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Unaudited Interim Condensed Consolidated Results for the Six Months ended 31 August 2017
VISUAL INTERNATIONAL HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2006/030975/06)
ISIN Code: ZAE000187407 Share code: VIS
(“Visual” or “the Company” or “the Group”)
UNAUDITED INTERIM CONDENSED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED
31 AUGUST 2017
Condensed Statement of Comprehensive Income
31 August 28 February 31 August
2017 2017 2016
Unaudited Audited Unaudited
R R R
Revenue 3 022 188 11 081 722 567 648
Cost of sales - (7 350 000) (161 964)
Gross profit 3 022 188 3 731 722 405 684
Other income 1 150 066 780 763 121 944
Operating expenses (5 803 354) (13 172 487) (6 258 659)
Operating loss (1 631 100) (11 702 677) (5 731 031)
Investment revenue 1 829 256 3 666 996 1 516 916
Impairment (3 966 955) - -
Loss on sale of investment property (364 000) - -
Fair value adjustments - - (17 675)
Income from equity accounted investments 1 260 495 (521 725) -
Finance costs (1 341 580) (5 697 508) (3 232 613)
Loss before taxation (4 213 884) (14 254 914) (7 325 917)
Taxation 258 103 5 358 138 34 908
Loss for the period (3 955 781) (8 896 776) (7 291 009)
Other comprehensive income - - -
Total comprehensive loss for the period (3 955 781) (8 896 776) (7 291 009)
Loss attributable to:
Owners of the parent (3 797 550) (8 556 452) (7 103 696)
Non-controlling interest (158 231) (340 324) (187 313)
(3 955 781) (8 896 776) (7 291 009)
Shares in issue at period end 338 367 112 231 700 445 223 000 126
Weighted average number of shares 325 088 126 226 665 525 222 834 545
Loss per share (cents) (1.22) (3.77) (3.19)
Diluted loss per share (cents) (1.22) (3.54) (3.19)
Condensed Statement of Financial Position
31 August 28 February 31 August
2017 2017 2016
Unaudited Audited Unaudited
R R R
Assets
Non-Current Assets
Investment property 1 920 000 13 023 820 16 523 820
Property, plant and equipment 394 035 520 394 662 936
Finance lease receivables 3 849 231 4 896 075 5 196 981
Investment in joint ventures 110 110 524 835
Investment in associate 13 780 000 - -
Loans to shareholders 46 762 869 44 898 129 45 538 872
Other financial assets 201 201 84 000
66 706 446 63 338 729 68 531 443
Current Assets
Inventories - 22 896 180 30 246 180
Finance lease receivable 965 365 925 565 1 013 192
Current tax receivable 1 686 1 686 -
Trade and other receivables 25 370 25 302 685 778
Cash and cash equivalents 335 789 355 100 155 106
1 328 210 24 203 833 32 100 257
Non-current assets held for sale and
assets of disposal groups 34 000 000 2 964 000 22 025 000
Total Assets 102 034 656 90 506 562 122 656 700
Equity and Liabilities
Equity
Share capital 84 494 960 70 614 960 69 365 080
(Accumulated loss)/Retained income (18 728 181) (14 930 631) (13 477 875)
Equity Attributable to Equity Holders of
Parent 65 766 779 55 684 329 55 887 205
Non-controlling interest (1 065 397) (907 166) (754 155)
64 701 382 54 777 163 55 133 050
Liabilities
Non-Current Liabilities
Loans from shareholders 17 196 476 16 161 571 17 299 755
Other financial liabilities 8 814 918 8 489 633 4 861 705
Deferred tax 823 736 1 081 839 3 494 205
26 835 130 25 733 043 25 655 665
Current Liabilities
Loans from group companies 35 111 688 232 626 752
Other financial liabilities 1 194 388 2 531 130 25 857 157
Provisions 900 000 - -
Current tax payable - - 188 560
Trade and other payables 7 624 833 4 996 115 8 816 378
Deferred income - 100 000 -
Bank overdraft 743 812 833 501 968 077
10 498 144 9 148 978 36 456 925
Liabilities of disposal groups - 847 378 5 411 060
Total Liabilities 37 333 274 35 729 399 67 523 649
Total Equity and Liabilities 102 034 656 90 506 562 122 656 700
Net asset value per share (cents) 19.1 23.25 24.74
Net tangible asset value per share 19.1 23.21 24.74
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 2016 68 365 080 (6 374 179) 61 990 901 (566 842) 61 424 059
Loss for the year - (8 556 452) (8 556 452) (340 324) (8 896 776)
Total comprehensive
loss for the year
ended 28 February
2017 - (8 556 452) (8 556 452) (340 324) (8 896 776)
Issue of shares 2 349 880 - 2 349 880 - 2 349 880
Balance at
1 March 2017 70 614 960 (14 930 631) 55 684 329 (907 166) 54 777 163
Loss for the period (3 797 550) (3 797 550) (158 231) (3 955 781)
Total comprehensive
loss for the period
ended 31 August
2017
Issue of shares 13 880 000 - 13 880 000 - 13 880 000
Total comprehensive
loss for the period
ended 31 August
2017 84 494 960 (18 728 181) 65 766 779 (1 065 397) 64 701 382
Condensed Abridged Statement of Cash Flows
31 August 28 February
2017 2017 31 August 2016
Unaudited Audited Unaudited
R R R
Cash flows from operating
activities
Cash used in operations 33 164 955 (956 145) (3 279 200)
Interest income 1 829 256 3 666 996 1 516 916
Finance costs (1 341 580) (5 697 508) (3 232 613)
Tax paid - 4 974 188 560
Net cash used in operating
activities 33 652 631 (2 981 683) (4 806 337)
Cash flows from investing
activities
Purchase of property, plant and
equipment (65 172) (53 881) -
Sale of property, plant and
equipment - (3 025 000) (36 975)
Movement of investment
property into assets held for sale (34 000 000) 3 500 000 -
Net movement in assets classified
as held for sale - 23 239 360 -
Sale of investment property 2 964 000 725 000 -
Loans to joint venture repaid - (134 640) -
Loans advanced to shareholders (1 864 740) (1 127 298) (976 757)
Loans to shareholders repaid - - 1 768 041
Advances on loans included in
other financial assets - - 9 213
Proceeds from loans included in
Other financial assets - 74 586 -
Net cash from investing activities (33 052 579) 23 198 127 763 522
Cash flows from financing
activities
Proceeds on share issue 100 000 2 249 880 -
Net movement in other financial
liabilities (1 011 457) 8 734 862 11 036 037
Increase in shareholders loans 1 034 905 - 583 788
Net movement in group loans - - 3 727 797
Net movement in liabilities of
disposal groups - (15 552 523) (10 988 841)
Repayment of shareholders’ loan (653 122) (554 396) -
Net cash from financing activities (529 674) (19 565 908) 4 358 781
Total cash movement for the year 70 378 650 536 315 966
Cash at the beginning of the (478 401)
year (1 128 937) (1 128 937)
Total cash at end of the year (408 023) (478 401) (812 971)
BASIS OF PREPARATION
The board of directors of Visual (“the Board”) presents the unaudited condensed consolidated
interim results for the six months ended 31 August 2017. The results have been prepared in
accordance with the requirements of the South African Companies Act, 71 of 2008, as
amended, the JSE Listings Requirements, as well as the framework concepts and the
recognition and measurement principles of International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board, including 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 2017.
These condensed interim consolidated financial statements were compiled under the
supervision of the financial director, Mr L A Rauch CA(SA), and were not reviewed or audited
by Visual’s external auditor, Grant Thornton Cape. These interim results have been prepared
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. Any reference to future financial performance included in this
announcement, has not been reviewed or reported on by the Company’s auditor.
BACKGROUND AND NATURE OF BUSINESS
Visual is 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 focuses on the development of entire suburbs which comprises houses, apartments,
lifestyle and retirement accommodation, retail facilities, schools, offices and recreation as well
as other related facilities. With this focus Visual is able to ensure the overall quality and integrity
of the suburb. It enables Visual to supply quality residences and other facilities at affordable
prices. Furthermore, providing these combinations in a single suburb leads to job creation,
which is important to the owners and occupants.
To date, Visual has developed nearly 500 homes within Stellendale, comprising stand-alone
homes and two and three storey walk-up apartments.
With effect from 1 March 2017, Visual has acquired 31.2% of Mosegedi & Associates Proprietary
Limited (“Mosegedi”), which is involved in the development of affordable housing for both
Provinces and Government. Mosegedi is currently busy with 8 contracts in 4 provinces,
including contracts in KZN which started in August 2017.
FINANCIAL RESULTS COMMENTARY
Visual reports that the performance of the Group improved compared to the prior period.
The improved performance can be attributed to an increase in investment income and a
decrease in operating expenses and finance cost. The latter was achieved through the sale
of certain group properties and applying the proceeds towards debt repayment. The Group
also received management fees from its Mosegedi associate.
The loan to shareholder increased by the interest accrued on the loan, which loan will be
primarily settled through the transfer of land once it has been rezoned and independently
valued as stated in the Company’s prospectus on listing. This is expected during the latter part
of 2018. Any difference will be settled in cash.
Stated capital increased by R 13.7 million following the issue of shares for the acquisition of
31.2% of Mosegedi with effect from 1 March 2017.
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 3 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 2017 and 31 August 2016:
- 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.
No consulting fees were generated in the reporting period. Revenue from rentals amounted
to R15 885 (August 2016: R567 648), arising from services rendered by the Property Investment
segment.
Primary segment report Property Property Property
August 2017 Services Investment Development Total
SEGMENT RESULTS
Total revenue 3 006 303 15 885 - 3 022 188
Total external revenue 3 006 303 15 885 - 3 022 188
Other income - 1 150 066 - 1 150 066
Income from associate - - - 1 260 495
Finance costs - (230 007) (76 669) (306 676)
Employee costs - (2 385 404) (795 135) (3 180 539)
Depreciation - (191 529) - (191 529)
Other operating expenses - (1 823 464) (607 822) (2 431 286)
Loss on sale of investment property - (364 000) - (364 000)
Impairment - - - (3 966 955)
Segment results before taxation
Interest income on shareholder loans - - - 1 829 201
Interest income on instalment sale - - - -
Finance costs accrued on shareholder
loans - - - (1 034 904)
Taxation - - - 258 103
Interest income on cash and cash - - - 55
equivalents
Finance costs on bank overdraft - - - -
Net loss per statement of
comprehensive income (3 955 781)
SEGMENT ASSETS AND LIABILITIES
Investment in joint venture - 110 - 110
Investment in associate - - - 13 780 000
Other reportable segment assets - - 2 314 035 2 314 035
Non-Current assets held for sale - 34 000 000 - 34 000 000
Total reportable segment assets
Loans to shareholders - - - 46 762 869
Other financial assets 4 928 520
Cash and cash equivalents - - - 335 789
Total assets per statement of financial
position - 34 000 110 2 314 035 102 121 323
Total reportable segment liabilities
Current tax - - - -
Deferred tax - - - 823 736
Loans from shareholders - - - 17 196 476
Other financial liabilities - - - 18 569 250
Bank overdraft - - - 743 812
Total liabilities per statement of financial
position - - - 37 333 274
Primary segment report Property Property Property
August 2016 Services Investment Development Total
SEGMENT RESULTS
Total revenue - 567 648 - 567 648
Total external revenue - 567 648 - 567 648
Other income - 121 944 - 121 944
Cost of sales - (161 964) - (161 964)
Finance costs - (551 821) (1 578 021) (2 089 842)
Employee costs - (2 301 352) (669 562) (3 082 848)
Depreciation - (53 123) (53 123)
Other operating expenses - (2 470 799) (651 919) (3 122 668)
Fair value adjustments - (17 675) - (17 675)
Segment results before taxation
Interest income on shareholder loans - - - 1 516 833
Interest income on instalment sale - 138 486 - 138 486
Finance costs accrued on shareholder - - -
loans (1 084 090)
Taxation - - - 34 908
Interest income on cash and cash - - -
equivalents 83
Finance costs on bank overdraft - - - (58 681)
Net loss per statement of
comprehensive income (7 291 009)
SEGMENT ASSETS AND LIABILITIES
Investment in joint venture 524 835 - 524 835
Other reportable segment assets 53 319 421 22 896 180 76 353 887
Total reportable segment assets
Loans to shareholders - - 45 538 872
Other financial assets - - 84 000
Cash and cash equivalents - - 155 106
Total assets per statement of financial
position 53 844 256 22 896 180 122 656 700
Total reportable segment liabilities 27 538 824 18 034 228 45 573 052
Current tax - - 188 560
Deferred tax - - 3 494 205
Loans from shareholders - - 17 299 755
Bank overdraft - - 968 077
Total liabilities per statement of financial
position 67 523 649
Geographic information:
The Group's revenue is derived from operations and property holdings 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.
HEADLINE LOSS INFORMATION:
31 August 28 February 31 August
2017 2017 2016
Unaudited Audited Unaudited
Headline loss reconciliation R R
Net loss for the period (3 955 781) (8 556 452) (7 103 696)
Adjustments: 536 000
Fair value adjustment on investment properties - - 17 675
Tax effects on fair value adjustment - - -
Headline loss for the period (3 955 781) (8 020 452) (7 273 334)
Headline loss per share (cents) (1.22) (3.54) (3.26)
SHARE CAPITAL AND ISSUE/ REPURCHASE OF SHARES
During the period under review, the Company issued:
- 106 000 000 shares at 13 cents per share for the acquisition of 31.2% of Mosegedi; and
- 666 667 shares at 15 cents per share to Arbitrage Investment Holdings Proprietary Limited
pursuant to a subscription agreement dated 22 November 2017.
As announced on SENS on 15 September 2017 (“Milost Facility Announcement”), Visual
entered into a funding agreement with Milost Global Inc (“Milost”) for equity and debt funding
of up to R500 000 000, which agreement is divided into two parts:
- A R150 million equity draw down facility for the subscription of shares in Visual, which will
be subscribed at a 50% premium to the 5-day volume-weighted average share price
(“VWAP”) for each draw down, which shares are expected to be issued under the
Company’s general authority to issue shares for cash; and
- A R350m convertible debt facility (“Notes Draw Down”). The conversion price of a Notes
Draw Down will be calculated at the 5-day VWAP on the business day immediately
preceding the draw down notice plus 200% on each Note Draw Down. The additional
terms of the convertible debt facility are detailed in the Milost Facility Announcement.
In the event that any of the above share issues fall outside the general authority granted to
the Board by the shareholders, or if Milost becomes a related party to Visual, shareholder
approval will be required.
The first equity draw down was received by the Company from Milost as announced on SENS
on 17 November 2017.
The Company did not repurchase any shares.
DIVIDENDS
The Company has not declared a dividend for the period ended 31 August 2017. (31 August
2016: RNil).
LITIGATION
There is no legal or arbitration proceedings, including any proceedings that are pending or
threatened, of which the Company and Group is aware that may have or have had a material
effect on the Company’s or Group’s financial position during the period other than claims by
a former and current employee in respect of remuneration. The Company has instituted
counter claims against the individuals and has made a provision to cover the claims and legal
costs.
CONTINGENT LIABILITIES
At the reporting date the Group does not have any contingent liabilities (2016: RNil).
RELATED PARTIES
Related parties are the same as reported in the previous period. Transactions with related
parties up until 31 August 2017 are detailed below:
Related party transactions up until 31 August 2017 R
Interest paid to/(received from) related parties
Shareholders 1 034 904
Shareholder (1 829 201)
Shareholders of subsidiaries 618 042
Salary paid to related party
Close family member of director 32 670
Management fees received from related parties
Associate (Mosegedi) (3 006 303)
Legal fees paid to related parties
Companies controlled by close family member of director 134 555
GOING CONCERN
As noted above, the interim results have been prepared 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 the settlement of liabilities, contingent
obligations and commitments will occur in the ordinary course of business.
The Group’s cash flow constraints previously reported remain due to delays in being able to
generate revenue from property development and sales. However, the situation has
improved from the prior year and will continue to improve due to the Milost transaction
referred to above.
The directors have considered the operational budget and cash flow forecasts for the ensuing
year which are based on the current expected economic and market conditions and the
following events or subsequent events taking place:
a) Receipt of the first equity draw down from Milost referred to above;
b) Application for the second equity draw down from Milost has been submitted and
approved;
c) Further draw downs in terms of the Milost agreement; and
d) Visual entered into an agreement for the sale of the Stellendale Junction land, and into
a joint venture development agreement for the development of the shopping mall;
The directors believe that due to a) to d) above, the Company will have adequate financial
resources to continue as a going concern. Accordingly, the directors have adopted the going
concern basis in the preparation of the interim results.
EVENTS AFTER THE REPORTING PERIOD
Cancellation of Phase 2 acquisition of Mosegedi
As announced on SENS on 24 October 2017, Visual and the major shareholders of Mosegedi
have agreed not to proceed with Phase 2 of the acquisition of 18.9% of Mosegedi due to the
audit of the Mosegedi financial statements still being incomplete as a result of difficulties with
the year ended 29 February 2016 (which has a knock-on effect into the year ended
28 February 2017). Management has taken a decision to impair the full Mosegedi equity
accounted income of R1 260 495 as disclosed in the condensed statement of comprehensive
income above as well as management fees and reimbursements receivable which are
overdue.
Changes to the Board
As announced previously, Mr Leon Rauch was appointed as Financial Director of Visual with
effect from 1 October 2017, and Ms Diana Genu was appointed as a non-executive director
of Visual with effect from 23 November 2017. Mr Grant Noble resigned as a director of Visual
with effect from 3 October 2017.
Going forward, the Board will be considering the size and nature of properties held by the
Group in order to start its key development initiatives and ensure that it has sufficient cash and
funding resources to grow the Group’s property assets.
By order of the Board
Cape Town
30 November 2017
Designated Advisor
Arbor Capital Sponsors Proprietary Limited
Date: 30/11/2017 04:02:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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