| Thu 4 Nov 2010, 15:37 | | ING - Ingenuity - Abridged audited consolidated results for the year ended 31 |
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ING - Ingenuity - Abridged audited consolidated results for the year ended 31
August 2010
INGENUITY PROPERTY INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Company registration number 2000/018084/06)
Share code: ING ISIN: ZAE000127411
("INGENUITY") (the "Company")
ABRIDGED AUDITED CONSOLIDATED RESULTS FOR THE YEAR ENDED 31 AUGUST 2010
KEY FINANCIAL INDICATORS
Audited Audited
2010 2009
R`000 R`000
Total contractual rental income 50 605 48 384
Investment property portfolio 447 659 446 534
Investment property held for sale - 128 238
Development assets 95 421 95 141
Borrowings 202 581 314 274
Market capitalisation at year end 263 420 270 005
Headline Earnings per Share 1.0 cents 1.9 cents
Basic Earnings per Share 4.0 cents 4.6 cents
Net Asset Value per Share 61 cents 56 cents
Abridged Consolidated Statement of Financial Position
at 31 August 2010 Group
2010 2 009
Assets R`000 R` 000
Non-current assets 598 018 559 625
Investment properties 477 659 446 534
Straight-line lease accrual 16 420 9 937
Investment properties under
Development 95 421 95 141
Equipment 37 68
Loans receivable 8 481 7 945
Current assets 14 126 150 493
Trade and other receivables 792 1 030
Loan receivable 6 901 -
Investment property held for sale - 128 238
Tax receivable 494 -
Cash and cash equivalents 5 939 21 225
Total assets 612 144 710 118
Equity and liabilities
Shareholders interest 372 489 356 166
Share capital 6 585 6 585
Share premium 281 824 271 204
Non-distributable reserve 35 028 20 788
Treasury shares (27 254) (13 006)
Share option reserve 863 863
Retained earnings 68 407 62 617
Total equity attributable to parent 365 453 349 051
Minority interest 7 036 7 115
Non-current liabilities 236 367 335 207
Financial liabilities 202 581 314 274
Financial instruments 15 899 8 542
Deferred tax 17 887 12 391
Current liabilities 3 288 18 745
Trade and other payables 3 265 3 130
Prepaid rent received 23 3 172
Put option - 12 000
Taxation - 443
Total equity and liabilities 612 144 710 118
Abridged Consolidated Income statement
for the year ended 31 August 2010 Group
2010 2 009
R`000 R` 000
Revenue 56 285 55 881
- Contractual 50 605 48 384
- Straight-line lease adjustment 5 680 7 497
Selling costs on disposal of investment properties (1 713) -
Loss on sale of investment property (626) -
Other income - 237
Net operating expenses (21 026) (17 775)
Profit before fair value adjustments 32 920 38 343
Fair value adjustments to investment
properties 25 274 18 670
Profit before interest and taxation 58 194 57 013
Interest received 2 147 2 488
Interest paid (24 032) (23 859)
Profit before taxation 36 309 35 642
Taxation (11 992) (6 223)
Profit for the year 24 317 29 419
Attributable to:
Equity holders of the parent 24 116 29 076
Minority interest 201 343
24 317 29 419
Cents Cents
Basic earnings per share 4.0 4.6
Diluted basic earnings per share 4.0 4.5
Headline earnings per share 1.0 1.9
Diluted headline earnings per share 1.0 1.8
The calculation of earnings per share is based on a weighted number of 615 705
614 (2009: 631 695 376) shares in issue during the year. The actual number of
shares in issue at the year end is 658 550 000 (2009: 658 550 000).
Headline earnings are calculated as follows:
R`000 R`000
Earnings attributable to equity holders 24 116 29 076
Fair value adjustment of investment properties (25 274) (18 670)
Deferred tax on fair value adjustment 6 936 1 291
Loss on sale of investment property 626 -
Tax on realised loss (88) -
6 316 11 697
Abridged Consolidated Statement of Comprehensive Income
for the year ended 31 August 2010 Group
2010 2009
R`000 R`000
Profit for the year 24 317 29 419
Other comprehensive income:
Cash flow hedges (7 357) (8 542)
Income tax relating to components of
other comprehensive income 2 060 -
Other comprehensive income for the year, net of tax (5 297) (8 542)
Total comprehensive income for the year 19 020 20 877
Total comprehensive income attributable to:
Equity holders of the parent 18 819 20 534
Minority interest 201 343
19 020 20 877
Abridged Consolidated Statement of Changes in Equity Group
Share
Share Share option
for the year ended 31 August 2010 capital premium reserve
R`000 R`000 R`000
Balance at 1 September 2008 6 585 271 204 863
Changes in equity - - -
Increase in minority interest - - -
Total comprehensive income for the year - - -
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 income for the year - - -
Purchase of treasury shares - 10 620 -
Transfer to non-distributable reserve - - -
Realisation of non-distributable reserves - - -
Balance at 31 August 2010 6 585 281 824 863
Non-
distributable Treasury Retained
for the year ended 31 August 2010 reserve shares earnings
R`000 R`000 R`000
Balance at 1 September 2008 23 071 (12 878) 39 800
Changes in equity (2 283) (128) 22 817
Increase in minority interest - - -
Total comprehensive income for the year (8 542) - 29 076
Purchase of 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 14 240 (14 248) 5 790
Increase in minority interest - - -
Total comprehensive income for the year (5 297) - 24 116
Purchase of treasury shares - (14 248) 1 380
Transfer to non-distributable reserve 27 189 - (27 189)
Realisation of non-distributable reserves (7 652) - 7 483
Balance at 31 August 2010 35 028 (27 254) 68 407
Minority Total
for the year ended 31 August 2010 interest equity
R`000 R`000
Balance at 1 September 2008 6 719 335 364
Changes in equity 396 20 802
Increase in minority interest 53 53
Total comprehensive income for the year 343 20 877
Purchase of treasury shares - (128)
Transfer to non-distributable reserve - -
Balance at 31 August 2009 7 115 356 166
Changes in equity (79) 16 323
(Decrease) in minority interest (280) (280)
Total comprehensive income for the year 201 19 020
Purchase of treasury shares - (2 248)
Transfer to non-distributable reserve - (169)
Realisation of non-distributable reserves - -
Balance at 31 August 2010 7 036 372 489
Abridged Consolidated Statement of Cash Flows
for the year ended 31 August 2010 Group
2010 2009
R`000 R`000
Cash flows from operating activities
Cash generated from operations 27 599 36 092
Interest received 931 1 405
Interest paid (25 898) (22 720)
Taxation paid (5 374) (5 891)
Net cash (outflow) inflow from operating activities (2 742) 8 886
Cash flows from investing activities
Additions to equipment (21) -
Acquisitions/additions to investment properties (4 748) (186 986)
Acquisition/additions to investment properties
under development (280) (1 828)
Proceeds on disposal of equipment 10 -
Proceeds on disposal of investment properties 124 450 -
Increase in financial assets (6 500) -
Net cash inflow (outflow) from investing activities 112 911 (188 814)
Cash flows from financing activities
Treasury shares purchased (14 248) (128)
Interest capitalised to investment properties - (9 084)
Financial liabilities (repaid) raised (111 207) 188 592
Net cash (outflow) inflow from financing activities (125 455) 179 380
Net (decrease) in cash and cash equivalents (15 286) (548)
Cash and cash equivalents at beginning of year 21 225 21 773
Cash and cash equivalents at end of year 5 939 21 225
Segmental information
at 31 August 2010
2010 2009
R`000 R`000
Segmental Segmental
operating profit operating profit
Revenue before tax Revenue before tax
Offices 31 226 38 811 30 244 47 422
Retail 7 324 7 194 7 815 2 960
Industrial 3 029 3 257 2 141 (472)
Gym 2 759 2 043 2 555 4 785
Parking 6 124 7 172 5 543 2 742
Other 143 - 86 45
50 605 58 477 48 384 57 482
Reconciliation to profit for the year in the abridged consolidated income
statement:
2010 2009
R`000 R`000
Total segmental operating profit before tax 58 477 57 482
Unsegmental operating expenses (5 963) (8 203)
Interest received 2 147 2 488
Interest paid (24 032) (23 859)
Other income - 237
30 629 28 145
Straight lining 5 680 7 497
Profit before tax 36 309 35 642
Segmental information
at 31 August 2010
Property Assets
2010 2009
R`000 R`000
Offices 304 100 362 395
Retail 61 407 87 329
Industrial 26 420 25 433
Gym 35 000 35 444
Parking 66 862 73 155
Other 290 953
494 079 584 709
COMMENTARY
1. Presentation of Abridged Consolidated 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 28 October 2010. 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 consolidated 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 affect the application of
accounting policies and the reported amounts of assets, liabilities, income
and expenses. 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, the Company`s auditors, have audited the consolidated annual financial
statements for the year ended 31 August 2010. These abridged financial
statements have been extracted from the audited consolidated annual financial
statements for the purposes of this announcement. Mazars` unqualified audit
reports on the comprehensive annual financial statements and the abridged
financial statements are available for inspection at the registered office of
the company.
2. General review of operations
Against the backdrop of an uncertain market, Ingenuity delivered results for
the year under review in line with expectations and managed to strengthen its
statement of financial position. Management`s prudent approach should enable
the company to take advantage of opportunities as they arise and not expose
the company to any undue risk or unforeseen market shocks. Our vision of
creating an enduring long term business and continually seeking to enhance
shareholder wealth is of paramount importance.
The aftermath of the global turmoil is still being felt and expectations of
economic recovery are that the ride will still be bumpy and that growth will
be slow. Returns from the property sector have come under pressure from high
vacancies and higher operating costs which cannot always be passed on to
tenants. Additional electricity hikes and upward pressure from other areas
will contain rental growth. Against these somewhat negative factors the South
African economy remains robust and our capital markets and banking system are
intact. Substantial capital infrastructural spend continues and there is
evidence that demand is on the increase. Capital markets are easing and
liquidity is more readily available, whilst interest rates remain on a
downward trend. These are all positive factors for the property market.
The year ended 31 August 2010 is the third financial year of operations since
Ingenuity listed in October 2007. Since the previous financial year end, the
most significant changes have been the reduction of debt by 36% and the growth
in value of the core investment portfolio from R 446 million to R 477 million.
This growth in asset value is after taking into account the sale of certain
properties reported on previously, for R 124.45 million. During the current
year, the property portfolio valuation increased by R25.3m (2009: R18.7m).
The core assets constitute a sound income base comprising solid, long term
leases. The effect of this is to provide strong and certain cash flow. Each of
the core assets has a major upside, with additional bulk available as market
conditions improve.
Development land still constitutes a fairly large component of the asset base.
Each of the sites is strategically situated and will create assets which will
increase value in the future. The development market has been hit hard over
the last few years, however management remain focused to unlock value.
Ingenuity`s directors have unique skills and a solid knowledge base, as well
as a good network to deliver opportunities.
The portfolio and business is sound and well poised for future growth.
3. Borrowings
The Company achieved an average borrowing cost of 9.3% for the current year.
Total borrowings at year end amounted to R 202.5 million (2009: R 314.2
million) of which R 200 million is fixed at an all inclusive rate of 10.65%
until the end of November 2013. The balance remains floating at rates linked
to prime, currently at 8%. The reduction in borrowings for the current year
came about as a result of the disposals of 3 investment properties for a total
gross sales value of R 124.45 million.
Total cash on hand at year end amounted to R 5.9 million (2009: R 21.2m).
Excess cash is applied to reduce borrowings.
The Company`s gearing ratio is 33% (2009: 44%) at year end. This is low,
considering the relatively high value of undeveloped land in the portfolio.
The low gearing puts the Company in a favourable position to take advantage of
new investments, and to fund developments.
4. 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 29 000 sqm of additional bulk
available for future development. During the year under review, 31 Martin
Hammerschlag was upgraded and a floor of surplus parking was converted to A-
grade office space. 33 Martin Hammerschlag is presently being redeveloped and
a further floor of 1 000 sqm is being added to the existing building. These
enhancements unlock bulk and lead to better average rentals.
We are also in process of negotiation with certain new tenants to lease a
further 8 000 sqm which will be added to the Reeds building. Should these
negotiations be successful, construction of the additional area will commence
early 2011.
These properties remain strategically situated and represent significant
development upside.
VIRGIN ACTIVE
The planning phase of the future development of this site is just about
complete and represents a significant opportunity. Applications made to the
City of Cape Town to convert certain leasehold rights to freehold are underway
and should be resolved early 2011. This will be the final phase necessary in
order to be in a position to commence building plan submission and marketing
of this development.
SANTAM HEAD OFFICE - TYGERVALLEY
During the year a further 50 parking bays were constructed on the site and
leased to Santam until December 2017. Formal site development applications
were also made and approved post year end for the construction of a further 12
900 sqm of offices and 581 parking bays. This creates strategic value for the
site and management are hoping to unlock this development in the forthcoming
year. The total estimated construction value is R260 million.
DEVELOPMENT PROPERTIES
1 DOCK ROAD
As reported last year formal permission has been granted to proceed with the
development of this vacant site. 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 R 700 million, to be funded equally by Redefine and Ingenuity.
The site is situated in the heart of the Cape Town CBD and CTICC zone.
Marketing remains a core focus, as development will only commence once a
suitable tenant is secured.
ERF 38746 TYGERVALLEY
Marketing of the development of this site is ongoing. During the current year
very little interest has been shown from prospective tenants. The site is well
situated but is unfortunately subject to the vagrancies of the current
depressed market.
ACQUISITIONS
During the year under review no new acquisitions were made. Subsequent to year
end, a retail centre known as the Loerie Centre in George, was acquired for a
consideration of R 38.75 million which was funded out of existing borrowing
facilities.
DISPOSALS
During the year under review the disposals of 22 Long Street, 33 Waterkant
Street and Midas Goodwood, reported on previously, were transferred. The gross
sale consideration received amounting to R124.45 million was used to reduce
debt.
CAPITAL COMMITMENTS AND CONTINGENCIES
Authorised and contracted for capital commitments of R14m (2009: nil) will be
financed from existing cash resources and finance facilities.
PORTFOLIO INFORMATION
VACANCIES
Vacancies amount to 4% (2009: 3.9%) of the total GLA of the portfolio. This
comprises a retail/showroom space of 983mSquared at 31 Martin Hammerschlag
(2.1%) and a vacant office of 912mSquared at 33 Martin Hammerschlag (1.9%).
The office vacancy exists due to the upgrade of the building, which is
currently underway. 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 for the financial year 2011 equates to 13% of the total GLA
and to 9% of revenue of the portfolio. Subsequent to year end 3% had already
been renewed and negotiations commenced on the remainder. Management are
confident of renewing all expiries.
COST TO INCOME RATIOS
Gross expenses are reflected as a percentage of gross income including
recoveries. The net cost to revenue ratio of 16% (2009: 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 (53%) (2009: 55%) and
retail (27%) (2009: 30%) sectors. These sectors are seen to be where superior
growth opportunities are expected.
GEOGRAPHICAL SPREAD OF THE PORTFOLIO
The concentration of the portfolio is in the Western Cape region (93%) (2009:
95%). This is in line with the Company`s strategy to remain focused within
this region.
5. Prospects
The Company`s management is focused on creating a leading Cape based
development and investment property company. Our core focus remains on
extracting maximum value from the existing portfolio and unlocking all non-
income producing assets. We are of the view that economic growth will be muted
but with prudent management, a strong financial base and additional available
capacity, we are confident that we 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 Chief Financial Officer
Cape Town
3 November 2010
Directors: RC Squire-Howe (Chairman)*, AJ Branch * (British), J Bielich,
LH Cohen*, DB Fabian*, AA Maresky (CEO), RS Schur*, A Varachhia*, M Wagenheim
*non-executive
Company secretary:
M Wagenheim
Registered office:
Suite 102, 1st Floor INTABA, 25 Protea Road, Claremont, Cape Town. 7708.
Postal address:
Suite 102, 1st Floor 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, Mazars House, Rialto Road, Grand Moorings Precinct, Century
City, Cape Town. 7441. (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)
Date: 04/11/2010 15:37:01 Produced by the JSE SENS Department.
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