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ING - Ingenuity Property Investments Limited - Unaudited Consolidated Interim

Release Date: 07/05/2012 15:10
Code(s): 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 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. 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