| Tue 3 Nov 2009, 17:32 | | ING - Ingenuity Property Investments Limited - Reviewed Condensed Preliminary |
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ING
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ING - Ingenuity Property Investments Limited - Reviewed Condensed Preliminary
Consolidated Results For The Year Ended 31 August 2009
INGENUITY PROPERTY INVESTMENTS LIMITED
(formerly SA REIT LIMITED)
(Incorporated in the Republic of South Africa)
(Company registration number 2000/018084/06)
Share code: ING ISIN: ZAE000127411
("INGENUITY") (the "Company")
REVIEWED CONDENSED PRELIMINARY CONSOLIDATED RESULTS FOR THE YEAR ENDED 31
AUGUST 2009
Reviewed Audited
2009 2008
R`000 R`000
KEY FINANCIAL INDICATORS
Total contractual rental income 48 384 28 662
Investment property portfolio 446 534 369 610
Investment property held for sale 128 238 -
Development assets 95 141 84 229
Borrowings 314 274 125 923
Market capitalisation at year end 270 005 289 762
Share Trading profits - 13 816
Headline Earnings per Share 1.9 cents 1.5 cents
Basic Earnings per Share 4.6 cents 7.5 cents
Net Asset Value per Share 56 cents 53 cents
COMMENTARY
1. Presentation of Reviewed Annual Financial Statements
INGENUITY is a company domiciled in the Republic of South Africa. The
financial
statements were approved and authorised for issue by the board of directors on
29 October 2009. The financial statements have been prepared on the going
concern basis using a combination of the historical cost and fair value basis
of accounting in accordance with the recognition and measurement requirements
of International Financial Reporting Standards (IFRS) and with the disclosure
requirements of IAS 34, and in the manner required by the Companies Act of
South Africa.
The accounting policies have been applied consistently to all periods
presented
in these results. These annual financial statements are presented in South
African Rands, which is the functional currency of the company. The
preparation of financial statements requires management to make judgements,
estimates and assumptions that effect the application of accounting policies
and the reported amounts of assets, liabilities, income and expenses. During
the current year, the property portfolio valuation increased by R 18.6 m.
Actual results may differ from these estimates. Estimates and underlying
assumptions
are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised and in any future
periods affected.
Mazars Moores Rowland, the Company`s auditors, has reviewed the annual
financial statements for the year ended 31 August 2009 and their review
opinion is available for inspection at the Company`s registered office. These
financial
statements have been condensed for the purposes of this announcement.
2. Code of Corporate Practice and Conduct
The directors of INGENUITY are committed to the principles of sound corporate
governance as contained in the King II Code on Corporate Practices and Conduct
for South African business and other public entities. The directors endorse
and
accept responsibility for the application of the principles of King II in both
letter and spirit.
Directors are required to observe the highest ethical standards ensuring its
business practices are conducted professionally and beyond reproach.
3. General review of operations
During the year under review INGENUITY was able to maintain its strategic
focus and deliver results in line with its targeted performance. A global
market dominated by financial uncertainty and a worldwide credit crunch has
had the negative effect of slower growth prospects but against this management
has maintained its vision to grow a solid business to enhance shareholder
wealth.
South African fundamentals for property remain fairly robust however there are
pressures from increased overhead costs such as electricity whilst gross
revenues remain under squeeze in what is very much a tenant driven market.
Vacancies across the listed sector have increased to just over 6% from 4.9% a
year ago and this trend is likely to continue as businesses remain under
operational pressure and lower profitability. New developments similarly
remain challenging on the back of fallen demand.
Overall, income is still expected to grow going forward creating an underpin
for value. Inflation is expected to fall within the targeted inflation range
of 3-6% in 2010 and economists expect a recovery as the economy moves back
into positive growth territory. Management accordingly remain focussed and
continue to seek opportunities to grow INGENUITY.
The year ended 31 August 2009 is the second financial year of operations of
the restructured Company. Since the previous financial year end, some
significant changes have taken place. Gross rental income has increased 69%
whilst total investment properties, after taking into account properties sold
and to be transferred post year end, has increased 84% to R447 m. Borrowings
have been well controlled and the loan to value reduces substantially after
the properties sold have been transferred.NAV has been further enhanced
through strategic focus on extraction of asset value.
INGENUITY has strength in its key strategic relationships with Trematon
Capital Investments Limited, the Rabie Property Group, Nedbank and Absa. These
all contribute to the success of the company. The skills base of these
parties, through active participation with management, provides the company
with a uniquely skilled knowledge base and network to deliver opportunities.
The portfolio and business is sound and well poised for future growth.
4. Company name change
At a meeting of shareholders held on 30 October 2008, a resolution was passed
approving the change of the Company`s name to Ingenuity Property Investments
Limited.
5. Borrowings
The Company achieved an average borrowing cost of 10.04% for the current year.
Total borrowings at year end amounted to R314.2 m. of which R200 m is fixed at
an all inclusive rate of 10.65% until the end of November 2013. The balance
remains floating at rates currently at 9%. The increase in borrowings for the
current year came about as a result of the acquisition of the Santam Head
Office for R 180 m which was funded by borrowings. The net effect of the
acquisition on the basic earnings per share and headline earnings per share
are insignificant.
Total cash on hand at year end amounted to R21.2 m.
The Company`s gearing ratio was 44% at the year end. This is low considering
the relatively high value of development assets in the portfolio.
Post year end, as disclosed under disposals, the proceeds on the sales of the
22 Long Street, 33 Waterkant Street and Midas Goodwood buildings will result
in borrowings decreasing by R124 m and the gearing ratio of the company
decreasing to 33%. This puts the company in a favourable position to take
advantage of new investments and to fund developments.
6. Property portfolio activities
INVESTMENT PROPERTIES
REEDS, 31 AND 33 MARTIN HAMMERSCHLAG WAY
This significant grouping of three properties situated in the heart of
Culemborg in the Cape Town Foreshore region has in total 29 000 sqm of
additional bulk available for future development. Certain portions of the
existing buildings are currently being upgraded to enhance lettings and
improve the precinct. Total anticipated capital expenditure of the upgrades is
R 5.4 m and will be completed by December 2009.
These properties are strategically situated and have opportunity to develop
going forward. Various investigations have been made to explore this.
VIRGIN ACTIVE
The lease with Virgin Active which expires at the end of May 2010 has been
extended for a further 5 years to the end of May 2015. Management is exploring
further development of the site. The building is one of the only low rise
buildings left in a zone adjacent to the Cape Town International Convention
Centre (CTICC). Formal applications have made to the City of Cape Town to
grant the additional bulk rights to a portion of the site that is held by
Ingenuity in terms of a leasehold right.
DEVELOPMENT PROPERTIES
1 DOCK ROAD (formerly known as the Curry and CMH buildings)
Formal permission has now been granted to proceed with the development of this
site. The delay in development of this site came about as the result of
objection to the scheme by an adjacent neighbour. As reported last year, 50%
of this scheme was sold to the Redefine Income Fund Ltd during that year. This
was done in order to reduce the risk profile and furthermore to attract the
skills base of a strong joint venture party. Marketing of the scheme is
imminent and it remains a core focus of management to commence construction of
the building during 2010. In total 22 000 sqm of premium grade offices and 1
500 sqm of retail is to be built. The anticipated total value of the
development is R700 m which is to be funded equally by Redefine and Ingenuity.
The site is situated in the heart of the CBD and CTICC zone which is set to
become Cape Town`s hottest new address.
ERF 38746 TYGERVALLEY
During the current year application was made to the City Council to amend the
zoning and bulk factor applicable to the site. This was done in order to
convert the dual commercial and part residential bulk to a larger office
development as opposed to residential apartments. This application has been
approved by Council and we are ready to commence with the marketing of the
site and the development thereof. The scheme will comprise 11 000 sqm of
premium grade offices and is estimated to cost just over R200 m.
ACQUISITIONS
During the year under review one major acquisition was made growing the
portfolio by R180 m. Details of the property are:
SANTAM HEAD OFFICE - TYGERVALLEY
This landmark property which was acquired on 31 October 2008 for R180 m is the
head office of South Africa`s largest short term insurance company, Santam,
and is wholly let to them under a long lease. The buildings are set in a park
like environment and offer a total of 17 200 sqm of premium grade office
space. A further key advantage to this building is the site size of 27 000
sqm which represents an opportunity to create further development. Management
has commenced initiatives to develop a further 14 000 sqm of offices on the
site.
DISPOSALS
During the year under review sale agreements totalling a gross value of
R124.45m were concluded. The properties sold are 22 Long Street (R104.5 m), 33
Waterkant Street (R9.2 m) and Midas Goodwood (R10.75 m). At the time of
reporting these results, all conditions precedent have been fulfilled except
for final approval by Ingenuity shareholders of the sale of 22 Long Street.
This is still subject to a resolution to be passed at a shareholders meeting
to be held at the end of November 2009. A circular in this regard is to be
posted to shareholders on or about 6 November 2009.
PORTFOLIO INFORMATION
VACANCIES
Vacancies amount to 3.9% of the total GLA of the portfolio. This is primarily
due to the redevelopment of both the 31 & the 33 Martin Hammerschlag Way
properties. We have increased the accommodation in 31 Martin Hammerschlag Way
by 525mSquared, and by 983mSquared in 33 Martin Hammerschlag Way and a further
33 covered parking bays have also been added to the building. No significant
vacancies are anticipated in the forthcoming financial year and management
remain confident of letting the vacant space.
LEASE EXPIRY PROFILE
The lease expiries in the year subsequent to 31 August 2009 equates to 5.5% of
the total GLA of the portfolio, and is predominantly within the industrial
sector at 3.6% of GLA, followed by the office sector at 1.9%. The industrial
lease expiry relates to one tenant who has already indicated that they will
renew on expiry of their lease.
COST TO INCOME RATIOS
Gross expenses are reflected as a percentage of gross income including
recoveries. The net cost to revenue ratio of 16% is what the Company carries
as a landlord. These ratios are within acceptable norms for the industry.
SECTORAL SPREAD OF THE PORTFOLIO
The concentration of the portfolio is in the office (54.9%) and retail (29.7%)
sectors. These sectors are seen to be where superior growth opportunities are
expected in the future.
GEOGRAPHICAL SPREAD OF THE PORTFOLIO
The concentration of the portfolio is in the Western Cape region (95%). This
is in line with the Company`s strategy to remain focussed within this region.
7. Reclassification
The financial statements have been restated for 2008 to take into account a
put option granted by the Company to a vendor for a property purchased during
that year. The effect is a reclassification of R 10.6 m transferred from the
non-distributable reserves to a financial liability. The reclassification had
no effect on the earnings for 2008. The restatement does not take into account
the effect on net asset value per share if the put option were to be
exercised. Had this taken place at year end, the effect would not be material.
Further detailed information regarding the put option has been included in a
circular to shareholders expected to be posted on or about 9 November 2009.
8. Prospects
The Company`s management is focused on creating a leading Cape based
development and investment property company. We are of the view that economic
recovery will be slow for the year ahead but with prudent management, a strong
financial base and additional available capacity, management remain confident
that they will continue to enhance shareholder wealth through increases in
earnings and net asset growth.
For and on behalf of the Board
ARNOLD AARON MARESKY MARK WAGENHEIM
Chief Executive Officer Financial director
Cape Town
3 November 2009
Directors: M Kaplan (Chairman)*, J Bielich, L H Cohen*, D B Fabian*, A Groll*,
A A Maresky (CEO), R S Schur*, A J Shapiro*, A Varachhia*,
M Wagenheim *non-executive
Company secretary: M Wagenheim
Registered office: Suite 102, INTABA, 25 Protea Road, Claremont,
Cape Town. 7708.
Postal address: Suite 102, INTABA, 25 Protea Road, Claremont, Cape Town. 7708.
Contact details: tel: 021 674 5170. fax: 021 674 5135.
e-mail: info@ingenuityproperty.com
www.ingenuityproperty.com
Transfer secretaries: Computershare Investor Services (Pty) Ltd
70 Marshall Street, Johannesburg. 2001 (PO Box 61051,
Marshalltown. 2107)
Bank: ABSA Bank Ltd, 1st Floor Tijgerpark IV Building,
Willie van Schoor Drive, Tyger
Valley,Bellville. 7530. (PO Box 4453, Tyger Valley, 7536)
Investment bank and Sponsor: Nedbank Capital, a division of Nedbank Ltd
3rd Floor, Corporate Place, Nedbank Sandton,
135 Rivonia Road,Sandton. 2196.
(PO Box 1144, Johannesburg. 2000)
Auditors: Mazars Moores Rowland, 27th Floor, 1 Thibault Square, Cape Town.
8001.
(PO Box 2785, Cape Town. 8000)
Attorneys: Edward Nathan Sonnenbergs Inc., 1 North Wharf Square, Loop Street,
Cape Town. 8001. (PO Box 2293, Cape Town. 8000)
Balance sheet
at 31 August 2009 Group
2009 2008
Assets R`000 R`000
Non-current assets 559 625 464 007
Investment properties 446 534 369 610
Straight-line lease accrual 9 937 3 243
Investment properties under
Development 95 141 84 229
Equipment 68 116
Loans receivable 7 945 6 809
Current assets 150 493 24 993
Trade and other receivables 1 030 3 220
Investment property held for sale 128 238 -
Cash and cash equivalents 21 225 21 773
Total assets 710 118 489 000
Equity and liabilities
Shareholders interest 356 168 335 364
Share capital 6 585 6 585
Share premium 271 204 271 204
Non-distributable reserve 20 788 23 071
Treasury shares (13 006) (12 878)
Minority interest 7115 6 719
Share option reserve 863 863
Retained earnings 62 619 39 800
Non-current liabilities 335 207 133 810
Financial liabilities 314 274 125 923
Financial instruments 8 542 -
Deferred tax 12 391 7 887
Current liabilities 18 743 19 826
Trade and other payables 3 130 4 059
Prepaid rent received 3 170 532
Put option 12 000 10 619
Taxation 443 4 616
Total equity and liabilities 710 118 489 000
Income statement
for the year ended 31 August 2009 Group
2009 2008
R`000 R`000
Revenue 55 881 31 905
- Contractual 48 384 28 662
- Straight-line lease adjustment 7 497 3 243
Profit on disposal of investments - 13 816
Other income 237 86
Net operating expenses (17 775) (15 326)
Profit before fair value adjustments 38 343 30 481
Fair value adjustments to investment
properties 18 670 30 086
Profit before interest and taxation 57 013 60 567
Interest received 2 488 2 308
Interest paid (23 859) (5 143)
Profit before taxation 35 642 57 732
Taxation (6 223) (12 739)
Profit for the year 29 419 44 993
Attributable to:
Equity holders of the parent 29 076 44 455
Minority interest 343 538
29 419 44 993
Cents Cents
Basic earnings per share 4.6 7.5
Diluted earnings per share 4.5 7.5
Headline earnings per share 1.9 1.5
Diluted headline earnings per share 1.8 1.5
The calculation of earnings per share is based on a weighted number of 631 695
376 (2008: 595 033 434) shares in issue during the year. The actual number of
shares in issue at the year end is 658 550 000 (2008: 658 550 000). Headline
earnings are calculated as follows:
R`000 R`000
Earnings attributable to equity holders 29 076 44 455
Fair value adjustment of investment properties (18 669) (30 086)
Deferred tax on fair value adjustment 1 291 6 675
Profit on disposal of investments - (13 816)
Tax on realised profit - 1 934
11 698 9 162
Statements of changes in equity
Share
Share Share option
for the year ended 31 August 2009 capital premium reserve
R`000 R`000 R`000
Group
Balance at 1 September 2007 721 559 -
Issue of 643 000 000 shares 5 709 279 734 -
Listing costs written off - (6 126) -
Repurchase of 1 450 000 shares (15) (673) -
Issue of 17 000 000 shares 170 8 330 -
Transfer of fair value reserve to
the income statement - - -
Cost and subsequent expenditure
on Virgin Active building - - -
Profit for the year - - -
Share option expense - - 863
Purchase of 9 837 419 treasury shares - - -
Transfer to financial liability - (10 620) -
Transfer to non-distributable reserve - - -
Balance at 31 August 2008 6 585 271 204 863
Increase in minority interest - - -
Profit for the year - - -
Transfer to financial instrument - - -
Purchase of treasury shares - - -
Transfer to non-distributable reserve - - -
Balance at 31 August 2009 6 585 271 204 863
Non-
distributable Treasury Fair value
for the year ended 31 August 2009 reserve shares reserve
R`000 R`000 R`000
Group
Balance at 1 September 2007 - - 10 104
Issue of 643 000 000 shares - - -
Listing costs written off - - -
Repurchase of 1 450 000 shares - - -
Issue of 17 000 000 shares - (8 500) -
Transfer of fair value reserve to
the income statement - - (10 104)
Cost and subsequent expenditure
on Virgin Active building - - -
Profit for the year - - -
Share option expense - - -
Purchase of 9 837 419 treasury
shares - (4 378) -
Transfer to financial liability - - -
Transfer to non-distributable
reserve 23 071 - -
Balance at 31 August 2008 23 071 (12 878) -
Increase in minority interest - - -
Profit for the year - - -
Transfer to financial instrument (8 542) - -
Purchase of treasury shares - (128) -
Transfer to non-distributable reserve 6 259 - -
Balance at 31 August 2009 20 788 (13 006) -
Retained Minority Total
for the year ended 31 August 2009 earnings interest equity
R`000 R`000 R`000
Group
Balance at 1 September 2007 18 416 - 29 800
Issue of 643 000 000 shares - - 285 443
Listing costs written off - - (6 126)
Repurchase of 1 450 000 shares - - (688)
Issue of 17 000 000 shares - - -
Transfer of fair value reserve to the
income statement - - (10 104)
Cost and subsequent expenditure on Virgin
Active building - 6 181 6 181
Profit for the year 44 455 538 44 993
Share option expense - - 863
Purchase of 9 837 419 treasury shares - - (4 378)
Transfer to financial liability - - (10 620)
Transfer to non-distributable reserve (23 071) - -
Balance at 31 August 2008 39 800 6 719 335 364
Increase in minority interest - 53 53
Profit for the year 29 076 343 29 419
Transfer to financial instrument - - (8 542)
Purchase of treasury shares - - (128)
Transfer to non-distributable reserve (6 259) - -
Balance at 31 August 2009 62 619 7 115 356 168
Cash flow statement
for the year ended 31 August 2009 Group
2009 2008
R`000
R`000
Cash flows from operating activities
Cash generated from operations 36 090 23 515
Interest received 1 405 1 680
Interest paid (22 720) (3 797)
Taxation paid (5 889) (1 960)
Net cash inflow from operating
activities 8 886 19 438
Cash flows from investing activities
Additions to equipment - (63)
Acquisition/additions to investment properties (186 986) (339 703)
Interest capitalised to investment properties (9 084) (13 209)
Acquisition/additions to investment properties
under development (1 828) (124 683)
Proceeds on disposal of investments - 22 511
Proceeds on sale of investment property for
development - 53 663
Increase in financial assets - (6 181)
Net cash (outflow) from investing
activities (197 898) (407 665)
Cash flows from financing activities
Proceeds from the issue of shares - 279 317
Treasury shares purchased (128) (4 378)
Share repurchase - (688)
Financial liabilities raised 188 592 123 068
Net cash inflow from financing activities 188 464 397 319
Net (decrease)/increase in cash and cash equivalents (548) 9 092
Cash and cash equivalents at beginning of year 21 773 12 681
Cash and cash equivalents at end of year 21 225 21 773
Segmental information
at 31 August 2009
2009 2008
R`000
R`000
Profit
Profit
Revenue before tax Revenue before
tax
Offices 35 422 52 600 17 902 29 593
Retail 8 972 4 117 7 447 8 525
Industrial 2 197 (416) 2 286 2 793
Specialised 2 562 4 792 1 415 3 372
Parking 6 630 3 830 2 818 8 135
Other 98 56 37 41
Unsegmental - (29 337) - 5 273
_______ _______ _______ _______
55 881 35 642 31 905 57 732
_______ _______ _______ _______
Date: 03/11/2009 17:32:01 Produced by the JSE SENS Department.
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