| Wed 18 Nov 2009, 16:30 | | TMT - Trematon Capital Investments Limited - Audited final results for the year |
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TMT - Trematon Capital Investments Limited - Audited final results for the year
ended 31 August 2009
TREMATON CAPITAL INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1997/008691/06)
JSE share code: TMT
ISIN: ZAE000013991
AUDITED FINAL RESULTS for the year ended 31 August 2009
Directors` review
Trematon Capital Investments Limited is an investment group with investments,
subsidiaries and associates engaged in a variety of industries which make up
its investment portfolio. Most of the investments are in the Western Cape and
are related in some way to property or leisure. The company also engages in
investment and trading in listed shares which are not specific to any industry.
The primary aim of the group is to generate superior risk-adjusted long-term
returns for its shareholders.
The largest investments are long-term in nature and will yield income or
capital growth in an uneven pattern so earnings can be expected to be volatile
from period to period and no dividend should be expected unless the board
determines that capital should be returned to shareholders.
Commentary on financial results
Each investment in the company forms part of the investment portfolio.
However, the nature of IFRS accounting rules treats the accounting of these
investments as either investments, associates or subsidiaries depending on the
relevant criteria. This means that not all investments receive the same
accounting treatment. It is therefore important for shareholders to read this
directors` commentary in conjunction with the financial accounts in order to
better understand the nature of the investment portfolio.
Net asset value at year-end was 81 cents (2008: 88 cents). The directors aim to
increase net asset value in the long term but it has in fact decreased slightly
in each of the past two years as a result of difficult market conditions.
The net asset value includes the investment in Ingenuity Property Investments
Limited. The major part of this investment is equity accounted (aside from
26 million shares which are "held for trading" and are thus marked to market at
year-end). The equity accounted portion (111 million shares) is valued at an
effective 60 cents per share which reflects cost plus post-acquisition share of
reserves. The net asset value of Ingenuity is 56 cents and the market value at
year-end was 44 cents. If the holding in Ingenuity had been written down to the
market price at year-end, this would have had the effect of reducing the
reported net asset value from 81 cents to 71 cents. The net asset value of
Ingenuity is based on a current valuation of the underlying properties and their
income streams and accordingly, the directors do not believe that the investment
should be impaired.
Trading losses of R18.0 million (2008: trading profit of R1.4 million) were
incurred during the year. The biggest component of trading losses was the
operating losses incurred at Club Mykonos Langebaan Limited. The primary cause
of the operating losses was the once-off restructuring costs incurred at the
Club Mykonos head office during the period. Further trading losses resulted from
the impairment of certain properties at Club Mykonos and share trading.
The group earned investment income of R18.4 million (2008: R9.0 million) and
incurred finance costs of R13.0 million (2008: R8.1 million).
The loan to Cloudberry Investments 18 (Pty) Limited was impaired by a further
R5.4 million (2008: R4.3 million) to reflect the market value of the underlying
investment in Mazor Group Ltd. This is discussed in more detail below.
Profit from equity accounted investments amounted to R13.8 million
(2008: R7.1 million). The two largest contributors to equity accounted income
are Ingenuity Property Investments Limited and West Coast Leisure (Pty) Limited.
Headline earnings per share amounted to 4.5 cents (2008: 5.5 cents) and the
basic loss per share amounted to -1.3 cent (2008: earnings per share of
19.7 cents).
Commentary on individual investments
Club Mykonos Langebaan Limited ("CML")
The company owns 34.2% of CML which is accounted for as a subsidiary.
Trematon has de facto control of CML and has implemented various restructuring
measures to make the operations of the company more efficient. This resulted in
substantial non-recurring restructuring costs in the current financial year.
CML owns various properties within the Club Mykonos Resort which include
completed residential units, vacant serviced residential plots, undeveloped
land, boat moorings and commercial properties. The resort is situated on a
superb Cape West Coast location. The property market in that area is weak at
the moment but the asset should yield satisfactory long-term returns when the
market for coastal leisure properties recovers. In the interim, CML is working
with the other home-owners on the resort to improve the resort infrastructure
and the overall leisure experience.
CML also owns 29.6% of the Mykonos Casino which is managed by an excellent Gold
Reef Resorts team and continues to perform very well.
More details about the resort and its facilities can be found at
www.clubmykonos.co.za
Ingenuity Property Investment Limited
Ingenuity is a listed property company with prime commercial and industrial and
development property assets situated mostly in the Western Cape. It has a small
but high quality management team.
The commercial and industrial portfolio is well let to high quality tenants and
vacancies and arrears are negligible. The development land is situated in prime
nodes and do not yield income at present but have significant long-term value.
Ingenuity trades at a substantial discount to its reported NAV and management
is in the process of implementing various initiatives to ensure that the
investment fully reflects the value accruing to shareholders.
Faircare Trust
Faircare Trust, of which Trematon effectively owns 40%, is responsible for the
management and operation of up-market retirement villages based mainly in the
Western Cape. The villages are all well established and highly regarded and
operate under a variety of ownership structures which are tailored to the needs
of their customers. All of the villages comprise residential units, assisted
living suites, frail care and catering facilities. The villages include Cle du
Cap (situated in Tokai), Noordhoek Manor, Onrus Manor, Heritage Manor and
Bridgewater Manor (both situated in Somerset West).
The group is well managed by an experienced team of specialist professionals.
Trematon is represented on the boards of the various entities but occupies a
non-executive role in the operations.
The nature of the retirement village model which Faircare applies results in a
situation where the operator has a long-term incentive to increase the value of
the residential units and the quality of the villages. The owner, in turn
receives a value-for-money investment in a secure, high quality retirement
lifestyle.
Faircare Trust did not contribute to group profits in the current period
because no income was recognised in the Trust while the underlying structures
were being optimised. The underlying operations are currently profitable and
the directors are confident that the investment will realise its potential in
the years to come.
More details about Faircare can be found at www.faircare.co.za
Mazor Group Limited
Trematon owns 7.2% of Mazor indirectly via a 49% holding in Cloudberry
Investments 18 (Pty) Limited. Cloudberry is controlled by a BEE entity and is
partially funded via a loan from Trematon. The value of the loan receivable is
adjusted to reflect the value of the underlying security at year-end. Two
Trematon directors occupy non-executive positions on the Mazor board.
The investment in Mazor has resulted in a net loss in the income statement for
each of the past two years as a result of the timing of the listing and the
movement in the share price. However, the operating performance of the
underlying company has been exceptional. The interim accounts for the period to
August 2009 indicate substantial net cash reserves and growth in core earnings
of 54% for the period. The performance of the company should ultimately reflect
in the share price.
More information about Mazor can be found at www.mazor.co.za
Grand Parade Investment Limited ("GPI")
The company owns 5 200 000 ordinary shares in GPI (2008: 12 770 648) after
some profitable share sales during the period. The company has no direct
involvement with GPI and the investment represents a small minority investment
stake acquired at favourable prices. These shares rank pari passu with other
ordinary shares but are subject to a voting pool agreement with a BEE trust.
GPI has investments in high quality gaming and leisure assets in the Western
Cape.
Shareholders are referred to the published results of GPI and to the GPI
website at www.grandparade.co.za
Direct property investments
Stalagmite (Pty) Limited
Stalagmite is a development comprising prime industrial land in Strand at the
Broadway Industrial Park adjacent to the proposed route of the new N2 highway.
Stalagmite is 50% held and is an equity accounted joint venture.
The partners in the joint venture are Gateway Property Developers (Pty) Limited
who conceived the project and have managed it since inception.
The project made a contribution to profits in the current year. It is now debt
free and holds prime industrial land which will be released to the market or
developed as appropriate.
The project is debt free and at list prices the land has a value of R25 million
of which Trematon has a 50% share.
Boulevard Park
Trematon owns an effective 37.5% interest in Boulevard Park which is a premier
grade development located adjacent to the N2 highway on the Cape Town CBD
periphery. The development comprises seven office towers comprising
38 000 square metres of office space and 1 980 parking bays.
At year-end 69% of the park had been sold and the Boulevard Park Trust has
retained an indirect equity interest in some of the buildings sold. The park as
a whole is 65% let and the bulk of the tenants are blue-chip corporations with
long leases. The first group of tenants has taken occupation and the completed
building occupies a prominent position on one of the main access routes to the
city.
The project came on stream at the low point of the property cycle so rentals
achieved are below those originally budgeted but the quality of the leases is
exceptional. The project made a very small net contribution to group profit in
the current period.
Loans due to Trematon from the Boulevard Park Trust amounted to R53.7 million
at year-end.
Wembley Square II
Trematon owns an effective 40% interest in Wembley Square II which is located
opposite Wembley Square and is managed by Faircape, which was the original
developer of Wembley Square. The site is in a highly desirable development node
and plans are under way to maximise the value of the investment. Construction
has commenced on the basement infrastructure.
Loans due to Trematon from the New Wembley Trust amounted to R8.9 million at
year-end.
Prospects
The company is exposed to a diversified portfolio of businesses in the property-
related and leisure industries and is therefore well positioned to benefit from
any improvement in economic activity in these areas. The nature of the company`s
investments is such that returns and cash flows will not accrue evenly in each
accounting period but will be realised when dictated by commercial circumstances
and the judgement of the directors.
The company is in a sound financial position and is likely to make new
investments within the existing portfolio and in new businesses during the next
financial year.
BALANCE SHEET
Audited Audited
31 August 31 August
2009 2008
R`000 R`000
ASSETS
Non-current assets 257 543 272 862
Property, plant and equipment 7 989 12 506
Investment property 1 446 -
Investment in subsidiaries - -
Investments 246 629 259 234
Deferred tax asset 1 479 1 122
Current assets 99 361 94 358
Loans receivable 1 248 9 073
Trade and other receivables 9 362 11 369
Investments 11 440 6 146
Inventories 31 904 31 938
Current tax asset 224 1 292
Cash and cash equivalents 45 183 34 540
Total assets 356 904 367 220
EQUITY AND LIABILITIES
Equity 236 725 252 092
Share capital and share premium 203 296 203 296
Fair value reserve 2 929 13 409
Accumulated loss (64 976) (62 697)
Total equity attributable to equity
holders of the parent 141 249 154 008
Minority interest 95 476 98 084
Non-current liabilities
Deferred tax liability 4 386 4 898
Current liabilities 115 793 110 230
Loans payable 104 369 92 576
Secured debentures 7 312 9 681
Current tax liabilities 189 22
Trade and other payables 3 725 7 902
Bank overdraft 198 49
Total equity and liabilities 356 904 367 220
Net asset value per share (cents)
(based on shares in issue at end of year) 81 88
INCOME STATEMENT
Audited Audited
Year ended Year ended
31 August 31 August
2009 2008
Notes R`000 R`000
Revenue 42 626 27 124
Trading (loss)/profit (17 970) 1 362
Investment income 18 361 9 079
Finance costs (12 992) (8 060)
Recycling of fair value reserve to
profit - 15 715
Profit on change in shareholding in
associate and subsidiary 540 12 610
Impairment of loan (5 410) (4 262)
Profit from equity accounted
investments (net of tax) 13 772 7 074
(Loss)/profit before taxation (3 699) 33 518
Income tax expense (1 147) 1 323
(Loss)/profit for the year (4 846) 34 841
Attributable to:
Equity holders of the parent (2 280) 34 419
Minority interest (2 566) 422
(4 846) 34 841
Number of shares issued (`000) 174 873 174 873
Weighted average number of shares (`000) 174 873 174 873
Basic (loss)/earnings per share (cents) (1.3) 19.7
Diluted (loss)/earnings per share (cents) (1.3) 19.7
Headline earnings per share (cents) 2 4.5 5.5
Diluted headline earnings per share (cents) 2 4.5 5.5
STATEMENT OF CHANGES IN EQUITY
Share Share
capital premium
R`000 R`000
Balance at 1 September 2007 1 749 201 547
Total recognised income and expenses - -
Profit for the year - -
Total income and expenses recognised directly
in equity - -
Change in tax rate recognised in equity - -
Fair value loss on available-for-sale investments - -
Fair value gain on available-for-sale investment - -
Recycling of fair value reserve to profit - -
Dilution of subsidiary - -
Fair value reserve realised on sale of investments - -
Acquisition of subsidiary - -
Balance at 31 August 2008 1 749 201 547
Balance at 1 September 2008 1 749 201 547
Total recognised income and expenses - -
Profit/(loss) for the year - -
Total income and expenses recognised directly
in equity - -
Fair value loss on available-for-sale investments - -
Change in shareholding in subsidiary - -
Fair value reserve realised on sale of investments - -
Balance at 31 August 2009 1 749 201 547
Total share Fair value
capital reserve
R`000 R`000
Balance at 1 September 2007 203 296 40 249
Total recognised income and expenses - (26 840)
Profit for the year - -
Total income and expenses recognised directly
in equity - (26 840)
Change in tax rate recognised in equity - 235
Fair value loss on available-for-sale
investments - (11 516)
Fair value gain on available-for-sale
investment - 8 479
Recycling of fair value reserve to profit - (13 514)
Dilution of subsidiary - (9 623)
Fair value reserve realised on sale of
investments - (901)
Acquisition of subsidiary - -
Balance at 31 August 2008 203 296 13 409
Balance at 1 September 2008 203 296 13 409
Total recognised income and expenses - (10 480)
Profit/(loss) for the year - -
Total income and expenses recognised directly
in equity - (10 480)
Fair value loss on available-for-sale
investments - (3 667)
Change in shareholding in subsidiary - -
Fair value reserve realised on sale of
investments - (6 813)
Balance at 31 August 2009 203 296 2 929
Accumulated
loss Total
R`000 R`000
Balance at 1 September 2007 (97 115) 146 430
Total recognised income and expenses 34 418 7 578
Profit for the year 34 418 34 418
Total income and expenses recognised directly
in equity - (26 840)
Change in tax rate recognised in equity - 235
Fair value loss on available-for-sale
investments - (11 516)
Fair value gain on available-for-sale
investment - 8 479
Recycling of fair value reserve to profit - (13 514)
Dilution of subsidiary - (9 623)
Fair value reserve realised on sale of
investments - (901)
Acquisition of subsidiary - -
Balance at 31 August 2008 (62 697) 154 008
Balance at 1 September 2008 (62 697) 154 008
Total recognised income and expenses (2 279) (12 759)
Profit/(loss) for the year (2 279) (2 279)
Total income and expenses recognised directly
in equity - (10 480)
Fair value loss on available-for-sale
investments - (3 667)
Change in shareholding in subsidiary - -
Fair value reserve realised on sale of
investments - (6 813)
Balance at 31 August 2009 (64 976) 141 249
Minority Total
interest equity
R`000 R`000
Balance at 1 September 2007 7 197 153 627
Total recognised income and expenses (7 197) 381
Profit for the year 422 34 840
Total income and expenses recognised directly
in equity (7 619) (34 459)
Change in tax rate recognised in equity - 235
Fair value loss on available-for-sale investments - (11 516)
Fair value gain on available-for-sale investment - 8 479
Recycling of fair value reserve to profit - (13 514)
Dilution of subsidiary (7 619) (17 242)
Fair value reserve realised on sale of investments - (901)
Acquisition of subsidiary 98 084 98 084
Balance at 31 August 2008 98 084 252 092
Balance at 1 September 2008 98 084 252 092
Total recognised income and expenses (2 608) (15 367)
Profit/(loss) for the year (2 567) (4 846)
Total income and expenses recognised directly
in equity (41) (10 521)
Fair value loss on available-for-sale investments - (3 667)
Change in shareholding in subsidiary (41) (41)
Fair value reserve realised on sale of investments - (6 813)
Balance at 31 August 2009 95 476 236 725
CASH FLOW STATEMENT
Audited Audited
Year ended Year ended
31 August 31 August
2009 2008
R`000 R`000
Cash flows from operating activities
Cash (utilised in)/generated by operations (6 240) 2 243
Finance income 17 092 7 966
Dividends received 1 269 1 113
Finance costs (12 992) (8 060)
Income tax received/(paid) 926 (1 387)
Net cash inflow from operating activities 55 1 875
Cash flows from investing activities
Acquisition of property, plant and equipment (671) (31)
Acquisition of investment property (1 446) -
Proceeds on disposal of property, plant
and equipment 146 -
Dilution of subsidiary - (12 681)
Acquisition of subsidiary, net of cash
acquired - 33 041
Increase in loans receivable (11 492) (87 569)
Decrease in loan in dilution of subsidiary - 1 509
Loan repaid by joint venture 5 790 1 997
Acquisition of held-for-trading and
available-for-sale investments (8 895) (65 939)
Proceeds from sale of investments 17 584 9 831
Net cash inflow/(outflow) from investing
activities 1 016 (119 842)
Cash flows from financing activities
Increase in borrowings 11 792 92 576
Decrease in secured debentures (2 369) -
Net cash inflow from financing activities 9 423 92 576
Net increase/(decrease) in cash and cash
equivalents 10 494 (25 391)
Cash and cash equivalents at the beginning
of the year 34 490 59 887
Effect of exchange rate movement on cash
balances - (6)
Total cash and cash equivalents at the end
of the year 44 984 34 490
NOTES:
1 Presentation of annual financial statements
Trematon Capital Investments Limited (the "company") is a company domiciled in
South Africa. The consolidated financial statements of the company as at and
for the year ended 31 August 2009 comprise the company and its subsidiaries
(together referred to as the "group") and the group`s interest in jointly
controlled entities.
The financial statements were authorised for issue by the directors on
13 November 2009.
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS), IAS 34: Interim Financial Reporting, the
Listings Requirements of the JSE Limited and the South African Companies Act.
The financial statements have been prepared on the going concern basis using a
combination of the historical cost and fair value basis of accounting.
All significant accounting policies have been consistently applied to all
periods presented and throughout the group.
The consolidated annual financial statements and the company annual financial
statements are stated in Rands, which is the company`s functional and
presentation currency.
The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities, income
and expenses.
The estimates and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under circumstances,
the results of which form the basis of making judgements about carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
The 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 if the revision affects only that period, or the period of
the revision and future periods if the revision affects both current and future
periods.
KPMG Inc. has provided an unqualified audit opinion, which is available for
inspection at the company`s registered office.
Audited Audited
Year ended Year ended
31 August 31 August
2009 2008
R`000 R`000
2 Headline earnings per share
Headline earnings per share is calculated as
follows:
(Loss)/profit attributable to equity holders
of the parent (2 280) 34 419
Realised profit on available-for-sale
investments, net of minority interest (656) (1 985)
Realised gain on change in shareholding (540) (12 610)
Recycling of fair value reserve to profit - (15 715)
Impairment of property, plant and equipment 4 647 -
Impairment of loan 5 410 4 262
Tax effect on impairment of loan 1 193 (1 193)
Tax effect on realised profit on
available-for-sale investments, net of
minority interest 92 278
Tax effect on recycling of fair value reserve
to profit - 2 200
Headline earnings 7 866 9 656
Headline earnings per share (cents) 4.5 5.5
Diluted headline earnings per share 4.5 5.5
The calculation of headline earnings per share is based on the weighted average
number of 174 872 545 shares in issue during the year (2008: 174 872 545).
The Annual Report of the company for the year ended 31 August 2009 will be
posted on Friday, 27 November 2009.
Registration number: 1997/008691/06
Domicile and registered office
2nd Floor, The Hudson
30 Hudson Street, DeWaterkant, Cape Town
PO Box 7677, Roggebaai, 8012, South Africa
Transfer secretaries
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001
Directors
M Kaplan (Chairman)*, A Shapiro (CEO), A Groll, AM Louw*, R Stumpf*, S Litten
* Non-executive
Secretary
S Litten
18 November 2009
Sponsor
Sasfin Capital (A division of Sasfin Bank Limited)
Auditor
KPMG Inc.
Contact details
Tel: 021 421 5550
Fax: 021 421 5551
Date: 18/11/2009 16:30:01 Produced by the JSE SENS Department.
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