TIDMITA
RNS Number : 4352O
Itacare Capital Investments Ltd
19 September 2011
Itacare Capital Investments Ltd
("Itacare Capital" or the "Company" or the "Group")
HALF YEAR RESULTS TO 30 JUNE 2011
PROGRESS WITH INVESTMENT PROJECTS SUPPORTED BY CONTINUED
FINANCIAL STRENGTH
19 September, 2011 - Itacare Capital Investments Ltd. (AIM:
ITA), a real estate investment company focused on high-end
residential resorts in Brazil, today announces its half year
results for the six months ended 30 June 2011.
Highlights
-- Basic Net Asset Value increased by 6.3% to $1.18 per share
from $1.11 per share at December 2010, primarily as a result of
valuation uplifts to each of the Company's investments.
-- Profit of $5.96 million, compared to a profit for the full
year 2010 of $3.41 million
-- Balance sheet remains strong with total assets at 30 June
2011 of $110.9 million and no debt at the Company level (31
December 2010: $103.7 million)
-- Cash and money market instruments of $4.9 million ensure that
the Company is adequately funded until cashflow generation
-- Continued progress made on projects being developed at Duas
Barras, Trancoso and Tres Praias
-- Expect first off-plan sales to commence by the end of
2011
-- Havaizinho investment on hold while solutions are identified
for Warapuru development, but the Company is considering
alternative options for the site on a standalone basis or a
sale
-- Brazilian economy strengthening with expectations of further
improvement as the country prepares for the 2014 World Cup and the
2016 Olympic Games.
Commenting, Michael St Aldwyn, Chairman of Itacare Capital,
said:
"We look forward to the beginning of development work across a
number of our sites, where we will see our team's efforts in
planning and progressing our various projects come to fruition. The
combination of the quality of our land development projects, our
financial strength and the strong underlying fundamentals of our
market all serve to underline the investment potential of our
portfolio and enable us to look forward with confidence."
For further information
Itacare Capital Investments Tel: +44 (0)20 7245 4632
Chairman, Michael St. Aldwyn
Itacare Capital Partners Tel: +55 11 3443 7304
Pedro de Miranda
Duet Private Equity Tel: +44 (0)20 8959 8534
David Mattey
Numis Securities Tel: +44 (0)20 7260 1000
Stuart Skinner (Nominated Adviser)
Alex Ham (Corporate Broking)
Financial Dynamics Tel: +44 (0)20 7831 3113
Richard Sunderland/Jamie Robertson
CHAIRMAN'S REPORT
In the midst of the continued global market turbulence this
year, including the volatility of the Brazilian stock market and
the continued strengthening of the Real, we are pleased to report
that the Company continues to make excellent progress. As outlined
in the Investment Manager's report below, Itacare Capital is moving
steadily forward with the process of securing final planning
consents for its three development sites and the fourth quarter is
likely to see the issuance of final licenses for at least one of
the projects and the start of the off-plan sales process.
This is a significant achievement and we recognise the
Investment Manager's role in delivering this extended first phase
of the development process. Despite the challenges in many other
parts of the world, Brazil continues to move steadily forward under
the guidance of the new President Dilma Rousseff, albeit at a more
modest pace than last year, and it is this growth that continues to
give us confidence in the upcoming potential sales.
Results
The results for the six months to 30 June 2011 show a profit of
$5.96 million, compared with a profit of $3.41 million for the full
year to 31 December 2010. The profit is attributable to unrealised
gains across all of our investment properties, with material gains
arising because of exchange movements and planning progress made on
our three primary development sites - Duas Barras, Bahia Beach
(Trancoso) and Tres Praias. While the Company's operating costs
have remained on budget, the level of reported administration costs
have been increased by our share of operating costs incurred for
each of the development projects, notably some additional legal and
professional costs associated with Warapuru.
Consequently, the Company is reporting a 6.3% increase in Basic
Net Asset Value (NAV) to $1.18 per share at 30 June 2011, compared
with $1.11 at 31 December 2010. Itacare Capital continues to have
no debt at a Company or asset level and total assets, as of 30 June
2011, totalled $110.9 million. This included cash and money market
instruments of $4.9 million, which gives the Company sufficient
cash headroom to meet our future financial commitments and see us
through to a time when we expect to generate cash from investment
realisations.
In April 2011, Jones Lang La Salle informed the Company that due
to an internal reorganisation it would not be properly staffed to
provide periodic valuations in a timely manner and that they could
no longer provide a valuation service for our properties. As a
result, we appointed another leading independent international real
estate firm, Cushman and Wakefield (C&W), to produce the
Company's valuations, which are incorporated into these
accounts.
Despite the strong progress that we continue to make across our
schemes, we remain frustrated by the problems at the Warapuru
development, which has now had its bankruptcy declared, and this is
reflected in the valuation. Our Investment Manager has secured the
best possible position for the Company as regards other creditors
and the previous separation of the Havaizinho site has proven to be
the correct strategic decision. While bankruptcy proceedings in
Brazil are notoriously protracted, we remain hopeful that a
solution will be forthcoming, which will limit the amount of time
that the Investment Manager has to devote to this situation.
Looking forward
The Company has continued to work diligently through the first
half which we believe will give rise to a greater level of news
flow. Consequently your Board has resolved to take steps to enhance
the Company's visibility over the forthcoming months with the hope
of seeing a reduction in the discount to NAV at which shares are
currently trading. It is our belief that the visibility of
pre-sales activity, which we expect to take place in the fourth
quarter of 2011 and the first quarter of 2012, will re-confirm the
independent valuations of our assets and we look forward to
investors having a greater understanding of the Company's unlocked
potential.
I would like to thank my fellow Board members, the Investment
Adviser and Investment Manager for their continued contribution to
the progress of the Company and look forward to the rest of 2011
with confidence.
Michael St Aldwyn
Chairman
16 September 2011
MANAGER'S REPORT
We are pleased to be reporting continued solid operational
progress for the six months ending 30 June 2011.
Brazilian Economy
Brazil experienced a smooth transition of power in January with
the inauguration of new President, Dilma Rouseff. However,
President Dilma has faced some challenges in reducing the
Government budget and filling senior government roles based on
merit. She reacted to corruption scandals, but that has eroded
support in Congress from her political coalition, which may impact
her ability to bring about her proposed reforms.
The recent deterioration in the international environment is
expected to contribute to the acceleration of the current process
of moderating domestic activity, which has already reduced the
growth forecasts for the Brazilian economy to 3.8% this year.
Issues overseas, mainly in the US and Europe, could lead to the
reduction of trade, moderation of investment flows, more
restrictive credit conditions and worsening consumer and business
sentiment. As a result, the Brazilian Central Bank recently cut its
reference interest rate by 0.5% despite inflation being in the
upper range of its policy target.
The real estate sector continued to be very strong in all areas
(residential, office, logistics, etc.) during the first half of the
year. In particular, two other new Fasano residential developments
were launched at Punta del Este, Uruguay and Boa Vista in the Sao
Paulo countryside, and have been selling very well to wealthy
Brazilians.
Portfolio Update
The tables below illustrate the value progression in the
Company's five projects both in local currency and US Dollar
equivalent. The Real appreciated by 6.6% from the beginning of
January to 30 June 2011, positively impacting on our US Dollar
reported numbers. We continue to see growing consumer confidence
and wealth creation in the country, which is reflected in the
demand for residential properties. Our portfolio is currently
mainly positioned for local buyers who are looking to purchase
second homes in attractive locations.
Project Valuation Summary ($ m)
Warapuru
Duas Barras Tres Praias BB Trancoso 2 Havaizinho
Entry Price 8.2 16.7 16.0 11.1 7.1
Valuation
Jun-2008 14.0 33.2 17.5 12.7 9.2
Valuation
Dec-2008 15.5 22.6 17.1 10.4 11.0
Valuation
Jun-2009 16.2 31.2 19.8 4.8 7.4
Valuation
Dec-2009 17.1 32.2 21.0 5.3 8.7
Valuation
Jun-2010 17.0 35.1 21.5 4.8 7.6
Valuation
Dec-2010 20.0 38.9 24.5 5.0 6.6
Valuation
Jun-2011 21.6 43.9 26.2 5.2 7.3
Project Valuation Summary (R$ m)
Warapuru
Duas Barras Tres Praias BB Trancoso 2 Havaizinho
Entry Price 15.5 29.7 27.4 19.8 12.2
Valuation
Jun-2008 22.3 53.5 27.9 20.2 14.6
Valuation
Dec-2008 36.3 52.9 40.0 24.3 25.7
Valuation
Jun-2009 31.6 60.8 38.6 9.4 14.5
Valuation
Dec-2009 29.8 56.0 36.5 9.2 15.1
Valuation
Jun-2010 30.6 63.2 38.7 8.6 13.7
Valuation
Dec-2010 33.4 65.0 40.9 8.3 11.0
Valuation
Jun-2011 33.9 68.8 41.1 8.2 11.5
-- Source: Jones Lang La Salle up to and including 31 December
2010. Cushman & Wakefield 30 June 2011
-- The valuation of Tres Praias up to and including 30 June 2009
represents 100% ownership. For 31 December 2009 and beyond the
valuations represent the value after the sale of a 10% portion of
the land.
Duas Barras
Duas Barras, in the state of Alagoas, is situated on a
200-hectare beachfront plot, which is divided into two main parts
where villas will be located. The first is a relatively flat
plateau that sits approximately 30 metres above sea level and
offers panoramic ocean views. The second is a beach-level coconut
plantation with access to close to 2.6 kilometres of white sandy
beach.
Oscar Niemeyer, the famous Brazilian architect, designed a
40-room hotel and New York-based Field Operations prepared the
master plan for the site. The project plan is split into two main
phases. Phase 1 real estate will be clustered around the hotel
complex, in order to facilitate the construction and the use of
shared infrastructure. Phase 1 will include sea view villas and
polo villas on the plateau, while the beachfront villas will be
developed as part of Phase 2.
In February 2010, the project was approved by the State of
Alagoas Environmental Council (CEPRAM) for the issuance of the
preliminary license (Stage 1 permits). At the end of 2010, we
received approval of the Implementation License which is the next
stage of permits (Stage 2A permits) for the construction of
infrastructure that supports the project. During the first half of
2011 the Investment Manager has been working to develop the
detailed plans for the houses, buildings and common areas, as well
as fulfilling the required environmental recuperation works that
were a condition of the Stage 1 permits. In addition, we completed
the registration process with Banco Do Nordeste, an arm of
Brazilian Development Bank - BNDES, required for the bank loan and
are now working on obtaining the financing pre-approval. The
Company expects to obtain the final stage of permits (Stage 2B
permits) for the construction of the villas and hotels in the first
quarter of 2012.
Cushman & Wakefield ("C&W") valued the investment on a
"Residual Valuation" basis. During the reporting period our 50%
share of the valuation increased by 8.1% to $21.6 million.
Tres Praias
The Company has invested $16.7 million investment in the Tres
Praias residential project, situated in the state of Espirito
Santo, Brazil. Tres Praias is expected to benefit from a
significant increase in the level of investment into the state, as
more foreigners and locals move there to work in the oil and steel
industries. Petrobras (NYSE: PBR), the government-owned oil
company, is investing $6 billion over the next four years in
Espirito Santo, to expand production, and Vale (NYSE: VALE) is
expected to invest up to $5 billion in a new steel facility. The
expansion of the oil and steel business in the region is expected
to contribute to further infrastructure developments, as well as
the growth of the middle and upper classes and a resultant increase
in demand for residential properties, including our own.
As announced in July 2009, the Company and its project partner,
a subsidiary of Brookfield Incorporacoes SA (BOVESPA: BISA3), one
of Brazil's largest real estate developers ("Brookfield"), agreed
new terms to the original investment agreement signed in December
2007. Brookfield acquired approximately nine hectares, or 10% of
the entire site, for a cash consideration of R$6.5 million ($3.2
million) payable in three tranches. As at the period end only the
final balance amounting to R$2.25million ($1.4 million) remained
due, which has now been received since the period end.
Under the amended agreement with Brookfield, in addition to the
sale of 10% of the site, Brookfield is responsible for the master
planning and preliminary licensing of the entire site and all
related costs.
During the period, detailed engineering drawings for
infrastructure and residential units have been completed. MEP, BMS,
foundations, internal traffic and telecom studies have been
completed for Phase 1. Brookfield is submitting all studies and
paperwork for the obtaining of permits during the second half of
2011. Once received, Brookfield will be in a position to start the
pre marketing of the units ahead of the build program.
The Tres Praias project targets only local buyers and C&W's
residual valuation in local currency has increased from R$65.0
million to R$68.8 million. In US dollar terms the increase was
further boosted by the currency appreciation, rising from $38.9
million to $43.9 million.
Trancoso - Bahia Beach
The Trancoso-Bahia Beach project is situated on a 293-hectare
site with approximately 600 metres of beachfront. It is three
kilometres from the village of Trancoso, Bahia and 47 km south of
Porto Seguro International Airport, which is served by domestic and
international charter flights. There is also a 1,500-metre paved
landing strip located within a 15-minute drive from the project.
The project will see the phased development of 177 residential
units, a small 40-bungalow luxury hotel, a beach club, a spa and
other amenities on the site.
In December 2010, Itacare Capital signed a Hotel Operating
Agreement with Hotel Marco Internacional S.A., the operator of the
Fasano Hotels, a premium luxury brand in Brazil, and JHSF
Participacoes S.A., the controlling shareholder of the Fasano
Hotels, for the development of Fasano Trancoso. The project team
also comprises Hart Howerton, a London-based firm of
master-planners, and Isay Weinfeld, the award-winning Brazilian
architect. Preliminary licenses were granted in December 2010 and
all studies and materials required for the second stage licenses
were filed in H1 2011 such that at present, the Company has
satisfactorily completed all its requirements to Stage 2 approval
and is now awaiting the issuance of permits from the local
authorities.
C&W conducted a residual valuation analysis of the project
recognising that it is likely to attract a good mix of wealthy
Brazilians and foreign buyers. C&W also took into account the
full impact of hotel construction, which on a standalone basis is
slightly value dilutive, but positively impacted by a premium sales
price anticipated in their valuation model for the Fasano-branded
real estate. During the reporting period, the US dollar valuation
of the Company's 50% share of the project increased by 7% from
$24.5 million to $26.2 million.
Warapuru 2
Warapuru 2 comprises four luxury villas on a beachfront
development in Bahia, designed by Anoushka Hempel. The price paid
was designed to cover a finished cost of the units, but during
construction the developer informed the Company of financial
difficulties and has been unable to finish the development of the
entire site including our four villas. In addition to the title to
the four plots and the right to have the four villas built, the
Company also holds a first lien on ten partially completed hotel
bungalows.
Given that the developer faced the risk of bankruptcy, the
Company, along with the other main secured creditor, a Brazilian
bank, decided to file a claim with the local courts in order to
protect their interests. In parallel, the Investment Manager also
signed a Memorandum of Understanding to work alongside the two
European banks that originally financed the developer's holding
company and other third parties to study a solution. Given the
turbulent conditions in Europe, these banks decided in May 2011 not
to proceed.
After several attempts to help the developer in finding a
financial solution that would lead to the completion of the
project, the developer declared itself bankrupt in May 2011 and the
Investment Manager is now focused on divesting of its interest in
Warapuru 2.
Given the potential decay of the partially built structures and
the associated uncertainties with the timing of the solution of the
bankruptcy and the completion of the project, C&W has valued
the Warapuru Phase 2 investment on a forced sale/liquidation basis
with a resultant valuation of $5.2 million. The small increase in
value is due to the fact that the Real appreciation during the
period was higher than the depreciation charge estimated by
C&W.
Havaizinho
The site comprises a 33-hectare land parcel adjacent to Warapuru
1 and 2, which has 860 metres of sea frontage and a small cove
beach. It has lower levels of dense vegetation than the sites of
the first and second phases of the Warapuru development, which are
expected to simplify the process of obtaining construction
permits.
The Company originally acquired this site in a 50:50 partnership
with the developer of Warapuru. Once the developer ran into
financial troubles, the Company assumed the remaining land payments
and, in 2010, excluded the developer from the partnership. As a
result the Company owns 100% of this site without being exposed to
any potential claims from the developer's creditors.
Due to the uncertainties and delays associated with Warapuru,
C&W has valued Havaizinho at $7.3 million on a standalone
basis, which is below our cost basis of $10.4 million. Due to the
above, the permit process for Havaizinho has been put on hold but
the Company has begun to look at other development options for the
site on a standalone basis or a sale of the site.
Looking ahead
In the short term we expect to receive full permit approvals for
Trancoso, which will enable us to commence sales. Tres Praias
should be next, followed by Duas Barras, which will greatly enhance
visibility of cash inflows and realisation values for our major
project investments. We are also actively looking at the sale of
some non-strategic parcels of land within our land bank, which will
generate further realisations for the Company.
Pedro P. de Miranda
Managing Director
Itacare Capital Partners Ltd.
16 September 2011
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
==============================================================================
6 months 6 months
to to Year ended
30 June 30 June 31 December
2011 2010 2010
$ $ $
Interest received 312,655 147,932 591,626
Gain on sale of part of Tres Praias 63,132 - 95,056
Valuation gains on investment
properties 8,333,199 2,800,000 10,360,575
Valuation losses on investment
properties - (3,697,583) (3,830,000)
------------ ------------
Total operating profit/(loss) 8,708,986 (749,651) 7,217,257
Management fees (870,000) (870,000) (1,740,000)
Other administration fees and
expenses (1,040,454) (876,741) (1,776,957)
Deferred performance fee on Tres
Praias gain (16,535) (10,394) (21,647)
------------ ------------
(1,926,989) (1,757,135) (3,538,604)
Profit/(loss) for the period before
tax 6,781,997 (2,506,786) 3,678,653
Deferred tax (1,249,980) 134,637 (979,586)
------------ ------------ ------------
Profit/(loss) for the period 5,532,017 (2,372,149) 2,699,067
Other comprehensive income
Exchange differences on translating
foreign operations 432,283 586,455 709,217
Other comprehensive income, net
of tax 432,283 586,455 709,217
Total comprehensive income/(loss)
for period 5,964,300 (1,785,694) 3,408,284
============ ============ ============
Basic earnings/(loss) per Share $0.07 ($0.02) $0.03
The accompanying notes are an
integral part of the interim report
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
==============================================================================
30 June 30 June 31 December
2011 2010 2010
ASSETS Notes $ $ $
Non-current assets
Investment properties 4 104,249,123 86,000,000 95,000,000
Long term receivable - 1,187,441 -
------------ ------------
104,249,123 87,187,441 95,000,000
Current Assets
Trade and other receivables 1,755,126 254,158 1,592,204
Cash and cash equivalents 4,916,987 11,908,459 7,155,281
------------ ----------- ------------
6,672,113 12,162,617 8,747,485
Total assets 110,921,236 99,350,058 103,747,485
============ =========== ============
EQUITY
Capital and reserves attributable
to equity holders
Ordinary Shares 850,965 850,965 850,965
Share premium account 86,177,272 86,177,272 86,177,272
Retained earnings 12,580,865 1,977,632 7,048,848
Foreign exchange reserve 988,275 433,230 555,992
Total equity 100,597,377 89,439,099 94,633,077
------------ ----------- ------------
LIABILITIES
Non Current Liabilities
Deferred tax liability 3 5,792,477 3,428,274 4,542,497
Trade and other payables 2,547,006 2,625,004 2,701,461
------------ ----------- ------------
8,339,483 6,053,278 7,243,958
------------ ----------- ------------
Current Liabilities
Trade and other payables 1,984,376 3,857,681 1,870,450
------------ ----------- ------------
1,984,376 3,857,681 1,870,450
------------ ----------- ------------
Total liabilities 10,323,859 9,910,959 9,114,408
Total equity and liabilities 110,921,236 99,350,058 103,747,485
============ =========== ============
The accompanying notes are an
integral part of the interim report
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
==============================================================================
Share Foreign
Ordinary premium Retained exchange
Shares account earnings reserve Total
$ $ $ $ $
Balance at 1
January
2010 850,965 86,177,272 4,349,781 (153,225) 91,224,793
Net profit
for the
period - - (2,372,149) - (2,372,149)
Foreign
exchange
reserve - - - 586,455 586,455
Balance at 30
June 2010 850,965 86,177,272 1,977,632 433,230 89,439,099
--------- ----------- ------------ ---------- ------------
Balance at 1
July 2010 850,965 86,177,272 1,977,632 433,230 89,439,099
Net profit
for the
period - - 5,071,216 - 5,071,216
Foreign
exchange
reserve - - - 122,762 122,762
Balance at 31
December
2010 850,965 86,177,272 7,048,848 555,992 94,633,077
--------- ----------- ------------ ---------- ------------
Balance at 1
January
2011 850,965 86,177,272 7,048,848 555,992 94,633,077
Net profit
for the
period - - 5,532,017 - 5,532,017
Foreign
exchange
reserve - - - 432,283 432,283
Balance at 30
June 2011 850,965 86,177,272 12,580,865 988,275 100,597,377
--------- ----------- ------------ ---------- ------------
The accompanying notes are an
integral part of the interim report
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
==============================================================================
6 months to 6 months to Year ended
30 June 30 June 31 December
2011 2010 2010
$ $ $
Operating activities
Net profit/(loss) for the period 5,532,017 (2,372,149) 2,699,067
Revaluation of investment
properties (8,333,199) 897,583 (6,530,575)
(Increase)/decrease in receivables (162,922) 1,128,590 977,985
(Decrease) in payables (40,529) (187,339) (2,098,113)
Foreign exchange 432,283 586,455 709,217
Deferred taxation 1,249,980 (134,637) 979,586
------------ ------------
Net cash (used) in operating
activities (1,322,370) (81,497) (3,262,833)
Investing activities
Increase in investment properties (915,924) (2,547,583) (4,119,425)
Net cash outflow from investing
activities (915,924) (2,547,583) (4,119,425)
Net (decrease) in cash and
cash equivalents (2,238,294) (2,629,080) (7,382,258)
Cash and cash equivalents at
the start of the period 7,155,281 14,537,539 14,537,539
Cash and cash equivalents at
the end of the period 4,916,987 11,908,459 7,155,281
============ ============ ============
The accompanying notes are an
integral part of the interim report
NOTES TO THE FINANCIAL STATEMENTS
==============================================================================
1 General information
The Company is a limited liability closed-end real estate investment
company, incorporated on 27 April 2006 in the British Virgin Islands
(BVI). The Company is a real estate investment company focused on
master planned residential resorts in Brazil and managed by Itacare
Capital Partners Ltd. ("ICP" or the "Investment Manager").
The shares of the Company were admitted to the Alternative Investment
Market ("AIM") of the London Stock Exchange on 30 May 2007. The consolidated
financial statements for the half-year to 30 June 2011, comprise
the Company and its subsidiaries (together referred to as the "Group")
This unaudited condensed consolidated interim report does not constitute
statutory accounts. The financial information for the year ended 31 December
2010 has been extracted from the statutory accounts for that year, which are
available on the Group's website www.itacarecapital.com. The auditor's report
on those financial statements was unqualified.
2. Accounting policies
2.1 Basis of preparation
The unaudited condensed consolidated interim report for
the six months ended 30 June 2011 has been prepared using
accounting policies consistent with International Financial
Reporting Standards ("IFRS") as adopted by the European
Union. The unaudited condensed consolidated interim report
should be read in conjunction with the annual financial
statements for the year ended 31 December 2010, which were
prepared in accordance with IFRS as adopted by the European
Union.
2.2 Joint Ventures
The following amounts represent the Group's 50% share of
the assets and liabilities, and results of joint ventures.
They are proportionately included in the balance sheet and
income statement.
Duas Barras Ltd BB Trancoso Ltd
6 months 6 months
ended Year ended ended Year ended
Jun Dec Jun Dec
2011 2010 2011 2010
Assets
Long-term assets 21,614,035 20,000,000 26,232,391 24,511,008
Current assets 409,223 341,405 238,760 288,435
22,023,258 20,341,405 26,471,151 24,799,443
------------ ----------- ----------- -----------
Liabilities
Long-term liabilities - - 1,446,405 1,317,543
Current liabilities 2,534,836 2,305,050 18,102 29,411
2,534,836 2,305,050 1,464,507 1,346,954
------------ ----------- ----------- -----------
Net assets 19,488,422 18,036,355 25,006,644 23,452,489
------------ ----------- ----------- -----------
Income 2,855 2,331 8,225 27,899
Expenses (99,886) (85,596) (82,558) (209,105)
Loss after income tax (97,031) (83,265) (74,333) (181,206)
------------ ----------- ----------- -----------
There are no contingent liabilities relating to the Group's interest
in the joint ventures (Dec 2010:nil), and no contingent liabilities
of the ventures themselves (Dec 2010:nil).
3. Deferred Taxation
As a company incorporated under the BVI International Business
Companies Act (Cap. 291), the Company is exempt from taxes
on profit, income or dividends. Each company incorporated
in BVI is required to pay an annual government fee, which
is determined by reference to the amount of the Company's
authorised share capital.
The deferred tax provision for the Brazilian subsidiaries
is based on the capital gains tax rate, which is 15%. At the
Company level such tax liability is likely to be reduced depending
on, among other things, the tax domicile of the vehicle being
sold and/or the acquirer.
In accordance with IAS 12 Income Taxes a full provision has
been made for the 15% liability that would arise if the Company
were to sell its interest in the Brazilian property directly
instead.
Deferred
tax
liability
$
Balance at 1 January 2010 3,562,911
Charge in the income statement 979,586
Balance as at 31 December 2010 4,542,497
==========
Balance at 1 January 2011 4,542,497
Charge in the income statement 1,249,980
Balance as at 30 June 2011 5,792,477
==========
Deferred tax liability is attributable
to the following:
Revaluation of investment property 5,792,477
Total 5,792,477
==========
4. Investment Properties
Duas Tres BB Warapuru
Barras Praias Trancoso 2 Havaizinho Total
$ $ $ $ $ $
At
beginning
of period 20,000,000 38,900,000 24,500,000 5,000,000 6,600,000 95,000,000
Additions
in period 217,500 - 570,379 88,045 40,000 915,924
----------- ----------- ----------- ---------- ----------- ------------
20,217,500 38,900,000 25,070,379 5,088,045 6,640,000 95,915,924
Fair value
adjustment 1,396,535 4,964,753 1,150,036 143,215 678,660 8,333,199
At end of
period 21,614,035 43,864,753 26,220,415 5,231,260 7,318,660 104,249,123
=========== =========== =========== ========== =========== ============
The Directors appointed Cushman & Wakefield, an internationally
recognised firm of surveyors to conduct a valuation of the Company's
acquired sites to determine their fair asset value as at 30 June
2011. These valuations were prepared in accordance with generally
accepted appraisal standards, as set out by the American Society
of Appraisers (the "ASA"), and in conformity with the Uniform Standards
of Professional Appraisal Practice of the Appraisal Foundation
and the Principles of Appraisal Practice and Code of Ethics of
the ASA and RICS (the "Royal Institute of Chartered Surveyors").
The analysis of market value of the properties is based on all
the pertinent factors that relate both to the real estate market
and, more specifically, to the subject properties. The valuation
analysis of the properties used three approaches: the comparison
approach, the residual value approach and a liquidated sale approach.
The comparison approach is based on the premise that potential
buyers in the marketplace would buy a property by comparison. It
involves acquiring market sales/offerings data on properties similar
to the subject property. The prices of the comparables are then
adjusted for any dissimilar characteristics as compared to the
subject's characteristics. Once the sales prices are adjusted,
they can be reconciled to estimate the market value of the subject
property. The residual value approach is an assessment of the value
of a scheme as completed and deduction of the costs of development
(including developers profit) to arrive at the underlying land
value. The liquidated sale approach is used where the investment
has not performed as expected. Under this approach, special assumptions
are made whereby the liquidated value is determined in a similar
manner to the direct sales or residual approach but with a discount
factor to reflect the fact that the interest that is being valued
is subject to special circumstances and cannot be offered freely
and openly in the market.
Each of the above-mentioned techniques results in a separate valuation
indication for the subject property. Unless the liquidation approach
has been used, a reconciliation process is performed to weigh the
merits and limiting conditions of the first two approaches. Once
this is accomplished, a value conclusion is reached by placing
primary weight on the technique, or techniques, that are considered
to be the most reliable, given all factors. These are consistent
with the prior period's valuation methodology.
5. Net asset value per share
The net asset value per share and the net asset values attributable
to ordinary shares at the period end are calculated in accordance
with their entitlements in the Articles of Association and were:
Net asset value per Net asset value
share attributable attributable
30 June 30 June 31 Dec 30 June 30 June 31 Dec
2011 2010 2010 2011 2010 2010
Unaudited Unaudited Audited Unaudited Unaudited Audited
$ $ $ $'000 $'000 $'000
Basic 1.18 1.05 1.11 100,597 89,439 94,633
Diluted 1.18 1.05 1.11 100,597 89,439 94,633
Diluted
excluding
deferred
tax
liability 1.25 1.09 1.17 106,389 92,867 99,175
Basic and diluted net asset value per share is based on net assets
at the June 2011 period end, and on 85,096,500 (2010: 85,096,500)
ordinary shares, being the respective number of shares in issue
at the period end.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR MMGMLVVNGMZM
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