RNS Number:8568Q
South African Property Opps PLC
27 March 2008
SOUTH AFRICAN PROPERTY OPPORTUNITIES PLC
('SAPRO' or the 'Company')
Interim results for 6 months ended 31 December 2007
South African Property Opportunities plc (AIM: SAPO), an investment company
established to invest in real estate opportunities in South Africa, announces
its interim results for the six month period ended 31 December 2007.
Financial highlights (as at 31 December 2007):
- IFRS Net Asset Value of �64.5 million (103.6p per ordinary share), up 3.0%
since 30 June 2007 (�62.6 million (100.6p))1
- Adjusted Net Asset Value of �74.3 million (119.2p per ordinary share)2
Operational highlights:
- �34.2 million raised in May 2007, bringing total funds raised to �62.6 million
(net of placing expenses)
- �45.1 million of investment commitments in 13 projects (72% of the Company's
net issue proceeds)
- Significant transaction under negotiation, which, if completed, would result
in the fund being substantially fully invested, failing which expect to be fully
invested by 30 June 2008
- Investment portfolio spread across mixed use (52%), industrial (32%) and
residential (16%) sectors of the market
- Increase in staffing at the management level as Company begins post-planning
development phase on a number of projects
Valuations update
- Independent valuers, CB Richard Ellis, valued eight projects as at 31 December
2007
- CB Richard Ellis valuation attributes a �9.7 million uplift (46%) from the
cost (�20.9 million) of these eight projects
o representing, on a cost basis, less than half of the investments made to date
o the first of these projects was only twelve months old
Outlook
- Long term economic outlook remains favourable given strength of resource
sector and investor interest in Africa. The banking sector in South Africa
remains buoyant and 'fully open for business'.
Commenting on the results, Quentin Spicer, Chairman stated:
'I am pleased to report strong growth in the value of the initial projects in
the property portfolio over a very short period of time. This is extremely
encouraging for the rest of the investments made to date. This growth far
outstrips general returns in the local and global property sectors and in
inflation rates. It highlights the quality of the site selection and the impact
that achieving planning permissions has in the Company's development strategy.
Whilst South Africa is not immune to the issues affecting the global economy, in
particular the impact of the high oil price, given the strength of its natural
resources and continued availability of capital from the local banking system,
the economy continues to grow. The shortage of real estate development during
the Apartheid years has created significant opportunities for the Company and we
look forward to further progress this year, particularly as the Company moves
into the development phase on a number of its projects.'
Principle Capital on behalf of SAPRO Anne Dalen +44 20 7240 3222
Landsbanki Securities Paul Fincham +44 20 7426 9000
Bell Pottinger Dan de Belder +44 20 7861 3232
Notes:
1 Excludes the open market CB Richard Ellis revaluations
2 IFRS Net Asset Value adjusted for the increases in valuation attributed by CB
Richard Ellis, in accordance with guidelines produced by the European Public
Real Estate Association (EPRA)
Note to Editors:
- South African Property Opportunities plc (SAPRO) is a
company investing in the South African property market. Its shares were
admitted to AIM in October 2006 raising an initial �30 million (before placing
expenses). In May 2007 a further �34.2 million (before placing expenses) was
raised from new and existing investors.
- SAPRO was established to invest in the South African
property market with a view to generating attractive returns, principally
through capital growth. It is targeting opportunities arising from the
increasing wealth that has been generated from greater urbanisation and economic
growth in South Africa coupled with the rapid emergence of a cross cultural
middle class. SAPRO is currently focused on investments in brownfield and
greenfield development opportunities.
- The Investment Manager is Proteus Property Partners
Limited and the Investment Adviser is Proteus Property Advisors (Pty) Limited.
The Investment Manager and Investment Adviser are responsible for identifying
new investment opportunities.
- The Investment Manager and Investment Adviser are 60%
owned subsidiaries of Principle Capital Holdings S.A. (AIM: PCX.L).
Chairman's Statement
Introduction
I am very pleased to report the Company's interim results for the six month
period ended 31 December 2007.
SAPRO has raised funds of �62.6 million (net of placing expenses) in two
tranches, one in October 2006 and the second in May 2007. The focus of the
Company has been in committing these funds to a broad range of projects as well
as advancing the earlier projects. The key highlight in this period has been the
very significant uplift in value of SAPRO's first eight projects. In addition,
the Company looks set to beat the 18 month target for investing the proceeds of
the second tranche of the funds raised, as set out in the May 2007 placing
document.
Investments and Valuations
The total portfolio investment currently consists of 13 developments split as to
mixed use (52%), industrial (32%) and residential (16%). At 31 December 2007,
total commitments stood at �45.1 million, which represents 72% of the Company's
net issue proceeds. Of these 13 projects, the Company had taken transfer of
title on seven at the period end and thereafter secured transfer of one more.
The Investment Manager expects title to have been taken on at least 12 of the 13
projects by the Company's financial year end (30 June 2008) and that title on
the other project will follow shortly thereafter.
The net asset value of the Company calculated in accordance with IFRS stood at
�64.5 million at the period end (up from �62.6 million at 30 June 2007).
International Accounting Standards do not permit the recognition of increases in
land values of certain types of property that are held for development and
accordingly the seven projects on which title transfer had been taken at the
period end are only valued on a cost basis in that net asset value calculation.
However, independent valuers CB Richard Ellis conducted a land valuation of
these seven projects and a further project (Waltloo Industrial Park on which
title transfer is expected to be taken in April 2008), for which the Company's
share of the projects equated to �30.6 million, a �9.7 million (46%) uplift in
value over their �20.9 million base cost. The most significant revaluations were
the Industrial Park developments at Imbonini (Phase 1) and Clayville which
showed 93% and 180% uplifts in value respectively and African Renaissance, the
residential development East of Pretoria which showed a 129% uplift.
It is also particularly gratifying that these significant uplifts have been
achieved on projects with a cost base of �20.9 million, representing less than
half of the commitments made by the Company on projects to date and one third of
the net issue proceeds from the Company's fund raisings in October 2006 and May
2007.
In order to demonstrate the potential uplift to shareholders in the net asset
value arising from these revaluations, the Board has decided to publish an
adjusted net asset value in accordance with guidelines produced by the European
Public Real Estate Association (EPRA). The EPRA net asset value at the period
end was �74.2 million (119.2 pence per ordinary share) and the EPRA triple net
net asset value (which includes a simple assumption on tax rate) was �71.5
million (114.8 pence per ordinary share).
These valuations are clearly encouraging for the remainder of the investments in
the portfolio and highlight the value created by good site selection and, in
particular, the obtaining of planning permissions, and in the installation of
services at certain projects. Since the Company expects title to have been
transferred on at least 12 of the 13 projects in the portfolio by the Company's
financial year end (30 June 2008) and that title on the other project will
follow shortly thereafter, the Company intends that the whole of the current
portfolio will be revalued by the independent valuers as at that date.
Financial Results
At the end of the period under review, the Company's net asset value in
accordance with IFRS was �64.5 million which equates to 103.6 pence per ordinary
share, the EPRA net asset value was �74.2 million (119.2 pence per ordinary
share) and the EPRA triple net net asset value was �71.5 million (114.8 pence
per ordinary share). At the period end, the Company held �38.7 million in cash
and cash equivalents, split approximately evenly between Rands and Sterling. To
finance the investment portfolio, a total of R685 million has been purchased at
an average Rand/� exchange rate of 14.2347, equating to �48.4 million. At the
period end the exchange rate was 13.6909 or 3.6% stronger than at 30 June 2007
(14.1798). Deposit interest earned averaged approximately 5.6 per cent per annum
on Sterling balances and 9.8 per cent per annum on Rand balances, generating
�1.36 million of finance income. After management, administration fees, other
expenses and revaluing the Rand from the year end rate, the net profit for the
period was �1,863,000.
At the period end the Imbonini Services Park (Phase 1) project had borrowings of
�1.3 million and since the year end the Gosforth Business Estate project had
taken out a facility of �4.6 million, in both cases to finance the commencement
of building works. The Company will be gearing up its investments as required
permissions on various other developments come through to facilitate the Company
commencing building work. In line with the Company's focus on achieving capital
returns and in line with its dividend policy, the Board is not proposing an
interim dividend.
Outlook
The report of the Investment Manager goes into greater detail on the macro
economic picture in South Africa. However, given the crises affecting the global
economy, it is appropriate for me also to comment. South Africa as a country is
a major success story, particularly in light of the severe difficulties that
more mature and sophisticated economies are experiencing. It is the economic hub
of sub-Saharan Africa, a region that is predicted to grow, according to the
International Monetary Fund, at 8.2% in 2008 (excluding South Africa and
Nigeria, its two most developed economies). It is home to the only major stock
exchange in Africa and has a first world banking system servicing the region
that has been almost unaffected by the issues facing the developed world. South
Africa is an emerging market and suffers from volatility in its currency as well
as experiencing the pains of growth, such as the power shortages that
shareholders will be aware of. But that reflects the exciting environment from
which I expect the Company and its management team to benefit in the coming
years.
South Africa has had massive underinvestment in its infrastructure in the past
and, on the back of the strong growth in its own economy over the last five
years in particular, has created a significant requirement for new property. The
Company is seeking to take advantage of these conditions and has succeeded to
date in doing so.
Quentin Spicer
Chairman
27 March 2008
Report of the Investment Manager
SAPRO is, in our opinion, the first listed overseas property company focusing
solely on opportunities in the South African real estate market. The Company's
investment policy is to achieve primarily capital growth from an opportunistic
portfolio of real estate assets across the commercial, industrial and
residential sectors in South Africa.
The Company's strategy is to target opportunities that will benefit from active
management and from the drivers behind South Africa's strong economic growth,
particularly meeting the demands of increased urbanisation and associated
infrastructure requirement as well as the spending power of the country's
rapidly emerging cross cultural middle class.
Portfolio overview
At 31 December 2007, the Company had committed �45.1 million to 13 projects,
which have in aggregate an expected development cost of �514.7 million. The
current portfolio is spread across mixed use (52%), industrial (32%) and
residential (16%) developments. We believe that this provides the Company with
diversification benefits across the various real estate asset classes, and we
have focused the investments on the areas of the market where we see appropriate
levels of demand arising in line with the development timetable. However, we
shall also consider making shorter-term profits by selling off opportunities
where they have exceeded expectations and appropriate opportunities present
themselves.
The bulk of the investments have been made in Gauteng, South Africa's main
economic and political centre, with four developments in KwaZulu Natal which
continues to experience strong growth and where attractive development
opportunities lie. The following table sets out the constituents of the current
portfolio:
Project Name and Sector Sector Interest SAPRO Total Project Projected Exit
Investment Expected Year
Commitment Development Cost
(� million) (� million)
Imbonini Services Park (Phase 1) Industrial 50% 1.5 4.3 2008
Clayville Industrial Park Industrial 100% 1.1 5.0 2012
Gosforth Business Estate Industrial 75% 6.1 43.7 2014
Hughes Industrial Park Industrial 30% 0.4 4.9 2009
Waltloo Industrial Park Industrial 50% 0.6 5.6 2009
Longmeadow Mixed Use 49% 6.0 148.6 2016
Driefontein Residential Residential 85% 2.8 17.6 2013
Lenasia Mixed Use 100% 7.3 40.5 2016
Announced as at 30th June 2007 25.8 270.1
Imbonini Services Park (Phase 2) Industrial 50% 4.9 11.0 2011
African Renaissance Residential 65% 6.1 187.7 2016
Kindlewood Nature Estate Residential 65% 2.4 14.1 2011
Kyalami Residential Estate Residential 75% 2.0 18.4 2012
Emberton Residential 70% 3.9 13.5 2012
Announced since 30th June 2007 19.3 244.6
Total 45.1 514.7
�1 = R13.6909 (31st December 2007 rate)
Of these 13 transactions, at the period end actual title had only transferred in
seven, Imbonini Services Park (Phase 1), Gosforth Business Estate, Longmeadow,
Clayville Industrial Park, Driefontein Residential, African Renaissance and
Lenasia. It is only these seven which are reflected in the Company's balance
sheet but they are carried at cost in accordance with International Accounting
Standards.
However, we are pleased to report the results of an encouraging land valuation
by independent valuers, CB Richard Ellis, of those seven projects as at 31
December 2007, as well as a valuation of Waltloo Industrial Park (where transfer
of title is expected to occur by April 2008), as follows:
Project Name SAPRO Title SAPRO Share of SAPRO Share of SAPRO SAPRO
Interest Transfer Date Land Cost 31.12.07 Land Share of Share of
(� million) Value Uplift Uplift over
(� million) (� million) Cost
Gosforth Business Estate 75% Mar 07 6.0 8.2 2.2 37%
Imbonini Services Park (Phase 1) * 50% Apr 07 1.4 2.7 1.3 93%
Longmeadow* 49% Jun 07 4.9 6.5 1.5 31%
Clayville Industrial Park 100% Jul 07 0.5 1.4 0.9 180%
Waltloo Industrial Park 50% Expected 0.5 0.8 0.2 40%
Apr 08
Driefontein Residential 85% Jul 07 1.2 1.6 0.5 42%
African Renaissance 65% Aug 07 2.1 4.7 2.7 129%
Lenasia 100% Aug 07 4.4 4.7 0.4 9%
Total 20.9 30.6 9.7 46%
�1 = R13.6909 (31st December 2007 rate)
* Valuations assume townships will be
proclaimed in line with the Investment
Manager's expectations
It is important to note that International Financial Reporting Standards do not
permit the recognition of increases in land values on property that is held for
development and sale and accordingly these increases in value are not reflected
in the Company's balance sheet or income statement. However, we set out below
adjusted net asset values of the Company in accordance with the Best Practice
Policy Recommendations of the European Public Real Estate Association (EPRA). We
also include a comparison with the status at 30 June 2007. This valuation is not
intended to replace the net asset value stated in the Company's balance sheet,
but instead to provide complementary information to assist shareholders in
better understanding the Company's performance.
Net Asset Value (NAV) Summary 2007 Year End 2008 Interim
30.06.07 31.12.07
IFRS NAV (� million) 62.6 64.5
IFRS NAV (pence per share) 100.6 103.6
Fair value adjustment (� million) 5.1 9.7
EPRA NAV (� million) 67.7 74.2
EPRA NAV (pence per share) 108.7 119.2
Deferred tax adjustment (� million)* 1.4 2.7
EPRA Triple Net NAV (� million) 66.3 71.5
Triple Net NAV (pence per share) 106.5 114.8
Shares in issue: 62,292,810
* Assumed corporation tax rate of 28%
The uplift in values set out above has only been generated on less than one half
of the investment commitments made to date and one third of the net issue
proceeds from the Company's fund raisings in October 2006 and May 2007.
Further information on all 13 projects in the portfolio is set out below.
Residential
a) Driefontein Residential Development. This development comprises a 13.2
hectare site, 4 miles south of Johannesburg's main international airport. It is
currently undeveloped but should deliver an estimated 35,000 sqm of gross
developable area (GDA) after rights have been granted. SAPRO intends to develop
a high density residential estate of approximately 500 units targeting the
region's fast growing middle income market. The project is a joint venture in
which the Company will hold an 85% stake and a local property developer will
hold the remaining 15%. Draft Conditions of Establishment have already been
received from the local authorities, and it is expected that the township will
be proclaimed in 2008.
b) African Renaissance Development. This development comprises a 146.6
hectare residential development, with a retail component, in a rapidly growing
area east of Pretoria. Upon completion, the site, of which the majority is
undeveloped vacant land, is expected to yield an estimated 252,920 sqm of GDA
after planning has been obtained. The development is a joint venture with three
individuals, one of whom is a local real estate project manager, one a building
contractor and the other a quantity surveyor, who secured the opportunity and
conceptualised the development plan over the last two years. SAPRO has a 65%
interest in the development vehicle. The joint venture partners have applied for
planning to build approximately 3,200 residential units (apartments and freehold
stands) with a retail and commercial centre on the site. The planning
application process is on track, with retail and commercial planning granted in
the first quarter of 2008. SAPRO expects full planning to be granted in the
second quarter of 2008. The east of Pretoria has recently enjoyed significant
growth, and this is evident in the 129% uplift in the land value post
acquisition. It is expected that building will commence in 2009 and that the
total length of the build-out will be 7 years.
c) Kindlewood Nature Estate. This development comprises two adjoining
pieces of land with a combined area of 5.3 hectares in the Kindlewood Estate,
Umhlanga, north of Durban, KwaZulu Natal. The site, which is currently
undeveloped land, is situated adjacent to the prestigious Mount Edgecombe Golf
Estate and will be developed into a residential conservation estate featuring
natural wetlands aimed at the upper end of the market. The development is a
joint venture with an experienced local residential developer with SAPRO holding
a 65% stake. The land already has medium density residential zoning rights in
place, and the Company expects to take transfer of the site in the second
quarter of 2008 (the seller has experienced delays in servicing the township due
to excessive rain in KwaZulu Natal). Building will commence shortly after title
to the land is taken, with completion expected within two years. Marketing of
the first phase of the development was successfully launched in Durban in
November 2007 and the pre-sales threshold of the lending bank to the project was
reached in March 2008, paving the way for the provision of senior debt. Launch
of the second phase is scheduled for the second half of 2008.
d) Kyalami Residential Estate. This development comprises an 8.9 hectare
site in Kyalami, north of Johannesburg, Gauteng. The site, which is currently
undeveloped land, is located within a growing node close to the well known
Kyalami Racetrack, and it is intended that it will be developed into a
residential complex aimed at middle market buyers. The development is a joint
venture that includes an experienced local residential property developer. SAPRO
will hold up to 75% of the equity pending the results of the planning
application which will determine the maximum density that can be achieved on the
site. The site, title on which was taken in March 2008, is currently zoned as an
agricultural holding, but our planning application has already been submitted
and we expect that it will receive approval by the third quarter of 2008. The
Company anticipates being on site in the first quarter of 2009 and completing
the project within two years.
Mixed Use
a) Longmeadow Development. This development is a significant strategic
investment which comprises a 15.6 hectare, highly prominent, mixed use site
(commercial, residential and retail) in Fourways, Johannesburg. The site, the
majority of which is undeveloped vacant land, together with a number of small
commercial structures, should yield an estimated 132,000m(2) of net lettable
area (NLA) after rights have been granted. It is situated approximately 5 miles
to the north of Johannesburg's Sandton Central Business District in the Fourways
node. The development is a joint venture with three partners comprising a
Johannesburg listed property company and a local contractor (both of whom SAPRO
has joint ventured with in previous transactions) and a trust representing the
vendor of the land (which will remain as a 27.5% shareholder in the joint
venture). SAPRO has a 49.2% interest in the development vehicle. The joint
venture partners plan to apply for rights to build high density residential
apartments, commercial office space, hotels, and a niche retail component on the
site. Major hotel operators are currently being approached with a view to
building a hotel and commercial component in the first phase of the project
where planning rights are expected by the third quarter of 2008. Vacant land in
the Fourways node is scarce which has contributed to the uplift in value (31%)
that SAPRO has enjoyed since entering this joint venture. It is expected that
building will commence on the first phase by the third quarter of 2008 and that
the build-out period for the entire development will be five years.
b) Lenasia Development. This development comprises a 12.95 hectare
prominent mixed use site (commercial and retail) in Lenasia, Johannesburg. The
site, the majority of which is undeveloped vacant land, together with a
commercial structure on part of the site, should yield an estimated 51,600m(2)
of NLA after rights have been granted. It is situated immediately south of
Soweto (which is south west of Johannesburg). The site is opposite a newly
developed regional shopping mall, and is directly alongside a major commuting
route into Johannesburg from Lenasia, providing excellent visibility. SAPRO
plans to apply for rights to build a mixed use retail and commercial
development. Conceptual architects have been retained as a first step in
planning the development, and agreement has been reached with two strategic
partners to joint venture on the development. It is expected that building will
commence in early 2009 and that the build-out period will be three years.
c) Emberton Development. This development comprises a 16.5 hectare
prominent mixed use site in Hillcrest, approximately 15 km west of Durban. The
site, an existing golf driving range, is currently zoned for agricultural use.
It is situated directly adjacent to the main M13 highway and commuter route into
Durban from the west, providing excellent visibility and exposure. SAPRO is in
negotiations with an experienced local contractor who it is proposed would
acquire a minority stake in the development. The development will comprise an
upmarket mixed-use secure estate, with commercial and retail components. It is
estimated the project will require a two year township application process to
allow SAPRO to commence construction in early 2010.
Industrial
a) Imbonini Services Park Phase I. This development is a joint venture with
local developers in which SAPRO has a 50% interest. The joint venture vehicle
has acquired a 36 hectare site located close to the fast growing residential and
leisure node of Ballito, just north of Durban, which is being developed for
light industrial use. The site has been platformed and internal services are
currently being installed. This process should be complete by the first quarter
of 2008, after which buyers will be able to take transfer of their stands. Sales
have been very strong and the park is currently substantially sold out. The lack
of serviced industrial land in Durban and the proposed relocation of the Durban
international airport to a site south of Imbonini have resulted in the very
significant uplift (93%) in the Imbonini investment's value since the investment
was made.
b) Clayville Industrial Park. This development comprises a 49 hectare site
located north west of the Johannesburg international airport. It is intended to
service the site for industrial use and sell stands to owner occupiers. A final
site layout has been submitted to the local authority as part of the township
proclamation process. Service installation is expected to commence in the first
quarter of 2009. Whilst a small investment, the CB Richard Ellis revaluation
attributed an increase in value of 180% over the cost of this investment.
c) Gosforth Business Estate. This is an important strategic property
investment for the Company comprising a 42 hectare prominent industrial site
with an estimated 150,000 m2 of NLA. It is situated to the south east of
Johannesburg's Central Business District adjacent to the main N3 highway running
between Johannesburg and the port at Durban. The development is a joint venture
with two partners, one a local contractor and the other a South African listed
property fund. SAPRO has a 75% interest in the development vehicle. The Company
intends to service the site and build warehouses and distribution facilities for
industrial users. The installation of bulk services to the site has commenced,
and it is expected that the township should be proclaimed by the second quarter
of 2008.
d) Hughes Industrial Park. This development is an existing project in which
Richard Currie and Ed Raubenheimer (directors of Proteus Property Advisors (Pty)
Limited, the South African investment adviser to SAPRO's investment manager)
have an interest alongside a local contractor and a South African listed
property fund. SAPRO is subscribing for a 30% interest in the development
vehicle. The development comprises a sectional title mini unit development
totalling 18,500 m2.
e) Waltloo Industrial Park. This development comprises a 4.4 hectare site
located east of the Pretoria CBD, and is a 50% joint venture with a local
contractor. It is envisaged that sectional title industrial premises catering to
small businesses and freehold warehouse premises will be developed on the site,
which comprises 21,948 m2 of GDA. The joint venture is expected to take transfer
of the site by the second quarter of 2008. Bulk services have been installed and
the township is expected to be proclaimed by the first quarter of 2008.
f) Imbonini Services Park Phase II. This is the second phase of the
Imbonini development and will comprise a 77.5 hectare industrial park directly
north east of and adjoining the Company's current Imbonini Phase I development.
The development is a joint venture with the same two partners who invested in
Phase I. SAPRO will have a 50% interest in the development vehicle. The joint
venture partners are currently applying for planning rights for approximately
430,589 sqm of GDA in order to develop an industrial park on the site. It is
expected that servicing of the site will commence in 2009 and that the total
length of the project will be four years.
Pipeline
At the period end, the Company had committed a total of �45.1 million,
representing 72%. of the �62.6 million net issue proceeds raised by the Company
to date. The Company has agreed the terms of a large specific transaction that
would, if completed, commit remaining proceeds of the funds raised for
investment by the Company. This remains subject to a number of conditions being
satisfied, and we should know whether the transaction will proceed by the end of
April 2008, failing which we remain constantly in the market for interesting
transactions and expect the Company to be fully invested by the end of the
second quarter of 2008. We are also investigating a further pipeline currently
with an investment cost of approximately �75 million and in particular we are
looking at some exciting transactions in the Cape region where we currently have
no investments. However, in the event that the Company is fully invested
(allowing for potential or expected realizations within the portfolio), we will
need to review with the Company how it might fund further transactions.
Economic Outlook(1)
The South African economy is expected to undergo a deceleration in 2008 from its
fast pace of growth over the last four years when it averaged 5.1%, in
particular given the conundrum that many world economies are experiencing with
high commodity and energy costs feeding inflation and keeping interest rates
high. GDP growth is expected to slow to between 3.5% and 4.5%. South Africa is
also currently experiencing electricity shortages, as current demand exceeds the
national power utility's (Eskom) available reserve capacity. This could serve as
a further dampener on expected GDP growth. Inflation is expected to peak at 8.8%
in February 2008, however given high interest rates, it is expected to fall
below its target ceiling (6%) by the middle of 2009. Interest rates are expected
to fall by up to 200 basis points by mid-2009, as South Africa moves past the
expected peak of its interest rate cycle.
Currency
At the time of writing this report, the Rand has weakened significantly,
seemingly on the back of a 'flight to safety' in the global economy. It has also
been impacted by the electricity shortages mentioned below, with a result that
foreign investors switched out of South African mining stocks. However, Eskom
has recently agreed more favourable electricity sharing arrangements with the
mining companies and indeed those companies and the South African economy stand
to benefit from the strength of commodities prices, gold and platinum in
particular. In addition, while the world is going through an unprecedented
crisis, South Africa seems well insulated from the problems, in particular given
the fact that the banking sector is not reliant on the global banking markets.
The Rand ought also to benefit from attractive domestic yields as well as the
strength in its resource sectors, gold in particular and currently appears
significantly undervalued against the US dollar on a purchasing power basis.
Notwithstanding the weakness in the Rand, the current portfolio of investments
has a total development cost (over time) of �518 million, of which �473 million
will be funded by way of borrowings denominated in Rand and only �45 million by
way of equity. This has the effect of limiting the Company's overall currency
risk. In addition, any cash held in Rand deposits earns interest at currently
significantly higher rates than Sterling deposits.
Residential Market(2)
House price growth rate has slowed to 4.4% (based on a five month moving
average), the lowest it has been since November 2000; however this is on the
back of the surge in house prices since 2000, where house prices have risen on
average by 16.6% per annum. The high interest rate environment has impacted
house price affordability. However, the expectation of still solid economic
growth, in particular as a result of significant increased public sector fixed
investment, reiterated in the 2008 budget, should provide a positive outlook for
residential property prices over the medium term, which matches the time lines
for the availability of many of our residential projects. We also continue to
expect good demand for our developments given the lack of quality new housing
available on the market at the price points and in the locations we have
identified.
Industrial Market(3)
Strong demand for industrial space, coupled with high and robustly growing
replacement costs, continue to keep upward pressure on market rentals. Vigorous,
20% plus year-on-year rental growth rates were recorded in all of the big
industrial areas, barring Durban, where market rentals for prime industrial
space were up by 18% on the same quarter a year earlier. Real rentals have been
moving steadily upwards since 2005, implying that the industrial upswing phase
is now entrenched.
Commercial / Retail Market3
The excess office supply from 2000 has now effectively been exhausted, with
vacancies in all of the major decentralised office nodes below the 5% mark. This
bodes well for market rental growth over the next few years. On the retail side,
retail sales have been losing impetus in recent months, in particular given
rising interest rates and the introduction of more prudent borrowing limits in
accordance with the 2007 National Credit Act. This slowdown in consumption, when
combined with the continued increase in shopping centre completions, will
possibly lead to a slowdown in rentals. Accordingly, the retail elements of our
developments are only as part of mixed use developments where we expect the
creation of office and residential units will create a natural feed to the
retail element.
Power issues
South Africa has experienced electricity supply interruptions in the first
quarter of 2008. Further interruptions to the provision of bulk electricity
supply to new developments is expected to be a feature in South Africa over the
short term. There is some uncertainty on some of our developments as to when we
might receive power and we do expect some delays as a result. However, we
believe the Company is well placed to meet its development milestones on most of
its projects. It is also worth noting that power shortages prospectively serve
to increase the value of those projects where we have already secured guaranteed
electricity supply. We certainly don't see power issues being any where near as
significant an issue as those experienced in other developing countries such as
India as South Africa's power supply is much more sophisticated and has been
exceptionally well developed by comparison.
Staffing
Within the Proteus Property group, we have identified an experienced project
manager who will be employed on a full time basis from 1 April 2008. The project
manager will assist in providing development oversight for the Company's
existing investments, and will add further depth to the existing management
team. A second experienced project manager is also being retained on a part-time
basis during 2008, with a view to joining the Proteus Property group full time
from 2009 as more of the Company's investments progress from the town planning
phase. In addition, Ed Raubenheimer, an experienced developer (who previously
acted as a non-executive director within the Proteus Property group) has been
employed on a full time basis to set up operations in Cape Town. We are
confident that this presence will lead to increased deal flow from the Western
Cape region.
Proteus Property Partners Limited
Investment Manager
Consolidated Income Statement
For the period 1 July 2007 to 31 December 2007
For period 1 July 2007 to For period 27 June 2006 to
31 December 2007 31 December 2006
Note �'000 �'000
Turnover - -
Investment Manager's fees 4 (631) (110)
Other administration fees
and expenses 5 (236) (63)
Administrative expenses (867) (173)
Operating loss (867) (173)
Finance income 1,358 308
Foreign exchange gain 1,568 -
Finance costs (24) (2)
Net finance income 2,902 306
Share of loss of equity
accounted investees 8 (25) -
Profit before income tax 2,010 133
Income tax expense 6 (147) -
Profit for the period 1,863 133
Attributable to:
Equity holders of the Company 1,870 133
Minority Interest (7) -
1,863 133
Basic and diluted earnings per
share (pence) for profit
attributable to the equity
holders of the Company during
the period 7 5.23 0.44
All items in the above statement derive from continuing operations. All income
is attributable to the equity holders of South African Property Opportunities
plc, the parent company.
The accompanying Notes form an integral part of these financial statements
Consolidated Balance Sheet
Note As at 31 December 2007 As at 31 December 2006
�'000 �'000
Assets
Non-current assets
Inventories 9 18,206 -
Loans due from joint
venture 8 1,450 -
Investments in equity
accounted investees 8 6,197 72
25,853 72
Current assets
Trade and other receivables 10 606 2,017
Cash and cash equivalents 40,688 27,248
41,294 29,265
Total assets 67,147 29,337
Equity
Capital and reserves
attributable to equity
holders of the Company:
Issued share capital 11 623 300
Share premium 12 61,943 28,759
Foreign currency
translation reserve (8) 133
Retained earnings 1,990 62
Minority interest (21) -
Total equity 64,527 29,254
Current liabilities
Loans from third parties 15 2,030 -
Trade and other payables 14 590 83
Total liabilities 2,620 83
Total equity & liabilities 67,147 29,337
The accompanying Notes form an integral part of these financial statements
Company Balance Sheet
Note As at 31 December 2007 As at 31 December 2006
�'000 �'000
Assets
Non-current assets
Loans and receivables due
from subsidiary 10 26,099 2,079
Investment in subsidiaries 8 8,710 -
34,809 2,079
Current assets
Trade and other receivables 10 36 21
Cash and cash equivalents 31,640 27,248
31,676 27,269
Total assets 66,485 29,348
Equity
Capital and reserves
attributable to equity
holders of the Company:
Issued share capital 11 623 300
Share premium 12 61,943 28,759
Retained earnings 3,514 206
Total equity 66,080 29,265
Current liabilities
Trade and other payables 14 405 83
Total liabilities 405 83
Total equity & liabilities 66,485 29,348
The accompanying Notes form an integral part of these financial statements
Consolidated Statement of Changes in Shareholders' Equity
For the period from 1 July 2007 to 31 December 2007
Attributable to equity holders of the Company
GROUP Share Share Foreign Retained Total Minority Total
capital premium Currency earnings interest
Translation
Reserve
�'000 �'000 �'000 �'000 �'000
Balance at 27 - - - - - - -
June 2006
Shares issued 300 29,700 - - 30,000 - 30,000
in the period
Foreign - - 62 - 62 - 62
exchange
translation
differences
Share issue - (941) - - (941) - (941)
expenses
Profit for the - - - 133 133 - 133
period
Balance at 31 300 28,759 62 133 29,254 - 29,254
December 2006
Balance at 1 623 61,943 (44) 120 62,642 - 62,642
July 2007
Acquisition of - - - - - (14) (14)
subsidiary
Foreign exchange - - 36 - 36 - 36
translation
differences
Profit for the - - - 1,870 1,870 (7) 1,863
period
Balance at 31 623 61,943 (8) 1,990 64,548 (21) 64,527
December 2007
The accompanying Notes form an integral part of these financial statements
Consolidated Cash Flow Statement
For the period from 1 July 2007 to 31 December 2007
Note For period 1 July 2007 to For period 27 June 2006 to
31 December 2007 31 December 2006
�'000 �'000
Operating activities
Profit for the period 1,863 133
Adjustments for:
Investment income (1,358) (308)
Investment expense - 2
Income tax 147 -
Share of loss of equity
accounted investees 25 -
Foreign exchange loss - -
Minority interest 7 -
Operating gain/(loss)
before changes in working
capital 684 (173)
Purchase of inventory (13,597) -
Decrease in trade and other
receivables 208 41
Increase in trade and
other payables 271 83
Cash used in operations (12,434) (49)
Interest paid (355) (2)
Interest received 2,634 308
Cash (outflows)/inflows
from operating activities (10,155) 257
Investing activities
Acquisition of subsidiary,
net of cash received (72)
Acquisition of equity
accounted investees 8 (219) -
Loans to equity accounted
investees 8 (36) (134)
Loans to third parties (784) (1,862)
Cash outflows from
investing activities (1,039) (2,068)
Financing activities
Proceeds from the issue
of ordinary share capital 11 - 30,000
Share issue expenses - (941)
Cash inflows from financing
activities - 29,059
Net (decrease)/increase in
cash and cash equivalents (11,194) 27,248
Cash and cash equivalents
at 1 July 2007 51,797 -
Foreign exchange losses on
cash and cash equivalents (85) -
Cash and cash equivalents
at 31 December 2007 40,688 27,248
The accompanying Notes form an integral part of these financial statements
Notes to the Interim Financial Statements
1 General Information
South African Property Opportunities plc (the "Company") was incorporated and
registered in the Isle of Man under the Isle of Man Companies Acts 1931 to 2004
on 27 June 2006 as a public limited company with registered number 117001C. The
Company's investment objective is to achieve capital growth from a opportunistic
portfolio of real estate assets in South Africa.
The Company's investment activities are managed by Proteus Property Partners
Limited (the "Manager"). The Company's administration is delegated to Galileo
Fund Services Limited (the "Administrator"). The registered office of the
Company is Jubilee Buildings, Victoria Street Douglas, Isle of Man, IM1 2SH.
Pursuant to a prospectus dated 20 October 2006 there was an original placing of
up to 50,000,000 Ordinary Shares. Following the close of the placing on 26
October 2006 30,000,000 Shares were issued.
The Shares of the Company were admitted to trading on the Alternative Investment
Market of the London Stock Exchange ("AIM") on 26 October 2006 when dealings
also commenced.
As a result of a further fund raising in May 2007 32,292,810 Ordinary Shares
were issued, which were admitted to trading on AIM on 22 May 2007.
The Company's agents and the Manager perform all significant functions.
Accordingly, the Company itself has no employees.
Duration
In accordance with the Company's Articles of Association, Shareholders will be
given the opportunity to vote on the life of the Company after approximately 7
years.
At the annual general meeting of the Company to be held in 2013, the Directors
are obligated to propose an ordinary resolution that the Company continues in
existence. If the resolution is passed then it shall be proposed at every third
annual general meeting thereafter. If the resolution is not passed then the
Directors shall, within 3 months after the date of the resolution, put forward
proposals to shareholders to the effect that the Company be wound up,
liquidated, reorganised or unitised.
Financial Year End
The financial year end of the Company is 30 June in each year. The first
accounting period of the Company is for the period ended 30 June 2007.
Company Profit
In accordance with the provisions of Section 3 of the Isle of Man Companies Act
1982, no separate income statement has been presented for the Company. The
amount of the Company's profit for the period recognised in the Consolidated
Income Statement is �3,008,595.
2 Summary of Significant Accounting Policies
The principal accounting policies applied in the preparation of these financial
statements are set out below.
2.1 Basis of preparation
These consolidated interim financial statements have been prepared in accordance
with International Financial Reporting Standards ("IFRS") IAS34 Interim
Financial Reporting. They do not include all of the financial information
required for full annual financial statements. The financial statements have
been prepared under the historical cost convention.
There are no critical estimates or assumptions.
Notes to the Interim Financial Statements (continued)
2.1 Basis of preparation (continued)
In the current period the Group has adopted IFRS7 Financial Instruments
Disclosures and IAS 1 Amendment Presentation of Financial Statements that
introduced new disclosures relating to financial instruments but had not changed
the classification or valuation of the Company's financial statements.
2.2 Foreign currency translation
South African Rand is the currency of the primary economic environment in which
the Group's direct and indirect subsidiaries operate ("The functional
currency").
Pound Sterling is the currency of the primary economic environment in which the
Group's direct and indirect subsidiaries operate ("The functional currency").
Monetary assets and liabilities denominated in foreign currencies as at the date
of these financial statements are translated to South African Rand at exchange
rates prevailing on that date (31 December 2007: ZAR:GBP 13.6909). Expenses are
translated into South African Rand based on the average exchange rates
prevailing during the year. All resulting exchange differences are recognised in
the income statement.
The accounts are presented in Pounds Sterling by translating the assets and
liabilities at the exchange rate prevailing on the balance sheet date. Items of
revenue and expense are translated at the average exchange rates prevailing
during the year. Components of equity are translated at the date of the relevant
transaction and not retranslated and all resulting exchange differences are
recognised in equity.
2.3 Revenue and expense recognition
Deposit interest income is recognised in the financial statements on a
time-proportionate basis using the effective interest method.
Interest expense for borrowings is recognised in the financial statements using
the effective interest method.
The effective interest method is a method of calculating the amortised cost of a
financial assets or financial liability and of allocating the interest income or
interest expense over the period.
Expenses are accounted for on an accruals basis.
2.4 Basis of consolidation
Subsidiaries
Subsidiaries are those enterprises controlled by the Company. Control exists
where the Company has the power, directly or indirectly, to govern the financial
and operating policies of an enterprise so as to obtain benefits from its
activities. The financial statements of the subsidiaries are included in the
consolidated financial statements from the date that control effectively
commences until the date that control effectively ceases.
Transactions and minority interest
The Group applies a policy of treating transactions with minority interest at
transactions with parties external to the group.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised gains arising from
intra-group transactions, are eliminated in preparing the consolidated financial
statements.
Notes to the Interim Financial Statements (continued)
2.4 Basis of consolidation (continued)
Associates and joint ventures (equity accounted investees)
Associates are those entities in which the Company has a significant influence,
but no control, over the financial and operating policies. Joint ventures are
those entities over whose activities the Group has joint control, established by
contractual agreement and requiring unanimous consent for strategic financial
and operating decisions. Associates and joint ventures are accounted for using
the equity method (equity accounted investees). The consolidated financial
statements include the Group's shares of the income and expenses of the equity
accounts investees, after adjustments to align the accounting policies with
those of the Group, from the date that significant influence or joint control
commences until the date that significant influence or joint control ceases.
When the Group's share of losses exceeds its interest in an equity accounted
investee, the carrying amount of that interest (including any long-term
investment) is reduced to nil and the recognition of further losses is
discontinued except to the extent that the Group has an obligation or has made
payments on behalf of the investee.
Unrealised gains on transactions between the Company and its equity accounted
investees are eliminated to the extent of the Company's interest in the equity
accounted investees. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred.
Accounting policies have been changed where necessary to ensure consistency with
the policies adopted by the Company.
Financial statements of foreign operations
The assets and liabilities of foreign operations, including goodwill and fair
value adjustments arising on consolidation, are translated to South African Rand
at the foreign currency exchange rates ruling at the balance sheet date. Foreign
exchange differences arising on translation are recognised directly in equity.
2.5 Segmental reporting
The Company has one segment focusing on achieving capital growth through
investing in the property market in South Africa. No additional disclosure is
included in relation to segment reporting, as the Company's activities are
limited to one business and geographical segment.
2.6 Inventories
Investment properties that are being developed for future sales are classified
as inventories at their deemed cost, which is the carrying amounts at the date
of classification. They are subsequently carried at the lower of cost and net
realisable value. Net realisable value it the estimated selling price in the
ordinary course of business less selling expenses.
2.7 Loans and receivables
Loans and receivable are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method.
2.8 Trade and other receivables
Trade and other receivables are initially stated at fair value and subsequently
measured at amortised cost using the effective interest method.
2.9 Cash and cash equivalents
Cash and cash equivalents comprise cash deposited with banks.
Notes to the Interim Financial Statements (continued)
2.10 Trade and other payables
Trade and other payables are recognised initially at fair value and subsequently
at amortised cost using the effective interest method.
2.11 Taxation
The Company is resident for taxation purposes in the Isle of Man and is subject
to income tax at a rate of zero per cent. A corporate charge is payable, which
amounted to �250 for the 2006/2007 tax year.
The Group is liable to tax in South Africa on the activities of its
subsidiaries.
The tax expense represents the sum of the tax currently payable, which is based
on taxable profits for the period. The Group's liability is calculated using tax
rates applicable at the balance sheet date.
2.12 Share capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares are shown in equity as a deduction, net
of tax, from the proceeds.
2.13 Dividends
Dividends are recognised as a liability in the period in which they are declared
and approved. There was no dividend declared as at 31 December 2007 (2006: Nil).
3 Preliminary (Formation) Expenses
The estimated total costs and expenses payable by the Company in connection with
the Placing and Admission (including professional fees, the costs of printing
and the other fees payable including commission payable to the Placing Agent)
was estimated as equal to 3% of the gross amount raised based on the Placing
being fully subscribed. The actual total amount of preliminary expenses paid was
�941,262 representing 3.14% of the gross amount raised.
The total costs and expenses payable by the Company in connection with the
secondary Placing (including professional fees, the costs of printing and the
other fees payable including commission payable to the Placing Agent) was
�723,075 representing 2.11% of the gross amount raised.
In accordance with the terms of the initial Placing and the secondary Placing,
the Placing Agent was to receive from the Company commission equal to 2% of the
aggregate value of the amount raised by the Placing. In addition, for the
initial Placing the Placing Agent was to receive a corporate finance fee of 0.5%
of the aggregate value of the Placing.
The total placing admission costs payable by the Company during the period ended
31 December 2007 amounted to �nil (June 2007: �941,262), which has been charged
to equity as a share issue expense.
4 Investment Manager fees
Annual fees
The Investment Manager receives a management fee of 2% per annum of the net
asset value of the Group from Admission, payable quarterly in advance.
The Manager is also entitled to recharge to the Group all and any costs and
disbursements reasonably incurred by it in the performance of its duties
including costs of travel save to the extent that such costs are staff costs or
other internal costs of the Investment Manager. Accordingly, the Company is
responsible for paying all the fees and expenses of all valuers, surveyors,
Notes to the Interim Financial Statements (continued)
4 Investment Manager fees (continued)
legal advisers and other external advisers to the Company in connection with any
investments made on its behalf. All amounts payable to the Investment Manager by
the Company are paid together with any value added tax, if applicable.
Annual management fees payable for the period ended 31 December 2007 �631,569
(2006: �110,137).
Performance fees
The Investment Manager is entitled to a performance fee which is payable by
reference to the increase in net asset value per Ordinary Share. The Investment
Manager will become entitled to a performance fee in respect of the period from
Admission to 30 June 2009 and any subsequent financial period at the end of
which the net asset value per Ordinary Share is above the performance fee
hurdle. The performance fee test for the period ending 30 June 2009 is 100p per
Ordinary Share increased at a rate of 12 per cent. per annum, on an annual
compounding basis up to the end of the period but adjusted so as to exclude any
dividends paid during the period.
If the performance hurdle is met the performance fee payable will be an amount
equal to 20 per cent. of the amount of the increase in the net asset value per
Ordinary Share, multiplied by the time weighted average of the number of
Ordinary Shares in issue since inception or (if later) the end of the last
financial period by reference to which a performance fee was earned.
Any performance fee will be payable as follows:
a) seventy-five percent of the performance fee will be paid to
the Manager in cash within ten Business Days of the publication of the audited
financial statements for the relevant period end; and
b) twenty-five percent of the performance fee shall be satisfied within ten
Business Days of the publication of the audited financial statements for the
relevant performance period end by the allotment and issue to the Manager of
such number of Ordinary Shares which, when multiplied by the Net Asset Value per
Ordinary Share on the date of issue, results in a value equal to that of twenty
five percent. of the performance fee.
Performance fees payable for the period ended 31 December 2007 amounted to �nil
(2006: �nil).
5 Other Administration Fees and Expenses
Group
�'000
Audit 25
Directors' Remuneration 47
Included within other administration fees and expenses are the following:
Nominated Adviser and Broker fees
As Nominated Adviser and Broker to the Company for the purposes of the AIM
Rules, the Nominated Adviser and Broker receives a Nominated Adviser fee of
�15,000 per annum and a Broker fee of �15,000 per annum, both fees payable
half-yearly in advance.
Custodian fees
The Custodian receives an annual minimum fee of �5,000, payable quarterly in
arrears.
The Custodian expects to review and, subject to written agreement between the
Company and the Custodian, may amend the foregoing fees six months after
Admission and annually thereafter.
Notes to the Interim Financial Statements (continued)
5 Other Administration Fees and Expenses (continued)
Administrator and Registrar fees
The Administrator receives a fee of 10 basis points of the net assets of the
Company between �0 and �50 million; 8.5 basis points per annum of the net assets
of the Company between �50 and �100 million and 7 basis points per annum of the
net assets of the Company in excess of �100 million, subject to a minimum
monthly fee of �3,750 and a maximum monthly fee of �10,000 payable quarterly in
arrears.
The Administrator assists in the preparation of the financial statements of the
Company for which it receives a fee of �1,750 per set.
The Administrator provides general secretarial services to the Company for which
it receives a minimum annual fee of �5,000. Additional fees based on time and
charges will apply where the number of Board meetings exceeds four per annum.
For attendance at meetings not held in the Isle of Man, an attendance fee of
�350 per day or part thereof will be charged.
The Administrator may utilise the services of a CREST accredited registrar for
the purposes of settling share transactions through CREST. The cost of this
service will be borne by the Company. It is anticipated that the cost will be in
the region of �6,000 per annum subject to the number of CREST settled
transactions undertaken.
The Administrator expects to review and, subject to written agreement between
the Company and the Administrator, may amend the foregoing fees six months after
Admission and annually thereafter.
Offshore Registrar fees
The Offshore Registrar receives an annual registration fee from the Company of
�2 per shareholder account, subject to an annual minimum charge of �5,500.
Sponsor fees
The Sponsor receives a fee for the listing of the shares on the Channel Islands
Stock Exchange. The Sponsor is paid a fee of �6,000 for the initial listing,
charged to equity as a share issue expense, and an annual fee of �1,750 and a
fee determined by reference to the number of hours spent on the work undertaken
by the Sponsor by reference to its standard hourly charging rate.
Strategic Adviser fees
The Strategic Adviser receives a fee for its services of �40,000 per annum,
payable quarterly in advance. The Strategic Advisor agreement was signed on 20
October 2006.
Directors' Remuneration
The maximum amount of remuneration payable to the Directors permitted under the
Articles of Association is �200,000 p.a. The Directors are each entitled to
receive reimbursement of any expenses incurred in relation to their appointment.
Notes to the Interim Financial Statements (continued)
6 Income Tax Expense
Group Group
2007 2006
�'000 �'000
Current tax 147 -
147 -
The tax on the Group's profit before tax differs from the theoretical amount
that would arise using the weighted average tax rate of the applicable profits
of the consolidated companies as follows:
Group Group
2007 2006
�'000 �'000
Profit before tax 1,780 133
Tax calculated at domestic tax rates applicable in the Isle of Man (0%) - -
Effect of higher rate in South Africa (29%) 147 -
Tax charge 147 -
7 Basic and Diluted Earnings per Share
Basic and diluted earnings per share are calculated by dividing the profit
attributable to equity holders of the Company by the weighted average number of
ordinary shares in issue during the period.
31 December 2007 31 December 2006
Profit attributable to equity holders of the
Company (�'000) 1,870 133
Weighted average number of ordinary shares
in issue (thousands) 35,729 30,000
Basic and diluted profit per share (pence
per share) 5.23 0.44
8 Subsidiaries, Associates and Joint Ventures
8.1 Subsidiaries
During the period and for efficient portfolio management purposes, the Company
established the following subsidiary company:-
Country of Percentage of
incorporation shares held
SAPSPV Holdings RSA (Pty) Limited South Africa 100%
SAPSPV Holdings RSA (Pty) Limited is a direct subsidiary of South African
Property Opportunities plc. The cost of this investment to the Company is
�1,807,000. SAPSV Holdings RSA (Pty) Limited was incorporated on 20 October 2006
and the �1,807,000 represents ZAR 101 of share capital and ZAR 24,999,899 of
share premium.
Notes to the Interim Financial Statements (continued)
8 Subsidiaries, Associates and Joint Ventures (continued)
During the period, the Company has increased its investment in the direct
subsidiary, see table below for details:
Date Share Capital Share Premium
� ZAR ZAR
30 August 2007 352,614 1 4,999,999
15 October 2007 1,339,934 1 18,999,999
29 October 2007 1,428,088 1 20,249,999
18 December 2007 3,526,143 1 49,999,999
Since inception, SAPSPV Holdings RSA (Pty) Limited established the following
companies:-
Country of Percentage of
incorporation shares held
SAPSPV Clayville Property Investments (Pty) South Africa 100%
Limited
SAPSPV Imbonini Property Investments (Pty) South Africa 100%
Limited
Madison Park Properties 33 (Pty) Limited South Africa 100%
Madison Park Properties 34 (Pty) Limtied South Africa 100%
Madison Park Properties 36 (Pty) Limited South Africa 100%
Madison Park Properties 40 (Pty) Limited South Africa 100%
Royal Albatross Properties 313 (Pty) Limited South Africa 100%
Crimson King Properties 378 (Pty) Limited South Africa 100%
Breeze Court Investments 31 (Pty) Limited South Africa 100%
Breeze Court Investments 35 (Pty) Limited South Africa 100%
Business Ventures Investments 1172 (Pty) Limited South Africa 100%
Business Ventures Investments 1180 (Pty) Limited South Africa 100%
Business Ventures Investments 1189 (Pty) Limited South Africa 100%
Wonderwall Investments 18 (Pty) Limited South Africa 100%
8 Mile Investments 504 (Pty) Limited South Africa 100%
Dream World Investments 551 (Pty) Limited South Africa 100%
Business Ventures Investments 1238 (Pty) Limited South Africa 100%
Business Ventures Investments 1205 (Pty) Limited South Africa 100%
Business Ventures Investments 1152 (Pty) Limited South Africa 100%
Business Ventures Investments 1191 (Pty) Limited South Africa 100%
Business Ventures Investments 1270 (Pty) Limited South Africa 100%
Business Ventures Investments 1268 (Pty) Limited South Africa 100%
Business Ventures Investments 1239 (Pty) Limited South Africa 100%
Business Ventures Investments 1269 (Pty) Limited South Africa 100%
Breeze Court Investments 34 (Pty) Limited South Africa 100%
Business Ventures Investments 1237 (Pty) Limited South Africa 100%
Business Ventures Investments 1187 (Pty) LImited South Africa 100%
Cranes Crest Investments 28 (Pty) Limited South Africa 100%
Living 4 U Development (PTY) Ltd South Africa 65%
Notes to the Interim Financial Statements (continued)
8 Subsidiaries, Associates and Joint Ventures (continued)
8.2 Associates and Joint Ventures
31 December 2007 31 December 2006
�'000 �'000
Start of the period 5,794 -
Acquisition of equity accounted investees 220 72
Foreign exchange gain 208 -
Share of loss of equity accounted investees (25) -
End of the period 6,197 72
In September 2007 the Group acquired 50% of the ordinary share capital of
Imbonini Park (Phase 2) (Pty) Limited, a property holding company incorporated
in South Africa, for �220,000 (ZAR 3,000,000). There was goodwill of �220,000
(ZAR 2,999,000) as a result of this transaction.
Loan due from Joint Venture
The Group lent a total of �1,450,000 (ZAR (19,850,000) to its joint venture,
Imbonini Park (Pty) Limited. Of this, �1,388,000 (ZAR 19,000,000) is interest
bearing at 15% per annum and the remaining �62,000 (ZAR 850,000) is non-interest
bearing. Unless agreed to otherwise by the Group the loan will be repayable
within 2 years.
The fair value of this loan approximates its carrying value at 31 December 2007.
9 Inventories
Group
At 31 December 2007 At 31 December 2006
�'000 �'000
At start of period 4,231 -
Cost of land acquired 14,795 -
Foreign exchange loss (820) -
At end of period 18,206 -
During the period, the Group acquired land for �14,795,000 (ZAR 210,792,852),
which was acquired in order to develop it for future re-sale, and accordingly it
was classified as inventory.
10 Subsidiary Loans and Trade and Other Receivables
Group
31 December 2007 31 December 2006
�'000 �'000
Notary accounts - 1,862
Loans to third parties 146 -
Interest on loan to associate (see note 8.2) 167 134
Prepayments 10 -
VAT receivable 192 -
Other receivables 91 21
Trade and other receivables 606 2,017
Notes to the Interim Financial Statements (continued)
10 Subsidiary Loans and Trade and Other Receivables (continued)
Company
31 December 2007 31 December 2006
�'000 �'000
Loan due from SAPSPV Holdings RSA (Pty) 26,099 2,079
Limited
Prepayments 10 -
Other receivables 26 21
Trade and other receivables 36 21
�5,289,000 of the loan from the Company to SAPSPV Holdings RSA (Pty) Limited,
which represents ZAR 75,000,000, bears interest at JiBar from the date of
advance to the date of repayment, and the interest is compounded monthly in
arrears on the last working day of each month.
This loan is repayable as and when the directors of SAPSPV Holdings RSA (Pty)
Limited resolve that repayment shall be effected, providing there are sufficient
cash resources available to do so.
The remaining �13,093,000 (ZAR 185,653,346) of the loan from the Company to
SAPSPV Holdings RSA (Pty) Limited bears interest at the Repurchase Rate as
published by the Reserve Bank of South Africa from the date of the advance to
the date of repayment, which interest shall be compounded monthly in arrears on
the last working day of each month.
This loan is repayable as and when the directors of SAPSPV Holdings RSA (Pty)
Limited resolve that repayment shall be effected, provided there are sufficient
cash reserves available to do so and that prior approval has been obtained from
the Exchange Control Division of the South African Reserve Bank but in no case
later than 30 June 2013.
11 Share Capital
Ordinary Shares of 1p each Number �'000
Authorised 150,000,000 1,500
Issued 62,292,810 623
At incorporation the authorised share capital of the Company was �2,000 divided
into 200,000 ordinary shares of 1p each.
Pursuant to an ordinary resolution on 19 October 2006 the authorised share
capital was increased from �2,000 to �500,000 giving in total 50,000,000
ordinary shares of 1p each.
Pursuant to an ordinary resolution on 18 May 2007 the authorised share capital
was increased from �500,000 to �1,500,000 giving in total 150,000,000 ordinary
shares of 1p each.
The holders or ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at meetings of the
Company.
On 26 October 2006, the Company raised a gross amount of �30,000,000 following
the admission of the Company's ordinary shares to the Alternative Investment
Market ("AIM"). The Company placed 30,000,000 ordinary shares of �0.01 par
value, at an issue price of �1.00 per share.
Notes to the Interim Financial Statements (continued)
11 Share Capital (continued)
On 1 May 2007, the Company placed an additional 50,000,000 ordinary shares of
�0.01 par value at a price of �1.06 per share, of which 32,292,810 ordinary
shares have been issued at a price of �1.06 per share.
Related transaction costs have been deducted from the proceeds.
12 Share Premium
31 December 2007 31 December 2006
�'000 �'000
Share premium arising on issue of ordinary shares 63,607 29,700
Transaction costs on issue of ordinary shares (1,664) (941)
As at 31 December 2007 61,943 28,759
The Company's share premium has arisen on the issue of the Company's ordinary
shares and represents the difference between the issue prices of �1.00 and �1.06
and the par value of �0.01 per share.
13 Net Asset Value per Share
Group
As at 31 December 2007 As at 31 December 2006
Net assets attributable to
equity holders of the Company (�'000) 64,527 29,254
Shares in issue 62,292,810 30,000,000
NAV per share �1.04 �0.97
The NAV per share is calculated by dividing the net assets attributable to
equity holders of the Company by the number of ordinary shares in issue.
14 Trade and Other Payables
Group
31 December 2007 31 December 2006
�'000 �'000
Management fees 77 -
Income tax 147 -
Other payables 366 83
590 83
Notes to the Interim Financial Statements (continued)
14 Trade and Other Payables (continued)
Company
31 December 2007 31 December 2006
�'000 �'000
Management fees 77 -
Other payables 328 83
405 83
15 Loans from Third Parties
Loans from third parties consist of �1,240,000 (ZAR 16,976,000) from Abbeydale
Building & Civils (Pty) Ltd and �790,000 (ZAR 10,817,000) from Sable Holdings
Limited which relate to the intended future sale of 25% of Crimson King
Properties 378 (Pty) Limited to these two companies. Both of these loans are
unsecured and interest free.
16 Contingent Liabilities and Commitments
Commitments:
The company has committed a total of �45.1 million to the thirteen projects in
the portfolio as at the date of publication of the Interim Report. This figure
is unchanged from the figure as at the balance sheet date.
Contingent Liabilities:
Contingent liabilities existed at the balance sheet date in respect of the
following transaction.
Waltloo Industrial Park: �0.6 million in favour of the seller.
17 Related Party Transactions
Brian Myerson is a director of the Company and the Investment Manager. He
received no direct remuneration for these appointments. He is also the Chief
Executive Officer of Principle Capital Holdings S.A., the ultimate parent
company of the majority shareholder in the Investment Manager.
Richard Currie is a director of the Investment Advisor and a shareholder in
Currie Group, a firm of property agents that has been retained by the Company to
provide lead marketing agent services on Gosforth Business Estate and Clayville
Industrial Park at the rate of �15,200 per annum.
Brian Padgett is a director of the Company's South African subsidiaries and the
Investment Manager. He received no direct remuneration for these appointments.
He is also a director of Principle Capital Holdings S.A., the parent company of
the majority shareholder in the Investment Manager and a Director of Silex
Management Ltd, a firm that was acquired by Principle Capital Holdings S.A.
group in the fourth quarter of 2007 and continues to be retained by the Company
to administer the Company's South African Subsidiaries.
James Peggie is a director of the Company's South African Subsidiaries for which
he received no direct remuneration. He is also a shareholder in Principle
Capital Holdings S.A., the parent company of the majority shareholder in the
Investment Manager.
18 Post Balance Sheet Events
Conditions of establishment were received from the local municipality in respect
of the proposed business retail centre and office park that will form part of
the African Renaissance development.
On Gosforth Business Estate, the Company issued a mortgage bond in favour of a
major South African bank securing a borrowing facility of up to �4.6m to finance
the continuing development of the site.
The Kyalami Residential Estate transferred into the name of the Company on the
3rd March 2008 and the deposit of �1.8 million was released in favour of the
seller.
Further to the initial holding deposit that was paid to secure the Kindlewood
Nature Estate transaction in August 2007, the balance was paid in February 2008
raising the total on deposit to �2.2 million
--------------------------
(1) Standard Bank, 8 February 2008; Barnard Jacobs Mellet, 22 January 2008
(2) Standard Bank; Residential Property Gauge; 1 February 2008
(3) Ervin Rode; Rode's Report on the South African Property Market; 2007:4
This information is provided by RNS
The company news service from the London Stock Exchange
END
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