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Abridged prospectus relating to the listing Visual
VISUAL INTERNATIONAL HOLDINGS LIMITED
(Formerly Presto Financing Proprietary Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2006/030975/06)
(“the Company” or “Visual”)
ISIN Code: ZAE000187407 Share code: VIS
ABRIDGED PROSPECTUS RELATING TO THE LISTING OF VISUAL
Prepared and issued in terms of the Listings Requirements (“the Listings Requirements”)
of the JSE Limited (“the JSE”) and the Companies Act, 2008 (No. 71 of 2008), as
amended (“the Act”), relating to an Offer for subscription of Visual ordinary shares by
way of:
- an Offer by the Company by way of a private placement for subscription of up to
66 000 000 ordinary no par value shares in the issued share capital of the Company
at an issue price of R0.50 per ordinary share; and
- the subsequent listing of the ordinary shares of Visual on the Alternative Exchange
(AltX) of the JSE.
In the event of an over-subscription in terms of the Offer, the directors will adjust the
allocation of applicants on an equitable basis in accordance with paragraph 5.18 of the
JSE Listings Requirements. The shares offered in terms of this prospectus will rank pari
passu with the existing ordinary shares in Visual and rank equally as to share in profits,
dividends and distributions.
At the Last Practicable Date, Visual’s share capital comprises 1 000 000 000 authorised
ordinary shares of no par value and 189 458 775 issued ordinary shares of no par value
with stated capital of approximately R57 015 055.
At the date of closing of the Offer and assuming that the Offer is fully subscribed,
Visual’s share capital will comprise 1 000 000 000 authorised ordinary shares of no par
value and 255 458 775 issued ordinary shares of no par value with stated capital of
approximately R90 502 170. There will be no convertible or redeemable shares issued.
The Offer is subject to a minimum subscription of R3 600 000 which needs to be raised
by the issue of 7 200 000 shares in terms of this prospectus in order to achieve the spread
requirements that at least 10% of the shares are held by the public and there are at least
100 public shareholders as stipulated in the AltX Listings Requirements.
The Offer has not been underwritten. The Company does not have any treasury shares in
issue.
Subject to achieving the required spread of public shareholders in terms of the JSE
Listings Requirements, (which stipulates that the public must hold a minimum of 10% of
each class of equity securities and the number of public shareholders shall be at least
100), the JSE has granted Visual a listing in respect of up to 255 458 775 ordinary shares
on the AltX under the abbreviated name “Visual”, share code “VIS” and ISIN
ZAE000187407. In addition, the listing will be subject to all the properties being
transferred into the Visual Group. The transfer of the properties is expected to be
finalised during March 2014 but the properties must be acquired before the listing of
Visual is permitted to proceed.
It is anticipated that the listing of the shares on AltX will become effective from the
commencement of business on Friday, 28 March 2014.
Applications for ordinary shares in Visual must be for a minimum of 10 000 ordinary
shares at R0.50 cents per share, amounting to R5 000, and in multiples of 100 ordinary
shares thereafter. Fractions of shares in Visual will not be issued.
The shares in Visual will only be tradable on the JSE in dematerialised form and, as such,
all investors who elect to receive their ordinary shares in Visual in certificated form, will
have to dematerialise their certificated shares should they wish to trade therein.
An English copy of this prospectus, accompanied by the documents referred to under
“Registration of Prospectus”, was registered by the Registrar of Companies on 28
February 2014 in terms of in terms of Regulation 52(5) of the Companies Act, 2008 (No.
71 of 2008), as amended.
Background, incorporation and nature of business
Visual was incorporated as a private company on 5 October 2006 under the name Presto
Financing Proprietary Limited. The company’s name was changed, and it was converted
to a public company, by way of special resolutions on 3 October 2013, which special
resolutions were registered by CIPC on 23 December 2013. Presto Financing Proprietary
Limited was a dormant subsidiary of Visual International until it was decided to use this
group company as the new holding company for the purposes of the listing. Visual then
acquired the controlling interest in Visual International from CKR Investment Trust with
effect from 1 March 2012 and became the holding company of the various Subsidiaries of
Visual.
Thus Visual, with its wholly owned subsidiary Visual International, has operated as a
group for the full year ended 28 February 2013 and group annual financial statements are
available for inspection. These results have been audited and have been prepared in
accordance with accounting policies that are in accordance with IFRS.
Visual is essentially a property developer that acquires land, rezones the land, installs the
relevant services and then constructs houses and apartments on the land for sale to
homeowners or investors. Visual has recently started to hold some of the homes
developed (27 units) which it rents out to families and intends to grow this area going
forward with the initial intention to acquire a further 63 units during the first half of 2014.
Visual International, the main subsidiary and previously held 100% directly by the CKR
Investment Trust, was established more than 20 years ago and has been involved in a
number of premier property development projects in South Africa over the past 14 years.
In addition, a number of property developments were undertaken by entities associated
with CK Robertson and Visual International, namely RAL Trust and My Place Trust,
which properties have been acquired by the Visual Group by way of a restructure in
accordance with Section 42 of the Income Tax Act ahead of the listing, termed inter-
related acquisitions.
The additional properties and assets acquired subsequent to 28 February 2013 are
summarised as follows:
- The acquisition of Erf 18363, Kuils River dated 18 October 2013 from RAL
Trust, for a net purchase consideration of R21 500 000 which was settled through
the issue of 83 169 544 Shares in Visual;
- The acquisition of Erf 18358 and the remainder of farm 1286, Kuils River from
RAL Trust dated 18 October 2013, for a net purchase consideration of
R2 362 387 which was settled through the issue of 7 706 987 Shares in Visual;
- The cancellation agreement dated 29 November 2013 with RAL Trust pursuant to
the above acquisitions from RAL Trust terminating the former development
agreement and beneficiary agreement with Visual International, resulting in a
capital receipt of R32 million;
- An agreement was entered into on 15 February 2013 to purchase Erf 22887 with a
fair value of R2 155 774 from the My Place Trust in exchange for the issue of
shares by Stellendale Village to the amount of R6 600 000. On 20 January 2014
the agreement was cancelled. The property was substituted for Erf 24258, with a
fair value of R7 350 000, with a commensurate issue of shares by Stellendale
Village;
- The agreement with My Place Trust for the acquisition of the remaining minority
shareholding of 10 shares in Stellendale Village dated 31 October 2013, for a net
purchase consideration of R215 587 which was settled through the issue of
703 325 Shares in Visual.
The two trusts, namely CKR Investment Trust and the RAL Trust, now represent the
controlling shareholders of the Visual Group, both being associated with the founder and
Chief Executive Officer of the Visual Group, Mr CK Robertson.
The Visual Group, through Visual International and through the CKR Investment Trust,
the RAL Trust and My Place Trust prior to the Section 42 restructure, has a long profit
history and together has built up a property portfolio with a gross asset value of over
R120 million and a net asset value of R70.7 million as at 30 November 2013. Visual
International used to be a beneficiary of RAL Trust and My Place Trust and used to
receive a distribution of profits from these trusts, which was recognised in “Other
Income”.
The revenue and cost of sales were recognised within the trusts. Due to the complex
nature of the previous inter- related parties, all of which were managed by CK Robertson
and the Visual International management team, a decision was taken to simplify the
structure and bring the relevant properties under Visual International, as the main
operating subsidiary and previous beneficiary of the RAL Trust and My Place Trust.
It should be noted that the executive directors that managed Visual International and also
assisted with the property development of the properties held by the RAL Trust and My
Place Trust as a team over the past seven years, remain in place and will continue to
manage the Visual Group going forward. The executive directors have many years’
experience in property development and property management (including leasing, repairs
and maintenance of the properties, running the home owners association and sales) as
detailed in their Curriculum Vitaes as set out in the Prospectus.
Other than the acquisition of properties and assets in anticipation of the listing as
described above (in which Mr CK Robertson had an indirect interest as a beneficiary of
the RAL Trust and My Place Trust), as well as the dividend declared as detailed in the
annual financial statements for the year ended 28 February 2013, there has been no
material change in the business or the trading objects over the past five years.
Visual is the holding company of a number of Subsidiaries, focusing mainly on property
development and to a much lesser extent, property investment and property services. It is
the intention to establish a new area focussing on property sales to investors.
The majority of the revenue and profits of the group arise from residential property
development of houses and apartments for sale to individuals or property investors.
To date, approximately 440 homes have been developed by Visual International at
Stellendale for the various Trusts and Clidet, with a further 63 units under construction
within Clidet, which units will be acquired and held for rental income by Visual as
detailed in paragraph 1.7.2 of the Prospectus. The underlying land has since been
acquired from the Trusts as detailed in paragraph 1.7.2 of the Prospectus and is owned by
the Visual group going forward. The original intention was to also acquire the 50%
shareholding in Clidet from My Place Trust, however, shareholder approval from the
other 50% shareholder in Clidet could not be secured. Visual International will continue
to manage this development for Clidet in terms of the management agreement that is in
place.
Prospects
Going forward, most of the property development projects take place in Visual
International, whilst Stellendale Village houses the Stellendale Lifestyle Retirement
development, which project has commenced with 88 units sold of the planned
approximately 840 units and the contractors having been appointed to install the services
for construction of, the units at Northbank 1 and Northbank 2 within the Stellendale
Lifestyle Retirement development.
Hoeksteen Projects and Richland respectively hold land for future development at
Machadadorp and Richwood, although no development is planned or forecast on these
two properties for the two years ending 28 February 2014 and 28 February 2015. Mystic
Pearl similarly holds two pieces of land for future development in Hagley, with its joint
venture partner, Oupossie Trust.
Visual International holds a 50% interest in Dream Weaver which owns under cover and
open parking bays at three buildings from which income is generated through leasing of
parking bays, with its joint venture partner Ruby and Martha Trust.
The Visual Property Club will be jointly operated as a 50:50 division under Visual
International with Van Der Merwe & Robertson Bonds Proprietary Limited and provides
comprehensive services to investors that wish to become property developers and holds a
registered patent under ZA Patent Number 2012/03640 for the process to qualify an
investor as a property developer in accordance with the Income Tax Act, that it has
successfully developed over the past four years, although it does not generate any income
or direct benefit for the group.
In addition, Clidet has entered into a joint development agreement with the Department
of Local Government and Housing of the Western Cape Provincial Government (“the
Department”), whereby the Department made a portion of state land, immediately
adjacent to Stellendale Village, available for incorporation into Stellendale. In terms of
this agreement, Clidet, with Visual as the management partner, commenced with, and
will continue to build, a total of 140 “GAP” housing opportunities which are spread
throughout Stellendale Village, and which are similar to the other homes and apartments.
These GAP units are available at ±R430 000 each (which is ±R80 000 less than the
market value of these houses/apartments) to qualifying buyers, i.e. such buyers must earn
less than R18 000 per month, must be South African citizens and must be first time home
buyers to qualify. These “GAP” or affordable units represent ±10% of Stellendale
Village’s homes and apartments, thus promoting an integrated society and providing real
social upliftment. Visual will benefit in due course through an increase in its bulk
available to the greater Stellendale Village.
Other than the above joint development agreement, there are no government protection or
investment encouragement laws that impact on the company or the Group.
SUMMARY OF ESTIMATE AND FORECAST FINANCIAL INFORMATION
The Visual forecast for the years ending 28 February 2014 and 28 February 2015
respectively are summarised below.
2014 2015
R R
Revenue (Note 4) 2 760 390 134 214 499
Management fees received 1 024 224 1 024 224
Rental income 1 736 166 4 164 469
Property development (Note 4) 129 025 806
Cost of sales (270 381) (71 383 917)
Development costs (Note 4) (70 379 979)
Inventory impairment -
Property utilities (270 381) (1 003 938)
Gross profit 2 490 009 62 830 582
Other income (Note 5) 32 689 978 2 436 158
Capital Receipt and termination of beneficiary right 27 000 000 -
Capital Receipt – management agreement 5 000 000 -
Investment income 545 186 2 213 048
Other income 144 792 223 110
Expenses (Note 6) (7 839 753) (12 077 241)
Salaries & Wages (Note 6) (2 931 178) (5 697 277)
Listing costs (Note 6) (908 272) (415 000)
IFRS 2 charges (Note 7) (1 140 630) -
Sales commissions (2 081 857)
Other non-material expenses(Note 6) (2 859 673) (3 355 106)
Rental guarantee (Note 8) - (528 000)
Operating profit 27 340 234 53 189 499
Finance costs (Note 9) (3 084 045) (6 162 741)
Profit before taxation 24 256 189 47 026 758
Taxation (Note 9) (2 863 053) (13 167 492)
Profit for the year 21 393 136 33 859 266
Profit/(loss) attributable to:
Owners of parent 21 508 700 33 447 048
Non-controlling interest (115 564) 412 218
21 393 136 33 859 266
Total issued shares 255 458 775 255 458 775
Earnings per share (cents) 8.42 13.09
Headline earnings per share (cents) (2.15) 13.09
Assumptions:
The assumptions utilised in the profit forecast and which are considered by management
to be significant or are key factors on which the results of the Company will depend, are
disclosed below. The assumptions disclosed are not intended to be an exhaustive list.
The actual results achieved during the forecast period may vary from the forecast and the
variations may or may not be material.
1. The current market conditions in the industry in which the business operates are not expected
to change substantially.
2. The forecast numbers have been prepared in terms of the accounting policies of the Visual
Group in accordance with IFRS.
3. Revenue and other income for the year ending 28 February 2014 has been substantially
secured and is in terms of current agreements and top structure development work that is in
progress or planned. The profit forecast for the year ending 28 February 2014 has been based
on the actual reviewed results for the nine months ended 30 November 2014 and three month
forecast information to the year-end being 28 February 2014. The revenue for the year ended
28 February 2015 is partly derived from a sale agreement with CK Robertson of R36 284 104
subject to CK Robertson being granted a 100% bond for the purchase.
4. The substantial increase in revenue in 2015 is primarily related to revenue from property
developments in the group. This is directly associated with the higher costs of sales which is
incurred due to the standard cost of developing the residential unit is required to be
recognised in cost of sales. Previously this cost was incurred in the respective trusts.
In addition, annual rental income is expected to increase by 6% per annum and growth in
rental income is anticipated as the group’s own property holdings increase. No uncontracted
revenue has been assumed as the 27 units (per Valuation I) are fully let and as a vacancy
occurs, the unit is immediately re-let. Rental income from the parking is relatively
immaterial to the profit forecast.
For the year ending February 2015, 63 units are assumed to be purchased on or about 31 May
2014 from Clidet using a portion of listing funds, a portion external bank financing and a
portion shareholder finance. Approval from the bank financiers has been issue in principal,
but Visual is awaiting final approval from the other shareholder in Clidet for the transaction
and will only pursue the acquisition subject to the listing of Visual. It is assumed that Visual
will retain the 63 units at the Stellendale Village development. The units will be completed
by 31 May 2014 and will be let in full with no vacancies.
Erf 18358 (per Valuation B) will be developed into the Saxdownes Junction site. The start
date of the project is around 1 September 2014 and the completion date is estimated to be
during December 2014, with transfer prior to 28 February 2014: The project consists of
servicing the site and selling the serviced site. Management also allowed for a discount of up
to 4,5% discount on the selling price.
Income from property services is expected to grow slowly in the first couple of years.
The directors have estimated income from property development based on current
development work being undertaken at Northbank 1 and Northbank 2 in Stellendale Village
being completed and all units thereon being sold in the period ending 28 February 2015, the
estimated timing of property transfers and on past experience. These factors may not be
completely under the control of the directors. For instance, sectional title property transfers
are normally transferred simultaneously to avoid waiting for counter covers, etc. to be opened
to lodge a second or third batch. Therefore, if the planned February 2015 transfer of 206
units in the second phase of Northbank 2 is late, in a worst case scenario, this will decrease
revenue by R78 562 352 and cost of sales by R47 168 030 (Cost of sales will be allocated to
work in progress at 28 February 2014 and will then be expensed to cost of sales in the
following year). The net effect in profit will be a reduction in profit before taxation by R31
394 322 to R15 323 710. However, this will be a timing difference and the R31 394 322
profit before taxation will then be recognised in the following year.
5. Other income primarily arises from the termination benefits received as detailed in the
reviewed results for the nine months ended 30 November 2013.
6. Expenses have been forecast on a line by line basis and reflect the current budgeted
expenditure with a year on year projected increase for most of the operating expenses of
10%.
The annual rental expense is projected to increase at 8% per annum whilst levies and
property utilities are expected to increase by 6%.
The expenses for the year ending 28 February 2014 are higher due to the once off costs
associated with the listing of the Company. Audit fees are expected to increase due to the
Company being a listed entity going forward as well as salaries and wages due to the
appointment of a number of independent non-executive directors and an additional member
of key management during the latter part of 2013.
Whilst both revenue and property development expenses increased as reflected under cost of
sales, normal operating expenses would not increase substantially or proportionately as the
same employees are handling the process and administration. All expenses relevant to the
property developments are included in cost of sales.
7. The IFRS 2 charges are for once-off share based payments to advisors in connection with the
listing and the issue of shares to the Community in order to achieve a spread of shareholders
for the listing and to create goodwill within the community in which Visual develops its
properties.
8. The rental guarantee provision relates to a contracted sale for which a rental guarantee has
been issued. Whilst this guarantee may not be called upon, it has been fully provided in the
forecast for the year ending 28 February 2015.
9. The present level of interest and tax rates will remain substantially unchanged
10. The capital accounting receipt and termination benefit distribution of R27 000 000 received
is not taxable due to it being received from a trust under Section 42 of the Income Tax Act
transaction and therefore not taxable in the hands of Visual
11. The cash raised on the Offer is utilised as follows:
a) R5 235 090 for the part funding of the purchase of three apartment buildings in the
Stellendale 2 project from Clidet.
b) R16 364 910 for the part funding of the development of the first two phases of the
lifestyle estate, Stellendale Lifestyle Retirement. Should funding permit, any excess
funds at the completion of Northbank 2 will be used to part fund the acquisition by
Visual of up to 72 x Northbank 2 suites as well as part funding to install the
infrastructure services for Stellendale 3 for the development of a private primary
school, a ±9,000m2 shopping mall and ±200 building opportunities (apartments and
houses).
c) Working capital including settling of existing liabilities and cash flow reserve of R9.1
million.
d) R2.3 million cost of listing and raising capital.
12. Interest from cash in the bank or cash generated from operations has not been taken into
account in the forecasts.
13. Taxation has been assumed at a rate of 28%, as per the Income Tax Act 58 of 1962, except
for exceptional items having a material effect.
14. The weighted average number of shares in issue is based on the Offer for subscription being
fully subscribed and an issue of shares and listing date of 28 February 2014.
Authorised and issued share capital
The authorised and issued share capital of Visual before and after the offer is set out
below.
R
Authorised share capital before the offer
1 000 000 000 ordinary shares of no par value 0
Issued, before the offer
189 458 775 ordinary shares of no par value (stated capital) 57 015 185
R
Authorised after the offer
1 000 000 000 ordinary shares of no par value 0
Issued, after the offer
189 458 775 ordinary shares of no par value 57 015 185
66 000 000 ordinary shares of no par value (net of issue costs) 30 615 760
Total issued share capital of 255 458 775 ordinary shares of no par value
(stated capital) 87 630 945
Directors of Visual
The full name, ages, addresses and occupations of the directors of Visual are set out
below:
Name (age) Business Address Occupation
Charles Kenneth Robertson (66) 23 Kleinplaas, Chief Executive Officer
Hohenhort Street,
Stellenberg, 7550
Grant Noble (36) 23 Kleinplaas, Projects Director
Hohenhort Street, (executive)
Stellenberg, 7550
Peter Grobbelaar (58) 23 Kleinplaas, Projects Director
Hohenhort Street, (executive)
Stellenberg, 7550
Eltie Link (67) 46 Hofmeyer Street, Independent Non-executive
Welgemoed, 7530 Director / Chairman of the
Audit Committee
Guy Lundy (43) 7 West Quay, V&A Independent Non-executive
Waterfront, Cape Director
Town, 8001
Reuben Kadalie (58) CSIR 15 Lower Hope Independent Non-executive
Road, Rosebank, 7701 Director
Ruben Richards (53) First Floor, Spire Independent Non-executive
House, Tannery Park, Chairman
23 Belmont Rd,
Rondebosch 7700,
Cape Town
Theo Vorster (50) Galileo Capital, Independent Non-executive
Fountain Grove Office Director
Park, 5 Second Road,
Hyde Park, 2191
Pankaj Ranchod (58) 24 Main Street, Linden Independent Non-Executive
Extension, Randburg, Director
2194
PURPOSE OF THE OFFER AND LISTING
The purpose of the Offer is to expand the capital base and shareholder spread of the
Company in order to achieve a minimum spread of shareholders in terms of the JSE
Listings Requirements. The additional capital will be applied to facilitate the
development and growth of the Group’s existing property developments and to build the
investment property portfolio held for rental income.
The Offer will enable the general public to participate directly in the equity of the
Company. The listing is aimed to create a platform for the Group from which it will be
able to raise additional capital in due course.
The cash raised on the Offer is utilised as follows:
a) R5 235 090 for the part funding of the purchase of three apartment buildings in the
Stellendale 2 project from Clidet.
b) R16 364 910 for the part funding of the development of the first two phases of the
lifestyle estate, Stellendale Lifestyle Retirement. Should funding permit, any excess
funds at the completion of Northbank 2 will be used to part fund the acquisition by
Visual of up to 72 x Northbank 2 suites as well as part funding to install the
infrastructure services for Stellendale 3 for the development of a private primary
school, a ±9,000m2 shopping mall and ±200 building opportunities (apartments and
houses).
c) Working capital and cash flow reserve of R9.1 million.
d) R2.3 million cost of listing and raising capital.
SALIENT DATES AND TIMES
2014
Date on which the Offer contemplated in this Prospectus will be
open at 09h00 on 3 March
Date on which the Offer contemplated in this Prospectus will close
at 12h00 on 24 March
Listing of securities on the JSE at the commencement of business on 28 March
*Shareholders wishing to subscribe for ordinary shares in dematerialized form must
advise their Central Securities Depository Participant (“CSDP”) or broker of their
acceptance of the offer to subscribe for shares I the manner and within the cut-off time
stipulated by their CSDP or broker.
Interested investors should contact Michelle Krastanov or Arcay Moela Sponsors
Proprietary Limited and Carl Liebenberg of Prescient Wealth Management Proprietary
Limited on 011 480 8500. A copy of the prospectus can be obtained from the registered
office of the Company in Cape Town and at the office of the Designated Advisor in
Joahnnesburg.
By order of the board
Johannesburg
7 March 2014
Designated Adviser Auditor and Reporting Accountants
Arcay Moela Sponsors Baker Tilly Greenwoods
Lead Funding Arranger Property Valuer
Prescient Wealth Management Adval Valuation Centre cc
Attorneys Stockbroker
Van Der Merwe & Robertson Imara SP Reid
Date: 07/03/2014 02:20:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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