| Thu 14 Jun 2007, 10:00 | | ACC - Acc-Ross - Reviewed Results for the year end |
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ACC
ACC
ACC - Acc-Ross - Reviewed Results for the year ended 28 February 2007 and
withdrawal of cautionary
ACC-ROSS HOLDINGS LIMITED
(Registration Number: 2000/000059/06)
Share code: ACC & ISIN code: ZAE000077335
("Acc-Ross" or "the company")
REVIEWED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2007
CONDENSED CONSOLIDATED BALANCE SHEET Reviewed Restated
AT 28 FEBRUARY 2007 2007 2006
R R
ASSETS
Non-current assets 269 793 989 270 402 906
Property, plant and equipment 994 589 1 219 803
Inventory/Freehold land and stands 97 166 864 140 347 209
Goodwill 160 456 944 107 318 951
Investments at amortised cost -- 10 240 025
Deferred tax assets 11 175 592 11 276 918
Current assets 423 950 754 154 668 277
Inventory/Freehold land and 365 690 830 88 232 202
proclaimed stands for sale
Trade and other receivables 35 437 293 48 818 736
Other financial assets 21 617 613 13 708 058
Cash and cash equivalents 1 204 993 3 909 281
Non-current assets held for sale 25 --
Total Assets 693 744 743 425 071 183
EQUITY AND LIABILITIES
Equity and reserves 274 701 666 179 007 393
Issued capital, share premium and 280 600 194 167 043 256
share-based payments
Accumulated (loss) profit (5 898 528) 11 964 137
Minority interest 1 980 656 1 123 492
Non-current liabilities 301 710 206 108 310 364
Borrowings 258 877 238 86 398 089
Finance lease obligation 454 537 597 039
Deferred tax liabilities 42 378 431 21 315 236
Current liabilities 115 352 215 136 629 934
Trade and other payables 45 417 992 30 820 552
Borrowings 21 001 217 73 880 423
Finance lease obligation 137 504 109 261
Current tax payable 16 860 126 13 187 327
Provisions 31 935 376 18 632 371
Total Equity and Liabilities 693 744 743 425 071 183
Shares in issue at year end 1 118 430 034 877 930 034
Net asset value per share (cents) 24.56 20.39
Net tangible asset value per share 10.21 8.17
(cents)
CONDENSED CONSOLIDATED INCOME Reviewed Restated
STATEMENT FOR THE YEAR ENDED 28 2007 2006
FEBRUARY 2007 R R
Revenue 154 890 863 189 027 031
Cost of sales 140 178 401 162 491 694
Gross profit 14 712 462 26 535 337
Gains and losses on disposal of 28 376 351 16 765 541
investments
Investment revenue 806 364 351 752
Marketing and sales expenses (10 706 791) (5 000 966)
Consulting expenses (2 446 996) (855 270)
Administration expenses (8 819 054) (6 517 420)
Occupancy expenses (571 033) (380 358)
Project expenses 4 894 (2 624 318)
Other expenses (1 706 774) (1 323 009)
Depreciation and amortisation (226 760) (96 131)
Impairment of goodwill (19 854 778) --
Impairment of investments (2 000 000) --
Impairment of property, plant and (105 942) --
equipment
Share-based payments to staff and -- (11 000 000)
directors
(Loss) profit before finance costs (2 538 057) 15 855 158
and taxation
Finance costs (13 845 456) (6 725 082)
(Loss) profit before taxation (16 383 513) 9 130 076
Income tax (expense) income (734 376) 626 672
(Loss) profit for the year (17 117 889) 9 756 748
Minority interest 744 776 (2 207 389)
(Loss) profit attributable to (17 862 665) 11 964 137
ordinary shareholders of the parent
(Loss) earnings per share:
Basic (cents) (1.76) 1.93
Diluted basic (cents) (1.76) 1.92
Headline (cents) (2.38) (0.38)
Diluted headline (cents) (2.38) (0.38)
Weighted average shares in issue 1 012 689 261 618 708 037
Weighted average shares in issue for 1 012 689 261 622 708 037
dilution
Headline loss:
(Loss) profit attributable to (17 862 665) 11 964 137
ordinary shareholders of the parent
Adjustments for:
Impairment of goodwill 19 854 778 --
Impairment of property, plant and 105 942 --
equipment
Profit on disposal of investments,
adjusted for taxation effect (26 176 980) (14 334 538)
Headline loss for the year (24 078 925) (2 370 401)
Profit on disposal of assets and
investments - project related 26 176 980 14 334 538
Loss on disposal of assets and
investments - non project related 4 240 000 --
Adjusted headline earnings for the 6 338 055 11 961 137
year
CONDENSED CONSOLIDATED CASH FLOW Reviewed Restated
STATEMENT FOR THE YEAR ENDED 28 2007 2006
FEBRUARY 2007 R R
Net cash used in operations (46 504 225) (81 131 611)
Interest income 806 364 351 752
Interest paid (13 845 456) (9 762 270)
Net cash outflow from operating (59 543 317) (90 542 129)
activities
Net cash inflow from investing 1 124 765 5 573 754
activities
Net cash inflow from financing 55 714 264 87 043 689
activities
Net (decrease) increase in cash and (2 704 288) 2 075 314
cash equivalents
Cash and cash equivalents at 3 909 281 1 833 967
beginning of the year
Cash and cash equivalents at end of 1 204 993 3 909 281
the year
CONSOLIDATED Share Share Share-based Accumulated
STATEMENT OF capital premium payment profit
CHANGES IN EQUITY R R reserve (loss)
FOR THE YEAR ENDED R R
28 FEBRUARY 2007
Balance at 01 March 47 714 -- -- --
2005
Restated earnings -- -- -- 11 964 137
for the year
- as previously -- -- -- (3 468 453)
stated
- restatement -- -- -- 15 432 590
Issue of shares in 39 807 155 431 202 -- --
settlement of
liabilities
Share-based -- -- 11 000 000 --
payments to staff
and directors
Raised on -- -- -- --
acquisition
Acquired minorities -- -- -- --
Issue of shares for 272 2 715 628 -- --
cash
Share issue -- (2 191 367) -- --
expenses
Balance at 28 87 793 155 955 463 11 000 000 11 964 137
February 2006
- as previously 87 793 166 334 621 -- (3 468 453)
stated
- restatement -- (10 379 11 000 000 15 432 590
158)
Loss for year -- -- -- (17 862
665)
Issue of shares in 16 550 98 261 950 -- --
settlement of
liabilities
Issue of share for 7 500 19 266 817 -- --
cash
Acquired minorities -- -- -- --
Share issue -- (3 995 879) -- --
expenses
Balance at 28 111 843 269 488 351 11 000 000 (5 898 528)
February 2007
CONSOLIDATED STATEMENT OF Attributable Minority Total
CHANGES IN EQUITY FOR THE to equity interests
YEAR ENDED 28 FEBRUARY 2007 holders of R R
(CONTINUED) parent
R
Balance at 01 March 2005 47 714 85 47 799
Restated earnings for the 11 964 137 (2 207 389) 9 756 748
year
- as previously stated (3 468 453) (5 254 463) (8 722 916)
- restatement 15 432 590 3 047 074 18 479 664
Issue of shares in 155 417 009 -- 155 471 009
settlement of liabilities
Share-based payments to 11 000 000 -- 11 000 000
staff and directors
Raised on acquisition -- 2 219 567 2 219 567
Acquired minorities -- 1 111 229 1 111 229
Issue of shares for cash 2 715 900 -- 2 715 900
Share issue expenses (2 191 367) -- (2 191 367)
Balance at 28 February 2006 179 007 393 1 123 492 180 130 885
- as previously stated 162 953 961 867 831 163 821 792
- restatement 16 053 432 255 661 19 100 506
Loss for year (17 862 665) 744 776 (17 117 889)
Issue of shares in 98 278 500 -- 98 278 500
settlement of liabilities
Issue of share for cash 19 274 317 -- 19 274 317
Acquired minorities -- 112 388 112 388
Share issue expenses (3 995 879) -- (3 995 879)
Balance at 28 February 2007 274 701 666 1 980 656 276 682 322
COMMENTARY
The board of directors presents the Group`s results for the year ended 28
February 2007, reflecting the full year`s trading as a listed entity and
the second year of operations as a Group. Acc-Ross listed on the
Alternative Exchange of the JSE Limited ("JSE") on 16 February 2006.
These results have been prepared in terms of IAS 34: Interim Financial
Reporting and the accounting policies, which are in line with
International Financial Reporting Standards ("IFRS"), are consistent with
the prior year, with the exception of accounting for borrowing costs and
the reclassification of projects held from Property, Plant and Equipment
to Inventory/Freehold land and stands, which resulted in an increase of
current and non-current Inventory/Freehold land and stands in 2006 of
R176 582 255 and a corresponding decrease in Property, Plant and
Equipment. In addition, the Group adopted the following revised
accounting standards which had no material impact on the results:
- IAS 39: Financial Instruments: Recognition And Measurements
- IFRIC 4: Determining Whether An Arrangement Contains A Lease
The results have been reviewed by the company`s auditors, Deloitte & Touche,
whose unmodified review report is available for inspection at the
registered office of the company.
Acc-Ross appointed Deloitte & Touche as the new auditors to the entire Acc-
Ross Group, having previously had two different audit firms within the
Group. This resulted in new guidance from the profession which gave
advice and clarity on the most appropriate treatment and interpretation
of relevant issues in our industry as well as new developments in IFRS.
This resulted in the reclassification of certain assets and changes in
certain accounting policies which have culminated in the results
disclosed and have assisted greatly in more appropriate classification on
the Group`s balance sheet, more notably with the treatment of the Group`s
projects which have now been accounted for as inventory (current and non-
current - Inventory/Freehold land and stands/proclaimed stands for sale),
as opposed to Property, Plant and Equipment. The reclassification has
had a material impact on the disclosures and classification of certain
items included in the balance sheet and the cash flow statement.
The major impact on the current year`s income statement was, firstly, due to
the decision to include the costs of construction of the Gardener Ross
golf course in cost of sales, which decision is in line with the original
intention when construction of the golf course commenced in 2003 and is
the basis on which the funding and profit share arrangements with
Investec Bank Limited were concluded. Due to minority shareholders and
profit share arrangements in Gardener Ross, the option for the Group to
retain this asset is not commercially viable at this point in time.
Secondly, in line with developments in IFRS, the Group has early adopted
the amendments to IAS 23: Borrowing Costs, in terms of which borrowing
costs are required to be capitalised to the underlying projects, whereas
these were previously expensed.
RESTATEMENT OF PROFIT FOR THE YEAR ENDED 28 FEBRUARY 2006
Opening balances and comparative results have required restatement as a
result of the above two issues, as well as other restatements, and are
detailed below.
Attributable Minority Total
to equity interest
holders of
the parent.
As previously stated (3 468 453) (5 254 463) (8 722 916)
Change in accounting policy
Capitalisation of borrowing 9 115 346 1 012 816 10 128 162
costs
Other restatements
Adjustment to cost of sales (19 618 257) (2 179 807) (21 798 064)
(golf course)
Reversal of deferred (1 423 127) -- (1 423 127)
taxation assets
Subsidiaries previously 25 728 845 3 788 533 29 517 378
incorrectly consolidated
Adjustments to income (1 216 201) (135 133) (1 351 334)
taxation calculations
Shares issued to employees (2 200 000) -- (2 200 000)
recognised
Correction of debenture 5 045 984 560 665 5 606 649
fair value adjustment
As restated 11 964 137 (2 207 389) 9 756 748
In order to comply with IAS 27: Consolidated and Separate Financial
Statements, an adjustment has been made for the consolidation of certain
subsidiaries in the prior year as well as an adjustment for the cut off
date for the consolidation of Gardener Ross, which represents the major
portion of the adjustment. The adjustment relating to shares issued to
employees and directors relate to commitments made during 2005 prior to
the listing, but which were inadvertently omitted from the original share
allocations, which have been fair valued at R2.2 million. The fair value
adjustment relating to debentures has been corrected. Taxation
adjustments have been made where appropriate, including the reversal of
deferred tax assets incorrectly raised in terms of IAS 12: Income Taxes.
INDUSTRY AND BUSINESS OVERVIEW
Acc-Ross is primarily a developer of leisure resorts and residential
lifestyle estates, whereby land is acquired, rezoned and developed for
sale or to retain to generate future annuity income. Although lead times
in development projects are normally over a number of years,
profitability is typically high. Once the stand sales are completed, Acc-
Ross will retain certain of the leisure or commercial assets which have
been developed, such as leisure golf courses, sport facilities,
conference facilities, club houses, hotels and commercial or retail
interests and rental stock to ultimately generate annuity income for the
Group. The strategy of Acc-Ross is to become a hotel and leisure group
over the next few years.
Rights/Records of Decision ("ROD") are in place for the Group`s current major
projects, thereby reducing the risk typically associated with property
developments of this nature. In addition, the Group has acceptable pre-
sales, which sales will be recognised on proclamation and transfer of the
underlying stands in each development. Funding facilities are also in
place for the Group`s current projects, which facilities are secured by
the land and pre-sales of each project. Further details of each project
are set out below.
SEGMENTAL REPORTING
The Group`s primary basis for segment reporting is based on the business
segment within which the Group operates, as all current developments are
held in South Africa. Turnover and profits are primarily generated by
the transfer of Phases 1 and 2 of Gardener Ross Golf & Country Estate
(Proprietary) Limited ("Gardener Ross"), which houses the Ernie Els
designed golf course in Centurion.
Reviewed Restated
2007 2006
R R
Segment revenue 154 890 863 189 027 031
Segment results - operating loss (9 760 052) (1 262 135)
FINANCIAL OVERVIEW
For the year under review, revenue and profits were primarily generated by
the transfer of the remainder of Phase 1 and a portion of Phase 2 of
Gardener Ross sales. Income from the disposal of other non-core assets
and developments was the only other source of income, but due to the IFRS
framework, cannot be included as trading revenue, as these sales resulted
from the sale of projects through the disposal of the entity holding the
development. Only the profit or loss on disposal is recognised in the
income statement. This is accordingly adjusted in the calculation of
headline earnings in accordance with Circular 7 of 2002. In order to
show the impact of the disposal of shares in companies holding
projects/development, the board has disclosed adjusted headline earnings
by adding this income back to headline earnings.
The loss per share of (1.76) cents shows a decline from the prior years
restated results of a profit of 1.93 cents per share, which is more fully
detailed below, however this has been impacted by an impairment to the
carrying cost of The Bay development, which has been sold subsequent to
year end. Headline loss per share shows a decline over the prior period
from (0.38) to (2.38) cents per share. As mentioned earlier, the profits
realised on the disposal of certain developments have been excluded from
headline earnings in accordance with the guideline issued on headline
earnings as shares were sold as opposed to the underlying
land/development. If this profit is included, the company would have
reflected adjusted headline earnings of 0.63 cents compared to adjusted
headline earnings of 1.93 cents for the prior period. The weighted
average shares in issue have increased primarily due to acquisitions,
which will only deliver earnings in future periods.
Income statement review
The directors have presented commentary on the results for the year ended 28
February 2007 in comparison to the restated results for 28 February 2006,
as the previously reported results have changed significantly.
Revenue, being sales of stands in Gardener Ross declined in relation to the
prior year, mainly due to the slow down experienced in the luxury
residential market, higher interest rates and an excess of stock in the
higher end of the market. Phase 2 of Gardener Ross is also the smallest
Phase, with fewer stands available for sale.
Cost of sales as a percentage of revenue was substantially higher, primarily
due to the revised accounting treatment regarding the costs incurred for
the golf course in Gardener Ross, which costs have now been included in
cost of sales on a pro rata basis in relation to stand sales.
Furthermore, the correct application of the acquisition date within the
consolidation of the 90% share in Gardener Ross Holdings Limited ("GRH")
on 15 August 2005 has also affected the prior period results. The
balance of the cost of the golf course is carried in inventory and this
will have a continuing effect on costs of sales throughout the project.
The golf course has been completed during the current period and most of
the costs of construction have been accrued.
In addition, the Group`s early adoption of IAS 23: Borrowing Cost, and the
capitalisation of all borrowing costs to inventory also increased and
will continue to increase the cost of sales This capitalisation includes
the profit share attributable to Investec Bank Limited on Gardener Ross.
Gains and losses on disposal of investments arose on the disposal of shares
in certain developments. Although this primarily represents revenue for
the Group, the profit or loss on disposal has been recorded as a separate
line item as this revenue arose from the disposal of shares.
Impairment of goodwill primarily resulted from impairment of The Bay, which
has been sold subsequent to year end, subject to a remaining suspensive
condition, as detailed below. The profit on disposal of The Bay,
expected to be in excess of R60 million after taxation in the subsidiary
company holding the asset and will only be recognised during the current
financial year ending 28 February 2008. However, due to the excess
consideration paid over the net asset value of the subsidiary holding The
Bay the profit to be realised by the group will be significantly lower as
detailed under subsequent events below.
Whilst finance costs reduced overall year on year in the underlying
subsidiaries due to the repayment of higher interest-bearing debt during
the year, the prior year figures above reflect only interest paid after
acquisition of GRH on 15 August 2005 as well as an adjustment for the
increase in fair value of the debentures as detailed earlier.
Amounts attributable to minorities relate to the 10% shareholding of
minorities in Gardener Ross.
Balance sheet review
The balance sheet commentary has been limited to the movement between the
restated results as at 28 February 2006. Where appropriate, commentary
also addresses significant reclassification of assets from the prior
reported results.
Property, plant and equipment decreased materially from the prior reported
number as a result of the reclassification of land held for sale to
Inventory/Freehold land and stands, which similarly reflected a material
increase from prior reported numbers.
Non-current assets of Inventory/Freehold land and stands represent non-
current inventory and un-proclaimed stands held by the company for
resale. The decline from the prior year relates to the proclamation of
Phase 2 and 3 of Gardener Ross, which has in turn resulted in an increase
in current freehold land and proclaimed stands as at 28 February 2007.
The balance of R97 million primarily represents the Lizard Point
development.
Goodwill remaining on the balance sheet primarily relates to The Bay, GRH and
Welvergenoegd, the Group`s Cape Town property.
Current Inventory/Freehold land and proclaimed stands of R365 million
represents the stands remaining in Gardener Ross and land held in The Bay
development. The carry cost of Inventory/Freehold land and stands also
increased due to the increase in cost resulting from capitalisation of
borrowing costs, the inclusion of the cost of the Gardener Ross golf
course in the cost of stands and the higher cost of acquisition of GRH
and The Bay, which was previous recorded as goodwill.
Non-current borrowings primarily comprise the GRH preference shares of R53
million as well as amounts due to Investec Bank Limited for project
developments at Gardener Ross, Lizard Point and The Bay as well as
debentures issued in Lizard Point which will convert to stands on
proclamation of Phase 1 of Lizard Point.
Current borrowings primarily relate to current borrowings of approximately
R17 million due to Investec Bank Limited.
Provisions increased for Investec Bank Limited`s profit share on Phase 1 and
2 of Gardener Ross.
Trade and other payables are mostly related to the underlying projects and
are settled through the project finance within each development.
Cash Flow Statement review
Cash utilised by operations has been affected by the decision to reclassify
projects as inventory and non-current inventory, the impact of which is a
net movement of R81,1 million in 2006 and R46,5 million in 2007. Net
cash generated by financing activities primarily relates to project
related funding or the acquisition of assets settled by the issue of
shares in Acc-Ross. The increase in both cash used in investing
activities and generated by financing activities relate to the
acquisitions of the company subsequent to 28 February 2006 and the
proceeds from sale of non core activities and developments.
DETAILS OF PROJECTS
Gardener Ross
Gardener Ross comprises an Ernie Els signature golf course and a housing
development comprising 1 131 full title stands and is situated in
Centurion, Gauteng. The land was acquired in 2003 for a purchase
consideration of R12 million. The individual stands are to be sold,
whilst certain assets will remain the property of Acc-Ross and be
utilised to generate future annuity income which is not expected to be
significant in this particular development in the short term.
Gardener Ross has already transferred the majority of Phase 1 and a number of
phase 2 stands to purchasers. Phase 3 was proclaimed in May 2007 and all
phases of the development are now completed. Sales of stands will now be
ready for transfer on purchase and payment for the stand, due to final
proclamation of all phases of the development. Construction of a number
of owner properties are about to commence and a number of show-houses are
to be built for the Star Homes Show due to be held on site during
November 2007.
Gardener Ross, per its projected budgets, projects total sales of R900
million from all three phases and a total profit after tax and minority
interests from the entire development upon sale of all stands, of
approximately R110 million. Thereafter, it is expected that Gardener
Ross will start generating annuity income from the retained leisure
assets.
Gardener Ross is fully financed by Investec. The project finance is a rolling
facility, attracting interest at prime less 0.5% and a profit share of
25% of the pre-tax profit from the project. The necessary ROD and
Environmental Impact Report approvals were obtained in 2004 and
construction commenced in September 2004. The development is currently
ahead of schedule, with all 18 golf holes having been completed and the
course is expected to be opened for play in the near future.
Lizard Point
Acc-Ross now owns 100% of the shareholding in Eagle Creek 74 (Proprietary)
Limited which will develop the Lizard Point Resort Development. The land
was acquired in 2004 for a purchase consideration of R11,5 million, which
has been settled in full. All professional fees have been carried by the
company to date through funds raised from bank funding and the sale of
debentures. Lizard Point is a 700 hectare resort development with 6,4
kilometres of water frontage, situated at the mouth of the Wilge river
and on the banks of the Vaal Dam next to Orangeville, Free State
Province. Facilities of R140 million are in place to fund the development
of Phase 1 with certain pre-sales and other bank conditions.
The project achieved its ROD from the environment authorities on 02 November
2005 and the final amendment to the Guide Plan was promulgated on 19 May
2006. The company is planning to break ground in September 2007 after
receipt of the final Township Development rights expected in the next 8
weeks, which process has taken much longer than expected. The first
phase of the development comprises an 18 hole championship Links golf
course, which will be co-designed by Retief Goosen, with 526 Residential
One, freehold stands and approximately 800 higher density units. Phase 1
was officially launched in August 2005 and pre-sales of stands of
approximately R200 million have been achieved to date.
The 2nd phase will comprise a second 18 hole signature Parklands golf course
with 315 Residential One, freehold stands and 621 Residential Two sites.
Other products in the development include boat storage and launching
facilities, a golf driving range, tennis courts, the 2 club houses for
the golf courses and the island with the resort pools and sundowner bars.
Phases 3 and 4 comprise the development of residential units and the
waterfront area, which consists of a commercial hotel, retail outlets,
restaurants, cinemas, entertainment and the boutique hotel and timeshare
component.
Blue Horizon Bay
Acc-Ross is the major shareholder in GR Equity (Proprietary) Limited with the
Blue Horizon Bay Eco-Estate property of 76 hectares is located in an
extremely sought-after area of coastal land, between Port Elizabeth and
Jeffreys Bay. The development will be a sea side development catering to
the holiday market. The majority of the homes to be built will have
uninterrupted ocean views.
The land was purchased for R550 000 three years ago and transfer has been
effected. Environmental Impact Assessments have been initiated and the
applications for rights are at an early stage. The township application
is in the process of formulation. Banks will be approached to finance
the project in the normal manner once the ROD has been received.
Eagle Creek/Zeranza
On 15 August 2005, Gardener Ross entered into an agreement for the
acquisition of 100% of Eagle Creek Investments 257 (Proprietary) Limited
("Eagle Creek") for a purchase consideration of R15 million. Eagle Creek
has a 60% vested interest in the Cluster Homes Development of Gardener
Ross through its 60% shareholding in Zeranza 50 (Proprietary) Limited.
The Cluster Homes Development comprises the rights relating to the
development of 164 cluster units. Since year end all the remaining
cluster units have been sold to Zotos Homes, which company will begin
construction of cluster style housing in the near future. As each
dwelling is sold and transfer is taken by the end user, the sale will be
recorded in the books of Gardener Ross. Given this development, Acc Ross
Group is in the process of acquiring the remaining 40% shareholding in
Zeranza 50 (Proprietary) Limited and will use this vehicle to house the
Group`s own top side construction activities.
Welvergenoegd
Welvergenoegd is a planned township development situated outside Durbanville
in the Cape. Water Rights have been secured for the development through
part funding of the Durbanville water pipeline. Environmental Impact
Assessments have been initiated and applications for rights are at an
early stage. It is anticipated that the development will commence during
2009 and be completed within 36 months thereafter. The project is
similar in nature and size to Gardener Ross and estimated profit before
taxation of the entire development over 4 years is expected to be over
R400 million.
Subsequent to year end, guarantees for the balance of the payment of the land
have been issued and transfer into Acc Ross Group is expected by end June
2007. The township application is in the process of formulation and banks
will be approached to finance the project in the normal manner once the
ROD has been received.
Comuine Coastal Resort, Vilanculos, Mozambique
Acc-Ross effectively owns 50% of Comuine Golf Estate Limitada, which owns the
Comuine Coastal Resort in Vilanculos, Mozambique. The Board decided to
dispose of this development and no success on disposal has been achieved
to date. Subsequent to the cyclone that recently devastated the area,
the Mozambican authorities have advised the project managers that they
are withdrawing the rights granted to date and Acc Ross Group has written
off the full carry cost of this development of R2 million.
LITIGATION
There is no material litigation pending against the Group.
ACQUISITIONS AND ISSUE OF SHARES
Details of the shares issued during the period under review are set out
below:
Details Number of Date Issue
Shares Price
(Rounded)
Issue to Abalengani Group 98 000 000 08 March 2006 R0.867
for The Bay and
Icon@Sandhurst
Issue of shares in 7 500 000 01 September 2006 R0.175
settlement of liabilities
Issue of shares for cash 10 000 000 29 September 2006 R0.257
Issue of shares for cash 35 000 000 10 December 2006 R0.220
Acquisition of minority 60 000 000 14 December 2006 R0.200
interest in Eagle Creek
Investments 274
(Proprietary) Limited, 50%
of Zamien Investments 67
(Proprietary) Limited and
claims from Abalengani Group
and Zunaid Moti (Lizard
Point)
Issue of shares for cash 30 000 000 15 February 2007 R0.300
SUBSEQUENT EVENTS
In terms of an agreement entered into effective 11 December 2006, the Group
acquired the remaining 50% of Zamien Investments 67 (Proprietary)
Limited, holding a minority interest in Eagle Creek Investments 274
(Proprietary) Limited from Fana Hlongwane (Lizard Point). The purchase
consideration was settled through the issue of 77 199 477 shares at 23.3
cents per share, which share issue was only finalised during March 2007
due to the potential option to substitute cash in lieu of shares.
Prior to year end Acc-Ross entered into an agreement for the disposal of The
Bay at Hartbeespoort for R195 550 000. At a meeting of shareholders on
28 May 2007 the transaction was unanimously supported and the only
unfilled suspensive condition is the delivery of bank guarantees during
June 2007. This transaction will only be booked during the new financial
year once all suspensive conditions have been met and transfer of the
land has taken place. As mentioned earlier, the profit on disposal of
The Bay, in the subsidiary disposing of the project, is expected to be in
excess of R60 million after taxation. However, due to the excess
consideration paid over the net asset value of the subsidiary holding The
Bay the profit to be realised by the group will be significantly lower.
Due to the excess consideration paid being capitalised to the underlying
development asset as per the requirements of IFRS 3: Business
Combinations, the original goodwill amount will not be added back for
headline earnings purposes when the profit on disposal is realised. The
expected headline earnings for the Group from the disposal of The Bay is
now expected to be approximately R39.5 million.
The company issued 60 000 000 shares at 50 cents for cash to the general
public subsequent to year end, which proceeds were applied to the settle
the remaining liability owing on the land at Welvergenoegd outside
Durbanville. The balance was injected into Gardener Ross.
Phase 3 of Gardener Ross, comprising 412 stands, was proclaimed during May
2007.
DIRECTOR CHANGES
During the year under review the following director changes occurred:
Appointed Date Resigned Date
W Robinson 22 June 2006 Dr NM Phosa 31 July 2006
JJ Verster 06 February 2007
DIVIDENDS
No dividend has been declared.
FUTURE PROSPECTS
Acc-Ross continues to be approached with numerous high quality projects and
is evaluating ways to take advantage of such opportunities in future, now
that the Group has disposed of its non core projects, has designed a new
business model and has improved the Group`s liquidity position as a
result of the sale of The Bay. In the short term it will continue with
its current key projects, which will ultimately lead to the Group holding
various leisure assets at key locations from which annuity income can be
generated. The retained portfolio of projects is world class and is
expected to create sustainable revenue streams into the future.
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
With regard to the cautionary announcement published on 15 March 2007 and
renewed on 26 April 2007, the company advises that whilst it continues to
be approached by potential BEE investors, formal proposals will not be
considered by the board until proof of funding is in place. Accordingly,
the company is withdrawing the cautionary announcement.
By order of the Board
AM Mashiatshidi W Robinson
Chairperson Chief Executive Officer
14 June 2007
Johannesburg
Registered Office
Arcay House, Number 3 Anerley Road, Parktown, Johannesburg, 2193
PO Box 62397, Marshalltown, Johannesburg, 2107
Directors
AM Mashiatshidi *(Chairman), W Robinson (CEO), N Owen, A Wiese, KS
Mthembu*, EM Sono*
* Non-executive
Designated Advisor Transfer Office
Arcay Corporate Services Computershare Investor Services 2004
(Proprietary) Limited
Date: 14/06/2007 10:00:01 Produced by the JSE SENS Department.
