28 February 2009
Group Balance Sheet
Unaudited Unaudited Audited
at 28 Feb at 29 Feb at 31 Aug
2009 2008 2008
R`000 R`000 R`000
ASSETS
Non-current assets 658 284 408 257 464 007
Investment properties 552 959 332 282 369 610
Operating lease receivable 6 830 - 3 243
Investment properties under
development 90 800 75 884 84 229
Equipment 92 91 116
Loans receivable 7 603 - 6 809
Current assets 24 679 59 569 24 993
Trade and other receivables 915 5 443 3 220
Properties for redevelopment - 50 597 -
Cash and cash equivalents 23 764 3 528 21 773
Total assets 682 963 467 826 489 000
EQUITY AND LIABILITIES
Shareholders` interest 345 986 316 080 345 984
Share capital 6 585 6 416 6 585
Share premium 281 824 273 494 281 824
Non-distributable reserve 16 328 - 23 071
Treasury shares (12 878) - (12 878)
Share option reserve 863 - 863
Retained earnings 46 499 36 171 39 800
Total equity attributable to equity
holders of the parent 339 221 316 080 339 265
Minority interest 6 765 - 6 719
Non-current liabilities 332 367 144 358 133 810
Financial liabilities 315 948 144 142 125 923
Derivative financial liability 6 743 - -
Deferred tax 9 676 215 7 887
Current liabilities 4 610 7 388 9 206
Trade and other payables 3 820 2 437 4 590
Taxation 790 4 951 4 616
Total equity and liabilities 682 963 467 826 489 000
Net asset value per share (based on
shares in issue at end of
period/year net of treasury shares) 53.3 49.3 53.3
Group Income Statement
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
28 Feb 29 Feb 31 Aug
2009 2008 2008
R`000 R`000 R`000
Revenue 24 933 11 650 31 905
- Contractual 21 346 10 881 28 662
- Straight lining 3 587 769 3 243
Profit on disposal of
investments - 12 102 13 816
Other income 162 - 86
Net operating expenses (8 338) (1 616) (15 326)
Profit before fair value
adjustments 16 757 22 136 30 481
Fair value adjustments to
investment properties - - 30 086
16 757 22 136 60 567
Interest received 1 174 1 176 2 308
Interest paid (8 787) (2 992) (5 143)
Profit before taxation 9 144 20 320 57 732
Taxation (2 560) (2 565) (12 739)
Profit for the period/year 6 584 17 755 44 993
Attributable to:
Equity holders of the parent 6 699 17 755 44 455
Minority interest (115) - 538
6 584 17 755 44 993
Total shares in issue 658 550 000 641 550 000 658 550 000
Number of shares in issue, net
of treasury shares 648 712 581 641 550 000 658 550 000
Weighted average number of
shares 648 712 581 536 085 717 595 033 434
Basic earnings per share (cents) 1.0 3.3 7.5
Headline earnings per share
(cents) 1.0 1.4 1.5
WORKINGS
Headline earnings are calculated
as follows:
Earnings attributable to equity
holders 6 699 17 755 44 455
Fair value adjustment of
investment properties - - (30 086)
Deferred tax on fair value
adjustments of investment
properties - - 6 675
Profit on disposal of
investments - (12 102) (13 816)
Tax on realised profit - 1 694 1 934
Adjusted earnings 6 699 7 347 9 162
Group Statement of Changes in Equity
Share
Share Share option
capital premium reserve
R`000 R`000 R`000
Balance at 1 September 2007 721 559 -
Total recognised income 5 694 272 935 -
Profit for the period - - -
Issue of 643 000 000 shares 5 709 279 734 -
Share issue costs written off - (6 126) -
Repurchase of 1 450 000 shares (15) (673) -
Transfer of fair value reserve to
the income statement - - -
Balance at 29 February 2008 6 415 273 494 -
Total recognised income 170 8 330 863
Profit for the period - - -
Issue of 17 000 000 shares 170 8 330 -
Cost and subsequent expenditure
on Virgin Active building - - -
Share option expense - - 863
Purchase of 9 837 419 treasury shares - - -
Transfer to non-distributable reserve - - -
Balance at 31 August 2008 6 585 281 824 863
Profit for the period - - -
Subsequent expenditure on
Virgin Active building - - -
Fair value of cash flow hedge
recognised directly in equity - - -
Balance at 28 February 2009 6 585 281 824 863
Non-
distributable Treasury Fair value
reserve shares reserve
R`000 R`000 R`000
Balance at 1 September 2007 - - 10 104
Total recognised income - - (10 104)
Profit for the period - - -
Issue of 643 000 000 shares - - -
Share issue costs written off - - -
Repurchase of 1 450 000 shares - - -
Transfer of fair value reserve to
the income statement - - (10 104)
Balance at 29 February 2008 - - -
Total recognised income 23 071 (12 878) -
Profit for the period - - -
Issue of 17 000 000 shares - (8 500) -
Cost and subsequent expenditure
on Virgin Active building - - -
Share option expense - - -
Purchase of 9 837 419 treasury
shares - (4 378) -
Transfer to non-distributable
reserve 23 071 - -
Balance at 31 August 2008 23 071 (12 878) -
Profit for the period - - -
Subsequent expenditure on
Virgin Active building - - -
Fair value of cash flow hedge
recognised directly in equity (6 743) - -
Balance at 28 February 2009 16 328 (12 878) -
Retained Minority Total
earnings interest equity
R`000 R`000 R`000
Balance at 1 September 2007 18 416 - 29 800
Total recognised income 17 755 - 286 280
Profit for the period 17 755 - 17 755
Issue of 643 000 000 shares - - 285 443
Share issue costs written off - - (6 126)
Repurchase of 1 450 000 shares - - (688)
Transfer of fair value reserve to
the income statement - - (10 104)
Balance at 29 February 2008 36 171 - 316 080
Total recognised income 3 629 6 719 29 904
Profit for the period 26 700 538 27 238
Issue of 17 000 000 shares - - -
Cost and subsequent expenditure
on Virgin Active building - 6 181 6 181
Share option expense - - 863
Purchase of 9 837 419 treasury shares - - (4 378)
Transfer to non-distributable reserve (23 071) - -
Balance at 31 August 2008 39 800 6 719 345 984
Profit for the period 6 699 (115) 6 584
Subsequent expenditure on
Virgin Active building - 161 161
Fair value of cash flow hedge
recognised directly in equity (6 743)
Balance at 28 February 2009 41 644 6 765 345 986
Group Cash Flow Statement
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
28 Feb 29 Feb 31 Aug
2009 2008 2008
Note R`000 R`000 R`000
Cash flows from operating
activities
Cash generated by/(utilised
in) operations 1 16 344 8 505 23 515
Interest received 2 1 802 1 176 1 680
Interest paid 3 (10 364) (2 992) (3 797)
Taxation paid 4 (4 597) (835) (1 960)
Net cash inflow/(outflow)from
operating activities 3 185 5 854 19 438
Cash flows from investing
activities
Additions to equipment - (17) (63)
Acquisition of investment
properties (184 016) (332 282) (339 703)
Interest capitalised to
investment properties (5 100) - (13 209)
Acquisition of investment
properties under development (1 471) (126 481) (124 683)
Proceeds on disposal of
investments - 22 510 22 511
Proceeds on sale of
investment property
for development - - 53 663
Increase in financial assets (633) - (6 181)
Net cash (outflow)/inflow
from investing activities (191 220) (436 270) (407 665)
Cash flows from financing
activities
Proceeds from the issue of
shares - 279 317 279 317
Treasury shares purchased - - (4 378)
Share repurchase - (687) (688)
Financial liabilities raised 190 026 144 142 123 068
Decrease in loan payable - (1 509) -
Net cash inflow from
financing activities 190 026 421 263 397 319
Net (decrease)/increase in
cash and cash equivalents 1 991 (9 153) 9 092
Cash and cash equivalents at
beginning of the period/year 21 773 12 681 12 681
Cash and cash equivalents at
end of the period/year 23 764 3 528 21 773
Notes to the Cash Flow Statement
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
28 Feb 29 Feb 31 Aug
2009 2008 2008
R`000 R`000 R`000
1 Cash generated from/(utilised in)
operations
Profit before taxation 9 144 20 319 57 732
Adjusted for:
Interest received (1 174) (1 176) (2 308)
Interest paid 8 787 2 992 5 143
Depreciation 24 17 38
Bad debts 304 - -
Letting commission 72 - -
Amortisation of deferred lease
incentive 595 - 179
Straight lining of operating leases
(income) (3 587) (769) (3 243)
Straight lining of operating leases
(expense) 25 - -
Increase in fair value of investment
properties - - (30 086)
Share option expense - - 863
Increase in minority interests - - 6 181
Profit on disposal of investments - (12 102) (13 816)
14 191 9 281 20 683
Decrease/(Increase) in trade and other
receivables 1 373 (3 183) (1 728)
Increase/(Decrease) in trade and other
payables 780 2 407 4 560
16 344 8 505 23 515
2 Interest received
Amount outstanding at beginning of the
period/year 628 - -
Interest income per income statement 1 174 1 176 2 308
Amount outstanding at end of the
period/year - - (628)
1 802 1 176 1 680
3 Interest paid
Amount outstanding at beginning of the
period/year 1 366 - 20
Interest income per income statement 8 787 2 992 5 143
Amount outstanding at end of the
period/year 211 - (1 366)
10 364 2 992 3 797
4 Taxation paid
Amount outstanding at beginning of
period/year 4 616 1 724 1 724
Income statement charge 771 4 062 4 852
Amount outstanding at end of the
period/year (790) (4 951) (4 616)
4 597 835 1 960
Group Segmental Assets, Reserves and Liabilities
Unaudited Audited
at 28 Feb at 31 Aug
2009 2008
R`000 R`000
Offices
Property assets 340 760 193 190
Segmental assets 340 760 193 190
Non-distributable reserve 12 059 12 059
Segmental reserve 12 059 12 059
Trade and other payables 142 000 -
Deferred tax 4 121 4 121
Segmental liabilities 146 121 4 121
Retail
Property assets 73 495 75 056
Segmental assets 73 495 75 056
Non-distributable reserve 4 685 4 685
Segmental reserve 4 685 4 685
Deferred tax 729 729
Segmental liabilities 729 729
Industrial
Property assets 26 835 26 914
Segmental assets 26 835 26 914
Non-distributable reserve 1 680 1 680
Segmental reserve 1 680 1 680
Deferred tax 198 198
Segmental liabilities 198 198
Special
Property assets 32 924 32 921
Loans receivable 7 603 6 809
Segmental assets 40 527 39 730
Non-distributable reserve 2 055 2 055
Segmental reserve 2 055 2 055
Trade and other payables 13 330 13 363
Deferred tax 355 355
Segmental liabilities 13 685 13 718
Parking
Property assets 78 434 41 371
Segmental assets 78 434 41 371
Non-distributable reserve 2 582 2 582
Segmental reserve 2 582 2 582
Trade and other payables 35 500 -
Deferred tax 1 269 1 269
Segmental liabilities 36 769 1 269
Other
Property assets 511 158
Segmental assets 511 158
Non-distributable reserve 10 10
Segmental reserve 10 10
Deferred tax 1 1
Segmental liabilities 1 1
Reconciliation to the balance sheet
Total Allocated Unallocated
R`000 R`000 R`000
Unaudited at 28 February 2009
Investment properties 559 789 559 789 -
Investment properties under
development 90 800 - 90 800
Equipment 92 - 92
Loans receivable 7 603 7 603 -
Trade and other receivables 915 - 915
Cash and cash equivalents 23 764 - 23 764
Total assets 682 963 567 392 115 571
Share capital and share premium 288 409 - 288 409
Non-distributable reserve 16 328 23 071 (6 743)
Treasury shares (12 878) - (12 878)
Minority interest 6 765 - 6 765
Share option reserve 863 - 863
Retained earnings 46 499 - 46 499
Total equity 345 986 23 071 322 915
Financial liabilities 315 948 190 830 125 118
Derivative financial liability 6 743 - 6 743
Deferred tax 9 676 6 675 3 001
Trade and other payables 3 820 - 3 820
Taxation 790 - 790
Total liabilities 336 977 197 505 139 472
Audited at 31 August 2008
Investment properties 372 853 372 853 -
Investment properties under
development 84 229 - 84 229
Equipment 116 - 116
Loans receivable 6 809 6 809 -
Trade and other receivables 3 220 - 3 220
Cash and cash equivalents 21 773 - 21 773
Total assets 489 000 379 662 109 338
Share capital and share premium 288 409 - 288 409
Non-distributable reserve 23 071 23 071 -
Treasury shares (12 878) - (12 878)
Minority interest 6 719 - 6 719
Share option reserve 863 - 863
Retained earnings 39 800 - 39 800
Total equity 345 984 23 071 322 913
Financial liabilities 125 923 13 363 112 560
Derivative financial liability - - -
Deferred tax 7 887 6 675 1 212
Trade and other payables 4 590 - 4 590
Taxation 4 616 - 4 616
Total liabilities 143 016 20 038 122 978
Group Operating Segments
Unaudited Audited
6 months year
ended ended
28 Feb 31 Aug
2009 2008
R`000 R`000
Offices
Segment revenue 13 337 15 604
Segment operating expenses (3 475) (6 614)
Profit before fair value adjustments 9 862 8 990
Fair value adjustment - 18 305
Segmental results 9 862 27 295
Retail
Segment revenue 3 294 6 900
Segment operating expenses (1 002) (1 913)
Profit before fair value adjustments 2 292 4 987
Fair value adjustment - 2 992
Segmental results 2 292 7 979
Industrial
Segment revenue 921 2 176
Segment operating expenses (815) (390)
Profit before fair value adjustments 106 1 786
Fair value adjustment - 897
Segmental results 106 2 683
Special (includes gymnasiums)
Segment revenue 1 261 1 335
Segment operating expenses (94) (55)
Profit before fair value adjustments 1 167 1 280
Fair value adjustment - 2 012
Segmental results 1 167 3 292
Parking
Segment revenue 2 512 2 609
Segment operating expenses - (556)
Profit before fair value adjustments 2 512 2 053
Fair value adjustment - 5 873
Segmental results 2 512 7 926
Other (signage)
Segment revenue 21 37
Segment operating expenses (7) (3)
Profit before fair value adjustments 14 34
Fair value adjustment - 7
Segmental results 14 41
Total segmental results 15 953 49 216
Reconciliation to profit for the period/year in the income statement
Straight
Total Allocated Unallocated lining
R`000 R`000 R`000 R`000
Unaudited 6 months ended
28 February 2009
Revenue 24 933 21 346 - 3 587
Net operating expenses (8 338) (5 393) (2 945) -
Profit on sale of
investments - - - -
Profit before fair
value adjustments 16 595 15 953 (2 945) 3 587
Fair value adjustments - - - -
Operating profit 16 595 15 953 (2 945) 3 587
Interest received 1 174 - 1 174 -
Interest paid (8 787) - (8 787) -
Other income 162 - 162 -
Profit before taxation 9 144 15 953 (10 396) 3 587
Taxation (2 560) - (2 560) -
Profit for the
period/year 6 584 15 953 (12 956) 3 587
Audited year ended
31 August 2008
Revenue 31 905 28 662 - 3 243
Net operating expenses (15 326) (9 532) (5 794) -
Profit on sale of
investments 13 816 - 13 816 -
Profit before fair
value adjustments 30 395 19 130 8 022 3 243
Fair value adjustments 30 086 30 086 - -
Operating profit 60 481 49 216 8 022 3 243
Interest received 2 308 - 2 308 -
Interest paid (5 143) - (5 143) -
Other income 86 - 86 -
Profit before taxation 57 732 49 216 5 273 3 243
Taxation (12 739) - (12 739) -
Profit for the
period/year 44 993 49 216 (7 466) 3 243
Note
Basis of accounting
The interim financial report has been prepared in accordance with the
recognition and measurement requirements of International Financial Reporting
Standards ("IFRS") and the disclosure and presentation requirements of IAS 34:
Interim Financial Reporting, the Listings Requirements of the JSE Ltd and in
the manner required by the Companies Act of South Africa.
The accounting policies used in the preparation of this interim financial
report are consistent with those used in prior periods.
Comments
General review
Against the background of the most severe economic downturn in recent history,
the company has continued to grow its asset base whilst maintaining a
conservative approach in risk management.
Total property assets have grown 42% to R644 million whilst borrowings have
increased to R316 million or 45% of loan to value, after allowing for cash on
hand of R24 million. Management does not foresee any negative revisions being
made to property valuations at the financial year-end and accordingly during
the period under review no adjustments to any property valuations were made.
In terms of a special resolution passed at a general meeting of shareholders
held on 30 October 2008, the company`s name was changed to INGENUITY PROPERTY
INVESTMENTS LIMITED. Following discussions held with the Property Loan Stock
Association of South Africa in view of the pending legislation changes to
establish REIT structures in South Africa, it was agreed that the old name
could create confusion amongst industry participants.
Property acquisitions and developments
During October 2008 the company acquired Erf 32140 Tygervalley and the
buildings situated thereon, situated between Sportica Crescent and Carl Cronje
Drive, Tygervalley, Bellville and known as Santam Corporate Office Complex, for
a consideration of R177.5 million.
The buildings are fully tenanted by Santam Ltd who has entered into 5-year and
10-year triple net leases with various options to renew.
The acquisition was funded jointly by way of internal resources and borrowings
from Nedbank and Absa Bank through an existing Special Purpose Vehicle.
Two primary opportunities, namely the Tygervalley scheme and 1 Dock Road are
the main focus on the development side of the business. The Tygervalley scheme
comprises 10 500 sqm of A-grade office space whilst 1 Dock Road comprises 24
500 sqm of premium grade office space. 1 Dock Road is set to become one of the
most significant investments in the Cape Town CBD. The estimated combined capex
of the projects is R872 million. Funding is to be raised from borrowings and
additional capital. 50% of the funding for the 1 Dock Road scheme will come
from Redefine Income Fund Ltd, the project`s joint venture partner.
Operations
During this reporting period, the company continued trading as property
investors earning rental income from its core investment properties; and
further working on creating development opportunities. The investment
properties were increased by 66% from R332 million to R553 million, delivering
good quality sustainable contractual rental income and strengthening the total
operational earnings of the company. The upgrading and refurbishment of some of
the investment properties which began during the previous financial year, were
completed. This enabled the company to increase the rental returns on these
properties and thereby enhance earnings.
Net rental income is R15.9 million for the six months and includes four
months` rental from the Santam property which was acquired with effect from
November 2008. Interest received is comprised mainly from funds on call and on
the loan receivable from a joint venture partner. Interest paid during this
period was in respect of funding for the investment properties.
The company entered into interest rate swap transactions on R200 million for a
five-year period at an effective rate of 10.65%. 63% of borrowings are now
fixed until 2013.
The basic earnings per share is 1.0 cents (2008: 3.3 cents) and the headline
earnings per share is 1.0 cents (2008: 1.4 cents). The main differences between
the basic and the headline earnings in the current period and that of the
comparative period are due to the increases in interest rates in the current
period and the net profit after tax on disposal of the listed investments held
prior to the company`s capital restructure in the comparative period.
At the reporting date, the total value of investment properties amounted to
R553 million (2008: R332 million) and investment properties under development
amounted to R91 million (2008: R126 million), whilst borrowings amounted to
R316 million (2008: R144 million).
The increase in borrowings is due largely to the funding of the Santam property
acquisition and has no significant or material effect on the earnings per share
and headline earnings per share for the period under review.
Interest cover at 1.5 times (2008: 1.6 times) reflects an adequate borrowing
capacity.
Total cash on hand at the end of the period amounted to R24 million.
The company held 9 837 419 treasury shares at a cost of R4.4 million in a
subsidiary company as at the reporting date (2008: nil). Share buy-backs will
continue when opportune and where management believes resources should be so
applied.
Segmental information has been provided without comparison to the comparative
interim period, as these are not considered meaningful due to the nature of
the business being totally different prior to the company`s restructure.
During the period under review Mazars Moores Rowland were appointed as auditors
in place of KMPG Inc. These consolidated interim financial results have not
been audited or reviewed.
Prospects
The development projects currently in the planning phase are expected to
commence construction during the next financial year. These developments will
add significant value to the company`s portfolio and generate increased rental
inflows in the forthcoming years.
Management continues to seek opportunities and are confident of creating a
superior asset base capable of yielding solid returns for shareholders.
Subsequent events
There are no material subsequent events to be reported on as at the date of
signature of this report.
On behalf of the Board
AA MARESKY
Chief Executive Officer
M KAPLAN
Chairman
M WAGENHEIM
Financial Director and Company Secretary
15 May 2009
Cape Town
INGENUITY PROPERTY INVESTMENTS LIMITED
(formerly SA REIT Ltd)
(Incorporated in the Republic of South Africa)
Registration number: 2000/018084/06
Share code: ING
ISIN: ZAE000127411
Directors:
J Bielich, LH Cohen*, DB Fabian*, A Groll*, M Kaplan* (Chairman),
AA Maresky, AJ Shapiro*, RS Schur*, A Varachhia*, M Wagenheim
* non-executive
Registered office and postal address:
Suite 102, Intaba, 25 Protea Road, Claremont, Cape Town, 7708.
Company secretary:
M Wagenheim
Contact details:
Tel: 021 674 5170; Fax: 021 674 5135
E-mail: mark@ingenuityproperty.com
Transfer secretaries:
Computershare Investor Services (Pty) Ltd,
70 Marshall Street, Johannesburg, 2001
Tel: 011 370 5000
Sponsor: Nedbank Capital
Auditors: Mazars Moores Rowland
Bankers: Absa Bank Ltd and Nedbank Ltd
Attorneys: Edward Nathan Sonnenbergs
Date: 15/05/2009 17:20:56 Produced by the JSE SENS Department.
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