Wrap Text
Preliminary condensed results for the year ended 31 August 2015
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")
PRELIMINARY CONDENSED CONSOLIDATED RESULTS
FOR THE YEAR ENDED 31 AUGUST 2015
HIGHLIGHTS
- Earnings per share up 98%
- Headline earnings per share up 161%
- Net asset value per share up 41%
- Intrinsic net asset value per share up 15%
- Distribution of 3.75 cents per share up 7% (in the previous year a dividend per
share of 3.5 cents with an additional special dividend of 1.5 cents per share
was declared)
STATEMENT OF FINANCIAL POSITION
Reviewed Audited
31 August 31 August
2015 2014
Notes R'000 R'000
ASSETS
Non-current assets 880 312 330 348
Property, plant and equipment 7 317 8 191
Investment properties 725 570 210 410
Investments in joint ventures 28 034 10 015
Investments in associate entities 96 692 91 330
Loans receivable 20 572 6 110
Deferred tax asset 2 127 4 292
Current assets 194 722 275 240
Loans receivable 8 521 12 918
Investments 39 373 12 070
Inventories 82 274 182 385
Current tax asset 2 259
Trade and other receivables 9 164 23 108
Cash and cash equivalents 55 388 44 500
Total assets 1 075 034 605 588
EQUITY AND LIABILITIES
Equity 542 528 322 320
Share capital and share premium 329 076 209 259
Treasury shares 2 (2 559) (2 559)
Fair value reserve 11 322 1 683
Share-based payment reserve 6 657 4 188
Accumulated profit 165 151 82 346
Total equity attributable to equity holders of the parent 509 647 294 917
Non-controlling interest 32 881 27 403
Liabilities
Non-current liabilities 478 236 241 196
Loans payable 454 245 227 216
Deferred tax liability 23 991 13 980
Current liabilities 54 270 42 072
Loans payable 24 968 10 965
Current tax liabilities 111 10
Trade and other payables 29 191 31 097
Total liabilities 532 506 283 268
Total equity and liabilities 1 075 034 605 588
Net asset value per share (based on shares in
issue at year-end) 235 cents 167 cents
STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
Year ended Year ended
31 August 31 August
2015 2014
R'000 R'000
Revenue 103 116 67 773
Realised profit on available-for-sale investments - 13 902
Realised profit on held-for-trading investments 5 847 1 351
Realised profit on sale of non-current assets 128 -
Realised profit on sale of property, plant and equipment - 12
Gain on change in shareholding - 1 034
Total realised profit 5 975 16 299
Fair value adjustment on held-for-trading investments 417 (1 285)
Fair value adjustment on investment properties 77 110 33 040
Deemed profit on transfer of inventory to investment property 17 389 -
Fair value adjustment on previously held investment in
joint venture - 2 229
(Impairment of loan)/reversal of impairment of loan (4 535) 4 593
Total profit from fair value adjustments 90 381 38 577
Employee benefits (15 618) (12 853)
Cost of property and land sold (35 742) (16 173)
Other operating expenses (33 918) (31 718)
Operating profit 114 194 61 905
Finance costs (26 792) (17 845)
Profit from equity accounted investments (net of tax) 31 216 13 217
Profit before income tax 118 618 57 277
Income tax (10 580) (8 915)
Profit for the year 108 038 48 362
Other comprehensive income
Items that will not subsequently be reclassified to profit/(loss):
Fair value gain on revaluation of property, plant and equipment 11 779 -
Tax effects of fair value adjustments (2 140) -
Items that may subsequently be reclassified to profit/(loss):
Fair value gain on available-for-sale investments - 4 347
Reclassification adjustment on sale of available-for-sale
investments - (13 902)
Tax effects of fair value adjustments - 1 784
Other comprehensive income for the year 9 639 (7 771)
Total comprehensive income for the year 117 677 40 591
Profit attributable to:
Equity holders of the parent 95 235 43 247
Non-controlling interests 12 802 5 115
108 037 48 362
Total comprehensive income attributable to:
Equity holders of the parent 104 875 35 476
Non-controlling interests 12 802 5 115
117 677 40 591
Basic earnings per share 48.4 cents 24.5 cents
Diluted earnings per share 44.6 cents 22.7 cents
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 2013 1 781 207 478 209 259 (2 559) 2 311
Total comprehensive income for 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-based payment expense - - - 1 877
Dividends paid - - - - -
Non-controlling interest on acquisition
of subsidiary - - - - -
Balance at 31 August 2014 1 781 207 478 209 259 (2 559) 4 188
Balance at 1 September 2014 1 781 207 478 209 259 (2 559) 4 188
Total comprehensive income for year - - - - -
Profit for the year - - - - -
Fair value gain on revaluation of
property, plant and equipment - - - - -
Tax effects on revaluations - - - - -
Share-based payment expense - - - - 2 557
Settlement of share-based payment - - (88)
Ordinary shares issued 403 119 414 119 817 - -
Dividends paid (note 7) - - - - -
Change in shareholding - -
Balance at 31 August 2015 2 184 326 892 329 076 (2 559) 6 657
Note 2
Fair Accumu- Non-con-
value lated trolling Total
reserve profit Total interest equity
R'000 R'000 R'000 R'000 R'000
Balance at 1 September 2013 9 454 44 829 263 294 19 555 282 849
Total comprehensive income for year (7 771) 43 247 35 476 5 115 40 591
Profit for the year - 43 247 43 247 5 115 48 362
Fair value gain on available-for-sale
investments 4 347 - 4 347 - 4 347
Reclassification adjustment on sale of
available-for-sale investments (13 902) - (13 902) - (13 902)
Tax effects on revaluations 1 784 - 1 784 - 1 784
Share-based payment expense - - 1 877 1 877
Dividends paid - (5 730) (5 730) - (5 730)
Non-controlling interest on acquisition
of subsidiary - - - 2 733 2 733
Balance at 31 August 2014 1 683 82 346 294 917 27 403 322 320
Balance at 1 September 2014 1 683 82 346 294 917 27 403 322 320
Total comprehensive income for year 9 639 95 235 104 874 12 802 117 676
Profit for the year - 95 235 95 235 12 802 108 037
Fair value gain on revaluation of
property, plant and equipment 11 779 - 11 779 - 11 779
Tax effects on revaluations (2 140) - (2 140) - (2 140)
Share-based payment expense - - 2 557 - 2 557
Settlement of share-based payment - 88 - - -
Ordinary shares issued - 119 817 - 119 817
Dividends paid (note 7) - (8 816) (8 816) - (8 816)
Change in shareholding - (3 702) (3 702) (7 324) (11 026)
Balance at 31 August 2015 11 322 165 151 509 647 32 881 542 528
STATEMENT OF CASH FLOWS
Reviewed Audited
Year ended Year ended
31 August 31 August
2015 2014
R'000 R'000
Cash flows from operating activities
Cash generated from/(utilised in) operations 36 461 (121 914)
Finance income 4 760 4 070
Dividends received 257 1 855
Dividends received from associate 7 409 5 927
Finance costs (26 792) (17 845)
Dividends paid (8 816) (5 730)
Taxation received/(paid) 16 (9 996)
Net cash inflow/(outflow) from operating activities 13 295 (143 633)
Cash flows from investing activities
Acquisition of property, plant and equipment (6 269) (809)
Acquisition of and addition to investment properties (319 485) (67 510)
Proceeds on disposal of non-current assets held for sale - 146 403
Proceeds on disposal of non-current assets 12 127 83
Loans receivable repaid - 9 261
Loans receivable advanced (6 039) (6 110)
Business combination (note 5) 44 (61)
Loans advanced to joint ventures and associates (9 053) (1 467)
Loans repaid by joint ventures and associates 4 786 3 673
Acquisition of held-for-trading and available-for-sale
investments (44 663) (20 917)
Proceeds on disposal of investments 12 397 33 459
Net cash (outflow)/inflow from investing activities (356 155) 96 005
Cash flows from financing activities
Issue of shares 119 817 -
Decrease in borrowings (13 736) (72 647)
Increase in borrowings 247 668 130 095
Net cash inflow from financing activities 353 749 57 448
Net increase in cash and cash equivalents 10 889 9 820
Cash and cash equivalents at the beginning of the year 44 500 34 680
Total cash and cash equivalents at the end of the year 55 389 44 500
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 2015 comprise the company and its subsidiaries (together referred
to as the "group") and the group's interest in associates and joint ventures.
The financial statements were authorised for issue by the directors on 11 November 2015.
The preliminary, condensed consolidated results have been prepared in accordance with
the framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards ("IFRS") and the SAICA Financial Reporting
Guides as issued by the Accounting Practices Committee and contain the information
required by IAS 34: Interim Financial Reporting, the JSE Listings Requirements and
the Companies Act. The accounting policies and methods of computation applied in the
presentation of the preliminary, condensed consolidated results are consistent with
those applied in the prior year. These accounting policies and methods of computation
are in terms of IFRS.
The preliminary, condensed consolidated results 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.
Significant influence:
The directors of the company assessed whether or not the group has significant influence
over Cloudberry Investments 18 (Pty) Limited and Clusten 54 (Pty) Limited based on the
power to participate in the financial and operating policy decisions of the companies.
After assessment, the directors concluded that the group had no representation on the
board of directors or participation in the policy-making processes and due to the
nature of the investment being a BEE structure the group had no significant influence
over either company.
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 preliminary, condensed consolidated results have been reviewed by the company's
independent auditor, Mazars. Their unmodified review opinion is available for
inspection at the company's registered office. Their review was conducted in accordance
with ISRE 2410 "Review of interim financial information performed by the independent
auditor of the entity". The auditor's report does not necessarily report on all of the
information contained in these results. 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.
2 TREASURY SHARES
Reviewed Audited
Year ended Year ended
31 August 31 August
2015 2014
Number of shares held at year-end 1 772 771 1 772 771
3 HEADLINE EARNINGS PER SHARE
Reviewed Audited
Year ended Year ended
31 August 31 August
2015 2014
R'000 R'000 R'000 R'000
Gross Net Gross Net
Headline earnings per share is calculated
as follows:
Profit attributable to equity holders of
the parent 95 235 43 247
Gain on acquisition of subsidiary - - (1 034) (1 034)
Fair value adjustment on previously held
investment in joint venture - - (2 229) (2 229)
Fair value adjustment on investment
properties (77 110) (59 813) (33 040) (18 159)
Realised profit on available-for-sale
investments - - (13 902) (11 307)
Fair value adjustments within equity
accounted profits (25 967) (15 822) (3 490) (2 838)
Goodwill write-off 2 595 2 595 - -
Realised profit on sale of property, plant
and equipment (128) (104) (12) (10)
Headline earnings 22 091 7 670
Headline earnings per share (cents) 11.2 4.3
Diluted headline earnings per share (cents) 10.3 4.1
The calculation of headline earnings per share is based on the weighted average
number of 196 787 425 shares in issue during the year (2014: 176 323 052).
The calculation of diluted headline earnings per share is based on the diluted
weighted average number of 213 488 389 shares in issue during the year
(2014: 190 137 162).
4 SEGMENTAL INFORMATION
Property
invest- Unallo- Elimin-
Gaming ments cated ations Total
R'000 R'000 R'000 R'000 R'000
2015
Revenue 1 612 101 504 - - 103 116
Intersegment revenue 7 409 - - (7 409) -
Net income before tax 20 347 99 541 - - 118 618
Total assets 100 625 960 965 13 444 - 1 075 034
Total liabilities - 532 506 532 506
2014
Revenue 2 257 64 501 1 015 - 67 773
Intersegment revenue 5 927 - - (5 927) -
Net income before tax 19 887 32 740 4 650 - 57 277
Total assets 95 130 489 270 21 188 - 605 588
Total liabilities - 283 268 - - 283 268
5 BUSINESS COMBINATIONS
PLAYGROUND INVESTMENTS (PTY) LIMITED ("PLAYGROUND")
On 30 April 2015 the group obtained a controlling interest in Playground Investments
(Pty) Limited by acquiring an additional 50% of their share capital for a total cash
consideration of R50. The acquisition has resulted in an increased shareholding to
100% in the property management company.
The acquisition was made in term of a shareholders' agreement whereby our joint
venture partners decided to sell their entire interest in the company. Management
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
R'000
2015
Amount settled in cash -
Fair value of previously held investment (2 595)
Fair value of consideration transferred (2 595)
Non-controlling interest -
Recognised fair value of identifiable net assets:
Property, plant and equipment 57
Cash and cash equivalents 44
Trade and other receivables 1 837
Loans payable (7 100)
Trade and other payables (29)
Net identifiable assets and liabilities (5 191)
Goodwill 2 595
PREVIOUSLY HELD INVESTMENT
The previously held investment is considered part of what was given up by the group
to obtain control of Playground.
GOODWILL PURCHASE FROM ADDITIONAL SHARES ACQUIRED
Goodwill of R2.6 million was recognised on the acquisition date as a result of a
minority stake being acquired at a price more than the identifiable assets acquired
and liabilities assumed. Due to the company having accumulated losses and no
foreseeable prospects for the group to obtain future economic benefits other than
those arising directly from the company's separately identifiable assets this goodwill
was fully written off in the current year.
PLAYGROUND’S CONTRIBUTION TO THE GROUP RESULTS
Playground has contributed R2.4 million to the group's revenue and a loss of
R0.4 million to the group's profit from the acquisition date to 31 August 2015.
Had the acquisition occurred on 1 September 2014 the group's revenue for the
period to 31 August 2015 would have been R103.5 million and the group's profit for
the period would have been R107.7 million.
6 SUBSEQUENT EVENTS
The directors are not aware of any material event which occurred after the reporting
date and up to the date of this report.
7 DIVIDENDS AND CAPITAL DISTRIBUTION
The special dividend of R8.9 million (5.0 cents per share) which was declared on
13 November 2014 was paid to members on 26 January 2015.
Secondary tax on companies credits of R8.9 million were used in the dividend declared
and paid during the year.
On 11 November 2015, subsequent to year-end, the board of directors declared a
capital distribution of 3.75 cents per share as a return of contributed tax capital
to shareholders recorded in the share register of the company at the close of business
on 15 January 2016.
The directors have determined that this capital reduction distribution will be paid
out of qualifying contributed tax capital as contemplated in the definition of
"contributed tax capital" in section 1 of the Income Tax Act, 1962. As the
distribution will be regarded as a return of capital and may have potential capital
gains tax consequences, Trematon shareholders are advised to consult their tax
advisers regarding the impact of the distribution.
The directors have reasonably concluded that the company will satisfy the solvency
and liquidity test immediately after the capital distribution.
The net amount payable to shareholders is R8.2 million, being 3.75 cents per share,
based on the current number of 218 350 100 shares in issue.
The income tax reference number of Trematon Capital investments Limited is
9340/323/84/0.
Last date to trade: Friday, 8 January 2016
Ex-date: Monday, 11 January 2016
Record date: Friday, 15 January 2016
Payment date: Monday, 18 January 2016
Share certificates may not be dematerialised or rematerialised between Monday,
11 January 2016 and Friday, 15 January 2016, both days inclusive.
8 ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting of the members of Trematon
Capital Investments Limited will be held in the boardroom on the first floor,
The Hudson, 30 Hudson Street, Cape Town on Wednesday, 27 January 2016 at 10:00.
CHAIRMAN'S REPORT
In my first chairman's report for the 2005 financial year I reported that Trematon's net
asset value per share had increased from 44 cents to 57 cents. At that point Trematon
owned small minority stakes in two listed equities, had two full-time staff members,
no operating businesses, gross total assets of R113 million and net borrowings of
R13 million.
Over the past decade Trematon has developed and expanded steadily into a diversified
investment holding company with a bias towards property-related investments. The company
operates across the property spectrum and has significant investments in commercial,
residential and leisure properties. These investments include both completed buildings
and buildings in various stages of development. Non-property investments include a 30%
stake in the West Coast casino licence, a schools business and minority shares in
various listed and unlisted businesses.
Today the group has gross assets of more than R1 billion, a strong balance sheet and a
promising investment pipeline. The staff complement has expanded over the past two years
to the extent that the group is capable of taking on larger projects with confidence.
The bulk of the senior management team has been in place for most of the last decade
and remains a committed and capable group. All of the senior management team have a
significant portion of their personal wealth invested in the group and maintain an
entrepreneurial mindset with due regard to the risks inherent in the markets in which
the group operates.
The property market in general has performed exceptionally well over the past few years.
Trematon has benefited from this trend and much of the earnings in the current period
are due to revaluations of properties that have been held for some time. It is possible
that the strength in the property market may not continue at the same pace and group
earnings will tend to reflect the realities of the general economy.
The group is still small in the context of South African listed companies and has the
ambition and potential to grow significantly from its current base.
As chairman I am supported by a very experienced group of non-executives and I would
like to extend my thanks to them for their help and support.
I would like to congratulate the executive team on an excellent set of financial results
and I believe that shareholders can look forward to further successes over the next decade.
Monty Kaplan
Chairman
CHIEF EXECUTIVE OFFICER'S REPORT
Trematon is an investment holding company that invests in assets and businesses which
management believes are undervalued and have the potential to achieve our targeted
internal rate of return. The current investment portfolio has a strong bias towards
property-related investments but this is not an exclusive area of investment and may
vary over time.
The broad aim is to achieve an average internal rate of return of 20% or more over time.
This target is neither guaranteed nor easy to achieve. It is more likely that some
investments will yield more than this while others will fall short of this objective,
but the aim is to have a decent batting average.
Trematon owns some operating businesses with a stable income flow but these tend to be
outweighed by investment activities during the year. The pattern of investment
acquisition and realisation is irregular which can result in uneven profits that do not
follow predictable patterns. In order to ameliorate this volatility it is our objective
to pay a regular and growing dividend over time.
The best measure of value for shareholders is the intrinsic net asset value report
which can be viewed below. In this report the directors have attributed a valuation
to each asset which represents a fair and realisable market value. The intrinsic value
at the reporting date was 362 cents per share.
For the current year total profit attributable to shareholders was R95.2 million
(2014: R43.2 million) which represents a record level of profit since current management
took control of the business in 2005. For a detailed review of the financial aspects of
the results please refer to the Chief Financial Officer's report below.
The group has four major areas of operation: Club Mykonos (including a 30% share in
the Mykonos Casino), Aria Property Group (commercial, retail and industrial property
investments), Resi Investment Group (residential property investments primarily held
for rental) and other investments which include listed and unlisted equities across
many industry sectors. The group also has a fledgling education business which, in time,
is expected to become the fifth major area of operation. These are discussed in more
detail below.
CLUB MYKONOS LANGEBAAN (PTY) LIMITED ("CML")
MYKONOS CASINO
The group owns 30% of the Mykonos Casino, the remainder of the equity is owned by
Tsogo Sun Holdings Limited which also manages the casino. The regional economy on the
West Coast has grown steadily and Mykonos Casino achieved revenue growth of 8.8%
compared to the previous year. The group's share of profits grew by 4.8% - profit growth
was lower than revenue growth due to increased depreciation on new software systems
and costs relating to the refurbishment as discussed below.
During the second half of the group's financial year the casino underwent a refurbishment
and introduced an entirely new software system. The total costs relating to this upgrade
were approximately R28 million. The upgrade was completed by the end of August 2015 and
was achieved without a major disruption to operations and funded out of cash on hand.
At year-end the casino had cash on hand of R45 million.
Mykonos Casino has performed better than its peer group over the past 12 months
reflecting the relatively positive economic outlook for the West Coast region. The
completion of the refurbishment and the ongoing improvements at the holiday resort
should ensure a good holiday season.
For several years there has been speculation relating to the possible relocation of
one of the Western Cape casino licences to the Cape Metropole. This remains a
possibility but there is still no clarity regarding the process to be followed or the
timing of such an event.
THE MARINA AND BOATYARD
The Club Mykonos Marina and The Boatyard at Club Mykonos represent the finest and largest
leisure yachting and boating facility in the region. The facility consists of 188 berths
on the water, 251 boat and general storage garages of various sizes and various ancillary
businesses related to powerboating and yachting.
Phase three of The Boatyard at Club Mykonos is now complete and although returns can
still be optimised there is limited further scope for the expansion of the boating and
yachting facilities due to space constraints.
COMMERCIAL AND LEISURE PROPERTIES
The Club Mykonos resort continues to receive industry recognition as one of the best
family holiday destinations in South Africa and has a high level of customer loyalty
and an enviable influx of return visitors.
The leisure industry in general has experienced a challenging year. The resort is
highly seasonal and is full during holiday season and on weekends. Out of season weeks
and mid-weeks are harder to fill but the conferencing facility and the many activities
on the resort help to maintain a relatively high level of year-round activity.
The group does not have a lot of exposure to holiday rental accommodation but generates
most of its income from rentals earned on the commercial assets on the resort such as
the conference centre, the marina and various shops and restaurants. The conference
centre and restaurants are operated by third parties. The bulk of the residential
holiday units is owned by timeshare owners, clubs and individual owners.
Construction of the Marina Village development on the water's edge is well under way
and consists of 25 top-end luxury units. Some off-plan sales have been concluded in
order to manage risk and the remainder of the units will be sold on completion. Both
commercial and residential developments on the resort are likely to continue for
several years.
All of the restaurants on the resort are trading well and a brand-new beach bar
(Marc's Beach Bar) was opened on the Hobie beach site during 2015 and has proven to
be an extremely popular addition to the restaurant offering.
The resort in general is well maintained by the Club Mykonos Langebaan Homeowners'
Association which is in a healthy financial position.
ARIA PROPERTY GROUP ("ARIA")
Aria, which incorporates Arbitrage Property Fund (Pty) Limited and is the trading name
of the business, took transfer of a further four properties during the year and has
reinforced its reputation for adding value to medium-sized properties by addressing the
specialised needs of tenants and by focused and creative management.
The market for commercial properties in general has been strong for several years and
it is currently a challenge to find properties of the right size, pricing and quality.
However, Aria focuses on the overall internal rate of return of a property and is able
to do innovative deals which sometimes fall outside the scope of the traditional
property companies.
Aria does not have specific size targets and future investment will be dictated by
projected returns rather than growth for its own sake.
The current portfolio is distributed between Cape Town and surrounding towns,
Johannesburg and Durban, and includes shopping centres, industrial facilities, office
accommodation and parking.
RESI INVESTMENT GROUP ("RESI")
Resi is now a 100%-owned subsidiary (see the Chief Financial Officer's Report for details)
and consists of 585 residential units in central Cape Town and surrounding areas.
Resi's Woodstock activities are a 50:50 joint venture with Prime Point Properties
(Pty) Limited.
The bulk of the properties are held for rental income while a smaller proportion are
held for trading. In future the majority of acquisitions will be for rental purposes.
The availability of attractively priced completed residential stock has reduced over
the past 12 months and the rate of acquisition of new properties has slowed down.
The level of residential building activity has also picked up so the supply and demand
balance will shift again as the cycle changes.
The group is currently engaged in a new build of 126 units in Sanddrift, Cape Town
(close to Century City) which will be held for rental. This development will be a 50:50
joint venture with other investment partners. Further opportunities are in the process
of investigation.
GENERATION EDUCATION ("GENERATION")
The first Generation school will open in Sunningdale, a high-growth residential area on
the West Coast of Cape Town. Demand has thus far exceeded expectations and although
this business is still small in the group context further developments are planned.
Generation is 75% owned by the group, the balance is held by the Children's Campaign
Trust which is an education NGO.
OTHER INVESTMENTS
Other investments comprise mainly listed investments held directly or indirectly as
disclosed in the 2015 Integrated Annual Report.
Trading in both listed and unlisted investments remains a feature of the company's
operations and realised a profit of R5.8 million in the current financial year.
The group is also constantly in the process of investigating new areas of operation
and investment across the business spectrum.
PROSPECTS
The group achieved a record level of profits this year and most areas of investment
and operations have performed at least as well as management expected. However, a large
proportion of the profit achieved was due to revaluations of investment properties
(both commercial and residential) and the future level of profits from this source will
be partially dependent on the state of the property market in general.
The group continues to improve its level of annuity income and has become increasingly
diversified over the past few years. However the returns from investments are still
lumpy and profits may still vary considerably from year to year.
Arnold Shapiro
Chief Executive Officer
CHIEF FINANCIAL OFFICER'S REPORT
OVERVIEW
This is the first year in which Trematon has raised capital in the market since the
current management team took over in 2005. In February 2015, 40 million shares were
issued by way of a private placement to select institutional investors and individuals.
The primary purpose of the capital raising was to enable Trematon to have the cash
resources available to take advantage of its increasing investment pipeline and continue
to grow the company. This capital-raising exercise also helped broaden the shareholder
base of the company and increase the marketability and liquidity of the shares in issue.
RESULTS
The group made a profit for the year attributable to equity holders of R95.2 million
(2014: R43.2 million). This translates to earnings per share of 48.4 cents
(2014: 24.5 cents) which is an increase of 98% over the prior year.
The group's book net asset value has increased by 68 cents per share to 235 cents per
share (2014: 167 cents per share) which is an increase of 41% over the prior year.
The intrinsic net asset value has increased by 47 cents per share to 362 cents per share
(2014: 315 cents per share). This is an increase of 15% from the prior year's intrinsic
net asset value. The intrinsic net asset value aims to provide shareholders with a
realistic estimate of the group's net asset value. This differs from the IFRS values
because IFRS dictates that certain assets are not recorded at their market value.
Further details are included in the intrinsic value report which can be found below.
INDIVIDUAL INVESTMENTS
SUBSIDIARIES
CLUB MYKONOS LANGEBAAN ("CML") (100%)
CML contributed a profit for the year of R28.0 million (2014: R21.3 million). This profit
includes a contribution from the Mykonos Casino of R11.2 million (2014: R10.7 million).
Dividends from the casino for the year amounted to R7.4 million (2014: R5.9 million).
The casino traded well throughout the year. The casino was upgraded during the year,
which included both a system upgrade and gaming floor refurbishment. This refurbishment
limited access to certain areas during the year, but it did not have a material impact
on the gaming revenue.
Rental income from investment properties continues to grow.
RESI INVESTMENT GROUP (100%)
On 30 April 2015 Trematon purchased the remaining 50% of Resi and now holds 100% of the
investment. Resi's core focus continues to be long-term investment in residential
properties. There is continued focus on reducing costs and increasing rental income,
while seeking property acquisitions that will add both yield enhancements and capital
growth to the portfolio in the long term. Resi contributed R61.1 million
(2014: R1.1 million) to group profits, of which R58.9 million relates to fair value
adjustments. These fair value adjustments have been based on valuations using both
yield and comparable sales data of similar properties in the area. We are continuing
to grow this business and make acquisitions that meet our investment criteria.
ARIA PROPERTY GROUP (67%)
Aria, which includes Arbitrage Property Fund (Pty) Limited, continues to invest in
properties in the commercial, industrial, retail and office sectors with the aim of
generating income and capital growth. Aria contributed R26.3 million (2014: R16.2 million)
to the group's profit. During the year Aria purchased the North Wharf building in Cape Town
for R51.5 million. Aria also concluded the purchase of the Stanhope Bridge building in
Claremont, Cape Town, Redefine Boulevard Shopping Centre in George and the Devonshire
Parking Garage in Durban. The total cost of these properties was R203.1 million which
were transferred on 31 August 2015, the result of which was that no operating profit
from these three properties was recognised in this financial year.
GENERATION EDUCATION (75%)
Generation will focus on education and is in the process of construction of its first
school which is situated in Sunningdale, Cape Town. This school will be opening in
January 2016 and will cater for children from the ages of 4 months to 12 years old.
The school has capacity for 280 children and has received applications and deposits for
240 children. Generation plans to expand to offer education for all ages up to the age
of 18 years. We are currently in the process of negotiating the acquisition of additional
schools which will complement and expand our current offering. Included in the current
year's group earnings is a loss of R0.2 million as a result of set-up costs.
JOINT VENTURES AND ASSOCIATES
THE VREDENBURG PROPERTY TRUST ("VPT") (50%)
VPT, a joint venture of which Aria owns 50%, owns the Vredenburg Mall in Vredenburg,
Western Cape. VPT contributed R2.7 million (2014: R4.6 million) to equity accounted
earnings. The reason for the drop in earnings from the prior year was due to a lower
fair value adjustment in the current year. Operating profits increased marginally over
the prior year and the asset continues to perform well.
TREMTRUST 1 ("TREMTRUST") (50%)
Tremtrust is a joint venture with Buffet Investment Services (Pty) Limited via Aria.
Tremtrust owns the Northgate Park which is located on the N1 highway in Cape Town.
The property was purchased at a cost of R107 million and has undergone a redevelopment
to convert from retail space to an A-grade office park. The cost of the renovation is
R30 million. The property has attracted good-quality tenants, some of whom have already
moved into the building. We expect to have the property fully let during the 2016
financial year. Tremtrust contributed R12.2 million to equity accounted earnings for
the year.
THE WOODSTOCK HUB (PTY) LIMITED (50%)
The Woodstock Hub continues to acquire properties in the Woodstock area in Cape Town
with the intention to redevelop both residential, commercial and mixed-use properties.
The Woodstock Hub has shown improved results over the past year realising an equity
accounted profit of R4.7 million (2014: loss of R1.5 million). During the past year
two properties have been completed and tenanted and contributed to the above profit.
BUFFSHELF 70 TRUST ("BUFFSHELF") (20%)
Buffshelf, a new investment via Aria, purchased the Cape Gate Value Centre situated
in Brackenfell, Cape Town. The investment is equity accounted and contributed
R1.6 million to group profits.
OTHER INVESTMENTS
Trematon continues to invest in various JSE-listed companies where we feel a trading
opportunity exists. During the current year Trematon realised a profit on held-for-trading
investments of R5.8 million (2014: R1.4 million).
The group maintains its investment in Cloudberry Investments 18 (Pty) Limited which
holds shares in Mazor Group Limited and Phumelela Gaming and Leisure Limited. This
investment was impaired in the current year due to the fall in the Mazor share price.
The investment in Cloudberry is carried at the realisable net book value of the company.
INTRINSIC VALUE REPORT
An intrinsic value report has been prepared to improve shareholder communication.
The group's financial results have been prepared in terms of the required IFRS
interpretations, which in some cases do not allow for certain investments to be shown
at their market values, such as investments in associates and joint ventures, which
are recorded at cost plus its share of post-acquisition reserves less distributions
received and inventory which is carried at the lower of cost and net realisable value.
The intrinsic net asset value of the group includes valuations of all investment
categories and represents, in the opinion of the directors, a more accurate assessment
of the group's value than the net asset value calculated in terms of IFRS.
These valuations are either based on their listed market value, external professional
or directors' valuations.
2015 2015 2014 2014
Book Intrinsic Book Intrinsic
value value value value
Note R R R R
Listed shares 1 39 372 983 39 372 983 12 070 272 12 070 272
Cloudberry Investments 18 2 8 521 483 8 521 483 12 917 812 12 917 812
Stalagmite Property
Investments 3 8 815 600 8 815 600 8 815 600 8 815 600
Club Mykonos Langebaan 4 190 548 884 430 774 154 162 674 206 374 407 445
Property, Marina and Casino
Aria Property Group 3 392 940 239 392 940 239 111 462 382 111 462 382
Commercial property
Resi Investment Group 3 340 193 893 367 987 192 202 147 848 254 276 316
Residential property
Cash on hand 5 55 388 465 55 388 465 44 499 617 44 499 617
Other assets 5 39 253 247 39 253 247 50 999 822 50 999 822
Total assets 1 075 034 794 1 343 053 363 605 587 559 869 449 266
Liabilities 6 532 506 155 526 006 155 283 268 056 283 268 056
Non-controlling interests 32 880 958 32 880 958 27 402 457 30 802 457
Net assets (attributable to
equity holders) 509 647 681 784 166 250 294 917 046 555 378 753
Intrinsic net asset value
per share 2.35 3.62 1.67 3.15
Note:
1. Valuation based on quoted market prices at year-end.
2. Valuation based on net asset value of company using quoted market prices at year-end.
3. Directors' valuation taking into account current market prices.
4. Valuation of assets at Club Mykonos based on current market prices of similar assets
and earnings, where applicable.
5. Market value equals book value.
6. Liabilities include total borrowing of group and subsidiary companies.
Arthur Winkler
Chief Financial Officer
Domicile and registered office: 30 Hudson Street, Cape Town.
PO Box 7677, Roggebaai, 8012, South Africa
Transfer secretaries: Link Market Services South Africa (Pty) Limited
19 Ameshoff Street, Braamfontein
Directors: M Kaplan (Chairman)#*, AJ Shapiro (Chief Executive Officer),
AL Winkler (Chief Financial Officer), JP Fisher#* A Groll, AM Louw*#, R Stumpf*
* Non-executive # Independent
Secretary: SA Litten
Sponsor: Sasfin Capital, a division of Sasfin Bank Limited
Auditor: Mazars
Date Published: 13 November 2015
Preparer: The group financial results have been prepared under the supervision
of AL Winkler (Chief Financial Officer) CA (SA)
Contact details: Tel: 021 421 5550. Fax: 021 421 5551
Website: www.trematon.co.za
The preliminary condensed consolidated results have been independently reviewed in
compliance with the requirements of the Companies Act of South Africa.
Date: 13/11/2015 02:53:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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