| Tue 1 Nov 2011, 9:00 | | RIN - Redefine Properties International Limited - Results for the period ended |
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RIN
RIN
RIN - Redefine Properties International Limited - Results for the period ended
31 August 2011
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")
Set out below is an announcement which was released by Redefine International
P.L.C. (formerly Wichford P.L.C.), the London Stock Exchange-listed subsidiary
of RIN, on the Regulatory News Service ("RNS") of the London Stock Exchange
today.
"REDEFINE INTERNATIONAL P.L.C.
(`Redefine International` or the `Company`)
RESULTS FOR THE PERIOD ENDED 31 AUGUST 2011
REDEFINE INTERNATIONAL`S ENLARGED PLATFORM POSITIONS IT STRONGLY FOR GROWTH
Redefine International P.L.C., formerly Wichford P.L.C., today announces its
results for the period ended 31 August 2011*.
Financial Highlights
- Earnings available for distribution of GBP20.3 million (2010: GBP7.5
million)
- Second interim dividend of 2.10 pence per share giving a total dividend
of 4.13 pence per share (2010: 3.21 pence)
- Fully diluted NAV per share of 46.59 pence (2010: 46.77 pence); fully
diluted EPRA NAV per share 50.72 pence (2010: 48.77 pence)
Operational Highlights
- Successful reverse takeover between Wichford P.L.C. and Redefine
International plc to create an enlarged diversified income focused
property company with circa GBP1.27 billion of assets. Anticipated cost
savings going forward expected to be GBP0.3 million per annum
- Acquisition of the St George`s Shopping Centre, Harrow for GBP65.9
million and the 122 bed Crowne Plaza Hotel, Reading for GBP12.8 million
- Following the period end, the Company announced the appointment of Greg
Clarke as Chairman designate
- Good progress made in planning for 2012 refinancing strategy
Philippe de Nicolay, Chairman, said:
"With the benefit of our strong platform of income-generating assets,
comprising holdings spread across sectors and geographies, our experienced
management team and the support of our largest shareholder, we look forward to
a year in which we can take advantage of improved access to capital and
explore a wide potential spectrum of accretive and strategic acquisitions for
the benefit of all our shareholders."
*The results for the period ended 31 August 2011 reflect the first set of
results for the enlarged group following the merger. As a result of the
application of reverse takeover accounting, the results reflect those of
Redefine International for the period ended 31 August 2011 and do not give a
true reflection of the enlarged Group`s underlying distributable earnings for
the period.
Meeting and conference call
A meeting for analysts and institutional investors will take place today at
09.00 at Redefine International, 2nd Floor, 30 Charles II Street, London, SW1Y
4AE. The meeting can also be accessed via a conference call dial in facility,
starting at 09.15, using the details below and the analyst`s presentation will
made available on the Company`s website
http://www.redefineinternational.com/investor-relations/financial-reports/
Dial in number: + 44 (0)20 7784 1036 UK Local
+27 11 019 7076 South Africa Local
Confirmation Code: 5218494
For further information, please contact:
Redefine International Property FTI Consulting
Management Limited Stephanie Highett/Dido Laurimore
Michael Watters, Stephen Oakenfull Tel: +44 (0)20 7831 3113
Tel: +44 (0)20 7811 0100
Group Overview
Introduction
Redefine International P.L.C. ("Redefine International" or the "Company" and
together with its subsidiaries the "Group") is a property investment company
with exposure to a broad range of properties and geographical areas. The
Company is domiciled in the Isle of Man and has investments in the UK,
Germany, Switzerland, the Channel Islands, the Netherlands and Australia.
Investment strategy
The Group`s strategy is focused on delivering sustainable and growing income
returns through investment into income yielding assets let to high quality
occupiers on long leases. Development exposure is generally limited to asset
management and ancillary development of existing assets in order to enhance
and protect capital values. The Group aims to distribute the majority of its
earnings available for distribution on a semi-annual basis, providing
investors with attractive income returns and exposure to capital growth
opportunities.
Investment markets
The Group is focused on real estate investment in large, well developed
economies with established and transparent real estate markets. The investment
portfolio is geographically diversified across the UK, Europe and Australia
providing exposure to the retail, office, industrial and hotel sectors.
Group structure
Redefine International is listed on the main market of the London Stock
Exchange (the "LSE") and is part of the Redefine Properties Limited group.
The ultimate holding company, Redefine Properties Limited ("Redefine
Properties"), is listed on the Johannesburg Stock Exchange (the "JSE") and has
a market capitalisation of approximately GBP2billion.
Board and Management
The Board is responsible for setting the Group`s strategy and providing
leadership for the Company. It supports the principles of good corporate
governance as set out in the UK Corporate Governance Code published by the
Financial Reporting Council in May 2010).Following the listing of Redefine
Properties International Limited ("RIN", the Company`s largest shareholder) on
the JSE, the Boards have resolved to comply with the provisions of the third
King Report on Governance for South Africa 2009 based on the Code of
Governance Principles for South Africa 2009.
The Board is entirely non-executive and comprises ten directors. The Chairman
and five other directors are considered to be independent of the Investment
Adviser.
The Group is advised on an exclusive basis by Redefine International Property
Management Limited ("RIPML"). RIPML has a management team with extensive
property and finance experience in the listed property sector and which has
been active in the UK and Europe for over a decade.
Chairman`s statement
The 2011 financial period has been a landmark one. The successful reverse
acquisition between Redefine International plc (subsequently renamed Redefine
International Holdings Limited ("RIHL")) and Wichford P.L.C. ("Wichford") has
created a mid-tier, diversified income focused property company. It has also
secured a significant capital commitment from the Company`s largest
shareholder.
Following RIHL`s initial approach to Wichford in November 2010, the Wichford
Board undertook a thorough strategic review and concluded that a reverse
acquisition with its largest shareholder provided the best possible basis from
which to address its 2012 debt maturities as well as securing a supportive and
well capitalised major shareholder alongside, with whom to pursue growth
opportunities.
Both sets of shareholders stand to benefit from:
- a larger, well diversified asset base reducing exposure to any single
market;
- a proposed capital raising in 2012 of up to GBP100 million supported by
the Company`s largest shareholder;
- a strategy focused on cashflow and income distribution;
- a larger shareholder base; and
- a listing on the Premium Segment of the Official List of the UK Listing
Authority and admission to trading on the London Stock Exchange`s Main
Market for listed securities.
In a period of such intensive corporate activity, the Company has asked a
great deal of its advisers and their staff and I and my fellow directors wish
to thank them for their efforts and dedication.
Financial results
Earnings for the period reflect the implementation of IFRS rules for business
combinations with the result that no earnings have been included for Wichford
for the period 1 April 2011 to 31 August 2011 as these are considered to be
pre-acquisition earnings. An adjustment has been made to earnings available
for distribution to reflect the contribution made by Wichford.
Earnings available for distribution of 4.13 pence per share for the period are
marginally ahead of market expectations and pleasing in the context of the
prevailing economic conditions.
EPRA net asset value increased 4.0% to 50.72 pence per share following the
reverse acquisition. There were further valuation declines in property values,
principally in UK regional offices. However this was offset by gains in the
Cromwell investment and fair value adjustments to the carrying value of
certain Wichford debt facilities.
The Board has declared a dividend for the second half of the period of 2.10
pence per share. This brings the total dividend per share paid to the RIHL
shareholders for the period to 4.13 pence and reflects a 100% payout of
earnings available for distribution.
Operations
I am pleased to report the Group`s recent investments into Cromwell and the
hotel sector are performing strongly. Distributions from Cromwell of GBP8.4
million (net of withholding tax) in the period reflects a yield of 8.5% on the
market value of the Group`s shareholding as at 31 August 2011 which is
underpinned by a high quality property portfolio. The underlying performance
of the hotel portfolio benefited from strong demand for hotel rooms in the
Greater London market. The Group has, in a short space of time, developed a
presence in the UK hotel market which has created a number of new investment
opportunities.
The UK stable income portfolio produced stable income returns underpinned by
high quality tenants. However values in regional offices continued to come
under pressure. Exposure to weaker regional office markets and underperforming
assets are being critically assessed as part of the refinancing strategy for
the acquired Wichford portfolio.
The UK retail portfolio maintained occupancy levels above 97% despite
significant pressures on retailers and a difficult trading environment.
Redevelopment of 46,000 sq ft of retail space has commenced at Birchwood,
Warrington and a refurbishment programme for the recently acquired St George`s
Shopping Centre in Harrow is anticipated to commence in the new financial year
with a view to creating further value from the asset over the long term.
The European portfolio`s macro-economic environment has been the key driving
force during the period under review. The potential sovereign debt default by
Greece and other peripheral Eurozone countries has created significant
volatility in the markets. Against this backdrop, the European portfolio has
performed well at an operating level with occupancy levels close to 100% and
consistent cash flows from rental income. The Swiss portfolio benefited from a
strong appreciation of the Swiss Franc against Sterling over the period.
Board
The reverse acquisition has inevitably led to some changes in the composition
of the Board. David Harrel and Mark Sheardown stepped down following
completion of the transaction and I would like to offer my sincere thanks for
their services and significant contribution to Wichford, particularly during
the strategic review and reverse acquisition process. I would also like to
take the opportunity to thank Greg Heron, Peter Todd and John Ruddy who
retired from the RIHL board following the reverse acquisition. They have made
substantial contributions to the Redefine International business over the
years.
Marc Wainer, Michael Watters, Michael Farrow and Gavin Tipper, previous RIHL
directors, joined the Board with effect from 22 August 2011.
I am also pleased to welcome Stewart Shaw Taylor to the Board. Stewart is
Global Head of Real Estate Investments for the Corporate and Investment
Banking Division of the Standard Bank Group and I am sure he will add
significant strength to the Board.
I believe the Board has considerable depth and breadth of expertise and will
bring invaluable experience to the Company.
Retirement
It was with much sadness that, at the time of the reverse acquisition, I
announced my intention to retire. I have been involved with the Company since
2004 and following my relocation to Brazil I have found it increasingly
difficult to fulfill my duties as Chairman.
I am, however, delighted that Greg Clarke has joined the Board as Chairman
Designate to take over from me when I step down from the Board in November.
His extensive experience of managing companies across our key geographic areas
and his knowledge of real estate in particular should prove valuable to the
Company as it enters the next phase of growth.
I wish Greg and the Company every success in the future.
Prospects
Following a period of substantial change, the 2012 financial year is set to be
one of consolidation and positioning the Company for future growth. The
integration with Wichford has progressed well and identified cost savings will
be fully achieved in the next financial year. With an asset base of over
GBP1.2 billion, the Company has become a significant player in the listed real
estate sector and will look to leverage off this base to improve access to
capital and take advantage of investment opportunities.
The Company is considering selective share buybacks, in accordance with the
existing shareholder authority granted at the AGM held on 27 January 2011
(such authority being subject to the subsequent consolidation of the Company`s
share capital which was approved by the Company on 4 August 2011 and effected
on 22 August 2011).. The authority will only be exercised after careful
consideration by the Board, as and when conditions are favourable, with a view
to enhancing earnings per share and/or net asset value per share. Shares
acquired will be held in Treasury and details of all transactions will be
announced to the market in accordance with the Listing Rules, when any
relevant purchases have been made.
Planning for the refinancing of the debt facilities maturing in 2012 is
underway, and is expected to result in a rationalised government portfolio
through a refinancing of a core portfolio of assets. The intention, as set out
at the time of the reverse acquisition, is to undertake a capital raising
during the course of 2012 to partly support a refinancing and to provide
capital for identified and secured investment opportunities. Disposals of
assets with limited growth potential or significant re-letting risk will be
targeted to strengthen the lease length profile and improve the overall
quality of the portfolio. Following negotiations with the servicer, a market
testing exercise is being undertaken on the VBG2 portfolio which may lead to a
sale, remove the refinancing requirement and enhance the overall leverage
ratios of the Group.
While the current economic and financial markets present real risks,
investment opportunities for, inter alia, hotels, shopping centres and German
retail units are once again looking attractive. Cromwell continues to go from
strength to strength and the Company will look to support the growth of its
associate when the opportunity arises. The Company will also continue to
monitor developments on changes to the REIT regime and review the possibility
of converting to a UK REIT.
The new financial year presents a number of challenges but with a clear
strategy to strengthen the balance sheet and enhance the Group`s portfolio, it
is well positioned for the future.
Philippe de Nicolay
Chairman
Key facts related to the reverse acquisition
On 13 July 2011, the Boards of Wichford and RIHL announced that they had
reached agreement on a reverse acquisition in terms of which Wichford made an
all share offer (the "Offer") for the entire issued ordinary share capital of
RIHL (the "reverse acquisition"). RIHL`s shareholders received 7.2 Wichford
ordinary 1 pence shares for each RIHL share. The share register was then
consolidated on the basis of 1 new ordinary 7.2 pence share for every 7.2
ordinary 1 pence shares held.
On 22 August 2011, the Company announced that the reverse acquisition had
become unconditional in all respects and on 23 August 2011 announced the
admission of 543,890,859 ordinary shares of 7.2 pence to the LSE. Wichford
subsequently changed its name to Redefine International P.L.C. Following
further acceptances of the Offer and the final squeeze out of non-controlling
shareholders in RIHL, a total of 567,643,792 Redefine International ordinary
shares of 7.2 pence are in issue as at 1 November 2011.
Redefine International now owns a property portfolio well diversified by
sector and geography and includes inter alia; office and industrial
properties, shopping centres and hotels. The combined income streams of
Wichford and RIHL have diversified the risk within Wichford`s portfolio which
has significant exposure to UK government tenants and could be subject to the
UK Government`s recently announced austerity and rationalisation plans. The
commitment by RIN to support its share of a capital raising of up to GBP100
million will also significantly enhance the ability to refinance Wichford`s
Delta and Gamma facilities which fall due in October 2012.
This announcement makes various references to companies within the Redefine
Group which are summarised below.
Company name Abbreviation Description
Redefine Redefine The enlarged company following the reverse
International International, acquisition between Wichford and Redefine
P.L.C. the Company or International plc
the Group
Redefine RIHL The previously AIM listed property
International investment company party to the reverse
Holdings acquisition (previously named Redefine
Limited International plc)
Redefine RIN The Company`s largest shareholder listed
Properties on the JSE, whose sole asset is Redefine
International International
Limited
Redefine Redefine Ultimate parent company of the Redefine
Properties Ltd Properties Group, listed on the JSE
Wichford P.L.C. Wichford The previously LSE listed property
investment company party to the reverse
acquisition
Redefine RIPML or Investment Adviser to the Company
International Investment
Property Adviser
Management
Limited
Rationale behind the reverse acquisition
The Board believes that the reverse acquisition represents a clear and strong
complementary fit, substantially enhancing the strategic position of the
Company through the creation of a stronger, mid-tier UK listed property
company, focused on providing an attractive, sustainable and growing income
stream for investors.
The reverse acquisition has created an enlarged, income-focused property
company with a diversified investment property portfolio. The Group has an
improved capital structure benefiting from RIHL`s attractive long term debt
facilities as well as an undertaking from its major shareholder, RIN, to
support a proposed capital raising of up to GBP100 million, with RIN`s
commitment reflecting its current 67% shareholding.
The income stream from the property portfolio is complemented by a 22.7%
interest in the Group`s associate, Cromwell Property Group ("Cromwell") an
Australian listed property trust with significant exposure to central and
state government tenants.
The Group will seek to grow income for its investors through the pursuit of
active asset management opportunities within its existing portfolio, including
asset repositioning and ancillary development, and through the yield enhancing
acquisition and disposal of assets. The Group will act opportunistically and
will have the flexibility to execute transactions quickly. This potential
growth will be further enhanced by the expected reduction to the combined
expenses of the Group as a result of the elimination of certain public company
costs.
The Group is managed by RIPML which is a fully resourced and experienced
investment adviser. The historic advisory agreement between RIHL and Redefine
International Fund Managers Limited was acquired by RIPML on 22 August 2011.
The reverse acquisition has also resulted in an enlarged shareholder base
which should enhance trading liquidity for shares in the Company.
Information for shareholders
Following the reverse acquisition, the cancellation of RIHL`s previously
equity accounted investment in Wichford (refer note 14 to the consolidated
financial statements) and the subsequent issue of ordinary shares to the RIHL
shareholders, RIN became the majority shareholder in the Company with a
shareholding of approximately 65.59%. Minority shareholders in RIHL hold
approximately 14.07% and previous Wichford shareholders (other than RIHL
shareholders) hold approximately 20.34% of the shares in the Company.
The following ISIM, TIDM and SEDOL references have been adopted:
ISIN: IM00B4JZYL28
TIDM: RDI
SEDOL: B4JZYL2
Effect on the financial statements
Following the adoption of reverse takeover accounting in accordance with IFRS,
RIHL has been identified as the accounting acquirer, as it was deemed to
obtain control of Wichford. Consequently, the statement of financial position
reflects the reserves, assets and liabilities of RIHL and the capital,
reserves, assets and liabilities of Wichford, effectively acquired by RIHL at
fair value, as at 22 August 2011. As Wichford was the legal acquirer, the
Wichford capital structure remains that of the Company. Although the reverse
acquisition became effective on 23 August 2011 the financial statements have
been prepared assuming an acquisition date of 31 August 2011. The difference
between these dates is not deemed to be material and hence the statement of
comprehensive income reflects the income and expenses of RIHL only, for the 12
months ended 31 August 2011.
Top 15 properties by value
Name Principal Marke Owner- Sector Lettabl Annua Let Weight
occupiers t ship e area l- by ed
value intere sqft ised area averag
GBPm st net % e
% rent unexpi
GBPm red
lease
term
yrs
Wigan, Debenhams 85.0 50.0% Retail 473,355 7.43 99.1% 14.2
Grande , BHS
Arcade
Harrow, St Debenhams 64.0 100.0% Retail 215,489 3.76 99.1% 5.6
George`s
Coventry, Debenhams 45.0 81.3% Retail 210,188 3.92 98.0% 8.8
West
Orchards
Halle, Ministry 32.7 93.9% Europe 373,389 2.91 100.0% 8.8
Justizzentr of
um Justice
Dresden, VBG 31.2 100.0% Europe 187,818 2.44 100.0% 11.5
VBG
Warrington, ASDA 30.0 100.0% Retail 393,264 2.54 94.3% 15.9
Birchwood
Bradford - HMRC 27.2 100.0% Office 104,875 2.01 100.0% 9.6
Centenary
Court
Brentford RHM2 26.1 71.0% Hotels 61,064 2.01 100.0% 14.3
Lock,
Holiday Inn
Stuttgart, VBG 25.7 100.0% Europe 134,059 2.07 100.0% 13.4
VBG
Limehouse, RHM2 23.5 71.0% Hotels 61,860 1.78 100.0% 14.3
Holiday Inn
Express
Southwark, RHM2 22.4 71.0% Hotels 23,476 1.69 100.0% 14.3
Holiday Inn
Express
Royal RHM2 22.4 71.0% Hotels 49,094 1.74 100.0% 14.3
Docks,
Holiday Inn
Express
The Hague, Royal 19.8 100.0% Europe 138,618 1.93 100.0% 2.8
ICC Dutch
Gov.
Leeds, HMRC 19.7 100.0% Office 78,262 1.25 100.0% 12.3
Castle
House
Seaham, ASDA 16.8 100.0% Retail 115,377 1.33 100.0% 14.6
Byron Place
Notes:
1)Figures reflect 100% ownership
2)Redefine Hotel Management Limited
Business review
Overview
Against a backdrop of continued volatile and challenging economic conditions,
the Group performed well and achieved the significant milestone of owning a
portfolio of assets valued in excess of GBP1.2 billion following the reverse
acquisition of Wichford by RIHL, the single most significant corporate event
of the reporting period. Despite tough trading conditions the overall
performance of the Group, as measured against its stated objective of
delivering a high sustainable distribution yield, was satisfactorily met.
Additional highlights for the period included:
- The acquisition of the London Hotel portfolio, comprising five assets for
GBP112.0 million (including transaction costs);
- The acquisition of the St George`s Shopping Centre in Harrow, North
London, for GBP65.9 million (including transaction costs);
- The acquisition of two OBI DIY centres in Germany for a combined cost of
GBP20.9 million;
- The increased shareholding in Cromwell to 22.7% from 19.67% as at 28
February 2011; and
- The raising of GBP107.4 million of new capital through share placements,
and the listing of RIN on the JSE.
Performance
The portfolio has changed substantially following the reverse acquisition and
the acquisition of the Hotel portfolio. In a difficult economic environment,
the portfolio has benefitted from diversification across both sectors and
geographies. While regional office markets and UK retailers have suffered,
exposure to discount retail units in Germany, Greater London limited service
hotels and the Company`s Australian associate Cromwell has benefited the
Company as these segments have performed well. Overall occupancy of 97.0%, a
weighted average unexpired lease length in excess of nine years and indexed or
fixed uplifts close to a third of rental income provides for defensive income
returns.
Business Segments
UK Stable Income: Predominantly UK offices, but includes petrol filling
stations, Kwik-Fit centres, retail and residential units.
UK Retail: Major UK shopping centres.
Europe: Consists of the Group`s properties in Continental Europe,
located in Germany, Switzerland and the Netherlands.
Hotels: Consists of all the Group`s hotel properties.The hotels
are let to Redefine Hotel Management Limited on a fixed
rental basis with annual reviews based on EBITDA.
Cromwell: Relates to the Group`s investment in the Cromwell
Property Group, Australia.
Business segments at 31 August 2011
Market Occupancy Lettable Net rental
values % area income
GBP`million sqft`000 GBP`million
UK Stable Income 503.3 95.0% 3,723 39.7
UK Retail 257.9 97.4% 1,590 19.9
Hotels 123.4 100.0% 268 9.3
Europe 248.5 100.0% 1,971 19.3
Cromwell (22.7% stake) 102.5 n/a n/a 10.0
Total 1,235.6 97.0% 7,552 98.2
Notes:
1) UK Retail lettable area excludes the APCOA parking space of 326,315 sqft
2) Cromwell`s portfolio occupancy was 99.6% as at June 2011
3) Includes Grand Arcade Wigan, held through a joint venture entity
UK Stable Income
Market conditions outside of London remained challenging with limited occupier
demand and excess availability in many regional office markets. As a
consequence, investment demand remained weak for all but the most secure
property let on long-term leases.
The UK Government`s Comprehensive Spending Review is having a noticeable
impact on occupational demand and lease terms in regional markets dominated by
government occupiers. While the Group`s government-tenanted portfolio is
dominated by occupiers undertaking `core` government functions, many of which
are public facing, securing near-term renewals and re-lettings will be
challenging and an increase in vacancy is anticipated.
The UK stable income portfolio suffered a 7.9% like-for-like decline in values
over the period but provided stable income returns supported by the
exceptional covenant strength of its tenant and occupier base. Occupancy
remained high at 95% after the impact of a lease surrender of 89,636 sqft at
Sapphire House, Telford, in return for a GBP5.0 million surrender premium.
Key activity during the period included:
Lyon House& Equitable House, Harrow
Preparation for submission of a planning application is nearing completion
with a formal submission anticipated towards the end of this calendar year.
The application is for a mixed-use, residential led scheme of approximately
290,000 sqft. Significant progress has been made in securing a social housing
landlord for the affordable housing element of the scheme.
Sapphire House, Telford
The lease to Tatung (UK) Limited, with a remaining term of six years, was
surrendered in return for a tenant`s surrender premium of GBP5.0 million and
the transfer of all rights against the outgoing sub-tenant (Ministry of
Defence ("MoD")) for dilapidations liabilities. A dilapidations settlement of
approximately GBP0.9 million has been agreed with the MoD.
Coburg House, Southwark
A GBP0.8 million programme of refurbishment works has been completed following
agreement with Trillium to enter into a new 13 year lease with a break option
in 2018. The commencing rent of GBP315,000 per annum reflects GBP19.3psf with
a fixed increase to GBP336,000 per annum in year five, which will provide a
yield of 7.6% on the current value.
Churchill Court, Crawley
A comprehensive refurbishment of this 106,000 sqft building is underway, as
well as the creation of a show suite to enhance marketing of the vacant office
space. The programme is set for completion in November 2011.
It is anticipated the UK regional office market will remain challenging.
However the existing portfolio remains defensive from an income perspective
given the weighted average unexpired lease length of 8.0 years and the
strength of the tenant covenants. The long unexpired lease terms of between 9
and 18 years on the Kwik-Fit and petrol filling station portfolios have
provided stable values and secure income. Key objectives for 2012 will focus
on retaining income and occupancy and repositioning assets with better
alternative uses.
A strategy for improving the overall quality of the assets in the UK Stable
Income portfolio will be integrally linked to the refinancing of the Delta and
Gamma portfolios in 2012. The immediate and longer term strategy will be
focussed on reducing the overall number of assets in the portfolio through the
sale of smaller non-core assets and concentrating geographical exposure in
major regional centres with stronger growth prospects.
UK Retail
The Group`s UK Retail portfolio consists of sub-regional shopping centres
which dominate their catchment areas and a town centre redevelopment scheme
located in Crewe. The centres have generally performed well and delivered
consistent returns against a backdrop of severe stress in the retailing
environment caused by low consumer confidence, weak economic conditions and
the impact of technology on shopping patterns.
With retailing in the UK under pressure, retailers are looking to consolidate
through larger shop units in superior locations. The high street is set to
lose out in this rush to quality with leisure (cinema & restaurant) components
becoming an increasingly important element in the overall retail mix. With
the consumer under pressure and technology becoming a bigger factor, shopping
centre owners have to innovate continuously to attract shoppers to their
centres.
Increased pressure is also being put on landlords to reduce rentals and
service charges and provide more flexible lease terms. The Company is working
with its retailers in a constructive and positive manner to reduce
occupational costs. A number of capital projects are in place to improve the
quality of the centres.
The knock-on effects of reduced demand have caused numerous retailer
administrations and Company Voluntary Arrangements. The Company is fortunate,
however, that no single retail failure has had a significant impact on any of
its shopping centres and, where this has occurred, replacement tenants have
been secured without undue income loss.The Company has succeeded in
maintaining footfall through its portfolio and, with a void rate of less than
3% by area, it has managed to retain its tenants.
UK Retail at a glance
Market value Occupancy(by area)
GBP257.9million 97.4%
Annualised gross rental income ERV
GBP21.36million GBP21.5million
Footfall1 Footfall % change 2010/20111
30.1million (0.9%)
Net initial yield Lettable area (`000)
7.3% 1,590 sqft
Figures assume 100% ownership
Excludes Crewe
Definitions:
Estimated Rental Value (ERV); the estimated market rental value of lettable
space which could reasonably be expected to be obtained on a new letting or
rent review
ITZA; a means of analysing and comparing the rental value of retail space by
dividing it into zones parallel with the main frontage. The most valuable
zone, Zone A, is at the front of each unit. Each successive zone is valued at
half the rate of the zone in front of it.
The two major initiatives during the period have been the purchase of St
George`s Shopping Centre in Harrow and commencing the redevelopment of the
Birchwood Shopping Centre in Warrington. St George`s contains the locally
dominant cinema and food offering and provides a number of opportunities to
enhance the tenant profile and add value to the asset. Further details of
asset management activity are set out below.
Grand Arcade, Wigan
Market value Occupancy (by area)
GBP85.0 million 99.1%
Lettable area Annualised gross rental income
473,355 sqft GBP7.8 million
% Ownership Headline rent ITZA
50% GBP100
Number of stores Footfall per annum
48 6.8 million
Key Retailers: Debenhams, BHS, Boots, Marks & Spencer, Next, HMV, WH Smith
The centre traded well throughout the period and with the exception of one
unit external to the mall, was fully let at period end. A number of new
lettings were completed and Jane Norman and Faith Shoes were replaced post
their administrations. New tenants to the centre include, Republic on a 10
year lease in an 8,600 sqft unit, Skopes Menswear, FX Currency and Schuh.
Footfall decreased marginally, (0.3%) year-on-year, whilst the rental tone has
remained constant.
Byron Place, Seaham
Market value Occupancy (by area)
GBP16.8 million 100%
Lettable area Annualised gross rental income
115,377 sqft GBP1.3 million
% Ownership Headline rent ITZA
100% GBP40
Number of stores Footfall per annum
17 2.5 million
Key Retailers: Asda, Wilkinsons, Argos, Peacocks
Byron Place performed well and at period end was fully occupied.
It showed footfall growth of 2% over the previous year.
West Orchards, Coventry
Market value Occupancy (by area)
GBP45.0 million 98.0%
Lettable area Annualised gross rental income
210,188 sqft GBP4.2 million
% Ownership Headline rent ITZA
81.3% GBP100
Number of stores Footfall per annum
59 7.2 million
Key Retailers : Debenhams, Marks & Spencer, WH Smith, Republic, Peacocks
A significant amount of asset management activity has taken place in this
centre during the period. A major study was undertaken by a specialist in
food and restaurant operations to assess the food court (the major attraction
of the centre and main food draw in the centre of Coventry) following the
operator going into administration. Encouragingly, the report concluded that
the existing offer was correctly sized and appropriately pitched for the
market. It identified an improved mix and this is being implemented as part
of a new 15 year lease agreed with a new operator.
Elsewhere in the centre, ten leases expired with five being renewed, three
vacated and two are holding over. The following new tenants took space:
Skopes Menswear, Gimme Gizmo and Premier Leathers. Six rent reviews were
documented at nil increase.
It is pleasing to report that Thorntons signed a new five year lease, as did
the Apple reseller which also undertook a major store refurbishment to bring
it into line with latest Apple standards. There are currently four vacant
units which are being marketed. Crucially Debenhams continues to trade well
notwithstanding a decrease in footfall in the centre for the period. Steps
have been taken to reduce the service charge which had risen to an above
average level, through identifying operational efficiencies.
Birchwood, Warrington
Market value Occupancy (by area)
GBP30.0 million1 94.3%2
Lettable area Annualised gross rental income
393,264 sq ft1 GBP2.8 million1
% Ownership Headline rent ITZA
100% GBP45
Number of stores Footfall per annum
43 4.7 million
Key Retailers: Asda, New Look, Peacocks, Argos, Home Bargains
1 Current (before refurbishment)
2 Retail units vacated for refurbishment programme
Planning consent has been granted for the redevelopment of 46,000 sqft at the
eastern end of the centre. The initiative involves the replacement of the
weak tenant profile in this area through the expansion and reconfiguration of
the space to accommodate a 19,181 sqft anchor and two 9,000 sqft sub-anchors.
The balance of the space provides five smaller units ranging in size from
1,100 sqft to 635 sq ft. Deals have been concluded with the anchor (Home
Bargains) and one sub-anchor (QVC). Negotiations are in progress with a
tenant for the second sub-anchor unit. Active marketing of the remaining
units will be initiated closer to works completion. Construction commenced in
October 2011.
Thirteen leases expired during the period with five tenants renewing and eight
vacating. All eight are part of the redevelopment area where a number of
short term leases and licences were agreed with tenants. All agreements were
arranged to provide vacant possession in accordance with the phased format of
the redevelopment.
Of the four outstanding rent reviews, three were settled, with Domino`s at a
3% uplift; Done Brothers at a 4% uplift and ASDA at a 6.9% uplift. Further
rental uplifts are anticipated to be limited.
Footfall for the period was 0.5% down on the same period last year.
St George`s, Harrow
Market value Occupancy (by area)
GBP64.0 million 99.1%
Lettable area Annualised gross rental income
215,489 sqft GBP4.2 million
% Ownership Headline rent ITZA
100% GBP100
Number of stores Footfall per annum
30 8.9 million
Key Retailers : Wilkinson, Boots, TK Maxx, H&M, Vue
The centre, acquired in July 2011, is already trading ahead of management
expectations.
A new centre manager has been appointed and a number of asset management
initiatives are underway. These include a cosmetic upgrade to the floor and
walls of the mall, increasing the lighting levels, rebranding and generally
improving the appearance and quality of the centre.
New leases have been agreed with Rymans, Toni & Guy and Vision Express. Short
term leases have been agreed with three tenants in an area adjacent to a large
store which becomes vacant in 2012. Negotiations are underway for a major
tenant to take the space created by combining the four individual units.
Footfall was up 3.4% on the same period last year.
Delamere Place, Crewe
A detailed plan has been formalised for a phased redevelopment of the scheme.
A decision will be taken in 2012/13 as to when to commence with the
development proposal. This will depend on retailer demand for new space and
an economic return being achieved. In the interim the centre will continue to
be managed for short term cash generation.
Hotels
The Group owns six hotel properties branded as Holiday Inn, Holiday Inn
Express and Crowne Plaza, five of which are located in Greater London and one
in the South East. The focus on branded, limited service hotels in Greater
London provides for defensive underlying occupancies in line with the
Company`s income focus.
The Greater London hotel market was buoyant throughout the period with average
occupancy levels of 82.1%, up 0.7% on 2010 and revenue per available room
("Revpar")of GBP106.7 up 10.1% on 2010.The Group`s tenant performed in line
with these figures for the period under review. Whilst a fixed lease is in
place with the hotel operator, the Group should benefit through EBITDA based
rental growth going forward.
Key activity during the period included:
Acquisition of Crowne Plaza, Reading
Crowne Plaza, Reading was acquired out of administration from the Pederson
Hotel Group for a price of GBP12.8 million. The hotel was refurbished by the
Pederson Group approximately 12 months prior to acquisition for a reported
GBP8.0 million. The hotel has 122 bedrooms and is ideally located on the
Thames in Reading and remains the best performing hotel in its competitive
set.
Holiday Inn Express, Southwark
The Southwark Holiday Inn Express is awaiting planning approval for an
additional 50 rooms which, if approved, will see an investment of up to GBP13
million to double the existing capacity of the hotel. The extension is being
driven by high occupancy and excess demand.
Refurbishment programme
The initial phase of a portfolio refurbishment programme commenced with the
refurbishment of the common areas of the Royal Docks Holiday Inn Express.
HD flat screens have been installed in all hotels and an upgrade of all
wireless connectivity is underway to ensure the hotels remain competitive and
in line with on-going guest requirements. There is an established fixtures,
fittings and equipment reserve to meet the capital requirements of the
proposed refurbishment programme.
Prospects
There are a significant number of hotels and hotel portfolios coming onto the
market, driven mainly by owners being forced to exit investments due to
refinancing requirements and LTV breaches. Banks holding hotel debt are in
the process of exploring exit strategies and assessing demand for these
assets. The Group is exploring a number of opportunities and will seek to
take advantage of these where possible.
London is likely to have a record year off a high base in 2012. Well
publicised events include the Olympics, the Para Olympics and the Farnborough
Air Show. The impact of a weaker global economy and the traditional trough
periods pre and post major events are unknown, however PriceWaterhouse Coopers
has forecast between 0.9% to 8.4% Revpar growth increases over the 2011 - 2012
calendar years.
According to Investment Property Databank, hotels were the best performing
sector in the UK property market over the last 10 years providing an annual
total return of 9%. Expectations are that hotels will continue to outperform,
with the strong income generation underpinning the investment case.
Europe
Against a backdrop of significant macro-economic instability, the European
portfolio has performed strongly at an operating level with occupancy levels
close to 100% and consistent cash flows from rental income. The Swiss
portfolio, of coop retail units, benefited from a strong appreciation of the
Swiss Franc to Sterling over the period.
Seven lease extensions in Germany, ranging from 10 to 15 years, were entered
into during the period with anchor tenants such as Lidl and Kik. Further lease
extensions are at an advanced stage of negotiations.
Key activity during the period included:
VBG portfolio
Following negotiations with the servicer, a marketing process is underway to
test potential sales values of the Cologne and Stuttgart properties from the
former Wichford portfolio. These properties, which make up the VBG2 portfolio,
may be disposed of in the near future following the maturity of the CMBS debt
facility secured against them and on-going consultation with the facility
servicer. There are on-going discussions in relation to the VBG1 portfolio,
although a similar process to VBG2 is anticipated in 2012. Further
information is provided within the Financial Review.
OBI acquisition, Germany
Acquisition of a 50% interest in two properties both leased to OBI, one of
Europe`s largest DIY stores, was completed. The leases are for 15 years
indexed to German CPI. The acquisition price of GBP20.9 million reflects a
net initial yield of 7.0%.
COOP, Switzerland rent review
A 10% rental increase was agreed through the operation of the turn-over
clause.
Germany
While Europe is currently experiencing a sovereign debt crisis, the European
portfolio is proving to be resilient as it was during the period between 2007
and 2009. The Group`s largely German portfolio provides exposure to one of
Europe`s strongest economies which is anticipated to perform well relative to
other European countries.
The Group will continue to look for opportunities to exit non-core properties
acquired in the reverse acquisition process in order to rationalise the
portfolio and reduce overall gearing levels. The strategy going forward will
focus on simple format discount retailers and DIY stores which have proved
defensive and provided consistent income returns.
Cromwell
Cromwell is an internally managed Australian Real Estate Investment Trust (A-
REIT) with a property investment portfolio in excess of AUD1.4billion
(GBP900million) together with a funds management business that promotes and
manages unlisted property investments. Cromwell has an enviable track record
of developing and owning high quality investment products whilst delivering
consistent returns to investors. It has approximately AUD1.8billion (GBP1.18
billion) of assets under management and manages 27 commercial, industrial and
retail properties throughout Australia.
Cromwell trades on the Australian stock exchange as a stapled security
comprising Cromwell Corporation Limited (which manages the funds management
brand and the property operations) and Cromwell Diversified Property Trust
(which owns the AUD1.4billion property portfolio). Cromwell delivers over 95%
of the earnings from its property portfolio. The portfolio occupancy stands at
99.6% and has one of the longest unexpired weighted-average lease lengths (6.8
years at 30 June 2011) in the A-REIT sector.
On 2 March 2011 Redefine International exercised its option to acquire a
further 35,000,000 stapled securities in Cromwell increasing its shareholding
from 19.6% to 22.2%. The increase in shareholding, together with the addition
of Michael Watters joining the board of Cromwell, resulted in the investment
now being equity accounted as an associate rather than being carried at fair
value. The transaction consolidated Redefine International`s position as
Cromwell`s largest shareholder, and the Group has since increased its
shareholding to 22.66%. Redefine International`s investment in Cromwell
provides a healthy diversification of assets and Cromwell`s income-focused
portfolio is in line with the Group`s strategy. Cromwell has an excellent
management team and an outstanding portfolio of assets; these should result in
strong returns.
In addition to the strong returns produced by the underlying business, the
return on the Cromwell investment has been bolstered by the weakening of
Sterling to the Australian dollar. Should Sterling strengthen and remain
relatively stronger, a portion of this gain will reverse.
Cromwell`s performance and outlook
Cromwell produced strong operating and financial results for their financial
year ending 30 June 2011. Highlights included:
- Statutory accounting profit of AUD88.1 million or 9.6 cents per share
- Operating earnings of AUD65.3 million or 7.1 cents per share,
distributions of 7.0 cents per share
- Net increase in property valuations of 2.5%, net tangible assets per
security increased to AUD0.73
- No material debt maturity until July 2013
- Agreement signed to expand Qantas Global Headquarters and extend lease
term to 2032
- 2012 financial year operating earnings guidance of 7.3 cents per share,
distributions of 7.0 cents per share (a forward yield of 10% on the 31
August 2011 share price)
Cromwell`s strategy remains focused on managing a portfolio of Australian
assets with long lease profiles and quality tenants. Growth in operating
earnings is expected to be underpinned by property earnings before the
contribution from new funds or other transactions. Cromwell is well positioned
to deliver the strong property income returns historically achieved whilst
being able to take advantage of current market conditions to buy quality
property at attractive prices. Cromwell aims for 4% annual growth in "like
for like" property income.
Portfolio summary
Portfolio overview by business segment
Business segments - values
Properties Lettable Market Segmental Net
No. Area Value Split by initial
Sqft `000 GBP`milli Value Yield
on % %
UK Stable Income 135 3,723 503.3 40.7% 7.5%
UK Retail 6 1,590 257.9 20.9% 7.3%
Hotels 6 268 123.4 10.0% 7.1%
Europe 37 1,971 248.5 20.1% 7.6%
Cromwell n/a n/a 102.5 8.3% 8.2%
Total investment 184 7,552 1,235.6 100.0% 7.7%
portfolio
Notes:
1. Cromwell reflects share of market value
2. Cromwell`s portfolio consist of 21 assets with a market value of AUD
1,444.9 million as at June 2011
3. Figures reflect 100% ownership of property assets
Business segments - income
Annualise Average Weighted Occupancy Indexatio
d gross rent per average % n and
income sqft unexpired by area fixed
GBP`milli lease increases
on term %
years
UK Stable Income 40.0 10.7 8.0 95.0% 54.6%
UK Retail 21.4 13.4 11.7 97.4% 5.5%
Hotels 9.3 34.7 14.3 100.0% -
Europe 20.0 10.1 8.3 100.0% 100.0%
Cromwell 10.0 n/a 6.8 99.6% 75.0%
Total investment 100.7 13.3 9.3 97.0% 32.1%
portfolio
Notes:
1. Cromwell income reflects last quarterly dividend of 1.75 Australian cents
annualised
2. Total occupancy excludes Cromwell
3. Figures reflect 100% ownership of property assets
Business segments - valuation movement
Proportion Market value Valuation Valuation
of portfolio 31 August movement six movement
by value 2011 months ended 12 months
% GBP`million 31 August %
2011
%
UK Stable Income 40.3% 497.7 (4.0%) (7.9%)
UK Retail 15.7% 193.9 - (2.8%)
Hotels - - - -
Europe 18.5% 228.3 2.5% 4.7%
Cromwell 6.9% 84.8 (0.4%) 13.4%
Total like-for-like 81.4% 1,004.7 (1.3%) (2.7%)
portfolio
Acquisitions 18.6% 230.9 6.6% 4.5%
Total investment 100.0% 1,235.6 (0.8%) (1.4%)
portfolio
Notes:
1. Acquisitions reflect purchase price excl. acquisition costs
Portfolio overview by sector
Property sectors at 31 August 2011
Market Occupancy Lettable area Net rental Income
values % sqft`000 GBP`million
GBP`million
Retail 374.8 98.3% 2,524 27.6
Office 593.2 95.3% 3,938 48.0
Industrial 41.0 100.0% 816 3.0
Hotels 123.4 100.0% 268 9.3
Other 0.7 100.0% 6 1.0
Total 1,133.1 97.0% 7,552 88.9
Notes:
1. Excludes Cromwell
Financial review
Overview
The results for the period ended 31 August 2011 reflect the first set of
results for the enlarged group following the reverse acquisition. As a result
of the application of reverse takeover accounting the results reflect those of
RIHL for the twelve month period to 31 August 2011and do not give a true
reflection of the enlarged Group`s underlying earnings available for
distribution for the period.
Significant transactions since the interim period include the reverse
acquisition of Wichford as well as the acquisitions of the St George`s
Shopping Centre ("St George`s") and the Crowne Plaza Hotel in Reading.
The Company`s financial and strategic position has been strengthened through
the creation of an enlarged group which, together with RIN and Redefine
Properties` agreement to support a capital raising of up to GBP100 million,
will significantly enhance the Group`s capital structure and gearing ratios.
The reverse acquisition resulted in one-off acquisition costs of GBP6.2
million that were largely incurred within the second half of 2011.GBP0.91
million of these costs are reflected in the statement of comprehensive income,
the balance of GBP2.1 million is included within Share Premium and Wichford
acquired reserves. Following the reverse acquisition, the Board anticipates
annual cost savings from synergies amounting to approximately GBP0.3 million
per annum. The majority of these savings are expected to be implemented from
the end of 2011 with further cost benefits taking effect in 2012.
The enlarged Group has gross assets of GBP1.27billion at 31 August 2011, a
significant increase of 195% from the prior period.
As a result of the stronger capital base and capital commitment, it is
expected that the Group will benefit from improved access to funding, at an
attractive cost. This is particularly important for the refinancing of the
Gamma and Delta facilities due to mature in October 2012 which have a nominal
value of GBP314.3 million.
Earnings available for distribution
The earnings available for distribution represent the earnings available for
distribution for RIHL for the financial period ended 31 August 2011 and the
acquired earnings available for distribution for Wichford during the five
month period ended 31 August 2011.Earnings available for distribution exclude
any capital and one-off items and the figure is used by the Board as its
measure of underlying earnings performance. Earnings available for
distribution have increased by GBP12.8 million to GBP20.3 million. This is due
to the acquired Wichford earnings (relating to the five month period ended 31
August 2011), the acquisition of the hotel portfolio, St George`s and the OBI
portfolio in Germany. The effect of the full twelve month holding of the
investment in Cromwell has also meant an increase in GBP5.8 million of
distributions, net of withholding tax. Net Cromwell distributions received
during the period amounted to AUD12.8 million (GBP8.4 million) at an average
of 1.75 Australian cents per unit. Apart from a one-off distributable amount
of GBP0.9 million related to the discount received on the Malthurst portfolio
loan settlement, the earnings available for distribution reflect recurring
earnings.
The Company`s policy is to distribute the majority of its earnings available
for distribution in the form of dividends to shareholders. The Wichford
shareholders on the shareholder register on 3 June 2011 received an interim
dividend of 0.32 pence per share for the six month period ended 31 March 2011
as declared on 23 May 2011. Shareholders of RIHL on the shareholder register
on 13 May 2011 received an interim dividend of 2.03 pence per RIHL share for
the six month period ended 28 February 2011 as declared on 3 May 2011.
Considering the earnings available for distribution at the period end, the
Board has declared a second interim dividend of 2.10 pence per share. Taken
together with the interim dividend of 2.03 pence per share, total dividends
for the period are 4.13 pence per share (2010:3.21 pence), slightly ahead of
the forecasted distribution per share in the reverse acquisition prospectus.
Statement of earnings available for distribution 12 Month 11 Month
(unaudited) period period
For the period ended 31 August 2011 ended ended
31 August 31 August
2011 2010
GBP`000 GBP`000
Gross rental income from investment properties 27,335 13,380
Property operating expenses (2,957) (1,661)
Net operating income from investment properties 24,378 11,719
Investment income 3,875 3,207
Fee income 1,010 420
Other income 277 325
Total revenue 29,540 15,671
Expenses (4,245) (2,335)
Administrative expenses (774) (466)
Investment management fees (2,431) (1,227)
Professional fees (1,040) (642)
Net operating profit 25,295 13,336
Share of distributable income of associates 7,183 3,363
Gain on financial assets and liabilities 840 -
Non-controlling interest (569) (257)
Adjusted operating profit 32,749 16,442
Net finance charges (14,978) (8,744)
Interest paid (23,112) (12,363)
Interest received 8,134 3,619
Foreign exchange loss (329) (6)
Taxation (291) (200)
Profit before earnings adjustments 17,151 7,492
Wichford acquired earnings 3,166 -
Earnings available for distribution for the period 20,317 7,492
ended
Interim distribution (8,395) (2,719)
Earnings available for distribution at the period end 11,922 4,773
Earnings available for distribution per share
Earnings available for distribution 11,922 4,773
Number of Ordinary Shares (`000) 567,644 238,706
Actual number of shares in issue on 31 August 567,644 304,706
Shares not qualifying for distribution at the period - (66,000)
end
Earnings available for distribution per share (pence) 2.10
2.00
Summary
Distribution per share (pence)
4.13 3.21
Interim
2.03 1.14
Second interim
2.10 2.07
Earnings per share
Basic earnings per share were 1.18 pence, an increase of 148% compared to the
loss of 2.46 pence per share in the prior period. The improvement was
predominantly due to the increase in earnings available for distribution and
the mark to market and foreign exchange revaluation of the investment in
Cromwell, partly offset by additional shares issued during the period. EPRA
earnings per share were 4.00 pence compared to a loss of 0.67 pence in the
prior period.
Net assets
The table below summarises the key movements in the net asset value over the
period. The reverse acquisition had a slightly dilutive impact on NAV per
share due to the reverse acquisition costs incurred.
Fully diluted EPRA NAV per share, which adds back the cumulative fair value
movements on interest rate swaps and similar instruments as well as deferred
tax, increased 4.0% to 50.72 pence per share. EPRA NAV is used as a reporting
measure to better reflect underlying net asset value attributable to
shareholders by removing non-cash fair value adjustments not anticipated to be
realised.
Net assets attributable to equity shareholders
(unaudited)
As at 31 August 2011
31 August 31 August
2011 2010
GBP`000 GBP`000
Net assets at the beginning of the period 142,506 43,098
Profit after tax attributable to equity shareholders 5,035 (4,915)
Earnings available for distribution 20,317 7,492
Wichford acquired earnings (3,166) -
Fair value adjustment on investment property (10,627) (2,167)
Equity accounted earnings 82 2,668
Impairment of equity accounted investments (6,326) (6,478)
Mark-to-market on derivative financial instruments 2,833 (1,755)
Other 1,922 (4,675)
Ordinary Shares issued during the period 71,539 109,601
Reverse acquisition costs (2,134) -
Reverse acquisition of Wichford 52,535 -
Equity instrument recognised 13,768 -
Dividends (13,964) (3,685)
Currency translation reserve movement 8,277 (1,738)
Other reserve movements (258) 145
Net assets at the end of the period 277,304 142,506
Fair value of derivative financial instruments 22,354 6,107
Deferred tax 2,239 -
EPRA net assets as the end of the period 301,897 148,613
Fully diluted number of shares in issue 595,181 304,706
Fully diluted NAV per share (pence) 46.59 46.77
Fully diluted EPRA NAV per share (pence) 50.72 48.77
Cashflow
The cash flow statement shows net cash inflow before financing costs of
GBP35.1 million (2010:GBP12.9 million), a substantial improvement from 2010,
driven mainly by the increased investment in Cromwell.
The Group`s cash balance at 31 August 2011 was GBP51.4 million of which
GBP11.4million is restricted against bank borrowings. The Company benefitted
from the acquisition of GBP32.3 million of unrestricted cash reserves through
the reverse acquisition with Wichford which it has partly utilised, post
period end, to settle short-term debt facilities.
Operating cash flows after interest and taxation amounted to GBP12.3 million.
A net GBP63.1 million was spent on investment property, principally relating
to the acquisitions of St George`s, the Hotel Portfolio and the OBI portfolio.
The acquisitions were funded by a GBP20.4 million capital raising in respect
of St George`s and capital raised during the listing of RIN on the JSE. The
additional investment in Cromwell amounting to GBP16.4 million was financed by
a facility provided by Investec Australia.
The repayment of loans and borrowings included a one-off repayment of the
Citibank facility on Malthurst amounting to GBP17.0 million.
Dividends paid during the period (including scrip dividends), being the final
August 2010 dividend and the February 2011 interim dividend amounted to
GBP14.2 million.
Financing and Capital
The Group`s nominal value of its senior debt facilities and working capital
facility at 31 August 2011 was GBP863.1 million and GBP852.5 million including
its attributable share of debt in subsidiaries and joint ventures. Overall
gearing levels and weighted average maturities have been influenced by the
take-on of Wichford`s shorter-term debt maturity profiles, however, there is a
strategy for dealing with each of these maturities, including a substantial
capital commitment from the Company`s largest shareholder to support its share
of a GBP100.0 million capital raising before October 2012.
The key financing statistics are summarised below.
Key financing statistics as at 31 August 2011
Group
GBP`000
Gross Debt 863,149
Cash and short-term deposits (51,368)
Net debt 811,781
Weighted average debt maturity 4.15 years
Weighted average interest rate 5.01%
% of debt at fixed/capped rates 92.9%
Loan to value 75.4%
The Group`s weighted average debt maturity is 4.2 years and 4.6 years on a see
through basis.
The EUR52.8million VBG2 facility matured in April 2011. Following
restructuring discussions, the loan servicer has agreed for a consensual
marketing process of the Cologne and Stuttgart properties secured against the
loans. A standstill agreement including a waiver of the LTV covenant has been
agreed in the interim while a marketing process is conducted. The loan
security is limited to the underlying property assets and property owning
companies with no recourse to the Group despite the current LTV ratio of
128.7%. A potential sale of these assets will reduce the Group`s gearing ratio
and is in line with the strategy of exiting from non-core assets.
The Group is in the process of reviewing all options related to the GBP314.3
million Delta and Gamma facilities ahead of the October 2012 maturity date. A
process of identifying new sources of finance as well as restructuring options
is underway. The current low interest rate environment presents opportunities
to refinance at attractive rates; although a rigorous approach will be taken
to assess shareholder returns on any new equity commitments.
The EUR65.6million VBG1 facility matures in January 2012 and preliminary
discussions with the loan servicer are underway. As with the VBG2 loan, the
non-recourse nature of the loan provides the Group with a number of options at
its disposal, none of which demand the commitment of additional equity.
The Delamere Place, Crewe facility was set for expiry in November 2011. Aviva
credit approval has been obtained to extend the facility for four months while
approval is sought for a long term restructuring of the facility. There are
currently no financial covenant breaches in terms of the loan facility.
As at 31 August 2011 the Malthurst portfolio was ungeared. A new GBP11.8
million facility was put in place on 30 September 2011 with a five year term
at an all-in rate of 4.19%. The loan reflects an LTV of 49.3%, in line with
the Group`s strategy of reducing LTV`s, and has allowed the Group to take
advantage of the current low interest rate environment.
The Board remains committed to improving the level of gearing across the
portfolio and the proposed capital raising will significantly increase the
refinancing options available to the Group. In limited cases, financial
covenants are exceeded and where this occurs the Group will work with lenders
to rectify the breaches on a reasonable basis. Material covenants under
discussion or subject to waivers are summarised below. Refer to note 18 for
details on all banking facilities.
Significant effort is being directed to achieving a stable and sustainable
capital structure and to reap the benefits associated with that.
Facility Lender Maturity Principal ICR ICR LTV LTV
GBP`millio Covenant Ratio Covenant ratio
n % % % %
VBG1 Talisman January 58.1 120 282 n/a 122
3 2012
VBG2 Talisman April 46.8 115 176 n/a 129
4 2011
Ciref RBS September 16.2 120 164 90 93
Berlin 2014
Notes:
1 VBG1
The loan has a current LTV of 122%. It is anticipated that the loan servicer
will request a market testing exercise and may look to sell the assets with co-
operation from the borrowing SPVs. There is an existing LTV waiver until
January 2012. The loan is non-recourse to the Group.
2 VBG2
The loan has a current LTV of 129%. The servicer has requested a market
testing exercise which is in progress and may look to sell the assets (with co-
operation from the borrowing SPVs) should acceptable offers be forthcoming.
There is an existing LTV waiver until January 2012. The loan is non-recourse
to the Group.
3 RBS (Ciref Berlin)
The LTV breach is anticipated to be rectified on completion of the extension
works to the Lidl stores and resulting lease re-gears which should provide a
sufficient value uplift to cure the temporary LTV breach. A new ten year lease
has also been signed with Kik and Tedi with regards to the property in Tarp.
RBS have agreed to waive the LTV covenant while asset management initiatives
are in place and capital is invested into the portfolio.
Hedging
The Group utilises derivative instruments, including interest rate swaps and
interest rate caps to manage its interest-rate exposure. At 31 August 2011,
the net fair value liability of the Group`s derivative financial instruments
was GBP22.4million. This increase is directly related to the decrease in long
and short term interest rates in the year - indicative five year swap rates
moved from 2.07% to 1.97% during the period.
The Group has a hedging policy which requires at least 75% of all interest
rate exposures exceeding one year to be on a fixed rate basis. At 31 August
2011, Group debt (including its economic interest of subsidiaries and joint
ventures) was 93.1%fixed. For facilities with interest rate swaps attached,
the interest rates are fixed for the duration of the facility. The Group has
not applied hedge accounting during the current period and hence changes in
the fair value of the Group`s hedging instruments have been recognised in
profit or loss.
Taxation
The Company is tax resident in the Isle of Man and property investment
portfolios are, generally, owned by single property owning SPV companies which
are tax resident outside the UK. The UK government announced on 23 March 2011
that it intends to consult with the property industry and other interested
parties on lowering the barriers and regulatory hurdles to enter the REIT
regime. In view of these proposed changes and the potential benefits of REIT
status, the Board will consider the possibility of converting to a UK REIT, as
it believes conversion to REIT status is attractive to UK and international
real estate investors and may facilitate access to capital, particularly from
institutional investors.
An initial feasibility study has been performed and once the conclusions of
the REIT consultation process have been announced, the Company will make a
decision as to whether conversion to REIT status is in the best interests of
shareholders.
The tax charge for the period includes a deferred tax charge of GBP0.6million
relating to the increase in value of the Cromwell investment. The current tax
charge accrued for the period of GBP0.6 million includes income taxes as well
as real estate taxes specific to the jurisdictions in which the investment
properties are located. Withholding taxes incurred amounting to GBP0.2million,
relate to the distributions received from the investment in Cromwell.
Statement of Directors` Responsibilities
The Directors are responsible for preparing the Directors` Report and the
Financial Statements in accordance with applicable law and regulations.
Isle of Man Companies Acts 1931-2004 (as amended) requires the Directors to
prepare Group financial statements for each financial year. Under the Listing
Rules issued by the London Stock Exchange, the Directors are required to
prepare the Group financial statements in accordance with International
Financial Reporting Standards (IFRS) as adopted by the EU and as applied in
accordance with the Isle of Man Companies Acts 1931-2004 (as amended).
The Group financial statements are required by law and IFRS as adopted by the
EU, to present fairly the financial position and performance of the Group. The
Isle of Man Companies Acts 1931-2004 (as amended) provide in relation to such
financial statements that references in the relevant part of the law to
financial statements giving a true and fair view are references to their
achieving a fair presentation.
In preparing each of the Group financial statements, the Directors are
required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state that the financial statements comply with IFRS as adopted by the EU as
applied in accordance with the Isle of Man Companies Acts 1931-2004 (as
amended); and
prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Group will continue in business.
Under applicable law and the requirements of the Listing Rules issued by the
London Stock Exchange, the Directors are also responsible for preparing a
Directors` Report and reports relating to Directors` remuneration and
corporate governance that comply with that law and those Rules. In particular,
in accordance with the Disclosure and Transparency Rules ("the DTR"), the
Directors are required to include in their report a fair review of the
business and a description of the principal risks and uncertainties facing the
Group and a responsibility statement relating to these and other matters,
included below.
The Directors are responsible for keeping proper books of accounts that
disclose with reasonable accuracy at any time the financial position of the
Group and enable them to ensure that the financial statements comply with the
Isle of Man Companies Acts 1931-2004 (as amended) and, as regards the Group
financial statements, Article 4 of the IAS Regulation. They are also
responsible for taking such steps as are reasonably open to them to safeguard
the assets of the Group and to prevent and detect fraud and other
irregularities.
Responsibility statement, in accordance with the transparency regulations
Each of the Directors confirms that to the best of each person`s knowledge and
belief;
- the Group financial statements, prepared in accordance with IFRS as
adopted by the EU, give a true and fair view of the assets, liabilities
and financial position of the Group at 31 August 2011 and its profits for
the period then ended;
- the Directors` Report together with the Business Review includes a fair
review of the development and performance of the business and the
position of the Group, together with a description of the principal risks
and uncertainties that they face.
The Board of Directors
1 November 2011
Financial Statements
Consolidated Statement of Comprehensive Income
For the period ended 31 August 2011
12 Month 11 Month
period period
ended ended
31 Aug 31 Aug
2011 2010
Notes GBP`000 GBP`000
Revenue
Gross rental income 26,823 13,267
Investment income 3,875 2,560
Other income 1,592 673
Total revenue 32,290 16,500
Expenses
Administrative expenses (774) (466)
Investment adviser and professional fees (4,664) (3,406)
Property operating expenses (2,368) (1,661)
Net operating income 24,484 10,967
Gain/(loss) from financial assets and 13,540 (544)
liabilities
Equity accounted loss (3,088) (3,525)
Impairment of loans to joint ventures (444) (598)
Net fair value losses on investment property 8 (10,627) (2,167)
Amortisation/impairment of intangible assets 11 (591) (345)
Profit from operations 23,274 3,788
Interest income 5 8,134 3,381
Interest expense 6 (24,305) (12,363)
Share based payment 17 (768) -
Foreign currency loss (1,224) (6)
Profit/(loss) before tax 5,111 (5,200)
Taxation 7 (1,360) (200)
Profit/(loss) after tax 3,751 (5,400)
Profit/(loss) attributable to:
Equity holders of the parent 5,035 (4,915)
Non-controlling interests (1,284) (485)
Profit/(loss) after tax 3,751 (5,400)
Other comprehensive income
Foreign currency translation on foreign 1,927 (43)
operations - subsidiaries
Foreign currency translation on foreign 4,882 (217)
operations - joint ventures and associates
Share of foreign currency movement recognised 1,494 (1,494)
in associate undertaking
Share of cash flow hedge reserve movement (155) 155
recognised in associate undertaking
Total comprehensive income for the period 11,899 (6,999)
Total comprehensive income attributable to:
Equity holders of the parent 13,157 (6,498)
Non-controlling interests (1,258) (501)
Total comprehensive income for the period 11,899 (6,999)
Basic earnings/(loss) per share (pence) 21 1.18 (2.46)
Diluted earnings/(loss) per share (pence) 21 1.11 (2.46)
Consolidated Statement of Financial Position
As at 31 August 2011
31 Aug 2011 31 Aug 2010
Notes GBP`000 GBP`000
Assets
Non-current assets
Investment property 8 986,654 227,675
Long-term receivables 9 104,080 48,160
Investments designated at fair value 10 1,123 75,139
Intangible assets 11 - 7,559
Investments in joint ventures 13 2,607 2,041
Investments in associates 14 104,680 18,923
Total non-current assets 1,199,144 379,497
Current assets
Trade and other receivables 23,785 13,233
Cash at bank 15 51,368 35,411
Total current assets 75,153 48,644
Total assets 1,274,297 428,141
Equity and liabilities
Capital and reserves
Share capital 16 40,870 10,621
Share premium 161,420 161,420
Reverse acquisition reserve 134,295 42,365
Retained earnings (87,598) (78,327)
Other reserve 3,912 3,912
Currency translation reserve 10,637 2,360
Cash flow hedge reserve - 155
Capital instrument 17 13,768 -
Total equity attributable to equity 277,304 142,506
shareholders
Non-controlling interest 5,506 2,254
Total equity 282,810 144,760
Non-current liabilities
Borrowings 18 811,415 161,156
Derivatives 19 6,824 4,529
Deferred tax 7 2,239 -
Total non-current liabilities 820,478 165,685
Current liabilities
Borrowings 18 117,071 100,003
Derivatives 19 16,291 1,578
Trade and other payables 37,647 16,115
Total current liabilities 171,009 117,696
Total liabilities 991,487 283,381
Total equity and liabilities 1,274,297 428,141
Basic net asset value per share (pence) 22 48.85 46.77
Diluted net asset value per share (pence) 22 46.59 46.77
Number of ordinary shares in issue 21 567,643,792 304,706,406
Consolidated Statement of Changes in Equity
For the period ended 31 August 2011
Share Share Reverse Treas- Retained Other
capital premium acqui- ury earnings reserve
sition shares
reserve
GBP`000 GBP`000 GBP`000 GBP`000 GBP`000 GBP`000
Balance at 1 739 104,127 - (61) (69,717) 3,912
October 2009
Total loss for - - - - (4,915) -
the period
Foreign - - - - - -
currency
translation
effect
Effective - - - - - -
portion of cash
flow hedges
Total - - - - (4,915) -
comprehensive
income
Shares issued 2,308 110,553 - - - -
Share issue - (3,260) - - - -
costs
Dividend paid - (61) - 61 (3,685) -
to equity
stakeholders
Dividends paid - - - - - -
to non-
controlling
interests
Increase in non-- - - - (10) -
controlling
interest
Contribution of - - - - - -
non-controlling
shareholders
Balance at 31 3,047 211,359 - - (78,327) 3,912
August 2010
Adjustment to 7,574 (49,939) 42,365 - - -
present
Wichford
capital
structure
Restated 10,621 161,420 42,365 - (78,327) 3,912
balance at 31
August 2010
Balance at 31 3,047 211,359 - - (78,327) 3,912
August 2010
Total profit - - - - 5,035 -
for the period
Foreign - - - - - -
currency
translation
effect
Effective - - - - - -
portion of cash
flow hedges
Total - - - - 5,035 -
comprehensive
income
Shares issued 1,471 73,096 - - - -
Share issue - (3,028) - - - -
costs
Dividend paid - - - - (13,964) -
to equity
stakeholders
Scrip dividend 4 235 - - (239) -
paid to equity
stakeholders
Dividends paid - - - - - -
to non-
controlling
interests
Convertible - - - - - -
shares to be
issued
Share based - - - - - -
payment
Decrease in non-- - - - (103) -
controlling
interest
Contribution of - - - - - -
non-controlling
shareholders
Adjustment to 6,099 (120,242) 114,143 - - -
present
Wichford
capital
structure
Shares issued 32,557 - 19,978 - - -
pursuant to
reverse
acquisition
Cancellation of (2,308) - 2,308 - - -
shares
Share issue - - (2,134) - - -
costs
Balance at 31 40,870 161,420 134,295 - (87,598) 3,912
August 2011
Currency Cash Capital Total Non- Total
trans- Flow instru- attrib- Control- equity
lation Hedge ment utable ling
reserve reserve to interest
equity
share-
holders
GBP`000 GBP`000 GBP`000 GBP`000 GBP`000 GBP`000
Balance at 1 4,098 - - 43,098 2,512 45,610
October 2009
Total loss for - - - (485)
the period (4,915) (5,400)
Foreign (1,738) - - (16)
currency (1,738) (1,754)
translation
effect
Effective - 155 - 155 - 155
portion of cash
flow hedges
Total (1,738) 155 - (501)
comprehensive (6,498) (6,999)
income
Shares issued - - - 112,861 - 112,861
Share issue - - - -
costs (3,260) (3,260)
Dividend paid - - - -
to equity (3,685) (3,685)
stakeholders
Dividends paid - - - - (14) (14)
to non-
controlling
interests
Increase in non-- - - (10) 10 -
controlling
interest
Contribution of - - - - 247 247
non-controlling
shareholders
Balance at 31 2,360 155 - 142,506 2,254 144,760
August 2010
Adjustment to - - - - - -
present
Wichford
capital
structure
Restated 2,360 155 - 142,506 2,254 144,760
balance at 31
August 2010
Balance at 31 2,360 155 - 142,506 2,254 144,760
August 2010
Total profit - - - 5,035 (1,284) 3,751
for the period
Foreign 8,277 - - 8,277 26 8,303
currency
translation
effect
Effective - (155) - (155) - (155)
portion of cash
flow hedges
Total 8,277 (155) - 13,157 (1,258) 11,899
comprehensive
income
Shares issued - - - 74,567 - 74,567
Share issue - - - -
costs (3,028) (3,028)
Dividend paid - - - -
to equity (13,964 (13,964
stakeholders ) )
Scrip dividend - - - - - -
paid to equity
stakeholders
Dividends paid - - - - (81) (81)
to non-
controlling
interests
Convertible - - 13,000 13,000 - 13,000
shares to be
issued
Share based - - 768 768 - 768
payment
Decrease in non-- - - (103) (326) (429)
controlling
interest
Contribution of - - - - 4,917 4,917
non-controlling
shareholders
Adjustment to - - - - - -
present
Wichford
capital
structure
Shares issued - - - 52,535 - 52,535
pursuant to
reverse
acquisition
Cancellation of - - - - - -
shares
Share issue - - - -
costs (2,134) (2,134)
Balance at 31 10,637 - 13,768 277,304 5,506 282,810
August 2011
Consolidated Statement of Cash Flows
For the period ended 31 August 2011
12 Month 11 Month
period period
ended ended
31 Aug 31 Aug
2011 2010
Notes GBP`000 GBP`000
Cash flows from operating activities
Profit/(loss) for the period before tax 5,111 (5,200)
Adjusted for:
Straight lining of rental income 169 -
Amortisation/impairment of intangible assets 11 591 345
Net fair value losses on investment property 8 10,627 2,167
Foreign exchange loss 1,224 6
(Gain)/loss from financial assets and (13,540) 544
liabilities
Equity accounted losses 3,088 3,525
Impairment of loans to joint ventures 444 598
Investment income (3,875) (2,560)
Interest income 5 (8,134) (3,381)
Interest expense 6 24,305 12,363
Share based payment 17 768 -
Cash generated by operations 20,778 8,407
Changes in working capital 93 279
Cash generated by operations 20,871 8,686
Interest paid (22,867) (12,257)
Taxation paid (152) (200)
Distribution received 3,875 1,395
Distributions from associates and joint 5,986 1,849
ventures
Interest income 4,540 1,158
Net cash generated by operating activities 12,253 631
Cash flows from investing activities
Purchase of investment properties 8 (211,083) (527)
Investment in associates and joint ventures 13,14 (18,586) (22,885)
Cash acquired on reverse acquisition 12 32,340 -
Acquisition of subsidiaries (307) (390)
Disposal of subsidiaries (477) -
Decrease/(increase) in loans to related 3,990 (1,504)
parties
Purchases of financial assets (1,565) (72,188)
Decrease/(increase) in restricted cash 14,616 (18,442)
balances
Net cash utilised in investing activities (181,072)
(115,936)
Cash flows from financing activities
Proceeds from loans and borrowings 152,831 13,610
Repayment of loans and borrowings (21,846) (2,648)
Dividends paid to non-controlling interests (81) (14)
Dividends paid to equity shareholders (13,964) (3,465)
Proceeds from issue of share capital 73,644 112,642
Share issue costs (3,028) (3,260)
Reverse acquisition share issue costs paid (965) -
Additional contribution from non-controlling 4,804 247
shareholders
Net cash generated from financing activities 191,395 117,112
Net increase in cash 22,576 1,807
Effect of exchange rate fluctuations on cash 392 (370)
held
Net cash at the beginning of period 16,969 15,532
Net cash at the end of the period 15 39,937 16,969
Notes to the Consolidated Financial Statements
For the period ended 31 August 2011
1. General information
Redefine International was incorporated on 28 June 2004 under the laws of the
Isle of Man and is listed on the Main Market of the London Stock Exchange. On
23 August 2011 the Company`s financial year end was changed to 31 August from
30 September.
With effect from 23 August 2011, Redefine International plc (subsequently
renamed Redefine International Holdings Limited ("RIHL")) reverse acquired
Wichford P.L.C. ("Wichford"). As a result of the terms of the reverse
acquisition, reverse acquisition accounting has been applied under IFRS 3
Business Combinations (2008). Following the adoption of reverse takeover
accounting, RIHL has been identified as the accounting acquirer. Consequently,
the statement of financial position reflects the reserves, assets and
liabilities of RIHL and the capital, reserves, assets and liabilities of
Redefine International, effectively acquired by RIHL at fair value as at 31
August 2011.
Although the reverse acquisition became effective on 23 August 2011 the
financial statements have been prepared assuming an acquisition date of 31
August 2011. The difference between these dates is not deemed to be material
and hence the statement of comprehensive income reflects the income and
expenses of RIHL only, for the 12 months ended 31 August 2011.
The condensed consolidated financial statements of the Company for the twelve
month period ended 31 August 2011 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.
These condensed consolidated financial statements have been prepared on a
going concern basis as the Directors consider this the most appropriate basis.
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 12 month period ended 31 August 2011 have been reviewed by
the Auditors. The summary financial statements for the eleven month period
ended 31 August 2010, 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 31 August 2010.
The following standards/amendments to standards were adopted by the Group
during the period:
Amendment to IAS 24 - Related Party Disclosures
This amendment simplifies the definition of a related party, clarifying its
intended meaning and eliminating inconsistencies from the definition. It also
provides a partial exemption from the disclosure requirements for government-
related entities. The remainder of the amendment impacts upon the disclosure
of certain related party relationships, transactions and outstanding balances
including commitments in the financial statements of the Group.
Amendment to IAS 32 - Financial Instruments: Presentation-Classification of
rights issues
The amendment which is effective for annual periods beginning on or after 1
February 2010, states that if rights issues are issued by an entity pro rata
to all existing shareholders in the same class for a fixed amount of currency,
they should be classified as equity regardless of the currency in which the
exercise price is denominated. This amendment did not have any impact on the
Group`s financial statements but may do so in the future.
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
This IFRIC which is effective for annual periods beginning on or after 1 July
2010 clarifies the requirements of IFRSs when an entity renegotiates the terms
of a financial liability with its creditor and the creditor agrees to accept
the entity`s shares or other equity instruments to settle the financial
liability fully or partially. This amendment did not have any impact on the
Group`s financial statements but may do so in the future.
Improvement to IFRSs May 2010
In May 2010, the IASB issued its third edition of amendments to its standards,
primarily with a view to removing inconsistencies and clarifying wording.
The adoption of the following amendments resulted in changes to accounting
policies, but did not have any impact on the financial position or performance
of the Group.
- IFRS 3 Business Combinations: The measurement options available for non-
controlling interest ("NCI") have been amended. Only components of NCI
that constitute a present ownership interest that entitles their holder
to a proportionate share of the entity`s net assets in the event of
liquidation shall be measured at either fair value or at the present
ownership instruments` proportionate share of the acquiree`s identifiable
net assets. All other components are to be measured at their acquisition
date fair value.
- IFRS 7 Financial Instruments - Disclosures: The amendment to IFRS 7
clarifies the required level of disclosure about credit risk and
collateral held and provides relief from disclosures previously required
regarding renegotiated loans.
- IAS 1 Presentation of Financial Statements: The amendment clarifies that
an option to present an analysis of each component of other comprehensive
income may be included either in the statement of changes in equity or in
the notes to the financial statements.
Other amendments resulting from Improvements to IFRSs did not have any impact
on the accounting policies, financial position or performance of the Group.
New standards and interpretations not yet adopted
The Directors have considered all IFRSs and interpretations that have been
issued, but which are not yet effective and are currently assessing whether
they will have a significant impact on how the results of operations and
financial position of the Group are prepared and presented.
Accounting for business combinations
The Group applies IFRS 3 Business Combinations (2008) in accounting for
business combinations.
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. Judgement is applied in determining the acquisition date and
determining whether control is transferred from one party to another.
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 acquiree; 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.
Consideration transferred includes the fair values of the assets transferred,
liabilities incurred by the Group to the previous owners of the acquiree, and
equity interests issued by the Group. Consideration transferred also includes
the fair value of any contingent consideration. If a business combination
results in the termination of pre-existing relationships between the Group and
the acquiree, then the lower of the termination amount, as contained in the
agreement, and the value of the off-market element is deducted from the
consideration transferred and recognised in other expenses.
A contingent liability of the acquiree is assumed in a business combination
only if such a liability represents a present obligation and arises from a
past event, and its fair value can be measured reliably.
The Group measures any non-controlling interest at its proportionate interest
in the identifiable net assets of the acquiree.
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.
Costs associated with the issue of equity securities are recorded directly in
equity.
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.
Capital instrument
A financial instrument or its component parts is classified on initial
recognition as a financial liability, a financial asset or an equity
instrument in accordance with the substance of the contractual arrangement.
An instrument is classified as equity where there is no contractual obligation
to deliver cash or another financial asset to another party, or to exchange
financial assets or financial liabilities with another party under potentially
unfavourable conditions (for the issuer of the instrument) or where the
instrument will or may be settled for a fixed number of the entity`s own
equity instruments.
Equity instruments are recognised initially at their fair value with any
directly attributable costs allocated to the instrument. The equity instrument
is not re-measured subsequent to initial recognition.
Payments in relation to the capital instrument are deemed to be share based
payments and are recorded in the statement of comprehensive income due to the
unavoidable nature of the obligation. See note 17 for further details
Restructured Debt
A financial liability is derecognised when it is extinguished (i.e. it is
discharged, cancelled or expires) which may happen when a payment is made to
the lender, the borrower legally is released from primary responsibility for
the financial liability or where there is an exchange of debt instruments with
substantially different terms or a substantial modification of the terms of an
existing debt instrument.
Any difference between the carrying amount of the original liability and the
consideration paid is recognised in profit or loss. The consideration paid
includes non-financial assets transferred and the assumption of liabilities,
including the new modified financial liability. Any new financial liability
recognised is measured initially at fair value. Any costs or fees incurred are
recognised as part of the gain or loss on extinguishment and do not adjust the
carrying amount of the new liability.
Finance Leases
Finance leases, which are the ground rents payable to the superior landlord on
leasehold properties, are capitalised at the inception of the lease at the
fair value of the leased property or, if lower, at the present value of the
minimum lease payments. Lease payments are apportioned between the finance
charges and the reduction of the lease liability so as to achieve a constant
rate of interest on the remaining balance of the liability. Finance charges
are charged through profit or loss as they arise.
Service charges
Where the Group invoices service charges, these amounts are not recognised as
income as the risks in relation to the provision of these goods and services
are primarily borne by the Group`s customers. Any servicing expenses suffered
by the Group are included within property operating expenses in the statement
of comprehensive income.
3. Significant accounting judgements, estimates and assumptions
The preparation of financial statements in conformity with IFRS requires the
use of judgements and estimates that affect the reported amounts of assets and
liabilities at the reporting date and the reported amounts of revenues and
expenses during the period reported. Although these estimates are based on the
Directors` best knowledge of the amount, event or actions, actual results may
differ from those estimates.
The principal areas where such judgements and estimates have been made are:
Application of the going concern basis of accounting
These financial statements have been prepared on a going concern basis as the
Directors consider this the most appropriate basis.
After considering the relevant factors, the Directors have a reasonable
expectation that the Group has adequate resources to continue in operation for
the foreseeable future.
The principal issues the Board considered in their enquiries included, inter
alia, the maturity of the Delta and Gamma Facilities in October 2012, the
maturity of the VBG2 facility in May 2011, the maturity of the VBG1 facility
in January 2012 and the maturity of the Crewe facility in November 2011.
Following the conclusion of the reverse acquisition the Group`s capital
structure improved benefiting from RIHL`s attractive long term facilities as
well as a commitment from its major shareholder to support a proposed capital
raising of their share of up to GBP100 million (i.e. GBP67 million), the
Directors are confident that the maturity of the Delta and Gamma facilities
will be addressed.
With regard to both the VBG1 and VBG2 facilities the Board is confident that
these facilities will not be required to be repaid at maturity. The Board
notes that these facilities are ring-fenced with no recourse to any other
assets pledged to other Group facilities. There can be no certainty as to the
outcome of current negotiations or the market testing exercises requested by
the servicer on VBG2, however the Board remains of the view that there would
be no impact on the continued operations of the Group.
Credit approval has been obtained to extend the Crewe facility for four months
while approval is sought for a longer term restructuring solution. The Board
notes that this facility is ring-fenced with no recourse to any other assets
pledged to other Group facilities. There can be no certainty that agreement
will be reached on restructuring the facility but the Board is of the view
that this will not impact the continued operations of the Group.
The Board has a reasonable expectation that the Company and Group have
adequate resources to continue in operation for the foreseeable future as
outlined in the Directors Report.
Investment Property Valuation
The Group uses the valuation performed by its independent valuers as a fair
value of its investment properties. The valuation is based upon assumptions
including estimated rental values, future rental income, anticipated
maintenance costs, future development costs and appropriate discount rates.
The valuers also make reference to market evidence of transaction prices for
similar properties.
Determination of the fair value of the liabilities of Wichford on acquisition
In determining the fair value of Wichford financing, consideration has been
given to the non-recourse nature of the loans, the remaining duration of the
financing and the current cost of funding for similar transactions. See Note
12 for further details.
Taxation
The Group is exposed to the risk of changes to tax legislation in the various
countries in which the Group operates. It is also exposed to different
interpretations of tax regulations between the tax authorities and the Group.
Deferred Taxation
The Group considers that the value of the property portfolio is likely to be
realised by both the sale and the use over time. The Group bases its deferred
taxation provision on the assumption that the residual value of the investment
properties is not less than the present value as provided by its external
valuers.
The Group makes an initial estimate of the length of time that each property
will be held in order to determine the initial recognised exemption for both
the in use and on sale elements for each property. Periodically the Group will
review the length of time for which each property will continue to be held and
this can be significantly different from the residual of the time from the
initial estimate.
The resulting provision, being subject to assumptions on the length of the
time that each property will be held by the Group which can change over time,
can lead to significantly different results for each property from one period
to another.
The recoverability of any deferred tax asset is assessed and, where it is
thought unlikely that a recovery will be made, is not included in the Group`s
provision.
4. Segment reporting
The Group`s identified reportable segments are set out below. These segments
are generally managed by separate management teams. During the twelve month
period ended 31 August 2011, the Group acquired six hotel properties. The
hotel properties are managed by a separate management team and represent a new
segment within the Group. As required by IFRS 8, Operating Segments, the
information provided to the Board of directors, who are the Chief Operating
Decision Makers, can be classified in the following segments:
UK Stable Predominantly UK offices, but includes petrol filling
Income: stations, Kwik-Fit centres, retail and residential units.
UK Retail: Major UK shopping centres.
Europe: Consists of the Group`s properties in Continental Europe,
located in Germany, Switzerland and the Netherlands.
Hotels: Consists of all the Group`s hotel properties.The hotels are
let to Redefine Hotel Management Limited on a fixed rental
basis with annual reviews based on EBITDA.
Wichford: Consists of the Group`s investment in Wichford, up to the
date of the reverse acquisition.
Cromwell: Relates to the Group`s investment in the Cromwell Property
Group, Australia.
Relevant revenue, assets and capital expenditure information is set out below:
i. Information about reportable segments
UK Stable UK Europe Hotels
Income Retail
GBP`000 GBP`000 GBP`000 GBP`000
At 31 August 2011
Rental income 3,965 10,656 5,816 6,386
Investment income - - - -
Net fair value (losses)/gains (354) (8,485) (2,298) 510
on investment property
Gain/(loss) from financial 4,384 519 816 (2,225)
assets and liabilities
Equity accounted losses 173 (2,137) 473 -
Impairment of loans to joint (444) - - -
ventures
Interest income 2,316 3,348 - 2,397
Interest expense - bank debt (1,204) (8,400) (2,270) (2,460)
Property operating expenses (102) (1,896) (303) (67)
Investment property 467,426 82,796 312,657 123,775
Investments designated at fair 361 592 170 -
value
Investments in joint ventures 823 - 1,784 -
Investment in associates - - - -
Loans and receivables 29,889 42,804 - 31,387
Borrowings - bank loans (378,793) (139,818) (186,511) (75,778)
At 31 August 2010
Rental income 3,532 5,745 3,990 -
Investment income - - - -
Net fair value gains/(losses) 691 (703) (2,155) -
on investment property
Losses from financial assets (2,766) (350) -
and liabilities
Equity accounted losses (615) (1,016) (786) -
Impairment of loans to joint (598) - -
ventures
Interest income 1,714 909 - -
Interest expense (2,238) (4,934) (1,989) -
Property operating expenses (177) (1,029) (455) -
Investment property 58,913 114,439 54,323 -
Investments designated at fair 362 - - -
value
Investments in joint ventures 650 - 1,391 -
Investment in associates - - - -
Loans and receivables 31,426 16,734 - -
Borrowings - bank loans (99,868) (133,941) (33,457) -
Wichford Cromwell Total
GBP`000 GBP`000 GBP`000
At 31 August 2011
Rental income - - 26,823
Investment income - 3,875 3,875
Net fair value (losses)/gains on investment - - (10,627)
property
Gain/(loss) from financial assets and - 10,046 13,540
liabilities
Equity accounted losses (4,224) 2,627 (3,088)
Impairment of loans to joint ventures - - (444)
Interest income - - 8,061
Interest expense - bank debt - (727) (15,061)
Property operating expenses - - (2,368)
-
Investment property - - 986,654
Investments designated at fair value - - 1,123
Investments in joint ventures - - 2,607
Investment in associates - 104,680 104,680
Loans and receivables - - 104,080
Borrowings - bank loans - (17,344) (798,244)
At 31 August 2010
Rental income - - 13,267
Investment income - 2,560 2,560
Net fair value gains/(losses) on investment - - (2,167)
property
Losses from financial assets and - 2,572 (544)
liabilities
Equity accounted losses (1,108) - (3,525)
Impairment of loans to joint ventures - - (598)
Interest income - - 2,623
Interest expense - - (9,161)
Property operating expenses - - (1,661)
Investment property - - 227,675
Investments designated at fair value - 74,777 75,139
Investments in joint ventures - - 2,041
Investment in associates 18,923 - 18,923
Loans and receivables - - 48,160
Borrowings - bank loans - - (267,266)
ii. Reconciliation of reportable segment profit or loss
12 Month 11 Month
31 August 31 August
2011 2010
GBP`000 GBP`000
Rental income
Total rental income for reported segments 26,823 13,267
Profit or loss
Investment income 3,875 2,560
Net fair value losses on investment property (10,627) (2,167)
Gain/(loss) from financial assets and liabilities 13,540 (544)
Equity accounted losses (3,088) (3,525)
Impairment of loans to joint ventures (444) (598)
Interest income 8,061 2,623
Interest expense (15,061) (9,161)
Property operating expenses (2,368) (1,661)
Total gain per reportable segments 20,711 794
Other profit or loss - unallocated amounts
Other income 1,592 673
Administrative expenses (774) (466)
Investment management and professional fees (4,664) (3,406)
Amortisation of intangible assets (591) (345)
Interest income 73 758
Interest expense (9,244) (3,202)
Share based payment (768) -
Foreign exchange loss (1,224) (6)
Consolidated profit/(loss) before tax 5,111 (5,200)
5. Interest Income
The following table details the interest income earned by the Group during the
period:
12 Month 11 Month
period ended period ended
31 Aug 2011 31 Aug 2010
GBP`000 GBP`000
Interest income on bank deposits 136 454
Interest income from mezzanine financing 7,998 2,927
Total interest income 8,134 3,381
6. Interest Expense
The following table details the interest expense at amortised cost incurred by
the Group during the period:
12 Month 11 Month
period ended period ended
31 Aug 2011 31 Aug 2010
GBP`000 GBP`000
Interest expense on secured bank loans (15,060) (9,161)
Finance lease interest (386) -
Interest expense on other financial (868) (663)
liabilities
Interest expense on mezzanine financing (7,991) (2,539)
Total interest expense (24,305) (12,363)
7. Taxation
Income tax expense
12 Month 11 Month
period ended period ended
31 Aug 2011 31 Aug 2010
GBP`000 GBP`000
a) Tax on profit from ordinary activities
Current income tax
Income tax in respect of current period 563 43
Withholding tax 174 157
Deferred tax
Origination and reversal of temporary 623 -
differences
Total income tax expense reported in the 1,360 200
statement of comprehensive income
b) Deferred taxation
Deferred tax asset
Fair value adjustment - investment property 28,665 6,044
Fair value adjustment - derivatives 171 503
Deferred taxation asset not recognised 28,836 6,547
Deferred tax liability
Deferred tax liability acquired (refer Note 1,616 -
12)
Deferred tax liability recognised 623 -
Deferred taxation liability 2,239 -
c) Factors affecting the tax charge in the period
As the largest portion of the Group`s properties are principally in the UK and
owned by companies registered in the Isle of Man or in the British Virgin
Islands, the Company regards the UK`s income tax rate of 20% (2010: 20%), as
payable under the UK`s Non Resident Landlord Scheme, to be most relevant tax
rate for the reconciliation of the theoretical tax charge on accounting
profits to the tax charge for the period shown through the profit or loss.
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%.
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%.
8. Investment Property
The book cost of properties as at 31 August 2011 was GBP1.19billion (31 August
2010: GBP239.70 million). The carrying amount of investment property, apart
from the investment properties in 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 (together referred to as
"valuers"). The carrying amount of the investment properties in Crewe as at 31
August 2011 is the fair value as determined by directors` valuation.
Pursuant to the reverse acquisition the RIHL and Wichford investment
properties were valued as at 30 June 2011 and 31 March 2011 respectively. A
"no material change" statement was then obtained from the valuers from the
valuation dates to the date of the issue of the Prospectus being 13 July 2011.
The Wichford property valuations were then subsequently updated as at 31
August 2011. The Board is confident that there was no material change in the
RIHL property valuations between 13 July 2011 and 31 August 2011.
The fair value of each of the properties has been assessed by the valuers in
accordance with the Appraisal and Valuation Standards of the Royal Institution
of Chartered Surveyors ("Red Book"). In particular, the Market Value has been
assessed in accordance with PS 3.2. Under these provisions, the term "Market
Value" means "the estimated amount for which a property should exchange on the
date of valuation between a willing buyer and a willing seller in an arms-
length transaction after proper marketing wherein the parties have each acted
knowledgeably, prudently and without compulsion".
In undertaking the valuations on the basis of Market Value, the valuers have
applied the interpretative commentary which has been settled by the
International Valuation Standards Committee and which is included in PS 3.2.
The RICS considers that the application of the Market Value definition
provides the same result as Open Market Value, a basis of value supported by
previous editions of the Red Book.
The valuation does not include any adjustments to reflect any liability to
taxation that may arise on disposal, nor for any costs associated with
disposals incurred by the owner. No allowance has been made to reflect any
liability to repay any government or other grants, or taxation allowance that
may arise on disposals.
The valuers have used the following key assumptions:
The Market Value of investment properties has been primarily derived using
comparable market transactions on arm`s-length terms and an assessment of
market sentiment. The aggregate of the net annual rents receivable from the
properties and, where relevant, associated costs, have been valued at an
average yield of 7.7%, which reflect the risks inherent in the net cash flows.
Valuations reflect, where appropriate, the type of tenants actually in
occupation or likely to be in occupation after letting of vacant accommodation
and the market`s perception of their creditworthiness and the remaining useful
life of the property.
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 property under development at a value of
GBP17.15 million (2010: GBP29.20 million), including the disposed Ciref
Streatham Limited property).
In terms of IAS40 Investment property:Paragraph 14, judgement is needed to
determine whether a property qualifies as an investment property. The Group
has developed criteria so that it can exercise its judgement consistently in
recognising investment properties. These include inter alia; property held for
long-term capital appreciation, property owned (or held under finance leases)
and leased out under one or more operating leases; and property that is being
constructed or developed for future use as an investment property. The
recognition and classification of property as investment property principally
assures that the Group does not retain significant exposure to the variation
in cash flows arising from the underlying operations of the properties.
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 hotel properties are held for capital appreciation and to earn rental
income. The properties have been let to Redefine Hotel Management Limited
("RHML") for a fixed rent which is subject to annual review. RHML operates the
hotel business on its own account and is exposed to the fluctuations in the
underlying trading performance of the hotels. It is responsible for the day to
day upkeep of the properties and retains the key decision making
responsibility for the business. Aside from the payment of rental income to
Redefine International there are limited or no transactions between the two
entities. As a result, in line with guidance in IAS 40, Redefine International
classifies the hotel properties as investment properties.
Property operating expenses in the consolidated statement of comprehensive
income relate solely to income generating properties.
2011 2010
GBP`000 GBP`000
Opening balance on 1 September 227,675 186,021
Properties acquired during the period 197,424 -
Capitalised expenditure 13,659 527
Disposals (6,543) -
Impact of reverse acquisition (refer note 12) 546,900 -
Investment property at fair value 543,275 -
Finance leases 3,625 -
Impact of acquisition of subsidiaries 2,381 46,100
Foreign exchange movements in foreign operations 6,017 (2,806)
Recognition of finance leases 9,768 -
Net fair value losses on investment property (10,627) (2,167)
Closing balance on 31 August 986,654 227,675
Analysis of additions:
New additions:
Redefine Hotel portfolio 116,914 1 -
St George`s Harrow shopping centre 59,610 2 -
OBI Portfolio 20,900 3 -
197,424 -
Additions/(disposals) as a result of a change in
control of underlying entities:
Ciref Kwik-fit Stafford Limited 1,456 4 -
Ciref Kwik-fit Stockport Limited 925 5 -
Ciref Streatham Limited (6,543)
Byron Place Seaham Limited - 16,100
Birchwood Warrington Limited - 30,000
(4,162) 46,100
1 The Redefine Hotels portfolio consists of five Holiday Inn branded hotels
located in London and the Crowne Plaza Caversham Hotel, Thames Side
Promenade, Reading.
2 Consists of a shopping centre in Harrow, London.
3 OBI portfolio consists of two properties located in Herzogenrath and
Schwandorf, Germany.
4 Consists of a Kwik Fit outlet in Stafford, Staffordshire.
5 Consists of a Kwik Fit outlet in Stockport, Lancashire.
A reconciliation of investment property valuations to the consolidated
statement of financial position are shown below:
2011 2010
GBP`000 GBP`000
Investment property at market value as determined by 956,167 198,473
external valuers
Freehold 714,430 136,893
Freehold and long leasehold 17,900 -
Leasehold 223,837 61,580
Investment property at directors` valuation 17,150 29,202
Adjustments for items presented separately on the
consolidated statement of financial position:
- Add minimum payment under head leases separately 13,337 -
included under borrowings
Consolidated statement of financial position carrying 986,654 227,675
value of investment property
9. Long term receivables
2011 2010
GBP`000 GBP`000
Security deposits with banks 464 4,306
Amounts due from related parties (refer Note 20) 116 116
Amounts due from Corovest Mezzanine Capital Limited 103,500 43,738
Loans 121,592 61,386
Impairment (18,092) (17,648)
104,080 48,160
Security deposits with banks bear interest at a rate of 6.725% with maturity
between 1 and 3 years.
The loans from joint ventures are unsecured, bear interest at rates between 0%
and 7% and are repayable on demand, but the expectation is that the term will
be greater than 12 months.
The loans from Corovest Mezzanine Capital Limited are secured, bear interest
at rates between 10% and 12% and are repayable between 1 and 3 years.
Included in amounts due from Corovest Mezzanine Capital Limited is rolled up
interest in respect of the period of GBP6.0 million (2010: GBP3.6 million).
10. Investments designated at fair value
2011 2010
GBP`000 GBP`000
Opening balance 75,139 290
Acquisitions during the period - 72,188
Fair value adjustments 10,351 2,572
Foreign exchange movement in foreign investments - 89
Reclassification to investment in associates (85,128) -
Derivative financial instruments (refer Note 19) 761 -
Closing balance 1,123 75,139
With effect from 4 March 2011 the Group`s shareholding in Cromwell was
reclassified from investments designated at fair value to an investment in an
associate (Refer Note 14).
During the financial period to the date where significant influence was held,
the Group received AUD 6,259,167 (2010: AUD 4,372,174) as a distribution,
before withholding tax of AUD 279,657 (2010: AUD 268,109), resulting in net
income of AUD 5,979,510 (2010: AUD 4,104,065). The GBP equivalent of the above
is GBP3.87million (2010: GBP2.56 million) as a distribution, before
withholding tax of GBP0.17 million (2010: GBP0.16 million), resulting in net
income of GBP 3.70 million (2010: GBP2.40 million).
11. Intangible assets
2011 2010
GBP`000 GBP`000
Cost
Opening balance 8,092 7,517
Additions 16 575
Reclassification (7,517) -
Impairment (591) -
- 8,092
Amortisation and impairment losses
Opening balance 533 188
Amortisation for the period - 345
Reclassification (533) -
- 533
Closing balance - 7,559
The reclassification of intangible assets relates to the fair value adjustment
of the Aviva facility with regards to West Orchards Coventry Limited following
the completion of the Aviva debt restructuring.
12. Business Combinations
On 13 July 2011 the Boards of Wichford and RIHL announced that they had
reached agreement on the terms of a reverse acquisition. The transaction was
undertaken in terms of which Wichford made a recommended all share offer ("the
offer") by Wichford for the entire issued ordinary share capital of RIHL ("the
reverse acquisition"). Under the terms of the offer RIHL shareholders received
7.2 Wichford shares for each RIHL share. The share register was then
consolidated with 1 new share for every 7.2 shares held. Following the
adoption of reverse acquisition accounting in accordance with IFRS, RIHL has
been identified as the accounting acquirer.
Following the reverse acquisition, the cancellation of RIHL`s previously
equity accounted investment in Wichford (refer note 14) and the subsequent
issue of ordinary shares to the RIHL shareholders, RIN became the majority
shareholder in the Company with a shareholding of approximately 65.59%. Non-
controlling Interest ("NCI") shareholders in RIHL hold approximately 14.07%
and previous Wichford shareholders (other than RIHL shareholders) hold
approximately 20.34% of the shares in the Company.
a) Consideration transferred
In accordance with IFRS3.B20, the consideration transferred by RIHL to the
Company is based on the number of shares RIHL would have had to issue to give
the shareholders of the Company the same percentage equity interest in the
combined entity that results from the reverse acquisition, i.e. a 20.34%
equity interest:
Previous shareholding of the Company 831,323,584 20.3%
Shares deemed to be issued to all RIHL shareholders 3,255,711,718 79.7%
4,087,035,302
Number of issued shares in RIHL 452,182,183 79.7%
Hypothetical shares to be issued to reflect the same 115,461,609 20.3%
percentage as above
Share price as at 23 August 2011 (pence per share) 45.5
Value of shares to be issued to reflect the same 52,535
percentage as above (GBP`000)
2011 2010
GBP`000 GBP`000
Value of 115,461,609 shares at share price of 45.5p 52,535 -
per share on 23 August 2011
Total consideration 52,535 -
b) Identifiable assets acquired and liabilities assumed
Investment property 546,900 -
Trade and other receivables 3,769 -
Cash and cash equivalents - unrestricted 32,340 -
Cash and cash equivalents - restricted 7,605 -
Loans and borrowings (487,894) -
Derivative financial instruments (18,704) -
Deferred tax (1,616) -
Trade and other payables (15,342) -
Total identifiable net assets 67,058 -
c) Goodwill
Goodwill was recognised as a result of the
acquisition as follows:
Total consideration transferred 52,535 -
Fair value of existing interest in the Company (refer 14,539 -
Note 14)
Fair value of identifiable net assets (67,058) -
Goodwill 16 -
Goodwill was impaired in the statement of comprehensive income as no lasting
economic benefits could be attributed to the goodwill.
The financial statements have been prepared assuming an acquisition date of 31
August 2011, with the statement of comprehensive income reflecting the income
and expenses of RIHL only for the 12 months ended 31 August 2011. If the
acquisition had occurred on 1 September 2010, management estimates that
consolidated revenue would have been GBP68.11 million and consolidated loss
for the period would have been GBP44.73 million. In determining these amounts,
management has assumed that the fair value adjustments that arose on the date
of acquisition would have been the same if the acquisition occurred on 1
September 2010.
13. Investments in joint ventures
The Group`s investments in joint ventures currently consist of the following:
i) 50% in Pearl House Swansea Limited, a joint venture with Sandgate
Properties Limited, which owns a long leasehold retail interest in
Swansea, Wales.
ii) 50% in Swansea Estates Limited, a joint venture with Sandgate Properties
Limited, which owns a long leasehold retail interest in Swansea, Wales.
iii) 50% in Ciref NEPI Holdings Limited, a joint venture with New Europe
Property Investments, which ultimately owns property in Germany, Western
Europe.
iv) 50% in 26 The Esplanade No 1 Limited, a joint venture with Rimstone
Limited which ultimately owns an office building in St. Helier, Jersey.
v) 50% in Ciref Crawley Limited, a joint venture with Graymont Limited which
owns a 3 blocks of offices in Crawley, Surrey
vi) 50% in Grand Arcade Wigan Limited, a joint venture with Sandgate
Properties Limited, which owns a shopping centre in Wigan, Greater
Manchester.
2011 2010
GBP`000 GBP`000
Opening balance 2,041 5,008
Increase in investment 2,137 153
Equity accounted loss (1,491) (2,415)
Change in fair value due to foreign currency (80) (217)
translation
Distribution received from joint ventures - (488)
Closing balance 2,607 2,041
Summarised financial information
The summarised financial information derived from the gross balance sheets of
the joint ventures is set out below:
2011 2010
GBP`000 GBP`000
Investment property 156,193 78,789
Current assets 6,213 6,208
Total assets 162,406 84,997
Capital and reserves (80,236) (26,611)
Long term liabilities 233,212 101,644
Current liabilities 9,430 9,964
Total equity and liabilities 162,406 84,997
Revenue 12,996 9,589
Net loss (2,306) (5,236)
On 14 September 2010 50% of Grand Arcade Wigan Limited was acquired out of
administration as part of the Group`s debt restructuring with Aviva.
Currently, the fair value of the liabilities exceeds the fair value of the
assets within the company and the investment is carried at a nil value as a
result.
Investment in joint ventures includes investments which have been written down
to a carrying amount of nil during the period ended 31 August 2011.
Additionally, there are joint ventures included at nil in the balance carried
forward on 1 September 2010.
14. Investments in associates
2011 2010
GBP`000 GBP`000
Wichford Cromwell Total Total
Opening balance 18,923 - 18,923 -
Investment at cost including goodwill - 16,449 16,449 22,732
Reclassified from investments - 85,128 85,128 -
designated at fair value (refer Note
10)
Change in fair value due to foreign - 4,963 4,963 1
currency translation
Equity accounted (loss)/profit (3,375) 8,104 4,729 5,368
Impairment of investment (849) (5,477) (6,326)
(6,478)
Share of foreign currency movement 1,494 - 1,494
recognised (1,494)
Share of cash flow hedge reserve (155) - (155) 155
movement recognised
Distribution received from associates (1,499) (4,487) (5,986)
(1,361)
Cancellation of investment at fair - -
value (14,539) (14,539)
Closing balance - 104,680 104,680 18,923
Following the reverse acquisition as referred to in note 12 and in the
investment manager`s review, RIHL`s previous shareholding of 230,772,000
(21.73%) in the Company was cancelled. RIHL`s previously equity accounted
investment in the Company was therefore disposed of and its acquisition of the
Company accounted for as a reverse acquisition in terms of IFRS.
Investment in associates include:
22.36% investment in Cromwell Property Group
Cromwell Property Group ("Cromwell") is a property investment company listed
on the Australian Stock Exchange. The closing price of Cromwell on 31 August
2011 was 72 Australian cents per security and the total fair value of shares
held is AUD 155.67 million (GBP102.48 million). On 2 March 2011 Redefine
International exercised its option to acquire a further 35,000,000 stapled
securities in Cromwell and hence increased its shareholding from 19.6% to
22.2%. The increase in shareholding, along with the addition of Michael
Watters to the board of Cromwell, resulted in the investment now being equity
accounted as an associate as opposed to an investment recognised at fair
value. During August 2011 the Group acquired an additional 2,370,920
securities. The new portion of the investment in Cromwell acquired in March
2011 and August 2011 are financed by a loan of AUD 26.35 million from
Investec, the GBP equivalent being GBP17.34 million. Refer Note 18 for further
details.
During the period from the date where significant influence was held, the
Group received AUD 7,062,222 as a distribution, before withholding tax of AUD
196,730, resulting in a net distribution of AUD 6,865,492. The GBP equivalent
of the above is GBP4.66 million as a distribution, before withholding tax of
GBP 0.17 million, resulting in a net distribution of GBP4.49 million.
There are no restrictions on the ability of Cromwell to transfer funds to its
shareholders in the form of cash, distributions and loan repayments.
Summarised financial information
The summarised financial information derived from the gross statements of
financial position of the associates, is set out below. The financial
information in 2011 represents those as reported by Cromwell at 30 June 2011
(2010: Wichford only).
2011 2010
GBP`000 GBP`000
Investment property 1,444,850 551,400
Other non-current assets 35,126 -
Current assets 59,452 85,200
Total assets 1,539,428 636,600
Capital and reserves 705,160 57,000
Long term liabilities 780,865 461,800
Current liabilities 53,403 117,800
Total equity and liabilities 1,539,428 636,600
Revenue 181,976 21,900
Net profit 88,102 4,300
15. Cash at bank
2011 2010
GBP`000 GBP`000
Cash and cash equivalents consist of the
following:
Unrestricted cash balances 39,937 16,969
Bank balances 35,742 4,158
Call deposits 4,195 12,811
Restricted cash balances 11,431 18,442
51,368 35,411
As at 31 August 2011 there was GBP11.43 million of the cash at bank to which
the Group did not have instant access. The principle reason for this is that
rents received are primarily held in locked bank accounts as interest and
other related expenses are paid from these monies on the interest payment
dates. Included in the restricted cash balance is GBP3 million held with Aviva
with regards to development in Birchwood Warrington Limited.
16. Capital and reserves
Share capital and share premium
In accordance with IFRS 3 Business Combinations and in reference to Note 12,
with a reverse acquisition the issued equity instruments information relates
to that of the legal acquirer, Wichford. The prior period numbers have also
been adjusted to reflect the capital structure of Wichford.
2011 2010
Authorised
Ordinary shares of 1 penny each
- number - 5,000,000,000
- GBP`000 - 50,000
Ordinary shares of 7.2 pence each
- number 1,000,000,000 -
- GBP`000 72,000 -
Issued, called and fully paid
Opening: Ordinary Shares of 1 penny each
- number 1,062,095,584 1,062,095,584
- GBP`000 10,621 10,621
Allotted: Ordinary Shares of 1 penny each
- number 3,255,711,718 -
- GBP`000 32,557 -
Consolidation from 1 pence to 7.2 pence each
- number 599,695,459 -
- GBP`000 43,178 -
Cancellation of ordinary shares of 7.2 pence
each
- number (32,051,667) -
- GBP`000 (2,308) -
Closing: Ordinary Shares of 7.2 pence each
- number 567,643,792 1,062,095,584
- GBP`000 40,870 10,621
Following the reverse acquisition and the subsequent consolidation of the
Company`s Ordinary Shares of 1 pence each into Ordinary Shares of 7.2 pence
each, the resulting number of Ordinary Shares post-consolidation, at listing
and at the period end calculates as 599,695,459. Of this number 32,051,667
shares were held by RIHL as an equity accounted investment (refer Note 14)
which did not form part of the applications for listing on the LSE`s main
market for listed securities and were subsequently cancelled. On 23 August
2011, 428,429,251 Ordinary Shares out of the previous total of 452,182,184
issued Ordinary Shares were allotted to RIHL shareholders pursuant the Offer.
The 23,752,932 shares not initially voted on were subject to compulsory
acquisition in terms of Articles 116-124A of the Companies (Jersey) Law 1991
("the compulsory acquisition shares"). The Company`s issued share capital
therefore consisted of 543,890,859 Ordinary Shares as at 23 August 2011. The
compulsory acquisition shares were issued in tranches post the period end, the
last of which was issued on 5 October 2011. As at the date of this report
567,643,792 Ordinary Shares are in issue and this is the deemed number of
shares disclosed at 31 August 2011 for the purposes of the financial
statements.
Distributions
With effect from 23 August 2011, the Company adopted the dividend policy of
RIHL. In terms of the dividend policy, the Company will seek to distribute the
majority of its recurring earnings available fordistribution in the form of
dividends subject to realizable profits. However, there is no assurance that
the Company will pay a dividend, or if a dividend is paid the amount of such
dividend.
The following dividends have been distributed during the period ended 31
August 2011:
Wichford RIHL
Final 2010 dividend (pence per share) 0.33 2.07
Interim 2011 dividend (pence per share) 0.32 2.03
Reverse acquisition reserve
The acquisition reverse acquisition reserve comprises the difference between
the capital structure of the Company and RIHL.
Other reserves
These are non-distributable reserves arising from the acquisition of
subsidiaries.
17. Capital instrument
As part of the Aviva debt restructuring RIHL has entered into a GBP13million
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 three 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, RIHL 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 RIHL.
The new capital instrument is an equity instrument under IAS 32 as it is to be
settled in either cash or a fixed number of equity shares at the discretion of
the Company. The fixed number of shares to be issued changes over time but is
fully predetermined based on the time the Company chooses to settle the
instrument. The additional shares that arise over time are charged to profit
or loss in each period as a share based payment charge and is credited to the
equity reserve.
2011 2010
GBP`000 GBP`000
Opening balance - -
Capital instrument issued 13,000 -
Share based payment 768 -
Closing balance 13,768 -
18. Borrowings
2011 2010
GBP`000 GBP`000
Current
Bank loans 117,822 100,003
Less: deferred finance costs (751) -
Total current borrowings 117,071 100,003
Non-current
Bank loans 800,518 160,513
Less: deferred finance costs (2,440) -
Finance leases 13,337 -
Unsecured shareholder loans - 643
Total non-current borrowings 811,415 161,156
a) Loans
This note provides information about the contractual terms of the Group`s
loans and borrowings, which are measured at amortised cost.
18.1 Secured Borrowings
The terms and conditions of outstanding loans are as follows:
2011 2010
Amo Lend Loan Matu Nom- Carry- Nom- Carry-
Facility r- er Inter Cur- rity inal ing inal ing
tis est ren date value amount value amount
ing rate cy
Gibson Yes Aviv 6.37% GBP 11,053 11,053 11,348 11,197
Property a * June
Holdings 2029
Limited
Ciref Kwik- No KBC LIBOR GBP 718 718 - -
fit Stafford + Apri
Limited 2.5% l
2012
Ciref Kwik- No KBC LIBOR GBP 463 463 - -
fit + Apri
Stockport 2.5% l
Limited 2012
Newington Yes AIB LIBOR GBP 6,509 6,509 7,300 6,699
House + Sept
Limited 2.5% embe
r
2013
Ciref No RBS LIBOR GBP 2,500 2,500 2,980 2,980
Reigate + June
Limited 2.5% 2015
Kalihora Yes UBS 2.87% CHF 13,522 13,522 13,355 12,618
Holdings * Octo
Limited ber
2018
Delamere No Aviv 6.49% GBP 17,150 17,150 17,150 17,150
Place Crewe a * Nove
Limited mber
2011
West Yes Aviv 6.29% GBP 55,971 49,227 56,750 56,183
Orchards a * July
Coventry 2027
Limited
Byron Place Yes Aviv 6.44% GBP 16,907 15,182 17,199 15,203
Seaham a * Sept
Limited embe
r
2031
Birchwood No Aviv 6.1%* GBP 29,150 16,629 42,000 29,307
Warrington a Sept
Limited embe
r
2035
Ciref Berlin Yes RBS EURIB EUR 16,242 16,242 15,833 15,399
1 Limited OR + Sept
1.2% embe
r
2014
Ciref German Yes RBS EURIB EUR 3,447 3,447 3,323 3,281
Portfolio OR + Sept
Limited 1.2% embe
r
2014
InkstoneGrun Yes Barc 5.75% EUR 3,603 3,603 3,630 3,434
dstucksverwa lays * Augu
ltung st
Limited & 2012
Co.KG
InkstoneZwei Yes Barc 5.91% EUR 3,986 3,986 4,105 3,837
Grundstucksv lays * Augu
erwaltung st
Limited & 2012
Co.KG
CEL Yes Valo 4.95% EUR 4,427 4,427 4,219 4,208
Portfolio vis * Nove
Limited & mber
Co. KG 2014
Redefine Yes Aare LIBOR GBP 75,778 75,778 - -
Hotel al + Nove
Holdings 2.45% mber
Limited 2015
ITB Yes Baye EURIB EUR 6,593 6,593 - -
Herzogenrath rn OR + Octo
B.V. LB 1.3% ber
2017
ITB Yes Baye EURIB EUR 7,971 7,971 - -
Schwandorf rn OR + Octo
B.V. LB 1.3% ber
2017
Redefine No Inve BBSY AUD 17,344 17,344 - -
Australian stec + 4% Febr
Investments uary
Limited 2013
St George`s Yes Land LIBOR GBP 41,630 41,630 - -
Harrow esba + Apri
Limited nk 2.5% l
Berl 2016
in
Delta No Wind LIBOR GBP 199,678 197,791 - -
erme + Octo
re 0.75% ber
XI 2012
CMBS
Gamma No Wind LIBOR GBP 114,608 113,759 - -
erme + Octo
re 0.75% ber
VIII 2012
CMBS
Zeta No Lloy LIBOR GBP May 46,000 46,000 - -
ds + 2013
TSB 1.15%
Hague Yes SNS EURIB EUR 19,309 16,879 - -
Prop OR + July
erty 2.3% 2014
Fina
nce
Halle No Wind EURIB EUR 32,849 25,975 - -
erme OR + Apri
re 0.85% l
XIV 2014
CMBS
VBG1 Yes Tali EURIB EUR 58,063 37,984 - -
sman OR + Janu
3 1.1% ary
2012
VBG2 Yes Tali EURIB EUR 46,770 45,882 - -
sman OR + Apri
4 1.1%* l
** 2011
Ciref - - 20,000 17,913
Malthurst
Limited
Ciref - - 1,400 1,400
Streatham
Limited
Total bank 852,239 798,244 220,591 200,809
loans
Corovest 7.10% GBP 2012 107,847 107,847 40,423 40,423
Mezzanine -
Capital 10%*
Limited
Coronation 4%* GBP 2011 10,910 10,910 13,600 13,600
Capital
Limited
Loans 7.00% GBP 2011 650 650 5,040 5,040
secured by *
cash
deposits
CEL 0%* GBP 2029 689 689 644 644
Portfolio
Limited &
Co. KG
Total 972,335 918,340 280,298 260,516
secured
loans
All bank loans are secured over investment property, and bear interest at the
specified interest rates.
* Fixed rates
**Loan secured over Redefine Australian Investments Limited.
***Increase of 1% default interest since repayment date.
The Delamere Place, Crewe facility was set for expiry in November 2011. Aviva
credit approval has been obtained to extend the facility for four months while
approval is sought for a long term restructuring of the facility. The
possibility of writing the facility down to the level of the standing
investment value, as opposed to the development value, has been discussed.
There are currently no financial covenant breaches in terms of the loan
facility.
There has been a number of covenant breaches within the Group during the
period. Material covenants under discussion or subject to waivers are
summarised below:
Facility Lender Maturity Prin- ICR ICR LTV LTV
cipal covenant ratio % covenant ratio
GBP`000 % % %
VBG1 Talisman January 58,063 120 282 n/a 122
3 2012
VBG2 Talisman April 46,770 115 176 n/a 129
4 2011
Ciref RBS 16,242 120 164 90 93
Berlin 1 September
Limited 2014
VBG 1
The loan has a current LTV of 122%. It is anticipated that the loan servicer
will request a market testing exercise and may look to sell the assets with co-
operation from the borrowing SPVs. There is an existing LTV waiver and
standstill agreement until January 2012. The loan is non-recourse to the
Group.
VBG 2
The loan has a current LTV of 129%. The servicer has requested a market
testing exercise which is in progress and may look to sell the assets (with co-
operation from the borrowing SPVs) should acceptable offers be forthcoming.
There is an existing LTV waiver until January 2012. The loan is non-recourse
to the Group.
RBS (Ciref Berlin)
The LTV breach is anticipated to be rectified on completion of the extension
works to the Lidl stores and resulting lease re-gears which should provide a
sufficient value uplift to cure the temporary LTV breach. A new ten year lease
has also been signed with Kik and Tedi with regards to the property in Tarp.
RBS have agreed to waive the LTV covenant while asset management initiatives
are in place and capital is invested into properties.
18.2 Unsecured Borrowings
2011 2010
GBP`000 GBP`000
Non-controlling shareholders loans - 643
Total unsecured loans - 643
18.3 Current and non-current Borrowings
Non-current liabilities
Secured loans 800,518 160,513
Unsecured shareholder loans - 643
Total non-current loans and borrowings 800,518 161,156
The maturity of non-current borrowings is as follows:
Between one year and five years 685,581 89,026
More than five years 114,937 72,130
800,518 161,156
Current liabilities
Secured loans 117,822 100,003
Total current loans and borrowings 117,822 100,003
Total loans and borrowings 918,340 261,159
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 19 for
further details.
b) Finance Leases
Obligations under finance leases at the reporting dates are analysed as
follows:
2011 2010
GBP`000 GBP`000
Gross finance leases liabilities repayable:
Not later than 1 year 680 -
Later than 1 year not later than 5 years 2,720 -
Later than 5 years 48,344 -
51,744 -
Less: finance charges allocated to future periods (38,407) -
Present value of minimum lease payments 13,337 -
Present value of finance lease liabilities repayable:
Not later than 1 year 44 -
Later than 1 year not later than 5 years 1,821 -
Later than 5 years 11,472 -
Present value of minimum lease payments 13,337 -
19. Derivatives
The Group enters into interest rate swaps and interest rate cap agreements.
The purpose is to manage the interest rate risks arising from the Group`s
operations and its sources of finance.
The interest rate swaps employed by the Group to convert the Group`s
borrowings to fixed interest ones fall into two categories, as explained in a)
i) and ii) below.
The interest rate caps employed by the Group limit the exposure to upward
movements in interest rates. These are detailed in b) below.
It is the Group`s policy that no economic trading in derivatives shall be
undertaken.
a) Interest rate swap agreements
In accordance with the terms of the borrowing arrangements, the Group has
entered into interest swap agreements. The interest rate swaps are used to
manage the interest rate profile of financial liabilities. The Group has
employed interest rate swaps to eliminate future exposure to interest rate
fluctuations as well as being charged fixed rate interest on those facilities
described as having lender level swaps.
i) Lender level interest rate swap agreements
Lender level interest rate swaps agreements are those from which the Group
benefits but which do not have any Group entity as a counter-party, instead
the lender is the counter-party with the commercial banking entity providing
the interest rate swap. These arise where the loan agreements call for
interest rate swaps to be taken out to allow a fixed interest charge to be
made to the borrowing subsidiaries and these borrowers have given indemnities
to the lenders in respect to these interest rate swaps.
The interest rate swaps for the Delta, Gamma and Halle facilities, from which
the Group benefits by both eliminating any interest rate fluctuations in the
market over the course of the facilities and also from any benefit (or cost)
of closing these instruments out, are lender level interest rate swaps. The
swaps are between the CMBS vehicles (the lenders) and commercial banking
counterparties.
The Group recognises these embedded derivatives separately as, while the Group
is charged interest at a fixed rate on these facilities, the terms of the
facilities mean the Group ultimately receives their benefit or pay their
burdens.
As a result of the use of interest rate swaps, the fixed rate profile of the
Group`s lender level interest rate swaps was:
Fair value Nominal value
hedged
2011 2010 2011 2010
Facility Effective Maturity Swap GBP`000 GBP`000 GBP`000 GBP`000
date date rate
Delta 21/07/2006 15/10/2012 4.95% (5,062) - 199,678 -
Gamma 23/05/2005 20/10/2012 4.77% (8,426) - 114,608 -
Halle 19/02/2007 22/04/2014 4.19% (2,325) - 32,849 -
(15,813) - 347,135 -
ii) Borrower level interest rate swap agreements
Borrower level interest rate swap agreements are those that have a Group
company as the counter-party to the commercial bank providing the interest
rate swap. As a result of the use of interest rate swaps, the fixed rate
profile of the Group was:
Fair value Nominal value
hedged
2011 2010 2011 2010
Facility Effective Maturity Swap GBP`000 GBP`000 GBP`000 GBP`000
date date rate
Subsidiaries
Ciref Reigate 23/09/2010 30/06/2015 2.03% (68) (43) 2,500 2,000
Limited
Newington 03/09/2010 19/09/2013 1.54% (82) (64) 6,509 6,699
House Limited
Ciref Berlin 1 05/06/2007 15/04/2014 4.61% (735) (947) 8,591 8,176
Limited
Ciref Berlin 1 31/07/2007 15/04/2014 4.20% (569) (734) 7,681 7,274
Limited
Ciref German 31/07/2007 15/04/2014 4.20% (256) (330) 3,452 3,186
Portfolio
Limited
Redefine Hotel 30/11/2010 30/11/2015 2.45% - 68,145 -
Holdings (2,105)
Limited
Redefine Hotel 30/06/2011 30/11/2015 2.32% (290) - 7,633 -
Holdings
Limited
Redefine 04/03/2011 04/03/2013 5.45% (305) - 16,293 -
International
Holdings
Limited
Hague 01/08/2008 01/08/2014 4.89% - 19,309 -
(1,751)
Zeta 20/07/2010 09/05/2013 2.73% - 46,000 -
(1,141)
CirefMalthurst - - 18,000
Limited (3,989)
186,113 45,335
(7,302) (6,107)
Held in joint
ventures
Ciref Jersey 31/07/2007 30/07/2027 5.48% 18,500 18,500
Limited (5,532) (5,343)
Ciref Jersey 30/01/2008 30/07/2027 4.80% (371) (378) 1,800 1,800
Limited
Premium 31/03/2008 31/12/2014 4.23% (435) (565) 5,544 5,269
Portfolio
Limited & Co.
KG
Premium 31/03/2008 31/12/2014 4.13% 18,182 17,282
Portfolio (1,486) (1,925)
Limited & Co.
KG
Churchill 10/04/2008 10/04/2018 5.08% 9,863 10,613
Court Limited (1,554) (1,657)
53,889 53,464
(9,378) (9,868)
b) Interest rate cap agreements
The Group has entered into interest rate caps in order to take advantage of
the low interest rates in the market while at the same time protecting the
Group against any significant increases in these interest rates. The current
interest rate cap agreements are detailed below:
Fair value Nominal value
hedged
2011 2010 2011 2010
Facility Effective Maturity Cap GBP`00 GBP` GBP`000 GBP`0
date date rate 0 000 00
VBG1 15/07/2010 15/01/2012 2.50% - - 58,063 -
St George`s 27/04/2011 27/04/2016 2.85% 591 - 41,630 -
Harrow Limited
ITB 31/05/2011 31/05/2017 4.50% 93 - 6,593 -
Herzogenrath
B.V.
ITB Schwandorf 31/05/2011 31/05/2017 4.50% 77 - 7,971 -
B.V.
761 - 114,257 -
c) Summary of fair value of interest rate swaps and interest rate caps
2011 2010
GBP`000 GBP`000
Fair value of lender level interest rate swaps (15,813)
Fair value of borrower level interest rate swaps (7,302) (6,107)
(23,115) (6,107)
Fair value of interest rate cap agreements* 761 -
Fair value of the Group`s derivative instruments (22,354) (6,107)
*Interest rate cap assets are included in investments designated at fair value
(please refer Note 10).
20. Related party transactions
Investment manager
Following completion of the reverse acquisition, the investment adviser duties
are to be carried out in accordance with the Investment Adviser`s Agreement
(as approved on 13 July 2011) between the Company and RIPML ("IAA"). The
Company and RIPML agreed that RIPML would acquire the rights previously
enjoyed by RIFM under the investment manager`s agreement between RIFM and
RIHL. This acquisition was completed on 23 August 2011 upon completion of the
reverse acquisition. The director Michael Watters is a director of associated
companies of the investment adviser.
2011 2010
GBP`000 GBP`000
Trading transactions
Rental income received from Redefine Hotel Management 6,386 -
Limited
Fee income from Redefine Hotel Management Limited 700 -
Fee income from the Cromwell Property Group 310 -
Portfolio management fees charged by Redefine (2,028) (1,027)
International Fund Managers Limited
Portfolio management fees charged by Redefine (403) (200)
International Fund Managers Europe Limited
Administration fees charged by Redefine International (153) (135)
Group Services Limited
Loans Receivable
Pearl House Swansea Limited 116 116
Redefine Hotel Management Limited 2,922 -
Redefine Properties International Limited 70 -
Cromwell Property Group 1,217 1,165
Ciref Crawley Investments Limited 100 76
Swansea Estates Limited 84 84
CirefKwik-fit Stafford Limited - 2,209
CirefKwik-fit Stockport Limited - 1,374
Loans Payable
Redefine International Fund Managers Limited 1,689 366
Redefine International Fund Managers Europe Limited 260 124
Redefine International Group Services Limited 80 77
Non-controlling shareholder loans - 643
Loans payable to Redefine International Fund Managers Limited, Redefine
International Fund Managers Europe Limited and Redefine International Group
Services Limited are not secured, bear no interest and are expected to be
repaid in cash within 12 months.
Directors
Further details of Directors remuneration will be included within the Annual
Report to shareholders.
21. Earnings per share
Earnings per share are calculated on the weighted average number of shares in
issue and the profit/(loss) attributable to shareholders. The weighted average
number of shares in issue is based on the new capital structure.
2011 2010
GBP`000 GBP`000
Profit/(loss) attributable to shareholders 5,035 (4,915)
Weighted average number of ordinary shares 426,125 199,492
Effect of potential share based payment transactions - -
performance fee arrangements
Effect of potential share based payment transactions - 26,480 -
capital instrument
Diluted weighted average number of ordinary shares 452,605 199,492
Number of ordinary shares
- In issue 567,644 304,706
- Weighted average 426,125 199,492
- Diluted weighted average 452,605 199,492
Earnings per share (pence)
- Basic 1.18 (2.46)
- Diluted 1.11 (2.46)
22. Net assets per share
The net assets per share are calculated by dividing the net assets at 31
August 2011 attributable to equity holders of the parent of GBP277.30 million
(2010: GBP142.5 million) by the number of Ordinary Shares in issue as at 31
August 2011 of 567,643,792 (2010:304.706.406).
The potential number of Ordinary Shares to be issued to Aviva at 50p per share
under the convertible instrument at 31 August 2011 is 27,536,990 as the value
of the instrument on 31 August 2011 is GBP13.77 million.
2011 2010
Net assets attributable to equity shareholders (GBP`000) 277,304 142,506
Number of Ordinary Shares (`000`s) 567,644 304,706
Effect of potential share based payment transactions - -
performance fee arrangements
Effect of potential share based payment transactions - 27,537 -
capital instrument
Diluted number of shares (`000`s) 595,181 304,706
Net asset value per share (pence):
- Basic 48.85 46.77
- Diluted 46.59 46.77
23. Interest rate risk
The Group`s exposure to the risk of the changes in market interest rates
relates primarily to the Group`s long-term debt obligations with floating
interest rates. The Group uses interest rate derivatives to fully mitigate its
exposure to interest rate fluctuations. At the period end, as a result of the
use of interest rate swaps, the majority of the Group`s borrowings were at
fixed interest rates.
The Group`s profit before tax has limited exposure to interest rate
fluctuations until the repayment dates of the loans for which the interest
rate swaps have been arranged. Refer Note 19 for further details on the
Group`s interest rate swap agreements.
24. Liquidity risk
The Group`s approach to managing liquidity is to ensure, as far as possible,
that it will always have sufficient liquidity to meet its liabilities when
due, under both normal and stressed conditions, without incurring unacceptable
losses or risking damage to the Group`s reputation.
The Group`s approach to managing liquidity is to ensure, as far as possible,
that it will always have sufficient rental income to service its financial
obligations when they fall due. The monitoring of liquidity risk is assisted
by the monthly review of financial covenants imposed by financial
institutions, such as interest and loan to value covenant ratios.
Renegotiation of loans takes place in advance of any potential covenant
breaches in so far as the factors are within the control of the Board. In
periods of increased market uncertainty the Board will ensure sufficient cash
resources are available for potential loan repayments/cash deposits as may be
required by financial institutions. Refer Note 3 for further details on the
going concern assumption adopted by the Board.
25. Contingencies, guarantees and capital commitments
The Group has capital commitments of GBP3million (2010: GBP51million) in
respect of capital expenditure contracted for at the reporting date, but not
yet incurred, for future transactions approved by the Board. The Group has
entered into a corporate guarantee agreement with IHG Hotels Limited, the
contingent liability of which is not expected to exceed GBP0.3million.
26. Post balance sheet events
The Board has resolved to declare a second interim dividend of 2.10 pence per
share. The last day to trade "cum" dividend in order to participate in the
dividend will be 8 November 2011. The shares will commence trading "ex"
dividend on 9 November 2011 and the record date will be 11 November 2011. The
dividend will be paid to shareholders on 24 November 2011."
Sponsor to Redefine Properties International Limited
Java Capital
Date: 01/11/2011 09:00:10 Produced by the JSE SENS Department.
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