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Reviewed condensed consolidated interim results for the six monhts ended 28 February 2013
INGENUITY PROPERTY INVESTMENTS LIMITED
("the Company" or "Ingenuity")
(Incorporated in the Republic of South Africa)
Registration number: 2000/018084/06
JSE share code: ING
ISIN: ZAE000127411
REVIEWED CONDENSED CONSOLIDATED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 28 FEBRUARY 2013
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AT 28 FEBRUARY 2013
Reviewed Unaudited Audited
6 months 6 months year
ended ended ended
28 Feb 13 29 Feb 12 31 Aug 12
R'000 R'000 R'000
ASSETS
Non-current assets 1 179 020 859 109 1 065 960
Investment properties 767 925 645 059 743 086
Straight-line lease accrual 30 935 24 627 26 853
Investment properties under development 370 485 180 226 286 562
Equipment 86 81 75
Loans receivable 9 589 9 116 9 384
Current assets 18 413 49 381 37 038
Trade and other receivables 2 950 1 228 3 721
Investment property held for sale - 41 500 -
Straight-line lease accrual 223 - 1 093
Tax receivable 2 822 998 1 557
Cash and cash equivalents 12 418 5 655 30 667
Total assets 1 197 433 908 490 1 102 998
EQUITY AND LIABILITIES
Shareholders' interest 506 594 447 518 504 654
Ordinary share capital and share premium 328 409 328 409 328 409
Treasury shares (34 928) (34 928) (34 928)
Non-distributable reserve 111 584 64 507 108 813
Share option reserve - 863 863
Retained earnings 94 604 81 697 94 520
Total equity attributable to equity holders
of the parent 499 669 440 548 497 677
Non-controlling interest 6 925 6 970 6 977
Non-current liabilities 650 163 451 582 553 805
Borrowings 605 283 419 385 509 130
Financial instruments 6 303 11 531 10 152
Deferred tax 38 577 20 666 34 523
Current liabilities 40 676 9 390 44 539
Trade and other payables 37 831 6 600 27 236
Current portion of borrowings - - 13 204
Prepaid rent received 2 845 2 790 4 099
Total equity and liabilities 1 197 433 908 490 1 102 998
Net asset value per share (based on shares in
issue at end of period/year net of treasury shares) 76 67 75
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 28 FEBRUARY 2013
Reviewed Unaudited Audited
6 months 6 months year
ended ended ended
28 Feb 13 29 Feb 12 31 Aug 12
R'000 R'000 R'000
Revenue 39 989 34 925 71 898
Contractual 36 777 31 322 64 976
Straight-lining 3 212 3 603 6 922
Net operating expenses (14 896) (11 199) (23 242)
Profit before fair value adjustments 25 093 23 726 48 656
Fair value adjustments to investment properties - 338 62 760
25 093 24 064 111 416
Interest received 1 003 545 1 228
Interest paid (16 877) (16 497) (34 039)
Profit before taxation 9 219 8 112 78 605
Taxation (2 977) (6 084) (20 295)
Profit for the period/year 6 242 2 028 58 310
Attributable to:
Equity holders of the parent 6 087 1 898 58 034
Non-controlling interest 155 130 276
6 242 2 028 58 310
Profit for the period/year 6 242 2 028 58 310
Other comprehensive income:
Cash flow hedges 3 849 3 818 5 197
Income tax relating to components of other
comprehensive income (1 078) (1 069) (1 455)
Other comprehensive income for the period/year,
net of tax 2 771 2 749 3 742
Total comprehensive income for the period/year 9 013 4 777 62 052
Total comprehensive income attributable to:
Equity holders of the parent 8 858 4 647 61 776
Non-controlling interest 155 130 276
9 013 4 777 62 052
Total shares in issue 738 550 000 738 550 000 738 550 000
Number of shares in issue, net of
treasury shares 669 616 773 669 616 773 669 616 773
Weighted average number of shares 669 616 773 621 265 125 645 573 057
Basic and diluted earnings per share (cents) 0.9 0.3 9.0
Headline earnings
Headline and diluted headline earnings per
share (cents) 0.9 0.9 1.6
Workings
Headline earnings are calculated as follows:
Earnings attributable to equity holders 6 087 1 898 58 034
Fair value adjustment of investment properties - (338) (62 760)
Deferred tax on fair value adjustment - 52 11 105
Deferred tax on change in capital gains tax rate - 4 016 4 016
Adjusted earnings for HEPS 6 087 5 628 10 395
STATEMENTS OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 28 FEBRUARY 2013
Share Non-dis- Share
capital Treasury tributable option
and premium shares reserve reserve
R'000 R'000 R'000 R'000
Balance at 1 September 2011 288 409 (34 928) 65 773 863
Changes in equity 40 000 - (1 266) -
(Decrease) in minority interest - - - -
Total comprehensive income for the period - - 2 749 -
- other comprehensive income,
net of tax: cash flow hedges - - 2 749 -
- net profit for the period - - - -
Issue of 80 000 000 shares 40 000 - - -
Realisation of non-distributable reserves - - (4 015) -
Balance at 29 February 2012 328 409 (34 928) 64 507 863
Changes in equity - - 44 306 -
(Decrease) in minority interest - - - -
Total comprehensive income for the period - - 993 -
- other comprehensive income,
net of tax: cash flow hedges - - 993 -
- net profit for the period - - - -
Transfer to non-distributable reserve - - 42 496 -
Realisation of non-distributable reserves - - 817 -
Balance at 31 August 2012 328 409 (34 928) 108 813 863
Changes in equity - - 2 771 (863)
(Decrease) in minority interest - - - -
Total comprehensive income for the period - - 2 771 -
- other comprehensive income,
net of tax: cash flow hedges - - 2 771 -
- net profit for the period - - - -
Reclassification of share option reserve - - - (863)
Dividends paid - - - -
Balance at 28 February 2013 328 409 (34 928) 111 584 -
Non-
Retained controlling
earnings interest Total
R'000 R'000 R'000
Balance at 1 September 2011 75 784 7 021 402 922
Changes in equity 5 913 (51) 44 596
(Decrease) in minority interest - (181) (181)
Total comprehensive income for the period 1 898 130 4 777
- other comprehensive income, net of tax:
cash flow hedges - - 2 749
- net profit for the period 1 898 130 2 028
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
Changes in equity 12 823 7 57 136
(Decrease) in minority interest - (139) (139)
Total comprehensive income for the period 56 136 146 57 275
- other comprehensive income, net of tax:
cash flow hedges - - 993
- net profit for the period 56 136 146 56 282
Transfer to non-distributable reserve (42 496) - -
Realisation of non-distributable reserves (817) - -
Balance at 31 August 2012 94 520 6 977 504 654
Changes in equity 84 (52) 1 940
(Decrease) in minority interest - (207) (207)
Total comprehensive income for the period 6 087 155 9 013
- other comprehensive income, net of tax:
cash flow hedges - - 2 771
- net profit for the period 6 087 155 6 242
Reclassification of share option reserve 863 - -
Dividends paid (6 866) - (6 866)
Balance at 28 February 2013 94 604 6 925 506 594
STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2013
Reviewed Unaudited Audited
6 months 6 months year
ended ended ended
Note 28 Feb 13 29 Feb 12 31 Aug 12
R'000 R'000 R'000
Cash flows from operating activities
Cash generated from operations 1 33 207 22 102 65 595
Interest received 2 592 152 427
Interest paid 3 (16 877) (17 365) (34 907)
Taxation paid 4 (1 265) (1 887) (3 186)
Dividends paid (6 866) - -
Net cash inflow from operating activities 8 791 3 002 27 929
Cash flows from investing activities
Additions to equipment (32) (81) (95)
Acquisitions/Additions to investment properties (25 805) (90 986) (129 561)
Acquisitions/Additions to investment properties
under development (83 922) (21 525) (126 854)
Proceeds on disposal of investment properties - 3 000 44 743
Net cash (outflow) from investing activities (109 759) (109 592) (211 767)
Cash flows from financing activities
Proceeds from the issue of shares - 40 000 40 000
Financial liabilities raised 82 719 68 869 171 129
Net cash inflow from financing activities 82 719 108 869 211 129
Net (decrease)/increase in cash and cash
equivalents (18 249) 2 279 27 291
Cash and cash equivalents at the beginning
of the period/year 30 667 3 376 3 376
Cash and cash equivalents at the end of
the period/year 12 418 5 655 30 667
NOTES TO THE STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2013
1 CASH GENERATED FROM OPERATIONS
Profit before taxation 9 219 8 112 78 605
Adjusted for:
Interest received (1 003) (545) (1 228)
Interest paid 16 877 16 497 34 039
Depreciation 21 20 40
Amortisation of finance costs 230 - 690
Amortisation of deferred lease incentive 965 336 785
Amortisation of letting commission 122 122 371
Cash-settled share incentive scheme charge 1 181 - -
Straight-lining of operating leases (income) (3 212) (3 603) (6 922)
Increase in fair value of investment properties - (338) (62 760)
24 400 20 601 43 620
Decrease/(Increase) in trade and other
receivables 649 (544) (3 287)
Increase in trade and other payables 8 158 2 045 25 262
33 207 22 102 65 595
2 INTEREST RECEIVED
Amount outstanding at the beginning of
the period/year 4 094 3 293 3 293
Interest income per income statement 1 003 545 1 228
Amount outstanding at the end of the
period/year (4 505) (3 686) (4 094)
592 152 427
3 INTEREST PAID
Amount outstanding at the beginning of
the period/year - 868 868
Interest income per income statement 16 877 16 497 34 039
Amount outstanding at the end of the period/year - - -
16 877 17 365 34 907
4 TAXATION PAID
Amount outstanding at the beginning of the
period/year (1 557) 53 53
Income statement charge - 836 1 576
Amount outstanding at the end of the
period/year 2 822 998 1 557
1 265 1 887 3 186
SEGMENTAL RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2013
Reviewed Unaudited Audited
6 months 6 months year
ended ended ended
28 Feb 13 29 Feb 12 31 Aug 12
R'000 R'000 R'000
Offices
Segmental revenue 24 979 18 596 40 804
Segmental results 17 766 14 494 72 384
Property assets 569 188 470 415 537 758
Retail
Segmental revenue 6 580 6 192 11 937
Segmental results 5 306 4 815 25 172
Property assets 115 679 93 730 114 337
Industrial
Segmental revenue - 1 636 1 755
Segmental results - 1 618 1 858
Property assets - 41 500 -
Gym
Segmental revenue 1 687 1 571 3 177
Segmental results 1 526 1 377 6 531
Property assets 41 016 37 291 41 000
Parking
Segmental revenue 3 531 3 252 6 671
Segmental results 3 036 2 665 13 857
Property assets 73 200 67 709 77 607
Other
Segmental revenue - 76 632
Segmental results (123) (69) 7 325
Property assets - 542 330
Reconciliation to the profit before interest and
taxation for the period in the income statement
Segmental revenue 39 989 34 925 71 898
Allocated operating expenses (9 266) (6 760) (15 259)
Unallocated operating expenses (5 630) (4 439) (7 983)
Fair value adjustment - 338 62 760
Profit before interest and taxation 25 093 24 064 111 416
NOTES TO THE FINANCIAL STATEMENTS
BASIS OF PREPARATION
The unaudited condensed consolidated financial statements have been prepared in
accordance with and containing the information required by IAS 34: Interim
Financial Reporting, the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee, the Listings Requirements of the JSE Limited 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 in accordance with
International Financial Reporting Standards ("IFRS"), and are consistent with those
applied in the financial statements for the year ended 31 August 2012.
INDEPENDENT AUDITOR'S REPORT
Mazars, Ingenuity's independent auditors, have reviewed the condensed consolidated
interim financial results of Ingenuity and have expressed an unmodified review
conclusion on the condensed consolidated interim financial results. The auditor's
review was conducted in accordance with International Standards of Review Engagements
(ISRE 2410): Review of Interim Information Performed by the independent Auditor of
the entity. The condensed consolidated interim financial results comprise the condensed
consolidated statement of financial position at 28 February 2013, condensed
consolidated statement of comprehensive income, condensed consolidated statement of
changes in equity, condensed consolidated statement of cash flows for the six months
then ended and selected explanatory notes. The review report is available for
inspection at Ingenuity's registered office.
DIRECTORS' COMMENTARY
GENERAL REVIEW
Ingenuity's property portfolio continued to perform well during the period under
review.
The investment property portfolio comprises 67% of the property portfolio and is well
managed with a strong tenant base delivering good quality sustainable contractual
rental income. The remaining 33% comprises property in process of development and
land held for future development. The asset base of the investment property portfolio
has increased by 17% over the comparative period due to the fair value revaluations at
31 August 2012 and the redevelopment of Newspaper House. The current vacancy
percentage is 7.7% consisting of unlet office space in the Foreshore precinct and in
Newspaper House.
PROPERTY ACQUISITIONS AND DEVELOPMENTS
During the period under review the Company concluded an agreement to purchase two
properties situated between Dreyer Street and Main Road Claremont, with transfer being
registered on 24 April 2013. The properties were purchased at a cost of R82 million
and were partly financed out of borrowings and the balance out of the issue of
67 million shares at 61 cents by way of a vendor placement. The property has a gross
lettable area ("GLA") of 7 014 m2 with an initial expected yield of 8%.
The period under review saw three of our major developments being completed or
nearing completion. The total capital expenditure of the three buildings is expected
to be approximately R531 million.
The redevelopment of Newspaper House which began in February 2012 was completed during
November 2012 at a total cost of R146 million which includes tenant installation costs
to date. The property has been well let with long leases to major national and
international tenants. The initial return on capital expenditure is expected to
exceed 10%.
The construction of a new office building which commenced during November 2011 on the
Santam site in Tyger Valley was completed during March 2013. This development will
have a GLA of 10 544 m2 of premium grade office space and has been let primarily to
Santam Limited and Glacier Financial Holdings for a period of ten years, with these
leases commencing 1 August 2013. This property is set to become Ingenuity's first
4-star Green-rated building.
The redevelopment of Atlantic Centre which is situated in the prime Foreshore
precinct, and which commenced during February 2012, is due to be completed during
May 2013. An additional four floors of 1 000 m2 each was added to the existing building
and on completion will deliver approximately 10 374 m2 of premium grade offices and
861 m2 retail accommodation.
All three developments listed above were financed through borrowings out of facilities
granted by Nedbank Limited.
OPERATIONS
Net property income has increased by 12% to R27.5 million (2012: R24.5 million) due
mainly to the mix of properties sold and 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 31% (2012: 48%) of the borrowings are fixed,
with the balance floating. The weighted average rate of interest is 8.4% (2012: 8.2%).
The basic earnings per share is 0.9 cent (2012: 0.3 cent) and the headline earnings
per share is 0.9 cent (2012: 0.9 cent). The headline earnings per share for the
interim period ended 29 February 2012 has been restated. Headline earnings per share
were previously reported at 0.3 cent per share. The restatement of headline earnings
is as a result of Circular 3/2012 issued which states that previously reported
headline earnings are required to be restated in accordance with the requirements of
the most recently issued circular. In the interim period ended 29 February 2012 the
substantively enacted effective capital gains tax rate for companies increased from
14% to 18.67%, the effect of which was not added back to headline earnings per the
previous circular. Adjustments as a result of changes in tax rates must be added back
as per Circular 3/2012 and the comparative headline earnings have been restated.
At the reporting date, the total value of investment properties increased to
R798.9 million (2012: R711.2 million) whilst properties under development and land
held for future development increased to R370.5 million (2012: R180.2 million).
On completion of the developments their related capital costs will be transferred to
investment properties.
Borrowings increased to R605.3 million (2012: R419.4 million) as a result of property
developments. The loan to value ratio is 51% (2012: 47%) which is well within accepted
industry norms.
The net asset value per share (based on shares in issue net of total treasury shares)
is 76 cents (2012: 67 cents).
Total cash on hand at the end of this interim period amounted to R12.4 million
(2012: R5.7 million). Any surplus cash is used to reduce borrowings on an access
facility basis.
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. 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.
DIRECTORATE
There have been no changes to the directorate during the period under review.
SUBSEQUENT EVENTS
The Company formally announced on 8 April 2013 that it had entered into an agreement
for the acquisition of nine rental enterprises including their related immovable
properties from the Century City Investment Trust and its partners in the various
properties, for an amount of R866 million.
The acquisitions are subject to certain conditions precedent and transfer is expected
to take place on 1 September 2013. The acquisitions will be financed by a vendor
placement of shares to be issued at 85 cents each and the balance by way of borrowings.
Other than as reported above in Property Acquisitions and Developments, 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
Cape Town
13 May 2013
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;
E-mail: info@ingenuityproperty.com
www.ingenuityproperty.com
TRANSFER SECRETARIES
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001
Tel: 011 370 5000
SPONSOR
Nedbank Capital, a division of Nedbank Limited
AUDITORS
Mazars
BANKERS
Absa Bank Limited and Nedbank Limited
ATTORNEYS
Edward Nathan Sonnenbergs Inc.
Date: 13/05/2013 01:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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