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QPG - Quantum Property Group Limited - Condensed unaudited consolidated interim
results for the six months ended 29 February 2012 and renewal of cautionary
announcement
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")
CONDENSED UNAUDITED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED
29 FEBRUARY 2012 AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION FOR THE PERIOD
ENDED 29 FEBRUARY 2012
Unaudited Unaudited Audited
as at as at as at
29 28 31
February February August
2012 2011 2011
R`000 R`000 R`000
Assets
Non-current assets 742 562 952 792 709 172
Investment property 693 867 928 940 687 620
Intangible assets 12 863 - -
Furniture, fittings and 26 908 - 16 325
equipment 647 562 726
Loans receivable
Deferred taxation 8 277 23 290 4 501
Current assets 75 192 103 445 83 687
Inventories 67 912 82 140 67 401
Accounts receivable 5 686 7 849 7 524
Loan receivable 156 109 142
Loans to related parties - - 237
Cash and cash equivalents 1 438 13 347 8 383
Total assets 817 754 1 056 237 792 859
Equity and liabilities
Capital and reserves 160 159 398 024 185 412
Non-current liabilities 500 014 617 747 476 274
Borrowings 430 439 468 341 396 550
Loan payable 3 869 - 3 869
Loans from related parties 35 982 32 896 34 404
Deferred taxation 29 724 116 510 41 451
Current liabilities 157 581 40 466 131 173
Borrowings 112 537 - 91 392
Trade and other payables 23 349 19 976 23 102
Loans from related parties 21 695 20 490 16 679
Total equity and liabilities 817 754 1 056 237 792 859
Number of ordinary shares in 152 944 152 944 152 944
issue at period-end 087 087 087
Net asset value per share 105 260 121
(cents)
Net tangible asset value per 96 260 121
share (cents)
CONDENSED UNAUDITED CONSOLIDATED GROUP STATEMENTS OF COMPREHENSIVE INCOME FOR
THE PERIOD ENDED 29 FEBRUARY 2012
Unaudited Unaudited Audited
Six Six 12
months months months
ended ended ended
29 28 31
February February August
2012 2011 2011
R`000 R`000 R`000
Revenue 24 477 13 863 37 291
Cost of sales - - (15 450)
Gross profit 24 477 13 863 21 841
Other income 4 982 4 3 270
Operating costs (32 188) (15 406) (46 939)
Operating loss (2 729) (1 539) (21 828)
Fair value adjustment - - (225
963)
Depreciation (3 281) (2 210) (4 495)
Interest received 136 270 569
Interest paid (30 879) (20 756) (41 400)
Loss before taxation (36 753) (24 235) (293
117)
Taxation 15 502 11 580 67 850
Total comprehensive loss for (21 251) (12 655) (225
the period 267)
Weighted average number of 152 944 152 944 152 944
shares in issue 087 087 087
Loss per share (cents) (14) (8) (147)
Headline loss per share (cents) (16) (8) (39)
Diluted loss per share (cents) (14) (8) (147)
Diluted headline loss per share (16) (8) (39)
(cents)
CONDENSED UNAUDITED CONSOLIDATED GROUP STATEMENTS OF CASH FLOW FOR THE PERIOD
ENDED 29 FEBRUARY 2012
Unaudited Unaudited Audited
Six Six 12
months months months
ended ended ended
29 28 31
February February August
2012 2011 2011
R`000 R`000 R`000
Cash flows from operating (40 840) (26 271) (48 208)
activities
Cash flows from investing (16 352) (15 122) (19 317)
activities
Cash flows from financing 50 247 43 301 64 469
activities
(Decrease) / Increase in cash (6 945) 1 908 (3 056)
and cash equivalents
Cash and cash equivalents at the 8 383 11 439 11 439
beginning of period
Cash and cash equivalents at the 1 438 13 347 8 383
end of period
CONDENSED UNAUDITED CONSOLIDATED GROUP STATEMENT OF CHANGES IN EQUITY FOR THE
PERIOD ENDED 29 FEBRUARY 2012
Share Share Acquis Accumul Total
Capita Premium ition ated
l Reserv Profit
e
R`000 R`000 R`000 R`000 R`000
Balance at 1 September 313 47 285 (7 370 676 410 679
2010 595)
Total comprehensive - - - (12 (12
loss for the period 655) 655)
Balance at 28 February 313 47 285 (7 358 021 398 024
2011 595)
Total comprehensive - - - (212 (212
loss for the period 612) 612)
Balance at 31 August 313 47 285 (7 145 409 185 412
2011 595)
Deferred tax asset
acquired on acquisition - - - (4 002) (4 002)
of 15 on Orange Hotel
reversed
Total comprehensive
loss for the period - - - (21 (21
251) 251)
Balance at 29 February 313 47 285 (7 120 156 160 159
2012 595)
COMMENTARY
Introduction
The directors present the condensed unaudited consolidated interim results
("results") for the six months ended 29 February 2012 ("the interim period") for
QPG.
Board of Directors
The following changes in directorate occurred during the period under review:
* Richard Bendel was appointed as an independent non-executive director with
effect from 1 December 2011;
* Barry Sneech resigned as an independent non-executive director with effect
from 12 June 2012; and
* Mrs Madeleine du Plessis resigned as Financial Director with immediate
effect from 18 June 2012, but will continue to assist QPG as a consultant
until a new Financial Director is appointed.
Group Profile
QPG is a property investment company that aims to build a quality, sustainable
property portfolio. The 15 on Orange property is a landmark development in Cape
Town and the initial development undertaken by QPG. The property comprises the
15 on Orange Hotel, a residential component of 12 luxury penthouses, 6 of which
will be included in the hotel rental pool (whilst remaining for sale), a
boutique retail centre, a 1 500mSquared venue facility and four levels of
parking.
The 15 on Orange Hotel has established itself, since opening in December 2009,
as one of the city`s leading luxury hotels across multiple corporate and leisure
markets and continues to receive numerous accolades and awards.
Prospects
The directors are confident of the performance and prospects of the 15 on Orange
Hotel. It continues to cement its reputation as one of Cape Town`s leading
hotels and has now further strengthened its position in the market place as a
result of the various improvements and enhancements.
Financial Results
The hotel industry continued to experience extremely challenging trading
conditions during the period under review, but despite that, there has been an
increase in hotel revenue and occupancy levels compared to the previous
corresponding period. The directors are confident that the hotel performance
will continue to improve.
Acquisition of 50% interest in 15 on Orange Hotel (Pty) Ltd
Shareholders are referred to the announcement released on SENS on 21 October
2011, wherein it was disclosed that in terms of a Sale of Shares Agreement dated
6 September 2011 and a First Addendum to the Sale of Shares Agreement dated 18
October 2011, A Million Up Investments 105 (Pty) Ltd (``AMU``) acquired the
remaining 50% of the issued share capital in 15 on Orange Hotel (Pty) Ltd ("15
on Orange``).
In terms of IAS 31 `Interest in joint ventures`, the Group`s proportionate share
of 50% of 15 on Orange`s assets, liabilities, income, expenses and cash flows
were consolidated to 31 August 2011. With the acquisition of the remaining 50%
of the shares in 15 on Orange, 100% of the assets, liabilities, income, expenses
and cash flows are now consolidated. This has the effect that 100% of the net
loss of 15 on Orange for the six months under review has been consolidated
versus only 50% in the comparative period ended 28 February 2011 and the twelve
months ended 31 August 2011.
The fair value of the assets and liabilities of 15 on Orange acquired was as
follows:
R`000
Furniture, fittings and equipment 4 088
Deferred tax asset 4 002
Inventories 496
Accounts receivable 1 188
Cash 393
Trade and other payables (6 149)
Loans from related parties (16 881)
Net asset value (12 863)
Consideration paid in cash -
Cash and cash equivalents acquired 393
Net cash inflow 393
The Management Services and License Agreement for the management of the 15 on
Orange Hotel was renegotiated and re-signed with Protea Hospitality Group (Pty)
Ltd and African Pride Hotels effective from 1 September 2011. The Lease
Agreement between AMU and 15 on Orange was also amended and re-signed effective
from 1 September 2011.
AMU has substantially completed the enhancement programme undertaken at the 15
on Orange Hotel, which includes the fit out of a 240-seater multi-use, high-
specification venue facility, furnishing of six penthouse units for inclusion in
the hotel inventory, a general exterior upgrade and improvements to the swimming
pool area.
Basic and Diluted loss per share
The calculation of basic earnings and diluted earnings per ordinary
share is based on a net loss attributable to ordinary shareholders of
R21 250 723 and a weighted average of 152 944 087 ordinary shares in
issue throughout the period.
The calculation of headline and diluted headline loss per ordinary
share is based on a net headline loss of R25 210 723 and a weighted
average of 152 944 087 ordinary shares in issue throughout the period.
Reconciliation of basic loss to
headline loss R`000
Total comprehensive loss for the (21 251)
period
Less: Write-down of related party (5 500)
loan
Plus: Deferred taxation movement on 1 540
write-down of related party loan
Headline loss for the period 25 211
The write-down of the related party loan relates to a Department of Trade and
Industry grant that was not granted in connection with 15 on Orange Hotel.
Related party transactions and balances
There were no new material related party transactions or balances in the six
months under review.
Segmental report
The Group`s main business is currently operated from one property in Cape Town.
The chief operating decision maker is of the opinion that the operations of this
one property should be considered to be the business of a single segment.
Subsequent events
Since the end of the interim period up to and including the date of this report,
the following events have occurred:
* Business rescue application
Shareholders are referred to the announcement released on SENS on 13 June 2012,
wherein it was disclosed that the board of directors of QPG ("the Board")
resolved that business rescue proceedings commence regarding its wholly-owned
subsidiary A Million Up Investments 105 Proprietary Limited ("AMU") and that AMU
be placed under supervision in terms of Section 129 of the Companies Act, 71, of
2008 ("the Companies Act").
An application which was initiated by Absa Bank Limited ("Absa"), to set aside
the resolution taken by the board of AMU, was heard in the Western Cape High
Court on Friday 15 June 2012. As disclosed in an announcement released on SENS
on 15 June 2012, Absa`s application was successful and hence AMU was discharged
from business rescue.
* Negotiations with Absa and application for provisional liquidation
There is a dispute with Absa regarding the securities which Absa contends were
provided by QPG in respect of the development facility, and in order for Absa to
continue funding AMU and the 15 On Orange Hotel, they require to perfect their
securities.
As a result of this impasse, Absa has resorted to placing AMU into provisional
liquidation.
AMU had agreed not to oppose the application as QPG and AMU have reached
agreement with Absa that they will be afforded sufficient time before Absa
applies for a final winding up order of AMU in order to enable the parties to
endeavour to conclude an amicable, commercial transaction beneficial to all
parties.
The Western Cape High Court granted an interim order on 29 June 2012, with the
final liquidation proceedings to be heard on Tuesday, 14 August 2012.
QPG, AMU and Absa intend on reaching a solution prior to this date to prevent
the granting of a final liquidation order.
QPG and AMU will immediately enter into proposed negotiations with Absa in an
endeavour to conclude a transaction beneficial to both parties. Shareholders
will be advised in due course regarding the outcome of these negotiations.
Should a commercial transaction be concluded, then it will not be necessary for
Absa to apply for the final winding up of AMU.
It is anticipated that whilst the negotiations continue, Absa will continue
funding both AMU and the 15 On Orange Hotel and that there will be no impact on
the day to day running of the hotel business.
The board of directors is not aware of any other material matters or
circumstances arising since the end of the interim period and up to the date of
this report.
Dividend policy
No dividend has been declared for the period.
Litigation
The directors previously reported that the Group has instituted legal
proceedings and a high court summons against Mr Chaim Cohen, New City Group
(Pty) Ltd ("New City"), Bonheur 92 General Trading (Pty) Ltd, Mr Gary Itzikowitz
and Compass Projects (Pty) Ltd.
Absa applied for the liquidation of New City. On 3 February 2012 Mr Chaim Cohen
applied to have New City placed under business rescue. This was opposed by inter
alia Absa and by AMU and QPG in their capacity as affected persons.
The application was withdrawn on 11 June 2012 and the costs including the costs
of AMU and QPG were tendered by Mr Cohen.
Absa continued with its application for the liquidation of New City. The
application was supported by AMU and QPG. New City was placed under provisional
liquidation by the South Gauteng High Court on 14 June 2012. The return day is
31 July 2012.
Going concern
The on-going dispute with Absa and the application for liquidation, as stated
above, indicates the existence of a material uncertainty that may cast
significant doubt on the Group`s ability to continue as a going concern. The
Group may therefore be unable to realise its assets and discharge its
liabilities in the normal course of business.
As the outcome of the abovementioned dispute and liquidation application and the
estimate of its financial effect and impact on the Group is not yet known and
cannot be reliably quantified at this time, these unaudited interim results have
been prepared on the going concern basis of accounting policies applicable to a
going concern. This basis presumes that funds will be available to finance
future operations and that the realisation of assets and settlement of
liabilities, contingent obligations and commitments will occur in the ordinary
course of business.
The Board endeavours to apply all of its efforts in obtaining the most suitable
outcome possible in the circumstances and as such refers shareholders to the
renewal of cautionary included in this announcement.
Basis of preparation and accounting policies
These condensed unaudited consolidated interim results have been prepared in
accordance with International Financial Reporting Standards ("IFRS"), the AC500
Standards, International Accounting Standards IAS 34 `Interim
Financial Reporting`, the Companies Act, 2008 (Act No.71 of 2008) and the
Listings Requirements of JSE Limited. The accounting policies applied are
consistent with those applied in the audited annual financial statements for the
year ended 31 August 2011.
Significant accounting policies include:
* Significant judgments: Judgment is required in determining the fair value
of investment property. The fair value is determined annually with an
independent valuation carried out every three years and any fair value
adjustment is recognised in profit and loss.
* Investment Properties: Investment properties are held to earn rental income
and to appreciate in capital value. Investment properties under development
are held for development in order to earn rental income and to appreciate
in capital value upon completion of the development. Consideration is
given to ancillary services provided. Investment properties held to earn
rental income are treated as longterm investments and are measured
initially at cost including transaction costs and thereafter at fair value.
The fair value is determined annually with an independent valuation carried
out every three years and any fair value adjustment is recognised in profit
and loss. 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. Rental income and operating expenses from investment
property are reported within revenue and operating costs respectively.
Material change in assets:
* The enhancement programme undertaken by AMU at 15 on Orange Hotel has
resulted in an increase in investment property and additions to furniture,
fittings and equipment.
The results have not been reviewed or audited by the Company`s auditors, Grant
Thornton.
Renewal of cautionary announcement
Further to the cautionary announcement dated 25 May 2012 and the negotiations
with Absa as referred to above, shareholders are advised that as the full impact
and outcomes of such negotiations cannot currently be determined, and that these
may have a material effect on the price of the Company`s securities,
shareholders are advised to continue exercising caution when dealing in the
Company`s securities, until a further announcement is made.
GN Shaff
Chief Executive Officer
BY ORDER OF THE BOARD
29 June 2012
Directors:
GN Shaff (Chief Executive Officer), PM Shaff *, TM Wolpe *, R Bendel *+
* non-executive + independent
Registered office: Corner Grey`s Pass and Orange Street, Gardens, Cape Town,
8001
Company secretary: Corporate and Merchant Administrators (Pty) Ltd
Designated adviser: Merchantec Capital
Transfer secretaries: Computershare Investor Services (Pty) Ltd, 70 Marshall
Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107)
Date: 29/06/2012 17:41:02 Supplied by www.sharenet.co.za
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