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PNG - Pinnacle Point Group Limited - Reviewed condensed consolidated results
for the year ended 28 February 2011, renewal of existing cautionary
announcement and new cautionary announcement
PINNACLE POINT GROUP LIMITED
(Registration Number: 2000/000059/06)
Share code: PNG ISIN code: ZAE000127122
("Pinnacle Point" or "the Company")
REVIEWED CONDENSED CONSOLIDATED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2011,
RENEWAL OF EXISTING CAUTIONARY ANNOUNCEMENT AND NEW CAUTIONARY ANNOUNCEMENT
Condensed consolidated statement of financial position at 28 February 2011
Reviewed Audited
28 28
February February
2011 2010
R`000 R`000
ASSETS
Non-current assets 877 687 1 100 147
Property, plant and equipment 1 825 14 921
Investment property 1 900 4 400
Inventory/Freehold land and stands 766 138 860 680
Goodwill - 7 504
Other intangible assets 875 1 603
Loans and receivables at amortised cost 79 881 179 169
Deferred tax assets 27 068 31 870
Current assets 302 311 502 293
Inventory/Freehold land and stands 292 574 364 127
Loans and receivables at amortised cost 1 850 24 216
Trade and other receivables 7 240 17 126
Current tax receivable - 1 045
Cash and cash equivalents 647 95 779
Non-current assets held for sale 26 744 23 506
Total Assets 1 206 742 1 625 946
EQUITY AND LIABILITIES
Equity and reserves
Issued capital 1 160 043 1 151 007
Foreign currency translation reserve (8 442) (15 159)
Accumulated loss (566 780) (327 683)
Equity attributable to owners of the parent
584 821 808 165
Non-controlling interests 6 996 11 189
Total equity 591 817 819 354
Non-current liabilities 239 099 239 685
Borrowings 33 000 39 819
Finance leases and other arrangements - 5 188
Deferred tax liabilities 206 099 194 678
Current liabilities 348 727 541 901
Trade and other payables 87 524 111 918
Borrowings 229 906 383 161
Finance leases and other arrangements - 3 631
Provisions 9 925 20 407
Operating lease liability 102 102
Current tax payable 1 773 4 034
Bank overdraft 19 497 18 648
Liabilities directly attributable to Non- 27 099 25 006
current assets held for sale
Total Equity and Liabilities 1 206 742 1 625 946
Net asset value per share issued (cents)
7.12 11.53
Net tangible asset value per share (cents)
7.11 11.40
Shares in issue at year end (`000)
8 311 122 7 006 622
Condensed consolidated statement of comprehensive income for the year
ended 28 February 2011
Reviewed Audited
12 Months 12 months
to to
28 28
February February
2011 2010
R`000 R`000
142 239 16 759
Turnover
Cost of Sales (190 620) (93 348)
Gross (loss) / profit (48 381) (76 589)
Other gains and losses 3 727 16 322
Marketing and sales expenses (831) (12 206)
Impairment charges (118 505) (78 665)
Other expenses (75 149) (117 440)
Loss before interest and tax (239 139) (268 578)
Investment revenue 23 474 26 030
Finance costs (41 071) (54 227)
Loss before tax (256 736) (296 775)
Taxation income / (expense) 17 628 (9 361)
Loss for the year (239 108)) (306 136)
Other comprehensive losses:
Exchange differences arising on translation of (4 583) (3 544)
foreign operations
Other comprehensive loss for the year, net of (4 583) (3 544)
tax
(243 691) (309 680)
Total comprehensive loss for the year
Loss attributable to:
Owners of the parent (227 796) (276 945)
Non-controlling interests (11 312)
(29 191)
Total comprehensive loss attributable to:
Owners of the parent (234 513) (280 489)
Non-controlling interests (11 312) (29 191)
Loss per share
Basic loss per share (cents) (3.16) (5.63)
Diluted basic loss per share (cents) (3.15) (3.95)
(227 796) (276 945)
Headline loss reconciliation
Loss attributable to owners of the parent
(after tax)
Adjusted for:
Profit on disposal of property, plant and (41) (4)
equipment
Impairment of goodwill 7 504 10 000
Impairment of property, plant and equipment 2 246 1 089
Impairment of non-current assets held for sale 967 2 309
Fair value adjustments for investment property 602 939
Gains on available for sale financial assets - (7 445)
Profit on disposal of investment property - (343)
Headline loss for the period (216 518) (270 400)
Tax effect of above adjustments (1 332) (1 416)
Headline loss per share
Headline loss per share (cents) (3.00) (5.50)
Diluted headline loss per share (cents) (3.00) (3.86)
Weighted average shares in issue (`000)2 7 218 374 4 915 747
Diluted weighted average shares in issue 7 227 259 4 915 747
(`000) 2
Condensed consolidated statement of cash flows for the year ended 28 February
2011
Reviewed Audited
12 Months 12 months
to to
28 28
February February
2011 2011
R`000 R`000
Net cash outflow from operating activities (54 897) (252 699)
Net cash inflow / (outflow) from investing
activities 118 581 (36 416)
Net cash (outflow) / inflow from financing (158 816) 235 208
activities
Net decrease in cash and cash equivalents (95 132) (53 907)
Cash in transit - 95 000
Cash and cash equivalents at beginning of the 95 779 54 686
year
Cash and cash equivalents at end of the year 647 95 779
Condensed consolidated statement of changes in equity for the year ended 28
February 2011
Issued Foreign Accumulate Attributab Non- Total
capital 1 currency d loss le to controlli
translati owners of ng
on the parent interests
reserve
R`000 R`000 R`000 R`000 R`000 R`000
Balance 813 866 (11 615) (50 738) 751 513 16 100 767 613
at 28
February
2009 -
Audited
Loss for - - (276 945) (276 945) (29 191) (306 136)
the year
Foreign - (3 544) - (3 544) - (3 544)
exchange
movement
Total - (3 544) (276 945) (280 489) (29 191) (309 680)
comprehe
nsive
loss for
the year
Issue of 165 515 - - 165 515 - 165 515
ordinary
shares
to
settle
liabilit
ies
Issue of 196 485 - - 196 485 - 196 485
ordinary
shares
for cash
Share (24 859) - - (24 859) - (24 859)
issue
costs
Platinum - - - - 24 280 24 280
Club
Balance 1 151 007 (15 159) (327 683) 808 165 11 189 819 354
at 28
February
2010 -
Audited
Loss for - - (227 797) (227 797) (11 312) (239 108)
the year
Foreign - (4 583) (4 583) (4 583)
exchange -
movement
Foreign 11 301 (11 301) - -
currency
translat
ion
reserve
realised
Total - 6 718 (239 098) (232 380) (11 312) (243 692)
comprehe
nsive
loss for
the year
Issue of - - - - - -
ordinary
shares
to
settle
liabilit
ies
Issue of 13 000 - - 13 000 - 13 000
ordinary
shares
for cash
Share (1 004) - - (1 004) - (1 004)
issue
costs
Platinum (2 960) - - (2 960) 2 960 -
Club
Disposal - - - - 4 159 4 159
of
subsidia
ry
Balance 1 160 043 (8 441) (566 781) 584 821 6 996 591 817
at 28
February
2011 -
Reviewed
1 Includes share capital, share premium, share based payment reserve and
equity reserve arising from the reverse acquisition consolidation.
2 Excluding treasury shares and including shares contracted for but not yet
issued.
BASIS OF PREPARATION
The reviewed condensed consolidated annual financial results of the Group are
prepared as a going concern on a historical cost basis, except for certain
financial instruments, at fair value. The condensed annual financial
statements conform to International Accounting Standard 34: Interim Financial
Reporting, the AC 500 standards, the Listings Requirements of the JSE
Limited, and the Companies Act of South Africa (Act 61 of 1973), as amended.
The principal accounting policies, which comply with International Financial
Reporting Standards, have been consistently applied in all material respects
in the current and comparative years. All new interpretations and standards
were assessed and adopted with no material impact. The same accounting
policies and methods of computation are followed in the provisional report as
compared with the most recent annual financial statements; these condensed
results must be read in conjunction with the 2010 Annual Financial
Statements.
The Group`s auditors, Mazars, have reviewed, but not audited, these results
and a copy of their qualified review opinion on the condensed financial
information is available for inspection at the Group`s registered office.
Their report includes a qualification based on going concern. Matters
relating to going concern are discussed in more detail in the commentary
below. Any reference to future financial performance included in this
announcement has not been reviewed or reported on by the Group`s auditors.
BUSINESS AND MARKET OVERVIEW
After an initial improvement in the property market in the early stages of
this financial year growth has slowed and the lower interest rates are yet to
positively impact on the residential property market and in particular the
secondary home market.
The National Credit Act has led to the banks tightening their lending
criteria which has likewise had a bigger impact on the property market than
initially expected. Property developers have to evaluate building homes on
vacant land as part of the development offering in order to sell property
that can be financed.
Pinnacle Point was also constrained by the lack of funding and development
capital which resulted in very low levels of activity. Property developers
and property speculators across the country are going into liquidation
placing further pressure on stock pricing as liquidators and troubled home
owners try and offload excess stock at any price.
Pinnacle Point has, where possible, tried not to dump stock at any price as
markets do eventually turn at which point rapid price escalations are
expected as existing stock values catch up with the ever increasing
replacement cost of buildings and infrastructure costs. Holding costs
however, at times, put strain on the Company when liquidity is tight.
Pinnacle Point is in discussions with financiers and potential joint venture
partners to commence construction of homes at its Wedgewood development. This
project targets the middle income and young professional market with
completed homes priced at between R1,2 million and R1,8 million. The vacant
stands identified for this development are already fully serviced which will
enable the commencement of construction in the short-term.
The sale of Pinnacle Point`s secondary market vacant stands and completed
apartments have proved to be difficult despite price reductions. For this
reason the Company has elected to sell the entire Pinnacle Point Beach and
Golf Resort to an investor who is taking a longer term view on the ownership
of prestigious golfing destinations across the globe. Should this sale not
materialise Pinnacle Point is exploring ways to dispose of the Golf Course to
the Pinnacle Point Beach and Golf resort home owners and/or a consortium of
golf members.
As the Board has made a decision that ownership of golf courses will no
longer be part of its future strategy, the golf course at The Clarens Golf
and Trout Estate will also be sold. The terms of the transaction have been
agreed to and are subject to Investec Bank Limited`s approval. Investec hold
a bond over the property. The disposal of these golf course operations will
lead to substantial cost savings for the Group.
The downsizing of Pinnacle Point`s head office to align the staff requirement
with its resource outsourcing strategy has now also been completed. These
staff reductions, together with the elimination of the associated costs will
bring substantial saving to the group. Where possible costs will, in future,
be of a variable nature to match income when earned.
FINANCIAL REVIEW
The net loss for the Group for the year amounts to R239 million whilst the
headline loss for the year amounts to R217 million. Revenue was up on the
same period for 2011 at R142 million compared to R16 million mainly due to
the disposal of the Gardener Ross Golf and Country Estate properties.
The Group`s gross profit margin remains under pressure due to high standing
time costs and development expenditure on completed developments such as
Pinnacle Point and Clarens, which is expensed. Included in cost of sales are
the inventory impairment charges for the year amounting to R102 million which
is a non cash flow item. The related finance costs on these developments were
also expensed during the period.
Notwithstanding this there was an overall reduction in finance costs compared
to the same period for 2010 of R13 million, due to the repayment of bank
facilities and the disposal of the Gardener Ross Estate, Golf Course and the
related debt to Investec Bank Limited.
The impairment of inventory (R102 million) and certain loans receivables and
goodwill (R135 million), for the period under review did not have any cash
flow related effects.
The inventory impairment includes providing in full against the investment in
Ile Aurore Nouvelle Seychelles Limited ("Ile Aurore Nouvelle"). The matter
reported on previously between the Seychelles Government with regard to the
lease cancellation notice is still ongoing. Ile Aurore Nouvelle is disputing
the validity of the cancellation notice and is through its Seychellois legal
representative currently engaging with the Seychelles Attorney General to
resolve the dispute. As the matter remains in dispute at the date of these
results the directors have provided in full against the investment.
Should this matter be resolved PPG has signed a term sheet to secure the
funding for the development through a group based in Australia. This deal
will completely de-risk the project for Ile Aurore Nouvelle, as although
remaining as the developer, it will not take any of the financial risk and
only earn fees and commission on the project.
The loan account impairments relate to the Pinnacle Point Holdings (Pty) Ltd
("PPH") and Property Promotions and Management (Pty) Ltd ("PPM") loan
accounts. These are the only material related party transactions. These loan
accounts have been impaired in full as their recovery in the opinion of the
Board is dependent on the successful outcome of the PPH and PPM claim ("the
claim") against Nedbank Limited ("Nedbank"). The Company has security for the
loans in the form of a R100 million cession of the claim proceeds in addition
to 300 million shares in Pinnacle Point. The claim is in respect of the part
Nedbank allegedly played in the single stock future ("SSF") debacle which
took place in 2008.
While Pinnacle Point was not in any way involved in the SSF matter and was
not approached for approval in relation to the listing of SSF`s in the
Company, it has been severely negatively impacted by the fallout and
reputational damage caused by this event. The consequences included, inter
alia, a rapid decline in the share price of Pinnacle Point, with banks
subsequently not renewing or withdrawing facilities which made it very
difficult for the Company to raise capital and or new debt funding and to
complete certain projects on time such as Wedgewood. This in turn led to
increased holding costs.
The SSF related claim is consecutively being fought by certain minority
shareholders in two separate areas i.e. as a High Court Claim for damages and
simultaneously the former Securities Regulation Panel ("SRP") ruling
published on 16 August 2010 is being taken on review. The SRP`s findings
were, inter alia, that while the whole matter was "fraught with negligence
and recklessness, they could find no indication of an intention on the part
of Nedbank to gain control over Acc-Ross (now Pinnacle Point). Therefore, an
affected transaction did not occur (i.e. a breach of rule 8 of the SRP Code)
at the time when Syfrets (a wholly owned subsidiary of Nedbank) holding of
Acc-Ross shares reached 35%, or each time that it`s holding increased by
another 5%." Nedbank allegedly eventually acquired 89,4% of Pinnacle Point`s
shares prior to seeking condonation from the SRP for non compliance with rule
8 of the SRP Code.
The SRP did, however, believe that rule changes were required similar to
those of the City Code in the United Kingdom to regulate such transactions
and ensure proper disclosure. Unfortunately no such changes were introduced
with the new Companies Act (No. 71 of 2008)("the Act"). As a consequence of
this ruling, it remains unclear who in fact breached rule 8 of the SRP Code
as no offer was made to Acc Ross minorities by any party involved in the SSF
debacle.
PPH and PPM are taking the SRP ruling on review and are still pursuing their
high court action against Nedbank. Should the claimants be successful either
in securing an offer to minorities or in their damages claims, these
provisions may be reversed in whole or in part.
There is a significant reduction in other expenses compared to the same
period for 2010 amounting to R42 million due to operational restructuring and
the reduction in work force. Other expenses still include the cost of
operating the various golf courses that the Group owns which will be
eliminated once these golf courses are sold as part of the sale of the
underlying inventory
Property plant and equipment and investment properties declined from R19
million to R4 million as a result of certain assets being earmarked for sale
and therefore reallocated to assets held for sale. The related borrowing and
finance leases were consequently reallocated to Liabilities directly
attributable to non-current assets held for sale.
Total interest bearing debt decreased by R159 million over the year to 28
February 2011, primarily due to the disposal of the Gardener Ross Golf and
Country Estate development.
Provisions declined by R11 million mainly as result of the Investec profit
share provision in respect of the Gardener Ross property that was sold to
them being eliminated.
SEGMENTAL REPORTING
For management purposes, the Group is organised into the following segments
based on the products and services it renders:
Sale of freehold land and stands
The Group develops leisure resorts and residential lifestyle estates, whereby
land is acquired, rezoned, developed and sold. In the sale of freehold
property and serviced vacant land segment, revenue is derived from the sale
of this property.
The segment is further divided into geographical regions, namely South
Africa, Nigeria and Seychelles. Whilst the South African segments comprise a
number of projects, the various projects are exposed to similar risks and
possess similar characteristics and accordingly, are aggregated into one
segment for financial statement and other reporting purposes.
The developments in the countries other than South Africa are still in
initial phases and no revenue has been derived from these segments yet.
Golf course operations
Revenue in this segment is derived principally from membership and green fees
received from golf operations in South Africa. This operating segment is
immaterial to the group and accordingly, the groups consolidated results
materially reflect the results relating to sale of freehold property and
serviced vacant land.
Freehold land and stands Other 1 Group
consoli-
dated
South Nigeria Seyche Subtotal
Africa lles
Segment 136 286 - - 136 286 5 953 142 239
revenue
Segment 23 474 - - 23 474 - 23 474
interest
income
Segment (53 000) 8 764 1 449 (42 788) 1 717 (41 071)
finance cost
Segment 104 321 - (11 (116 247) 2 669 (113 579)
depreciation, 926)
amortisation
and
impairments
Segment loss (218 760) (20 (5 (245 201) (11 535) (256 736)
before 510) 931)
taxation
Segment (17 629) - - (17 629) - (17 629)
income tax
for the year
Segment 480 128 578 585 - 1 058 713 - 1 058 713
inventory
Segment total 597 402 582 584 11 1 179 997 - 1 179 997
assets
Segment total 21 800 - - 21 800 4 944 26 744
assets held
for sale
Segment total 33 374 - - 33 374 (6 275) 27 099
borrowings
held for sale
Segment 262 906 - - 262 906 - 262 906
borrowings
28 February
2010
Freehold land and stands Other 1 Group
consoli-
dated
South Nigeria Seyche Subtotal
Africa lles
Segment 17 175 - - 17 175 (416) 16 759
revenue
Segment 21 099 - - 21 099 4 931 26 030
interest
income
Segment 45 263 8 764 2 912 56 939 (2 712) 54 227
finance cost
Segment 128 146 - - 128 146 1 345 129 491
depreciation,
amortisation
and
impairments
Segment (271 766) (35 (7 (315 118) 18 343 (296 775)
profit / 642) 710)
(loss) before
taxation
Segment (10 457) - (778) (11 235) 1 874 (9 361)
income tax
for the year
Segment 635 940 574 461 14 406 1 224 807 - 1 224 807
inventory
Segment total 1 050 408 583 186 15 206 1 648 800 (46 360) 1 602 440
assets
Segment total 23 506 - - 23 506 - 23 506
assets held
for sale
Segment total 16 033 16 033 - 16 033
borrowings
held for sale
Segment 420 136 - - 420 136 2 844 422 980
borrowings
1 Other comprise non-reportable segments and consolidation adjustments
ISSUE OF SHARES
On 21 December 2010, the Company`s major shareholder, Trilinear Empowerment
Trust ("Trilinear")subscribed for 1 300 000 000 new shares ("Claw Back
Shares") at an issue price of 1 (one) cent per share which shares will then
be offered to Pinnacle shareholders by way of a Claw Back Offer at an offer
price of 1 (one) cent per share each in the ratio of 18.54197 (eighteen point
five four one nine seven) new Pinnacle ordinary share for every 100 Pinnacle
ordinary shares held.
Trilinear subscribed for the Claw Back Shares for a placement consideration
of R13 million.
Trilinear`s shareholding in Pinnacle thereby increased from 48.4% to
approximately 56.5%.
The SRP, now referred to as the Takeover Regulation Panel ("TRP"), with the
required shareholder approval exempted Trilinear from having to make a
mandatory offer.
Approval was granted by the JSE to list these shares on.24 December 2010. The
new salient dates for the claw back offer will be announced after the
publication of these results.
LITIGATION
As advised in the directors` report dated 6 September 2010, certain of the
Company`s shareholders have instituted and are engaged in legal proceedings
against various parties, including Nedbank,("the defendants") in respect of
claims in the amount of approximately R1,3 billion for alleged damages
suffered by those shareholders as a result of, inter alia, the non-disclosure
by the defendants of material information in respect of the shares for assets
exchange between the then Acc-Ross Holdings Limited and the Pinnacle Group of
Companies during November 2008.
In its defence to the above action one of the defendants is claiming partial
indemnity and is also claiming a contribution from the Company in respect of
the shareholder action and has filed a third party notice setting out that
relief. The Company`s legal advisors have advised the Board, and the Board
believes, that there is no basis for such claim by the defendant and the
Company has defended accordingly.
Certain companies in the Group are engaged in litigation with Nedbank on the
following matters as set out below:
- Wedgewood Golf & Country Estate (Pty) Ltd & Others ("the Wedgewood
matter") - summary judgment application for R55,8 million; and
- Danger Point Ecological Development Company (Pty) Ltd & Others ("the
Danger Point matter") - application to declare immovable property
executable for an amount of R40,5 million.
The court and all parties agreed to consider the Wedgewood and Danger Point
matters together on 23 May 2011. On that day, the court granted Nedbank the
relief sought in the Danger Point matter and reserved judgment in the
Wedgewood matter. That judgment has not yet been handed down. The Company is
in discussions with Nedbank at present with a view to delaying the execution
of these orders.
Action has been instituted in the South Gauteng High Court, Johannesburg by
Nedbank against certain subsidiaries as sureties to a BEE related transaction
concluded by Pinnacle Point Holdings (Pty) Ltd ("Pinnacle Point Holdings")
took place prior to the merger with Acc Ross mentioned above. Nedbank is
claiming an amount of approximately R39 million in respect of the outstanding
balance allegedly due and payable by Pinnacle Point Holdings ("the Pinnacle
Point Holdings matter"). Pinnacle Point Holdings has, in turn, instituted a
rectification action in respect of the loan agreement forming the subject of
the Pinnacle Point Holdings matter.
It has been agreed between the parties that both the Pinnacle Point Holdings
matter and the rectification action will be argued on 22 March 2012.
However, Nedbank, in addition to holding sureties from a large number of
other sureties, also holds separate security outside of the Group and
accordingly the impact of this litigation on the Group may not be material.
Certain companies in the Group are engaged in litigation with Investec Bank
Limited ("Investec"):
- Pinnacle Point Resorts (Pty) Ltd: Liquidation application for an
outstanding debt of R19 million - postponed, by agreement between the
parties, until 18 August 2011
- Festival Bay Trading 55 (Pty) Ltd: Liquidation application for an
outstanding debt of R40 million - postponed, by agreement between the
parties, until 18 August 2011
- Clarens Golf and Trout Estate (Pty) Ltd: Liquidation application for an
outstanding debt of R25 million - postponed, by agreement between the
parties, until 18 August 2011 and
- Eagle Creek Investments 74 (Pty) Ltd: Liquidation application for an
outstanding debt of R40 million - this has as yet not been enrolled for
hearing.
The Company is currently in discussions with Investec with a view to
resolving this litigation.
First Rand Bank Limited t/a RMB Private Bank ("RMB") instituted action
against Pinnacle Point Investments (Pty) Ltd ("PPI") and certain other Group
companies for an amount of approximately R19 million. On 4 May 2011, RMB`s
application for summary judgment against PPI and the other defendants was
argued in the Western Cape High Court, Cape Town and judgment was reserved.
On 27 June 2011, RMB`s application for summary judgment was granted. The
Company is in discussions with RMB to suspend execution proceedings pursuant
to the order and is furthermore considering taking the matter on appeal.
Certain professionals engaged on the Lagos Keys, Nigeria Project have
instituted liquidation proceedings against the Company as a result of inter
alia a claim for alleged outstanding fees of approximately R1,5 million. The
Company has defended these applications.
On 27 June 2011, business rescue proceedings in respect of the Company were
instituted by one of the Company`s shareholders in the Western Cape High
Court, Cape Town in terms of section 131 of the Act. That business rescue
application has been set down for hearing on Tuesday, 12 July 2011. The
effect of the business rescue application is that, in terms of section 133 of
the Act, all legal proceedings against the Company are suspended and no
further legal proceedings may be instituted against the Company pending
either the dismissal of the business rescue application or, should the
application be successful, the emergence of the Company from business rescue.
A separate announcement will be made in this regard.
DIVIDENDS
The directors have decided not to declare a dividend for the period under
review.
SUBSEQUENT EVENTS AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
On 13 May 2011, the Board approved a re-instatement agreement of sale for
Pinnacle Point Resort which has been entered into with effect from 18 April
2011 whereby the Main Agreement signed on 03 February 2011 has been re-
instated with amended conditions precedent and an extension of dates for
proof of funds and guarantees by 31 May 2011.
The agreement between Pinnacle Point Resorts (Proprietary) Limited ("PPR"), a
wholly-owned subsidiary of the Company, Festival Bay Trading 55 (Proprietary)
Limited ("Festival"), another wholly-owned subsidiary of the Company,
collectively referred to as "the Sellers", and Veritable Investments
(Proprietary) Limited ("Veritable") and Raptoguard (Proprietary) Limited
("Raptoguard"), collectively referred to as "the Purchasers" has been signed
with effect from 23 April 2011.
The agreement states that the Sellers will sell to the Purchasers the golf
course, the property upon which the clubhouse is situated, all unsold erven,
and certain vacant property upon which a gymnasium, spa, recreational
facilities and convention centre will be erected on and utilized as a hotel
operation of the Pinnacle Point Resort ("PP Resort").
The purchase consideration for the PP Resort as a going concern is R75 000
000 which is payable in cash.
The purchase amount is payable on registration of transfer of the properties
to be purchased which will also then be the effective date of the disposal.
The Purchasers are a German-based consortium that wishes to convert the PP
Resort into a 5-star resort.
The purchase consideration of R75 million will be used, inter alia, to settle
outstanding debt of approximately R58 million with Investec.
The conditions precedent for the above mentioned agreement to be fulfilled
are as follows:
- Approval by the Veritable and Raptoguard shareholders of this purchase;
- Veritable and Raptoguard to furnish the Company with a bank guarantee
for the amount of R75 million by 31 May 2011 and the balance of the R400
million by 30 June 2011;
- PPR to obtain the sanction of the PPR Homeowner`s Association ("PPHOA")
by 21 May 2011 to approve the agreement and amend Article 35.13 of its
constitution authorising the hosting of up to 36 professional golf
tournaments at the golf course and clubhouse; and
- Approval by the Pinnacle shareholders of this transaction, if required.
The first two conditions have as yet not been met and the Purchaser has
requested an extension of time in order to meet these conditions which time
has been granted to 30 June 2011 at which time all options will be
reconsidered by the Board.
Other terms are that the Purchasers grant a first option to PPHOA to acquire
the golf course and clubhouse property in the event that the Purchaser does
not construct and complete the various facilities within the stipulated time
period and/or in the event that the Platinum shareholders benefits are not
maintained as set out in their agreement with the Company.
Accordingly, shareholders are advised to continue to exercise caution in
dealing in their shares until a further announcement is made.
DIRECTORS AND EXECUTIVE MANAGEMENT
During the period under review and to the date of this report, the directors
of the Group were as follows:
Director Date appointed Date resigned
GH Johannes (Chairman)*# 15 December 2010
AO Austen-Peters (Nigerian)* 31 October 2008
F Ogunsiakan (Nigerian)* 8 June 2010
SS Gamede (Chief executive 15 December 2010
Officer)
S Kruger (Financial 31 October 2008
Director)
AV Fasedemi* 31 October 2008 8 June 2010
PL Zim (Chairman)* 31 October 2008 8 June 2010
KS Mthembu*# 07 October 2005 8 June 2010
B Igbinedion (Nigerian)* 20 February 2009 8 June 2010
S Maziya 8 June 2010 31 August 2010
SLH Braun 17 September 27 October 2010
2009
YT Moerane*# 16 May 2008 27 October 2010
HPJ Pretorius 5 May 2009 10 December 2010
K Massaad (Swiss)* 20 March 2009 21 December 2010
IC Stratford* 31 October 2008 31 December 2010
* non-executive # independent
Sibusiso Gamede was appointed to the Board on 15 December 2010 as a non-
executive director and as Chief Executive Officer of Pinnacle on 18 February
2011.
GOING CONCERN
The Pinnacle Board is of the view that the company will require additional
capital in the amount of approximately R250 million for the replacement of
certain existing banking facilities to enable Pinnacle to meet its working
capital requirements and to allow the company to realise the potential of its
property assets as a going concern. To this end the directors are busy with
the following initiatives.
- Applying for business rescue for certain Group companies or the Company
itself, in instances where this makes commercial sense. The business
rescue provisions have been instituted to protect companies that have
temporary liquidity constraints to enable the directors to focus on the
operations of the companies concerned, to preserve employment and give
all shareholders and creditors opportunity to benefit from the rescue
and not a select few.
- Pinnacle is considering raising funding as part of the required working
capital through a rights offer, from new or existing investors. A formal
terms announcement providing details of the rights offer may be made in
due course.
- Restructuring and / or extending existing debt facilities.
- PPG has recently been approached by a number of interested parties with
a view to recapitalising the business.
- Negotiating new debt facilities and in this regard the directors are at
an advanced stage to introduce new debt facilities into the Group.
- These negotiations also include the raising of a combination of debt and
equity for the Lagos Keys project. This project`s net carrying value on
Pinnacle Points balance amounts to R398 118 966.00. These negotiations
are therefore very important to the future success of the project..
The ability of the Group to continue as a going concern is dependent on the
successful conclusion of the above initiatives. The Board advises that on
this basis the preparation of the financial statements on a going concern
basis is appropriate.
At the date of this report these negotiations are still underway. Should
these negotiations not be successful there would be a material uncertainty
about the Group`s ability to continue as a going concern and, therefore may
be unable to realise its assets and discharge its liabilities in the normal
course of business.
FUTURE PROSPECTS
The future prospects are very much dependant on the successful outcome and
timing of the above initiatives. Further announcements will be made in due
course as and when these initiatives materialise and their impact on the
future prospects of the Group will then be made know to the market.
ANNUAL GENERAL MEETING
Shareholders will be advised of the date of the annual general meeting in due
course.
NEW CAUTIONARY ANNOUNCEMENT
The Group is in discussions with its stakeholders and lenders, to restructure
the existing debt and to recapitalise the Group, or alternatively apply for
"business rescue" which if successfully concluded, may have a material effect
on the price of Pinnacle Point`s securities.
Accordingly shareholders are advised to exercise caution when dealing in
Pinnacle Point securities until a further announcement is made.
By order of the Board
GH Johannes
Chairman
30 June 2011
Johannesburg
Registered Office
Arcay House Number 3 Anerley Road Parktown Johannesburg 2193
PO Box 62397 Marshalltown Johannesburg 2107
Directors
GH Johannes Chairman#*, Dr AO Austen-Peters (Nigerian)*, SS Gamede(Chief
Executive Officer)S Kruger(Financial Director), F Ogunsiakan (Nigerian)#*,
# Independent
* Non-executive
Designated Advisor Transfer Office
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