| Mon 7 May 2012, 15:10 | | ING - Ingenuity Property Investments Limited - Unaudited Consolidated Interim |
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ING
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ING - Ingenuity Property Investments Limited - Unaudited Consolidated Interim
Results for the six months ended 29 February 2012
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 29 February 2012
Consolidated Statements of Financial Position
Unaudited
Unaudited at Audited
at 28 February at
29 February 2011 31 August
2012 Restated* 2011
R`000 R`000 R`000
ASSETS
Non-current assets 859 109 645 723 782 948
Investment properties 645 059 522 367 593 728
Straight-line lease accrual 24 627 19 213 21 596
Investment properties under development 180 226 95 421 158 701
Equipment 81 28 20
Loans receivable 9 116 8 694 8903
Current assets 49 381 16 873 7182
Trade and other receivables 1 228 1 029 806
Investment property held for sale 41 500 - 3 000
Tax receivable 998 - -
Cash and cash equivalents 5 655 15 844 3 376
Total assets 908 490 662 596 790 130
EQUITY AND LIABILITIES
Shareholders` interest 447 518 379 122 402 922
Ordinary share capital and share premium 328 409 288 409 288 409
Non-distributable reserve 64 507 43 725 65 773
Treasury shares (34 928) (34 928) (34 928)
Share option reserve 863 863 863
Retained earnings 81 697 73 982 75 784
Total equity attributable to equity
holders of the parent 440 548 372 051 395 901
Minority interest 6 970 7 071 7 021
Non-current liabilities 451 582 279 543 381 081
Financial liabilities 419 385 253 807 351 384
Financial instruments 11 531 11 877 15 349
Deferred tax 20 666 13 859 14 348
Current liabilities 9 390 3 931 6 127
Trade and other payables 6 600 3 845 3 131
Prepaid rent received 2 790 42 2 943
Tax payable - 44 53
Total equity and liabilities 908 490 662 596 790 130
Net asset value per share 67 63 68
(based on shares in issue at end of period/year net of treasury shares)
* Restated due to early adoption of IAS 12 amendment
Consolidated Statements of Comprehensive Income
Unaudited Unaudited
6 months 6 months Audited
ended ended year ended
29 February 28 February 31 August
2012 2011 2011
R`000 R`000 R`000
Revenue 34 925 28 713 59 058
Contractual 31 322 25 920 53 882
Straight lining 3 603 2 793 5 176
Net operating expenses (11 199) (9 127) (18 211)
Profit before fair value adjustments 23 726 19 586 40 847
Fair value adjustments to
investment properties 338 - 21 615
24 064 19 586 62 462
Interest received 545 818 1 775
Interest paid (16 497) (12 499) (27 067)
Profit before taxation 8 112 7 905 37 170
Taxation (6 084) (2 209) (7 388)
Profit for the period/year 2 028 5 696 29 782
Attributable to:
Equity holders of the parent 1 898 5 575 29 533
Minority interest 130 121 249
2 028 5 696 29 782
Profit for the period/year 2 028 5 696 29 782
Other comprehensive income:
Cash flow hedges 3 818 4 022 550
Income tax relating to components
of other
Comprehensive income (1 069) (1 126) 2 238
Other comprehensive income for the
period/year, net of tax 2 749 2 896 2 788
Total comprehensive income for the
period/year 4 777 8 592 32 570
Total comprehensive income
attributable to:
Equity holders of the parent 4 647 8 471 32 321
Minority interest 130 121 249
4 777 8 592 32 570
Total shares in issue 738 550 000 658 550 000 658 550 000
Number of shares in issue, net of
treasury shares 669 616 773 589 616 773 589 616 773
Weighted average number of shares 621 265 125 596 602 566 593 080 961
Basic and diluted earnings per
share cents 0.3 1.0 5.0
Headline and diluted headline
earnings per share cents 0.3 1.0 1.8
Workings
Headline earnings are calculated
as follows:
Earnings attributable to equity holders 1 898 5 575 29 533
Fair value adjustment of
investment properties (338) - (21 615)
Deferred tax on fair value adjustment 52 - 3 027
Adjusted earnings for HEPS 1 612 5 575 10 945
Statements of Changes in Equity
Share
capital Share Non-
and option distributable Treasury
premium reserve reserve shares
R`000 R`000 R`000 R`000
Balance at 1 September 2010 288 409 863 35 028 (27 254)
Restatement of prior period
balances - - 5 801 -
288 409 863 40 829 (27 254)
Changes in equity - - 2 896 (7 674)
(Decrease) in minority
interest - - - -
Total comprehensive profit
for the period - - 2 896 -
Purchase of 16 768 845
treasury shares - - - (7 674)
Balance at 28 February 2011 288 409 863 43 725 (34 928)
Changes in equity - - 22 048 -
(Decrease) in minority
interest - - - -
Total comprehensive profit
for the period - - (108) -
Transfer to
non-distributable reserve - - 22 156 -
Balance at 31 August 2011 288 409 863 65 773 (34 928)
Changes in equity 40 000 - (1 266) -
(Decrease) in minority
interest - - - -
Total comprehensive profit
for the period - - 2 749 -
Issue of 80 000 000 shares 40 000 - - -
Realisation of
non-distributable reserves - - (4 015) -
Balance at 29 February 2012 328 409 863 64 507 (34 928)
Retained Minority
earnings interest Total
R`000 R`000 R`000
Balance at 1 September 2010 68 407 7 036 372 489
Restatement of prior period balances - 81 5 882
68 407 7 117 378 371
Changes in equity 5 575 (46) 751
(Decrease) in minority interest - (167) (167)
Total comprehensive profit for the period 5 575 121 8 592
Purchase of 16 768 845 treasury shares - - (7 674)
Balance at 28 February 2011 73 982 7 071 379 122
Changes in equity 1 802 (50) 23 800
(Decrease) in minority interest - (178) (178)
Total comprehensive profit for the period 23 958 128 23 978
Transfer to non-distributable reserve (22 156) - -
Balance at 31 August 2011 75 784 7 021 402 922
Changes in equity 5 913 (51) 44 596
(Decrease) in minority interest - (181) (181)
Total comprehensive profit for the period 1 898 130 4 777
Issue of 80 000 000 shares - - 40 000
Realisation of non-distributable reserves 4 015 - -
Balance at 29 February 2012 81 697 6 970 447 518
Statements of Cash Flows
Unaudited Unaudited
6 months 6 months Audited
ended ended year ended
29 February 28 February 31 August
2012 2011 2011
Note R`000 R`000 R`000
Cash flows from operating
activities
Cash generated from
operations 1 22 102 17 527 39 062
Interest received 2 152 839 1 409
Interest paid 3 (17 365) (13 138) (26 838)
Taxation paid 4 (1 887) (943) (2 260)
Net cash inflow from
operating activities 3 002 4 285 11 373
Cash flows from investing
activities
Additions to equipment (81) - -
Acquisitions/additions to
investment properties (90 986) (45 073) (98 635)
Acquisitions/additions to
investment properties under
development (21 525) - (62 702)
Net proceeds from disposals
of investment properties 3 000 - -
Decrease in financial assets - 6 500 6 500
Net cash (outflow) from
investing activities (109 592) (38 573) (154 837)
Cash flows from financing activities
Proceeds from the issue of shares 40 000 - -
Treasury shares purchased - (7 674) (7 674)
Financial liabilities raised 68 869 51 867 148 575
Net cash inflow from
financing activities 108 869 44 193 140 901
Net increase/(decrease) in
cash and cash equivalents 2 279 9 905 (2 563)
Cash and cash equivalents
at the beginning of the period/year 3 376 5 939 5 939
Cash and cash equivalents
at the end of the period/year 5 655 15 844 3 376
Notes to the Statements of Cash Flows
Unaudited Unaudited
6 months 6 months Audited
ended ended year ended
29 February 28 February 31 August
2012 2011 2011
R`000 R`000 R`000
1 Cash generated from operations
Profit before taxation 8 112 7 905 37 170
Adjusted for:
Interest received (545) (818) (1 775)
Interest paid 16 497 12 499 27 067
Depreciation 20 9 17
Bad debts - 23 -
Amortisation of deferred lease incentive 336 365 602
Amortisation of letting commission 122 84 152
Straight lining of operating leases
(income) (3 603) (2 793) (5 176)
Straight lining of operating leases
(expenses) - (26) -
Increase in fair value of
investment properties (338) - (21 615)
20 601 17 248 36 442
(Increase) in trade and other
receivables (544) (320) (166)
Increase in trade and other payables 2 045 599 2 786
22 102 17 527 39 062
2 Interest received
Amount outstanding at the beginning
of the period/year 3 293 2 927 2 927
Interest income per income statement 545 818 1 775
Amount outstanding at the end of
the period/year (3 686) (2 906) (3 293)
152 839 1 409
3 Interest paid
Amount outstanding at the beginning
of the period/year 868 639 639
Income statement charge 16 497 12 499 27 067
Amount outstanding at the end of
the period/year - - (868)
17 365 13 138 26 838
4 Taxation paid
Amount outstanding at the beginning
of the period/year 53 (494) (494)
Income statement charge 836 1 481 2 807
Amount outstanding at the end of
the period/year 998 (44) (53)
1 887 943 2 260
Segmental Results
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
29 February 28 February 31 August
2012 2011 2011
R`000 R`000 R`000
Offices
Segmental revenue 18 596 14 077 30 849
Segmental results 14 494 11 322 39 357
Property assets 470 415 317 205 379 857
Retail
Segmental revenue 6 192 5 738 10 718
Segmental results 4 815 4 068 7 273
Property assets 93 730 102 280 101 283
Industrial
Segmental revenue 1 636 1 716 3 704
Segmental results 1 618 1 285 4 788
Property assets 41 500 25 190 34 424
Gym
Segmental revenue 1 571 1 465 2 960
Segmental results 1 377 1 327 4 218
Property assets 37 291 35 202 37 000
Parking
Segmental revenue 3 252 2 861 5 629
Segmental results 2 665 2 377 8 752
Property assets 67 709 61 379 65 524
Other
Segmental revenue 76 63 22
Segmental results (69) (83) (165)
Property assets 542 323 236
Reconciliation to the profit before interest and taxation for the period in the
income statement
Segmental revenue 34 925 28 713 59 058
Allocated operating expenses (6 760) (5 624) (11 274)
Unallocated operating expenses (4 439) (3 501) (6 937)
Fair value adjustment 338 - 21 615
Profit before interest and taxation 24 064 19 586 62 462
Notes to the Financial Statements
Basis of Preparation
The unaudited condensed consolidated financial statements have been prepared
in accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards ("IFRS"),
the disclosure requirements of IAS 34: Interim Financial Reporting, the AC 500
standards as issued by the Accounting Practices Board, the Listings Requirements
of the JSE Ltd and the requirements of the Companies Act 71 of 2008 of South
Africa, as amended.
These consolidated results were prepared under the supervision of Mr M Wagenheim
CA(SA), in his capacity as group financial director.
The accounting policies adopted and methods of computation are consistent with
those applied in the financial statements for the year ended 31 August 2011.
The effective Capital Gains Taxation ("CGT") rate to be applied to the
revaluation of investment properties has increased from 14% to 18.67%, as
announced in the recent 2012 Budget proposals tabled in Parliament. An
adjustment relating to prior years amounting to R4.016 million was made to the
current period deferred tax charge to account for the increased CGT rate.
Restatement of Deferred Taxation Due to Early Adoption of IAS 12 Amendment
As disclosed in the annual report 2011, the company has early adopted the
amendments to IAS 12 which resulted in the restatement of certain prior year
comparatives. The comparative figures as at 28 February 2011 have accordingly
also been restated.
Directors` Commentary
General Review
Ingenuity`s property portfolio continued to perform well during the period under
review.
The investment property portfolio comprises 79% of the property portfolio and is
well managed with a strong tenant base delivering good quality sustainable
contractual rental income. The remaining 21% comprises property for development.
The asset base of the investment property portfolio has increased by 31% over
the comparative period due mainly to acquisitions. The current vacancy
percentage of 3.5% is in respect of one property and is expected to decrease as
we are in advanced stages of concluding leases with prospective tenants.
Property Acquisitions and Developments
During this period, the company acquired Newspaper House, a landmark historical
office block situated in the centre of the Cape Town CBD, at a cost of R86
million which was partly financed out of borrowings and the balance out of the
issue of 80 million shares at 50 cents by way of a vendor placement. The
property has a gross lettable area ("GLA") of 18 417 m2 with an initial expected
yield of 9% on completion of the current upgrade and refurbishment of the
property, due to be completed by the end of July 2012. The total capital
investment on completion is estimated to be R150 million.
Ingenuity commenced the construction of a new office building during November
2011 on the Santam site in Tyger Valley. This development will have a GLA of 10
264 m2 of premium grade office space and is expected to be completed during the
middle of 2013. The property will be Ingenuity`s first Green Star Rated
building. The total estimated capital investment for this building is R215
million and the initial development yield is expected to exceed 8.5%. The
building has been pre-let to Santam Limited and Glacier Financial Holdings (Pty)
Ltd on a long lease.
Ingenuity also commenced the redevelopment of Atlantic Centre during February
2012 which is situated in the prime Foreshore precinct, and which was purchased
as a development opportunity. As part of the redevelopment an additional four
floors of 1 000 m2 each, will be added to the existing building. This
redevelopment is anticipated to be completed during the 1st quarter of 2013 and
will deliver approximately 10 800 m2 of premium grade retail and office
accommodation. The total anticipated capital value of the investment is R154
million and the initial yield once let is expected to exceed 8%.
All three development initiatives detailed above will be financed through
borrowings out of facilities granted by Nedbank Ltd.
Operations
Net property income has increased by 21% to R 24.5 million (2011: R20.3 million)
due mainly to the timing mix of properties purchased, rental escalations and
reduced maintenance expenditures. Property expenses and non-property overhead
expenses were within budget and are well controlled.
Interest paid during the period is in respect of 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 48% (2011: 79%) of
the borrowings are fixed, with the balance floating. The weighted average rate
of interest is 8.2% (2011: 8.1%).
The basic and the headline earnings per share are 0.3 cents (2011: 1.0 cent) and
has been materially impacted by the increase in the effective tax rate of
capital gains tax from 14% to 18.67% calculated on the revaluation of investment
properties. This increase has been provided for by a charge through the income
statement in the current period amounting to R4.016 million.
At the reporting date, the total value of investment properties increased to
R711.2 million (2011: R541.6 million) whilst properties under development
increased to R180.2 million (2011: R95.4 million). On completion of the
developments their related capital costs will be transferred to investment
properties.
Borrowings increased as a result of the property acquisitions and developments
to R419.4 million (2011: R253.8 million). The loan to value ratio is 47% (2011:
37%) which is well within accepted industry norms.
The net asset value per share (based on shares in issue net of total treasury
shares) is 67 cents (2011: 63 cents) and includes the issue of 80 million shares
for the Newspaper House acquisition.
Total cash on hand at the end of this interim period amounted to R5.7 million
(2011: R15.8 million). Any surplus cash is used to reduce borrowings on an
access facility basis.
These consolidated interim financial results have not been reviewed or reported
on by the company`s auditors.
Prospects
Ingenuity`s core focus remains the conversion of its development properties into
income-earning assets and the maximising of value-add opportunities on existing
income-earning properties. This year we have made great strides in commencing
three substantial developments and unlocking bulk opportunities on existing
sites. These developments will materially enhance our core income base which
will ultimately translate to superior investment returns for our shareholders.
The above information has not been reviewed or reported on by the company`s
auditors.
Directorate
There have been no changes to the directorate during the period under review.
Subsequent Events
The company has signed agreements for the sale of two commercial properties,
disclosed as investment property held for sale, namely the property known as
Natural Stone Warehouse in Paarden Eiland for R27.5 million and the property
known as 2 Mobile Road, Airport Industria for R14.0 million - both these
transfers were registered on 15 March 2012. The net proceeds from these sales
were used to reduce borrowings.
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
7 May 2012
Cape Town
DIRECTORS:
R Squire-Howe*+ (Chairman), AA Maresky (CEO), M Wagenheim (Financial),
J Bielich, AJ Branch*+ (British), LH Cohen*, DB Fabian*+, RS Schur*+
*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
Email: 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: 07/05/2012 15:10:00 Produced by the JSE SENS Department.
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