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Summary Of The Audited Results For The Year Ended 31 August 2013 And Dividend Declaration
TREMATON CAPITAL INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1997/008691/06)
JSE code: TMT
ISIN: ZAE000013991
("Trematon" or "the company")
SUMMARY OF THE AUDITED RESULTS FOR THE YEAR ENDED 31 AUGUST 2013
AND DIVIDEND DECLARATION
STATEMENT OF FINANCIAL POSITION
Audited Audited
31 August 31 August
2013 2012
Note R'000 R'000
ASSETS
Non-current assets 236 886 159 859
Property, plant and equipment 8 572 6 500
Investment properties 109 397 21 098
Investments 16 380 16 120
Investment in joint ventures 11 553 28 985
Investment in associate entities 86 579 85 583
Deferred tax asset 4 405 1 573
Current assets 129 866 96 680
Loans receivable 17 585 14 181
Investments 2 555 17 175
Inventories 65 311 28 396
Current tax asset 1 2
Trade and other receivables 9 734 4 156
Cash and cash equivalents 34 680 32 770
Non-current assets held for sale 146 403 -
Total assets 513 155 256 539
EQUITY AND LIABILITIES
Equity 282 849 214 759
Share capital and share premium 209 259 209 259
Treasury shares 2 (2 559) (1 239)
Fair value reserve 9 454 8 156
Share-based payment reserve 2 311 844
Accumulated profit/(loss) 44 829 (2 261)
Total equity attributable to equity holders
of the parent 263 294 214 759
Non-controlling interest 19 555 -
Liabilities
Non-current liabilities 188 210 11 424
Loans payable 172 070 5 795
Deferred tax liability 16 140 5 629
Current liabilities 42 096 30 356
Loans payable 8 664 884
Derivative instruments - 1 373
Tax payable 121 27
Trade and other payables 33 311 28 072
Total liabilities 230 306 41 780
Total equity and liabilities 513 155 256 539
Net asset value per share (cents) (based on
shares in issue at year-end) 149 121
STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
Year ended Year ended
31 August 31 August
2013 2012
R'000 R'000
Revenue 34 329 24 805
Realised profit on available-for-sale investments 2 063 -
Realised loss on settlement of derivative instrument (9 048) -
Realised (loss)/profit on held-for-trading investments (3 743) 1 497
Realised profit on sale of non-current assets 1 008 -
Gain on change in shareholding 3 420 -
Realised profit on sale of associate - 10 349
Total realised (loss)/profit (6 300) 11 846
Fair value adjustment on held-for-trading investments 4 474 (3 053)
Fair value adjustment on derivative instrument - (1 373)
Fair value adjustment on investment properties 18 730 -
Fair value adjustment on previously held investment
in joint venture 3 457 -
Reversal of impairment of loan 3 405 3 987
Total profit/(loss) from fair value adjustments 30 066 (439)
Employee benefits (11 070) (7 370)
Cost of sales of property and land (7 535) (2 553)
Other operating expenses (13 140) (10 571)
Operating profit 26 350 15 718
Finance costs (7 092) (958)
Profit from equity accounted investment (net of tax) 30 477 7 420
Profit before income tax 49 735 22 180
Income tax 4 131 (2 936)
Profit for the year 53 866 19 244
Other comprehensive income
Fair value gain on available-for-sale investments 4 068 1 508
Reclassification adjustment on sale of
available-for-sale investments (2 063) -
Fair value gain on revaluation of
property, plant and equipment - 2 302
Tax effects on revaluations (707) (953)
Other comprehensive income for the year 1 298 2 857
Total comprehensive income for the year 55 165 22 101
Profit attributable to:
Equity holders of the parent 51 498 18 901
Non-controlling interests 2 368 343
53 866 19 244
Total comprehensive income attributable to:
Equity holders of the parent 52 797 21 758
Non-controlling interests 2 368 343
55 165 22 101
Basic earnings per share (cents) 29.2 10.8
Diluted earnings per share (cents) 27.2 10.4
STATEMENT OF CHANGES IN EQUITY
Share-
Total based
Share Share share Treasury payment
capital premium capital shares reserve
R'000 R'000 R'000 R'000 R'000
Balance at 1 September 2011 1 749 201 547 203 296 (1 277) -
Total comprehensive income
for the year - - - - -
Profit for the year - - - - -
Fair value gain on
available-for-sale investments - - - - -
Fair value gain on revaluation
of property, plant and equipment - - - - -
Tax effects on revaluations - - - - -
Net share sales - - - 38 -
Share-based payment - - - 844
Dividends paid - - - - -
Issue of ordinary shares to
acquire balance of shares in
subsidiary 32 5 931 5 963 - -
Balance at 31 August 2012 1 781 207 478 209 259 (1 239) 844
Balance at 1 September 2012 1 781 207 478 209 259 (1 239) 844
Total comprehensive income
for the year - - - - -
Profit for the year - - - - -
Fair value gain on
available-for-sale investments - - - - -
Reclassification adjustment on
sale of available-for-sale
investments - - - - -
Tax effects on revaluations - - - - -
Share purchases - - - (1 320) -
Share-based payment - - - 1 467
Dividends paid - - - - -
Non-controlling interest on
acquisition of subsidiary - -
Balance at 31 August 2013 1 781 207 478 209 259 (2 559) 2 311
Note 2
Accumu- Non-
Fair lated con-
value profit/ trolling Total
reserve (loss) Total interest equity
R'000 R'000 R'000 R'000 R'000
Balance at 1 September 2011 5 299 (18 857) 188 461 10 709 199 170
Total comprehensive income
for the year 2 857 18 901 21 758 343 22 101
Profit for the year - 18 901 18 901 343 19 244
Fair value gain on
available-for-sale investments 1 508 - 1 508 - 1 508
Fair value gain on revaluation
of property, plant and
equipment 2 302 - 2 302 - 2 302
Tax effects on revaluations (953) - (953) - (953)
Net share sales - - 38 - 38
Share-based payment - - 844 844
Dividends paid - (3 476) (3 476) - (3 476)
Issue of ordinary shares to
acquire balance of shares in
subsidiary - 1 171 7 134 (11 052) (3 918)
Balance at 31 August 2012 8 156 (2 261) 214 759 - 214 759
Balance at 1 September 2012 8 156 (2 261) 214 759 - 214 759
Total comprehensive income
for the year 1 298 51 498 52 796 2 367 55 163
Profit for the year - 51 498 51 498 2 367 53 865
Fair value gain on
available-for-sale investments 4 068 - 4 068 - 4 068
Reclassification adjustment on
sale of available-for-sale
investments (2 063) - (2 063) - (2 063)
Tax effects on revaluations (707) - (707) - (707)
Share purchases - - (1 320) - (1 320)
Share-based payment - - 1 467 1 467
Dividends paid - (4 408) (4 408) - (4 408)
Non-controlling interest on
acquisition of subsidiary - - - 17 188 17 188
Balance at 31 August 2013 9 454 44 829 263 294 19 555 282 849
STATEMENT OF CASH FLOW
Audited Audited
Year ended Year ended
31 August 31 August
2013 2012
R'000 R'000
Cash flows from operating activities
Cash generated/(utilised) in operations 5 093 (8 261)
Finance income 3 272 3 322
Dividends received 1 975 6 016
Dividends received from associate 8 891 4 445
Finance costs (7 092) (958)
Dividends paid (4 408) (3 476)
Taxation paid (418) (3 938)
Net cash inflow/(outflow) from operating activities 7 313 (2 850)
Cash flows from investing activities
Acquisition of property, plant and equipment (2 876) (3 599)
Acquisition of and addition to investment properties (1 657) (8 425)
Proceeds on disposal of non-current assets 5 488 -
Decrease in loans receivable - 392
Proceeds on sale of associate - 40 672
Business combination (488) -
Loans advanced to jointly controlled entities and associates (15 912) (14 113)
Acquisition of held-for-trading and
available-for-sale investments (7 454) (23 791)
Proceeds on disposal of investments 27 088 15 991
Net cash inflow from investing activities 4 189 7 127
Cash flows from financing activities
Change in shareholding of subsidiary - (2 841)
Treasury share purchases (1 320) -
Settlement of derivative instrument (10 421) -
Increase/(decrease) in borrowings 2 149 (9 496)
Net cash outflow from financing activities (9 592) (12 337)
Net decrease in cash and cash equivalents 1 910 (8 060)
Cash and cash equivalents at the beginning of the year 32 770 40 830
Total cash and cash equivalents at the end of the year 34 680 32 770
NOTES
1 PRESENTATION OF ANNUAL FINANCIAL STATEMENTS
Trematon Capital Investments Limited (the "company") is a company domiciled in
South Africa. The consolidated financial statements of the company as at and for the
year ended 31 August 2013 comprise the company and its subsidiaries (together
referred to as the "group") and the group's interest in associates and jointly
controlled entities.
The financial statements were authorised for issue by the directors on
11 November 2013.
The annual financial results have been prepared in accordance with the framework
concepts and the measurement and recognition requirements of IFRS and the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and
Financial Reporting Pronouncements as issued by Financial Reporting Standards
Council and contain the information required by IAS 34: Interim Financial Reporting,
the JSE Limited Listings Requirements and the Companies Act. The same IFRS-compliant
accounting policies and methods of computation have been followed in the preparation
of these annual financial results as compared with the most recent annual financial
statements.
The consolidated annual financial statements and the company annual financial
statements are stated in Rands, which is the company's functional and presentation
currency.
In preparing the annual financial statements, management is required to make
estimates and assumptions that affect the amounts represented in the annual
financial statements and related disclosures. Use of available information and the
application of judgement is inherent in the formation of estimates. Actual results
in the future could differ from these estimates which may be material to the
annual financial statements. Significant judgements include:
IMPAIRMENT OF FINANCIAL ASSETS
The group assesses loans and receivables for impairment on an ongoing basis. In
determining whether an impairment loss should be recorded in profit or loss, the
group makes judgements as to whether there is observable data indicating a
measurable decrease in the estimated future cash flows of that financial asset.
FAIR VALUE ESTIMATION
The fair value of financial instruments traded in active markets (such as held-for-
trading and available-for-sale securities) is based on quoted market prices at the
reporting period-end. The quoted market price used for financial assets held by the
group is the current bid price.
The fair value of financial instruments that are not traded in an active market is
determined by using valuation techniques. The group uses a variety of methods and
makes assumptions that are based on observable market conditions existing at the end
of each reporting period, where possible, but where this is not feasible, a degree
of judgement is required in establishing fair values. The judgements include
considerations of inputs such as liquidity risk, credit risk and volatility. Changes
in assumptions about these factors could affect the reported fair value of financial
instruments.
TAXATION
Judgement is required in determining the provision for income taxes due to the
complexity of legislation. There are many transactions and calculations for which
the ultimate tax determination is uncertain during the ordinary course of business.
The group recognises liabilities for anticipated tax audit issues based on estimates
of whether additional taxes will be due. Where the final tax outcome of these matters
is different from the amounts that were initially recorded, such differences will
impact the income tax and deferred tax provisions in the period in which such
determination is made.
The group recognises the net future tax benefit related to deferred income tax assets
to the extent that it is probable that the deductible temporary differences will
reverse in the foreseeable future. Assessing the recoverability of deferred income
tax assets requires the group to make significant estimates related to expectations
of future taxable income. Estimates of future taxable income are based on forecast
cash flows from operations and the application of existing tax laws in each
jurisdiction. To the extent that future cash flows and taxable income differ
significantly from estimates, the ability of the group to realise the net deferred
tax assets recorded at the end of the reporting period could be impacted.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimate is revised
and in any future periods affected.
There have been no changes to the board of directors during the year under review.
The consolidated financial statements are considered preliminary based on the JSE
Listings Requirements and are summarised from a complete set of the group financial
statements on which the independent auditors, Mazars, has expressed an unmodified
audit opinion, which is available for inspection at the company's registered office.
This report is extracted from audited information, but is not itself audited. The
auditor's report does not necessarily report on all of the information contained in
this announcement. Shareholders are therefore advised that in order to obtain a
full understanding of the nature of the auditor's engagement they should obtain a
copy of the auditor's report together with the accompanying financial information
from the company's registered office.
The directors of Trematon take full responsibility for the preparation of this
report and that the financial information has been correctly extracted from the
underlying annual financial statements.
2 TREASURY SHARES
Audited Audited
Year ended Year ended
31 August 31 August
2013 2012
Number of shares held at year-end 1 772 771 978 771
During the year 785 000 treasury shares were purchased at a cost of 168 cents per
share.
3 HEADLINE EARNINGS PER SHARE
Audited Audited
Year ended Year ended
31 August 31 August
2013 2012
Gross Net Gross Net
R'000 R'000 R'000 R'000
Headline earnings per share is
calculated as follows:
Profit attributable to equity
holders of the parent 51 498 18 901
Gain on acquisition of
subsidiary (3 420) (3 420) - -
Fair value adjustment on
previously held investment in
joint venture (3 457) (3 457) - -
Fair value adjustment on
investment properties (18 730) (12 405) - -
Realised profit on
available-for-sale
investments (2 063) (1 678) - -
Fair value adjustments
within equity accounted
profits (21 183) (17 223) - -
Realised profit on sale of
associate - - (10 349) (7 072)
Headline earnings 13 315 11 829
Headline earnings per
share (cents) 7.5 6.8
Diluted headline earnings
per share (cents) 7.0 6.5
The calculation of headline earnings per share is based on the weighted average
number of 176 540 271 shares in issue during the year (2012: 174 552 504).
The calculation of diluted headline earnings per share is based on the diluted
weighted average number of 189 105 340 shares in issue during the year
(2012: 181 588 023).
4 SEGMENTAL INFORMATION
Property
invest- Unallo- Elimin-
Gaming ments cated ations Total
R'000 R'000 R'000 R'000 R'000
2013
Revenue 3 295 31 034 - - 34 329
Intersegment revenue 8 891 18 255 - (27 146) -
Net income before tax 18 654 25 423 5 658 - 49 735
Total assets 102 959 390 055 20 141 - 513 155
Total liabilities - 230 306 - - 230 306
2012
Revenue 6 015 18 788 1 - 24 804
Intersegment revenue - 8 603 - (8 603) -
Net income before tax 15 725 11 247 (4 793) - 22 179
Total assets 116 203 137 660 2 675 - 256 538
Total liabilities - 41 780 - - 41 780
5 BUSINESS COMBINATIONS
5.1 Arbitrage Property Fund (Pty) Limited ("Arbitrage")
On 31 March 2013 the group obtained controlling interest of Arbitrage by
acquiring an additional 16.7% of their share capital for a total cash
consideration of R3.5 million. The acquisition has resulted in an increase in
share holding to 66.7% in Arbitrage.
The acquisition was made in terms of a shareholders' agreement whereby one of
our joint venture partners decided to sell his interest in the company. We
felt that the company was placed in a strong position to take advantage of
any future opportunities and that there is future growth in the business.
This resulted in us purchasing the additional shares.
Details of the business combination are as follows:
Group
2013 2012
R'000 R'000
Amount settled in cash 3 452 -
Fair value of previously held investment 20 211 -
Fair value of consideration transferred 23 663 -
Non-controlling interest 13 340 -
Recognised amounts of identifiable net assets:
Investment properties 210 735 -
Investment in joint venture 5 452 -
Deferred lease asset 5 337 -
Cash and cash equivalents 2 900 -
Long-term loans (144 307) -
Deferred tax (8 028) -
Other liabilities (4 547) -
Shareholder loans (24 828) -
Accounts payable (1 099) -
Tenant deposits (691) -
Taxation (502) -
Net identifiable assets and liabilities 40 423 -
Gain on change in shareholding (bargain purchase) (3 420) -
Previously held investment
On the acquisition date the group's 50% investment in Arbitrage, previously
accounted for as an equity accounted investment, has been remeasured to fair
value. The previously held investment is considered part of what was given up
by the group to obtain control of Arbitrage.
Non-controlling interest
The non-controlling interest in Arbitrage is measured at their share of the
fair value of the assets and liabilities of the acquiree at acquisition date.
Bargain purchase from additional shares acquired
A bargain purchase of R3.4 million was recognised on the acquisition date.
This has been presented as a separate line item in the consolidated
statement of comprehensive income.
Arbitrage's contribution to the group's results
Arbitrage has contributed R6.8 million and R3.6 million to the group's
revenues and profit, respectively from the acquisition date to 31 August 2013.
Had the acquisition occurred on 1 September 2012, the group's revenue for the
period to 31 August 2013 would have been R49.7 million and the group's profit
for the period would have been R79.4 million.
5.2 The Resi Investment Group ("Resi")
On 1 March 2013 the group obtained a controlling interest of Tremprop (Pty)
Limited, Lion Property Investment Trust and Resi Investment Trust, together
referred to as The Resi Investment Group by holding two-thirds of the voting
rights in the group. There has been no increase in the shareholding which
remains at 50%.
Details of the business combination are as follows:
Group
2013 2012
R'000 R'000
Amount settled in cash - -
Fair value of previously held investment 3 847 -
Fair value of consideration transferred 3 847 -
Non-controlling interest 3 847 -
Recognised amounts of identifiable net assets:
Investment properties 6 421 -
Inventory 41 343 -
Accounts receivable 967 -
Cash and cash equivalents 64 -
Long-term loans (17 295) -
Deferred tax (2 783) -
Shareholder loans (19 714) -
Accounts payable (1 309) -
Net identifiable assets and liabilities 7 695 -
Gain on change in shareholding (bargain purchase) - -
Previously held investment
On the acquisition date the group's 50% investment in Resi, previously
accounted for as an equity accounted investment, has been remeasured to fair
value. The previously held investment is considered part of what was given up
by the group to obtain control of Resi.
Non-controlling interest
The non-controlling interest in Resi is measured at their share of the fair
value of the assets and liabilities of the acquiree at acquisition date.
Fair value adjustment on remeasurement of investment
A fair value gain of R3.5 million was recognised on the acquisition date.
This has been presented as a separate line item in the consolidated statement
of comprehensive income.
Resi's contribution to the group's results
Resi has contributed R4.3 million to the group's revenues and a loss of
R0.8 million to the group's profit from the acquisition date to 31 August 2013.
Had the acquisition occurred on 1 September 2012, the group's revenue for the
period to 31 August 2013 would have been R36.3 million and the group's profit
for the period would have been R58.2 million.
6 COMPARATIVE FIGURES
The presentation of the comparative statements of comprehensive income has been
changed to conform to that of the current year statements of comprehensive income
(by nature) in order to improve clarity and comparability. The change in
presentation has resulted in the disclosure of additional items, but has not
resulted in a material change to the revenue or profit before income tax line items.
7 SUBSEQUENT EVENTS
Subsequent to year-end, the properties referred to as Hibernian Towers, situated in
the Strand, Western Cape, was acquired at a cost of R45.4 million. This investment
was purchased by Resi Investment Group for the purpose of trading stock. This
consideration was financed by way of bank debt.
8 DIVIDENDS
STC credits of R32.5 million remained available for future utilisation after the
declaration of the 2012 dividend.
On 11 November 2013, subsequent to year-end, the board of directors declared a
dividend of 3.25 cents per share.
The directors have reasonably concluded that the company will satisfy the solvency
and liquidity test immediately after the dividend distribution.
Additional information pertaining to the cash dividend:
The final gross dividend declared of 3.25 cents per share will be paid from income
reserves.
Dividend withholding tax ("DWT") rate is 15%. The company will utilise secondary tax
on companies ("STC") credits.
The STC credits utilised as part of this dividend declared amount to R5.8 million,
being 3.25 cents per share and consequently no DWT is payable by shareholders who
are normally not exempt from DWT. The net amount payable to shareholders is
R5.8 million, being 3.25 cents per share based on the current number of
178 095 823 shares in issue.
STC credits of R26.7 million, being 15.0 cents per share, will remain available to
be set off against future dividends.
The income tax reference number of Trematon Capital investments Limited is
9340/323/84/0.
Last date to trade: Friday, 6 December 2013
Ex-date: Monday, 9 December 2013
Record date: Friday, 13 December 2013
Payment date: Tuesday, 17 December 2013
Share certificates may not be dematerialised or rematerialised between Monday,
9 December 2013 and Friday, 13 December 2013, both days inclusive.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S JOINT REPORT
Trematon is an investment holding company which invests in assets which we believe to
be undervalued. By "undervalued" we mean that the price at which we can purchase or
gain control of the asset is at a discount to the price which can be realised in due
course. The broad aim is to achieve an average internal rate of return of more than 20%.
To achieve a consistent 20% internal rate of return over time is neither easy nor
guaranteed. It is more likely that some investments will yield more than this while
others will fall short of this objective, but we aim to have a decent batting average.
Trematon owns certain operating businesses with stable income but these tend to be
outweighed by investment activities during the year. The pattern of investment
realisations is irregular which results in a lumpy earnings pattern that does not
follow an easily predictable pattern.
For the current year the total profit attributable to shareholders was R51.5 million
(2012: R18.9 million). The bulk of the profit was due to fair value adjustments made
on investment properties. Agreements for the sale of two of these properties were
concluded during the year and transfer will take place after year-end.
This report focuses on a description of the various investments as well as some of the
important aspects of operations. For a detailed review of the financial results please
refer to the chief financial officer's report.
Current management has been in place since 1 April 2005. In the past eight years the
group has developed into a diversified investment holding company with a strong balance
sheet and a resilient portfolio.
CLUB MYKONOS LANGEBAAN (PTY) LIMITED ("CML")
CML remains the largest single investment in the group and is in itself comprised of
several distinct business areas as detailed below. It is situated in Langebaan which
is close to Saldanha Bay. The Saldanha Bay Industrial Development Zone was officially
launched by President Jacob Zuma on 31 October 2013. According to the feasibility
study conducted prior to the launch, the zone has the potential to create 12 000 new
jobs in the area and could attract foreign direct investment of R9.3 billion. The area
is already developing rapidly and the excellent road infrastructure and ancillary
commercial activity should provide opportunities for Club Mykonos over the next decade.
Club Mykonos is now firmly established as one of the favoured family holiday
destinations in the country. The resort has been awarded a four-star grading by the
Tourism Grading Council of South Africa and has received industry awards and
recognition as one of the top resorts in South Africa. Occupancies are among the
highest in the country and the infrastructure is continually being improved. The most
recent project is the complete redesign of the Club Mykonos reception area to create
a contemporary check-in area of the highest quality. Brand loyalty to Club Mykonos is
very high and most visitors are repeat customers.
Mykonos Casino
The casino is operated by Tsogo Sun Holdings Limited. Although it operates in a
separate area of the resort, it forms an important component of the holiday experience
for some and provides a gaming option for those guests who enjoy the activity. The
casino generates stable income for the CML group. For the current financial period the
casino's contribution to group profit increased by 24% to R9.9 million
(2012: R8.0 million).
The marina and boatyard
The marina continues to be a very sought after yachting centre and berthing facilities
are in high demand. Saldanha Bay is gaining in popularity as a yachting destination
due to ideal sailing conditions and pressure on facilities in Cape Town. The most
popular event at the marina is the Mykonos Offshore regatta which is the signature
yacht race of the Royal Cape Yacht Club and is the biggest keel boat race in
South Africa. In 2013 the marina hosted the African Optimist Sailing Championships
which was the biggest event of its kind held to date. The continued investment in the
marina has been well justified and it will remain a key asset of the resort.
The boatyard, which is a boat and general storage facility, is now established as the
finest facility of its kind in the country. The construction of the final phase is under
way and new garages are built in line with demand. When complete the facility will
include 360 boat garages. The boatyard also runs a retail facility and offers boating-
related repairs and services. A key attraction of the facility is the convenience
offered to boating enthusiasts who have their valuable assets well cared for and ready
to use and on the water when required.
Rental of commercial and holiday properties
CML owns commercial properties that house restaurants, resort services and conference
facilities. These commercial assets are leased out to operators who work with the
resort to create attractive businesses which cater for holiday makers and the growing
local market.
The refurbishments of the commercial areas, which took place in 2012, have been very
well received and the restaurants, conference and entertainment areas are growing in
popularity.
These properties generate consistent and growing rental income for the group as well
as good profits for the operators.
Recent expansions include two supervised dedicated children's facilities for toddlers
and teenagers and an on-site full service laundromat.
The bulk of the resort accommodation is owned by third parties, including a large
timeshare component which has the advantage of generating constant foot traffic on the
resort. CML owns a few rental properties which are rented to holiday makers but this
is not a material component of income.
Development opportunities
The major future potential of the resort lies in the undeveloped land areas. Club
Mykonos Resort has 362 completed residential units called "kalivas". These units are
mainly owned by third parties and not by the development company. These are not
conventional hotel rooms but include large bedrooms with fully fitted kitchens and
living areas suitable for families. They offer a high-quality but cost-effective
family holiday option for people who enjoy a coastal resort experience.
There is further capacity on the resort to develop up to 500 further residential units.
The remaining zoned development land is in prime areas on or close to the water and
has excellent potential for development. The market for coastal leisure properties has
been subdued since 2008 but there are definite signs of an improvement on the West Coast
and town planners and architects have been engaged to draw up various development
options. No new projects have been initiated to date but there is potential for the
launch of a niche product in 2014.
ARBITRAGE PROPERTY FUND (PTY) LIMITED ("ARBITRAGE")
Arbitrage is now a 67%-held subsidiary as detailed in the chief financial officer's
report. Arbitrage, which is a loan stock company specialising in commercial and
industrial property, had an active and successful year. Agreements for the sale of two
retail shopping centre investments in Rustenburg and Pretoria were concluded during
the year. The sales were opportunistic and based on our assessment of the ability to
add further value to those investments. Arbitrage contributed a substantial portion
of the current year's profits for the group, however and this performance is unlikely
to be repeated next year due to the nature of the property investment cycle.
The size of the portfolio has been temporarily reduced by the above-mentioned sales
and Arbitrage has negligible gearing. We remain committed to this investment and
Arbitrage is expected to grow substantially in the future.
RESI INVESTMENT GROUP ("RESI")
Deal flow in the buy-to-let segment of the residential property market continues to be
strong. Several acquisitions were concluded in the current year and further
acquisitions are in advanced stages of negotiation. Although Resi has a trading
portfolio which generates consistent profits and helps to fund the business, its main
aim is to build a large portfolio of high-quality rental stock. The portfolio remains
focused in the Western Cape, although opportunities further afield will be considered
if they are large and attractive enough to justify the investment. Resi's acquisition
strategy is to focus on the market segments above affordable housing in sought-after
residential neighbourhoods. This market niche is management intensive and Resi has the
skills to provide a highly desirable product at a competitive market rental.
OTHER INVESTMENTS
Trematon has active trading and investment portfolios which focus on both listed and
unlisted companies and holds minority stakes in a variety of such companies from time
to time. At year-end the investment and trading portfolios amounted to R19 million.
Other investments also include property joint ventures which are not currently
material to the group.
Trematon owns 49% of Cloudberry Investments 18 (Pty) Limited which is a BEE company
that invests in listed shares. At year-end Cloudberry owned 18 million shares in
Mazor Group Limited and 6.3 million shares in Grand Parade Investments Limited.
PROSPECTS
The bulk of the profits earned in the 2013 financial year were attributable to the mark-
to-market of investment properties where agreements for sale were concluded, as well
as fair value adjustments of the remaining investment properties. Due to the nature of
the property investment cycle, this is unlikely to be repeated in the 2014 financial
year. All of the businesses in which Trematon has invested are well financed and have
good growth potential. Trematon has a well-positioned portfolio of existing
investments and sufficient balance sheet capacity to make material new investments
should the opportunity arise.
DIVIDENDS
The board has declared a dividend of 3.25 cents per share which is an increase of 30%
on the prior year.
MONTY KAPLAN ARNOLD SHAPIRO
Chairman Chief Executive Officer
Cape Town
11 November 2013
CHIEF FINANCIAL OFFICER'S REPORT
During the year Trematon acquired a controlling interest in both Arbitrage Property
Fund (Pty) Limited and The Resi Investment Group. These investments were previously
accounted for as joint ventures and were therefore equity accounted in the group results.
The change in control has resulted in both investments being consolidated into the
Trematon Group at year-end with the assets, liabilities, income and expenses of the
respective investment now being included in the group statement of financial position
and statement of comprehensive income. The consolidation has resulted in an increase
in investment property, inventory and loans payable in the group accounts.
Trematon increased its investment in Arbitrage by purchasing an additional 17% for a
cash consideration of R4.2 million which included shares and loan accounts.
Trematon has appointed two out of the three directors of Resi which has resulted in
Trematon consolidating the investment from 1 March 2013. Its investment in Resi
remains at 50%.
RESULTS
The group made a profit for the year of R51.5 million (2012: R18.9 million) which
translates into earnings per share of 29.2 cents (2012: 10.8 cents). The main
contributions to the increased profit are the increase in equity accounted earnings from
associates and joint ventures due to fair value adjustments on investment properties
within these entities and an increase in earnings from the Mykonos Casino.
Operating profit increased as a result of increased rental income and property sales,
as well as fair value adjustments on held-for-trading investments and investment
properties. The group also realised a loss on the settlement of an option written
against the group's holdings in Club Mykonos Langebaan (Pty) Limited ("CML"), together
with losses realised on held-for-trading investments.
NET ASSET VALUE
The group's net asset value increased by 28 cents per share to 149 cents per share
(2012: 121 cents per share).
The major reasons for the increase in net asset value were fair value adjustments on
investment properties and inventory held by joint ventures that are now subsidiaries.
These adjustments were accounted for in terms of IFRS 3: Business Combinations, which
are consolidated as part of the group. Equity accounted earnings also contributed to
the increase in net asset value. Sale agreements in respect of two investment
properties were concluded during the year under review with transfer scheduled to take
place subsequent to year-end. The investment properties have been classified at their
fair market value and are disclosed as non-current assets held for sale. This fair
value adjustment also contributed to the increase in net asset value.
INDIVIDUAL INVESTMENTS
Subsidiaries
Club Mykonos Langebaan (Pty) Limited (100%)
CML's profit for the year increased from R7.5 million to R28.2 million. The main
contributors to the large increase in profits were the revaluation of investment
property and deferred tax asset that was recognised in the current year.
Revenue from resort operations increased due to increased rental income from the
Mykonos Boatyard and Mykonos Marina which both continue to meet expectations. This is
the first full year of rental income from the additional jetties that were constructed
at the marina as well as a full year's operations for the boatyard.
The casino continues to perform well, generating R9.9 million (2012: R8.0 million)
equity accounted profits for the group. Dividend received from the casino for the year
was R8.9 million (2012: R4.5 million).
The call and put option issued by Trematon in the prior year in respect of 10% of its
shareholding in CML was exercised by the holders during the current year. This resulted
in a realised loss of R10.4 million. There is no further exposure in this regard.
Arbitrage Property Fund (Pty) Limited ("Arbitrage") (67%)
As mentioned above, Trematon increased its holdings in Arbitrage. This resulted in
Arbitrage becoming a subsidiary of the group from 31 March 2013. Arbitrage holds
investment properties in the commercial, industrial and retail sectors. These
properties continue to generate strong yields and have contributed R19.1 million to
equity accounted earnings from the beginning of the year to the date of change in
control. During the year Arbitrage concluded agreements for the sale of two investment
properties for a total consideration of R145.4 million with a realised profit of
R40.7 million. These properties are disclosed as non-current assets held for sale.
After the sale of these properties, Arbitrage will hold R72.9 million worth of
investment property.
Resi Investment Group ("Resi") (50%)
This is the first full year of trading for Resi, which focuses on residential
developments. The group has performed well over the past year and has met all
expectations. As mentioned above, Trematon increased its board control over Resi, which
consists of both companies and trusts. This results in Resi becoming a subsidiary of
the Trematon Group. Resi has managed to take advantage of favourable trading
opportunities during the year which have generated R1.7 million to equity accounted
earnings to the date of change in control. The group currently holds properties, for
both trading and as investment, to the value of R44.8 million. There are acquisitions
currently in the process of registration and this figure is expected to grow
significantly over time.
JOINT VENTURES
Stalagmite Property Investments (Pty) Limited ("Stalagmite") (50%)
There has been no activity in the investment in Stalagmite during the year. The company
owns land in an industrial park situated adjacent to the route of the proposed
N2 highway in the Western Cape. There is no external debt in the company. The company
contributed an immaterial loss to the equity accounted earnings of the group.
The Vredenburg Property Trust ("VPT") (50%)
The VPT is a joint venture of which Arbitrage owns 50%. VPT owns the Vredenburg Mall
in Vredenburg, Western Cape. This property has proven to be a positive investment for
the group and has contributed R6.5 million to Arbitrage's equity accounted earnings.
The Woodstock Hub (Pty) Limited ("The Woodstock Hub") (50%)
The Woodstock Hub is a joint venture of which Resi owns 50%. This newly formed company
has purchased a semi-completed property in Woodstock, Western Cape. The property was
transferred after year-end. The Woodstock Hub plans to develop the property into a
residential property in a fast-growing area on the outskirts of the city. The company
contributed an immaterial loss to the equity accounted earnings of the group.
OTHER INVESTMENTS
Cloudberry Investments 18 (Pty) Limited ("Cloudberry") (49%)
The group's investment in Cloudberry increased by R3.4 million which is reflected as a
reversal of the provision for impairment previously raised against the loan to
Cloudberry. The value of the investment in Cloudberry is directly linked to its net
asset value which has improved during the year as a result of an increase in the value
of the company's investments in listed shares, being Mazor Group Limited and Grand
Parade Investments Limited.
The group maintains investments in various JSE-listed companies for both long-term and
short-term trading opportunities. These investments contributed R2.0 million in
dividend revenue for the year. At year-end the market value of these investments was
R19.0 million.
ARTHUR WINKLER
Chief Financial Officer
Cape Town
11 November 2013
PREPARER OF THE SUMMARISED AUDITED RESULTS
The group financial results have been prepared under the supervision of the chief
financial officer, Mr AL Winkler CA (SA).
DOMICILE and REGISTERED OFFICE
30 Hudson Street, Cape Town, 8000. PO Box 7677, Roggebaai, 8012, South Africa
DIRECTORS
M Kaplan (Chairman)#*, AJ Shapiro (Chief Executive Officer), AL Winkler (Chief
Financial Officer), JP Fisher#*, A Groll, AM Louw#*, R Stumpf *
# Independent * Non-executive
COMPANY SECRETARY
SA Litten
CONTACT DETAILS
Tel: 021 421 5550;
Fax: 021 421 5551;
www.trematon.co.za
TRANSFER SECRETARIES
Link Market Services South Africa (Pty) Limited
19 Ameshoff Street, Braamfontein
Tel: 011 713 0800
SPONSOR
Sasfin Capital, a division of Sasfin Bank Limited
AUDITORS
Mazars
BANKERS
Absa Bank Limited
ATTORNEYS
Bernadt, Vukic, Potash & Getz
Date: 19/11/2013 12:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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