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ING
ING
ING - Ingenuity Property Investments - Unaudited Consolidated Interim Results
for the six months ended 28 February 2010
INGENUITY PROPERTY INVESTMENTS LIMITED
("the company" or "Ingenuity")
(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
2010
Consolidated Statement of Financial Position
Unaudited Unaudited Audited
at at at
28 February 28 February 31 August
2010 2009 2009
R`000 R`000 R`000
ASSETS
Non-current assets 570 653 658 284 559 625
Investment properties 450 290 552 959 446 534
Straight-line lease accrual 13 460 6 830 9 937
Investment properties under
development 98 623 90 800 95 141
Equipment 61 92 68
Loans receivable 8 219 7 603 7 945
Current assets 20 030 24 679 150 493
Trade and other receivables 667 915 1 030
Loan receivable 6 547 - -
Investment property held
for sale - - 128 238
Cash and cash equivalents 12 816 23 764 21 225
Total assets 590 683 682 963 710 118
EQUITY AND LIABILITIES
Shareholders` interest 356 146 345 986 356 166
Share capital 6 585 6 585 6 585
Share premium 281 824 281 824 271 204
Non-distributable reserve 12 364 16 328 20 788
Treasury shares (27 255) (12 878) (13 006)
Share option reserve 863 863 863
Retained earnings 74 686 46 499 62 617
Total equity attributable to
equity holders of the parent 349 067 339 221 349 051
Minority interest 7 079 6 765 7 115
Non-current liabilities 223 481 332 367 335 207
Financial liabilities 203 448 315 948 314 274
Financial instruments 9 314 6 743 8 542
Deferred tax 10 719 9 676 12 391
Current liabilities 11 056 4 610 18 745
Trade and other payables 4 073 3 820 3 130
Prepaid rent received 2 776 - 3 172
Financial liability - - 12 000
Taxation 4 207 790 443
Total equity and liabilities 590 683 682 963 710 118
Net asset value per share
(based on shares in issue at
end of period/year net of
treasury shares) 59 cents 53 cents 56 cents
Consolidated Statement of Comprehensive Income
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
28 February 28 February 31 August
2010 2009 2009
R`000 R`000 R`000
Revenue 30 409 24 933 55 881
- Contractual 27 689 21 346 48 384
- Straight lining 2 720 3 587 7 497
Selling costs on disposals
of investment properties (1 713) - -
Loss on sale of property (626) - -
Other income - 162 237
Net operating expenses (13 758) (8 338) (17 775)
Profit before fair value
adjustments 14 312 16 757 38 343
Fair value adjustments to
investment properties - - 18 670
14 312 16 757 57 013
Interest received 1 003 1 174 2 488
Interest paid (9 610) (8 787) (23 859)
Profit before taxation 5 705 9 144 35 642
Taxation (2 403) (2 560) (6 223)
Profit for the period/year 3 302 6 584 29 419
Other comprehensive income - - -
Total comprehensive income
for the period/year 3 302 6 584 29 419
Total comprehensive income
attributable to:
Equity holders of the parent 3 207 6 699 29 076
Minority interest 95 (115) 343
3 302 6 584 29 419
Total shares in issue 658 550 000 658 550 000 658 550 000
Number of shares in issue,
net of treasury shares 606 385 618 648 712 581 631 404 259
Weighted average number
of shares 627 279 533 648 712 581 631 695 376
Basic earnings per share cents 0.5 1.0 4.6
Diluted basic earnings
per share cents 0.5 1.0 4.5
Headline earnings per
share cents 0.6 1.0 1.9
Workings
Headline earnings are
calculated as follows:
Earnings attributable to
equity holders 3 207 6 699 29 076
Fair value adjustment of
investment properties - - (18 670)
Deferred tax on fair value
adjustment - - 1 291
Loss on sale of investment
property 626 - -
Tax on realised loss (88) - -
Adjusted earnings for HEPS 3 745 6 699 11 697
Statement of Cash Flows
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
28 February 28 February 31 August
2010 2009 2009
Note R`000 R`000 R`000
Cash flows from operating
activities
Cash generated from
operations 1 15 639 16 344 36 092
Interest received 2 551 1 802 1 405
Interest paid 3 (10 616) (10 364) (22 720)
Taxation paid 4 (311) (4 597) (5 891)
Net cash inflow from
operating activities 5 263 3 185 8 886
Cash flows from investing
activities
Additions to equipment (19) - -
Acquisitions/additions to
investment properties (4 062) (184 016) (186 986)
Acquisitions/additions to
investment properties under
development (100) (1 471) (1 828)
Proceeds on disposal of
equipment 9 - -
Net proceeds from disposals
of investment properties 124 450 - -
Increase in financial assets (6 500) (633) -
Net cash inflow/(outflow)
from investing activities 113 778 (186 120) (188 814)
Cash flows from financing
activities
Treasury shares purchased (14 249) - (128)
Interest capitalised to
investment properties (3 382) (5 100) (9 084)
Financial liabilities
(repaid)/raised (109 820) 190 026 188 592
Net cash (outflow)/inflow
from financing activities (127 451) 184 926 179 380
Net (decrease)/increase in
cash and cash equivalents (8 409) 1 991 (548)
Cash and cash equivalents at
beginning of the period/year 21 225 21 773 21 773
Cash and cash equivalents at
end of the period/year 12 816 23 764 21 225
Notes to the Statement of Cash Flows
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
28 February 28 February 31 August
2010 2009 2009
R`000 R`000 R`000
1 Cash generated from
operations
Profit before taxation 5 705 9 144 35 642
Adjusted for:
Interest received (1 003) (1 174) (2 488)
Interest paid 9 610 8 787 23 859
Depreciation 23 24 48
Bad debts - 304 -
Amortisation of letting
commission 659 72 242
Amortisation of deferred
lease incentive 2 490 595 1 297
Straight lining of operating
leases (income) (2 720) (3 587) (7 497)
Straight lining of operating
leases (expense) - 25 -
Increase in fair value of
investment properties - - (18 670)
Loss on sale of property 626 - -
15 390 14 191 32 433
(Increase)/decrease in trade
and other receivables (297) 1 373 1 948
Increase in trade and other
payables 546 780 1 711
15 639 16 344 36 092
2 Interest received
Amount outstanding at
beginning of the
period/year 1 711 628 628
Interest income per income
statement 1 003 1 174 2 488
Amount outstanding at end
of the period/year (2 163) - (1 711)
551 1 802 1 405
3 Interest paid
Amount outstanding at
beginning of the
period/year 2 505 1 366 1 366
Interest income per income
statement 9 610 8 787 23 859
Amount outstanding at end
of the period/year (1 499) 211 (2 505)
10 616 10 364 22 720
4 Taxation paid
Amount outstanding at
beginning of period/year 443 4 616 4 616
Income statement charge 4 075 771 1 718
Amount outstanding at end
of the period/year (4 207) (790) (443)
311 4 597 5 891
Consolidated Statement of Changes in Equity
Share
Share Share option
capital premium reserve
R`000 R`000 R`000
Balance at 1 September 2008 6 585 271 204 863
Changes in equity - - -
Total comprehensive profit for
the period - - -
Subsequent expenditure on Virgin
Active building - - -
Transfer to financial instrument - - -
Balance at 28 February 2009 6 585 271 204 863
Changes in equity - - -
Increase in minority interest - - -
Total comprehensive profit for
the period - - -
Transfer to financial
instrument - - -
Purchase of 308 322 treasury
shares - - -
Transfer to non-distributable
reserve - - -
Balance at 31 August 2009 6 585 271 204 863
Changes in equity - 10 620 -
Increase in minority interest - - -
Total comprehensive profit for
the period - - -
Transfer to financial
instrument - - -
Purchase of 25 018 641 treasury
shares - 10 620 -
Realisation of non-distributable
reserves - - -
Balance at 28 February 2010 6 585 281 824 863
Non-
distributable Treasury Retained
reserve shares earnings
R`000 R`000 R`000
Balance at 1 September 2008 23 071 (12 878) 39 800
Changes in equity (6 743) - 6 699
Total comprehensive profit
for the period - - 6 699
Subsequent expenditure on
Virgin Active building - - -
Transfer to financial
instrument (6 743) - -
Balance at 28 February 2009 16 328 (12 878) 46 499
Changes in equity 4 460 (128) 16 118
Increase in minority
interest - - -
Total comprehensive profit
for the period - - -
Transfer to financial
instrument (1 799) - -
Purchase of 308 322
treasury shares - (128) -
Transfer to non-
distributable reserve 6 259 - (6 259)
Balance at 31 August 2009 20 788 (13 006) 62 617
Changes in equity (8 424) (14 249) 12 069
Increase in minority
interest - - -
Total comprehensive profit
for the period - - -
Transfer to financial
instrument (772) - -
Purchase of 25 018 641
treasury shares - (14 249) -
Realisation of non-
distributable reserves (7 652) - 7 480
Balance at 28 February 12 364 (27 255) 74 686
Minority
interest Total
R`000 R`000
Balance at 1 September 2008 6 719 335 364
Changes in equity 46 2
Total comprehensive profit for the period (115) 6 584
Subsequent expenditure on Virgin Active
building 161 161
Transfer to financial instrument - (6 743)
Balance at 28 February 2009 6 765 335 366
Changes in equity 350 20 800
Increase in minority interest 53 53
Total comprehensive profit for the period 297 22 674
Transfer to financial instrument - (1 799)
Purchase of 308 322 treasury shares - (128)
Transfer to non-distributable reserve - -
Balance at 31 August 2009 7 115 356 166
Changes in equity (36) (20)
Increase in minority interest (131) (131)
Total comprehensive profit for the period 95 3 302
Transfer to financial instrument - (772)
Purchase of 25 018 641 treasury shares - (2 247)
Realisation of non-distributable reserves - (172)
Balance at 28 February 2010 7 079 356 146
Segmental Results
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
28 February 28 February 31 August
2010 2009 2009
R`000 R`000 R`000
Offices
Segment revenue 22 945 13 337 30 244
Net operating expenses (6 525) (3 475) (6 245)
Fair value adjustment to
investment properties - - 23 423
Selling costs related to
sales of investment
properties (1 195) - -
Segmental results 15 225 9 862 47 422
Retail
Segment revenue 1 842 3 294 7 815
Net operating expenses (1 175) (1 002) (1 584)
Fair value adjustment to
investment properties - - (3 271)
Loss on disposal of
investment properties (626) - -
Selling costs related to
sales of investment
properties (518) - -
Segmental results (477) 2 292 2 960
Industrial
Segment revenue 1 618 921 2 141
Net operating expenses (599) (815) (583)
Fair value adjustment to
investment properties - - (2 030)
Segmental results 1 019 106 (472)
Special
Segment revenue 1 309 1 261 2 555
Net operating expenses (137) (94) (188)
Fair value adjustment to
investment properties - - 2 418
Segmental results 1 172 1 167 4 785
Parking
Segment revenue 2 616 2 512 5 543
Net operating expenses (1 963) - (951)
Fair value adjustment to
investment properties - - (1 850)
Segmental results 653 2 512 2 742
Other
Segment revenue 79 21 86
Net operating expenses (28) (7) (21)
Fair value adjustment to
investment properties - - (20)
Segmental results 51 14 45
Reconciliation to profit
before interest and
taxation for the period in
the income statement
Revenue 30 409 24 933 55 881
Allocated operating expenses (10 427) (5 393) (9 572)
Unallocated operating expenses (3 331) (2 783) (7 966)
Loss on disposal of investment
properties (626) - -
Selling costs related to sales
of investment properties (1 713) - -
Fair value adjustment to
investment properties - - 18 670
Profit before interest and
taxation 14 312 16 757 57 013
Segmental Report - Investment Properties
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
28 February 28 February 31 August
2010 2009 2009
R`000 R`000 R`000
Offices
Property assets 258 989 340 760 362 395
Segmental results 258 989 340 760 362 395
Retail
Property assets 55 499 73 495 87 329
Segmental results 55 499 73 495 87 329
Industrial
Property assets 26 167 26 835 25 433
Segmental results 26 167 26 835 25 433
Special
Property assets 35 367 32 924 35 444
Segmental results 35 367 32 924 35 444
Parking
Property assets 73 738 78 434 73 155
Segmental results 73 738 78 434 73 155
Other
Property assets 481 511 953
Segmental results 481 511 953
NOTE
Basis of preparation
The financial statements are prepared in accordance with International
Financial Reporting Standards ("IFRS") IAS 34: Interim Financial Reporting,
AC 500 standards and the Listings Requirements of the JSE Ltd as well as the
requirements of the Companies Act of South Africa, and on a basis consistent
with the company`s most recent annual financial statements.
COMMENTS
General review
Within the constraints of the current economic downturn, the company has
continued to manage its asset base whilst maintaining a conservative approach
towards risk management.
During this period under review, the company sold three properties - 33
Waterkant Street, 22 Long Street and Midas Goodwood, for a total gross
consideration of R124.5 million. Two of these properties had been upgraded,
refurbished and fully tenanted, and management felt that they had extracted
maximum value, whilst the third property was a small non-core holding. The
proceeds on these sales were applied to reduce the company`s borrowings,
thereby reducing the risk profile and placing it in a strong position to seek
investment growth opportunities and invest funds in its own assets where
further value exists.
The property portfolio now comprises 82% of income-producing assets and is
well managed with a strong tenant base delivering good quality sustainable
contractual rental income. The current vacancy percentage of 2.1% is not
expected to rise.
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.
Property acquisitions and developments
No properties were acquired during the period under review.
The two development opportunities, namely the Tygervalley scheme and "The
Modern" (previously called 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 "The Modern" comprises 21 400 sqm of premium grade office
space. Redefine Income Fund Ltd is the company`s joint venture partner in
"The Modern" development. Negotiations are in progress with potential tenants
for these developments.
Operations
The company continued trading as property investors and developers, earning
rental income from its core investment properties and working on its existing
development opportunities. The upgrading and refurbishment of certain of the
investment properties is now substantially complete with all vacancies being
tenanted with good quality tenants. This has resulted in the company being
able to increase the rental returns on these properties and thereby enhance
earnings going forward.
Net property income has increased by 10.2% to R17.3 million
(2009: R15.7 million) for the 6 months which includes rentals from the
properties disposed of up until the dates of transfer.
Interest received comprises interest from funds on call and the loan
receivable from a joint venture partner. Interest paid during the period is in
respect of the funding for the investment properties. The interest rate on
R200 million of borrowings remains fixed until October 2013 at an effective
all-in rate of 10.65%. Currently 98% (2009: 63%) of the borrowings are fixed.
The basic earnings per share is 0.5 cent (2009: 1.0 cent) and the headline
earnings per share is 0.6 cent (2009: 1.0 cent). The main differences
between the basic and the headline earnings in the current period and that of
the comparative period is due to the selling costs and recoupment of tax
allowances relating to the sales of the investment properties.
At the reporting date, the total value of investment properties amounted to
R450 million (2009: R553 million) whilst properties under development
amounted to R98 milion (2009: R91 million). Borrowings were reduced to
R203 million (2009: R316 million). The loan to value ratio is now 35%
(2009: 45%).
The net asset value per share (based on shares in issue net of treasury
shares) is 59 cents (2009: 53 cents).
Total cash on hand at the end of the period amounted to R13 million (2009:
R24 million).
The company held 35 164 382 treasury shares, at a cost of R18.8 million (2009:
9 837 419 treasury shares at a cost of R4.4 million), in a subsidiary company
as at the reporting date. Share buy-backs will continue when management
believe it is opportune to apply cash resources.
These consolidated interim financial results have not been reviewed or
reported on by the company`s auditors.
Prospects
The core investments of the portfolio remain well let, producing solid long-
term returns. Management`s focus remains on extracting the additional value-
add opportunities on the core portfolio and to convert development land into
income-producing assets. The developments will add considerable value to the
portfolio and generate increased rental inflows in the forthcoming years. The
reduction in borrowings as a result of applying the proceeds on the sales of
the investment properties will impact positively on the second half income.
The comments above exclude the effects of any unforeseen circumstances and the
information on which these are based has not been reviewed or reported on by
the company`s auditors.
Directorate
During the period under review, Messrs Kaplan, Groll and Shapiro resigned as
non-executive directors following the sale by Trematon Capital Investments Ltd
of its interest in Ingenuity. Mr Rodney Squire-Howe, formerly the chief
executive of the listed Paramount Property Fund, has been appointed to the
Board as the non-executive independent chairman.
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
R SQUIRE-HOWE
Chairman
M WAGENHEIM
Financial Director and Company Secretary
23 April 2010
Cape Town
INGENUITY PROPERTY INVESTMENTS LIMITED
("the company" or "Ingenuity")
(Incorporated in the Republic of South Africa)
Registration number: 2000/018084/06
Share code: ING
ISIN code: ZAE000127411
Directors:
J Bielich, LH Cohen*, DB Fabian*, AA Maresky (CEO), RS Schur*, R Squire-Howe*
(Chairman), A Varachhia*, M Wagenheim (Financial)
*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: info@ingenuityproperty.com
www.ingenuityproperty.com
Transfer secretaries:
Computershare Investor Services (Pty) Ltd,
70 Marshall Street, Johannesburg, 2001.
Tel: 011 370 5000
Sponsor: Nedbank Capital
Auditors: Mazars
Bankers: Absa Bank Ltd and Nedbank Ltd
Attorneys: Edward Nathan Sonnenbergs Inc.
Date: 23/04/2010 16:15:05 Produced by the JSE SENS Department.
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