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Group's Audited Results for the year ended 30 June 2013
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" or "the Group")
Group's Audited Results
for the year ended 30 June 2013
Statement of financial position
as at 30 June 2013
Group
Figures in Rand 2013 2012
ASSETS
Non-current assets 748 712 118 695 858 856
Gross investment properties 733 823 518 695 577 519
Straight-line rental income adjustment (9 175 070) (9 337 896)
Net investment properties 724 648 448 686 239 623
Straight-line lease asset 9 175 070 9 028 615
Property, plant and equipment 564 705 590 618
Trade and other receivables 14 323 895
Current assets 31 332 290 33 993 706
Loans to related parties 5 740 324 2 700 135
Trade and other receivables 21 404 542 28 335 287
Cash and cash equivalents 4 187 424 2 958 284
Investment properties held for sale 24 650 000 16 190 000
Total assets 804 694 408 746 042 562
EQUITY AND LIABILITIES
Capital and reserves
Share capital and share premium 74 235 526 74 235 526
Debenture reserve 10 675 886 10 675 886
Retained earnings 334 192 893 303 725 058
Total equity attributable to owners of the parent 419 104 305 388 636 470
Non-controlling interest (271 212) (267 426)
Total equity 418 833 093 388 369 044
Non-current liabilities 297 834 463 169 806 707
Linked debentures 54 438 419 49 386 923
Borrowings 169 992 645 51 796 490
Deferred tax liabilities 73 403 399 68 623 294
Current liabilities 88 026 852 187 866 811
Current income tax liabilities 13 064 856 12 715 619
Loans from shareholders 1 998 792
Loans from directors 18 508 2 598 511
Loans from related parties 2 126 356 905 609
Tenant deposits 6 371 863 6 246 795
Trade and other payables 30 141 534 24 448 808
Borrowings 33 846 265 136 569 656
Bank overdraft 2 457 470 2 383 021
Total liabilities 385 861 315 357 673 518
Total equity and liabilities 804 694 408 746 042 562
Statement of comprehensive income
for the year ended 30 June 2013
Figures in Rand 2013 2012
Revenue 91 224 924 95 473 815
Gross property revenue 87 198 739 90 828 412
Property revenue 87 361 565 90 155 895
Straight-line of lease accrual (162 826) 672 517
Other income 2 177 891 3 043 398
Other direct property operating costs (56 650 405) (60 791 997)
Administrative and management expenses (10 578 716) (11 965 192)
Repairs and maintenance (5 635 341) (4 951 860)
Fair value adjustment 40 763 417 72 376 415
Gross change in fair value of investment
property 40 600 591 73 048 932
Straight-line lease adjustment 162 826 (672 517)
Operating profit before interest 57 275 585 88 539 176
Finance income 1 685 468 2 274 522
Linked debenture interest (5 051 496) 5 656 163
Finance costs (16 865 413) (17 205 419)
Profit before taxation 37 044 144 79 264 442
Taxation (6 580 095) (31 384 825)
Profit for the year 30 464 049 47 879 617
Other comprehensive income
Total comprehensive income for the year 30 464 049 47 879 617
Attributable to:
Owners of the parent 30 467 835 47 966 586
Non-controlling interest (3 786) (86 969)
30 464 049 47 879 617
Basic earnings per linked unit (cents) 4.86 7.65
Diluted earnings per linked unit (cents) 4.86 7.65
1. Commentary
The results have been derived from the Annual Financial Statements for
the year ended 30 June 2013. The consolidated financial statements are
prepared in accordance with the Framework Concepts and the measurement
and recognition requirements of IFRS and the AC 500 Standards as issued
by the Accounting Practices Board and contain the information required by
IAS 34 Interim Financial Reporting, the JSE Listing Requirements and the
Companies Act 2008. The results were prepared by the Financial Manager,
Sandarie le Roux CA (SA).
The accounting policies are in terms of IFRS and are consistent with those
of the consolidated Annual Financial Statements at 30 June 2012 as issued
on 27 September 2012. The results have been audited by the company's
auditors, Mazars, whose unmodified audited report is available for inspection
at the registered office of the company.
This summarised report is extracted from the audited information, but is not
itself audited. The directors take full responsibility for the preparation of this
provisional report and are satisfied that the financial information has been
correctly extracted from the underlying annual financial statements.
The presentation of the financial statements has changed during the
current year in order to better reflect the investment property valuations in
accordance with the requirements of IFRSs. No third statement of financial
position has been presented as the changes do not meet the requirements
for a third statement of financial position as required by the amended IAS 1,
which requires a third statement of financial position be presented if:
(a) "it applies an accounting policy retrospectively, makes a retrospective
restatement of items in its financial statements or reclassifies items in its
financial statements; and
(b) the retrospective application, retrospective restatement or reclassification
has a material effect on the information in that statement of financial
position at the beginning of the preceding period."
The change in the disclosure is adding to the information already provided
clarifying the position in accordance with the requirements of IAS 40; the
value of the investment property has not changed.
Any reference to future financial performance included in the commentary
within the Financial and operational overview and Prospects has not been
audited by our auditors, shareholders are advised refer to the audit report in
order to obtain a full understanding of the nature of the auditor's engagement.
2. Financial and operational overview
The macro business environment remains volatile and although some
positive signs are evident, continuous trends of growth has not yet emerged.
Various conflict zones and especially those in oil producing regions create
uncertainty in the marketplace that can have significant impact on emerging
economies such as South Africa.
The South African economy remains subdued and recent unrest in the
mining and manufacturing sectors have not contributed to a more positive
environment. Unemployment and poverty remain critical areas that require
positive interventions. It was recently stated that in the next year the number
of people earning a grant would be more than the number of people that are
working permanently. The question has to be asked to what extent the South
African economy could afford the current grant system. To stimulate growth
a new culture of work ethics and responsibility will have to be established
and both the Government of the day and the private sector will have to play
a positive role in this regard.
The directors and staff members, however, remain positive about the future
of the company and opportunities that still exist in the broader market.
Such opportunities are actively pursued to the benefit of the Group and
shareholders.
Statements of changes in equity
for the year ended 30 June 2013
Total share Non-
Share Share capital and Debenture Retained controlling Total
Figures in Rand capital premium premium reserve earnings Total interest equity
Balance at 30 June 2011 6 270 098 67 965 428 74 235 526 10 675 886 255 758 472 340 669 884 (180 457) 340 489 427
Total comprehensive
income for the year profit 47 966 586 47 966 586 (86 969) 47 879 617
Balance at 30 June 2012 6 270 098 67 965 428 74 235 526 10 675 886 303 725 058 388 636 470 (267 426) 388 369 044
Total comprehensive
income for the year profit 30 467 835 30 467 835 (3 786) 30 464 049
Balance at 30 June 2013 6 270 098 67 965 428 74 235 526 10 675 886 334 192 893 419 104 305 (271 212) 418 833 093
Statement of cash flows
for the year ended 30 June 2013
Group
Figures in Rand 2013 2012
Cash flows from operating
activities (1 563 847) 5 068 546
Cash generated by operations 15 094 811 23 148 936
Interest paid (15 207 905) (16 470 687)
Taxation paid (1 450 753) (1 609 703)
Cash flows from investing
activities (8 486 194) 5 617 458
Loans advanced to related parties (3 040 189) (2 700 000)
Additions to investment property (12 295 407)
Proceeds on sale of investment
property 5 397 436 6 600 000
Interest received 1 685 468 2 274 522
Purchases of property, plant and
equipment (233 502) (557 064)
Cash flows from financing
activities 11 204 732 (8 862 717)
Proceeds from loans from
shareholders (1 998 792) 526 885
Repayment of loans from directors (2 580 003)
Movement in loans from related
parties 1 220 747 (803 572)
Interest paid (909 984) (734 732)
Movement in interest-bearing
borrowings 15 472 764 (7 824 298)
Net increase in cash, cash
equivalents and bank overdrafts 1 154 691 1 823 287
Cash, cash equivalents and bank
overdrafts at the beginning of
the year 575 263 (1 248 024)
Cash, cash equivalents and
bank overdrafts at the end of
the year 1 729 954 575 263
It is a privilege to report to shareholders that Orion Real Estate
has shown positive results in a number of areas. In some areas
attention is required to improve current results.
Due to very challenging and competitive trading conditions
gross property revenue has decreased from R90.8 million in
2012 to R87.2 million in 2013. This represents a decrease of
3.96%. Other direct property operating costs, administrative
and management expenses and repairs and maintenance costs
were, however, well contained and reduced from R77.7 million in
2012 to R72.9 million in 2013. This represents an improvement
of 6.18%.
The average vacancy factor of the portfolio has also improved
from 27.7% in June 2012 to 15.41% in June 2013. Most of these
gains were realised in the period between January 2013 and April
2013.
The decrease in income despite the improved occupancy is a
clear indication of very tight trading conditions.
The decrease in comprehensive income for the year attributable
to equity holders of the Group has decreased from a profit of
R47.97 million in 2012 to a profit of R30.47 million in 2013.
Headline earnings have improved for the same period from a
profit of R0.4 million to a profit of R1.9 million.
Headline earnings have improved from 0.07 cents per linked unit
in 2012 to 0.30 cents per linked unit in 2013. Basic earnings
per share have decreased from 7.65 cents per linked unit to
4.86 cents per linked unit.
The decrease in basic earnings can mainly be attributed to the fair
value measurement of investment property that decreased from
R72.4 million in 2012 to R40.8 million in 2013.
The Group has also in the reporting period in-sourced almost all
maintenance work of the portfolio and this has led to substantial
savings in the cost of maintenance. Although there was a
slight increase in the overall cost of repairs and maintenance
substantial more work was done and the overall condition of the
buildings has improved.
The company has also, from 1 July 2013 in-sourced all property
administrative and management services and this is expected
to have a positive influence on future profitability. This strategy
together with further improved vacancies can be key drivers for
further improved results.
The value of the property portfolio has increased from
R711.8 million in 2012 to R758.5 million in 2013. This represents
a growth rate of 6.6%. Softer interest rates in the market,
supported by the Rode report were the catalysts for this growth.
Properties to the value of R24.7 million were identified and held
for sale.
Various opportunities of available properties are pursued for
acquisition but with limited success. Good quality properties at
attractive prices remain a challenge.
Non-current trade receivables have been recognised for debtors
not expected to pay within the next twelve months due to
current economic conditions. Loans to and from related parties
increased due to slower than anticipated payments received as
a result of general economic conditions in the country which also
had a similar negative impact on trade payments. The increase
in borrowings can be attributed to the major additions and
renovations to Mountain View Shopping Centre to accommodate
a national tenant in the latter part of the financial year.
The movement in the straight-line lease accrual in the statement
of comprehensive income was a result of an improvement in
vacancies due to leases signed. Finance costs decreased due
to the reduction in the borrowing rate and the effect of capital
redemption on the mortgage bonds. The linked debenture
interest reflecting as an expense in 2013, reflected as income in
the previous year due to the change in anticipated redemption
period last year. Finance income has reduced significantly this
year due to bad debt write-offs.
2013 2012
Earnings per share
Headline earnings per linked unit
(cents) 0.30 0.07
Diluted headline earnings per linked
unit (cents) 0.30 0.07
Net asset value per linked unit
(cents) 75.52 69.86
Reconciliation of basic earnings
and headline earnings: 2013 2012
Profit attributable to equity holders 30 467 835 47 966 586
Fair value adjustment to investment
properties (40 600 591) (72 376 415)
Linked debenture interest 5 051 496 (5 656 163)
Deferred tax raised on fair value
adjustment to investment property 7 578 019 13 508 913
Deferred tax on linked debenture
interest (1 414 419)
Loss on disposal of investment
property 792 564 636 000
Change in capital gains tax rate 16 338 726
Headline earnings 1 874 904 417 647
Segment report
for the year ended 30 June 2013
Revenue (excluding 2013 2012
recoveries) R % R %
Commercial 28 226 808 42 30 539 465 43
Industrial 10 389 598 15 11 337 101 16
Retail 19 908 982 29 19 906 389 28
Hospitality 8 732 180 13 8 558 721 12
Residential 983 143 1 811 680 1
68 240 711 100 71 153 356 100
Profit before
taxation
Commercial 22 220 053 60 19 369 619 24
Industrial 3 611 357 10 27 753 993 35
Retail 9 185 734 25 21 436 987 27
Hospitality 4 777 277 13 15 983 352 20
Residential (2 750 277) (7) (3 589 035) (5)
Land (1 690 474) (2)
37 044 144 100 79 264 442 100
Property values
(including
properties held for
sale)
Commercial 299 379 166 39 269 395 965 38
Industrial 96 732 072 13 102 999 264 14
Retail 184 985 965 24 187 172 134 26
Hospitality 79 881 715 11 74 719 819 11
Residential 44 094 600 6 44 395 941 7
Land 53 400 000 7 32 775 115 5
758 473 518 100 711 458 238 100
The Group has also commenced an initiative
to utilise available technology to affect substantial energy
savings in all buildings owned by the company. This initiative will
not only lead to substantial savings in terms of utility costs but will
also enable the company to offer tenants lower recoverable utility
costs in the future. It is critical that companies do not only look
after their own interests, but for future sustainability and growth
the interest of stakeholders on a broader front should also be
considered. The initiative has now been approved by ESKOM
and will commence during September 2013.
The Group has continued with the initiative to replan and
redevelop a number of buildings to keep in line with market
developments and changing needs. These initiatives have
already identified opportunities to subdivide identified industrial
buildings into smaller units to meet new market needs, reduce
risk and as such also utilise the opportunity to generate more
income per square metre. Buildings have also been identified
where existing unused space could be converted into rentable
space and as such improve not only income but also the value of
such properties. This initiative has made a further 660m2 of space
available in Orion House for redevelopment.
The Bethlehem project is still hampered by administrative red
tape, but indications are that it should be resolved in the near
future. Opportunities remain to make this planned initiative a
major source of growth and development for the future.
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.
3. Dividends
No dividends were paid or declared during the financial period.
4. Linked units issued
No linked units were issued during the reporting period.
5. Change to Board of Directors
Dr A Parker resigned as a director with effect from 2 January
2013 due to other business commitments. Mr M D K Mthembu
joined the board from 22 April 2013.
6. Prospects
The National and International business environment is very fluid
and combined with political uncertainty, both locally and abroad,
not predictable in the medium to longer terms. Local strike action
is also influencing economic growth negatively and this has a
direct influence on business confidence and the sustainability
of businesses. Business strategies have to continuously take
cognisance of these business risks to ensure business stability.
Despite these challenges we remain confident that even in such
an environment enough business opportunities are available to
ensure business success. The current state of the economy
might inhibit results in the short term, but improved trading
conditions would immediately benefit the portfolio. The planned
energy savings would also influence the competitiveness of the
portfolio positively.
7. Notice of annual general meeting
Shareholders are advised that the annual general meeting will be
held at 10:00 on Friday 29 November 2013, in the Boardroom,
16th Floor, Orion House, 49 Jorissen Street, Braamfontein,
Johannesburg.
Johannesburg
27 September 2013
Directors
R S Wilkinson*, F M Viruly*, M D K Mthembu*, A C Gmeiner**
F Gmeiner (MD)#, C B Nolte (FD)#
*Independent non-executive **Non-executive #Executive
Company secretary Sponsor
Corporate Governance Arcay Moela
Facilitators CC Sponsors (Pty) Limited
Transfer office
Computershare Investor Services (Pty) Limited
Date: 27/09/2013 04:31:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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