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INGENUITY PROPERTY INVESTMENTS LTD - Preliminary audited summarised consolidated results for the year ended 31 August 2012

Release Date: 15/11/2012 16:28
Code(s): ING     PDF:  
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Preliminary audited summarised consolidated results for the year ended 31 August 2012

INGENUITY PROPERTY INVESTMENTS LIMITED
Registration number 2000/018084/06
Share code: ING
ISIN: ZAE000127411
("Ingenuity") ("the Company")

PRELIMINARY AUDITED SUMMARISED CONSOLIDATED RESULTS 
for the year ended 31 August 2012

                                                                 2012           2011
KEY FINANCIAL INDICATORS                                        R000          R000
Total contractual rental income                                64 976         53 882
Investment property portfolio value                           743 086        593 728
Investment property held for sale                                   -          3 000
Development property                                          286 562        158 701
Borrowings                                                    522 334        351 384
Loan to value ratio                                               46%            45%
Market capitalisation at year end                             443 130        342 446
Earnings per share                                          9.0 cents      5.0 cents
Headline earnings per share                                 1.6 cents      1.8 cents
Net asset value per share                                    75 cents       68 cents

PRELIMINARY SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 August 2012
                                                                   2012          2011
                                                                  R000         R000
ASSETS
Non-current assets                                            1 065 960       782 948
Investment properties                                           743 086       593 728
Straight-line lease accrual                                      26 853        21 596
Investment properties under development                         286 562       158 701
Equipment                                                            75            20
Loans receivable                                                  9 384         8 903
Current assets                                                   37 038         7 182
Trade and other receivables                                       3 721           806
Investment property held for sale                                     -         3 000
Straight-line lease accrual                                       1 093             -
Tax receivable                                                    1 557             -
Cash and cash equivalents                                        30 667         3 376
Total assets                                                  1 102 998       790 130
EQUITY AND LIABILITIES
Shareholders interest                                          504 654       402 922
Share capital                                                     7 385         6 585
Share premium                                                   321 024       281 824
Treasury shares                                                (34 928)      (34 928)
Non-distributable reserve                                       108 813        65 773
Share option reserve                                                863           863
Retained earnings                                                94 520        75 784
Total equity attributable to equity holders of the parent       497 677       395 901
Minority interest                                                 6 977         7 021
Non-current liabilities                                         553 805       381 081
Borrowings                                                      509 130       351 384
Financial instruments                                            10 152        15 349
Deferred tax                                                     34 523        14 348
Current liabilities                                              44 539         6 127
Trade and other payables                                         27 236         3 131
Current portion of borrowings                                    13 204             -
Prepaid rent received                                             4 099         2 943
Tax payable                                                           -            53
Total equity and liabilities                                  1 102 998       790 130

PRELIMINARY SUMMARISED CONSOLIDATED INCOME STATEMENT
for the year ended 31 August 2012
                                                                   2012          2011
                                                                  R000         R000
Revenue                                                          71 898        59 058
- Contractual                                                    64 976        53 882
- Straight-lining                                                 6 922         5 176
Net operating expenses                                         (23 242)      (18 211)
Profit before fair value adjustments                             48 656        40 847
Fair value adjustments to investment properties                  62 760        21 615
Profit before interest and taxation                             111 416        62 462
Interest received                                                 1 228         1 775
Interest paid                                                  (34 039)      (27 067)
Profit before taxation                                           78 605        37 170
Taxation                                                       (20 295)       (7 388)
Profit for the year                                              58 310        29 782
Attributable to:
Equity holders of the parent                                     58 034        29 533
Minority interest                                                   276           249
                                                                 58 310        29 782

                                                                  Cents         Cents
Basic and diluted earnings per share                                9.0           5.0
Comments to the Income Statement
1. Headline and Diluted headline earnings per share                 1.6           1.8
2. The calculation of earnings per share is based on a 
weighted average number of 645 573 057 (2011: 593 080 961) 
shares in issue during the year. The actual number of shares 
in issue at the year-end is 738 550 000 (2011: 658 550 000).
Headline earnings are calculated as follows:
Earnings attributable to equity holders                          58 034        29 533
Fair value adjustments to investment properties                (62 760)      (21 615)
Deferred tax on fair value adjustments                           11 105         3 027
Deferred tax on change in Capital Gains Tax rate                  4 016             -
                                                                 10 395        10 945
                            
PRELIMINARY SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 August 2012
                                                                   2012          2011
                                                                  R000         R000
Profit for the year                                              58 310        29 782
Other comprehensive income:
Cash flow hedges                                                  5 197           550
Income tax relating to components of other comprehensive income (1 455)         2 238
Other comprehensive income for the year, net of tax               3 742         2 788
Total comprehensive income for the year                          62 052        32 570
Total comprehensive income attributable to:
Equity holders of the parent                                     61 776        32 321
Minority interest                                                   276           249
                                                                 62 052        32 570

PRELIMINARY SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 August 2012 
                                                                          Non-distri-
                                      Share         Share      Treasury       butable
                                    capital       premium        shares       reserve
                                      R000         R000         R000         R000
GROUP
Balance at 1 September 2010           6 585       281 824      (27 254)        40 829
Changes in equity                         -             -       (7 674)        24 944
Decrease in minority interest             -             -             -             -
Total comprehensive income for the year   -             -             -         2 788
- other comprehensive income, 
net of tax: cash flow hedges              -             -             -         2 788
- net profit for the year                 -             -             -             -
Purchase of treasury shares               -             -       (7 674)             -
Transfer to non-distributable reserve
- fair value adjustments to 
investment properties                     -             -             -        22 156
Balance at 31 August 2011             6 585       281 824      (34 928)        65 773
Changes in equity                       800        39 200             -        43 040
Decrease in minority interest             -             -             -             -
Total comprehensive income for the year   -             -             -         3 742
- other comprehensive income, net 
of tax: cash flow hedges                  -             -             -         3 742
- net profit for the year                 -             -             -             -
Issue of 80 000 000 shares              800        39 200             -             -
Transfer to non-distributable reserve
- fair value adjustments to 
investment properties                     -             -             -        42 496
Realisation of non-distributable 
reserve
- fair value adjustments 
realised on properties sold               -             -             -       (3 198)
Balance at 31 August 2012             7 385       321 024      (34 928)       108 813
Comprising:
Fair value reserve                                                            116 165
Net hedging reserve                                                           (7 352)
                                                                              108 813

                                      Share
                                     option      Retained      Minority
                                    reserve        income      interest         Total
                                      R000         R000         R000         R000
GROUP
Balance at 1 September 2010             863        68 407         7 117       378 371
Changes in equity                         -         7 377          (96)        24 551
Decrease in minority interest             -             -         (345)         (345)
Total comprehensive income for 
the year                                  -        29 533           249        32 570
- other comprehensive income, net 
of tax: cash flow hedges                  -             -             -         2 788
- net profit for the year                 -        29 533           249        29 782
Purchase of treasury shares               -             -             -       (7 674)
Transfer to non-distributable reserve     -             -             -             -
- fair value adjustments to 
investment properties                     -      (22 156)             -             -
Balance at 31 August 2011               863        75 784         7 021       402 922
Changes in equity                         -        18 736          (44)       101 732
Decrease in minority interest             -             -         (320)         (320)
Total comprehensive income for the year   -        58 034           276        62 052
- other comprehensive income, net 
of tax: cash flow hedges                  -             -             -         3 742
- net profit for the year                 -        58 034           276        58 310
Issue of 80 000 000 shares                -             -             -        40 000
Transfer to non-distributable reserve
- fair value adjustments to 
investment properties                     -      (42 496)             -             -
Realisation of non-distributable 
reserve 
- fair value adjustments 
realised on properties sold               -         3 198             -             -
Balance at 31 August 2012               863        94 520         6 977       504 654

PRELIMINARY SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 August 2012
                                                                   2012          2011
                                                                  R000         R000
Cash flows from operating activities
Cash generated from operations                                   65 595        39 062
Interest received                                                   427         1 409
Interest paid                                                  (34 907)      (26 838)
Taxation paid                                                   (3 186)       (2 260)
Net cash inflow from operating activities                        27 929        11 373
Cash flows from investing activities
Additions to equipment                                             (95)             -
Acquisitions/additions to investment properties               (129 561)      (98 635)
Acquisitions/additions to investment properties 
under development                                             (126 854)      (62 702)
Proceeds on disposal of investment properties                    44 743             -
Decrease in financial assets                                          -         6 500
Net cash outflow from investing activities                    (211 767)     (154 837)
Cash flows from financing activities
Proceeds from the issue of shares                                40 000             -
Treasury shares purchased                                             -       (7 674)
Financial liabilities raised                                    171 129       148 575
Net cash inflow from financing activities                       211 129       140 901
Net increase (decrease) in cash and cash equivalents             27 291       (2 563)
Cash and cash equivalents at beginning of year                    3 376         5 939
Cash and cash equivalents at end of year                         30 667         3 376

PRELIMINARY SUMMARISED CONSOLIDATED SEGMENTAL INFORMATION
at 31 August 2012
                                                Segmental                   Segmental
                                                operating                   operating
                                                   profit                      profit
                                    Revenue    before tax       Revenue    before tax
                                       2012          2012          2011          2011
                                      R000         R000         R000         R000
Offices                              40 804        72 384        30 849        39 357
Retail                               11 937        25 172        10 718         7 273
Industrial                            1 755         1 858         3 704         4 788
Gym                                   3 177         6 531         2 960         4 218
Parking                               6 671        13 857         5 629         8 752
Other                                   632       (7 325)            22         (165)
                                     64 976       112 477        53 882        64 223

Reconciliation to profit for the year in the preliminary consolidated income statement:
                                                                   2012          2011
                                                                  R000         R000
Total segmental operating profit before tax                     112 477        64 223
Unsegmental operating expenses                                  (7 983)       (6 937)
Interest received                                                 1 228         1 775
Interest paid                                                  (34 039)      (27 067)
                                                                 71 683        31 994
Straight-lining                                                   6 922         5 176
Profit before tax                                                78 605        37 170

SEGMENTAL INFORMATION
at 31 August 2012
                                                                   2012          2011
                                                                  R000         R000
PROPERTY ASSETS                                                                          
Offices                                                         537 758       379 857
Retail                                                          114 337       101 283
Industrial                                                            -        34 424
Gym                                                              41 000        37 000
Parking                                                          77 607        65 524
Other                                                               330           236
                                                                771 032       618 324

COMMENTARY
1. PRESENTATION OF PRELIMINARY SUMMARISED CONSOLIDATED FINANCIAL RESULTS
The preliminary summarised consolidated financial results for the year ended 
31 August 2012 have been prepared in accordance with International Accounting 
Standard 34: Interim Financial Reporting, the Listings Requirements of the 
JSE Limited, the AC500 Standards as issued by the Accounting Practices Board and 
the South African Companies Act, 2008, as amended.

The accounting policies applied in the presentation of the preliminary summarised 
financial results are consistent with those applied for the year ended 31 August 2012. 
The preliminary financial results should be read in conjunction with those accounting 
policies. These, together with the methods of computation, are in terms of 
International Financial Reporting Standards (IFRS) as issued by the International 
Accounting Standards Board.

Mazars, the Company's auditors, have audited the consolidated annual financial 
statements for the year ended 31 August 2012. These preliminary summarised 
consolidated financial statements have been extracted from the audited consolidated 
annual financial statements for the purposes of this announcement. Mazars' unqualified 
audit report is available for inspection at the registered office of the company.

During the current year, the property portfolio valuation increased by R62.8 million 
(2011: R21.6 million) as a result of the developments undertaken by the Company, which 
have enhanced the values of the development properties and those in the surrounding 
precincts owned by the Company.

2. GENERAL REVIEW OF OPERATIONS
Continued uncertainty prevails in economic markets and growth in most countries 
remains subdued. Despite these circumstances Ingenuity has remained steadfast in its 
course and delivered a solid financial result for the year. We have grown our core 
asset base by 24% and embarked on further developments that when completed will add 
further value exceeding R500 million to the asset base. The Company is well positioned 
for growth with additional exciting opportunities to further grow the business. Our 
goal is to create an enduring long-term business, continually seeking to maximise 
shareholder wealth and net asset growth.

The year ended 31 August 2012 delivered solid performance and significant inroads have 
been made particularly on the development side of the business where it has always 
been stated as a core activity of the Company.  During the year under review the total 
asset base including development assets increased in value by R277.2 million or 36.8%, 
whilst borrowings were maintained at conservative levels. The three developments which 
are currently in progress, namely the redevelopment of Newspaper House situated in 
St Georges Mall, Cape Town; the redevelopment of Atlantic Centre situated in Culemborg 
on the Foreshore, Cape Town; and the development of a third building on the Santam 
site in Tyger Valley will all be completed in the new financial year and will 
substantially enhance our net rental base. 

Property held for development remains a major component of the asset base and 
management remains focused to unlock and realise these non-income producing assets. 
The two opportunities held are situated at prime locations and we are confident that 
they will add value to the Company.

Our core strategy to remain focused in the Western Cape places us in a unique position 
relative to our peers. This enables us to extract maximum value in a region where we 
are well networked and positioned to take advantage of opportunities when they arise. 

3. BORROWINGS
The Company achieved a weighted average borrowing cost of 9.04% (2011: 9.8%) for the 
current year. Total borrowings at year-end amounted to R522.3 million 
(2011: R351.4 million) of which R200 million is fixed at an all-inclusive rate of 
10.65% until November 2013. The balance remains floating at rates linked to prime. 
The increase in borrowings for the current year came about as a result of the 
acquisition of Newspaper House and the additional development funding used for 
Atlantic Centre and Building 3 on the Santam site. 

Total cash on hand at year-end amounted to R30.7 million (2011: R3.4 million). Excess 
cash is applied to reduce borrowings or to grow the asset base where appropriate.

The Companys gearing ratio is 46% (2011: 45%) at year-end. This is considered 
acceptable considering the development nature of the Company and the fact that 
we seek to grow the business through leverage of the existing asset base.

4. PROPERTY PORTFOLIO ACTIVITIES
INVESTMENT PROPERTIES
ATLANTIC CENTRE, REEDS, 31 AND 33 MARTIN HAMMERSCHLAG WAY
This significant grouping of four properties situated in the heart of Culemborg on 
the Cape Town Foreshore area has made available substantial additional bulk for 
development. During the year under review, the commencement of the redevelopment of 
Atlantic Centre was implemented. The scheme comprises a total revamp and includes an 
extension to the existing structure by adding four floors. The total capital 
expenditure of this project is estimated to be R156.4 million.  On completion, the 
building will provide 11 000 sqm of attractive A-grade space. Marketing has commenced 
and keen interest in the building has been received. Completion of this project is 
expected to take place in the second quarter of 2013. 
 
The extension of the Reeds building will be a second phase of the development and 
utilisation of the bulk on the site. Planning is well underway to add a further four 
floors of parking to the existing Reeds structure. This phase will use over 18 000 sqm 
of bulk. The parking will serve the newly completed Atlantic Centre offices and the 
planned future office extension of the Reeds building. This grouping of properties 
remains strategically situated and represents a significant holding of the portfolio 
with attractive upside still in hand.

SANTAM BUILDING 3  TYGER VALLEY
Construction of this new building commenced in November 2011 and is due for completion 
in March 2013. 

On completion, the building will provide an additional 10 639 sqm of premium grade 
space. Over 80% of the building has already been pre-let to Santam Ltd and 
Glacier Financial Holdings (Pty) Ltd for long-term lease periods. The new Building 3, 
combined with those that are already owned and let to Santam on the rest of the site, 
represents a significant and core holding of Ingenuitys portfolio. On completion, 
the total scheme will comprise 27 847 sqm of GLA with 1 037 parking bays. 

The new building is also set to become one of Ingenuitys first 4-star, Green Rated 
buildings and represents a significant milestone in our development history. 

VIRGIN ACTIVE
Application for the additional development rights for this site is well underway. 
The public participation process that was required has commenced and has received 
favourable response thus far. This process is likely to be completed during the next 
financial year. Once approved, this will add significant value to the site, as the 
combined erven will have over 22 000 sqm of available bulk for development. The 
building situated on the land remains well let and provides a solid return.

DEVELOPMENT PROPERTIES
1 DOCK ROAD
Marketing of this prime city site remains a core focus. Together with 
Redefine Properties Ltd, our joint venture partner, we continue to seek to secure 
suitable tenants to obtain an acceptable pre-let percentage required to commence 
development. The site is situated adjacent to the Portside Development of Old Mutual 
and FNB where development has commenced for the erection of Cape Towns tallest 
building. This development is likely to provide a catalyst for our scheme.

ERF 38746 TYGER VALLEY
Marketing of the development of this site is ongoing. Interest in the area remains 
subdued and we continue to seek ways to realise this investment.

ACQUISITIONS
During the year under review Newspaper House, situated in St Georges Mall, Cape Town, 
was acquired for a consideration totalling R86 million funded in part by the issue of 
80 million shares at 50 cents each. This historic landmark property provided a unique 
opportunity to be upgraded and to convert old industrial space into A-grade offices 
and retail premises. On-site parking has also been created in the basement of the 
building. The total building has just over 14 000 sqm of GLA. The refurbishment 
commenced in March 2012 and is due for completion at the end of October 2012. The 
total estimated capital expenditure on the property is R155.8 million. The property 
has been well let on long-term leases to Independent Newspapers and Fruit and 
Veg City Holdings as core tenants. Other tenants are Groupon and Serco BPO. 

DISPOSALS
During the year under review, the Midas Port Elizabeth property, the Natural Stone 
Warehouse property in Paarden Eiland and the Mobile Road property situated in 
Airport Industria Cape Town were sold. The combined net consideration of R43.1 million 
was applied to reduce debt through reducing access facilities and then used partly to 
fund the new acquisitions and associated development costs. The properties were 
considered to be non-core and provided an opportunity to realise some good profits 
and allow funds to be applied elsewhere.

PORTFOLIO INFORMATION
VACANCIES
Vacancies amount to 14% (2011: 10%) of the total GLA of the portfolios. The retail 
component has been let as from 1 November 2012. The office vacancy is largely made up 
of space at Newspaper House which was under refurbishment and not completed for 
occupation at year-end. 50% of this space has subsequently been leased with effect 
from 1 November 2012. No significant vacancies are anticipated in the forthcoming 
financial year.

LEASE EXPIRY PROFILE
The lease expiries for the financial year 2012 equates to 6% of the total GLA, and to 
12% of revenue of the portfolio. Management continue to strive to renew all expiries 
as they arise.

COST-TO-INCOME RATIOS
Gross expenses are reflected as a percentage of gross income including recoveries. The 
net cost-to-revenue ratio of 14% (2011: 9%) is what the company carries as a landlord. 
These ratios are within acceptable norms for the industry. 

SECTORAL SPREAD OF THE PORTFOLIO
The concentration of the portfolio is in the office (68%) (2011: 51%) and retail (26%) 
(2011: 32%) sectors. 

GEOGRAPHICAL SPREAD OF THE PORTFOLIO
In line with our core strategy, 100% of the Companys buildings are situated in the 
Western Cape.

6. PROSPECTS
Broader economic factors continue to place negative pressures on growth. Ingenuity, 
however, remains well poised for expansion. The significant development activity 
undertaken in the past year should enhance our asset base substantially and ultimately 
reward shareholders in the forthcoming periods.

The above information has not been reported on by the Companys auditors.

7. DIVIDENDS TO SHAREHOLDERS
In respect of the current year, the Board of directors have declared a maiden cash 
dividend of 1 cent per share, to be paid to shareholders who are registered on the 
record date of 14 December 2012. The total estimated dividend to be paid by the 
Company is R7.385 million. 

The dividend has been declared from income reserves and no Secondary Tax on Companies 
credits have been used. A dividend withholding tax of 15% will be applicable to all 
shareholders who are not exempt. 

Company tax reference number                    9635/047/14/6
Gross cash dividends per share                  1 cent
Net cash dividend amount per share              0.85 cents 
Issued number of shares                         738 550 000
Last day to trade cum dividend                  Friday, 7 December 2012
First day to trade ex dividend                  Monday, 10 December 2012
Record date                                     Friday, 14 December 2012
Payment date                                    Tuesday, 18 December 2012

Shares may not be dematerialised or rematerialised between Monday, 10 December 2012 
and Friday, 14 December 2012, both days inclusive.

For and on behalf of the Board

ARNOLD AARON MARESKY                            MARK WAGENHEIM
Chief Executive Officer                         Chief Financial Officer
Cape Town
12 November 2012

PREPARER OF THE PRELIMINARY SUMMARISED CONSOLIDATED RESULTS
In compliance with the disclosure requirements of the Companies Act, No 71 of 2008, 
these preliminary summarised consolidated results have been prepared by the Chief 
Financial Officer, Mr M Wagenheim B.Com (Hons), CTA, CA (SA).

Directors: RC Squire-Howe (Chairman)*, AJ Branch * (British), J Bielich,
LH Cohen*, DB Fabian*, AA Maresky (CEO), RS Schur*, M Wagenheim
*Non-executive

Company secretary: M Wagenheim

Registered office: 
Suite 102, 1st Floor Intaba Building, 25 Protea Road, Claremont, Cape Town, 7708.

Postal address:       
Suite 102, 1st Floor Intaba Building, 25 Protea Road, Claremont, Cape Town, 7708.

Contact details:      
Tel: 021 674 5170. Fax: 021 674 5135.
e-mail: info@ingenuityproperty.com
www.ingenuityproperty.com

Transfer secretaries: 
Computershare Investor Services (Pty) Ltd
70 Marshall Street, Johannesburg, 2001. (PO Box 61051, Marshalltown, 2107)

Bank:                 
ABSA Bank Ltd, 1st Floor Tijgerpark IV Building,
Willie van Schoor Drive, Tyger Valley, Bellville, 7530.
(PO Box 4453, Tyger Valley, 7536)

Investment bank and sponsor: 
Nedbank Capital, a division of Nedbank Ltd
3rd Floor, Corporate Place, Nedbank Sandton,
135 Rivonia Road, Sandton, 2196. (PO Box 1144, Johannesburg, 2000)

Auditors: 
Mazars, Mazars House, Rialto Road, Grand Moorings Precinct, Century City, 
Cape Town, 7441. (PO Box 2785, Cape Town, 8000)

Attorneys: 
Edward Nathan Sonnenbergs Inc., 1 North Wharf Square, Loop Street,
Cape Town, 8001. (PO Box 2293, Cape Town, 8000)

Date: 15/11/2012 04:28:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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