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QPG - Quantum Property Group Limited - Abridged audited consolidated financial
results for the year ended 31 August 2009
QUANTUM PROPERTY GROUP LIMITED
Incorporated in the Republic of South Africa
(Registration number 1984/002788/06)
Share code: QPG ISIN: ZAE000125647
("QPG" or "the company" or "the group")
ABRIDGED AUDITED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 31 AUGUST
2009
HIGHLIGHTS
- Maiden results exceed forecasts
- EPS of 272 cents
- NAV of 288 cents
- 15 on Orange Hotel due to open shortly
- Exciting growth pipeline
CONDENSED GROUP BALANCE SHEETS
Audited Restated Audited
31 August 2009 31 August 2008
R`000 R`000
ASSETS
Non-current assets 848 088 176 033
Investment property 848 088 176 033
Current assets 133 912 65 815
Employee benefits 22 800 -
Inventories 84 490 34 424
Accounts receivable 19 061 4 131
Prepaid expenses 319 300
Loans to related parties - 5 599
Cash and cash equivalents 7 242 21 361
Total assets 982 000 241 848
EQUITY AND LIABILITIES
Capital and reserves 438 380 37 486
Non-current liabilities 486 602 182 231
Long-term borrowings 329 451 152 382
Loans from related parties 28 359 24 846
Deferred taxation 128 792 5 003
Current liabilities 57 018 22 131
Accounts payable 32 322 19 495
Loans from related parties 12 973 -
Bank overdraft 11 723 2 636
Total equity and liabilities 982 000 241 848
Number of shares in issue 152 147 631 100
Net asset value and net tangible asset
value per share (cents) 288 37 486
CONDENSED GROUP INCOME STATEMENTS
Audited Restated Audited
12 months ended 6 months ended
31 August 2009 31 August 2008
R`000 R`000
Gross revenue 877 -
Other income 5 3 944
Operating costs (24 181) (218)
Operating (loss)/profit (23 299) 3 726
Fair value adjustment 508 609 12
Interest received 526 46
Interest paid (6) (9)
Profit before taxation 485 830 3 775
Taxation (123 789) 2 137
Net profit for period 362 041 5 912
Weighted average number of shares in issue 133 129 190 100
Earnings per share (cents) 272 5 912 000
Headline (loss)/earnings per share (cents) (7) 5 912 000
Diluted earnings per share (cents) 272 5 912 000
Diluted headline (loss)/earnings per share (cents) (7) 5 912 000
Reconciliation of earnings to headline earnings R`000 R`000
Net profit for the period 362 040 5 912
Less: fair value adjustment on
investment property (508 647) -
Plus: deferred taxation movement on fair
value adjustment on investment property 137 241 -
Headline (loss)/earnings (9 365) 5 912
CONDENSED GROUP CASH FLOW STATEMENTS
Audited Restated Audited
12 months ended 6 months ended
31 August 2009 31 August 2008
R`000 R`000
Cash flows from operating activities (98 316) (31 819)
Cash flows from investing activities (157 808) (39 819)
Cash flows from financing activities 232 919 84 540
(Decrease)/Increase in cash
and cash equivalents (23 205) 12 902
Cash and cash equivalents at
beginning of period 18 724 5 822
Cash and cash equivalents at end
of period (4 481) 18 724
CONDENSED STATEMENT OF CHANGES IN EQUITY
Audited for the period ended 31 August 2009
Share Share Acquisition
capital premium reserve
R`000 R`000 R`000
Balance at 1 March 2008 - - -
Net profit for the period - - -
Balance at 31 August 2008 as
previously stated - - -
Prior year adjustment - - -
Balance at 1 September 2008 as restated - - -
Issue of ordinary shares 305 50 640
Listing and capital raising costs
written off against share premium - (4 497) -
Acquisition reserve arising from reverse
take-over - - (7 595)
Net profit for the period - - -
Balance 31 August 2009 305 46 143 (7 595)
Retained
earnings Total
R`000 R`000
Balance at 1 March 2008 28 362 28 362
Net profit for the period 5 749 5 749
Balance at 31 August 2008 as previously stated 34 111 34 111
Prior year adjustment 3 375 3 375
Balance at 1 September 2008 as restated 37 486 37 486
Issue of ordinary shares - 50 945
Listing and capital raising costs written off
against share premium - (4 497)
Acquisition reserve arising from reverse take-over - (7 595)
Net profit for the period 362 041 362 041
Balance 31 August 2009 399 527 438 380
COMMENTARY
Introduction
The directors are pleased to present the maiden annual financial results of
the group for the year ended 31 August 2009 ("the year"), which exceed pre-
listing forecasts for all key performance indicators as set out in the Revised
Listings Particulars dated 25 August 2008 (the "RLPs").
This young group has achieved a watershed first year listed on AltX,
outperforming market expectations despite the global financial crisis which
negatively impacted the domestic property market. QPG`s initial real estate
asset, the close to R1 billion `15 on Orange` in Cape Town, demonstrates
management`s expertise and ability to create shareholder wealth in line with
investor undertakings.
During the year management focused primarily on consolidating the platform for
growth by completing the development of 15 on Orange and carefully assessing
further appropriate property-related opportunities.
Profile
QPG is a dynamic property group with a vision of building a sustainable,
quality, high-yielding portfolio across all sectors of the property market.
The group`s focus is trophy properties in prime urban locations.
QPG listed on AltX on 13 October 2008 to pursue development and investment
opportunities which are continually sourced through management`s wide network
and proven track record.
The bedrock of the current QPG portfolio, 15 on Orange, encompasses an opulent
129 all-suite 5-star hotel, 12 high-end penthouse apartments, 2 467m2 of
boutique retail space and a 4-storey parking garage.
Financial Results
The group achieved profit after tax for the period of R362 million following
the revaluation of 15 on Orange, which is nearing completion. Earnings per
share was 272 cents, 7% higher than the forecast of 254 cents. Net asset value
per share was 288 cents.
Growth strategy
QPG is focused on delivering medium-to long-term wealth creation through three
core activities:
- Developments to achieve capital appreciation and generate income;
- Investments - to build an asset base; and
- Trading - to generate additional profit.
Directorate
As previously announced Kamil Abdul-Karrim was appointed as a non-executive
director of the company with effect from 3 August 2009, strengthening the
board`s specialist expertise in the leisure sector and furthering the group`s
strategy in this regard. Kamil is a former Director of Strategic Marketing for
Southern Sun Hotels and is currently a non-executive director of the JSE-
listed Hospitality Property Fund Limited.
Prospects
Management is actively assessing a number of attractive opportunities in major
centres, and is cognisant of the need for diligence and patience in reviewing
these opportunities in order to achieve the strategic objective of sustainable
wealth creation for stakeholders. All potential investments will be of a
quality equivalent to 15 on Orange but may range across all property sectors.
While adverse economic conditions have intensified since the initial capital
raising at the time of QPG`s listing on AltX, capital raising efforts will
remain ongoing to enable the group to pursue its strong pipeline of
opportunities sourced by management.
The local economy has shown resilience and it continues to grow, albeit at a
slower rate than previously. Future growth should be spearheaded by major
public sector projects provided funding can be obtained. The historical
backlog, specifically in housing and retirement facilities, offers exciting
avenues for growth. Tourism remains healthy with anticipated escalation during
and post the 2010 FIFA World Cup.
The outlook for the year ahead is positive subject to the group`s ability to
finance its proposed projects in a tough credit environment. The directors
believe that QPG`s key strengths, supported by management`s proven ability,
will provide a solid platform to enable QPG to achieve its growth objectives.
Basis of preparation and accounting policies
These condensed consolidated annual financial results for QPG for the year
have been prepared in accordance with International Financial Reporting
Standards ("IFRS"), IAS 34: Interim Financial Reporting and in the manner
required by the South African Companies Act, 1973, as amended, and the
Listings Requirements of the JSE Limited. The accounting policies and methods
of measurement and assessment are consistent with those applied in the audited
financial statements for the period ended 31 August 2008.
Significant accounting policies include:
- Significant judgement: Judgement is required in determining the fair value
of investment property. The fair value is determined annually by independent
parties and any fair value adjustment is recognised in the income statement.
- Investment Properties: Existing investment properties under development held
for continued future use as investment properties are treated as long-term
investments and are measured at fair value, being the fair value of the land
and buildings. The fair values of the land and buildings are determined
annually by independent parties and any fair value adjustments are recognised
in the annual financial statements.
Material change in assets:
- Investment property: Investment properties are stated at fair value.
Existing investment properties under development for continued use as
investment properties are stated at fair value which includes the fair value
of the land and buildings to be retained. The fair value of the land and
buildings is R843 million (including land at a value of R104 million) which
has been determined based on a valuation performed by Bradley Richard Ryle MIV
(SA) as at 31 August 2009, on the basis of open market value, supported by
market evidence, in accordance with International Valuation Standards.
- Inventories: Development costs pertaining to the portion of 15 on Orange to
be sold were reclassified as inventory.
Related party transactions and balances:
There were no material related party transactions or balances.
Comparatives
These are the maiden results of the reconstituted group following the reverse
take-over acquisition of QPG by A Million Up Investments 105 (Proprietary)
Limited ("AMU") on 13 October 2008 (the date on which the JSE granted the
listing of QPG on AltX). The previous period results are those of AMU.
Prior year adjustment
A prior year adjustment has been passed to capitalise borrowing costs on the
qualifying asset that were erroneously not capitalised. The prior year figures
have been restated accordingly. The prior year adjustment is as follows:
2009 2008
R`000 R`000
Balance Sheet
Investment property - 4 688
Deferred taxation - (1 313)
Accumulated loss - 3 375
Income Statement
Interest paid - 1 476
Taxation - 1 313
Prior year reclassification
It was determined that the development costs pertaining to the portion of 15
on Orange to be sold should be reclassified as inventory. The effect of the
reclassification on the prior figures is as follows:
2009 2008
R`000 R`000
Balance Sheet
Investment property - (34 424 228)
Inventory - 34 424 228
Segmental report
QPG does not have separate identifiable segments and therefore no segmental
report has been prepared.
Subsequent events
No significant transactions which require disclosure have occurred since the
year end.
Report of the independent auditors
The condensed annual financial results have been extracted from the group
audited annual financial statements on which the company`s auditors Grant
Thornton has issued an unqualified audit report. The audit report is available
for inspection at the company`s registered office.
Appreciation
We would like to thank our team and fellow directors for their hard work,
perseverance, commitment and wise strategic input that helped steer the group
to its initial success and we look forward to working together to continue
this long into the future. Thank you also to our advisers, suppliers and
business partners for their support and to our shareholders for their faith in
the group.
Chaim Cohen Gary Itzikowitz
Executive Chairman Chief Executive Officer
BY ORDER OF THE BOARD
25 November 2009
Directors
C Cohen (Executive Chairman), G Itzikowitz (Chief Executive Officer), MR Taitz
(Financial Director), K Abdul-Karrim*, BS Cohen*, CJ Kupritz*, I Levitt*,
JT Opperman, IS Schmidt, BH Sneech*
*non-executive
Registered office: 19th Floor, Sandton City Office Towers, cnr. 5th Street
and Rivonia Road, Sandton, 2196
Company secretary: Corporate and Merchant Administrators (Proprietary) Limited
Designated adviser: Merchantec (Proprietary) Limited
Independent auditors: Grant Thornton Chartered Accountants (SA)
Transfer secretaries: Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107)
Date: 25/11/2009 07:50:47 Supplied by www.sharenet.co.za
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