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Unaudited Interim Condensed Consolidated Results for the six months ended 31 August 2015
VISUAL INTERNATIONAL HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2006/030975/06)
(“the Company” or “Visual”)
ISIN Code: ZAE000187407 Share code: VIS
UNAUDITED INTERIM CONDENSED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED
31 AUGUST 2015
Condensed Statement of Comprehensive Income
31 August 31 August 28 February
2015 2014 2015
Unaudited Unaudited Audited
R R R
Revenue 2 151 759 1 372 465 2 771 299
Cost of sales (587 285) (642 038) (428 575)
Gross profit 1 564 474 730 427 2 342 724
Other income 133 835 432 600 325 581
Operating expenses (4 687 911) (5 941 978) (11 319 437)
Operating loss (2 989 602) (4 778 951) (8 651 132)
Investment revenue 1 423 698 1 883 491 2 974 926
Fair value adjustments - - 720 252
(Loss)/income from equity accounted
investments (457 133) 175 217 641 198
Finance costs (2 766 760) (2 701 001) (4 642 288)
Loss before taxation (4 789 797) (5 421 244) (8 957 044)
Taxation 776 311 (308 279) 1 208 241
(Loss) for the period (4 013 486) (5 729 523) (7 748 803)
Other comprehensive income - - -
Total comprehensive loss for the period (4 013 486) (5 729 523) (7 748 803)
Loss attributable to:
Owners of the parent (3 887 638) (5 612 130) (7 718 807)
Non-controlling interest (125 848) (117 393) (29 996)
(4 013 486) (5 729 523) (7 748 803)
Shares in issue at period end 215 383 400 212 883 400 215 383 400
Weighted average number of shares 215 383 400 195 845 304 208 237 178
Loss per share (cents) (1.80) (2.87) (3.71)
Diluted loss per share (1.80) (2.87) (3.71)
Headline earnings reconciliation
Net (loss)/profit for the period (3 887 638) (5 612 130) (7 718 807)
Adjustments:
Fair value adjustment on investment
properties - - (540 000)
Tax effects on fair value adjustment - - 100 440
Impairment of goodwill
Headline loss for the period (3 887 638) (5 612 130) (8 258 807)
Headline loss per share (cents) (1.80) (2.87) (3.97)
Condensed Statement of Financial Position as at 31 August 2015
31 August 31 August 28 February
2015 2014 2015
Unaudited Unaudited Audited
R R R
Assets
Non-Current Assets
Investment property 41 073 820 41 368 820 41 908 820
Property, plant and equipment 809 104 969 367 919 279
Intangible assets 91 766 58 045 47 868
Investment in joint ventures 895 317 886 467 1 352 449
Loan to joint venture - 848 291 -
Loans to shareholders 40 962 048 48 737 628 42 532 616
Other financial assets 426 782 590 531 425 782
84 258 837 93 459 149 87 186 814
Current Assets
Inventories 40 246 180 40 556 757 40 246 180
Loan to joint venture 753 529 - 871 802
Current tax receivable - - 256 331
Trade and other receivables 1 377 682 370 548 443 881
Cash and cash equivalents 508 838 040 877 920
42 377 899 41 765 345 42 696 114
Total Assets 126 636 736 134 224 494 129 882 928
Equity and Liabilities
Equity
Share capital 68 365 080 67 275 801 68 365 080
Retained income/(Accumulated loss) 1 408 977 7 477 163 5 359 867
Equity Attributable to Equity Holders of
Parent 69 774 057 74 752 964 73 724 947
Non-controlling interest (582 066) (543 615) (456 218)
69 191 991 74 209 349 73 268 729
Liabilities
Non-Current Liabilities
Loans from shareholders 15 714 310 17 301 919 14 353 931
Other financial liabilities 12 504 443 12 987 270 20 157 628
Operating lease liability 19 091 25 476 19 091
Deferred tax 7 794 036 10 018 749 8 517 304
36 031 880 40 333 414 43 047 954
Current Liabilities
Loans from shareholders 4 478 848 6 277 823 4 945 210
Other financial liabilities 12 369 541 8 280 285 5 362 913
Current tax payable 400 001 4 068 877 1 157 367
Trade and other payables 3 051 993 937 781 1 114 925
Provisions - 1 038 659 -
Bank overdraft 1 112 482 78 306 985 830
21 412 865 20 681 731 13 566 245
Total Liabilities 57 444 745 61 015 145 56 614 199
Total Equity and Liabilities 126 636 736 135 224 494 129 882 928
Net asset value per share (cents) 32.40 35.11 34.23
Net tangible asset value per share 32.40 35.11 34.23
Condensed Statement of Changes in Equity
Total
attributable
Total to equity Non-
stated Retained holders of controlling
capital income the group interest Total equity
R R R R R
Group
Balance at
1 March 2014 56 264 571 13 078 667 69 343 238 (426 222) 68 917 016
Loss for the year - (7 718 807) (7 718 807) (29 996) (7 748 803)
Other comprehensive
income - - - - -
Issue of shares 12 401 891 - 12 401 891 - 12 401 891
Capitalised costs on
equity raising (301 382) - (301 382) - (301 382)
Total contributions by
and distributions to
owners of company
recognised directly in
equity 12 100 509 - 12 100 509 - 12 100 509
Balance at
1 March 2015 68 365 080 5 359 867 73 724 947 (456 218) 73 268 729
Loss for the period - (3 887 638) (3 887 638) (125 848) (4 013 486)
Other comprehensive
income - - - - -
Other transfers - (63 245) (63 245) - (63 245)
Total comprehensive
Loss for the year - (3 887 638) (3 887 638) (125 848) (4 013 486)
Balance at
31 August 2015 68 365 080 1 408 984 69 774 064 (582 066) 69 191 998
Condensed Abridged Statement of Cash Flows
31 August 15 31 August 14 28 February
Unaudited Reviewed 15 Audited
R R R
Net cash from operating activities (3 643 761) (10 565 336) (17 607 609)
Net cash from investing activities (110 863) (174 859) 39 119
Net cash from financing activities 2 528 834 11 701 208 17 661 859
Total cash movement for the year (1 004 064) 961 013 93 369
Cash at the beginning of the year (107 910) (201 279) (201 279)
Total cash at end of the period (1 111 974) 759 734 (107 910)
BASIS OF PREPARATION
The board of directors presents the unaudited condensed consolidated interim results for the
six months ended 31 August 2015. The results have been prepared in accordance the
requirements of the Johannesburg Stock Exchange (“JSE”) Listings Requirements and the
framework concepts and the recognition and measurement requirements of International
Financial Reporting Standards (IFRS) and IAS 34 Interim Financial Reporting. The accounting
policies used in preparation of the interim results are in terms of IFRS and are consistent with
those applied in the preparation of the annual financial statements of the Group for the year
ended 28 February 2015.
The unaudited interim results have been prepared by the financial director Mr G Noble
(B.Comm) on the 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.
BACKGROUND AND NATURE OF BUSINESS
Visual, through the group, 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 also holds some of the homes developed (27 units)
which it rents out to families and intends to grow this area going forward, potentially in
partnership with one or more large funds.
Visual International, the main subsidiary 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 15 years. In addition, a number of properties were acquired by the Visual Group
during the year ended 28 February 2015 ahead of the listing on 23 May 2015.
To date, over 500 homes and apartments have been developed by Visual International at
Stellendale for the various Trusts and Clidet (a sister joint venture), with a further 449 units in
the process of being constructed by Clidet with Visual International a project manager.
FINANCIAL RESULTS COMMENTARY
Visual reports that the performance of the Group was in line with the prior period, with further
delays in commencement of development work due to town council approval only being
received during 2015, some nine months later than expected, as well as continued
reluctance of the banking sector to provide end user finance or bridging finance for the
middle income market.
The executive team remains in negotiations with a large contractor to finance a large
portion of development work planned for 2016 and is also making progress in its discussions
with a listed REIT for the off-take of units and a strategic relationship going forward.
All indications are that development funding will be in place by 29 February 2016.
Management is in the process of procuring funding against assets held and have also started
to sell off non-core assets to facilitate development work in the absence of funding.
Operating expenses for the six months ended 31 August 2015 were reduced compared to
the prior period, as the prior period included various costs associated with the restructure
and listing of the company.
Investment revenue was lower due to lower interest received on funds raised in connection
with the listing, whilst finance charges were higher due to higher levels of borrowings
associated with the funding of the Group some of which are at bridging finance rates.
During the period under review, a joint venture of the group, Dream Weaver Trading
Proprietary Limited, sold all its assets as a going concern on 27 March 2015 for R5 350 000.
Visual is a 50% shareholder in this joint venture. The proceeds have been received
subsequent to 31 August 2015 and have been primarily applied to reduce bridging funding,
which attracts a high funding cost.
The taxation credit is at a rate of 16.21% due to deferred taxation being raised against losses
incurred.
On the balance sheet, investment property and inventories remained in line with the prior
comparable period and prior year as development work could not commence until
planning approvals were received from the relevant authorities. Other financial liabilities
increased due to the securing of interim funding whilst development funding and partners
are secured.
hgCurrent liabilities also include a portion of a withholding tax liability due to SARS, which arose
during the restructure of the group ahead of the listing. The SARS obligations have been
substantially reduced from R4.068 million at 31 August 2014 and R1.1 million at 28 February
2015 to approximately R400 000 as at 31 August 2015. The withholding tax liability was settled
subsequent to 31 August 2015.
SEGMENTAL REPORTING
The segmental information is set out below:
The basis of segmentation and the measurement of segment profit/loss is consistent with the
prior period audited annual financial statements.
The group currently has three reportable segments, as described below, which are the
group's strategic business units. The strategic business units offer different services and are
reviewed by management. For each of the strategic business units, the group's CEO reviews
internal management reports on at least a monthly basis. The following summary describes
the operations of each of the group's reportable segments for the period ended 31 August
2015 and 31 August 2014:
- Property Services segment - Rendering of management, administration and consulting
services on development projects
- Property Investment segment - Letting of residential properties held by the group
- Property Development segment - Development of residential properties held by the
group or sold to third parties.
Revenue from two customers amounted to R749 307 and R480 000 respectively (2014:
R426 764 and Rnil), arising from services rendered by the Property Services segment.
Primary segment report – Property Property Property
August 2015 Services Investment Development Total
SEGMENT RESULTS
Total revenue 1,229,307 922,452 - 2,151,759
Inter segmental results - - - -
Total external revenue 1,229,307 922,452 - 2,151,759
Other income 32,150 101,685 - 133,835
Income from equity accounted
investments - (457,133) - (457,133)
Finance income - 96 - 96
Cost of sales (587,285) - - (587,285)
Finance costs - (1,660,175) (162,385) (1,822,560)
Employee costs (1,046,152) (844,299) (971,056) (2,861,507)
Depreciation (13,476) (119,940) - (133,416)
Other operating expenses (873,528) (683,867) (135,593) (1,692,988)
Segment results before taxation (845 863) (3,154,303) (1,269,034) (5,269,200)
Interest income on shareholder
loans 1,423,280
Finance costs accrued on
shareholder loans (894,017)
Taxation 776 311
Interest income on cash and
cash equivalents 322
Finance costs on bank
overdraft (50,182)
Net loss per statement of
comprehensive income (4,013,486)
SEGMENT ASSETS AND LIABILITIES
Investment in joint venture - 895,317 - 895,317
Other reportable segment
assets 1,345,581 42,760,320 40,246,180 84,452,081
Total reportable segment assets 1,345,581 43,655,637 40,246,180 85,247,398
Loans to shareholders 40,962,048
Other financial assets 426,782
Cash and cash equivalents 508
Total assets per statement of
financial position 126,636,736
Total reportable segment
liabilities 610,108 27,023,189 7,035,963 34,669,260
Current tax 400,001
Deferred tax 7,794,036
Loans from shareholders 13,468,967
Bank overdraft 1,112,481
Total liabilities per statement of
financial position 57,444,745
Primary segment report – Property Property Property
February 2015 Services Investment Development Total
SEGMENT RESULTS
Total revenue 1,025,734 1,745,565 - 2,771,299
Inter segmental results - - - -
Total external revenue 1,025,734 1,745,565 - 2,771,299
Other income 43,131 73,398 - 116,529
Income from equity accounted
investments - 641,198 - 641,198
Fair value adjustments - 720,252 - 720,252
Finance income - 62,705 - 62,705
Cost of sales (428,575) - - (428,575)
Finance costs - (2,544,712) (362,852) (2,907,564)
Employee costs (921,503) (1,266,427) (1,773,352) (3,961,282)
Depreciation (16,431) (234,909) - (251,340)
Other operating expenses (2,208,720) (4,528,349) (369,745) (7,106,814)
Segment results before taxation (2,506,364) (5,331,279) (2,505,949) (10,343,592)
Interest income on shareholder
loans 2,910,345
Finance costs accrued on
shareholder loans (1,689,665)
Other income 209,051
Taxation 1,208,241
Interest income on cash and
cash equivalents 1,876
Finance costs on bank overdraft (45,059)
Net loss per statement of
comprehensive income (7,748,803)
SEGMENT ASSETS AND LIABILITIES
Investment in joint venture - 1,352,449 - 1,352,449
Other reportable segment assets 77,814 44,113,836 40,246,180 84,437,830
Total reportable segment assets 77,814 45,466,285 40,246,180 85,790,279
Loans to shareholders 42,532,616
Other financial assets 425,782
Current tax 256,331
Cash and cash equivalents 877,920
Total assets per statement of
financial position 129,882,928
Total reportable segment
liabilities 26,664 26,627,893 6,561,806 33,216,363
Current tax 1,157,367
Deferred tax 8,517,304
Loans from shareholders 12,737,335
Bank overdraft 985,830
Total liabilities per statement of
financial position 56,614,199
Primary segment report – August Property Property Property
2014 Services Investment Development Total
SEGMENT RESULTS
Total revenue 512,117 860,349 - 1,372,466
Inter segmental results - - - -
Total external revenue 512,117 860,349 - 1,372,466
Other income 84,994 178,846 168,760 432,600
Income from equity accounted
investments - 175,217 - 175,217
Cost of sales (642,038) - - (642,038)
Finance costs - (1,385,327) (191,512) (1,576,839)
Employee costs (684,320) (1,114,969) (714,741) (2,514,030)
Depreciation (5,385) (109,658) - (115,043)
Other operating expenses (1,067,645) (2,024,513) (220,750) (3,312,908)
Segment results before taxation (1,802,277) (3,420,055) (958,243) (6,180,575)
Interest income on shareholder
loans 1,881,939
Finance costs accrued on
shareholder loans (1,096,109)
Taxation (308,279)
Interest income on cash and
cash equivalents 1,553
Finance costs on bank overdraft (28,052)
Net loss per statement of
comprehensive income (5,729,523)
SEGMENT ASSETS AND LIABILITIES
Investment in joint venture - 886,467 - 886,467
Other reportable segment assets 165,524 43,449,547 40,556,757 84,171,828
Total reportable segment assets 165,524 44,336,014 40,556,757 85,058,295
Loans to shareholders 48,737,628
Other financial assets 590,531
Cash and cash equivalents 838,040
Total assets per statement of
financial position 135,224,494
Total reportable segment
liabilities - 22,230,812 6,277,823 28,508,635
Current tax 4,068,877
Deferred tax 10,018,749
Loans from shareholders 17,301,919
Provisions 1,038,659
Bank overdraft 78,306
Total liabilities per statement of
financial position 61,015,145
Geographic information:
The group's revenue is derived from operations and property holding only in South Africa.
The group's non-current assets are also located in South Africa.
Segment revenue and expenses:
Revenue and expenses that are directly attributable to segments are allocated to those
segments. Those that are not directly attributable to segments are allocated on a
reasonable basis.
Segment assets and liabilities:
Segment assets and liabilities comprise those operating assets and liabilities that are directly
attributable to the segment or can be allocated to the segment on a reasonable basis.
Segment assets exclude investments, tax assets, bank balances, deposits and cash. Segment
liabilities exclude loans, bank overdraft and tax liabilities. Capital expenditure represents the
local costs incurred during the period to acquire segment assets that are expected to be
used during more than one period, namely, property, plant and equipment, investment
property and intangible assets other than goodwill.
SHARE CAPITAL AND ISSUE/ REPURCHASE OF SHARES
During the period under review, the Company did not issue or repurchase any shares.
DIVIDENDS
The Company has not declared a dividend for period ended 31 August 2015 and in line with
its stated intention in the prospectus, the Company will not be considering a dividend
payment.
LITIGATION
There is no litigation pending against the Company or its Subsidiaries, which is expected to
have a material impact on the results of the Group.
CONTINGENT LIABILITIES
At the reporting date the Group does not have any contingent liabilities (2014: RNil).
RELATED PARTIES
Related parties are the same as reported in the previous period.
Related party transactions up until 31 August 2015 R
Interest paid to/(received from) related parties
Shareholders 894 017
Shareholder (1 423 280)
Company controlled by director 141 676
Close family member of director 3 750
Shareholders of subsidiaries 1 222 380
Salary paid to related party
Close family member of director 30 000
Management fees received from related parties
Joint venture (Dream Weaver Trading) 549 850
Companies controlled by directors (Clidet) 661 581
Legal fees paid to related parties
Companies controlled by close family member of director 81 686
GOING CONCERN
As previously reported, the Group experienced cash flow complications during the period
under review, partly due to the nature of the business, which it addressed by borrowing from
a lending institution at higher interest rates. The cash flow complications resulted from the
following events:
- A full share subscription was not received upon listing in 2014 and subsequent
placement of shares have taken longer than expected.
- Delays in being able to generate revenue from property development sales were also
experienced due to a nine month delay in approval of zonings and plan approvals
from the local authorities, substantially delaying the start of construction on
Northbank 1.
The directors have considered the operational budget and cash flow forecasts for the
ensuing 12 months which are based on the current expected economic and market
conditions and the happening of certain of the following events:
a) A large foreign engineering and construction company continues in discussions with
Visual to assist with construction of planned projects. Currently Visual has zoning rights
to develop approximately 250 houses on Erf 18358 and the remainder of farm 1286. If
the agreement is concluded timeously, the construction company will undertake the
building thereof. Otherwise Visual plans to sell, develop and bridge fund these houses
on a plot and plan basis during the next calendar year.
b) Visual is continuing with its negotiations with a couple of recognised property and
investment funds about the establishment with Visual of one or more middle income
residential property investment funds, one of which is progressing well. If negotiations
are concluded successfully, Visual will develop some of its property projects for this
fund, hold a minority share in the residential REIT, and undertake the management of
the properties for the residential REIT. In certain instances the residential REIT will
acquire properties held by other developers, in which case Visual will receive
commission and management fees.
c) The Company is also in discussions with certain entities that have expressed in interest in
subscribing for a strategic shareholding in Visual or its projects, which discussions are
progressing well.
d) In addition to the above discussions, management's funding plans include:
i. Securing funding from normal banking sources for property development, which
has been the normal source of development funding of the group historically.
ii. The sale of undeveloped serviced land for an estimated consideration of
R36 million.
iii. Returning to its original business model of “plot and plan” should the negotiations
with the various funders be further delayed.
It is noted that discussions with local agents indicate that the property valuations reflected in
the above results are conservative.
PROSPECTS
Going forward, most of the property development projects take place in Visual International,
whilst Stellendale Village houses the planned Stellendale Lifestyle Retirement development of
approximately 825 units.
The Stellendale 3 project was redesigned to enable a faster roll-out of approximately
250 single residential houses on a plot and plan basis. It is anticipated that the first phase of
Stellendale 3 of approximately 83 units will be commenced shortly and should be completed
during 2016.
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 year ending 28 February 2016. Mystic Pearl similarly holds two pieces of
land for future development in Hagley, with a joint venture partner. Due to the change in
focus to larger developments as detailed in subsequent events below, the Company may
consider disposing of some of its smaller properties during 2016.
Visual has a positive net tangible asset value in excess of R70 million and the board will be
considering the size and nature of properties held in order to optimise the balance sheet for
its key development initiatives and ensure that it has sufficient cash and funding resources to
grow the group.
EVENTS AFTER THE REPORTING PERIOD
There are no other material events that require reporting after 31 August 2015, other than in
the normal course of business.
By order of the board
Johannesburg
6 November 2015
Designated Advisor
Arbor Capital Sponsors Proprietary Limited
Date: 23/11/2015 05:28:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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