| Fri 28 May 2010, 16:30 | | QPG - Quantum Property Group Limited - Unaudited condensed consolidated |
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QPG
QPG
QPG - Quantum Property Group Limited - Unaudited condensed consolidated
interim results for the six months ended 28 February 2010
QUANTUM PROPERTY GROUP LIMITED
Incorporated in the Republic of South Africa
(Registration number 1984/002788/06)
Share code: QPG & ISIN: ZAE000125647
("QPG" or "the company" or "the group")
UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED
28 FEBRUARY 2010
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited Restated Audited
28 February Unaudited 31 August
2010 28 February 2009
2009
(R`000) (R`000) (R`000)
ASSETS
Non-current assets 899 430 241 984 848 088
Investment property and 899 430 241 984 848 088
furniture, fittings and equipment
Current assets 126 623 113 468 133 912
Employee benefits - 40 000 22 800
Inventories 98 305 55 177 84 490
Accounts receivable 18 262 3 498 19 380
Deposits - 1 000 -
Deferred taxation - 4 369 -
Bank balances 10 056 9 424 7 242
Total assets 1 026 053 355 452 982 000
EQUITY AND LIABILITIES
Capital and reserves 411 653 83 331 438 380
Non-current liabilities 154 547 254 776 486 602
Long-term borrowings - 228 251 329 451
Loans from related parties 29 880 26 525 28 359
Deferred taxation 124 667 - 128 792
Current liabilities 459 853 17 345 57 018
Development loan 401 875 - 32 322
Accounts payable 12 227 15 379 -
Deposits 4 269 - -
Loans from related parties 20 415 - 12 973
Bank overdraft 21 067 1 966 11 723
Total equity and liabilities 1 026 053 355 542 982 000
Number of shares in issue 152 147 631 152 144 365 152 147 631
Net asset value and net tangible 270.56 54.77 288.13
asset value per share (cents)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited Restated Audited
Six months Unaudited Twelve
ended Six months months ended
28 February ended 31 August
2010 28 February 2009
2009
(R`000) (R`000) (R`000)
Gross revenue 2 326 - 877
Other income 6 - 5
Restraint of trade expensed (22 800) - (17 200)
Operating costs (10 350) (2 665) (6 981)
Operating loss (30 818) (2 665) (23 299)
Fair value adjustment - (38) 508 609
Depreciation and amortisation (235) - -
Interest received 260 329 526
Interest paid (60) (5) (6)
Loss before taxation (30 853) (2 379) 485 830
Taxation 4 125 9 371 (123 789)
Net (loss)/profit for period (26 728) 6 992 362 041
Other comprehensive income:
Acquisition reserve arising on - (7 595) (7 595)
reverse take-over
Listing costs written off against - (4 496) (4 496)
share premium
Total comprehensive income (26 728) (5 099) 349 950
Weighted average number of shares 152 147 631 114 108 299 133 129 190
in issue
(Loss)/earnings per share (cents) (17.57) 6.13 271.95
Headline (loss)/earnings per (17.57) 6.13 (7.03)
share (cents)
Diluted (loss)/earnings per share (17.57) 6.13 271.95
(cents)
Diluted headline (loss)/earnings (17.57) 6.13 (7.03)
per share (cents)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
Unaudited Restated Audited
Six months Unaudited Twelve
ended Six months months ended
28 February ended 31 August
2010 28 February 2009
2009
(R`000) (R`000) (R`000)
Cash flows from operating 365 300 (67 827) (98 316)
activities
Cash flows from investing (51 343) (60 352) (157 808)
activities
Cash flows from financing (320 487) 116 913 232 919
activities
Decrease in cash and cash (6 530) (11 266) (23 205)
equivalents
Cash and cash equivalents at (4 481) 18 724 18 724
beginning of period
Cash and cash equivalents at end (11 011) 7 458 (4 481)
of period
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited for the period ended 28 February 2010
Share Share Acquisit Retained
capital premium ion earnings Total
reserve
(R`000) (R`000) (R`000) (R`000) (R`000)
Balance 1 September 2008 - - - 34 111 34 111
as previously reported
Prior year adjustment 3 375 3 375
Balance 1 September 2008 - - - 37 486 37 486
as restated
Issue of ordinary shares 305 50 640 50 945
Other comprehensive income (4 496) (7 595) (12
091)
Net profit for the period 6 992 6 992
Balance 28 February 2009 305 46 144 (7 595) 44 478 83 332
Net profit for the period 355 049 355 049
Balance 1 September 2009 305 46 144 (7 595) 399 527 438 381
Net loss for the period (26 728) (26
728)
Balance 28 February 2010 305 46 144 (7 595) 372 799 411 653
COMMENTARY
Introduction
The directors are pleased to present the interim results for the six months
ended 28 February 2010 ("the interim period") for the diversified property
group QPG.
The group`s flagship mixed-use development,`15 on Orange` in Cape Town, was
substantially completed during the interim period. Recognised for its
distinct industry-leading design, the development has since been honoured
with the prestigious SAPOA award for "Innovative Excellence in Property
Development` in May 2010.
The 5-star luxury Hotel opened initially with a soft launch-to-market in
December 2009, successfully garnering critical acclaim in the first five
months of trading and concentrating on brand elevation and improving
occupancy levels through various marketing initiatives. It has been
featured as a destination of choice on national luxury magazine programme
Top Billing, and in a number of design, style and architectural
publications.
15 on Orange
The penthouse apartments forming a component of the full development are
currently nearing completion, and the concluded transfers in respect of two
are imminent. Due to the depressed economy during the first half of the
interim period, the remaining apartment sales were impacted by tightening
lending criteria which saw certain approved sales collapse and the
purchasers forfeit their deposits. Efforts are now well-advanced to re-
market these apartments and the QPG directors are confident that they will
be sold in due course, especially in light of slowly improving credit
lending criteria. The boutique retail component is also nearing completion
with several tenants set to begin trading shortly. The balance of the floor
space is in the process of letting. Overall the development experienced a
cost-overrun, attributable to a number of factors including significant
construction delays caused by excessive rainfall, higher than budgeted
steel prices and a spike in interest rates for a large portion of the
period of development. Accordingly, the development bond ("the AMU
development loan") was increased to partly cover the increased costs,
falling due on 31 March 2010. This short-term liability is currently being
renegotiated into a longer-term instrument with the financial institution
involved. QPG is also simultaneously exploring alternative/additional
avenues of finance and is well-advanced in this regard.
The directors remain confident of the company`s long-term prospects in
light of the competitive advantages of the `15 on Orange` development.
Although hotel occupancies have and continue to be negatively impacted by
the global recession, the World Cup tournament is expected to offset this
to a degree in South Africa in the short-term. It is further expected that
as the marketing of the Hotel and the tentative emergence from the
recession become cemented, hotel occupancies (and room rates) will increase
to generate increasing income for the group.
Profile
QPG has a three-pronged growth strategy encompassing:
Developments
Investments
Trading
This is intended to build a quality, sustainable portfolio with diversified
revenue streams.
`15 on Orange` is a landmark integrated development in Cape Town and
currently forms the bedrock of QPG`s property portfolio. The benchmark 5-
star Hotel and boutique retail centre are in the process of revolutionising
leisure in the Western Cape. The development also features ample parking.
QPG is set to derive ongoing income from the leasing and operation of the
15 on Orange Hotel, the latter jointly with Protea Hotel Group and managed
by African Pride (the premier 5-star brand in the Protea Hotel Group`s
stable), and from the parking bays and retail tenant rentals. `15 on
Orange` was independently valued at almost R1 billion in August 2009.
Similar opportunities in terms of scale, value and quality are in the
pipeline for 2010 across the range of property sectors.
Directorate
With effect from 19 March 2010 Kamil Abdul-Karrim resigned as an
independent non-executive director, and effective 23 March 2010 Irwin
Steven Schmidt resigned as an executive director.
Prospects
`15 on Orange` positions the group to take advantage of the long-term
tourism prospects in Cape Town in light of the city`s status as a prime
international tourist destination.
A number of further attractive development opportunities have been
identified and are in the process of being assessed. General capital
raising efforts to finance the development pipeline remain ongoing.
Joint Ventures and segment reporting
QPG owns a 50% share in 15 on Orange (Proprietary) Limited, via its wholly
owned subsidiary A Million Up Investments 105 (Proprietary) Limited
("AMU"). 15 on Orange (Proprietary) Limited is the hotel operating company
operating `15 on Orange`, which commenced trading in December 2009. The
group`s proportionate share of 15 on Orange (Proprietary) Limited`s assets,
liabilities, income, expenses and cash flows are proportionately
consolidated with similar items in the consolidated interim results on a
line-by-line basis.
QPG does not have separate identifiable segments and therefore no segmental
report has been prepared.
Basis of preparation and accounting policies
The accounting policies applied in the preparation of these condensed
financial statements, which are based on reasonable judgments and
estimates, are in accordance with International Financial Reporting
Standards ("IFRS") (other than for the acquisition of AMU as detailed
below) and are consistent with those applied in the annual financial
statements for the year ended 31 August 2009. These condensed financial
statements as set out in this report have been prepared in terms of IAS 34
- Interim Financial Reporting, the Companies Act, 1973 (Act 61 of 1973), as
amended, and the Listings Requirements of JSE Limited.
The consolidation of AMU, a wholly-owned subsidiary which in turn owns `15
on Orange`, does not fall into the scope of the provisions of IFRS 3
"Business Combinations" as QPG on its own did not constitute a sustainable
business prior to the acquisition of AMU. Pursuant to the AMU acquisition,
a parent and subsidiary relationship exists between QPG and AMU and
consolidated accounts are presented in accordance with IAS 27 and the South
African Companies Act. The consolidation has as a result been prepared on a
similar basis to a reverse-acquisition, but without recognising goodwill.
The condensed consolidated interim results have not been audited or
reviewed by the company`s auditors Grant Thornton Inc.
Employee benefits
Unaudited Unaudited Audited
28 February 28 February 31 August
2010 2009 2009
(R`000) (R`000) (R`000)
Restraints of trade
- Paid 40 000 40 000 40 000
- Expensed during the period (22 800) - (22 800)
- Expensed during prior periods (17 200) - -
- 40 000 17 200
Restraints of trade were entered into with strategic management. The
restraints were effective from 13 October 2008 and were being written-off
over a period of 12 months. The amount written-off at the end of each
reporting period was reduced by the amount repayable by each of the
restrained individuals at that point in time in terms of their restraint
agreements.
Restatement of comparatives
The unaudited interim results of 28 February 2009 have been restated to
reflect the capitalisation of borrowing costs on the qualifying asset that
were erroneously not capitalised. This correction was reflected for the
full year in the audited 31 August 2009 financial statements. The
restatement of the unaudited interim results of 28 February 2009 is as
follows:
Prior to 1 Unaudited Total
September Six months (R`000)
2008 ended
(R`000) 28 February
2009
(R`000)
Balance sheet
Investment property 4 688 1 927 6 615
Deferred taxation (1 312) (540) (1 852)
Distributable reserves 3 376 1 387 4 762
Prior to 1 Unaudited Total
September Six months (R`000)
2008 ended
(R`000) 28 February
2009
(R`000)
Income statement
Interest paid - 1 927 1 927
Taxation - (540) (540)
- 1 387 1 387
Reclassification of comparatives
It was determined that the development costs pertaining to the portion of
15 on Orange to be sold should be reclassified as inventory. The effect of
the reclassification on the unaudited interim results of 28 February 2009
is as follows:
Prior to 1 Unaudited Total
September Six months (R`000)
2008 ended
(R`000) 28 February
2009
(R`000)
Balance sheet
Investment property - (55 177) (55 177)
Inventories - 55 177 55 177
Post balance sheet events
The board of directors is not aware of any material matters or
circumstances arising since the end of the interim period and up to the
date of this report.
Going concern
The unaudited condensed consolidated interim financial statements have been
prepared on a going concern basis. This basis presumes that adequate funds
will be available to finance future operations and the realisation of
assets and settlement of liabilities, contingent obligations and
commitments will occur in the ordinary course of business and all
obligations will be fulfilled as and when they fall due.
Although the AMU development loan was due for payment on 31 March 2010, the
executive directors are confident of renegotiating the loan as a long-term
loan in addition to the good prospects for alternative financing options
well in progress.
Further, Bonheur 92 General Trading (Proprietary) Limited, the company`s
management company, has undertaken to fund any working capital shortfalls
of the company in the interim.
BY ORDER OF THE BOARD
Chaim Cohen Gary Itzikowitz
Executive Chairman Chief Executive Officer
28 May 2010
Directors
C Cohen (Chairman), G Itzikowitz (Chief Executive Officer), MR Taitz
(Financial Director), JT Opperman, BH Sneech*, I Levitt*, CJ
Kupritz*, BS Cohen*
* non-executive
independent
Company secretary:
Corporate and Merchant Administrators (Proprietary) Limited
Designated adviser
Merchantec (Proprietary) Limited
Registered office
19th Floor, Sandton City Office Tower, corner 5th Street and Rivonia
Road, Sandton, 2196
Transfer secretaries
Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Date: 28/05/2010 16:30:02 Produced by the JSE SENS Department.
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