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HOTELS & RESORTS
1
Contents
Group structure 3
Chairman’s report 5
Chief executive officer’s report 9
Directorate and executive 14
Senior management 22
Corporate governance 25
Sustainability report 35
Annual financial statements
Directors’ responsibility statement 38
Company secretary’s certificate 38
Auditors’ report 39
Report of the directors 40
Balance sheet 44
Income statement 45
Statement of changes in equity 46
Cash flow statement 47
Notes to the annual financial statements 48
Definitions 88
Corporate information 89
Shareholders’ diary 90
Notice of annual general meeting 91
Proxy inserted
2
The Palm, Jumeirah – Dubai, United Arab Emirates
HOTELS & RESORTS
3
Group Structure
IFA Hotels & Resorts
(SA)(Pty) Limited
(”IFA Hotels”)
100%
IFA Zimbali Lodge
(Pty) Limited
(”IFA Zimbali”)
100%
IFA Boschendal
Investments
(Pty) Limited
100%
International Financial Advisors KSCC (”IFA”)
(listed in Kuwait)
IFA Hotels & Resorts KSCC (”IFA H&R Kuwait”)
(listed in Kuwait)
IFA Assets
(Pty) Limited
(”IFA Properties”)
IFA Hotels & Resorts Limited (”IFA SA”)
(listed on JSE)
55% (45% free float)
85% (15% free float)
100%
100%
Moreland IFA
Joint Venture
(”Mifaz”)
50%
Zimbali Estates
(Pty) Limited
50%
Boschendal
Limited
(”Boschendal”)
19,25%
Purple Plum
Properties 59
Limited
19,25%
“THE GROUP”
IFA Hotels & Resorts 8
(Pty) Limited
(”IFA Estates”)
4
Laguna Tower – Dubai, United Arab Emirates
HOTELS & RESORTS
5
Chairman’s Report
Introduction
The listing of IFA SA on the JSE marked a further milestone in the growth of the global IFA group
as a leading international hospitality and real estate developer. The JSE-listing followed the
earlier listing in January 2006 of IFA H&R Kuwait on the Kuwait Stock Exchange, with a market
capitalisation of over $1 billion.
IFA H&R Kuwait has maintained a majority stake in IFA SA, manifesting our commitment to foreign
direct investment in South Africa. In fact IFA H&R Kuwait has to date been the largest single foreign
investor in KwaZulu-Natal tourism – through IFA SA it owns the exclusive Zimbali Lodge on
KwaZulu-Natal’s north coast, rated by Condé Nast as one of the world’s top hotels, and a 50% stake
in the development of the Zimbali Coastal Resort. The Mifaz joint venture to develop this Resort has
continued the IFA group’s world-wide tradition of strong strategic partnerships and alliances.
June 2006 saw the Mifaz joint venture further acquire 255 hectares on the south bank of the
Tongaat River, opposite the soon-to-be-developed ‘Zimbali Lakes’ on the north bank. The land
for development is north-facing with spectacular lake and sea views over the Tongaat River
estuary and Zimbali Lakes, towards the Zimbali Coastal Resort. The acquisition will enable the
Mifaz joint venture to leverage the value-add of the prestigious Zimbali brand to successfully
conclude the sale and development of the intended residential estate including a proposed
retirement village.
Also in June 2006 IFA SA purchased a significant stake in Boschendal (“the Boschendal
Investment”), which aligned us with an iconic South African brand. We intend to elevate
Boschendal onto the international real estate market and present the estate as a world-class
destination.
Results
We are very pleased with the strong performance of IFA SA reflected in the first set of annual
results since listing. The company has achieved significant growth in all major key performance
indicators (set out in detail in the annual financial statements which form part of this report.)
BEE
Our commitment to sustainable transformation is further evidenced by our Boschendal Investment.
The Boschendal Treasury Trust, in which IFA SA will now participate, was established to administer
the 5% of gross land sales to be donated by Boschendal to the local community. Gross land sales
are expected to generate approximately R2,2 billion over the next ten years. The Dwarsriver
community stands to benefit materially as the transformation initiative should see more than
R100 million in cash and 270 hectares of land contributed to the community over the next ten
years. In addition the development is expected to boost real wages in the area by 30%.
6
Zanzibar Beach Hotel and Resort – Zanzibar, Tanzania
HOTELS & RESORTS
7
Chairman’s Report
Directorate
On listing I was pleased to welcome as CEO Talal Al-Bahar, who is also the Chairman and
Managing Director of IFA H&R Kuwait. He was joined by James Wilson, Phillip de Sylva and Elliot
Nkosi as executive directors and Greg Larson as a non-executive director.
On 8 June 2006 Werner Burger, who is also the COO and President of IFA H&R Kuwait, was
appointed to the board as a non-executive director and James Wilson changed his status to non-
executive director on the same date.
Prospects
South Africa has emerged as an ideal investment opportunity in light of positive economic
factors and an untapped property asset base. IFA H&R Kuwait’s multi-million rand investment
in South African property development to date reflects its confidence in the economy given the
strict regulatory controls and economic stability. It remains committed to investing further
capital and management expertise in resort development in South Africa, through IFA SA.
IFA SA itself is well-positioned for further expansion and will continue to pursue new integrated
resort developments, boosted by the exponential growth of the tourism industry and increasing
demand for premier resorts in South Africa.
Further, the international IFA group reaffirms its commitment to leverage the South African
operation to continue wider investment in Africa. This will enable us to expand our global
network of resorts and offer prime opportunities to investors world-wide.
Appreciation
I wish to thank my colleagues on the board, executive management and all employees for their
efforts and perseverance which were integral to achieving the group’s successful listing and
good performance. I also extend my appreciation to our new fellow shareholders, and our
strategic partners, for their loyal support.
JASSIM AL-BAHAR
Chairman
24 August 2006
8
Zimbali Coastal Resort – Durban, South Africa
HOTELS & RESORTS
9
Chief Executive Officer’s Report
Introduction
The year saw the global IFA group cement its commitment to investment in South Africa
through the listing on the JSE of IFA SA. IFA SA has provided the international group with a
platform to capitalise on robust tourism and global investment interest in South Africa,
to maximise shareholder returns.
Our first set of annual results since the reverse-listing into Moribo of IFA Zimbali and IFA Hotels,
reflects strong growth for our underlying operations where strict focus on operational
efficiencies was evidenced in improved earnings before interest, tax, depreciation and
amortisation (“EBITDA”).
Shortly before year-end IFA SA acquired a significant stake in a third property – the Boschendal
estate – marking the first-time entry of IFA SA into the Western Cape. This investment has
positioned the company to partner in the proposed mixed-use development on the world-
renowned estate, at the same time fulfiling IFA SA’s commitment to sustainable transformation
through an upliftment initiative to benefit the local surrounding community (see ‘Acquisition’
below).
Financial results
See note 40 to the annual financial statements for accounting assumptions in respect of
comparative information.
The consolidated revenue for the group has increased by 57% to R161,0 million for the year.
This has translated to net earnings after tax of R42,0 million, which is up 209% over the same
period in 2005. Earnings per share amounted to19,52 cents and headline earnings per share to
19,56 cents.
Listing
IFA H&R Kuwait reverse-listed two South African subsidiaries – IFA Zimbali and IFA Hotels – into
JSE cash-shell Moribo (“the reverse takeover”) and subsequently listed on 27 February 2006 on
the JSE’s main board under the banner IFA Hotels & Resorts Limited. The share debuted at R4,50
to generate a market capitalisation of just under R1 billion on listing.
A number of transactions devised to streamline the company’s share capital took place
following the reverse takeover:
• The Moribo Share Incentive Trust was terminated after IFA SA’s repurchase of the Trust’s
677 843 shares, for an aggregate price of R1;
• The number of shares in issue was reduced to a manageable level when the company’s
shares were consolidated on a one-for-ten basis; and
• The share capital was increased to 500 000 000 consolidated shares by the creation of
461 121 152 new consolidated shares to facilitate future growth.
10
Boschendal Estate – Western Cape, South Africa
HOTELS & RESORTS
11
Chief Executive Officer’s Report
In addition the company changed its main business and trading objectives to reflect its core
business of investing in, developing and managing land, apartments, hotels and timeshare
resorts. Finally, IFA H&R Kuwait has the option to settle any liabilities that may arise within
three years of the reverse takeover, relating to activities conducted by the former Moribo (prior
to becoming a cash shell), in exchange for the issue of additional shares in IFA SA subject to a
maximum aggregate issue value of R20 million.
Acquisition
Boschendal
As announced on 20 June 2006, the group has acquired a 19,25% stake in Boschendal and
Purple Plum for an aggregate consideration of R54 million. Development plans for the
2 400 hectare Boschendal estate near Franschhoek include an upmarket retirement village
with 500 individual homes, a boutique hotel with upwards of 80 rooms and a mixed-use
development of a shopping centre, offices and apartments.
The investment is in line with the IFA group’s strategy of delivering new premier resort and
residential developments in South Africa.
Further, the investment enables IFA SA to participate in the Boschendal community programme
spearheaded by BEE shareholder Kovacs Investments 609 (Pty) Limited.
Operations
See note 40 to the annual financial statements for accounting assumptions in respect of
comparative information.
IFA Zimbali
The Zimbali Lodge has also shown steady improvement in revenues with an increase of 12%
from R31,0 million for the previous year to R34,8 million. EBITDA has similarly shown
improvement over 2005 as a result of securing additional income streams in the form of
ongoing service fees and rental commissions. EBITDA grew by 9% to R4,3 million. Of significance
is earnings before interest and taxation (“EBIT”) which has shown a strong improvement over
2005 and the R0,1 million achieved this year has reversed a trend of losses, the most recent
being R1,3 million for the previous year. The net asset value of IFA Zimbali has increased by
R20,2 million as a result of revaluing the property. The revaluation is not reflected in earnings.
The directors are pleased at the positive EBITDA and EBIT trend as well as the growth in value
of the business and will continue focusing on increasing the brand equity of the Zimbali Lodge,
which they believe is a key driver of higher occupancies and average revenue per visit.
IFA Hotels
The Mifaz joint venture has shown strong growth in land sales. Revenue increased by 78% to
R127,3 million from R71,3 million for the previous year. Healthy EBITDA has followed in this
12
Zimbali Coastal Resort – Durban, South Africa
HOTELS & RESORTS
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Chief Executive Officer’s Report
segment of the business with R55,9 million for the year reflecting a 126% increase over 2005.
A pleasing aspect of this profit growth is the reduction in operating costs as a percentage of
revenue from 18% to 11%. As the scale of the operation increases IFA SA intends to further
leverage the fixed-cost base. The heightened awareness of the Zimbali brand should ensure that
value is achieved for land currently in inventory, which includes “The Lakes” and the recently
acquired 255 hectare piece of land on the south bank, which have yet to be released to the
market.
Prospects
The continued positive performances of IFA SA’s assets bode well for future growth, particularly
in light of increasing tourism as South Africa’s coastline finds favour with international tourists.
The standard of leisure and living offered by Zimbali continues to attract holidaymakers and
serious international property investors alike.
In light of the rapid take-up of properties in the Zimbali Coastal Resort, a 300 hectare extension,
“The Lakes” and a 255 hectare development on the south bank are being planned for
development by the joint venture. The Lakes will include a Gary Player golf course. Both
developments are expected to be completed in time for the 2010 World Cup. The area’s growth
prospects are further supported by the proposed King Shaka airport to be established between
Zimbali and Durban.
The recent addition to the IFA SA portfolio of the Boschendal brand represents the strategic
entry into the booming Western Cape tourism industry and enables the company to utilise
Boschendal’s prime real estate for development.
Further, IFA SA has a strong balance sheet with no borrowings other than shareholder’s loans.
The board is currently investigating opportunities to leverage this to further maximise returns
to shareholders. To this end IFA SA will continue to pursue new integrated resort developments
in South Africa and across Africa and the Indian Ocean region.
Thanks
Thank you to our management and staff for their hard work and dedication during the year.
I also thank our partners. customers and suppliers for their continued invaluable support of our
developments.
TALAL AL-BAHAR
CEO
24 August 2006
HOTELS & RESORTS
Directorate and Executive
14
The following persons were directors of the company when it was known as Moribo Leisure Limited
and all of them resigned with effect from 16 January 2006, as a result of the implementation
of the reverse takeover of Moribo by IFA H&R Kuwait: Messrs WS Yeowart, SA Levitt, A Ball,
M Lutrin, KN Michael, A Norman and EP Rechter.
The following persons comprise the current board of IFA SA:
Jassim M Al-Bahar Non-executive Chairman appointed 16 January 2006
Talal JM Al-Bahar Chief Executive Officer appointed 16 January 2006
James AM Wilson Non-executive appointed 16 January 2006
Werner J Burger Non-executive appointed 8 June 2006
Phillip GR de Sylva Executive appointed 16 January 2006
Vusumuzi M Nkosi Executive appointed 16 January 2006
Gregory E Larson Non-executive appointed 16 January 2006
The board is therefore currently made up of seven directors, three executive members and three
non-executive directors as well as a non-executive chairman. The ages, qualifications,
nationality, business addresses and profiles of these directors are set out on the following pages.
HOTELS & RESORTS
15
Directorate and Executive
Jassim Mohamed Al-Bahar (64) Non-executive Chairman
Education
BA International Relations Programme (London School of Economics)
BA Political Science, International Relations
Master of Public Administration (University of Southern California)
Nationality
Kuwaiti
Address
Al Salhiya Complex, Gate 1, Floor 5
PO Box 4694, Zip Code 13047, Safat-Kuwait
Mr Al-Bahar commenced his career as the President of MAR Al-Bahar, the CaterpillarTM dealer for
Kuwait, Bahrain, Qatar, United Arab Emirates and the Sultanate of Oman. During this period he
was appointed as a board member to the Kuwait International Investment Company (“KIIC”)
and was ultimately appointed as the chairman and managing director of KIIC. He held this
position from 1987 to 2000. Mr Al-Bahar is currently the chairman and managing director of IFA
and has held this appointment since 2002. He is also the chairman and CEO of United
Investment Portugal, which has invested approximately $120 million in the Sheraton Algarve
and Pine Cliffs Resort. He was the chairman of the Kuwait Portugal Fund, which has invested $40
million in ESPART, part of Espirito Santo Group, and in the Saviotti Group and the Dom Pedro
Hotel in Portugal. Mr Al-Bahar was elected to the Senior Supervisory Board of Banco
Commercial Portuguese (BCP) and is on the board of BCP. He is also on the board and the
executive board of Kingdom Hotel Investments (KHI), part of Kingdom Holding Company,
chaired by HRH Prince Alwaleed Bin Talal Bin Abdelaziz Al-Saud.
Mr Al-Bahar also serves as chairman of the Kuwait Heart Foundation, is a board member of the
Kuwait American Foundation and a board member and treasurer of the Kuwait Society for the
Advancement of Arab Children and a board member of Al-Qabas newspaper.
HOTELS & RESORTS
Directorate and Executive
16
Talal Jassim Mohamed Al-Bahar (28) Chief Executive Officer
Education
BA Business Studies (Loyola Marymount University, Los Angeles)
Nationality
Kuwaiti
Address
Al Salhiya Complex, Gate 1, Floor 5
PO Box 4694, Zip Code 13047, Safat-Kuwait
Mr Al-Bahar currently serves as chairman and managing director of IFA H&R Kuwait based in
Dubai;. He is also the general manager of United Investments in Portugal; and an executive
director of Drake & Skull Kuwait. He has served as chairman and managing director of Kuwait
Investment Holding Company.
He also serves on the board of Jeezan Real Estate, where he is vice chairman and Al-Deera
Holding Company as vice chairman. He was also previously a director of Marketing Services
Company (MMS) and International Finance Company (IFCO).
HOTELS & RESORTS
17
Directorate and Executive
James AM Wilson (48) Non-executive
Education
Degree in Hospitality Management Oxford Brookes and HCIMA and
Member of WTTC (World Travel and Tourism Council)
Nationality
British
Address
Dubai Media City, Boutique Office, Villa No. 6
Mr Wilson has had extensive exposure to trading and corporate strategies, including expansion
and development, franchising, international hotel management contracts, cohesive negotiation,
financial, development and asset management, site sourcing and acquisitions.
Prior to joining the IFA group, Mr Wilson held a number of senior positions within the Five Star
hospitality industry covering the management and development of hotels, timeshare resorts,
integrated Five Star resorts, golf development with Southern Sun Hotels (South Africa), Trust
House Forte (London – Hyde Park Hotel), Whitbread Plc, UK Country Club Hotels (Marriott),
Radisson Roe Park (Northern Ireland), Quinta Do Lago Resort (Portugal), Rothschild Investment
Trust (Invicta Golf and Leisure) and has had extensive experience in choosing and evaluating
property types and sectors which will work best for investors.
His group has been instrumental in Europe and the Middle East in changing the way branded
hotels are planned and developed to include residential, fractional, timeshare components to
deliver accelerated returns and to maximise the potential of common marketing investment
and achieving what high-net-worth real estate investors are looking for in today’s market, with
an optimum property portfolio.
HOTELS & RESORTS
Directorate and Executive
18
Werner Johannes Burger (37) Non-executive
Education
BSc Building Management (University of Pretoria)
Nationality
South African
Address
Dubai Media City, Boutique Office, Villa No. 6
Mr Burger has extensive experience in all aspects of property and resort development and
management across southern Africa, the Middle East and various other markets and regions.
In Dubai, UAE, Mr Burger has held, amongst other executive positions in the industry, that of
Vice President Sales and Marketing for IFA H&R Kuwait before his current appointment as
President and COO.
As COO, he plays a critical role in the management and future expansion of IFA H&R Kuwait,
locally and internationally. His portfolio includes, inter alia, the strategic positioning of the IFA
H&R Kuwait group globally, the development of new market sectors, the identification and
acquisition of new projects and the building of strategic alliances with key industry leaders and
hospitality operators. His diverse areas of responsibility encompass; financial, organisational and
strategic planning; in addition he spearheads the development of new divisions within the group
that add value and diversity to the current portfolio.
Mr Burger works with the CEO to develop and implement short- and long-term strategy and is
responsible for all major operational decisions.
HOTELS & RESORTS
19
Directorate and Executive
Phillip Guy René de Sylva (50) Executive
Education
National Diploma in Surveying
National Diploma in Property Valuations (Natal Technikon)
Nationality
South African
Address
1 Amanbali, Zimbali Coastal Resort, Zimbali, 4422
Mr De Sylva was registered as a professional valuer with the SA Council for the Property Valuers
Profession in September 1986.
He is a past president of the SA Institute of Valuers (SAIV), and past chairman of the SAIV’s
KwaZulu-Natal branch. He is currently a Fellow Member of the institute.
He was appointed by the Minister of Justice as an appraiser for the district of Durban in
October 1994.
Mr De Sylva was employed by Marriott Properties from January 1981 – November 1993 and
managed the Pinetown branch of Marriott for a four-year period up to July 1992.
He acquired PDS Property Consultants CC (“PDS”) (a property valuation practice) in December
1993 as the sole member. He sold PDS in January 2005 to take up an appointment as IFA SA’s
Vice President Operations (Africa and Indian Ocean).
Mr De Sylva has held company directorships in property owning, development and management
companies as well as acting as a consultant to various institutions, government departments
and private sector clients in the past.
HOTELS & RESORTS
Directorate and Executive
20
Vusumuzi Mhlawuleni Nkosi (35) Executive
Education
Diploma Golf Course Management (Pretoria Business School)
Nationality
South African
Address
1 Amanbali, Zimbali Coastal Resort, Zimbali, 4422
Mr Nkosi was a touring golf professional (PGA Sunshine Tour) for a period of four years and
qualified as golf teaching professional. He acted as operations manager (1998-2000) and
assistant golf director (2000-2003) of the Zimbali Country Club.
Mr Nkosi’s current responsibilities include developing IFA SA’s social responsibility programme,
initiating and implementing a BEE strategy and overseeing the various stakeholders’ needs at
the Zimbali Coastal Resort.
His current business interests further include:
1 Leitch Landscapes (Pty) Limited, shareholder and director, a landscaping, golf course
maintenance and horticultural services company;
2 NVZ Property Management (Pty) Limited, sole shareholder and managing director, a
property maintenance and cleaning services company;
3 Marine Docksworks CC, member, a marine services/stevedoring company.
HOTELS & RESORTS
21
Directorate and Executive
Gregory Errol Larson (53) Non-executive
Education
BProc (University of Natal, Pietermaritzburg)
Nationality
South African
Address
3rd Floor Momentum House, 125 Prince Alfred Street, Durban, 4001
Mr Larson was admitted as an attorney, notary public and conveyancer on 5 March 1979 and
has practised law ever since. He is currently practising as a director of Larson Falconer Inc of
Durban specialising in commercial and property law.
HOTELS & RESORTS
Senior Management
22
Kevin Watson (34) Financial Manager and Company Secretary
(Africa and Indian Ocean)
Education
Bachelor of Accounting Science (Honours) (University of South Africa)
Chartered Accountant (South Africa)
Master of Business Administration (Edinburgh Business School)
Nationality
South African
Address
1 Amanbali, Zimbali Coastal Resort, Zimbali, 4422
After completing four years of accounting articles, including involvement in numerous
construction and leisure industry audits, Mr Watson relocated to the UK in 1995 where he
worked as a treasury analyst for Bull Information Systems, a large IT company listed in Paris. In
1997 he joined Canary Riverside Developments (a JV between companies listed on the UK and
Singapore exchanges) as financial controller. The JV was responsible for a $500 million mixed
use development, the first in the UK. After the project completion in 2000, Mr Watson worked
as a financial consultant in Switzerland for SITA, preparing one of their subsidiaries for an
Amsterdam listing.
In 2001 Mr Watson returned to South Africa in the position of financial manager for one of Shell
Oil Company’s subsidiaries and in 2003 moved to the USA to another Shell subsidiary as
internal controls manager, then chief financial officer and ultimately general manager. While in
the USA he was involved extensively in implementing corporate governance in compliance with
the Sarbanes Oxley Act and introducing a performance driven business model.
Mr Watson returned to South Africa for the opportunity presented by IFA SA in April 2006 and
currently heads up the full financial function for Africa and the Indian Ocean, which includes
the company secretarial duties.
HOTELS & RESORTS
23
Senior Management
Wessel Witthuhn (45) Vice President Design and Development
(Africa and Indian Ocean)
Education
BSc Building Science
MSc Construction Management
CIOB
AAArb
Nationality
South African
Address
Amanbali, Zimbali Coastal Resort, Zimbali, 4422
Mr Witthuhn commenced his career in the construction industry in 1987 and in 1992 started
his own company Rig Construction. In 1997 he joined Grinaker Building Cape to project manage
a $45 million refurbishment of the Cavendish Square Shopping Centre. Mr Witthuhn was made
a director of Grinaker Cape where his responsibilities included procuring new work, marketing,
negotiating, financial management, budgeting and strategic planning.
In 2000 Mr Witthuhn was appointed as general manager of Grinaker Infrastructure Development
in Johannesburg where his role included negotiating with the Parliamentary Ministers.
Mr Witthuhn joined Damac Properties in 2002 as the vice president for projects – Damac was
the first private developer in Dubai to sell freehold property. He successfully set up the design
and development division within the company, and managed the feasibility of developments
within Dubai to the value of $250 million.
In September 2003 Mr Witthuhn was headhunted to take over the management of the entire
Real Estate and Property Management Divisions within the Al-Rostamani Group. Mr Witthuhn
had full responsibility and control over the entire property portfolio of approximately
$550 million. Also during his tenure, he managed and coordinated the acquisition of certain
lands on a concession basis, including the complete development of these lands from concept
(master planning) to financing, marketing, selling and developing. The total value of these
developments was in the region of $2,2 billion.
In May 2006 he joined IFA SA as the Vice President Design and Development (Africa and Indian
Ocean). His portfolio includes all developmental aspects within this region.
24
Zimbali Coastal Resort – Durban, South Africa
HOTELS & RESORTS
25
Corporate Governance
The company’s directors acknowledge the importance of sound corporate governance and are
committed to implementing the principles of the King II Report. During the year the directors’
primary focus was to achieve a successful listing on the JSE in the ‘Travel & Leisure’ sector.
Subsequent to the listing on 27 February 2006, the directors are now able to focus on improving
and codifying operational and corporate practices to achieve compliance with the Code of
Corporate Practices and Conduct (“the Code”) set out in the King II Report.
The appointment on 8 June 2006 of a company secretary with extensive corporate governance
experience will facilitate the ongoing effort to enhance the company’s governance framework.
The board
Post listing the unitary board consists of seven directors and is chaired by non-executive
Chairman JM Al-Bahar. In line with the King II Report recommendations it comprises three
executive directors, including the CEO TJM Al-Bahar, and a further three non-executive directors.
JAM Wilson (who had served previously on the board as an executive director) and WJ Burger
were appointed as non-executive directors with effect from 8 June 2006. The group recognises
the King II Report recommendations that board membership include independent non-executive
directors and will seek to facilitate compliance with future board appointments.
As set out in the Board Charter the roles of the non-executive Chairman and CEO are strictly
separated. The clear division of responsibilities is echoed across the board and ensures a balance of
authority which precludes any one director from exercising unfettered powers of decision-making.
Currently none of the directors have entered into service contracts in excess of three years.
In accordance with the articles of association directors retire every three years and being
eligible, offer themselves for re-election at the annual general meeting. JM Al-Bahar, GE Larson
and JAM Wilson retire by rotation at the forthcoming annual general meeting and, being eligible,
will offer themselves for re-election. WJ Burger, being a new director, is also required to retire
and will make himself available for re-election.
The board meets at least four times a year with additional meetings held where necessary.
Subsequent to the listing on the JSE in February 2006 the board has formally met once on
8 June 2006, with attendance as indicated:
26
Rhodes Cottage, Boschendal Estate – Western Cape, South Africa
HOTELS & RESORTS
27
Corporate Governance
Directors Board meetings
JM Al-Bahar*▼ Chairman 0 (1)
TJM Al-Bahar▼ CEO 1 (1)
WJ Burger* appointed 8 June 2006 1 (1)
PGR de Sylva 1 (1)
GE Larson* 1 (1)
VM Nkosi 1 (1)
JAM Wilson*▲ 1 (1)
*non-executive ▼Kuwaiti ▲British
The board maintains full and effective control over the company and is responsible for
monitoring executive management, ensuring the proper direction and control of the company
and any acquisitions or disposals. A Board Charter formally setting out the board’s composition
and procedures was proposed for discussion at the board meeting on 8 June 2006 and will be
adopted at the next board meeting.
The Charter codifies the board’s duties and responsibilities which include determining the
group’s overall policy, strategic direction and goals, acquisitions and resource allocation,
monitoring key risks and legal and regulatory compliance. Steps for the appointment of
directors and the formation of sub-committees are also codified.
All directors have unrestricted access to the advice and services of the company secretary and
to company records, information, documents and property. Non-executive directors also have
unfettered access to management at any time. All directors are entitled, at the company’s
expense, to seek independent professional advice on any matters pertaining to the group
necessary to discharge their responsibilities.
Board processes
Share dealings
Directors are required to declare their shareholdings, additional directorships, potential conflicts
of interest and any dealings in securities of the company to an appointed executive director and
the company secretary, who together with the sponsor ensure that such dealings are released
on SENS.
28
Zimbali Coastal Resort – Durban, South Africa
HOTELS & RESORTS
29
Corporate Governance
In addition, all directors and management with access to financial information and any other
price sensitive information are prohibited from dealing in the shares of the company during
‘closed periods’, as defined by the JSE.
New appointments
Presently the board as a whole is responsible for the appointment of new directors. Going
forward the board in conjunction with the remuneration committee will regularly review and
assess the mix of skills and experience on the board as well as its composition in light of South
African transformation policies. The board has a formal Board Appointment policy which is used
when appointing directors.
Self-evaluation
The group is cognisant of the King II Report’s recommendation for a board self-evaluation
procedure as well as the need for the sub-committees to conduct annual self-evaluation
exercises. Accordingly a formal self-evaluation procedure is set out as a future imperative in the
Board Charter.
Company secretary
The company secretary is responsible for providing the directors with up-to-date information
on regulatory developments as well as corporate governance. Where appropriate, the company
secretary will involve the sponsor and other relevant experts in this regard. GL Evans resigned
as company secretary during the year to focus on his financial controller duties, and KA Watson
was appointed in his stead with effect from 8 June 2006.
Board committees
The company has established a group audit, risk and compliance and a remuneration
committee. The committees are governed by written terms of reference which were tabled at
the recent board meeting on 8 June 2006 and will be approved at the next board meeting.
Group Audit Risk and Compliance (“ARC”) committee
The ARC committee comprises non-executive directors GE Larson, who chairs the committee,
JAM Wilson and Chairman JM Al-Bahar. Although the committee has not met since the
company’s listing on the JSE, going forward it will meet at least four times a year in line with
the King II Report recommendations.
30
Boschendal Estate – Western Cape, South Africa
HOTELS & RESORTS
31
Corporate Governance
The ARC committee is responsible for monitoring the company’s risk and environmental
management and the safeguarding of assets and internal control. It also reviews the
performance of the external auditors and the company’s compliance with laws and regulations.
The committee is further responsible for recommending the use of the external auditor for non-
audit services. The committee’s Charter sets guidelines for determining audit and non-audit
services including differing approval procedures for varying project costs.
Remuneration committee
The remuneration committee comprises the CEO TJM Al-Bahar and non-executive director
JAM Wilson, who chairs the committee. The CEO is recused from discussions regarding his own
remuneration. Although the remuneration committee has formally not met during the year,
going forward the committee will meet twice a year and will look to add an additional non-
executive director to its membership.
The committee is responsible for reviewing and approving the remuneration and terms of
employment of the executive directors and senior employees. When making appointments the
committee takes into account IFA SA’s board appointment policy which formalises a transparent
procedure for new appointments. The fees of both executive and non-executive directors are
approved by shareholders at the annual general meeting in line with the King II Report.
Directors’ emoluments are disclosed in note 27 to the annual financial statements.
The committee is further tasked with reviewing the composition of the board and making
recommendations for the appointment of new directors.
Accounting and auditing
The group is fully audited by the external auditors twice a year with an additional two quarterly
reviews. The preparation of the financial statements remains the responsibility of the directors.
32
Zimbali Coastal Resort – Durban, South Africa
HOTELS & RESORTS
33
Corporate Governance
Internal control and risk management
Internal control
The board, through the ARC committee, is responsible for the group’s systems of internal control
and risk management and reviewing the effectiveness of these systems. In light of the current
size of the group, the board has deemed a dedicated internal audit function to be impractical.
Nothing has come to the attention of the board to indicate that there has been a material
breakdown in the internal systems of control during the year.
Stakeholder communication
The company is committed to timely, consistent and transparent communication with all
stakeholders.
Company announcements are released on SENS and financial results announcements are also
posted to shareholders, who are encouraged to attend the annual general meeting to facilitate
ongoing interaction with the board.
The company is committed to the highest standards of integrity, behaviour and ethics in dealing
with all stakeholders. Employees are required to adhere to integrity in all business dealings,
confidentiality of information, timeous dissemination of information and a non-discriminatory
work environment.
34
Boschendal Estate – Western Cape, South Africa
HOTELS & RESORTS
35
Sustainability Report
BEE
The group is committed to sustainable transformation as a business imperative. To this end
IFA SA has begun the process of determining its current BEE status in terms of a generic
scorecard to assess the requirements for achieving the necessary BEE platform. Going forward
the group will monitor the applicable industry transformation charters, in particular the Tourism
Charter, and the Department of Trade and Industry’s Broad-Based BEE (BBBEE) Codes of Good
Practice.
IFA SA’s commitment to transformation was recently evidenced by the acquisition of a stake in
Boschendal as announced on 20 June 2006, which will enable the group to contribute towards
Boschendal’s transformation initiative. The programme, set up by Boschendal BEE shareholder
Kovacs Investments 609 (Pty) Limited, intends to contribute over R100 million in trust and
270 hectares of land to the local Dwarsriver community over the next ten years.
Employees
IFA SA is committed to achieving an employment status that fairly represents the demographics
of the country and to fostering a non-discriminatory work environment in which all employees
enjoy equal rights.
Skills development and training
In light of the group’s recent listing and the small number of employees at holding company
level, no formal skills development programme is presently in place. However, IFA SA will
re-assess the need to implement formal skills and development programmes commensurate
with the growth of the group.
Health and safety
IFA SA is committed to ensuring full compliance with the South African Occupational Health
and Safety Act. Although the group presently has no formal health and safety policy, it facilitates
compliance through adherence to those of its joint venture partner (Moreland at Zimbali
Coastal Resort) and hotel operators (Sun International (South Africa) Limited) at Zimbali Lodge,
respectively. At Zimbali Lodge a committee is responsible for monitoring compliance with the
policies in place, and in addition regular safety, health and environment audits are conducted by
independent contractors and bodies.
36
Zimbali Coastal Resort – Durban, South Africa
HOTELS & RESORTS
37
Sustainability Report
Environment
The group is committed to the preservation and conservation of the environment and the
natural resources of the local regions in which it operates. Environmental impact studies are
conducted at all new developments prior to the commencement of construction.
The Zimbali Coastal Resort includes a 50 hectare nature reserve with all primary dune areas
demarcated as conservation areas to conserve the local flora and fauna. The group further
adheres to the environmental policies of its joint venture and management partners, Moreland
and Sun International. In this regard Zimbali Lodge, managed by Sun International (South Africa)
Limited, has received a Gold Award from the Heritage Environmental Rating Programme and
Moreland is ISO 14001 certified.
IFA SA’s commitment to conservation is further evidenced in the Boschendal co-development
which includes a 750 hectare nature reserve, and recognises a social accord with Dwarsriver
residents to conserve the natural resources in the valley. In designing and planning the
development, IFA SA and Boschendal are cognisant of its status as a heritage site and have taken
the viewpoint of the South African Heritage Association into consideration in this regard.
Corporate Social Investment (“CSI”)
IFA SA acknowledges its responsibility towards the communities in which it operates as well as
broader development projects. Following the successful listing the group is now able to establish
a formal CSI structure. To this end the group has tasked an executive director with identifying
suitable beneficiaries for social and community upliftment programmes.
38
Company Secretary’s Certificate
HOTELS & RESORTS
I, KA Watson, company secretary of IFA Hotels & Resorts Limited, certify that, to the best of my knowledge and belief, all returns required
of a public company have, in respect of the period under review, been lodged with the Registrar of Companies and that all such returns
are true, correct and up to date.
KA WATSON Durban
Company Secretary 24 August 2006
Directors’ Responsibility Statement
The directors are responsible for the maintenance of adequate accounting records and the preparation and integrity of the financial
statements and related information. The auditors are responsible to report on the fair presentation of the financial statements. The
financial statements have been prepared in accordance with International Financial Reporting Standards and in the manner required by
the Companies Act in South Africa.
The directors are also responsible for the group and company’s system of internal financial control. These are designed to provide
reasonable, but not absolute, assurance as to the reliability of the financial statements, and to adequately safeguard, verify and maintain
accountability of assets, and to prevent and detect misstatement and loss. Nothing has come to the attention of the directors to indicate
that any material breakdown in the functioning of these controls, procedures and systems has occurred during the period under review.
The financial statements have been prepared on the going concern basis, since the directors have every reason to believe that the group
and company has adequate resources in place to continue in operation for the foreseeable future.
The directors of the company, whose names are set out on page 14, collectively and individually accept full responsibility for the accuracy
of the information given in this report and these annual financial statements and certify to the best of their knowledge and belief that:
• no facts have been omitted, which would make any statement in this report false or misleading;
• all reasonable enquiries to ascertain such facts have been made; and
• the report contains all information required by the South African Companies Act and the JSE Listings Requirements.
The annual financial statements set out on pages 40 to 88 were approved by the board of directors on 24 August 2006 and are signed
on their behalf by:
JM AL-BAHAR TJM AL-BAHAR
Chairman CEO
39
HOTELS & RESORTS
Auditors’ Report
Report of the independent auditors to the shareholders of IFA Hotels & Resorts Limited
We have audited the group and company annual financial statements of IFA Hotels & Resorts Limited set out on pages 40 to 88 for the
period ended 30 June 2006. These financial statements are the responsibility of the company’s directors. Our responsibility is to express
an opinion on these financial statements based on our audit.
Scope
We conducted our audit in accordance with statements of International Standards on Auditing. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis for our opinion.
Audit opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of the group and the company at
30 June 2006 and the results of their operations and their cash flows for the period then ended in accordance with International Financial
Reporting Standards, and in the manner required by the Companies Act in South Africa.
BDO SPENCER STEWARD (KZN) INCORPORATED
Chartered Accountants (South Africa)
Registered Auditors
Durban
24 August 2006
40
HOTELS & RESORTS
Report of the Directors
To the shareholders of IFA Hotels & Resorts Limited
Your directors submit their report for the period ended 30 June 2006. This report forms part of the audited financial statements.
Year-end
The group changed its year-end in the previous financial year from 31 December to 30 June. The results of the group’s operations and cash
flows in the comparative year are for the period of six months ended 30 June 2005.
The company changed its year-end in the current financial year from 31 December to 30 June. The results of the company’s operations and
cash flows in the current year are for the period of 18 months ended 30 June 2006.
Review of operations
Detailed commentary is set out in the CEO’s report.
Investments in wholly-owned subsidiaries and principal subsidiaries
Details of the company’s subsidiaries are set out on page 3 of the annual report.
The company’s three principal subsidiaries are IFA Zimbali Lodge (Pty) Limited, IFA Hotels and Resorts (South Africa) (Pty) Limited and
IFA Boschendal Investments (Pty) Limited. IFA Zimbali Lodge (Pty) Limited owns the Zimbali Lodge. Sun International Management Limited
has the management contract and is responsible for the day-to-day operations of the Zimbali Lodge. IFA Hotels and Resorts (South Africa)
(Pty) Limited holds a 50% interest in two joint ventures with Moreland-Zimbali Resorts (Pty) Limited known as Mifaz and Zimbali Estates (Pty)
Limited. They are jointly controlled. IFA Boschendal Investments (Pty) Limited owns a 19,25% stake in Boschendal Limited and Purple Plum
Properties 59 Limited which is responsible for developing the Boschendal estate.
Financial review
Detailed commentary is set out in the CEO’s report and the annual financial statements.
Borrowing powers
The borrowing powers of the company are not limited.
The IFA SA group currently has no external borrowings. It is financed entirely by shareholder’s loans and internally generated cash.
The aggregate of the shareholder’s loans, both interest-bearing and non-interest bearing, can be found in note 21 to the annual financial
statements.
Dividends
No dividends were declared or recommended during the period (2005: RNIL).
As set out in the Circular to the shareholders of Moribo Leisure Limited issued on 22 December 2005 (“the Circular”), the board of directors
undertook to distribute all of the company’s excess cash that existed before the implementation of the reverse takeover to its shareholders
who were recorded in the register as such on the record date.
41
HOTELS & RESORTS
Report of the Directors
The last date to trade in order to participate in the dividend was Friday, 10 February 2006 and the record date was Friday, 17 February 2006
and was prior to the implementation of the reverse takeover.
During the period and subsequent to the implementation of the reverse takeover the South African Revenue Service (“SARS”) acquired all of
the excess cash, to settle certain claims. The previous directors of the company continue to apply for the settlement of the company’s previous
receivables including the excess cash acquired by SARS. It is not possible at this time to quantify the extent, if any, of the dividend.
Share capital
The authorised and issued share capital of the company, at 30 June 2006, was as follows: R
Authorised
500 000 000 ordinary shares of 1 cent each 5 000 000
Issued
218 210 680 ordinary shares of 1 cent each 2 182 107
Share premium 207 054 943
All changes in the authorised and issued share capital are set out in note 19 to the financial statements.
Unlisted securities
IFA SA has no unlisted securities.
Major shareholders
Based on the share register at 30 June 2006, the following shareholders held in excess of 5% in the capital of the company:
Number of shares held Percentage of
Name of shareholder Direct Indirect issued share capital
IFA Hotels & Resorts KSCC 185 479 078 – 85,0
International Investment Projects Company KSCC 20 730 015 – 9,5
The holding company of IFA Hotels & Resorts KSCC is International Financial Advisors KSCC. Both of these entities are incorporated in Kuwait.
42
Report of the Directors
HOTELS & RESORTS
Shareholder spread
The number of public shareholders and the percentage of shares held by public and non-public shareholders, as well as an analysis of the
non-public shareholdings, are set out below as at 30 June 2006:
Number of % of Number of % of
shareholders shareholders shares held issued shares
Non-public shareholders
Directors – direct interests – – – –
Directors – indirect interests – – – –
Associates of the directors – – – –
Entities with a right to nominate a director – – – –
Trustees of the company’s share scheme – – – –
Strategic holdings (more than 10%) 1 0,16 185 479 078 85
Public shareholders 632 99,84 32 731 602 15
Total 633 100 218 210 680 100
Auditors
BDO Spencer Steward (KZN) Incorporated have indicated their willingness to continue in office as auditors of the company. A resolution
to reappoint them as auditors will be proposed at the next annual general meeting of shareholders scheduled to take place on
20 September 2006.
Directors’ fees
As the reverse listing of the company onto the JSE was implemented shortly before year-end, the directors have agreed not to be paid any
directors’ fees for the year ended 30 June 2006. The directors have also agreed not to take any directors’ fees for the year ending 30 June 2007.
This further applies to members of the ARC and remuneration committees. Please see note 27 of the financial statements for further details
on directors’ remuneration.
Directors’ interests in the company
At 30 June 2006, none of the directors held direct or indirect interests in the company. There have been no changes in this status between the
year-end and the date of this report.
Special resolutions
All the ordinary and special resolutions proposed at the general meeting of shareholders held on Monday, 16 January 2006 were passed by
shareholders at the meeting and have been registered by the Companies and Intellectual Property Registration Office of South Africa.
IFA Zimbali Lodge (Pty) Limited and IFA Hotels and Resorts (South Africa) (Pty) Limited both amended their Articles of Association prior to the
reverse listing onto the JSE. These resolutions were both passed on 16 January 2006.
43
Report of the Directors HOTELS & RESORTS
Litigation statement
There are no legal or arbitration proceedings, including any proceedings which are pending or threatened, of which the company is aware which
may have, or have had, during the twelve month period preceding the date of these annual financial statements, a material effect on the
financial position of the group.
Events subsequent to year-end
Other than as set out in these financial statements, there have been no material facts or circumstances that have occurred or changes in the
financial or trading position of the company or its subsidiaries between the year-end date and the date of this report.
Company secretary
GL Evans Appointed 1 February 2006, resigned 8 June 2006
KA Watson Appointed 8 June 2006
Business and postal address
1 Amanbali, Zimbali Coastal Resort, KwaZulu-Natal, South Africa
PO Box 12, Zimbali, 4422, South Africa
The directors’ report set out on pages 40 to 43 was approved by the board of directors on 24 August 2006 and is signed on their behalf
by:
JM AL-BAHAR TJM AL-BAHAR
Chairman CEO
44
Balance Sheetas at 30 June 2006
HOTELS & RESORTS
Group Company
30 June 30 June 30 June 31 December
2006 2005 2006 2004
Note R R R R
Restated
Assets
Non-current assets 146 051 959 68 251 862 183 842 869 556 132
Property, plant and equipment 7 83 132 333 57 455 949 – 156 332
Intangible assets 8 5 533 763 2 297 759 – –
Investment in subsidiaries 9 – – 57 548 727 1 000
Loans to subsidiaries 9 – – 126 294 142 –
Investment in associates 10 13 902 778 – – –
Loan to associate 10 35 851 326 – – –
Investments 11 7 300 000 7 300 000 – –
Other financial assets 12 – – – 398 800
Deferred tax 13 331 759 1 198 154 – –
Current assets 312 644 707 191 430 799 1 637 035 5 808 287
Township properties 14 86 217 232 77 606 681 – –
Inventories 15 2 453 812 2 176 994 – –
Trade and other receivables 16 142 739 260 57 975 325 115 694 1 350 112
Other financial assets 12 1 094 977 983 886 1 094 977 –
Assets held for sale 17 211 765 – 211 765 –
Cash and cash equivalents 18 79 927 661 52 687 913 214 599 4 458 175
Total assets 458 696 666 259 682 661 185 479 904 6 364 419
Equity and liabilities
Capital and reserves 148 653 825 17 738 815 120 945 299 5 764 905
Issued capital and share premium 19 71 891 716 200 209 237 050 83 033 588
Non-distributable reserve 20 23 796 690 – – 5 251 216
Distributable reserve 52 965 419 17 738 615 (88 291 751) (82 519 899)
Non-current liabilities 133 593 638 103 618 960 55 298 878 –
Shareholder’s loan 21 113 570 846 96 227 384 55 298 878 –
Deferred tax 13 20 022 792 7 391 576 – –
Current liabilities 176 449 203 138 324 886 9 235 727 599 514
Shareholder’s loan 21 47 794 492 74 578 080 – –
Liabilities held for sale 17 211 765 – 211 765 –
Trade and other payables 22 66 706 480 19 069 956 8 401 265 599 514
Advance deposits 23 903 154 302 267 – –
Deferred revenue 24 50 885 092 43 540 092 – –
Taxation 9 948 220 834 491 622 697 –
Total equity and liabilities 458 696 666 259 682 661 185 479 904 6 364 419
45
Income Statementfor the period ended 30 June 2006
HOTELS & RESORTS
Group Company
Twelve Six Eighteen Twelve
months ended months ended months ended months ended
30 June 30 June 30 June 31 December
2006 2005 2006 2004
R R R R
Note Restated
Continuing operations
Revenue 25 161 006 555 55 458 306 2 623 769 546 306
Cost of sales (72 174 742) (25 137 105) – –
Gross profit 88 831 813 30 321 201 2 623 769 546 306
Other income 160 967 33 832 – 3 943 000
Distribution costs (562 574) (541 244) – –
Administrative expenses (10 747 258) (9 717 558) – (3 466 000)
Other expenses (22 083 553) (2 823 815) (2 957 580) (3 286 323)
Operating profit/(loss) 26 55 599 395 17 272 416 (333 811) (2 263 017)
Interest received 29 15 227 074 3 242 605 8 911 063 –
Finance costs 30 (10 731 269) (4 307 578) (6 399 122) (1 095)
Profit/(loss) before tax 60 095 200 16 207 443 2 178 130 (2 264 112)
Taxation 31 (18 117 295) (3 910 788) (622 697) –
Profit/(loss) after tax from continuing operations 41 977 905 12 296 655 1 555 433 (2 264 112)
Discontinuing operations
Loss on discontinued operations 17 – – (5 764 905) –
Net profit/(loss) 41 977 905 12 296 655 (4 209 472) (2 264 112)
Attributable to:
– Equity holders of the parent 41 977 905 12 296 655 (4 209 472) (2 264 112)
Earnings per share
– Basic and diluted basic earnings per share (cents) 32 19,52 5,78
– Headline and diluted headline earnings per share (cents) 32 19,56 5,78
46
Statement of Changes in Equityfor the period ended 30 June 2006
HOTELS & RESORTS
Non-
Share Share distributable Distributable
capital premium reserve reserve Total
Group R R R R R
Balance at 1 January 2005 200 – – 5 441 960 5 442 160
Net profit for the year 12 296 655 12 296 655
Balance at 1 July 2005 200 – – 17 738 615 17 738 815
2 181 907 69 709 609 23 796 690 35 226 804 130 915 010
Issue of share capital 2 181 907 69 709 609 71 891 516
Transaction costs (6 814 273) (6 814 273)
Surplus on revaluation of land and buildings 28 933 303 28 933 303
Deferred tax on revaluation surplus (5 073 441) (5 073 441)
Net profit for the period 41 977 905 41 977 905
Transfer to distributable reserve (63 172) 63 172 –
Balance at 30 June 2006 2 182 107 69 709 609 23 796 690 52 965 419 148 653 825
Non-
Share Share distributable Distributable
capital premium reserve reserve Total
Company R R R R R
Balance at 1 January 2004 (restated) 55 231 82 978 357 5 251 216 (80 255 787) 8 029 017
Net loss for the period (restated) (2 264 112) (2 264 112)
Balance at 1 January 2005 (restated) 55 231 82 978 357 5 251 216 (82 519 899) 5 764 905
2 126 876 124 076 586 (5 251 216) (5 771 852) 115 180 394
Share buyback (677) 677 –
Transfer to distributable reserve (5 251 216) 5 251 216 –
Issue of share capital 2 127 553 124 076 586 126 204 139
Transaction costs (6 814 273) (6 814 273)
Net loss for the period (4 209 472) (4 209 472)
Balance at 30 June 2006 2 182 107 207 054 943 – (88 291 751) 120 945 299
47
Cash Flow Statementfor the period ended 30 June 2006
HOTELS & RESORTS
Group Company
Twelve Six Eighteen Twelve
months ended months ended months ended months ended
30 June 30 June 30 June 31 December
2006 2005 2006 2004
R R R R
Note Restated
Cash flows from operating activities 23 482 286 11 922 952 4 510 748 (2 656 825)
Cash generated/(utilised) by operating activities 38.1 21 816 326 13 056 239 6 856 782 (2 655 730)
Interest received 8 827 952 3 242 605 2 511 941 –
Interest paid (6 582 595) (4 307 578) – (1 095)
Taxation paid 38.2 (579 397) (68 314) – –
Cash utilised by discontinued operations 17 – – (4 857 975) –
Cash flows from investing activities (55 042 775) (407 637) (63 638 051) 6 187 000
Expenditure to maintain operating capacity
Property, plant and equipment acquired (1 139 997) (407 637) – (9 000)
Proceeds of disposal of investments – – – 5 962 000
Proceeds of discontinued operation 17 – – 399 800 –
Long-term loan receivable repaid – – – 234 000
Expenditure for expansion
Subsidiary acquired 38.3 – – (100) –
Investment in associates (13 902 778) – – –
Loans to subsidiaries and associate (40 000 000) – (64 037 751) –
Cash flows from financing activities 58 800 237 4 292 983 54 883 727 –
Transaction costs (6 814 273) – (6 814 273) –
Loans raised 71 614 510 5 641 292 61 698 000 –
Loans repaid (6 000 000) (1 348 309) – –
Increase/(decrease) in cash and cash equivalents 27 239 748 15 808 298 (4 243 576) 3 530 175
Cash and cash equivalents at beginning of the period 38.4 52 687 913 36 879 615 4 458 175 928 000
Cash and cash equivalents at end of the period 38.4 79 927 661 52 687 913 214 599 4 458 175
48
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
1. Adoption of new and revised International Financial Reporting Standards (IFRS)
The group has previously adopted all of the following new and revised Standards and Interpretations issued by the International
Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are
relevant to its operations.
The financial statements of the company were prepared in accordance with IFRS for the first time. The company previously prepared its
financial statements under South African Statements of Generally Accepted Accounting Practice. The date of transition to IFRS is
1 January 2004 and accordingly comparative information has been restated. The impact of IFRS on the company’s financial statements
is immaterial.
Where applicable, changes to recognition, measurement and disclosures were made as a result of the adoption of the following standards:
IAS 1 Presentation of Financial Statements
IAS 2 Inventories
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
IAS 10 Events after the Balance Sheet Date
IAS 16 Property, Plant and Equipment
IAS 17 Leases
IAS 21 Accounting for the Effects of Changes in Foreign Exchange rates
IAS 24 Related Party Disclosures
IAS 31 Interests in Joint Ventures
IAS 32 Financial Instruments: Disclosure and Presentation
IAS 36 Impairment of Assets
IAS 38 Intangible Assets
IAS 39 Financial Instruments: Recognition and Measurement
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.
At the date of authorisation of these financial statements, the following Standards and Interpretations were in issue but not yet effective:
IFRS 6 Exploration for and Evaluation of Mineral Resources
IFRS 7 Financial Instruments: Disclosures
IFRIC 4 Determining whether an Arrangement contains a Lease
IFRIC 5 Right to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds
IFRIC 6 Liabilities Arising from Participating in a Specific Market – Waste Electrical and Electronic Equipments
IFRIC 7 Applying the Restatement Approach under IAS 29 – Financial Reporting in Hyperinflationary Economies
IFRIC 8 Scope of IFRS 2.
The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the
financial statements of the group and company other than requiring additional disclosure.
49
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
2. Significant accounting policies
The financial statements are prepared in accordance with International Financial Reporting Standards. The financial statements are
prepared under the historical cost convention, modified for certain items measured at fair value and the principal accounting policies
adopted are set out below.
2.1 Consolidation
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the company and entities controlled by the company
(its legal subsidiaries and those entities that it has the ability to control) as well as business combinations, commonly referred to as
reverse acquisitions, where the acquirer (the legal subsidiary) is the entity whose equity interests have been acquired and the issuing
entity (the company) is the acquiree. Consolidated financial statements prepared following a reverse acquisition are issued under
the name of the company but are described in the notes as a continuation of the financial statements of the legal subsidiary
(ie: the acquirer for accounting purposes).
Control is achieved where the acquirer has the power to govern the financial and operating policies of an entity so as to obtain
benefits from its activities. The results of the acquirees acquired or disposed of during the year are included in the consolidated
income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary,
adjustments are made to the financial statements of acquirees to bring their accounting policies into line with those used by other
members of the group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation. Minority interests in the net assets of
consolidated acquirees are identified separately from the group’s equity therein. Minority interests consist of the amount of those
interests at the date of the original business combination and the minority’s share of changes in equity since the date of the
combination. The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair
value of the assets, liabilities and contingent liabilities recognised. Losses applicable to the minority in excess of the minority’s
interest in the acquiree’s equity are allocated against the interests of the group except to the extent that the minority has a binding
obligation and is able to make an additional investment to cover the losses.
Business combinations
The acquisition of businesses is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate
of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the group
in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable
assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 – Business Combinations are
recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held
for sale in accordance with IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations. In a reverse acquisition, the cost
of the business combination is deemed to have been incurred by the legal subsidiary (ie: the acquirer for accounting purposes) in
the form of equity instruments issued to the owners of the legal parent (ie: the acquiree for accounting purposes). When equity
instruments are issued as part of the cost of the acquisition, the cost of the acquisition is calculated as the fair value of those equity
instruments at the date of exchange. In the absence of a reliable published price, the fair value of the equity instruments is estimated
by reference to the fair value of the acquirer or the fair value of the acquiree, whichever is more clearly evident.
Investments in subsidiaries are carried at cost in the company financial statements.
50
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
2. Significant accounting policies continued
2.1 Consolidation continued
Jointly controlled entities
The group’s interests in jointly controlled entities are accounted for by proportionate consolidation. The group combines its share
of the joint venture’s individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with similar items
in the group’s financial statements. The group recognises the portion of gains or losses on the sale of assets by the group to the
joint venture that is attributable to the other venturers. The group does not recognise its share of profits or losses from the joint
venture that result from the group’s purchase of assets from the joint venture until it resells the assets to an independent party.
However, a loss on the transaction is recognised immediately if the loss provides evidence of a reduction in the net realisable value
of current assets, or an impairment loss.
Investments in associates
An associate is an entity over which the group has the ability to excercise significant influence and that is neither a subsidiary nor
an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the
investee but is not control or joint control over those policies. The results and assets and liabilities of associates are incorporated in
these financial statements using the equity method of accounting except when the investment is classified as held for sale, in which
case it is accounted for under IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations. Under the equity method,
investments in associates are carried in the consolidated balance sheet at cost plus equity-accounted earnings less dividends
received and any impairment in the value of individual investments. Losses of an associate in excess of the group’s interest in that
associate (which includes any long-term interests that, in substance, form part of the group’s net investment in the associate) are
not recognised unless the group has a liability to pay certain amounts, has given a guarantee or has made payments on behalf of
the associate. Where a group entity transacts with an associate of the group, profits and losses are eliminated to the extent of the
group’s interest in the relevant associate. Any excess of the cost of acquisition over the company’s share of the net fair value of the
identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition, is recognised as goodwill
in terms of the company’s policy on goodwill. The goodwill is included within the carrying amount of the investment and is assessed
for impairment as part of the investment.
2.2 Goodwill
Goodwill arising on an acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the
business combination over the group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities
recognised. If, after reassessment, the group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and
contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.
2.3 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and
services provided in the normal course of business, net of discounts, rebates and sales-related taxes.
Revenue from the sale of goods is recognised when all of the following conditions have been satisfied:
• The entity has transferred to the buyer the significant risks and rewards of ownership of the goods;
51
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
2. Significant accounting policies continued
2.3 Revenue recognition continued
• The entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective
control over the goods sold;
• The amount of revenue can be measured reliably;
• It is probable that the economic benefits associated with the transaction will flow to the entity; and
• The costs incurred or to be incurred in respect of the transaction can be measured reliably.
Revenue from the sale of township property is recognised in accordance with the group’s accounting policy on township property
developments (refer to note 2.4 below).
Revenue from the rendering of services is recognised in the accounting period in which the services are rendered, by reference to
completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to
be provided.
The outcome of a transaction can be estimated reliably when all of the following conditions are satisfied:
• The amount of revenue can be measured reliably;
• It is probable that the economic benefits associated with the transaction will flow to the entity;
• The stage of completion of the transaction at the balance sheet date can be measured reliably; and
• The costs incurred for the transaction and the costs to complete the transaction can be measured reliably.
Interest is recognised on a time proportion basis which takes into account the effective yield on the asset over the period it is
expected to be held.
2.4 Township property developments
Revenue from the sale of township property is recognised when legal title passes or when the equitable interest in the property
vests in the buyer. Where there are further substantial acts to complete in the development of a township property, revenue is
deferred and recognised as the acts are performed. Revenue is recognised by reference to the stage of completion of the
development of the township property at the balance sheet date, as measured by the proportion that land and development costs
incurred to date bear to the estimated total land and development costs.
In assessing whether equitable interest vests in the buyer prior to legal title passing, management’s judgements are based on
whether the following conditions have been met:
• The relevant agreements are unconditional and binding on the purchaser;
• The purchaser has paid a meaningful deposit or has made arrangements to secure payment of the purchase price;
• Zoning and final conditions of establishment have been obtained; and
• Servicing arrangements and costs are substantially finalised.
2.5 Property, plant and equipment
Property, plant and equipment, other than land, are stated at cost less any accumulated depreciation and any accumulated
impairment losses.
52
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
2. Significant accounting policies continued
2.5 Property, plant and equipment continued
Land and buildings held for use in the production or supply of goods or services or for administrative purposes are stated in the
balance sheet at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated
depreciation and subsequent accumulated impairment losses. Land is not depreciated. Revaluations are performed with sufficient
regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the
balance sheet date.
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate
that the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated
recoverable amount, the assets or cash-generating units are written down to their recoverable amount.
Depreciation is charged so as to write off the cost of assets less their residual values over their estimated useful lives, using the
straight-line method. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet
date.Where significant parts of an item have different useful lives to the item itself, these parts are depreciated over their estimated
useful lives.
Increases in the carrying amount arising on revaluation are credited to non-distributable reserves in shareholders’ equity. Decreases
that offset previous increases of the same asset are charged against the non-distributable reserve; all other decreases are charged
to the income statement. Each year the difference between depreciation based on the revalued carrying amount of the asset
(the depreciation charged to the income statement) and depreciation based on the asset’s original cost is transferred from
non-distributable reserves to retained earnings.
The estimated useful lives of the major categories of property, plant and equipment are:
Buildings 1 – 50 years
Computer equipment 1 – 4 years
Furniture and fittings 1 – 7 years
Motor vehicles 1 – 5 years
Office equipment 1 – 7 years
Plant and equipment 1 – 50 years
Soft furnishings 1 – 5 years
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference
between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
2.6 Non-current assets held for sale
Non-current assets are classified as held for sale if the carrying amount will be recovered principally through sale rather than
through continuing use. This condition is regarded as met only when the sale is highly probable, the asset is available for immediate
sale in its present condition, management is actively looking for a buyer, the price is reasonable in relation to fair value and
management is committed to the sale which should be expected to qualify for recognition as a completed sale within one year from
the date of the classification.
53
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
2. Significant accounting policies continued
2.6 Non-current assets held for sale continued
Immediately prior to being classified as held for sale, the carrying amount of assets and liabilities are measured in accordance with
the applicable standard. After classification as held for sale it is measured at the lower of the carrying amount and fair value less
costs to sell. An impairment loss is recognised in profit or loss for any initial and subsequent write-down of the asset and disposal
group to fair value less costs to sell.
A gain for any subsequent increase in fair value less costs to sell is recognised in profit or loss to the extent that it is not in excess
of the cumulative impairment loss previously recognised. Non-current assets or disposal groups that are classified as held for sale
are not depreciated.
2.7 Discontinued operations
The results of discontinued operations are presented separately in the income statement and the assets and liabilities associated
with these operations are included with Assets/Liabilities Held for Sale in the balance sheet.
2.8 Township properties
Township properties comprise land at cost and development expenditure attributable to unsold property. Development expenditure
consists of township planning, site maintenance and servicing.Township properties are valued at the lower of cost and net realisable value.
2.9 Government grants
Government grants relating to assets are presented in the balance sheet by reducing the carrying value of the related asset.
The grant is recognised as income as the assets are sold by reducing the cost of sale charge to the income statement.
2.10 Financial instruments
Financial assets and financial liabilities are recognised on the group’s and the company’s balance sheet when the group or company
becomes a party to the contractual provisions of the instrument.
Cash and cash equivalents
Cash and cash equivalents comprise balances with banks, cash on hand, demand deposits, and other short-term highly liquid
investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in fair value.
Loans and trade and other receivables
Loans and trade and other receivables are initially measured at cost which is the fair value of the amount receivable in future, plus
transaction costs. These are subsequently measured at amortised cost using the effective-interest rate method. Appropriate
allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is
impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of
estimated future cash flows discounted at the effective-interest rate computed at initial recognition.
Financial liabilities and trade and other payables
Financial liabilities consist of shareholders’ loans, loans from group companies, other loans and trade and other payables. They are
recognised initially at fair value, net of transaction costs incurred. Financial liabilities are subsequently stated at amortised cost.
Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement
over the period of the financial liabilities using the effective-interest rate method.
54
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
2. Significant accounting policies continued
2.10 Financial instruments continued
Investments
Investments are recognised and derecognised on a trade date basis where the purchase or sale of an investment is under a contract
whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially
measured at cost, which is the fair value, plus directly attributable transaction costs.
The group and company have no expressed intention or ability to ‘hold-to-maturity’ any of its investments. Investments are
classified as either investments held for trading or as available for sale, and are measured at subsequent reporting dates at fair value.
Where investments are held for trading purposes, gains and losses arising from changes in fair value are included in profit or loss for
the period. For available-for-sale investments, gains and losses arising from changes in fair value are recognised directly in equity,
until the security is disposed of or is determined to be impaired, at which time the impairment or the cumulative gain or loss
previously recognised in equity is included in the profit or loss for the period.
Impairment losses recognised in profit or loss for equity investments classified as available for sale are not subsequently reversed
through profit or loss. Impairment losses recognised in profit or loss for debt instruments classified as available for sale are
subsequently reversed if an increase in the fair value of the instrument can be objectively related to an event occurring after the
recognition of the impairment loss.
2.11 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct
labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost
is calculated using the weighted average method. Net realisable value represents the estimated selling price less all estimated costs
of completion and costs to be incurred in marketing, selling and distribution.
2.12 Provisions
Provisions are recognised when the group and/or company has a present legal or constructive obligation as a result of past events,
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable
estimate of the amount of the obligation can be made.
If the effect is material, provisions are determined by discounting the expected future cash flows at a rate that reflects current
market assessments for such liabilities.
2.13 Equity
All transactions relating to the acquisition and sale of shares in the group and company, together with their associated costs, are
accounted for in equity.
55
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
2. Significant accounting policies continued
2.14 Translation of foreign currencies
Transactions
Foreign currency transactions are recorded, on initial recognition in Rand, by applying to the foreign currency amount the exchange
rate between the Rand and the foreign currency at the date of the transaction.
At each balance sheet date:
(a) foreign currency monetary items are reported using the closing rate;
(b) non-monetary items, which are carried in terms of historical cost denominated in a foreign currency, are reported using the
exchange rate at the date of the transaction; and
(c) non-monetary items which are carried at fair value denominated in a foreign currency are reported using the exchange rates
that existed when the values were determined.
Exchange differences arising on the settlement of monetary items or on reporting an entity’s monetary items at rates different from
those at which they were initially recorded during the period, or reported in previous financial statements, are recognised in profit
or loss in the period in which they arise.
2.15 Borrowing costs
All borrowing costs are recognised in profit or loss in the period in which they are incurred.
2.16 Leased assets
Leases of assets under which substantially all of the risks and benefits of ownership are effectively retained by the lessor, are
classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis
over the period of the lease.
When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way
of penalty is recognised as an expense in the period in which termination takes place.
2.17 Taxation
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such
assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than
in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year plus secondary tax on companies. Taxable profit differs from profit
as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years
and it further excludes items that are never taxable or deductible. The group’s and company’s liability for current and deferred tax
is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
56
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
2. Significant accounting policies continued
2.18 Employee benefits
Defined contribution plans
Contributions to a defined contribution plan in respect of services in a particular period are recognised as an expense in that period.
2.19 Segmental reporting
Segment accounting policies are consistent with those adopted for the preparation of the group financial statements. The primary
basis for reporting segment information is business segments and the secondary basis is by significant geographical region, which
is based on the location of assets. The basis is consistent with internal reporting for management purposes as well as the source and
nature of business risks and returns. All intra-segment transactions are eliminated on consolidation.
3. Critical judgements in applying the accounting policies
In the process of applying the accounting policies, which are described in note 2.1 to 2.19, management has made the following
judgements that have the most significant effect on the amounts recognised in the financial statements.
Investments
The fair value of the investment in Zimbali Country Club is included in the balance sheet at R7 300 000 at 30 June 2006. In making this
judgement it was determined that the fair value would not exceed cost. The profitability of the Club and future developments envisaged
in the Zimbali Estate will impact favourably on the Club’s financial position, and the fair value of the investment is not considered to be
less than cost.
Investment in associate
The investment in Boschendal has been accounted for using the equity method. Income from the associate was not recorded in the
current year as the 19,25% interest in the unlisted shares in Boschendal and Purple Plum only took place on 21 June 2006 and the effect
is immaterial.
Revaluation of land and buildings
As described in note 2.5, it is the group’s accounting policy to carry land and buildings at fair value. The fair value has been based on
valuations performed by independent external valuers on the capitalised rental approach basis.
Asset life and residual values
Property, plant and equipment are depreciated over their useful lives taking into account residual values. The actual life of the assets and
residual values are assessed annually and are influenced by factors such as technological innovation, product life cycles and maintenance
programmes. Residual value assessments consider issues such as market conditions, the remaining life of the asset and estimated current
disposal values.
Revenue recognition
Revenue on the sale of development property is recognised using the percentage of completion basis and has been measured by the
proportion that land and development costs incurred to date bear to the estimated total land and development costs for each
development phase. Revenue on the sale of development property has therefore been deferred.
Impairment of assets
Ongoing assessments are made regarding any potential impairment of assets.
57
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
4. Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are
discussed below.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which goodwill
has been allocated. The value-in-use calculation requires the entity to estimate the future cash flows expected to arise from the
cash-generating unit and a suitable discount rate in order to calculate present value.
5. Changes in accounting policy
Property, plant and equipment
During the year, the group changed its policy for the subsequent measurement of land and buildings from the cost model to the
revaluation model. The impact of the change in accounting policy in the current year has resulted in an increase in operating expenses
being additional depreciation of R88 973 before deferred tax of R25 802; an increase in land and buildings of R28 933 302 before deferred
tax of R5 047 639 and an increase in net assets of R23 796 690 at 30 June 2006.
6. Reverse acquisition
On 16 January 2006, the company acquired from IFA H&R Kuwait, as an indivisible transaction, IFA H&R Kuwait’s entire shareholding and
a portion of its loan account (R68 655 512) in IFA Zimbali and its entire shareholding in IFA Hotels in exchange for the issue of
212 755 413 shares (97,5% of the voting equity in the company). The purchase consideration for IFA Zimbali’s shares and loan account
was R85 000 000 and IFA Hotel’s shares was R41 204 139 which totalled R126 204 139. This transaction has been accounted for as a
reverse acquisition. The consolidated annual financial statements of the group for the comparative period ended 30 June 2005 comprise
the results of IFA Hotels and IFA Zimbali for the six months then ended.
58
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
7. Property, plant and equipment2006 2005
Accumulated Accumulated
Cost/valuation depreciation Carrying value Cost/valuation depreciation Carrying value
Group R R R R R R
Owned assets
Land 24 000 000 – 24 000 000 1 122 649 – 1 122 649
Buildings 53 500 000 – 53 500 000 50 669 781 1 474 116 49 195 665
Computer equipment 947 690 501 451 446 239 768 401 327 731 440 670
Furniture and fittings 4 872 168 3 235 987 1 636 181 4 645 456 1 922 657 2 722 799
Motor vehicles 820 206 381 965 438 241 533 750 169 857 363 893
Office equipment 113 176 80 274 32 902 113 176 40 651 72 525
Plant and equipment 3 848 878 1 048 801 2 800 077 3 649 590 527 663 3 121 927
Soft furnishings 902 385 623 692 278 693 782 699 366 878 415 821
89 004 503 5 872 170 83 132 333 62 285 502 4 829 553 57 455 949
The carrying amounts of property, plant and equipment can be reconciled as follows:
Carrying value Carrying value
at beginning at end of
of year Additions Revaluation Impairments Depreciation year
June 2006 R R R R R R
Owned assets
Land 1 122 649 – 22 877 351 – – 24 000 000
Buildings 49 195 665 – 6 055 951 – (1 751 616) 53 500 000
Computer equipment 440 670 191 892 – – (186 323) 446 239
Furniture and fittings 2 722 799 342 675 – (89 784) (1 339 509) 1 636 181
Motor vehicles 363 893 286 456 – – (212 108) 438 241
Office equipment 72 525 – – – (39 623) 32 902
Plant and equipment 3 121 927 199 288 – – (521 138) 2 800 077
Soft furnishings 415 821 119 686 – – (256 814) 278 693
57 455 949 1 139 997 28 933 302 (89 784) (4 307 131) 83 132 333
59
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
7. Property, plant and equipment continued
Carrying value Carrying value
at beginning at end of
of period Additions Revaluation Impairments Depreciation period
June 2005 R R R R R R
Owned assets
Land 1 122 649 – – – – 1 122 649
Buildings 50 027 652 – – – (831 987) 49 195 665
Computer equipment 414 247 121 328 – – (94 905) 440 670
Furniture and fittings 3 621 232 157 436 – – (1 055 869) 2 722 799
Motor vehicles 460 959 – – – (97 066) 363 893
Office equipment 71 385 24 666 – – (23 526) 72 525
Plant and equipment 3 354 706 65 761 – – (298 540) 3 121 927
Soft furnishings 585 244 38 445 – – (207 868) 415 821
59 658 074 407 636 – – (2 609 761) 57 455 949
2006 2004
Accumulated Accumulated
Cost/valuation depreciation Carrying value Cost/valuation depreciation Carrying value
R R R R R R
Company Restated Restated Restated
Owned assets
Computer equipment – – – 154 662 135 546 19 116
Furniture and fittings – – – 281 643 218 707 62 936
Motor vehicles – – – 142 542 75 973 66 569
Office equipment – – – 88 251 80 540 7 711
– – – 667 098 510 766 156 332
60
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
7. Property, plant and equipment continued
The carrying amounts of property, plant and equipment can be reconciled as follows:
Carrying value Carrying value
at beginning at end
of period Additions Disposals Depreciation of period
June 2006 R R R R R
Owned assets
Computer equipment 19 116 – (19 116) – –
Furniture and fittings 62 936 – (62 936) – –
Motor vehicles 66 569 – (66 569) – –
Office equipment 7 711 – (7 711) – –
156 332 – (156 332) – –
Carrying value Carrying value
at beginning at end
of year Additions Disposals Depreciation of year
R R R R R
December 2004 Restated Restated Restated Restated Restated
Owned assets
Computer equipment 21 595 7 000 – (9 479) 19 116
Furniture and fittings 89 869 1 000 – (27 933) 62 936
Motor vehicles 94 077 1 000 – (28 508) 66 569
Office equipment 10 346 – – (2 635) 7 711
215 887 9 000 – (68 555) 156 332
Group Company
2006 2005 2006 2004
R R R R
Land and buildings can be reconciled as follows: Restated
At cost – 2004 51 792 431 51 792 431 – –
Revaluation – 2006 28 933 302 – – –
Depreciation – 2004 (642 130) (642 130) – –
– 2005 (831 987) (831 987) – –
– 2006 (1 751 616) – – –
77 500 000 50 318 314 – –
Land and buildings comprise Erf 189, Port Zimbali, KwaZulu-Natal, in extent 3 824 hectares.
Land and buildings have been valued by an independent valuer (Norman Griffiths FRICS FIV (SA), Professional valuer of Norman
Griffiths & Associates CC) as at 30 June 2006 on the capitalised rental approach basis, in accordance with International Valuation
Standards.
Had the revalued properties been measured on the historical cost basis, their carrying amount would have been R48 655 670.
61
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
8. Intangible assets
2006 2005
Accumulated Accumulated
Cost/valuation depreciation Carrying value Cost/valuation depreciation Carrying value
R R R R R R
Goodwill 5 533 763 – 5 533 763 2 297 759 – 2 297 759
The carrying amounts of intangible assets can be reconciled as follows:
Carrying value Carrying value
at beginning at end of
of year Additions year
2006 R R R
Goodwill 2 297 759 3 236 004 5 533 763
Carrying value Carrying value
at beginning at end of
of period Additions period
2005 R R R
Goodwill 2 297 759 – 2 297 759
Group Company
2006 2005 2006 2004
R R R R
Goodwill comprises: Restated
Acquisition of Zimbali Lodge business 2 297 759 2 297 759 – –
Acquisition of Moribo 3 236 004 – – –
5 533 763 2 297 759 – –
62
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
Group Company
2006 2005 2006 2004
R R R R
Restated
9. Investment in subsidiaries
Shares at cost less provisions and amounts written off – – 57 548 727 1 000
Loans to subsidiaries – – 126 294 142 –
IFA Zimbali – – 70 995 264 –
IFA Boschendal – – 55 298 878 –
– – 183 842 869 1 000
Loans to subsidiaries are unsecured and not repayable before 30 June 2007. The loan to IFA Zimbali bears interest at prime lending
rates. The loan to IFA Boschendal is interest-free and is carried at present value.
Principal subsidiary undertakings Country of incorporation
IFA Hotels South Africa
IFA Zimbali South Africa
IFA Boschendal South Africa
All subsidiaries are wholly owned unless otherwise stated. All holdings are in the ordinary share capital of the undertaking concerned.
Group Company
2006 2005 2006 2004
R R R R
Restated
10. Investment in associates
Associates 49 754 104 – – –
Associates
Equity accounted
Boschendal
19,25% interest in unlisted shares and voting rights of
Boschendal, a company in the business of
property development.
Carrying value of investment:
– Shares at cost 13 902 759 – – –
Loan to associate 35 851 326 – – –
49 754 085 – – –
Directors’ valuation 49 754 085 – – –
63
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
10. Investment in associate continued
The loan to associate is interest free, and carried at present value, is unsecured and has been subordinated in favour of Nedbank.
The loan is not repayable before 30 June 2007. Income from the associate was not recorded in the current year as the acquisitiion
of the 19,25% interest in the unlisted shares in Boschendal only took place on 21 June 2006 and is not material.
Summarised financial information of Boschendal:Group Company
2006 2005 2006 2004
R R R R
Restated
Assets
Non-current 19 670 062 – – –
Current 20 797 870 – – –
40 467 932 – – –
Equity and liabilities
Equity and reserves 5 493 593 – – –
Non-current liabilities 34 158 178 – – –
Current liabilities 816 161 – – –
40 467 932 – – –
Group Company
Twelve Six Eighteen Twelve
months ended months ended months ended months ended
30 June 30 June 30 June 31 December
2006 2005 2006 2004
R R R R
Restated
Revenue 4 278 954 – – –
Net loss (10 400 982) – – –
Group Company
2006 2005 2006 2004
R R R R
Restated
Purple Plum
19,25% interest in the unlisted shares and voting rights
of Purple Plum, a company in the business
of property development.
Carrying value of investment:
– Shares at cost 19 – – –
Directors’ valuation 19 – – –
64
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
Group Company
2006 2005 2006 2004
R R R R
Restated
11. Investments
Available-for-sale financial assets
Zimbali Country Club
Promoter membership debentures 7 000 000 7 000 000 – –
Hotel membership debentures 300 000 300 000 – –
7 300 000 7 300 000 – –
Directors’ valuation of unlisted debentures 7 300 000 7 300 000 – –
Details of available-for-sale financial assets:
Number of debentures Number of debentures
Class P – Promoter membership debentures 350 350 – –
Class H – Hotel membership debentures 15 15 – –
The debentures are interest-free and no fixed terms of repayment have been set
Group Company
2006 2005 2006 2004
R R R R
Restated
12. Other financial assets
Afrisun – 983 886 – –
Games Africa – – – 398 800
IFA Resorts 945 422 – 945 422 –
Ocean Leisure 149 555 – 149 555 –
1 094 977 983 886 1 094 977 398 800
The above loans, except Games Africa, bear interest at prime lending rates, are unsecured and will be repaid within one year.
A provision for the write-down of the Games Africa loan was made during the year.
65
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
Group Company
2006 2005 2006 2004
R R R R
Restated
13. Deferred tax
The following are the major deferred tax liabilities and
assets recognised by the group and company,
and the movements therein, during the current and
prior reporting periods.
Balance at beginning of year/period (6 193 422) (3 117 125) – –
Movements during year/period attributable to:
– Available unutilised tax losses 109 256 (461 317) – –
– Capital allowances – buildings (3 317 216) – – –
– Capital allowances – land (1 730 423) – – _
– Capital allowances – other assets (472 595) 1 102 163 – –
– Change in tax rate – 103 904 – –
– Income and expenditure accruals (7 821 466) (3 582 042) – –
– Unrealised fair value adjustment (265 167) (239 005) – –
Balance at end of year/period (19 691 033) (6 193 422) – –
The balance comprises:
– Available unutilised tax losses 109 256 – – –
– Capital allowances – buildings (3 317 216) – – –
– Capital allowances – land (1 730 423) – – _
– Capital allowances – other assets 629 568 1 102 163 – –
– Income and expenditure accruals (15 383 670) (7 562 204) – –
– Unrealised fair value adjustments 1 452 266 619 – –
(19 691 033) (6 193 422) – –
66
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
Group Company
2006 2005 2006 2004
R R R R
Restated
13. Deferred tax continued
The following is the analysis of the deferred tax balances
for balance sheet purposes:
Deferred tax liabilities (20 022 792) (7 391 576) – –
Deferred tax assets 331 759 1 198 154 – –
(19 691 033) (6 193 422) – –
At the balance sheet date, the group has unutilised tax losses of R14 601 103 (2005: RNIL) available for offset against future profits and
a capital loss of approximately R3 497 763 (2005: RNIL). A deferred tax asset has been recognised in respect of R109 256 (2005: RNIL)
of such losses. No deferred tax asset has been recognised in respect of the remaining unutilised tax losses of R14 491 847 (2005: RNIL)
and unutilised capital losses of approximately R3 497 763 (2005: RNIL) due to the unpredictability of future profit streams in the
particular company within the group.
At the balance sheet date, the company has unutilised tax losses of R14 491 847 (2004: R11 076 156) available for offset against future
profits and a capital loss of approximately R1 148 549 (2004: R1 148 549). No deferred tax asset has been recognised in respect of the
unutilised tax losses of R14 491 847 (2004: R11 076 156) and unutilised capital losses of approximately R1 148 549 due to the
unpredictability of future profit streams in the company.
67
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
Group Company
2006 2005 2006 2004
R R R R
Restated
14. Township properties
Land
Balance at beginning of year/period 49 154 069 56 737 812 – –
Additions/acquisitions in current year/period 31 240 986 – – –
Allocated to cost of sales (21 328 685) (7 583 743) – –
59 066 370 49 154 069 – –
Development expenditure
Balance at beginning of year/period 28 452 612 21 748 568 – –
Capitalised expenditure in current year/period 36 007 562 17 308 864 – –
Allocated to cost of sales (37 309 312) (10 604 820) – –
27 150 862 28 452 612 – –
Total 86 217 232 77 606 681 – –
Included in township properties above, is a government
grant of R5 000 000 (2005: R5 000 000) relating
to the re-alignment of an existing national road.
15. Inventories
The amounts attributable to the different categories
are as follows:
Consumables 560 738 419 623 – –
Hotel stocks 1 893 074 1 757 371 – –
2 453 812 2 176 994 – –
16. Trade and other receivables
Prepayments and deposits 566 391 562 883 – 13 000
Sundry debtors 960 403 1 014 915 – 1 291 000
Trade debtors 141 096 773 56 296 597 – 441 112
Value-added Tax 115 693 100 930 115 694 60 000
Loan to director – – – 586 000
Provisions for impairments – – – (1 041 000)
142 739 260 57 975 325 115 694 1 350 112
68
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
17. Discontinued operations
In the company’s annual report for the year ended 31 December 2004, the company announced that its investment in preference
shares in Main Street 47 (Pty) Limited and a loan to WBS Investments (Pty) Limited had been redeemed on 31 May 2004 and that
it had sold its investment in The Beverage Worx (Pty) Limited with effect 1 July 2004 and that it had discontinued all of its operations
with effect from the same date. All of the shares in each of the subsidiaries of the company are now to be distributed to shareholders,
the remaining assets of the company are to be realised, the liabilities settled and any remaining cash balance in the company
distributed to shareholders as the dividend. The company reports in the financial statements all of these activities as a discontinued
operation. The sales, results, cash flows and net assets of the discontinued operations were as follows:
Group Company
2006 2005 2006 2004
R R R R
Restated
Loss on discontinued operations
Revenue and other operating loss – – 433 092 –
Operating and administration expenses – – 5 331 813 –
Loss from discontinuing operations – – 5 764 905 –
Tax – – – –
Loss after tax of discontinuing operations – – 5 764 905 –
Operating cash flows – – (4 857 975) –
Investing cash flows – – 399 800 –
Financing cash flows – – – –
Total cash flows – – (4 458 175) –
Assets classified as held for sale
Disposal group held for sale:
Current assets 211 765 – 211 765 –
Liabilities directly associated with assets
classified as held for sale (211 765) – (211 765) –
Net assets – – – –
69
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
Group Company
2006 2005 2006 2004
R R R R
Restated
18. Cash and cash equivalents
Cash and cash equivalents comprise:
Bank balances 699 556 7 718 576 214 599 4 458 175
Cash on hand 3 100 1 000 – –
Short-term deposits 79 225 005 44 968 337 – –
79 927 661 52 687 913 214 599 4 458 175
Short-term deposits are funds placed on deposit with Moreland Developments (Pty) Limited, and earn interest at an average rate of
11,6% (2005: 11,6%) per annum.
The banking facilities of the group and company are secured by:
• Letter of comfort by IFA H&R Kuwait for R15 000 000; and
• Unlimited suretyship by IFA Resorts, a fellow subsidiary company, (supporting security of First Sectional Mortgage Bond of
R1 800 000 over Section No 1 in a scheme known as “Amanbali” situated at Port Zimbali, and First Covering Bond of
R14 200 000 over Portions 23, 24, 25, 26, 27 and 28 (of 22) of Erf 6 Zimbali South).
70
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
Group Company
2006 2005 2006 2004
R R R R
Restated
19. Issued capital
Authorised
500 000 000 Consolidated ordinary shares of R0,01 each.
(2004: 388 788 480 Unconsolidated ordinary shares
of R0,001 each) 5 000 000 200 5 000 000 388 789
Issued
218 210 680 Consolidated ordinary shares of R0,01 each.
(2005: 55 230 513 Unconsolidated ordinary shares
of R0,001 each) 2 182 107 200 2 182 107 55 231
Share premium 69 709 609 – 207 054 943 82 978 357
71 891 716 200 209 237 050 83 033 588
The directors are authorised, until the forthcoming annual general meeting, to dispose of the unissued shares for any purpose and upon
such terms and conditions as they deem fit.
The company has one class of ordinary shares which carries no right to fixed income and no shares are reserved for issuance under options
and sales contracts.
Repurchase
In terms of a shareholders’ resolution passed at the general meeting held on 16 January 2006, 677 843 shares (i.e. 67 784 consolidated
shares) held by the Moribo Share Incentive Trust were repurchased by the company for an aggregate purchase consideration of R1,00 and
were cancelled. The Moribo Share Incentive Scheme has been terminated.
Increase in authorised share capital
In terms of a shareholders’ resolution passed at the general meeting held on 16 January 2006, the company increased its authorised share
capital to 500 000 000 consolidated shares by the creation of 461 121 152 consolidated shares.
Consolidation and increase in issued share capital
On 27 February 2006, the company’s shares were consolidated on a one-for-ten basis and 212 755 413 new shares were issued for a
purchase consideration of R126 204 139.
The specific issue of shares
Should any liabilities arise within three years from the effective date of the reverse takeover (23 January 2006) that relate to any activities
conducted by the company prior to that effective date which, in aggregate, exceed the Moribo group’s cash resources as determined at
the effective date, IFA H&R Kuwait will settle the balance of any such liabilities which cannot be settled out of cash resources plus any
transaction costs. In exchange for settlement, the company will issue consolidated shares to IFA H&R Kuwait at the weighted average
traded price of such shares over the 30 days prior to the date that the price of issue is agreed by the directors of the company or at such
prices as determined by a JSE-approved independent advisor appointed to indicate that the issue price is fair and reasonable, subject to
a maximum total value in aggregate of all such issues of consolidated shares of R20 million.
At the date of this report, there are no indications that IFA H&R Kuwait will be required to settle any such liabilities.
71
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
Group Company
2006 2005 2006 2004
R R R R
Restated
20. Non-distributable reserve
Balance at beginning of the period – – 5 251 216 –
Movement during the period:
– Surplus arising from revaluation of freehold land and buildings 28 933 303 – – –
– Deferred tax on land at capital gains tax rate (3 317 216) – – –
– Deferred tax on buildings at income tax rate (1 756 226) – – –
– Transfer to retained earnings (63 171) – – –
– Surplus on realisation of investments, plant and equipment – – – 5 251 216
– Reversal of surplus above – – (5 251 216) –
Balance at end of period 23 796 690 – – 5 251 216
Comprising:
Surplus on realisation of investments, plant and equipment – – – 5 251 216
Surplus arising from revaluation of freehold land and buildings 23 796 690 – – –
23 796 690 – – 5 251 216
21. Shareholder’s loan
IFA H&R Kuwait
Non-interest-bearing loan 47 794 492 115 492 368 – –
The loan is unsecured and has no fixed terms of repayment.
Non-interest-bearing loan held at present value 55 298 878 – 55 298 878 –
The loan is unsecured, interest-free, is carried at present
value and is not repayable before 30 June 2007.
Interest-bearing loan 58 271 968 55 313 096 – –
The loan is unsecured, bears interest at prime lending rates
and is not repayable before 30 June 2007.
161 365 338 170 805 464 55 298 878 –
Less short-term portion (47 794 492) (74 578 080) – –
113 570 846 96 227 384 55 298 878 –
72
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
Group Company
2006 2005 2006 2004
R R R R
22. Trade and other payables
Trade payables 41 035 847 8 201 154 2 167 836 78 127
Accruals 2 801 405 2 066 172 442 854 141 387
Sundry payables 8 511 856 997 155 5 790 575 107 000
Directors’ fees – – – 273 000
Value-added Tax 14 357 372 7 805 475 – –
66 706 480 19 069 956 8 401 265 599 514
23. Advance deposits
Advance deposits for hotel accommodation 903 154 302 267 – –
24. Deferred revenue
The substantial acts required to complete the development of a township property are expected to be completed within the next
twelve months, therefore the revenue that has been deferred in terms of the revenue recognition policy is likely to be recognised
within the next twelve months.
73
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
Group Company
Twelve Six Eighteen Twelve
months ended months ended months ended months ended
30 June 30 June 30 June 31 December
2006 2005 2006 2004
R R R R
Restated
25. Revenue
Revenue comprises turnover, which excludes value-added tax
and represents the fair value of goods and services supplied.
Major classes of revenue comprise:
Sale of township properties 123 747 207 37 358 337 – –
Hotel accommodation and services 33 505 478 16 344 142 – –
Commission income 1 832 125 1 755 827 – –
Management and marketing fees 1 921 745 – 2 623 769 –
Interest received – – – 546 306
161 006 555 55 458 306 2 623 769 546 306
26. Operating profit/(loss)
Operating profit/(loss) is stated after:
Income
Profit on foreign exchange 16 923 17 206 – –
Expenditure
Auditors’ remuneration
– Audit fee 527 138 208 528 411 207 90 966
Depreciation
– Property, plant and equipment 4 307 131 2 609 761 – 68 555
Impairment losses
– Property, plant and equipment 89 784 – – –
Lease rentals
– Equipment 131 514 – – –
74
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
Group Company
Twelve Six Eighteen Twelve
months ended months ended months ended months ended
30 June 30 June 30 June 31 December
2006 2005 2006 2004
R R R R
Restated
27. Directors’ emoluments
Executive
Mr R Biesheuvel *
Director’s fees – – – –
Salary – – – 758 000
Pension fund contributions – – – 93 000
– – – 851 000
Mr PGR de Sylva
Director’s fees – – – –
Salary 700 000 – – –
Bonus 162 500 – – –
862 500 – – –
Mr VM Nkosi
Director’s fees – – – –
Salary 128 000 – – –
Bonus 10 000 – – –
138 000 – – –
Non-executive directors – accumulative amounts due
Mr AJ Hugo * – – 15 000 –
Mr AM Ball * – – 10 000 –
Mr WS Yeowart * – – 30 000 53 000
Mr SA Levitt * – – 20 000 –
Mr M Lutrin * – – 50 000 40 000
Ms P Mashabela * – – – 40 000
Mr K Michael * – – 20 000 20 000
Mrs H Ndude * – – – (20 000)
Mr A Norman * – – 20 000 20 000
Mr M Ramollo * – – – 20 000
Mr EP Rechter * – – 20 000 20 000
Mr V Zwane * – – – 60 000
– – 185 000 253 000
* Resigned
As the reverse listing of the company on the JSE was implemented shortly before year-end, the directors have agreed not to take
any directors’ fees for the year ended 30 June 2006. The directors have also agreed not to take any directors’ fees for the year ending
30 June 2007. This includes members of the audit and remuneration committees.
75
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
Group Company
2006 2005 2006 2004
R R R R
Restated
27. Directors’ emoluments continued
Loan to director
Balance at the beginning of the period – – 586 000 1 768 000
Loans repaid – – (600 000) (1 308 000)
Interest – – 14 000 126 000
Balance at the end of the period – – – 586 000
A loan of R950 000 was advanced to R Biesheuvel in 2002 at the prime rate of interest. Life insurance with disability was given as
security for the loan. In terms of an agreement the loan was fully repayable on 30 June 2004 inclusive of interest. It was repaid during
the year.
Group Company
Twelve Six Eighteen Twelve
months ended months ended months ended months ended
30 June 30 June 30 June 31 December
2006 2005 2006 2004
R R R R
Restated
28. Staff costs
Salaries and wages 13 345 995 5 289 294 – 1 419 000
Defined contribution retirement plan 679 203 406 586 – 162 000
Medical aid – – – 42 000
14 025 198 5 695 880 – 1 623 000
Defined contribution retirement plan
It is the policy of a subsidiary company to provide retirement benefits to all its employees. A defined contribution provident fund,
The Old Mutual Retirement Fund, which is subject to the Pensions Fund Act, exists for this purpose. The scheme is funded both by
member and by the subsidiary company contributions, which are charged to the income statement as they are incurred.
76
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
Group Company
Twelve Six Eighteen Twelve
months ended months ended months ended months ended
30 June 30 June 30 June 31 December
2006 2005 2006 2004
R R R R
Restated
29. Investment income
Interest received 8 827 952 3 242 605 2 511 941 –
Notional interest received 6 399 122 – 6 399 122 –
15 227 074 3 242 605 8 911 063 –
Notional interest has arisen due to certain loans being
held at present value.
30. Finance costs
Bank overdrafts and acceptances 17 000 397 – 1 095
Long-term loans 6 564 502 4 307 181 – –
Other 1 093 – – –
Interest paid 6 582 595 4 307 578 – 1 095
Notional interest 4 148 674 – 6 399 122 –
10 731 269 4 307 578 6 399 122 1 095
Notional interest has arisen due to certain loans being
held at present value.
31. Taxation
South African normal tax
– Current tax 9 693 126 834 491 622 697 –
– Deferred tax
– Current year 8 424 169 3 076 297 – –
Tax for the year 18 117 295 3 910 788 622 697 –
Reconciliation of rate of taxation % % % %
South African normal tax rate 29,0 30,0 29,0 30,0
Adjusted for:
– Disallowable expenditure 1,1 (5,3) (0,4) (49)
– Deferred tax rate change – (0,6) – –
– Utilisation of assessed losses – – – 19
Net increase/(reduction) 1,1 (5,9) (0,4) (30)
Effective rate 30,1 24,1 28,6 –
An STC liability of R8 529 123 (2005: R1 970 957) would arise if all of the retained earnings of the group were declared as a dividend.
77
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
32. Earnings per share
The calculation of basic earnings per share is based on net profit attributable to ordinary shareholders of R41 977 905
(2005: R12 296 655) and a weighted average of 215 028 441 (2005: 212 755 413) shares in issue throughout the year.
The calculation of headline earnings per share is based on earnings of R42 067 689 (2005: R12 297 792) and a weighted average of
215 028 441 (2005: 212 755 413) shares in issue throughout the year.
Group
Net profit Net profit
2006 2005
R R
Reconciliation between earnings and headline earnings:
Per the financial statements 41 977 905 12 296 655
Impairment losses 89 784 –
Loss on disposal of property, plant and equipment – 1 137
42 067 689 12 297 792
33. Segmental analysis
Business segments
For management purposes, the group is currently organised into three divisions: IFA Zimbali, IFA Hotels and IFA Boschendal.
These divisions are the basis on which the group reports its primary segment information.
Principal activities are as follows:
IFA Zimbali
IFA Zimbali is the owner of the Zimbali Lodge which is operated by Sun International Management Limited. The Zimbali Lodge is a
magnificent five-star boutique hotel with 76 luxurious rooms to be expanded in 2007/8 with an additional 20 rooms and is rated by
Condé Nast Traveller magazine as one of the top hotels in the world. Zimbali Lodge is located amongst indigenous semi-tropical
gardens, and overlooks the signature hole of the scenic Tom Weiskopf-designed championship golf course, the magnificent lakes and
conservation area and the Indian Ocean beyond.
IFA Hotels
In 2003, IFA Hotels formed a joint venture with Moreland to participate in the development of the Zimbali Coastal Estate. IFA Hotels
is responsible for the sales and marketing and Moreland is responsible for the technical and development functions thereof.
The Zimbali Coastal Resort covers 3,7 million square metres (370 hectares) of coastal forest estate with 3,5 km of coastline.
The Zimbali Lakes Development covers 3 million square metres (300 hectares) and is adjacent to the Zimbali Coastal Resort.
The piece of land on the south bank covers 2,55 million square metres (255 hectares).
The principal business of the Moreland joint venture is the subdivision and servicing of land in the Zimbali Coastal Estate for
subsequent sale.
IFA Boschendal
During the current year IFA Boschendal acquired a 19,25% stake in Boschendal and Purple Plum. These companies have development
plans for the 2 400 hectare Boschendal estate near Franschhoek, which includes an upmarket retirement village with 500 individual
homes, a boutique hotel with upwards of 120 rooms and a mixed-use development of a shopping centre, offices and apartments.
78
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
33. Segmental analysis continued
IFA Hotels IFA Zimbali IFA Boschendal Other Eliminations Consolidated
2006 R R R R R R
Revenue 127 313 626 34 755 676 – 2 623 769 (3 686 516) 161 006 555
Other income 144 044 16 923 – – – 160 967
Total revenue 127 457 670 34 772 599 – 2 623 769 (3 686 516) 161 167 522
Segment result 55 827 495 109 316 (4 700) (333 809) 1 093 55 599 395
EBITDA * 55 922 651 4 321 291 (4 700) (333 809) 1 093 59 906 526
Depreciation (95 156) (4 211 975) – – – (4 307 131)
Interest income 9 865 764 200 799 6 493 809 8 911 063 (10 244 361) 15 227 074
Interest expense (6 581 502) (3 845 239) (4 148 674) (6 399 122) 10 243 268 (10 731 269)
Income taxes (16 747 511) (68 361) (678 726) (622 697) – (18 117 295)
Net profit/(loss) 42 364 246 (3 603 485) 1 661 709 1 555 435 – 41 977 905
Other information
Segment assets 292 035 632 105 984 660 57 639 413 188 501 139 (182 855 602) 461 305 242
Segment liabilities (214 420 282) (84 202 169) (55 298 878) (65 876 594) 127 460 304 (292 337 619)
Capital expenditure (142 340) (997 658) – – – (1 139 998)
Other non-cash items (16 386) (89 784) – – – (106 170)
2005
Revenue 38 939 737 16 518 569 – – – 55 458 306
Other income 17 763 16 069 – – – 33 832
Total revenue 38 957 500 16 534 638 – – – 55 492 138
Segment result 17 504 668 (232 252) – – – 17 272 416
EBITDA * 17 534 409 2 347 768 – – – 19 882 177
Depreciation (29 741) (2 580 020) – – – (2 609 761)
Interest income 3 161 438 81 167 – – – 3 242 605
Interest expense (2 959 269) (1 348 309) – – – (4 307 578)
Income taxes (5 031 079) 1 120 291 – – – (3 910 788)
Net profit/(loss) 12 675 758 (379 103) – – – 12 296 655
Other information
Segment assets 204 196 514 80 762 217 – – – 284 958 731
Segment liabilities (175 876 529) (84 315 472) – – – (260 192 001)
Capital expenditure (102 887) (304 750) – – – (407 637)
Other non-cash items (6 441) (129 403) – – – (135 844)
* EBITDA – Earnings before interest, tax, depreciation and amortisation
Geographical segments
The group's operations are located in one region – South Africa.
79
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
Group
2006 2005
R R
Restated
34. Interest in Moreland/IFA Resort Developments (Joint Venture)
The group has a 50% interest in a partnership, Moreland/IFA Resort Developments (Joint Venture),
which is involved in property development. The following amounts represent the group’s 50%
share of the assets, liabilities, sales and profit of the partnership. They are included in the
balance sheet and income statement on the proportional consolidation basis:
Assets
Non-current assets 82 780 367 76 346 657
Current assets 180 701 116 86 529 774
263 481 483 162 876 431
Liabilities
Non-current liabilities 27 202 523 47 329 210
Current liabilities 104 950 806 50 460 889
132 153 329 97 790 099
Net assets 131 328 154 65 086 332
Twelve Six
months ended months ended
30 June 30 June
2006 2005
R R
Restated
Income 138 039 201 37 358 337
Expenses (71 797 381) (20 350 669)
Profit 66 241 820 17 007 668
80
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
Group
2006 2005
R R
Restated
35. Interest in Zimbali Estates (Pty) Limited
The group has a 50% shareholding in a company, Zimbali Estates (Pty) Limited, which
sells property developed by Moreland/IFA Resort Developments (Joint Venture). The following
amounts represent the group’s 50% share of the assets, liabilities, sales and profit of the company.
They are included in the balance sheet and income statement on the proportional
consolidation basis:
Assets
Non-current assets 419 509 155 829
Current assets 9 038 983 4 999 925
9 458 492 5 155 754
Liabilities
Current liabilities 8 139 916 3 542 053
Net assets 1 318 576 1 613 701
Twelve Sixmonths ended months ended
30 June 30 June
2006 2005
R R
Restated
Income 8 158 107 4 669 455
Expenses (8 457 626) (2 889 350)
(Loss)/profit before tax (299 519) 1 780 105
81
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
36. Related parties
During the year, the group and company, in the ordinary course of business, entered into various related-party sales, purchases and
investment transactions. These transactions occurred under terms that are no less favourable than those arranged with third parties.
Intra-group transactions are eliminated on consolidation.
Identity of related parties
The group’s and company's holding company is IFA H&R Kuwait. Its ultimate holding company is IFA.
The subsidiaries of the group are identified in note 9, the associates in note 10 and joint ventures in notes 34 and 35.
The directors are set out on page 14 of this report.Group Company
Twelve Six Eighteen Twelve
months ended months ended months ended months ended
30 June 30 June 30 June 31 December
2006 2005 2006 2004
R R R R
Restated
IFA H&R Kuwait
Accounting and administration 23 378 – – –
Asset management fee 47 724 – – –
Human resources fees 13 576 – – –
General 19 471 – – –
Management fee paid 190 854 98 546 – –
Interest paid 6 115 223 2 958 872 6 115 223 2 958 872
Notional interest received (6 399 122) – (6 399 122) –
Management service fees 86 576 – – –
Transaction costs 5 790 473 – 5 790 473 –
Travel and accommodation 53 465 – 53 465 –
5 941 618 3 057 418 5 560 039 2 958 872
Larson Falconer Inc. legal fees 15 750 – – –
Sun International Management Limited
Management fee paid 1 376 247 720 546 – –
IFA Zimbali
Interest received – – (2 511 087) –
Management fee – – (393 655) –
– – (2 904 742) –
82
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
Group CompanyTwelve Six Eighteen Twelve
months ended months ended months ended months ended
30 June 30 June 30 June 31 December
2006 2005 2006 2004
R R R R
Restated
36. Related parties continued
Zimbali Country Club
Management fee received (948 141) (535 116) – –
Sale of goods (3 517 849) (1 653 475) – –
(4 465 990) (2 188 591) – –
IFA Resorts
Management fee 220 189 – 220 189 –
Management fee received (1 049 506) – (1 049 506) –
Sale of properties (32 010 965) (9 854 167) – –
(32 840 282) (9 854 167) (829 317) –
IFA Boschendal
Notional interest paid – – 6 399 122 –
Boschendal
Notional interest paid 4 148 674 – – –
Related-party balances at year-end included in accruals, accounts payable and accounts receivable at year end are as follows:
Group Company2006 2005 2006 2004
R R R R
Restated
Accruals
Sun International Management Limited 5 497 94 223 – –
Accounts payable
Sun International Management Limited 378 698 – – –
IFA H&R Kuwait 531 700 – – –
IFA Hotels 2 167 835 – – –
Zimbali Country Club 235 927 33 299 – –
IFA Resorts 6 827 – – –
Accounts receivable
Forest Suites at Zimbali (Pty) Limited 158 324 – – –
Ocean Leisure 149 555 – 149 555 –
Sun International Management Limited – 487 018 – –
IFA Resorts 22 945 422 – 945 422 –
83
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
36. Related parties continued
Afrisun
Afrisun is a subsidiary of Sun International (South Africa) Limited.
IFA H&R Kuwait
IFA H&R Kuwait is the holding company of IFA SA.
IFA Hotels
IFA Hotels is a subsidiary company to IFA SA.
IFA Resorts
IFA Resorts is a subsidiary of IFA H&R Kuwait.
IFA Zimbali
IFA Zimbali is a subsidiary company to IFA SA.
Forest Suites at Zimbali (Pty) Limited
Sun International Management Limited is responsible for the management of the day-to-day business activities of Forest suites at
Zimbali.
Larson Falconer Inc.
GE Larson, a director of IFA SA, is also a director of Larson Falconer Inc.
Sun International Management Limited
Sun International Management Limited is responsible for management of the day-to-day business activities of IFA Zimbali.
Ocean Leisure
Ocean Leisure is controlled by IFA H&R Kuwait.
Loans to/from related parties
For details on loans from related parties, refer to notes 9, 10, 12 and 21.
Group CompanyTwelve Six Eighteen Twelve
months ended months ended months ended months ended
30 June 30 June 30 June 31 December
2006 2005 2006 2004
R R R R
Restated
Compensation of key management personnel
Salaries and other allowances 2 506 992 1 097 757 – –
84
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
Group Company
2006 2005 2006 2004
R R R R
Restated
37. Commitments
Capital expenditure
Contracted for 35 168 365 22 130 219 35 168 365 22 130 219
Approved by the directors but not contracted for 18 565 201 18 500 000 – –
53 733 566 40 630 219 35 168 365 22 130 219
Contracted for expenditure relates to the group’s share of
approved development expenditure not yet incurred by the
Moreland/IFA Resort Developments (Joint Venture).
The group intends to finance this expenditure from existing
borrowing facilities and from internally generated funds.
Approved by the directors but not contracted for:
– Expansion project for IFA Zimbali for the construction
of 20 additional rooms 18 500 000 18 500 000 – –
– Refurbishment of reception floor 65 201 – – –
Operating lease commitments
The future minimum lease payments under non-cancellable
operating leases are as follows:
Not later than one year 138 729 113 832 – –
Later than one year and not later than five years 165 415 104 346 – –
304 144 218 178 – –
85
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
Group Company
Twelve Six Eighteen Twelve
months ended months ended months ended months ended
30 June 30 June 30 June 31 December
2006 2005 2006 2004
R R R R
Restated
38. Notes to the cash flow statement
38.1 Cash generated/(utilised) by operating activities
Net profit before tax 60 095 200 16 207 443 2 178 130 (2 264 112)
Adjustments for:
Depreciation 4 307 131 2 609 761 – 68 555
Impairment losses 89 784 – – –
Interest received (8 827 952) (3 242 605) (2 511 941) –
Interest paid 6 582 595 4 307 578 – 1 095
Provision – – – (54 000)
Reversal of provision for impairment of loan – – – (3 793 000)
Notional interest received (6 399 122) – (6 399 122) –
Notional interest paid 4 148 674 – 6 399 122 –
Loan written off – – – 2 297 732
59 996 310 19 882 177 (333 811) (3 689 730)
Movements in working capital
(Increase)/decrease in trade and other receivables (84 875 026) (11 746 225) (1 210 671) 1 276 000
Increase/(decrease) in trade and other payables 55 582 411 3 925 797 8 401 264 (242 000)
(Increase)/decrease in inventories (276 818) 114 791 – –
(Increase)/decrease in township properties (8 610 551) 879 699 – –
21 816 326 13 056 239 6 856 782 (2 655 730)
38.2 Reconciliation of taxation paid during year
Charge in income statement (18 117 295) (3 910 788) (622 697) –
Adjustment for deferred tax 8 424 169 3 076 297 – –
Movement in taxation balance 9 113 729 766 177 622 697 –
Payments made (579 397) (68 314) – –
86
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
Group Company2006 2005 2006 2004
R R R R
Restated
38. Notes to the cash flow statement continued
38.3 Acquisition of subsidiary
During the period the group and company acquired
the business of IFA Boschendal.
Share capital – – 100 –
Total purchase price – – 100 –
38.4 Cash and cash equivalents
Cash and cash equivalents consist of cash on hand,
balances with banks, demand deposits and other
short-term highly liquid investments that are readily
convertible to a known amount of cash and are subject
to an insignificant risk of change in value. Cash and
cash equivalents included in the cash flow statement
comprise the following balance sheet amounts:
Cash and cash equivalents 79 927 661 52 687 913 214 599 4 458 175
39. Financial instruments
Interest rate risk
The group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the group to cash flow
interest rate risk.
As part of the process of managing the group’s interest rate risk, interest rate characteristics of new borrowings and the refinancing
of existing borrowings are positioned according to expected movements in the interest rate. Full details of interest rates relating to
borrowings are detailed in note 21.
Credit risk
The group’s principal financial assets are bank balances, demand deposits and cash, trade and other receivables, and investments.
The credit risk on liquid funds is limited because the ultimate counterparties are banks and companies with high credit ratings.
87
Notes to the Annual Financial Statementsat 30 June 2006
HOTELS & RESORTS
39. Financial instruments continued
Credit risk continued
The group’s credit risk is primarily attributable to its trade and other receivables. The amounts presented in the balance sheet are net
of allowances for doubtful receivables. An allowance for impairment is made where there is an identified loss event which, based on
previous experience, is evidence of a reduction in the recoverability of the cash flows.
The group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.
Liquidity risk
The group has minimised its liquidity risk by ensuring that it has adequate banking facilities and reserve borrowing capacity.
Fair value
The directors are of the opinion that the carrying amount of financial instruments approximates their fair value.
40. Comparative figures
Certain comparative figures have been reclassified as follows:
– A shareholder’s loan valued at R74 578 080 which was previously classified as a non-current liability, has been reclassified as a
current liability.
– Leave pay and bonus benefits were previously classified as provisions and have been reclassified to accruals in terms of IAS 10
(“Employee Benefits”).
Comparative amounts for the income statement, changes in equity, cash flows and related notes are not comparable due to the
year-end change (refer to the directors’ report).
Comparative results for commentary purposes.
The results of IFA SA for the comparative year ended 30 June 2005 have been taken from management information available. This has
been done for commentary purposes only and is not audited. This approach allows for a more useful comparison as the group’s year-end
has changed and the comparative period’s results are for the six months ended 30 June 2005. The results used are the combination of
IFA Hotels and IFA Zimbali.
To calculate results for the full year from 1 July 2004 to 30 June 2005, the published income statements for the six months to 30 June
2005 were added to the following:
IFA Hotels – the full year audited income statement to 31 December 2004, halved; and
IFA Zimbali – the audited results for the five months to December 2004 (i.e. from the effective date of acquisition of the Zimbali Lodge
by IFA Zimbali), divided by five and multiplied by six.
88
HOTELS & RESORTS
Definitions
“Afrisun” Afrisun KZN (Pty) Limited
“the board” The board of directors of IFA Hotels & Resorts Limited
“Boschendal” Boschendal Limited
“the current year” The year ending 30 June 2006
“Games Africa” Games Africa (Pty) Limited
“the group” IFA Hotels & Resorts Limited and its subsidiaries
“HDI” Historically disadvantaged individual
“IFA” International Financial Advisors KSCC (Incorporated in Kuwait)
“IFA Boschendal” IFA Boschendal Investments (Pty) Limited
“IFA Hotels” IFA Hotels & Resorts (South Africa) (Pty) Limited
“IFA H&R Kuwait” IFA Hotels and Resorts KSCC (Incorporated in Kuwait)
“IFA Estates” IFA Hotels and Resorts 8 (Pty) Limited
“IFA Properties” IFA Assets (Pty) Limited
“IFA Resorts” IFA Zimbali Hotel and Resorts (Pty) Limited
“IFA SA” or “the company” IFA Hotels & Resorts Limited (formerly Moribo Leisure Limited)
“IFA Zimbali” IFA Zimbali Lodge (Pty) Limited
“JSE” JSE Limited
“King II Report” King Report on Corporate Governance for South Africa 2002
“Mifaz” Moreland/IFA Resorts Development (Joint Venture)
“Moreland” Moreland-Zimbali Resorts (Pty) Limited, a wholly owned subsidiary of
Moreland Developments (Pty) Limited
“Moribo” Moribo Leisure Limited
“Ocean Leisure” Ocean Leisure Company Limited
“the previous year” The year ended 30 June 2005 used for commentary purposes (see note 40)
“Purple Plum” Purple Plum Properties 59 Limited
“SENS” Securities Exchange News Service
“the year” or “the year under review” The year ended 30 June 2006
89
HOTELS & RESORTS
IFA HOTELS & RESORTS LIMITED
(Registration number 1919/001318/06)
Share code: IFH
ISIN code: ZAE000075669
Country of incorporation: South Africa
NATURE OF BUSINESS
To invest in land and develop apartments,
hotels and time-share resorts.
DIRECTORS
JM Al Bahar
TJM Al Bahar
WJ Burger
PGR de Sylva
GE Larson
VM Nkosi
JAM Wilson
COMPANY SECTRETARY
KA Watson
REGISTERED OFFICE
1 Amanbali
Zimbali Coastal Resort
KwaZulu-Natal
PO Box 12, Zimbali, 4422, South Africa
Tel: +27 (0)32 538 1988
Fax: +27 (0)32 538 1864
www.ifahotelsresorts.com
HOLDING COMPANY
IFA Hotels & Resorts KSCC (incorporated in Kuwait)
ULTIMATE HOLDING COMPANY
International Financial Advisors KSCC (incorporated in Kuwait)
ATTORNEYS
Larson Falconer Inc
AUDITORS
BDO Spencer Steward (KZN) Incorporated
Chartered Accountants (South Africa)
Registered Auditors
BANKERS
First National Bank Corporate
SPONSOR
BDO QuestCo (Pty) Limited
(Registration number 2004/018276/07)
13 Wellington Road, Parktown, 2193
Private Bag X60500, Houghton, 2041
Tel: +27 (0)11 643 7271
Fax: +27 (0)11 643 6585
Docex 574 JHB
TRANSFER SECRETARIES
Computershare Investor Services 2004 (Pty) Limited
(Registration number 2004/003647/07)
Ground Floor, 70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Tel: +27 (0)11 370 5000
Fax: +27 (0)11 370 5271
Corporate Information
90
Shareholders’ Diary
HOTELS & RESORTS
REPORTING
Interim 31 December 2006
– Announcement of results End February 2007
Final 30 June
– Announcement of results End August
– Annual report posted by End August
– Annual general meeting 20 September
Please note that the above are only guidelines based on current information and may be subject to slight change.
91
Notice of Annual General MeetingHOTELS & RESORTS
This document is important and requires your immediate attention.
If you are in any doubt as to the action you should take, please consult your stockbroker, accountant, attorney, banker or other independent
professional adviser immediately.
IFA HOTELS & RESORTS LIMITED
(formerly Moribo Leisure Limited)
Incorporated in the Republic of South Africa
Registration number 1919/001318/06
Share code: IFH
ISIN code: ZAE000075669
Notice is hereby given that the annual general meeting of IFA Hotels & Resorts Limited, formerly Moribo Leisure Limited, (“IFA SA” or “the
company”) will be held at Zimbali Lodge on Wednesday, 20 September 2006 at 09:00 for the following purposes:
1. To receive and consider the audited annual financial statements for the financial year ended 30 June 2006.
2. To re-elect directors in accordance with the company’s articles of association. The following retiring directors, chosen in alphabetical order
on this first occasion, are eligible and offer themselves for re-election:
Mr Jassim Al-Bahar
Mr James Wilson
Mr Greg Larson
Mr Werner Burger, appointed during the year, is also required to retire and is eligible and offers himself for re-election.
Curriculum vitae of these four directors are set out on pages 15 to 21 of the annual financial statements of the company of which this
notice of annual general meeting forms part.
3. To authorise the directors to fix the remuneration of the auditors, BDO Spencer Steward (KZN) Inc., with regard to their audit of the
financial statements for the financial year ended 30 June 2006.
4. To renew the appointment of BDO Spencer Steward (KZN) Inc. as the auditors of the company effective from 1 July 2006.
5. To approve the remuneration of the directors paid by way of fees for the financial year ended 30 June 2006 and ending 30 June 2007.
As the reverse listing of the company on the JSE Limited was implemented shortly before year-end, the directors have agreed not to take
any directors’ fees for the year ended 30 June 2006. The directors have also agreed not to take any directors’ fees for the year ending
30 June 2007. This applies to members of the audit and remuneration committees as well.
6. To consider as special business, and if deemed fit, to pass, with or without modification, the following ordinary and special resolutions:
6.1 ORDINARY RESOLUTION NUMBER 1
“RESOLVED THAT the unissued ordinary shares in the authorised share capital of the company be placed under the control of the
directors of the company for allotment and issue at their discretion, as a general authority in terms of section 221 of the Companies
Act, 1973, as amended, and subject to the JSE Limited Listings Requirements.”
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Notice of Annual General Meeting
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6.2 ORDINARY RESOLUTION NUMBER 2
“RESOLVED THAT the directors have the powers to allot and issue any securities of any class already in issue or convertible into a
class already in issue in the capital of the company for cash when the directors consider it appropriate in the circumstances, subject
to the following:
a. this authority shall not endure beyond the earlier of the next annual general meeting of the company or beyond 15 months
from the date of this meeting;
b. there will be no restrictions in regard to the persons to whom the securities may be issued, provided that such securities are to
be issued to public shareholders (as defined in the JSE Limited Listings Requirements (“the JSE Listings Requirements”) and not
to related parties (as defined by the JSE Listings Requirements);
c. upon any issue of securities which, together with prior issues during any financial year, will constitute 5% or more of the number
of securities of the class in issue, the company shall, by way of a paid press announcement in terms of section 11.22 of the
JSE Listings Requirements, give full details thereof, including the effect on the net asset value of the company and earnings per
share, the number of securities issued and the average discount to the weighted average traded price of the securities over the
30 days prior to the date that the price of such issue was determined or agreed by the company’s directors;
d. that issues in the aggregate in any one financial year may not exceed 15% of the number of securities of that class of the
company’s issued share capital (including instruments which are compulsorily convertible into shares of that class) at the date
of application less any securities of that class issued, or to be issued in the future arising from options/convertible securities
issued during the current financial year, plus any securities to be issued pursuant to an announced, irrevocable and fully
underwritten rights offer or to be issued pursuant to any acquisition for which final terms have been announced; and
e. the maximum discount at which securities may be issued is 10% of the weighted average traded price of those securities over
the 30 business days prior to the date that the price of the issue is determined or agreed by the directors.”
A 75% majority is required of votes cast by the shareholders present or represented by proxy at the annual general meeting to
approve the resolution.
6.3 ORDINARY RESOLUTION NUMBER 3
“RESOLVED THAT, subject to the passing of the relevant ordinary and special resolutions at this annual general meeting, any director
of the company or the company secretary be and is hereby authorised to sign any and all documentation required to effect such
ordinary and special resolutions.”
6.4. SPECIAL RESOLUTION NUMBER 1
“RESOLVED THAT the company hereby approves, as a general approval contemplated in sections 85(2) and 85(3) of the Companies
Act, 1973 (Act 61 of 1973), as amended (“the Act”) and in terms of article 7 of the company’s Articles of Association, the acquisition
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Notice of Annual General MeetingHOTELS & RESORTS
by the company or any of its subsidiaries from time to time of the company’s securities (as defined by the JSE Limited Listings
Requirements (“the JSE Listings Requirements”), upon such terms and conditions and in such amounts as the directors of the
company may from time to time determine, but subject to the Articles of Association of the company, the provisions of the Act and
the JSE Listings Requirements as presently constituted and which may be amended from time to time, and provided that:
a. any such acquisition of the company’s securities shall be effected through the order book operated by the JSE trading system
and done without any prior understanding or arrangement between the company and the counter party;
b. this authority shall not endure beyond the earlier of the next annual general meeting of the company or beyond 15 months
from the date of this meeting;
c. a paid press announcement will be published as soon as the company or its subsidiary(ies) has/have acquired securities
constituting, on a cumulative basis, 3% (three percent) of the number of securities in issue prior to the acquisition pursuant to
which the 3% (three percent) threshold is reached, and in respect of every 3% (three percent) thereafter, which announcement
shall contain full details of such acquisitions;
d. acquisitions of the company’s securities by the company or its subsidiary(ies) in the aggregate in any one financial year may
not exceed 20% (twenty percent) of the company’s issued share capital from the date of the grant of this general authority;
e. repurchases may not be made at a price greater than 10% above the weighted average of the market value for such securities
for the 5 (five) business days immediately preceding the date on which the transaction is effected;
f. the company may at any point in time only appoint one agent to effect any repurchase(s) on its behalf;
g. the company or its subsidiary(ies) may only undertake a repurchase if, after such a repurchase, it shall still comply with the
spread requirements of the JSE Listings Requirements; and
h. the company or its subsidiary(ies) may not repurchase securities during a prohibited period, as defined in the JSE Listings
Requirements.”
The reason for the special resolution is to grant the company a general authority in terms of the Act for the acquisition by the
company or any of its subsidiaries of securities issued by the company, which authority shall be valid until the earlier of the next
annual general meeting of the company or the variation or revocation of such general authority by special resolution by any
subsequent general meeting of the company, provided that the general authority shall not extend beyond 15 (fifteen) months from
the date of this annual general meeting. The passing and registration of this special resolution will have the effect of authorising the
company or any of its subsidiaries to acquire securities issued by the company.
Statement by the board of directors of the company
Pursuant to and in terms of the JSE Limited Listings Requirements (“JSE Listings Requirements”), the directors of the company hereby
state that:
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Notice of Annual General Meeting
HOTELS & RESORTS
a. the intention of the directors of the company is to utilise the authority if, at some future date, the cash resources of the
company are in excess of its requirements. In this regard the directors will take account of, inter alia, an appropriate
capitalisation structure for the company, the long-term cash needs of the company, and will ensure that any such utilisation is
in the interests of shareholders; and
b. the method by which the company intends to re-purchase its securities and the date on which such repurchase will take place,
has not yet been determined.
At the time that any contemplated repurchase is to take place, the directors of the company will ensure that:
a. the company and its subsidiaries will be able to pay their debts as they become due in the ordinary course of business for a
period of twelve months after the date of the transaction;
b. the consolidated assets of the company and its subsidiaries, fairly valued in accordance with the accounting policies used in the
company’s latest audited annual group financial statements, will be in excess of the consolidated liabilities of the company and
its subsidiaries for a period of twelve months after the date of the transaction;
c. the issued share capital and reserves of the company and its subsidiaries will be adequate for the purposes of the business of
the company and its subsidiaries for a period of twelve months after the date of the transaction;
d. the working capital available to the company and its subsidiaries will be sufficient for the company and its subsidiaries’
requirements for a period of twelve months after the date of the transaction; and
e. the company will provide its sponsor and the JSE Limited (“JSE”) with all documentation as required in Schedule 25 of the
JSE Listings Requirements, and will not commence any repurchase programme until the sponsor has signed off on the adequacy
of its working capital, advised the JSE accordingly and the JSE has approved this documentation.
6.5 ORDINARY RESOLUTION NUMBER 4
“RESOLVED THAT the company hereby approves, as a general approval contemplated in section 90 of the Companies Act, 1973
(Act 61 of 1973), as amended (“the Act”) and in terms of article 7 of the company’s articles of association, the grant of a renewable
mandate to make payments to shareholders on a pro rata basis by way of the reduction of the company’s share capital upon such
terms and conditions and in such amounts as the directors of the company may from time to time determine, but subject to the
articles of association of the company, the provisions of the Act and the JSE Limited Listings Requirements as presently constituted
and which may be amended from time to time, and provided that:
a. this general authority shall only be valid until the company’s next annual general meeting, provided that it shall not extend
beyond 15 (fifteen) months from the date of passing of this ordinary resolution; and
b. any general payment may not exceed, in any one financial year, 20% of the company’s issued share capital including reserves
but excluding minority interests and revaluations of assets and intangible assets that are not supported by a valuation by an
independent expert acceptable to the JSE Limited prepared within the last six months.”
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Notice of Annual General MeetingHOTELS & RESORTS
Statement by the board of directors of the company
Pursuant to and in terms of the JSE Listings Requirements, the directors of the company hereby state that:
a. the intention of the directors of the company is to utilise the authority if, at some future date, the cash resources of the
company are in excess of its requirements. In this regard the directors will take account of, inter alia, an appropriate
capitalisation structure for the company, the long-term cash needs of the company, and will ensure that any such utilisation is
in the interests of shareholders; and
b. the method by which the company intends to make such payment and the date on which such payment will take place, has
not yet been determined.
At the time that the contemplated payment is to take place, the directors of the company will ensure that:
a. the company and its subsidiaries will be able to pay their debts as they become due in the ordinary course of business for a
period of twelve months after the date of the transaction;
b. the consolidated assets of the company and its subsidiaries, fairly valued in accordance with the accounting policies used in the
company’s latest audited annual group financial statements, will be in excess of the consolidated liabilities of the company and
its subsidiaries for a period of twelve months after the date of the transaction;
c. the issued share capital and reserves of the company and its subsidiaries will be adequate for the purposes of the business of
the company and its subsidiaries for a period of twelve months after the date of the transaction;
d. the working capital available to the company and its subsidiaries will be sufficient for the requirements of the company and its
subsidiaries for a period of twelve months after the date of the transaction; and
e. the company will provide its sponsor and the JSE with all documentation as required in Schedule 25 of the JSE Listings
Requirements, and will not undertake any such payment until the sponsor has signed off on the adequacy of its working capital,
advised the JSE accordingly and the JSE has approved this documentation.
The following information, which is required by the JSE Listings Requirements with regard to the resolutions granting a general authority to
the company to repurchase securities and to make payments to its shareholders by way of a reduction in share capital, appears on the pages
of the annual financial statements to which this notice of general meeting is annexed indicated below:
Directors and management of the company pages 14 – 23
Major shareholders page 41
Directors’ interests in securities page 42
Share capital of the company page 41
Responsibility statement page 38
Material changes page 43
There are no legal or arbitration proceedings, either pending or threatened against the company or its subsidiaries, of which the company is
aware, which may have, or have had in the last twelve months, a material effect on the financial position of the company or its subsidiaries.
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Notice of Annual General Meeting
HOTELS & RESORTS
VOTING AND PROXIES
Shareholders who hold their shares in certificated form or who are own-name registered shareholders holding their shares in dematerialised
form who are unable to attend the annual general meeting but who wish to be represented thereat, are required to complete and return the
attached form of proxy so as to be received by the transfer secretaries by not later than 09:00 on Monday, 18 September 2006.
Shareholders who have dematerialised their shares through a Central Securities Depository Participant (“CSDP”) or broker, other than by
own-name registration, who wish to attend the annual general meeting, should instruct their CSDP or broker to issue them with the necessary
authority to attend the meeting, in terms of the custody agreement entered into between such shareholders and their CSDP or broker.
Shareholders who have dematerialised their shares through a CSDP or broker, other than by own-name registration, who wish to vote by way
of proxy, should provide their CSDP or broker with their voting instructions, in terms of the custody agreement entered into between such
shareholders and their CSDP or broker. These instructions must be provided to their CSDP or broker by the cut-off time or date advised by their
CSDP or broker for instructions of this nature.
Shareholders who have any doubt as to the action they should take, should consult their stockbroker, accountant, attorney, banker or other
professional adviser immediately.
By order of the board
IFA HOTELS & RESORTS LIMITED
KA WATSON
Company Secretary
28 August 2006
Durban
Transfer secretaries
Computershare Investor Services 2004 (Pty) Limited
(Registration number 1958/003456/06)
70 Marshall Street, Johannesburg 2000
PO Box 61051, Marshalltown, 2107
PRINTED BY INCE (PTY) LTD
97
Form of ProxyHOTELS & RESORTS
For use ONLY by certificated shareholders and own-name dematerialised shareholders at the annual general meeting of shareholders of
IFA Hotels & Resorts Limited to be held at the Zimbali Lodge, Zimbali Coastal Resort, KwaZulu-Natal, at 09:00 on Wednesday,
20 September 2006 (“the annual general meeting”).
IFA HOTELS & RESORTS LIMITED
(formerly Moribo Leisure Limited)
Incorporated in the Republic of South Africa
Registration number 1919/001318/06
Share code: IFH
ISIN code: ZAE000075669
(“the company”)
I/We of (address)
being the holders of shares in the company do hereby appoint (see note 1):
1.
2.
3.
or failing him/her, the Chairman of the annual general meeting as my/our proxy to vote for me/us and on my/our behalf at the annual general meeting.
I/We desire to vote as follows:
For Against Abstain
1. Adopt the annual financial statements for the year ended 30 June 2006
2. Reappoint directors
2.1 JM Al-Bahar
2.2 JAM Wilson
2.3 GE Larson
2.4 WJ Burger
3. Authorise the directors to fix the auditors’ remuneration
4. Renew the appointment of BDO Spencer Steward (KZN) Inc. as auditors
5. Approve the fees of the directors for the year ended 30 June 2006 and 30 June 2007
6. Special business
6.1 Ordinary resolution number 1 regarding placing the unissued ordinary shares under directors’ control
6.2 Ordinary resolution number 2 regarding a general authority to issue shares for cash
6.3 Ordinary resolution number 3 regarding an authority for any director or the company secretary
to sign documents to effect all the ordinary and special resolutions
6.4 Special resolution number 1 regarding a general authority for the company and/or
its subsidiaries to acquire its own shares
6.5 Ordinary resolution number 4 regarding a general authority for the company to make payments
to shareholders
Signed at on this day of 2006
Signature Assisted by me (where applicable)
98
Notes to the Form of Proxy
HOTELS & RESORTS
1. A shareholder of the company may insert the name of a proxy or the names of two alternative proxies of the shareholder’s choice in the
space/s provided, with or without deleting “the Chairperson of the annual general meeting”, but any such deletion must be initialled by
the shareholder concerned. The person whose name appears first on the form of proxy and who is present at the annual general meeting
will be entitled to act as proxy to the exclusion of those whose names follow.
2. Please insert an “X” in the relevant spaces according to how you wish your votes to be cast. However, if you wish to cast your votes in
respect of a lesser number of shares than you own in the company, insert the number of ordinary shares held in respect of which you
desire to vote. Failure to comply with the above will be deemed to authorise the proxy to vote or to abstain from voting at the annual
general meeting as he/she deems fit in respect of all the shareholder’s votes exercisable thereat. A shareholder or his/her proxy is not
obliged to use all the votes exercisable by the shareholder or by his/her proxy, but the total of the votes cast and in respect whereof
abstentions recorded may not exceed the total of the votes exercisable by the shareholder or by his/her proxy.
3. The date must be filled in on this proxy form when it is signed.
4. The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the annual general meeting
and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof.Where there are joint holders of shares,
the vote of the senior joint holder who tenders a vote, as determined by the order in which the names stand in the register of members,
will be accepted.
5. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to
this form of proxy unless previously recorded by the transfer secretaries of the company or waived by the Chairperson of the annual
general meeting of shareholders.
6. Any alterations or corrections made to this form of proxy must be initialled by the signatory/ies.
7. A minor must be assisted by his/her parent or guardian unless the relevant documents establishing his/her legal capacity are produced or
have been registered by the transfer secretaries of the company.
8. Forms of proxy must be received by the transfer secretaries, Computershare Investor Services 2004 (Pty) Limited, at 70 Marshall Street,
Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) by not later than 09:00 on Monday, 18 September 2006.
9. The Chairperson of the annual general meeting may accept or reject any form of proxy, in his absolute discretion, which is completed
other than in accordance with these notes.
10. If required, additional forms of proxy are available from the transfer secretaries of the company.
11. Dematerialised shareholders, other than by own-name registration, must NOT complete this form of proxy and must provide their CSDP or
broker with their voting instructions in terms of the custody agreement entered into between such shareholders and their CSDP or broker.
To be completed and mailed to: OR To be completed and hand delivered to:
Computershare Investor Services 2004 (Pty) Limited Computershare Investor Services 2004 (Pty) Limited
PO Box 61051, Marshalltown, 2107 Ground Floor, 70 Marshall Street, Johannesburg