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ORION REAL ESTATE LIMITED - Group's audited abridged results for the year ended 30 June 2014

Release Date: 30/09/2014 07:05
Code(s): ORE     PDF:  
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Group's audited abridged results for the year ended 30 June 2014

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 Abridged Results
for the year ended 30 June 2014

Statement of Financial Position
as at 30 June 2014

Figures in Rand                              2014              2013
ASSETS                                                            
Non-current assets                    803 667 130       748 712 118
Gross investment properties           783 223 686       733 823 518
Straight-line rental income
adjustment                           (11 045 881)       (9 175 070)
Net investment properties             772 177 808       724 648 448
Straight-line lease asset              10 193 238         9 175 070
Property, plant and equipment           1 289 050           564 705
Trade and other receivables            20 007 034        14 323 895
Current assets                         31 254 311        31 332 290
Loans to related parties               14 508 175         5 740 324
Other current assets                   15 811 877        21 404 542
Cash and cash equivalents                774 188          4 187 424
Investment properties held for sale             –        24 650 000
Total assets                          834 921 441       804 694 408
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                     369 012 064       334 192 893
Total equity attributable to owners
of the parent                         453 923 476       419 104 305
Non-controlling interest                (270 127)         (271 212)
Total equity                         453 653 349       418 833 093
Non-current liabilities               302 024 802       297 834 463
Linked debentures                      54 974 397        54 438 419
Borrowings                            167 250 231       169 992 645
Deferred tax liabilities               79 800 174        73 403 399
Current liabilities                    79 243 290        88 026 852
Current income tax liabilities         11 005 713        13 064 856
Loans from directors                       18 508            18 508
Loans from related parties                435 360         2 126 356
Tenant deposits                         6 563 381         6 371 863
Trade and other payables               38 718 411        30 141 534
Borrowings                             17 923 438        33 846 265
Bank overdraft                          4 578 479         2 457 470                                                               
Total liabilities                     381 268 092       385 861 315
Total equity and liabilities          834 921 441       804 694 408

Segment Report
for the year ended 30 June 2014

                                 2014                  2013 
                                    R      %              R       %
Revenue (excluding                                                
recoveries)
Commercial                   35 088 213     47     28 226 808      41
Industrial                    9 216 222     12     10 389 598      15
Retail                       24 057 345     33     19 908 982      29
Hospitality                   4 246 290      6      8 732 180      13
Residential                   1 158 981      2        983 143       2
                            73 767 051    100     68 240 711     100
Profit before taxation                                             
Commercial                   24 473 062     54     22 220 053      60
Industrial                   11 413 154     25      3 611 357      10
Retail                        6 625 057     15      9 185 734      24
Hospitality                   5 631 583     13      4 777 277      13
Residential                 (3 242 111)    (7)    (2 750 277)     (7)
                            44 900 745    100     37 044 144     100
Property values                                                    
(including properties
held for sale, before
adjustment for
straight-lining of
leases)
Commercial                  329 978 783     43    299 379 166      39
Industrial                   86 843 163     11     96 732 072      13
Retail                      182 559 352     23    184 985 965      24
Hospitality                  81 999 571     10     79 881 715      11
Residential                  48 442 817      6     44 094 600       6
Land                         53 400 000      7     53 400 000       7
                           783 223 686    100    758 473 518     100
Borrowings                                                        
(excluding instalment
sales and loans)
Commercial                   71 554 364     43     78 141 672      43
Industrial                   25 597 334     15     28 180 201      15
Retail                       49 138 070     30     55 189 383      30
Hospitality                  11 281 707      7     13 320 476       7
Residential                   8 441 724      5      9 205 157       5
                           166 013 199    100    184 036 889     100
Rating of tenants                                                 
(Rental income)
Commercial               A     3 583 868      6      3 448 844       6
                        B     8 819 767     15      8 479 851      16
                        C    13 380 752     22     10 805 341      20
Industrial               B     5 285 476      9      5 000 179       9
                        C     2 644 652      4      3 821 299       7
Retail                   A     2 999 091      5      2 659 484       5
                        B     4 849 775      8      3 932 168       7
                        C    13 254 761     22     12 570 179      23
Hospitality              B     3 944 524      7      3 230 520       6
Residential              C     1 173 669      2        983 143       1
                            59 936 335    100     54 931 008     100

A: Represents major listed companies
B: Represents smaller listed companies and big unlisted companies
C: Represents smaller unlisted companies and private businesses

Statement of Comprehensive Income
for the year ended 30 June 2014
          
Figures in Rand                              2014                 2013
Revenue                               101 059 214           91 224 924
Gross property revenue                 96 708 822           87 198 739
Property revenue                       94 838 010           87 361 565
Straight-line of lease accrual          1 870 812            (162 826)
Other income                            3 049 775            2 177 891
Other direct property operating          
costs                                (68 146 174)         (56 650 405)
Administrative and management          
expenses                                (200 760)         (10 578 716)
Repairs and maintenance               (7 982 122)          (5 635 341)
Fair value adjustment                 38 816 938           40 763 417
Gross change in fair value of          
investment property                    40 687 750           40 600 591
Straight-line lease adjustment        (1 870 812)              162 826
Fair value adjustment to debtors        (446 238)                    –
Operating profit before interest       61 800 241           57 275 585
Finance income                          3 171 429            1 685 468
Linked debenture interest               (535 978)          (5 051 496)
Finance costs                        (19 534 947)         (16 865 413)
Profit before taxation                 44 900 745           37 044 144
Taxation                             (10 080 489)          (6 580 095)
Profit for the year                    34 820 256           30 464 049
Other comprehensive income                      –                    –
Total comprehensive income          
for the year                           34 820 256           30 464 049
Attributable to:          
Owners of the parent                   34 819 171           30 467 835
Non-controlling interest                    1 085              (3 786)
                                       34 820 256           30 464 049
Basic earnings per linked unit          
(cents)                                      5,55                 4,86
Diluted earnings per linked unit          
(cents)                                      5,55                 4,86

Statement of Cash Flows
for the year ended 30 June 2014

Figures in Rand                              2014                 2013
Cash flows from/(to) operating       
activities                             25 433 111           14 419 542
Cash generated by operations           30 351 996           15 094 811
Interest received                       3 171 429            1 685 468
Interest paid                         (1 454 054)            (909 984)
Taxation paid                         (6 636 260)          (1 450 753)
Cash flows to investing       
activities                              7 469 774         (10 171 662)
Loans advanced to related parties     (8 767 851)          (3 040 189)
Loans advanced to directors             (160 071)                    –
Additions to investment property     (11 600 000)         (12 295 407)
Proceeds on sale of investment       
property                               29 098 006            5 397 436
Purchases of property, plant and       
equipment                             (1 100 310)            (233 502)
Cash flows (to)/from financing       
activities                           (38 437 130)          (3 093 189)
Proceeds from loans from       
shareholders                                    –          (1 998 792)
Repayment of loans from directors               –          (2 580 003)
Repayment of loans from related       
parties                               (1 690 996)                    –
Proceeds from loans from related       
parties                                         –            1 220 747
Interest paid                        (18 080 893)         (15 207 905)
Increase in interest-bearing       
borrowings                                      –           15 472 764
Decrease in interest-bearing       
borrowings                           (18 665 241)                    –
Net increase in cash, cash       
equivalents and bank overdrafts       (5 534 245)            1 154 691
Cash, cash equivalents and bank       
overdrafts at the beginning of the       
year                                    1 729 954              575 263
Cash, cash equivalents and       
bank overdrafts at the end of       
the year                              (3 804 291)            1 729 954

Statement of Changes in Equity
for the year ended 30 June 2014

                                                    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 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
Total comprehensive income   
for the year – profit                –             –             –             –     34 819 171     34 819 171         1 085    34 820 256
Balance at 30 June 2014      6 270 098    67 965 428    74 235 526    10 675 886    369 012 064    453 923 476     (270 127)   453 653 349

1.  Commentary
    The Board of Directors presents the Group's audited results for the year
    ended 30 June 2014. The financial statements have been prepared in
    accordance with the Framework concepts and measurement and recognition
    requirements of IFRS and the SAICA Financial Reporting Guides as issued by
    the Accounting Practices Committee, containing the information required by
    IAS 34 Interim Financial Reporting, the requirement of the Companies Act,
    2008 and the Johannesburg Stock Exchange Listings requirements.
   
    The accounting policies are consistent with those applied in the annual
    financial statements for the year ended 30 June 2014 from which this report is
    extracted The results have been prepared by the Financial Manager, Sandarie
    le Roux CA (SA).
   
    This abridged consolidated group financial statements has been extracted
    from the audited annual financial statements upon which Mazars have
    issued an unqualified report, but is not itself audited. The directors take full
    responsibility for the preparation of the abridged financial statements and
    confirm that the financial information has been correctly extracted from the
    underlying annual financial statements. The group annual financial statements
    are available for inspection at the company's registered office.
   
    The auditor's report does not necessarily cover all of the information
    contained in this financial report. Shareholders are therefore advised that in
    order to obtain a full understanding of the nature of the auditor's work they
    should obtain a copy of that report together with the accompanying financial
    information from the registered office of the company.

2.  Financial and operational overview
    South African economic growth for the year under review remained
    sluggish and the recovery process has not materialised. The South African
    economy is still facing a number of challenges that are inhibiting the recovery
    process.
  
    Strike action in several industries has continued, adversely impacting the
    potential to earn foreign exchange from the sale of goods in foreign markets
    thereby reducing the balance of payments and further influencing the overall
    economy negatively. Consumer confidence is constrained and spending
    moderating as growth in disposable income slows and banks limit unsecured
    lending to households.
  
    It is a privilege to report to shareholders that Orion Real Estate has shown
    growth and positive results in a number of areas.
  
    The gross property revenue grew from R87,2 million in 2013 to R96,7 million
    in 2014. This represents a growth of 10,9%. Other direct property operating
    cost, administrative and management expenses and repairs and maintenance
    were, however, well contained and increased only from R72,9 million in 2013
    to R76,3 million in 2014. This represents an increase of 4,6%.
  
    The average vacancy factor of the portfolio has also improved from 15,4% in
    June 2013 to 12,4% in June 2014.
  
    The total comprehensive income for the year attributable to equity holders
    of the group has increased from a profit of R30,5 million in 2013 to a profit of
    R34,8 million in 2014. Headline earnings have improved for the same period
    from a profit of R1,9 million to a profit of R3,9 million.
  
    Headline earnings per linked units have improved from 0,30 cents in 2013 to
    0,62 cents in 2014. Basic earnings per share have increased from 4,86 cents
    per linked unit to 5,55 cents per linked unit. The NAV has improved from
    75,52 cents to 81,76 cents.
  
    Movement in trade and other receivables has shown a movement from short
    to long term as a result of the profile of debtors. Movement in trade and
    other payables has shown a slowing in the payment of creditors. This is the
    result of debtor payments that have also slowed down and was dealt with
    by applying discounting on debtors. The negative movement in debtors has
    led to an increase in interest charges a resultant increase in finance income.
    Payments by related parties have also slowed down. Debenture interest has
    shown substantial movement due to an adjustment in economic outlook and
    future profitability in uncertain economic conditions. The movement in finance
    costs from short to long term was due to loans that were renegotiated during
    the financial year. The movement in cash generated by operations is the result
    of various positive movements.
  
    The Group has insourced the property management and administrative
    function from 1 July 2013 this has seen a drop in the administrative and
    management expenses but has led to an increase in other direct property
    operating costs however this has only led to a total combine increase of
    1,7% in these expenses. Although there was an increase in the overall cost
    of repairs and maintenance substantially more work was done and the overall
    condition of the buildings has improved across the board.
  
    Resultant improved occupancies can be key drivers for further improved
    results.
  
    The value of the property portfolio has increased from R758,5 million in 2013
    to R783,2 million in 2014. This represents a growth rate of 3,3%.
    
    We will continue in the future to evaluate our property portfolio and purchase
    more property where we consider that the property offers value and a
    good revenue stream. We will sell property if we can realise value and if the
    property's revenue stream is not returning the value that we seek.
  
    Various opportunities of available properties are pursued for acquisition.
    
                                                                 2014            2013
    Earnings per share                                                               
    Basic earnings per linked unit (cents)                        5,55            4,86
    Diluted earnings per linked unit (cents)                      5,55            4,86
    Headline earnings per linked unit (cents)                     0,62             0,3
    Diluted headline earnings per linked unit (cents)             0,62            0,30
    Net asset value per linked unit (cents)                      81,16           75,52
    Reconciliation of basic earnings and headline earnings:
                                                                 2014            2013
    Profit attributable to equity holders                   34 819 171      30 467 835
    Fair value adjustment to investment                   (40 687 750)    (40 600 591)
    properties   
    Linked debenture interest                                  535 978       5 051 496
    Deferred tax raised on fair value adjustment             7 594 287       7 578 019
    to investment property   
    Deferred tax raised on linked debenture                  (150 074)     (1 414 419)
    interest   
    (Profit)/Loss on disposal of investment                (1 560 426)         792 564
    property   
    Capital gains tax raised on disposal of                      3 365             964
    investment property   
    Headline earnings                                        3 917 150       1 874 904

    The insourcing of maintenance and tenant installations from external service
    providers to an associate company has continued to deliver a reduction in
    these costs.
 
    The initiative to utilise available green technologies to reduce energy
    consumption and the utilisation of digital technology to measure energy
    consumption online had a beneficial effect in delivering reduction in costs and
    a saving in the consumption of energy. The utilisation of the digital technology
    to measure energy consumption is enabling us to efficiently manage our
    energy consumption.
 
    The Group has continued with the initiative to redevelop a number of buildings
    to keep in line with market developments and changing needs.
 
    The Group has on a continuous basis been busy looking for new business
    opportunities. Strategies have been developed and implemented to ensure
    that such identified business opportunities have minimal potential risks.

3.  Acquisitions and disposals
    During the year under review we have acquired a property in Lydenberg for
    an amount of R9.,5 million. We have also disposed of three properties namely
    City Deep, Laser Park Stand 100 and Marlboro 213. We made a combined
    profit of R1,5 million compared to the book values.

4.  Dividends
    No dividends were paid or declared during the financial period.

5.  Linked units issued
    No linked units were issued during the reporting period.

6.  Change to Board of Directors
    There was no change to the directors during the reporting period.

7.  Prospects
    South African economic growth is forecasted to remain sluggish for the next
    financial year and the recovery process will not materialise during the next
    financial year. The South African economy is still facing a number of challenges
    that are inhibiting the recovery process.
 
    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. 
 
    We will continue our efforts to expand Orion Real Estate's portfolio and
    redevelop our properties. We believe that maintaining our strategy and focus
    will enable us to continue producing growth.

30 September 2014

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 and registered office
Corporate Governance Facilitators CC

Sponsor                               Transfer Office
Arcay Moela Sponsors (Pty) Ltd        Computershare Investor Services (Pty) Ltd
Trading as Arbor Capital Sponsors      



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