TIDMSAPO
RNS Number : 8292I
South African Property Opps PLC
30 March 2015
30 March 2015
SOUTH AFRICAN PROPERTY OPPORTUNITIES PLC
('SAPRO' or the 'Group')
Interim results for the six months ended 31 December 2014
South African Property Opportunities plc (AIM: SAPO), an
investment company established to invest in real estate
opportunities in South Africa, announces its unaudited interim
results for the six months ended 31 December 2014.
For further information please contact
Paul Fincham +44 (0) 20 7886 2713
Robert Naylor +44 (0) 20 7886 2714
Panmure Gordon
Ian Dungate/Suzanne Jones + 44 (0) 1624 692600
Galileo Fund Services Limited
A copy of the results announcement will be available on the
Company's website at www.saprofund.com
Chairman's Statement
On behalf of the Board, I am pleased to present the interim
results for South African Property Opportunities plc ("SAPRO" or
"the Company") for the six months ended 31 December 2014.
Performance
As at 31 December 2014 the unaudited EPRA net asset value per
share "NAV" (taking into account property revaluations, estimated
sales and distribution costs) was 30 pence compared with 36 pence
at 30 June 2014. The fall in NAV primarily relates to the capital
payment of 5 pence per share made in October 2014, and the loss on
sale of subsidiary of GBP605,654 (excluding GBP575,885 cumulative
foreign exchange gains reclassified from equity to profit and loss)
or 1 pence per share. Between 30 June 2014 and 31 December 2014 the
exchange rate moved from 18.19 ZAR/GBP to 18.03. The Company does
not hedge its South African Rand exposure. The Company has no bank
debt.
Management
New management arrangements were implemented with effect from 1
July 2014, with Bridgehead Real Estate (Pty) Ltd replacing Group
Five. The new arrangements represented a cost saving in terms of
fixed fees and were regarded by the Board as advantageous to the
Company.
South African Economy and Property Market
The Investment Manager reports on the South African economy in
detail on pages 3 to 6. In summary, circumstances remain
challenging with no meaningful change forecast.
Valuations
The portfolio was not revalued externally at 31 December 2014,
and the figures adopted in the accounts are the CBRE numbers from
June 2014, with minor amendments to reflect specific transactions
agreed where relevant.
Sales
A number of sales in the period were reported as post balance
sheet events in the 30 June 2014 accounts, including the final
tranche of Gosforth Park and the remaining assets at Kindlewood,
with full settlement of both received in the period.
Post 31 December 2014 the sale of the Emberton asset was
concluded, with the first payment tranche of ZAR9m received in
February 2015. Further contracted payments are due in 2015 for
Emberton and for Acacia Park.
Asset Management
The key efforts of the manager are focused on achieving sales,
and on improving the liquidity of the remaining assets. South
Africa remains a difficult environment in which to do business, and
both infrastructure (mainly supply of power) and planning
improvements are difficult to achieve in a reasonable timescale. In
addition, legal disputes are not unusual, and the Company has
experienced a land ownership claim which, inter alia, covers the
African Renaissance site. The Manager is confident that this is
spurious, but it is compromising on-going sale discussions on this
asset.
Outlook
The Company's remaining assets all have a degree of illiquidity
and the Board and Manager continue to take a proactive approach to
their realisation including endeavouring to monetize the Company's
remaining assets with due regard for market conditions and the
Company's running costs.
David Hunter
Chairman
27 March 2015
Report of the Investment Manager
Introduction
The interim report provides an update on the status of asset
sales and planning permissions. Sales continue to be achieved
against a backdrop of difficulties pertaining to property planning
permissions, subdued economic conditions as well as national and
local specific risks (Eskom power supply, political and
bureaucratic inefficiencies at local and national government). The
low business confidence together with the high holding costs,
planning and development risks associated with land assets make
disposals challenging in the current economic environment.
Expectations around any changes to the political and economic
headwinds in South Africa do not indicate a likely turnaround
anytime soon. The volatility of the SA Rand will continue to remain
a threat to the distributable value of realisations going
forward.
Key SA Economic Indicators
Key Statistics (q/q) *Q1 Q4 2014
2015
------------------------ ------------------ ------------------
Consumer Price Index
(Headline Inflation) 4.40% 5.30%
Gross Domestic Product
growth 4.10% 4.10%
Producer Price Index 3.50% 5.80%
Retail Sales -0,6% 3.40%
Other Indicators
------------------------ ------------------ ------------------
Unemployment rate 24.90% 25.40%
Prime Interest rate 9.25% 9.25%
ZAR:GBP (avg) 17.74 17.86
*Forecast statistics
SOURCE - Stats SA.
SARB
------------------------ ------------------ ------------------
South African Property Market
2014 saw the listed property sector raise in excess of ZAR40bn
of capital compared to ZAR18bn in 2013 while 2015 seems to have got
off to an active start indicating another strong year for capital
raising in the sector. The listed property market (predominately
REIT funds) out-performed all other asset classes in 2014
delivering a total return of 26.6% but 2015 could be more subdued
considering the local economic challenges facing the industry.
2015 is expected to produce similar trends in regard to direct
commercial, industrial and retail property performance to that
experienced in 2014. The increasing interest from institutional
investors in the residential sector should continue to gain
momentum with new traction from specialist funds aiming to provide
investors with focused offerings. This could prove appealing in a
market that has undergone substantial consolidation over the last
few years leaving fund managers with a limited availability of
quality stock and increasing concerns over portfolio compositions
that have sacrificed quality in the interest of scale.
Operationally landlords will be forced to engage more actively
in property and asset management activities to sweat the most out
of their existing portfolios where tenant retention, lease rates on
renewals, and operating costs will be under the spot light. In
particular the vacancy rates in the office sector will be under
increasing pressure considering the overhang of stock in the
market, the benign economic outlook and new development space,
especially in prime decentralised nodes like Sandton. The rental
margin for the best of landlords will be challenged by lower
escalations expectations (dropping inflation forecasts) together
with high municipal rates and taxes inputs.
Disposal Progress
Sales of the smaller assets in the portfolio (Imbonini 1,
Acacia, Driefontein) with a wider buyer audience achieved more
interest and sales traction than SAPRO's larger land holdings.
Further sales discussions continue. African Renaissance, along with
other neighbouring land owners, has just become the subject of a
blanket land claim in the area. The merits of the claim are
doubtful and regarded by Counsel as unfounded. Once particulars of
claim have been provided by the claimants a final risk assessment
can be completed.
The Company adopts various sales methods in order to facilitate
the orderly sell down of properties at fair market prices including
but not limited to; structured and secured payment terms, planning
approval conditions, as well as price discounting where
appropriate.
Portfolio Valuations
The portfolio was not revalued independently at 31 December
2014, and the values adopted are from the Broll (CBRE) assessments
performed as at 30 June 2014. Where applicable values have been
adjusted on certain properties to reflect specific sale
transactions concluded.
BROLL
/ CBRE SALES DURING ADJUSTED SALES POST
VALUATION PERIOD VALUE PERIOD END
------------ ------------- ------------ ------------
30 Jun 01 Jul 14 31 Dec 01 Jan 15 -
Period 14 - 31 Dec 14 14 15 Mar 15
-------- ------------ ------------- ------------ ------------
Total
(ZAR) 368,528,000 44,312,995 325,441,125 10,812,046
-------- ------------ ------------- ------------ ------------
Schedule B: Planning Permission Progress
Brakpan:
Currently the rezoning to "business 2" for 25,000sqm of
commercial rights is in progress. The City Manager is waiting for
final comments from Gauteng Provincial Government Department Public
Roads, Transport and Works. On receipt of comments the final report
will be submitted to the Development Tribunal Committee. Currently
there is a 6 to 8 week waiting period for the item to be put on the
agenda and then the prescribed 14 day notice period for the
hearing. At the hearing a final decision will be provided. If
positive the objectors will have the opportunity to appeal the
decision and the matter is then referred to the Townships Board
where it can take up to 12 months. Once cleared by the Township
Boards any further objections/appeals will need to go through the
High court which could be up to 3 years. It is anticipated that
competitor landlords will object.
Lenasia:
The City council is currently reviewing all professional reports
and recent application submissions and will provide a technical
co-ordination report once all internal departments are satisfied.
The City Manager is expected to provide approval in principle
within 4 months of receipt, around August 2015. The remaining items
to achieve the Section 101 certificate (a Section 101 certificate
confirms that the applicant has fulfilled all required conditions
of establishment and the new township may be registered with the
Deeds Office) will take approximately 4 to 5 months, estimated by
December 2015.
Clayville:
Town planning has recently received a copy of the service level
agreement to be applied for approval of the three extensions of the
Clayville site. This is expected to take until July 2015. Once
approved, the Section 125 Amended Scheme (the Section 125 Amended
Scheme sets out the approved planning rights (zoning) of the new
township into the municipalities overall Town Planning Scheme) will
be approved along with the general plan. Section 101 is expected
before November 2015.
Driefontein:
Three approvals are left to complete before a section 101
certificate is achieved, including:
1. Confirmation that the Minister of Minerals and Resources is
satisfied to either abandon the surface right permit and or
de-registration of any servitudes in their favour.
2. The radon survey and findings to be submitted to GDACE
(environmental agency) and
3. The finalisation of the service level agreements.
The section 101 certificate is expected to be finalised by June
2015.
African Renaissance:
New conditions of establishment are expected by end of April
2015, as the old layout had to be amended. The phasing of the new
township will be approved by end of April 2015 and the service
level agreements should be finalised before the end of May 2015.
General plan will be completed simultaneously along with the
Section 125 amendment. Section 101 is anticipated for July
2015.
Sales Summary (July - December 2014)
During the period 1 July 2014 to 31 December 2014 the Company
concluded 7 property sales to the value of ZAR47,033,995. The
Company has reduced the total number of projects available for sale
in its portfolio from 11 to 9.
Table 1.1: Portfolio Sales (July 2014 - December 2014)
Property Sales Amount Receipts
------------ ---------------- ----------------
Acacia
Park ZAR 2,800,000 ZAR 2,800,000
Acacia
Park ZAR 2,800,000 ZAR 2,800,000
Acacia
Park * ZAR 2,946,000 ZAR 225,000
Imbonini
1 ZAR 1,808,875 ZAR 1,808,875
Gosforth
Park ZAR 11,829,120 ZAR 11,829,120
Kindlewood ZAR 4,850,000 ZAR 4,850,000
Kindlewood ZAR 20,000,000 ZAR 20,000,000
TOTAL ZAR 47,033,995 ZAR 44,312,995
------------ ---------------- ----------------
*Instalment sale restructured during the period
Sales post reporting date (January 2015 - March 2015)
Since 31 December 2014 the Company has reduced the total number
of properties available for sale in its portfolio from 9 to 7. The
details of sales concluded are as follows:
Unconditional sales pending
Emberton:
SAPRO concluded a sale of the subsidiary company owning the
assets of the Emberton Project. The total sales proceeds of
ZAR39million will be received over five (5) payments with the first
payment of ZAR9million received on 28 February 2015 and four
subsequent tranches ending in August 2016. The purchase price is
2.5% below the carrying value of the property (ZAR40million).
Imbonini 1:
Transfer is pending the registration of a servitude over the
property before to be registered with the deeds office (sales
receipt of ZAR1.3m).
Acacia Park:
The last sold unit at Acacia Park has been restructured as an
instalment sale for ZAR2.9m with the last tranche due by February
2016.
Table 1.2: Portfolio Sales Status (March 2015)
Sales Amount Sales Amount
Status (ZAR) (GBP) %
---------------- ------------------
Unconditional
Sales ZAR 33,758,046 GBP 1,875,447 11%
Under Offer ZAR 118,000,000 GBP 6,555,556 37%
For Sale ZAR 163,181,079 GBP 9,065,615 52%
Total ZAR 314,939,125 GBP 17,496,618
---------------- ------------------ ---------------- ----
Bridgehead Real Estate Fund (Pty) Ltd
Investment Manager
27 March 2015
Consolidated Income Statement
(Unaudited) (Unaudited)
Period from 1 July 2014 to 31 Period from 1 July 2013 to 31
December 2014 December 2013
Note GBP'000 GBP'000
------------------------------------ ----- ----------------------------------- ------------------------------------
Revenue - rental income 21 76
Revenue - sale of inventory 1,319 1,394
------------------------------------ ----- ----------------------------------- ------------------------------------
Total revenue 1,340 1,470
Cost of sales 5 (1,243) (2,204)
------------------------------------ ----- ----------------------------------- ------------------------------------
Gross profit/(loss) 97 (734)
Investment management fees 6 (201) (160)
Performance fees 6 (35) 93
Other administration fees and
expenses 7 (354) (477)
Directors incentive payments 7 (62) (125)
Administrative expenses (652) (669)
------------------------------------ ----- ----------------------------------- ------------------------------------
Operating loss (555) (1,403)
Finance income 8 1
Foreign exchange gain/(loss) 320 (6,207)
Finance costs - (37)
------------------------------------ ----- ----------------------------------- ------------------------------------
Net finance income/(expense) 328 (6,243)
------------------------------------ ----- ----------------------------------- ------------------------------------
Loss on disposal of subsidiary 21 (31) -
Profit on sale of associate - 786
------------------------------------ ----- ----------------------------------- ------------------------------------
Loss before income tax (258) (6,860)
Income tax expense 8 - (235)
------------------------------------ ----- ----------------------------------- ------------------------------------
Loss for the period (258) (7,095)
------------------------------------ ----- ----------------------------------- ------------------------------------
Attributable to:
- Owners of the Parent (282) (7,099)
- Non-controlling interests 24 4
------------------------------------ ----- ----------------------------------- ------------------------------------
(258) (7,095)
------------------------------------ ----- ----------------------------------- ------------------------------------
Basic and diluted loss per share
(pence) for loss attributable to
the owners of the Parent
during the period 9 (0.45) (11.40)
------------------------------------ ----- ----------------------------------- ------------------------------------
Consolidated Statement of Comprehensive Income
(Unaudited) (Unaudited)
Period from 1 July 2014 to 31 Period from 1 July 2013 to 31
December 2014 December 2013
Note GBP'000 GBP'000
------------------------------------ ------ ----------------------------------- -----------------------------------
Loss for the period (258) (7,095)
Other comprehensive
(expense)/income
Items reclassified to profit and
loss
Accumulated foreign exchange (575) -
differences arising on subsidiary
operations reclassified from
equity to profit and loss
Items that may subsequently be
reclassified to profit and loss
Currency translation differences (75) 1,544
-------------------------------------------- ----------------------------------- -----------------------------------
Other comprehensive (expense)/income for
the period (650) 1,544
Total comprehensive expense for the period (908) (5,551)
-------------------------------------------- ----------------------------------- -----------------------------------
Total comprehensive expense
attributable to:
- Owners of the Parent (924) (5,685)
- Non-controlling interests 16 134
-------------------------------------------- ----------------------------------- -----------------------------------
(908) (5,551)
------------------------------------------- ----------------------------------- -----------------------------------
Consolidated Balance Sheet
(Unaudited) (Audited)
As at 31 December 2014 As at 30 June 2014
Note GBP'000 GBP'000
------------------------------------------------------------ ----- ------------------------ --------------------
Assets
Non-current assets
Intangible assets 11 786 779
786 779
------------------------------------------------------------ ----- ------------------------ --------------------
Current assets
Inventories 12 16,151 18,590
Trade and other receivables 13 376 230
Cash at bank 14 2,929 4,596
------------------------------------------------------------ ----- ------------------------ --------------------
19,456 23,416
------------------------------------------------------------ ----- ------------------------ --------------------
Total assets 20,242 24,195
------------------------------------------------------------ ----- ------------------------ --------------------
Equity
Capital and reserves attributable to owners of the Parent:
Issued share capital 15 623 623
Foreign currency translation reserve 5,707 6,349
Retained earnings 12,969 16,366
------------------------------------------------------------ ----- ------------------------ --------------------
19,299 23,338
Non-controlling interests (642) (782)
Total equity 18,657 22,556
------------------------------------------------------------ ----- ------------------------ --------------------
Liabilities
Current liabilities
Loans from third parties 17 1,397 1,411
Trade and other payables 18 188 228
1,585 1,639
------------------------------------------------------------ ----- ------------------------ --------------------
Total liabilities 1,585 1,639
------------------------------------------------------------ ----- ------------------------ --------------------
Total equity and liabilities 20,242 24,195
------------------------------------------------------------ ----- ------------------------ --------------------
Consolidated Statement of Changes in Equity
Attributable to owners of the Parent
---------------------------------------------------------------
Share capital Foreign Retained Total Non-controlling Total
currency earnings/(deficit) interests
translation
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- -------------- ---------------- ------------------- -------- ---------------- --------
Balance at 1
July 2013 623 4,709 37,646 42,978 (977) 42,001
----------------- -------------- ---------------- ------------------- -------- ---------------- --------
Comprehensive
income
Loss for the
period - - (7,099) (7,099) 4 (7,095)
Other
comprehensive
expense
Foreign exchange
translation
differences - 1,414 - 1,414 130 1,544
----------------- -------------- ---------------- ------------------- -------- ---------------- --------
Total
comprehensive
expense for the
period - 1,414 (7,099) (5,685) 134 (5,551)
----------------- -------------- ---------------- ------------------- -------- ---------------- --------
Transactions
with owners
Dividends paid - - (6,237) (6,237) - (6,237)
----------------- -------------- ---------------- ------------------- -------- ---------------- --------
Total
transactions
with owners - - (6,237) (6,237) - (6,237)
----------------- -------------- ---------------- ------------------- -------- ---------------- --------
Balance at 31
December 2013 623 6,123 24,310 31,056 (843) 30,213
----------------- -------------- ---------------- ------------------- -------- ---------------- --------
Balance at 1 July 2014 623 6,349 16,366 23,338 (782) 22,556
------------------------------------------------------------------ ---- ------ -------- -------- ------ --------
Comprehensive income
Loss for the period - - (282) (282) 24 (258)
Other comprehensive expense
Accumulated foreign exchange differences arising on subsidiary
operations reclassified from
equity to profit and loss - (575) - (575) - (575)
Foreign exchange translation differences - (67) - (67) (8) (75)
------------------------------------------------------------------ ---- ------ -------- -------- ------ --------
Total comprehensive expense for the period - (642) (282) (924) 16 (908)
------------------------------------------------------------------ ---- ------ -------- -------- ------ --------
Transactions with owners
Dividends paid - - (3,115) (3,115) - (3,115)
Sale of subsidiary (note 21) - - - - 124 124
------------------------------------------------------------------ ---- ------ -------- -------- ------ --------
Total transactions with owners - - (3,115) (3,115) 124 (2,991)
------------------------------------------------------------------ ---- ------ -------- -------- ------ --------
Balance at 31 December 2014 623 5,707 12,969 19,299 (642) 18,657
------------------------------------------------------------------ ---- ------ -------- -------- ------ --------
Consolidated Cash Flow Statement
(Unaudited) (Unaudited)
Period from 1 July 2014 to 31 Period from 1 July 2013 to 31
December 2014 December 2013
Note GBP'000 GBP'000
------------------------------------ ----- ----------------------------------- ------------------------------------
Cash flows from operating
activities
Loss for the period before tax (258) (6,860)
Adjustments for:
Interest income (8) (1)
Interest expense - 37
Profit on sale of associate - (786)
Loss on sale of subsidiary 31 -
Foreign exchange (gain)/loss (320) 6,207
Operating loss before changes in
working capital (555) (1,403)
Decrease in inventory 1,056 1,687
Decrease in trade and other
receivables 28 395
(increase)/decrease in trade and
other payables (255) 94
------------------------------------ ----- ----------------------------------- ------------------------------------
Cash generated from operations 274 773
Interest paid - (37)
Interest received 8 1
Tax paid - (235)
Net cash generated from operating
activities 282 502
------------------------------------ ----- ----------------------------------- ------------------------------------
Cash flows from investing
activities
Repayment of loans by associates - 462
Proceeds on disposal of associate - 6,418
Net cash on disposal of subsidiary 21 1,119 -
Movement in cash restricted by bank
guarantees (1) 47
------------------------------------ ----- -----------------------------------
Net cash generated from investing
activities 1,118 6,927
------------------------------------ ----- ----------------------------------- ------------------------------------
Cash flows from financing
activities
Repayment of loans from third (21) -
parties
Repayment of bank loans - (1,301)
Distributions paid (3,115) (6,237)
------------------------------------ ----- ----------------------------------- ------------------------------------
Net cash used in from financing
activities (3,136) (7,538)
------------------------------------ ----- ----------------------------------- ------------------------------------
Net decrease in cash and cash
equivalents (1,736) (109)
Cash and cash equivalents at
beginning of the period 4,549 2,012
Foreign exchange losses on cash and
cash equivalents 67 (278)
------------------------------------ ----- ----------------------------------- ------------------------------------
Cash and cash equivalents at end of
the period 14 2,880 1,625
------------------------------------ ----- ----------------------------------- ------------------------------------
Notes to the 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. On 7 January 2011 with the
approval of Shareholders in general meeting, the Company was
re-registered as a company under the Isle of Man Companies Act 2006
with registered number 006491v. South African Property
Opportunities plc and its subsidiaries' (the "Group") investment
objective is to achieve capital growth from the development and
subsequent sale of a portfolio of real estate assets in South
Africa.
The Company's property activities were managed by Group Five
Property Developments (Pty) Limited ("Group Five"). Bridgehead Real
Estate Fund (Pty) Ltd ("Bridgehead") was appointed as the
replacement investment manager with effect from 1 July 2014. The
Company's administration is delegated to Galileo Fund Services
Limited (the "Administrator"). The registered office of the Company
is Millennium House, 46 Athol Street, Douglas, Isle of Man, IM1
1JB.
Pursuant to a prospectus dated 20 October 2006 there was an
authorisation to place up to 50 million shares. Following the close
of the placing on 26 October 2006, 30 million shares were issued at
a price of 100p per share.
The shares of the Company were admitted to trading on the AIM
Market of the London Stock Exchange ("AIM") on 26 October 2006 when
dealings also commenced. On the same date the shares of the Company
were admitted to the Official List of the Channel Islands Stock
Exchange (the "CISX").
As a result of a further fundraising in May 2007, 32,292,810
shares were issued at a price of 106p per share, which were
admitted to trading on AIM on 22 May 2007.
The Company's agents and its Investment Manager perform all
functions, other than those carried out by the Board's executive
and non-executive directors. The Group has two executive
directors.
Financial year end
The financial year end of the Company is 30 June in each
year.
2 Summary of significant accounting policies
2.1 Basis of preparation
Except as described below, the accounting policies applied by
the Group in the preparation of these condensed consolidated
interim financial statements are the same as those applied by the
Group in its consolidated financial statements for the year ended
30 June 2014.
These interim financial statements have been prepared in
accordance with IAS 34 'Interim Financial Reporting' as adopted by
the European Union. They do not include all of the information
required for full annual financial statements and should be read in
conjunction with the consolidated financial statements of the Group
as at and for the year ended 30 June 2014 which have been prepared
in accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union.
The interim financial statements for the six months ended 31
December 2014 are unaudited. The comparative interim figures for
the six months ended 31 December 2013 are also unaudited.
a) New and amended standards adopted by the Group
The Group has adopted IFRS 10, 'Consolidated financial
statements', issued in May 2011. This standard builds on existing
principles by identifying the concept of control as the determining
factor in whether an entity should be included within the
consolidated financial statements. The standard provides additional
guidance to assist in determining control where this is difficult
to assess. This standard is applicable for periods beginning on or
after 1 January 2014. This has not had a significant impact on the
Group.
2.2 Critical accounting estimates and assumptions
Management makes estimates and assumptions concerning the
future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amount of assets and liabilities within
the next financial year are addressed below:
(a) Going concern
These financial statements have been prepared on a going concern
basis, which assumes that the Group will be able to meet its
liabilities as and when they fall due for the foreseeable
future.
The Directors have prepared forecasts that indicate that the
Group will be able to meet its financial obligations from existing
cash resources and the projected sales proceeds from sale of
inventory.
(b) Estimated impairment of inventory, investment in associates
and loans to associates
The Group obtains third party valuations performed by Broll
(Broll represent CBRE under the terms of a network agreement
whereby Broll represent CBRE in those sub-Saharan markets where
CBRE do not have a presence of their own. Together with South
Africa this includes Nigeria and Ghana) on an annual basis at the
end of June each year. The interim valuation is independently
assessed by the Investment Manager and any proposed variations are
then approved by the SAPRO Board. These are used in conjunction
with the strategic plan for each development in order to determine
any impairment of inventory, investments in associates and loans to
associates.
During the period there were no impairment charges in relation
to inventory (see note 12).
(a) Estimated impairment of goodwill
The Group tests annually for whether goodwill has suffered any
impairment, in accordance with its accounting policy. The
recoverable amount of the cash generating unit has been determined
using fair value less cost to sell. This calculation requires the
use of estimates, see note 11 for further details.
3 Segment Information
The entity is domiciled in the Isle of Man. All of the reported
revenue, GBP1,339,470 (31 December 2013: GBP1,470,328), arises in
South Africa.
The total of non-current assets other than financial instruments
is GBP785,521 (30 June 2014: GBP778,822) and all of these are
located in South Africa.
For the six months ended 31 December 2014 revenues of GBP313,451
(ZAR 5,600,000), GBP662,116 (ZAR 11,829,120) and GBP238,132 (ZAR
4,254,386) were derived from single external customers attributable
to the Imbonini development, Gosforth Park development and the
Kindlewood development respectively (31 December 2013: GBPnil (ZAR
nil)).
4 Operating leases
The Group leased out certain parts of its inventory under
operating leases whilst it was in the process of seeking a buyer.
The future minimum lease payments receivable by the Group under
non-cancellable leases were as follows:
Period ended Period ended
31 December 2014 31 December 2013
GBP'000 GBP'000
---------------------------- ------------------- ------------------
Less than one year - 39
Between one and five years - -
More than five years - -
---------------------------- ------------------- ------------------
- 39
------------------------------------------------ ------------------
5 Cost of sales
Period ended Period ended
31 December 2014 31 December 2013
GBP'000 GBP'000
------------------------------------------------------------ ------------------ ------------------
Cost of inventory sold 1,100 1,183
Property expenses 174 488
------------------------------------------------------------ ------------------ ------------------
1,274 1,671
(Reversal of impairment)/impairment of inventory (note 12) (31) 533
Total cost of sales 1,243 2,204
------------------------------------------------------------ ------------------ ------------------
6 Investment Manager's fees
Annual fees
Bridgehead was appointed as the replacement investment manager
with effect from 1 July 2014 and is entitled to an annual
management fee of GBP175,000 per annum. Management fees for the
period ended 31 December 2014 paid to Bridgehead amounted to
GBP98,583.
Group Five was entitled to a management fee of GBP290,000 per
annum payable monthly in arrears. Management fees for the period
ended 31 December 2014 paid to Group Five amounted to GBP24,370
(ZAR 435,381) (31 December 2013: GBP159,800 (ZAR 2,548,951)). The
Group entered into a termination deed on 1 July 2014 with Group
Five under which the Group agreed to pay Group Five a termination
fee of GBP78,363 (ZAR 1.4 million) in lieu of notice.
Sales fee
Bridgehead is not entitled to a sales fee under the investment
management agreement dated 1 July 2014.
Group Five was entitled to a sales fee of up to 3 per cent. of
the gross proceeds on disposal of the Group's projects (such fee is
net of external brokerage costs incurred). This fee was eliminated
under the new investment management agreement dated 18 March 2013.
These fees were payable on sale and were considered when
determining the net realisable value of inventory in prior periods
(see note 12). Sales fees payable for the period ended 31 December
2014 payable to Group Five amounted to GBP14,163 (ZAR 253,035) (31
December 2013: GBP354,256 (ZAR 5,650,676)).
Performance fees
Bridgehead is entitled to a performance fee of 1.5% of the net
proceeds received by the Group following the sale of an asset under
the investment management agreement dated 1 July 2014. Performance
fees of GBP35,438 (ZAR 633,119) payable to Bridgehead have been
accrued for the period ended 31 December 2014.
The Group accrued a performance fee due to Group Five based upon
the market value of the portfolio which only became payable on the
eventual sale of these assets so long as the sales values were
better than certain agreed benchmarks. Under the new investment
management agreement dated 18 March 2013 the performance fee was
calculated based on 1.5% on the net proceeds of the sale of each
asset.
The Group entered into a termination deed on 1 July 2014 with
Group Five under which the Group has agreed to pay Group Five a fee
of 0.5% of the net proceeds received by the Group following the
sale of an asset until 1 January 2016.
Performance fees of GBPnil (ZAR nil) payable to Group Five have
been accrued for the period ended 31 December 2014 (31 December
2013: reduction of GBP93,055 (ZAR 1,618,153)).
7 Other administration fees and expenses
Period ended Period ended
31 December 2014 31 December 2013
GBP'000 GBP'000
---------------------------------- ------------------ ------------------
Directors' remuneration and fees 76 85
Other expenses 278 392
---------------------------------- ------------------ ------------------
Administration fees and expenses 354 477
---------------------------------- ------------------ ------------------
Included within other administration fees and expenses are the
following:
Directors' remuneration
The maximum amount of basic remuneration payable by the Company
by way of fees to the Non-executive Directors permitted under the
Articles of Association is GBP200,000 per annum. All Directors are
each entitled to receive reimbursement of any expenses incurred in
relation to their appointment. During the period of these accounts,
the Chairman was entitled to an annual fee of GBP40,000, Stephen
Coe was entitled to an annual fee of GBP35,000 and David Saville
was entitled to an annual fee of GBP15,000.
Executive Directors' fees
The Executive Directors received annual basic salaries of
GBP40,000. From 1 April 2013 John Chapman reduced his annual basic
salary to GBP30,000. From 1 July 2014 Craig McMurray reduced his
annual basic salary to GBP20,000 per annum. Pursuant to the terms
of their service agreements, Craig McMurray and John Chapman are
entitled to incentive payments of, respectively, 1.5 per cent. and
0.5 per cent. of all sums distributed to shareholders. Their
service agreements also provide for payments of the same
percentages, following termination of their employment, for
distributions paid or payable from cash generated during their
employment. Total incentive fees for the period ended 31 December
2014 amounted to GBP62,293 (31 December 2013 GBP124,586).
All directors' remuneration and fees
Total fees and basic remuneration (including VAT where
applicable) paid to the Directors for the period ended 31 December
2014 amounted to GBP75,766 (31 December 2013: GBP85,500) and was
split as below. Directors' insurance cover amounted to GBP10,151
(31 December 2013: GBP15,870).
Period ended 31 December 2014 Period ended 31 December 2013
Basic fee/salary Incentive fees Total Basic fee/salary Incentive fees Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ----------------- --------------- -------- ----------------- --------------- --------
David Hunter 24 - 24 24 - 24
David Saville 9 - 9 9 - 9
Stephen Coe 18 - 18 17 - 17
51 - 51 50 - 50
---------------- ----------------- --------------- -------- ----------------- --------------- --------
John Chapman 15 15 30 15 31 46
Craig McMurray 10 47 57 20 94 114
---------------- ----------------- --------------- -------- ----------------- --------------- --------
25 62 87 35 125 160
---------------- ----------------- --------------- -------- ----------------- --------------- --------
76 62 138 85 125 210
---------------- ----------------- --------------- -------- ----------------- --------------- --------
8 Income tax expense
Period ended Period ended
31 December 2014 31 December 2013
GBP'000 GBP'000
------------- ------------------- ------------------
Current tax - 235
------------- ------------------- ------------------
The tax on the Group's profit before tax is higher than the
standard rate of income tax in the Isle of Man of zero per cent.
The differences are explained below:
Period ended Period ended
31 December 2014 31 December 2013
GBP'000 GBP'000
------------------------------------------------------------------------- ------------------ ------------------
Loss before tax (833) (6,860)
------------------------------------------------------------------------- ------------------ ------------------
Tax calculated at domestic tax rates applicable in the Isle of Man (0%) - -
Effect of higher tax rates in South Africa (28%) - 235
------------------------------------------------------------------------- ------------------ ------------------
Tax expense - 235
------------------------------------------------------------------------- ------------------ ------------------
9 Basic and diluted loss per share
Basic loss per share is calculated by dividing the loss
attributable to equity holders of the Group by the weighted average
number of shares in issue during the period.
Period ended Period ended
31 December 2014 31 December 2013
-------------------------------------------------------------- ------------------ ------------------
Loss attributable to equity holders of the Company (GBP'000) (282) (7,099)
Weighted average number of shares in issue (thousands) 62,293 62,293
-------------------------------------------------------------- ------------------ ------------------
Basic loss per share (pence per share) (0.45) (11.40)
-------------------------------------------------------------- ------------------ ------------------
The Company has no dilutive potential ordinary shares; the
diluted earnings per share is the same as the basic earnings per
share.
10 Investments in associates
31 December 2014 30 June 2014
GBP'000 GBP'000
----------------------------- ------------------ -------------
Start of the period/year - 5,968
Exchange differences - (649)
Profit on sale of associate - 994
Disposal of associate - (6,313)
----------------------------- ------------------ -------------
End of the period/year - -
----------------------------- ------------------ -------------
11 Intangible assets
31 December 2014 30 June 2014
GBP'000 GBP'000
-------------------------- ----------------- -------------
Goodwill
Start of the period/year 779 1,162
Impairment - (197)
Exchange differences 7 (186)
-------------------------- ----------------- -------------
End of the period/year 786 779
-------------------------- ----------------- -------------
The above goodwill relates entirely to the Group's investment in
the shares of Zwartkoppies Property Investment (Pty) Ltd,
previously known as Living 4 U Developments (Pty) Ltd, (the African
Renaissance development). The recoverable amount of this cash
generating unit has been determined using fair value less cost to
sell. The recoverable amount has been assessed as GBP785,521 (ZAR
14,165,068).
12 Inventories
Current assets
31 December 2014 30 June 2014
GBP'000 GBP'000
------------------------------------------- ----------------- -------------
Start of the period/year 18,590 37,181
Costs capitalised 13 324
Reversal of impairment/(impairment) 31 (936)
Cost of inventory sold (1,100) (12,510)
Disposal via sale of subsidiary (note 21) (1,566) -
Exchange differences 183 (5,469)
-----------------
End of the period/year 16,151 18,590
------------------------------------------- ----------------- -------------
During the period, the Group capitalised costs of GBP12,849 (ZAR
229,547) (30 June 2014: GBP323,519 (ZAR 5,464,155)) in order to
develop these assets for future re-sale, and accordingly they were
classified as inventory.
At 31 December 2014 the net realisable values of Brakpan,
Driefontein, Emberton, Lenasia, Imbonini and Imbonini phase 2 were
lower than cost, therefore their inventory values have been
impaired to a value of GBP11,517,221 (ZAR 207,395,348) (30 June
2014: Brakpan, Driefontein, Emberton, Gosforth Park, Kindlewood,
Lenasia, Imbonini and Imbonini phase 2 were lower than cost,
therefore their inventory values were impaired to a value of
GBP13,979,393 (ZAR 254,254,412)). Net realisable value has been
assessed using valuations determined by Broll as at 30 June 2014
which have been updated by the directors to reflect current levels
of interest and any potential offers from third parties less
estimated selling expenses.
The Directors consider all inventories to be current in nature.
It is not possible to determine with accuracy when specific
inventory will be realised, as this will be subject to a number of
issues such as availability of finance and delays due to obtaining
permits.
13 Trade and other receivables
31 December 2014 30 June 2014
GBP'000 GBP'000
----------------------------- ----------------- -------------
Prepayments 22 23
VAT receivable 216 2
Trade receivables 103 69
Other receivables 35 136
----------------------------- ----------------- -------------
Trade and other receivables 376 230
----------------------------- ----------------- -------------
The fair value of trade and other receivables approximates their
carrying value.
14 Cash at bank
31 December 2014 30 June 2014
GBP'000 GBP'000
----------------------- ----------------- -------------
Bank balances 2,880 4,549
Bank deposit balances 49 47
----------------------- ----------------- -------------
Cash at bank 2,929 4,596
----------------------- ----------------- -------------
Included within the bank deposit balances figure is an amount of
GBP48,632 (ZAR 876,974) (30 June 2014: GBP47,381 (ZAR 861,759))
represented by bank guarantees retained by the bank under fixed
deposit (detailed below). This is the only figure excluded from the
above balances for analysing the movements of cash and cash
equivalents in the cash flow statement.
Bank guarantees
The subsidiary SAPSPV Holdings RSA (Pty) Ltd has a contingent
liability of GBP48,632 (ZAR 876,974) (30 June 2014: GBP47,381 (ZAR
861,759)) in connection with senior debt obligations of its
associate Imbonini Park (Pty) Ltd.
15 Share capital
Ordinary Shares of 1p each As at 31 December 2014 & 30 June 2014 As at 31 December 2014 & 30 June 2014
Number GBP'000
---------------------------- ------------------------------------------- -------------------------------------------
Authorised 150,000,000 1,500
Issued 62,292,810 623
---------------------------- ------------------------------------------- -------------------------------------------
The holders of 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.
Preference shares As at 31 As at 31
December December
2014 & 30 2014 & 30
June 2014 June 2014
Number GBP'000
------------------ ----------- -----------------
Issued 100 -
------------------ ----------- -----------------
Business Venture Investments No 1269 (Pty) Limited (the
Wedgewood development) has issued preference shares ZAR 100 to its
minority holders. The holders of the preference shares are entitled
to the first ZAR 22,000,000 (GBP1,231,414) in dividends declared by
Business Venture Investments No 1269 (Pty) Limited. A dividend of
ZAR 7,588,039 (GBP449,268) was declared and paid during the year
ended 30 June 2014.
Two distributions were paid during the year ended 30 June 2014,
10 pence per Ordinary Share on 9 August 2013 and 9 pence per
Ordinary Share on 23 April 2014 (2013 GBPnil). One distribution was
paid during the period ended 31 December 2014, 5 pence per Ordinary
Share on 31 October 2014.
16 Net asset value ("NAV") per share
31 December 2014 30 June 2014
-------------------------------------------------------------------- ----------------- -------------
Net assets attributable to equity holders of the Company (GBP'000) 19,299 23,338
Shares in issue (in thousands) 62,293 62,293
-------------------------------------------------------------------- ----------------- -------------
NAV per share (GBP) 0.31 0.37
-------------------------------------------------------------------- ----------------- -------------
The NAV per share is calculated by dividing the net assets
attributable to equity holders of the Group by the number of
ordinary shares in issue.
The Group publishes an adjusted NAV that is calculated in
accordance with the guidelines of the European Public Real Estate
Association ("EPRA"). The primary difference between EPRA and IFRS
is that, in general, under IFRS the Group's development properties
are classified as inventory and held at cost while EPRA permits the
incorporation of open market valuations. In order to produce the
EPRA numbers the Group has retained Broll's Johannesburg office to
conduct annual valuations, which are reviewed and adjusted by the
directors for the interim accounts. The EPRA numbers incorporate
the adjusted Broll valuations and are net of tax.
The below figures also take into consideration any profit share
agreements with development partners, fees due on sale of
properties (see note 6) and incentive fees due to the Executive
Directors (see note 7).
EPRA NAV 31 December 2014 30 June 2014
-------------------------------------------------------------------- ----------------- -------------
Net assets attributable to equity holders of the Company (GBP'000) 18,648 22,559
Shares in issue (in thousands) 62,293 62,293
-------------------------------------------------------------------- ----------------- -------------
EPRA NAV per share (GBP) 0.30 0.36
-------------------------------------------------------------------- ----------------- -------------
17 Loans from third parties
31 December 2014 30 June 2014
GBP'000 GBP'000
------------------------------------------- ----------------- -------------
Start of the period/year 1,411 2,920
Payment of loans from third parties (21) (1,084)
Disposal via sale of subsidiary (note 21) (6) -
Exchange differences 13 (425)
------------------------------------------- ----------------- -------------
End of the period/year 1,397 1,411
------------------------------------------- ----------------- -------------
The loans from third parties are as follows:
Name Interest Rate 31 December 2014
GBP'000
-------------------- --------------- -----------------
Homa Adama Trust * - 1,397
1,397
------------------------------------ -----------------
* in relation to its 50 per cent. interest in subsidiary
company, Madison Park Properties 40 (Pty) Ltd, and the Brakpan
development.
The above loan is unsecured and carries no fixed terms of
repayment.
The fair value of this loan approximates its carrying value.
18 Trade and other payables
31 December 2014 30 June 2014
GBP'000 GBP'000
-------------------------- ----------------- -------------
Trade payables 58 64
Other payables 130 164
-------------------------- ----------------- -------------
Trade and other payables 188 228
-------------------------- ----------------- -------------
The fair value of trade and other payables approximates their
carrying value.
19 Contingent liabilities and commitments
As at 31 December 2014 the Group has contingent liabilities
which have corresponding bank guarantees amounting to GBP48,632.
See note 14 for further details.
20 Related party transactions
Parties are considered to be related if one party has the
ability to control the other party or to exercise significant
influence over the other party in making financial or operational
decisions.
The former investment manager, Group Five Property Developments
(Pty) Limited, and the Directors of the Company are considered to
be related parties by virtue of their ability to make operational
decisions for the Group. Fees in relation to Group Five are
disclosed in note 6 and fees in relation to the Directors are
disclosed in note 7.
Group Five Property Developments (Pty) Limited is a related
party to Group Five Construction (Pty) Limited, which is a partner
in the Wedgewood and Starleith developments. There was a loan in
respect of the Starleith development which was repaid during the
period see note 17.
The replacement investment manager, Bridgehead Real Estate Fund
(Pty) Ltd, is a company managed by Craig McMurray, an Executive
Director of the Company. Fees in relation to Bridgehead are
disclosed in note 6 and fees in relation to the Executive Directors
are disclosed in note 7.
Related party transactions with associates are disclosed in note
10.
The principal subsidiary undertakings within the Group as at 31
December 2014 are:-
Development property Country of incorporation Percentage of shares held *
------------------------------------ ---------------------- -------------------------- ----------------------------
Breeze Court Investments 31 (Pty)
Limited ** Starleith South Africa 50%
Business Venture Investments No
1172 (Pty) Limited Driefontein South Africa 100%
Business Venture Investments No
1268 (Pty) Limited Emberton South Africa 100%
Business Venture Investments No
1269 (Pty) Limited Wedgewood South Africa 79%
Crimson King Properties 378 (Pty)
Limited Gosforth Park South Africa 100%
Imbonini Park (Pty) Ltd Imbonini phase 1 South Africa 100%
Imbonini Park Phase 2 (Pty) Ltd Imbonini phase 2 South Africa 100%
Madison Park Properties 33 (Pty)
Limited Lenasia South Africa 100%
Madison Park Properties 34 (Pty)
Limited Kyalami South Africa 100%
Madison Park Properties 40 (Pty)
Limited ** Brakpan South Africa 50%
SAPSPV Clayville Property
Investments (Pty) Limited Clayville South Africa 100%
Zwartkoppies Property Investment
(Pty) Ltd*** African Renaissance South Africa 100%
Business Venture Investments No
1180 (Pty) Limited n/a South Africa 100%
SAPSPV Holdings RSA (Pty) Limited n/a South Africa 100%
Business Venture Investments No
1187 (Pty) Limited Inactive South Africa 100%
------------------------------------ ---------------------- -------------------------- ----------------------------
* this also represents the percentage of ordinary share capital and voting rights held - 2014
** the Group controls the company by means of direct control of
the board
*** previously known as Living 4 U Developments (Pty)
Limited
The following companies were deregistered during the period and
therefore no longer form part of the Group:
Development property Country of incorporation Percentage of shares held
-------------------------------------- ---------------------- -------------------------- --------------------------
8 Mile Investments 504 (Pty) Limited n/a South Africa 100%
Business Venture Investments No 1191
(Pty) Limited n/a South Africa 100%
Business Venture Investments No 1205
(Pty) Limited n/a South Africa 100%
Business Venture Investments No 1239
(Pty) Limited n/a South Africa 100%
Business Venture Investments No 1270
(Pty) Limited n/a South Africa 100%
SAPSPV Imbonini Property Investments
(Pty) Limited n/a South Africa 100%
Crane's Crest Investments 28 (Pty)
Limited n/a South Africa 100%
Wonderwall Investments 18 (Pty)
Limited n/a South Africa 100%
-------------------------------------- ---------------------- -------------------------- --------------------------
21 Loss on Disposal of Subsidiary
During the period the Group disposed of its holding in and
intercompany loan with Royal Albatross Properties 313 (Pty) Limited
for total consideration of ZAR 20,000,000 (GBP1,119,467). This
resulted in a loss on disposal of GBP605,653 as follows:
GBP'000
--------------------------------------------------------------------------------------------- ------------
Inventory (note 12) 1,566
Trade and other receivables 40
Cash and cash equivalents 1
Loans from third parties (note 17) (6)
Intercompany loan (2,705)
--------------------------------------------------------------------------------------------- ------------
Total identifiable net assets (1,104)
Non-controlling interest 124
Intercompany loan 2,705
--------------------------------------------------------------------------------------------- ------------
Total interest 1,725
Consideration (1,119)
--------------------------------------------------------------------------------------------- ------------
Loss on disposal 606
Accumulated foreign exchange differences arising on subsidiary operations reclassified from
equity to profit and loss (575)
--------------------------------------------------------------------------------------------- ------------
Net Loss on disposal 31
--------------------------------------------------------------------------------------------- ------------
22 Post balance sheet events
Subsequent to the period end the Group concluded a sale of
Business Venture Investments No 1268 (Pty) Limited owning the
assets of the Emberton Project. The total sales proceeds of ZAR 39
million (GBP2.16 million) will be received over five (5) payments
with the first payment of ZAR 9 million (GBP0.5 million) received
on 28 February 2015 and four subsequent tranches ending in August
2016.
Subsequent to the period end, Business Venture Investments No
1180 (Pty) Limited and Madison Park Properties 34 (Pty) Limited
were deregistered.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR ZMGFFRGLGKZG
SA Property Opps (LSE:SAPO)
Historical Stock Chart
From May 2024 to Jun 2024
SA Property Opps (LSE:SAPO)
Historical Stock Chart
From Jun 2023 to Jun 2024
