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TMT - Trematon - Audited results for the year ended 31 August 2008

Release Date: 20/11/2008 15:06
Code(s): TMT
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TMT - Trematon - Audited results for the year ended 31 August 2008 TREMATON Capital Investments Limited (Incorporated in the Republic of South Africa) (Registration number 1997/008691/06) Share code: TMT ISIN: ZAE000013991 ("Trematon") AUDITED RESULTS FOR THE YEAR ENDED 31 AUGUST 2008 Directors` Review We are pleased to report the financial results of the group for the 12 months ended 31 August 2008. The current management team has been in place for more than three years and the group has undergone significant transformation during this time. Trematon Capital Investments Ltd is an investment group with investments, subsidiaries and associates engaged in a variety of industries which make up its investment portfolio. Most of the investments are in the Western Cape and are related in some way to property or gaming. The primary aim of the group is to generate superior risk-adjusted long-term returns for its shareholders. Commentary on financial results Shareholders should note that SA REIT Ltd ("SA REIT") was accounted for as a subsidiary in the previous period and an associate in the current period and Club Mykonos Langebaan Ltd ("CML") was consolidated for the first time so the results are not readily comparable with the prior year figures. Reported net asset value (NAV) increased to 88c (2007: 84c). SA REIT Ltd is equity accounted for as an associate in terms of IAS 28 so changes in the market value of its shares are not reflected in the NAV. If SA REIT had been accounted for purely as an investment, the pro forma NAV would have been approximately 82.5c. We believe this is a creditable performance in a period which includes a substantial markdown in the value of financial assets in general. Shareholders should, however, be aware that a material proportion of the measured NAV is determined by subjective valuations of unlisted assets which do not have a readily determinable market value. Such valuations, however prudently and diligently arrived at, are ultimately guesswork. The group also has borrowings and the double-edged sword of leverage will play a role in determining the future NAV. The debt/equity ratio of the Trematon Group (excluding CML, which is in a net cash position) is approximately 60%. Basic earnings per share increased to 19.7c (2007: 4.6c) and headline earnings per share increased to 5.5c (2007: 1.5c). Shareholders are referred to note 2 which provides a reconciliation between the two measures of earnings per share. The primary reasons for the difference between the two measures is a change in the effective percentage shareholding of SA REIT giving rise to a profit on change in shareholding in the income statement and a change in the basis of accounting for the interest in CML from an investment to a subsidiary which is now consolidated for the first time. Share trading activities resulted in a net loss for the period but this was off- set by other sources of income. All listed investments, other than SA REIT as discussed above, have been marked to market at the end of the period and all profits and losses accounted for. Where necessary the value of receivables has been impaired to reflect the underlying value of the asset. Commentary on individual investments Club Mykonos Langebaan Ltd The group owns 34.2% of CML. In the prior reporting period Trematon had no influence over CML`s operations and no representation on its board, therefore CML was accounted for as an investment. With effect from 24 April 2008 Trematon obtained de facto control of CML via the exercise of its votes at a general meeting of the company and it is accordingly consolidated as a subsidiary. CML`s major assets are all situated near Langebaan on the West Coast (approximately 100 km from Cape Town) and include 29.6% of the Mykonos Casino, a conference centre, restaurants and various rental properties, vacant land and developed residential erven. Gaming revenues in the Western Cape have declined slightly in comparison with the equivalent period last year but the casino is currently undergoing a major refurbishment and is well placed to capitalise on any recovery in consumer spending. The commercial and rental assets currently generate net losses after the allocation of head office overheads and the board of CML is investigating ways to address this. The vacant land and developed erven are well located in prime coastal locations but the property market in the area is weak and the environment for developing and/or realising these properties is currently not optimal. SA REIT Ltd The group owned 18.4% of SA REIT at year-end. Three Trematon directors are also directors of SA REIT and it is accordingly classified as an associate and equity accounted. Shareholders are referred to the SENS announcement reporting SA REIT`s financial results for the year to 31 August 2008 which were published on 31 October 2008. SA REIT is a property company which holds a mix of high-quality commercial and industrial property assets, mainly in the Western Cape. The portfolio comprises both investment properties and development opportunities. During the previous financial year Trematon entered into a transaction with a property vendor in terms of which the vendor was granted a put option in respect of 16 million SA REIT shares at 50c per share. The put option was exercised in November 2008. If the put option had been exercised at year-end it would have resulted in a mark-to-market loss of R0.8 million and Trematon`s effective shareholding in SA REIT would have increased to 21.1%. On 11 November 2008, the name of SA REIT Ltd was changed to Ingenuity Property Investments Ltd. The name change will be reflected on the JSE on Monday, 24 November 2008. Faircare Trust (Formerly the RV Holdings Trust) The Faircare Trust, of which Trematon effectively owns 35%, is responsible for the management and operation of up-market retirement villages based mainly in the Western Cape. The villages are all well established and highly regarded and operate under a variety of ownership structures which are tailored to the needs of their customers. All of the villages comprise residential units, assisted living suites, frail care and catering facilities. The villages include Cle du Cap (situated in Tokai), Noordhoek Manor, Onrus Manor, Heritage Manor and Bridgewater Manor (both situated in Somerset West). Grand Parade Investments Ltd ("GPI") Trematon owns 2.7% of GPI which is accounted for as an investment. Shareholders are referred to the reviewed results of GPI for the period to 30 June 2008 which were published on SENS on 2 September 2008. GPI is in a healthy financial position. The latest gaming industry statistics for the Western Cape suggest that GPI`s next financial year will not show the same rate of growth as in the previous two years, but indications are that dividends will at least be maintained in the 2009 financial year. Mazor Group Ltd ("Mazor") Trematon owns 7.2% of Mazor indirectly via a 49% holding in Cloudberry Investments 18 (Pty) Ltd. Cloudberry is controlled by a BEE entity and is partially funded via a loan from Trematon. The value of the loan receivable is adjusted to reflect the value of the underlying security at year-end. Shareholders are referred to the interim results of Mazor which were published on SENS on 10 November 2008 in which it was indicated that Mazor is likely to achieve the earnings per share forecast of 44c contained in its prospectus for the year ending 28 February 2009 and that a dividend is likely to be declared. Property investments Stalagmite (Pty) Ltd Stalagmite is a development comprising prime industrial land in Strand at the Broadway Industrial Park adjacent to the route of the proposed route of the new N2 highway. Stalagmite is 50% held and is equity accounted. No profits have yet been accounted for in this entity as the transfers of property to buyers had not yet taken place at year-end. The partners in the joint venture are Gateway Property Developers (Pty) Ltd who have managed the project since inception. Subsequent to year-end the transfers of land sold to date were effected and all bank borrowings and loans due to Trematon have been repaid in full with accrued interest. The remaining inventory is well located and the board, in conjuction with our joint venture partners, is investigating the best way to maximise value for shareholders. This development is expected to make a contribution to group profits in the 2009 financial year. Boulevard Park Trematon owns an effective 37.5% interest in Boulevard Park which is a premier grade development located adjacent to the N2 highway on the Cape Town CBD periphery. The development is well under way and delivery of all the buildings is expected to take place in March 2009. The development comprises seven office towers comprising 38 000 square metres of office space and 1 980 parking bays. Five of the seven towers have been sold and letting has commenced. This development is expected to make a contribution to group profits in the 2009 financial year. Wembley Square II Trematon owns an effective 40% interest in Wembley Square II which is located opposite Wembley Square and is a co-operative venture with Faircape which was the original developer of Wembley Square. The site is in a highly desirable development node and plans are under way to maximise the value of the investment. This project is still in the relatively early stages of conception and is not expected to contribute to profits in the current financial year. Prospects Trematon is an investment group and is therefore dependent to some extent on the overall investment climate. Many of the group`s investments are linked to the property market in general and the performance of the property sector will be a key determinant of returns in the current financial year. The investment portfolio is of high quality and should yield good long-term returns but short- term prospects are uncertain. Management will focus on bringing current projects to fruition and reducing gearing. The board is not unduly pessimistic regarding economic prospects but we believe that it is prudent to assume that the current uncertain investment climate will persist for an extended period of time. BALANCE SHEET Audited Audited
31 August 31 August 2008 2007 R`000 R`000 ASSETS Non-current assets 289 456 102 397 Property, plant and equipment 12 506 104 Investments 259 234 99 329 Deferred tax asset 1 122 - Loans receivable 9 073 2 964 Long-term receivables 7 521 - Current assets 77 764 61 569 Investments 6 146 - Inventory 31 938 - Tax receivable 1 292 148 Trade and other receivables 3 848 1 520 Cash and cash equivalents 34 540 59 901 Total assets 367 220 163 966 EQUITY AND LIABILITIES Equity 252 092 153 627 Share capital and share premium 203 296 203 296 Fair value reserve 13 409 40 249 Accumulated loss (62 697) (97 115) Total equity attributable to equity holders of the parent 154 008 146 430 Minority interest 98 084 7 197 Non-current liabilities 63 116 8 388 Long-term loans payable 58 218 - Deferred tax liability 4 898 8 388 Current liabilities 52 012 1 951 Secured debentures 9 681 - Loans payable 34 358 - Tax payable 22 1 784 Trade and other payables 7 902 153 Bank overdraft 49 14 Total equity and liabilities 367 220 163 966 Net asset value per share (cents) 88 84 (based on shares in issue at end of year) INCOME STATEMENT Audited Audited Year ended Year ended
31 August 31 August 2008 2007 Notes R`000 R`000 Revenue 19 300 18 409 Trading profit 1 362 6 404 Investment income 9 079 6 371 Finance costs (8 060) (792) Fair value reserve recognised in profit 15 715 - Profit on change in shareholding 12 610 - Impairment of loan (4 262) - Profit/(loss) from equity accounted investments (net of tax) 7 074 (247) Profit before taxation 33 518 11 736 Taxation 1 323 (2 662) Profit for the year 34 841 9 074 Attributable to: Equity holders of the parent 34 419 8 115 Minority interest 422 959 34 841 9 074 Number of shares issued (thousands) 174 873 174 873 Weighted average number of shares (thousands) 174 873 174 873 Earnings per share (cents) 19.7 4.6 Headline earnings per share (cents) 2 5.5 1.5 CASH FLOW STATEMENT Audited Audited Year ended Year ended 31 August 31 August
2008 2007 R`000 R`000 Cash flows from operating activities Cash used in operations 2 243 (7 653) Interest received 7 966 4 906 Dividends received 1 113 1 465 Finance costs (8 060) (792) Tax paid (1 387) (6 294) Net cash from operating activities 1 875 (8 368) Cash flows from investing activities Acquisition of equipment (31) (91) Decrease in investment in subsidiary (12 681) - Acquisition of subsidiary, net of cash acquired 33 041 8 162 Increase in loans receivable (87 569) (2 964) Decrease in loan in dilution of subsidiary 1 509 - Loan repaid/(advanced) to joint venture 1 997 (3 016) Acquisition of investments (65 939) (49 655) Proceeds from sale of investments 9 831 93 034 Net cash from investing activities (119 842) 45 470 Cash flows from financing activities Increase in borrowings 92 576 - Net cash from financing activities 92 576 - Net (decrease)/increase in cash and cash equivalents (25 391) 37 102 Cash and cash equivalents at the beginning of the year 59 887 22 788 Effect of exchange rate movement on cash balances (6) (3) Total cash and cash equivalents at the end of the year 34 490 59 887 STATEMENT OF CHANGES IN EQUITY Total Fair Share Share share value
capital premium capital reserve R`000 R`000 R`000 R`000 Balance at 1 September 2006 1 749 201 547 203 296 7 095 Total recognised income - - - 33 154 Profit for the year - - - - Total income recognised directly in equity - - - 33 154 Fair value gain on available-for-sale investments - - - 28 646 Fair value loss on available-for-sale investments realised through income statement - - - 4 508 Acquisition of subsidiary - - - - Total equity at 31 August 2007 1 749 201 547 203 296 40 249 Balance at 1 September 2007 1 749 201 547 203 296 40 249 Total recognised income - - - (26 840) Profit for the year - - - - Total income recognised directly in equity - - - (26 840) Change in rate recognised in equity - - - 235 Fair value loss on available-for-sale investments - - - (11 516) Fair value gain on available-for-sale investment - - - 8 479 Fair value reserve release on consolidation of Club Mykonos Langebaan Limited - - - (13 514) Dilution of SA Reit Limited - - - (9 623) Fair value reserve realised on sale of investments - - - (901) Acquisition of subsidiary - - - - Total equity at 31 August 2008 1 749 201 547 203 296 13 409 Accumu- lated Minority Total loss Total interest equity
R`000 R`000 R`000 R`000 Balance at 1 September 2006 (105 230) 105 161 - 105 161 Total recognised income 8 115 41 269 1 245 42 514 Profit for the year 8 115 8 115 959 9 074 Total income recognised directly in equity - 33 154 286 33 440 Fair value gain on available-for-sale investments - 28 646 286 28 932 Fair value loss on available-for-sale investments realised through income statement - 4 508 - 4 508 Acquisition of subsidiary - - 5 952 5 952 Total equity at 31 August 2007 (97 115) 146 430 7 197 153 627 Balance at 1 September 2007 (97 115) 146 430 7 197 153 627 Total recognised income 34 418 7 578 (7 197) 381 Profit for the year 34 418 34 418 422 34 840 Total income recognised directly in equity - (26 840) (7 619) (34 459) Change in rate recognised in equity - 235 - 235 Fair value loss on available-for-sale investments - (11 516) - (11 516) Fair value gain on available-for-sale investment - 8 479 - 8 479 Fair value reserve release on consolidation of Club Mykonos Langebaan Limited - (13 514) - (13 514) Dilution of SA Reit Limited - (9 623) (7 619) (17 242) Fair value reserve realised on sale of investments - (901) - (901) Acquisition of subsidiary - - 98 084 98 084 Total equity at 31 August 2008 (62 697) 154 008 98 084 252 092 NOTES: 1 Presentation of Annual Financial Statements Trematon Capital Investments Limited (the `company`) is a company domiciled in South Africa. The consolidated financial statements of the company as at and for the year ended 31 August 2008 comprise the company and its subsidiaries (together referred to as the `group`) and the group`s interest in jointly controlled entities. The financial statements were authorised for issue by the directors on 17 November 2008. The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), IAS 34 - Interim Financial Reporting, the Listings Requirements of the JSE Limited and the South African Companies Act. The financial statements have been prepared on the going concern basis. All significant accounting policies have been consistently applied to all periods presented and throughout the group. The consolidated annual financial statements and the company annual financial statements are stated in Rands, which is the company`s functional and presentation currency. The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The 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 if the revision affects only that period, or the period of the revision and future periods if the revision affects both current and future periods. KPMG Inc. has provided an unqualified audit opinion, which is available for inspection at the company`s registered office, on the annual financial statements for the year ended 31 August 2008, which have been summarised for the purposes of this report. Audited Audited
Year ended Year ended 31 August 31 August 2008 2007 R`000 R`000
2 Headline earnings per share Headline earnings per share is calculated as follows: Profit attributable to equity holders of the parent 34 419 8 115 Realised profit on available-for-sale investments, net of minority interest (1 985) (6 206) Realised gain on change in shareholding (12 610) - Fair value realised on investment (15 715) - Impairment of loan 4 262 - Tax effects, net of minority interest 1 285 786 Headline earnings 9 656 2 695 Headline earnings per share (cents) 5.5 1.5 Diluted headline earnings per share (cents) 5.5 1.5 The calculation of headline earnings per share is based on the weighted average number of 174 872 545 shares in issue during the year (2007: 174 872 545). Domicile and registered office: 42 Hans Strijdom Avenue, Foreshore, Cape Town, 8001 PO Box 7677, Roggebaai, 8012, South Africa Transfer Secretaries: Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg, 2001 Principal banker: Investec Bank Limited Directors: M Kaplan (Chairman)*, A J Shapiro (CEO), A Groll, A M Louw*, R Stumpf * * Non-executive Secretary: S Litten Auditor: KPMG Inc. Contact details: Tel: (021) 421-5550 Fax: (021) 421-5551 20 November 2008 Cape Town Sponsor: Sasfin Capital A division of Sasfin Bank Limited Date: 20/11/2008 15:06:19 Supplied by www.sharenet.co.za 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.

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