| Tue 30 Nov 2010, 16:24 | | QPG - Quantum Property Group Limited - Abridged audited consolidated financial |
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QPG
QPG
QPG - Quantum Property Group Limited - Abridged audited consolidated financial
results for the year ended 31 August 2010 and notice of annual general meeting
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")
ABRIDGED AUDITED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 31 AUGUST
2010 AND NOTICE OF ANNUAL GENERAL MEETING
HIGHLIGHTS
* Opening of 15 on Orange Hotel
* International recognition for 15 on Orange Development
* Significant uptick in Hotel occupancies post year-end
* NAV per share of 269 cents
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION AS AT 31 AUGUST 2010
Audited Audited
2010 2009
R`000 R`000
ASSETS
Non-current assets 937 402 848 088
Investment property 895 112 848 088
Furniture, fittings and equipment 21 662 -
Loan receivable 598 -
Deferred taxation 20 030 -
Current assets 94 428 133 912
Employee benefits - 22 800
Inventories 79 953 84 490
Accounts receivable 2 679 19 061
Prepaid expenses 256 319
Loan receivable 101 -
Cash and cash equivalents 11 439 7 242
Total assets 1 031 830 982 000
EQUITY AND LIABILITIES
Capital and reserves 410 679 438 380
Non-current liabilities 585 933 486 602
Long-term borrowings 429 687 329 451
Loans from related parties 31 416 28 359
Deferred taxation 124 830 128 792
Current liabilities 35 218 57 018
Accounts payable 17 895 32 322
Loans from related parties 17 323 12 973
Bank overdraft - 11 723
Total equity and liabilities 1 031 830 982 000
Number of shares in issue 152 944 087 152 147 631
Net asset value and net tangible asset 269 288
value per share (cents)
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 AUGUST
2010
Audited Audited
2010 2009
R`000 R`000
Gross revenue 36 160 877
Cost of sales (21 139) -
Gross profit 15 021 877
Other income 1 754 5
Operating costs (47 708) (24 181)
Operating loss (30 933) (23 299)
Fair value adjustment - 508 609
Depreciation (2 398) -
Interest received 540 526
Interest paid (20 052) (6)
(Loss)/Profit before taxation (52 843) 485 830
Taxation 23 992 (123 789)
Total comprehensive (loss)/income for the (28 851) 362 041
year
Weighted average number of shares in 152 214 002 133 129 190
issue
(Loss)/Earnings per share (cents) (19) 272
Headline loss per share (cents) (19) (7)
Diluted (loss)/earnings per share (cents) (19) 272
Diluted headline loss per share (cents) (19) (7)
Reconciliation of earnings to headline R`000 R`000
earnings
Total comprehensive income for the year (28 851) 362 041
Less: fair value adjustment on investment - (508 647)
property
Plus: deferred taxation movement on fair
value adjustment on investment property - 137 241
Headline loss (28 851) (9 365)
CONDENSED GROUP STATEMENT OF CASH FLOW FOR THE YEAR ENDED 31 AUGUST 2010
Audited Audited
2010 2009
R`000 R`000
Cash flows from operating activities (20 348) (98 316)
Cash flows from investing activities (72 525) (157 808)
Cash flows from financing activities 108 793 232 919
Increase/(Decrease) in cash and cash 15 920 (23 205)
equivalents
Cash and cash equivalents at beginning of (4 481) 18 724
year
Cash and cash equivalents at end of year 11 439 (4 481)
CONDENSED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 AUGUST 2010
Share Share
Capital Premium
R`000 R`000
Balance at 1 September 2008 as restated * -
Issue of ordinary shares 305 50 640
Listing and capital raising costs written off - (4 497)
against share premium
Acquisition reserve arising from reverse take- - -
over
Total comprehensive income for the year - -
Balance 31 August 2009 305 46 143
Issue of ordinary shares 8 1 142
Total comprehensive income for the year - -
Balance 31 August 2010 313 47 285
*Less than R 1000
Acquisition Retained
Reserve Earnings Total
R`000 R`000 R`000
Balance at 1 September 2008 as restated - 37 486 37 486
Issue of ordinary shares - - 50 945
Listing and capital raising costs written off - (4 497)
against share premium -
Acquisition reserve arising from reverse take- (7 595) - (7 595)
over
Total comprehensive income for the year - 362 041 362 041
Balance 31 August 2009 (7 595) 399 527 438 380
Issue of ordinary shares - - 1 150
Total comprehensive income for the year - (28 851) (28 851)
Balance 31 August 2010 (7 595) 370 676 410 679
*Less than R1 000
COMMENTARY
Introduction
The directors present the abridged audited consolidated annual financial results
of the group ("the financial results") for the year ended 31 August 2010 ("the
year"). Key financial indicators were lower than forecast in the Revised
Listings Particulars dated 25 August 2008 ("the RLP`s") due to the impact of the
global recession on the leisure industry at large. Further, the write-off of
once-off expenses in the year depressed the bottom line. Although anticipated,
these expenses were originally intended to have been written off in the previous
financial year (see `Financial Review` below).
During the year management focused primarily on consolidating the platform for
growth by opening the hotel component of 15 on Orange ("the Hotel") and
carefully assessing other opportunities.
Profile
QPG is a young, dynamic property group aiming to achieve capital growth from an
investment-grade portfolio spanning all sectors. The group`s focus is trophy
properties in prime urban locations similar in scale and scope to 15 on Orange.
15 on Orange is a mixed-use development valued at close on R1 billion. It
comprises a luxury Hotel with full conference facilities, a chic urban spa,
exquisitely appointed world-class amenities and popular bars and dining; 12
penthouses, 2 467mSquared of boutique retail; and a four-storey parkade. The
Hotel is the flagship for African Pride Hotels (Proprietary) Limited, the
premier brand of Protea Hotel Group (Proprietary) Limited ("Protea Hotels") with
whom QPG shares a 50% joint venture in respect of the Hotel business.
Financial Review
The loss for the year of R28,9 million translated into a loss per share of 19
cents. This was mainly attributable to the write-off of the balance of
restraints of trade totalling R23 million. In terms of the RLP`s this balance
was due to be written-off in full during the previous financial year. However,
with the actual listing date of QPG on AltX having occurred later than
originally anticipated, the write-off of the restraints of trade also commenced
later than expected and carried over into the year under review.
Similarly, pre-opening expenses for 15 on Orange were written-off in full during
the year under review and were higher than expected at approximately R6 million.
These would have been written-off in full in the previous financial year if the
Hotel had opened on schedule as per the RLP`s.
Excluding the write-offs of the restraints of trade and the pre-opening
expenses, the basic and headline loss per share would have been approximately
2,3 cents.
Three of the 12 penthouse apartments in the 15 on Orange development were sold
during the year. However, the margin on these sales was lower than expected.
The pricing of the remaining apartments will take into account the imperative to
achieve improved margins.
As the Hotel opened during December 2009 following unforeseen delays, a full
year`s performance is not reflected in the financial results. Post year-end the
performance of the Hotel has improved significantly with healthy occupancies
being achieved. The directors are confident of the long-term viability of the
Hotel, and are supported by the opinion of industry experts that the oversupply
of 5 star rooms currently prevalent in the Cape Town market will subside in the
near future.
The retail component of 15 on Orange was approximately 34% let at 31 August
2010. Since year-end the letting of the retail space is at close to 100%, with a
nationwide anchor tenant intended to drive footfall to the retail centre and
Hotel having been recently signed up. It is anticipated that the marginal
balance of the retail centre will be let by February 2011.
Net asset value per share was 269 cents compared to 288 cents for the previous
year.
Growth strategy
QPG`s key goal is building a diverse, sustainable portfolio that delivers
consistent capital growth by:
* doubling the group`s asset base year-on-year from 2011 over a 3-5 year
horizon;
* developing trophy properties of the same quality, scope, magnitude and
value as 15 on Orange (in different sectors of the property market);
* acquiring attractive income generating properties;
* broadening the group`s shareholder base; and
* improving the BEE platform.
The Multi-SiloTrade Mark Investment Strategy comprises Developments and
Redevelopments; and Property Investments. This is designed to supplement
predictable recurring rental income with regular development returns for long-
term sustainability, with property traditionally proving the best performing
asset class over this time horizon.
Directorate
During the year under review the board of QPG was streamlined and reconstituted.
As previously announced with effect from 24 June 2010 G Itzikowitz resigned as
CEO to pursue personal interests. CJ Kupritz, a former non-executive director,
was appointed as CEO in line with succession planning. Further as previously
announced with effect from 19 March 2010 and 18 March 2010, respectively, IS
Schmidt resigned as an executive director and K Abdul-Karrim as a non-executive
director in light of potential conflicts of interest. With effect from 24 June
2010 GN Shaff was appointed to the board as an executive director and PM Shaff
as a non-executive director. Post year-end effective 30 September 2010 JT
Opperman resigned as an executive director. We thank the outgoing directors for
their contribution and welcome the new directors, with whom we look forward to
building QPG for the future.
Prospects
The recent uptick in Hotel occupancy levels is encouraging. Prospects for
growth are positive in light of an optimistic outlook for 5 star hotels in the
South African leisure industry generally. Tourism is healthy following a
successful 2010 FIFA World Cup.
Further, the local economy has shown resilience and continues to grow, albeit at
a slower rate than previously.
Management is actively assessing a number of attractive opportunities in major
centres. The board has also identified BEE as a key criterion for future
growth. QPG is in an ongoing process to identify a suitable partner in this
regard. Announcements will be made in due course when negotiations with such a
partner are advanced.
Basis of preparation and accounting policies
These abridged condensed consolidated annual financial results for QPG in this
announcement have been prepared in accordance with the measurement and
recognition criteria of International Financial Reporting Standards ("IFRS"),
IAS 34: Interim Financial Reporting and in the manner required by the South
African Companies Act, 1973, as amended, and the Listings Requirements of the
JSE Limited. The accounting policies and methods of measurement and assessment
are consistent with those applied in the audited financial statements for the
period ended 31 August 2009.
Significant accounting policies include:
* Significant judgement: Judgement is required in determining the fair value
of investment property. The fair value is determined annually with an
independent valuation carried out every three years and any fair value
adjustment is recognised in profit and loss.
* Investment Properties: Investment properties are held to earn rental income
and to appreciate in capital value. Investment properties under development
are held for development in order to earn rental income and to appreciate
in capital value upon completion of the development. Investment properties
held to earn rental income are treated as longterm investments and are
measured initially at cost including transaction costs and thereafter at
fair value. The fair value is determined annually with an independent
valuation carried out every three years and any fair value adjustment is
recognised in profit and loss. Existing investment properties under
development held for continued future use as investment properties are
treated as long-term investments and are measured at fair value, being the
fair value of the land and buildings. The fair values of the land and
buildings are determined annually with an independent valuation carried out
every three years and any fair value adjustments are recognised in profit
and loss. Rental income and operating expenses from investment property are
reported within revenue and operating expenses respectively.
Material change in assets:
* Inventories: Development costs pertaining to the portion of 15 on Orange to
be sold are classified as inventory. During the period under review, 3 of
the 12 units for sale were sold and the costs thereof recognised as cost of
sales.
Related party transactions and balances
There were no material related party transactions or balances in the year under
review.
Segmental report
QPG does not have separate identifiable segments. No segmental report has
therefore been prepared.
Subsequent events
Post year-end the secured development loan of A Million Up Investments 105
(Proprietary) Limited, QPG`s wholly owned subsidiary, which bears interest at
the prime rate per annum was converted into a five year senior facility and two
bridging facilities. The senior facility is to be repaid on 31 January 2016 and
the two bridging facilities are to be repaid on 30 November 2011 and 30 November
2013 respectively.
Report of the independent auditors
Grant Thornton, the group`s independent auditors, have audited the consolidated
annual financial statements of QPG from which the condensed consolidated
financial results have been derived and have expressed an unmodified audit
opinion on the consolidated annual financial statements. The audit report is
available for inspection at QPG`s registered office.
Annual General Meeting
The annual general meeting of members of the company will be held at 10:00 on
Tuesday, 8 March 2011 at the offices of Werksmans Attorneys, 155 Fifth Street,
Sandown, Sandton, Johannesburg.
Appreciation
We thank our team for their hard work and tenacity in a challenging year. We
look forward to working together with our new directors to drive the future
success of the group. Thank you also to our advisers, suppliers and business
partners for their support and to our shareholders for their faith in the group.
Chaim Cohen Clifford Kupritz
Executive Chairman Chief Executive Officer
BY ORDER OF THE BOARD
30 November 2010
Directors
C Cohen (Executive Chairman), CJ Kupritz (Chief Executive Officer), MR Taitz
(Financial Director), GN Shaff, BS Cohen*, I Levitt*+, BH Sneech*+, PM Shaff*
*non-executive + independent
Registered office: 19th Floor, Sandton City Office Towers, cnr. 5th Street and
Rivonia Road, Sandton, 2196
Company secretary: Corporate and Merchant Administrators (Proprietary) Limited
Designated adviser: Merchantec Capital
Independent auditors: Grant Thornton Chartered Accountants (SA)
Transfer secretaries: Computershare Investor Services (Proprietary) Limited 70
Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107)
Date: 30/11/2010 16:24:01 Produced by the JSE SENS Department.
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