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IFH
IFH
IFH - IFA Hotels & Resorts - Interim Results For The Six Months Ended
31 December 2007
IFA HOTELS & RESORTS LIMITED
("IFA SA" or "the company" or "the Group")
Registration number 1919/001318/06
Share code: IFH ISIN: ZAE000075669
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2007
CONSOLIDATED INCOME STATEMENT
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2007 2006 2007
Audited Audited Audited
R`000 R`000 R`000
Revenue 73 817 63 732 120 521
Operating profit 7 906 20 245 35 646
Investment income 8 906 3 357 7 143
Finance costs (9 156) (4 808) (9 662)
Share of results of associate (2 479) (2 432) (4 382)
Profit before taxation 5 177 16 362 28 745
Taxation (2 974) (6 382) (8 424)
Profit for the period 2 203 9 980 20 321
Profit attributable to equity
holders of the company 2 203 9 980 20 321
Basic and diluted earnings per
share (cents) ("EPS") 1,01 4,57 9,31
CONSOLIDATED CASH FLOW STATEMENT
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2007 2006 2007
Audited Audited Audited
R`000 R`000 R`000
Cash flows from operating activities 9 741 (6 089) (35 201)
Cash generated by operating activities 22 684 5 100 (23 018)
Interest received 8 906 3 357 6 943
Interest paid (9 156) (4 242) (8 959)
Taxation paid (12 693) (10 304) (10 167)
Cash flows from investing activities (210 494) (919) (17 710)
Expenditure to maintain
operating capacity
Property, plant and
equipment acquired (8 972) (1 919) (2 997)
Proceeds of disposals of
property, plant and equipment 4 - 148
Long-term loans made (77 726) - -
Expenditure for expansion
Investment in associates (15 000) - (15 861)
Loan to associate and subsidiaries (110 000)
Other investments 1 200 1 000 1 000
Cash flows from financing activities 180 276 2 361 18 665
Loans raised 180 276 7 964 18 665
Loans repaid - (5 603) -
Decrease in cash and cash equivalents (20 477) (4 647) (34 246)
Cash and cash equivalents at
beginning of the period 45 688 79 928 79 934
Cash and cash equivalents at end
of the period 25 211 75 281 45 688
CONSOLIDATED BALANCE SHEET
31 December 31 December 30 June
2007 2006 2007
Audited Audited Audited
R`000 R`000 R`000
ASSETS
Non-current assets 292 800 142 308 164 199
Property plant and equipment 102 353 83 308 95 072
Intangible assets 2 298 5 534 2 298
Investment in associates 37 901 11 471 25 381
Loan to associate 145 148 35 323 35 148
Investments 5 100 6 300 6 300
Deferred tax - 372 -
Current assets 393 312 305 031 283 497
Inventories 3 711 2 719 2 819
Township properties 131 629 78 877 81 016
Trade and other receivables 142 128 147 804 153 301
Other financial assets 90 633 138 673
Assets held for sale - 212 -
Cash and cash equivalents 25 211 75 281 45 688
Total assets 686 112 447 339 447 696
EQUITY AND LIABILITIES
Capital and reserves 180 315 158 634 178 112
Issued share capital and share
premium 71 892 71 892 71 892
Revaluation reserve 32 638 23 693 32 830
Distributable reserves 75 785 63 049 73 390
Non-current liabilities 333 683 142 724 160 754
Shareholders` loans 129 833 121 572 125 405
Borrowings 188 061 - 12 233
Deferred tax 15 789 21 152 23 116
Current liabilities 172 114 145 981 108 830
Shareholder`s loans 42 211 42 192 42 192
Trade and other payables 88 479 54 229 30 432
Advance deposits 2 637 956 1 207
Deferred revenue 33 279 43 456 27 099
Liabilities held for sale - 212 -
Taxation 5 508 4 936 7 900
Total equity and liabilities 686 112 447 339 447 696
Net asset value ("NAV")
per share (cents) 82,63 72,70 81,62
Net tangible asset value ("NTAV")
per share (cents) 81,58 70,16 80,57
Number of shares in issue and used
from NAV and NTAV calculations 218 210 680 218 210 680 218 210 680
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non-distributable
Share capital Share premium reserves
Audited R`000 R`000 R`000
Balance at 1 July 2006 2 182 69 710 23 797
Profit for the period - - -
Transfer to distributable
reserves - - (104)
Balance at 31
December 2006 2 182 69 710 23 693
Balance at 1 July 2007 2 182 69 710 32 830
Profit for the period - - -
Transfer to
distributable reserves - - (192)
Balance at 31
December 2007 2 182 69 710 32 638
Distributable
reserves Total
Audited R`000 R`000
Balance at 1 July 2006 52 965 148 654
Profit for the period 9 980 9 980
Transfer to distributable reserves 104 -
Balance at 31 December 2006 63 049 158 634
Balance at 1 July 2007 73 390 178 112
Profit for the period 2 203 2 203
Transfer to distributable reserves 192 -
Balance at 31 December 2007 75 785 180 315
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
2007 2006 2007 2006
Audited Audited Audited Audited
R`000 R`000 R`000 R`000
Revenue 53 695 43 982 18 917 17 849
EBITDA 19 260 24 428 964 2 110
EBIT 19 343 24 388 (734) 445
Profit/(Loss)
after tax 14 966 16 537 (2 977) (3 512)
IFA Boschendal IFA Estates
Six months Six months Six months Six months
ended ended ended ended
31 December 31 December 31 December 31 December
2007 2006 2007 2006
Audited Audited Audited Audited
R`000 R`000 R`000 R`000
Revenue - - 66 62
EBITDA (7 549) (3 102) (4 096) (1 882)
EBIT (7 549) (3 102) (4 106) (1 886)
Profit/(Loss)
after tax (7 435) (3 227) (2 912) (1 338)
IFA SA IFA Namibia
Six months Six months Six months Six months
ended ended ended ended
31 December 31 December 31 December 31 December
2007 2006 2007 2006
Audited Audited Audited Audited
R`000 R`000 R`000 R`000
Revenue 2 980 3 281 - -
EBITDA (6 033) (2 005) (309) -
EBIT (6 099) (2 031) (309) -
Profit/(Loss)
after tax (4 100) 1 520 (219) -
IFA Legends Eliminations
Six months Six months Six months Six months
ended ended ended ended
31 December 31 December 31 December 31 December
2007 2006 2007 2006
Audited Audited Audited Audited
R`000 R`000 R`000 R`000
Revenue - - (1 841) (1 442)
EBITDA 4 880 - - -
EBIT 4 880 - - -
Profit/(Loss)
after tax 4 880 - - -
Consolidated
Six months Six months
ended ended
31 December 31 December
2007 2006
Audited Audited
R`000 R`000
Revenue 73 817 63 732
EBITDA 7 117 19 549
EBIT 5 426 17 814
Profit/(Loss) after tax 2 203 9 980
BASIS OF PREPARATION
The condensed consolidated financial results for the six months ended 31
December 2007 ("the period") have been prepared in compliance with the Group`s
accounting policies and are consistent with the audited financial statements
for the previous financial year ended 30 June 2007. The interim condensed
consolidated financial results have been prepared in accordance with IAS 34:
Interim Financial Reporting, and fully comply with International Financial
Reporting Standards ("IFRS"), the South African Companies Act, 1973, and the
Listings Requirements of the JSE Limited ("JSE").
The interim condensed consolidated financial results have been audited by BDO
Spencer Steward (KZN) Inc., 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, the South
African Companies Act and the Listings Requirements of the JSE.
NOTES TO THE FINANCIAL RESULTS
1. 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 18 months. Therefore the revenue
that has been deferred in terms of the revenue recognition policy is likely to
be recognised within the next 18 months. This policy also applies to
associates. However, as associates are not consolidated , there will be no
deferred revenue on the balance sheet.
2. Headline earnings per ordinary share
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2007 2006 2007
Audited Audited Audited
R`000 R`000 R`000
Headline profit reconciliation
Profit attributable to ordinary
shareholders 2 203 9 980 20 321
Loss on disposal of property,
plant and equipment (4) 7 46
Goodwill adjustments - - 3 236
Headline profit 2 199 9 987 23 603
Number of shares
- in issue 218 210 680 218 210 680 218 210 680
- for EPS and HEPS calculation 218 210 680 218 210 680 218 210 680
- basic and diluted headline
earnings per share (HEPS) (cents) 1,01 4,57 10,82
3. Investments and loans
Unlisted associate companies 37 901 11 471 25 381
Other unlisted investments 5 100 6 300 6 300
Loans 145 148 35 323 35 148
188 149 53 094 66 829
Directors valuation of unlisted
investments
- Unlisted associate companies 183 049 46 794 60 529
- Other unlisted investments 5 100 6 300 6 300
4. Borrowing facilities
The Group has the following
borrowing
facilities:
Utilised 188 061 - 12 233
Available 200 000 - 200 000
Borrowing rate (%) 12,75 - 11,25
Borrowing powers
The borrowing powers in terms of the articles of association of the company and
its subsidiaries are unlimited.
5. Capital expenditure commitments
31 Dec 2007 31 Dec 2006 30 June 2007
R`000 R`000 R`000
Contracted 9 837 40 868 11 046
Approved but not contracted 48 880 18 565 18 500
58 717 59 433 53 733
6. Operating lease commitments 304 - 165
7. Post balance sheet events
No event which is material to the understanding of this report has occurred
between the financial period and the date of this report.
COMMENTS
IFA H&R Kuwait holds the majority interest in IFA SA with an 85% shareholding.
IFA SA owns:
- IFA Zimbali Lodge (Pty) Limited ("IFA Zimbali")
IFA Zimbali is the owner of Zimbali Lodge, a world class five-star boutique
hotel with 76 luxurious rooms rated by Conde Nast Traveller magazine as one of
the top hotels in the world.
- IFA Hotels & Resorts (SA) (Pty) Limited ("IFA Hotels")
IFA SA and Tongaat Hulett Developments established a joint venture ("TIFAZ") to
develop the Zimbali Coastal Resort, spanning 300 hectares neighbouring the
proposed Zimbali Lakes development.
TIFAZ owns an additional 700 hectares of land south of Zimbali for longer term
development. The principal business is the subdivision and servicing of land
for sale.
- IFA Boschendal Investments (Pty) Limited ("IFA Boschendal")
IFA Boschendal holds a 26,57% stake in the 2 400 hectare Boschendal estate near
Franschhoek, which includes plans for an upmarket retirement village with 500
individual homes, a 120-room boutique hotel and a mixed-use development
that includes a shopping centre, offices and apartments.
- IFA Hotels and Resorts 8 (Pty) Limited ("IFA Estates")
IFA SA` s estate agency has the sole mandate to sell the Fairmont Zimbali
resort development situated in Zimbali and the residential elements of the
pending developments in Namibia (see `IFA Namibia` below). IFA Estates will
also assist with the sales and marketing for IFA Legends and, on behalf of its
parent company, for developments planned in the Seychelles and Zanzibar.
- IFA Hotels and Resorts (Namibia) (Pty) Limited ("IFA Namibia")
In March 2007 IFA Namibia formed a joint venture with the Ohlthaver & List
Group ("OLIFA") to redevelop three hotels - The Strand Hotel in Swakopmund,
Kings Den Lodge on the banks of the Chobe River and Mokuti Lodge at the gateway
to the Etosha game reserve. OLIFA will also develop a fourth site in Windhoek
into a five-star hotel. Five-star international hotelier, Kempinski Hotels,
has been introduced to Namibia to operate these hotels. OLIFA is assessing the
potential for residential and retail opportunities surrounding these
properties. Construction will commence mid 2008.
- IFA Legends Investments (Pty) Limited ("IFA Legends")
IFA H&R Kuwait, IFA SA and Crimson King Properties (Pty) Limited have partnered
in the Legend Golf & Safari Resort, a 22 000 hectare safari conservancy in the
malaria-free Waterberg region of the Limpopo Province. The resort, comprising
approximately 900 residential opportunities, will offer an internationally
branded five-star hotel with a health spa and a wellness centre, as well as
conference and recreational facilities for up to 2 500 delegates. It also
boasts an 18-hole championship golf course designed by 18 top international
golfers.
FINANCIAL REVIEW
Group revenue increased by 16% to R73,8 million during the period compared to
the same period in 2006. Operating profit decreased by 61%, mainly as a result
of increases in the operating expenses of IFA SA and IFA Estates which have
expanded to ensure adequate resources to manage projects in the pipeline
throughout Africa and the Indian Ocean region.
Segmental review
IFA ZIMBALI - although revenue rose 6% to R18,9 million from R17,8 million,
increasing operating costs as a result of higher inflation in costs versus
revenue and an increase in interest rates reduced earnings before interest,
taxation, depreciation and amortisation ("EBITDA") from R2,1 million to R1,0
million for the period.
While the Zimbali Lodge has elevated the Zimbali brand, thereby increasing the
value of the surrounding land sold by TIFAZ, management are reviewing options
to ensure the Zimbali Lodge is more profitably run as a stand-alone business.
IFA HOTELS - the decline in EBITDA from the comparative period in 2006 is
attributable to a retrospective adjustment made in 2006 relating to an upward
adjustment of gross margins as additional land was made available for sale, off
the same cost base. Removing this anomaly results in an increase in gross
margins over the prior period in line with the increase in sales.
A key focus for IFA Hotels remains the development of the next phase of the
Zimbali Coastal Resort, namely the Zimbali Lakes. Limited land stock remains in
the current phase.
IFA BOSCHENDAL - The Boschendal estate is still in the planning stages and
continues to incur costs in anticipation of future revenues. IFA SA`s 26,57%
share of the losses has resulted in a reduction of IFA SA`s after-tax profit by
R7,4 million. R643 million in land reservations have already been secured.
IFA ESTATES - IFA SA`s estate agency has a number of projects due to launch
shortly which will help bring the company to profitability. The Fairmont
Zimbali project began concluding sales contracts in 2008. However, costs were
incurred during the period to gear the operation, which in the absence of
revenue, resulting in a continued loss.
IFA NAMIBIA - OLIFA effectively commenced on 1 February 2008. Minimal costs of
R0,2 million were incurred in the period. Development planning is currently
taking place.
IFA LEGENDS - IFA SA`s 20% share of profits in the Legend Golf and Safari
Resort contributed R4,9 million to IFA SA`s total after-tax profit for the
period. Phase 1 of the development is complete and the golf course is
substantially complete. The directors are pleased with progress made to date.
The directors are cognisant of the need for planned developments, namely the
Zimbali Lakes and Boschendal, to receive development rights soon in order for
profits to be realised especially as the current phase of the Zimbali Coastal
Resort draws to a close. The Group is well positioned financially to go through
this process but has identified the securing of rights as a key initiative over
the next quarter. The directors are pleased with the progress being made with
the three Namibian hotel developments and the Legend Golf & Safari Resort and
are confident that the Group has established a solid foundation for future
growth.
PROSPECTS
IFA SA recognises the current state of the South African economy, specifically
rising interest rates and its effect on property sales. However, IFA H&R Kuwait
has a large database of high net worth clients with limited exposure to South
African products to date. This can be leveraged to complement the local
buyers` market. A devaluing currency presents an opportunity for overseas
buyers in this regard.
IFA SA does not foresee significant contraction of the local buyers` market due
to the positioning of the Group`s products and target market.
The scale of IFA SA`s operations enables the Group to negotiate favourable
construction costs to counter increases, which offers a competitive advantage.
The current power crisis in the country is not expected to impact materially on
the Group`s planned developments.
IFA H&R Kuwait is well-positioned to invest further capital and expertise in
resort development in South Africa, particularly in light of consolidation
opportunities in the sector which are likely to be created by the economic
downturn.
DIVIDEND
No dividend has been declared for the period.
For and on behalf of the board
JM Al-Bahar TJM Al-Bahar
Chairman Chief Executive Officer
Zimbali, Durban, KwaZulu-Natal 26 March 2008
CORPORATE INFORMATION
Directors
JM Al-Bahar (Chairman)*, GE Larson*, TJM Al-Bahar (Chief Executive Officer),
JAM Wilson*
PGR de Sylva, VM Nkosi, WJ Burger* *Non-executive
Registered office
Zimbali Northgate Suites, Zimbali Coastal Resort, KwaZulu-Natal
Company secretary
KA Watson CA(SA), MBA
Transfer secretaries
Computershare Investor Services (Pty) Limited, 70 Marshall Street,
Johannesburg
Sponsor
QuestCo Sponsors (Pty) Limited
Date: 26/03/2008 14:20:01 Produced by the JSE SENS Department.
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