Latest Results
Interim Results
West Pioneer Properties Limited (AIM:WPR), a leading developer and operator of shopping malls and mixed use developments in west and south India, announces its interim results for the 6 months ended 30 September 2012.
Highlights
Highlights
- Major boost to Indian retail sector as Foreign Direct Investment ("FDI") in multi-brand retail approved by Parliament on 7 December 2012. This has improved confidence in the retail sector
- Steady progress being made in the Company's commercial and residential development projects at Kalyan
- Repositioning of the Kalyan Mall into a lifestyle/value mall progressing well but has led to a short term fall in rental income over the period
- The Company has successfully negotiated a new debt facility of US$11.83 million to fund capital expenditure at the Kalyan Mall, construction of commercial plaza, towers 3 and 4 at Kalyan and construction work at Aurangabad. The facility will be drawn down in phases, as required, over the next 1-2 years
- 20% depreciation in average value of Indian Rupee against the US Dollar for the period compared to the financial year ended 31 March 2012, materially affecting the reported profit
- Balance sheet remains robust as a result of prudent cash management with period end cash and cash equivalents of US$0.97million, while maintaining good levels of ongoing investment into inventory, together with an additional US$11.42 million unutilised bank facilities in place
- Development approvals at Nashik being pursued. Ground break plans will be announced once approvals are available.
Commenting on the results, Amit Jatia, Chairman of West Pioneer, said: "The period has been one of mixed news for the Company as its retail operations have been affected, as envisaged, by the ongoing re-engineering of the tenant mix in the Kalyan Mall. This is reflected in the fall in rental income which is expected to continue in the current financial year. However, once the re-positioning is completed this is likely to result in a rise in rental income.
"The Mall is therefore well placed to take advantage of increased confidence in the retail sector following the approval by Parliament of the relaxation of restrictions in Foreign Direct Investment. Progress in the residential and commercial development is continuing steadily and this should result in improved financial performance for the Company in the near future.
"The results, particularly the income statement, have been materially affected by depreciation in the value of Indian Rupee against the US Dollar over the last year.
"Although moving at slower pace, we remain confident of the intrinsic underlying values in the Aurangabad and Nashik properties. The Company is confident of making further progress on these sites in the future."
Chairman's statement
Indian Economy
Challenges from sluggish economic growth and high inflation continue with GDP expected to rise at 5.7% in the year to March 2013 and inflation currently running at 7.2%, well above the Central Bank's target of 5%. Business confidence has been boosted by recent steps taken by Central government allowing Foreign Direct Investment ("FDI") in the retail, aviation and insurance sectors. However, concerns in relation to rising levels of fiscal deficit and risk of spill-over of global economic slowdown still loom over the Indian economy.
Impact of depreciation of Rupee
The Indian Rupee has depreciated by around 20% against the US Dollar from the average exchange rate for the financial year ended 31 March 2012compared to the accounting period in the six months to 30 September 2012. This has had a material impact the income statement.
Retail
With the relaxation of FDI in multi-brand retail, retailers are preparing to scale up their operations. Many prominent international brands have expressed intentions to enter the Indian retail market revalidating strength and attractiveness of this largely unexploited industry. The policy aims to deploy FDI capital in retail infrastructure and other auxiliary industries. In addition to helping penetration of organised retail, this will also provide impetus to overall economic growth.
Residential
This sector is growing steadily on both volume and price fronts. In established markets, developers are producing luxury developments with ultra modern amenities. As units are becoming more expensive in established markets, further projects are being launched in extended suburbs to meet the demand in middle and lower segments. The outlook of the residential sector remains positive with ample opportunities in various micro markets catering to different income levels.
Financial Review
In the period ended 30 September 2012, West Pioneer achieved revenue and other income of US$1.7million (2011: US$2.4million), including property rentals and other operating income of US$1.6million (2011: US$2.3million). Loss before tax was US$(1.7million) (2011: US$(0.6) million) and basic loss per share was US$(0.0191) (2011: Loss US$(0.0033)). Net assets at the period end were US$55.4million (2011: US$61.1million), including cash and short term deposits of US$1.0 million (2011: US$1.8 million). Interest bearing loans and borrowings increased from US$10.0 million to US$10.2million during the period, inclusive of debt repayments.
The Company has also continued to manage its working capital carefully and after having invested US$2.9 million in increasing its inventory, the Board is pleased to still be able to report US$1.0 million of cash on its balance sheet.
Operating Review
Kalyan
The Company has been successful in implementing its retail-led mixed use development model at Kalyan (the "Mall"). As a mixed use development, West Pioneer has the benefit of direct access to consumers through the residential and commercial projects, which in turn offers valuable consumer insight and synergies for use in the Mall itself. As previously announced, these insights have resulted in the strategic focus for the Mall shifting to consumer value and the successful positioning of the Mall as a value and lifestyle destination.
Kalyan - Retail
Phase I of the 500,000 sq. ft. Mall includes a fully functional food court and entertainment zone on the second floor, along with other retail offerings on Lower Ground and Ground floors. The repositioning exercise undertaken which is focused on establishing the Mall as a leading value shopping and lifestyle destination is in progress. This has led to a short term loss of income. Capital and other expenditure is also being incurred as part of this exercise which is aimed at improving the look and feel of the Mall and upgrading infrastructure at the premises.
However, the Company is confident that on completion of this exercise the Mall will provide enhanced opportunities to lifestyle retailers, resulting in higher rentals and footfalls in the near future, which is anticipated to have a positive effect on Mall profitability.
Leasing levels at the Mall remained steady at 74% during the period and the Company is currently in negotiation with a number of other major brands to lease the remaining retail space.
Kalyan - Residential
The Company is pleased that the development of the first two residential towers of Phase II at Kalyan is progressing well. The first tower is nearing completion with final activities under way. Completion of tower A is expected to be in the first quarter of FY14. The profits from completion are therefore expected be recognised in the September 2013 interim results. The second tower development is on schedule and is currently completed to the 17th floor. Response from customers remains encouraging with 89% of the units pre-sold in these two towers.
Planning permissions for the fourth tower are in progress and the launch will take place upon receipt of these planning permissions. The third tower, which is already approved, will be launched together with the fourth tower. The fourth tower will see the total residential area being developed at Kalyan rising to over 810,000 sq. ft.
Kalyan - Commercial plaza
Significant progress has been made in Phase III of the development, a commercial plaza ("Metro Plaza") of 68,000 sq. ft. of office space with the building structure completed recently. Work is progressing well and the development is expected to be completed in the next few months. Metro Plaza will have small commercial units for leasing on the ground floor and units for sale on the first and second floors, with the target market being self-employed professionals such as doctors, lawyers and architects. The response to the development continues to be encouraging with 40% of the space pre-sold at an estimated 50% premium over current residential sale rates. This is in line with the Company's strategy to take advantage of opportunities where the maximum value can be generated.
Nashik
Development permissions at Nashik are being pursued with various authorities and ground break will be announced once these permissions are in place. The Company is confident of initiating activities on this site in the future and exploiting the intrinsic value the Nashik property carries.
Aurangabad
The Company has commenced development of retail and warehousing space at Aurangabad with an intention to sell on completion.
Outlook
The Company's focus in the near term remains on the repositioning and refurbishment of the Kalyan mall and establishing it as a value and lifestyle destination. This in turn is likely to increase revenues and help support the long term plans of the Company. In addition, the Company is optimistic of earning good rental income from the ground floor space at the Metro Plaza project on completion. The Development of residential and commercial projects at Kalyan is also a priority and the Company intends to deliver these projects to customers in a phased manner.
The Company is confident of making further progress in the development of the Nashik and Aurangabad sites in the near future and will update shareholders on the progress of these projects. The Board is confident of continuing progress on establishing West Pioneer as a formidable brand standing for quality and transparency among retailers and consumers. The Board believes strongly in the Company's ability to deliver growth over the longer term.
Amit Jatia
Chairman
20 December 2012
Interim Consolidated Income Statement
for the six month period ended 30th September 2012
| 2012 | 2011 | ||
| Notes | Unaudited | ||
| $ | $ | ||
| Revenue | |||
| Property rentals | 826,275 | 1,147,780 | |
| Other operating income | 818,082 | 1,153,868 | |
| Total Revenue | 1,644,357 | 2,301,648 | |
| Finance and other income | 6 | 105,897 | 106,812 |
| Total Income | 1,750,254 | 2,408,460 | |
| Expenses | |||
| Property revaluation loss | (669,925) | (46,943) | |
| Direct operating expenses for rent-earning properties | (1,138,976) | (1,132,494) | |
| Administrative expenses | (757,160) | (1,010,806) | |
| Selling and distribution costs | (189,685) | (232,322) | |
| Finance costs | 7 | (734,967) | (585,817) |
| Total expenses | (3,490,713) | (3,008,382) | |
| Loss before tax | (1,740,459) | (599,922) | |
| Income tax credit | 8 | 216,766 | 335,092 |
| Loss after tax | (1,523,693) | (264,830) | |
| Attributable to: Equity holders |
(1,523,693) | (264,830) | |
| Earnings per share (attributable to equity holders) | 9 | ||
| Basic | (0.0191) | (0.0033) | |
| Diluted | (0.0190) | (0.0033) | |
Interim Consolidated Statement of Comprehensive Income
for the six month period ended 30th September 2012
| 2012 | 2011 | |
| Unaudited | ||
| $ | $ | |
| Loss for the period | (1,523,693) | (264,830) |
| Exchange loss on translation of foreign operations | (832,077) | (5,759,269) |
| Other comprehensive loss for the period, net of tax | (832,077) | (5,759,269) |
| Total comprehensive loss for the period, net of tax | (2,355,770) | (6,024,099) |
| Attributable to: | ||
| Equity holders | (2,355,770) | (6,024,099) |
| (2,355,770) | (6,024,099) | |
Interim Consolidated Statement of Financial Position
As at 30th September 2012
| 30 September | 31March | |||||
| 2012 | 2011 | 2012 | ||||
| Notes | Unaudited | Audited | ||||
| $ | $ | $ | ||||
| Assets | ||||||
| Non-current assets | ||||||
| Property, plant and equipment | 1,622,635 | 3,151,545 | 1,671,041 | |||
| Investment properties | 10 | 53,810,775 | 68,557,254 | 54,329,562 | ||
| Intangible assets | 4,542 | 8,385 | 6,321 | |||
| Other non-financial assets | 11,913 | - | 16,103 | |||
| Other financial assets | 335,388 | 289,769 | 322,879 | |||
| Advance income tax | 182,447 | 292,369 | 308,076 | |||
| 55,967,700 | 72,299,322 | 56,653,982 | ||||
| Current assets | ||||||
| Inventories | 11 | 32,551,634 | 10,081,640 | 29,557,631 | ||
| Investments - held for trading | 12 | - | 435,120 | 438,592 | ||
| Trade and other receivables | 13 | 920,500 | 1,068,846 | 966,668 | ||
| Other non-financial assets | 719,702 | 250,818 | 531,693 | |||
| Prepayments | 84,754 | 175,867 | 43,501 | |||
| Cash and short-term deposits | 5 | 967,153 | 1,760,516 | 771,640 | ||
| 35,243,743 | 13,772,807 | 32,309,725 | ||||
| Total Assets | 91,211,443 | 86,072,129 | 88,963,707 | |||
| Equity and liabilities | ||||||
| Equity attributable to the equity holders | ||||||
| Issued capital | 7,996,130 | 7,996,130 | 7,996,130 | |||
| Share premium | 45,717,870 | 45,717,870 | 45,717,870 | |||
| Retained earnings | 15,140,782 | 17,325,675 | 16,664,475 | |||
| Employee equity benefit reserve | 561,185 | 554,104 | 559,427 | |||
| Foreign currency translation reserve | (14,009,168) | (10,502,064) | (13,177,091) | |||
| 55,406,799 | 61,091,715 | 57,760,811 | ||||
| Non current liabilities | ||||||
| Interest bearing loans and borrowings | 17 | 7,534,519 | - | 4,453,381 | ||
| Advance from sale of units | 12,520,340 | 5,493,409 | 8,269,352 | |||
| Other financial liabilities | 4,108,163 | 1,018,516 | 3,817,688 | |||
| Other non-financial liabilities | 34,394 | 15,300 | 6,282 | |||
| Employee benefit liability | 51,341 | 49,139 | 48,620 | |||
| Deferred tax liability | 6,174,691 | 7,918,438 | 6,488,338 | |||
| 30,423,448 | 14,494,802 | 23,083,661 | ||||
| Current liabilities | ||||||
| Trade and other payables | 1,050,446 | 1,848,949 | 1,442,463 | |||
| Interest bearing loans and borrowings | 17 | 2,691,491 | 7,423,863 | 5,552,766 | ||
| Other financial liabilities | 1,614,613 | 1,182,870 | 1,107,284 | |||
| Other non-financial liabilities | 24,646 | 29,930 | 16,722 | |||
| 5,381,196 | 10,485,612 | 8,119,235 | ||||
| Total Liabilities | 35,804,644 | 24,980,414 | 31,202,896 | |||
| Total Equity and Liabilities | 91,211,443 | 86,072,129 | 88,963,707 | |||
Interim Consolidated Statement of Changes in Equity
For the six months ended 30th September 2012
| Attributable to equity holders | |||||||
| Issued | Share | Retained | Employee equity benefits | Foreign currency translation | Total | ||
| capital | premium | earnings | reserve | reserve | Equity | ||
| $ | $ | $ | $ | $ | $ | ||
| Balance as at 1 April 2012 | 7,996,130 | 45,717,870 | 16,664,475 | 559,427 | (13,177,091) | 57,760,811 | |
| Loss for the period | - | - | (1,523,693) | - | - | (1,523,693) | |
| Other comprehensive loss | - | - | - | - | (832,077) | (832,077) | |
| Total comprehensive loss | - | - | (1,523,693) | - | (832,077) | (2,355,770) | |
| Share based payment | - | - | - | 1,758 | - | 1,758 | |
| Balance as at 30 September 2012 | 7,996,130 | 45,717,870 | 15,140,782 | 561,185 | (14,009,168) | 55,406,799 | |
| Balance as at 1 April 2011 | 7,996,130 | 45,717,870 | 17,449,183 | 690,216 | (4,742,795) | 67,110,604 | |
| Loss for the period | - | - | (264,830) | - | - | (264,830) | |
| Other comprehensive loss | - | - | - | - | (5,759,269) | (5,759,269) | |
| Total comprehensive loss | - | - | (264,830) | - | (5,759,269) | (6,024,099) | |
| Share based payment | - | - | - | 5,210 | - | 5,210 | |
| Transfer to retained earnings on options forfeited | - | - | 141,322 | (141,322) | - | - | |
| Balance as at 30 September 2011 | 7,996,130 | 45,717,870 | 17,325,675 | 554,104 | (10,502,064) | 61,091,715 | |
Interim Consolidated Cash Flow Statement
For the six months ended 30th September 2012
| 2012 | 2011 | ||
| Notes | Unaudited | ||
| $ | $ | ||
| Operating activities | |||
| Loss before tax | (1,740,459) | (599,922) | |
| Adjustments to reconcile loss before tax to net cash flows | |||
| Depreciation and amortisation | 10,114 | 14,982 | |
| Provision for doubtful debts | 81,696 | 157,222 | |
| Share based payments expense | 1,758 | 5,210 | |
| Decrease in fair value of investment properties | 669,925 | 46,943 | |
| Decrease / (Increase) in value of investments held-for-sale | 27,633 | 9,377 | |
| Foreign exchange difference | (54,325) | 39,428 | |
| Net gain on sale of investment | (106) | (5) | |
| Dividend income | (12,573) | (5,229) | |
| Interest income | (26,849) | (78,728) | |
| Interest expense | 702,771 | 536,532 | |
| (340,415) | 125,810 | ||
| Working Capital adjustments | |||
| (Increase) in prepayments (current) | (32,700) | (139,325) | |
| (Increase) / Decrease in trade and other receivables | (82,700) | (350,118) | |
| (Increase) / Decrease in other assets (current) | (191,762) | 43,208 | |
| (Increase) in other assets (non-current) | (16,276) | (3,671) | |
| (Increase) in inventories | (3,105,278) | (1,083,815) | |
| (Decrease) in trade and other payables (current) | (273,132) | (83,828) | |
| Increase / (Decrease) in other liabilities (current) | 425,407 | 45,790 | |
| Increase in other liabilities (non current) | 4,337,247 | 1,037,428 | |
| 1,060,806 | (534,331) | ||
| Income tax refund / (paid) | 149,639 | 268,877 | |
| Net cash flows from/ (used in) operating activities | 870,030 | (139,644) | |
| Investing activities | |||
| Proceeds from sale of held-for-trading investments | 3,712,808 | 1,528,590 | |
| Purchase of property, plant and equipment and intangible assets | (2,517) | (9,086) | |
| Purchase of held-for-trading investments | (3,247,785) | (1,438,428) | |
| Capital expenditure on Investment Property | (829,586) | (101,212) | |
| Dividend income | 12,573 | 5,229 | |
| Interest received | 26,849 | 52,731 | |
| Net cash flows (used in)/from investing activities | (327,658) | 37,824 | |
| Financing activities | |||
| Proceeds from borrowings | 5,807,143 | 1,808,283 | |
| Repayment of borrowings | (5,683,236) | (1,668,040) | |
| Interest paid | (460,216) | (344,089) | |
| Net cash flows (used in) financing activities | (336,309) | (203,846) | |
| Net increase/(decrease) in cash and cash equivalents | 206,063 | (305,666) | |
| Net foreign exchange difference | (10,717) | (63,883) | |
| Cash and cash equivalents at 1st April | 752,868 | 1,492,741 | |
| Cash and cash equivalents at 30th September (See Note 5) | 948,214 | 1,123,192 | |