30th Mar 2010 10:30
SOUTH AFRICAN PROPERTY OPPORTUNITIES PLC
('SAPRO' or the 'Group')
Interim results for the six months ended 31 December 2009
South African Property Opportunities plc (AIM: SAPO), an investment company established to invest in real estate opportunities in South Africa, announces its unaudited interim results for the six months ended 31 December 2009.
Matrix Paul Fincham +44 (0)20 3206 7175
Hogarth Partnership Tim McCall (office) +44 (0)20 7357 9477
(mobile) +44 (0)77753 561862
A copy of the results announcement will be available on the Company's website at www.saprofund.com
Notes:
Note to Editors:
- South African Property Opportunities plc (SAPRO) is a company investing in the South African property market. Its shares were admitted to AIM in October 2006 raising an initial £30 million (before placing expenses). In May 2007 a further £34.2 million (before placing expenses) was raised from new and existing investors.
Chairman's Statement
Introduction
I am pleased to report South African Property Opportunities plc's ("SAPRO's" or "the Company's") unaudited interim results for the six months ended 31 December 2009.
We continue to work to identify projects within the portfolio which have the potential to generate an appropriate level of return. This is against the background, as identified in our final results, of a depressed property market in South Africa. This has impacted our net asset value ("NAV"), but we believe that the portfolio is well placed for recovery and this puts the Company in a good position as and when residential and commercial demand picks up. In addition, the Company and its subsidiaries (the "Group") has a healthy balance sheet with cash of £12.5 million enabling it to take full advantage of the opportunities inherent in the investments.
Financial results
As at 31 December 2009, the NAV of the Group, calculated in accordance with International Financial Reporting Standards ("IFRS") stood at £73.1 million (117.3 pence per share), up 4.1% from £70.2 million (112.7 pence per share) as at 30 June 2009. IFRS does not permit the recognition of increases in land value of certain types of property that are held for development and accordingly, the IFRS NAV shows these development properties at cost.
The board of directors of the Company (the "Board") is also publishing an adjusted NAV that incorporates open market property valuations in accordance with guidelines produced by the European Public Real Estate Association ("EPRA"). As with previous results, these property valuations have been carried out by CBRE. The EPRA NAV, reflecting the increase in value net of the associated tax, was £86.0 million (138.0 pence per share), up 3.2% from £83.3 million (133.7 pence per share) as at 30 June 2009.
The rise in the EPRA NAV is due to the movement in currency and to the ongoing investments in some of the projects. On a like-for-like basis (in Rand terms), there has been a marginal fall in values, reflecting the lower level of transactional activity in South Africa, together with a more cautious approach in the market.
Ongoing management arrangements
Since this Board was constituted in October 2009, we have taken a number of steps to rationalise the business.
We served notice on the current investment manager and their notice period lasts until 20 October 2010. We have started to put in place appropriate arrangements for when the contract comes to an end later this year. We will clearly inform you as and when these arrangements are finalised. As explained in the report and accounts for the year ended 30 June 2009, John Chapman and Craig McMurray continue to ensure the Company is managed effectively on a day-to-day basis.
We have also replaced the South African administrator with the GMG Group. GMG is a well reputed company with a strong presence in South Africa. We were also able to negotiate fees that are substantially less than those of the previous administrator. The turnover has not been entirely smooth, however, and, amongst other issues, we have had to requisition many general meetings in South Africa to remove directors and replace them with our choices. This has taken several months (given that there are two layers of local companies in South Africa) but we are now close to concluding this process.
As we have previously announced, the Company's investment manager has made a claim for performance fees allegedly due for an amount of up to £5.1 million (in cash and shares). The Company believes that the claim is without merit and intends to vigorously defend it. The Investment Manager has also made a claim for unpaid management fees for 2010.
I hope that we can quickly put these legacy issues behind us and focus on the ongoing development of the Group.
Investments and valuations
As I mentioned in my December report, we are undertaking a comprehensive evaluation of SAPRO's entire portfolio and are sorting our assets into three categories - develop, hold and sell. We intend to approach this process rigorously by forming a clear view as to the expected rate of return from each project and whether this rate is adequate. In my view the required rate of return must factor in two major risk components - country risk plus project risk.
As for country risk, shareholders should keep in mind that while South Africa offers a lot of opportunity, it also presents substantial risks. Because there was no real credit boom in the early part of this decade, South Africa has not suffered in the global recession like so many other countries. Although there were some excesses in South African property prices, especially in the residential sector, property prices never disengaged from economic reality to the extent they did in other parts of the world. There continue to be many arguments why South Africa's future should be bright including the increasing demand from a newly emerging middle class and South Africa's position as the business centre of Africa. Having said that, South Africa faces many challenges as well. Consumer price inflation is projected to be in the order of 6% for 2010. Approximately 25% of the eligible work force is unemployed, and recent economic growth, while positive with GDP growth projected at 2.8% for 2010, is not at a level sufficient to materially diminish the unemployment numbers nor offer sufficient opportunity to South Africa's large underclass. Political stability must also be considered given that the unequal wealth distribution is primarily along racial lines. These risks and inflationary expectations are reflected in the yields on South African government paper, ten year government bonds yielding close to 9%. Factoring in an appropriate development risk premium, your board believes the assets in the portfolio need to be able to exceed a high hurdle, although this hurdle will vary from the lower risk of holding land to the higher risk decision of carrying out development.
With this in mind, let me now turn to our assets and give you an overview of what has been accomplished since the last report. The projects as at 31 December 2009 were as follows:
|
Project Name |
SAPRO Interest (%) |
SAPRO Share of Land Cost (ZAR million) |
SAPRO Share of Land Value (ZAR million) |
SAPRO Share of Uplift (ZAR million) |
SAPRO Share of Uplift over Cost (%) |
|
Residential |
|
|
|
|
|
|
African Renaissance |
65 |
41.5 |
82.9 |
41.4 |
100 |
|
Driefontein Residential |
100 |
22.0 |
25.8 |
3.8 |
17 |
|
Kindlewood Nature Estate |
89 |
72.0 |
72.0 |
- |
- |
|
Kyalami Residential Estate |
90 |
25.4 |
25.4 |
- |
- |
|
Mixed Use |
|
|
|
|
|
|
Brakpan |
50 |
15.2 |
15.9 |
0.7 |
5 |
|
Emberton |
80 |
41.6 |
41.5 |
(0.1) |
- |
|
Lenasia |
100 |
55.1 |
55.1 |
- |
- |
|
Longmeadow |
49 |
80.5 |
111.9 |
31.4 |
39 |
|
Sandton |
79 |
89.6 |
89.6 |
- |
- |
|
Starleith |
50 |
18.7 |
17.4 |
(1.3) |
(7) |
|
Industrial |
|
|
|
|
|
|
Clayville Industrial Park |
100 |
6.7 |
17.7 |
11.0 |
164 |
|
Gosforth Business Estate |
75 |
102.3 |
131.2 |
28.9 |
28 |
|
Hughes Industrial Park |
30 |
13.4 |
12.6 |
(0.8) |
(6) |
|
Imbonini Services Park (Phase 1) |
50 |
13.7 |
13.7 |
- |
- |
|
Acacia Park * |
50 |
19.6 |
19.6 |
- |
- |
|
Imbonini Services Park (Phase 2) |
50 |
34.6 |
69.2 |
34.6 |
100 |
|
Waltloo Industrial Park |
50 |
7.7 |
9.7 |
2.0 |
26 |
|
Total |
|
659.6 |
811.2 |
151.6 |
23 |
|
£1 = R11.7889 (31 December 2009 rate) Source: Proteus Property Partners, GMG and CBRE |
|||||
|
* Acacia Park is a mini unit industrial park that has been developed on the Imbonini Park (Phase 1) land. |
|||||
Residential Developments
The residential sector has been under a lot of pressure and it remains questionable how quickly things will improve. For 2009 as a whole, the total area of residential buildings completed in South Africa declined by 23.2%, while that of plans passed fell by an even greater level, 40.4%.
We expect 2010 to be another tough year for the residential building sector, and for the year as a whole completions growth is expected to be flat. This, however, can imply an improving level of activity as the year progresses, with the worst part of the year being the first half, while the second half is expected to see some positive year-on-year growth off what is now a very low base.
It is not expected that that the recovery in nominal house prices will result in a change in real house prices in the near term. The reasons for this are:
·; Tough prospects for the country's finances (adding pressure on taxes)
·; Rising unemployment
·; Already high house prices in real terms
·; Already high levels of household debt
·; Constraints on economic growth through electricity shortages and an uncertain outlook for the world economy
Given this situation SAPRO will exercise prudence before it commits to further top structure residential development.
Kindlewood phase one is now complete. The Kindlewood development comprises two adjoining plots with a combined area of 5.3 hectares and is located north of Durban. Phase one comprises forty-one units. Sales have been slow with eleven units sold. Given the market conditions, we have begun letting units and now have two units under lease. Considering the difficult market conditions and slow sales in Kindlewood phase one, we have no immediate plans to commence construction on phase two of the project.
African Renaissance is predominantly undeveloped land east of Pretoria. The plan has been to construct a large residential development along with a commercial/retail component. We have been considering hiving off African Renaissance's commercial/retail component, which should be attractive to investors separately from the residential component. We would then sell the residential component separately.
Driefontein comprises a vacant 13.2 hectare site suitable for low cost residential housing located four miles south of Johannesburg airport. It is adjacent to a former mining site. Final conditions of establishment have been granted and the necessary bulk services have been secured. However, environmental approvals have been withheld for reasons that we do not believe are justified. We are working on overturning the relevant decision. We will then need to determine how to proceed, with one possibility being selling the entire site to a developer experienced in constructing low cost housing.
Kyalami is undeveloped agricultural land situated in Kyalami, north of Johannesburg. The original plan was for a high density residential development. The town planning process is well advanced and the Johannesburg City Council has approved higher density development than was originally anticipated. Whether SAPRO will develop Kyalami or sell it on to a developer remains to be determined. Originally SAPRO was to hold 55%, with a group of development partners holding the remainder. It has subsequently been suggested that the partners are considering reducing their position; SAPRO is expecting a proposal shortly.
Emberton is a 16.5 hectare site located outside of Durban. A local developer with considerable experience in the region is responsible for obtaining the various approvals for a high quality residential development with a smaller component of retail and commercial. Under the terms of the contract, the developer had an option to inject capital into the development by mid-February 2010 and thereby participate as a 20% equity investor. The development partner so far has not done so and the parties are engaged in negotiations to restructure the arrangement. Progress has been made with the acquisition of planning rights but considerable work remains. SAPRO has been approached by the regional council to sell a portion of the property for ZAR 9 million to construct a new water reservoir.
Mixed Use Developments
Continued global economic problems have resulted in an amount of uncertainty regarding investment yields for property in South Africa resulting in persistent instability in the industry. In spite of the technical emergence of the economy out of recession, the rental markets in particular continue to feel the pinch of weak economic conditions across the commercial, industrial and residential arenas. Generally the outlook for building activity is negative, as building-input costs and tender prices continue to weaken.
Latest reports show that real retail sales in December 2009 were still in negative territory, declining at a rate of 3.7% year on year. This poor performance is due to a combination of a lack of consumer confidence, still-high levels of household debt, the almost one million jobs lost last year and very little appetite for credit.
Tempered expectations for real rentals remains the main risk to capitalisation rates necessitating higher income returns for investors because of lower capital-return prospects, resulting in suppressed values. Capitalisation rates for non-residential property types have remained static from Q4 2009.
Brakpan comprises 6.65 hectares of undeveloped land with final approvals expected later this year. At that point SAPRO will need to decide whether to proceed with top structure development or sell the asset to a third party. Brakpan will take time and substantial money to develop. The original plan was to obtain the requisite approvals, develop and lease the site, and sell it to an institutional investor at a later date. Whether the expected returns from this strategy are commensurate with the risks remains to be determined.
Lenasia comprises 12.95 hectares of undeveloped vacant land at a busy intersection in Johannesburg's Lenasia district. The original plan was to team up with a local developer/retailer to build a large mixed use retail and commercial complex. As things stand now we have no development partner but progress has recently been made on the provision of bulk electricity for a first phase.
Sandton and Starleith are two adjacent properties in the heart of Johannesburg's Sandton business district. Our partners, two well regarded South African developers, continue to work on obtaining the requisite approvals for what is expected to comprise office, residential and retail components. Consents are not expected until 2011.
Longmeadow is a substantial investment comprising a commercial, residential and retail mixed use site in Fourways, Johannesburg - which is about four miles from Johannesburg's Sandton district. The project has two phases with phase one comprising 12,769 square metres of hotel and commercial space and phase two the remainder. Substantial progress has been made in developing phase one, where planning rights were received in late 2008. City Lodges Hotels, a major national hotel operator, has taken a long term ground lease and developed a hotel on the north eastern corner of the property. The City Lodge hotel is now open for business and rents are being paid. Substantial progress has also been made on the construction of the adjacent 5,400 m² commercial development, and the Longpoint building is now being fitted out for its new tenants with all of the retail space and about 20% of the office space now fully let. Our manager is working on obtaining the requisite approvals to commence phase two, which is expected to comprise residential, retail and commercial components.
Industrial Developments
The effects of the softer economic activity on the demand for industrial space, and consequently its effect on market rentals, have become evident. The industrial market is equally affected by the major drivers of the local economy as described above and until a sustained improvement is evident one can expect the tough market fundamentals to put pressure on the growth of the new industrial space and the feasibility for new projects coming to market.
Clayville Industrial Park is a 49.3 hectare site located North West of the Johannesburg airport. The idea here was to sell serviced stands to industrial users. This objective has been delayed due to delays in obtaining bulk electricity. Clayville was a relatively small investment (ZAR 2.1 million) and due to the favourable acquisition price should produce an acceptable return regardless of when bulk electricity is finally provided.
Gosforth Business Estate is one of SAPRO's major projects with planning consents in place to develop between 130,000 and 150,000 m² of gross developable area. The plan here is to develop a portion of the property and sell serviced stands on the remainder. The installation of bulk services is complete and the installation of internal services for the first phase of the park is also complete. Completion of construction of the first eight units of small warehouse facilities is expected by May of this year. One unit has been sold, one let and one is under negotiation.
Hughes Industrial Park is a small industrial project. It comprises 3.69 hectares of former agricultural land, which has been planned for light industrial use. SAPRO has a minority interest (30%) in a development vehicle with four other partners. Hughes has been planned in two phases. The first phase, which comprises eighteen small warehouse units, is complete. Sales have been slow with four units sold and seven let. Our development partners intend to proceed with phase two once phase one is predominantly sold or let.
Imbonini comprises over 100 hectares of land and has been planned in two phases. The development essentially has three components, Acacia Park (the 10,400 m² sectional title mini-unit development on one of Imbonini 1's serviced stands), the remainder of the land comprising Imbonini 1, being a 36 hectare industrial estate, and Imbonini 2, being a 77 hectares of agricultural land adjacent to Imbonini 1. Imbonini 1 is approximately 66% sold with further sales currently being negotiated. As for Imbonini 2, planning consents have been obtained though services are not yet in place. Considering the high cost of servicing the land (forecast > ZAR 100 million) our thinking in the current market is to make bulk sales of development sites available to other developers or sell the entire site. Active marketing will commence this month.
Waltloo Industrial Park comprises a 4.4 hectare site located east of the Pretoria central business district held in partnership with a local developer. Recently our partner has approached us with a development proposal. We gave careful consideration to the proposal but finally determined that it did not provide an appropriate risk adjusted return. Following negotiations, we agreed to sell our interest to the developer at its CBRE appraised value.
Outlook and project business plans
Your Board continues to develop an in-depth appraisal of the various projects and the outlook for their development. We have made significant strides in this and will have it in place to begin implementation, at the optimum time for each project, as the market moves into recovery mode. This will identify projects where we believe continued ownership can earn our shareholders an appropriate rate of return and those where we believe that it is more attractive to realise value in the shorter term.
Against this background, your Board continues to believe that the Company is well placed and that the coming year will see a strong focus on delivering value to our shareholders.
David Hunter
Chairman
29 March 2010
Consolidated Income Statement
|
|
|
(Unaudited) Period from 1 July 2009 to 31 December 2009 |
(Unaudited) Period from 1 July 2008 to 31 December 2008 |
|
|
Note |
£'000 |
£'000 |
|
|
|
|
|
|
Revenue |
|
525 |
- |
|
|
|
|
|
|
Investment Manager's fees |
4 |
(797) |
(835) |
|
Accrual for potential performance fee |
4 |
- |
(4,116) |
|
Other administration fees and expenses |
5 |
(1,506) |
(848) |
|
Impairment in value of inventory |
10 |
(457) |
- |
|
Administrative expenses |
|
(2,760) |
(5,799) |
|
|
|
|
|
|
Operating loss |
|
(2,235) |
(5,799) |
|
|
|
|
|
|
Foreign exchange gain |
|
3,496 |
6,904 |
|
Other income |
|
3,496 |
6,904 |
|
|
|
|
|
|
Finance income |
|
576 |
916 |
|
Finance costs |
|
(105) |
(82) |
|
Net finance income |
|
471 |
834 |
|
|
|
|
|
|
Share of (loss)/profit of associates |
8 |
(102) |
377 |
|
Profit before income tax |
|
1,630 |
2,316 |
|
|
|
|
|
|
Income tax expense |
6 |
(2) |
(46) |
|
Profit for the period |
|
1,628 |
2,270 |
|
|
|
|
|
|
Attributable to: |
|
|
|
|
Owners of the Parent |
|
1,621 |
2,270 |
|
Minority interest |
|
7 |
- |
|
|
|
1,628 |
2,270 |
|
|
|
|
|
|
Basic and diluted earnings per share (pence) for profit attributable to the equity holders of the Company during the period |
7 |
2.60 |
3.64 |
Consolidated Statement of Comprehensive Income
|
|
Note |
(Unaudited) Period from 1 July 2009 to 31 December 2009 |
(Unaudited) Period from 1 July 2008 to 31 December 2008 |
|
|
|
£'000 |
£'000 |
|
Profit for the period |
|
1,628 |
2,270 |
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
Currency translation differences |
|
1,293 |
2,727 |
|
Other comprehensive income for the period (net of tax) |
|
1,293 |
2,727 |
|
|
|
|
|
|
Total comprehensive income for the period |
|
2,921 |
4,997 |
|
|
|
|
|
|
Total comprehensive income attributable to: |
|
|
|
|
-Owners of the Parent |
|
2,912 |
4,997 |
|
-Minority interest |
|
9 |
- |
|
|
|
2,921 |
4,997 |
Consolidated Balance Sheet
|
|
Note |
(Unaudited) As at 31 December 2009 |
(Audited) As at 30 June 2009 |
|
|
|
£'000 |
£'000 |
|
Assets |
|
|
|
|
Non-current assets |
|
|
|
|
Intangible assets |
9 |
1,484 |
1,376 |
|
Inventories |
10 |
54,440 |
48,489 |
|
Investments in associates |
8 |
7,127 |
6,707 |
|
Loans due from associates |
8 |
9,622 |
8,465 |
|
|
|
72,673 |
65,037 |
|
Current assets |
|
|
|
|
Trade and other receivables |
11 |
4,629 |
1,689 |
|
Cash at bank |
12 |
12,504 |
14,972 |
|
|
|
17,133 |
16,661 |
|
Total assets |
|
89,806 |
81,698 |
|
|
|
|
|
|
Equity |
|
|
|
|
Capital and reserves attributable to owners of the Parent: |
|
|
|
|
Issued share capital |
13 |
623 |
623 |
|
Share premium |
14 |
61,943 |
61,943 |
|
Foreign currency translation reserve |
|
3,934 |
2,643 |
|
Retained earnings |
|
6,593 |
4,972 |
|
|
|
73,093 |
70,181 |
|
Minority interest |
|
23 |
14 |
|
Total equity |
|
73,116 |
70,195 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
Current liabilities |
|
|
|
|
Loans from third parties |
16 |
6,697 |
4,520 |
|
Trade and other payables |
17 |
2,347 |
676 |
|
Current tax liabilities |
|
72 |
65 |
|
Borrowings |
18 |
7,574 |
6,242 |
|
|
|
16,690 |
11,503 |
|
Total liabilities |
|
16,690 |
11,503 |
|
Total equity and liabilities |
|
89,806 |
81,698 |
The financial statements were approved and authorised for issue by the Board of Directors on 29 March 2010 and signed on its behalf by:
David Hunter Simon Godwin
Director Director
Company Balance Sheet
|
|
Note |
(Unaudited) As at 31 December 2009 |
(Audited) As at 30 June 2009 |
|
|
|
£'000 |
£'000 |
|
Assets |
|
|
|
|
Non-current assets |
|
|
|
|
Loans and receivables due from subsidiary |
11 |
50,561 |
42,142 |
|
Investment in subsidiary |
|
21,741 |
21,741 |
|
|
|
72,302 |
63,883 |
|
Current assets |
|
|
|
|
Trade and other receivables |
11 |
66 |
43 |
|
Cash and cash equivalents |
12 |
8,253 |
11,944 |
|
|
|
8,319 |
11,987 |
|
Total assets |
|
80,621 |
75,870 |
|
|
|
|
|
|
Equity |
|
|
|
|
Capital and reserves attributable to owners of the Parent: |
|
|
|
|
Issued share capital |
13 |
623 |
623 |
|
Share premium |
14 |
61,943 |
61,943 |
|
Retained earnings |
|
17,606 |
12,962 |
|
Total equity |
|
80,172 |
75,528 |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
17 |
449 |
342 |
|
Total liabilities |
|
449 |
342 |
|
Total equity and liabilities |
|
80,621 |
75,870 |
The financial statements were approved and authorised for issue by the Board of Directors on 29 March 2010 and signed on its behalf by:
David Hunter Simon Godwin
Director Director
Consolidated Statement of Changes in Equity
|
|
Attributable to equity holders of the Company |
|
|
|
|||
|
|
Share capital |
Share premium |
Foreign currency translation reserve |
Retained earnings/(deficit) |
Total |
Minority interest |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
|
Balance at 1 July 2008 |
623 |
61,943 |
(1,622) |
(2,510) |
58,434 |
- |
58,434 |
|
Comprehensive income |
|
|
|
|
|
|
|
|
Profit for the period |
- |
- |
- |
2,270 |
2,270 |
- |
2,270 |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
Foreign exchange translation differences |
- |
- |
2,727 |
- |
2,727 |
- |
2,727 |
|
Total comprehensive income for the period |
- |
- |
2,727 |
2,270 |
4,997 |
- |
4,997 |
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2008 |
623 |
61,943 |
1,105 |
(240) |
63,431 |
- |
63,431 |
|
|
|
|
|
|
|
|
|
|
Balance at 1 July 2009 |
623 |
61,943 |
2,643 |
4,972 |
70,181 |
14 |
70,195 |
|
Comprehensive income |
|
|
|
|
|
|
|
|
Profit for the period |
- |
- |
- |
1,621 |
1,621 |
7 |
1,628 |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
Foreign exchange translation differences |
- |
- |
1,291 |
- |
1,291 |
2 |
1,293 |
|
Total comprehensive income for the period |
- |
- |
1,291 |
1,621 |
2,912 |
9 |
2,921 |
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2009 |
623 |
61,943 |
3,934 |
6,593 |
73,093 |
23 |
73,116 |
Consolidated Cash Flow Statement
|
|
Note |
(Unaudited) Period from 1 July 2009 to 31 December 2009 |
(Unaudited) Period from 1 July 2008 to 31 December 2008 |
|
|
|
£'000 |
£'000 |
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
Profit for the period before tax |
|
1,630 |
2,316 |
|
Adjustments for: |
|
|
|
|
Interest income |
|
(576) |
(916) |
|
Interest expense |
|
105 |
82 |
|
Impairment of inventory |
|
457 |
- |
|
Share of loss/(profit) of associates |
|
102 |
(377) |
|
Foreign exchange gain |
|
(3,496) |
(6,904) |
|
Operating loss before changes in working capital |
|
(1,778) |
(5,799) |
|
Purchase of inventory |
|
(4,534) |
(11,030) |
|
Increase in trade and other receivables |
|
(559) |
(243) |
|
Increase in trade and other payables |
|
1,550 |
4,833 |
|
Cash used in operations |
|
(5,321) |
(12,239) |
|
Interest paid |
|
(11) |
(82) |
|
Interest received |
|
22 |
548 |
|
Net cash used in operating activities |
|
(5,310) |
(11,773) |
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Acquisition of subsidiary |
|
- |
(1,118) |
|
Acquisition of associates |
|
- |
(197) |
|
Repayment/(payment) of loans to associates |
|
96 |
(4,256) |
|
Loan from third parties |
|
1,613 |
1,066 |
|
Movement in cash restricted by bank guarantees |
|
179 |
6,698 |
|
Net cash generated from investing activities |
|
1,888 |
2,193 |
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Proceeds from bank loans |
|
788 |
1,470 |
|
Net cash generated from financing activities |
|
788 |
1,470 |
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
(2,634) |
(8,110) |
|
Cash and cash equivalents at beginning of the period |
|
13,172 |
20,403 |
|
Foreign exchange gains on cash and cash equivalents |
|
215 |
2,666 |
|
Cash and cash equivalents at end of the period |
12 |
10,753 |
14,959 |
Notes to the Financial Statements
1 General Information
South African Property Opportunities plc (the "Company") was incorporated and registered in the Isle of Man under the Isle of Man Companies Acts 1931 to 2004 on 27 June 2006 as a public limited company with registered number 117001C. South African Property Opportunities plc and its subsidiaries (the "Group") investment objective is to achieve capital growth from an opportunistic portfolio of real estate assets in South Africa.
Proteus Property Partners Limited (the "Investment Manager") has been appointed as the Company's manager. The Company's administration is delegated to Galileo Fund Services Limited (the "Administrator"). The registered office of the Company is Third Floor Britannia House, St George's Street, Douglas, Isle of Man, IM1 1JE.
Pursuant to a prospectus dated 20 October 2006 there was an original placing of up to 50 million shares. Following the close of the placing on 26 October 2006 30 million shares were issued at a price of 100p per share.
The shares of the Company were admitted to trading on the AIM Market of the London Stock Exchange ("AIM") on 26 October 2006 when dealings also commenced. On the same date the shares of the Company were admitted to the Official List of the Channel Islands Stock Exchange (the "CISX").
As a result of a further fund raising in May 2007, 32,292,810 shares were issued at a price of 106p per share, which were admitted to trading on AIM on 22 May 2007.
The Company's agents and the Investment Manager perform all functions other than those carried out by the Board's executive and non-executive directors. The Company itself has two employees.
Financial Year End
The financial year end of the Company is 30 June in each year.
Company Profit
In accordance with the provisions of Section 3 of the Isle of Man Companies Act 1982, no separate income statement has been presented for the Company. The amount of the Company's profit for the period recognised in the Consolidated Income Statement is £4,644,116 (31 December 2008: £4,307,330).
2 Summary of Significant Accounting Policies
Except as described below, the accounting policies applied by the Group in the preparation of these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements for the year ended 30 June 2009.
These interim financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) IAS 34: Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 30 June 2009.
The interim financial statements for the six months ended 31 December 2009 are unaudited. The comparative interim figures for the six months ended 31 December 2008 are also unaudited.
The financial statements have been prepared under the historic cost convention and the requirements of the Isle of Man Companies Acts 1931 to 2004. The preparation of financial statements in conformity with IFRS requires the use of accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies. The most significant area requiring estimation and judgement by the Directors is the valuation of the inventory and the resulting calculation of the performance fee liability (see note 4).
The following new standards and amendments to standards are included for the first time and have a material impact for the financial year beginning 1 July 2009:
·; IAS 1 (revised), 'Presentation of financial statements'. The revised standard prohibits the presentation of items of income and expenses (that is 'non-owner changes in equity') in the statement of changes in equity, requiring 'non-owner changes in equity' to be presented separately from owner changes in equity. All 'non-owner changes in equity' are required to be shown in a performance statement.
Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). The Group has elected to present two statements: an income statement and a statement of comprehensive income. The interim financial statements have been prepared under the revised disclosure requirements.
·; IFRS 8, 'Operating segments'. IFRS 8 replaces IAS 14, 'Segment reporting'. It requires a 'management approach' under which segment information is presented on the same basis as that used for internal reporting purposes. This has resulted in an increase in the number of reportable segments presented, as the one previously reported geographical segment has now been split out at a project level.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-makers have been identified as the Board and Investment Manager that make strategic decisions.
3 Segment Information
The chief operating decision-makers have been identified as the Board and the Investment Manager. The Board and the Investment Manager review the group's internal reporting in order to assess performance and allocate resources. They have determined the operating segments based on these reports. The Board and the Investment Manager consider the business on a project basis by sector. The sectors are Residential, Mixed Use and Industrial.
Tables removed - please refer to the Company's website www.saprofund.com for the segment reporting for the six months ended 31 December 2009 and a comparative table for the six months ended 31 December 2008.
4 Investment Manager's Fees
Annual fees
During the term of the investment management agreement, the Investment Manager receives a management fee of 2% per annum of the net asset value of the Group payable quarterly in advance.
The Company has adopted the net asset value of the Group as calculated in accordance with customary accountancy or industry practices relating to the Company but valuing the Group's property assets on an open market basis for the purposes of calculating the Investment Manager's fee.
During the term of the investment management agreement, the Investment Manager is also entitled to recharge to the Group all and any costs and disbursements reasonably incurred by it in the performance of its duties including costs of travel save to the extent that such costs are staff costs or other internal costs of the Investment Manager. Accordingly, the Company is responsible for paying all the fees and expenses of all valuers, surveyors, legal advisers and other external advisers to the Company in connection with any investments made on its behalf. All amounts payable to the Investment Manager by the Company are paid together with any value added tax, if applicable.
Management fees payable for the period ended 31 December 2009 amounted to £796,811 (31 December 2008: £834,853).
Performance fees
During the term of the investment management agreement, the Investment Manager is entitled to a performance fee which is payable by reference to the increase in net asset value per share above a hurdle based on the issue price per share increased at a rate of 12% per annum, but adjusted so as to exclude any dividends paid during the period.
Potential performance fees payable for the period ended 31 December 2009 amounted to £nil (31 December 2008: £4,116,383). The 2008 amount was an accrual based on the assumption that a fee would be payable, however, as the relevant performance hurdle was not met, no such fee is payable.
5 Other Administration Fees and Expenses
|
Group
|
Period ended 31 December 2009 £'000 |
Period ended 31 December 2008 £'000 |
|
Audit |
101 |
100 |
|
Directors' remuneration |
144 |
61 |
|
Director's insurance cover |
14 |
11 |
|
Nominated Adviser and broker fees |
20 |
15 |
|
Administrator and Registrar fees |
44 |
36 |
|
Custodian fees |
3 |
3 |
|
Sponsor fees |
2 |
1 |
|
Strategic Adviser fees |
- |
20 |
|
Professional fees |
647 |
127 |
|
Property expenses |
220 |
33 |
|
Broker commission |
- |
33 |
|
Other expenses |
311 |
408 |
|
Administration fees and expenses |
1,506 |
848 |
Included within other administration fees and expenses are the following:
Nominated Adviser and Broker fees
As Nominated Adviser and Broker to the Company for the purposes of the AIM Rules, the Nominated Adviser and Broker receives a Nominated Adviser fee of £17,500 per annum and a Broker fee of £17,500 per annum, both fees payable half-yearly in advance. Matrix Corporate Capital was appointed on these terms as Broker from 26 November 2008 and as Nominated Adviser from 30 January 2009. Prior to those dates Teathers Limited was the Nominated Adviser and Broker and received a Nominated Adviser fee of £15,000 per annum and a Broker fee of £15,000 per annum, both fees payable half-yearly in advance.
Nominated adviser fees paid for the period ended 31 December 2009 amounted to £20,125 (31 December 2008: £15,041).
Custodian fees
The Custodian received a fee of 3 basis points of the value of the non real-estate assets held by the Company subject to a minimum annual fee of £5,000, payable quarterly in arrears.
Custodian fees payable for the period ended 31 December 2009 amounted to £2,875 (31 December 2008: £2,906).
Administrator and Registrar fees
The Administrator receives a fee of 10 basis points of the net assets of the Company between £0 and £50 million; 8.5 basis points per annum of the net assets of the Company between £50 and £100 million and 7 basis points per annum of the net assets of the Company in excess of £100 million, subject to a minimum monthly fee of £3,750 and a maximum monthly fee of £10,000 payable quarterly in arrears.
The Administrator assists in the preparation of the financial statements of the Group for which it receives a fee of £1,750 per set.
The Administrator provides general secretarial services to the Group for which it receives a minimum annual fee of £5,000. Additional fees based on time and charges will apply where the number of Board meetings exceeds four per annum. For attendance at meetings not held in the Isle of Man, an attendance fee of £350 per day or part thereof will be charged.
The Administrator may utilise the services of a CREST accredited registrar for the purposes of settling share transactions through CREST. The cost of this service will be borne by the Group. It is anticipated that the cost will be in the region of £6,000 per annum subject to the number of CREST settled transactions undertaken.
Administration fees payable for the period ended 31 December 2009 amounted to £43,512 (31 December 2008: £35,583).
Sponsor fees
The Sponsor receives a fee for the listing of the shares on the CISX. The Sponsor is paid an annual fee of £2,000 and a fee determined by reference to the number of hours spent on the work undertaken by the Sponsor by reference to its standard hourly charging rate.
Sponsor fees payable for the period ended 31 December 2009 were £2,254 (31 December 2008: £1,134).
Directors' Remuneration
The maximum amount of basic remuneration payable by way of fees to the Directors permitted under the Articles of Association is £200,000 per annum. The Directors are each entitled to receive reimbursement of any expenses incurred in relation to their appointment. The non-executive (excluding the Chairman) and executive Directors are entitled to receive an annual fee of £40,000 each and the Chairman £50,000. The Chairman's annual fee was increased from 1 October 2009 to £75,000.
Total fees and expenses paid to the Directors for the period ended 31 December 2009 amounted to £143,821 (31 December 2008: £61,343) in relation the annual fees referred to above plus travel expenses and irrecoverable VAT. Directors' insurance cover amounted to £13,808 (Period ended 31 December 2008: £10,183).
6 Income Tax Expense
|
Group |
Period ended 31 December 2009 |
Period ended 31 December 2008 |
|
|
£'000 |
£'000 |
|
Current tax |
2 |
46 |
The tax on the Group's profit before tax is higher than the standard rate of income tax in the Isle of Man of zero%. The differences are explained below:
|
Group |
Period ended 31 December 2009 |
Period ended 31 December 2008 |
|
|
£'000 |
£'000 |
|
Profit before tax |
1,630 |
2,316 |
|
|
|
|
|
Tax calculated at domestic tax rates applicable in the Isle of Man (0%) |
- |
- |
|
Tax effect of expenses that are not deductible for tax purposes |
- |
- |
|
Effect of higher tax rates in South Africa (28%) |
2 |
46 |
|
Tax expense |
2 |
46 |
7 Basic and Diluted Earnings per Share
Basic and diluted earnings per share are calculated by dividing the profit attributable to equity holders of the Group by the weighted average number of shares in issue during the period.
|
|
Period ended 31 December 2009 |
Period ended 31 December 2008 |
|
Profit attributable to equity holders of the Company (£'000) |
1,621 |
2,270 |
|
Weighted average number of shares in issue (thousands) |
62,293 |
62,293 |
|
Basic and diluted profit per share (pence per share) |
2.60 |
3.64 |
8 Subsidiaries and Associates
8.1 Subsidiaries
Since inception and for efficient portfolio management purposes, the Company established the following subsidiary company:-
|
|
Country of incorporation |
Percentage of shares held |
|
SAPSPV Holdings RSA (Pty) Limited |
South Africa |
100% |
SAPSPV Holdings RSA (Pty) Limited is a direct subsidiary of the Company. SAPSPV Holdings RSA (Pty) Limited was incorporated on 20 October 2006 with a share capital of ZAR 101 and share premium of ZAR 24,999,899.
During the period there has been no change in the Company's investment in the direct subsidiary.
The direct and indirect subsidiaries held by SAPSPV Holdings RSA (Pty) Limited are as follows:-
|
|
Country of incorporation |
Percentage of shares held * |
|
8 Mile Investments 504 (Pty) Limited |
South Africa |
100% |
|
Breeze Court Investments 31 (Pty) Limited ** |
South Africa |
50% |
|
Breeze Court Investments 34 (Pty) Limited |
South Africa |
100% |
|
Breeze Court Investments 35 (Pty) Limited |
South Africa |
100% |
|
Business Venture Investments No 1152 (Pty) Limited |
South Africa |
100% |
|
Business Venture Investments No 1172 (Pty) Limited |
South Africa |
100% |
|
Business Venture Investments No 1180 (Pty) Limited |
South Africa |
100% |
|
Business Venture Investments No 1187 (Pty) Limited |
South Africa |
100% |
|
Business Venture Investments No 1189 (Pty) Limited |
South Africa |
100% |
|
Business Venture Investments No 1191 (Pty) Limited |
South Africa |
100% |
|
Business Venture Investments No 1205 (Pty) Limited |
South Africa |
100% |
|
Business Venture Investments No 1237 (Pty) Limited |
South Africa |
100% |
|
Business Venture Investments No 1238 (Pty) Limited |
South Africa |
100% |
|
Business Venture Investments No 1239 (Pty) Limited |
South Africa |
100% |
|
Business Venture Investments No 1256 (Pty) Limited |
South Africa |
100% |
|
Business Venture Investments No 1262 (Pty) Limited |
South Africa |
100% |
|
Business Venture Investments No 1268 (Pty) Limited |
South Africa |
100% |
|
Business Venture Investments No 1269 (Pty) Limited |
South Africa |
79% |
|
Business Venture Investments No 1270 (Pty) Limited |
South Africa |
100% |
|
Business Venture Investments No 1300 (Pty) Limited |
South Africa |
100% |
|
Business Venture Investments No 1306 (Pty) Limited |
South Africa |
100% |
|
Crane's Crest Investments 28 (Pty) Limited |
South Africa |
100% |
|
Crimson King Properties 378 (Pty) Limited |
South Africa |
75% |
|
Dream World Investments 551 (Pty) Limited |
South Africa |
100% |
|
Living 4 U Developments (Pty) Limited |
South Africa |
65% |
|
Madison Park Properties 33 (Pty) Limited |
South Africa |
100% |
|
Madison Park Properties 34 (Pty) Limited |
South Africa |
100% |
|
Madison Park Properties 36 (Pty) Limited ** |
South Africa |
50% |
|
Madison Park Properties 40 (Pty) Limited ** |
South Africa |
50% |
|
Royal Albatross Properties 313 (Pty) Limited |
South Africa |
89% |
|
SAPSPV Clayville Property Investments (Pty) Limited |
South Africa |
100% |
|
SAPSPV Imbonini Property Investments (Pty) Limited |
South Africa |
100% |
|
Wonderwall Investments 18 (Pty) Limited |
South Africa |
100% |
* this also represents the percentage of ordinary share capital and voting rights held - 2009
** the Group controls the company by means of direct control of the board
8.2 Associates
|
|
31 December 2009 |
30 June 2009 |
|
|
£'000 |
£'000 |
|
Start of the period/year |
6,707 |
5,469 |
|
Acquisition of associates |
- |
211 |
|
Foreign exchange gain |
522 |
1,349 |
|
Share of loss of associates |
(102) |
(322) |
|
End of the period/year |
7,127 |
6,707 |
The Group's share of the results of its principal associates, all of which are unlisted, and its aggregate assets (including goodwill) and liabilities, is as follows:
|
Name |
Assets |
Liabilities |
Revenues |
Profit/(Loss) |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Period ended 31 December 2009 |
|
|
|
|
|
Imbonini Park (Pty) Limited |
2,658 |
(2,658) |
- |
- |
|
Longland Investments (Pty) Limited |
8,576 |
(1,449) |
37 |
24 |
|
Imbonini Park (Phase 2) (Pty) Limited |
3,097 |
(3,097) |
- |
(126) |
|
Blue Waves Properties 2 (Pty) Limited |
1,220 |
(1,220) |
- |
- |
|
|
15,551 |
(8,424) |
37 |
(102) |
|
|
|
|
|
|
|
Year ended 30 June 2009 |
|
|
|
|
|
Imbonini Park (Pty) Limited |
2,545 |
(2,545) |
1,859 |
(68) |
|
Longland Investments (Pty) Limited |
6,659 |
(77) |
75 |
54 |
|
Imbonini Park (Phase 2) (Pty) Limited |
2,870 |
(2,745) |
6 |
(305) |
|
Blue Waves Properties 2 (Pty) Limited |
1,141 |
(1,141) |
- |
(3) |
|
|
13,215 |
(6,508) |
1,940 |
(322) |
Loans due from Associates
|
|
31 December 2009 |
30 June 2009 |
|
|
£'000 |
£'000 |
|
Loans due from associates |
9,622 |
8,465 |
The loans due from associates are as follows:
|
Name |
Term |
Interest Rate |
31 December 2009 |
|
|
|
|
£'000 |
|
Imbonini Park (Pty) Limited |
* |
15% |
2,383 |
|
Imbonini Park (Pty) Limited |
* |
0% |
30 |
|
Imbonini Park Phase 2 (Pty) Limited |
** |
South African Prime +2.5% (capped at 16%) |
6,220 |
|
Imbonini Park Phase 2 (Pty) Limited |
*** |
0% |
42 |
|
Blue Waves Properties 2 (Pty) Ltd |
**** |
South African Prime |
947 |
|
|
|
|
9,622 |
* repayable after the senior debt funding provided by Investec Bank Limited has been repaid in full (note 18)
** repayment date is four years + one day following the receipt of the Recordal from the Development Facilitation Act, 1995 (DFA) Tribunal approving the planning application
*** repayable as and when the directors of Imbonini Park Phase 2 (Pty) Limited resolve that repayment shall be effected, provided there are sufficient cash reserves available to do so and proportionately to each shareholder
**** repayable at the discretion of the directors of Blue Waves
The fair value of these loans approximate their carrying value at 31 December 2009.
9 Intangible assets
|
Group |
|
|
|
|
31 December 2009 |
30 June 2009 |
|
Goodwill |
£'000 |
£'000 |
|
Start of the period/year |
1,376 |
31 |
|
Additions |
- |
1,177 |
|
Exchange differences |
108 |
168 |
|
End of the period/year |
1,484 |
1,376 |
10 Inventories
Group
|
|
31 December 2009 |
30 June 2009 |
|
|
£'000 |
£'000 |
|
At start of period/year |
48,489 |
24,531 |
|
Cost of land acquired and costs capitalised |
4,534 |
15,706 |
|
Impairment |
(457) |
- |
|
Disposals |
(2,078) |
- |
|
Foreign exchange gain |
3,952 |
8,252 |
|
At end of period/year |
54,440 |
48,489 |
During the period 10 out of a total of 41 completed units within the first phase of the Kindlewood development were sold for a total of £2,417,941 (ZAR 30,381,579) plus VAT.
During the period, the Group acquired land and capitalised costs of £4,533,939 (ZAR 56,969,210) (year ended 30 June 2009: £15,705,562 (ZAR 226,815,012)), in order to develop it for future re-sale, and accordingly it was classified as inventory.
At 31 December 2009 the net realisable value of Lenasia was £456,932 (ZAR 5,741,374) lower than cost, therefore, this inventory has been impaired during the period.
Security
At 31 December 2009, there are two first rank mortgages on two of the developments included in the above inventory securing the bank loans (see note 18 for details).
11 Trade and Other Receivables
Group
|
|
31 December 2009 |
30 June 2009 |
|
|
£'000 |
£'000 |
|
Prepayments |
162 |
76 |
|
VAT receivable |
515 |
793 |
|
Inventory sales |
2,577 |
- |
|
Other receivables |
1,375 |
820 |
|
Trade and other receivables |
4,629 |
1,689 |
Company
|
|
31 December 2009 |
30 June 2009 |
|
|
£'000 |
£'000 |
|
Loan due from SAPSPV Holdings RSA (Pty) Limited |
50,561 |
42,142 |
|
|
|
|
|
Prepayments |
56 |
34 |
|
Other receivables |
10 |
9 |
|
Trade and other receivables |
66 |
43 |
The loan from the Company to SAPSPV Holdings RSA (Pty) Limited bears interest at the Prime Rate (up to 30 June 2007 at the Repurchase Rate) as published by the Reserve Bank of South Africa from the date of the advance to the date of repayment, which interest shall be compounded monthly in arrears on the last working day of each month.
This loan is repayable as and when the directors of SAPSPV Holdings RSA (Pty) Limited resolve that repayment shall be effected, provided there are sufficient cash reserves available to do so and that prior approval has been obtained from the Exchange Control Division of the South African Reserve Bank but in no case later than 30 June 2013.
The fair value of the loan approximates its fair value at 31 December 2009.
12 Cash at Bank
Group
|
|
31 December 2009 |
30 June 2009 |
|
|
£'000 |
£'000 |
|
Bank balances |
2,575 |
1,321 |
|
Bank deposit balances |
9,929 |
13,651 |
|
Cash at bank |
12,504 |
14,972 |
Included within the £9,929,406 bank deposit balances figure is an amount of £1,751,127 (ZAR 20,643,858) (30 June 2009: £1,800,108 (ZAR 22,893,585)) represented by bank guarantees retained by the bank under fixed deposit (detailed below). This is the only figure excluded from the above balances for analysing the movements of cash and cash equivalents in the cash flow statement.
Bank guarantees
The indirect subsidiary Royal Albatross Properties 313 (Pty) Limited has a contingent liability of £1,326,999 (ZAR 15,643,858) in connection with its senior debt obligations.
The subsidiary SAPSPV Holdings RSA (Pty) Ltd has a contingent liability of £424,128 (ZAR 5,000,000) in connection with senior debt obligations of its associate Imbonini Park (Pty) Ltd.
Company
|
|
31 December 2009 |
30 June 2009 |
|
|
£'000 |
£'000 |
|
Bank balances |
116 |
144 |
|
Bank deposit balances |
8,137 |
11,800 |
|
Cash and cash equivalents |
8,253 |
11,944 |
13 Share Capital
|
Ordinary Shares of 1p each |
As at 31 December 2009 & 30 June 2009 Number |
As at 31 December 2009 & 30 June 2009 £'000 |
|
Authorised |
150,000,000 |
1,500 |
|
Issued |
62,292,810 |
623 |
The holders of Ordinary Shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
14 Share Premium
|
Company and the Group |
31 December 2009 £'000 |
30 June 2009 £'000 |
|
As at beginning and end of period/year |
61,943 |
61,943 |
15 Net Asset Value per Share
Group
|
|
31 December 2009 |
30 June 2009 |
|
Net assets attributable to equity holders of the Company (£'000) |
73,093 |
70,181 |
|
Shares in issue (in thousands) |
62,293 |
62,293 |
|
NAV per share |
£1.17 |
£1.13 |
The NAV per share is calculated by dividing the net assets attributable to equity holders of the Group by the number of ordinary shares in issue.
16 Loans from third parties
Group
|
|
31 December 2009 |
30 June 2009 |
|
|
£'000 |
£'000 |
|
Loans from third parties |
6,697 |
4,520 |
The loans from third parties are as follows:
|
Name |
Interest Rate |
31 December 2009 |
|
|
% |
£'000 |
|
Abbeydale Investment Holdings (Pty) Ltd * |
- |
1,438 |
|
Sable Holdings Limited * |
- |
959 |
|
Abbeydale Investment Holdings (Pty) Ltd ** |
- |
744 |
|
Homa Adama Trust *** |
Prime Rate plus 3 |
1,579 |
|
Justin Nash **** |
- |
254 |
|
Barrow Construction (Pty) Ltd ***** |
- |
861 |
|
Group Five Construction (Pty) Ltd ***** |
- |
858 |
|
Other |
- |
4 |
|
|
|
6,697 |
* in relation to their combined ownership of 25% of Crimson King Properties 378 (Pty) Limited and the Gosforth Business Estate development
** in relation to its 50% interest in Madison Park Properties 36 (Pty) Ltd and the Waltloo Industrial Park development
*** in relation to its 50% interest in Madison Park Properties 40 (Pty) Ltd and the Brakpan development
**** in relation to his prospective interest in Madison Park Properties 34 (Pty) Ltd and the Kyalami Residential Estate development
***** in relation to its 25% interest in Breeze Court 31 (Pty) Ltd and the Starleith development
All of the above loans are unsecured and carry no fixed terms of repayment.
The fair value of these loans approximate their carrying value at 31 December 2009.
17 Trade and Other Payables
Group
|
|
31 December 2009 |
30 June 2009 |
|
|
£'000 |
£'000 |
|
Other payables |
2,347 |
676 |
Company
|
|
31 December 2009 |
30 June 2009 |
|
|
£'000 |
£'000 |
|
Other payables |
449 |
342 |
18 Borrowings
Current liabilities
Group
|
|
31 December 2009 |
30 June 2009 |
|
|
£'000 |
£'000 |
|
Secured bank loans |
7,574 |
6,242 |
Terms and debt repayment schedule:
|
Bank |
Effective interest rate |
Final Maturity date |
31 December 2009 |
|
|
31 December 2009 |
|
£'000 |
|
Investec Bank |
South African Prime Rate minus 0.85% |
April 2010 |
5,153 |
|
Imperial Bank |
South African Prime Rate |
September 2010 |
2,421 |
|
|
|
|
7,574 |
19 Contingent Liabilities and Commitments
As at 31 December 2009 the Group has the following contingent liabilities and commitments:
- contingent liabilities which have corresponding bank guarantees are detailed separately in note 12.
- the indirect subsidiary Wonderwall Investments 18 (Pty) Ltd has a contingent liability to advance up to £129,862 (ZAR 1,530,932) being the balance under a Mezzanine Loan Agreement with Living 4 U Developments (Pty) Ltd to finance the African Renaissance development.
- the indirect subsidiary Business Venture Investments No 1269 (Pty) Limited ("BVI 1269") has a contingent liability to issue 100 Preference Shares to its minority shareholders. The Preference Shares entitle their owners to the first ZAR 22 million of any and all dividends declared by BVI 1269. BVI 1269 shall not declare any dividends to Ordinary Shareholders until the ZAR 22 million has been declared and paid in respect of the Preference Shareholders.
- The management agreement between the Group and its Investment Manager provides for a performance fee if the Net Asset Value of the Group, as defined in the agreement, exceeds a specified hurdle. Subsequent to 31 December 2009 the Group has received a claim from its Investment Manager for payment of £5.083 million based on their own calculation that the hurdle has been achieved. The Directors, having engaged an independent accountant to look at the Investment Manager's calculation, are of the opinion that the specified hurdle has not in fact been achieved and did not therefore made any accrual for payment of the performance fee as at 30 June 2009.
20 Related party transactions
Parties are considered to be related if one party has the ability to control the other party or to exercise significant influence over the other party in making financial or operational decisions.
The Investment Manager, Proteus Property Partners Limited, is a related party by virtue of its ability to make operational decisions for the Company. Fees for the period ended 31 December 2009 are disclosed in note 4.
Brian Padgett is a director of some of the Group's subsidiaries in South Africa, the Investment Manager and of Silex Management Limited, a company that provided administration services to the majority of the Group's South African subsidiaries. He is also a shareholder in Principle Capital Holdings S.A. the ultimate parent company of the majority shareholder in the Investment Manager.
During the period Abbeydale Construction invoiced Crimson King Properties 378 (Pty) Ltd £651,006 (ZAR 8,179,934) (30 June 2009: £214,899 (ZAR 2,733,068)) and Longland Investments (Pty) Limited £2,176,557 (ZAR 27,348,573) in relation to building work.
21 Post balance sheet events
On 6 February 2010 Anglo Irish Bank Corporation (International) Limited ceased to be the cash custodian of the company. The Company does not intend to appoint a new custodian.
The preference shares for Business Venture Investments No 1269 (Pty) Limited (see note 19) were issued on 13 January 2010.
Subsequent to 31 December 2009 agreements were signed for a sale of a further unit at the Kindlewood development (at a price of ZAR 2,115,000) and a further two units have been leased on one year lease contracts (total rental income of ZAR 36,000 per annum).
Subsequent to 31 December 2009 the Longpoint development (Longmeadow) in Fourways concluded lease agreements representing 21.6% of the total lettable space for terms ranging between two and five years. Total rental income of ZAR 2 million per annum.
Subsequent to 31 December 2009 Crimson King Properties 378 has been informed that it will be required to provide a guarantee to the Ekurhuleni Metropolitan Municipality for a period of 12 months relative to the external services which have already been installed. The guarantee value is expected to be no more than ZAR 500,000. The Ekurhuleni Metropolitan Municipality still has to advise us of this figure.
Agreement has been reached with our development partners on the Waltloo development which will see Abbeydale Construction purchasing 50% of the site from Madison Park Properties 36 (Pty) Ltd (the development vehicle) at ZAR 450sqm so that Abbeydale can conclude a develop and lease opportunity which SAPRO did not consider met certain return thresholds. Approximate purchase value of ZAR 10 million.
On 8 March 2010, Business Venture Investments No 1268 (Pty) Ltd (a wholly owned subsidiary), which will develop the Emberton site, was issued notice from council informing it that 11,657sqm of land for a water storage facility will be expropriated. The council will pay ZAR 9 million for the expropriated land (original cost ZAR 3.7 million).
Subsequent to 31 December 2009 the Hughes development concluded leases on six units (33% of the park), for terms ranging between six months and five years providing rental income of ZAR 1.7 million per annum and a sale of one unit (5% of the park) for ZAR 4.4 million.
City Power Johannesburg confirmed in a letter dated 24 March 2010 that it would be supplying part of the Lenasia site with a bulk electricity supply. This will cost ZAR 4 million, but will make a significant difference to the viability of the development.
Related Shares:
South African Property Opportunities