Nova Property Group Holdings Limited and its Subsidiaries (Registration number 2011/003964/06) Annual Financial Statements for the year ended 29 February 2016
Nova Property Group Holdings Limited and its Subsidiaries (Registration number 2011 /003964/06) Annual Financial Statements for the year ended 29 February 2016 General Information Country of Incorporation and domicile Nature of business and principal activities Directors Registered office Business address Postal address Bankers Auditors Secretary Company registration number Level of assurance Preparer Issued South Africa Investing in commercial and residential property, the letting thereof and development of residential property D Haese RP Badenhorst DR Koekemoer CF Myburgh 105 Club Avenue Waterkloof Heights 0181 105 Club Avenue Waterkloof Heights 0181 Private Bag 27067 Monument Park 0105 Standard Bank Group Limited ABSA Bank Limited Mercantile Bank Limited Nedbank Limited BDO South Africa Incorporated D Haese 2011/003964/06 These financial statements have been audited in compliance with Section 30(2)(a) of the Companies Act as it is a pub lic company The annual financial statements were internally compiled by: M Henwood Financial Manager 31 August 2016
Nova Property Group Holdings Limited and its Subsidiaries (Registration number 2011 /003964/06) Annual Financial Statements for the year ended 29 February 2016 Index The reports and statements set out below comprise the annual financial statements presented to the shareholders : Index Page Directors' Responsibilities and Approval Directors' Report Independent Auditor's Report Statement of Financial Position Statement of Profit or Loss and Other Comprehensive Income Statement of Changes in Equity Statement of Cash Flows Accounting Policies Notes to the Financial Statements 3 4.5 6 7 8 9 10 11 19 49 2
Mova Property Group Holdings Limited and its Subsidiaries (Registration number 2011 /003964/06) Annual Financial Statements for the year ended 29 February 2016 Directors' Responsibilities and Approval The directors are required in terms of the Companies Act of South Africa to maintain adequate accounti ng records and are responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is t hei r responsibility to ensure that t he annual financial statements fairly present the state of affairs of the group as at the end of the fina ncia l year and the results of its operations and cash flows for the period then ended, in conformity With International Financial Reporting Standards and the requirements of the Companies Act of South Africa. The external auditors are engaged to express an independent opinion on the financial statements. The annual financial statements are prepared in accordance with International Financial Reporting Standards and the requirement s of t he Companies Act of South Africa and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates. The directors acknowledge that they are ultimately responsible for the system of internal fi nancial contr ol establi shed by the group and place considerable importance on maintaining a strong control environment. To enable the direct ors t o meet these responsibilities, the board sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards i nclude the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable Level of risk. These controls are monitored throughout the group and all employees are required to maintain the highest ethi cal standards in ensuring the group's business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the group is on identifying, assessing, managing and monitoring all known forms of risk across the group. While operati ng risk cannot be full y eliminated, the group endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and et hical behaviour are applied and managed wit hin predetermined procedures and constraints. The directors are of the opinion, based on the information and explanations given by management, t hat the system of interna l control provides reasonable assurance that the financial records may be relied on for the preparation of the annual fi nancial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss. The directors have reviewed the group's budget forecast for the year from date of approval and, in light of this review and the current fina ncial position, they are satisfied that the group has or had access to adequate resources to continue i n operational existence for t he foreseeable future. The external auditors are responsible for auditing and reporting on the group's financial statements. The finan cial statements have been examined by the group's external auditors and their report is presented on page 6. The annual financial statements set out on pages 4 to 49, which have been prepared on the going concern basis, were approved by the board on 31 August 2016 and were signed on their behalf by: D Haese RP Badenh~ 3
Nova Property Group Holdings Limited and its Subsidiaries (Registration number 2011 /003964/06) Annual Financial Statements for the year ended 29 February 2016 Directors' Report 8. Special resolutions During the period under review, the following special resolutions were passed: - Special resolution passed on 3 July 2015, whereby subsidiary, Nova Property Group Investments Proprietary Limited, bind itself to and in favour of Standard Bank Group Limited as surety for an amount limited to a maximum of R4 million plus further interest, collection commission and costs on the attorney and client scale for any present and future indebtedness of Magalies Investments Proprietary Limited_ - Special resolution passed on 3 December 2015 in terms of Section 45 of the Companies Act of South Africa, whereby subsidiary, Nova Property Group Investments Proprietary Limited, continues to bind itself to and in favour of Standard Bank Group Limited as surety in solidum and co-principal debtor jointly and severally with Witbank Highveld Investments Proprietary Limited ('Witbank") for the due and punctual performance by Witbank of all its obligations to Standard Bank Group Limited from time to time whether arising out of facilities allowed to the debtors, such suretyship being limited to an amount of R40 million plus further interest, collection commission and costs on the attorney and client scale. 9. Events after the reporting period Nova Property Group Investments Proprietary Limited The directors have made a decision to repay debentures on Town Square (PreViously Lydenburg) at full historical invested capital value. These debentures related to the investment property held by subsidiary, Brookfield Investments 255 Proprietary Limited. This process commenced dur1ng May 2016. Brookfield Investments 255 Proprietary Limited ("Brookfield") During May 2016, the directors of the company have made a decision to dispose of its shareholding in Brookfield to fellow subsidiary, Geo Sphere Developments Proprietary Limited ("Geo Sphere"), due to the debentures being redeemed as described above. During the 2017 financial year, the boa(d of directors obtained an increase in external financing to the capital sum of R31,5 million from Nedbank Limited ('"Nedbank") bearing interest at prime less 0,25% over a period of 10 years. The financing is secured over a first covering mortgage bond for R50 million, plus an additional sum of R12,5 million for securing certain costs and disbursements which Nedbank may pay, incur or make, in favour of Nedbank over investment property, Erf 3355, Portion 7 of Erf 80 and Portion 9 of Erf 8, Lydenburg, Mpumalanga, refer to note 3 of the financial statements_ Geo Sphere provided a limited deed of suretyship in favour of Nedbank whereby Geo Sphere binds itself jointly and severally and as co-principal debtor with Brookfield limited to R10 million of Brookfield's indebtedness to Nedbank. The limitation of this deed of suretyship applies to the extent of Brookfield"s liability only, not to the cause of debt. Directors, D Haese, CF Myburgh, RP Badenhorst and DR Koekemoer provided a limited deed of suretyship in favour of Nedbank whereby the directors jointly and severally with each other and as co-principal debtor with Brookfield for a combined aggregate sum of R7 million_ This limitation of this deed suretyship applies to the extent of the aggregate llability of these sureties only, not to the cause of the debt. The directors are not aware of any other material event which occurred after the reporting date and up to the date of this report not already dealt with elsewhere in the financial statements. 1 O. Going concern The directors believe that the group has adequate financial resources to continue in operation for the foreseeable future and accordingly the consolidated annual financial statements have been prepared on a going concern basis. The directors have satisfied themselves that the group is in a sound financial position and that it has access to sufficient borrowing facilities to meet its foreseeable cash requirements_ The directors are riot aware of any new material changes that may adversely impact the group. The directors are also not aware of any material non-compliance with statutory or regulatory requirements or of any pending changes to legislation which may affect the group. 11. Auditors BDO South Africa Incorporated continued in office as auditors for the company and its subsidiaries for 2016. 5
Nova Property Group Holdings Limited and its Subsidiaries (Registration number 2011 /003964/06) Annual Financial Statements for the year ended 29 February 2016 Statement of Profit or Loss and Other Comprehensive Income Group Figures in Rand Note(s) 2016 2015 Revenue 21 98 452 936 79 244 210 Cost of sales (1 279 869) (34 090 802) Gross profit 97 173 067 45 153 408 Other income 22 54766 863 53 136 749 Operating expenses (137 315 546) (147 548 532) Operating profit I (loss) 26 14 624 384 (49 258 375) Investment revenue 23 1 128 595 2 000 269 Fair value adjustments 24 256 964106 228 425 722 Profit from equity accounted investments 264 097 Finance costs 25 (31 415 487) (28 123 950) Profit before taxation 241 301 598 153 307 763 Taxation 27 (105 618 449) 859 627 Profit for the year 135 683 149 154 167 390 Other comprehensive income Total comprehensive income for the year 135 683 149 154 167 390 Company 2016 2015 (1 722) (35 801) (1 722) (35 801) 10 593 273 9 752 495 118 834 836 155 635 657 (11 204630) (10035 859) 118 221 757 155 316 492 118 221 757 155 316 492 118 221 757 155 316 492 8
Nova Property Group Holdings Limited and its Subsidiaries (Registration number 2011 /003964/06) Annual Financial Statements for the year ended 29 February 2016 Accounting Policies 1. Presentation of annual financial statements The annual financial statements have been prepared in accordance with International Financial Reporting Standards, and the Companies Act of South Africa. The annual financial statements have been prepared on the historical cost basis, except for the measurement of investment properties and debentures at fair value, and incorporate the principal accounting policies set out below. They are presented in South African Rands. These accounting policies are consistent with the previous period. 1. 1 Significant judgements and sources of estimation uncertainty In preparing the annual financial statements, management is required to make estimates and assumptions that affect the amounts represented in the annual financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the annual financial statements. Significant judgements include: Investment property In the application of the accounting policies which are described in note 1.3, the board of directors are required to make judgements, estimates and assumptions about the fair value of investment properties. The estimates and assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The board of directors have decided to obtain external valuations on one third of the property portfolio every year from an independent valuer. The fair value of the remaining two thirds of the property portfolio are based on directors valuations performed in terms of IFRS 13 where the highest and best use are taken into account. The fair value of the following investment properties are based on external valuations obtained from an independent valuer based on current market conditions: 2016 Del Judor Mall (Witbank) Flora Centre Waterglen Shopping Centre Benoni Hyper Carnival Centre (Range View) Town Square (Lydenburg) Zambezi Retail Park The Villa Retail Park Tarentaal Centre 2015 Magalieskruin Mall Silverwater Crossing Centre Carletonville Centre Checkers Virginia De Marionette Shopping Centre Shoprite Secunda Athlone Park Secunda Plaza Liberty Mall The Village Mall All investment properties have been categorised as a Level 3 and there have been no significant transfers made between Level 1, 2 or 3 during the period under review. Refer to note 3 Investment property. Classification of investment property and inventories Property held for capital appreciation and earning rental income is classified as investment property. This includes property under construction. Property held for development of residential and commercial use is classified as inventory when the carrying amount.will be recovered through sale in the ordinary course of business. 11