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IFH
IFH
IFH - IFA SA - Interim results for the six months ended 31 December 2006
IFA HOTELS & RESORTS LIMITED
("IFA SA" or "the company")
Registration number 1919/001318/06
Share code: IFH ISIN code: ZAE000075669
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2006
CONSOLIDATED INCOME STATEMENT
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
Audited Audited Audited
R`000 R`000 R`000
Revenue 63 732 85 571 161 007
Operating profit 20 245 28 257 55 599
Investment income 3 357 4 306 15 227
Finance costs (4 808) (4 192) (10 731)
Share of results of associate (2 432) - -
Profit before taxation 16 362 28 371 60 095
Taxation (6 382) (8 358) (18 117)
Profit for the period 9 980 20 013 41 978
Profit attributable to equity
holders of the company 9 980 20 013 41 978
Basic and diluted earnings
per share (cents) ("EPS") 4,57 9,41 19,52
CONSOLIDATED CASH FLOW STATEMENT
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
Audited Audited Audited
R`000 R`000 R`000
Cash flows from operating
activities (6 089) 18 839 23 482
Cash generated by operating
activities 5 100 19 144 21 816
Interest received 3 357 4 306 8 828
Interest paid (4 242) (4 192) (6 583)
Taxation paid (10 304) (419) (579)
Cash flows from investing
activities (919) (711) (55 043)
Expenditure to maintain
operating capacity
Property, plant and
equipment acquired (1 919) (711) (1 140)
Expenditure for expansion
Investment in associates - - (13 903)
Loan to associate - - (40 000)
Other investments 1 000 - -
Cash flows from financing
activities 2 361 4 991 58 801
Transaction costs - - (6 814)
Loans raised 7 964 6 325 71 615
Loans repaid (5 603) (1 334) (6 000)
(Decrease)/increase in cash
and cash equivalents (4 647) 23 119 27 240
Cash and cash equivalents at
beginning of the period 79 928 52 688 52 688
Cash and cash equivalents at
end of the period 75 281 75 807 79 928
CONSOLIDATED BALANCE SHEET
31 December 31 December 30 June
2006 2005 2006
Audited Audited Audited
R`000 R`000 R`000
ASSETS
Non-current assets 142 308 65 527 146 052
Property, plant and equipment 83 308 55 929 83 132
Intangible assets 5 534 2 298 5 534
Investment in associates 11 471 - 13 903
Loan to associate 35 323 - 35 851
Investments 6 300 7 300 7 300
Deferred tax 372 - 332
Current assets 305 031 245 137 312 645
Inventories 2 719 2 282 2 454
Township properties 78 877 65 101 86 217
Trade and other receivables 147 804 101 700 142 739
Other financial assets 138 247 1 095
Assets held for sale 212 - 212
Cash and cash equivalents 75 281 75 807 79 928
Total assets 447 339 310 664 458 697
EQUITY AND LIABILITIES
Capital and reserves 158 634 37 753 148 654
Issued share capital
and share premium 71 892 1 71 892
Revaluation reserve 23 693 - 23 797
Distributable reserves 63 049 37 752 52 965
Non-current liabilities 142 724 121 214 133 594
Shareholder`s loans 121 572 111 567 113 571
Deferred tax 21 152 9 647 20 023
Current liabilities 145 981 151 697 176 449
Shareholder`s loans 42 192 63 526 47 794
Trade and other payables 54 229 26 531 66 707
Advance deposits 956 887 903
Deferred revenue 43 456 55 433 50 885
Liabilities held for sale 212 - 212
Taxation 4 936 5 320 9 948
Total equity and liabilities 447 339 310 664 458 697
Net asset value per share
(cents) ("NAV") 72,70 17,30 68,12
Net tangible asset
value per share
(cents) ("NTAV") 70,16 16,25 65,59
Number of shares
- in issue 218 210 680 200 218 210 680
- for NAV and NTAV
calculation 218 210 680 218 210 680 218 210 680
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Reval- Distri-
Share Share uation butable
capital premium reserves reserves Total
R`000 R`000 R`000 R`000 R`000
Balance at 1 July 2005 1 - - 17 739 17 740
Net profit for the period - - - 20 013 20 013
Balance at 31 December 2005 1 - - 37 752 37 753
Balance at 1 July 2006 2 182 69 710 23 797 52 965 148 654
Net profit for the period - - - 9 980 9 980
Transfer to
distributable reserve - - (104) 104 -
Balance at 31 December 2006 2 182 69 710 23 693 63 049 158 634
SEGMENTAL ANALYSIS
IFA HOTELS IFA ZIMBALI
Six months Six months Six months Six months
ended ended ended ended
31 December 31 December 31 December 31 December
2006 2005 2006 2005
Audited Audited Audited Audited
R`000 R`000 R`000 R`000
Revenue 43 982 68 492 17 849 17 079
EBITDA 24 428 28 355 2 110 2 115
EBIT 24 388 28 323 445 (66)
Profit/(loss)
after tax 16 537 21 032 (3 512) (1 019)
IFA BOSCHENDAL IFA ESTATES
Six months Six months Six months Six months
ended ended ended ended
31 December 31 December 31 December 31 December
2006 2005 2006 2005
Audited Audited Audited Audited
R`000 R`000 R`000 R`000
Revenue - - 62 -
EBITDA (3 102) - (1 882) -
EBIT (3 102) - (1 886) -
Profit/(loss)
after tax (3 227) - (1 338) -
IFA SA ELIMINATIONS
Six months Six months Six months Six months
ended ended ended ended
31 December 31 December 31 December 31 December
2006 2005 2006 2005
Audited Audited Audited Audited
R`000 R`000 R`000 R`000
Revenue 3 281 - (1 442) -
EBITDA (2 005) - - -
EBIT (2 031) - - -
Profit/(loss)
after tax 1 520 - - -
CONSOLIDATED
Six months Six months
ended ended
31 December 31 December
2006 2005
Audited Audited
R`000 R`000
Revenue 63 732 85 571
EBITDA 19 549 30 470
EBIT 17 814 28 257
Profit/(loss)
after tax 9 980 20 013
BASIS OF PREPARATION
The condensed consolidated financial results for the six months ended
31 December 2006 ("the period") have been prepared in compliance with the
group`s accounting policies which fully comply with International
Financial Reporting Standards ("IFRS") and the Listings Requirements
of the JSE Limited ("JSE").
The interim condensed consolidated financial results have been audited by BDO
Spencer Steward (KZN) Inc., Chartered Accountants (SA), Registered Auditors.
Their unqualified opinion is available for inspection at the company`s
registered office.
The board acknowledges its responsibility for the preparation of the interim
condensed consolidated financial statements in accordance with IFRS and the
Listings Requirements of the JSE.
NOTES TO THE FINANCIAL RESULTS
1. Reverse acquisition
On 16 January 2006, the company acquired from IFA Hotels & Resorts KSCC ("IFA
H&R Kuwait"), as an indivisible transaction, IFA H&R Kuwait`s interest in IFA
Zimbali Lodge (Pty) Limited ("IFA Zimbali") and its entire shareholding in IFA
Hotels & Resorts (SA) (Pty) Limited ("IFA Hotels") in exchange for the issue of
212 755 413 shares (97,5% of the voting equity in the company). This
transaction has been accounted for as a reverse acquisition where the legal
subsidiaries are treated as the acquirer and the company as the acquiree. The
financial statements are a continuation of the financial statements of the
subsidiaries. Accordingly, the consolidated interim financial statements of the
group for the comparative six month period ended 31 December 2005 comprise the
results of IFA Hotels and IFA Zimbali for the six months then ended.
2. Deferred revenue
Revenue from the sale of township property is recognised when legal title
passes or when the equitable interest in the property vests in the buyer.
Where there are further substantial acts to complete in the development of
township property, revenue is deferred and recognised as the acts are
performed. Revenue is recognised by reference to the stage of completion of the
development of the township property at the balance sheet date, as measured by
the proportion that land and development costs incurred to date bear to the
estimated total land and development costs.
The substantial acts required to complete the development of township property
are expected to be completed within the next eighteen months. Therefore the
revenue that has been deferred in terms of the revenue recognition policy is
likely to be recognised within the next eighteen months.
3. Headline earnings per ordinary share
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
Audited Audited Audited
R`000 R`000 R`000
Headline profit reconciliation
Profit attributable to
ordinary shareholders 9 980 20 013 41 978
Loss on disposal of property,
plant and equipment 7
Impairment losses - 1 90
Headline profit 9 987 20 014 42 068
Number of shares
- in issue 218 210 680 200 218 210 680
- for EPS and HEPS calculation 218 210 680 212 755 413 215 028 441
- basic and diluted
headline earnings
per share (cents) (HEPS) 4,58 9,41 19,56
4. Capital expenditure commitments
- contracted 40 868 19 256 35 168
- approved but not contracted 18 565 18 500 18 565
Total 59 433 37 756 53 733
5. Operating lease commitments 304 218 304
COMMENTS
GROUP PROFILE
IFA SA`s shares were listed on the JSE on 27 February 2006. IFA H&R Kuwait
holds the majority interest with an 85% shareholding. IFA SA owns:
- Through IFA Zimbali: the exclusive Zimbali Lodge on KwaZulu-Natal`s north
coast, rated as one of the world`s top hotels;
- Through IFA Hotels: a 50% stake in the development of the multi-million Rand
Zimbali Coastal Resort which is being jointly developed with Moreland-Zimbali
Resorts (Pty) Limited, a subsidiary of Moreland Developments (Pty) Limited
("Moreland") which owns the remaining 50% interest ("the Mifaz joint
venture");
- Through IFA Boschendal Investments (Pty) Limited ("IFA Boschendal"): a 19,25%
stake in Boschendal Limited ("Boschendal"). This investment represents a
significant stake in the world-renowned estate in the Western Cape and aligns
the group with an iconic South African brand. IFA SA intends to elevate
Boschendal onto the international real estate market and present the estate as
a world-class destination; and
- Through IFA Hotels & Resorts 8 (Pty) Limited ("IFA Estates"): an estate
agency which has the sole mandate to sell the R2 billion Fairmont Zimbali
project offering a hotel, luxury residences, a golf course and leisure
facilities.
FINANCIAL REVIEW
IFA ZIMBALI has shown a steady improvement in revenues with an increase of
4,5% to R17,9 million from R17,1 million for the comparative interim period.
The increase in revenue would have been 6,8% had the Zimbali Country Club been
running at full capacity. Of significance is earnings before interest and
taxation ("EBIT") which continued its growth trend to R0,4 million, reversing
from a previous loss of R0,1 million. The directors are pleased at the
positive EBIT trend as a precursor to future growth in net asset value. They
will continue to focus on elevating the brand equity of Zimbali Lodge, which
they believe is key to driving higher occupancies, average revenue per visit
and the value of the surrounding land.
IFA HOTELS - The decline in earnings from the comparative interim period is
largely attributable to the expected slowing in sales normally associated with
the conclusion of a development phase - in this instance Phase I of Zimbali
Coastal Resort. However, the method of accounting for revenue and profits has
resulted in deferred revenue being released to the income statement which has
countered, to a large extent, the slowing in sales.
Gross margins dropped by R4,5 million for the period despite factoring in an
upward revision in the expected gross margin due to increased saleable land
from the current development phase which resulted in a retrospective increase
in gross margins of R12,6 million recognised in the period. Gross margins were
also favourably impacted by an increase in commissions on re-sales of R1,6
million. Total EBITDA decreased by R3,9 million, after taking into account the
positive impact of a reduction in operating costs of R0,6 million.
A key focus for IFA Hotels remains the assembly on the balance sheet of land
inventory for development of future phases of the Zimbali Coastal Resort.
Recent land acquisitions have been made in this regard. The current phase of
the Zimbali Coastal Resort accounts for only 25% of IFA SA`s total development
potential in Zimbali. In addition to the remaining sales in the current phase,
deferred revenue of R43,5 million on the balance sheet will also be recognised
as the project is completed.
IFA BOSCHENDAL - The 2 400 ha Boschendal estate is still in the planning phase
and is accordingly incurring costs in anticipation of future revenues. The
group`s 19,25% share of the losses caused a negative after tax effect of R3,2
million, or 32% of the R10,0 million reduction in IFA SA`s after tax profit
for the period as compared to the comparative interim period. Boschendal is
expected to generate in excess of R2 billion in sales, of which approximately
R580 million has already been reserved.
IFA ESTATES - IFA SA`s estate agency has the sole mandate to sell the R2
billion Fairmont Zimbali project. While sales activity only began in January
2007, costs were incurred during the period in setting up the operation. The
after tax loss of R1,3 million is responsible for a further 13% of the total
reduction in IFA SA`s after tax profit compared to the comparative interim
period.
The directors are confident that the performance of the group is in line with
expectations in light of the current phase of the various business units` life
cycles. They are confident that the group is establishing a solid foundation
for future growth.
PROSPECTS
IFA H&R Kuwait is well-positioned to invest further capital and expertise in
resort development in South Africa. Its significant investment in the country
to date affirms its intention to use the South African operation as a platform
to expand its global network of resorts and offer prime opportunities to
investors in Africa. In addition IFA SA has secured an initial R200 million in
bank funding for appropriate strategic acquisition opportunities across the
continent.
Post year-end IFA SA has in line with strategy entered the Namibian hospitality
market for the first time. Through a N$97 million joint venture agreement with
the Ohlthaver & List (O&L) Group, IFA SA will introduce five star international
hotelier Kempinski Hotels ("Kempinski") to Namibia. The joint venture will
redevelop three hotels - The Strand Hotel in Swartkopmund, King`s Den Lodge on
the banks of the Chobe River and Mokuti Lodge located at the gateway to the
renowned Etosha Park game reserve - and develop a fourth hotel in Windhoek, all
currently branded and operated within the Namib Sun Portfolio and to be
operated by Kempinski going forward. IFA SA will also assess the potential for
residential and retail opportunities with a view to integration into the
adjoining hotel properties.
Further, as previously announced on 5 March 2007 the Mifaz joint venture has,
post year-end, acquired a further 427 hectares of land between Zimbali and the
proposed King Shaka International Airport from the Tongaat-Hulett Group for
R139,2 million.The acquisition offers opportunity for expanding the current
Zimbali-based resort and residential nodes as well as for introducing a
significant business/commercial node close to the new airport.
DIVIDEND
No dividend has been declared for the period.
As set out in the circular to the shareholders of Moribo Leisure Limited
("Moribo") dated 22 December 2005, the board of directors undertook to
distribute all of the company`s excess cash that existed before the
implementation of the reverse acquisition ("the Moribo dividend") to its
shareholders who were recorded in the register as such on the record date.
The last date to trade in order to participate in the Moribo dividend was
Friday, 10 February 2006, the record date was Friday, 17 February 2006,
both prior to implementation of the reverse acquisition. Subsequent to the
implementation of the reverse acquisition, the South African Revenue Service
("SARS") acquired all of Moribo`s excess cash to settle certain claims.
The previous directors of the company continue to apply for the settlement of
the company`s previous receivables including the excess cash acquired by SARS.
It is not possible at this time to quantify the extent, if any, of the Moribo
dividend.
For and on behalf of the board
JM Al-Bahar TJM Al-Bahar
(Chairman) (Chief Executive Officer)
Zimbali, Durban, KwaZulu-Natal
28 March 2007
CORPORATE INFORMATION
Directors
JM Al-Bahar (Chairman)*, TJM Al-Bahar (Chief Executive Officer), WJ Burger*
PGR de Sylva, GE Larson*, VM Nkosi, JAM Wilson*
*Non-executive
Registered office
1 Amanbali, Zimbali Coastal Resort, KwaZulu-Natal
Company secretary
KA Watson CA(SA), MBA
Transfer secretaries
Computershare Investor Services 2004 (Pty) Limited, 70 Marshall Street,
Johannesburg
Sponsor
BDOQuestCo (Pty) Limited
Date: 29/03/2007 11:08:00 Produced by the JSE SENS Department.
