Trematon, the small investment company that mixes real estate ventures and private education, has paid another bumper distribution to shareholders.
Results for the year to end-August, which were released on Tuesday, showed Trematon declaring a 40c a share payout to shareholders. This is 33% higher than the 30c it forked out in December 2021.
The big payout comes despite Trematon’s private school business, Generations (GenEd), still not generating a profit. GenEd, which operates a handful of Montessori-styled schools in the Western Cape, increased revenue to R179m (from R138m last year). But the loss before tax came in at R9.5m.
GenEd represents 38% of Trematon’s R1.1bn intrinsic net asset value, making it the single-largest investment in the group. Trematon CEO Arnie Shapiro said the latest dividend was a “statement of intent”.
“Our share price does not reflect Trematon’s underlying asset value, so one way of giving value back to shareholders is with large distributions. We will have paid 70c a share in the last two years, and we still have enough capital to do what we need to.”
The group finished the financial year with more than R200m cash on hand.
Shapiro expected the GenEd segment to enjoy a profitable year in financial 2023.
He said GenEd, which operates schools in Hermanus, Somerset West, Imhoff (near Kommetjie), Sandown and Sunnydale (near Milnerton), still had the fastest growth trajectory in the portfolio. “More than a third of turnover at year-end was attributable to education.”
Shapiro stressed GenEd was cash-flow positive before non-cash IFRS (International Financial Reporting Standards) adjustments stemming from the accounting treatment on the Somerset West campus lease (which is owned by a third party).
He added that the Somerset West campus — which has stern competition in the surrounding area — was not yet profitable and dragged on the overall result for GenEd.
Shapiro said the bricks-and-mortar school business was maturing — although it was not yet operating at optimal efficiency. “Metrics will improve as the capacity usage increases.” He clarified that the Somerset West was the only school not operating profitably.
Shapiro said the existing Western Cape schools would see organic expansion next year. But he also disclosed plans to move into the Gauteng market with a new school opening in Modderfontein in January next year. Shapiro explained this was a slight deviation from the Cape Town-based expansion by using a “capital-lite” development model in conjunction with M&T Developers.
On the property side, Shapiro said the group’s Western Cape-based residential portfolio took advantage of a buoyant residential property market for entry-level apartments and was able to sell a large amount of its properties at attractive prices.
ARIA, Trematon’s commercial property arm, concluded the acquisition of Riverside Mall in Rondebosch, which is performing well compared to its peer group in the Western Cape.
Shapiro said CML, which owns commercial, leisure and development properties in Langebaan, had been a very stable cash generator thanks to a loyal customer base. He believed this should improve further as trading conditions normalise.
ASK, Trematon’s UK-based property financing company, also performed well and met all budgets by contributing R9m to group equity accounted earnings and paying a R3m dividend.
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