| Fri 30 Oct 2009, 16:17 | | PNG - Pinnacle Point Group - Final Terms Announcement in respect of the Rights |
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PNG - Pinnacle Point Group - Final Terms Announcement in respect of the Rights
Offer and Issue of Shares for Cash (collectively the "Equity Capital Raising")
PINNACLE POINT GROUP LIMITED
(Formerly Acc-Ross Holdings Limited)
(Incorporated in the Republic of South Africa)
(Registration Number 2000/000059/06)
JSE Share code: PNG
NSE Share code: PNG
ISIN: ZAE000127122
("Pinnacle Point" or the "Company")
Final Terms Announcement in respect of the Rights Offer and Issue of Shares for
Cash (collectively the "Equity Capital Raising")
Introduction
Shareholders of Pinnacle Point ("Shareholders") are referred to the announcement
released on SENS on 17 September 2009 in which Pinnacle Point advised
Shareholders, inter alia, that the board of directors of the company ("Board" or
"Directors") had resolved to implement an Equity Capital Raising process in
order to raise a minimum of R360 million through a rights offer ("Rights Offer")
and potentially through an issue of shares for cash ("Issue for Cash"). The
proceeds of the Equity Capital Raising would be used to reduce the level of
borrowings in Pinnacle Point by approximately R165 million and raise new cash of
at least R195 million.
Shareholders were further advised that new investors and/or existing
Shareholders would commit to subscribe for an additional R100 million worth of
ordinary shares in Pinnacle Point ("Shares") either in the Rights Offer or to be
issued under the general authority to issue Shares placed under the control of
the Directors.
Rationale for the Equity Capital Raising
It is the view of the Directors that the recapitalisation of Pinnacle Point is
required to enable the Pinnacle Point Group to meet its working capital
requirements, to allow the group to realise the potential of all its property
assets and to facilitate the conversion of:
i. The aggregate amount, including principal, interest and costs of
approximately R125 million debt owed by Pinnacle Point to Absa Bank Limited
("Absa"), comprising Absa`s existing debt facility in the amount of R70 million
and a bridge loan advanced under the debt facility of R55 million (the "Absa
Loan"); and
ii. The aggregate amount, including principal, interest and costs, owing by the
Company to Goldbanc Management Associates Limited ("GMA") in terms of a written
loan agreement entered into between the Company and GMA on 10 March 2009,
pursuant to which GMA advanced a loan of USD5,000,000.00 to the Company, the
equivalent rand amount of which aggregate amount has been agreed between the
Company and GMA to be R38,912,676.79 (the "GMA Loan").
In the cautionary announcement released on SENS on Monday, 3 August 2009,
Pinnacle Point advised Shareholders, inter alia, that the Board was of the view
that Pinnacle Point requires additional capital of R250 million, to be raised
through a proposed rights offer.
Due to the positive reaction by the market to the proposed recapitalisation of
Pinnacle Point, the Board has now resolved to increase the amount of equity
capital to be raised to approximately R460 million, R100 million in terms of the
issue for cash referred to below and R360 million in terms of the Rights Offer.
Up to R195 million in new cash may be raised under the Rights Offer and, in
terms of the issue for cash referred to below, R100 million in new cash will be
raised. This new cash is intended to enable Pinnacle Point to meet its working
capital requirements and allow the Company to realise the potential of its
property assets The Rights Offer is also intended to facilitate the conversion
of the Absa Loan and GMA Loan into equity.
Terms of the Issue for Cash
On 8 October 2009, Pinnacle Point entered into a subscription agreement (the
"Subscription Agreement") with the Trustees of the Trilinear Empowerment Trust
("Trilinear").
In terms of the Subscription Agreement, Trilinear agreed to inject R100 million
into the Company through the subscription by Trilinear for 666,666,667 Shares to
be issued for cash at 15 cents per Share for an aggregate consideration of R100
million. These Shares will be issued to Trilinear by the Directors under the
general authority to issue Shares placed under the control of the Directors.
The Subscription Agreement will be implemented as follows:
i. an amount of R63,999,999.90 was placed in escrow on 21 October 2009 and will
be released to the Company on or about 30 October 2009 against the issue of
426,666,666 Shares at 15 cents per Share;
ii. an amount of R31,000,000.05 was placed in escrow on 23 October 2009 and
will be released to the Company on or about 30 October 2009 against the issue of
206,666,667 Shares at 15 cents per Share; and
iii. an amount of R5,000,000.10 was placed in escrow on 29 October 2009 and
will be released to the Company on or about 30 October 2009 against the issue of
33,333,334 Shares at 15 cents per Share.
A commission of R5 million has been paid by the Company to TriLinear Specialised
Finance (Proprietary) Limited for services provided by TriLinear Specialised
Finance (Proprietary) Limited in sourcing the aforesaid finance from Trilinear
which payment complies with the provisions of the Companies Act and the
Company`s articles of association (the "Articles").
Terms of the Rights Offer
The Rights Offer will be for a total of 2,400,000,000 Shares (the "Rights Offer
Shares") and will be made by way of renounceable rights to subscribe for Shares,
at a subscription price of 15 cents per Rights Offer Share on the basis of
45.74561 Rights Offer Shares for every 100 Shares held on the record date for
the Rights Offer, being Friday 13 November 2009 (the "Record Date"). Qualifying
shareholders recorded in the register of the Company at the close of business on
the Record Date will be entitled to participate in the Rights Offer. The Rights
Offer may raise approximately R360 million. Excess applications will be
permitted.
Although the Rights Offer will not be made in Nigeria, Shareholders holding
Shares on the Nigerian Branch Register will be able to participate in the Rights
Offer through the JSE process.
Underwriting
In terms of the underwriting agreements between the Company and each of Absa and
GMA (the "Underwriting Agreements"):
i. Absa has agreed to partially underwrite the Rights Offer, up to a maximum of
R220 million; and
ii. GMA has agreed to partially underwrite the Rights Offer, up to a maximum of
R39,795,926.
An underwriting fee of R5 million, being 2.27% of R220 million, is payable by
the Company to Absa, the R220 million being the R55 million bridging loan of the
Absa Loan, the existing debt facility of R70 million and R95 million in cash.
At a general meeting of Shareholders on 2 October 2009, in terms of the
Securities Regulation Code of the Securities Regulation Panel (the "Code"),
shareholders approved a waiver of an offer to minority Shareholders in the event
that the shareholding of Absa exceeds 35% as a result of Absa acquiring
additional Shares pursuant to Absa partially underwriting the Rights Offer. On
14 October 2009, the Securities Regulation Panel granted the relevant
dispensation in terms of the Code.
An underwriting fee of R883,249.21, being 2.27% of R38,912,676.79 million, is
payable by the Company to GMA, the R38,912,676.79 million being the equivalent
rand amount of the US$5,000,000.00 loan advanced to the Company by GMA on 12
March 2009 and accumulated interest and fees thereon.
The effect of the above underwriting is that the minimum subscription of the
Rights Offer of R259.8 million will be met. The underwriting fees are, in the
opinion of the Board, not greater than the current market rate charged by
independent underwriters and are in accordance with the Companies Act and the
provisions of the Articles. The underwriting fees are payable upon fulfilment of
the commitments by GMA pursuant to the GMA Underwriting Agreement and upon the
fulfilment of the commitment by Absa pursuant to the Absa Underwriting Agreement
(or upon the failure of the conditions precedent therein). The underwriting fee
debt payable to GMA will be discharged by the Company to GMA by the issue of
5,888,328 of the Rights Offer Shares being underwritten by GMA to extinguish the
underwriting fee debt (or, if there are insufficient Rights Offer Shares, in
cash).
The rights of the Underwriters to subscribe for the Rights Offer Shares in terms
of the Underwriting Agreements shall be subordinate to any/all excess
application(s).
Conditions
Save as disclosed below, all conditions precedent to the Rights Offer have now
been fulfilled including approval from the JSE Limited (the "JSE") for the
rights offer circular and for the listings of the letters of allocation and the
Rights Offer Shares. The necessary approvals and registrations will be obtained
from the Registrar of Companies at the Companies and Intellectual Property
Registration Office prior to Friday, 6 November 2009. A further announcement
will be made to Shareholders upon such registration.
Pro forma financial effects
The unaudited pro forma financial effects set out below have been prepared to
assist Shareholders to assess the impact of the Rights Offer on the Earnings Per
Share, Headline Earnings Per Share, Net Asset Value Per Share and Tangible Net
Asset Value Per Share of Pinnacle Point. Due to the nature of these pro forma
financial effects, they are presented for illustrative purposes only and may not
fairly present the financial position of the Company, the results of its
operations after the Rights Offer, cash flows or changes in equity.
The unaudited pro forma financial effects have been prepared in accordance with
the Listings Requirements of the JSE (the "Listings Requirements") and the Guide
on Pro Forma Financial Information issued by The South African Institute of
Chartered Accountants. These unaudited pro forma financial effects are the
responsibility of the Board. The material assumptions on which the pro forma
financial effects are based are set out in the notes following the table.
Pro forma financial effects for the year ended 28 February 2009
Audited Unaudited Percentag
financial pro forma e change
information financial
adjusted for informatio
Issue for n
Cash
EPS (cents) (0.01) 0.06 838%
Diluted EPS (cents) (0.01) 0.06 838%
HEPS (cents) (0.10) 0.01 107%
Diluted HEPS (cents) (0.10) 0.01 107%
NAV Per Share (cents) 23.60 19.97 (15%)
TNAV Per Share (cents) 23.08 19.65 (15%)
Shares in issue (`000) 5 246 450 7 646 450 45%
Weighted average
number of Shares in 3 674 570 6 054 570 64%
issue (`000)
Notes and assumptions:
1. The audited financial information has been extracted from the published
audited annual financial statements of Pinnacle Point for the year ended 28
February 2009.
The pro forma adjustments to the above have been calculated on the assumption
that the 2. proceeds from the Rights Offer were received on 1 March 2008 and
that the proceeds were partially used to repay debt. The pro forma adjustment to
the above also includes the effects of the Issue for Cash before the Rights
Offer on the basis that 666 666 667 Shares were issued under the Company`s
general authority at 15 cents per Share.
3. The pro forma adjustments to the NAV and TNAV have been calculated on the
assumption that the proceeds were received on 28 February 2009.
4. A Rights Offer Price of 15 cents per Share has been used for the pro forma
adjustments with 2 400 000 000 Rights Offer Shares being issued for a total
quantum of R360 million.
5. The interest impact on the income statement has been calculated by
analysing the Group borrowings balance on a monthly basis. Interest rates used
for calculating the impact are an average rate of 15% on borrowings (based on
actual finance costs incurred on the underlying liabilities). These rates have
been applied to the borrowings balances as applicable during the year. No
interest is calculated on surplus cash funds. This is in accordance with SAICA
Guide on Pro Forma Financial Information (issued September 2009), paragraph 82.
.
6. A notional tax rate of 28% has been used, (it being the prescribed taxation
rate for the period), with income tax adjusted for the taxation effect of the
movements in finance costs.
7. Transaction costs of c.R13.7 million, relating to the Rights Offer, have
been taken into account in determining the financial effects. These costs have
been assumed to reduce share premium.
8. Transaction costs of R5 million relating to the Issue for Cash have been
taken into account in determining the financial effects. This cost is assumed
to reduce share premium.
Profit forecast
A summary of the forecast financial information of Pinnacle Point for the 12
months ending 28 February 2010 and 2011, together with detailed information and
bases and assumptions is set out below. This summary has been reviewed by
Mazars Moores Rowland whose report will be included in the Rights Offer circular
and will be available for inspection at the Company`s registered office. This
summary takes into account the Issue for Cash and the impact of the Rights
Offer.
Forecast Forecast
12 months 12 months
ending ending
28 February 28 February
2010 2011
R`000 R`000
Revenue 368 618 2 572 384
- Sale of properties 237 531 2 572 384
- Sale of project 131 087 -
Cost of Sales 171 332 (1 013 453)
- Sale of properties 91 341 1 013 453
- Sale of project 79 991 -
Gross Profit 197 286 1 558 931
- Sale of properties 146 190 1 558 931
- Sale of project 51 097 -
Other Income 21 543 7 566
Operating Expenses (141 318) (236 960)
Operating Profit 77 511 1 329 537
Finance Cost (40 985) (42 547)
Profit before Taxation 36 526 1 286 990
Taxation (11 628) (386 085)
Profit after Taxation 24 898 900 905
Minority interest (23 321) (441 219)
Profit for the year 1 577 459 686
Net profit attributable to 1 577 459 686
shareholders
Adjusted for:
Nigerian listing expenses 28 759 -
Core headline earnings 30 336 459 686
Weighted average shares in 5 638 105 7 732 749
issue (`000)
Earnings per share (cents) 0.03 5.94
Headline earnings per share 0.03 5.94
(cents)
Core Headline earnings per 0.54 5.94
share (cents)
The following major bases and assumptions, which are outside the control of the
Directors, have been included in the profit forecasts:
1. Interest rates and exchange rates will remain at current levels.
2. Trading conditions are expected to improve from January 2010 onwards.
3. There will be no material change to the business of the Pinnacle Point
Group or the manner in which it conducts its business.
4. There will be continuity in the Pinnacle Point Group`s management and
trading policies.
5. A Rand / USD exchange rate of R8.00 has been assumed for the years ending
28 February 2010 and 2011. Factors influencing future exchange rates are outside
the influence of the Directors.
The following major bases and assumptions, which are within the control of the
Directors, have been included in the profit forecast:
6. The forecast was prepared in accordance with the Group`s accounting
policies, IFRS, the revised SAICA guide on forecasts and applicable paragraphs
pertaining to section 8 of the Listing Requirements.
7. Forecast revenue for the year ending 28 February 2010 and 28 February 2011,
is based on an estimate of revenue from contracts that are currently in place as
well as the Directors best estimates based on historical experience and future
expectations of property trends and prices.
8. Gross profit percentages are development specific and have been forecast
per development based on Pinnacle Point`s best estimates based on historical
experience and future expectations of property trends and prices.
9. Operating costs have been forecasted taking into account factors such as
historical trends, inflation, assumed growth of the business and improvements in
infrastructure.
10. Commissions have been calculated at 5% on all sales.
11. Taxation has been provided for at 28% for local developments and at 30% for
the Lagos Keys development.
12. Sales of the Lagos Keys development is expected to commence in the latter
part of the 2010 financial year. Included in the forecasted revenue for the year
ending 28 February 2010 are 15 units and the Directors are of the opinion that,
based on information received from third parties, Pinnacle Point will be able to
achieve this target. If this is not achieved, the projected core headline loss
will amount to R22.3 million and the revenue from these sales will carry over to
the following financial year. The forecasted number of units transferred,
included in the revenue for the year ending 28 February 2011 is 85.
13. Revenue on the Lagos Keys development is recognised when the Group has
unconditionally transferred to a buyer the risks and rewards of ownership of an
unserviced vacant property, in line with Nigerian property laws. A corresponding
obligation to service the vacant property is recognised as a future obligation
in Pinnacle Point`s consolidated balance sheet.
14. Pinnacle Point`s effective interest in the Lagos Keys development is 51.0%.
Provision has therefore been made in the forecast for the minority share of
profits of an effective 49% in this development.
15. Finance cost for the Lagos Keys development was calculated at 8% and for
local developments and overdrafts at current prime lending rate.
16. Included in the 2010 revenue is the disposal of a development which
Pinnacle Point intends selling. The Company held inventory for resale and the
disposal of the Company housing this development is, in substance, the disposal
of the inventory.
17. The Directors decided to use core headline earnings as an appropriate
measure of the sustainable operating performance of Pinnacle Point, as it
adjusts for non-recurring and non-operational items.
Salient dates and times
Last day to trade in Shares in Friday, 6 November 2009
order to participate in the Rights
Offer (cum entitlement)
Shares commence trading ex- Monday, 9 November 2009
entitlement at 09:00 on
Listing of and trading in the Monday, 9 November 2009
Letters of Allocation on the JSE
commences at 09:00 on
Record Date for the Rights Offer Friday, 13 November 2009
Circular and Form of Instruction, Monday, 16 November 2009
where applicable, posted to
Shareholders
Rights Offer opens at 09:00 on Monday, 16 November 2009
Letters of Allocation credited to Monday, 16 November 2009
an electronic account held at the
Transfer Secretaries in South
Africa in respect of holders of
Certificated Shares
CSDP or Broker accounts credited Monday, 16 November 2009
with entitlements in respect of
holders of Dematerialised Shares
Last day for trading Letters of Friday, 27 November 2009
Allocation on the JSE
Listing of Rights Offer Shares and Monday, 30 November 2009
trading therein on the JSE
commences at 09:00 on
Rights Offer closes 12:00 on (See Friday, 4 December 2009
notes 3 and 4)
Payment to be made and Form of Friday, 4 December 2009
Instruction to be lodged with the
Transfer Secretaries in South
Africa by holders of Certificated
Shares by 12:00
Record date for the Letters of Friday, 4 December 2009
Allocation
Rights Offer Shares issued Monday, 7 December 2009
CSDP or Broker accounts in respect Monday, 7 December 2009
of holders of dematerialised Shares
debited with money and updated with
Rights Offer Shares and share
certificates posted to certificated
Shareholders by registered post on
or about
Results of the Rights Offer Monday, 7 December 2009
announced on SENS
Results of the Rights Offer Tuesday, 8 December 2009
published in the South African
press
CSDP or broker accounts in respect Wednesday, 9 December
of holders of dematerialised Shares 2009
debited and updated with excess
share allocations and share
certificates or refund cheques, if
applicable, posted to certificated
Shareholders by registered post on
or about
Notes:
1. Share certificates in respect of Shares may not be dematerialised or
rematerialised between Monday, 9 November 2009 and Friday, 13 November 2009,
both days inclusive.
2. No Shares may be transferred between the South African Register and the
Nigerian Branch Register between Monday, 9 November 2009 and Friday, 13 November
2009, both days inclusive.
3. A Central Security Depository Participant ("CSDP") will effect payment on a
delivery versus payment method in respect of qualifying Shareholders holding
dematerialised Shares.
4. If you are a qualifying Shareholder holding dematerialised Shares you are
required to notify your duly appointed CSDP or broker of your instructions in
respect of the Rights Offer in the manner and time stipulated in the custody
agreement governing the relationship between yourself and your CSDP or broker.
5. Unless otherwise indicated, all dates and times are South African dates and
times and, subject to the Listings Requirements, Pinnacle Point reserves the
right to change all or any such dates and times at its sole discretion. Any such
change will be published on SENS in South Africa.
A circular pertaining to the Rights Offer will be posted to Shareholders on
Monday, 16 November 2009.
Cape Town
30 October 2009
Designated Advisor
Arcay Moela Sponsors (Proprietary) Limited
Financial Adviser to Pinnacle Point in South Africa
NM Rothschild & Sons (Proprietary) Limited
Financial Adviser to Pinnacle Point in Nigeria and Co-underwriter
Goldbanc Management Associates Limited
Legal Adviser to Pinnacle Point
Edward Nathan Sonnenbergs Inc
Independent Reporting Accountants
Mazars Moores Rowland
Underwriter
Absa Bank Limited
Financial adviser to Absa Bank Limited
Absa Capital, a division of Absa Bank Limited
Legal Adviser to Absa Bank Limited
Werksmans Incorporating Jan S De Villiers
Date: 30/10/2009 16:17:06 Produced by the JSE SENS Department.
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employees and agents accept no liability for (or in respect of) any direct,
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