| Fri 1 Dec 2006, 8:56 | | Acc-Ross Holdings - Unaudited Results For The Six |
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ACC
ACC
Acc-Ross Holdings - Unaudited Results For The Six Months Ended
31 August 2006 And Renewal Of Cautionary Announcement
ACC-ROSS HOLDINGS LIMITED
(formerly Le-Sel Holdings Limited)
(Registration Number: 2000/000059/06)
Share code: ACC & ISIN code: ZAE000077335
("Acc-Ross Holdings" or "the company")
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2006 AND RENEWAL OF
CAUTIONARY ANNOUNCEMENT
Income Statements Unaudited Audited Reviewed
6 months 12 months 6 months
31 Aug 28 Feb 31 Aug 2005
2006 2006 R"000
R"000 R"000
Revenue 36 380 197 004 --
Cost of sales (13 419) (131 790) --
Gross profit 22 961 65 213 --
Other income 3 2 --
Operating expenses (11 757) (5 197)) (2 409)
Share based payments to -- (8 800)
directors and employees
Write off of investment (2 240) --
Impairment of goodwill (485) (7 346) --
Impairment losses (404) (4 597)
Operating profit/(loss) 8 078 37 308 (2 409)
before interest
Finance costs (5 613) (24 027) (6)
Fair value adjustments -- (4 860) --
Investment revenue 854 568 2
Profit/(Loss) before 3 319 (8 989) (2 413)
taxation
Taxation (1 486) 266 614
Profit/(Loss) after taxation 1 833 (8 723) (1 799)
Minority interest in 63 5 254 --
subsidiaries
Share of results of -- -- 16
associate
Profit/(Loss) attributable 1 896 (3 468) (1 783)
to ordinary shareholders
Calculation of headline
earnings
Net profit/(loss) for the 1 896 (3 468) (1 783)
year
Adjustments for:
Impairment of goodwill 485 7 346 --
Impairment losses 404 4 597 --
Write off of investment 2 240 --
Impairment of debentures -- 4 860 --
Headline earnings for the 5 025 13 335 (1 783)
period
Weighted average shares in 972 734 618 708 477 853
issue (`000)
Earnings/(loss) per share 0.19 (0.56) (0.37)
ordinary share (cents)
Headline earnings per 0.52 2.16 (0.37)
ordinary share (cents)
Balance Sheets Unaudited Audited Reviewed
31 Aug 28 Feb 31 Aug 2005
2006 2006 R
R"000 R
ASSETS
Non-current assets 603.229 299 754 460 590
Property, plant and 430 565 177 481 316 897
equipment
Intangible assets 157 273 82 758 130 182
Investment in associates -- -- 16
Investments 2 000 25 240 4 000
Loans receivable 13 391 14 275 9 495
Deferred tax -- -- --
Current assets 71 594 91 850 12 714
Inventory 26 841 32 841 --
Trade and other receivables 27 143 47 743 12 456
Other financial assets 14 416 75 --
Cash and cash equivalents 3 194 11 192 258
Total assets 674 823 391 605 473 304
EQUITY AND LIABILITIES
Capital and reserves 257 628 162 954 160 765
Issued capital 259 201 166 422 162 548
Accumulated loss (1 573) (3 468) (1 783)
Minority interest 805 868 (2 623)
Non-current liabilities 245 830 112 998 195 838
Other financial liabilities 204 349 101 977 173 696
Finance lease obligations 258 294 --
Deferred tax 41 223 10 727 22 142
Current liabilities 170 560 114 785 119 324
Trade and other payables 50 823 44 721 119 324
Other financial liabilities 110 828 66 401 --
Current tax payable 8 799 3 554 --
Finance lease obligation 110 109 --
Total equity and 674 823 391 605 473 304
liabilities
Shares in issue at period 975 930 877 930 737 141
end (`000)
Net asset value per share 26.4 18.6 21.5
(cents)
Net tangible asset value 10.3 9.1 3.8
per share (cents)
Abridged Cash Flow Statement Unaudited Audited Reviewed
31 Aug 28 Feb 31 Aug 2005
2006 2006 R"000
R"000 R"000
Cash flows from operating 36 336 (41 721) --
activities
Cash flows from (utilised (283 912) (264 021) 1 786
in) investing activities
Cash flows from financing 239 578 315 100 48
activities
(Decrease)/increase in cash (7 998) 9 358 1 834
and cash equivalents
Cash and cash equivalents at 11 192 1 834 --
beginning of the period
Cash and cash equivalents at 3 194 11 192 1 834
end of the period
Statement of changes in Share Share Accumul Total
equity capital premium ated
R"000 R"000 loss R"000
R"000
Balance at 01 March -- -- -- --
2004
Net profit for the -- -- -- --
period
Issue of share capital 48 48
Balance at 01 March 48 -- - 48
2005
Issue of share capital 40 166 334 166 374
(adjusted to fair
value)
Net loss for the period -- -- (3 468) (3 468)
Balance at 01 March 88 166 334 (3 468) 162 954
2006
Net profit for the -- -- 1 895 1 895
period
Issue of share capital 10 92 769 -- 92 779
Balance at 31 August 98 259 103 (1 573) 257 628
2006
COMMENTARY
The directors are pleased to present the company"s results for the six months
ended 31 August 2006, reflecting the first interim results since the company"s
listing on 16 February 2006.
The accounting policies adopted for purposes of this report comply with
International Financial Reporting Standards ("IFRS"), with 01 March 2004 being
the IFRS transition date.
INDUSTRY AND BUSINESS OVERVIEW
Acc-Ross is primarily a developer of hotel and leisure resorts and residential
lifestyle estates, whereby land is acquired, rezoned and developed. Whilst
revenue and profits will initially be generated through the sale of land, the
projects enable Acc-Ross to fund the development of substantial leisure assets
as part of the process. The strategy of Acc-Ross is to become a leading hotel
and leisure company over the next few years.
Revenue is initially derived from the sale of land, where, although lead times
in developing projects is normally a couple of years, profitability is typically
high. Once the stand sales are completed, Acc-Ross will either retain, sell or
joint venture, the leisure or commercial assets which have been developed, such
as the golf course, sport facilities, conference facilities, club house, hotel
and commercial or retail interests. These assets will ultimately generate
annuity income for the group.
Rights/Records of Decision (ROD"s) are in place for the group"s larger projects,
thereby reducing the risk typically associated with property development. In
addition, the group has substantial pre-sales, which sales will be recognised on
proclamation and transfer of the underlying stands. Facilities are also in
place for most of the group"s projects, which facilities are ring-fenced in each
project and secured by the land and pre-sales of each project. Further details
of each project, its ROD status, level of pre-sales and status of facilities,
are set out below.
SEGMENTAL REPORTING
The company has not presented segmental information as the turnover and profits
are primarily generated by the transfer of Phase 1 of Gardener Ross Golf &
Country Estate (Proprietary) Limited ("Gardener Ross or "Gardener Ross Golf &
Country Estates"), which houses the Ernie Els Golf Estate development in
Centurion.
FINANCIAL OVERVIEW
For the period under review, revenue and profits were primarily generated by the
transfer of the balance of Phase 1 of Gardener Ross, the bulk of which was
transferred in the second half of the prior year. Although Phase 2 of Gardener
Ross has been proclaimed, transfers only commenced during October 2006.
Cost of sales relate to the transfer of Phase 1 stands, and includes a write off
of goodwill which had been attributed to the underlying stands in accordance
with IFRS due to the allocation of a portion of the purchase price of Gardener
Ross Golf & Country Estate being attributed to property, which, following
proclamation becomes inventory until such time as the stands are sold and
transferred. This non-cash flow amount included in cost of sales as a result of
IFRS accounting treatment is approximately R1.1 million. The cost of sales also
includes a provision for Investec Bank Limited"s profit share in the project.
In accordance with the group"s revised strategy of focusing on its larger
property developments, the company elected not to proceed with certain
acquisitions and/or projects after listing. As a result, certain investments
have been written off or impaired.
The impairment of goodwill arises as a result of a portion of the goodwill
raised on the acquisition of Gardener Ross Golf & Country Estate being
attributed to the stands, with the balance being attributed to, inter alia, the
golf course development. The portion of goodwill attributed to the stands is
impaired in direct proportion to the sale of stands in Gardener Ross Golf &
Country Estate.
Finance costs relate to debt funding that is not project related.
Where applicable, interest on project related funding is capitalised into the
cost of the project, which is later expensed through cost of sales on a pro rata
basis.
The taxation expense has arisen as a result of profit being recognised in
Gardener Ross, which project is now profitable.
The earnings per share of 0.19 cents and headline earnings per share of 0.52
cents were achieved for the period.
Balance sheet review
Property, plant and equipment increased, despite the transfer of Phase 1 of
Gardener Ross, primarily due to the continued development of Phases 2 and 3 of
Gardener Ross as well as the acquisition of the Bay at Hartbeespoortdam, which
acquisition was announced on SENS on 08 March 2006. Intangibles also increased
as a result of the acquisition of The Bay.
Inventory of R26 million represents the balance of stands remaining in Phase 1
of Gardener Ross, which transfers had not been processed by the deeds office by
31 August 2006.
Non-current borrowings primarily comprise redeemable preference shares in
Gardener Ross Holdings, debentures issued in Lizard Point which will convert to
stands on proclamation of Phase 1 of Lizard Point and the long term debt
facilities on Lizard Point and The Bay, which were incurred after year end.
Trade and other payables are mostly related to the underlying projects and are
settled through the project finance within each subsidiary. The current portion
of borrowings relates primarily to the Investec facility in Gardener Ross, which
is repayable at the completion of each phase. The repayment of Investec funding
of R102 million at 31 August 2006 has commenced during October 2006 from the
proceeds of transfers of Phase 1 and Phase 2 and the Phase 2 funding is expected
to be repaid in full by January 2007.
Cash Flow Statement review
Cash generated by operations increased to R36 million primarily as a result of
the proclamation and transfer of Phase 1 of Gardener Ross. The increase in both
cash used in investing activities and generated by financing activities relate
to the acquisitions of the company subsequent to 28 February 2006.
DETAILS OF PROJECTS
Gardener Ross
Gardener Ross comprises an Ernie Els signature golf course and a housing
development comprising 1 153 full title stands and is situated in Centurion,
Gauteng. The land was acquired in 2003 for a purchase consideration of
R12 million. The individual stands are to be sold, whilst the golf course,
clubhouse and all other developments will remain the property of Gardener Ross.
Gardener Ross has already transferred the majority of Phase 1, following
proclamation in September 2005 and transfer of the stands commenced in October
2005. Phase 2 sales are in progress and transfer of approximately R120 million
of existing pre-sales commenced in October 2006, which proceeds will be applied
to the elimination of the Phase 2 Investec facility. Pre-sales for Phase 3 were
launched in September 2006.
Gardener Ross, per its projected budgets, projects total sales of R900 million
from all three phases and a total profit after tax from the entire development
upon sale of all stands, of approximately R200 million, before minorities.
Thereafter, it is expected that Gardener Ross will start generating annuity
income from the retained leisure assets.
Gardener Ross is fully financed by Investec, attracting interest at prime less
0.5% and a profit share of 25% of the pre-tax profit, which represents an
increase of 5% as a result of financing being advanced against security of the
stands as opposed to waiting for minimum levels of pre-sales to be achieved.
This will enable the project to be completed ahead of schedule, despite quieter
market conditions. The necessary ROD and Environmental Impact Report approvals
were obtained in 2004 and construction commenced in September 2004. The
development has all 18 golf holes completed and the golf course will be ready
for playing in April 2007.
The Gardener Ross project development management is being undertaken by Devco
Africa (Proprietary) Limited, which owns the remaining 10% in Gardener Ross. An
independent valuation of R235 million has previously been obtained for Gardener
Ross.
Lizard Point
As at 31 August 2006, Acc-Ross owned 65% of the shareholding in the subsidiary
which will develop the Lizard Point Resort Development, estimated by directors
to be a R4,5 billion development over 8 years. The land was acquired in 2004
for a purchase consideration of R11,5 million, which has been settled in full.
Lizard Point is a 700 hectare resort development with 6 kilometres of water
frontage, situated at the mouth of the Wilge river and on the banks of the Vaal
Dam next to Orangeville, Free State Province and currently has a land value of
R170 million, with phase 1 of the project funded by Investec. Facilities of
R140 million are in place to fund the development of Phase 1, subject to minimum
pre-sales being achieved.
The project achieved its ROD from the environment authorities on 02 November
2005 and the final amendment to the Guide Plan was promulgated on 19 May 2006.
The company is planning to break ground in February 2007. The first phase of
the development comprises an 18 hole championship Links golf course, which will
be co-designed by Retief Goosen and DDV Design Group, with 513 Residential One,
freehold stands and 135 cluster units
Phases 2 and 3 comprise the development of residential units and the waterfront
area, which consists of a commercial hotel, retail outlets, restaurants,
cinemas, entertainment and the boutique hotel and timeshare component.
The 4th phase will comprise a second 18 hole signature Parklands golf course
with 315 Residential One, freehold stands and 621 Residential Two sites. Other
products in the development include boat storage and launching facilities, a
golf driving range, tennis courts, the 2 club houses for the golf courses and
the island with the resort pools and sundowner bars.
An independent valuation of R50 million has been obtained on Phase 1 of Lizard
Point and R120 million for Phases 2 to 4.
Subsequent to the reporting date, the company acquired a further 10%
shareholding in the project. The total shareholding are now 75%.
Welvergenoegd
Welvergenoegd is a planned signature golf and leisure development situated
outside Durbanville in the Cape. Water Rights have been secured for the
development through part funding of the Durbanville water pipeline.
Environmental Impact Assessments still need to be submitted and, subject to this
approval, the ROD is expected to be received in late 2006. It is anticipated
that the development will commence during 2008 and be completed within 36 months
thereafter. The project is similar in nature and size to Gardener Ross and
estimated profit before taxation of the entire development over 4 years is R400
million.
The balance of the payment for the land is only payable in 10 months time and is
expected to be funded through project finance or own cash resources at that
time.
Blue Horizon Bay
Acc-Ross effectively owns 80% of Blue Horizon Bay Eco-Estate, which property of
76 hectares is located in an extremely sought-after area of coastal land,
between Port Elizabeth and Jeffreys Bay. The eco-game estate development will
be a low density development with less than 150 homes, leaving ample open space
to allow small game to roam freely. The majority of the homes to be built will
have uninterrupted ocean views.
Blue Horizon Bay Eco-Estate is one of the first estates of its kind in the area,
potentially setting the standard for other eco-estates to follow. Every
possible precaution will be taken during the design and development of the
project to minimise negative environmental impact. Comprehensive studies of the
existing flora and fauna, the soil conditions and land use have been done and
will continue to play a critical role in the development.
The land was purchased for R550 000 three years ago and transfer has been
effected. The Environmental Impact Assessment has been prepared and submitted
for approval. The township application is in the process of formulation.
Twelve months have been estimated for the construction of the development
infrastructure, currently planned to commence during 2007/2008. Banks will be
approached to finance the project in the normal manner once the ROD has been
received.
The Bay
The Bay is a development on approximately 300 Hectares on the banks of the
Hartbeespoort Dam, next to Pecanwood and is currently valued at approximately
R200 million. The Bay has existing rights in place for residential, commercial,
retail and hotel development in conjunction with a golf course as well as water
rights which will facilitate the development of a small harbour with mooring
rights. The Bay already has facilities in place through Investec Bank Limited,
which has funded approximately R60 million of acquisition and development costs
to date. Shareholders are referred to the renewal of cautionary announcement
below in relation to this project.
LITIGATION
There is no litigation pending against the company that is expected to have a
material impact on the company.
SUBSEQUENT EVENTS
The have been no major subsequent events from 31 August 2006 to the current
date. However, shareholders are referred to the renewal of cautionary
announcement below.
DIRECTOR CHANGES
During the period under review the following director changes occurred:
Appointed Date Resigned Date
Wilfred 22 June 2006 Dr Mathews 02 August 2006
Robinson Phosa
Mr H Friedman resigned as an alternate director to Mr Jomo Sono on 09 November
2006.
DIVIDENDS
The directors have decided not to declare a dividend for the period under
review.
FUTURE PROSPECTS AND REVISED PROFIT FORECAST
Acc-Ross continues to be approached with numerous high quality projects, both
generally and through its relationship with Els International and is evaluating
ways to take advantage of such opportunities. In the short term it will
continue with its current projects, which will ultimately lead to the group
holding significant leisure assets at key locations. In the second half of the
year, the company will recognise revenue from the sale of a portion of Phase 2
of Gardener Ross. It is the intention of the company to publish a revised
profit forecast of the group for the year ending 28 February 2007, which profit
forecast is expected to be published during December 2006.
The first generation of annuity revenue is expected for the year ending 28
February 2008, which is expected from the opening of the Ernie Els designed golf
course in Centurion, the clubhouse and associated conference facilities and
niche corporate office park. The signature golf course will be the longest
course in the Southern Hemisphere and is expected to attract high profile
tournaments, which in turn will generate revenue associated with such events.
RENEWAL OF CAUTIONARY ANNOUNCEMENT
The company continues in negotiations for the acquisition of the remaining
shareholding in Lizard Point, with a potential introduction of a strategic
partner for Acc-Ross and the disposal of a project, which, if negotiations are
successful, could affect the price at which the companies securities trade.
Accordingly, shareholders are advised to continue to exercise caution in dealing
in their securities.
In accordance with AltX Listings Requirements, shareholders are advised of the
risks of investing in a company listed on the AltX and that the JSE does not
guarantee the viability or the success of a company listed on the AltX. In
terms of the JSE Listings Requirements, a Designated Advisor has to be retained
by the company. The Designated Advisor is required, inter alia, to attend all
board meetings held by the company to ensure that all the JSE Listings
Requirements and applicable regulations are complied with, approve the financial
director of the company and guide the company in a competent, professional and
impartial manner. If the company fails to retain a Designated Advisor it must
make arrangements to appoint a new Designated Advisor within 10 business days,
failing which the company faces suspension of trading of its securities. If a
Designated Advisor is not appointed within 30 days of its suspension, the
company faces the termination of its listing without an offer to minorities.
By order of the Board
AM Mashiatshidi W Robinson
Chairperson Chief Executive Officer
30 November 2006
Johannesburg
Registered Office
Arcay House, Number 3 Anerley Road, Parktown, Johannesburg,
2193
PO Box 62397, Marshalltown, Johannesburg, 2107
Directors
AM Mashiatshidi *(Chairman), W Robinson (CEO), JJ Verster, N
Owen, A Wiese, KS Mthembu*, EM Sono*
* Non-executive
Designated Advisor Transfer Office
Arcay Moela Sponsors Computershare Investor Services 2004
(Proprietary) Limited
Date: 01/12/2006 08:56:32 AM Produced by the JSE SENS Department
