| Mon 30 Apr 2012, 9:01 | | RIN - Redefine Properties International Limited - Unaudited condensed |
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RIN
RIN
RIN - Redefine Properties International Limited - Unaudited condensed
consolidated interim results for 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" or "the company" and together with its subsidiaries, associates and joint
ventures (the "group")
Unaudited condensed consolidated interim results for the six months ended 29
February 2012
Financial highlights
- Earnings available for distribution of GBP8,98 million (February 2011: GBP6,79
million), an increase of 32,16%
- Interim distribution per linked unit of 2,09 pence (February 2011: 2,02
pence), an increase of 3,5%
- Headline earnings per linked unit of 2,88 pence (February 2011: 3,91 pence)
- Net asset value per linked unit of 32,43 pence (February 2011: 47,03 pence)
- Adjusted net asset value per linked unit of 43,12 pence*
(* See financial review section)
Operational highlights
- Strong performance from Cromwell and the Hotel portfolio, supporting the
group`s diversification strategy
- Secure cash flows 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 in progress
Substantial progress on the disposal of legacy Wichford assets (VBG 1, 2 and
Halle)
- Disposal of RI PLC stake in Ciref Reigate Limited for 5,9% more than the
carrying value of the property, in line with decisions to consolidate the
portfolio and focus on larger, better quality assets
- Additional GBP24,2 million investment in Cromwell, securing the group`s
strategic shareholder position
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
GROUP
Unaudited Audited Unaudited
six months year ended six months
ended 31 August ended
29 February 2011 28 February
2012 GBP`000 2011
GBP`000 GBP`000
Revenue
Gross rental income 38 537 26 823 11 588
Investment income - 3 875 3 875
Other income 1 257 1 592 994
Total revenue 39 794 32 290 16 457
Expenses
Administrative expenses (955) (899) (288)
Investment management and (4 774) (4 688) (2 099)
professional fees
Property operating expenses (2 437) (2 368) (1 595)
Net operating income 31 628 24 335 12 475
Gain from financial assets and 49 298 17 516 17 930
liabilities (including debentures)
Equity accounted profit/(loss) 1 879 (1 749) (6 784)
Impairment of loans to joint - (444) (15)
ventures
Net fair value loss on investment (57 824) (10 627) (6 802)
property
Amortisation and impairment of - (591) -
intangible assets
Profit from operations 24 981 28 440 16 804
Interest income 4 912 8 175 3 194
Interest expense (46 180) (25 312) (9 930)
Foreign currency (loss)/gain (945) 9 1 046
(Loss)/profit before debenture (17 232) 11 312 11 114
interest
Debenture interest (8 816) (14 580) (6 792)
(Loss)/profit before tax (26 048) (3 268) 4 322
Taxation (1 164) (1 360) (193)
(Loss)/profit after tax (27 212) (4 628) 4 129
(Loss)/profit attributable to:
RIN shareholders (6 847) (3 612) 2 819
Non-controlling interest (20 365) (1 016) 1 310
(27 212) (4 628) 4 129
Other comprehensive income
Foreign currency translation on 138 1 865 153
foreign operations - subsidiaries
Foreign currency translation on 3 692 4 882 44
foreign operations - associates and
joint ventures
Share of foreign currency movement - - 779
recognised in associate undertaking
Share of cash flow hedge reserve - - 2 459
movement recognised in associate
undertaking
Total comprehensive income for the (23 382) 2 119 7 564
period/year
Total comprehensive income
attributable to:
RIN shareholders (4 148) 1 922 5 611
Non-controlling interest (19 234) 197 1 953
(23 382) 2 119 7 564
Reconciliation of (loss)/earnings
and headline earnings
(Loss)/profit for the period (6 847) (3 612) 2 819
attributable to RIN shareholders
Debenture interest 8 816 14 580 6 792
Changes in fair value of investment 53 757 15 848 5 028
property and intangible assets
Fair value adjustment on debentures (44 549) (4 881) (1 734)
Headline earnings attributable to 11 177 21 935 12 905
linked unitholders
Earnings available for distribution
Net operating income 31 628 24 335 12 475
Operating income from equity 5 633 7 183 1 206
accounted entities
Straight-line rental income accrual 96 169 131
Non-distributable expenses - 1 277 171
(including reverse acquisition
costs)
Gain on redemption of borrowings - 840 912
Interest income 184 8 175 3 194
Interest expense (23 163) (23 791) (9 176)
Foreign exchange loss (160) (283) (142)
Taxation (766) (291) (193)
Effect of reverse acquisition - 565 -
Earnings available for distribution 13 452 18 179 8 578
Attributable to non-controlling (4 476) (3 599) (1 786)
interest
Earnings available for distribution 8 976 14 580 6 792
to linked unitholders
Interim distribution - (6 799) -
Earnings available for distribution 8 976 7 781 6 792
to linked unitholders at period
end/year end
Actual number of linked units in 405 507 372 306 336 575
issue (`000)
Weighted number of linked units in 387 654 345 686 330 075
issue (`000)
Basic earnings per linked unit 0,51 3,17 2,91
(pence)*
Headline earnings per linked unit 2,88 6,35 3,91
(pence)*
Earnings available for distribution 2,21 4,11 2,02
per linked unit (pence)
Distributions per linked unit 2,09 4,11 2,02
Interim distribution per linked unit 2,09 2,02 2,02
Year-end distribution per linked - 2,09 -
unit
* The company does not have any dilutionary instruments in issue.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
GROUP
Unaudited Audited Unaudited
six months year ended six months
ended 31 August ended
29 February 2011 28 February
2012 GBP`000 2011
GBP`000 GBP`000
ASSETS
Non-current assets
Investment property 805 249 986 654 348 183
Long-term receivables 91 881 104 080 87 809
Investments designated at fair value 529 1 123 86 958
Intangible assets - - 575
Investments in joint ventures 2 201 2 607 2 647
Investment in associate 129 795 104 680 16 731
Total non-current assets 1 029 655 1 199 144 542 903
Current assets
Assets held for sale 109 231 - -
Trade and other receivables 23 939 23 716 19 288
Cash and cash equivalents 34 072 51 815 10 763
Total current assets 167 242 75 531 30 051
Total assets 1 196 897 1 274 675 572 954
EQUITY AND LIABILITIES
Capital and reserves
Share capital 36 33 30
Retained (loss)/earnings (12 241) (5 395) 1 168
Non-distributable reserve (7 222) (7 833) (2 209)
Currency translation reserve 8 383 5 684 938
Total equity attributable to equity (11 044) (7 511) (73)
shareholders
Non-controlling interest 77 887 106 383 55 972
Total equity 66 843 98 872 55 899
Non-current liabilities
Debenture capital 142 554 173 199 158 351
Borrowings 468 829 810 958 307 240
Derivatives 5 487 6 824 1 260
Deferred taxation 2 637 2 239
Total non-current liabilities 619 507 993 220 466 851
Current liabilities
Borrowings 458 377 117 041 20 267
Trade and other payables 40 830 49 251 29 882
Derivatives 11 340 16 291 55
Total current liabilities 510 547 182 583 50 204
Total liabilities 1 130 054 1 175 803 517 055
Total equity and liabilities 1 196 897 1 274 675 572 954
Net asset value per linked unit 32,43 44,50 47,03
(pence)
Number of linked units in issue 405 507 157 372 305 640 336 574 640
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
GROUP
Unaudited Audited Unaudited
six months year ended six months
ended 31 August ended
29 February 2011 28 February
2012 GBP`000 2011
GBP`000 GBP`000
Cash flows from operating activities
Cash generated by operations 22 567 21 180 13 233
Interest paid (34 315) (29 709) (7 703)
Taxation paid (718) (152) (193)
Interest received 3 754 4 581 822
Distribution received - 3 875 3 875
Distribution received from associate 5 083 5 986 -
and joint ventures
Net cash (utilised in)/generated (3 629) 5 761 10 034
from operating activities
Net cash (utilised in)/generated (26 898) (181 002) (116 305)
from investing activities
Net cash generated from financing 10 131 198 218 99 158
activities
Net movement in cash and cash (20 396) 22 977 (7 113)
equivalents
Effect of exchange rate fluctuations 695 438 907
on cash held
Increase in restricted cash balance 1 958 11 431 -
Cash and cash equivalents at the 51 815 16 969 16 969
beginning of the period/year
Net cash and cash equivalents at the 34 072 51 815 10 763
end of the period/year
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
GROUP
Unaudited Audited Unaudited
six months year ended six months
ended 31 August ended
29 February 2011 28 February
2012 GBP`000 2011
GBP`000 GBP`000
Balance at beginning of the (7 511) (2 804) (2 804)
period/year
Shares issued 3 18 15
Comprehensive income attributable to (4 148) 1 922 5 611
RIN shareholders
Other reserves 612 (6 647) (2 895)
Total equity (11 044) (7 511) (73)
SEGMENTAL ANALYSIS
UK UK Europe Hotels
Stable Retail GBP`000 GBP`000
Income GBP`000
GBP`000
Period ended 29 February 2012
Gross rental income 18 258 6 858 8 721 4 700
Property operating expenses (1 001) (795) (641) -
Net property income 17 257 6 063 8 080 4 700
Non-current assets
Investment property 418 702 167 911 94 861 123 775
Investments designated at fair value 222 228 79 -
Investment in associate - - - -
Year ended 31 August 2011
Gross rental income 3 965 10 656 5 816 6 386
Property operating expenses (102) (1 896) (303) (67)
Net property income 3 863 8 760 5 513 6 319
Non-current assets
Investment property 467 426 82 796 312 657 123 775
Investments designated at fair value 361 592 170 -
Investment in associate - - - -
Period ended 28 February 2011
Gross rental income 1 924 4 612 3 009 2 043
Property operating expenses (94) (1 196) (305) -
Net property income 1 830 3 416 2 704 2 043
Non-current assets
Investment property 52 290 108 914 76 379 110 600
Investments designated at fair value 478 - - 1 352
Investment in associate - - - -
SEGMENTAL ANALYSIS (continued)
Cromwell Wichford Total
GBP`000 GBP`000 GBP`000
Period ended 29 February 2012
Gross rental income - - 38 537
Property operating expenses - - (2 437)
Net property income 36 100
Non-current assets
Investment property - - 805 249
Investments designated at fair value - - 529
Investment in associate 129 795 - 129 795
Year ended 31 August 2011
Gross rental income - - 26 823
Property operating expenses - - (2 368)
Net property income 24 455
Non-current assets
Investment property - - 986 654
Investments designated at fair value - - 1 123
Investment in associate 104 680 - 104 680
Period ended 28 February 2011
Gross rental income - - 11 588
Property operating expenses - - (1 595)
Net property income 9 993
Non-current assets
Investment property - - 348 183
Investments designated at fair value 85 128 - 86 958
Investment in associate - 16 731 16 731
Commentary
Introduction
RIN holds as its main asset a controlling 69,98% shareholding in Redefine
International P.L.C. ("RI PLC"). Each linked unit in RIN effectively equates to
one share in RI PLC.
Background to RI PLC
RI PLC is an income-focused property investment company with exposure to a broad
range of properties and geographical areas and is listed on the Main Market of
the London Stock Exchange ("the LSE"). It is domiciled in the Isle of Man and
has investments in the UK, Germany, Switzerland, the Channel Islands, the
Netherlands and Australia.
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. RI PLC distributes 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. In terms
of its trust deed, RIN makes semi-annual interest distributions based on
distributable earnings.
RI PLC acquires real estate investments 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.
Chairman`s statement
The period under review was again an active one for the group, being the first
full reporting period of the enlarged RI PLC group following the reverse
acquisition of Wichford P.L.C. ("Wichford") by Redefine International plc. The
group`s trading operations performed well against a backdrop of further write-
downs in property investment valuations and weak macro-economic markets.
The tenant covenant strength of the UK Stable Income portfolio, strong
performances from the Hotel portfolio and the European portfolio and a robust
contribution from the Australian associate, Cromwell, showed the benefit of the
group`s diversified investment portfolio. RIN is on track to meet its forecast
as set out in its prospectus dated 23 August 2010.
Although the company`s underlying performance remains sound, the unwieldy dual
listing structure has come in for criticism and the board is currently exploring
ways to streamline the group structure.
The proposed capital raise (further details of which are set out in the circular
issued by RIN on 15 July 2011) is expected to take place in the first quarter of
the 2012/13 financial year.
Further details are contained in the RI PLC announcement referred to below.
Prospects and Strategy
As outlined in the RI PLC half-year results announcement, the remainder of the
financial year will be focussed on the expiring debt facilities, the consequent
capital raising and the proposed disposal of certain Wichford legacy assets.?
RI PLC`s results
The results for RI PLC for the six months ended 29 February 2012 have been
released simultaneously with these results and can be viewed on the website
www.redefineinternational.com or on the JSE`s SENS or the LSE`s Regulatory News
Service. Unitholders will be able to obtain further financial information and
commentary on the performance of RI PLC for the six months ended 29 February
2012 by referring to these results. A summary of the portfolio review is set out
below.
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 resulted in a sharp decline in
transactional activity and the values of many regional properties. The group`s
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
from reviews subject to CPI indexation or fixed increases. The proportion of
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 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, RI PLC has only lost
three out of the eight units let to these tenants, equating to 0,6% of total
floor space after concluding leases with the new owners of the business,
reflecting the portfolio`s locally dominant status.
Despite the number of retailer administrations, RI PLC 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 UK Retail 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 RI PLC`s
strategy to acquire assets with a dominant hold over their catchment area.
UK Retail at a glance
29 February 31 August
2012 2011
Market value GBP247,4 GBP257,9
million 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
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 RI PLC`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 meeting 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 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, this 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 is largely complete.
The Limehouse hotel will have the new public area refurbished before the
Olympics while 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.
Cromwell Property group ("Cromwell")
On 16 December 2011 the company announced that the group 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. RI PLC received a fee of
AUD875 000 (GBP566 160) from Cromwell 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 in the interest in Cromwell is in line with the group`s objective
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, RI PLC exercised its option to place new shares with RIN for
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 adjustments to the fair value of 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 `000) (GBP`millio value yield
n) (%) (%)
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 RI PLC`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 AUD
1,66 billion as at 31 December 2011
Figures (excluding Cromwell(1.) assume 100% ownership of property assets held in
subsidiaries and joint ventures
Business segments - income
Annualised Average Weighted Occupancy Indexation
gross rental rent per average by area and fixed
income (sq ft) unexpired (%) increases
(GBP`million 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 1 052,7 96,4 7 468 88,6
Note:
Excludes Cromwell and assumes 100% ownership of property assets held in
subsidiaries and joint ventures
Fair value adjustment on debentures
Each linked unit comprises one share and one debenture. The debentures have been
designated at fair value through profit or loss.
Debentures are adjusted to fair value which represents the net asset value of RI
PLC attributable to debenture holders. As one linked unit in the company
effectively equates to one share in the company`s subsidiary, RI PLC, the fair
value of one debenture is determined by reference to the "cum" dividend net
asset value of one RI PLC share as at 29 February 2012.
Debentures are reflected in the statement of financial position as follows:
29 February 28 February 31 August
2012 2011 2011
GBP`000 GBP`000 GBP`000
Opening debenture value 173 199 76 065 76 065
Debentures issued at par value 13 735 73 895 90 047
Premium on debentures issues 169 10 126 11 968
Fair value adjustment (44 549) (1 735) (4 881)
Closing debenture value 142 554 158 351 173 199
Basis of preparation
These condensed consolidated interim results of the group for the six months
ended 29 February 2012 have not been reviewed or audited by the company`s
auditors KPMG Inc. They are presented in pound sterling which represents the
functional currency of the company and the presentational currency of the group
and are rounded to the nearest thousand. The preparation of these results was
supervised by the Financial Director, Andrew Rowell CA(SA).
These condensed consolidated results have been prepared in accordance with the
recognition and measurement criteria of International Financial Reporting
Standards ("IFRS"), the AC 500 series issued by The South African Institute of
Chartered Accountants, the South African Companies Act, 71 of 2008 and the JSE
Listings Requirements.
The preparation of financial statements requires management to make judgements,
estimates and assumptions that affect the application of policies and reported
amounts of assets and liabilities. In preparing these condensed consolidated
financial statements, the significant judgements made by management in applying
the group`s accounting policies and the key sources of estimation uncertainty
were the same as those that applied to the condensed consolidated financial
statements as at and for the period ended 29 February 2012, for that of its
subsidiary entity RI PLC.
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 policy for disposal groups and non-current assets held for
sale noted in RI PLC`s condensed consolidated financial statements.
The directors have considered all IFRS 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.
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. As
a property loan stock company in South Africa, RIN distributes all of its
earnings on the basis that the debenture interest is tax deductible. The wording
of current taxation legislation is such that there is an alternative view. The
board has taken advice on the matter from its legal advisors and on the basis of
the advice received believes that the deduction of debenture interest is
appropriate. Should the debenture interest not be deductible for tax purposes
this would have a consequential impact on the tax liability as at 29 February
2012.
Financial review
Overview
These results reflect the first set of half-year results for the enlarged RI PLC
group following the reverse acquisition of Wichford. 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 GBP8,98
million, up 32,16% from the six-month period ended 28 February 2011.
The group delivered a loss attributable to shareholders of GBP6,8 million for
the six months ended 29 February 2012 (after the six-month debenture interest
accrual of GBP8,8 million). Key items impacting the results of the group for the
period since 31 August 2011 included:
- A net decrease in the fair value of the group`s investment property of GBP57,8
million (5,9% 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 to the VBG Gamma and Delta loan facilities as at the date of
the reverse acquisition with 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 15 962 517 new linked units on 8 February 2012, at R4,90 per
linked unit. The placement was made to assist with the funding of RI PLC`s
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 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 51,5 million stapled securities acquired during the period. 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 net asset
value ("NAV") per linked unit from 44,50 pence as at 31 August 2011 to 32,43
pence per linked unit.
The net asset value, however, includes items which, in the opinion of the board,
need to be adjusted. Therefore in order to allow unitholders to gain a better
understanding of the underlying value of the group, an "adjusted net asset
value" has been calculated as presented below:
Note Pence per share
NAV as at 29 February 2012 32,43
Reversal of VBG amortisation of the fair value 1 1,71
adjustment
Write back of Gamma and Delta negative equity 2 4,26
EPRA adjustments 3 4,72
Adjusted NAV per linked unit 43,12
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 principle value over the
remaining term of the loan. This amount may however, reverse upon disposal of
the assets and settlement of the 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
would lead to a positive effect on net asset value per linked unit of 4,26
pence.
3. The European Public Real Estate Association ("EPRA") publish best practice
recommendations for Europe`s Stock Exchange listed real estate sector. In order
to enhance comparability and transparency, RI PLC has adopted the EPRA
performance measures within their reporting. The EPRA adjusted rents include the
write-back of derivative instruments and deferred tax liabilities.
Debenture interest distribution
The board has declared an interim interest distribution of 2,09 pence per linked
unit for the six months ended 29 February 2012. The announcement of the rand
equivalent of the interest distribution will be made on or before 11 May 2012.
The distribution will be payable to RIN linked unitholders in accordance with
the abbreviated timetable set out below:
2012
Last day to trade "cum" interest distribution Friday, 18 May
Linked units "ex" interest distribution Monday, 21 May
Record date Friday, 25 May
Payment date Monday, 28 May
There may be no dematerialisation or rematerialisation of linked units between
Monday, 21 May 2012 and Friday, 25 May 2012, both days inclusive.
On behalf of the board
G R Tipper M J Watters
Chairman Chief Executive Officer
30 April 2012
Directors: Gavin Tipper* (Non-executive Chairman), Michael Watters (Chief
Executive Officer), Andrew Rowell (Financial Director),
Gregory Heron*, Bernard Nackan*, Peter Todd*, Marc Wainer#
# Non-executive * Independent non-executive
Registered office: Redefine Place, 2 Arnold Road, Rosebank, Johannesburg, 2196
Transfer secretaries: Computershare Investor Services (Proprietary) Limited
Company secretary: Probity Business Services (Proprietary) Limited, 3rd Floor,
The Mall Offices, Cradock Avenue, Rosebank, Johannesburg, 2196
Sponsor: Java Capital
www.redefineint.com
Date: 30/04/2012 09:01:01 Produced by the JSE SENS Department.
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