Page 1 of 51 RI PLC RNS HY2014 REDEFINE INTERNATIONAL P.L.C. (“Redefine International” or the “Company” or the “Group”) (Incorporated in the Isle of Man) (Registered number 010534V) LSE share code: RDI JSE share code: RPL ISIN: IM00B8BV8G91 RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2014 REDEFINE INTERNATIONAL DELIVERS STRONG MAIDEN RESULTS AS A UK-REIT Redefine International, a UK-REIT, which holds a primary listing on the London Stock Exchange and a secondary listing on the Johannesburg Stock Exchange, today announces its results for the six months ended 28 February 2014. Financial Highlights ‒ Earnings available for distribution of 1.55 pence per share (28 February 2013: 1.475 pence per share) an increase of 5.1% ‒ Basic earnings per share (excluding the effect of the management internalisation) of 2.18 pence (28 February 2013: 1.91 pence), an increase of 14.1% ‒ Adjusted NAV per share of 38.14 pence (31 August 2013: 38.66 pence) ‒ Adjusted NAV per share (excluding the effect of the management internalisation) of 40.10 pence (31 August 2013: 38.66 pence) ‒ Successful placing of 115.1 million new Redefine International shares to raise £54.7 million ‒ Interim dividend of 1.50 pence per share (28 February 2013: 1.475 pence) ‒ Balance sheet strengthened with pro-forma Group LTV reduced to 53.0% (31 August 2013: 56.8%) and ongoing programme of early debt extensions Operational Highlights ‒ Conversion to a UK-REIT ‒ Strong operating results across all income focused business segments ‒ Property portfolio valuations up 2.0% despite adverse foreign exchange movements ‒ Disposals totalling £29.4 million at an average premium to book value of 23.8%, providing opportunities for further accretive capital recycling ‒ Completion of acquisition of Weston Favell Shopping Centre for £84.0 million ‒ Acquisition of remaining 40% of Earls Court Holiday Inn Express for £6.3 million (post period end) ‒ Good progress on asset management initiatives; marginal decline in occupancy to 97.2% (31 August 2013: 97.3%), largely reflecting retail space taken back to progress redevelopment opportunities ‒ Board and management team strengthened ‒ Inclusion in FTSE and EPRA indices Greg Clarke, Chairman, commented: “Our conversion to a UK-REIT and the internalisation of our management in December 2013 marked the successful conclusion of the strategy outlined to shareholders over 18 months ago. This has, in turn, resulted in a larger free float and enhanced liquidity which has ensured the Company's admission into the FTSE and EPRA/NAREIT indices and growing recognition as a mid-cap REIT. “This, combined with the growth in the Company's market cap and reduction in leverage, has created access to new sources of funding and the ability to drive down the cost of capital, which will support our strategy to invest into high quality assets generating strong income flows with the potential for capital growth.” Mike Watters, Chief Executive, added: "Based on current market conditions, our expectations are for full year earnings to be in line with management expectations. With our focus on positioning the Company and its portfolio for future growth, we look forward with confidence." Meeting, webcast and conference call A meeting for analysts and investors will take place today at 09.00 (UK local time) at FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. The meeting can also be accessed via a conference call dial in facility and webcast link, starting at 09.00am (UK time) 10.00am (SA time), using the details below. The presentation will be made available on the Company’s website http://www.redefineinternational.com/investor-relations/financial-reports.
Transcript
Page 1 of 51
RI PLC RNS HY2014
REDEFINE INTERNATIONAL P.L.C.
(“Redefine International” or the “Company” or the “Group”)
(Incorporated in the Isle of Man)
(Registered number 010534V)
LSE share code: RDI
JSE share code: RPL
ISIN: IM00B8BV8G91
RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2014
REDEFINE INTERNATIONAL DELIVERS STRONG MAIDEN RESULTS AS A UK-REIT
Redefine International, a UK-REIT, which holds a primary listing on the London Stock Exchange and a secondary listing on the Johannesburg Stock Exchange, today announces its results for the six months ended 28 February 2014.
Financial Highlights
‒ Earnings available for distribution of 1.55 pence per share (28 February 2013: 1.475 pence per share) an increase of 5.1%
‒ Basic earnings per share (excluding the effect of the management internalisation) of 2.18 pence (28 February 2013: 1.91 pence), an increase of 14.1%
‒ Adjusted NAV per share of 38.14 pence (31 August 2013: 38.66 pence)
‒ Adjusted NAV per share (excluding the effect of the management internalisation) of 40.10 pence (31 August 2013: 38.66 pence)
‒ Successful placing of 115.1 million new Redefine International shares to raise £54.7 million
‒ Interim dividend of 1.50 pence per share (28 February 2013: 1.475 pence)
‒ Balance sheet strengthened with pro-forma Group LTV reduced to 53.0% (31 August 2013: 56.8%) and ongoing programme of early debt extensions
Operational Highlights
‒ Conversion to a UK-REIT
‒ Strong operating results across all income focused business segments
‒ Disposals totalling £29.4 million at an average premium to book value of 23.8%, providing opportunities for further accretive capital recycling
‒ Completion of acquisition of Weston Favell Shopping Centre for £84.0 million
‒ Acquisition of remaining 40% of Earls Court Holiday Inn Express for £6.3 million (post period end)
‒ Good progress on asset management initiatives; marginal decline in occupancy to 97.2% (31 August 2013: 97.3%), largely reflecting retail space taken back to progress redevelopment opportunities
‒ Board and management team strengthened
‒ Inclusion in FTSE and EPRA indices
Greg Clarke, Chairman, commented:
“Our conversion to a UK-REIT and the internalisation of our management in December 2013 marked the successful conclusion of the strategy outlined to shareholders over 18 months ago. This has, in turn, resulted in a larger free float and enhanced liquidity which has ensured the Company's admission into the FTSE and EPRA/NAREIT indices and growing recognition as a mid-cap REIT. “This, combined with the growth in the Company's market cap and reduction in leverage, has created access to new sources of funding and the ability to drive down the cost of capital, which will support our strategy to invest into high quality assets generating strong income flows with the potential for capital growth.” Mike Watters, Chief Executive, added:
"Based on current market conditions, our expectations are for full year earnings to be in line with management expectations. With our focus on positioning the Company and its portfolio for future growth, we look forward with confidence." Meeting, webcast and conference call
A meeting for analysts and investors will take place today at 09.00 (UK local time) at FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. The meeting can also be accessed via a conference call dial in facility and webcast link, starting at 09.00am (UK time) 10.00am (SA time), using the details below. The presentation will be made available on the Company’s website http://www.redefineinternational.com/investor-relations/financial-reports.
The UK Retail portfolio has increased to 34.6% of the portfolio following the acquisition of Weston Favell, Northampton
and the restructuring of the Aviva portfolio, which result in all UK shopping centres being wholly owned. Although the
underlying performance of the retail market remains mixed and some way behind the overall recent strong performance of
the investment market, a number of economic indicators, including the prospect of real wage growth, bode well for
continued improvement in retailing, consumer confidence and demand for space.
The Hotel portfolio produced a very pleasing performance with underlying operating metrics showing strong like-for-like
improvements. The remaining 40% of the Earl’s Court Holiday Inn Express was acquired post period end which, together
with the addition of 48 rooms at Southwark nearing completion, will increase the Company’s exposure to a portfolio with
good growth prospects.
The European portfolio produced a steady performance in local currency terms, however a weaker Euro against Sterling
negatively impacted its net contribution to the Group. The impact of the weaker Euro was however partially offset by Euro
denominated bank funding. The newly acquired shopping centres in Berlin and Hamburg have performed well and the
opportunities to add value that were identified on acquisition are progressing to plan.
Cromwell continues to perform well operationally and has grown its third party asset management business significantly.
Unfortunately the decline of the Australian dollar against Sterling negatively impacted the Cromwell contribution in this
reporting period. The shareholding in Cromwell remains a strategic holding although the Company took advantage of the
strong share price to dispose of a further 8.46 million securities in December 2013.
Changes to the Board
As part of the corporate restructuring, certain Board changes were made during the last quarter.
I am delighted to welcome Sue Ford and Bernie Nackan as non-executive directors and Adrian Horsburgh as property
director. All have strong track records in the real estate environment and we are fortunate to have such high calibre
individuals joining our team. Sue is expected to play a major role on the audit committee; Bernie will represent Redefine
Properties Limited, the Company’s 33% shareholder, whilst Adrian will lead the property team.
It is also with sadness that we say farewell to three long serving board members; Ita McArdle, Mark Taylor and Stewart
Shaw-Taylor. All three have played significant roles in the creation and advancement of the Company and I would like to
thank them for their efforts over the many years they have served on the Board.
Dividend
The Board declared an interim dividend of 1.50 pence per share for the six months ended 28 February 2014 on 29 April
2014, reflecting a pay-out ratio of 97% of earnings available for distribution. Shareholders are being given the opportunity
to elect to receive new ordinary shares in lieu of the cash dividend under a Scrip Dividend Scheme. A circular will be
posted to all shareholders setting out details of the election. Further details on the timing of the interim dividend will be
announced today.
Prospects
The current imbalance between investment demand and good quality investment opportunities, particularly in the UK, has
resulted in a very competitive bidding environment. Our approach to new investment and pricing therefore remains
cautious, particularly where the institutional market is concerned. We do however continue to see attractive off-market
opportunities which, in the current interest rate environment, can either be financed at rates which are accretive to
earnings or offer development opportunities where we believe we can create value for the Group.
The growth in the Company’s market capitalisation, reduction in leverage and establishment as a recognised mid-cap UK-
REIT has created access to new sources of funding and the ability to drive down the cost of capital which will support
investment into high quality assets with long-term growth potential. The Company has also been on the cusp of FTSE 250
admission which, if achieved in the future, will reinforce the Company’s status as a mid-cap player in the UK listed real
estate market.
The current interest rate environment together with the return of a competitive lending market has created an opportunity
to secure finance at attractive rates when compared to long run averages. There has also been good progress in
extending a number of near term facilities and this is expected to provide clear visibility on interest costs over the medium
term.
The Company expects earnings for the full financial year to 31 August 2014 (barring any major unforeseen macro events)
to be in line with management expectations and looks forward to the second half with confidence.
Greg Clarke
Chairman
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RI PLC RNS HY2014
Our Business
Investment Strategy
The Group’s strategy is focused on delivering sustainable and growing income returns through investment in income yielding assets let to high quality occupiers on long leases. Development exposure is generally limited to asset management and the 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 and provides exposure to the office, retail, industrial and hotel sectors.
Business Segments
UK Commercial Offices let to the UK Government, motor trade and roadside services, and residential units.
UK Retail The Group’s UK shopping centre portfolio of seven wholly owned shopping centres.
Hotels The Group’s hotel properties situated in the United Kingdom. The hotels are let to Redefine Hotel
Management Limited on a fixed rental basis with annual reviews. The portfolio comprises six
London based hotels and one hotel in Reading, branded under the Holiday Inn, Holiday Inn
Express and Crowne Plaza franchises.
RBDL The Group’s 33% shareholding in Redefine BDL Hotel Group Limited, the UK’s largest
independent hotel management company.
Europe The Group’s properties in Continental Europe, located primarily in Germany but also in Switzerland
and the Netherlands. The portfolio comprises shopping centres, discount supermarkets and
government-let offices.
Cromwell The Group’s investment in the Cromwell Property Group, a commercial real estate company listed
in Australia with major lettings to listed companies and Government tenants. As at 28 February
2014 Cromwell’s market capitalisation was £911.1 million and the Group’s shareholding was
13.17%.
Property portfolio by business segment at 28 February 2014
Business segments
28 February 2014
Market values
(£’million)
Occupancy by
lettable area
(%)
Lettable area
(m2)
Annualised gross
rental income
(£’million)
UK Commercial 136.6 98.4% 117,614 12.1
UK Retail 331.6 95.4% 175,577 26.5
Hotels 155.7 100.0% 26,744 11.1
Europe 262.4 98.0% 117,320 17.4
Total (excl non-core assets) 886.3 97.2% 437,255 67.1
Non-core assets 70.9 99.2% 81,087 9.7
Total 957.2 97.5% 518,342 76.8
Notes:
1. Figures reflect the Group’s share of joint ventures.
2. The table excludes the Group’s interest in Cromwell, which had a market value of £120.0 million at 28 February 2014.
3. Non-core assets comprise the Delta portfolio, the Justice Centre in the Hague and the Ciref Berlin/German portfolio.
Top 10 properties by value
Portfolio analysis Top 10 investments Anchor tenants
1. Figures reflect 100% of the asset values; ownership percentages are provided above. 2. The effective shareholding in the Earls Court Holiday Inn Express increased to 71.0% post period end.
UK Commercial
Market
The second half of 2013 saw a modest recovery in occupational markets with demand for space at its highest level since
2008. London continues to dominate occupier demand and generate exceptional investor activity, but it is the recovery in
the South East market, and in particular the Thames Valley, which was a major driver of overall performance. Despite the
strength of London and the South East, the improvement in the office market was reported as widespread with Leeds,
Manchester, Edinburgh and Glasgow all showing encouraging results. Caution still needs to be exercised as the recovery
in occupier demand remains fragile in the regions.
The well documented increase in investor risk appetite continues to benefit the regional office market as a lack of supply in
London and South East forces investors to bid competitively for prime and secondary assets. This is expected to continue
during the second half, as demonstrated by unprecedented investment by Sovereign wealth funds in cities such as
Birmingham and Manchester. Bristol has recently demonstrated a return to yield compression, not seen since 2007, for
well let prime office stock.
The Government’s apparent ability to enter into longer lease terms is also an encouraging trend. Previous Government
Property Unit policy required mandatory five year breaks.
Performance
Occupancy increased to 98.4% (31 August 2013: 98.0%) following the take up of 8,500 sqft in total at the Observatory,
Chatham and the Crescent Centre, Bristol. A stronger occupational market was also reflected in stabilising and, in some
cases, improving ERVs which increased 5.0% on a like-for-like basis.
The portfolio value increased 3.6% in the six month period (excluding sales of £28.4 million which achieved an average
premium of 25.0% to their 31 August 2013 book values). Well located assets with secure cash flows or residential
conversion potential continued to attract strong investment demand as evidenced by the sales concluded during the
period.
Investment and asset management
The Company capitalised on a strong investment market to sell assets at a premium to book value. West Tullos,
Aberdeen was sold in December 2013 for £2.2 million reflecting a 5% premium to the 31 August 2013 book value. The
sale is in line with the Company’s strategy to reduce the number of smaller assets in the portfolio. The sales price reflected
a net initial yield of 4.5%.
St Anne House, Croydon was sold in February 2014 for £8.4 million reflecting a 53% premium to the 31 August 2013 book
value, having secured planning permission to convert the 100,000 sqft office building to hotel and residential uses. The
sales proceeds will be reinvested into income producing investments.
The sale of the Harrow residential scheme completed during the period for a total consideration of £13.77 million reflecting
a 12.4% premium to the 31 August 2013 book value.
A number of small sales totalling £4.1 million were completed to meet sales targets under the Delta portfolio restructuring
agreement.
Letting activity in the period focused on the Observatory, Chatham with the letting of the vacant ground floor (4,475 sqft) to
the Insolvency Service (Department of Business, Innovation and Skills) on a 10 year lease at £15.75 per sqft. The
remainder of the space (2,092 sqft) is currently under offer at the same rent.
The Crescent Centre, Bristol, continued to perform well and a further two new lettings were secured; Arriva took 2,373
sqft and Protection Group International took 1,640 sqft, both on five year lease terms at £11.50 per sqft and £20 per sqft
respectively.
The strength of the London West End market in general has had a positive impact on the Southbank market as a number
of traditional Soho and West End occupiers have relocated into this rapidly improving area of London. This was clearly
evidenced by the 5% rental uplift to £897,500 p.a. achieved at Newington House, Southwark Bridge Road.
Strategy and outlook
The Government-let (formerly Wichford) portfolio (excluding non-core assets) now represents 8.1% of the total portfolio by
value (31 August 2013: 11.6%). The successful restructuring of this portfolio has removed significant medium term re-
letting risk and increased the overall quality of the portfolio in the process.
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RI PLC RNS HY2014
UK Retail
Market
The economic recovery together with improved consumer confidence supported like-for-like growth in UK retail sales in
the second half of 2013. Lower inflationary expectations and reduced unemployment are expected to support real wage
growth and consequently higher retail spending in 2014.The British Retail Consortium reported that footfall in March 2014
was 1.8% higher than a year ago while in the year to February 2014 the amount spent on UK high streets rose by 3.5%.
While there is a general oversupply of retail space, particularly in poor secondary and tertiary locations, demand remains
robust for the right type of large format retail and leisure space in the right locations. It is considered that the significant
‘retail rent correction’ is well advanced with average rental growth stabilising, having previously been in negative territory.
The leisure, food and beverage market remains one of the most successful sub-sectors with operators such as Nandos
and Frankie & Benny’s still expanding rapidly. The fashion retail market is more polarised. Operators such as River Island,
Next, TK Maxx and H&M continue to trade well and the discount and single price operators such as B&M Bargains and
Home Bargains have experienced good growth. With the exception of the convenience stores, the supermarket sector is
no longer in a growth phase.
Investment in shopping centres witnessed a sharp increase in 2013 with over 80 separate transactions totalling £4.58
billion. The weight of capital being invested has seen a significant re-rating of investment yields with yields for town centre
dominant schemes decreasing by 50 – 70 basis points during 2013.
Performance
Occupancy by area increased to 95.4% (31 August 2013: 95.0%) following a period of successful lettings at St Georges,
Harrow and Grand Arcade, Wigan.
Footfall declined 2.0% compared to the same six month period last year. This is in line with the Experian national
benchmark reflecting a 2.1% decline for the same six month period.
The like-for-like portfolio value increased 5.3% which excludes an increase of 3.7% at Weston Favell which was acquired
during the period. Valuation uplifts were supported by leasing, rent reviews and asset management progress; particularly
at Grand Arcade (Wigan), St Georges (Harrow) and Byron Pace (Seaham). ERVs across the portfolio grew marginally by
1.0% on a like-for-like basis.
Investment and asset management
St Georges, Harrow
The asset management plan at St Georges to position the centre as the leisure, dining and retail destination of choice in
the wider catchment area continues to be implemented through investment into the centre’s entrance and façade to
modernise its appearance and customer appeal. The success of recently introduced food and beverage retailers such as
Nandos and Frankie & Benny’s has resulted in increased demand from food and beverage operators and improved footfall
which is benefitting other retailers. Key leasing activity during the period included:
‒ Frankie and Benny’s entered into a new 25 year lease (15 years term certain) over 4,270 sqft at a rent of £102,480
p.a.
‒ Warren James entered into a new five year lease at a rent of £45,000 p.a. over a newly configured 575 sqft unit.
Grand Arcade, Wigan
Retailer demand at Grand Arcade has strengthened, cementing the centre’s dominance in the town and reflecting our
strategy of investing in dominant retail locations and offering retailers space that meets their requirements. Improving
sentiment for the right retail product is being reflected in increased leasing activity. Key leasing activity during the period
included:
‒ Superdrug entering into a new ten year lease over 7,263 sqft establishing a new zone A rental tone of £98.3 per sqft
net effective and equating to a gross rent of £165,000 p.a.
‒ Pandora opening a new store over 1,198 sqft on a ten year lease with a break at year five at £50,000 p.a. The store
has experienced exceptionally strong trade since opening.
Weston Favell
Plans to refurbish the recently acquired centre on a phased basis are being put in place. A modest capital investment is being committed to refresh the centre’s branding and appeal to customers and retailers has commenced and is anticipated to be completed over the next 12 months.
UK Retail at a glance (£m) 28 February 2014 31 August 2013 28 February 2013
Market value 331.6 232.1 226.3
Occupancy (by lettable area) 95.4% 95.0% 95.9%
Annualised gross rental income 26.5 19.6 20.5
ERV 28.9 21.4 20.9
Footfall %change (yoy) (2.0%) (3.8%) (2.6%)
Net initial yield 6.9% 7.1% 7.5%
Lettable area 175,577 m2 147,127 m
2 148,788 m
2
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RI PLC RNS HY2014
Notes:
1. Prior period figures have been re-stated to reflect 100% ownership for comparison on a like-for-like basis
Strategy and outlook
Following the restructuring of the portfolio, the Group now owns 100% of all seven of its UK shopping centres which has
simplified the ownership structure.
Investment remains focused on efficient capital expenditure to support leasing and asset management plans by making
the Group’s centres more attractive to retailers and their customers.
Hotels
Market
The London hotel market has witnessed continued strength following a strong performance in the second half of 2013. An
improvement in economic indicators and sentiment is being reflected in both trading activity and the investment market.
The investment market has been dominated by bank-led sales and liquidity has improved to the highest level since 2007.
An increase in regional investment activity is a further indication of renewed investor confidence with regional transactions
comprising up to 43% of total activity.
Performance
Underlying trading across the Company’s portfolio of London limited service hotels has performed well ahead of operating
budgets. The majority of the hotels continue to achieve relative share growth in their markets with Brentford Lock and
Earls Court leading the way.
Average underlying occupancy across the portfolio was 78.7% for the six month period to 28 February 2014 (28 February
2013: 79.3%) however RevPars grew by 12.1% on average compared to the same six month period last year.
The value of the portfolio increased 3.6% to £155.7 million. Following the anticipated completion of the additional rooms at
Southwark, the portfolio value is expected to increase to approximately £168.0 million.
Investment and asset management
The 48 bedroom extension at the Southwark Holiday Inn Express is due to open in May 2014. Trading at the hotel remains
ahead of expectations and the additional rooms should be easily absorbed by the market, which will support increased
market share in an area of London that is undergoing significant redevelopment.
The remaining 40% of the Holiday Inn Express at Earls Court was acquired post period end for a consideration of £6.3
million reflecting a net initial yield of 7.0%. Earl’s Court has delivered trading figures ahead of expectations and the
proposed large scale redevelopment of the Earls Court and Olympia Exhibition Centre is anticipated to provide continued
strong demand to the hotel during the development phase.
Strategy and outlook
The Company has targeted growth in its portfolio through the development of additional rooms and the acquisition of
minority interests. This is seen as an effective way of increasing exposure to assets that are expected to outperform over
the medium-term.
Despite increases in supply, PWC is forecasting ongoing strong demand in London to drive RevPar growth of 3.8% and
5.2% in 2014 and 2015 respectively. RevPar growth is expected to be supported by growth in average daily room rates as
occupancy is already high with London hotel rooms typically full from mid-week business trade.
Current evidence of strong trading together with expectations of further growth make for encouraging prospects for our
portfolio. Furthermore we believe with London’s consistent ranking, at or near the top of European cities hotel market,
supports the Group’s narrow investment focus on the London limited service hotel sector.
Redefine BDL Hotel Group Limited (“RBDL”)
The Group’s 33% share in RBDL is shown at its initial acquisition cost of £7.26 million and has produced earnings of
£0.18 million. RBDL currently has 56 management contracts making it the largest independent hotel operator in the
UK. RBDL signed a new agreement with Holiday Inn Express Cheltenham in February 2014.
Europe
Market
Risk aversion to the Eurozone appears to be diminishing with improving economic and financial data. It also seems likely
that monetary policy will remain accommodative for the foreseeable future, maintaining low interest rates and attracting
capital to real estate assets.
Investment activity in Germany continued to increase with total investment in 2013 exceeding €30.8 billion, an increase of
over 20% from 2012. A continued strong investment market is expected to see a narrowing in the yields between prime
and secondary assets, as has been experienced in the UK.
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RI PLC RNS HY2014
Performance
Occupancy remains high at 98.0% (31 August 2013: 98.6%). The small reduction in overall occupancy reflects progress
on asset management initiatives which require obtaining vacant possession by agreeing surrender or termination
agreements with certain tenants. Excluding the impact of units taken back and currently not available to let, occupancy
was 99.2%.
Footfall and turnover figures at the recently acquired Schloss Centre in Berlin and the Bahnhof Altona Centre in Hamburg
are showing stable or increasing trends. Primark continues to deliver exceptional footfall at the Schloss Centre with over
9.7 million visitors annually.
The value of the portfolio increased marginally in local currency terms, however a weaker Euro resulted in a 3.1% decline
in Sterling terms.
Investment and asset management
Solid progress has been made in respect of a number of asset management opportunities including those related to the
recently acquired shopping centres.
Bahnhof Altona, Hamburg
Leases in respect of 6,704 m2 of retail space have been extended for periods of between five and ten years. The lease
extensions provided an uplift in base rents of €0.8 million. In particular, Media Markt exercised their option to extend their
lease over 5,273 m2 on existing terms to 2020.
Schloss Centre, Berlin
The success of Primark at the Schloss Centre continues with strong footfall being reported during the period under review.
four new leases were signed in the period over a total of 206 m². Occupancy has increased marginally from 99.0% on
acquisition to 99.3% at 28 February 2014 following the letting of vacant units.
Current initiatives include improvements to the quality of the kiosks and commercialisation activities to develop longer term
secure income, and introducing retailers that will benefit from the high levels of footfall generated by the centre and its
integrated transport links.
Strategy and outlook
Property values outside of prime institutional assets in major centres such as Frankfurt and Berlin have not seen the rapid
recovery in values experienced in the UK. Although asset selection remains critical and investment demand and
competition have increased, opportunities to acquire good quality assets producing relatively high income yields remain.
Combined with an exceptionally low interest rate environment and a competitive German lending market, current market
conditions provide strong opportunities to acquire earnings accretive investments backed by good quality assets.
Investment will remain opportunistic, but focused on larger assets in established local investment markets. Rationalisation
of the existing portfolio will continue with the sale of smaller and non-core assets.
Cromwell
The Group’s investment in Cromwell remains a significant part of the overall investment portfolio. The Company has
however taken the opportunity to further reduce its shareholding in order to recycle capital into new and higher return
opportunities. As at 28 February 2014, the market value of the Company’s shareholding was £120.0 million and reflected
11.14% of the Group’s combined gross property and investment portfolio.
Shareholding
The Group’s shareholding at 28 February 2014 was 13.17% (31 August 2013: 13.72%) following the sale of 8.46 million
securities in December 2013 for AUD 0.96 per security, at an exchange rate of GBP1.00:AUD1.81, netting proceeds of
£4.5 million.
Valuation
The requirement to report the value of the Group’s shareholding at market value has led to some volatility; both as a result
of security price fluctuations and movements in exchange rates. Cromwell’s share price closed at AUD 0.99 on 28
February 2014 (31 August 2013: AUD 1.025) whilst the AUD: GBP exchange rate declined 7.3% during the period. The
combined impact resulted in a 10% like-for-like market value decline of £14.5 million. However, as at 28 April 2014, the
Australian Dollar had strengthened 3.1% from the period end date.
Operating and financial results
Cromwell produced a strong set of operating and financial results for the first six months of its financial year to 31
December 2013. Highlights included:
‒ Half-year profit from operations up 59% over the same period in 2013 to AUD 73.2 million
‒ Sale of six non-core assets for AUD 253 million and the acquisition of Northpoint Tower
‒ Increase in external assets under management to AUD 1.2 billion with fund management earnings up 285%
‒ Gearing reduced to 43% with debt refinance well advanced
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‒ Full year guidance of at least 8.4 cps earnings and distribution guidance increased to 7.625 cps.
For further information please visit www.cromwell.com.au
Portfolio Summary
Portfolio overview by business segment
Business segments – market values
Properties
(No.)
Lettable area (m
2)
Market value
(£’million)
Segmental split by
value (%)
Net initial yield (%)
UK Commercial 69 117,614 136.6 14.3% 8.4%
UK Retail 7 175,577 331.6 34.6% 6.9%
Hotels 7 26,744 155.7 16.3% 6.7%
Europe 23 117,320 262.4 27.4% 6.3%
Total (excl. non-core portfolio) 106 437,255 886.2 92.6% 6.9%
Non-core portfolio 25 81,087 70.9 7.4% 13.2%
Total 131 518,342 957.2 100.0% 7.4%
Notes:
1. Figures reflect the Group’s share of joint ventures. 2. The table excludes the Group’s interest in Cromwell which had a market value of £120.0 million at 28 February 2014. 3. The non-core portfolio includes the Delta portfolio, the Justice Centre in the Hague and the Ciref German/Berlin portfolio.
Business segments – gross rental income
Annualised gross rental
income (£’million)
Average rent per
(m2)
Weighted average
unexpired lease term
(years)
Occupancy by lettable
area (%)
Indexation and fixed increases
(%)
UK Commercial 12.1 102.8 7.7 98.4% 38.2%
UK Retail 26.5 150.7 10.1 95.4% 19.7%
Hotels 11.1 415.0 11.8 100.0% 0.0%
Europe 17.4 148.4 6.8 98.0% 98.4%
Total (excl. non-core portfolio) 67.1 153.4 9.1 97.2% 45.0%
Non-core portfolio 9.7 119.8 4.1 99.2% 75.6%
Total 76.8 148.1 8.5 97.5% 47.7%
Notes:
1. Figures reflect the Group’s share of joint ventures. 2. The table excludes the Group’s interest in Cromwell which had a market value of £120.0 million at 28 February 2014. 3. The non-core portfolio includes the Delta portfolio, the Justice Centre in the Hague and the Ciref German/Berlin portfolio.
Business segments - valuation movement since 31 August 2013
Proportion of portfolio
by value (%)
Market value 28 February
2014 (£’million)
Valuation movement six months ended
28 February 2014
(%)
UK Commercial 14.3% 136.6 3.6%
UK Retail 25.5% 244.5 5.3%
Hotels 16.3% 155.7 3.6%
Europe1 27.4% 262.4 (3.1%)
Total like-for-like portfolio 83.5% 799.2 1.8%
Acquisitions 9.1% 87.1 3.7%
Total (excl. non-core portfolio) 92.6% 886.3 2.0%
Non-core portfolio3 7.4% 70.9 (7.6%)
Total (incl. non-core assets) 100.0% 957.2 1.2%
Notes:
1. Includes the effect of foreign exchange movement during the period. The Euro declined 3.3% against Sterling. 2. Figures reflect the Group’s share of joint ventures. 3. The non-core portfolio includes the Delta portfolio, the Justice Centre in the Hague and the Ciref German/Berlin portfolio.
1. Figures reflect the Group’s share of joint ventures. 2. The table excludes the Group’s interest in Cromwell which had a market value of £120.0 million at 28 February 2014.
Financial Review
Overview
Profit after tax, excluding the effect of the management internalisation, increased by £7.1 million against the same six
month period last year. The consideration of £22.8 million related to the cancellation of the investment advisory agreement
as well as the £2.1 million of goodwill on the acquisition of RIFM were fully written off in the period. The property valuation
uplift of £20.1 million was offset by the unrealised Cromwell fair value decline of £14.5 million.
Basic earnings per share, excluding the effect of the management internalisation, were 2.18 pence compared with 1.91
pence for the six months ended 28 February 2013. Earnings available for distribution were £17.9 million, an increase of
£3.5 million from the comparable period.
Adjusted NAV per share was marginally down to 38.14 pence (31 August 2013: 38.66 pence). The cost of the
management internalisation was fully written off in the period which had an impact of 1.96 pence per share. Adjusted NAV
per share, excluding the effect of the management internalisation would have been 40.10 pence.
Earnings available for distribution and dividend
Earnings available for distribution increased 24.3% to £17.9 million, mainly due to higher distributable rental income (as
set out in Note 25 of the Interim Financial Statements). Distributable rental income was up £20.5 million due to the
acquisition of the CMC portfolio, Weston Favell and the restructuring of the Aviva shopping centre portfolio resulting in
Grand Arcade, Wigan and West Orchards, Coventry becoming 100% owned. The higher rental income was partly offset
by higher interest costs.
Distributable earnings per share increased 5.1% to 1.55 pence (28 February 2013: 1.475 pence) despite an additional
302.4 million shares in issue.
The Company’s policy is to distribute the majority of its earnings available for distribution in the form of dividends. The
earnings available for distribution excludes any capital items and is the figure used by the Board as its measure of
underlying performance. The earnings also exclude any earnings from the Gamma portfolio and includes only the Group’s
share of the net income from the Delta portfolio.
The Board declared an interim dividend of 1.50 pence per share on 29 April 2014, for the six month period ended 28
February 2014. The distribution reflects an annualised yield of 7.9% on the Adjusted NAV per share at 28 February 2014.
The Company proposes offering shareholders the option of receiving ordinary shares in lieu of the cash dividend under a
Scrip Dividend Scheme. An announcement containing details of the tax components of the dividend, the timetable and the
Scrip Dividend Scheme will be announced separately today. A reconciliation of profit attributable to equity holders to
headline earnings and earnings available for distribution has been provided in Note 25 to the interim financial statements.
Net assets
EPRA NAV per share has increased by 5.4% to 31.62 pence (31 August 2013: 30.00 pence). EPRA NAV is used as a
reporting measure to better reflect underlying net asset value attributable to shareholders by removing the cumulative fair
value movements of interest rate derivatives and deferred tax.
The property valuation uplift of £20.1 million (1.58 pence per share) was offset by the unrealised Cromwell fair value
decline of £14.5 million (1.14 pence per share) as well as a £1.9 million (0.15 pence per share) foreign exchange
translation movement. Share placements during the period added 2.04 pence per share owing to placements at a
premium to net asset value.
The EPRA NAV as at 28 February 2014 includes items which, in the opinion of the Board, should be adjusted for in order
to better reflect the underlying value of the Group. An Adjusted NAV per share has therefore been calculated as follows:
Page 11 of 51
RI PLC RNS HY2014
Note
28 February
2014
Pence per share
28 February
2013
Pence per share
31 August
2013
Pence per share
Fully diluted IFRS NAV per share 31.02 26.69 29.05
Adjusted for derivatives and deferred tax 0.60 1.67 0.95
EPRA NAV per share 1 31.62 28.36 30.00
Gamma residual debt 2 3.49 4.82 4.21
Delta negative equity 3 1.82 2.52 2.36
Other negative equity/provision 4 1.21 - 1.66
Cromwell fair value write-up - 4.59 -
Performance fee - - 0.43
Adjusted NAV per share 38.14 40.29 38.66
The cancellation fee and goodwill amounts of £22.8 million and £2.1 million respectively, for the internalisation of the
investment advisor, were fully written off in the period. This had the effect of reducing EPRA NAV per share and Adjusted
NAV per share by 1.96 pence. There is no adjustment for this as it has a permanent impact despite the expectation that
the management internalisation will have a long-term positive effect on earnings and the performance of the Group.
Without the impact of the management internalisation, Adjusted NAV per share would have been 40.10 pence per share.
Notes:
1. The EPRA publishes best practice recommendations for Europe’s Stock Exchange listed real estate sector. In order to enhance
comparability and transparency the Company has adopted the EPRA net asset value measure within its reporting. The EPRA net
asset value (“NAV”) presented removes the cumulative fair value movements of interest rate derivatives and deferred tax.
2. Notwithstanding the appointment of a receiver to the assets held in the Gamma portfolio, the residual non-recourse debt associated
with the portfolio of £41.9 million and accrued interest of £2.5 million will remain on the Group’s statement of financial position until
such time as it can be legally extinguished or the Company loses control of Wichford Gamma Limited.
3. Following the successful completion of the Delta restructuring announced on 15 October 2012, the negative net asset value position
of 1.82 pence per share is expected to reverse at the end of the loan term.
4. A liability of £5.6 million (0.44 pence per share) is currently held relating to the facility provided to the Grand Arcade, Wigan. As part of
the Aviva restructure completed in December 2013, Aviva retained the right to participate in 50% of the income and capital growth
generated by Grand Arcade. This right has been recognised at fair value on 28 February 2014 although is not deemed to have an
immediate impact on NAV and has therefore been adjusted for. In addition, as a result of the non-recourse nature of the debt relating
to the Justice Centre in the Hague, Netherlands and the Ciref Berlin portfolio, the negative net asset value positions of 0.67 pence per
share and 0.10 pence per share respectively have been written back.
Net debt and capital management
The Company has made substantial progress in improving its capital structure. The Group’s pro-forma LTV ratio reduced
to 53.0% (31 August 2013: 56.8%) as a result of actively managing the balance sheet through the successful issuance of
new equity, the refinancing of existing facilities at lower LTVs and selective sales of, and repayment of debt associated
with, non-core assets. The “pro-forma” ratio shown below excludes the debt against the Delta portfolio, the residual
Gamma debt and other legacy non-recourse loans.
The Company has taken the decision to extend or refinance the majority of its facilities maturing in 2016. Historically low
interest rates combined with a competitive lending market are providing an opportunity to extend the Group’s debt maturity
profile at attractive rates. Of the £194.1 million maturing in 2016, £144.7 million is at advanced stages of negotiation. It is
anticipated that, on average, existing facilities can be extended or refinanced at comparable all-in rates.
The Group’s existing weighted average debt maturity stands at 7.24 years and, subject to the successful extension of
various 2016 maturities, is anticipated to be extended to approximately 8.55 years before the financial year end. £160.4
million of debt was refinanced during the period.
The nominal value of the Group’s total debt facilities at 28 February 2014 was £795.6 million. The Group’s economic share of debt (including its share of debt in subsidiaries and jointly controlled entities), was £698.4 million.
Key financing statistics pro-forma
(1)
£’000
28 February 2014
£’000
28 February 2013
£’000
31 August 2013
£’000
Total investment portfolio 926,715 1,000,239 744,319 1,111,702
Gross debt 576,467 680,952 438,821 815,932
Cash and short-term deposits (85,217) (85,217) (57,879) (33,657)
Net debt 491,250 595,735 380,942 782,275
Weighted average debt maturity 8.32 years 7.24 years 8.18 years 4.67 years
Weighted average interest rate 4.50% 4.22% 4.25% 3.94%
% of debt at fixed/capped rates 96.8% 97.3% 99.9% 99.9%
Loan-to-value 53.0% 59.8% 51.2% 60.4%
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Note:
1. Pro-forma ratios exclude debt against the Delta portfolio, the residual Gamma debt and other smaller legacy non-recourse loans.
£64.8 million of the Mezzanine Capital loans were repaid with effect from 1 December 2013 with the remaining loans to be repaid before the financial year end.
Equity
The Group’s total equity attributable to equity holders increased by £94.2 million during the six months ended 28 February
2014. The substantial increase in equity was due to the 79.0 million shares issued to fund the acquisition of the investment
advisor, the placement of 155.1 million new ordinary shares, the 36.6 million shares issued to repay the Aviva convertible
loan instrument, as well as the 31.7 million shares issued to the vendors of the Schloss Strassen and Altona Centres in
Germany. Further details of these issues have been disclosed in Notes 18 and 19 to the interim financial statements.
Taxation
The Company converted to a UK-REIT on 4 December 2013. The Group continues to pay tax on non-UK property
earnings as well as overseas investment earnings under the UK-REIT rules. Following the management internalisation,
taxation also includes all employment taxes for the Group.
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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 28 February 2014 which comprise the condensed consolidated income statement, 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 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 Conduct Authority (“the FCA”). 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 FCA.
As disclosed in Note 2, the annual financial statements of the Group are prepared in accordance with IFRS.
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.
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 28 February 2014 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting and the DTR of the UK FCA.
Niamh Marshall Senior Statutory Auditor For and on behalf of KPMG Chartered Accountants Dublin, Ireland 29 April 2014
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RI PLC RNS HY2014
CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 28 February 2014
Notes
Reviewed 6 Months
ended 28 Feb 2014
£'000
Reviewed 6 Months
ended 28 Feb 2013
£'000
Audited Year ended
31 August 2013 £'000
Revenue
Gross rental income 30,571 29,421 51,407
Investment income 5,085 - 2,511
Other income 214 1,012 2,129
Total revenue 35,870 30,433 56,047
Expenses
Administrative and other operating expenses 4 (2,757) (721) (1,601)
Investment adviser and professional fees (6,001) (3,159) (14,067)
Net (losses)/gains from financial assets and liabilities 5 (6,007) 3,081 44,944
Gain on sale of subsidiaries - 16,491 17,285
Equity accounted profit 14,15 1,712 5,082 11,106 Net fair value gains / (losses) on investment property and assets held for sale 10,13 20,145 (15,680) (20,721)
Impairment of goodwill 6 (2,069) - -
Write down and amortisation of intangible assets 16 (22,847) - -
Profit from operations 16,394 33,652 89,548
Interest income 7 4,911 6,125 12,106
Interest expense 8 (21,666) (20,174) (37,960)
Share based payments – finance cost - (387) (803)
Foreign exchange gain / (loss) 2,396 (1,137) 4,352
Profit before taxation 2,035 18,079 67,243
Taxation 9 (348) (2,535) (6,179)
Profit after taxation 1,687 15,544 61,064
(Loss)/profit attributable to:
Equity holders of the parent (897) 16,918 61,521
Non-controlling interest 2,584 (1,374) (457)
1,687 15,544 61,064
Basic (loss)/earnings per share (pence) 25 (0.08) 1.91 6.66
Diluted (loss)/earnings per share (pence) 25 (0.08) 1.85 6.23
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 28 February 2014
Reviewed 6 Months
ended 28 Feb 2014
Total £'000
Reviewed 6 Months
ended 28 Feb 2013
Total £'000
Audited Year ended
31 August 2013 Total £'000
Profit for the period 1,687 15,544 61,064
Other comprehensive income
Items that are or may be reclassified to profit or loss
Transfer of FCTR to income statement on disposal of foreign operation - 298 (10,334) Foreign currency translation on foreign operations – subsidiaries (1,932) (98) (316) Foreign currency translation on foreign operations - associates and joint ventures 14,15 - 5,338 6,846
Total comprehensive income for the period (245) 21,082 57,260
Total comprehensive income attributable to:
Equity holders of the parent (2,818) 22,507 57,775
Page 15 of 51
RI PLC RNS HY2014
Reviewed 6 Months
ended 28 Feb 2014
Total £'000
Reviewed 6 Months
ended 28 Feb 2013
Total £'000
Audited Year ended
31 August 2013 Total £'000
Non-controlling interest 2,573 (1,425) (515)
(245) 21,082 57,260
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 28 February 2014
Notes
Reviewed 28 February
2014 Total £'000
Reviewed 28 February
2013 Total £'000
Audited 31 August
2013 Total £'000
Assets
Non-current assets
Investment property 10 842,184 487,349 643,892
Long-term receivables 11 38,629 103,559 103,928
Investments at fair value 12 120,057 99 139,092
Investments in joint ventures 14 15,192 14,068 15,150
Investment in associates 15 7,437 158,208 -
Intangible assets 16 1,792 - -
Property, plant and equipment 211 - -
Total non-current assets 1,025,502 763,283 902,062
(314) (5,025) (5,025) (Decrease) / increase in contribution from non-controlling shareholders
(106) 6,547 6,547
Net cash generated from financing activities
68,154 100,027 69,736
Net increase in cash
36,176 36,505 24,456
Effect of exchange rate fluctuations on cash held
3,091 (219) (561)
Opening cash
29,598 5,703 5,703
Net cash at end of period 17 68,865 41,989 29,598
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 28 February 2014
1. GENERAL INFORMATION
Redefine International P.L.C was incorporated on 28 June 2004 under the laws of the Isle of Man.
Following approval from the South African Reserve Bank in July 2013, the Company concluded an inward listing on the JSE. The Company now holds a primary listing on the Main Market of the LSE and a secondary listing on the Main Board of the JSE.
On 4 December 2013 the Company converted to a UK Real Estate Investment Trust and moved its tax residence from the Isle of Man to the UK.
New articles of association were adopted by the Company in the period and it converted to an Isle of Man Companies Act 2006 company with effect from 3 December 2013.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 BASIS OF PREPARATION
Statement of compliance
The condensed consolidated interim financial statements (hereafter ‘interim financial statements’) for the half-year ended 28 February 2014, were prepared in accordance with IAS 34 “Interim Financial Reporting” as issued by the International Accounting Standards Board (“IASB”).
Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual consolidated financial statements as at and for the year ended 31 August 2013.
The financial information contained in these Interim financial statements does not constitute a complete set of financial statements (including all comparative figures and all required notes) and does not include all of the information required for full annual financial statements prepared in accordance with International Financial Reporting Standards. The Interim financial statements should therefore be read in conjunction with the consolidated financial statements as at and for the year ended 31 August 2013 which are available at the Group’s
website www.redefineinternational.com .
The preparation of the condensed consolidated interim 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 Group’s accounting policies and the key sources of estimation uncertainty are discussed further in Note 2.2.
Significant accounting policies
The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its audited consolidated financial statements as at and for the year ended 31 August 2013, except for the new standards adopted during the period and the additional policies adopted due to changes in the business during the period.
The following standards, amendments and interpretations have been adopted during the half year to 28 February 2014:
‒ IAS 1 (amended) – Presentation of Items of Other Comprehensive Income; ‒ IFRS 10 Consolidated Financial Statements; ‒ IFRS 11 Joint Arrangements; ‒ IFRS 12 Disclosure of Interests in Other Entities; ‒ IAS 28 Investments in Associates ‒ IAS 19 (revised) Employee Benefits ‒ IFRS 7 (amended) – Offsetting Financial Assets and Financial Liabilities; and ‒ IFRS 13 Fair Value Measurement.
These had no material impact on the financial statements, but the adoption of IFRS 13 Fair Value Measurement has resulted in additional disclosure.
RIFM was acquired on 2 December 2013 thereby internalising the management function of the Company. This resulted in the implementation of new service contracts with employees.
Arising from the adoption of the IFRSs set out above and the changes in the business in the period, the following are the revised accounting policies applicable in the period:
Investments in subsidiaries
A subsidiary undertaking is an investee controlled by the Group. The Group controls an investee when it has power over the investee, is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Subsidiaries are consolidated in the Group’s financial statements from the date on which control commences until the date that control ceases.
The Group reassesses whether it controls a subsidiary when facts and circumstances indicate that there are changes to one or more elements of control.
Loss of control
If the Group loses control of a subsidiary, the Group: a) derecognises the assets (including any goodwill) and liabilities of the former subsidiary at their carrying
amounts at the date control is lost; b) derecognises the carrying amount of any non-controlling interests in the former subsidiary at the date control
is lost (including any attributable amounts in other comprehensive income); c) recognises the fair value of any consideration received and any distribution of shares of the subsidiary; d) reclassifies to profit or loss, or transfers directly to retained earnings, amounts recognised in OCI in relation to
the subsidiary on the same basis as would be required if the parent had directly disposed of the related assets or liabilities;
e) recognises any investment retained in the former subsidiary at its fair value at the date when control is lost; f) recognises any resulting difference of the above items as a gain or loss in the income statement.
The Group subsequently accounts for any investment retained in the former subsidiary in accordance with IAS 39 Financial Instruments, or when appropriate, IAS 28 Investments in Associates and Joint Ventures.
Business combinations
The Group accounts for the acquisition of businesses using the acquisition method. Under the acquisition method, the consideration transferred in a business combination is measured at fair value, which is calculated as the sum of:
‒ the acquisition date fair value of assets transferred by the Group;
‒ liabilities incurred by the Group to the former owners of the acquiree; and
‒ the equity interests issued by the Group in exchange for control of the acquiree.
Acquisition related costs are recognised in the income statement as incurred.
Goodwill is measured as the excess of the sum of:
‒ the fair value of the consideration transferred;
‒ the amount of any non-controlling interests in the acquiree; and
‒ the fair value of the acquirer’s previously held equity interest in the acquiree, if any; less
‒ the net of the acquisition date fair value of the identifiable assets acquired and liabilities assumed.
For each business combination, the Group recognises any non-controlling interest in the acquiree either at fair value; or at their proportionate share of the acquiree’s identifiable net assets.
For changes in the Group’s interest in a subsidiary that do not result in a loss of control, the Group adjusts the carrying amounts of the controlling and non-controlling interests to reflect the changes in their relative interests in the subsidiary. The difference between the change in value of the non-controlling interest and the fair value of the consideration paid or received is recognised directly in equity and attributed to the equity holders of the parent.
Consistent accounting policies are applied throughout the Group for the purposes of consolidation.
Joint arrangements Under IFRS 11, the Group classifies its interests in joint arrangements as either joint operations or joint ventures depending on the Group’s rights to the assets and obligations for the liabilities of the arrangements. When making this assessment, the Group considers the structure of the arrangements, the legal form of any separate vehicles,
Page 21 of 51
RI PLC RNS HY2014
the contractual terms of the arrangements and other facts and circumstances. Previously, the structure of the arrangement was the sole focus of classification.
The Group’s current joint arrangements continue to be classified as joint ventures and continue to be accounted for using the equity method.
Fair Value measurement
IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such measurements are required or permitted by other IFRSs. In particular, it unifies the definition of fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date. It also replaces and expands the disclosure requirements about fair value measurements in other IFRSs, including IFRS 7 Financial Instruments: Disclosures.
In accordance with the transitional provisions of IFRS 13, the Group has applied the new fair value measurement guidance prospectively, and has not provided any comparative information for new disclosures. Notwithstanding the above, the change had no significant impact on the measurements of the Group’s assets and liabilities.
Presentation of items of other comprehensive income
As a result of the amendments to IAS 1, the Group has modified the presentation of items of other comprehensive income in its condensed consolidated statement of comprehensive income, to present separately items that would be reclassified to profit or loss in the future from those that would never be. Comparative information has also been re-presented accordingly.
Employee benefits Employee benefits, such as salaries and other benefits, are accounted for on an accruals basis over the period during which employees have provided services. Bonuses are recognised to the extent that the Group has a legal or constructive obligation to its employees that can be measured reliably.
Share based payment arrangements with employees
Share based incentives are provided to all employees under the Group’s Long-Term Performance Share Plan (“PSP”) for Executive Directors and the Restricted Stock Plan for employees. The Group recognises a compensation cost in respect of these schemes that is based on the fair value of the awards, measured using the Monte Carlo valuation methodology. For equity-settled schemes, the fair value is determined at the date of grant and is not subsequently re-measured unless the conditions on which the award was granted are modified. For cash-settled schemes, the fair value is determined at the date of grant and is re-measured at each reporting date until the liability is settled. Generally, the compensation cost is recognised on a straight line basis over the vesting period. Adjustments are made to reflect expected and actual forfeitures during the vesting period due to the failure to satisfy service conditions or non-market performance conditions.
Property plant and equipment
Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Group. Depreciation is calculated to write off the cost of items less their estimated residual values using the straight line method over their estimated useful lives and is generally recognised in profit or loss. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Property plant and equipment is depreciated over a period of between 2 to 5 years.
2.2 JUDGEMENTS AND ESTIMATES
The preparation of the condensed consolidated interim financial statements 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 reported during the period. 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 discussed in more detail below.
2.2.1 FINANCING AND THE GOING CONCERN BASIS OF ACCOUNTING
Application of the Going Concern Basis of Accounting
These condensed consolidated interim financial statements have been prepared on a going concern basis as 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. Completion of the restructuring of the Aviva Facility in the period has improved the going concern expectation of the Group.
The Board has also had regard to the funds raised as part of the share placements which completed in September 2013 and February 2014 and saw the Company raise gross proceeds of £16.8 million and £54.7 million respectively. This additional capital has allowed the Group to further reduce its leverage.
The Board has also considered the working capital forecast for the Group and believes that based on a detailed analysis of, cashflow projections, the level of capital raised in the period and the completion of loan refinancing, that the Group has adequate resources to continue in operation for the foreseeable future.
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2.2.2 ACCOUNTING FOR GAMMA
Following the appointment of a Fixed Charge Receiver (the “Receiver”) to the property subsidiaries which secure the Gamma facility in January 2013, the Board considered whether the Group should continue to consolidate the underlying property companies.
Under IFRS 10 the requirement for consolidation is based on control, which is power over the investee, exposure, or rights, to variable returns from involvement with the investee and the ability to affect those returns through power over the investee.
As a result of the powers and the responsibilities of the Receiver as set out under UK law, the Directors believe that the Group has lost control of the underlying property companies. It no longer has the power to govern their operating activities or dispose of any of the underlying assets. It is also not in a position to exercise any power to generate variability of returns from the underlying subsidiaries’ activities. Redefine International has therefore ceased to consolidate the underlying property companies from the date control was lost i.e the date the Receiver was appointed.
Wichford Gamma Limited is the primary obligor for the debt although it is recourse only to the subsidiary companies on which it is secured. The Group is deemed to continue to control this company as a receiver has not been appointed to it and at 28 February 2014 Redefine International continues to have the ability to govern the activities of Wichford Gamma Limited.
The Directors have considered the impact of the appointment of the Receiver to the underlying property subsidiaries on the carrying value of the loan facility in the books of Wichford Gamma Limited.
IAS 39 does not provide specific guidance on whether or not the appointment by the lender of a receiver over the secured assets constitutes partial settlement of the debt. In the opinion of the Directors, the receiver is acting on behalf of the lender and consequently they consider that the transfer of the secured assets to the Receiver is in substance the transfer of those assets to the lender.
As a result the loan facility recorded in the books of Wichford Gamma Limited, and hence consolidated by Redefine International, has been reduced by the fair value of the net assets of the property subsidiaries at the date the Receiver was appointed to those companies. This is a key judgement.
The Group will continue to recognise the residual debt until such time as that element of the debt is legally extinguished or legally released by the Security Trustee or it can be evidenced that Redefine International no longer has the power to control Wichford Gamma Limited.
The Company is currently seeking a legal extinguishment of the debt from the Security Trustee following the sale by the Receiver of all of the properties securing the Gamma facility.
2.2.3 INVESTMENT PROPERTY VALUATION
The Group uses the valuations performed by its independent valuers in accordance with IFRS 13 as the fair value of its investment properties. The valuations are 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.
2.2.4 CLASSIFICATION OF INVESTMENT PROPERTY FOR HOTELS
The hotel properties are held for capital appreciation and to earn rental income. The properties have been let to Redefine Hotel Management Limited (“RHML”) and Redefine Earls Court Management Limited (“RECML”) for a fixed rent which is subject to annual review. The annual review takes into account the forecast EBITDA for the hotel portfolio when setting the revised rental level. RHML and RECML operate the hotel business and are exposed to the fluctuations in the underlying trading performance of the hotels. They are responsible for the day to day upkeep of the properties and retain the key decision making responsibility for the business.
As part of the acquisition of RIFM in December 2013, Redefine International acquired a 33% shareholding in Redefine BDL Hotel Group Ltd which in turn owns RHML and RECML. Having considered the guidance in IFRS 10, the respective rights of each of the shareholders in Redefine BDL Hotel Group Ltd and the size of the Company’s shareholding compared with other shareholders management have determined that Redefine International does not control Redefine BDL Hotel Group Ltd and hence does not control RHML or RECML.
Aside from the payment of rental income to Redefine International which resets annually and the Group’s shareholding in Redefine BDL Hotel Group Ltd, Redefine International is not involved with the hotel management business and there are limited transactions between it and RHML and RECML. As a result, Redefine International classifies the hotel properties as investment properties in line with IAS 40.
2.2.5 FAIR VALUE OF RESTRUCTURED OR ACQUIRED LIABILITIES
New borrowings or borrowings which have been substantially modified leading to the recognition of a new liability at fair value. The determination of fair value involves the application of judgement and estimation.
The Group determines fair value by discounting cashflows associated with the liability at a market discount rate. The key judgement surrounds the determination of an appropriate market discount rate. Management determine the discount rate on a loan by loan basis having regard to the term, duration and security arrangements of the new liability and an estimation of the current rates charged in the market for similar instruments.
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This judgment is made more difficult given the bespoke nature of certain loans obtained by the Group. Any difference between the nominal value of the loan and the deemed fair value will be accreted through profit or loss over the term of the loan through the effective interest rate.
2.2.6 CLASSIFICATION OF THE GROUP’S INVESTMENT IN CROMWELL AT FAIR VALUE THROUGH PROFIT OR LOSS
The Group ceased to account for Cromwell as an associate in April 2013 from the date its shareholding fell below 20% as it was no longer deemed to have significant influence over the operations of Cromwell. The investment was designated at Fair Value through Profit or Loss on that date as it is managed on a fair value basis.
While there is a presumption that significant influence does not exist if the holding is less than 20% this may be refuted if an ability, or lack of ability, to exercise significant influence is clearly demonstrated.
While the Company does not have a right to appoint a director it does currently have board representation. As such this increases the judgement involved in determining whether significant influence over the operations of Cromwell exists.
The Board has considered whether significant influence continues to exist notwithstanding the fact that the shareholding is below 20%. Having considered all of the facts and circumstances the Directors do not believe that the Company has significant influence over the operations of Cromwell.
In making this determination the Board have considered the size of the Company’s shareholding, the size of the Cromwell board, the nature of the directorship currently held on the Cromwell Board (independent Non-executive Director), the fact that the Company does not have a right to appoint a director and the fact that in practice the Company is unable to significantly influence the decisions and business focus of the Cromwell group. The Directors believe that significant influence over Cromwell does not exist and that the designation of the Company’s residual investment at Fair Value through Profit or Loss is appropriate.
2.2.7 PROPERTY ACQUISITIONS
Where properties are acquired through the acquisition of corporate interests, the Directors have regard to the substance of the assets and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business.
Where such acquisitions are not judged to be an acquisition of a business the transactions are accounted for as if the Group had acquired the underlying property directly. Accordingly, no goodwill arises, rather the cost of the corporate entity is allocated between the identifiable assets and liabilities of the entity based on their relative fair values at the acquisition date.
Otherwise corporate acquisitions are accounted for as business combinations.
3. SEGMENTAL 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 Commercial (formerly UK Stable Income):
Consists predominantly of UK offices, but includes petrol filling stations, Kwik-Fit centres, retail and residential units.
UK Retail: Consists of the Group’s major UK shopping centres and retail parks.
Europe: Consists of the Group’s properties in Continental Europe, located in Germany, Switzerland and the Netherlands.
Hotels: Consists of the Group’s hotel properties. The hotels are let to RHML and RECML on a fixed rental basis with annual reviews.
Cromwell: Relates to the Group’s investment in the Cromwell Property Group, Australia.
RBDL: The Group’s 33% shareholding in Redefine BDL Hotel Group Limited (“RBDL”), the UK’s largest independent hotel management company.
Relevant revenue, assets and capital expenditure information is set out below:
i) Information about reportable segments
UK Commer
cial £'000
UK Retail £'000
Europe £'000
Hotels £'000
Cromwell £'000
RBDL £’000
Total £'000
For the six months ended 28 February 2014
Rental income 8,702 8,517 7,952 5,400 - - 30,571
Investment Income - - - - 5,085 - 5,085 Net fair value gains/( losses) on investment property and assets held for sale 8,879 10,266 (4,400) 5,400 - - 20,145 Net gain/(loss) from financial assets and liabilities 99 7,700 112 533 (14,451) - (6,007)
Borrowings – senior debt (177,646) (204,247) (177,780) (84,975) (32,017) - (676,665) For the six months ended 28 February 2013 -
Rental income 15,681 4,519 4,149 5,072 - - 29,421 Net fair value (losses)/gains on investment property and assets held for sale (13,658) 844 (2,144) (722) - - (15,680) Net gain/(loss) from financial assets and liabilities 1,798 (48) 700 387 244 - 3,081
Gain on sale of subsidiaries 71 - 16,420 - - - 16,491
Investment in associates - - - - 158,208 - 158,208
Long term receivables 17,208 49,790 - 36,561 - - 103,559
Borrowings – senior debt (321,639) (73,072) (69,950) (86,831) (40,459) - (591,951) For the year ended 31 August 2013 -
Rental income 24,748 8,540 7,497 10,622 - - 51,407
Investment income - - - - 2,511 - 2,511 Net fair value (losses)/gains on investment property and assets held for sale (15,217) 2,715 (7,597) (622) - - (20,721) Gains/(losses) from financial assets and liabilities 2,141 (279) 514 1,416 41,152 - 44,944
Gain on sale of subsidiaries 82 - 17,203 - - - 17,285
Loss on remeasurement of deferred consideration related to the CMC acquisition (613) - -
Financial assets carried at amortised cost
Gain on debt restructure (Note 29) 6,182 - -
Reversal of impairments 1,791
Impairment of loans and receivables - (18) (1,538)
Net (losses)/gains from financial assets and liabilities (6,007) 3,081 44,944
In the prior year the Group recognised a gain on loss of significant influence in Cromwell of £46.69 million which was comprised of a £9.97 million (net of fees paid of £0.53 million) gain on the sale of 86 million of the securities it held in Cromwell, a £26.09 million gain being the difference between the carrying value and fair value of the remaining Cromwell securities held on the date significant influence was lost and £10.63 million related to the recycle to the income statement of the foreign currency translation reserve.
During the period the Group disposed of 8,460,067 securities in Cromwell realising a gain of £0.12 million (refer Note 12).
The unrealised loss on equity investments reflects the fair value movement in the Group’s investment in Cromwell. The Cromwell security price decreased from 102.5 Australian cents per security at 31 August 2013 to 99.0 Australian cents per security at 28 February 2014. The AUD: GBP rate also declined from AUD1.738:1GBP at 31 August 2013 to AUD1.874:1GBP at 28 February 2014.
A loss of £0.61 million was incurred on the remeasurement of the deferred consideration arising on the purchase of the CMC Berlin asset which was acquired in August 2013. The £0.61 million represents the difference between the fair value of the consideration liability at 31 August 2013 and the fair value at the date of issuing the consideration shares.
6. IMPAIRMENT OF GOODWILL
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Opening balance - - -
Goodwill generated from business acquisitions (Note 27) 2,069
Write off of goodwill (2,069) - -
Closing balance - - -
Goodwill arose as a result of the acquisition of RIFM (refer Note 27). Subsequent to its recognition, an impairment assessment was carried out at which point a decision was taken, given an assessment as to its recoverable amount, to impair the goodwill to zero.
7. INTEREST INCOME
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Interest receivable from mezzanine financing 3,970 5,358 10,895
Interest income on bank deposits 25 767 267
Interest income on loans advanced to other parties 916 - 567
Interest income on loans to joint ventures - - 377
Total interest income 4,911 6,125 12,106
8. INTEREST EXPENSE
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Interest expense on secured bank loans (16,198) (13,773) (25,176)
Finance lease interest (350) (244) (426)
Interest expense on amounts due to related parties (Note 24) (314) - (70)
Interest expense on other financial liabilities (435) (300) (18)
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RI PLC RNS HY2014
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Interest expense on mezzanine financing (4,369) (5,857) (12,270)
Total interest expense (21,666) (20,174) (37,960)
Interest expense on secured bank loans for the period ended 28 February 2014 includes £1.3 million (28 February 2013: £14.82 million, 31 August 2013: £22.2 million) in finance costs due to the amortisation of the fair value adjustments on liabilities acquired or substantially modified leading to the recognition of the deemed new liability at fair value. The charge for the six month period to 28 February 2013 and year to 31 August 2013 related primarily to the amortisation of the fair value adjustment on the Gamma, Hague and Delta loan facilities which arose on the reverse acquisition of Wichford in August 2011.
Swap interest expense is included in interest expense.
Interest expense on other financial liabilities includes a charge of £0.3m (28 February 2013 and 31 August 2013: Nil) related to the profit share granted to Aviva within the Grand Arcade Wigan loan agreement.
9. TAXATION
a) Tax recognised in profit or loss:
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Current income tax
Income tax in respect of current year (727) (1,460) (3,228)
Withholding tax (488) (226) (397)
Deferred tax
Origination and reversal of temporary differences 867 (849) (2,554)
Total income tax expense (348) (2,535) (6,179)
No tax was recognised on equity or other comprehensive income during the period (2013: nil).
b) Recognised deferred tax liability and movement during the period:
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Opening balance 4,924 2,489 2,489
Deferred tax liability recognised on investment properties 10 253 115
Deferred tax liability recognised on associates - 477 2,320
Deferred tax asset recognised on investments at fair value (877) - -
Closing balance 4,057 3,219 4,924
c) Reconciliation
The tax for the period is lower than the standard rate of corporation tax in the UK of 23% (28 February 2013: 24%). The differences are explained below:
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Profit before tax 2,035 18,079 67,243
Profit before tax multiplied by rate of corporation tax in the UK of 23% (Prior periods: NRL rate of UK income tax of 20%) 468 3,616 13,449
Effect of:
- exempt property valuations (4,633) 3,136 4,144
- income not subject to UK income tax (3,293) (9,474) (5,531)
- gain from financial assets and liabilities 1,382 (616) (8,989)
Page 28 of 51
RI PLC RNS HY2014
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
- losses carried forward 1,375 4,216 1,193
- expenses not deductible for tax 4,561 1,431 609
- share-based payment – incentive fee - - 1,447
- withholding tax 488 226 397
Total tax charge for the year 348 2,535 6,179
Net deferred tax assets not recognised amounted to £13.8 million (28 February 2013: £46.03 million; 31 August 2013: £45.06 million).
From the reconciliation above, the effective tax rate of the Group was 17.1% (28 February 2013: 14.0%, 31
August 2013: 9.2%).
10. INVESTMENT PROPERTY
The cost of the consolidated investment properties at 28 February 2014 was £0.99 billion (28 February 2013:
£0.90 billion, 31 August 2013: £1.02 billion). The carrying amount of investment property 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 fair value of each of the properties for the year ended 31 August 2013 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 28 February 2014, the independent valuers performed a desktop review to update the 31 August 2013 valuations to reflect movements in the market and guidance in IFRS 13.
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 average yields ranging from 5.3% to 15.4% 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.
In accordance with 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 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 properties. Investment property comprises a number of commercial and retail properties that are leased to third parties. The hotel properties are held for capital appreciation and to earn rental income. The properties have been let to Redefine Hotel Management Limited (“RHML”) and Redefine Earls Court Management Limited (“RECML”) for a fixed rent which is subject to annual review. The annual rent review takes into account the forecast EBITDA for the hotel portfolio when setting the revised rental level.
As part of the acquisition of RIFM in December 2013, Redefine International acquired a 33% shareholding in Redefine BDL Hotel Group Ltd which in turn owns RHML and RECML. Having considered the guidance in IFRS 10, the respective rights of each of the shareholders in Redefine BDL Hotel Group Ltd and the size of the Company’s shareholding compared with other shareholders, management have determined that Redefine International does not control Redefine BDL Hotel Group Ltd and hence does not control RHML or RECML
RHML and RECML operate the hotel business and are exposed to the fluctuations in the underlying trading performance of the hotels. They are responsible for the day to day upkeep of the properties and retain the key decision making responsibility for the business.
Aside from the payment of rental income to Redefine International which resets annually and the Group’s shareholding in Redefine BDL Hotel Group Ltd, Redefine International is not involved with the hotel management business and there are limited transactions between it and RHML and RECML. As a result, Redefine International classifies the hotel properties as investment properties in line with IAS 40.
Property operating expenses in the consolidated income statement relate solely to income generating properties.
Page 29 of 51
RI PLC RNS HY2014
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Opening balance 643,892 631,278 631,278
Properties acquired during the period 88,514 27,000 27,000
Capitalised expenditure 1,509 2,798 7,187
Disposals during the period (23,119) (7,985) (7,985)
Disposals through the sale of property (23,119) (6,937) (7,250)
Disposals through sale of subsidiaries - (1,048) (735)
Impact of the loss of control of subsidiary property companies securing the Gamma facility - (158,040) (158,040)
Impact of acquisition of subsidiaries (Note 28) 118,597 - 158,330
Foreign exchange movement in foreign operations (7,454) 6,854 5,854
Net fair value gains/(losses) on investment property 20,245 (10,330) (13,406)
Reclassification to assets held-for sale (Note 13) - (4,226) (6,326)
Closing balance 842,184 487,349 643,892
Acquisitions
Earls Court Holiday Inn Express, London - 27,000 27,000
Weston Favell Shopping Centre, Northampton 88,514 - -
Properties acquired through the acquisition of subsidiaries 118,597 - 158,330
West Orchards Shopping Centre, Coventry 37,400 - -
Grand Arcade Shopping Centre, Wigan 77,740 - -
Bahnhof Altona Shopping Centre, Hamburg - - 60,060
City Arkaden Shopping Mall, Ingolstadt - - 19,478
Schloss-Strassen Shopping Centre, Berlin - - 77,032
Finance leases acquired 3,457 - 1,760
207,111 27,000 185,330
On 11 December 2013, the Company, through its 100% held subsidiary, Weston Favell Limited, completed the acquisition of the Weston Favell Shopping Centre, Northampton for £88.5 million (inclusive of direct acquisition costs). This acquisition was part of the Aviva restructuring and was part financed by a loan from Aviva of £50.0 million. The property has been included in the security pool associated with the Aviva shopping centre debt.
The Group also acquired the other 50% of the former joint venture companies holding West Orchards Shopping Centre, Coventry and Grand Arcade Shopping Centre, Wigan with the properties consolidated from the date of acquisition. These acquisitions were deemed to be asset acquisitions within subsidiary entities rather than business acquisitions.
Disposals
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Lyon and Equitable House, Harrow (13,770) - -
St Anne House, Croydon (8,400) - -
Aschaffenburg, Germany (949) - -
Trito Petersfield Limited - (735) (735)
Inkstone Portfolio, Germany - (3,447) (3,447)
Princes Street Investments (Petrol Stations) - (3,490) (3,490)
Finance leases - (313) (313)
(23,119) (7,985) (7,985)
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On 13 December 2013, the Group disposed of the Lyon House and Equitable House sites to Redrow Homes Limited for £13.77 million. £6.7 million of the £13.77 million proceeds is deferred and payable within 12 months of the completion date. The Group is also entitled to additional consideration based on a share of sales revenues if the units developed by Redrow Homes Limited are sold for in excess of an agreed aggregate threshold. This additional consideration has not been recorded in the condensed consolidated interim financial statements given the uncertainty surrounding any potential sales proceeds.
In January 2014, the Company, through its 100% owned subsidiary, Wichford Wellesley Road Limited, sold St Anne’s House, Croydon for £8.4 million.
The Group also sold one of its smaller German properties located in Aschaffenburg for £0.95 million.
A reconciliation of investment property valuations to the condensed consolidated statement of financial position is shown below:
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Investment property at market value as determined by external valuers 880,816 540,516 692,256
Freehold 663,985 378,000 525,377
Freehold and long leasehold - 12,530 12,530
Leasehold 216,831 149,986 154,349
Adjustments for items presented separately on the Statement of Financial Position:
- Add minimum payment under head leases separately included under Borrowings 12,293 7,159 8,886
- Investment properties classified as assets held for sale (Note 13) (50,925) (60,326) (57,250)
Statement of financial position carrying value of investment property 842,184 487,349 643,892
11. LONG TERM RECEIVABLES
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Amounts due from joint ventures (Note 24) 476 74 74
Amounts due from Mezzanine Capital Limited 38,153 103,485 103,854
38,629 103,559 103,928
The loan to joint ventures is unsecured, bears interest at a rate of 2% and is repayable on demand, but the expectation is that the term will be greater than 12 months.
The loans to Mezzanine Capital Limited are secured, bear interest at rates between 10% and 12% and are repayable between one and two years. Amounts due from Mezzanine Capital Limited have decreased over the period due to the repayment of certain facilities effective 1 December 2013.
12. INVESTMENTS AT FAIR VALUE
The following table details investments designated at fair value.
Other investments – designated at fair value 72 72 72
Closing balance 120,057 99 139,092
The movement in investments designated at fair value may be reconciled as follows:
Page 31 of 51
RI PLC RNS HY2014
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Opening balance 139,092 399 399
Recognition of Cromwell shares at fair value at the date significant influence was lost - - 144,416
Movement in unrealised gains and losses on derivative assets (86) (151) (66)
Movement in unrealised gains and losses on other investments - (149) (149)
Disposal of Cromwell shares (4,498) - -
Realised gains on sale of Cromwell shares 117 - -
Movement in unrealised gains and losses on Cromwell (14,568) - (5,508)
Closing balance 120,057 99 139,092
The Group ceased to account for Cromwell as an associate from April 2013 and the investment was designated as Fair Value through Profit or Loss from that date as the Group was deemed to have lost significant influence following the sale of 86 million securities.
The Group disposed of 8,460,067 securities in Cromwell on 3 December 2013 at a price of AUD 0.96 for a total consideration of AUD 8.1 million (£4.5 million).
The Group’s shareholding in Cromwell at 28 February 2014 was 13.17% (31 August 2013: 13.70%, 28 February 2013: 22.01%). The closing price of Cromwell on 28 February 2014 was 99.0 Australian cents per security (28 February 2013: 94.0 cents; 31 August 2013: 102.5 cents).
13. ASSETS AND LIABILITIES HELD FOR SALE
Assets held for sale
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Opening balance 57,250 136,009 136,009
Capitalised expenditure 50 - -
Transfers in (Note 10) - 4,226 6,326
Disposals (6,275) (76,307) (79,440)
Foreign exchange movement in foreign operations - 1,748 1,670
Net fair value losses on assets held for sale (100) (5,350) (7,315)
Total 50,925 60,326 57,250
Assets held for sale include the following property assets:
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Delta 50,925 56,100 55,150
Telford - 530 -
Inkstone - 3,463 -
Ciref Berlin 1 Limited - Delmenhorst - 233 -
West Tullos, Aberdeen - - 2,100
Total 50,925 60,326 57,250
The Company announced on 15 October 2012 the agreement to extend and restructure the £114.6 million Delta facility. The maturity date of the Delta facility was extended to 15 April 2015 subject to the Company meeting annual disposal targets, in respect of the remaining 16 Delta portfolio assets. The Group has undertaken to sell these properties over a two year period with sales targets which are required to be met each year. The Group is unable to specifically identify in which financial year each of the Delta assets will be sold. As the Group is committed to the sale of the Delta property portfolio, all of the properties were included in assets held for sale.
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In October 2013, 3 properties within the Delta facility including the Grays, Hartlepool and Smethwick properties were disposed of for £1.475 million, £1.4 million and £1.2 million respectively. The proceeds of these sales were utilised to reduce the Delta facility loan balance in line with the agreed disposal targets in the Delta restructuring agreement.
On 13 December 2013, the Company disposed of a small industrial property in West Tullos, Aberdeen for £2.2 million.
Liabilities held for sale
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Opening balance - 91,935 91,935
Disposals - (91,935) (91,935)
Total - - -
At 31 August 2012 the Group had committed to a sale plan involving the loss of control of a number of subsidiaries and, as a result, all the assets and liabilities of those subsidiaries were classified as held for sale. The Group finalised the restructuring of the VBG assets and the associated financing facilities on 8 October 2012.The related sale of subsidiaries process to which the Group had committed and which resulted in liabilities being designated as held for sale completed in October 2012.
14. INVESTMENTS IN JOINT VENTURES
The Group’s investments in joint ventures currently consist of the following:
(i) 50% in Pearl House Swansea Limited, a joint venture with Sandgate Properties Limited, which owns a long leasehold retail interest in Swansea, Wales.
(ii) 50% in Swansea Estates Limited, a joint venture with Sandgate Properties Limited, which owns a long leasehold retail interest in Swansea, Wales.
(iii) 50% in Ciref NEPI Holdings Limited, a joint venture with New Europe Property Investments, which ultimately owns property in Germany, Western Europe.
(iv) 50% in 26 The Esplanade No 1 Limited, a joint venture with Rimstone Limited, which ultimately owns an office building in St. Helier, Jersey.
(v) 50% in Ciref Crawley Limited, a joint venture with Graymont Limited, which owns 3 blocks of offices in Crawley, Surrey.
(vi) 50.5% interest in RI Menora German Holdings S.a.r.l, a joint venture with Menora Mivtachim, which ultimately owns properties in Waldkraiburg, Hucklehoven and Kaiserslautern in Germany.
(vii) 49% interest in VBG Holdings S.a.r.l., a joint venture with Menora Mivtachim, which ultimately owns government let properties in Dresden, Berlin, Stuttgart and Cologne, Germany.
The investment in joint ventures includes investments at nil value in the balance carried forward on 1 September 2013.
Ciref Coventry Limited and Redefine Wigan Limited became subsidiaries with effect from December 2013, following the purchase of 50% of the shares in the entities for £1. These joint ventures had been held at nil value prior to this acquisition.
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15. INVESTMENTS IN ASSOCIATES
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Opening balance - 124,507 124,507
Acquisition of/increase in investment 7,261 26,121 26,121
Impact of foreign currency translation - 5,285 6,894
Equity accounted profits 176 3,302 7,861
Distribution received from associates - (6,484) (10,237)
Change in accounting treatment on loss of significant influence - - (118,325)
Disposal of shares - - (42,298)
Reversal of impairment previously recorded - 5,477 5,477
Closing balance 7,437 158,208 -
As detailed in Note 27, the acquisition of the investment in associate for the period ended 28 February 2014 reflects the 33% shareholding acquired in Redefine BDL Hotel Group Limited, acquired as part of the management internalisation on 2 December 2013.
16. INTANGIBLE ASSETS
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Opening balance - - -
Impact of acquisition of subsidiaries 24,639 - -
Write down of intangible assets (22,789) - -
Amortisation (58) - -
Closing Balance 1,792 - -
As detailed in Note 27, intangible assets were recognised on the acquisition of RIFM and represented the fair value of the Advisory Agreements acquired by the Group. The value attributed to the Group’s agreement with RIPML of £22.79 million has been treated as a payment to avoid making future payments under the contract and has been fully written down in the year. The value attributed to the contracts between RIFM and third parties including joint ventures of the Group and the non-controlling element of properties held by the Group of £1.85 million is being amortised on a straight line basis over the remaining terms of the contracts, which have an average life of eight years.
17. CASH AT BANK
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Cash at bank consists of the following:
Unrestricted cash balances 68,865 41,989 29,598
Bank balances 15 41,989 29,580
Call deposits 68,850 - 18
Restricted cash balances 16,352 15,890 4,059
85,217 57,879 33,657
As at 28 February 2014, there was £16.4 million (28 February 2013: £15.9 million, 31 August 2013: £4.1 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. At 28 February 2014 trade and other payables includes accrued interest on bank debt facilities of £5.2 million against which these cash balances will be applied.
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Also included in the restricted cash balance at 28 February 2014 is £5.7 million held with Aviva with regards to the developments in Birchwood Warrington Limited, and the proposed developments in Grand Arcade Wigan Limited and Weston Favell Limited (28 February 2013: £1.2m, 31 August 2013: £0.7m).
18. CAPITAL AND RESERVES
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Authorised
Ordinary shares of 8 pence each
- number 1,800,000,000 1,800,000,000 1,800,000,000
- £'000 144,000 144,000 144,000
Issued, called and fully paid
Opening: Ordinary Shares of 8 pence each (1 September 2013 7.2 pence each)
- number 967,963,757 579,454,792 579,454,792
- £'000 77,437 41,721 41,721
Shares issued during the period of 8 pence each (28 February 2013 & 31 August 2013: 7.2 pence each)
- number 302,364,897 490,384,616 490,384,616
- new issue 302,364,897 490,384,616 490,384,616
- £'000 24,189 35,308 35,308
Consolidation from 7.2 pence to 8 pence each (9 shares allotted for every 10 previously owned)
- number - (106,983,941) (106,983,941)
Shares issued to acquire non-controlling interests
- number - - 5,108,290
- £'000 - - 408
Closing: Ordinary Shares of 8 pence each
- number 1,270,328,654 962,855,467 967,963,757
- £'000 101,626 77,029 77,437
SHARE CAPITAL AND SHARE PREMIUM
Issue of shares associated with the CMC acquisition
The consideration for the CMC acquisition which completed in August 2013 was settled in part in cash and in part in shares. The share consideration was deferred as well as the cash element of the Berlin acquisition and settled in the period to 28 February 2014.
Included in the Share Consideration Reserve at 31 August 2013 was an amount of £5.5 million related to the shares to be issued for the acquisition of Hamburg and Ingolstadt which the Company acquired as part of the CMC acquisition in August 2013. On 3 September 2013 the Company issued 12,606,061 new Ordinary Shares of 8 pence each to settle this obligation.
As the exact number of shares to be issued for the acquisition of the Berlin asset was not known at 31 August 2013, the fair value of the deferred consideration was reflected as a liability at 31 August 2013. The consideration was subsequently settled on 6 December 2013 through payment of €12.1 million (£11.51 million) in cash and the issue of 19,090,863 new Ordinary Shares of 8 pence each (the “Berlin Consideration Shares”) at an effective issue price of 40.0 pence per share. The fair value of the shares issued was £7.64 million. The Berlin Consideration Shares did not rank for the final dividend for the year ended 31 August 2013. The difference between the fair value of the liability at 31 August 2013 and the fair value at the date of issuing the shares of £0.61 million has been reflected in Net (losses)/gains from financial assets and liabilities in the Income Statement.
Issue of shares to acquire Redefine International Fund Managers Limited (“RIFM”) and to settle the incentive fee
On 2 December 2013 the Company completed the acquisition of the entire issued share capital of RIFM for an issue of new ordinary shares in the Company. In total, 79,000,000 new ordinary shares were issued to acquire RIFM and to settle the incentive fee payable by the Company to RIPML. The fair value of these shares on the
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date of issue was £39.11 million. These shares were issued and admitted to trading on the LSE on 6 December 2013.
Other share issues
The Company raised £16.8 million through the issue of 40,000,000 new Ordinary Shares at 42 pence per share on 3 September 2013.
Also in September 2013 the Company repaid its £13 million 6% convertible loan instrument issued to Aviva in September 2010. This repayment was financed by the issue of 36,587,873 new Ordinary Shares of 8 pence each to Redefine Properties Limited at an issue price of 41.925 pence per share.
115,080,100 new ordinary shares were issued and admitted to trading on the LSE on 28 February 2014 raising gross proceeds of approximately £54.28 million.
The 40,000,000 shares issued in September 2013 along with the 12,606,061 shares issued to settle the acquisition of Hamburg and Ingolstadt and the 36,584,873 shares issued to fund the repayment of Aviva were issued cum dividend and so the associated dividend amount has been set against share premium.
The total voting rights in the Company at 28 February 2014 are 1,270,328,654.
OTHER RESERVES
Other reserves comprise the Share consideration reserve, the share‑based payment reserve and other reserves.
Share consideration reserve
The share consideration reserve comprised £5.5 million at 31 August 2013 related to the shares to be issued to settle the consideration associated with the Hamburg and Ingolstadt asset acquisitions. These shares were issued in September 2013 reducing the share consideration reserve to Nil at 28 February 2014.
Share-based payment reserve
The share – based payment reserve at 31 August 2013 related to potential shares to be issued to settle the incentive fee payable by the Company to RIPML. As detailed above shares were issued in December 2013 to settle this obligation.
The share – based payment reserve at 28 February 2013 relates to shares to be issued arising from equity settled share based payments to employees if certain conditions are met. Refer Note 23.
Other reserves
These are reserves arising from the acquisition of subsidiaries.
REVERSE ACQUISITION RESERVE
The reverse acquisition reserve arose on the reverse acquisition of Wichford PLC (subsequently renamed Redefine International P.L.C.) by RIHL and comprises the difference between the capital structure of the Company and RIHL.
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. 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 period ended 28 February 2014, the second interim dividend of 1.635 pence per share for the period ended 31 August 2013 (28 February 2013: 2.30 pence per share for the period ended 31 August 2012) was distributed.
19. CAPITAL INSTRUMENT
As part of the Aviva debt restructuring in 2010 the Company entered into a £13 million convertible facility with Aviva. The loan bore interest at 6% per annum, and all interest was rolled up until the repayment of the facility. The capital plus rolled up interest was repayable or convertible three years after the date of the agreement.
The convertible facility was classified as an equity instrument under IAS 32 as it was 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 changed over time but was fully predetermined based on the time the Company chose to settle the instrument. The additional shares that become due over time were charged to profit or loss in each period as a share based payment charge which was credited to the equity reserve.
On 13 September 2013, the capital instrument was settled in cash which was financed through the issue of 36,587,873 new ordinary shares in the Company to Redefine Properties Limited.
As part of the terms of the Aviva debt restructure Aviva have retained the right to participate in 50% of the income and capital growth generated by Grand Arcade Wigan (after all costs, expenses and interest). This profit share is deemed to be a financial liability and has been recognised initially at fair value and thereafter will be carried at amortised cost.
a) Loans
This note provides information about the contractual terms of the Group’s loans and borrowings, which are measured at amortised cost.
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SECURED BORROWINGS
The terms and conditions of outstanding loans are as follows:
Facility Amortising Lender Loan interest rate Currency Maturity date
Reviewed
28 February
2014
£'000
Reviewed
28 February
2013
£'000
Audited
31 August
2013
£'000
Carrying Value Carrying Value Carrying Value
Gamma2 No
Windermere VIII CMBS LIBOR + 0.75% GBP October 2012 41,862 47,904 41,862
Delta3 Partly
Windermere XI CMBS LIBOR + 0.75% GBP April 2015 74,059 81,116 79,165
Schloss-Strassen, Berlin Yes HSH Nordbank EURIBOR + 2.0% EUR August 2017 51,868 - 57,249
Weston Favell Limited4 Yes Aviva 5.71%
1 GBP November 2038 47,065 - -
Bahnhof Altona, Hamburg Yes HSH Nordbank EURIBOR + 2.2% EUR February 2020 45,281 - 44,299
Grand Arcade Wigan Limited4 No Aviva 5.68%
1 GBP April 2032 60,292 - -
Redefine Hotel Holdings Limited Yes Aareal LIBOR + 2.45% GBP November 2015 84,975 86,831 85,903
All bank loans are secured over investment property, and bear interest at the specified interest rates.
1 Fixed rates. 2 During the prior year a Fixed Charge Receiver was appointed to the property company subsidiaries that secured the Gamma debt resulting in the lender having been deemed to
have taken control of the assets and resulting in the extinguishing of part of the related debt. Refer Note 2.2.2 for further details. 3 The maturity date of the Delta facility was extended to 15 April 2015 subject to the Group meeting annual disposal targets in respect of the remaining Delta portfolio assets. 4 These facilities were subject to a fundamental debt restructure in December 2013 as detailed in Note 29 and are cross collateralised against each other. 5 This facility was repaid in full on 3 March 2014. 6 The outstanding facilities will be repaid prior to 31 August 2014.
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Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Non-current liabilities
Secured bank loans 508,078 444,685 497,230
Total non-current loans and borrowings 508,078 444,685 497,230
The maturity of non-current borrowings is as follows:
Between one year and five years 268,089 391,089 398,015
More than five years 239,989 53,596 99,215
508,078 444,685 497,230
Current liabilities
Secured loans 243,964 143,585 174,097
Total current loans and borrowings 243,964 143,585 174,097
Total loans and borrowings 752,042 588,270 671,327
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 21 for further details.
b) Finance leases
Obligations under finance leases at the reporting dates are analysed as follows:
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Gross finance leases liabilities repayable:
Not later than one year 625 318 404
Later than one year not later than five years 2,502 1,274 1,615
Later than five years 36,421 20,019 21,652
39,548 21,611 23,671
Less: finance charges allocated to future periods (27,255) (14,452) (14,784)
Present value of minimum lease payments 12,293 7,159 8,887
Present value of finance lease liabilities repayable:
Not later than one year 625 318 404
Later than one year not later than five years 2,133 1,108 1,428
Later than five years 9,535 5,733 7,055
Present value of minimum lease payments 12,293 7,159 8,887
21. 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 are employed by the Group to convert the Group’s borrowings from floating to fixed interest rates and are detailed in a) below.
The interest rate caps as detailed in b) below are employed by the Group to limit the exposure to upward movements in interest rates.
It is the Group’s policy that no economic trading in derivatives is undertaken.
a) Interest rate swap agreements
In accordance with the terms of 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 borrower level interest rate swaps to eliminate future exposure to interest rate fluctuations.
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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. The following table sets out the Borrower level interest rate swaps.
Fair value
Facility Effective
date Maturity
date Swap rate
Reviewed 28 February
2014 £’000
Reviewed 28 February
2013 £’000
Audited 31 August
2013 £’000
Newington House Limited 03/09/2010 19/09/2013 1.54% - (42) (10) Princes Street Investments Limited 30/09/2011 30/09/2016 1.69% (130) (318) (176) Ciref Berlin 1 Limited 05/06/2007 15/04/2014 4.61% (58) (449) (257) Ciref Berlin 1 Limited 31/07/2007 15/04/2014 4.20% (44) (361) (212) Ciref German Portfolio Limited 31/07/2007 15/04/2014 4.20% (30) (162) (95) Redefine Hotel Holdings Limited 30/11/2010 30/11/2015 2.45% (1,543) (2,936) (2,017) Redefine Hotel Holdings Limited 30/06/2011 30/11/2015 2.32% (195) (364) (255)
CMC Berlin 03/01/2013 30/08/2017 0.94% (272) - (281) Redefine Australian Investments 03/03/2013 04/03/2016 3.30% (284) - (275) West Orchard Coventry Limited* 11/12/2013 11/12/2018 2.033% (223) - -
(3,588) (6,355) (4,814)
* £14.6 million of the initial loan amount of £18.25 million was subject to the interest rate swap ie: 80% Fixed.
b) Interest rate cap agreements
The Group has entered into interest rate caps in order to protect the Group against any significant increases in the current low interest rates in the market. The current interest rate cap agreements are detailed below:
Fair value
Facility
Effective
date Maturity
date Cap rate
Reviewed 28 February
2014 £’000
Reviewed 28 February
2013 £’000
Audited 31 August
2013 £’000
St Georges Harrow 27/04/2011 27/04/2016 2.85% 16 7 67 ITB Herzogenrath B.V. 31/05/2011 31/05/2017 4.50% 5 11 24
c) Summary of fair value of interest rate swaps and interest rate caps
Facility
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Borrower level interest rate swaps
Non Current (252) (2,120) (776)
Current (3,336) (4,235) (4,038)
Total borrower level interest rate swaps (3,588) (6,355) (4,814)
Fair value of interest rate cap agreements* 25 27 111
Fair value of the Group's derivative instruments (3,563) (6,328) (4,703)
*Interest rate cap assets are included in investments designated at fair value (Note 12).
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22. PROVISION FOR LIABILITIES AND COMMITMENTS
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Opening balance 12,079 12,079 12,079
Release of provisions (see Note 29) (12,079) - -
Total - 12,079 12,079
A provision of £12.1 million had been set up in respect of estimated potential future cash outflows related to external loans provided by Aviva to the former joint ventures Redefine Wigan Limited and Ciref Coventry Limited which were cross collateralised against properties held directly by the Group.
Following the acquisition of these joint ventures and the agreed restructure of the Aviva debt facilities in December 2013 this provision was released.
See Notes 28 and 29 for further details on the acquisition of the joint ventures and the restructure of the Aviva shopping centre facilities.
23. SHARE BASED PAYMENTS
The Group’s share-based payments are all equity-settled and comprise the Long-Term Performance Share Plan (“PSP”) for Executive Directors and the Restricted Stock Plan for employees. In accordance with IFRS 2 ‘Share-based payments’ the fair value of equity-settled share-based payments to employees is determined at grant date, and is expensed on a straight-line basis over the vesting period, with a corresponding credit to the share-based payments reserve. The Company utilises the Monte-Carlo simulation valuation model to determine the fair value at grant date.
Long-Term Performance Share Plan
28 February 2014
Number of Shares
28 February 2013
Number of Shares
31 August 2013
Number of Shares
Awards brought forward - - -
Awards made during the current period 3,970,000 - -
Awards carried forward 3,970,000 - -
Share-based payment charge
28 February 2014
£’000
28 February 2013 £’000
31 August 2013 £’000
Opening balance - - -
Share based payment expense in the period/year 1,368 - -
Closing share-based payment balance 1,368 - -
The PSP for Executive Directors authorises the Remuneration Committee to make grants of PSP shares with a face value of up to 100% of salary to participants. Awards of PSP shares are subject to performance measures over three years. Half of the award will vest dependent on the Company’s Total Shareholder Return (“TSR”) equalling, or exceeding, the TSR relative to that of each of the members of the FTSE EPRA / REIT Developed Europe Index (“the Index”) and the other half of an award will be subject to a performance target which measures the Company’s TSR relative to that of the members of a bespoke comparator group. Vesting is on a sliding scale between 25% for median performance and 100% for upper quartile performance, with 0% vesting below a median performance. For the market-based TSR awards, the effect of the performance conditions is incorporated into the grant date fair value of the award. The fair value calculation assumes that PSP shares will be awarded at 65% of the face value at grant for the portion of the award subject to relative TSR performance against members of the Comparator Group and 73% of the face value at grant date for the portion of the award subject to relative TSR performance against members of the Index. No subsequent adjustment to the charge can be made to reflect the outcome of the performance test. Adjustments can, however, be made for participants who leave the scheme before vesting.
The shares outstanding under the scheme are to be issued at nil consideration provided performance conditions are met.
No shares were granted in respect of the Restricted Stock Plan during the six months ended 28 February 2014.
24. RELATED PARTY TRANSACTIONS
Related parties of the Group include associate undertakings and joint ventures, the Investment Advisor, Directors and key management personnel and connected parties, the major shareholder Redefine International Properties
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Limited and the ultimate parent Redefine Properties Limited as well as entities connected through common directors.
MANAGEMENT INTERNALISATION
Following the management internalisation and related acquisition of the investment adviser on 2 December 2013, RIFM and its group undertakings are no longer considered related parties as they are consolidated within the Group.
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Trading transactions Rental income received from Redefine Hotel Management Limited 5,400 5,072 10,622
Fee income from the Cromwell Property Group - 513 631
Interest receivable from West Orchards Coventry Limited - - 377 Portfolio management fees charged by Redefine International Property Management Limited (501) (1,234) (2,728) Portfolio management fees charged by Redefine International Fund Managers Limited (160) (352) (727) Portfolio management fees charged by Redefine International Fund Managers Europe Limited (709) (367) (590)
Redefine International Hotels Limited - (342) (514) Incentive fees payable to Redefine International Property Management Limited - - (6,430)
Amounts receivable
Pearl House Swansea Limited 476 74 74
Redefine Hotel Management Limited 4,096 3,080 3,642
Corovest Offshore Limited 162 162 162
Ciref Crawley Investments Limited 48 87 87
Swansea Estates Limited 87 87 87
West Orchards Coventry Limited - - 37,989
Kaiserslautern Merkerstrasse GmbH - - 400
Grand Arcade Wigan Limited - - 487
26 The Esplanade No 1 Limited - 78 78
Banstead Property Holdings Limited - 496 510
VBG Holdings S.a.r.l. - 243 -
Redefine International Hotels 3,012 - -
Amounts Payable
26 The Esplanade No 1 Limited 22 - -
Redefine International Fund Managers Limited - 352 374
Redefine International Fund Managers Europe Limited - 336 -
Redefine Properties International Limited - 45 7
VBG Holdings S.a.r.l - - 78
Pearl House Swansea - - 16
Osiris Properties Services Limited - - 6
Redefine BDC Hotel Group Limited - 342 480
Redefine International Property Management Limited - 464 176
MEZZANINE CAPITAL LIMITED
Details of transactions with Mezzanine Capital Limited are provided in Notes 7, 8, 11 and 20.
DIRECTORS
The remuneration paid to non-executive directors for the period ended 28 February 2014 was £160,318 which represents directors fees only (28 February 2013: £179,970, 31 August 2013: £345,000).
The remuneration paid to executive directors for the 3 months ended 28 February 2014, following the internalisation totalled £198,500.
25. EARNINGS PER SHARE AND EARNINGS AVAILABLE FOR DISTRIBUTION
Earnings per share is calculated on the weighted average number of shares in issue and the profit/(loss) attributable to shareholders.
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Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Net (loss)/profit attributable to equity holders (Basic and diluted) (897) 16,918 61,521
Weighted average number of ordinary shares 1,100,490 883,545 924,394
Effect of potential share based payment transactions - capital instrument - 29,846 36,587
* The share incentive scheme in place is currently non-dilutive.
The reconciliation of (loss)/profit attributable to equity holders to headline earnings and earnings available for
distribution is as follows:
Six months ended
28 February 2014 Total £'000
Six months ended
28 February 2013 Total £’000
Year ended
31 August 2013 Total £'000
(Loss)/profit attributable to equity holders of the parent (897) 16,918 61,521 Changes in fair value of investment property (net of deferred tax) (18,437) 12,965 23,299
Net fair value (gains)/losses on investment property (20,145) 15,680 20,721
Deferred taxation 10 372 234
Effect of non-controlling interest on above 2,055 (1,507) (1,069)
Net fair value losses in jointly controlled entities (357) (1,580) 3,413
Gain on loss of significant influence of Cromwell (net of capital gains tax) - - (44,643)
Gain on loss of significant influence of Cromwell - - (46,690)
Capital gains tax on Cromwell disposal - - 2,047
Impairment of receivables - - 1,538
Impairment of goodwill 2,069 - -
Impairment of intangible asset 22,789 - -
Gain on debt restructure (6,182) - -
Reversal of impairments (1,791) - -
Gain on sale of subsidiaries - (16,491) (17,285)
Headline earnings attributable to equity holders of the parent (2,449) 13,410 24,430
Gain/(loss) on financial assets and liabilities 13,980 (3,078) 208
Straight-lining of rental income 461 99 620
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Six months ended
28 February 2014 Total £'000
Six months ended
28 February 2013 Total £’000
Year ended
31 August 2013 Total £'000
Fair value interest amortisation 1,397 468 983
Net interest on mezzanine financing 398 176 1,375
Amortisation of debt issue costs 637 558 1,972
Share based payment 1,368 387 803
Capital gains tax on Cromwell disposal 298 - -
Deferred tax liability recognised on Cromwell (877) 477 2,320
Unrealised foreign exchange gain (2,408) 1,133 (4,357)
Non-distributable income from Gamma facility entities 2,413 (1,975) (1,314)
Non-distributable income from Delta facility entities (851) (665) (1,846)
RIFM acquired earnings 540 - - Impact of non-distributable items on non-controlling interest (893) (1,019) (1,889)
Earnings available for distribution (not reviewed or audited) 17,911 14,419 30,113
First interim dividend - - (14,202)
Earnings available for distribution at period ended (not reviewed or audited) 17,911 14,419 15,911
Number of ordinary shares in issue at period end 1,270,329 962,855 967,964
Less: February 2014 placement (115,080) - -
Adjusted shares in issue 1,155,249 962,855 967,964
Earnings available for distribution per share 1.550 1.475 3.110
Dividend per share (pence) 1.500 1.475 3.110
First interim dividend per share (pence) 1.500 1.475 1.475
Second interim dividend per share (pence) - - 1.635
26. NET ASSET VALUE PER SHARE
Reviewed 28 February
2014 £'000
Reviewed 28 February
2013 £'000
Audited 31 August
2013 £'000
Net assets attributable to equity shareholders (£'000) 394,009 264,956 299,799
Number of Ordinary Shares ('000's) 1,270,329 962,855 967,964 Effect of potential share-based payment transactions – incentive fee arrangements - - 14,697 Effect of potential share-based payment transactions – consideration payable on CMC - - 12,606 Effect of potential share based payment transactions - capital instrument - 29,846 36,587
Diluted number of shares ('000's) 1,270,329 992,701 1,031,854
Net asset value per share (pence):
- Basic 31.02 27.52 30.97
- Diluted* 31.02 26.69 29.05
* There are currently no dilutionary instruments in issue.
27. BUSINESS COMBINATION – ACQUISITION OF RIFM
On 2 December 2013 the Company completed the acquisition of RIFM. The consideration was satisfied by the issue of 79,000,000 new ordinary shares in the Company.
a) Consideration transferred
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The following table summarises the acquisition date fair value of the consideration transferred:
Fair value of consideration transferred Note £’000
Equity instruments (i) 32,675
b) Identifiable assets and liabilities assumed
Fair Value of identifiable assets and liabilities £’000
Intangible asset - third party management contracts (iii) 1,850
Investment in associates (ii) 7,261
Cash (ii) 219
Property, plant & equipment (ii) 161
Trade and other receivables (ii) 6,734
Loans and borrowings (ii) (5,400)
Trade and other payables (ii) (2,924)
30,690
c) Goodwill
£’000
Consideration 32,675
NCI, based on their proportionate interest in the recognised amounts of the assets and liabilities of RIFM
84
FV of identifiable assets and liabilities (30,690)
Goodwill (iv) 2,069
Notes
(i) Equity instruments issued
The Company issued 79 million shares on 2 December 2013. 12,989,899 were issued to settle the incentive fee payable under the Investment Adviser Agreement with 66,010,101 issued as consideration to acquire RIFM. The fair value of the ordinary shares issued was based on the listed share price of the Company at 2 December 2013 of 49.50 pence per share.
(ii) Fair value of identifiable assets and liabilities
The fair value of the investment in associates, which relates to a 33.0% interest in RBDL has been calculated using a P/E approach having regard for recent market transactions. The investment in associates has been recognised at its fair value of £7.26 million and will be subsequently increased or decreased for the Group’s share of the profit or loss of the associates and adjusted for any dividends received (refer to Note 15).
Given the short term nature of the trade and other payables and receivables the fair value has been deemed to be the carrying value as reflected in the RIFM accounts.
The fair value of loans and borrowings has been calculated based on discounting the cashflows under the agreement at a market interest rate for similar debt instruments.
(iii) Intangible assets
The intangible asset created represented the fair value of the Advisory Agreements acquired by the Group. The fair value of the intangible assets has been determined using a discounted cashflow model with the expected cashflows on the contracts discounted using a weighted average market discount rate determined by reference to the terms of the contracts.
The intangible asset includes an amount of £1.85 million related to the management contracts held by RIFM with third parties including joint ventures of the Group and the non – controlling interest element of properties held by the Group. The value attributed to these third party asset management fees of £1.85 million will be amortised over the remaining period of the contracts/expected asset management term, which is an average of 8 years (refer Note 16).
The intangible asset acquired also includes an amount of £22.789 million associated with the Investment Adviser agreement between RIPML and the Group. This has been treated as a payment to avoid making future payments under the contract and has been fully written down in the year (refer Note 16).
(iv) Goodwill
Goodwill of £2.07 million arose as a result of the acquisition of RIFM. As detailed in Note 6, subsequent to its recognition, it was reviewed for indications of impairment at which point a decision was taken, given an assessment as to its recoverable amount to, impair the goodwill to zero.
In the period following the acquisition, RIFM had revenue of £1.28 million and a profit of £0.23 million. For the period from 1 September 2013 to the date of internalisation, RIFM had revenue of £11.9 million and a profit of £1.67 million. The difference in revenue and profit is however not comparable, due to the restructure of the management fee charges within the Group following the UK-REIT conversion and related transfer pricing policies adopted.
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28. ACQUISITION OF SUBSIDIARIES
The companies holding Grand Arcade, Wigan and West Orchards, Coventry were acquired on 3 December 2013 in contemplation of the Aviva restructuring which is detailed further in Note 29.
The assets and liabilities arising from the acquisitions and the net cash position have been summarised in the table below:
Loans and borrowings (including finance leases) (3,457) (65,816) (69,273)
Trade and other payables (38,688) (5,381) (44,069)
Net assets acquired (762) 6,726 5,964
Settled as
Cash consideration - (7,146) (7,146)
Fair value of existing shareholding - - -
Total consideration - (7,146) (7,146)
Cash acquired 762 420 1,182
1) The fair value of the investment property has been determined by the Directors having regard to the 31 August 2013 independent valuation and movements in the market up to 3 December 2013.
2) The fair value of Wigan related loans and borrowings have been determined based on the fair value of the terms of the restructured Aviva debt and incorporate the fair value of the profit share granted to Aviva (refer Note 29 for further details).
3) The fair value of the existing shareholding was deemed to be nil at the date of acquisition.
29. AVIVA RESTRUCTURE
On 11 December 2013, the Company completed a fundamental restructuring of the loans advanced by Aviva with respect to the Company’s UK shopping centre portfolio.
As part of the restructure:
1) The Company purchased Weston Favell Shopping Centre, Northampton for £84.0 million. This acquisition was part funded by a new £50 million loan facility from Aviva which has a maturity date of November 2038.
2) Debt with a nominal value of £146.26 million against the Grand Arcade property was reduced by approximately 50% to £73 million in consideration for a cash payment of £7 million. This debt had been fair valued at £65.816 million on the acquisition of Wigan (refer Note 28).
3) Aviva retained the right to participate in 50% of the income and capital growth generated by Grand Arcade (after all costs, expenses and interest) going forward. The Company has the right to “buy-back” the profit share for a maximum cash payment of £18.5 million in five instalments upon the valuation of Grand Arcade increasing by certain agreed benchmarks.
4) Debt with a nominal value of £56 million against the West Orchards Shopping Centre in Coventry (“West Orchards”) was repaid in cash at the market value of the property (£37 million). Aviva are entitled to a 25% of profit (above a base cost of £37m plus any further capital spend and a notional return of 10% from new capital) should the property be sold within the next 3 years.
5) The cross collateralisation provisions were also amended with West Orchards removed from the Aviva security pool and replaced by Weston Favell. Amendments were also made related to the Grand Arcade Wigan property such that the Aviva facilities which finance Birchwood (Warrington), Byron Place (Seaham), and Weston Favell are cross collateralised with Aviva having recourse to those properties for only 50% of the Grand Arcade Wigan related facility.
Nominal value
Fair value at date of restructure
Carrying value at the date of
restructure Gain/loss on
restructure
West Orchards Coventry - - - -
Grand Arcade Wigan 73,000 60,211 60,211 -
Grand Arcade Wigan – Profit share - 5,605 5,605 -
Weston Favell 50,000 47,053 N/a (47,053)
Byron Place Seaham 16,707 15,402 15,136 (266)
Birchwood Warrington 29,024 26,683 18,105 (8,578)
Loss on restructure
(55,897)
Cash received from Aviva
50,000
Release of existing provision held
12,079
Net gain on restructuring
6,182
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30. 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 mitigate its exposure to interest rate fluctuations. At the year end, as a result of the use of interest rate swaps, the majority of the Group's borrowings were at fixed interest rates.
While the Group has entered into interest rate swaps and interest rate cap agreements to minimise interest rate fluctuations, the Group's profit before tax is exposed to the mark to market movement on the derivative instruments until the repayment dates of the loans for which the interest rate swaps have been arranged. Refer to Note 21 for further details on the Group's interest rate swap agreements.
31. 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 that are within the control of the Board. In periods of increased market uncertainty the Board strive to ensure sufficient cash resources are available for potential loan repayments/cash deposits as may be required by financial institutions. In certain cases the Company may take a decision not to support non-recourse facilities. Refer to Note 2.2.1 for further details on the going concern assumption adopted by the Board.
32. FAIR VALUES
The fair value of financial assets and liabilities together with the carrying amount shown in the statement of financial position is detailed below:
28 February 2014 31 August 2013
Carrying value £’000
Fair value £’000
Carrying value £’000
Fair value £’000
Financial assets
Loans and receivables 38,629 38,629 173,633 173,633
The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements.
Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.
Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.
Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments.
Fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations. For all other financial instruments the Company determines fair values using net present value and discounted cash flow models and comparisons to similar instruments for which market observable prices exist. Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates, credit spreads and other premia used in estimating discount rates, foreign currency
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exchange rates and expected price volatilities and correlations. The objective of valuation techniques is to arrive at a fair value determination that reflects the price of the financial instrument at the reporting date that would have been determined by market participants acting at arm’s length.
The Group uses widely recognised valuation models for determining the fair value of common and more simple financial instruments such as interest rate swaps that use only observable market data and require little management judgement and estimation. Observable prices and model inputs are usually available in the market for simple over the counter derivatives, e.g. interest rate swaps. Availability of observable market prices and model inputs reduces the need for management judgement and estimation and also reduces the uncertainty associated with determination of fair values. Availability of observable market prices and inputs varies depending on the products and markets and is prone to changes based on specific events and general conditions in the financial markets.
The following is a summary of the classifications of the financial assets and liabilities:
Level 1 £’000
Level 2
£’000
Level 3
£’000
Total Fair value
£’000
28 February 2014
Financial assets
Designated at fair value through profit or loss –equity securities 119,960 72 - 120,032
Derivative financial assets - 25 - 25
119,960 97 - 120,057
Financial liabilities
Interest rate swaps - (3,588) - (3,588)
- (3,588) - (3,588)
31 August 2013
Financial assets
Designated at fair value through profit or loss –equity securities 138,909 72 - 138,981
Derivative financial assets - 111 - 111
138,909 183 - 139,092
Financial liabilities
Interest rate swaps - (4,814) - (4,814)
- (4,814) - (4,814)
No financial instruments were transferred between levels during the year.
The investment in Cromwell is categorised as a Level 1 investment as it has been priced using quoted prices in an active market.
Certain financial assets designated at fair value through profit or loss have been categorised as Level 2 as they have been priced using quoted prices for identical instruments in markets that are considered less than active.
Interest rate swaps have been categorised as Level 2 as although they are priced using directly observable inputs, the instruments are not traded in an active market.
No instruments have been categorised as Level 3.
33. CONTINGENCIES, GUARANTEES AND CAPITAL COMMITMENTS
The Group has capital commitments of £9.3 million (31 August 2013: £1.3 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 £0.3 million.
Further consideration being a share in the potential uplift in property values following redevelopment may be payable in respect of the CMC acquisition specifically the acquisition of the Ingolstadt and Hamburg properties. This is payable within three years of the completion date if certain conditions are met. Based on the facts as at 28 February 2014 the outflow of economic benefits is not probable and so no provision has been set up for any potential future outflow.
The fair value of the assets and liabilities acquired in respect of the CMC acquisition was based on best estimates at year end and may be subject to change as further information is obtained during the measurement period.
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34. SUBSEQUENT EVENTS
The Board resolved to declare an interim dividend of 1.5 pence per share. The record date for the interim dividend is 23 May 2014. The dividend will be paid to shareholders on 5 June 2014.
The Company proposes to offer shareholders the option to receive ordinary shares in lieu of the cash dividend under a Scrip Dividend Scheme. An announcement will follow in due course.
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Glossary
Aviva Aviva Commercial Finance Limited
Board The board of directors of Redefine International
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.
EPRA European Public Real Estate Association.
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 € The lawful common currency of participating member states of the European Monetary Union.
Fair value movement An accounting adjustment to change the book value of an asset or liability to its market value.
Finance lease A lease that transfers substantially all the risks and rewards of ownership from the lessor to the lessee.
FCTR Foreign Currency Translation Reserve.
GBP or £ Great British Pound, the legal currency of the UK.
GDP Gross domestic product
Grand Arcade Grand Arcade Shopping Centre in Wigan, UK
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.
JSE JSE Limited, licensed as an exchange and a public company incorporated in terms of the laws of South Africa and the operator of the Johannesburg Stock Exchange.
LIBOR The London Interbank Offered Rate, the interest rate charged by one bank to another for lending money.
LTV Loan to value. A ratio of debt divided by the market value of investment property
LSE The London Stock Exchange plc.
NAV Net Asset Value.
PSP Long-term performance Share Plan awarded to the Executive Directors.
Redefine International P.L.C. (Redefine International, the Company or the Group)
The enlarged company following the reverse acquisition between Wichford and Redefine International plc.
RBDL Redefine BDL Hotel Group Limited, the holding company for the hotel management group.
RHM Redefine Hotel Management Limited
RIFM Redefine International Fund Managers Limited. The parent entity of RIPML.
RIHL Redefine International Holdings Limited. The previously AIM listed property investment company party to the reverse acquisition (previously named Redefine International plc).
RIPML Redefine International Property Management Limited. The Investment Adviser to the Company.
Redefine Properties Limited (Redefine Properties)
Listed on the JSE, 32.95% shareholder of the Company.
REIT Real Estate Investment Trust. A REIT must be a publicly quoted company with
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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.
Revpar Revenue per available room (calculated by multiplying the hotel’s average daily room rate by its occupancy rate).
Share Plan The Long-Term Performance Share Plan (PSP) and the Restricted Stock Policy
TSR Total Shareholder Return. The growth in value of the Company’s share over a specified period, assuming that dividends are reinvested to purchase additional shares.
UK The United Kingdom of Great Britain and Northern Ireland.
UK-REIT UK Real Estate Investment Trust. A UK-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.
WAULT Weighted average unexpired lease term.
Weston Favell Weston Favell Shopping Centre in Northampton, UK
West Orchards West Orchards Shopping Centre in Coventry, UK
Wichford Wichford P.L.C., the previously LSE listed property investment company party to the reverse acquisition.
