| Thu 5 Sep 2019, 8:02 | | MAS REAL ESTATE INC. - MSP : Consolidated Annual Financial Statements 2019 |
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MSP : Consolidated Annual Financial Statements 2019: https://senspdf.jse.co.za/documents/2019/jse/isse/msp/MASYE2019.pdf
Consolidated Annual Financial Statements 2019
MAS Real Estate Inc.
Registered in British Virgin Islands
Registration number 1750199
SEDOL (EMTF): B96VLJ5
SEDOL (JSE): B96TSD2
JSE share code: MSP
ISIN: VGG5884M1041
LEI code: 213800T1TZPGQ7HS4Q13
("MAS" or "the company")
SHORT-FORM ANNOUNCEMENT: CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 2019
OUTPERFORMED DISTRIBUTABLE
EARNINGS PER SHARE TARGET OF
8.75 EURO CENTS
41.9%
YEAR-ON-YEAR INCREASE
DISTRIBUTABLE EARNINGS
PER SHARE
59.6%
YEAR-ON-YEAR INCREASE IN
NET RENTAL INCOME
45.3%
OF INVESTMENT PROPERTY
PORTFOLIO IN CEE(1)
2.0%
YEAR-ON-YEAR INCREASE IN
EPRA NAV PER SHARE TO
137.6 EURO CENTS
2 YEAR EXTENSION TO
EXCLUSIVITY WITH
PRIME KAPITAL
UNTIL 2025
(1) Includes investment property held for sale
DIRECTORS' REPORT
In 2016, MAS embarked on a three-year programme to restructure and grow
its balance sheet. The emphasis was on developing and owning retail assets in
Central and Eastern Europe (CEE), given strong historical consumption growth
trends in the region that are expected to continue, whilst retaining the benefits
of a geographically diversified asset portfolio. This was funded through raising
both debt and additional equity.
This initial programme has now drawn to a successful close. In light of
this, the board of directors has undertaken an in-depth review of the group's
strategy. The impressive performance and growth of the CEE portfolio led the
board to consider that the continued expansion into CEE, combined with an
orderly and disciplined divestment of the Western European assets, phased
to maximise realisable value, is the most appropriate strategy for the group.
The increased geographical focus in the higher growth CEE markets, with a
predominant focus on retail, provides the group with the best opportunity to
continue to meet its long-term objectives of sustainable growth in distributable
earnings per share.
DISTRIBUTABLE EARNINGS
The group achieved distributable earnings per share for the year of 9.01 euro
cents, which represents growth of 41.9% compared with 6.35 euro cents in the
prior year. This significant improvement in distributable earnings per share was
driven by the acquisition of a number of investment properties during the year,
as well as the interest earned on the additional preference share investment
in PKM Developments and distributions received from the group's real estate
equity securities.
FINAL DISTRIBUTION
Based on the increase in distributable earnings and in line with the previously
stated distribution targets, the board has proposed a final distribution per share
of 4.97 euro cents for the second half of the 2019 financial year. This brings the
distribution for the year to 8.75 euro cents per share, in-line with guidance.
INCOME-GENERATING PORTFOLIO AND NET ASSET VALUE
Investment property, including investment property held for sale, grew by
52.4%, from EUR632.8 million at 30 June 2018 to EUR964.7 million. The portfolio
performed strongly, with net rental income growing by 59.6% from EUR32.3 million
to EUR51.6 million year-on-year, and net operating income increasing by 51.8%, from
EUR38.3 million to EUR58.2 million. This growth was driven by acquisitions, income-
enhancing asset management initiatives and strong tenant performance.
The EPRA net asset value per share increased by 2.0% to 137.6 euro cents
per share, compared to 134.9 euro cents per share at the 30 June 2018 year-end.
This was achieved due to the completion of developments and valuation
gains across the direct portfolio which offset negative fair value adjustments on
the real estate equity securities portfolio.
ACQUISITION, DISPOSAL AND DEVELOPMENT UPDATE
The timely redeployment of capital realised from the divestment of the Western
European assets will be key to the successful implementation of the next
phase of the group's strategy. While opportunities remain for reinvestment,
current market pricing has led the group to exercise caution when assessing
opportunities. The group is unwilling to overpay for assets and will assess
new capital deployment opportunities carefully to ensure that its longer-term
strategic objectives are not compromised by actions taken in pursuit of short-
term goals. MAS remains prudent in its investment process and continues to
focus on investing in assets with high organic growth and the potential to add value.
MILITARI SHOPPING CENTRE, BUCHAREST, ROMANIA (ACQUIRED JULY 2018)
The acquisition of the Militari Shopping Centre, through the investment
joint venture, was completed in the current reporting period. Trading at the
56,200 square metre GLA centre has been strong since acquisition, with the
optimisation of leases at expiry, reconfiguration of units and the addition of
non-GLA revenue all providing a platform to grow income. Given ongoing
residential densification around the centre, the group is working on plans to
extend the centre and substantially increase the GLA to approximately 80,000
square metres.
ATRIUM MALL SHOPPING CENTRE, ARAD, ROMANIA (ACQUIRED DECEMBER 2018)
The Atrium Mall is the only modern retail destination in Arad and the wider
catchment area. The mall is well established and centrally located, adjacent
to main transport hubs, and with good accessibility and visibility. The city of
Arad is situated in Western Romania, close to the Hungarian border. It is the
administrative capital of Arad county and forms the principal economic hub of
the area. The city has healthy demographics, which are supported by growing
purchasing power, and it benefits from a significant catchment area, with
334,000 people within a 45-minute drive.
The mall has a fashion and entertainment focus, with an approximate GLA
of 28,600 square metres over three floors. It is anchored by strong tenants
including large European retailers Carrefour, Inditex, H an extension of 15,000 square metres of GLA at
Galleria Burgas, for which land has been secured; a refurbishment of Galleria
Stara Zagora Mall, which is in progress and expected to be completed in
December 2019; a major extension of Militari Shopping Centre; and extensions
to some of the newly acquired assets which form part of the transaction with
PKM Developments as discussed above.
NEW WAVERLEY, EDINBURGH, SCOTLAND
The 19,000 square metre office development for the UK government achieved
practical completion in May 2019, ahead of schedule and on budget, realising a
total profit of EUR12.5 million (GBP11.0 million) over the 2018 and 2019 financial years.
In addition to the disposal of the Premier Inn and Hub by Premier Inn Hotels,
with its associated retail units, discussed above, the southern section of the
residential element of the scheme was sold to Queensberry, a housebuilder,
on 30 October 2018 for EUR7.4 million (GBP6.5 million). The GPU's option over the
northern residential section has now lapsed and this is also in the process of
being sold to Queensberry.
LANGLEY PARK, CHIPPENHAM, ENGLAND
Planning permission was obtained in 2016 to develop the site for 420 residential
units, a Travelodge hotel with ground floor retail, and a discount food store. The
sale of the food store to Aldi was completed in June 2018. A forward sale of the
Travelodge was contracted with Torbay Council in 2018, practical completion
took place in August 2019 and the sale will be finalised in September 2019
at the agreed price of EUR6.4 million (GBP5.8 million). The disposal process has
progressed with two housebuilders for the sale of the rest of the development
site. Legal contracts were exchanged for the sale of part of the site in June 2019
and the remainder is under offer. Both sales should complete before the end of
the 2019 calendar year.
CAPITAL MANAGEMENT
At year end, the group held EUR71.2 million in cash and had access to EUR98.0
million in undrawn secured and unsecured debt facilities in addition to the REIT
portfolio.
At 30 June 2019 the group loan to value was 33.9% (30 June 2018: 10.0%),
below the 40.0% upper limit at which we are comfortable.
At the financial year end the group had a liability of EUR91.8 million of
interest-bearing deferred consideration and a further EUR250.0 million preference
share funding commitment to PKM Developments. Settling the interest-
bearing deferred consideration liability and meeting the preference share
funding commitment therefore represent the principal anticipated uses of
capital available for redeployment into CEE from the Western European asset
divestment programme and the liquidation of the real estate equity securities
portfolio.
Efficient capital management is an important area of value creation for
shareholders. To achieve this, the board will consider buying back shares as and
when it can create value for shareholders, if the trading price of the shares falls
significantly below the intrinsic value per share. Such buybacks will be done
with care, since capital is a scarce and valuable resource.
STRATEGY
As part of the updated strategic direction of the business, the board recognises
the importance of being able to manage its income-generating investment
properties in CEE directly without reliance on third parties. This strategic intent
envisages that MAS will strengthen its institutional capacity to manage and
grow its CEE investments. This process is underway.
PROSPECTS
With the group having delivered on its strategy and distribution targets for
the financial year ended 30 June 2019, MAS has set itself a three-year target
of growing its distribution per share by 30% for the year ending 30 June
2022, from the current distribution level of 8.75 euro cents per share. It should
be noted that this targeted growth will not be linear, given that the strategic
changes referred to above will include implementing a phased re-deployment
of capital from Western Europe into CEE over time. This target is based on
the assumption that a stable macro-economic environment will prevail, no
major corporate failures will occur and that budgeted rental income, based
on contractual escalations and market-related renewals, will be collected. In
addition, it is assumed that investments in Western Europe will be able to be
divested at least for book value and redeployed contemporaneously in CEE
markets at a rate of return on equity at least equivalent to what is currently
being achieved in Western Europe. This target has not been reviewed or
audited by the group's auditors.
MAS will continue to pursue profitable growth through further acquisition
and development opportunities in its markets. Further announcements will be
made as appropriate.
These condensed consolidated annual financial statements have been prepared
in accordance with International Financial Reporting Standard ("IFRS") as issued
by the IASB, the Johannesburg Stock Exchange ("JSE") Listings Requirements,
the Rules and Regulations of the Luxembourg Stock Exchange and applicable
legal and regulatory requirements of the BVI Business Companies Act 2004.
Below is an extract of the full condensed consolidated financial statements
which are available on the group's website (www.masrei.com), at the company's
head office, offices of our sponsor and upon request.
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
Audited Audited
Year ended Year ended
Euro 30 June 2019 30 June 2018
Rental income 57,619,556 37,452,513
Service charge income and other recoveries 12,455,268 5,954,048
Revenue 70,074,824 43,406,561
Service charge and other property operating (18,478,661) (11,073,518)
expenses
Net rental income 51,596,163 32,333,043
Sales of inventory property 39,164,705 26,020,940
Cost of sales of inventory property (31,013,909) (21,704,016)
Profit on sales of inventory property 8,150,796 4,316,924
Other income 7,259,104 8,585,032
Corporate expenses (5,627,077) (4,946,973)
Investment expenses (3,210,128) (1,976,096)
Net operating income 58,168,858 38,311,930
Fair value adjustments (7,631,570) (15,800,127)
Foreign currency exchange differences (364,553) (1,020,787)
Share of profit from equity accounted investees, 11,009,325 3,568,925
net of tax
Gain on bargain purchase 12,263,193 -
Goodwill impairment - (1,274,346)
Profit before finance income/(costs) 73,445,253 23,785,595
Finance income 12,057,819 7,975,558
Finance costs (10,251,058) (5,560,344)
Profit before tax 75,252,014 26,200,809
Current tax (3,948,325) (5,556,002)
Deferred tax (9,425,315) (1,311,385)
Tax expense (13,373,640) (6,867,387)
Profit for the year 61,878,374 19,333,422
Attributable to:
Owners of the group 55,035,797 16,856,306
Non-controlling interest 6,842,577 2,477,116
Profit for the year 61,878,374 19,333,422
Basic earnings per share (euro cents) 8.63 2.92
Diluted earnings per share (euro cents) 8.63 2.92
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Audited
As at As at
Euro 30 June 2019 30 June 2018
Investment property 872,062,423 579,212,345
Intangible assets 30,646,739 22,592,493
Investment in equity accounted investee 21,888,261 23,774,222
Financial assets 186,496,980 129,902,308
Property, plant and equipment 317,961 485,620
Deferred tax asset 4,280,027 607,179
Financial investments 87,814,010 183,052,263
Inventory property 5,269,960 1,293,501
Investment property held for sale 92,609,919 53,588,444
Trade and other receivables 17,305,972 16,148,333
Cash and cash equivalents 71,155,130 147,825,624
Total assets 1,389,847,382 1,158,482,332
Share capital 824,686,464 829,250,399
Geared share purchase plan shares (8,299,075) (12,863,010)
Retained earnings 53,864,243 48,616,712
Share-based payment reserve 975,364 1,031,739
Foreign currency translation reserve (13,106,889) (11,768,119)
Non-controlling interest 7,439,002 2,527,202
Total equity 865,559,109 856,794,923
Interest bearing borrowings 456,461,320 242,713,107
Financial liabilities 20,044,489 37,817,582
Deferred tax liability 26,269,767 6,139,373
Trade and other payables 21,271,411 14,733,264
Provisions 241,286 284,083
Total liabilities 524,288,273 301,687,409
Total shareholder equity and liabilities 1,389,847,382 1,158,482,332
IFRS Net Asset Value per share (euro cents) 134.6 134.0
EPRA Net Asset Value per share (euro cents) 137.6 134.9
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Geared
share
purchase Foreign Equity
plan shares Share-based currency attributable Non-
Share (treasury Retained payment translation to owners of controlling Total
Euro capital shares) earnings reserve reserve the group interest equity
Balance at 30 June 2018 (audited) 829,250,399 (12,863,010) 48,616,712 1,031,739 (11,768,119) 854,267,721 2,527,202 856,794,923
Total comprehensive profit/(loss)
for the year - - 55,035,797 - (1,338,770) 53,697,027 6,842,577 60,539,604
Total equity transactions (4,563,935) 4,563,935 - (56,375) - (56,375) - (56,375)
Distributions - - (49,788,266) - - (49,788,266) (1,930,777) (51,719,043)
Balance at 30 June 2019 (audited) 824,686,464 (8,299,075) 53,864,243 975,364 (13,106,889) 858,120,107 7,439,002 865,559,109
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
year ended year ended
Euro 30 June 2019 30 June 2018
Net cash from operating activities 62,835,056 35,386,649
Cash used in investing activities (185,599,955) (265,444,808)
Cash generated from financing activities 46,571,887 345,672,514
Net (decrease)/increase in cash and cash (76,193,012) 115,614,355
equivalents
Cash and cash equivalents at the beginning of 147,825,624 33,017,502
the year
Effect of movements in foreign exchange rate (477,482) (806,233)
fluctuations on cash held
Cash and cash equivalents at the end of the 71,155,130 147,825,624
year
DISTRIBUTABLE EARNINGS AND BASIS OF DISTRIBUTION
Audited Audited
year ended year ended
Euro 30 June 2019 30 June 2018
Direct investment result distributable to share- 49,696,674 34,078,183
holders
Company specific adjustments 7,713,959 2,628,067
Distributable earnings before effect of shares 57,410,633 36,706,250
issued during the period
Weighted average number of shares in issue 637,493,798 577,814,866
Distributable earnings per share (euro cents 9.01 6.35
per share)
Audited Audited
year ended year ended
Euro cents 30 June 2019 30 June 2018
Distributable earnings per share 9.01 6.35
Adjustment from reserves per share (0.26) 1.26
Distribution per share 8.75 7.61
This short-form announcement is the responsibility of the directors and is only a summary of the information contained in the full announcement
released on Thursday, 5 September 2019 and available at:
https://senspdf.jse.co.za/documents/2019/jse/isse/msp/MASYE2019.pdf
This short-form announcement does not contain full or complete details, any investment decisions by investors and/or shareholders should be based
on consideration of the full announcement. The full announcement is available for inspection or may be requested and obtained in person, at no
charge, at the head office of the company on the 2nd floor, Clarendon House, Douglas, Isle of Man, IM1 2LN, and at the offices of our sponsor
Java Capital, at 6A Sandown Valley Crescent, Sandton, 2196, South Africa, during office hours from 5 September 2019 to 4 October 2019.
www.masrei.com
Date: 05/09/2019 08:00:00
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