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RIN
RIN
RIN - Redefine Properties International Limited - Preliminary Results Of
Redefine International Plc for the 11 month period ended 31 August 2010
Redefine Properties International Limited
(formerly Kalpafon Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2010/009284/06)
JSE share code: RIN ISIN Code: ZAE000149282
("RIN")
PRELIMINARY RESULTS OF REDEFINE INTERNATIONAL PLC FOR THE 11 MONTH PERIOD ENDED
31 AUGUST 2010
Set out below is an announcement which was released by Redefine International
plc, the AIM-listed subsidiary of RIN, on the Regulatory News Service ("RNS") of
the London Stock Exchange today.
"Redefine International plc
("Redefine International", "the Group" or "the Company")
PRELIMINARY RESULTS FOR THE 11 MONTH PERIOD ENDED 31 AUGUST 2010
SALIENT FEATURES
- Profit from core operations of GBP7.49 million (2009: GBP6.67 million), an
annualised increase of 22%.
- Net loss per share of 2.46 pence (2009: 54.20 pence loss) after taking into
account unrealised losses on investments of GBP10.94 million and interest
rate swaps of GBP1.76 million.
- Final dividend of 2.07 pence per share (2009: 1.31 pence).
- NAV per share of 46.77 pence (2009: 58.43 pence). Pro forma 47.02 pence
after capital raising.
- Acquisition of 50% of Grand Arcade Shopping Centre, Wigan completed post
year end.
- Favourable restructuring of shopping centre senior debt completed post
period end.
- GBP33 million capital raising completed subsequent to the interim period.
- GBP53 million fully placed capital raising announced post period end.
- Shareholding in Cromwell Group, Australia increased to 19.9%.
- Exchange of contracts on GBP106 million hotel portfolio post period end.
Gavin Tipper, chairman, commented:
"Notwithstanding the continued volatility in international financial markets,
the Group performed well and achieved some major milestones. These included the
listing of its holding company on the JSE, a significant capital raising, the
conclusion of the Aviva restructuring and an acquisition of a portfolio of hotel
properties".
For further information please contact:
Redefine International plc + 27 (0)21 683 3829
Gavin Tipper - Chairman
www.redefineinternational.je
POWERSCOURT
Matthew Fletcher/Karen Le Cannu +44 (0)207 250 1446
www.powerscourtmedia.com
SINGER CAPITAL MARKETS LIMITED
Jeff Keating +44 (0)203 205 7500
www.singercm.com
About Redefine International:
1. Redefine International is a property investment and development company
which invests in commercial real estate primarily in the UK, Germany,
Switzerland and Australia, with a focus on retail, commercial and hotel
assets. Redefine International`s current investments are in the UK, Europe,
the Channel Islands and Australia and it will continue to source value-
enhancing opportunities in these markets.
2. As at 31 August 2010 the Group had interests in 92 properties with a gross
rentable area of approximately 2.7million square feet and listed property
securities to the value of GBP93.7million, including:
- Four UK shopping centres;
- A large integrated UK town centre redevelopment project;
Well let, low risk, stable income office and commercial properties
spread across the UK and Jersey;
- Five German based portfolios which include, shopping centres,
supermarkets, petrol stations and a medical centre;
- A supermarket and home depot centre in Switzerland;
- A 19.9% stake in the Cromwell Group ("Cromwell"), Australia; and
- A 21.7% stake in Wichford P.L.C. ("Wichford"), a London Stock Exchange
("LSE") listed property investment company specialising in government
property.
3. The strategy of the Group comprises four distinct yet complementary
elements: stable income investments; major development projects; value-
enhancing projects and investments in property securities. The resources of
the Group are allocated across the three major geographies and within the
four property investment criteria with the aim of providing shareholders
with a balanced exposure to lower risk, income-generating assets and assets
that have the potential to provide a higher capital return.
4. The Group has an experienced board of eight non-executive directors (the
"Board"). Three of the Directors are connected to the Investment Manager,
Redefine International Fund Managers Limited ("RIFM").
5. Further information on Redefine International can be found at
www.redefineinternational.je
CHAIRMAN`S STATEMENT
The period under review, and in particular the six months since the interim
results announcement, has been a very active time for the Group.
The highlight was the listing of, and simultaneous significant capital raising
by, Redefine Properties International Limited ("RIN") on the JSE Limited ("JSE")
on 7 September 2010.
RIN is the Company`s controlling shareholder and as at 31 August 2010 owned
76.9% of the Company. Redefine Properties Limited ("Redefine") in turn owned
100% of RIN at 31 August 2010, having swapped its shareholding in the Company
for linked units in RIN. Each linked unit comprises one share and one debenture
in RIN. Currently, (post the listing of RIN on 7 September 2010) RIN owns 81.9%
of the Company and Redefine in turn owns 57.2% of RIN.
Other highlights for the period included the finalisation of the Aviva
restructuring for the shopping centre senior debt, the acquisition of a 50%
interest in the Grand Arcade Shopping Centre, Wigan in September 2010, an
increase in the investment in Cromwell in Australia (to 19.9%) and the exchange
of contracts on the portfolio of hotels known as the "Splendid Hotel Portfolio".
Redefine International performed solidly at an operational level and exceeded
the forecasts set out in the RIN fund raising prospectus dated 23 August 2010.
The Group continues to be managed conservatively in light of the volatile on-
going economic conditions.
Operations
The Group produced a profit from core operations for 11 months of GBP7.49
million (2009: GBP6.67 million for 12 months).
The Group`s stable income portfolios in both the UK and Europe performed solidly
in a challenging environment. Cash flows were strong and tenant delinquencies
and voids low. The vacancy rates are currently 2.84% and 2.06% by rentable area
respectively.
The UK shopping centre portfolio (including Grand Arcade Shopping Centre, Wigan,
which was acquired post period end) performed well. The vacancy rate for the
portfolio is currently 1.36% by rentable area.
Wichford`s operational performance was above expectations during the period but
its share price performance has been weak due to the concerns over the impact of
the UK`s new coalition governments` austerity plans.
Financial
Net earnings were affected by an aggregate deficit on investment property
valuations, losses on interest rate swap valuations and the write-down of the
investment in Wichford to its share price at 31 August 2010.
The deficit on the investment property valuations related primarily to Delamere
Place Crewe, a property held for redevelopment. The balance of the property
portfolio showed a net increase in value.
The losses on the interest rate swap valuations arose largely on two long term
swaps. While the losses have been accounted for, it is unlikely that similar
term money of the same fixed rates would be available in the current market.
Cromwell performed to expectations and the high dividend yield made a
significant contribution to earnings.
Wichford is exposed to a significant number of government leases and the
company`s share price has been affected by the market`s concern over the
possible impact of the government`s planned austerity measures. The Investment
Manager is confident that the parties to the Wichford leases and the tenure of
these leases are such that the financial risk to the company of the austerity
measures is low. Despite the weakness in its share price, Wichford`s
operational performance was above expectations during the period.
Dividends
The Board has declared a final dividend for the period of 2.07 pence per share
which is subject to approval at an Extraordinary General Meeting ("EGM")
scheduled to take place on 24 November 2010. This will result in a total
dividend per share for the period of 3.21 pence, an annualised yield of 6.5%
based on the closing share price of 53.75 pence.
The dividend is offered to shareholders as a scrip dividend, with the ability to
elect a cash dividend alternative. Further details on the terms of the scrip
dividend are set out in a separate circular and form of election which were sent
to all shareholders on 21 October 2010.
Prospects
The world`s advanced economies look likely to keep interest rates low for an
extended period. The UK is poised to experience an extended period of austerity
due to government cut backs in spending. Inflation remains a risk in most
advanced economies which should be positive for property in the medium term.
The Group is well positioned due to the nature and geographical diversity of its
investment base. Australia`s economy is growing strongly and should support
Cromwell`s earnings growth going forward. Our European portfolio has been
resilient and has benefitted from consumers trading down in the German economy.
The UK shopping centre portfolio financing has been restructured and is set for
solid medium term growth as these assets become increasingly difficult to
replace.
The Company will continue to pursue a broad investment strategy that focuses on
assets that provide a strong yield, at low risk and with the likelihood of
capital enhancement. The listing of RIN is expected to provide major benefits
to the Group`s growth objectives.
Gavin Tipper
Chairman
INVESTMENT MANAGER`S REVIEW
The Group owns investments in commercial and retail properties in the UK,
Switzerland, Germany and the Channel Islands, which provide sustainable
occupancy rates and income flows, together with opportunities for development
and value enhancement. The Group also owns investments in two listed companies
being Wichford in the UK and Cromwell in Australia. It recently extended its
investment mandate to include limited service hotels.
Redefine International has an investment management agreement with RIFM, a
British Virgin Islands registered and regulated Fund Manager. In terms of the
agreement with the Group, RIFM is responsible for the investment and management
of the Group`s assets.
Group Strategy
The Group is a hybrid property fund with exposure to a broad range of
properties, listed property securities and geographical areas.
The Group`s strategy is to provide investors with strong investment returns and
a balanced exposure to lower risk income generating-assets and opportunities
that will provide a higher capital return.
In implementing its strategy, the Group contemplates available opportunities and
future undertakings that will yield satisfactory returns at acceptable risk
levels. In making investments the Group seeks to achieve a reasonable level of
diversification across types of assets and geographies.
The Group has historically selected property investments on the basis of four
criteria:
- stable income investments that produce a stable, predictable and low risk
income stream but where there are opportunities to enhance the value of the
investments;
- major development projects which provide opportunities for considerable
redevelopment and where major parts of the developments can be pre-let to
businesses with strong rental covenants. These are multi-year projects
which generally require high levels of funding and which may be delayed in
difficult markets to reduce risk;
- value enhancing projects which are smaller properties that can be converted
on a relatively low risk basis to provide premium commercial space;
- investments in property securities which are acquired when their value is
considered superior to physical property. These investments are often of a
strategic nature where the shareholding can be used to unlock value in
underlying property assets or significant influence can be exerted through
Board representation or through management.
These criteria continue to be applied, however the Group will increasingly look
at other property investments as markets recover. Investments outside the above
criteria will only be made where risk adjusted returns are satisfactory and the
Group has the resources necessary to extract an above-market return from the
investments.
The Group`s investments currently fall into three major geographies (UK, Western
Europe and Australia). The Group`s investments are managed and resources
allocated according to five reportable segments, being UK Portfolio, Shopping
Centres, European Portfolio, Wichford and Cromwell. Cognisance is taken of the
levels of investment in each category, by geography, and concentration risk is
avoided or managed, where necessary.
Portfolio Details
The Group`s investment portfolio consisted of a portfolio of properties and a
portfolio of listed securities. At 31 August 2010, the Group held an interest in
twenty-six investments in fixed and listed property assets located within the
UK, Switzerland, Germany, the Channel Islands and Australia.
Details of the investments are set out below;
NAME/(LOCATION) CATEGO USE/TYPE VALUE %
RY (GBP OWNED
million)
Delamere Place, Crewe SII/MD Retail Centre 22.70** 90.78
(UK) P
Streatham Retail Parade MDP Office, Retail 6.55** 100.0
& Wentworth House (UK) & Residential 0
Birchwood Shopping SII Retail Centre 30.00 100.0
Centre, Warrington (UK) 0
West Orchards Shopping SII Retail Centre 45.00 81.07
Centre, Coventry (UK)
Byron Place Shopping SII Retail Centre 16.7 100.0
Centre, Seaham (UK) 0
Kwik-Fit Portfolio (UK) SII Motor & 13.65 84.23
Ancillary
Newington House Ltd, SII Office 10.15 76.73
Southwark (UK)
Malthurst Portfolio SII Motor & 23.93 84.00
(UK) Ancillary
98-100 Main Street, SII Retail 1.13 71.43
Banstead (UK)
26 The Esplanade, St SII Offices 23.70 50.00
Helier (Jersey)
Co-Op Store SII Supermarket & 17.471 80.46
(Switzerland) Home Depot
Drinkgern, Lidl & SII Retail Centres 18.302 92.71
Aachen Portfolio
(Germany)
Inkstone Portfolio SII Retail Centres 8.972 55.17
(Germany)
Bremenvorde Portfolio SII Retail Centres 3.842 92.71
(Germany)
Premium Portfolio SII Retail Centres 27.752 92.71
(Germany) *
Lindenhof Portfolio SII Retail Centre 6.002 75.08
(Germany)
Churchill Court, SII/VE Offices 16.60 50.00
Crawley (UK) P *
15-17 The Square, VEP Residential 0.61 60.42
Petersfield (UK)
Pearl House, Swansea VEP Retail & 1.97 50.00
(UK) Residential
7-11 High Street, VEP Retail & 2.90 61.36
Reigate (UK) Offices,
Residential
Regal Walk, Margate VEP Retail Centre 4.00 25.00
(UK)
Stafford Redevelopment VEP Development 1.43 84.23
(UK) Property *
Stockport Redevelopment VEP Development 0.93 84.23
(UK) Property *
Alpha Property Fund PS Unlisted 0.22 1.04
(UK) Property
Company
Wichford P.L.C. (UK) PS Listed Property 18.923 21.73
Company
Cromwell Group PS Listed Property 74.784 19.85
(Australia) Company
* % ownership of the Group which owns 50% of the property
** Properties held for redevelopment included at Directors` valuation,
1 Functional currency is Swiss Franc (CHF), converted at a period-end closing
rate of 1.56 CHF:1 GBP
2 Functional currency is EURO, converted at a period-end closing rate of 1.20
EURO:1 GBP
3 Market value as at 31 August 2010
4 Market value as at 31 August 2010, functional currency is Australian Dollar
("AUD"), converted at a year-end closing rate of 1.72 AUD:1 GBP
Key:
MDP - Major Development Project SII - Stable Income Investment
VEP - Value Enhancing Project PS - Property Security
Market Overview
In the UK, commercial property valuations have stabilised and expectations are
that 2011 will show positive returns from both an income and capital point of
view. There are however downside risks, the most important being credit
availability from banks. The latest data available from the Bank of England
showed that in August 2010 the net lending flow to the property sector was
negative GBP1.1 billion (taking the cumulative outflow for 12 months to negative
GBP7.7 billion).
Interest rates are expected to remain low for an extended period, and should UK
banks fulfil their commitment to provide commercial property funding (albeit at
broadly flat rates), this should limit any major downside risk in the UK.
In Europe, the Company only has investments in the stronger geographical
locations (Switzerland and Germany) which are proving to be very resilient.
Economic growth forecasts are also encouraging.
In Australia, the Central Bank has begun a tightening of monetary policy in the
face of strong growth in the economy. With demand for mineral products strong
around the world, Australia is expected to continue to perform well.
JSE Listing of RIN
The Company`s controlling shareholder Redefine transferred its shareholding in
Redefine International to a South African subsidiary RIN with effect from 1
August 2010 in exchange for linked units in RIN. The linked units comprise one
share and one debenture in RIN. RIN was successfully listed on the JSE on 7
September 2010. The investment opportunity was well received by the South
African investment community and justified the decision to pursue a listing
which was preceded by a capital raising of some GBP84 million being raised in
the listing process. RIN is a property loan stock company which has shares
linked to debentures to create linked units. RIN`s sole asset comprises its
shareholding in Redefine International with each RIN linked unit effectively
equating to one share in Redefine International.
Issue of Equity
As at the date of this announcement, the Company has issued a total of
168,069,337 new shares to RIN subsequent to the interim period, as set out
below:
13 July 2010 : 60,000,000 at 50 pence per share
17 August 2010 : 6,000,000 at 50 pence per share
7 September 2010 : 102,069,337 at 50 pence per share
(post
period end)
These shares do not rank for the dividend declared for the period to 31 August
2010.
On 7 September 2010 the Company placed a further 4 million shares to investors
at an issue price of 52 pence per share. These shares rank for the dividend
declared for the period to 31 August 2010.
As at the date of this announcement, Redefine International had 410,775,743
shares in issue of which RIN holds 81.9%. As at 31 August 2010 Redefine held
57.2% of RIN giving it an effective holding in Redefine International of
46.85%.
Acquisitions and Disposals
The following acquisitions and disposals were made subsequent to the interim
period and prior to 31 August 2010:
United Kingdom
On 25 March 2010 the Company paid GBP1.1million to acquire the remaining 50%
beneficial interest in the Byron Place Shopping Centre.
On 15 July 2010 the Company increased its stake in the Birchwood Shopping Centre
from 33.33% to 100%. The acquisition was secured by way of a capitalisation in
Birchwood Warrington Limited of a GBP531,850 debt due to the Company.
Australia
On 13 July 2010, the Company acquired 69,333,333 new Cromwell stapled securities
at a price of AUD 0.75 per security for a total cost of approximately GBP30
million. The securities were acquired "cum div" with a AUD 0.02 per stapled
security dividend for the period ended 30 September 2010.
Redefine International subsequently followed its rights in the Cromwell rights
issue and acquired a further 4,750,000 stapled securities at AUD 0.72 per
stapled security ("ex div"). The Company currently owns 178,833,333 stapled
securities valued at approximately GBP74.8 million at 31 August 2010. This
equates to a holding of 19.9% in Cromwell.
The historic dividend yield on this investment has been in excess of 10% .
Disposals
The investment in TYS, British Virgin Islands was disposed of during the period
at book value.
The following transactions occurred post 31 August 2010:
United Kingdom
Acquisition of a 50% share in the Grand Arcade Shopping Centre, Wigan ("Grand
Arcade") a 425,000 square feet shopping centre. It is the dominant centre in
Wigan, and houses retailers such as Debenhams, BHS, Marks & Spencer, HMV, Top
shop and 46 other tenants. Grand Arcade is one of the first carbon neutral
shopping centres with natural ventilation and a strong commitment to recycling.
A total investment of GBP7 million was made by the Group into Grand Arcade as
part of the overall Aviva debt restructuring (see below).
Europe
Contracts have been exchanged to acquire an effective 50% interest in two
properties located in Herzogenrath and Schwandorf in Germany, which are leased
to OBI. OBI is Germany`s largest DIY chain. The Group will acquire a 50% equity
interest in 2 companies whose sole assets comprise each of the OBI properties.
The properties are leased to OBI on 15 year leases (commencing 2009) and have an
aggregate lease area of 20,000 square meters with 640 parking bays. The gross
purchase price of the properties held within the acquired companies is Euro23
million. Bank debt of Euro16.7 million, has been secured, which will be used to
partly fund the purchase price.
This is expected to be an earnings enhancing long term secure investment with a
historic yield of close to 8%.
Aviva Transaction
Introduction
Agreements between Aviva Commercial Finance Limited ("Aviva") and subsidiaries
of Redefine International in relation to the restructuring of the senior debt
facilities on the Birchwood Shopping Centre Warrington; Delamere Place Shopping
Centre, Crewe; West Orchards Shopping Centre Coventry; Byron Place Shopping
Centre Seaham; and the Grand Arcade Shopping Centre Wigan ("the Shopping Centre
Portfolio"), was completed on 13 September 2010.
As part of the restructuring, Company Voluntary Arrangements were successfully
implemented on the two companies that own the Grand Arcade, prior to Redefine
International acquiring a 50% shareholding.
The amended and restated loan terms
As the restructuring of the debt was only completed after the period end, a
substantial portion of the debt is reflected as current in the financial
statements. This will be reclassified in the next financial report to reflect
the long term nature of the Group`s obligations.
Details of the current and restated loan terms have been included in the notes
to the accounts.
The convertible loan facility agreement
As part of the restructuring the Company has entered into a GBP13m facility (
the "convertible loan") with Aviva. The loan bears interest at 6% per annum,
and all interest is rolled up until payment or conversion.
The capital plus rolled up interest is repayable 3 years after the date of the
agreement or on any earlier date if there is an event of default.
Should the drawings together with interest not be repaid, Redefine International
will be required to issue shares ("conversion shares") to discharge the
outstanding amount due, the number of which is calculated by dividing the
outstanding amount by 50 pence per ordinary share in Redefine International.
A put option between Aviva and RIN is proposed, in terms of which Aviva can put
the conversion shares to RIN within a 10 business day period of the conversion
of the outstanding loan into the conversion shares.
The restructuring of the senior debt on the Shopping Centre Portfolio is
expected to be of significant benefit to the Group due to the long term (average
25 year) nature of the debt and, inter alia, the interest rate covenants and
repayment terms.
Hotels
The Company exchanged contracts on 18 August 2010 to acquire the Splendid Hotel
Portfolio, which includes the following hotels::
- Holiday Inn Brentford Lock, Middlesex
- Express by Holiday Inn Limehouse, London;
- Express by Holiday Inn Park Royal, North Acton;
- Express by Holiday Inn Royal Docks, London; and
- Express by Holiday Inn Southwark, London
The total consideration payable after expenses is approximately GBP112 million.
Completion is expected no later than 30 November 2010.
The hotel portfolio is an exceptional acquisition, as not only is it London
based, but its track record of occupancy and revenue is exemplary.
An agreement for lease has been entered into with Redefine Hotel Management
Limited ("RHML"), a subsidiary of the Investment Manager. RHML has the expertise
and resources necessary to effectively manage the hotel portfolio and to meet
the company`s growth and profit targets for the hotel portfolio.
Interest Rate Swaps
The Group has again incurred unrealised mark to market losses on its interest
rate swaps. This is as a result of the application of IFRS and despite the fact
that much of the Group`s borrowings are of high quality and could not be
replaced in the current market at the rates that have been secured.
Interest rates have now reached unprecedented lows, e.g. the UK 10 year gilt is
trading under 3% which is below its historical average of closer to 5%. It is
highly unlikely that interest rates will drop below these levels in the absence
of significant deflation.
Future Strategy and Prospects
The Group intends to continue with its current investment strategy, whilst
consolidating the holdings of assets under part-ownership. In this regard the
non-controlling interests in joint venture companies are to be offered the
opportunity to exit either through a share swap with Redefine International or a
cash payment.
The Group will also consider increasing its stakes in Cromwell and Wichford if
the opportunities arise to do so at prices which offer our targeted returns.
The UK shopping centre portfolio will be managed to maximise cash returns and
redevelopment opportunities will be taken advantage of only where there are
strong cash on cash returns. An extension to the Birchwood Shopping Centre to
house a major discount retailer is at an advanced planning stage and is expected
to significantly enhance the value of the centre.
Further opportunities in the hotel sector are being considered and will be
evaluated on the basis of projected returns and available capital.
The likelihood of a significant increase in the UK stable income portfolio is
unlikely until economic conditions show signs of improvement.
The Board is committed to ensuring that the forecasts set out in the RIN listing
prospectus are met and currently has positive expectations in this regard.
FINANCIAL REVIEW
During the period under review the Board changed the Company`s dividend policy
from one linked to net asset value to one related to the distributable core
earnings in any given financial period. Due to the nature of the Group`s
investments the consolidated statement of comprehensive income includes various
unrealised revaluation items and one-off impairments. Core earnings which
exclude these items reflect a more reliable measurement and form the base for
dividend distributions. It is the Company`s intension to pay out not less than
100 per cent of such earnings in dividends. In light of the stated policy and
for unambiguous financial presentation, a reconciliation between the loss
attributable to the equity holders of the Group of GBP4.92 million prepared in
conformity with IFRS for the 11 month period ended 31 August 2010, and core
earnings is presented below. The results reflect core earnings of 3.76 pence
per share.
11 Months Year
Ended Ended
31 August 30 September
2010 2009
GBP`000 GBP`000
Loss for the year per the (5,400) (47,964)
statement of comprehensive
income
Non-controlling interests 485 8,257
Attributable to Equity holders (4,915) (39,707)
of Redefine International
Adjusted for:
Net fair value losses on 1,969 13,261
investment property
Gross 2,167 16,831
Non-controlling interests (198) (3,570)
Movement in the fair value of 1,536 3,874
interest rate swaps
Gross 1,755 4,467
Non-controlling interests (219) (593)
Fair value losses on investment
property and derivatives
included in equity accounted 2,972 12,040
losses
Gross 3,232 12,233
Non-controlling interests (260) (193)
Impairment of investments 6,572 18,637
(including Wichford)
Gross 6,572 22,808
Non-controlling interests - (4,171)
Net fair value profit on (1,034)
Cromwell
Gross (1,034) -
Non-controlling interests - -
Straightline of leases 113 -
Gross 113 -
Non-controlling interests - -
Amortisation of intangible 280 (1,435)
assets/goodwill
Gross 345 (1,580)
Non-controlling interests (65) 145
Core earnings 7,493 6,670
Core earnings per share
Core earnings 7,493 6,670
Weighted average number of 199,492 73,261
ordinary shares
Core earnings per share 3.76 9.11
STATEMENT OF DIRECTORS RESPONSIBILITIES
in respect of the condensed consolidated financial information
Each of the Directors confirms that, to the best of each person`s knowledge and
belief the condensed consolidated financial information comprising the condensed
statement of financial position as at 31 August 2010, the condensed statements
of comprehensive income, changes in equity and cash flows for the eleven month
period then ended and the related notes have been prepared in accordance with
the measurement and recognition criteria of IFRS, and in accordance with the
presentation and disclosure requirements of IAS 34 Interim Financial Reporting.
AUDITORS` INDEPENDENT REVIEW REPORT TO REDEFINE INTERNATIONAL Plc
We have been engaged by the Company to review the condensed set of financial
statements for the eleven month period ended 31 August 2010 which comprises the
condensed consolidated statements of comprehensive income, financial position,
cash flows, and changes in equity and the related explanatory notes.
We have read the other information contained in the Preliminary Results and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the Company in accordance with the terms of our
engagement letter. Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company for our review work, for
this report, or for the conclusions we have reached.
DIRECTORS` RESPONSIBILITY
The interim financial report is the responsibility of, and has been approved by,
the Directors.
As disclosed in Note 1, these condensed consolidated financial statements have
been prepared in accordance with the measurement and recognition criteria of
International Financial Reporting Standards (IFRS), and in accordance with the
presentation and disclosure requirements of IAS 34, Interim Financial Reporting.
Their responsibility includes: designing, implementing and maintaining internal
controls relevant to the preparation and presentation of the preliminary
financial statements that are free from material misstatements, whether due to
fraud and error; selecting and applying appropriate accounting policies; and
making accounting estimates that are reasonable in the circumstances.
OUR RESPONSIBILITY
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the Preliminary Results based on our review.
SCOPE OF REVIEW
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK and Ireland) and consequently does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express an
audit opinion.
CONCLUSION
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the Preliminary Results for
the eleven months ended 31 August 2010 is not prepared, in all material respects
in accordance with the measurement and recognition criteria of IFRS, and have
been prepared in accordance with the presentation and disclosure requirements of
IAS 34.
REDEFINE INTERNATIONAL PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 11 MONTH PERIOD ENDED 31 AUGUST 2010
Notes Period Year
ended 31 ended
August 30
2010 September
GBP`000 2009
GBP`000
Revenue
Gross rental income 13,267 10,198
Investment income 2,560 10
Other income 673 2,188
Total revenue 16,500 12,396
Expenses
Administrative expenses (466) (425)
Investment management and (3,406) (1,772)
professional fees
Property operating expenses (1,661) (1,525)
Net operating income 10,967 8,674
Losses from financial assets and 5 (544) (202)
liabilities
Equity accounted losses 6 (3,525) (10,658)
Impairment of loans to joint ventures (598) (23,773)
Net fair value losses on investment (2,167) (16,831)
property
Amortisation of intangible assets (345) (188)
Profit/(loss) from operations 3,788 (42,978)
Interest income 7 3,381 4,225
Interest expense 8 (12,363) (9,210)
Foreign currency (loss)/gain (6) 37
Loss before tax (5,200) (47,926)
Taxation 9 (200) (38)
Loss after tax (5,400) (47,964)
Loss attributable to:
Equity holders of parent (4,915) (39,707)
Non-controlling interests (485) (8,257)
(5,400) (47,964)
Other comprehensive (loss)/income
Foreign currency translation of (43) 2,758
foreign operations - subsidiaries
Foreign currency translation of (217) 571
foreign operations - joint ventures
Share of foreign currency movement (1,494) -
recognised in associate undertaking
Share of cash flow hedge reserve 155 -
movement recognised in associate
undertaking
Total comprehensive loss for the (6,999) (44,635)
period
Total comprehensive loss attributable
to:
Equity holders of parent (6,498) (37,378)
Non-controlling interests (501) (7,257)
(6,999) (44,635)
Basic and diluted loss per share 18 (2.46) (54.20)
(pence)
REDEFINE INTERNATIONAL PLC
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 AUGUST 2010
Notes 31 Aug 30 Sept
2010 2009
GBP`000 GBP`000
Assets
Non-current assets
Investment property 10 227,675 186,021
Long-term receivables 48,160 39,210
Investments designated at fair 11 75,139 290
value
Intangible assets 7,559 7,329
Investments in joint ventures 12 2,041 5,008
Investments in associates 13 18,923 -
Total non-current assets 379,497 237,858
Current assets
Trade and other receivables 13,233 11,533
Cash and cash equivalents 14 35,411 15,532
Total assets 428,141 264,923
Equity and liabilities
Capital and reserves
Share capital 15 3,047 739
Share premium 211,359 104,127
Treasury shares (61)
-
Retained earnings (78,327) (69,717)
Other reserve 3,912 3,912
Currency translation reserve 2,360 4,098
Cash flow hedge reserve 155 -
Total equity attributable to 142,506 43,098
equity shareholders
Non-controlling interest 2,254 2,512
Total equity 144,760 45,610
Non-current liabilities
Loans and borrowings 16 167,263 195,523
Current liabilities
Loans and borrowings 16 100,003 10,790
Trade and other payables 16,115 13,000
Total current liabilities 116,118 23,790
Total liabilities 283,381 219,313
Total equity and liabilities 428,141 264,923
Net asset value per share (pence) 46.77 58.43
Number of ordinary shares in 18 73,760,277
issue 304,706,406
REDEFINE INTERNATIONAL PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 11 MONTH PERIOD ENDED 31 AUGUST 2010
Other
Share Share Treasury Retained reserve
capital premium shares earnings
GBP`000
GBP`000 GBP`000 GBP`000 GBP`000
Balance at 1 October 727 103,294 - (26,816) -
2008
Total loss for the - - - (39,707) -
period
Foreign currency - - - - -
translation effect
Total comprehensive - - - (39,707) -
income for the period
Shares issued 4 261 - - -
Shares taken into - - (380) - -
treasury
Shares issued from - - 319 - -
treasury
Dividend paid to equity 8 572 - (3,104) -
stakeholders
Dividends paid to non- - - - - -
controlling interests
Arising on - - - - 3,912
reclassification from
joint venture
to subsidiary
Increase in non- - - - (90) -
controlling interests
Increase in non-
controlling shareholder
balances
Balance at 30 September 739 104,127 (61) (69,717) 3,912
2009
Balance at 1 October 739 104,127 (61) (69,717) 3,912
2009
Total loss for the - - - (4,915) -
period
Effective portion of - - - - -
cash flow hedges
Foreign currency - - - - -
translation effect
Total comprehensive - - - (4,915) -
income
Shares issued 2,308 110,553 - - -
Share issue costs - (3,260) - - -
Shares issued from - - - - -
treasury
Dividend paid to equity - (61) 61 (3,685) -
stakeholders
Dividends paid to non- - - - - -
controlling interests
Increase in non- - - - (10) -
controlling interests
Increase in non- - - - - -
controlling shareholder
balances
Balance at 31 August 3,047 211,359 - (78,327) 3,912
2010
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 11 MONTH PERIOD ENDED 31 AUGUST 2010
Currency Cash flow Total Non-
Translati hedge Attributa Controlli Total
on reserve ble ng equity
reserve to equity interest
GBP`000 Share- GBP`000
GBP`000 holders GBP`000
GBP`000
Balance at 1 October 2008 1,769 - 78,974 9,588 88,562
Total loss for the period - - (39,707) (8,257) (47,964)
Foreign currency 2,329 - 2,329 1,000 3,329
translation effect
Total comprehensive income 2,329 - (37,378) (7,257)
for the period (44,635)
Shares issued - - 265 - 265
Shares taken into treasury - - (380) - (380)
Shares issued from - - 319 - 319
treasury
Dividend paid to equity - - (2,524) - (2,524)
stakeholders
Dividends paid to non- - - - (31) (31)
controlling interests
Arising on - - 3,912 25 3,937
reclassification from
joint venture
to subsidiary
Increase in non- - - (90) 90 -
controlling interests
Increase in non- 97 97
controlling shareholder
balances
Balance at 30 September 4,098 - 43,098 2,512 45,610
2009
Balance at 1 October 2009 4,098 - 43,098 2,512 45,610
Total loss for the period - - (6,254) (485) (5,400)
Effective portion of cash - 155 155 - 155
flow hedges
Foreign currency (1,738) - (1,738) (16) (1,754)
translation effect
Total comprehensive income (1,738) 155 (6,498) (501) (6,999)
Shares issued - - 112,861 - 112,861
Share issue costs - - (3,260) - (3,260)
Shares issued from - - - - -
treasury
Dividend paid to equity - - (3,685) - (3,685)
stakeholders
Dividends paid to non- - - - (14) (14)
controlling interests
Increase in non- - - (10) 10 -
controlling interests
Increase in non- - - - 247 247
controlling shareholder
balances
Balance at 31 August 2010 2,360 155 142,506 2,254 144,760
REDEFINE INTERNATIONAL PLC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE 11 MONTH PERIOD ENDED 31 AUGUST 2010
31 Aug 30 Sept
Notes 2010 2009
GBP`000 GBP`000
Cash flows from operating activities
Loss before tax (5,200) (47,926)
Adjusted for:
Negative goodwill - (1,580)
Amortisation of intangible assets 10 345 188
Net fair value losses on investment 2,167 16,831
property
Foreign exchange gains 6 (37)
Losses from financial assets and 5 544 202
liabilities
Equity accounted losses 6 3,525 10,658
Impairment of loans to joint ventures 598 23,773
Investment income (2,560) (10)
Interest income 7 (3,381) (4,225)
Interest expense 8 12,363 9,210
Cash generated by operations 8,407 7,084
Changes in working capital 279 (1,300)
Cash generated by operations 8,686 5,784
Interest paid (12,257) (8,762)
Taxation paid (200) (38)
Net cash utilised in operating (3,771) (3,016)
activities
Cash flows from investing activities
Dividend income 1,395 750
Distributions from associates and 1,849 -
joint ventures
Interest income 1,158 4,193
Purchase of investment properties 10 (527) (7,576)
Investment in associates and joint (22,885) (4,180)
ventures
Acquisition of subsidiaries (390) 734
Increase in loans to joint ventures & (1,504) (1,274)
associates
Purchases of financial assets (72,188) -
Restricted cash balances 14 (18,442) -
Sale of investments in associates and - 8,089
joint ventures
Increase in loans to related parties - (879)
Proceeds on sale of financial assets - 532
Net cash (utilised in)/generated by 389
investing activities (111,534)
Cash flows from financing activities
Proceeds from loans and borrowings 13,610 5,375
Repayment of loans and borrowings (2,648) (2,503)
Dividends paid to non-controlling (14) (31)
interests
Dividends paid to equity shareholders (3,465) (2,524)
Proceeds from issue of share capital 112,642 -
Share issue costs written off (3,260) -
Additional contribution from non- 247 -
controlling shareholders
Sale of treasury shares - (380)
Net cash generated/(utilised) from 117,112 (63)
financing activities
Net increase/(decrease) in cash 1,807 (2,690)
Effect of exchange rate fluctuations (370) 282
on cash held
Net cash at the beginning of 15,532 17,940
period/year
Net cash at the end of period/year 14 16,969 15,532
REDEFINE INTERNATIONAL PLC
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE ELEVEN MONTH PERIOD ENDED 31 AUGUST
2010
1. General Information
The Company changed its name, with effect
from 1 July 2010, to Redefine International
plc from Ciref Plc. The Group also changed
its reporting date from 30 September to 31
August, to fall in line with that of its
ultimate parent company, Redefine Properties
Limited. The results reflect the reporting
period from 1 October 2009 to 31 August
2010, comparative information reflects the
period from 1 October 2008 to 30 September
2009.
The condensed consolidated financial
statements of the Company for the eleven
month period ended 31 August 2010
consolidate the Company and its subsidiaries
(together referred to as the "Group"). They
are presented in pound sterling which
represents the functional currency of the
Company and are rounded to the nearest
thousand. The report is prepared on the
historical cost basis except for investment
properties, derivative financial instruments
and financial instruments designated at fair
value through profit or loss.
The preparation of financial statements
requires management to make judgements,
estimates and assumptions that affect the
application of policies and reported amounts
of assets and liabilities, income and
expenses. Actual results may differ
materially from these estimates. In
preparing these financial statements, the
significant judgements made by management in
applying the Company`s accounting policies
and the key sources of estimation
uncertainty include the valuation of
investment property and the application of
the going concern principal of accounting as
noted in Note 3.
These condensed consolidated financial
statements have been prepared on a going
concern basis as the Directors consider this
the most appropriate basis. A summary of the
Directors` consideration in this regard can
be found in the going concern section below.
Statement of compliance
These condensed consolidated financial
statements have been prepared in accordance
with the measurement and recognition
criteria of IFRS, and in accordance with the
presentation and disclosure requirements of
IAS 34. They do not include all of the
information required for full annual
financial statements. Comparative
information has been regrouped on a basis
consistent with the current period.
The accounting policies set out below have
been applied consistently to all periods
presented in these financial statements
except for the adoption of new accounting
standards as set out below.
The figures for the eleven months to 31
August 2010 have been reviewed by the
Auditors. The summary financial statements
for the eleven month period ended 31 August
2009, as presented in the Preliminary
Results, represent an abbreviated version of
the Group`s full accounts for that period,
on which independent auditors issued an
unqualified audit report. The financial
information presented herein does not amount
to statutory financial statements.
2. Significant Accounting policies
Except as described below, the accounting
policies applied by the Group in these
condensed consolidated financial statements
are the same as those applied by the Group
in its audited financial statements as at
and for the year ended 30 September 2009.
The following standards/amendments to
standards were adopted by the Company during
the period ended 31 August 2010:
(i) Determination and presentation of
operating segments
As of 1 October 2009 the Group determines
and presents operating segments based on the
information that internally is provided to
the Board (considered to be the Chief
Operating Decision Maker ("CODM"). This
change in accounting policy is due to the
adoption of IFRS 8 "Operating Segments".
Previously operating segments were
determined and presented in accordance with
IAS 14 "Segment Reporting".
Comparative segment information has been re-
presented in conformity with the
transitional requirements of IFRS 8. Since
the change in accounting policy only impacts
presentation and disclosure aspects, there
is no impact on earnings per share.
The new accounting policy in respect of
segment operating disclosures is presented
as follows:
An operating segment is a component of the
Group that engages in business activities
from which it may earn revenues and in
respect of which it may incur expenses,
including revenues and expenses that relate
to the transactions with any of the Group`s
other components. An operating segment`s
operating results are reviewed regularly by
the CODM to make decisions about resources
to be allocated to the segment and assess
its performance, and for which discrete
financial information is available. See Note
4 for further details.
(ii) Presentation of financial statements
The Group applied the revised IAS 1
"Presentation of Financial Statements"
(2007), which became effective for the years
beginning on or after 1 January 2009. As a
result the Group presents a primary
statement called the consolidated statement
of changes in equity where all changes in
owner equity are recorded and a consolidated
statement of comprehensive income where all
non-owner changes in equity are provided.
This presentation has been applied in the
consolidated financial statements.
Comparative information has been re-
presented so that it is in conformity with
the revised standard. Since the change in
accounting policy only impacts
presentational aspects, there is no impact
on earnings per share.
(iii) Investments in associates
The Group applied revised IAS 28
"Investments in Associates", effective for
periods beginning on or after 1 January
2009. The amendments to IAS 28 clarified
that (i) an investment in an associate is
treated as a single asset for the purposes
of impairment testing, (ii) any impairment
loss is not allocated to specific assets
included within the investment, for example,
goodwill and (iii) reversals of impairment
are recorded as an adjustment to the
investment balance to the extent that the
recoverable amount of the associate
increases.
(iv) Investment property
The Group applied revised IAS 40 "Investment
Property", effective for periods beginning
on or after 1 January 2009. Following this
amendment, property that is under
construction or development for future use
as investment property is within the scope
of IAS 40 (previously under the scope of IAS
16 "Property, Plant and Equipment"). Where
the fair value model is applied, such
property is measured at fair value. The
Group has two properties held for
redevelopment which have been included at
their fair value in the current year as
determined in Note 10.
(v) Improving Disclosures about Financial
Instruments (Amendments to IFRS 7)
This amended standard, effective for
accounting periods commencing on or after 1
January 2009, requires enhanced disclosures
about fair value measurements and liquidity
risk in respect of financial instruments.
The amendments require that fair value
measurement disclosures use a three-level
fair value hierarchy that reflects the
significance of the inputs used in measuring
fair values of financial instruments.
Specific disclosures are required when fair
value measurements are categorised as Level
3 (significant unobservable inputs) in the
fair value hierarchy. The amendments require
that any significant transfers between Level
1 and Level 2 of the fair value hierarchy
are disclosed separately, distinguishing
between transfers into and out of each
level. Furthermore, changes in valuation
techniques from one period to another,
including the reasons therefore, are
required to be disclosed for each class of
financial instrument.
Further, the definition of liquidity risk
has been amended and it is now defined as
the risk that an entity will encounter
difficulty in meeting obligations associated
with financial liabilities that are settled
by delivering cash or another financial
asset.
(vi) Accounting for business combinations
(IFRS3)
From 1 October 2009 the Group has applied
IFRS 3 "Business Combinations" (2008) in
accounting for business combinations. The
change in accounting policy has been applied
prospectively and has had no impact on
comparative information.
Business combinations are accounted for
using the acquisition method as at the
acquisition date, which is the date on which
control is transferred to the Group. Control
is the power to govern the financial and
operating policies of an entity so as to
obtain benefits from its activities. In
assessing control, the Group takes into
consideration potential voting rights that
currently are exercisable.
Acquisitions on or after 1 October 2009
For acquisitions on or after 1 October 2009,
the Group measures goodwill at the
acquisition date as:
- the fair value of the consideration
transferred; plus
- the recognised amount of any non-
controlling interests in
the acquiree; plus if the business
combination has been achieved in
stages, the fair value of the existing
equity interest in the acquire; less
- the net recognised amount (generally
fair value) of the identifiable assets
acquired and liabilities assumed.
When the excess is negative, a bargain
purchase gain is recognised immediately in
profit or loss.
The consideration transferred does not
include amounts related to the settlement of
pre-existing relationships. Such amounts are
generally recognised in profit or loss.
Costs related to the acquisition, other than
those associated with the issue of debt or
equity securities, that the Group incurs in
connection with a business combination are
expensed as incurred.
Any contingent consideration payable is
recognised at fair value at the acquisition
date. If the contingent consideration is
classified as equity, it is not re-measured
and settlement is accounted for within
equity. Otherwise, subsequent changes to the
fair value of the contingent consideration
are recognised in profit or loss.
Acquisitions between 1 January 2004 and 1
October 2009
For acquisitions between 1 January 2004 and
1 October 2009, goodwill represents the
excess of the cost of the acquisition over
the Group`s interest in the recognised
amount (generally fair value) of the
identifiable assets, liabilities and
contingent liabilities of the acquiree. When
the excess was negative, a bargain purchase
gain was recognised immediately in profit or
loss. Transaction costs, other than those
associated with the issue of debt or equity
securities, that the Group incurred in
connection with business combinations were
capitalised as part of the cost of the
acquisition.
3. Significant accounting judgements,
estimates and assumptions
Investment property valuation
The property valuations continue to be
prepared in a period of market uncertainty
leading to increased levels of judgement and
estimation being applied to determine the
fair value of property.
The best evidence of fair value is current
prices in an active market for similar lease
and other contracts. In the absence of such
information, the Group determines the amount
within a range of reasonable estimates. The
Group considers information from a variety
of sources including:
independent valuers;
current prices in an active market for
properties of a different nature, condition
or location, adjusted for those differences;
recent prices from similar properties in
less active markets, with adjustments to
reflect any changes in economic conditions;
discounted cash flow projections based on
reliable estimates of future cash flows,
derived from the terms of any existing
leases and from external evidence such as
current market rents for similar properties
in the same location and condition, and
using discount rates that reflect current
market assessments.
At 31 August 2010, the yields used in
valuations are as follows:
31 Aug 30 Sept
2010 2009
UK Portfolio 6.67% 5.96%
European Portfolio 7.13% 6.93%
Shopping Centres 7.62% 7.61%
The Directors have estimated the recoverable
value of the property under development
based on expected/agreed development plans
and have made a number of assumptions in
deriving this value, including, in their
view, various reasonable long-term
assumptions relating to likely interest and
the ultimate rental potential of the
development and likely expected yields in
the range of 6%-7%. Based on these
calculations, which, given current market
conditions and the uncertainties in
projecting forward these assumptions, are
subjective, the Directors have valued the
properties under development at a value of
GBP29.2m.
Funding/going concern
The financing facilities in six of the
Group`s subsidiary and joint venture
entities have either expired or are due to
expire in the next twelve months. In the
case of the facilities which have expired,
the Group is at an advanced stage of
negotiations with the providers and the
Board is confident the facilities will be
extended, or that alternative facilities
will be obtained, on terms which are
reasonable to the Group. Based on
preliminary discussions with the relevant
institutions, the Board is confident that
facilities which will expire in the next
twelve months will be successfully
renegotiated or replaced.
In assessing the Group`s ability to
renegotiate facilities, the Board took
account of the existing cash reserves and
the Group`s ability to inject further equity
into investments where necessary.
If all of the facilities were not
successfully renegotiated, the going concern
status of the Group or Company would not be
affected. The Board does not believe that
there is a risk of not achieving a
favourable outcome to the refinancing.
4. Segment Reporting
The Group`s identified reportable segments
are set out below. These segments are
generally managed by separate management
teams. As required by IFRS 8, Operating
Segments, the segmental analysis below
follows the information provided to the
Board, who are the chief operating decision
makers.
Relevant revenue, asset and capital
expenditure information is set out below:
Information about reportable segments
UK Shopping European
Portfolio Centres Portfolio Wichford Cromwell Total
GBP`000 GBP`000 GBP`000 GBP`000 GBP`000 GBP`000
At 31 August
2010
Rental income 3,532 5,745 3,990 - - 13,267
Investment - - - - 2,560 2,560
income
Net fair value 691 (703) (2,155) - - (2,167)
gains/(losses)
on investment
property
(Losses)/profi (2,766) - (350) - 2,572 (544)
ts from
financial
assets and
liabilities
Equity (615) (1,016) (786) - (3,525)
accounted (1,108)*
losses
Impairment of (598) - (598)
loans to joint
ventures
Interest 1,714 909 - - - 2,623
income
Interest (2,238) (4,934) (1,989) - - (9,161)
expense -
secured bank
loans
Property (177) (1,029) (455) - - (1,661)
operating
expenses
Investment 58,913 114,439 54,323 - - 227,675
property
Investments 362 - - - 74,777 75,139
designated at
fair value
Investments in 650 - 1,391 - - 2,041
joint ventures
Investment in - - - 18,923 - 18,923
associates
Loans and 31,426 16,734 - - - 48,160
receivables
Loans and (99,868) (133,941) (33,457) - - (267,266
borrowings )
At 30
September 2009
Rental income 3,887 2,566 3,745 - - 10,198
Investment 10 - - - - 10
income
Net fair value (324) (12,000) (4,507) - - (16,831)
losses on
investment
property
Losses from 1,109 621 (1,932) (202)
financial
assets and
liabilities
Equity (2,680) 502 (2,368) (6,112) - (10,658)
accounted
losses
Impairment of (31) (23,742) - - - (23,773)
loans to joint
ventures
Interest 1,973 1,347 - - - 3,320
income
Interest (2,610) (2,188) (1,658) - - (6,456)
expense -
secure bank
loans
Foreign - - - - - -
currency gain
Property (325) (730) (470) - - (1,525)
operating
expenses
Investment 57,850 68,908 59,263 - - 186,021
property
Investments 290 - - - - 290
designated at
fair value
Investments in 2,328 - 2,680 - - 5,008
joint ventures
Investment in - - - - - -
associates
* Includes impairment of goodwill on
acquisition of Wichford please refer to
Note 13.
ii) Reconciliation of reportable segment
profit or loss
31 30
August September
2010 2009
GBP`000 GBP`000
Rental income
Total rental income for reported segments 13,267 10,198
Profit or loss
Investment income 2,560 10
Net fair value gains/(losses) on investment (2,167) (16,831)
property
Losses from financial assets and liabilities (544) (202)
Equity accounted losses (3,525) (10,658)
Impairment of loans to joint ventures (598) (23,773)
Interest income 2,623 3,320
Interest expense - secured bank loans (9,161) (6,456)
Property operating expenses (1,661) (1,525)
Total loss per reportable segments 794 (45,917)
Other profit or loss - unallocated amounts
Other income 673 2,188
Administrative expenses (466) (425)
Investment management and professional fees (3,406) (1,772)
Amortisation of intangible assets (345) (188)
Interest income 758 905
Interest expense (3,202) (2,754)
Foreign exchange gain/(loss) (6) 37
Consolidated loss before income tax (5,200) (47,926)
5. Losses from financial assets and
liabilities
31 30
August September
2010 2009
GBP`000 GBP`000
Fair value through profit or loss
Equity investments - realised 72 3,719
- unrealised 2,572 546
(refer to Note 11)
Derivative financial instruments (1,755) (4,467)
Financial assets carried at amortised cost (1,433) -
Impairment of loans and receivables
Net loss from financial assets and (544) (202)
liabilities
6. Equity accounted losses
31 30
August September
2010 2009
GBP`000 GBP`000
Investment in joint ventures (refer (2,415) (4,546)
to Note 12)
Investments in associates (refer to 5,368 (6,112)
Note 13)
Investments in associates - (6,478) -
impairment (refer to Note 13)
Total equity accounted losses (3,525) (10,658)
7. Interest Income
The following table details the interest
income earned by the Group during the
period:
31 30
August September
2010 2009
GBP`000 GBP`000
Interest income on bank deposits 454 1,012
Interest income from mezzanine financing 2,927 3,213
Total interest income 3,381 4,225
8. Interest expense
The following table details the interest
expense at amortised cost incurred by the
Group during the period:
31 30
August September
2010 2009
GBP`000 GBP`000
Interest expense on secure bank loans 9,161 6,456
Interest expense on other financial 663 918
liabilities
Interest paid on mezzanine financing 2,539 2,129
Interest capitalised to investment property - (293)
Total interest expenses 12,363 9,210
9. Taxation
The Group is exempt from all forms of
taxation in Jersey, including income,
capital gains and withholding taxes. In
jurisdictions other than Jersey, foreign
taxes will, in some cases, be withheld at
source on dividends and interest received by
the Group. Other than in Germany and
Switzerland, capital gains derived by the
Group in such jurisdictions generally will
be exempt from foreign income or withholding
taxes at source.
The Group invests in UK property and
therefore is liable to income tax in the UK
on the net rental profits. The current rate
of UK income tax for a non-resident company
is 20%. Based on current UK law, certain
joint ventures in the Group will be subject
to UK capital gains tax, or corporation tax
on capital gains, on the realisation of UK
investment property gains.
The Group invests in Swiss property and
therefore is liable to cantonal and federal
taxes in Switzerland. The rates depend
largely on the canton in which the property
is situated and the property value. The
effective rate of tax ranges from 22% to
25%.
The Group also invests in German properties
held either in corporates or partnerships.
The effective rate of tax ranges from
18.463% to 25% and the rate of capital gains
tax on any future disposal ranges from
15.825% to 20%.
Provision has been made for deferred capital
gains tax in all relevant entities, where
taxable temporary differences arise.
As all current year taxes arise in
jurisdictions outside Jersey, a full tax
rate reconciliation of the relationship
between the tax expense and accounting
profit has not been included within these
accounts.
The Group`s investment in the Australian
resident Cromwell Group is held through an
Irish Section 110 company. Unfranked
dividends received from the Cromwell Group
are subject to an Australian withholding tax
of 7.5%% (15.5% pre 1 July 2010).
31 30
August September
2010 2009
GBP`000 GBP`000
Foreign tax 200 38
10. Investment Property
The book cost of properties as at 31 August
2010 was GBP239,699,441 (30 September 2009:
GBP190,687,813). The carrying amount of
investment property, apart from the
investment properties in Streatham and
Delamere Place, Crewe, is the fair value of
the property as determined by a registered
independent appraiser having an appropriate
recognised professional qualification and
recent experience in the location and
category of the property being valued. The
carrying amount of the investment properties
in Streatham and Crewe as at 31 August 2010
is the fair value as determined by
Directors` valuation. Fair values were
determined having regard to recent market
transactions for similar properties in the
same location as the Group`s investment
property. The valuers also considered the
rental status of each property and current
market yields. The valuations have been
prepared in a period of market uncertainty,
refer to Note 3. The Group is also exposed
to the risks associated with investment
property, held within joint venture and
associate entities, which are equity
accounted.
Investment property comprises a number of
commercial and retail properties that are
leased to third parties. All investment
properties are income generating, as is the
investment property under development.
The Directors have estimated the recoverable
value of the property under development
based on expected/agreed development plans
and have made a number of assumptions in
deriving this value, including, in their
view, various reasonable long-term
assumptions relating to likely interest and
the ultimate rental potential of the
development and likely expected yields in
the range of 6%-7%. Based on these
calculations, which, given current market
conditions and the uncertainties in
projecting forward these assumptions, are
subjective, the Directors have valued the
properties under construction at a value of
GBP29,202,207 (2009: GBP34,241,207).
Investment property comprises a number of
commercial and retail properties that are
leased to third parties. All investment
properties are income generating, as are the
investment properties under development.
Property operating expenses in the statement
of comprehensive income relate solely to
income generating properties.
31 30
August September
2010 2009
GBP`000 GBP`000
Opening balance 186,021 106,636
Properties acquired during the period - 6,717
Capitalised expenditure 527 566
Capitalised interest - 293
Impact of acquisition of subsidiaries 46,100 80,600
Foreign exchange movements in foreign (2,806) 8,040
operations
Net fair value losses on investment property (2,167) (16,831)
Closing balance 227,675 186,021
Additions as a result of a change in control
of underlying entities:
Byron Place Seaham Limited and Seaham 16,100(1 -
Limited )
Birchwood Warrington Limited 30,000(2 -
)
West Orchards Coventry Limited - 53,206
Delamere Place Crewe Limited - 27,394
46,100 80,600
The change in control occurred as a result
of the joint venture entity becoming a
subsidiary during the period. The entity is
the beneficial owner of the Byron Place
Shopping Centre, Seaham.
The change in control occurred as a result
of the joint venture entity becoming a
subsidiary during the period. The entity is
the beneficial owner of the Birchwood
Shopping Centre, Warrington.
Investment properties are held as security
for the loans and borrowings as disclosed in
Note 16.
11. Investments designated at fair value
31 30
August September
2010 2009
GBP`000 GBP`000
Opening balance 290 735
Acquisitions during the period 72,188(1) 337
Disposals during the period - (420)
Fair value adjustments (refer to Note 2,572 (362)
5)
Foreign exchange movement in foreign 89(2) -
investments
Closing balance 75,139 290
During the financial year, the Group
purchased 178,833,333 stapled securities in
the Cromwell Group in Australia at an
average price of AUD 0.72. The Group
currently holds 19.85% of the total
securities of the Cromwell Group. The
stapled securities are valued at AUD 0.7209
per security on 31 August 2010.
The investment in Cromwell is translated at
an exchange rate of GBP1 : AUD1.724.
The fair value adjustment excludes dividend
income which is shown separately in the
accounts. During the period the Group
received GBP2,560k as a distribution, before
withholding tax of GBP157k, resulting in net
income of GBP2,403k.
12. Investments in joint ventures
31 30
August September
2010 2009
GBP`000 GBP`000
Opening balance 5,008 13,003
Reclassification on acquisition of non- - (1,807)
controlling interest
Increase in investment 153 2,176
Impairment of investment - (4,389)
Equity accounted loss (2,415) (4,546)
Change in fair value due to foreign (217) 571
currency translation
Distribution received from joint ventures (488) -
Closing balance 2,041 5,008
13. Investments in associates
31 30
August September
2010 2009
GBP`000 GBP`000
Opening balance - 6,859
Investment at cost including goodwill 22,732 3,005
Disposal - (3,014)
Change in fair value due to foreign currency 1 2
translation
Equity accounted profit/(loss) 5,368 (6,112)
Share of foreign currency movement (1,494) -
recognised
Share of cash flow hedge reserve movement 155 -
recognised
Impairment of investment (6,478) -
Distribution received from associates (1,361) (740)
Closing balance 18,923 -
Investment in associates include:
(i) 21.73% investment in Wichford
Wichford is a property investment company
listed on the main board of the LSE. The
closing price of Wichford on 31 August 2010
was 8.20p per share. The total fair value of
shares held is GBP18,923k at the period end.
14. Cash and cash equivalents
31 30
August September
2010 2009
GBP`000 GBP`000
Cash and cash equivalents consist of the
following:
Unrestricted cash balances 16,969 15,532
Bank balances 4,158 4,523
Call deposits 12,811 11,009
Restricted cash balances 18,442
-
Closing balance 35,411 15,532
Restricted cash balances relate to amounts
held on deposit with solicitors in respect
of potential future transactions.
15. Capital and reserves
Share capital and share premium
31 30
August September
2010 2009
GBP`000 GBP`000
Authorised
500,000,000 ordinary shares of GBP0.01 5,000 5,000
each
Issued
304,706,406 ordinary shares of GBP0.01 3,047 739
each (2009: 73,867,777 shares of GBP0.01
each)
In issue at 1 October 73,760 72,686
Shares issued 230,416 405
Shares issued as scrip dividend 422 777
Shares taken to treasury - (536)
Treasury shares issued 108 428
Shares in issue at period/year end 304,706 73,760
On 21 December 2009 the Company issued
84,444,444 shares for a total cash
consideration of GBP38million.
On 24 December 2009 the Company issued
23,000,000 shares for a total cash
consideration of GBP11.96million.
On 31 January 2010 the Company issued
57,079,659 shares for a total cash
consideration of GBP29.68million.
On 13 July 2010 the Company issued
60,000,000 shares for a total cash
consideration of GBP30million.
On 17 August 2010 the Company issued
6,000,000 shares for a total cash
consideration of GBP3million.
Distributions
Redefine International`s previous dividend
policy was to pay dividends twice yearly on
an interim and final basis, representing in
aggregate approximately 4.5 per cent of the
Group`s net asset value. With effect from
the placing on 21 December 2009, the Board
of Redefine International changed the
dividend policy from one linked to NAV to
one related to the distributable core
earnings in any given financial period. In
terms of the revised dividend policy, it is
intended that Redefine International will
pay out not less than 100% of core earnings
in dividends in each financial period.
On 11 February 2010 the Company distributed
the 2009 final dividend of 1.31p per share
(2009: 2.51p per share). The dividend was
settled through GBP869,509 in cash and by
issuing 199,441 shares at a premium of 47.5p
per share. 107,500 of the shares were issued
from treasury and 91,941 new shares were
issued.
On 9 July 2010 the Company distributed the
2010 interim dividend of 1.14p per share
(2009: 1.74p per share). The dividend was
settled through GBP2,595,366 in cash and by
issuing 222,585 shares at a premium of 54.4p
per share.
The 66,000,000 shares issued on 13 July 2010
and 17 August 2010, were issued ex-dividend,
i.e.: the shareholders will not rank for
dividends in respect of the six month period
ended 31 August 2010.
Currency translation reserve
The currency translation reserve comprises
all foreign currency differences arising
from the translation of the financial
statements of foreign operations.
Cash flow Hedge Reserve
The cash flow hedge reserve comprises the
Group`s share in the effective portion of
the cumulative change in fair value of cash
flow hedges related to hedged transactions
which have not yet occurred recognised in
associate undertakings.
16. Loans and borrowings
This note provides information about the
contractual terms of the Group`s loans and
borrowings, which are measured at amortised
cost.
Terms and debt repayment schedule
16.1 Secured borrowings
The terms and conditions of outstanding
loans are as follows:
2010 2009
Loan Currency Year of Face Carr- Face Carrying
Interest maturity value ying value amount
rate GBP`000 amount GBP`000 GBP`000
GBP`000
Gibson 6.37%* GBP 2029 11,348 11,197 11,348 11,331
Property
Holdings
Limited
Newington LIBOR + GBP 2010*** 7,300 6,699 7,300 6,859
House 1.25%
Limited
Ciref Base GBP 2010*** 2,980 2,980 2,980 2,980
Reigate rate +
Limited 1.35%
Kalihora 2.87%* CHF 2010*** 13,355 12,618 12,545 12,037
Holdings
Limited
Ciref LIBOR + GBP 2009 1,400 1,400 3,078 3,078
Streatham 1.25%
Limited
Ciref LIBOR + GBP 2014 20,000 17,913 20,000 18,250
Malthurst 0.95%
Limited
Delamere 6.49%* GBP 2011 17,150 17,150 17,150 17,150
Place
Crewe
Limited
West 6.29%* GBP 2027*** 56,750 56,183 56,750 56,384
Orchards
Coventry
Limited
Byron 6.44%* GBP 2031 17,199 15,203 - -
Place
Seaham
Limited
Birchwood 6.1%* GBP 2011*** 42,000 29,307 - -
Warringto
n Limited
Ciref EURIBOR EUR 2013 15,833 15,399 17,499 17,439
Berlin 1 + 1.2%
Limited
Ciref EURIBOR EUR 2013 3,323 3,281 3,672 3,663
German + 1.2%
Portfolio
Limited
Ink stone 5.75%* EUR 2011 3,630 3,434 4,012 3,867
Grundstuc
ksverwalt
ung
Limited &
Co.KG
Ink stone 5.91%* EUR 2011 4,105 3,837 4,537 4,317
Zwei
Grundstuc
ks-
verwaltun
g Limited
& Co.KG
CEL 4.95%* EUR 2014 4,219 4,208 4,663 4,663
Portfolio
Limited &
Co. KG
Total 220,591 200,809 165,534 162,018
bank
loans
Corovest 7.10% - GBP 2012 40,423 40,423 32,225 32,225
Mezzanine 10%*
Capital
Limited
Coronatio 4%* GBP 2010 13,600* 13,600 - -
n Capital *
Limited
Loans 7.00%* GBP 2011 5,040 5,040 5,915 5,915
secured
by cash
deposits
CEL 0%* GBP 2029 644 644 712 712
Portfolio
Limited &
Co. KG
Total 280,298 260,516 204,386 200,870
secured
loans
All bank loans are secured over investment
property, and bear interest at the specified
interest rates.
* Fixed rates
** Loan secured over Cromwell shares.
*** The following loans have renegotiated
terms and conditions post period end:
Loan Currency Year of Face
Interest maturity value
rate GBP`000
Newington House LIBOR + GBP 2013 6,699
Limited 2.50%
Ciref Reigate LIBOR + GBP 2015 2,500
Limited 2.50%
West Orchards 6.29%* GBP 2035 56,183
Coventry Limited
Birchwood 6.1%* GBP 2035 29,150
Warrington Limited
Kalihora Holdings Base + CHF 2018 11,543
Limited 1.20%
16.2 Unsecured borrowings
31 30
August September
2010 2009
GBP`000 GBP`000
Non-controlling shareholders loans 643 633
Derivatives (refer to Note 17) 6,107 4,810
Total unsecured loans 6,750 5,443
The shareholders loans are unsecured, bear interest at rates
between 5.5% and 7.5% and mature in September 2015.
16.3 Current and non-current liabilities
Non-current liabilities
Secured loans 160,513 190,080
Unsecured shareholder loans 643 633
Derivatives 6,107 4,810
Total non-current loans and borrowings 167,263 195,523
The maturity of non-current borrowings is as
follows:
Between one year and five years 95,133 110,952
More than five years 72,130 84,571
167,263 195,523
Current liabilities
Secured loans 100,003 10,790
Total current loans and borrowings 100,003 10,790
Total loans and borrowings 267,266 206,313
Exposure to credit, interest rate and
currency risks arise in the normal course of
the Group`s business, Derivative financial
instruments are used to reduce exposure to
fluctuations in interest rates. Refer to
Note 17 for further details.
17. Interest rate risk
The Group uses interest rate swaps to hedge
exposure to the variability in cash flows on
floating rate debt, such as secured bank
loans, caused by the movements in the market
rates of interest. The fair value movement
reflects the expectation that interest rates
will stay low on the long term. The table
below represent details regarding the
interest rate swaps in the Group:
Nominal loan Fixed Currency Year of Fair Fair
economically Interest maturity Value value
hedged rate 2010 2009
GBP`000 GBP`000
GBP`000
Subsidiaries
Ciref 18,000 5.17% GBP 2022
Malthurst (3,989) (2,550)
Limited
Ciref 2,000 4.81% GBP 2010 (43) (103)
Reigate
Limited
Newington 6,699 4.69% GBP 2010 (64) (303)
House
Limited
Ciref Berlin 8,176 4.61% EUR 2014 (947) (906)
1 Limited
Ciref Berlin 7,274 4.20% EUR 2014 (734) (656)
1 Limited
Ciref German 3,186 4.20% EUR 2014 (330) (292)
Portfolio
Limited
45,335
(6,107) (4,810)
Held in
joint
ventures
Ciref Jersey 18,500 5.48% GBP 2027
Limited (5,343) (3,338)
Ciref Jersey 1,800 4.80% GBP 2027 (378) (240)
Limited
Premium 5,269 4.13% EUR 2014 (565) (438)
Portfolio
Limited &
Co. KG
Premium 17,282 4.23% EUR 2014
Portfolio (1,925) (1,532)
Limited &
Co. KG
Churchill 10,613 5.08% GBP 2018
Court (1,657) (2,085)
Limited
53,464
(9,868) (7,633)
18. Earnings per share
31 30
August September
2010 2009
GBP`000 GBP`000
Loss attributable to shareholders (4,915) (39,707)
Weighted average number of ordinary shares 199,492 73,261
Number of ordinary shares
- In issue 304,706 73,868
- Treasury - (108)
Shares in issue 304,706 73,760
- Weighted average 199,492 73,261
Earnings per share (pence)
- Basic and diluted (2.46) (54.20)
The Group has no instruments in issue that
would dilute earnings per share, therefore
the diluted earnings per share is equal to
the basic earnings per share.
Post the period end, 4,000,000 shares were
issued at 52 pence per share which will rank
for dividend as detailed the salient
features.
19. Post balance sheet events
The Directors of the Company have resolved
to declare a dividend of 2.07 pence per
share. The dividend will be offered to
shareholders as a scrip dividend, with the
ability to elect to receive a cash dividend
alternative. Further details surrounding the
terms of the scrip dividend was set out in
the notice of the EGM on 21 October 2010.
The last day to trade "cum" dividend in
order to participate in the dividend is 1
November 2010. The shares will commence
trading "ex" dividend on 3 November 2010 and
the record date will be 5 November 2010. The
dividend will be paid to shareholders on 26
November 2010.
On 7 September 2010 the Company placed
102,069,337 shares at 50 pence per share as
well as 4,000,000 shares at 52 pence per
share. The issued shares represent 34.8% of
the current issued share capital of
410,775,743.
Other post balance sheet events include UK
and European property acquisitions, the
finalisation of the Aviva refinancing
transaction and the Splendid Hotel Portfolio
deal as detailed in the investment manager`s
review."
4 November 2010
Sponsor to Redefine Properties International
Limited
Java Capital
Date: 04/11/2010 09:07:01 Produced by the JSE SENS Department.
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