| Mon 7 Nov 2011, 13:21 | | ING - Ingenuity Property Investments Limited - Abridged audited consolidated |
|
ING
ING
ING - Ingenuity Property Investments Limited - Abridged audited consolidated
results for the year ended 31 August 2011
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 2011
2011 2010
KEY FINANCIAL INDICATORS R`000 R`000
Total contractual rental income 53 882 50 605
Investment property portfolio value 593 728 477 659
Core investment property portfolio at fair value 615 324 494 079
Investment property held for sale 3 000 -
Development property 158 701 95 141
Borrowings 351 384 202 581
Loan to Value ratio 45% 33%
Market capitalisation at year end 342 446 263 420
Headline earnings per share 1.8 cents 1.0 cents
Basic earnings per share 5.0 cents 4.4 cents
Net asset value per share 68 cents 62 cents
Abridged Consolidated Statement of Financial Position
at 31 August 2011
Group
2011 2010
Assets Restated*
R`000 R`000
Non-current assets 782 948 598 018
Investment properties 593 728 477 659
Straight-line lease accrual 21 596 16 420
Investment properties under 158 701 95 421
development
Equipment 20 37
Loans receivable 8 903 8 481
Current assets 7 182 14 126
Trade and other receivables 806 792
Loan receivable - 6 901
Investment property held for sale 3 000 -
Tax receivable - 494
Cash and cash equivalents 3 376 5 939
Total assets 790 130 612 144
Equity and liabilities
Shareholders interest 402 922 378 371
Share capital 6 585 6 585
Share premium 281 824 281 824
Non-distributable reserve 65 773 40 829
Treasury shares (34 928) (27 254)
Share option reserve 863 863
Retained earnings 75 784 68 407
Total equity attributable to
equity holders of the parent 395 901 371 254
Minority interest 7 021 7 117
Non-current liabilities 381 081 230 485
Financial liabilities 351 384 202 581
Financial instruments 15 349 15 899
Deferred tax 14 348 12 005
Current liabilities 6 127 3 288
Trade and other payables 3 131 3 265
Prepaid Rent received 2 943 23
Financial liability - -
Tax payable 53 -
Total equity and liabilities 790 130 612 144
*The Company has early adopted the Amendments to IAS 12 which requires the prior
year amounts to be restated. The effect of this early adoption is that deferred
tax on investment properties is no longer calculated at a blended rate but is
now treated with the rebuttable presumption that the carrying value of the
investment property will be recovered entirely through sale.
Abridged Consolidated Income statement
for the year ended 31 August 2011
Group
Audited Audited
2011 2010
Restated*
R`000 R`000
Revenue 59 058 56 285
- Contractual 53 882 50 605
- Straight lining 5 176 5 680
Selling costs on disposals of investment properties - (1 713)
Loss on sale of investment property - (626)
Net operating expenses (18 211) (21 026)
Profit before fair value adjustments 40 847 32 920
Fair value adjustments to investment properties 21 615 25 274
Profit before interest and taxation 62 462 58 194
Interest received 1 775 2 147
Interest paid (27 067) (24 032)
Profit before taxation 37 170 36 309
Taxation (7 388) (8 754)
Profit for the year 29 782 27 555
Attributable to:
Equity holders of the parent 29 533 27 316
Minority interest 249 239
29 782 27 555
Cents Cents
Basic and Diluted earnings per share 5.0 4.4
Headline and Diluted headline earnings per share 1.8 1.0
The calculation of earnings per share is based on a weighted average number of
593 080 961 (2010: 615 705 614) shares in issue during the year.
Headline earnings are calculated as follows:
Earnings attributable to equity holders 29 533 27 316
Fair value adjustment of investment properties (21 615) (25 274)
Deferred tax on fair value adjustment 3 027 3 698
Loss on sale of investment property - 626
Tax on realised loss - (88)
10 945 6 278
Abridged Consolidated Statement of Comprehensive Income
for the year ended 31 August 2011
Group
2011 2010
R`000 Restated*
R`000
Profit for the year 29 782 27 555
Other comprehensive income:
Cash flow hedges 550 (7 357)
Income tax relating to components of other 2 238 2 060
comprehensive income
Other comprehensive income for the year, net of tax 2 788 (5 297)
Total comprehensive income for the year 32 570 22 258
Total comprehensive income attributable to:
Equity holders of the parent 32 321 22 019
Minority interest 249 239
32 570 22 258
Abridged Consolidated Statement of Changes in Equity
Share Non-
Share Share option distributable
capital premium reserve reserve
for the year ended
31 August 2011 R`000 R`000 R`000 R`000
Group
Balance at 1 September 2009 6 585 271 204 863 20 788
Restatement of prior period
balances* - - - 2 601
RESTATED BALANCE AT
1 SEPTEMBER 2009 6 585 271 204 863 23 389
Changes in equity - 10 620 - 17 440
(Decrease) in minority interest - - - -
Total comprehensive income
for the year - - - (5 297)
Purchase of treasury shares - 10 620 - -
Transfer to non-distributable
reserve - - - 30 389
Realisation of non-distributable
reserves - - - (7 652)
Balance at 31 August 2010 6 585 281 824 863 40 829
Changes in equity - - - 24 944
(Decrease) in minority interest - - - -
Total comprehensive income
for the year - - - 2 788
Purchase of treasury shares - - - -
Transfer to non-distributable
reserves - - - 22 156
Balance at 31 August 2011
6 585 281 824 863 65 773
Comprising: 65 773
Fair value reserve 76 867
Net hedging reserve (11 094)
Treasury Retained Minority Total
shares earnings interest equity
for the year ended
31 August 2011 R`000 R`000 R`000 R`000
Group
Balance at 1 September 2009 (13 006) 62 617 7 115 356 166
Restatement of prior
period balances* - - 42 2 643
RESTATED BALANCE AT (13 006) 62 617 7 157 358 809
1 SEPTEMBER 2009
Changes in equity (14 248) 5 790 (40) 19 562
(Decrease) in minority interest - - (279) (279)
Total comprehensive income
for the year - 27 316 239 22 258
Purchase of treasury shares (14 248) 1 380 - (2 248)
Transfer to non-distributable
reserve - (30 389) - -
Realisation of non-distributable
reserves - 7 483 - (169)
Balance at 31 August 2010 (27 254) 68 407 7 117 378 371
Changes in equity (7 674) 7 377 (96) 24 551
(Decrease) in minority interest - - (345) (345)
Total comprehensive income
for the year - 29 533 249 32 570
Purchase of treasury shares (7 674) - - (7 674)
Transfer to non-distributable
reserves - (22 156) - -
Balance at 31 August 2011 (34 928) 75 784 7 021 402 922
Abridged Consolidated Statement of Cash Flows
for the year ended 31 August 2011
Group
2011 2010
R`000 R`000
Cash flows from operating activities
Cash generated from operations 39 062 27 599
Interest received 1 409 931
Interest paid (26 838) (25 898)
Taxation paid (2 260) (5 374)
Net cash inflow (outflow) from operating activities 11 373 (2 742)
Cash flows from investing activities
Additions to equipment - (21)
Acquisitions/additions to investment properties (98 635) (4 748)
Acquisitions/additions to investment properties under (62 702) (280)
development
Proceeds on disposal of equipment - 10
Proceeds on disposal of investment properties - 124 450
Decrease (increase) in financial assets 6 500 (6 500)
Net cash (outflow) inflow from investing activities (154 837) 112 911
Cash flows from financing activities
Treasury shares purchased (7 674) (14 248)
Financial liabilities raised (repaid) 148 575 (111 207)
Net cash inflow (outflow) from financing activities 140 901 (125 455)
Net (decrease) in cash and cash equivalents (2 563) (15 286)
Cash and cash equivalents at beginning of year 5 939 21 225
Cash and cash equivalents at end of year 3 376 5 939
Segmental information at 31 August 2011
2011 2010
R`000 R`000
Segmental Segmental
operating profit operating profit
Revenue before tax Revenue before tax
Offices 30 849 39 357 31 226 38 811
Retail 10 718 7 273 7 324 7 194
Industrial 3 704 4 788 3 029 3 257
Gym 2 960 4 218 2 759 2 043
Parking 5 629 8 752 6 124 7 172
Other 22 (165) 143 -
53 882 64 223 50 605 58 477
Reconciliation to profit for the year in the abridged consolidated
income statement:
2011 2010
R`000 R`000
Total segmental operating profit before tax 64 223 58 477
Unsegmental operating expenses (6 937) (5 963)
Interest received 1 775 2 147
Interest paid (27 067) (24 032)
31 994 30 629
Straight lining 5 176 5 680
Profit before tax 37 170 36 309
Segmental information at 31 August 2011
Property Assets 2011 2010
R`000 R`000
Offices 379 857 304 100
Retail 101 283 61 407
Industrial 34 424 26 420
Gym 37 000 35 000
Parking 65 524 66 862
Other 236 290
618 324 494 079
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 3
November 2011. The financial statements have been prepared in accordance with
the framework concepts and the measurement and recognition requirements of IFRS
and the AC 500 standards as issued by the Accounting Practices Board, containing
the information required by IAS 34: Interim Financial Reporting.
The same accounting policies and methods of computation have been followed in
the preparation of these abridged audited consolidated results as compared with
the most recent annual financial statements. These abridged audited consolidated
results are presented in South African Rands, which is the functional currency
of the Company.
Mazars, the Company`s auditors, have audited the consolidated annual financial
statements for the year ended 31 August 2011. 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 audited consolidated annual financial statements and the abridged
audited consolidated results are available for inspection at the registered
office of the company.
During the current year, the property portfolio valuation increased by R21.6
million (2010: R25.3 million).
2. General review of operations
It is during times of widespread fear and uncertainty that opportunity is
created. With this in mind and against the backdrop of world financial turmoil
and uncertainty we at Ingenuity have maintained a clear direction and have
steered the Company in such a manner that it is poised for growth whilst
continually being managed with prudent financial discipline. Our goal is to
create an enduring long-term business, continually seeking to maximise
shareholder wealth.
The year ended 31 August 2011 delivered solid performance and significant
inroads have been made to establish a sound core investment portfolio and
extract opportunity from existing assets. During the year under review the total
asset base including development assets increased in value by R184.8 million or
31%, whilst borrowings were maintained at conservative levels. Positive inroads
were made to commence two major developments totalling R368.5 million that will
be completed during the 1st quarter of 2013. These developments will contribute
positively to the earnings base of the Company in the forthcoming years
ultimately affording us the opportunity to pay dividends to shareholders. Growth
in net asset value per share has been a focus to enhance shareholder wealth.
Our development land stock is still a major component of the asset base and
management remains focussed to unlock and realise these non-income producing
assets. They are situated at prime locations and we are confident that they will
add value to the company.
Our geographic concentration in the Western Cape places us in a unique position
to extract maximum value in an area where we are well networked and positioned
to take advantage of opportunities when they arise.
3. BORROWINGS
The Company achieved an average borrowing cost of 9.8% (2010: 9.3%) for the
current year. Total borrowings at year-end amounted to R351.4 million (2010:
R202.5 million) of which R200 million is fixed at an all-inclusive rate of
10.65% until November 2013. The balance remains floating at rates linked to
prime at an average rate of 7.9%. The increase in borrowings for the current
year came about as a result of the acquisition of three investment properties
for a total gross purchase value of R84 million and the acquisition of an
investment property under development for a net purchase value of R60 million.
Total cash on hand at year end amounted to R 3.4 million (2010: R5.9 million).
Excess cash is applied to reduce borrowings or to grow the asset base.
The Company`s gearing ratio is 45% (2010: 33%) at year end. This is considered
acceptable considering the relatively high value of undeveloped land in the
portfolio.
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 made available substantial additional bulk
for future development. During the year under review, the redevelopment of 33
Martin Hammerschlag was completed and an additional 1000 m2 penthouse floor was
added to the building. The total capital expenditure of this project was R12.9
million. Attractive new lettings have been concluded thus creating further value
for the block.
During the year under review we also acquired another property known as Atlantic
Centre for a consideration of R60 million. This property, together with the
grouping we already own, provides control of this City block. This grouping of
properties remains strategically situated and represents significant development
upside.
VIRGIN ACTIVE
Formal agreements have been concluded with the City of Cape Town to acquire the
leasehold rights of one of the two erven that makes up this site. The
acquisition is subject to the approval of additional development rights to be
granted that must be approved prior to transfer. The application for the
development rights and a formal site development plan have been finalised and
form part of a public participation process. This process is likely to take in
excess of a year. Once approved this will add significant value to the site, as
the combined erven will have over 22 000sqm of available bulk for development.
In the meantime the building currently situated on the land remains well let and
provides a solid return.
SANTAM HEAD OFFICE - TYGERVALLEY
Formal development rights for the construction of another building on the site
were approved during the year. The building will comprise 10 250 m2 of premium
grade office space and will also add a further 591 parking bays to the site. The
total capital investment to be made is R215 million that is to be funded from
borrowings granted by Nedbank Ltd.
64% of the building has already been pre-let to Santam Ltd and Glacier Financial
Holdings (Pty) Ltd (a subsidiary of Sanlam) for an initial 7-year period
commencing on completion, which is expected to be March 2013.
Construction for this project has been awarded to WBHO Construction and
commenced November 2011.
On completion the total Santam scheme will comprise 27 500 m2 of GLA and 1 060
parking bays let to prime blue chip tenants for long term.
DEVELOPMENT PROPERTIES
1 DOCK ROAD
Marketing of this prime city site remains a core focus. Development will only
commence once suitable tenants have been secured and acceptable pre-let
percentages obtained. All development approvals have been obtained to allow us
to proceed when necessary. The site is situated adjacent to the Portside
Development of Old Mutual and FNB where development has commenced for the
erection of Cape Town`s tallest building. This development is likely to provide
a catalyst for our scheme.
ERF 38746 TYGER VALLEY
Marketing of the development of this site is on-going, however demand in the
area remains subdued. We are investigating alternative development uses for the
site and will also consider an outright sale of the land should this present
itself.
ACQUISITIONS
During the year under review acquisitions totalling R144 million (excluding any
capitalised costs at year end) were made. The properties acquired were Atlantic
Centre (R60 million), Loerie Centre (R39 million), Food Lovers Market Claremont
(R13 million) and 142 Edward Street (R32 million). All acquisitions were funded
out of existing borrowing facilities and cash on hand.
Details of the acquisitions are:
ATLANTIC CENTRE
This property, situated on Erf 34 Roggebaaai, is one of the last properties
making up the entire city block of the Reeds, 31 and 33 Martin Hammerschlag
node. The total site area of the combined buildings is 10 118 m2 with
significant additional available bulk for future development.
Atlantic Centre is to be completely redeveloped into a modern premium grade
building. As part of the redevelopment a further four floors of 1 000 m2 each
will be added to the existing structure. A key reason for this redevelopment is
the fact that Atlantic Centre will serve as the catalyst for the further
development of the Reeds parking garage building, which will take up some of the
unrealised bulk on the combined sites. The total capital expenditure of this 1st
phase of the project is estimated to be R154 million. Construction will commence
during November 2011 and is expected to take 12 months to complete. Finance for
this development has been secured from Nedbank Ltd.
Atlantic Centre enjoys prime visibility and should let well. Our targeted
rentals are very competitive and already keen interest has been displayed.
LOERIE CENTRE
This local convenience centre situated in the heart of George comprises 4 624 m2
GLA. Woolworths anchor it and other national retailers occupy most of the space.
The property was acquired at an initial yield of 11.9%. Minor capital was spent
to upgrade the building and the one vacancy that existed at the time has been
let subsequent to year-end. The property shows good rental growth and most of
the tenants have turnover clauses to their leases.
142 EDWARD STREET
This four storey A grade office block is situated in Edward Street, Tyger Valley
diagonally opposite Tyger Valley Shopping Centre. The property comprises 2 609
m2 and 56 parking bays. As part of the transaction new leases were negotiated
with Werksmans Attorneys. The other major tenant that occupies the building is
Bigen Africa, one of SA`s leading consulting engineering firms. The acquisition
yield was 11% with solid growth going forward.
FOOD LOVER`S MARKET BUILDING
The property is situated in the heart of Claremont directly adjacent to
Cavendish Square, one of Cape Town`s Super Regional Centres. This small double-
storey property comprises 740 m2 GLA and is let on a long term basis to Fruit
and Veg City Holdings (Pty) Ltd. Additional bulk rights exist to add a further 5
floors to the building. We are investigating the way forward to unlock this
value proposition.
DISPOSALS
During the year under review an agreement was signed to sell the Midas Port
Elizabeth property, comprising retail and offices, for a net consideration of R3
million. The property was vacant and was considered to be non-core and out of
our area of geographic focus. Transfer took place post year-end in October 2011.
PORTFOLIO INFORMATION
VACANCIES
Vacancies amount to 10% (2010: 4%) of the total GLA of the portfolio split
between retail (8%) and offices (2%). Subsequent to the financial year end, the
Midas Port Elizabeth property which comprises 6% in retail of the total, was
sold, reducing the vacancies to 4%. The office vacancies have subsequently been
let from 1 December 2011. No significant vacancies are anticipated in the
forthcoming financial year and management remain confident of letting the
vacancies.
LEASE EXPIRY PROFILE
The lease expiries for the financial year 2012 equates to 12% of the total GLA,
and to 7% of revenue of the portfolio. Subsequent to year end 1 205m2 (2%) of
GLA which equates to R0.8m (1.5%) of revenue, has already been re-let or
renewed, and negotiations have 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 9% (2010: 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 (51%) (2010: 53%) and retail
(32%) (2010: 27%) sectors.
GEOGRAPHICAL SPREAD OF THE PORTFOLIO
The concentration of the portfolio is in the Western Cape region. This is in
line with the company`s strategy to remain focused within this region.
Subsequent to year end, the Eastern Cape property has been sold, thereby
focusing our business in the Western Cape completely.
5. PROSPECTS
In line with management`s strategy to create a leading Cape based development
and investment property company we remain focussed on extracting maximum value
from the existing portfolio and unlocking all non-income producing developments
assets. The development of the new building on the Santam site and the
redevelopment of Atlantic Centre will add significant value to the asset base in
the forthcoming years whilst continued efforts to maximise value to the existing
investment base will further enhance shareholder wealth. There are signs that
economic activity is increasing and Ingenuity remains well positioned to
continue to grow its asset base.
6. PREPARER OF ABRIDGED CONSOLIDATED RESULTS
In accordance with the disclosure requirements of the Companies Act 71 of 2008,
the abridged consolidated results have been prepared by Mr M Wagenheim,
B.Com(Hons),CTA,CA(SA).
For and on behalf of the Board
ARNOLD AARON MARESKY MARK WAGENHEIM
Chief Executive Officer Chief Financial Officer
Cape Town
Date published: 7 November 2011
Directors: RC Squire-Howe (Chairman)*, AJ Branch * (British), J Bielich,
LH Cohen*, DB Fabian*, AA Maresky (CEO), RS Schur*, 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: 07/11/2011 13:21:00 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
