| Fri 29 Sep 2006, 14:53 | | Orion - Reviewed consolidated results of the group |
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ORE
ORE
Orion - Reviewed consolidated results of the group: year ended 30 June 2006
ORION REAL ESTATE LIMITED
formerly Alpina Investment Holdings Limited ("Alpina")
Incorporated in the Republic of South Africa)
(Registration number: 1997/021085/06)
Share Code: ORE & ISIN: ZAE000075651
("Orion" or "the company")
REVIEWED CONSOLIDATED RESULTS OF THE GROUP FOR THE YEAR ENDED 30 JUNE 2006
(all amounts given in Rands unless stated
otherwise)
Year ended Audited
Year ended
CONSOLIDATED INCOME STATEMENT 30 June 2006 30 June 2005
Revenue 17,091,333 22,401,404
Recoveries 1,543,996 5,819,179
Operating costs -14,293,103 -15,892,897
Operating profit 4,342,226 12,327,686
Interest Income 209,490 115,476
Profit on disposal of subsidiary 2,172,364
Reversal of unsubstantiated liability entry 4,379,807
that has prescribed
Loans receivable written off -3,469,783
Straight line operating lease adjustment 1,346,605 733,060
Revaluation of properties 34,202,191 9,071,822
Profit on sale of investment property 1,873,210
Finance charges -11,649,804 -15,752,313
Profit/ (loss) before taxation 28,450,708 11,451,329
Taxation -7,600,399 -5,529,295
Profit/(loss) for year 20,850,309 5,922,034
Earnings per linked unit (cents) 14.01 32.65
Diluted earnings per linked unit (cents) 14.01 33.35
Headline loss per linked unit (cents) -2.31 -13.88
Diluted headline loss per linked unit (cents) -2.31 -14.18
Net asset value per linked unit at year-end 33.66 72.14
(cents)
Number of linked units at year-end 188,286,200 18,139,125
Weighted number of linked units 148,859,622 18,139,125
Diluted number of linked units 148,859,622 17,758,125
Reconciliation between net earnings and headline earnings
Net profit/(loss) per Income Statement 20,850,309 5,922,034
- Loans written off 3,469,783
- Reversal of unsubstantiated liability entry -4,379,807
that has prescribed
- Profit on disposal of subsidiary -2,172,364
- Profit on sale of investment property -1,873,210
- Fair value adjustment to investment property -34,202,191 -9,071,822
- Tax effect as a result of the above 9,918,635 5,587,825
Headline earnings/(loss) -3,433,247 -2,517,560
CONSOLIDATED BALANCE SHEET 30 June 2006 30 June 2005
Investment properties 175,691,056 90,700,001
Tangible assets 377,213 136,317
Deferred tax 544,327 1,138,291
Loans receivable and rental smoothing 5,450,578 7,378,016
Current assets 45,416,909 1,747,812
Total assets 227,480,083 101,100,437
Shareholders" equity 17,591,803 -4,959,977
Deferred tax 14,413,609 3,851,738
Subordinated debentures 45,779,575 18,045,345
Long-term borrowings 126,819,686 74,799,770
Current liabilities 22,875,411 9,363,561
Total equity and liabilities 227,480,083 101,100,437
CONSOLIDATED CASH FLOW STATEMENT
Year ended Audited
Year ended
30 June 2006 30 June 2005
Net cash flow from operating activities -33,817,742 -6,292,411
- Cash generated from operations 16,789,450 9,304,517
- Purchase and development of flats for -39,166,878
resale
- Interest received 209,490 115,476
- Interest paid -11,649,804 -15,752,313
- Taxation paid - 39,909
Net cash outflow from investing activities -48,861,426 12,768,040
Net cash inflow from new share capital and 29,111,000 3,920,959
debentures
Net cash inflow from financing activities 52,019,916 -9,632,487
Net increase/ (decrease) in cash and cash -1,548,252 764,101
equivalents
Cash and cash equivalents at the begin of the 776,210 12,109
year
Cash and cash equivalents at the end of the -772,042 776,210
year
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Vendors Distri- Total
capital premium share butable
subscrip- reserve
tion
commitment
Balance at 30 June 3,516,635 3,158,964 -17,639,418 -
2004 161,786 10,802,033
Straight line 3,059,381
operating lease 3,059,381
adjustment
Restated balance -14,580,037 -
at 30 June 2004 161,786 3,516,635 3,158,964 7,742,652
Issue of linked 3,881,750 -3,158,964 742,391
units 19,605 -
Attributable loss - - -1,324,508 -1,324,508
for 6 months -
Balance at 31 - -15,904,545 -
December 2004 181,391 7,398,385 8,324,769
Issue of - -
debentures 3,881,750 3,881,750
incorrectly
classified as
share premium
Attributable - 8,300,164
profit for 6 - - 8,300,164
months
Balance at 30 June - -7,604,381 -
2005 181,391 3,516,635 3,906,355
Further losses on -1,053,622 -1,053,622
disposal of
subsidiary
Restated balance - -8,658,003 -
at 30 June 2005 181,391 3,516,635 4,959,977
Issue of linked
units 30,000 30,000
Attributable loss -1,187,576 -
for 6 months 1,187,576
Balance at 31 - -9,845,579 -
December 2005 211,391 3,516,635 6,117,553
Issue of linked
units 1,671,471 1,671,471
Attributable 22,037,885
profit for 6 22,037,885
months
Balance at 30 June 3,516,635 - 12,192,306 17,591,803
2006 1,882,862
Commentary on the June 2006 Financial Statements
Basis of Preparation
The reviewed consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards ("IFRS"). The
company adopted IFRS for the first time on 1 July 2005, effective from 1 July
2004.
IFRS
IFRS 1: First Time Adoption of IFRS has been applied. The requirements of the
South African Companies Act of 1973 and the disclosure requirements of the
JSE Limited have been adopted. This report has been prepared on the fair
value and going concern basis.
Significant changes to the Group"s accounting policies as a result of the
adoption of IFRS
The principal accounting policies are consistent with those applied in the
previous year:
Investment properties
Items of property have consistently been stated on an annual basis at
valuation and accordingly no adjustments in this regard were necessary.
Tangible assets
The company"s property, plant and equipment are stated at cost less
accumulated depreciation and impairment losses. As the company"s property,
plant and equipment have all been recently acquired and impaired in its June
2005 results, no adjustments in terms of IFRS were required.
Smoothing of operating rentals received
The operating rentals have been smoothed for the year ended 30 June 2006 in
accordance with AC105 - GAAP requirements. The previous year was restated as
required by AC105. The smoothing of the operating lease rentals received is
also an IFRS requirement and the results for 30 June 2006 have been adjusted
to conform therewith.
Impact of the transition to IFRS
The requirements for the First Time Adoption of IFRS as required by IFRS1 are
clearly reflected in the company"s statement of changes in equity. In
comparing its comparative information for the year ended 30 June 2005, the
group has adjusted the amounts previously reported in the financial
statements prepared in accordance with previous GAAP. The net effect of the
transition to IFRS is not material.
Review of Results
The results of the group as set out above have been reviewed by the Group"s
auditors, Horwath Leveton Boner, as required by the JSE Limited. The review
report is available for inspection at the group"s registered office.
Operating Performance
2005/6 was a year of rising commercial property prices and the portfolio has
gained value over the year under review.
As regards headline earnings, management has several reasons to expect
improvement going forward:
1. Reduced operating costs (note that the company has been under new
management for just the last three months of the financial year and
reductions to the group cost structure have had limited time to take effect).
2. Rent escalations in excess of the expected inflation rate, and the
improvement of market demand for commercial and retail space.
3. Lower interest charges resulting from more efficient debt funding,
expected interest rate increases notwithstanding.
4. The injection of further, profitable properties as laid out in the linked
unit holders circular of 23 January 2006, together with the unrealised
capital gains on this portfolio.
5. Anticipated property sales that will yield further capital and revenue
gains, including the development for resale of the flats at Elma Park.
Completion of the transactions referred to in the Linked Unit Holders
Circular of 23 January 2006
The purchase of the Orion Centre has taken place as set out in the circular
and the flats, including the construction of 5 new penthouse suites, are
currently being redeveloped for resale. As of year-end, 89 of a total of 95
units were sold.
The balance of the properties referred to in the circular are in the process
of being transferred; and on transfer will have the effect of increasing both
the share capital and the value of the property portfolio.
Post balance sheet events
A number of property disposals have occurred post year-end, as follows:
R 11 455 000 has been received from Gauteng Provincial Government; Dept of
Public Transport, Roads and Works as an expropriation payout on the Spoornet
property, erf 4899 Johannesburg pursuant to the construction of the Gautrain.
This price will result in a gain of R1, 86m. However, management is
contesting this settlement and is seeking compensation based on the
directors" valuation of R21,0m. Should these efforts prove successful, a
further gain of R8,54m will be realised for the group.
The sale of SS Manchester Park was registered in July 2006 for gross proceeds
of R5,5m payable in shares and cash. A loss of R0,2m will be reported on this
sale.
The sale of VLC House, ptn 9 of erf 19 Edenburg, has been lodged. The gross
proceeds of this transaction is R4,0m in shares and cash and a gain of R0,6m
will be realised on this sale.
Lepus Road situate at erven 253 and 256 Crown extension 8 has been sold for
gross cash proceeds of R4 017 000. This sale will realise a gain of R0,617m.
Corporate actions
No dividends or debenture distributions have been declared for the year under
review.
Directorate
Directors: PD Alexander*; F Gmeiner (Chief Executive), AC Gmeiner, RS
Wilkinson* (Chairman)
*Non-executive
Company Secretary: Corporate Governance Facilitators CC
Registered Office: 43 Wierda Road West, Wierda Valley, Sandton
Transfer Secretaries: Computershare Investor Services 200 (Pty) Limited
Sponsor: Imara Corporate Finance South Africa (Pty) Limited
Auditors: Horwath Leveton Boner
29-Sep-06
Date: 29/09/2006 02:53:13 PM Produced by the JSE SENS Department
