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ORE - Orion Real Estate Limited - Audited results for the year ended 30 June
2011 and notice of Annual General Meeting
ORION REAL ESTATE LIMITED
Incorporated in the Republic of South Africa)
(Registration number: 1997/021085/06)
Share Code: ORE ISIN: ZAE000075651
("Orion Real Estate" or "the company")
AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2011 AND NOTICE OF
ANNUAL GENERAL MEETING
1. Commentary
The Board of Directors presents the Group`s summarised audited results for the
year ended 30 June 2011. The results have been prepared in accordance with the
recognition and measurement criteria of the International Financial Reporting
Standards ("IFRS") and the presentation and the disclosure requirements of IAS
34, the JSE Limited Listings Requirements and the requirements of the South
African Companies Act, 2008, as amended.
The accounting policies have been consistently applied to all the years
presented and to years prior to transition to IFRS, unless stated otherwise. The
results have been audited by the company`s auditors, PWC Incorporated, whose
unmodified audited report is available for inspection at the registered office
of the company.
2. Financial and operational overview
Economic activity during the reporting period has showed signs of a gradual
recovery in the first quarter of 2011 when the real GDP growth expanded to an
annualised rate of 4.8%. This positive indicator was, however, severely dented
in the second quarter when it slowed to a rate of 1.3%. Subsequent international
events of debt pressure and political instability have highlighted the
volatility of current trading conditions. These conditions influenced business
conditions in general negatively, but they also provided to diligent companies
an opportunity to carefully select growth projects and opportunities.
In spite of the volatile trading conditions the company has grown income from
R75.1 million in 2010 to R82.0 million in the financial year under review, off
the same asset base. This movement represents an increase in income of 9.3%. The
direct property operating costs increased from R33.7 million to R49.4 million.
This represents an increase of 46.4%, mainly through substantial increases
imposed by municipal and other utilities (R5.2 million) and provision for
potential bad debts (R3.3 million). The operating profit decreased from R88.7
million to R21.6 million. The decrease was due to the mentioned increase in
operating costs and a decrease in the fair value adjustments of buildings from
R63.4 million in 2010 to R2.1 million. The general market outlook, depressed
economic conditions and low levels of rental growth have directed conservative
property valuations. The total comprehensive income for the year has decreased
from R54.7 million in 2010 to (R1. 8) million in the current year.
As mentioned the latest economic indicators and international debt turmoil do
not only spell doom and gloom, but potentially also provide ideal growth
opportunities for investors. During the financial year the company did not grow
in terms of acquisitions but substantial work has been done to improve
administration and systems. Judged by the number of offerings received on
virtually a daily basis the company should be in a position to make quality
acquisitions and investments during the new financial year.
Despite the adverse trading conditions and negative economic climate the
portfolio managed to maintain an improved vacancy rate of 12.95% compared to a
vacancy rate of 14.55% in the previous financial year. In some instances tenants
were placed at lower but viable rental rates that are a better proposition than
to have vacant space.
2011 2010
Earnings per share
Basic earnings per share (cents) (0.29) 8.72
Diluted earnings per share (cents) (0.29) 8.72
Headline earnings per share (cents) (0.58) 0.35
Diluted headline earnings per share (cents) (0.58) 0.35
Net asset value per share (cents) 63.11 56.89
Reconciliation of basic earnings and headline
earnings
(Loss)/Profit attributable to equity holders (1 841 453) 54 700 361
Fair value adjustment to investment properties (2 089 209) (63 420 000)
Deferred tax raised on fair value adjustment to
investment property 292 489 10 908 451
Headline (loss)/earnings (3 638 172) 2 188 812
The Group has, on a continuous basis been busy looking for new business
opportunities, despite the current economic environment. Mitigating strategies
have been developed and implemented to ensure that such identified business
opportunities have minimal potential risks.
It is not envisaged that the current market conditions will improve in the short
term, but management is committed to optimise the returns of the portfolio
despite the negative trading conditions. The functionality of the administrative
systems and internal controls have been improved substantially to ensure better
control through the management environment. Communication with tenants has, and
will continue to be improved so as to ensure improved service delivery and a
better understanding of clients` needs and preferences.
Substantial progress was made regarding the Bethlehem development. The Rights of
Development (RODs) were obtained for the first phase development of a shopping
centre and developments should be made in the new financial year. Despite the
present economic climate there is still a definite need for the envisaged
facility in the area. Taking the development period into consideration the
timing should be ideal to coincide with a more positive economic environment.
Subsequent developments on the site will be done in line with market needs and
the financial viability and sustainability of such developments. The Wartburg
development received a low priority in the past year, but a new initiative with
potential is in the process of finalisation. Once financial viability and
sustainability have been proven a phased approach in line with market needs will
be followed.
3. Change in accounting policy and restatements
The company and the Group have elected to early adopt the IAS 12 amendment and
the effect of the change in accounting policy and restatement is:
Group
2010 2009
Statement of financial position
Opening retained earnings previously reported (222 420 419) (169 749 709)
Increase in opening retained earnings (35 179 506) (33 149 855)
Adjusted opening retained earnings (257 599 925) (202 899 564)
Deferred taxation previously
reported (liability less asset) (79 722 011) (72 425 672)
Decrease in deferred taxation liability 35 179 506 33 149 855
Adjusted deferred taxation
(liability less asset) (44 542 505) (39 275 817)
Statement of comprehensive income
Decrease in taxation (2 029 651)
Increase in total comprehensive income (2 029 651)
Company
2010 2009
Statement of financial position
Opening retained earnings previously reported (121 910 968) (113 759 068)
Increase in opening retained earnings (23 038 064) (22 010 191)
Adjusted opening retained earnings (144 949 032) (135 769 259)
Deferred taxation previously
reported (liability less asset) (52 044 067) (52 672 703)
Decrease in deferred taxation liability 23 038 064 22 010 191
Adjusted deferred taxation
(liability less asset) (29 006 003) (30 662 512)
Statement of comprehensive income
Decrease in taxation (1 027 873)
Increase in total comprehensive income (1 027 873)
4. Dividends
No dividends were paid or declared during the financial period.
5. Linked units issued
No linked units were issued during the reporting period.
6. Change to Board of Directors
There were no changes to the Board of Directors during this period.
7. Prospects
A number of control areas were improved and administrative systems were enhanced
to improve the overall management of the portfolio. The current state of the
economy might inhibit results in the short term, but improved trading conditions
would immediately benefit the portfolio.
New opportunities are evaluated on a regular basis and those with potential
would be pursued to the benefit of the Group.
8. Notice of general meeting
Shareholders are advised that the annual general meeting will be held at 10:00
on Tuesday, 22 November 2011 in the Boardroom, 16th Floor, Orion House, 49
Jorissen Street, Braamfontein, Johannesburg.
Consolidated Statement of Financial Position
as at 30 June 2011
Group
Figures in Rand 2011 2010 (restated) 2009 (restated)
ASSETS
Non-current assets 658 327 455 647 603 731 580 216 276
Investment properties 637 289 209 631 900 000 568 480 000
Property, plant and
equipment 381 114 607 888 625 701
Investments in subsidiaries
and controlled trusts
Deferred tax assets 11 422 94 7 856 492 6 588 970
Other receivables 9 234 191 7 239 351 4 521 605
Current assets 22 333 524 20 603 642 15 138 026
Loans to related parties - 88 487 49 919
Trade and other receivables 22 333 524 20 426 684 14 992 425
Cash and cash equivalents - 88 471 95 682
Total assets 680 660 979 668 207 373 595 354 302
EQUITY AND LIABILITIES
Capital and reserves
Share capital and share
premium 74 235 526 74 235 526 62 288 101
Debenture reserve 10 675 886 10 675 886 15 018 472
Retained earnings 255 758 472 257 599 925 202 899 564
Total equity attributable
to equity holders 340 669 884 342 511 337 280 206 137
Non-controlling interest (180 457) (177 608) (171 185)
Total equity 340 489 427 342 333 729 280 034 952
Non-current liabilities 253 105 391 287 014 242 282 171 442
Linked debentures 55 043 086 49 343 086 38 328 919
Borrowings 145 036 215 185 272 159 197 977 736
Deferred tax liabilities 53 026 090 52 398 997 45 864 787
Current liabilities 87 066 161 38 859 402 33 147 908
Current income tax
liabilities 6 315 840 2 616 731 1 006 523
Loans from shareholders 1 471 907 1 359 768 12 500 000
Loans from directors 2 598 511 2 898 435 2 639 383
Loans from related parties 1 736 046 777 707 41 934
Tenant deposits 5 939 753 6 245 092 2 211 788
Trade and other payables 16 601 851 9 061 245 5 888 908
Borrowings 51 154 229 15 900 424 8 859 372
Bank overdraft 1 248 024 - -
Total liabilities 340 171 552 325 873 644 315 319 350
Total equity and
liabilities 680 660 979 668 207 373 595 354 302
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2011
Group
Figures in Rand 2011 2010 (restated)
Revenue 82 042 959 75 079 731
Other income 1 753 375 353 991
Other direct property operating costs (49 416 333) (33 743 971)
Administrative expenses (11 395 598) (11 201 241)
Repairs and maintenance (3 476 676) (5 172 244)
Profit distribution from controlled trust - -
Net gain from fair value adjustments on
investment property 2 089 209 63 420 000
Operating profit 21 596 936 88 736 266
Finance income 1 803 626 2 558 957
Finance costs (24 371 378) (27 291 056)
(Loss)/Profit before taxation (970 816) 64 004 167
Taxation (873 486) (9 310 229)
(Loss)/Profit for the year (1 844 302) 54 693 938
Other comprehensive income - -
Total comprehensive income for the year (1 844 302) 54 693 938
Profit and total comprehensive income for
the year attributable to:
Equity holders of the company (1 841 453) 54 700 361
Non-controlling interest (2 849) (6 423)
(1 844 302) 54 693 938
Consolidated Statement of Cash Flows
for the year ended 30 June 2011
Group
Figures in Rand 2011 2010
Cash flows from operating activities 994 850 1 045 172
Cash generated by/(utilised in) operations 19 779 962 24 610 065
Interest paid (18 671 378) (22 820 343)
Taxation paid (113 734) (744 550)
Cash flows from investing activities 1 603 968 3 914 937
Profit distribution from Orion Property Holdings
Trust - -
Loans advanced to group companies - -
Repayment of loans from group companies - -
Proceeds from/(Repayment of) loans from
shareholders 112 138 1 319 276
(Repayment of)/Proceeds from loans from directors (299 924) 259 052
Interest received 1 803 626 2 558 957
Purchases of property, plant and equipment (11 872) (222 348)
Cash flows from financing activities (3 935 313) (4 967 320)
Interest-bearing borrowings repaid (40 235 944) (12 705 577)
Proceeds from/(Repayment of) loans
from shareholders 1 046 826 697 205
Short-term portion of interest-bearing
borrowings raised 35 253 805 7 041 052
Net (decrease)/increase in cash and
cash equivalents (1 336 495) (7 211)
Cash and cash equivalents at the beginning
of the year 88 471 95 682
Cash and cash equivalents at the end of the year (1 248 024) 88 471
Investing and financing transactions that did not require the use of cash and
cash are excluded from the cash flow statement.
Consolidated Statement of Changes in Equity
for the year ended 30 June 2011
GROUP
Share Share
Figures in Rand capital premium
Opening balance previously reported - 1 July 2008 2 179 164 3 516 635
Prior period adjustments to deferred taxation - -
Issue of linked units 3 578 849 53 013 453
Issue of linked debentures - -
Issue of equity portion of linked debentures - -
Deferred taxation on equity portion of linked
debentures issued - -
Prior period restatement - deferred taxation on
building revaluations - -
Total comprehensive income for the year - -
Balance at 30 June 2009 5 758 013 56 530 088
Issue of linked units 512 085 11 435 340
Issue of linked debentures - -
Issue of equity portion of linked debentures - -
Deferred taxation on equity portion of linked
debentures issued - -
Prior period restatement - deferred taxation on
building revaluations - -
Total comprehensive income for the year - -
Balance at 30 June 2010 6 270 098 67 965 428
Total comprehensive income for the year - -
Balance at 30 June 2011 6 270 098 67 965 428
Total
share capital Debenture
Figures in Rand and premium reserve
Opening balance previously reported - 1 July 2008 5 695 799 30 397 932
Prior period adjustments to deferred taxation - -
Issue of linked units 56 592 302 -
Issue of linked debentures - (15 379 460)
Issue of equity portion of linked debentures - (21 360 361)
Deferred taxation on equity portion of linked
debentures issued - 5 980 901
Prior period restatement - deferred taxation on
building revaluations - -
Total comprehensive income for the year - -
Balance at 30 June 2009 62 288 101 15 018 472
Issue of linked units 11 947 425 -
Issue of linked debentures - (4 342 586)
Issue of equity portion of linked debentures - (6 031 369)
Deferred taxation on equity portion of linked
debentures issued - 1 688 783
Prior period restatement - deferred taxation on
building revaluations - -
Total comprehensive income for the year - -
Balance at 30 June 2010 74 235 526 10 675 886
Total comprehensive income for the year - -
Balance at 30 June 2011 74 235 526 10 675 886
Retained
Figures in Rand earnings Total
Opening balance previously reported - 1 July 2008 44 693 146 80 786 877
Prior period adjustments to deferred taxation 11 149 910 11 149 910
Issue of linked units - 56 592 302
Issue of linked debentures - (15 379 460)
Issue of equity portion of linked debentures - (21 360 361)
Deferred taxation on equity portion of linked
debentures issued - 5 980 901
Prior period restatement - deferred taxation on
building revaluations 21 999 945 21 999 945
Total comprehensive income for the year 125 056 563 125 056 563
Balance at 30 June 2009 202 899 564 280 206 137
Issue of linked units - 11 947 425
Issue of linked debentures - (4 342 586)
Issue of equity portion of linked debentures - (6 031 369)
Deferred taxation on equity portion of linked
debentures issued - 1 688 783
Prior period restatement - deferred taxation on
building revaluations 2 029 651 2 029 651
Total comprehensive income for the year 52 670 710 52 670 710
Balance at 30 June 2010 257 599 925 342 511 337
Total comprehensive income for the year (1 841 453) (1 841 453)
Balance at 30 June 2011 255 758 472 340 669 884
Non-
controlling Total
Figures in Rand interest equity
Opening balance previously reported - 1 July 2008 (60 522) 80 726 355
Prior period adjustments to deferred taxation - 11 149 910
Issue of linked units - 56 592 302
Issue of linked debentures - (15 379 460)
Issue of equity portion of linked debentures - (21 360 361)
Deferred taxation on equity portion of linked
debentures issued - 5 980 901
Prior period restatement - deferred taxation on
building revaluations - 21 999 945
Total comprehensive income for the year (110 663) 124 945 900
Balance at 30 June 2009 (171 185) 280 034 952
Issue of linked units - 11 947 425
Issue of linked debentures - (4 342 586)
Issue of equity portion of linked debentures - (6 031 369)
Deferred taxation on equity portion of linked
debentures issued - 1 688 783
Prior period restatement - deferred taxation on
building revaluations - 2 029 651
Total comprehensive income for the year (6 423) 52 664 287
Balance at 30 June 2010 (177 608) 342 333 729
Total comprehensive income for the year (2 849) (1 844 302)
Balance at 30 June 2011 (180 457) 340 489 427
Segment Report
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the managing
director in consultation with the Board of Directors. The chief operating
decision-maker evaluates and reports on the Group results per individual
property trial balance on a monthly basis. It was decided not to list all
buildings separately but based on the specific industry due to practicality.
The risks and rewards faced by the entity relate primarily to the operating
segments being retail, commercial, industrial, residential and hospitality.
Lettable space is classified as retail, commercial, industrial, residential or
hospitality according to the nature of the tenants.
2011 2010
R % R %
Revenue (excluding
operating lease adjustment
and recoveries)
Commercial 30 176 545 46 29 995 582 30
Industrial 10 426 671 16 8 201 324 22
Retail 17 251 689 26 15 312 762 34
Hospitality 7 518 105 11 6 717 475 13
Residential 448 853 1 279 999 1
65 821 863 100 60 507 142 100
Profit before taxation
Commercial (10 960 421) 1 129 11 619 314 18
Industrial 6 661 319 (686) 6 139 108 10
Retail 6 581 746 (678) (16 003 971) (25)
Hospitality 10 920 169 (1 125) 4 733 918 7
Residential (2 204 070) 227 (2 469 306) (4)
Land (11 969 560) 1 233 59 985 104 94
(970 817) 100 64 004 166 100
Property values
Commercial 245 385 507 39 253 028 923 40
Industrial 83 497 000 13 80 200 000 13
Retail 148 876 012 23 141 145 038 22
Hospitality 61 843 786 10 53 615 167 8
Residential 45 686 904 7 43 910 872 7
Land 52 000 000 8 60 000 000 9
637 289 209 100 631 900 000 100
Borrowings (excluding
instalment sales)
Commercial 86 441 152 44 88 747 346 44
Industrial 35 159 462 18 35 750 179 18
Retail 46 723 253 24 58 025 817 29
Hospitality 16 565 844 8 18 019 296 9
Residential 10 584 883 5 - -
195 474 594 100 200 542 638 100
Rating of tenants
(rental income)
Commercial A 9 785 061 18 4 605 712 9
B 11 136 738 21 6 818 008 14
C 14 650 633 27 11 828 239 24
Industrial A - - - -
B 664 326 1 1 017 454 2
C 613 797 1 6 079 547 13
Retail A 2 978 364 6 1 959 368 4
B 870 222 2 3 897 462 8
C 6 912 667 13 7 027 655 14
Hospitality A 879 153 2 - -
B 2 122 181 4 3 424 326 7
C 2 776 990 5 1 658 023 3
Residential A - - - -
B - - - -
C 448 853 1 279 999 1
53 838 985 100 48 595 793 100
A: Represents major listed companies
B: Represents smaller listed companies and big unlisted companies
C: Represents smaller unlisted companies and private businesses
By order of the board
29 September 2011
Directors
R S Wilkinson, F M Viruly, A Boessenkool, A C Gmeiner, F Gmeiner (MD),
C B Nolte (FD)
Company secretary and registered office
Corporate Governance Facilitators CC
Sponsor
Arcay Moela Sponsors (Pty) Ltd
Transfer office
Computershare Investor Services (Pty) Ltd
Johannesburg
29 September 2011
Designated Advisor
Arcay Moela Sponsors (Proprietary) Limited
(Registration number 2006/033725/07)
Date: 30/09/2011 07:05:57 Supplied by www.sharenet.co.za
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