| Wed 20 May 2009, 7:37 | | REI - Reinet Investments S.C.A. Depositary Receipts - Consolidated Financial |
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REI
REI
REI - Reinet Investments S.C.A. Depositary Receipts - Consolidated Financial
Results For The Period Ended 31 March 2009
Reinet Investments S.C.A. Depositary Receipts
issued by Richemont Securities AG
(Incorporated in Switzerland)
ISIN: CH0045793657
Depositary Receipt Code: REI
CONSOLIDATED FINANCIAL RESULTS FOR THE PERIOD ENDED 31 MARCH 2009
The Board of Reinet Investments Manager S.A. announces the results of Reinet
Investments S.C.A. for the period ended 31 March 2009. These include the
results of its wholly owned subsidiary Reinet Fund S.C.A. F.I.S. (`Reinet
Fund`). As required by Luxembourg law, the consolidated financial statements
have been prepared in accordance with International Financial Reporting
Standards.
Key information
* The Reinet structure was established on 20 October 2008
upon the separation of the investments currently held from
the luxury businesses retained by Compagnie Financiere
Richemont S.A.
* 195 941 286 Reinet ordinary shares are currently in issue
* Net asset value at 31 March 2009: EURO 1 846 million
* Net asset value per share at 31 March 2009: EURO 9.42
* Reported net profit for the period: EURO 426 million
* Underlying operating loss for the period: EURO 116 million
Net asset value (`NAV`)
The NAV of Reinet Investments S.C.A. comprises:
EURO million
* Listed portfolio investment
(*) British American Tobacco plc 1 470 79.7 %
* Cash and liquid funds 331 17.9 %
* Other assets, net of other liabilities 45 2.4 %
1 846 100.0 %
All of the underlying assets are held by Reinet Fund S.C.A.
F.I.S.
Since the establishment of Reinet in October 2008, the NAV has been adversely
impacted by the weakness of sterling and adverse price movements in respect of
Reinet Fund`s single biggest investment, British American Tobacco plc (`BAT`).
British American Tobacco
At 31 March 2009, the value of the investment in BAT in the balance sheet of
Reinet is EURO 1 470 million, the 84.3 million BAT shares being valued at POUND
16.13 / EURO 17.44 per share.
The weakening of the BAT share price, which was particularly marked in March
2009, combined with the fall in sterling, has obviously adversely impacted the
net asset value of Reinet over the period and resulted in unrealised losses for
Reinet, as we have to mark the investment to the euro market price at the end of
each accounting period.
BAT is a global enterprise which generates virtually all of its cash flow and
profits outside the United Kingdom. The weakening of sterling should therefore
contribute to higher reported profitability, in sterling terms, over time, which
should, in turn, be reflected in the share price. BAT is a very sound business,
well run and with a strong portfolio of tobacco brands. Further information on
BAT`s performance can be obtained from its website, www.bat.com.
Other investments
Each of the companies in the portfolio of small, venture capital investments
that we have taken over from Richemont has been requested to review its business
plan and to re-work its growth forecasts. These are very challenging times for
start-up and developing companies in whatever field and, whilst supporting the
management of the companies we have invested in, we have taken a very prudent
view as to the valuations being applied to them such that some are now carried
at significantly below the amounts that previously Richemont and more recently
Reinet Fund have invested to date. Nonetheless, we believe that prudent
oversight and an extremely conservative approach to valuation is called for at
this time. The portfolio of small investments is valued at EURO 46 million in
the balance sheet at 31 March.
Liquid funds
Reinet Fund`s cash is held on deposit with banks in Luxembourg and the UK. In
addition, we have invested EURO100 million in a euro-denominated government bond
fund. This holds exclusively short-dated bonds issued by western European
governments and short-term loans backed by government bonds. This is shown as
an investment rather than liquid funds in the balance sheet, in accordance with
the requirements of the accounting standards. As ever, our principal criterion
is to ensure the return of capital rather than attempting to maximise the return
on capital on our liquid funds.
Results for the six-month period ended 31 March 2009
Recurring Non- As
EURO m recurring reported
EURO m EURO m
Financial income 5 - 5
Operating expenses and (7) (2) (9)
transaction-related costs
(2) (2) (4)
Income from discontinued - 23 23
luxury activities
Realisation of holding gain - 530 530
on BAT shares retained
Elimination of cumulative
foreign currency
adjustments in respect of
the holding gain on BAT - (55) (55)
Equity accounted share of
BAT results pre-
distribution to
shareholders - 46 46
Unrealised fair value
adjustments
- BAT (66) - (66)
- Other investments (48) - (48)
(116) 542 426
Although Reinet was created in its current form only on 20 October 2008, the
publicly-listed company - Reinet Investments S.C.A. - previously existed as
Richemont S.A. As the prior accounting period of Richemont S.A. terminated on
30 September 2008, the consolidated financial statements of Reinet for the
period under review run from 1 October 2008 to 31 March 2009. As such, they
include the results for a 20-day period of the luxury goods operations, which
were transferred to Compagnie Financiere Richemont S.A. on 20 October 2008. The
income statement also includes the equity accounted share of the results of the
19.5 per cent interest in BAT held through the R&R Holdings S.A. joint-venture
with Remgro Limited for the period from 1 October to 3 November 2008. In both
cases, estimates have been used to arrive at the figures reported.
Income statement
Profit attributable to shareholders for the six-month period amounted to EURO
426 million. This figure includes a number of non-recurring accounting
adjustments, which must be eliminated in arriving at the underlying result for
the period.
Reinet`s ongoing, realised operating loss for the period was EURO 2 million. In
addition, non-realised fair value adjustments, made in respect of the Fund`s
investment portfolio, amounted to EURO 114 million. Non-recurring items
amounted to a net gain of EURO 542 million during the period under review.
Financial income represents interest income received on the Fund`s cash and
liquid resources.
Operating expenses include EURO 2 million in respect of capital and stamp duties
paid in respect of the rights issue, concluded in December 2008, which are shown
as a non-recurring expense. Other transactional costs include fees paid in
respect of the Lehman Brothers Merchant Banking transaction, which closed in
April 2009.
The figure of EURO 426 million includes an estimate of the results in respect of
the luxury goods businesses which were transferred to Compagnie Financiere
Richemont S.A. on 20 October. That amounted to EURO 23 million for the 20 days.
Reinet will obviously not receive those funds but they must still be reflected
in the consolidated accounts for the period.
The result for the period reflects a one-off gain on the revaluation of the
interest in BAT once Reinet had spun-off 90 per cent of its holding to the
shareholders and switched to carrying the investment at its `fair value` rather
than equity accounting it as an associated company. The net one-off gain on the
BAT stake is EURO 475 million, after taking into account an accounting
adjustment to eliminate a cumulative foreign exchange translation adjustment of
EURO 55 million from the Company`s reserves.
Reinet also recorded `income` of EURO 46 million in terms of its estimated
equity accounted share of the profits of BAT for the period from 1 October up to
3 November 2008, when the shares were transferred out to shareholders. This is
quite distinct from any cash-flow from BAT. In fact, Reinet did not receive any
dividend income from BAT during the six-month period.
The Board of BAT declared a dividend in March 2009 which resulted in Reinet
receiving some EURO 60 million in May of this year. International Accounting
Standards require, however, that we recognise dividend income only when it is
approved by the shareholders of the paying company. Since the BAT AGM was held
at the end of April, that dividend income accrues to Reinet only in the first
half of the current financial year.
Dividends
This has been the first accounting period for Reinet. As noted above, the
accounting treatment of dividends is now such that Reinet could not accrue any
dividend receivable from BAT in the financial statements for the period ended 31
March 2009.
In the future, we anticipate paying regular dividends out of Reinet`s realised
investment income in each financial year. However, this is the first year of
activity for Reinet and we consider it premature to pay a dividend at a time
when the portfolio has lost value as a consequence of the fall in sterling and
the BAT share price. Those shareholders who chose to retain the BAT shares
distributed to them last year will receive dividends from BAT and Richemont this
year, which will exceed those paid by Richemont alone last year.
Future developments
Immediately after the year-end, Reinet Fund concluded the deal to acquire,
together with the management team, the fund management businesses in New York
and London of Lehman Brothers. For a small initial investment, Reinet gained
access to a team of experienced asset managers, committed itself to invest
alongside the current limited partners in new investments to be made by the two
funds and has secured rights to co-invest alongside the funds in new
opportunities to be identified by the fund managers. Our commitment is to
invest $ 230 million over the remaining lives of the funds. This positions
Reinet to partner in the funds` deals and capitalise on the strengths of the
management team. We hope that this transaction may be the first of many where
Reinet will be able to partner with other investment professionals.
As we said in the prospectus, the goal of Reinet Fund is to build wealth over
the long-term. Our aim is to create enduring shareholder value, investing in
sound business opportunities. In addition, a part of the fund will be earmarked
to invest in new and growing enterprises, where we recognise innovation combined
with market potential. We aim to invest prudently and to work with professional
partners such that you as investors and we as managers and investors do not need
to lose sleep over the decisions that we take.
Johann Rupert
Chairman
Reinet Investments Manager S.A.
For and on behalf of Reinet Investments S.C.A.
20 May 2009
Further information: Mr A Grieve
Chief Financial Officer
Reinet Investments S.C.A.
Tel: +352 22 7252
Info@reinet.com
www.reinet.com
The consolidated financial statements at 31 March 2009, on which this
announcement is based, have been audited and will be published in full in the
Reinet annual report which will be available in July 2009.
Reinet Investments S.C.A. is a partnership limited by shares incorporated in the
Grand Duchy of Luxembourg and having its registered office at 35 Boulevard
Prince Henri, L 1724 Luxembourg. It is a securitisation company which allows
its shareholders to participate indirectly in the portfolio of assets held by
its wholly-owned subsidiary Reinet Fund S.C.A. F.I.S., a specialised investment
fund also incorporated in Luxembourg. Reinet shares are listed on the
Luxembourg Stock Exchange and Reinet South African Depository Receipts are
listed in Johannesburg. Reinet shares are included in the `LuxX` index of the
principal shares traded on the Luxembourg exchange and the South African
Depositary Receipts are included in the JSE `Top 40` Share Index.
Sponsor
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Reinet Investments S.C.A.
Registered office: 35, Boulevard Prince Henri, L-1724 Luxembourg
Date: 20/05/2009 07:37:07 Produced by the JSE SENS Department.
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