| Mon 30 Apr 2012, 9:00 | | RIN - Redefine Properties International Limited - Results for Redefine |
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RIN
RIN
RIN - Redefine Properties International Limited - Results for Redefine
International P.L.C the six months ended 29 February 2012
Redefine Properties International Limited
(Incorporated in the Republic of South Africa)
(Registration number 2010/009284/06)
JSE share code: RIN ISIN Code: ZAE000149282
("RIN")
RESULTS FOR REDEFINE INTERNATIONAL P.L.C THE SIX MONTHS ENDED 29 FEBRUARY 2012
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, 30 April 2012.
"REDEFINE INTERNATIONAL P.L.C.
(`Redefine International` or the `Company`)
RESULTS FOR THE SIX MONTHS ENDED 29 FEBRUARY 2012
Redefine International, the diversified income focused property company, today
announces its half-year results for the six months ended 29 February 2012.
These results reflect the first set of half-year results for the enlarged Group
following the reverse acquisition of Wichford.
Financial Highlights
Earnings available for distribution of GBP12.9 million (February 2011: GBP8.4
million), an increase of 53.6%
Interim dividend of 2.10 pence per share (February 2011: 2.03 pence), an
increase of 3.5%
IFRS loss per share of 10.67 pence (February 2011: 2.32 pence profit), due to
non-cash valuation declines
Adjusted fully diluted EPRA NAV per share of 46.77 pence
Fully diluted NAV per share of 35.08 pence (August 2011: 46.59 pence)
Fully diluted EPRA NAV per share of 38.23 pence (August 2011: 50.72 pence)
Operational Highlights
Greg Clarke assumes Chairmanship with effect from 1 December 2011
Strong performance from Cromwell and the Hotel portfolio, supporting the
Company`s diversification strategy
Secure cashflows delivered from the UK Stable Income and European portfolios
despite further valuation declines, principally from the former Wichford
portfolio
Detailed negotiations on Delta and Gamma refinancing are progressing in line
with the Company`s strategy and exposure to regional offices is anticipated to
reduce significantly
Substantial progress with the disposal of legacy Wichford assets (VBG 1, 2 and
Halle)
Disposal of 7 - 11 High Street, Reigate for an effective price of GBP3.15
million, 5.9% above the carrying value of the property and in line with
discussions to consolidate the portfolio and focus on larger better quality
assets
Additional GBP24.2 million investment in Cromwell securing Redefine
International`s strategic shareholder position
Greg Clarke, Chairman, said:
"I am pleased to report on my first half-year results which also reflect the
first set of interim results for the enlarged Group following the successful
reverse acquisition between Redefine International plc and Wichford P.L.C.
Notwithstanding the continuing adverse business conditions in the UK and Europe,
the Company has met its earnings targets and continues to be well placed to
benefit from any up-turn in economic growth going forward. Despite the
valuation decline of the UK Stable Income portfolio, the diversification of the
Group`s portfolio means that shareholders have benefited from the excellent
performance of the Australian and hotel investments, clearly supporting the
Company`s strategy to invest in these markets at a low point in the economic
cycle.
The Company continues to meet its targets and expects to deliver on the earnings
forecast and strategic objectives set out in the prospectus at the time of the
reverse acquisition of Wichford P.L.C. in the summer of 2011"
Meeting and conference call
A meeting for analysts and institutional investors will take place today at
09.00 (UK local time) 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. The presentation
will be made available on the Company`s website
http://www.redefineinternational.com/investor-relations/financial-reports
Dial in number: + 44 (0)20 3106 4822 UK Local
+27 11 019 7075 South Africa Local
Confirmation Code: 2854143
For further information, please contact:
Redefine International Property FTI Consulting LLP
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 is an income focused 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 GBP2 billion.
This announcement makes various references to companies within the Redefine
International Group which are summarised below.
Company name Abbreviation Description
Redefine Redefine International, The enlarged company following
International the Company, and the reverse acquisition between
P.L.C. together with its Wichford and Redefine
subsidiaries, International Holdings Limited
associates, and joint
ventures, the Group
Redefine RIHL The previously AIM listed
International property investment company
Holdings Limited party to the reverse
acquisition (previously named
Redefine International plc)
Redefine RIN The Company`s largest
Properties shareholder, listed on the JSE,
International whose sole asset is Redefine
Limited International
Redefine Redefine Properties Ultimate parent company of the
Properties Limited 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 Investment Adviser to the
International Adviser Company
Property
Management Limited
Cromwell Property Cromwell Associate company of Redefine
Group International, listed on the
ASX
Board and Management
The Board is responsible for setting the Group`s strategy and providing
leadership to 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 RIN on the
JSE, the Board has resolved to comply with the provisions of the third King
Report on Governance for South Africa 2009.
The Board of the Company is entirely non-executive and comprises nine directors.
The Chairman and five other directors are considered to be independent of the
Investment Adviser.
The Company is pleased to confirm the appointment of Stewart Shaw Taylor as
Chairman of the Audit Committee. Stewart is a Chartered Accountant with
extensive financial experience and, having recently stepped down from the Board
of Redefine International Fund Managers Limited, is deemed to be an independent
non-executive Director. Stewart replaces Gavin Tipper who, as Chairman of
Redefine Properties International Limited, is not regarded as independent.
The Group is advised on an exclusive basis by RIPML. The Investment Adviser has
a management team with extensive property and finance experience in the listed
property sector, which has been active in the UK and Europe for over a decade.
Chairman`s statement
The half-year results for the six months ended 29 February 2012 reflect the
first set of interim results for the enlarged Group following the successful
reverse acquisition between Redefine International plc and Wichford.
The reporting period has continued to be dominated by the Eurozone sovereign
debt and EU banking crises. This uncertain and volatile economic environment
together with tighter regulatory reforms in the banking sector, continues to
impact the performance of the commercial property market in the UK and Western
Europe. Although there are limited signs of renewed economic activity, a lack
of bank funding and a general liquidity squeeze is continuing to restrict growth
and dampen consumer sentiment.
Notwithstanding these tough business conditions, the Company`s underlying
performance remains sound. The tenant covenant strength of the UK Stable Income
portfolio, strong performance of the Hotel and European portfolios and a very
solid contribution from Cromwell, the Australian listed property trust in which
the Company holds a 23% interest, have more than offset the weaker performance
of the UK Retail and Stable Income portfolios, illustrating the benefit of
Redefine International`s diversified portfolio.
Financial results
It is pleasing to report that the new enlarged Group is on track to meet the
Company`s distributable earnings forecast for the year ending 31 August 2012 as
set out in the reverse acquisition prospectus (dated 13 July 2011) with earnings
available for distribution of 2.23 pence per share for the half-year period.
EPRA net asset value decreased to 38.23 pence per share from 50.72 pence at 31
August 2011, largely as a result of valuation declines in the UK regional office
(former Wichford) properties. This was partially offset by gains in the
Cromwell investment and fair value adjustments to interest rate swap agreements.
The Board has declared an interim dividend of 2.10 pence per share. This
reflects an increase of 3.5% from the comparable period in 2011.
Operations
Overall performance of the Group`s investment portfolio was supported by sound
underlying performance of Cromwell and the Hotel portfolio. Values in the UK
Retail and UK Stable Income portfolios suffered from weak tenant and investment
demand, however occupancies remained resilient at 96.4% despite tough trading
conditions.
The Company strengthened its strategic holding in Cromwell by supporting
Cromwell`s capital raising in December 2011 and increasing its interest to
23.16% (August 2011: 22.36%). Cromwell continues to deliver on earnings targets
and the recent capital raising to support the acquisition of the HQ North office
in Brisbane for AUD186 million provides a stronger platform for continued
growth.
Although the impact of lower UK GDP growth is starting to feed through, 2012 is
still expected to be a record year for London with major attractions such as the
Olympics and the Queen`s Jubilee. This would in turn be expected to have an
impact on the value of the Hotel portfolio.
The UK Retail portfolio maintained a healthy overall occupancy rate of 95%,
which has stabilised since February 2012 and compares favourably with recent
research suggesting the average void rate in secondary UK towns is 12.7%
(source: Colliers CRE October 2011). The redevelopment of 46,000 sq ft of new
retail space at the Birchwood Warrington Shopping Centre, to accommodate larger
unit requirements of certain key tenants, is on track for practical completion
in November 2012.
The European portfolio continues to deliver stable and increasing rental income.
The Company`s strategic focus on discount retail stores in Germany has proved
defensive despite Eurozone sovereign debt issues. The Company has agreed, in
respect of two separate transactions, to acquire a 50% interest in two newly
developed German retail stores for a total consideration of GBP13.4 million,
which is expected to complete post period end. Both assets are newly
constructed, fully let retail units anchored by multinational discount
retailers.
Prospects/Strategy
The remainder of 2012 will be focused on agreeing a refinancing and/or
restructuring of the Delta and Gamma debt facilities and the associated capital
raising. Negotiations with the servicer to these debt facilities has progressed
materially in the first half of this financial year and it is the Company`s
intention to approach shareholders once terms on the debt restructuring have
been agreed. It is currently anticipated that the previously announced capital
raising will take place after the current financial year end.
Real progress has been made with the sale of the VBG and Halle assets, both of
which are non-core to the Company`s strategy. As a result these assets are held
for sale as at 29 February 2012 and it is anticipated that completion of the
sales process will take place before the end of the current financial year.
Once completed, the sale of the VBG1, VBG2 and Halle assets is expected to have
a significant impact on the Group`s overall gearing ratios, removing GBP118.96
million of debt associated with those assets from the statement of financial
position which will result in an approximate 2.45 pence increase in NAV. These
sales, together with the restructuring of the Delta and Gamma facilities, are
significant steps towards securing a stable capital structure and exiting legacy
assets.
As previously stated, the Company is closely monitoring changes to existing
legislation to assess the possibility of converting to a UK REIT.
The Group`s diversified asset base continues to provide exposure to performing
markets, offsetting the challenges currently experienced in UK retail and
regional office markets. With a defined strategy to strengthen the Company`s
balance sheet and take advantage of future investment opportunities, Redefine
International remains on track to become a significant participant in the UK
listed real estate market.
Greg Clarke
Chairman
Business review
Top 15 properties by value
Name Anchor Market value Owner- Portfolio
tenants (GBP`million) ship type
interest
(%)
Wigan, Grand Arcade Debenhams, 83.0 50.0 Retail
TK Maxx, BHS
Harrow, St Georges Wilkinson, 60.0 100.0 Retail
Boots
Coventry, West Orchards Debenhams 41.6 81.3 Retail
Halle, Justizzentrum Ministry of 30.7 93.9 Office
Justice
Warrington, Birchwood ASDA 30.0 100.0 Retail
Dresden, VBG VBG(2.) 29.2 100.0 Office
Brentford Lock, Holiday RHM(1.) 25.1 71.0 Hotels
Inn
Stuttgart, VBG VBG(2.) 23.7 100.0 Office
Limehouse, Holiday Inn RHM(1.) 24.1 71.0 Hotels
Express
Southwark, Holiday Inn RHM(1.) 23.4 71.0 Hotels
Express
Royal Docks, Holiday Inn RHM(1.) 22.5 71.0 Hotels
Express
Bradford, Centenary Court HMRC 21.8 100.0 Office
Leeds, Castle House HMRC 18.1 100.0 Office
The Hague, ICC Royal Dutch 18.0 100.0 Office
Gov.
Seaham, Byron Place ASDA 15.7 100.0 Retail
Name Lettable area Annualised Let by Weighted
(sq ft) gross area average
rental (%) unexpired
(GBP`million) lease
term
(years)
Wigan, Grand Arcade 471,355 7.58 98 13.7
Harrow, St Georges 215,489 4.32 96 6.0
Coventry, West Orchards 210,188 3.91 94 9.4
Halle, Justizzentrum 373,389 2.76 100 8.3
Warrington, Birchwood 385,144 2.53 90 16.2
Dresden, VBG 187,818 2.31 100 12.2
Brentford Lock, Holiday 61,064 1.95 100 13.8
Inn
Stuttgart, VBG 134,059 1.96 100 12.9
Limehouse, Holiday Inn 61,860 1.80 100 13.8
Express
Southwark, Holiday Inn 1.69 100 13.8
Express
Royal Docks, Holiday Inn 49,094 1.62 100 13.8
Express
Bradford, Centenary Court 46,940 0.90 100 9.1
Leeds, Castle House 78,262 1.25 100 11.8
The Hague, ICC 138,618 1.88 100 2.3
Seaham, Byron Place 115,377 1.37 100 13.6
Notes:
1 Redefine Hotel Management Limited
2 Assets are classified as held for sale
Overview
The integration of Redefine International plc and Wichford has been completed
with limited disruption and operationally the Group is well set for the future.
The period under review was the first full half-year reporting period for the
Group as a merged entity.
The challenges brought about by the acquisition of the Wichford legacy assets
and the expiring debt facilities are being addressed and prioritised by the
management team. It is expected that by the end of the financial year
substantial progress will have been made in restructuring the Company`s
statement of financial position and either refinancing or exiting a number of
funding agreements.
Highlights for the period included:
Contracts exchanged, in respect of two separate acquisitions for a 50% stake in
two German retail properties (located in Kaiserslautern and Waldkraiburg for an
aggregate purchase consideration of EUR16.0 million (GBP13.4 million). These
acquisitions are being made in a joint venture with a major pension fund and are
expected to complete post period end.
Significant progress made in debt restructuring discussions with the loan
servicer for the Delta and Gamma facilities
The AUD 35 million (GBP22.6 million), participation in the Cromwell entitlement
offer, increasing the Company`s interest to 23.16% from 22.36% as at 31 August
2011
The raising of GBP4.7 million of new capital through a share placement with RIN
Disposal of 7 - 11 High Street, Reigate for an effective price of GBP3.15
million, 5.9% above the carrying value of the property
Substantial progress with the disposal of legacy Wichford assets (VBG 1, 2 and
Halle)
Performance
In a difficult economic environment, the Group`s investment portfolio has
benefited 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 investment, Cromwell has benefited the Company as these segments have
performed well. Overall occupancy of 96.4%, a weighted average unexpired lease
length of 8.8 years and in excess of 37% of rental income subject to indexation
or fixed uplifts, 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.
Cromwell: Relates to the Group`s investment in the Cromwell
Property Group, Australia.
Property portfolio - by business segment at 29 February 2012
Market values Occupancy Lettable Annualised
(GBP`million) (%) area gross rental
(sq ft`000) income
(GBP`million)
UK Stable Income 454.3 95.0 3,709 40.0
UK Retail(1.) 247.4 94.8 1,581(1.) 20.6
Hotels 123.4 100.0 268 9.4
Europe 227.6 100.0 1,910 18.6
Cromwell(2.) 260.6 99.1 1,391 24.2
Total 1,313.3 96.4 8,859 112.8
Notes:
1. UK Retail includes the Grand Arcade, Wigan Shopping Centre which is held
through a joint venture. Lettable area excludes the Wigan APCOA parking space of
326,315 sq ft.
2. Figures reflect Redefine International`s effective 23.16% share of Cromwell`s
property assets and net rental income. The investment value is GBP129.8 million
(based on a GBP:AUD exchange rate of GBP1.00:AUD1.479).
Figures assume 100% ownership of property assets in subsidiaries and joint
ventures.
UK Stable Income
The UK Stable Income portfolio performed ahead of expectations at an operating
level. Occupancy levels remained robust at 95%, supporting strong income
returns. A number of government leases with break options have been renewed or
are at advanced stages of negotiation which is providing encouraging evidence
that cost effective space remains an operational requirement to deliver front
line government services.
Despite this strong operational performance, investment sentiment together with
structural supply/demand imbalances has however resulted in a sharp decline in
transactional activity and the values of many regional properties. Overall
exposure to regional office markets is anticipated to reduce significantly as
part of the refinancing of the Delta and Gamma portfolios, leaving a core
portfolio of assets with better long term growth potential. In the near term the
focus will remain on maintaining occupancy levels and protecting income.
Rent reviews during the period provided an additional GBP0.63 million of income
resulting from rent reviews subject to CPI indexation or fixed increases. Rental
income subject to inflation or fixed increases rose slightly to 55.3% (2011:
54.6%).
Lyon House and Equitable House, Harrow
As announced in January 2012, the planning application for a residential-led
mixed use scheme for the adjoining Lyon House and Equitable House sites in
Harrow was submitted in November 2011. The application is for a new development
comprising approximately 316,000 sq ft of residential and commercial space
including 223 private residential units and 85 affordable housing units. A
conditional development agreement has been concluded with Metropolitan Housing
Trust for the affordable element of the scheme.
A post application meeting has been held with the local Council in order to
assess the design of certain elements of the scheme and a revised scheme
proposal has subsequently been submitted. Subject to a further public
consultation period, a hearing date is anticipated in May this year.
UK Retail
The Group`s UK Retail portfolio consists of five 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, debt-
burdened retailers and the growing impact of technology on shopping patterns.
Against this difficult economic backdrop, the retail market is becoming
increasingly polarised as the influence of technology gathers pace and those
retailers failing to invest are beginning to underperform. Successful retailers
are focusing on a seamless shopping experience whether it be through their
mobile website, traditional website, call centre or physical shops.
The success of the luxury brands, particularly in London, and volume retailers
continues. Exposure to volume brands impacts positively on the UK Retail
portfolio as borne out by the healthy footfall figures. Space requirements for
retailers are also changing, with a tendency towards fewer but larger format
stores for the major high street fashion brands.
The current economic climate has seen a `flight to prime` for some national and
international brands, although it is unclear whether this will become a
structural feature of the market or one typified by the poor economic climate.
There were a number of high profile insolvencies during the period, of which
Peacocks, Bon Marche, La Senza and Game affected the portfolio (three Peacocks,
one Bon Marche, two La Senza and two Game units). However, Redefine
International has only lost three out of the eight units let to these tenants,
equating to 0.6% of total floor space, reflecting the portfolio`s locally
dominant status.
Despite the number of retailer administrations, the Company has succeeded in
maintaining footfall across its portfolio and an occupancy rate of 95%.
The investment market for shopping centres continued to soften during the
period. Although the portfolio declined 4.1% in value, this reflected a
relatively positive outcome with the wider market seeing larger negative yield
shifts. This reinforces the strength of the portfolio and reflects Redefine
International`s strategy to acquire assets with a dominant hold over their
catchment area.
UK Retail at a glance
29 February 2012 31 August 2011
Market value GBP247.4 million GBP257.9 million
Occupancy (by lettable area) 94.8% 97.4%
Annualised gross rental income GBP20.6 million GBP21.4 million
Estimate rental value ("ERV") GBP21.2 million GBP21.5 million
Annual footfall(1.) 29.5 million 30.1 million
Footfall % change(1.) 1.6%(2.) (0.9%)
Net initial yield 7.4% 7.3%
Lettable area (`000) 1,580 sq ft 1,580 sq ft
Figures assume 100% ownership of property assets in subsidiaries and joint
ventures
1. Excludes Crewe
2. Reflects increase in footfall against the comparable 12 month period to
February 2011
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
Reading. The focus on branded, limited service hotels in Greater London provides
for defensive underlying occupancies in line with the Company`s income focus.
Although the Greater London hotel market is beginning to feel the impact of
lower UK GDP growth and Eurozone uncertainty as the private and public sector
cut back on meetings and accommodation demand, 2012 is still seen as a potential
record year due to anticipated strong demand over the third calendar quarter
with the Queen`s Jubilee, the bi-annual Farnborough Air Show and the Olympics.
The tenant, Redefine Hotel Management Limited, performed in line with its
competitors for the period under review.
Key activity during the period included:
Hotels
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 and, although there has been
significant room capacity growth in Central and East London it is anticipated
that with the continual growth in international leisure, particularly from the
East, will result in this surplus being absorbed in a short time period.
The initial phase of a modernisation and refurbishment programme for the
Southwark and Royal Dock hotels is underway. The Royal Dock public area "new
look" has been completed and work on the Southwark and Royal Docks bedrooms and
corridors are largely complete.
The Limehouse hotel will have the new public area refurbished before the
Olympics whilst the Park Royal hotel lobby upgrade has been completed.
The Brentford hotel will undergo a refurbishment of the food and beverage area
in co-operation with the Intercontinental Hotel Group and a new "HUB" food
concept, launched recently in the USA, will be put into operation at the hotel.
Europe
Despite a backdrop of continued macro-economic instability and the sovereign
debt crisis, the European portfolio has performed strongly at an operating level
with occupancy levels close to 100% and consistent cash flows from rental
income. The results of a concerted effort over the past 12 months to reduce
non-
recoverable costs have started to take effect, with significant expense
reductions having been achieved.
Several lease extensions with anchor tenants, ranging from five to 13 years,
were agreed. Further lease extensions involving anchor tenants within the
portfolio are at advanced stages of negotiations.
VBG portfolio
A marketing process has been completed in relation to the sale of the VBG
tenanted properties located in Dresden, Berlin, Cologne and Stuttgart (part of
the former Wichford portfolio). A number of offers were submitted and
negotiations are currently in place with a preferred party to finalise a sale
and purchase agreement. It is anticipated that completion of the sales process
will take place before the end of the current financial year. Further
information is provided within the Financial Review.
Cromwell
On 16 December 2011 the Company announced that it had increased its strategic
stake in the ASX-listed Cromwell to 24.32% (22.36% at 31 August 2011) by
subscribing for 51,470,588 new Cromwell stapled securities for an amount of
AUD35 million (GBP22.6 million), in terms of an underwriting agreement. The
subscription formed part of an institutional placement and pro-rata non-
renounceable entitlement offer (the "entitlement offer") undertaken by Cromwell
to fund the acquisition of `HQ North` office tower in Fortitude Valley, Brisbane
for AUD186 million. AUD9,424,997 (GBP6,098,348) of the subscription was funded
through an existing facility with Investec Bank (Australia) Limited and the
balance was funded from available cash resources. The Company received a fee of
AUD875,000 (GBP566,160) from Cromwell in consideration for providing an AUD35
million underwriting commitment for the entitlement offer.
The new Cromwell stapled securities were admitted to trading on the ASX on 21
December 2011 and entitled holders to receive a pro-rata share of the
distributions from Cromwell for the quarter ended 31 December 2011.
The increase of Redefine International`s interest in Cromwell is in line with
one of the Company`s objectives of increasing its presence in the Australian
property market and is expected to be earnings enhancing for shareholders in the
medium to long term.
The Cromwell distribution, amounting to AUD3.8 million (GBP2.6 million) for the
quarter ended 31 December 2011, was received on 16 February 2012.
The total net distributions received for the six months ended 29 February 2012
amounted to AUD 7.5 million (GBP4.9 million).
On 1 February 2012 the Company exercised its option to place new shares with RIN
at the sterling equivalent of AUD7.5 million at 37.0 pence per share to cover
part of the cost of the underwriting.
Cromwell`s performance and outlook
Cromwell produced strong operating and financial results for their half-year
ending 31 December 2011. Highlights included:
Operating earnings of AUD37.0 million (3.8 cents per security), up 13%
Statutory accounting loss of AUD6.8 million (0.7 cents per security) impacted by
fair value adjustment on interest rate swaps
Earnings from property investments of AUD37.5 million, up 15%
Acquisition of HQ North Tower, Brisbane for AUD186 million
Agreed terms to re-acquire Bundall Corporate Centre, Gold Coast for AUD63.4
million
Successful completion of a two year capital raising programme which places the
Group in a position to drive earnings and Net Tangible Asset growth from capital
recycling opportunities and funds management activities
Commenced AUD49 million equity raising for unlisted Ipswich City Heart Trust
Launch of Cromwell Real Estate Partners, targeting wholesale opportunity fund
investors
Guidance for FY12 operating earnings maintained at 7.3 cents per security and
distributions of 7.0 cents per security
Portfolio summary
Portfolio overview by business segment
Business segments - market values
Properties Lettable Market Segmental Net
(No.) Area Value Split by initial
(sq ft (GBP`million) Value Yield
`000) (%) (%)
UK Stable Income 134 3,709 454.3 34.6 8.3
UK Retail 6 1,581 247.4 18.9 7.4
Hotels 6 268 123.4 9.4 7.2
Europe 37 1,910 227.6 17.3 7.7
Cromwell(1.) 23 1,391 260.6 19.8 8.3
Total investment 206 8,859 1,313.3 100.0 8.1
portfolio
Notes:
1. Figures reflect Redefine International`s effective 23.16% share of Cromwell`s
property assets and net rental income. The investment value is GBP129.8
million.
The Cromwell property portfolio consists of 23 assets with a market value of
AUD1.66 billion as at 31 December 2011
Figures (excluding Cromwell) assume 100% ownership of property assets held in
subsidiaries and joint ventures
Business segments - income
Annualised Average Weighted Occupancy Indexation
gross rent average by area and fixed
Rental income per unexpired (%) increases
(GBP`million) (sq ft) lease (%)
term
(years)
UK Stable Income 40.0 10.8 8.1 95.0 55.3
UK Retail 20.6 13.0 11.6 94.8 5.3
Hotels 9.4 35.1 13.8 100.0 -
Europe 18.6 9.8 8.1 100.0 93.0
Cromwell 24.2(1.) 17.4 6.3 99.1 75.0
Total investment 112.8 12.7 8.8 96.4 37.1
portfolio
Notes:
1. Cromwell rental income reflects 23.16% stake
Figures (excluding Cromwell) assume 100% ownership of property assets held in
subsidiaries and joint ventures
Business segments - valuation movement
Proportion Market value Valuation
of portfolio 29 February movement
by value 2012 six months
(%) (GBP`million) ended
29 February
2012
(%)
UK Stable Income 38.3 454.3 (9.2)
UK Retail 20.9 247.4 (4.1)
Hotels 10.4 123.4 -
Europe 19.2 227.6 (8.4)
Cromwell(1.) 9.1 107.4 4.8(3.)
Total like-for-like portfolio 97.9 1,160.1 (5.9)
Acquisitions(2.) 2.1 25.2 11.4
Total investment portfolio 100.0 1,185.3 (5.6)
Notes:
1. Cromwell reflects investment value at a closing share price of 72.5
Australian cents per security as at 29 February 2012
2. Acquisition of 51.47 million Cromwell stapled securities
3. Includes effect of currency changes
Portfolio overview by sector
Property sectors at 29 February 2012
Market value Occupancy Lettable Annualised
(GBP`million) by area area gross rental
(%) (sq ft`000) income
(GBP`million)
Retail 338.1 96.5 2,344 26.4
Office 546.9 95.3 3,976 48.3
Industrial 39.4 100.0 807 3.0
Hotels 123.4 100.0 268 9.4
Other 5.0 100.0 73 1.5
Total 1,052.8 96.4 7,468 88.6
Notes:
Excludes Cromwell and assumes 100% ownership of property assets held in
subsidiaries and joint ventures
Financial review
Overview
These results reflect the first set of half-year results for the enlarged Group
following the reverse acquisition.
As reverse acquisition accounting was applied on the transaction between RIHL
and Wichford with RIHL being identified as the accounting acquirer, the
comparative figures shown are those of RIHL.
Consequently, gross rental income is GBP38.6 million, up 233% on the comparable
period and total investment property assets (including assets held for sale)
have increased from GBP348 million to GBP914 million. Earnings available for
distribution are GBP12.9 million, up 54.1% from the six month period ended 28
February 2011.
The Group delivered a loss attributable to equity holders of the parent of
GBP60.7 million for the six months ended 29 February 2012.
Key items impacting the results of the Group for the period since 31 August 2011
include:
A net decrease in the fair value of the Group`s investment property of GBP57.8
million (5.6% decrease) of which GBP44.3 million relates to the historic
"Wichford" UK portfolio.
GBP17.8 million increase in finance costs due to the amortisation of the fair
value adjustment of the VBG, Gamma and Delta facilities as at the date of the
reverse acquisition of Wichford. These are non-cash, IFRS adjustments, which
may reverse upon sale or re-structuring of the underlying assets on which the
loans are secured.
The placement of 12,750,000 shares to RIN on 1 February 2012, at a price of 37.0
pence per share to assist with the underwriting commitment in connection with
the Cromwell capital raising.
A net fair value increase in the interest rate derivatives held by the Group of
GBP5.3 million. The gain was principally due to the near-term expiry of the
Delta and Gamma interest rate swaps, as indicative five year swap rates moved
from 1.97% to 1.58% during the period.
AUD7.5 million (GBP4.9 million) of distributions received from Cromwell,
including the AUD148,000 (GBP97,000) pro-rata distribution received from the
additional 51.47 million shares acquired during the period and a AUD875,000
(GBP566,166) fee received in respect of the underwriting commitment.
The effect of certain of the above items has led to a decrease in the EPRA net
asset value per share from 50.72 pence as at 31 August 2011 to 38.23 pence per
share as at 29 February 2012.
The net asset value, however, includes items which, in the opinion of the Board
need to be adjusted in order to allow shareholders to gain a better
understanding of the underlying value of the Group. An "adjusted EPRA net asset
value" has therefore been calculated as presented below:
Note Pence per
share
Fully diluted IFRS NAV per share as at 29 February 2012 35.08
Adjusted for derivatives and deferred tax 3.15
Fully diluted EPRA NAV per share as at 29 February 2012 38.23
Reversal of VBG amortisation of the fair value adjustment 1 2.45
Write back of Gamma and Delta negative equity 2 6.09
Adjusted fully diluted EPRA NAV per share 46.77
Notes
1. In accordance with IFRS, the assets and liabilities of Wichford as at 31
August 2011 following the reverse acquisition were acquired at fair value.
Consequently, the VBG debt was valued at an amount of GBP83.87 million, which
was GBP20.97 million below the outstanding principal value. The interest charge
reflected in the accounts includes an amount of GBP14.9 million, relating to the
accretion of the fair value of the loan to its principal value over the
remaining term of the loan. This amount may however reverse upon disposal of
the assets and loan and therefore has been added back in the calculation.
2. The net Delta and Gamma portfolio debt values are in excess of the current
investment property values. Should the proposed restructuring take place, it
may remove the negative net asset value position, leading to a positive effect
on net asset value per share of 6.09 pence.
Earnings available for distribution
The Company`s policy is to distribute the majority of its earnings available for
distribution in the form of dividends to shareholders. Considering the earnings
available for distribution at the period end, the Board has declared an interim
dividend of 2.10 pence per share and is on track to achieve the forecast
distribution per share for the year ending 31 August 2012 in the reverse
acquisition prospectus.
The earnings available for distribution excludes any capital and one-off items
and the figure is used by the Board as its measure of underlying earnings
performance. The statement of earnings available for distribution is presented
as follows:
Not Not Unaudited
reviewed reviewed Year
6 months 6 months ended
ended ended 31 August
29 28 2011
February February Total
2012 2011 GBP`000
Total Total
GBP`000 GBP`000
Gross rental income from investment 38,633 11,718 27,335
properties
Property operating expenses (2,437) (1,598) (2,957)
Net operating income from investment 36,196 10,120 24,378
properties
Investment income - 3,875 3,875
Fee income 566 857 1,010
Other income 633 137 277
Total revenue 37,395 14,989 29,540
Expenses (5,022) (2,164) (4,245)
Administrative expenses (855) (252) (774)
Investment management fees (2,780) (1,170) (2,431)
Professional fees (1,387) (743) (1,040)
Net operating profit 32,373 12,825 25,295
Share of distributable income from 5,471 1,206 7,183
associates and joint ventures
Gain on financial assets and liabilities - 913 840
Non-controlling interest (1,160) (232) (569)
Adjusted operating profit 36,684 14,712 32,749
Net finance charges (22,979) (5,982) (14,978)
Interest paid (23,162) (9,176) (23,112)
Interest received 183 3,194 8,134
Foreign exchange loss (161) (142) (329)
Taxation (604) (193) (291)
Profit before earnings adjustments 12,940 8,395 17,151
Wichford acquired earnings - - 3,166
Distributable earnings for the period 12,940 8,395 20,317
Interim distribution - - (8,395)
Earnings available for distribution at 12,940 8,395 11,922
period end
Earnings available for distribution per
share
Earnings available for distribution 12,940 8,395 11,922
Number of ordinary shares in issue (`000) 579,455 412,899 567,644
Earnings available for distribution per 2.23 2.03 2.10
share (pence)
Summary
Distribution per share (pence) 2.10 2.03 4.13
Interim 2.10 2.03 2.03
Second interim - - 2.10
Financial position
The nominal value of senior debt facilities at 29 February 2012 was GBP855.4
million (GBP898.2 million including the Group`s attributable share of debt in
subsidiaries and joint ventures). Overall gearing levels have been influenced by
a decrease in property values, however, significant progress has been made
towards the restructure of the Delta and Gamma facilities.
The key financing statistics are summarised in the table below:
Key financing statistics 29 February 31 August
2012 2011
GBP`000 GBP`000
Total investment portfolio 1,038,808 1,076,568
Gross debt 855,380 863,149
Cash and short-term deposits (33,866) (51,368)
Net debt 821,474 811,781
Weighted average debt maturity 4.13 years 4.15 years
Weighted average interest rate 5.09% 5.01%
% of debt at fixed/capped rates 93.6% 92.9%
Loan-to-value 79.1% 75.4%
UK REIT Update
The revised UK REIT rules, as communicated in the Annual Report, will take
effect from the date on which the Finance Act 2012 receives Royal Assent
(expected to be in late July or early August 2012). If conversion were to take
place prior to the date on which Finance Act 2012 receives Royal Assent, the
advantages afforded by the new legislation would not be available.
An initial feasibility study has been performed and once the Finance Act 2012
has been enacted, the Company will make a decision as to whether conversion to
REIT status is in the best interests of shareholders.
Principal risks and uncertainties
The principal risk for the upcoming period is liquidity risk linked to the debt
maturity profile of the Group`s funding. As at 29 February 2012 the Group has
current loan liabilities of GBP458.4 million. These liabilities are classified
as current due to maturities within the next 12 months and or as a result of on-
going covenant breaches.
With respect to the VBG 1 and VBG 2 loan facilities totalling GBP93.37 million
the loan servicer is marketing the associated assets for sale and it is expected
that they will be disposed of and the loans settled within the next 6-12 months.
As a result the associated assets are classified as held for sale as at 29
February 2012. It should be noted that the liabilities are non-recourse to the
Group.
Discussions are on-going with the finance providers in respect of the Delta and
Gamma which total GBP312.84 million and have a maturity date of October 2012 as
well as with the finance provider for the Delamere Place Crewe facility which
totals GBP17.15 million and with the funding providers for the other facilities
which are due to mature in the next 6 to 12 months.
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.
Statement of Directors` Responsibilities
Each of the Directors confirms that to the best of each person`s knowledge and
belief:
a) the condensed consolidated interim financial statements comprising the
condensed consolidated statement of comprehensive income, the condensed
consolidated statement of financial position, the condensed consolidated
statement of changes in equity, the condensed consolidated statement of cash
flows and related notes have been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted by the EU.
b) The interim management commentary includes a fair review of the information
required by:
i) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of
important events that have occurred during the first six months of the financial
year and their impact on the condensed set of financial statements; and a
description of the principal risks and uncertainties for the remaining six
months of the year;
ii) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during the period; and any changes in the related
party transactions described in the last annual report that could do so.
The Board of Directors
30 April 2012
Independent Auditors` Review Report to Redefine International P.L.C.
We have been engaged to review the condensed consolidated set of financial
statements in the half-yearly financial report of Redefine International P.L.C.
for the six months ended 29 February 2012 which comprise the condensed
consolidated statement of financial position, the condensed consolidated
statement of comprehensive income, the condensed consolidated cash flow
statement, the condensed consolidated statement of changes in equity and the
related explanatory notes. We have read the other information contained in the
half-yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the condensed
set of financial statements.
This report is made solely to the Company in accordance with our engagement
letter to assist the Company in meeting the requirements of the Disclosure and
Transparency Rules ("the DTR") of the UK`s Financial Services Authority ("the
FSA"). Our review has been undertaken so that we might state to the Company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company for our review work, for this
report, or for the conclusions we have reached.
Directors` Responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the Directors. The Directors are responsible for preparing the half-yearly
financial report in accordance with the DTR of the FSA.
As disclosed in note 2, the annual financial statements of the Group are
prepared in accordance with IFRSs as adopted by the EU.
The Directors are responsible for ensuring that the condensed consolidated set
of financial statements included in this half-yearly financial report has been
prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the
EU.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed
consolidated set of financial statements in the half-yearly financial report
based on our review.
Scope of Review
We conducted our review in accordance with the International Standards on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with
International standards on Auditing (UK and Ireland) and consequently does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express an
audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed consolidated set of financial statements in the half-yearly
report for the six months ended 29 February 2012 is not prepared, in all
material respects, in accordance with IAS 34 as adopted by the EU and the DTR of
the UK FSA.
Darina Barrett
Senior Statutory Auditor
For and on behalf of KPMG
Chartered Accountants
Registered Auditor
Dublin, Ireland
30 April 2012
Financial Statements
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 29 February 2012
Notes Reviewed Reviewed Audited
6 Months 6 Months Year ended
ended ended 31 Aug
29 Feb 28 Feb 2011
2012 2011 GBP`000
GBP`000 GBP`000
Revenue
Gross rental income 38,537 11,588 26,823
Investment income - 3,875 3,875
Other income 1,199 994 1,592
Total revenue 39,736 16,457 32,290
Expenses
Administrative expenses (855) (252) (774)
Investment adviser and (4,473) (2,083) (4,664)
professional fees
Property operating expenses (2,437) (1,595) (2,368)
Net operating income 31,971 12,527 24,484
Net gains from financial assets 4 4,748 17,100 13,540
and liabilities
Equity accounted profit/(loss) 1,879 (6,784) (3,088)
Impairment of loans - (15) (444)
Net fair value losses on 8 (57,824) (6,802) (10,627)
investment property
Impairment of intangible assets - - (591)
(Loss)/profit from operations (19,226) 16,026 23,274
Interest income 5 4,911 3,194 8,134
Interest expense 6 (45,805) (9,320) (24,305)
Share based payment 13 (375) (294) (768)
Foreign exchange loss (945) (143) (1,224)
(Loss)/profit before tax (61,440) 9,463 5,111
Taxation 7 (1,164) (193) (1,360)
(Loss)/profit after tax (62,604) 9,270 3,751
Loss/profit attributable to:
Equity holders of the parent (60,710) 9,457 5,035
Non-controlling interests (1,894) (187) (1,284)
(Loss)/profit after tax (62,604) 9,270 3,751
Other comprehensive income
Foreign currency translation on 95 153 1,927
foreign operations - subsidiaries
Foreign currency translation on 3,692 44 4,882
foreign operations - joint
ventures and associates
Share of foreign currency - 779 1,494
movement recognised in associate
undertaking
Share of cash flow hedge reserve - 2,459 (155)
movement recognised in associate
undertaking
Total comprehensive income for (58,817) 12,705 11,899
the period/year
Total comprehensive income
attributable to:
Equity holders of the parent (56,915) 12,882 13,157
Non-controlling interests (1,902) (177) (1,258)
Total comprehensive income for (58,817) 12,705 11,899
the period/year
Basic (loss)/earnings per share 17 (10.67) 2.32 1.18
(pence)
Diluted (loss)/earnings per share 17 (10.67) 2.17 1.11
(pence)
Condensed Consolidated Statement of Financial Position
As at 29 February 2012
Notes Reviewed Reviewed Audited
29 Feb 28 Feb 31 Aug
2012 2011 2011
GBP`000 GBP`000 GBP`000
Assets
Non-current assets
Investment property 8 805,249 348,183 986,654
Long-term receivables 9 91,881 87,809 104,080
Investments at fair value 529 86,958 1,123
Intangible assets - 575 -
Investments in joint ventures 2,201 2,647 2,607
Investments in associate 10 129,795 16,731 104,680
Total non-current assets 1,029,655 542,903 1,199,144
Current assets
Assets held for sale 19 109,231 - -
Trade and other receivables 23,847 19,288 23,785
Cash at bank 11 33,820 10,763 51,368
Total current assets 166,898 30,051 75,153
Total assets 1,196,553 572,954 1,274,297
Equity and liabilities
Capital and reserves
Share capital 12 41,721 10,621 40,870
Share premium 164,902 161,420 161,420
Reverse acquisition reserve 134,295 94,011 134,295
Retained (loss)/earnings (160,229) (73,865) (87,598)
Capital instrument 13 14,143 13,294 13,768
Currency translation reserve 14,432 3,326 10,637
Other reserves 3,912 3,912 3,912
Cash flow hedge reserve - 2,614 -
Total equity attributable to 213,176 215,333 277,304
equity holders of the parent
Non-controlling interests 3,818 5,172 5,506
Total equity 216,994 220,505 282,810
Non-current liabilities
Borrowings 14 469,360 307,872 811,415
Derivatives 15 5,487 1,260 6,824
Deferred tax 7 2,637 - 2,239
Total non-current liabilities 477,484 309,132 820,478
Current liabilities
Borrowings 14 458,377 20,267 117,071
Derivatives 15 11,340 55 16,291
Trade and other payables 32,358 22,995 37,647
Total current liabilities 502,075 43,317 171,009
Total liabilities 979,559 352,449 991,487
Total equity and liabilities 1,196,553 572,954 1,274,297
Net asset value per share (pence) 18 36.79 52.15 48.85
Fully diluted net asset value per 18 35.08 49.00 46.59
share (pence)
Number of ordinary shares in 18 579,454,7 412,898,99 567,643,79
issue 92 5 2
Condensed Consolidated Statement of Changes in Equity
For the period ended 29 February 2012
Share Share Treasury Reverse Retained Other
capital premium shares acquisitio (loss)/ reserves
n reserve earnings
GBP`000 GBP`000 GBP`000 GBP`000 GBP`000 GBP`000
Balance at 1 3,047 211,359 - - (78,327) 3,912
September
2010
Total profit - - - - 9,457 -
for the
period
Foreign - - - - - -
currency
translation
effect
Effective - - - - - -
portion of
cash flow
hedges
Total - - - - 9,457 -
comprehensive
income
Shares issued 1,078 52,961 - - - -
Share issue - (2,631) - - - -
costs
Scrip 4 234 - - (238) -
dividend paid
to equity
stakeholders
Dividend paid - - - - (4,786) -
to equity
stakeholders
Dividends - - - - - -
paid to non-
controlling
interests
Group - - - - 29 -
acquisition
of non-
controlling
interest
Convertible - - - - - -
shares to be
issued
Share based - - - - - -
payment
Contribution - - - - - -
of non-
controlling
shareholders
Balance at 28 4,129 261,923 - - (73,865) 3,912
February 2011
Adjustment to 6,492 (100,503) - 94,011 - -
present
Wichford
capital
structure
Restated 10,621 161,420 - 94,011 (73,865) 3,912
balance at 28
February 2011
Balance at 28 4,129 261,923 - - (73,865) 3,912
February 2011
Total loss - - - - (4,422) -
for the
period
Foreign - - - - - -
currency
translation
effect
Effective - - - - - -
portion of
cash flow
hedges
Total - - - - (4,422) -
comprehensive
income
Shares issued 393 20,135 - - - -
Share issue - (396) - - - -
costs
Dividend paid - - - - (9,179) -
to equity
stakeholders
Dividends - - - - - -
paid to non-
controlling
interests
Share based - - - - - -
payment
Decrease in - - - - (132) -
non-
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 (2,308) - - 2,308 - -
of shares
Share issue - - - (2,134) - -
costs
Balance at 31 40,870 161,420 - 134,295 (87,598) 3,912
August 2011
Balance at 1 40,870 161,420 - 134,295 (87,598) 3,912
September
2011
Total loss - - - - (60,710) -
for the
period
Foreign - - - - - -
currency
translation
effect
Total - - - - (60,710) -
comprehensive
income
Shares issued 851 3,519 - - - -
Shares taken - (317) (67) - - -
into treasury
Treasury - 280 67 - - -
share sold
Dividend paid - - - - (11,921) -
to equity
stakeholders
Share based - - - - - -
payment
Disposal of - - - - - -
non-
controlling
interest
Decrease in - - - - - -
non-
controlling
interest
Balance at 29 41,721 164,902 - 134,295 (160,229) 3,912
February 2012
Condensed Consolidated Statement of Changes in Equity
For the period ended 29 February 2012
(Continued)
Currency Cash Capital Total NCI Total
translat Flow instrume attributab equity
ion hedge nt le to
reserve reserve equity
shareholde
rs
GBP`000 GBP`000 GBP`000 GBP`000 GBP`000 GBP`000
Balance at 1 2,360 155 - 142,506 2,254 144,760
September
2010
Total profit - - - 9,457 (187) 9,270
for the
period
Foreign 966 - - 966 10 976
currency
translation
effect
Effective - 2,459 - 2,459 - 2,459
portion of
cash flow
hedges
Total 966 2,459 - 12,882 (177) 12,705
comprehensive
income
Shares issued - - - 54,039 - 54,039
Share issue - - - (2,631) - (2,631
costs
Scrip - - - - - -
dividend paid
to equity
stakeholders
Dividend paid - - - (4,786) - (4,786)
to equity
stakeholders
Dividends - - - - (46) (46)
paid to non-
controlling
interests
Group - - - 29 (457) (428)
acquisition
of non-
controlling
interest
Convertible - - 13,000 13,000 - 13,000
shares to be
issued
Share based - - 294 294 - 294
payment
Contribution - - - - 3,598 3,598
of non-
controlling
shareholders
Balance at 28 3,326 2,614 13,294 215,333 5,172 220,505
February 2011
Adjustment to - - - - - -
present
Wichford
capital
structure
Restated 3,326 2,614 13,294 215,333 5,172 220,505
balance at 28
February 2011
Balance at 28 3,326 2,614 13,294 215,333 5,172 220,505
February 2011
Total loss - - - (4,422) (1,097) (5,519)
for the
period
Foreign 7,311 - - 7,311 16 7,327
currency
translation
effect
Effective - (2,614) - (2,614) - (2,614)
portion of
cash flow
hedges
Total 7,311 (2,614) - 275 (1,081) (806)
comprehensive
income
Shares issued - - - 20,528 - 20,528
Share issue - - - (396) - (396)
costs
Dividend paid - - - (9,179) - (9,179)
to equity
stakeholders
Dividends - - - - (35) (35)
paid to non-
controlling
interests
Share based - - 474 474 - 474
payment
Decrease in - - - (132) 131 (1)
non-
controlling
interest
Contribution - - - - 1,319 1,319
of non-
controlling
shareholders
Adjustment to - - - - - -
present
Wichford
capital
structure
Shares issued - - - 52,535 - 52,535
pursuant to
reverse
acquisition
Cancellation - - - - - -
of shares
Share issue - - - (2,134) - (2,134)
costs
Balance at 31 10,637 - 13,768 277,304 5,506 282,810
August 2011
Balance at 1 10,637 - 13,768 277,304 5,506 282,810
September
2011
Total loss - - - (60,710) (1,894) (62,604)
for the
period
Foreign 3,795 - - 3,795 (8) 3,787
currency
translation
effect
Total 3,795 - - (56,915) (1,902) (58,817)
comprehensive
income
Shares issued - - - 4,370 - 4,370
Shares taken - - - (384) - (384)
into treasury
Treasury - - - 347 - 347
share sold
Dividend paid - - - (11,921) - (11,921)
to equity
stakeholders
Share based - - 375 375 - 375
payment
Disposal of - - - - 664 664
non-
controlling
interest
Decrease in - - - - (450) (450)
non-
controlling
interest
Balance at 29 14,432 - 14,143 213,176 3,818 216,994
February 2012
Condensed Consolidated Statement of Cash Flows
For the six months ended 29 February 2012
Notes Reviewed Reviewed Audited
6 Months 6 Months Year
Ended Ended Ended
29 Feb 28 Feb 31 Aug
2012 2011 2011
GBP`000 GBP`000 GBP`000
Cash flows from operating
activities
(Loss)/profit for the period (61,440) 9,463 5,111
before tax
Adjusted for:
Straight-lining of rental 177 - 169
income
Impairment of intangible assets - - 591
Net fair value losses on 8 57,824 6,802 10,627
investment property
Foreign exchange loss 945 143 1,224
Gain from financial assets and 4 (4,748) (17,100) (13,540)
liabilities
Equity accounted (1,879) 6,784 3,088
(profits)/losses
Impairment of loans - 15 444
Investment income - (3,875) (3,875)
Interest income 5 (4,911) (3,194) (8,134)
Interest expense 6 45,805 9,320 24,305
Share based payment 13 375 294 768
Cash generated by operations 32,148 8,652 20,778
Changes in working capital (5,251) 1,542 93
Cash generated by operations 26,897 10,194 20,871
Interest income 3,754 822 4,540
Interest paid (26,193) (7,710) (22,867)
Taxation paid (718) (193) (152)
Distribution received - 5,040 3,875
Distributions received from 5,083 - 5,986
associate and joint ventures
Net cash generated from 8,823 8,153 12,253
operating activities
Cash flows from investing
activities
Increase in investment 8 (1,126) (132,141) (211,083)
properties
Investment in associate and (24,222) (1,916) (18,586)
joint ventures
Cash acquired on reverse - - 32,340
acquisition
Acquisition of subsidiaries - (84) (307)
Disposal of subsidiaries 615 (477) (477)
Decrease in long-term 11,057 - -
receivables
(Increase)/decrease in loans to (208) 35 3,990
related parties
Purchases of financial assets - - (1,565)
(Increase)/decrease in (1,958) 18,117 14,616
restricted cash balances
Net cash utilised in investing (15,842) (116,466) (181,072)
activities
Cash flows from financing
activities
Proceeds from loans and 18,776 88,847 152,831
borrowings
Repayment of loans and (24,369) (37,637) (21,846)
borrowings
Dividends paid to non- - (46) (81)
controlling interests
Dividends paid to equity (11,921) (4,786) (13,964)
shareholders
Acquisition of treasury shares (384) - -
Proceeds from issue of shares 347 - -
from treasury
Proceeds from issue of share 4,370 53,115 73,644
capital
Share issue and reverse - (2,631) (3,993)
acquisition costs
Additional contribution from - 5,200 4,804
non-controlling shareholders
Net cash generated (utilised (13,181) 102,062 191,395
in)/generated from financing
activities
Net (decrease)/increase in cash (20,200) (6,251) 22,576
Effect of exchange rate 694 (280) 392
fluctuations on cash held
Net cash at the beginning of 39,937 16,969 16,969
period
Net cash at the end of the 11 20,431 10,438 39,937
period
Notes to the Condensed Consolidated Financial Statements
For the six months ended 29 February 2012
1. General information
Redefine International P.L.C. 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")) was legally acquired
by Wichford P.L.C. ("Wichford") subsequently renamed Redefine International
P.L.C. As a result of the terms of the transaction, reverse acquisition
accounting has been applied under IFRS 3 Business Combinations (2008) and RIHL
has been identified as the accounting acquirer. Consequently, the comparative
figures shown for the condensed consolidated statement of financial position 28
February 2011 and the condensed consolidated statement of comprehensive income
are those of RIHL. The condensed consolidated statement of financial position
reflects the reserves, assets and liabilities of RIHL and the capital, reserves,
assets and liabilities of Redefine International (formerly Wichford),
effectively acquired by RIHL at fair value as at 31 August 2011. As Wichford was
the legal acquirer, the Wichford capital structure remains that of the Company.
The preparation of the condensed consolidated 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. The
significant judgements made by management in applying the Company`s accounting
policies and the key sources of estimation uncertainty are discussed further in
Note 2.4 Basis of preparation.
These condensed consolidated financial statements have been prepared on a going
concern basis as the Directors consider this the most appropriate basis.
2. Basis of preparation
2.1 Statement of compliance
These condensed consolidated financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by the EU. They do
not include all of the information required for full annual financial statements
and should be read in conjunction with the consolidated financial statements of
the Group as at and for the period ended 31 August 2011.
Comparative figures for 2011 have been regrouped on a basis consistent with the
current year. A reverse acquisition reserve has been created so that the capital
structure of the Group reflects that of the Company. Certain balances have also
been reclassified in the statement of cashflows to more accurately reflect the
activity to which they relate.
Both half-year figures for the six months ended 29 February 2012 and the
comparative amounts for the six months ended 28 February 2011 are unaudited and
does not constitute statutory accounts as defined in the Isle of Man Companies
Act 1931-2004 (as amended). Both sets of interim figures have however been
reviewed by the Auditors. The summary financial statements for the year ended 31
August 2011, as presented in the condensed consolidated interim financial
statements, represent an abbreviated version of the Group`s full accounts for
that period, on which independent auditors issued an unqualified audit report.
The consolidated financial statements of the Group as at and for the period
ended 31 August 2011 are available upon request from the Company`s Registered
Office at Top Floor, 14 Athol Street, Douglas, Isle of Man, IM1 1JA or at
www.redefineinternational.com.
The condensed consolidated interim financial statements were approved by the
Board of Directors on 27 April 2012.
2.2 Basis of measurement and functional currency
The condensed consolidated financial statements of the Company for the 6 months
ended 29 February 2012 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.
2.3 Significant Accounting policies
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 2011, except for the
additional accounting policies noted below:
Disposal groups and non-current assets held for sale
A non-current asset or a disposal group comprising assets and liabilities is
classified as held for sale if it is expected that its carrying amount will be
recovered principally through sale rather than through continuing use, it is
available for immediate sale and the sale is highly probable to occur within one
year. For the sale to be highly probable, the appropriate level of management
must be committed to a plan to sell the asset or disposal group.
On initial classification as held for sale, generally, non-current assets and
disposal groups are measured at the lower of the previous carrying amount and
fair value less costs to sell, with any adjustments taken to the income
statement. The same applies to gains and losses on subsequent re-measurement.
However, certain items such as financial assets within the scope of IAS 39 and
investment property in the scope of IAS 40 continue to be measured in accordance
with those standards.
Impairment losses subsequent to classification of assets as held for sale are
recognised in the income statement. Increases in fair value less costs to sell
assets that have been classified as held for sale are recognised in the income
statement to the extent that the increase is not in excess of any cumulative
impairment loss previously recognised in respect of the asset. Assets classified
as held for sale are not depreciated.
Gains and losses on re-measurement and impairment losses subsequent to
classification as disposal groups and non-current assets held for sale are shown
within continuing operations in the income statement, unless they qualify as
discontinued operations.
Disposal groups and non-current assets held for sale are presented separately
from other assets and liabilities on the statement of financial position. Prior
periods are not reclassified.
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.
2.4. Critical judgements and estimates
The preparation of the condensed consolidated 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 its enquiries included, inter alia,
the maturity of the Delta and Gamma facilities which total GBP312.84 million in
October 2012, the maturities of the VBG2 and VBG1 facilities totalling GBP93.37
million (both of which have expired but are the subject of a standstill
agreement with the facility provider until 14 April 2012), the maturity of the
Crewe facility which total GBP17.15 million in March 2012 and the maturity of a
number of other facilities totalling GBP35 million over the next 12 months.
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 to certain investment properties with no
recourse to any other assets pledged to other Group facilities.
Discussions are on-going with respect to the sale of the VBG and Halle assets,
both non-core to the Company`s strategy. As a result, the VBG1 and VBG2 assets
are included in assets held for sale as at 29 February 2012.
There can however be no certainty as to the outcome of current negotiations or
sales proceedings however the Board remains of the view that there would be no
impact on the continued operations of the Group.
Discussions are on-going on the refinancing of the Crewe facility. Aviva credit
approval has been obtained to extend the expiration of the Delamere Place Crewe
facility until 31 May 2012, from its previous expiry date of 16 March 2012, to
allow for further time for the re-financing of the facility. 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.
Discussions are also on-going on the other facilities maturing in the next 12
months. Again, these facilities are recourse only to the properties on which
they are secured.
The Board has a reasonable expectation that the Company and Group have adequate
resources to continue in operation for the foreseeable future.
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.
Classification of Investment Property
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.
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 recognition 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.
3. Segment reporting
The Group`s identified reportable segments are set out below. These segments are
generally managed by separate management teams. As required by IFRS 8, Operating
Segments, the information provided to the Board of directors, who are the Chief
Operating Decision Makers, can be classified in the following segments:
UK Stable Consists predominantly of UK offices, but includes petrol
Income: filling stations, Kwik-Fit centres, retail and residential
units.
UK Retail: Consists of the Group`s 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.
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 UK Europe Hotels Wichford Cromwel Total
Stable Retail GBP`000 GBP`00 GBP`000 l GBP`000
Income GBP`000 0 GBP`000
GBP`000
At 29
February
2012
Rental 18,258 6,858 8,721 4,700 - - 38,537
income
Investment - - - - - - -
income
Net fair (45,599) (9,250) (2,744) (231) - - (57,824)
value loss
on
investment
property
Gain/(loss 6,481 (363) (292) (540) - - 5,286
) from
financial
assets and
liabilitie
s
Equity (165) (144) - - 2,188 1,879
accounted
(losses)/p
rofits
Interest 801 2,397 92 1,554 - 17 4,861
income
Interest (11,779) (4,861) (20,464 (1,841 - (1,012) (39,957)
expense - ) )
bank debt
Property (1,001) (795) (641) - - - (2,437)
operating
expenses
Investment 418,703 167,911 94,860 123,77 - - 805,249
property 5
Assets - - 109,231 - - - 109,231
held for
sale
Investment 222 228 79 - - - 529
s
designated
at fair
value
Investment 657 - 1,544 - - - 2,201
s in joint
ventures
Investment - - - - 129,795 129,795
in
associates
Loans and 17,673 42,821 - 31,387 - - 91,881
receivable
s
Borrowings 411,150 177,525 194,285 119,08 - 25,694 927,737
- bank 3
loans
At 28
February
2011
Rental 1,924 4,612 3,009 2,043 - - 11,588
income
Investment - - - - - 3,875 3,875
income
Net fair (115) (5,556) 457 (1,588 - - (6,802)
value )
gains/(los
ses) on
investment
property
Losses 4,642 - 756 1,352 - 10,350 17,100
from
financial
assets and
liabilitie
s
Equity 121 (1,878) 403 - (5,430) - (6,784)
accounted
profits/(l
osses)
Impairment (15) - - - - - (15)
of loans
to joint
ventures
Interest 849 1,168 - 790 - - 2,807
income
Interest (606) (3,851) (1,085) (1,577 - - (7,119)
expense )
Share - (294) - - - - (294)
based
payment
Property (94) (1,196) (305) - - - (1,595)
operating
expenses
Investment 52,290 108,914 76,379 110,60 - - 348,183
property 0
Investment 478 - - 1,352 - 85,128 86,958
s
designated
at fair
value
Investment 809 - 1,838 - - - 2,647
s in joint
ventures
Investment - - - - 16,731 - 16,731
in
associates
Loans and 27,974 25,335 - 34,500 - - 87,809
receivable
s
Borrowings (45,152) (116,54 (58,995 (107,4 - - (328,139
- bank 7) ) 45) )
loans
At 31
August
2011
Rental 3,965 10,656 5,816 6,386 - - 26,823
income
Investment - - - - - 3,875 3,875
income
Net fair (354) 510 - -
value (8,485) (2,298) (10,627)
(losses)/g
ains on
investment
property
Gains/(los 4,384 519 816 - 10,046 13,540
ses) from (2,225
financial )
assets and
liabilitie
s
Equity 173 473 - (4,224) 2,627 (3,088)
accounted (2,137)
profits/(l
osses)
Impairment (444) - - - - - (444)
of loans
to joint
ventures
Interest 2,316 3,348 - 2,397 - - 8,061
income
Interest (1,204) - (727)
expense - (8,400) (2,270) (2,460 (15,061)
bank debt )
Property (102) (303) (67) - - (2,368)
operating (1,896)
expenses
-
Investment 467,426 82,796 312,657 123,77 - - 986,654
property 5
Investment 361 592 170 - - - 1,123
s
designated
at fair
value
Investment 823 - 1,784 - - - 2,607
s in joint
ventures
Investment - - - - - 104,680 104,680
in
associates
Loans and 29,889 42,804 - 31,387 - - 104,080
receivable
s
Borrowings (378,793 (139,81 (186,51 (75,77 - (17,344 (798,244
- bank ) 8) 1) 8) ) )
loans
ii. Reconciliation of reportable segment profit or loss
Reviewed Reviewed Audited
29 February 28 February 31 August
2012 2011 2011
GBP`000 GBP`000 GBP`000
Rental income
Total rental income for reported 38,537 11,588 26,823
segments
Profit or loss
Investment income - 3,875 3,875
Net fair value losses on investment (57,824) (6,802) (10,627)
property
Gains from financial assets and 5,286 17,100 13,540
liabilities
Equity accounted profits/( losses) 1,879 (6,784) (3,088)
Impairment of loans - (15) (444)
Interest income 4,861 2,807 8,061
Interest expense (39,957) (7,119) (15,061)
Share based payment - (294) -
Property operating expenses (2,437) (1,595) (2,368)
Total (loss)/gain per reportable (49,655) 12,761 20,711
segments
Other profit or loss - unallocated
amounts
Other income 1,199 994 1,592
Administrative expenses (855) (252) (774)
Investment advisor and professional (4,473) (2,083) (4,664)
fees
Impairment of intangible assets - - (591)
Loss from financial assets and (538) - -
liabilities
Interest income 50 387 73
Interest expense (5,848) (2,201) (9,244)
Share based payment (375) - (768)
Foreign exchange loss (945) (143) (1,224)
Consolidated (loss)/profit before tax (61,440) 9,463 5,111
4. Gains from financial assets and liabilities
The following table details the net gains and losses earned by the Group during
the period:
Reviewed Reviewed Audited
29 February 28 February 31 August
2012 2011 2011
GBP`000 GBP`000 GBP`000
Fair value through profit or loss
Equity investments - - -
- realised
- 10,350 10,350
- unrealised
Derivative financial instruments - - 3,540 3,540
realised
5,286 2,781 (856)
- unrealised
Financial assets carried at amortised
cost
Impairment of loans and receivables (438) - (73)
Other
Loss on sale of subsidiaries (Note 20) (100) (484) (334)
Financial liabilities carried at
amortised cost
Redemption of loans and borrowings - 913 913
Total net gains from financial assets 4,748 17,100 13,540
and liabilities
5. Interest income
The following table details the interest income earned by the Group during the
period:
Reviewed Reviewed Audited
29 February 28 February 31 August
2012 2011 2011
GBP`000 GBP`000 GBP`000
Interest income on bank deposits 183 101 136
Interest income from mezzanine 4,728 3,093 7,998
financing
Total interest income 4,911 3,194 8,134
6. Interest expense
The following table details the interest expense at amortised cost incurred by
the Group during the period:
Reviewed Reviewed Audited
29 February 28 February 31 August
2012 2011 2011
GBP`000 GBP`000 GBP`000
Interest expense on secured bank loans (39,958) (6,330) (15,060)
Finance lease interest (369) - (386)
Interest expense on other financial (285) (140) (868)
liabilities
Interest expense on mezzanine (5,193) (2,850) (7,991)
financing
Total interest expense (45,805) (9,320) (24,305)
Interest expense on secured bank loans includes GBP17.8 million in finance costs
due to the amortisation of the fair value adjustment of the VBG, Gamma and Delta
loan facilities arising due to reverse acquisition of Wichford
7. Taxation
Income tax expense
Reviewed Reviewed Audited
29 February 28 February 31 August
2012 2011 2011
GBP`000 GBP`000 GBP`000
a) Tax recognised in profit or loss
Current income tax
Income tax in respect of current 604 19 563
period
Withholding tax 162 174 174
Deferred tax
Origination and reversal of temporary 398 - 623
differences
Total income tax expense reported in 1,164 193 1,360
the statement of comprehensive income
b) Recognised deferred tax liability and movement during the period
Deferred tax and movement for the
period is attributable to the
following:
Deferred tax liability
Opening balance 2,239 - -
Deferred tax liability acquired - - 1,616
Deferred tax liability recognised 398 - 623
Closing balance 2,637 - 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% (2011: 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 23.23%.
The Group also invests in German properties held either in corporates or
partnerships. The effective rate of tax ranges from 15.825% to 25%.
The Group`s investment in the Australian resident, Cromwell is held through an
Irish Section 110 company. Unfranked dividends received from Cromwell are
subject to an Australian withholding tax of 7.5%. Following the change in the
accounting for the Cromwell investment to equity accounting with effect from 1
March 2011, withholding taxes on the distributions received have been disclosed
within equity accounted profits (Refer note 10 for details on taxes withheld
during the period).
The tax for the period is higher than the 20% payable under the UK`s NRL Scheme.
The differences are explained below:
Reviewed Reviewed Audited
29-Feb 28-Feb 31-Aug
2012 2011 2011
GBP`000 GBP`000 GBP`000
(Loss)/profit before tax (61,440) 9,463 5,111
(Loss)/profit before tax multiplied by NRL rate (12,288) 1,893 1,022
of UK income tax (20%)
Effect of:
- exempt property revaluations 11,565 1,360 2,125
- income not subject to UK income tax 1,846 (93) (321)
- gain/(loss) in financial assets and liabilities (950) (3,420) (2,708)
- losses carried forward 565 226 415
- expenses not deductible for tax 264 53 653
- withholding tax 162 174 174
Total tax charge for the period 1,164 193 1,360
8. Investment property
The cost of properties as at 29 February 2012 was GBP1.19 billion (28 February
2011: GBP371.52 million, 31 August 2011: GBP1.19 billion). 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 29 February 2012 is the fair value as
determined by directors` valuation.
The fair value of each of the properties for the year ended 31 August 2011 was
assessed by the valuers in accordance with the Appraisal and Valuation Standards
of the Royal Institution of Chartered Surveyors ("Red Book"). For the six months
ended 29 February 2012, the valuers updated the valuations as prepared at 31
August 2011, on a desktop basis.
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
8% 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 in Crewe 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 (2011: GBP17.15 million).
In terms of IAS 40 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.
Reviewed Reviewed Audited
29 February 28 February 31 August
2012 2011 2011
GBP`000 GBP`000 GBP`000
Opening balance 986,654 227,675 227,675
Properties acquired during the period - 132,141 197,424
Capitalised expenditure 1,126 - 13,659
Disposals (3,150) (6,543) (6,543)
Impact of reverse acquisition - - 546,900
Investment property at fair value - - 543,275
Finance leases - - 3,625
Impact of acquisition of subsidiaries - - 2,381
Foreign exchange movements in foreign (12,326) 1,712 6,073
operations
Recognition of finance leases - - 9,712
Net fair value losses on investment (57,824) (6,802) (10,627)
property
Reclassification to assets held for (109,231) - -
sale (refer Note 19)
Closing balance 805,249 348,183 986,654
A reconciliation of investment property valuations to the condensed consolidated
statement of financial position are shown below:
Reviewed Reviewed Audited
29 February 28 February 31 August
2012 2011 2011
GBP`000 GBP`000 GBP`000
Investment property at market value as 774,793 331,033 956,167
determined by external valuers
(excluding head leases, see below)
Freehold 552,801 256,048 714,430
Freehold and long leasehold 15,350 - 17,900
Leasehold 206,642 74,985 223,837
Investment property at directors` 17,150 17,150 17,150
valuation
Adjustments for items presented
separately on the consolidated
statement of financial position:
- Add minimum payment under head 13,306 - 13,337
leases separately included under
borrowings
Condensed consolidated statement of 805,249 348,183 986,654
financial position carrying value of
investment property
9. Long-term receivables
Reviewed Reviewed Audited
29 February 28 February 31 August
2012 2011 2011
GBP`000 GBP`000 GBP`000
Security deposits with banks 464 464 464
Amounts due from related parties 74 116 116
(refer Note 16)
Amounts due from Mezzanine Capital 91,343 87,229 103,500
Limited
91,881 87,809 104,080
Security deposits with banks bear interest at a rate of 6.725% with maturity
between 1 and 3 years.
The loans from related parties 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 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 Mezzanine Capital Limited is rolled up interest in
respect of GBP7.1 million (28 February 2011: GBP4.6 million, 31 August 2011:
GBP6.0 million).
10. Investments in associates
Reviewed Reviewed Audited
29 February 28 February 31 August
2012 2011 2011
GBP`000 GBP`000 GBP`000
Opening balance 104,680 18,923 18,923
Investment at cost 24,222 38 16,449
Reclassified from investments - - 85,128
designated at fair value
Change in carrying value due to 3,789 - 4,963
foreign currency translation
Equity accounted profit/(loss) 2,187 (3,335) 4,729
Impairment of investment - (2,133) (6,326)
Share of foreign currency movement - 779 1,494
recognised
Share of cash flow hedge reserve - 2,459 (155)
movement recognised
Distribution received (5,083) - (5,986)
Cancellation of investment at fair - - (14,539)
value
Closing balance 129,795 16,731 104,680
The Company increased its holding in Cromwell through the AUD 35 million
(GBP22.6 million), participation in the Cromwell entitlement offer in December
2011. Additional acquisitions of Cromwell shares over the period totalling
GBP1.6 million increased the Company`s interest to 23.16% from 22.36% as at 31
August 2011.
The closing price of Cromwell on 29 February 2012 was 72 Australian cents per
security and the total fair value of shares held is AUD 194.8 million (GBP131.7
million).
During the six month period ended 29 February 2012, the Group received AUD
7,796,143 (28 February 2011: nil, 31 August 2011: AUD 7,062,222) as a
distribution, before withholding tax of AUD 248,249 (28 February 2011: nil, 31
August 2011: AUD 196,730), resulting in a net distribution of AUD 7,547,894 (28
February 2011: nil, 31 August 2011: AUD 6,865,492). The GBP equivalent of the
above gross distribution is GBP5.08 million (28 February 2011: nil, 31 August
2011: 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.
11. Cash at bank
Reviewed Reviewed Audited
29 February 28 February 31 August
2012 2011 2011
GBP`000 GBP`000 GBP`000
Cash at bank consists of the
following:
Unrestricted cash balances 20,431 10,438 39,937
Bank balances 10,677 3,190 35,742
Call deposits 9,754 7,248 4,195
Restricted cash balances 13,389 325 11,431
33,820 10,763 51,368
As at 29 February 2012, there was GBP13.39 million (31 August 2011:GBP11.43
million) of cash at bank, to which the Group did not have instant access. The
principal 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. Also included in the restricted cash balance is
GBP2.57 million held with Aviva with regards to proposed developments in
Birchwood Warrington Limited.
12. Capital and reserves
Share capital
In accordance with IFRS 3 Business Combinations, with a reverse acquisition the
issued equity instruments information relates to that of the legal acquirer,
Wichford. The prior period numbers have therefore been adjusted to reflect the
capital structure of Wichford.
Reviewed Reviewed Audited
29 February 28 February 31 August
2012 2011 2011
GBP`000 GBP`000 GBP`000
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 - 1,000,000,000
- GBP`000 72,000 - 72,000
Issued, called and fully paid
Opening: ordinary shares of 1
penny each
- number 567,643,792 1,062,095,584 1,062,095,584
- GBP`000 40,870 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)
Ordinary shares acquired into
treasury of 7.2 pence each
- number (939,000) - -
- GBP`000 (67) - -
Shares issued during the period
of 7.2 pence each
- number 12,750,000 - -
- new issue 11,811,000
- out of treasury 939,000
- GBP`000 918 - -
Closing: ordinary shares of 7.2
pence each
- number 579,454,792 1,062,095,584 567,643,792
- GBP`000 41,721 10,621 40,870
The Company acquired 939,000 shares into treasury on 18 November 2011.
The Company issued 12,750,000 shares to RIN on 1 February 2012, at a price of
37.0 pence per share. The placement was made to assist with the funding of the
Company`s underwriting commitment in connection with the Cromwell capital
raising. The shares (including an issue of 939,000 shares out of treasury) were
admitted to trading on the LSE on 6 February 2012.
Following this placement and as at 29 February 2012, the Company had 579,454,792
shares in issue.
Distributions
In terms of the dividend policy, the Company will seek to distribute the
majority of its recurring earnings available for distribution in the form of
dividends subject to realisable profits. However, there is no assurance that the
Company will pay a dividend, or if a dividend is paid the amount of such
dividend.
During the six month period ended 29 February 2012, the interim dividend of 2.10
pence per share, for the financial period ended 31 August 2011, was distributed.
Reverse acquisition reserve
The 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.
13. Capital instrument
As part of the Aviva debt restructuring the Company has entered into a GBP13
million facility 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 or convertible 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, the Company will be
required to issue shares to discharge the outstanding amount due, the number of
which is calculated by dividing the outstanding amount by 50 pence per ordinary
share.
The 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.
Reviewed Reviewed Audited
29 February 28 February 31 August
2012 2011 2011
GBP`000 GBP`000 GBP`000
Opening balance 13,768 - -
Capital instrument issued - 13,000 13,000
Share based payment 375 294 768
Closing balance 14,143 13,294 13,768
14. Borrowings
Reviewed Reviewed Audited
29 February 28 February 31 August
2012 2011 2011
GBP`000 GBP`000 GBP`000
Non-current
Bank loans 458,397 307,872 800,518
Less: deferred finance costs (2,343) - (2,440)
Finance leases 13,306 - 13,337
Total 469,360 307,872 811,415
Current
Bank loans 459,334 20,267 117,822
Less: deferred finance costs (957) - (751)
Total 458,377 20,267 117,071
927,737 328,139 928,486
Total borrowings
a) Loans
This note provides information about the contractual terms of the Group`s loans
and borrowings, which are measured at amortised cost.
The terms and conditions of outstanding loans are as follows:
Facility Amor- Lender Loan Cur- Maturi Review Review Audite
tising Intere rency ty ed ed d
st date 29 28 31
rate Februa Februa August
ry ry 2011
2012 2011 GBP`00
GBP`00 GBP`00 0
0 0
Gamma No Winder LIBOR GBP 198,71 - 197,79
mere + Octobe 9 1
XI 0.75% r 2012
CMBS
Delta No Winder LIBOR GBP 114,17 - 113,75
mere + Octobe 7 9
VIII 0.75% r 2012
CMBS
Redefine Hotel Yes Aareal LIBOR GBP 75,295 68,445 75,778
Holdings + Novemb
Limited 2.45% er
2015
VBG1 Yes Talism EURIBO EUR 51,620 - 47,420
an 3 R + Januar
1.1% y 2012
West Orchards Yes Aviva 6.29%* GBP July 49,273 49,212 49,227
Coventry 2027
Limited***
Zeta No Lloyds LIBOR GBP May 46,000 - 46,000
TSB + 2013
1.15%
VBG2 Yes Talism EURIBO EUR April 41,751 - 36,446
an 4 R + 2011
1.1%
St George`s Yes Landes LIBOR GBP April 41,400 - 41,630
Harrow Limited bank + 2.5% 2016
Berlin
Halle No Winder EURIBO EUR April 25,590 - 25,975
mere R + 2014
XIV 0.85%
CMBS
Redefine No Invest BBSY + AUD 25,693 - 17,344
Australian ec 4% Februa
Investments ry
Limited 2013
Delamere Place No Aviva 6.49%* GBP May 17,150 17,150 17,150
Crewe Limited 2012
Hague Yes SNS EURIBO EUR July 16,216 - 16,879
Proper R + 2014
ty 2.3%
Financ
e
Birchwood No Aviva 6.1%* GBP 16,738 16,457 16,629
Warrington Septem
Limited*** ber
2035
Ciref Berlin 1 Yes RBS EURIBO EUR 15,234 15,782 16,242
Limited R + Septem
1.2% ber
2014
Byron Place Yes Aviva 6.44%* GBP 15,176 15,193 15,182
Seaham Septem
Limited*** ber
2031
Kalihora Yes UBS 2.87%* CHF 12,099 11,917 13,522
Holdings Octobe
Limited r 2018
Princes Street Yes HSBC LIBOR GBP Septem 11,710 - -
Investments + 2.5% ber
Limited 2016
Gibson Yes Aviva 6.37%* GBP June 10,978 11,128 11,053
Property 2029
Holdings
Limited
ITB Schwandorf Yes Bayern EURIBO EUR 7,469 7,795 7,971
B.V. LB R + Octobe
1.3% r 2017
ITB Yes Bayern EURIBO EUR 6,178 6,447 6,593
Herzogenrath LB R + Octobe
B.V. 1.3% r 2017
Newington Yes AIB LIBOR GBP 6,409 6,609 6,509
House Limited + 2.5% Septem
ber
2013
CEL Portfolio Yes Valovi 4.95%* EUR 4,134 4,305 4,427
Limited & Co. s Novemb
KG er
2014
InkstoneZweiGr Yes Barcla 5.91%* EUR 3,374 3,898 3,986
undstucksverwa ys August
ltung Limited 2012
& Co.KG
InkstoneGrunds Yes Barcla 5.75%* EUR 3,713 3,506 3,603
tucksverwaltun ys August
g Limited & 2012
Co.KG
Ciref German Yes RBS EURIBO EUR 3,237 3,365 3,447
Portfolio R + Septem
Limited 1.2% ber
2014
Ciref Reigate No RBS LIBOR GBP June - 2,500 2,500
Limited + 2.5% 2015
Ciref Kwik-fit No KBC LIBOR GBP April 718 - 718
Stafford + 2.5% 2012
Limited
Ciref Kwik-fit No KBC LIBOR GBP April 463 - 463
Stockport + 2.5% 2012
Limited
Total bank 820,51 243,70 798,24
loans 4 9 4
Mezzanine 7.10% GBP 2012 95,915 82,520 107,84
Capital - 10%* 7
Limited****
Coronation 4%* GBP 2011 - 596 10,910
Group
Investments
Limited**
Loans secured 7.00%* GBP 2011 650 650 650
by cash
deposits
CEL Portfolio 0%* GBP 2029 652 664 689
Limited & Co.
KG
Total secured 917,73 328,13 918,34
loans 1 9 0
All bank loans are secured over investment property (except Redefine Australian
Investments Limited which is secured by Cromwell securities), and bear interest
at the specified interest rates.
* Fixed rates
** Loan secured over Redefine Australian Investments Limited.
*** These facilities are cross collateralised against each other and against
facilities to Redefine Wigan Limited. See Note 23.
**** Loans are extendable at the request of the Company.
There have 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 Original Princip ICR ICR LTV LTV
Maturity al Covenan ratio covenant ratio
GBP`000 t % % %
%
VBG 1 Talisman Jan-12 51,620 120 229 N/a N/a
3
VBG 2 Talisman Apr-11 41,751 115 343 N/a N/a
4
Delamere Place Aviva Nov-11 17,150 110 104 N/a N/a
Crewe
Ciref Berlin 1 RBS Sep-14 15,234 120 171 90 93
Limited
VBG 1
The loan has a current LTV of 122%. There was an existing LTV waiver and
standstill agreement until 14 April 2012. The loan is non-recourse to the Group.
The loan servicer is marketing the associated assets for sale and it is expected
that they will be disposed of and loan settled within the next 6-12 months.
VBG 2
The loan has a current LTV of 129%. There was an existing LTV waiver until 14
April 2012. The loan is non-recourse to the Group. The loan servicer is
marketing the associated assets for sale and it is expected that they will be
disposed of and loan settled within the next 6-12 months.
Delamere Place Crewe
Aviva credit approval has been obtained to extend the expiration of the Delamere
Place Crewe facility until 31 May 2012, from its previous expiry date of 16
March 2012, to allow for further time for the re-financing of the facility. The
loan is non-recourse to the Group.
RBS (Ciref Berlin 1 Limited)
There is currently an LTV breach. A number of asset management initiatives have
been identified, many of which are at an advanced stage of negotiations with the
relevant tenants. Once these initiatives have been completed, it is expected
that they will provide a sufficient value uplift to cure the temporary LTV
breach.
Negotiations are currently in place with RBS to waive the LTV breach in the
interim.
Current and non-current borrowings
Reviewed Reviewed Audited
29 February 28 February 31 August
2012 2011 2011
GBP`000 GBP`000 GBP`000
Non-current liabilities
Secured loans 458,397 307,872 800,518
Total non-current borrowings 458,397 307,872 800,518
The maturity of non-current borrowings
is as follows:
Between one year and five years 345,570 117,442 685,581
More than five years 112,827 190,430 114,937
458,397 307,872 800,518
Current liabilities
Secured loans 459,334 20,267 117,822
Total current borrowings 459,334 20,267 117,822
Total borrowings 917,731 328,139 918,340
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 15, 21 and 22 for
further details.
b) Finance Leases
Obligations under finance leases at the reporting dates are analysed as follows:
Reviewed Reviewed Audited
29 February 28 February 31 August
2012 2011 2011
GBP`000 GBP`000 GBP`000
Gross finance leases liabilities
repayable:
Not later than 1 year 680 - 680
Later than 1 year not later than 5 2,720 - 2,720
years
Later than 5 years 48,005 - 48,344
51,405 - 51,744
Less: finance charges allocated to (38,099) - (38,407)
future periods
Present value of minimum lease 13,306 - 13,337
payments
Present value of finance lease
liabilities repayable:
Not later than 1 year 511 - 511
Later than 1 year not later than 5 1,821 - 1,821
years
Later than 5 years 10,974 - 11,005
Present value of minimum lease 13,306 - 13,337
payments
15. 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:
Facility Effective Maturity Swap Reviewed Reviewed Audited
date date rate 29 28 31 August
February February 2011
2012 2011 GBP`000
GBP`000 GBP`000
Delta 21/07/2006 15/10/2012 4.95% (2,653) - (5,062)
Gamma 23/05/2005 20/10/2012 4.77% (4,404) - (8,426)
Halle 19/02/2007 22/04/2014 4.19% (2,205) - (2,325)
(9,262) - (15,813)
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:
Facility Effective Maturity Swap Reviewed Reviewed Audited
date date rate 29 28 31 August
February February 2011
2012 2011 GBP`000
GBP`000 GBP`000
Subsidiaries
Redefine 30/11/2010 30/11/2015 2.45% (2,428) 1,351 (2,105)
Hotel
Holdings
Limited
Hague 01/08/2008 01/08/2014 4.89% (1,632) - (1,751)
Zeta 20/07/2010 09/05/2013 2.73% (966) - (1,141)
Ciref Berlin 05/06/2007 15/04/2014 4.61% (678) (634) (735)
1 Limited
Ciref Berlin 31/07/2007 15/04/2014 4.20% (537) (470) (569)
1 Limited
Redefine 30/06/2011 30/11/2015 2.32% (336) - (290)
Hotel
Holdings
Limited
Ciref German 31/07/2007 15/04/2014 4.20% (241) (211) (256)
Portfolio
Limited
Redefine 04/03/2011 04/03/2013 5.45% (227) - (305)
International
Holdings
Limited
Princes 30/09/2011 30/09/2016 1.69% (219) - -
Street
Investments
Limited
Matterhorn 30/01/2012 08/10/2018 0.73% (169) - -
Vich SARL
Matterhorn 30/01/2012 08/10/2018 0.73% (78) - -
Brig SARL
Newington 03/09/2010 19/09/2013 1.54% (54) 67 (82)
House Limited
Ciref Reigate 23/09/2010 30/06/2015 2.03% - 49 (68)
Limited
(7,565) 151 (7,302)
Held in joint
ventures
Ciref Jersey 31/07/2007 30/07/2027 5.48% (6,534) (3,808) (5,532)
Limited
Churchill 10/04/2008 10/04/2018 5.08% (1,585) (1,088) (1,554)
Court Limited
Premium 31/03/2008 31/12/2014 4.13% (1,463) (1,319) (1,486)
Portfolio
Limited & Co.
KG
Ciref Jersey 30/01/2008 30/07/2027 4.80% (503) (196) (371)
Limited
Premium 31/03/2008 31/12/2014 4.23% (146) (379) (435)
Portfolio
Limited & Co.
KG
(10,231) (6,790) (9,378)
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:
Facility Effective Maturity Swap Reviewed Reviewed Audited
date date rate 29 28 31 August
February February 2011
2012 2011 GBP`000
GBP`000 GBP`000
St George`s 27/04/2011 27/04/2016 2.85% 228 - 591
Harrow
Limited
ITB 31/05/2011 31/05/2017 4.50% 43 - 93
Herzogenrath
B.V.
ITB 31/05/2011 31/05/2017 4.50% 36 - 77
Schwandorf
B.V.
307 - 761
c) Summary of fair value of interest rate swaps and interest rate caps
Reviewed Reviewed Audited
29 February 28 February 31 August
2012 2011 2011
GBP`000 GBP`000 GBP`000
Fair value of lender level interest (9,262) - (15,813)
rate swaps
Fair value of borrower level interest (7,565) 151 (7,302)
rate swaps
(16,827) 151 (23,115)
Fair value of interest rate cap 307 - 761
agreements*
Fair value of the Group`s derivative (16,520) 151 (22,354)
instruments
*Interest rate cap and other derivative assets are included in investments at
fair value in the statement of financial position.
16. Related party transactions
Investment manager
The investment adviser duties are carried out in accordance with the Investment
Adviser`s Agreement (as approved on 13 July 2011) between the Company and RIPML.
The director Michael Watters is a director of associated companies of the
investment adviser.
Reviewed Reviewed Audited
29 February 28 February 31 August
2012 2011 2011
GBP`000 GBP`000 GBP`000
Trading transactions
Rental income received from Redefine 4,700 2,043 6,386
Hotel Management Limited
Fee income from Redefine Hotel - 700 700
Management Limited
Fee income from the Cromwell Property 566 157 310
Group
Portfolio management fees charged by (1,717) - -
Redefine International Property
Management Limited
Portfolio management fees charged by (261) (980) (2,028)
Redefine International Fund Managers
Limited
Portfolio management fees charged by (494) (190) (403)
Redefine International Fund Managers
Europe Limited
Redefine International Hotels Limited (309) - -
Administration fees charged by - (78) (153)
Redefine International Group Services
Limited
Loans receivable
Pearl House Swansea Limited 74 116 116
Redefine Hotel Management Limited 3,352 2,043 2,922
Redefine Properties International - - 70
Limited
Cromwell Property Group - - 1,217
Ciref Crawley Investments Limited 140 80 100
Swansea Estates Limited 86 84 84
Ciref Kwik-fit Stafford Limited - 2,188 -
Ciref Kwik-fit Stockport Limited - 1,355 -
Loans Payable
Redefine International Fund Managers 368 2,676 1,689
Limited
Redefine International Fund Managers 531 169 260
Europe Limited
Redefine International Group Services 43 46 80
Limited
Redefine Properties International 47 100 -
Limited
Redefine International Property 1,061 - -
Management Limited
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.
Please also see Note 12 for details of shares issued to RIN during the period.
Directors
Further details of Directors` remuneration will be included within the Annual
Report to shareholders.
17. Earnings per share
Earnings per share are calculated on the weighted average number of shares in
issue and the profit/(loss) attributable to shareholders.
Reviewed Reviewed Audited
29 February 28 February 31 August
2012 2011 2011
GBP`000 GBP`000 GBP`000
(Loss)/profit attributable to (60,710) 9,457 5,035
shareholders
Weighted average number of ordinary 569,139 407,121 426,125
shares in issue
Effect of potential share based
payment transactions - performance fee
arrangements
Effect of potential share based 28,286 28,686 26,480
payment transactions - capital
instrument (Refer Note 13)
Diluted weighted average number of 597,425 435,807 452,605
ordinary shares
Number of ordinary shares
- In issue 579,455 412,899 567,644
- Weighted average 569,139 407,121 426,125
- Diluted weighted average 597,425 435,807 452,605
(Loss)/earnings per share (pence)
- Basic (10.67) 2.32 1.18
- Diluted (10.67)1 2.17 1.11
1 Anti-dilutive given losses incurred during the period
18. Net asset value per share
The net asset value per share amount is calculated by dividing the net assets at
29 February 2012 attributable to equity holders of the parent of GBP213.18
million (28 February 2011: GBP215.33 million, 31 August 2011: GBP277.30 million)
by the number of ordinary shares in issue as at 29 February 2012 of 579,454,792
(28 February 2011: 412,898,995, 31 August 2011: 567,643,792).
The diluted net asset value per share is calculated on the following basis:
The potential number of ordinary shares to be issued to Aviva at 50 pence per
share under the capital instrument at 29 February 2012 is 28.29 million (28
February 2011: 26.59 million, 31 August 2011: 27.54 million) which is based on
the value of the capital instrument on 29 February 2012 is GBP14.14 million (28
February 2011: GBP13.29 million, 31 August 2011: GBP13.77 million).
Reviewed Reviewed Audited
29 February 28 February 31 August
2012 2011 2011
GBP`000 GBP`000 GBP`000
Net assets attributable to equity 213,176 215,333 277,304
shareholders (GBP`000)
Number of Ordinary Shares (`000`s) 579,455 412,899 567,644
Effect of potential share based
payment transactions - performance fee
arrangements
Effect of potential share based 28,286 26,588 27,537
payment transactions - capital
instrument
Diluted number of shares (`000`s) 607,741 439,487 595,181
Net asset value per share (pence):
- Basic 36.79 52.15 48.85
- Diluted 35.08 49.00 46.59
19. Non-current assets and assets held for sale
Discussions are on-going regarding the sale of VBG 1, 2 and Halle assets with
disposals expected to be finalised within the next 12 months. As a result the
property assets have been reclassified to held for sale in the period.
Reviewed Reviewed Audited
29 February 28 February 31 August
2012 2011 2011
GBP`000 GBP`000 GBP`000
Assets held for sale
VBG 1 44,177 - -
VBG 2 34,354 - -
Halle 30,700 - -
Total 109,231 - -
Loan liabilities totalling GBP118.96 million which are recourse only to these
properties are included in loans and borrowings. Of the GBP118.96 million,
GBP93.37 million are included in current liabilities due to repayment dates
within the next 12 months.
20. Disposal of subsidiaries
The Group disposed of the Ciref Reigate Limited in the period ended 29 February
2012 (TYS Holdings Limited and Ciref Streatham Limited during the financial year
ended 31 August 2011):
The assets and liabilities arising from those disposals were as follows:
Reviewed Reviewed Audited
29 February 28 February 31 August
2012 2011 2011
GBP`000 GBP`000 GBP`000
Assets disposed:
Investment Property 3,150 6,543 6,543
Long-term receivables 405 - -
Trade and other receivables (7) (5,244) (5,244)
Trade and other payables (79) (42) (42)
Derivative liabilities (80) - -
Loans and borrowings (3,160) (1,400) (1,400)
Total 229 (143) (143)
Add : 486
Non-controlling interest shareholder 178 - -
loans
Non-controlling interest share of net (664) - -
deficit
Less: loss on sale of subsidiary (100) (334) (334)
Net cash acquired/(disposed) 615 (477) (477)
21. 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 15 for further details on the Group`s interest rate
swap agreements.
22. 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.
As at 29 February 2012 the Group has current loan liabilities of GBP458.3
million. These liabilities are classified as current due to maturities within
the next 12 months and or as a result of on-going covenant breaches.
With respect to the VBG 1 and VBG 2 loan facilities totalling GBP93.37 million
the loan servicer is marketing the associated assets for sale and it is expected
that they will be disposed of and the loans settled within the next 6-12 months.
As a result the assets on which these loans are secured are classified as held
for sale as at 29 February 2012. It should be noted that the liabilities are
recourse only to this specific pool of assets. See Note 19 for details.
Discussions are on-going with the finance providers in respect of the Delta and
Gamma which total GBP312.84 million and have a maturity date of October 2012 as
well as with the finance provider for the Delamere Place Crewe facility which
totals GBP17.15 million and with the funding providers for the other facilities
which are due to mature in the next 6 to 12 months.
Further details of these loans and the status of the re-financings are given in
note 2.4 and note 14.
23. Contingencies, guarantees and capital commitments
The Group has capital commitments of GBP2.6 million (31 August 2011: GBP3
million) 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.
External financing totalling GBP142.6 million to Redefine Wigan Limited, a joint
venture of Redefine International which holds Grand Arcade Wigan Limited, has
been cross collateralised against properties held directly by the Group. The
value of Grand Arcade Wigan Limited as at 29 February 2012 is GBP 83 million (31
August 2011: GBP85 million). However, there is currently no exposure for the
Group, as the combined LTV of the cross collateralised properties is greater
than 100%.
Contracts have been exchanged to acquire an effective 50% interest in two newly
developed retail stores in Germany. The gross purchase price of the properties,
located in Kaiserslautern and Waldkraiburg, is EUR6.4 million (GBP5.3 million)
and EUR9.7 million (GBP8.1 million) respectively. Terms have been agreed for
bank funding at a 70% loan-to-value, the equity committed is therefore EUR.2.4
million (GBP2.0 million).
24. Subsequent events
The Board has resolved to declare an 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 May 2012. The shares will commence trading "ex" dividend on 9 May 2012
and the record date will be 11 May 2012. The dividend will be paid to
shareholders on 24 May 2012.
GLOSSARY
AUD Australian Dollar made up of 100 cents.
Cromwell Cromwell Property Group is an Australian
Securities Exchange listed stapled security
(ASX:CMW) comprising the Cromwell Corporation
Limited and Cromwell Property Securities
Limited, which acts as the responsible entity
of the Cromwell Diversified Property Trust.
www.cromwell.com.au
Enlarged Group The Redefine International P.L.C. Group
following the reverse acquisition of Wichford
P.L.C. by Redefine International Holdings
Limited.
EPRA European Public Real Estate Association.
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.
Eurozone The geographic and economic region that
consists of all the European Union countries
that have fully incorporated the Euro as their
national currency.
Euro or EUR The lawful common currency of participating
member states of the European Monetary Union.
Finance lease A lease that transfers substantially all the
risks and rewards of ownership from the lessor
to the lessee.
FSA The UK Financial Services Authority.
GBP or GBP or Sterling Great British Pound, the legal currency of the
UK
Headlease A lease under which the Group holds an
investment property.
GDP Gross Domestic Product
IFRS International Financial Reporting Standards.
Interest-rate swap A financial instrument where two parties agree
to exchange an interest rate obligation for a
predetermined amount of time. These are used by
the Group to convert floating-rate debt or
investments to fixed rates.
ICR Interest Cover Ratio
JSE JSE Limited, licensed as an exchange and a
public company incorporated in terms of the
laws of South Africa.
LIBOR The London Interbank Offered Rate, the interest
rate charged by one bank to another for lending
money.
Listing Rules The UK Listing Authority rules for listed
companies.
Loan-to-value (LTV) A ratio of debt divided by the market value of
investment property.
LSE The London Stock Exchange plc
NAV Net Asset Value
REIT Real Estate Investment Trust. A REIT must be a
publicly quoted company with at least three-
quarters of its profits and assets derived from
a qualifying property rental business. Income
and capital gains from the property rental
business are exempt from tax but the REIT is
required to distribute at least 90% of those
profits to shareholders. Corporation tax is
payable on non-qualifying activities in the
normal way.
sq ft Square feet
UK The United Kingdom of Great Britain and
Northern Ireland.
WAULT Weighted average unexpired lease term."
Sponsor to Redefine Properties International Limited
Java Capital
Date: 30/04/2012 09:00:02 Produced by the JSE SENS Department.
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