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ING
ING
ING - Ingenuity Property Investments Limited - Unaudited Consolidated Interim
Results for the six months ended 28 February 2011
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 2011
Consolidated Statement of Financial Position
Unaudited Unaudited Audited
at at at
28 February 28 February 31 August
2011 2010 2010
R`000 R`000 R`000
ASSETS
Non-current assets 645 723 570 653 598 018
Investment properties 522 367 450 290 477 659
Straight-line lease accrual 19 213 13 460 16 420
Investment properties under
development 95 421 98 623 95 421
Equipment 28 61 37
Loans receivable 8 694 8 219 8 481
Current assets 16 873 20 030 14 126
Trade and other receivables 1 029 667 792
Loan receivable - 6 547 6 901
Tax receivable - - 494
Cash and cash equivalents 15 844 12 816 5 939
Total assets 662 596 590 683 612 144
EQUITY AND LIABILITIES
Shareholders` interest 373 240 356 146 372 489
Share capital 6 585 6 585 6 585
Share premium 281 824 281 824 281 824
Non-distributable reserve 37 924 12 364 35 028
Treasury shares (34 928) (27 255) (27 254)
Share option reserve 863 863 863
Retained earnings 73 982 74 686 68 407
Total equity attributable to equity
holders of the parent 366 250 349 067 365 453
Non-controlling interest 6 990 7 079 7 036
Non-current liabilities 285 425 223 481 236 367
Financial liabilities 253 807 203 448 202 581
Financial instruments 11 877 9 314 15 899
Deferred tax 19 741 10 719 17 887
Current liabilities 3 931 11 056 3 288
Trade and other payables 3 845 4 073 3 265
Prepaid rent received 42 2 776 23
Taxation 44 4 207 -
Total equity and liabilities 662 596 590 683 612 144
Net asset value per share (based on
shares in issue at end of period/year
net of treasury shares) (cents) 63 59 61
Consolidated Statement of Comprehensive Income
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
28 February 28 February 31 August
2011 2010 2010
R`000 R`000 R`000
Revenue 28 713 30 409 56 285
- Contractual 25 920 27 689 50 605
- Straight lining 2 793 2 720 5 680
Selling costs on disposals of
investment properties - (1 713) (1 713)
Loss on sale of property - (626) (626)
Net operating expenses (9 127) (13 758) (21 026)
Profit before fair value
adjustments 19 586 14 312 32 920
Fair value adjustments to
investment properties - - 25 274
19 586 14 312 58 194
Interest received 818 1 003 2 147
Interest paid (12 499) (9 610) (24 032)
Profit before taxation 7 905 5 705 36 309
Taxation (2 209) (2 403) (11 992)
Profit for the period/year 5 696 3 302 24 317
Attributable to:
Equity holders of the parent 5 575 3 207 24 116
Non-controlling interest 121 95 201
5 696 3 302 24 317
Profit for the period/year 5 696 3 302 24 317
Other comprehensive income
Cash flow hedges 4 022 - (7 357)
Income tax relating to components
of other comprehensive income (1 126) - 2 060
Other comprehensive income for
the period/year, net of tax 2 896 - (5 297)
Total comprehensive income for
the period/year 8 592 3 302 19 020
Total comprehensive income
attributable to:
Equity holders of the parent 8 471 3 207 18 819
Non-controlling interest 121 95 201
8 592 3 302 19 020
Total shares in issue 658 550 000 658 550 000 658 550 000
Number of shares in issue,
net of treasury shares 589 616 773 606 385 618 606 385 618
Weighted average number
of shares 596 602 566 627 279 533 615 705 614
Basic earnings per
share cents 1 0.5 4
Diluted basic earnings
per share cents 1 0.5 4
Headline and diluted
headline earnings per
share cents 1 0.6 1
Workings
Headline earnings are calculated
as follows:
Earnings attributable to equity
holders 5 575 3 207 24 116
Fair value adjustment of
investment properties - - (25 274)
Deferred tax on fair value
adjustment - - 6 936
Loss on sale of investment
property - 626 626
Tax on realised loss - (88) (88)
Adjusted earnings for HEPS 5 575 3 745 6 316
Statement of Cash Flows
Unaudited
6 months
ended
28 February
2011
R`000
Note
Cash flows from operating activities
Cash generated from operations 1 17 527
Interest received 2 839
Interest paid 3 (13 138)
Taxation paid 4 (943)
Net cash inflow from operating activities 4 285
Cash flows from investing activities
Additions to equipment -
Acquisitions/additions to investment properties (45 073)
Acquisitions/additions to investment properties
under development -
Proceeds on disposal of equipment -
Net proceeds from disposals of investment properties -
Decrease/(increase) in financial assets 6 500
Net cash inflow/(outflow) from investing activities (38 573)
Cash flows from financing activities
Treasury shares purchased (7 674)
Interest capitalised to investment properties -
Financial liabilities raised/(repaid) 51 867
Net cash inflow/(outflow) from financing activities 44 193
Net increase/(decrease) in cash and cash equivalents 9 905
Cash and cash equivalents at the beginning of the
period/year 5 939
Cash and cash equivalents at the end of the
period/year 15 844
Unaudited Audited
6 months year
ended ended
28 February 31 August
2010 2010
R`000 R`000
Cash flows from operating activities
Cash generated from operations 15 639 27 599
Interest received 551 931
Interest paid (10 616) (25 898)
Taxation paid (311) (5 374)
Net cash inflow from operating activities 5 263 (2 742)
Cash flows from investing activities
Additions to equipment (19) (21)
Acquisitions/additions to investment
properties (4 062) (4 748)
Acquisitions/additions to investment
properties under development (100) (280)
Proceeds on disposal of equipment 9 10
Net proceeds from disposals of investment
properties 124 450 124 450
Decrease/(increase) in financial assets (6 500) (6 500)
Net cash inflow/(outflow) from investing
activities 113 778 112 911
Cash flows from financing activities
Treasury shares purchased (14 249) (14 248)
Interest capitalised to investment
properties (3 382) -
Financial liabilities raised/(repaid) (109 820) (111 207)
Net cash (outflow)/inflow from financing
activities (127 451) (125 455)
Net (decrease)/increase in cash and
cash equivalents (8 409) (15 286)
Cash and cash equivalents at the beginning
of the period/year 21 225 21 225
Cash and cash equivalents at the end of
the period/year 12 816 5 939
Notes to the Statement of Cash Flows
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
28 February 28 February 31 August
2011 2010 2010
R`000 R`000 R`000
1 Cash generated from operations
Profit before taxation 7 905 5 705 36 309
Adjusted for:
Interest received (818) (1 003) (2 147)
Interest paid 12 499 9 610 24 032
Depreciation 9 23 48
Bad debts 23 - -
Amortisation of deferred lease
incentive 365 2 490 2 465
Amortisation of letting commission 84 659 739
Straight lining of operating
leases (income) (2 793) (2 720) (5 680)
Straight lining of operating
leases (expense) (26) - -
Increase in fair value of
investment properties - - (25 274)
Profit on sale of equipment - - (6)
Loss on sale of investment property - 626 626
17 248 15 390 31 112
(Increase)/decrease in trade and
other receivables (320) (297) (502)
Increase/(decrease) in trade and
other payables 599 546 (3 011)
17 527 15 639 27 599
2 Interest received
Amount outstanding at the beginning
of the period/year 2 927 1 711 1 711
Interest income per income statement 818 1 003 2 147
Amount outstanding at the end of the
period/year (2 906) (2 163) (2 927)
839 551 931
3 Interest paid
Amount outstanding at the beginning
of the period/year 639 2 505 2 505
Interest income per income statement 12 499 9 610 24 032
Amount outstanding at the end of the
period/year - (1 499) (639)
13 138 10 616 25 898
4 Taxation paid
Amount outstanding at the beginning
of the period/year (494) 443 443
Income statement charge 1 481 4 075 4 437
Amount outstanding at the end of the
period/year (44) (4 207) 494
943 311 5 374
Consolidated Statement of Changes in Equity
Share
Share Share option
capital premium reserve
R`000 R`000 R`000
Balance at 1 September 2009 6 585 271 204 863
Changes in equity - 10 620 -
(Decrease) in non-controlling 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
Changes in equity - - -
(Decrease) in non-controlling interest - - -
Total comprehensive profit for the
period - - -
Transfer to non-distributable reserve - - -
Balance at 31 August 2010 6 585 281 824 863
Changes in equity - - -
(Decrease) in non-controlling interest - - -
Total comprehensive profit for the
period - - -
Purchase of 16 768 845 treasury
shares - - -
Balance at 28 February 2011 6 585 281 824 863
Non-
Distributable Treasury Retained
Reserve shares earnings
R`000 R`000 R`000
Balance at 1 September 2009 20 788 (13 006) 62 617
Changes in equity (8 424) (14 248) 12 070
(Decrease) in non-controlling
interest - - -
Total comprehensive profit for
the period - - 3 207
Transfer to financial instrument (772) - -
Purchase of 25 018 641 treasury
shares - (14 248) 1 380
Realisation of non-distributable
reserves (7 652) - 7 483
Balance at 28 February 2010 12 364 (27 254) 74 687
Changes in equity 22 664 - (6 280)
(Decrease) in non-controlling
interest - - -
Total comprehensive profit for
the period (5 297) - 20 909
Transfer to non-distributable
reserve 27 961 - (27 189)
Balance at 31 August 2010 35 028 (27 254) 68 407
Changes in equity 2 896 (7 674) 5 575
(Decrease) in non-controlling
interest - - -
Total comprehensive profit for
the period 2 896 - 5 575
Purchase of 16 768 845 treasury
shares - (7 674) -
Balance at 28 February 2011 37 924 (34 928) 73 982
Non-controlling
interest Total
R`000 R`000
Balance at 1 September 2009 7 115 356 166
Changes in equity (36) (18)
(Decrease) in non-controlling interest (131) (131)
Total comprehensive profit for the period 95 3 302
Transfer to financial instrument - (772)
Purchase of 25 018 641 treasury shares - (2 248)
Realisation of non-distributable reserves - (169)
Balance at 28 February 2010 7 079 356 148
Changes in equity (43) 16 341
(Decrease) in non-controlling interest (149) (149)
Total comprehensive profit for the period 106 15 718
Transfer to non-distributable reserve - 772
Balance at 31 August 2010 7 036 372 489
Changes in equity (46) 751
(Decrease) in non-controlling interest (167) (167)
Total comprehensive profit for the period 121 8 592
Purchase of 16 768 845 treasury shares - (7 674)
Balance at 28 February 2011 6 990 373 240
Segmental Report
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
28 February 28 February 31 August
2011 2010 2010
R`000 R`000 R`000
Offices
Segmental revenue 14 077 22 945 31 226
Segmental results 11 322 15 225 38 811
Property assets 317 205 259 038 304 100
Retail
Segmental revenue 5 738 1 842 7 324
Segmental results 4 068 (477) 7 194
Property assets 102 280 55 499 61 407
Industrial
Segmental revenue 1 716 1 618 3 029
Segmental results 1 285 1 019 3 257
Property assets 25 190 26 167 26 420
Gym
Segmental revenue 1 465 1 309 2 759
Segmental results 1 327 1 172 2 043
Property assets 35 202 35 367 35 000
Parking
Segmental revenue 2 861 2 616 6 124
Segmental results 2 377 653 7 172
Property assets 61 379 73 738 66 862
Other
Segmental revenue 63 79 143
Segmental results (83) 51 -
Property assets 323 481 290
Reconciliation to profit before
interest and taxation for the period
in the income statement
Segmental revenue 25 920 30 409 50 605
Allocated operating expenses (5 624) (10 427) (15 063)
Unallocated operating expenses (3 503) (3 331) (5 963)
Loss/costs on disposal of
investment properties - (2 339) (2 339)
Fair value adjustment - - 25 274
Profit before interest and
taxation 19 586 14 312 58 194
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
Despite challenging economic conditions, Ingenuity`s property portfolio
continued to perform well during the period under review.
The property portfolio comprises 85% of income-producing assets and is well
managed with a strong tenant base delivering good quality sustainable
contractual rental income. The remaining 15% comprises land for development. The
asset base of the investment property portfolio has increased by 17% over the
comparative period. The current vacancy percentage of 4.2% is expected to
decrease as the renovations to some of the properties are completed and the
buildings become tenanted.
PROPERTY ACQUISITIONS AND DEVELOPMENTS
During this period, the company acquired Loerie Centre, a retail shopping centre
in George at a cost of R39.2 million, which was financed out of borrowings and
its own cash resources. The property has a gross lettable area ("GLA") of 4 662
m2 with an initial yield of 10.75%.
The marketing of the two development opportunities, namely the Tyger Valley
scheme (Erf 38746 Tyger Valley) and "The Modern" (Erf 173153 Cape Town), is
ongoing in weak market conditions. Development of these sites will only commence
once suitable tenants have been secured. Both properties are strategically
situated and will release excellent value in the future.
Management continues to extract value from the existing portfolio. To this end
formal site development plan approval has been obtained for the development of a
further 12 900 m2 on the Santam site. In addition to this, the Foreshore Complex
of properties comprising the Reeds Building and the 31 and 33 Martin
Hammerschlag Way properties, provide significant further development rights.
During the period under review a comprehensive upgrade to 33 Martin Hammerschlag
commenced. A further floor to the building has also been added, thus utilising
additional bulk. The upgrade of this property will be completed by June 2011 and
should lead to higher rentals.
OPERATIONS
Net property income has increased by 17% to R20.3 million (2010:
R17.3 million) even though gross contractual revenue decreased by 6% due to the
disposals of three properties during the last financial year. Property expenses
and non-property overhead expenses were within budget and are well controlled.
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 79% (2010: 98%) of
the borrowings are fixed, with the balance floating at an average rate of 8.1%.
The basic earnings per share is 1 cent (2010: 0.5 cent) and the headline
earnings per share is 1 cent (2010: 0.6 cent).
At the reporting date, the total value of investment properties amounted to
R541.6 million (2010: R463.7 million) whilst properties under development
amounted to R95.4 million (2010: R98.6 million).
Borrowings increased to R253.8 million (2010: R203.4 million) due to the funding
for the Loerie Centre acquisition and other property acquisitions under
negotiation and to fund the current refurbishments and building additions.
The loan to value ratio is 37% (2010: 35%) which is well within accepted
norms.
The net asset value per share (based on shares in issue net of total treasury
shares) is 63 cents (2010: 59 cents).
Total cash on hand at the end of this interim period amounted to R15.8 million
(2010: R12.8 million).
During the current period, the company purchased 16 768 845 treasury shares at
an average cost per share of 46 cents. The company held 51 933 227 treasury
shares, at a total cost of R26.4 million (2010: 35 164 382 treasury shares at a
cost of R18.8 million), in a subsidiary company as at the reporting date. Share
buy-backs will continue when management believes 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
Management`s main focus remains the conversion of its development land into
income-earning assets, as well as maximising any value-add opportunities on
existing income-earning properties. The company is well capitalised with a solid
base, and is ideally positioned to grow the portfolio as suitable acquisition
opportunities arise.
DIRECTORATE
There have been no changes to the directorate during the period under review.
SUBSEQUENT EVENTS
The company has signed agreements for the acquisition of a further two
commercial properties, namely a property known as 142 Edward Street, Tyger
Valley for R31.9 million and a property known as the Food Lover`s Market in
Claremont for R13.4 million - both transfers are expected to be registered in
May 2011. Both these acquisitions have been funded by borrowings and cash
resources.
There are no other material subsequent events which have occurred between the
end of this interim period being reported on and the date of this report.
On behalf of the Board
AA Maresky
Chief Executive Officer
R Squire-Howe
Chairman
M Wagenheim
Financial Director and Company Secretary
15 April 2011
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: ZAE000127411
Directors:
J Bielich, AJ Branch*+ (British), LH Cohen*, DB Fabian*+, AA Maresky (CEO),
RS Schur*+, R Squire-Howe*+ (Chairman), A Varachhia*+, M Wagenheim (Financial)
* non-executive + independent
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, a division of Nedbank Ltd
Auditors: Mazars
Bankers: Absa Bank Ltd and Nedbank Ltd
Attorneys: Edward Nathan Sonnenbergs Inc.
Date: 15/04/2011 15:05:03 Produced by the JSE SENS Department.
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