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TMT - Trematon Capital Investments Limited - Annual financial results 31 August
2010
Trematon Capital Investments Limited
(Incorporated in the Republic of South Africa)
Registration number 1997/008691/06
Share code: TMT
ISIN: ZAE000013991
("Trematon" or "the Company")
ANNUAL FINANCIAL RESULTS 31 AUGUST 2010
Domicile and registered office
30 Hudson Street, Cape Town
PO Box 7677, Roggebaai, 8012, South Africa
Transfer secretaries
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001
Directors
M Kaplan (Chairman)*, AJ Shapiro (CEO)
AL Winkler (Financial Director), A Groll, AM Louw*, R Stumpf*
* Non-executive
Secretary
S Litten
Sponsor
Sasfin Capital, a division of Sasfin Bank Limited
Auditor
KPMG Inc
Contact details
Tel: (021) 421 5550
Fax: (021) 421 5551
STATEMENT OF FINANCIAL POSITION
Audited Audited
31 August 31 August
2010 2009
R`000 R`000
ASSETS
Non-current assets 178,871 257,543
Property, plant and equipment 8,117 7,989
Investment property 1,786 1,446
Investments 13,316 13,123
Investments in associate entities 154,832 233,506
Deferred tax asset 820 1,479
Current assets 101,280 99,361
Loans receivable 10,695 1,248
Investments - 11,440
Inventory 29,946 31,904
Tax receivable 142 224
Trade and other receivables 4,841 9,362
Cash and cash equivalents 55,656 45,183
Total assets 280,151 356,904
EQUITY AND LIABILITIES
Equity 233,506 236,725
Share capital and share premium 203,296 203,296
Fair value reserve 3,197 2,929
Accumulated loss (71,725) (64,976)
Total equity attributable to equity holders of the
parent 134,768 141,249
Non-controlling interest 98,738 95,476
Non-current liabilities
Deferred tax liability 4,429 4,386
Current liabilities 42,216 115,793
Creditors 7,266 7,312
Loans payable 24,825 104,369
Tax payable 2,784 189
Trade and other payables 1,490 3,725
Provisions 5,851 -
Bank overdraft - 198
Total equity and liabilities 280,151 356,904
Net asset value per share (cents) 77 81
(based on shares in issue at end of year)
STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
Year ended Year ended
31 August 31 August
2010 2009
Notes R`000 R`000
Revenue 6,877 42,626
Trading loss (24,558) (17,970)
Investment income 14,417 18,361
Finance costs (6,779) (12,992)
Profit on change in shareholding of
subsidiary - 540
Impairment of loan (3,848) (5,410)
Impairment of investment in associate (469) -
Profit from equity-accounted investments
(net of tax) 21,915 13,772
Profit/(loss) before taxation 678 (3,699)
Taxation (3,461) (1,147)
Loss for the year (2,783) (4,846)
Other comprehensive income
Fair value gain/(loss) on
available-for-sale investments 268 (3,667)
Fair value reserve realised on sale of
investments - (6,812)
Other comprehensive income for the year 268 (10,479)
Total comprehensive income for the year (2,515) (15,325)
Loss attributable to:
Equity holders of the parent (7,132) (2,280)
Non-controlling interests 4,349 (2,566)
(2,783) (4,846)
Total comprehensive income attributable to:
Equity holders of the parent (6,864) (12,759)
Non-controlling interests 4,349 (2,566)
(2,515) (15,325)
Number of shares issued (thousands) 174,873 174,873
Weighted average number of shares (thousands) 174,873 174,873
Loss per share (cents) (4.1) (1.3)
Diluted loss per share (cents) (4.1) (1.3)
Headline earnings per share (cents) 2 4.3 4.5
Diluted headline earnings per share (cents) 2 4.3 4.5
STATEMENT OF CHANGES IN EQUITY
Share Share Total share Fair value
capital premium capital reserve
R`000 R`000 R`000 R`000
Balance at 1 September 2008 1,749 201,547 203,296 13,408
Total comprehensive income
for the year - - - (10,479)
Loss for the year - - - -
Fair value loss on
available-for-sale investments - - - (3,667)
Fair value reserve realised
on sale of investments - - - (6,812)
Change in shareholding in
subsidiary - - - -
Balance at 31 August 2009 1,749 201,547 203,296 2,929
Balance at 1 September 2009 1,749 201,547 203,296 2,929
Total comprehensive income
For the year - - - 268
Loss for the year - - - -
Fair value gain on
available-for-sale investments - - - 268
Change in shareholding in
subsidiary - - - -
Balance at 31 August 2010 1,749 201,547 203,296 3,197
Accumulated Total Non-controlling Total
loss Interest Equity
R`000 R`000 R`000 R`000
Balance at 1
September 2008 (62,696) 154,008 98,083 252,091
Total comprehensive
income for the year (2,280) (12,759) (2,566) (15,325)
Loss for the year (2,280) (2,280) (2,566) (4,846)
Fair value loss on
available-for-sale
investments - (3,667) - (3,667)
Fair value reserve
realised on sale of
investments - (6,812) - (6,812)
Change in shareholding
in subsidiary - - (41) (41)
Balance at 31 August
2009 (64,976) 141,249 95,476 236,725
Balance at 1
September 2009 (64,976) 141,249 95,476 236,725
Total comprehensive
income for the year (7,132) (6,864) 4,349 (2,515)
Loss for the year (7,132) (7,132) 4,349 (2,783)
Fair value gain on
available-for-sale
investments - 268 - 268
Change in shareholding
in subsidiary 383 383 (1,087) (704)
Balance at 31 August
2010 (71,725) 134,768 98,738 233,506
CASH FLOW STATEMENT
Audited Audited
Year ended Year ended
31 August 31 August
2010 2009
R`000 R`000
Cash flows from operating activities
Cash utilised in operations (248) (6,240)
Finance income 14,026 17,092
Dividends received 390 1,269
Finance costs (6,779) (12,992)
Tax (paid)/received (126) 926
Net cash inflow from operating activities 7,263 55
Cash flows from investing activities
Acquisition of property, plant and equipment (809) (671)
Acquisation of investment property (340) (1,446)
Preceeds on disposal of property, plant and equipment 77 146
(Decrease)/increase in loans receivable 15,570 (11,492)
Loan repaid by joint venture - 5,790
Acquisition of held-for-trading and
available-for-sale investments - (8,895)
Proceeds on disposal of investments 68,500 17,584
Net cash inflow from investing activities 82,998 1,016
Cash flows from financing activities
(Decrease)/increase in borrowings (79,544) 11,792
Decrease in creditors (46) (2,369)
Net cash inflow from financing activities (79,590) 9,423
Net increase in cash and cash equivalents 10,671 10,494
Cash and cash equivalents at the beginning of the year 44,984 34,490
Total cash and cash equivalents at the end of the year 55,655 44,984
NOTES:
1. Presentation of Annual Financial Statements
Trematon is a company domciled in South Africa. The consolidated financial
statements of the company as at and for the year ended 31 August 2010 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
3 November 2010.
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS), IAS 34 - Interim Finance 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 using a
combination of the historical cost and fair value basis of accounting.
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 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.
Audited Audited
Year ended Year ended
31 August 31 August
2010 2009
R`000 R`000
2. Headline earnings per share
Headline earnings per share is calculated as follows:
Loss attributable to equity holders of the parent (7,132) (2,280)
Realised loss on available-for-sale investments, net
of minority interest - (656)
Loss on sale of associate 11,427 -
Realised gain on change in shareholding - (540)
Impairment of investment 469 -
Impairment of property, plant and equipment - 4,647
Impairment of loan - 5,410
Tax effect on impairment of loan - 1,193
Tax effect on realised loss on available-for-sale
investments, net of non-controlling interest 2,778 92
Tax effect of recycling of fair value reserve to profit - -
Headline earnings 7,542 7,866
Headline earnings per share (cents) 4.3 4.5
Diluted headline earnings per share 4.3 4.5
The calculation of headline earnings per share is based on the weighted average
number of 174,872,545 shares in issue during the year (2009: 174,872,545).
Chairman and Chief Executive`s Joint Report
Trematon is an investment group. The portfolio comprises investments,
subsidiaries and associates engaged in a variety of industries. Most of the
investments are based in the Western Cape and are related in some way to
property or leisure. The group also engages in investment and trading in
listed and unlisted shares which are not specific to any industry. The primary
aim of the group is to generate superior risk-adjusted long-term returns for its
shareholders. The largest investments are long-term in nature and will yield
income or capital growth in an uneven pattern so earnings can be expected to be
volatile from period to period.
Commentary on Financial Results
Each asset in the group forms part of the investment portfolio. However, the
nature of IFRS accounting rules treats the assets (for accounting purposes) as
either investments, associates or subsidiaries, depending on the level of
control and shareholding. This means that not all investments receive the same
accounting treatment. It is therefore important for shareholders to read this
report in conjunction with the annual financial statements in order to better
understand the nature of the investment portfolio.
The most significant change in financial position over the past year relates to
the level of gearing. At the end of the previous financial year loans payable
amounted to R104.4 million, with cash balances at R45.2 million. Cash
realized from the sale of investments and the repayment of loans owing to the
group resulted in consolidated cash balances increasing to R55.7 million and
loans payable reduced to R24.8 million at year end, which has put the group in a
position to make new investments from a position of financial strength.
Net asset value at year end was 77c (2009 - 81c). The investment portfolio of
the business changed during the period as a result of a strategy which was
intended to improve the financial structure of the company as detailed above.
Part of the restructuring involved the sale of Ingenuity Property Investments
Ltd ("Ingenuity") which resulted in cash proceeds of R68.5 million and a net
capital gain to the group of R19.8 million. However as a result of accounting
adjustments required in term of IFRS, an accounting loss of R11.4 million was
recognised because the capital profit was less than the equity accounted income
since acquisition to the date of sale. In addition, the group has begun to
expense pre-production interest on certain property developments which was
capitalised in prior periods in terms of the group`s accounting policies, this
has had a short term negative impact on earnings and net asset value.
The revenue figure on the statements of comprehensive income is not meaningful
in the context of an investment holding company of this nature. It is required
in terms of IFRS but can safely be ignored.
Net trading losses of R24.6 million were incurred (2009 - R17.9 million), the
biggest component of this was the accounting loss on the sale of Ingenuity
referred to above.
The loan to Cloudberry Investments 18 (Pty) Ltd was impaired by a further R3.8
million (2009 - R5.4 million), with an additional R5.8 million provided for to
reflect the effective market value of the underlying investment in Mazor Group
Ltd based on a decline in the Mazor Group Ltd share price from R2.50 to R1.67.
Profit from equity accounted investments amounted to R21.9 million (2009 - R13.7
million). The two largest contributors to equity accounted income were The
Boulevard Park Trust and West Coast Leisure (Pty) Limited.
Headline earnings per share amounted to 4.3c (2009 - 4.5c) and the basic loss
per share amounted to 4.1c (2009 - loss of 1.3c).
Commentary on Individual Investments
Club Mykonos Langebaan Ltd ("CML")
At year end the company owned 34.2% of CML. This investment had an original cost
of R33.2 million. As Trematon has de facto control of CML, it is accounted for
as a subsidiary. CML contributed a net amount of R2.3 million to Trematon`s
earnings. Subsequent to year end the company purchased a further 16.6 million
shares in CML which increased its holding to 82%.
CML owns 29.6% of the Mykonos Casino which is managed by Gold Reef Resorts and
has performed satisfactorily in a generally weak Western Cape gaming market.
The Club Mykonos Resort is in the third year of a refurbishment program which
has improved the physical appearance of the resort and the quality of the
accommodation. This program, coupled with the service efforts of the resort
management team has resulted in a pleasing improvement in customer ratings. Five
prime seafront plots were sold during the reporting period although the property
market on the West Coast remains generally subdued. The land owned by CML is
well positioned but it will not be possible to extract the full value until the
overall property market improves.
More details about the resort and its facilities can be found at
www.clubmykonos.co.za
Faircare Trust
The Faircare Trust, in which Trematon has an effective interest of 40%, 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 residents. 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).
The Faircare group is managed by an experienced team of specialist
professionals. Trematon is represented on the boards of the various entities
but occupies a non-executive role in the operations.
The nature of the retirement village model which the Faircare group applies
results in a business model where the operator has a long-term incentive to
increase the value of the residential units and the quality of the villages and
where the owner receives a value-for-money investment in a secure, high quality
retirement lifestyle.
The Faircare Trust contributed a small accounting loss during the reporting
period but the full value of the future long-term earnings potential is not
reflected. The investment is reflected in the statements of financial position
as a loan due from the Faircare Trust reduced by Trematon`s share of post
acquisition losses. As the investment is equity accounted, the value of its net
assets is not included in Trematon`s accounts. It is likely that the value
generated by the investment as it matures will be well in excess of the amount
reflected in these accounts. A summary of the Trusts financial information is
disclosed in note 6 of the annual financial statements.
More details about Faircare can be found at www.faircare.co.za.
Mazor Group Ltd ("Mazor")
Trematon owns 7.2% of Mazor indirectly via a 49% holding in Cloudberry
Investments 18 (Pty) Limited ("Cloudberry"). 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. Two Trematon directors occupy non-executive positions on the Mazor board.
On 21 September 2010 Mazor published a trading update on SENS which included the
following extract: "shareholders are advised that the Company`s earnings and
headline earnings per share for the six month period ended 31 August 2010 will
be at least 70% lower than the reported earnings and headline earnings per share
for the prior comparative period. This decline is largely attributable to
continued low activity within the construction sector in South Africa and, in
particular, the Western Cape."
Accordingly, a material recovery in the share price is not expected in
the short-term but Mazor remains financially robust and should perform
well on the back of any recovery in the construction sector. These results
include a full mark-to-market value of the Mazor investment at the reporting
date.
More information about Mazor can be found at www.mazor.co.za.
Grand Parade Investment Ltd ("GPI")
The company owns 5,200,000 ordinary shares in GPI. These shares rank pari
passu with other ordinary shares but are subject to a voting pool agreement
with a BEE trust. The shares original cost was R8.5 million and is carried
in the annual financial statements at its market value of R12.2 million.
Shareholders are referred to note 6 of the annual financial statements and to
the GPI website at www.grandparade.co.za.
Direct Property Investments
Stalagmite (Pty) Ltd ("Stalagmite")
The remaining land in the Broadway Office Park in the Strand is valued at
cost in the balance sheets of Stalagmite. At list prices the land has a
value of R25 million of which Trematon has a 50% share. The project remains
free of debt and has borrowing facilities which may be utilized in further
joint ventures with our partners in the project, Gateway Property Developers
(Pty) Ltd.
The Boulevard Park Trust ("Boulevard Park")
Trematon owns an effective 37.5% interest in Boulevard Park which, in turn
owns 49% of a premier grade office development which occupies a prominent
position on the main access route close to the Cape Town CBD. The total
development comprises seven office towers comprising 38 000 square metres
of office space and 1 980 parking bays. Trematon`s share of the equity
accounted profits from Boulevard Park has increased substantially during
the reporting period due mainly to profits on the sale of buildings.
The park as a whole is 86% let and there is strong interest in the remaining
space. Most tenants are blue-chip corporations who have signed long leases.
The bulk of the space was let on terms favourable to the tenants due to the
phase of the property cycle at the time so the park as a whole may prove to
be under-rented and offers good prospects for future capital appreciation.
Loans due to Trematon from Boulevard Park at year end amounted to R32.9
million (2009 - R53.7 million) and the equity accounted share of accumulated
profits amounted to R16.3 million.
Wembley Square II
Loans due to Trematon from the New Wembley Trust amount to R10.7 million
(2009 -R8.9 million). At the end of the previous year, the group had an
effective 40% equity share in this venture which has since been relinquished
in favour of other funders for the project which has commenced construction.
The loan due ranks ahead of shareholder loans and is expected to be repaid in
full within 6-12 months.The group no longer holds an equity interest in the
project.
Prospects
The group is in a strong financial position and actively seeking out new
investment opportunities. Active short-term asset trading which has been
minimal while the group was deleveraging will also resume. The group`s
net asset value is underpinned by conservatively valued investments all of
which have good potential for above average returns.
CML, Boulevard Park, Faircare, Stalagmite and Mazor are all linked in some way
to the property cycle and their future performance will be determined in part
by the overall state of the property market in the Western Cape. All these
businesses have strong management and are financially robust.
Board Changes
On 23 July 2010 the Board appointed Arthur Winkler as financial director.
Shiree Litten, formally the financial director and company secretary,
resigned as financial director but will continue to act as company secretary.
Dividend
In recognition of the company`s sound financial position and positive outlook
the board is pleased to propose a dividend of 1.5c per share subject to approval
by shareholders at the annual general meeting to be held on 2 February 2011.
The nature of the company`s earnings is such that a formal dividend cover
policy is not considered appropriate but the long term intention is to
maintain and improve the absolute level of the dividend over time. A
finalisation announcement confirming the dividend will be made after the
annual general meeting has been held.
Last day to trade Friday, 11 February 2011
Ex-date Monday, 14 February 2011
Record date Friday, 18 February 2011
Payment date Monday, 21 February 2011
Share certificates may not be dematerialised or rematerialised between Monday,
14 February 2011 and Friday, 18 February 2011 both days inclusive.
Posting of the annual report and notice of annual general meeting
Shareholders are advised that the annual financial statements will be posted on
or about 30 November 2010. The annual general meeting will be held on 2 February
2011 at The Hudson, 30 Hudson Street, Cape Town at 10am.
9 November 2010
Cape Town
Sponsor
Sasfin Capital
A division of Sasfin Bank Limited
Date: 09/11/2010 10:38:04 Supplied by www.sharenet.co.za
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