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Redefine International P.L.C - Results for the year ended 31 August 2012
REDEFINE PROPERTIES INTERNATIONAL LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2010/009284/06)
JSE share code: RIN ISIN code: ZAE000149282
JSE share code: RINC ISIN code: ZAE000170262
(RIN or the company)
Set out below is an announcement which was released by Redefine International P.L.C., the London
Stock Exchange-listed subsidiary of RIN, on the Regulatory News Service (RNS) of the London
Stock Exchange today, 30 October 2012.
REDEFINE INTERNATIONAL P.L.C.
(Redefine International or the Company or the Group)
RESULTS FOR THE YEAR ENDED 31 AUGUST 2012
Redefine International, the diversified income focused property company, today announces its full year results for the year ended
31 August 2012.
Financial Highlights
- Earnings available for distribution of £25.5 million (31 August 2011: £20.3 million), an increase of 25.6%
- Basic loss per share of 21.7 pence (31 August 2011: 1.18 pence profit), largely due to non-cash valuation declines
- Adjusted fully diluted EPRA NAV per share of 39.06 pence
- Second interim dividend of 2.30 pence per share (31 August 2011: 2.10 pence), an increase of 9.5%
- Total declared dividends for the year of 4.40 pence per share (31 August 2011: 4.13 pence), an increase of 6.5%
Operational Highlights
- Successful restructuring or repayment of over £250 million of legacy financing facilities
- Full integration of Redefine International and Wichford businesses successfully completed
- Strong operating performance from Cromwell and Hotel property portfolio
- Leases on the Malthurst portfolio (petrol filling stations) re-geared to 2025, extending the lease term for an additional five years
- Full planning approval received for 287 residential units at Lyon and Equitable House, Harrow
- Sale of the Companys 94% shareholding in the Justice Centre in Halle, Germany
- £127.5 million raised through Firm Placing and Open Offer, post year end
Greg Clarke, Chairman, said:
The year under review has been an exceptionally busy period and, I am pleased to report, will place the Company in a
substantially stronger position for the 2013 financial year. The restructuring and repayment of a number of legacy debt facilities,
together with the successful capital raise post year end, has significantly reduced the Groups leverage and strengthened its
financial position, allowing a shift in focus from restructuring the balance sheet to enhancing the property portfolio. The outlook for
much of the UK and Eurozone economies remains subdued. But, with a renewed focus on investment, the Company is now well
placed for future growth at a time when there are attractive opportunities to make accretive acquisitions.
Meeting and conference call
A meeting for analysts and institutional investors will take place today at 09.00 (UK local time) at Redefine International, 2nd Floor,
30 Charles II Street, London, SW1Y 4AE. The meeting can also be accessed via a conference call dial in facility, starting at 09.00,
using the details below. The presentation will be made available on the Companys website
http://www.redefineinternational.com/investor-relations/financial-reports
Dial in number: UK Local +44(0)20 7136 2050 South Africa Local +27(0)11 019 7015
Confirmation Code: 7402335
For further information, please contact:
Redefine International Property Management Limited FTI Consulting LLP
Michael Watters, Stephen Oakenfull Stephanie Highett, Dido Laurimore, Faye Walters
Tel: +44 (0)20 7811 0100 Tel: +44 (0)20 7831 3113
Chairmans Statement
The 2012 financial year has been one of consolidation and positioning the Company for its future development and growth.
At the time of the Merger with Wichford a number of short term objectives were set and, I am pleased to report, the majority of
these have been achieved.
Significant progress has been made in dealing with the near term maturity of our legacy debt facilities relating to the UK regional
office portfolio, integrating the two businesses and raising new capital.
The Company now has the benefit of a stronger capital base from which to make opportunistic investments and acquisitions and a
renewed focus on delivering sustainable and growing income returns.
Capital Raise
Redefine Internationals highly successful capital raise post year end was of significant importance to the Company. The Firm
Placing and Open Offer concluded on 9 October 2012 and raised £127.5 million before costs, well in excess of the initial target of
£100 million. Take-up from qualifying shareholders under the Open Offer was 96.35% reflecting strong support from existing
shareholders. A number of new institutional investors participated in the Firm Placing, widening the Companys shareholder base.
The success of the capital raising is a positive endorsement of the milestones that have been and continue to be achieved by the
management team.
Financial Results
Earnings available for distribution for the year were 4.40 pence per share, in line with the forecast provided at the time of the
merger. In a period in which there were significant challenges for the UK retail and regional office environment and austerity
measures throughout the Eurozone and the UK, it is particularly pleasing to have achieved a strong operating and income
performance.
The Groups Adjusted EPRA NAV removes the negative equity associated with certain non-recourse financing facilities, principally
the Delta, Gamma and VBG portfolios. The restructurings of both the Delta and VBG portfolios were concluded post year end.
The Adjusted EPRA NAV as at 31 August 2012 was 39.06 pence per share, down 16.5% from 29 February 2012. EPRA NAV per
share (unadjusted) decreased to 24.78 pence per share from 38.23 pence at 29 February 2012, largely as a result of significant
declines in values for regional offices across the UK, which impacted our former Wichford properties despite their strong income-
generating characteristics.
Operations
The performance of the portfolio varied substantially across our business segments. Overall, occupancy and income returns were
stable despite tough trading conditions, particularly for the UK Retail portfolio. In a market with such divergent performances, the
benefit of having diversified sources of income with strong covenants has been demonstrated.
The Hotel property portfolio performed strongly in a year that included both the Queens Diamond Jubilee and the Olympics. The
underlying hotel properties benefited from near full occupancy over the Olympic and Paralympic period and demand has remained
robust, which is encouraging.
Our investment in Cromwell remains an important part of the business and we are confident that the quality of the underlying
portfolio and recent investments will continue to provide strong income returns for our shareholders.
Dividend
The Board declared the second interim dividend of 2.30 pence per share on 20 September 2012, resulting in a total dividend of
4.40 pence per share for the financial year, reflecting a pay-out ratio of 100% of earnings available for distribution.
Prospects
Our success in strengthening the Groups financial position will allow an increasing shift in focus from restructuring legacy financing
facilities to enhancing the property portfolio. The market continues the process of recapitalising assets financed prior to the credit
crisis and the Company is now in a considerably stronger position to take advantage of these opportunities.
The anticipated changes to the UK REIT legislation were enacted in July 2012, paving the way to convert to a UK REIT without
having to incur the previous conversion charge. The Company is in the process of fully assessing the benefits to shareholders of
such a potential conversion and further announcements will be made in due course.
I would like to thank shareholders for their support through this restructuring period and the management team for their committed
efforts to transforming the Groups balance sheet and ensuring the capital raising was successful.
Lastly, I would also like to thank my fellow directors who formed the new Board following the merger with Wichford. The Board has
functioned well to guide the Company through this period of positive change.
Greg Clarke
Chairman
Redefine Properties International Limited (RIN) Trading Statement
The Company refers to the announcement made today by its largest shareholder, RIN. In terms of the Listing Requirements of the
JSE Limited, RIN is required to publish a trading statement when it is satisfied that a reasonable degree of certainty exists that the
distribution per linked unit for the period to be reported upon next will differ by at least 15% from the distribution for the previous
corresponding period. The Company notes RINs trading statement and that its expected range of distribution per linked unit for the
year ending 31 August 2013, after factoring in the known effects of the recent capital raise, is broadly consistent with the latest
published analyst guidance for Redefine International P.L.C. The financial results on which RINs trading statement is based have
not been reviewed or reported on by RINs external auditors.
Our Business
Investment Strategy
The Groups strategy is focused on delivering sustainable and growing income returns through investment in high income yielding
assets let to high quality occupiers on long leases. Development exposure is generally limited to asset management and ancillary
development of existing assets in order to enhance and protect capital values. The Group aims to distribute the majority of its
earnings available for distribution on a semi-annual basis, providing investors with attractive income returns and exposure to capital
growth opportunities.
Investment Markets
The Group is focused on real estate investment in large, well developed economies with established and transparent real estate
markets. The investment portfolio is geographically diversified across the UK, Europe and Australia providing exposure to the
office, retail, industrial and hotel sectors.
Business Segments
UK Stable Income Consists predominantly of offices let to the UK Government, but includes petrol filling stations,
Kwik-Fit centres, retail and residential units.
UK Retail Consists of the Groups UK shopping centre portfolio which includes six shopping centres
(two of which are held through jointly controlled entities).
Europe Consists of all the Groups properties in Continental Europe, located in Germany, Switzerland
and the Netherlands. The portfolio comprises discount supermarkets and government let
offices.
Hotels Consists of all the Groups hotel properties. The hotels are let to Redefine Hotel
Management Limited on a fixed rental basis with annual reviews. The portfolio comprises five
London based hotels and one hotel in Reading, branded under the Holiday Inn, Holiday Inn
Express and Crowne Plaza franchises.
Cromwell Relates to the Groups investment in the Cromwell Property Group, a commercial real estate
company listed in Australia with major lettings to listed company and government tenants. As
at 31 August 2012 Cromwells market capitalisation was £572.5 million and the Companys
shareholding was 23.08%.
Property portfolio by business segment at 31 August 2012
Occupancy by Annualised gross
Business segments Market values lettable area Lettable area rental income
31 August 2012 (£million) (%) (000 sqft) (£million)
UK Stable Income 404.7 93.3 3,632 39.0
UK Retail 224.1 95.2 1,578 20.5
Europe 190.6 99.3 1,594 15.7
Hotels 123.3 100.0 268 9.4
(1)
Cromwell 259.1 96.4 1,255 22.8
Total 1,201.8 95.5 8,327 107.4
Note:
1. Figures for Cromwell reflect the Companys 23.08% share of Cromwells property assets and net rental income. The investment
value based on the 31 August 2012 share price is £132.1 million.
Figures (excluding Cromwell) assume 100% ownership of assets held in subsidiaries and jointly controlled entities.
Top 15 properties by value
Annual- Weighted
Owner- ised Let average
Market ship Lettable gross by unexpired
Anchor value interest area rental area lease term
Name tenants (£million) (%) Sector (sqft) (£million) (%) (years)
Wigan, Grande Arcade Debenhams, BHS 76.4 50.0% Retail 471,355 7.44 99% 13.1
Harrow, St Georges Debenhams 57.0 100.0% Retail 216,153 4.36 97% 6.4
Coventry, West Orchards Debenhams 37.0 50.0% Retail 210,037 3.91 98% 7.9
Dresden, VBG1 VBG 28.4 100.0% Office 187,818 2.18 100% 11.7
Warrington, Birchwood ASDA 28.0 100.0% Retail 395,749 2.64 92% 16.9
Brentford Lock, Holiday Inn RHM2 25.4 71.0% Hotels 61,064 1.95 100% 13.3
Limehouse, Holiday Inn
Express RHM2 24.1 71.0% Hotels 61,860 1.80 100% 13.3
St Helier, 25-26 Esplanade JFSC3 23.9 50.0% Office 59,352 1.64 100% 11.0
Southwark, Holiday Inn
Express RHM2 23.2 71.0% Hotels 23,476 1.69 100% 13.3
Royal Docks, Holiday Inn
2
Express RHM 22.6 71.0% Hotels 49,094 1.62 100% 13.3
Stuttgart, VBG1 VBG 22.2 100.0% Office 134,059 1.86 100% 12.4
Bradford, Centenary Court HMRC 18.0 100.0% Office 46,940 0.90 100% 8.6
The Hague, ICC Royal Dutch Gov. 16.6 100.0% Office 138,618 1.78 100% 1.8
Leeds, Castle House HMRC 16.5 100.0% Office 78,262 1.25 100% 11.3
Seaham, Byron Place ASDA 16.1 100.0% Retail 115,377 1.36 100% 13.1
Notes:
1. A 50% interest in the holding company which holds the VBG portfolio was sold on 9 October 2012
2. Redefine Hotel Management Limited
3. Jersey Financial Services Commission
UK Stable Income
Market
The UK market remains polarised between the core Central London and West End markets and the rest of the UK. The regional
office market has seen significant increases in investment yields (lower valuations) as the general UK office market suffers from the
highest void rate recorded by IPD. The majority of investment capital has focused on prime London assets. The relative pricing and
performance of UK regional assets should move back into line with London at some point, although fundamentals suggest this is
unlikely in the near term.
Performance
Against these exceptionally challenging market conditions, the portfolio was relatively resilient with occupancy at 93.3% (29
February 2012: 95.0%). Of the eight leases (59,657 sqft) which expire or were subject to break options during the year, five leases
(38,228 sqft) were either renewed or re-let.
The UK Stable Income portfolio was valued at £404.7 million at 31 August 2012, a decline of 10.7% since 29 February 2012. This
significant decline in value is reflective of the current lack of investment demand for offices outside London and the supply/demand
imbalances in many regional towns. The Company benefits from secure cashflows and strong tenant covenants, although a
strategy to focus on fewer and better quality assets is expected to provide better long term income security and more stable capital
values.
Asset Management
Lyon House and Equitable House, Harrow
Full planning permission was granted in May 2012 for a residential-led mixed use redevelopment scheme. The scheme represents
one of the most significant town centre developments to be granted planning permission in Harrow in the last five years.
The development will provide a total of 287 residential units, 49 of which will be affordable. In addition, approximately 33,000 sqft of
modern flexible commercial space will be provided. The Company has concluded a development agreement with Metropolitan
Housing Trust for the affordable element of the scheme and is in advanced negotiations with potential joint venture development
partners.
Churchill Court, Crawley
The Company completed a £0.5 million refurbishment of Valiant House incorporating a re-modelled reception and marketing suite.
The entire 27,000 sqft property is currently on the market for sale.
Crescent Centre, Bristol
The first half of a phased ground floor refurbishment programme was completed in April this year with the second phase completing
in October 2012. 4,500 sqft of the ground floor is under offer to existing tenants.
St Anne House, Croydon
A planning application is being drawn up to convert the currently vacant 73,000 sqft office property into a hotel with residential
apartments on the upper floors. Early stage negotiations are underway to pre-let 40,000 sqft to a major hotel franchise. The
property is well located to benefit from the planned investment activity around the Whitgift Centre.
Malthurst, petrol filling station portfolio
Leases across the portfolio were re-geared to 2025, extending the previous unexpired term by five years. Three properties were
sold post year end to Malthurst (the tenant) for £3.49 million as part of the re-gearing transaction. The book value of the sold
properties was £3.83 million.
Strategy & Outlook
The priorities for 2013 are to reduce the Groups overall exposure to UK regional offices through the sale of assets and to improve
the quality of the portfolio by retaining exposure to assets with long-term secure leases and/or higher value alternative uses.
As announced on 8 August 2012, the Company has already made progress through the restructuring of the Delta financing facility.
Seven assets valued at £35.2 million will be retained with the remaining 16 assets valued at £61.5 million to be sold during the
course of 2013/14, the proceeds of which will accrue to the servicer. The assets being retained (excluding the Lyon House, Harrow
redevelopment site) have a WAULT in excess of 17 years providing long-term secure government income.
UK Retail
Market
It has been an exceptionally challenging year for the retail sector in light of the current economic climate. Continuous pressure is
being applied on landlords to reduce rentals and service charges. In addition, there were a number of retailer administrations in the
past twelve months, although this appears to have stabilised.
Demand from retailers continues to move towards larger shopping centres and out of town retail parks placing increasing pressure
on smaller towns and high streets. Stronger retailers are responding to the changes in the retail environment by addressing their
floor space requirements, focusing on fewer trading locations and offering a multichannel approach in combination with traditional
stores.
Performance
The Companys exposure to regionally dominant shopping centres proved relatively defensive in a tough market. Footfall across
the portfolio was broadly flat on the same period last year. This should be seen as a positive result in the context of shopping
centres generally which saw national footfall declines of approximately 1.9%.
The UK Retail portfolio (including two properties held in jointly controlled entities) was valued at £224.1 million as at 31 August
2012, a decline of 9.4% since 29 February 2012. The decline in value reflects general market concerns surrounding retailers and
future demand for retail space as well as lower rental income across the portfolio.
Occupancy increased in the second half of the year to 95.2% (29 February 2012: 94.8%) reflecting a number of successful lettings
and tenant retentions. A total of 31 leases totalling 125,396 sqft were completed during the period which reflects positively against
the 28 leases totalling 90,648 sqft that expired or were subject to tenant break options. The Company has succeeded in limiting the
effects of retailer administrations by re-letting vacant stores and working with retailers to ensure the shopping experience is
unaffected. Overall new lettings were done at lower rental levels, particularly where deals were struck with new owners of those
retailers that went into administration.
UK Retail at a glance
31 August 31 August
2012 2011
Market value £224.1 million £257.9 million
Occupancy (by lettable area) 95.2% 97.4%
Annualised gross rental income £20.5 million £21.4 million
Estimated rental value (ERV) £20.4 million £21.5 million
1
Footfall % change (0.8%) (0.9%)
Net initial yield 7.5% 7.3%
Lettable area (000) 1,578 sqft 1,578 sqft
Figures assume 100% ownership of property assets in subsidiaries and jointly controlled entities.
1 Excludes Crewe
Asset Management
Asset management initiatives have focused heavily on protecting occupancy and income. Longer term value is being created by
investing in a number of centres, particularly Birchwood, Warrington and St Georges, Harrow.
Birchwood, Warrington
Focusing on the eastern section of the centre, the project involves a comprehensive refurbishment of the existing mall including a
replacement of the existing ceilings, flooring, a new glazed entrance, new public square and washroom facilities, providing a
refreshed and more modern shopping environment. The refurbishment provides an additional 50,000 sqft of retail floor space,
arranged as eight new units. Phases one and two of the redevelopment are now complete.
Two units of 19,000 sqft and 9,000 sqft have been pre-let to Home Bargains and QVC respectively, whilst a further 10,000 sqft unit
is under offer to a national discount retailer. Advanced discussions are underway in respect of the remaining units.
Practical completion is set for Spring 2013, when Home Bargains take occupation.
St Georges, Harrow
Asset management initiatives to modernise the centre and reposition it towards leisure elements are progressing well. The works
will create a contemporary new look including modern double height shop fronts on the ground floor and three new kiosks in the
ground floor atrium. The strategy is to reposition St Georges as the leisure and shopping destination of choice in the wider
catchment area and the creation of additional casual dining restaurants around the atrium is a key step in delivering this.
A planning application for a change of use to A3 uses (restaurant and cafes) was successful and a number of key lettings have
been completed or agreed. Pizza Express has signed a new 25 year lease subject to a tenant only break option at year 15 at a rent
of £79,300 p.a. The restaurant opened in October 2012. In addition, a lease with a multi-national restaurant chain is in legal
negotiations for approximately 4,000 sqft. Other lettings included Deichmann Shoes which completed on a new ten year lease at a
rent of £110,000 p.a. and opened in October 2012.
Disposal
On 31 August 2012, the Group disposed of a 31.25% shareholding in Ciref Coventry Limited, the holding company of West
Orchards Coventry Limited. The disposal was for a nominal amount and resulted in the West Orchards Shopping Centre now being
held through a jointly controlled entity.
Strategy & Outlook
Many retailers are likely to remain under pressure until stronger economic growth and consumer confidence returns. Occupancy
and income protection are therefore expected to be priorities in the near term
The faster pace at which lenders are now reducing their legacy loan books is bringing new opportunities to the market. The
Company will remain opportunistic toward well priced, dominant shopping centres with a greater focus on the South East.
Europe
Market
The majority of the Groups investments are in German discount retail assets let to predominantly multi-national discount retailers,
and office assets let to government-backed organisations. The market for secure income generating assets remains strong as
investors look for income returns in an exceptionally low interest rate environment.
Performance
The European portfolio was valued at 240.6 million or £190.6 million at 31 August 2012, a decline of 1.7% since 29 February 2012
in local currency terms. Occupancy remained high at 99.3% (29 February 2012: 100.0%) and rental income continues to benefit
from indexation, albeit inflation remains below historic averages.
Investment & Asset Management
Asset management activity during the period focused on extending short term leases and enhancing income security. A total of
seven leases totalling 65,956 sqft were extended for an average of 9.8 years.
The Company completed the acquisition of a retail property in Waldkraiburg and exchanged contracts for the purchase of a retail
property in Kaiserslautern during the period. Both investments are held in jointly controlled entities with Menora Mivtachim
(Menora), a leading Israeli insurance company. The aggregate purchase price of 16.0 million (£12.6 million) reflects a yield on
equity in excess of 10%. Both assets are newly constructed and fully let to predominantly multi-national discount retailers on leases
of between 10 and 15 years linked to 75% of German CPI.
The restructuring of the VBG portfolio was completed following the year end, again in joint venture with Menora. The investment
reflected an initial yield on equity in excess of 19.0%. The VBG assets comprise four individual office properties situated in Berlin,
Dresden, Cologne and Stuttgart in Germany, all of which are let to a German government-backed social insurance body. The
leases have unexpired terms of between 7.6 years and 12.4 years and are indexed to 100% of German CPI. The VBG portfolio,
following completion of the restructuring has a current rent roll of 7.6 million p.a.
Strategy & Outlook
The process of restructuring the portfolio and exiting certain legacy Wichford assets is largely complete following the sale of the
Justice Centre in Halle and the restructuring of the VBG portfolio. Further investment will be focused on German discount retail
assets let to tenants with strong covenants where there are opportunities to generate double digit income yields with indexation.
Hotel properties
Market
As expected, the London hotel market has benefited from a year which included both the Queens Diamond Jubilee and the
Olympics. August was an exceptional month with Revpar growth at 41.0% higher than 2011.
Although there are some overall concerns in the market that there may be a slowdown in the post Olympic period as a result of
increased supply and generally weak economic conditions, there has been no evidence of this in the Groups Hotel Property
portfolio with the underlying tenant business continuing to trade well. The Companys focus on the branded limited service sector is
anticipated to provide more stable and consistent performance over the longer term.
Performance
The Hotel property portfolio was valued at 123.4 million at 31 August 2012, unchanged since 29 February 2012. Investment and
occupational demand for limited service hotels in London remains strong as evidenced by the number of operators and hotel
brands looking to expand into this market.
Underlying Performance
The Company sets a fixed annual rental which is reviewed annually. Redefine Hotel Management Limited (RHML) which operates
the hotel business on its own account continues to perform well and, while activity levels in 2013 are expected to be slightly below
that of 2012 due to fewer major events, trading in recent months has been encouraging.
Investment & Asset Management
A programme of refurbishment and reinvestment was carried out across the portfolio during the financial year to ensure the Groups
hotel properties provide modern and well specified accommodation.
Construction of an additional 50 rooms is set to commence in the new financial year at the Southwark Holiday Inn Express and is
anticipated to be completed in August 2013. The Company aims to enter into a forward funding commitment to acquire the
completed rooms on a pre-agreed return to match the existing yield.
Strategy & Outlook
The strategy to focus on branded London-based limited service hotel properties will be maintained. The Company will look to
capitalise on the wider Groups established hotel management platform to acquire assets from distressed or undercapitalised
owners in order to grow the portfolio. A number of acquisition opportunities are currently being considered.
Cromwell Property Group
The Cromwell Property Group (Cromwell)
Cromwell is an internally managed Australian Real Estate Investment Trust (A-REIT) with a property investment portfolio in excess
of AUD 1.7 billion (£1.1 billion) together with a fund management business that promotes and manages unlisted property
investments. Cromwell has an enviable track record of developing and owning high quality investment products whilst delivering
consistent returns to investors.
Cromwell trades on the Australian stock exchange as a stapled security comprising Cromwell Corporation Limited (which manages
the funds management brand and the property operations) and Cromwell Diversified Property Trust (which owns the AUD 1.7
billion property portfolio).
Performance
Cromwell produced a strong set of operating and financial results for their financial year ended 30 June 2012. Highlights included:
- Operating profit increased by 23% to AUD 80.0 million (7.5 cps)
- Increase in like for like property income of 6.8%
- Growth in operating EPS of 6.0%
- Distributions maintained at 7.0 cps with guidance of 7.25 cps for FY2013, providing a forward yield of 9.7% on the share price
as at 31 August 2012
- Net tangible assets per security (excluding interest rate swaps) of 71 cps.
During the year Redefine International increased its shareholding in the company from 21.7% to 23.08%. This subsequently
reduced to 22.14% when Cromwell issued securities after year end to acquire the unlisted Cromwell Property Fund.
Investment & Asset Management
The underling property portfolio remains focused on commercial offices (93% by gross income) with balanced exposure to
Brisbane, Sydney, Melbourne and Canberra. Government and listed companies account for approximately 84% of gross income
providing strong covenants and income security.
The recent acquisitions of HQ North Tower in Brisbane for AUD 186 million and the Bundall Corporate Centre on the Gold Cost for
AUD 63 million provide opportunities for asset management and capital growth.
Strategy & Outlook
Cromwells strategy remains focused on managing a portfolio of Australian assets with long lease profiles and quality tenants.
Growth in operating earnings is expected to be underpinned by property earnings before the contribution from fund management
activities or other transactions. Cromwell is well positioned to deliver the strong property income returns historically achieved whilst
being able to take advantage of current market conditions to buy quality property at attractive prices.
Portfolio Summary
Portfolio overview by business segment
Business segments market values
Segmental
Lettable Market Split by Net initial
Properties Area Value Value Yield
(No.) (sqft 000) (£million) (%) (%)
UK Stable Income 133 3,632 404.7 33.7 9.1
UK Retail 6 1,578 224.1 18.6 7.5
Europe 37 1,594 190.6 15.9 7.7
Hotels 6 268 123.3 10.3 7.2
(1)
Cromwell 22 1,255 259.1 21.5 8.3
Total investment portfolio 204 8,327 1,201.8 100.0 8.5
Notes:
1. Figures reflect Redefine Internationals effective 23.08% share of Cromwells property assets and net rental income at 31 August 2012. The value
of the investment in Cromwell at 31 August 2012 is £132.1 million based on the year end price of 75 cent per stapled security.
The Cromwell property portfolio consists of 22 assets with a market value of AUD 1.72 billion (£1.2 billion) as at 30 June 2012.
Figures (excluding Cromwell) assume 100% ownership of property assets held in subsidiaries and jointly controlled entities.
Business segments gross rental income
Weighted
Annualised average Occupancy
gross Average unexpired by lettable Indexation and
rental income rent per lease term area fixed increases
(£million) (sqft) (years) (%) (%)
UK Stable Income 39.0 10.8 7.9 93.3 56.9
UK Retail 20.5 13.0 11.0 95.2 5.3
Europe 15.7 9.9 7.8 99.3 100.0
Hotels 9.4 35.1 13.3 100.0 -
(1)
Cromwell 22.8 18.1 6.2 96.4 74.0
Total investment portfolio 107.4 12.9 8.6 95.5 52.0
Notes:
1. Cromwell rental income reflects Redefine Internationals effective 23.08% share of Cromwells property assets and net rental
income at 31 August 2012.
Figures (excluding Cromwell) assume 100% ownership of property assets held in subsidiaries and jointly controlled entities.
Business segments - valuation movement since 29 February 2012
Valuation movement
Proportion Market value six months ended
of portfolio 31 August 31 August
by value 2012 2012
c (%) (£million) (%)
UK Stable Income 37.7 404.7 (10.7)
UK Retail 20.8 224.1 (9.4)
1
Europe 17.0 182.9 (7.1)
Hotels 11.5 123.3 (0.0)
2
Cromwell 12.3 132.1 (0.4)
Total like-for-like portfolio 99.3 1,067.1 (7.5)
3
Acquisitions 0.7 7.7 0.8
Total investment portfolio 100.0 1,074.8 (7.4)
Notes:
1. Includes the effect of foreign exchange movement during the period. Values in local currency declined 1.7%.
2. Cromwell reflects investment value at a closing share price of 75.0 Australian cents per stapled security.
3. Acquisition of Waldkraiburg. The valuation movement reflects the effect of the foreign exchange rate movement only.
Figures (excluding Cromwell) assume 100% ownership of property assets held in subsidiaries and jointly controlled entities.
Portfolio overview by sector
Property sectors at 31 August 2012
Occupancy Annualised gross
Market value by lettable area Lettable area rental income
(£million) (%) (sqft000) (£million)
Retail 313.6 96.3 2,392 26.5
Office 460.3 93.2 3,530 44.2
Industrial 40.7 100.0 809 3.0
Hotels 123.3 100.0 268 9.4
Other 4.8 100.0 73 1.5
Total 942.7 95.4 7,072 84.6
Note:
Excludes Cromwell and assumes 100 per cent. ownership of property assets held in subsidiaries and jointly controlled entities.
Financial Review
Overview
These results reflect the first full year of trading following the reverse acquisition of Wichford on 23 August 2011. As reverse
acquisition accounting was applied on the transaction between Redefine International Holdings Limited (RIHL) and Wichford with
RIHL being identified as the accounting acquirer, the comparative figures shown in the Income Statement are those of RIHL.
Consequently, gross rental income was £76.2 million, up 184.3% on the comparable period. Earnings available for distribution were
£25.5 million, up 25.6% on the prior year.
Notwithstanding the increased earnings available for distribution, the Group delivered a loss attributable to equity holders of the
parent of £124.76 million for the twelve months ended 31 August 2012. The key driver of this loss was a net decrease in the fair
value of the Groups investment property and assets held for sale of £126.9 million. £94.6 million of the fair value loss relates to the
historic Wichford UK portfolio, including assets in the Gamma and Delta portfolios.
The debt facility secured against the Delta portfolio has been successfully restructured subsequent to the financial year end and the
Gamma facility is currently under negotiation with the loan servicer. As both of these facilities are non-recourse to the Group, the
negative equity associated with the portfolios of £61.9 million or 10.17 pence per share has been excluded from the calculation of
Adjusted NAV per share.
Additional items impacting the results of the Group for the year include:
- A £25.9 million increase in finance costs due to the amortisation of the fair value adjustment which arose on the VBG, Gamma
and Delta facilities at the date of the reverse acquisition of Wichford. These is a non-cash, IFRS adjustments, which will
reverse upon sale or re-structuring of the underlying assets on which the non-recourse loans are secured.
- A net increase in the fair value of the interest rate derivatives held by the Group of £10.0 million. The gain was principally due
to the near-term expiry of the Delta and Gamma interest rate swaps.
- An unrealised profit of £6.0 million from equity accounted entities, mainly due to the continued strong performance of
Cromwell.
Net assets
The items mentioned above have contributed to a decrease in the fully diluted EPRA net asset value per share, from 50.72 pence
in the prior year to 24.78 pence per share. 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 EPRA NAV as at 31 August 2012, includes items which, in the opinion of the Board, should be adjusted in order to better
reflect the underlying value of the Group. An Adjusted EPRA net asset value has therefore been calculated as follows:
Note Pence per share
Fully diluted IFRS NAV per share as at 31 August 2012 21.84
Adjusted for derivatives and deferred tax 2.94
Fully diluted EPRA NAV per share as at 31 August 2012 24.78
Write back of VBG negative equity 1 2.86
Write back of Delta negative equity 2 2.95
Write back of Gamma negative equity 3 7.22
Cromwell fair value write-up 4 1.25
Adjusted fully diluted EPRA NAV per share 39.06
Notes
1. The net VBG portfolio debt value as at 31 August 2012 was in excess of the current investment property value. Following the restructuring
which was completed subsequent to the year end, the negative net asset value position has been reversed, leading to a positive effect on net
asset value per share of 2.86 pence per share.
2. Following the successful completion of the Delta restructuring announced on 15 October 2012, the negative net asset value position of 2.95
pence per share is expected to reverse over the remaining term of the loan.
3. The Gamma portfolio debt values were in excess of the current investment property values at the year end. Following a proposed restructuring
and taking into account the non-recourse nature of the portfolio, the negative net asset value position is anticipated to reverse in the
foreseeable future, leading to a positive effect on net asset value per share of 7.22 pence.
4. Cromwell has been equity accounted at a net asset value of AUD 69.8 cents per security at 31 August 2012. The market price of Cromwell at
31 August 2012 was 75.0 cents per security and hence, should the Cromwell investment have been accounted for at fair value at this date, it
would have led to a write-up of 1.25 pence per share.
Earnings available for distribution
The Companys policy is to distribute the majority of its earnings available for distribution in the form of dividends to shareholders.
Considering the earnings available for distribution at the year end, the Board declared a second interim dividend of 2.30 pence per
share on 20 September 2012, payable to shareholders on 22 November 2012. No final dividend is proposed. Taken together with
the first interim dividend of 2.10 pence per share, the full year dividend was 4.40 pence per share, an increase of 6.5% on the prior
year and in line with the forecasted distribution presented in the reverse acquisition prospectus in July 2011. This was a pleasing
result considering the challenging market conditions and is confirmation of the resilience of the Groups underlying earnings despite
the negative asset revaluations incurred during the year.
The earnings available for distribution excludes any capital and one-off items and the figure is used by the Board as its measure of
underlying earnings performance. The statement of earnings available for distribution is presented as follows:
Year ended Year ended
31 August 31 August
2012 2011
Total Total
£'000 £'000
Gross rental income from investment properties 73,394 27,335
Property operating expenses (4,688) (2,957)
Net operating income from investment properties 68,706 24,378
Cromwell distributions received 11,467 8,361
Other income 1,866 1,287
Total revenue 82,039 34,026
Administrative expenses (1,538) (774)
Investment management fees (5,451) (2,431)
Professional fees (2,684) (1,040)
Net operating profit 72,366 29,781
Share of distributable income from associates and jointly controlled entities 847 2,697
Gain on financial assets and liabilities - 840
Adjusted operating profit 73,213 33,318
Net finance charges (43,273) (14,813)
Interest paid (43,519) (14,867)
Interest received 246 54
Foreign exchange loss (240) (329)
Taxation (2,216) (291)
Profit before non-controlling interests 27,484 17,885
Non-controlling interest (1,996) (734)
Wichford acquired earnings - 3,166
Earnings available for distribution for the year 25,488 20,317
First interim distribution (12,168) (8,395)
Year ended Year ended
31 August 31 August
2012 2011
Total Total
£'000 £'000
Earnings available for distribution at year end 13,320 11,922
Earnings available for distribution per share
Earnings available for distribution 13,320 11,922
Number of ordinary shares in issue ('000) 579,454 567,644
Earnings available for distribution per share (pence) at year end 2.30 2.10
Summary
Distribution per share (pence) 4.40 4.13
First interim (pence) 2.10 2.03
Second interim (pence) 2.30 2.10
Financing and capital
Although the Groups continued efforts to strengthen the balance sheet did not significantly impact the position at 31 August 2012,
the completion of the VBG and Delta restructurings, as well as the £127.5 million capital raising, have significantly improved the
balance sheet following the year end.
Looking ahead, the Group will look to deploy funds to both reduce gearing and seek yield enhancing investment opportunities.
Despite the limited amount of lending availability as a result of the regulatory and liquidity issues that continue to affect banks and
financial institutions across Europe, the cost of debt finance is attractive relative to almost all investment yields and means that
debt, where available, is earnings accretive to the vast majority of transactions.
The nominal value of the Groups debt facilities at 31 August 2012 was £744.7 million (£858.1 million including its attributable share
of debt in subsidiaries and jointly controlled entities). A pro-forma position of the investments and related debt financing has been
set out in the table below to show the effect of the capital raise and various debt restructurings and repayments completed after
31 August 2012.
31 August 31 August
Pro-Forma 2012 2011
Key financing statistics £000 £000 £000
Total investment portfolio 596,128 889,588 1,076,568
Gross debt 338,511 744,733 863,149
Cash and short-term deposits (74,459) (17,726) (51,368)
Net debt 264,052 727,007 811,781
Weighted average debt maturity 5.55 years 2.57 years 4.15 years
Weighted average interest rate 5.07% 5.02% 5.01%
% of debt at fixed/capped rates 97.5% 93.3% 92.9%
Loan-to-value 50.5% 81.7% 75.4%
Details of the repayment and restructuring of facilities which took place after 31 August 2012 are set out below:
VBG
The Company announced that it had completed the restructuring of all four VBG assets and the associated financing facilities on 8
October 2012. The restructuring and refinancing of the VBG portfolio and financing facilities has resulted in the Company owning a
50% interest in the VBG assets together with Menora as its joint venture partner.
As part of the restructuring, the Company agreed to sell, for a nominal amount, 50% of its interest in the VBG holding company to
Menora. This newly established joint venture company, together with certain of its subsidiaries, reached agreement with the
servicer of the VBG facilities to dispose of the VBG assets to new subsidiary companies within the joint venture vehicle. The
proceeds from the disposal of approximately 80.0 million were used to settle the original VBG facilities in full. The facilities had an
outstanding balance of 117.3 million.
The gross acquisition cost (inclusive of transaction costs) of approximately 84.9 million was partly funded by the joint venture
company with a new five year 57.0 million debt facility secured from DG Hyp, with both joint venture partners injecting 14.0
million (£11.7 million) for their 50% interests. The new debt facility has been secured at a margin of 1.72% p.a. which, together with
a swap rate of 0.915% p.a., provides an all-in rate of 2.64% p.a., resulting in an initial yield on equity in excess of 19.0% on the
Group's investment.
Delta
The Company announced on 15 October 2012 that the agreement to extend and restructure the £114.6 million Delta facility had
been completed. The restructuring involved the repayment of £33.5 million of debt in consideration for the release from charge of a
portfolio of seven assets, including the Lyon House, Harrow development site and six other assets let to predominantly UK central
government occupiers. The repayment of debt associated with the six income producing assets reflects a net initial yield of 7.6%
and a weighted average unexpired lease term in excess of 17 years.
The maturity date of the Delta facility has been extended to 15 April 2015 subject to the Company meeting certain limited annual
disposal targets, which the Company considers achievable, in respect of the remaining 16 Delta portfolio assets. The disposal
proceeds, together with amortisation requirements, will be applied to reducing the remaining £81.1 million facility balance. The
facility remains non-recourse to the Group.
Gamma
The Company continues to negotiate and explore restructuring options in connection with the £199.7 million Gamma facility. The
facility matured on 15 October 2012 and is currently subject to a Standstill Agreement whilst negotiations are in progress. The
facility is non-recourse to the Group.
Other facilities
The Group completed the restructuring of the Delamere Place, Crewe Facility with Aviva in May 2012. The outstanding loan
balance of £17.5 million in Delamere Place Crewe Limited was replaced by Mezzanine Capital Limited and subsequently settled
with Aviva for a £11.0 million cash payment.
As at 31 August 2011 the Malthurst portfolio was ungeared. A new £11.8 million facility with HSBC was put in place on 30
September 2011 with a five year term at an all-in rate of 4.19%. The loan reflects an LTV of 49.3%, in line with the Groups strategy
of reducing LTVs, and has allowed the Group to take advantage of the current low interest rate environment.
Equity Raising
On 13 September 2012, Redefine International announced details of a proposed Firm Placing and Open Offer to raise £127.5
million (£122.5 million net of expenses) through the issue of 490,384,616 New Ordinary Shares at an Issue Price of 26 pence per
New Ordinary Share.
The Company announced on 4 October 2012 that it had received valid applications under the Open Offer in respect of 386,517,950
New Ordinary Shares from Qualifying Shareholders. In addition, 89,223,606 Firm Placed Shares were placed with certain
institutional and other investors pursuant to the terms of the Firm Placing. As a consequence the Company raised, through its Firm
Placing and Open Offer, gross proceeds of £127.5 million.
The New Ordinary Shares were admitted to trading on 9 October 2012. These New Ordinary Shares are not eligible for the second
interim dividend, as announced on 20 September 2012, but rank pari passu in all other respects with the existing ordinary shares
as at the date of issue. The Ordinary Shares were consolidated on 11 October 2012 on a 0.9 for 1 basis, following which the
Companys issued ordinary share capital comprises of 962,855,467 Ordinary Shares of 8.0 pence each.
Cashflow
The cash flow statement reflects a net operating cash inflow before financing costs of £74.06 million (31 August 2011: £35.1
million), a substantial increase from 2011.
Operating cash flows after interest and taxation amounted to £20.1 million, up 63% from the prior year. A net reduction of £58.9
million on acquisitions from the prior year was directly related to the focus on renegotiation of current debt facilities and
implementing the capital raising. The major outflow for the year was the additional investment in Cromwell following the
subscription for 51,470,588 new Cromwell stapled securities for an amount of AUD 35 million (£22.6 million) in terms of an
underwriting commitment for the Cromwell capital raising. The additional investment in Cromwell was partly financed by the
placement of 12,750,000 shares to Redefine Properties International Limited on 1 February 2012, at a price of 37.0 pence per
share and utilising the existing facility with Investec (Australia) Limited.
The repayment of loans and borrowings include a one-off repayment of the Delamere Place, Crewe facility amounting to £11.0
million as well as £5.5 million of loan amortisations. The proceeds from loans and borrowings largely comprise a new £11.8 million,
five year facility for the Malthurst portfolio and a £7.6 million increase in the Investec facility referred to above.
Dividends paid during the period, being the final August 2011 dividend and the February 2012 interim dividend amounted to £24.1
million.
Hedging
The Group utilises derivative instruments, including interest rate swaps and interest rate caps to manage its interest-rate exposure.
At 31 August 2012, the net fair value liability of the Groups derivative financial instruments was £9.4 million. The decrease in the
liability of £12.9 million from the prior year, including the effects of foreign exchange, was principally due to the near-term expiry of
the Delta and Gamma interest rate swaps and the disposal of Halle.
The Group has a hedging policy which requires at least 75% of all interest rate exposures exceeding one year to be on a fixed or
capped rate basis. At 31 August 2012, Group debt (including its economic interest of subsidiaries and jointly controlled entities) was
93.3% fixed. For facilities with interest rate swaps or caps attached, the interest rates are fixed or capped for the duration of the
facility. The Group has not applied hedge accounting during the current period and changes in the fair value of the Groups hedging
instruments have been recognised in profit or loss.
Taxation
Redefine International has elected to early adopt the amendment of IAS 12 and deferred taxation is now recognised on the
revaluation of the building component of investment properties at the capital gains rate on the presumption that the investment will
be recovered through disposal and will therefore attract capital gains tax. Redefine International has applied the amendment
retrospectively as required by IAS 8. The early adoption had the effect of reducing the 2011 deferred taxation balance with a
corresponding increase of opening 2012 reserves by £0.9 million. The change in accounting policy had no impact on the balances
reported in 2010.
The first significant changes since the introduction of the UK REIT regime in 2007 were enacted in July 2012, when the Finance Bill
2012 received Royal Assent. Accordingly, the advantages afforded by the new legislation, in particular the removal of the 2.0%
gross asset conversion charge, provides an efficient method for the Group to convert to a transparent and tax efficient regime.
The Company had previously highlighted its intention to convert to a UK REIT and is, in consultation with its tax advisers, reviewing
the possibility of conversion. Any further decisions surrounding conversion and the potential benefits will be announced in due
course.
Conversion to a UK REIT would also involve the internalisation of the management of the Company. The Board recognises the
trend towards and advantages of internalising management and is in the process of determining the relative merits for the
Company and its shareholders.
Consolidated Income Statement
For the year ending 31 August 2012
Restated
Year ended Year ended
31 August 2012 31 August 2011
Total Total
Notes £'000 £'000
Revenue
Gross rental income 76,150 26,823
Investment income - 3,875
Other income 1,917 1,592
Total revenue 78,067 32,290
Expenses
Administrative expenses (1,639) (774)
Investment adviser and professional fees (9,006) (4,664)
Property operating expenses (4,707) (2,368)
Net operating income 62,715 24,484
Gains from financial assets and liabilities 1,943 12,517
Redemption of loans and borrowings 5 6,080 913
Loss on sale of subsidiaries 24 (2,195) (334)
Equity accounted profit/(loss) 6,325 (3,088)
Net fair value losses on investment property and assets held for sale 9,12 (126,871) (10,627)
Impairment of intangible assets - (591)
(Loss)/profit from operations (52,003) 23,274
Interest income 6 9,776 8,134
Interest expense 7 (81,344) (24,305)
Share based payment (768) (768)
Foreign exchange loss (542) (1,224)
(Loss)/profit before taxation (124,881) 5,111
Taxation 8 (3,370) (1,360)
(Loss)/profit after taxation (128,251) 3,751
(Loss)/profit attributable to:
Equity holders of the parent (124,755) 5,035
Non-controlling interest (3,496) (1,284)
(128,251) 3,751
Basic (loss)/earnings per share (pence) 22 (21.72) 1.18
Diluted (loss)/earnings per share (pence) 22 (21.72) 1.11
Consolidated Statement of Comprehensive Income
For the year ended 31 August 2012
Restated
Year ended Year ended
31 August 2012 31 August 2011
Total Total
£'000 £'000
(Loss)/profit for the year (128,251) 3,751
Other comprehensive income
Transfer of FCTR to income statement on disposal of foreign
operation 24 (381) -
Foreign currency translation on foreign operations - subsidiaries 497 1,927
Foreign currency translation on foreign operations - associates &
jointly controlled entities 13,14 (1,546) 4,882
Share of foreign currency movement recognised in associate
undertaking - 1,494
Share of cash flow hedge reserve movement recognised in associate
undertaking - (155)
Total comprehensive income for the year (129,681) 11,899
Total comprehensive income attributable to:
Equity holders of the parent (125,881) 13,157
Non-controlling interest (3,800) (1,258)
(129,681) 11,899
The accompanying notes form an integral part of these financial statements.
Consolidated Balance Sheet
As at 31 August 2012
Restated
Year ended Year ended
31 August 2012 31 August 2011
Total Total
Notes £'000 £'000
Assets
Non-current assets
Investment property 9 631,278 986,654
Long-term receivables 10 98,470 104,080
Investments designated at fair value 11 399 1,123
Investments in jointly controlled entities 13 2,159 2,607
Investment in associate 14 124,507 104,680
Total non-current assets 856,813 1,199,144
Current assets
Assets held for sale 12 136,009 -
Trade and other receivables 23,359 23,785
Cash at bank 15 17,726 51,368
Total current assets 177,094 75,153
Total assets 1,033,907 1,274,297
Equity and liabilities
Capital and reserves
Share capital 16 41,721 40,870
Share premium 164,939 161,420
Reverse acquisition reserve 134,295 134,295
Retained loss (232,991) (86,693)
Capital instrument 17 14,536 13,768
Foreign currency translation reserve 9,511 10,637
Other reserves 903 3,912
Total equity attributable to equity shareholders 132,914 278,209
Non-controlling interest 5,342 5,506
Total equity 138,256 283,715
Non-current liabilities
Borrowings 18 353,707 811,415
Derivatives 19 4,244 6,824
Restated
Year ended Year ended
31 August 2012 31 August 2011
Total Total
Notes £'000 £'000
Deferred tax 8 2,489 1,334
Total non-current liabilities 360,440 819,573
Current liabilities
Borrowings 18 400,455 117,071
Liabilities held for sale 18 91,935 -
Derivatives 19 5,379 16,291
Provision for liabilities and commitments 20 12,079 -
Trade and other payables 25,363 37,647
Total current liabilities 535,211 171,009
Total liabilities 895,651 990,582
Total equity and liabilities 1,033,907 1,274,297
Consolidated Statement of Changes In Equity
For the year ended 31 August 2012
Foreign Total
Reverse currency Cash flow attributable Non-
Share Share acquisition Retained Other translation hedge Capital to equity controlling Total
Capital Premium reserve loss reserves reserve reserve instrument shareholders interest equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 September 2010 3,047 211,359 - (78,327) 3,912 2,360 155 - 142,506 2,254 144,760
Change in accounting policy for deferred tax - - - - - - - - - - -
Restated balance at 1 September 2010 3,047 211,359 - (78,327) 3,912 2,360 155 - 142,506 2,254 144,760
Profit as previously reported - - - 5,035 - - 5,035 (1,284) 3,751
Effective portion of cash flow hedges from
associates - - - - - (155) - (155) - (155)
Foreign currency translation effect - - - - - 8,277 - 8,277 26 8,303
Total comprehensive income - - - 5,035 - 8,277 (155) - 13,157 (1,258) 11,899
Shares issued 1,471 73,096 - - - - - - 74,567 - 74,567
Share issue costs - (3,028) - - - - - - (3,028) - (3,028)
Scrip dividend paid to equity stakeholders 4 235 - (239) - - - - - - -
Dividend paid to equity stakeholders - - - (13,964) - - - - (13,964) - (13,964)
Dividend paid to non-controlling interests - - - - - - - - - (81) (81)
Decrease in non-controlling interest - - - (103) - - - (103) (326) (429)
Convertible shares to be issued - - - - - - - 13,000 13,000 - 13,000
Share based payment - - - - - - - 768 768 - 768
Contribution of non-controlling shareholders - - - - - - - - - 4,917 4,917
Shares issued pursuant to reverse acquisition 32,557 - 19,978 - - - - - 52,535 - 52,535
Cancellation of shares (2,308) - 2,308 - - - - - - -
Share issue costs - - (2,134) - - - - - (2,134) - (2,134)
Adjustment to present Wichford capital structure 6,099 (120,242) 114,143 - - - - - - - -
Reported balance at 31 August 2011 40,870 161,420 134,295 (87,598) 3,912 10,637 - 13,768 277,304 5,506 282,810
Change in accounting policy for deferred tax - - - 905 - - - 905 - 905
Restated balance at 31 August 2011 40,870 161,420 134,295 (86,693) 3,912 10,637 - 13,768 278,209 5,506 283,715
Balance at 1 September 2011 40,870 161,420 134,295 (86,693) 3,912 10,637 13,768 278,209 5,506 283,715
Total loss for the period - - - (124,755) - - - - (124,755) (3,496) (128,251)
Foreign currency translation effect - - - - - (1,126) - - (1,126) (304) (1,430)
Total comprehensive income - - - (124,755) - (1,126) - - (125,881) (3,800) (129,681)
Shares issued 851 3,519 - - - - - - 4,370 - 4,370
Shares taken into treasury - - (67) (317) - - - - (384) - (384)
Treasury shares sold - - 67 280 - - - - 347 - 347
Dividend paid to equity stakeholders - - - (24,089) - - - - (24,089) - (24,089)
Decrease in non-controlling interest (426) (426) 426 -
Share based payment - - - - - - - 768 768 - 768
Foreign Total
Reverse currency Cash flow attributable Non-
Share Share acquisition Retained Other translation hedge Capital to equity controlling Total
Capital Premium reserve loss reserves reserve reserve instrument shareholders interest equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Disposal of subsidiaries/non-controlling interests - - 3,009 (3,009) - - - - 3,210 3,210
Balance at 31 August 2012 41,721 164,939 134,295 (232,991) 903 9,511 - 14,536 132,914 5,342 138,256
The accompanying notes form an integral part of these financial statements.
18
Consolidated Cash Flow Statement
For the year ended 31 August 2012
Year ended Year ended
31 August 2012 31 August 2011
Total Total
Notes £'000 £'000
Cash flows from operating activities
(Loss)/profit before taxation (124,881) 5,111
Adjustments for:
Straight lining of rental income 504 169
Impairment of intangible assets - 591
Net fair value losses on investment property and assets held for sale 9,12 126,871 10,627
Exchange rate losses 542 1,224
Gains from financial assets and liabilities (1,944) (12,517)
Redemption of loans and borrowings 5 (6,080) (913)
Equity accounted (profits)/ losses (6,325) 3,088
Loss on sale of subsidiaries 2,195 334
Investment income - (3,875)
Interest income 6 (9,776) (8,134)
Interest expense 7 81,344 24,305
Share based payments 17 768 768
Cash generated by operations 63,219 20,778
Changes in working capital (6,915) 93
Cash flow from operations 56,304 20,871
Interest income 7,908 4,540
Interest paid (54,012) (22,867)
Taxation paid (1,412) (152)
Distributions received - 3,875
Distributions from associates and jointly controlled entities 11,263 5,986
Net cash generated from operating activities 20,051 12,253
Cash flows from investing activities
Purchase of investment properties 9 (3,893) (211,083)
Investment in associates and jointly controlled entities 14 (25,863) (18,586)
Cash acquired on reverse acquisition - 32,340
Acquisition of subsidiaries - (307)
Disposal of subsidiaries 24 (181) (477)
Decrease in loans to related parties - 3,990
Decrease in long term receivables (2,600) -
Purchases of financial assets - (1,565)
(Increase)/decrease in restricted cash balances (592) 14,616
Net cash utilised in investing activities (33,129) (181,072)
Cash flows from financing activities
Proceeds from loans and borrowings 19,443 152,831
Repayment of loans and borrowings (20,826) (21,846)
Dividends paid to equity shareholders (24,089) (13,964)
Dividends paid to non-controlling interests - (81)
Acquisition of treasury shares (384) -
Proceeds from issue of shares from treasury 347 -
Proceeds from issue of share capital 4,370 73,644
Share issue and reverse acquisition costs - (3,993)
Reduction in or contribution from non-controlling shareholders - 4,804
Net cash generated from financing activities (21,139) 191,395
Net(decrease)/increase in cash (34,217) 22,576
Effect of exchange rate fluctuations on cash held (17) 392
19
Year ended Year ended
31 August 2012 31 August 2011
Total Total
Notes £'000 £'000
Opening cash 39,937 16,969
Net cash at 31 August 15 5,703 39,937
The accompanying notes form an integral part of these financial statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 August 2012
1. General Information
Redefine International P.L.C (Redefine International) was incorporated on 28 June 2004 under the laws of the Isle of
Man and is listed on the Main Market of the London Stock Exchange. On 23 August 2011 the Companys financial year
end was changed to 31 August from 30 September.
With effect from 23 August 2011, Redefine International plc (subsequently renamed Redefine International Holdings
Limited (RIHL)) was legally acquired by Wichford P.L.C. (Wichford) and subsequently renamed Redefine International
P.L.C. As a result of the terms of the transaction, reverse acquisition accounting has been applied under IFRS 3 Business
Combinations (2008) and RIHL was identified as the accounting acquirer. Consequently, the comparative figures shown
for the consolidated statement of financial position reflect the reserves, assets and liabilities of RIHL and the capital,
reserves, assets and liabilities of Redefine International P.L.C., effectively acquired by RIHL at fair value as at 31 August
2011. As Wichford was the legal acquirer, the Wichford capital structure became that of the Company.
As the reverse acquisition occurred effective 31 August 2011, the comparative statement of comprehensive income
reflects the income and expenses of RIHL only, for the 12 months ended 31 August 2011.
The financial information presented herein does not amount to statutory financial statements. The Annual Financial Report
for the year ended 31 August 2012 will be available on the Internet website http://www.redefineinternational.com/investor-
relations/financial-reports later in November 2012.
The Auditors KPMG have reported on the audited financial statements and their report was unqualified. A copy of their
unqualified audit opinion is available at Top Floor, 14 Athol Street, Douglas, Isle of Man, IM1 1JA.
The preparation of the consolidated financial statements requires management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.
Actual results may differ materially from these estimates. The significant judgements made by management in applying
the Companys accounting policies and the key sources of estimation uncertainty are discussed further in Note 3.
2. Significant Accounting Policies
STATEMENT OF COMPLIANCE
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the IASB. This represents a difference from the prior year when the consolidated financial
statements were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.
There is however no material difference between International Financial Reporting Standards (IFRS) as issued by the
IASB and International Financial Reporting Standards (IFRS) as adopted by the EU.
The accounting policies applied by the Group in these consolidated financial statements are the same as those applied by
the Group in its audited financial statements as at and for the year ended 31 August 2011 except for the following:
IAS 12
In December 2010, the IASB released amendments to IAS 12 effective from 1 January 2012. Redefine International has
elected to early adopt the amendment of IAS 12. Deferred taxation is now recognised on the revaluation of the building
component of investment properties at the capital gains rate on the presumption that the investment will be recovered
through disposal and will therefore attract capital gains tax. Redefine International has applied the amendment
retrospectively as required by IAS 8.
It is the view of the Board that the adoption of this policy results in more accurate and meaningful information.
The effect of the change in the accounting policy is a reduction of the deferred tax balance, with a corresponding increase
in reserves as reflected in the statement of changes in equity.
The early adoption had the effect of reducing the 2011 deferred taxation balance with a corresponding increase of opening
2012 reserves by £0.9 million. The change in accounting policy had no impact on the balances reported in 2010.
Amendments to IFRS 7, Disclosures Transfers of Financial Assets
20
In October 2010, the IASB issued amendments to IFRS 7 Financial Instruments: Disclosures - Transfers of Financial
Assets. These amendments, were adopted by the Group during the year and result in additional disclosures on transfer
transactions of financial assets (for example, securitisations), including the possible effects of any risks that may remain
with the transferor of the assets. The adoption of this amendment did not have a significant impact on the Group.
DISPOSAL GROUPS AND NON-CURRENT ASSETS HELD FOR SALE
A non-current asset or a disposal group comprising assets and liabilities is classified as held for sale if it is expected that
its carrying amount will be recovered principally through sale rather than through continuing use, it is available for
immediate sale and the sale is highly probable to occur within one year. For the sale to be highly probable, the appropriate
level of management must be committed to a plan to sell the asset or disposal group.
Where the Group is committed to a sale plan involving the loss of control of a subsidiary it classifies all the assets and
liabilities of that subsidiary as held for sale when the criteria set out above and detailed in IFRS 5 Non-current Assets
Held for Sale and Discontinued Operations are met, regardless of whether the Group will retain a non-controlling interest
in its former subsidiary after the sale.
On initial classification as held for sale, generally, non-current assets and disposal groups are measured at the lower of
the previous carrying amount and fair value less costs to sell, with any adjustments taken to the income statement. The
same applies to gains and losses on subsequent re-measurement. However, certain items such as financial assets within
the scope of IAS 39 and investment property in the scope of IAS 40 continue to be measured in accordance with those
standards.
Impairment losses subsequent to classification of assets as held for sale are recognised in the income statement.
Increases in fair value less costs to sell assets that have been classified as held for sale are recognised in the income
statement to the extent that the increase is not in excess of any cumulative impairment loss previously recognised in
respect of the asset. Assets classified as held for sale are not depreciated.
Gains and losses on re-measurement and impairment losses subsequent to classification as disposal groups and non-
current assets held for sale are shown within continuing operations in the income statement, unless they qualify as
discontinued operations.
Disposal groups and non-current assets held for sale are presented separately from other assets and liabilities on the
statement of financial position. Prior periods are not reclassified.
PROVISIONS
A provision is recognised if, as a result of a past event the Group has a present legal or constructive obligation that can be
estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions
are determined by discounting the expected cash flows at a pre tax rate that reflects current market assessments of the
time value of money and the risks specific to the liability.
Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably,
the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote.
3. Significant Accounting Judgements, Estimates and Assumptions
The consolidated financial statements are presented in Great British Pounds, which is the functional currency of the
Company and the presentation currency of the Group, rounded to the nearest thousand pounds. They are prepared using
the historical cost basis except for investment property, derivative financial instruments and financial instruments
designated at fair value through profit or loss.
The preparation of financial statements in conformity with IFRS requires the use of judgements and estimates that affect
the reported amounts of assets and liabilities at the reporting date and the reported amounts of revenues and expenses
during the period reported. Although these estimates are based on the Directors best knowledge of the amount, event or
actions, actual results may differ from those estimates.
The principal areas where such judgements and estimates have been made are:
APPLICATION OF THE GOING CONCERN BASIS OF ACCOUNTING
These consolidated 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. The principal issues the Board considered in its enquiries included, inter alia, the maturity of the
Delta and Gamma facilities which total £314.29 million in October 2012 and the maturities of the VBG2 and VBG1 facilities
totalling £91.94 million and the equity raised post year end as part of the equity raising exercise.
Significant progress has been made on the refinancing discussions over the year and post year end including:
- The announcement on 3 August 2012 regarding the agreed restructuring of the VBG holding companies, the sale
of the VBG assets and restructuring/repayment of the related debt and its subsequent completion post year end.
The restructuring was finalised post year end with the proceeds from the disposal of the properties of
approximately 80.0 million used to settle the VBG facilities in full. The facilities had a current outstanding
balance of 116.0 million.
21
- The Company announced on 15 October 2012 that the agreement to extend and restructure the £114.6 million
Delta facility had been completed. The restructure sees the Group repaying £33.5 million of debt associated with
seven assets in the portfolio. The maturity date of the facility will then be extended to 15 April 2015 subject to the
Company meeting annual disposal targets.
- The settlement of the Aviva Commercial Finance Limited loan of £17.15 million secured on the Delamere Place,
Crewe property.
- The finalisation of the sale of the companies which held a 94% shareholding in the Justice Centre in Halle in
June 2012 resulting in property, with a value of 36.3 million and debt amounting to 37.1 million, being removed
from the Group's balance sheet and the de-recognition of a liability in respect of the 4% non-controlling interest.
Discussions are still on-going with respect to the Gamma facility of £199.7 million which matured on 15 October 2012. This
facility is non-recourse in nature. There can be no guarantee as to the outcome of current negotiations; however the Board
remains of the view that there would be limited impact on the continued operations of the Group should agreement not be
reached and if the servicer enforced its security rights.
The Board has also had regard for the funds raised as part of the equity raising which completed post year end and saw
the Company raise gross proceeds of £127.5 million. This additional capital will allow the Company 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 post year end and the progress made on loan refinancing that the Group
has adequate resources to continue in operation for the foreseeable future.
INVESTMENT PROPERTY VALUATION
The Group uses the valuations performed by its independent valuers as the fair value of its investment properties. The
valuation is based upon assumptions including estimated rental values, future rental income, anticipated maintenance
costs, future development costs and appropriate discount rates. The valuers also make reference to market evidence of
transaction prices for similar properties.
CLASSIFICATION OF INVESTMENT PROPERTY 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) for a fixed rent which is subject to annual review. RHML operates the hotel business
on its own account and is exposed to the fluctuations in the underlying trading performance of the hotels. It is responsible
for the day to day upkeep of the properties and retains the key decision making responsibility for the business. Aside from
the payment of rental income to Redefine International there are limited or no transactions between the two entities. As a
result, in line with guidance in IAS 40, Redefine International classifies the hotel properties as investment properties.
TAXATION
The Group is exposed to the risk of changes to tax legislation in the various countries in which the Group operates. It is
also exposed to different interpretations of tax regulations between the tax authorities and the Group.
DEFERRED TAXATION
The Group considers that the value of the property portfolio is likely to be realised through sale. The Group bases its
deferred taxation provision on the assumption that the residual value of the investment properties is not less than the
present value as provided by its external valuers.
The recoverability of any deferred tax asset is assessed and, where it is thought unlikely that a recovery will be made, is
not included in the Groups provision.
4. 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 Stable Income: Consists predominantly of UK offices, but includes petrol filling stations, Kwik-Fit centres, retail
and residential units.
UK Retail: Consists of the Groups major UK shopping centres.
Europe: Consists of the Groups properties in Continental Europe, located in Germany, Switzerland and
the Netherlands.
Hotels: Consists of the Groups hotel properties. The hotels are let to Redefine Hotel Management
Limited on a fixed rental basis with annual reviews.
22
Wichford: Consists of the Groups investment in Wichford, up to the date of the reverse acquisition.
Cromwell: Relates to the Groups investment in the Cromwell Property Group, Australia.
Relevant revenue, assets and capital expenditure information is set out below:
i) Information about reportable segments
UK
Stable UK
Income Retail Europe Hotels Wichford Cromwell Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 31 August 2012
Rental income 40,856 9,303 16,591 9,400 - - 76,150
Net fair value loss on investment property
and assets held for sale (101,215) (20,213) (5,102) (341) - - (126,871)
Gains/(loss) from financial assets and
liabilities 11,969 (8,391) (233) (1,463) - 61 1,943
Redemption of loans and borrowings - 6,080 - - - - 6,080
Losses on sale of subsidiaries (51) (1,323) (821) - - - (2,195)
Equity accounted (losses) / profits (858) - (914) - 8,097 6,325
Interest income 1,628 4,866 122 3,128 - 32 9,776
Interest expense - bank debt (23,755) (9,645) (30,624) (3,672) - (2,360) (70,056)
Property operating expenses (2,112) (1,696) (899) - - - (4,707)
Investment property 309,489 110,669 87,395 123,725 - - 631,278
Assets held for sale 61,450 - 74,559 - - - 136,009
Investments designated at fair value 222 118 59 - - - 399
Investment in jointly controlled entities 1,552 - 607 - - - 2,159
Investment in associates - - - - - 124,507 124,507
Loans and receivables 17,208 49,790 84 31,388 - - 98,470
Borrowings - bank loans (389,080) (73,191) (159,902) (74,961) - (24,740) (721,874)
Liabilities held for sale - - (91,935) - - - (91,935)
At 31 August 2011
Rental income 3,965 10,656 5,816 6,386 - - 26,823
Investment income - - - - - 3,875 3,875
Net fair value (losses)/gains on
investment property (354) (8,485) (2,298) 510 - - (10,627)
Gains/(losses) from financial assets and
liabilities 3,361 519 816 (2,225) - 10,046 12,517
Redemption of loans and borrowings 913 - - - - - 913
Gains /(losses) on sale of subsidiaries (334) - - - - - (334)
Equity accounted profits/(losses) 173 (2,137) 473 - (4,224) 2,627 (3,088)
Interest income 2,316 3,348 - 2,397 - - 8,061
Interest expense - bank debt (1,204) (8,400) (2,270) (2,460) - (727) (15,061)
Property operating expenses (102) (1,896) (303) (67) - - (2,368)
- -
Investment property 467,426 82,796 312,657 123,775 - - 986,654
Investments designated at fair value 361 592 170 - - - 1,123
Investment in jointly controlled entities 823 - 1,784 - - - 2,607
Investment in associates - - - - - 104,680 104,680
Loans and receivables 29,889 42,804 - 31,387 - - 104,080
Borrowings - bank loans (378,793) (139,818) (186,511) (75,778) - (17,344) (798,244)
ii) Reconciliation of reportable segment profit or loss
23
31 August 31 August
2012 2011
£'000 £'000
Rental income
Total rental income for reported segments 76,150 26,823
Profit or loss
Investment income - 3,875
Net fair value losses on investment property and assets held for sale (126,871) (10,627)
Gains from financial assets and liabilities 1,943 12,517
Redemption of loans and borrowings 6,080 913
Loss on sale of subsidiaries (2,195) (334)
Equity accounted profits/(losses) 6,325 (3,088)
Impairment of loans to jointly controlled entities - -
Interest income 9,776 8,061
Interest expense - secure bank loans (70,057) (15,061)
Property operating expenses (4,707) (2,368)
Total (loss)/profit per reportable segments (103,556) 20,711
Other profit or loss - unallocated amounts
Other income 1,917 1,592
Administrative expenses (1,639) (774)
Investment advisor and professional fees (9,006) (4,664)
Impairment of intangible assets - (591)
Interest income - 73
Interest expense (11,287) (9,244)
Share based payment (768) (768)
Foreign exchange loss (542) (1,224)
Consolidated (loss)/profit before income tax (124,881) 5,111
5. REDEMPTION OF LOANS AND BORROWINGS
31 August 31 August
2012 2011
£'000 £'000
Redemption of loans and borrowings 6,080 913
In May 2012, agreement was reached with Aviva Commercial Finance Limited with respect to the loan facility for
Delamere Place, Crewe. The outstanding loan balance of £17.15 million in Delamere Place Crewe Limited was replaced
by Mezzanine Capital Limited and subsequently settled with Aviva for a £11.0 million cash payment.
6. INTEREST INCOME
The following table details the interest income earned by the Group:
31 August 31 August
2012 2011
£'000 £'000
Interest income on bank deposits 250 136
Interest receivable from mezzanine financing 9,526 7,998
Total interest income 9,776 8,134
7. INTEREST EXPENSE
The following table details the interest expense incurred by the Group:
31 August 31 August
2012 2011
£'000 £'000
24
31 August 31 August
2012 2011
£'000 £'000
Interest expense on secured bank loans (70,056) (15,060)
Finance lease interest (693) (386)
Interest expense on other financial liabilities (509) (868)
Interest expense on mezzanine financing (10,086) (7,991)
Total interest expense (81,344) (24,305)
Interest expense on secured bank loans includes £25.93 million in finance costs due to the amortisation of the fair value
adjustment of the VBG, Gamma and Delta loan facilities arising due to the reverse acquisition of Wichford. Swap interest
expense is included in interest expense.
8. TAXATION
a) Tax recognised in profit or loss
31 August 31 August
2012 2011
£'000 £'000
Current income tax
Income tax in respect of current year 1,950 563
Withholding tax 265 174
Deferred tax
Origination and reversal of temporary differences 1,155 623
Total income tax expense 3,370 1,360
No tax was recognised on equity or other comprehensive income during the year (2011: nil).
b) Recognised deferred liability and movement during the period
31 August 31 August
2012 2011
£'000 £'000
Deferred tax movement for the year is attributable to the following:
Deferred tax liability
Opening balance 1,334 -
Deferred tax liability acquired investment properties - 1,616
Change in accounting policy - (905)
Restated deferred tax on investment properties 1,334 711
Deferred tax liability recognised on investment properties (55) -
Deferred tax liability recognised on associates 1,210 623
Closing balance 2,489 1,334
c) Reconciliation
The tax for the period is lower (higher in 2011) than the 20% payable under the UK's NRL Scheme. The differences are
explained below:
31 August 31 August
2012 2011
£'000 £'000
(Loss)/profit before tax (124,881) 5,111
(Loss)/profit before tax multiplied by NRL rate of UK income tax (20%) (24,976) 1,022
Effect of:
- exempt property valuations 25,373 2,125
25
31 August 31 August
2012 2011
£'000 £'000
- income not subject to UK income tax (4,918) (321)
- gain from financial assets and liabilities (388) (2,708)
- losses carried forward 6,680 415
- expenses not deductible for tax 1,334 653
- withholding tax 265 174
Total tax charge for the year 3,370 1,360
From the reconciliation above, the effective tax rate of the Group was 2.7% (2011: 26.6%).
9. INVESTMENT PROPERTY
The cost of properties as at 31 August 2012 was £1.07 billion (31 August 2011: £1.19 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 has been assessed by the valuers in accordance with the Appraisal and Valuation
Standards of the Royal Institution of Chartered Surveyors (Red Book). In particular, the Market Value has been assessed
in accordance with PS 3.2. Under these provisions, the term Market Value means the estimated amount for which a
property should exchange on the date of valuation between a willing buyer and a willing seller in an arms-length
transaction after proper marketing wherein the parties have each acted knowledgeably, prudently and without
compulsion.
In undertaking the valuations on the basis of Market Value, the valuers have applied the interpretative commentary which
has been settled by the International Valuation Standards Committee and which is included in PS 3.2. The RICS considers
that the application of the Market Value definition provides the same result as Open Market Value, a basis of value
supported by previous editions of the Red Book.
The valuation does not include any adjustments to reflect any liability for taxation that may arise on disposal, nor for any
costs associated with disposals incurred by the owner. No allowance has been made to reflect any liability to repay any
government or other grants, or taxation allowance that may arise on disposals.
The valuers have used the following key assumptions:
The market value of investment properties has been primarily derived using comparable market transactions on arms-
length terms and an assessment of market sentiment. The aggregate of the net annual rents receivable from the properties
and, where relevant, associated costs, have been valued at an average yield of 8% which reflect the risks inherent in the
net cash flows. Valuations reflect, where appropriate, the type of tenants actually in occupation or likely to be in occupation
after letting of vacant accommodation and the markets perception of their creditworthiness and the remaining useful life of
the property.
In terms of IAS 40 Investment property: Paragraph 14, judgement is needed to determine whether a property qualifies as
an investment property. The Group has developed criteria so that it can exercise its judgement consistently in recognising
investment properties. These include inter alia; property held for long-term capital appreciation, property owned (or 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 (RIHML) for a fixed rent which is subject to annual review. RHML operates the
hotel business on its own account and is exposed to the fluctuations in the underlying trading performance of the hotels. It
is responsible for the day to day upkeep of the properties and retains the key decision making responsibility for the
business. Aside from the payment of rental income to Redefine International there are limited or no transactions between
the two entities. As a result, in line with guidance in IAS 40, Redefine International classifies the hotel properties as
investment properties.
Property operating expenses in the consolidated income statement relate solely to income generating properties.
31 August 31 August
2012 2011
£'000 £'000
Opening balance 986,654 227,675
Properties acquired during the period 349 197,424
26
31 August 31 August
2012 2011
£'000 £'000
Capitalised expenditure 3,893 13,659
Disposals during the period (44,626) (6,543)
Impact of reverse acquisition - 546,900
Impact of acquisition of subsidiaries - 2,381
Foreign exchange movement in foreign operations (17,081) 6,073
Recognition of finance leases - 9,712
Net fair value losses on investment property (127,230) (10,627)
Reclassification to assets held-for sale (refer Note 12) (170,681)
Closing balance 631,278 986,654
Acquisitions
Petersfield 349 -
Ciref Kwik-fit Stockport - 925
Ciref Kwik-fit Stafford - 1,456
349 2,381
Disposals
Banstead (1,015) -
West Orchards Coventry (refer Note 24) (37,000) -
Reigate (3,150) -
Finance leases (3,461) -
Ciref Streatham Limited - (6,543)
(44,626) (6,543)
The properties noted above were sold as part of the sale of subsidiaries as detailed in note 24. The acquisition of
Petersfield was a non-cash transaction with the property being received as settlement for an outstanding debtor balance.
A reconciliation of investment property valuations to the consolidated statement of financial position are shown below:
31 August 31 August
2012 2011
£'000 £'000
Investment property at market value as determined by external valuers 757,468 956,167
Freehold 580,203 714,430
Freehold and long leasehold 15,350 17,900
Leasehold 161,915 223,837
Investment property at directors' valuation - 17,150
Adjustments for items presented separately on the Consolidated
Statement of Financial Position:
- Add minimum payment under head leases separately included under
Borrowings 9,819 13,337
- Investment properties classified as assets held for sale (note 12) (136,009) -
Consolidated statement of financial position carrying value of
investment property 631,278 986,654
27
10. LONG TERM RECEIVABLES
31 August 31 August
2012 2011
£'000 £'000
Amounts due from related parties (Refer Note 21) 158 116
Amounts due from Mezzanine Capital Limited 98,312 103,500
Loans 123,404 121,592
Impairment (25,092) (18,092)
Security deposits with banks - 464
98,470 104,080
The loans from jointly controlled entities are unsecured, bear interest at rates between 0% and 7% and are repayable on
demand, but the expectation is that the term will be greater than 12 months.
The loans from Mezzanine Capital Limited are secured, bear interest at rates between 10% and 12% and are repayable
between one and three years.
Included in amounts due from Mezzanine Capital Limited is rolled up interest in respect of the period of £7.6 million (2011:
£6 million).
11. INVESTMENTS DESIGNATED AT FAIR VALUE
31 August 31 August
2012 2011
£'000 £'000
Derivative financial instruments (refer note 19) 178 761
Other investments 221 362
Closing balance 399 1,123
12. ASSETS AND LIABILITIES HELD FOR SALE
Discussions are on-going regarding the sale of a number of assets with disposals expected to be finalised within the next
12 months. As a result the assets have been reclassified to held for sale in the period.
In addition the Group is 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 are classified as held for sale.
Assets held for sale
31 August 31 August
2012 2011
£'000 £'000
Opening balance - -
Transfers in (Note 9) 170,681 -
Disposals* (29,378) -
Foreign exchange movement in foreign operations (5,653) -
Net fair value gains on assets held for sale 359 -
Total 136,009 -
*Halle was disposed of during the year, see note 24 for further details.
Assets held for sale at the year end include the following:
31 August 31 August
2012 2011
£'000 £'000
VBG 74,559 -
Delta 61,450 -
Total 136,009 -
LIABILITIES HELD FOR SALE
28
31 August 31 August
2012 2011
£'000 £'000
Opening balance - -
Transfers in from borrowings (refer to note 18) 91,935 -
Total 91,935 -
As the Group is committed to the sale of the VGB1 and VGB2 subsidiaries, the related loan liabilities totalling £91.94
million have been included in liabilities held for sale.
13. INVESTMENTS IN JOINTLY CONTROLLED ENTITIES
The Groups investments in jointly controlled entities currently consist of the following:
(i) 50% in Pearl House Swansea Limited, a jointly controlled entity with Sandgate Properties Limited, which owns a long
leasehold retail interest in Swansea, Wales.
(ii) 50% in Swansea Estates Limited, a jointly controlled entity 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% in Redefine Wigan Limited, a jointly controlled entity with Sandgate Properties Limited, which ultimately owns a
shopping centre in Wigan, Greater Manchester.
(vii) 50% in CIREF Coventry Limited, a jointly controlled entity with Sandgate Properties Limited, which ultimately owns the
West Orchards Shopping Centre in Coventry.
(viii) 50.5% interest in RI Menora German Holdings S.a.r.l, a joint venture with Menora Mivtachim which ultimately owns a
property in Waldkraiburg, Germany.
31 August 31 August
2012 2011
£'000 £'000
Opening balance 2,607 2,041
Increase in investment 1,641 2,137
Equity accounted loss (1,772) (1,491)
Foreign currency translation (317) (80)
Closing balance 2,159 2,607
SUMMARISED FINANCIAL INFORMATION
The summarised financial information derived from the gross balance sheets of the jointly controlled entities is set out
below:
31 August 31 August
2012 2011
£'000 £'000
Investment property 185,189 156,193
Current assets 8,601 6,213
Total assets 193,790 162,406
Capital and reserves (19,119) (6,236)
Long term liabilities 199,482 159,212
Current liabilities 13,427 9,430
Total equity and liabilities 193,790 162,406
Revenue 19,097 12,996
Net loss (12,880) (2,306)
29
The investment in jointly controlled entities includes investments at nil value in the balance carried forward on 1
September 2011. These include a 50% holding in Redefine Wigan Limited which owns Grand Arcade Wigan Limited and
Standishgate Wigan Limited and which was acquired out of administration in September 2010 as part of the Groups debt
restructuring with Aviva.
Jointly controlled entities also include Ciref Coventry Limited. The Group disposed of a 31.25% shareholding in this
company effective 31 August 2012, resulting in a loss of control for the Group and the investment being re-classified from
an 81.25% held subsidiary to a 50% jointly controlled entity as at that date. At the date control was lost, the fair value of
Groups remaining 50% investment was deemed to be nil as the liabilities of the jointly controlled entity exceeded its
assets.
Loan facilities with a nominal value of £142 million to Redefine Wigan Limited and facilities with a nominal value of £55.97
million to Ciref Coventry Limited have been cross collateralised against properties held directly by the Group. The loan
liabilities of Redefine Wigan Limited and Ciref Coventry Limited are in excess of the value of the properties ultimately held
by these companies. As a result a provision has been created in the current year based on the estimated potential future
cash outflows for the Group related to this cross collateralisation. See note 20 for further details.
14. INVESTMENTS IN ASSOCIATES
31 August 31 August
2012 2011
£'000 £'000
Opening balance 104,680 18,923
Investment at cost 24,222 16,449
Reclassified from investments designated at fair value - 85,128
Impact of foreign currency translation (1,229) 4,963
Equity accounted profits 8,097 4,729
Distribution received from associates (11,263) (5,986)
Impairment of investment - (6,326)
Share of foreign currency movement recognised - 1,494
Share of cash flow hedge reserve movement recognised - (155)
Cancellation of investments at fair value. - (14,539)
Closing balance 124,507 104,680
With effect from 4 March 2011, the Groups shareholding in Cromwell was reclassified from investments designated at fair
value to an investment in an associate. The Company further increased its holding in the Cromwell Property Group
(Cromwell) through the AUD 35 million (£22.6 million), participation in the Cromwell entitlement offer in December 2011.
The Companys interest in Cromwell at 31 August 2012 was 23.08%. This was diluted post year end to 22.14% following
further share placements and following the merger of Cromwell with the Cromwell Property Fund which was announced on
3 October 2012.
The closing price of Cromwell on 31 August 2012 was 75 Australian cents per security and the total fair value of shares
held is AUD 202.9 million (£132.1 million).
During the year ended 31 August 2012, the Group received AUD 17,266,471 (31 August 2011: AUD 7,062,222) as a
distribution, before withholding tax of AUD 400,279 (31 August 2011: AUD 196,730), resulting in a net distribution of AUD
16,866,192 (31 August 2011: AUD 6,865,492). The GBP equivalent of the above gross distribution is £11.26 million (31
August 2011: £4.49 million).
There are no restrictions on the ability of Cromwell to transfer funds to its shareholders in the form of cash, distributions
and loan repayments.
The comparative numbers, including distributions received from associates, include RIHLs previous shareholding of
230,772,000 (21.73%) in Wichford PLC which following the reverse acquisition was deemed to be disposed of.
SUMMARISED FINANCIAL INFORMATION
The summarised financial information derived from the gross statements of financial position of the associates, is set out
below. The financial information represents those as reported by Cromwell in their 30 June 2012 and 2011 audited
financial statements.
30
30 June 30 June
2012 2011
£'000 £'000
Investment property 1,122,656 1,444,850
Other non-current assets 19,982 35,126
Current assets 53,717 59,452
Total assets 1,196,355 1,539,428
Capital and reserves 513,665 705,160
Long term liabilities 630,799 780,865
Current liabilities 51,891 53,403
Total equity and liabilities 1,196,355 1,539,428
Revenue 121,681 181,976
Net profit 15,024 88,102
15. CASH AT BANK
31 August 31 August
2012 2011
£'000 £'000
Cash at bank consists of the following:
Unrestricted cash balances 5,703 39,937
Bank balances 5,694 35,742
Call deposits 9 4,195
Restricted cash balances 12,023 11,431
17,726 51,368
As at 31 August 2012, there was £12.0 million (31 August 2011: £11.43 million) of cash at bank to which the Group did not
have instant access. The principal reason for this is that rents received are primarily held in locked bank accounts as
interest and other related expenses are paid from these monies. Also included in the restricted cash balance is £1.6 million
held with Aviva with regards to development in Birchwood Warrington Limited.
16. CAPITAL AND RESERVES
31 August 31 August
2012 2011
£'000 £'000
Authorised
Ordinary shares of 7.2 pence each
- number 1,000,000,000 1,000,000,000
- £'000 72,000 72,000
Issued, called and fully paid
Opening: Ordinary Shares of 1 penny each
- number 567,643,792 1,062,095,584
- £'000 40,870 10,621
Allotted: Ordinary Shares of 1 penny each
- number - 3,255,711,718
- £'000 - 32,557
Consolidation from 1 pence to 7.2 pence each
31
31 August 31 August
2012 2011
£'000 £'000
- number - 599,695,459
- £'000 - 43,178
Cancellation of ordinary shares of 7.2 pence each
- number - (32,051,667)
- £'000 - (2,308)
Ordinary Shares acquired into treasury of 7.2 pence each
- number (939,000) -
- £'000 (67) -
Shares issued during the period of 7.2 pence each
- number 12,750,000 -
- new issue 11,811,000
- out of treasury 939,000
- £'000 918 -
Closing: Ordinary Shares of 7.2 pence each
- number 579,454,792 567,643,792
- £'000 41,721 40,870
The Company acquired 939,000 shares into Treasury on 18 November 2011 at a cost of £317,000.
The Company issued 12,750,000 shares to RIN on 1 February 2012, at a price of 37.0 pence per share. The placement
was made to assist with the funding of the Company's underwriting commitment in connection with the Cromwell capital
raising. The shares (including the release of 939,000 shares out of Treasury) were admitted to trading on the LSE on 6
February 2012.
Following this placement and as at 31 August 2012, the Company had 579,454,792 shares in issue.
DISTRIBUTIONS
In terms of the dividend policy, the Company will seek to distribute the majority of its recurring earnings available for
distribution in the form of dividends subject to realisable profits. However, there is no assurance that the Company will pay
a dividend or, if a dividend is paid, the amount of such dividend.
During the year ended 31 August 2012, the second interim dividend of 2.10 pence per share for the period ended 31
August 2011 was distributed, as well as the first interim dividend of 2.10 pence per share for the six-month period ended
29 February 2012.
REVERSE ACQUISITION RESERVE
The reverse acquisition reserve comprises the difference between the capital structure of the Company and RIHL.
OTHER RESERVES
These are non-distributable reserves arising from the acquisition of subsidiaries. £3.0 million of Other Reserves were
transferred to the Retained Loss reserve during the year due to the sale of Ciref Coventry Limited.
17. CAPITAL INSTRUMENT
As part of the Aviva debt restructuring the Company has entered into a £13 million facility with Aviva. The loan bears
interest at 6% per annum, and all interest is rolled up until payment or conversion. The capital plus rolled up interest is
repayable or convertible three years after the date of the agreement or on any earlier date if there is an event of default.
Should the drawings together with interest not be repaid, the Company will be required to issue shares to discharge the
outstanding amount due, the number of which is calculated by dividing the outstanding amount by 50 pence per ordinary
share.
The capital instrument is an equity instrument under IAS 32 as it is to be settled in either cash or a fixed number of equity
shares at the discretion of the Company. The fixed number of shares to be issued changes over time but is fully
predetermined based on the time the Company chooses to settle the instrument. The additional shares that arise over time
are charged to profit or loss in each period as a share based payment charge and is credited to the equity reserve.
31 August 31 August
2012 2011
£'000 £'000
32
31 August 31 August
2012 2011
£'000 £'000
Opening balance 13,768 -
Capital instrument issued - 13,000
Share based payment 768 768
Closing balance 14,536 13,768
18. BORROWINGS
31 August 31 August
2012 2011
£'000 £'000
Non-current
Bank loans 345,819 800,518
Less: deferred finance costs (1,926) (2,440)
Finance leases 9,814 13,337
Total non-current borrowings 353,707 811,415
Current
Bank loans 401,330 117,822
Less: deferred finance costs (875) (751)
Total 400,455 117,071
Liabilities held for sale (secured loans) (refer Note 12) 91,935 -
Total borrowings 846,097 928,486
a) Loans
This note provides information about the contractual terms of the Groups loans and borrowings, which are measured at
amortised cost.
33
SECURED BORROWINGS
The terms and conditions of outstanding loans are as follows:
31 August 31 August 31 August 31 August
2012 2011 2012 2011
£'000 £'000 £'000 £'000
Amort
Facility -ising Lender Loan interest rate Currency Maturity date Nominal Value Nominal Value Carrying Value Carrying Value
Windermere VIII
Gamma No CMBS LIBOR + 0.75% GBP October 2012 199,678 199,678 199,678 197,791
Windermere XI
Delta No CMBS LIBOR + 0.75% GBP October 2012 114,608 114,608 114,608 113,759
Redefine Hotel Holdings Limited Yes Aareal LIBOR + 2.45% GBP November 2015 74,961 75,778 74,961 75,778
VBG1***** Yes Talisman 3 EURIBOR + 1.1% EUR January 2012 50,585 58,063 50,585 37,984
VBG2***** Yes Talisman 4 EURIBOR + 1.1%*** EUR April 2011 41,350 46,770 41,350 45,882
West Orchards Coventry Limited*** Yes Aviva 6.29% GBP July 2027 - 55,970 - 49,227
Zeta No Lloyds TSB LIBOR + 1.15% GBP May 2013 46,000 46,000 46,000 46,000
Landesbank
St Georges Harrow Limited Yes Berlin LIBOR + 2.5% GBP April 2016 41,170 41,630 41,170 41,630
Windermere XIV
Halle No CMBS EURIBOR + 0.85% EUR April 2014 - 32,849 - 25,975
Redefine Australian Investments
Limited No Investec BBSY + 4%** AUD February 2013 24,740 17,344 24,740 17,344
Delamere Place Crewe Limited No Aviva 6.49% GBP March 2012 - 17,150 - 17,150
SNS Property
Hague Yes Finance EURIBOR + 2.3% EUR July 2014 17,194 19,309 15,576 16,879
Birchwood Warrington Limited*** No Aviva 6.10% GBP September 2035 29,150 29,150 16,856 16,629
Ciref Berlin 1 Limited Yes RBS EURIBOR + 1.2% EUR September 2014 14,262 16,242 14,262 16,242
Byron Place Seaham Limited*** Yes Aviva 6.44% GBP September 2031 16,831 16,907 15,165 15,182
Kalihora Holdings Limited Yes UBS LIBOR + 1.25% CHF October 2018 11,820 13,522 11,820 13,522
Princes Street Investments Limited Yes HSBC LIBOR + 2.5% GBP September 2016 11,590 - 11,590 -
Gibson Property Holdings Limited Yes Aviva 6.37%* GBP June 2029 10,900 11,053 10,900 11,053
ITB Herzogenrath B.V. Yes Bayern LB EURIBOR + 1.3% EUR October 2017 6,989 6,593 6,989 6,593
ITB Schwandorf B.V. Yes Bayern LB EURIBOR + 1.3% EUR October 2017 5,781 7,971 5,781 7,971
Newington House Limited Yes AIB LIBOR + 2.50% GBP September 2013 6,304 6,509 6,304 6,509
34
31 August 31 August 31 August 31 August
Amort 2012 2011 2012 2011
Facility -ising Lender Loan interest rate Currency Maturity date £'000 £'000 £'000 £'000
CEL Portfolio Limited & Co. KG Yes Valovis 4.95%* EUR November 2014 3,851 4,427 3,851 4,427
Inkstone Grundstucksverwaltung
Limited & Co. KG Yes Barclays 5.75%* EUR August 2012 3,173 3,603 3,173 3,603
Inkstone Zwei Grundstucksverwaltung
Limited & Co. KG Yes Barclays 5.91%* EUR August 2012 3,482 3,986 3,482 3,986
Ciref Reigate Limited No RBS LIBOR + 2.50% GBP June 2015 - 2,500 - 2,500
Ciref German Portfolio Limited Yes RBS EURIBOR + 1.2% EUR September 2014 3,033 3,447 3,033 3,447
Ciref Kwik-Fit Stafford Limited No KBC LIBOR + 2.50% GBP April 2012 - 718 - 718
Ciref Kwik-Fit Stockport Limited No KBC LIBOR + 2.50% GBP April 2012 - 463 - 463
Total Bank loans 737,452 852,240 721,874 798,244
Mezzanine Capital Limited**** 7.10% - 10%* GBP 2012 108,825 107,847 108,825 107,847
Coronation Group Investments
Limited** 4%* GBP 2011 7,768 10,910 7,768 10,910
Loans secured by cash deposits 7.00%* GBP 2012 - 650 - 650
CEL Portfolio Limited & Co. KG 0%* GBP 2029 617 689 617 689
Total secured loans 854,662 972,336 839,084 918,340
All bank loans are secured over investment property, and bear interest at the specified interest rates.
* Fixed rates.
** Loan secured over Redefine Australian Investments Limited.
*** These facilities are cross collateralised against each other and against facilities to Redefine Wigan Limited. See Notes 20 and 27.
**** Loans are extendable at the request of the Company.
***** The Group has committed to the sale of the VGB1 and VGB2 subsidiaries and so the related loan liabilities totalling £91.94 million have been included in liabilities held for sale,
see note 12.
35
VBG 1 AND VBG 2
The VBG1 facility matured on 15 January 2010 and was subsequently extended to 15 January 2012. The VBG2 facility
matured on 21 April 2011. Both facilities were not repaid on the original or extended maturity dates and were further
extended to April 2012. Following the extended standstill period expiry, the Group announced on 3 August 2012, the
agreed restructuring of the VBG holding companies, sale of the VBG assets and restructuring/repayment of the related
debt. The restructuring was finalised post year end with the loans repaid in October 2012. Please see note 28 for further
details.
31 August 31 August
2012 2011
£'000 £'000
Non-current liabilities
Secured bank loans 345,819 800,518
Total non-current loans and borrowings 345,819 800,518
The maturity of non-current borrowings are as follows:
Between one year and five years 283,561 685,581
More than five years 62,258 114,937
345,819 800,518
Current liabilities
Secured loans 401,330 117,822
Liabilities held for sale (Note 12) 91,935 -
Total current loans and borrowings 493,265 117,822
Total loans and borrowings 839,084 918,340
Exposure to credit, interest rate and currency risks arise in the normal course of the Group's business. Derivative financial
instruments are used to reduce exposure to fluctuations in interest rates. Refer to Note 19 for further details.
b) Finance leases
Obligations under finance leases at the reporting dates are analysed as follows:
31 August 31 August
2012 2011
£'000 £'000
Gross finance leases liabilities repayable:
Not later than one year 460 680
Later than one year not later than five years 1,840 2,720
Later than five years 32,354 48,344
34,654 51,744
Less: finance charges allocated to future periods (24,840) (38,407)
Present value of minimum lease payments 9,814 13,337
Present value of finance lease liabilities repayable:
Not later than one year 313 511
Later than one year not later than five years 1,124 1,821
Later than five years 8,377 11,005
Present value of minimum lease payments 9,814 13,337
19. DERIVATIVES
The Group enters into interest rate swaps and interest rate cap agreements. The purpose is to manage the interest rate
risks arising from the Groups operations and its sources of finance.
The interest rate swaps employed by the Group to convert the Groups borrowings from floating to fixed interest rates, fall
into two categories, as explained in a) i) and ii) below.
36
The interest rate caps employed by the Group limit the exposure to upward movements in interest rates. These are
detailed in b) below.
It is the Groups policy that no economic trading in derivatives shall be undertaken.
a) Interest rate swap agreements
In accordance with the terms of the borrowing arrangements, the Group has entered into interest swap agreements. The
interest rate swaps are used to manage the interest rate profile of financial liabilities. The Group has employed interest rate
swaps to eliminate future exposure to interest rate fluctuations as well as being charged fixed rate interest on those
facilities described as having lender level swaps.
i) Lender level interest rate swap agreements
Lender level interest rate swaps agreements are those from which the Group benefits but which do not have any
Group entity as a counter-party, instead the lender is the counter-party with the commercial banking entity providing
the interest rate swap. These arise where the loan agreements call for interest rate swaps to be taken out to allow a
fixed interest charge to be made to the borrowing subsidiaries and these borrowers have given indemnities to the
lenders in respect to these interest rate swaps.
The interest rate swaps for the Delta and Gamma facilities, from which the Group benefits by both eliminating any
interest rate fluctuations in the market over the course of the facilities and also from any benefit (or cost) of closing
these instruments out, are lender level interest rate swaps. Swaps are between the CMBS vehicles (the lenders) and
commercial banking counterparties.
The Group recognises these embedded derivatives separately as, while the Group is charged interest at a fixed rate
on these facilities, the terms of the facilities mean the Group ultimately receives their benefit or pay their burdens.
As a result of the use of lender level interest rate swaps, the fixed rate profile of the Groups interest rate swaps was:
Fair value Nominal
31 August 31 August 31 August 31 August
Effective Maturity Swap 2012 2011 2012 2011
Facility date date rate £'000 £'000 £'000 £'000
Gamma 21/07/2006 15/10/2012 4.95% (557) (5,062) 199,678 199,678
Delta 23/05/2005 20/10/2012 4.77% (921) (8,426) 114,608 114,608
Halle* 19/02/2007 22/04/2014 4.19% - (2,325) - 32,849
(1,478) (15,813) 314,286 347,135
* Justizzentrum Halle mbh & Co. KG was disposed of effective 29 June 2012.
ii) Borrower level interest rate swap agreements
Borrower level interest rate swap agreements are those that have a Group company as the counter-party to the
commercial bank providing the interest rate swap. As a result of the use of interest rate swaps, the fixed rate profile
of the Group was:
37
Fair value Nominal
31 August 31 August 31 August 31 August
2012 2011 2012 2011
Facility Effective date Maturity date Swap rate £'000 £'000 £'000 £'000
Subsidiaries
Ciref Reigate Limited** 23/09/2010 30/06/2015 2.03% - (68) - 2,500
Newington House Limited 03/09/2010 19/09/2013 1.54% (62) (82) 6,304 6,509
Princes Street Investments Limited 30/09/2011 30/09/2016 1.69% (422) - 11,590 -
Ciref Berlin 1 Limited 05/06/2007 15/04/2014 4.61% (534) (735) 7,599 8,591
Ciref Berlin 1 Limited 31/07/2007 15/04/2014 4.20% (427) (569) 6,745 7,681
Ciref German Portfolio Limited 31/07/2007 15/04/2014 4.20% (192) (256) 3,061 3,452
Redefine Hotel Holdings Limited 30/11/2010 30/11/2015 2.45% (3,278) (2,105) 67,695 68,145
Redefine Hotel Holdings Limited 30/06/2011 30/11/2015 2.32% (409) (290) 7,599 7,633
Redefine International Holdings Limited 04/03/2011 04/03/2013 5.45% (244) (305) 16,733 16,293
Hague 01/08/2008 01/08/2014 4.89% (1,569) (1,751) 17,193 19,309
Zeta 20/07/2010 09/05/2013 2.73% (677) (1,141) 46,000 46,000
Matterhorn Brig SARL 30/01/2012 08/10/2018 0.73% (103) - 3,794 -
Matterhorn Vich SARL 30/01/2012 08/10/2018 0.73% (228) - 8,265 -
(8,145) (7,302) 202,578 186,113
** Ciref Reigate Limited was disposed of on 29 February 2012
Held in jointly controlled entities Fair value Nominal
31 August 31 August 31 August 31 August
2012 2011 2012 2011
Facility Effective date Maturity date Swap rate £'000 £'000 £'000 £'000
Ciref Jersey Limited 31/07/2007 30/07/2027 5.48% (7,484) (5,532) 18,500 18,500
Ciref Jersey Limited 30/01/2008 30/07/2027 4.80% (503) (371) 1,800 1,800
Churchill Court Limited 10/04/2008 10/04/2018 5.08% (1,620) (1,554) 9,487 9,863
Premium Portfolio Limited & Co. KG 31/03/2008 31/12/2014 4.23% (536) (435) 4,917 5,544
Premium Portfolio Limited & Co. KG 31/03/2008 31/12/2014 4.13% (1,175) (1,486) 16,129 18,182
(11,318) (9,378) 50,834 53,889
b) Interest rate cap agreements
The Group has entered into interest rate caps in order to take advantage of the low interest rates in the market while at the same time protecting the Group against any significant
increases in these interest rates. The current interest rate cap agreements are detailed below:
Fair value Nominal
31 August 31 August 31 August 31 August
2012 2011 2012 2011
Facility Effective date Maturity date Cap rate £'000 £'000 £'000 £'000
VBG1 15/07/2010 15/01/2012 2.50% - - - 58,063
St Georges Harrow 27/04/2011 27/04/2016 2.85% 118 591 41,400 41,630
ITB Herzogenrath B.V. 31/05/2011 31/05/2017 4.50% 41 93 6,989 6,593
ITB Schwandorf B.V. 31/05/2011 31/05/2017 4.50% 19 77 5,781 7,971
178 761 54,170 114,257
c) Summary of fair value of interest rate swaps and interest rate caps
31 August 31 August
Facility 2012 2011
£'000 £'000
Fair value of lender level interest rate swaps (1,478) (15,813)
Fair value of borrower level interest rate swaps (8,145) (7,302)
(9,623) (23,115)
Fair value of interest rate cap agreements* 178 761
Fair value of the Group's derivative instruments (9,445) (22,354)
*Interest rate cap assets are included in investments designated at fair value (please refer Note 11).
20. PROVISION FOR LIABILITIES AND COMMITMENTS
31 August 31 August
2012 2011
£'000 £'000
Opening balance - -
Increase in provisions 12,079 -
Total 12,079 -
External loan facilities to the jointly controlled entities Redefine Wigan Limited and Ciref Coventry Limited, which have a
nominal value of £197.97 million, are cross collateralised against properties held directly by the Group. These external loan
liabilities are in excess of the value of the properties held by the jointly controlled entities. A provision has been created in
the current year based on the estimated potential future cash outflows for the Group related to this cross collateralisation.
Ciref Coventry Limited was sold during the year. As the acquirer may benefit from the cross collateralisation of the Ciref
Coventry loan facilities, the provision was considered in calculating the loss on sale of the subsidiary, see note 24 for
further details.
21. RELATED PARTY TRANSACTIONS
Related parties of the Group include subsidiary undertakings, associate undertakings and jointly controlled entities, the
Investment Advisor, Directors and key management personnel and connected parties, the parent undertaking Redefine
International Properties Limited and the ultimate parent Redefine Properties Limited as well as entities connected through
common directors.
INVESTMENT ADVISER
The investment adviser duties are carried out in accordance with the Investment Adviser's Agreement (as approved on 13
July 2011) between the Company and RIPML. The director Michael Watters is a director of associated companies of the
investment adviser.
31 August 31 August
2012 2011
£'000 £'000
Trading transactions
Rental income received from Redefine Hotel Management Limited 9,400 6,386
Fee income from Redefine Hotel Management Limited 700
Fee income from the Cromwell Property Group 566 310
Portfolio management fees charged by Redefine International Property
Management Limited (3,328) -
Portfolio management fees charged by Redefine International Fund
Managers Limited (610) (2,028)
Portfolio management fees charged by Redefine International Fund
Managers Europe Limited (817) (403)
Redefine International Hotels Limited (617) -
Fee payable to Redefine Properties Limited (130) -
Administration fees charged by Redefine International Group Services
Limited - (153)
31 August 31 August
2012 2011
£'000 £'000
Amounts receivable
Pearl House Swansea Limited 74 116
ITB FMZ Waldkraiburg B.V. 84
Redefine Hotel Management Limited 3,314 2,922
Redefine Properties International Limited - 70
Cromwell Property Group - 1,217
Ciref Crawley Investments Limited 104 100
Swansea Estates Limited 86 84
26 The Esplanade No 1 Limited 48 -
Banstead Property Holdings Limited 518 -
Osiris Properties International Limited 369 -
Amounts Payable
Redefine International Fund Managers Limited 320 1,688
Osiris Properties Services Limited 6
Redefine International Fund Managers Europe Limited 352 260
Redefine International Group Services Limited - 80
Redefine Properties International Limited 35 -
Corovest Offshore Limited 868 2,363
Coronation Group Investments Limited 7,768 10,910
Redefine International Hotels Limited 154 -
Redefine International Property Management Limited 660 -
Loans payable to Redefine International Fund Managers Limited, Redefine International Fund Managers Europe Limited
and Redefine International Group Services Limited are not secured, bear no interest and are expected to be repaid in cash
within 12 months.
MEZZANINE CAPITAL LIMITED
Details of transactions with Mezzanine Capital Limited are provided in notes 6, 7,10 and 18.
DIRECTORS
The remuneration paid to directors for the period ended 31 August 2012 was £334,565 which represents directors fees
only (2011: £175,000 paid to RIHL Directors).
22. EARNINGS PER SHARE
Earnings per share are calculated on the weighted average number of shares in issue and the profit/(loss) attributable to
shareholders. The weighted average number of shares in issue is based on the capital structure in place after the reverse
acquisition.
Restated
31 August 31 August
2012 2011
£'000 £'000
Net (loss)/profit attributable to shareholders (Basic and diluted) (124,755) 5,035
Weighted average number of ordinary shares 574,325 426,125
Effect of potential share based payment transactions - capital instrument 29,072 26,480
Diluted weighted average number of ordinary shares 603,397 452,605
Number of ordinary shares
- In issue 579,455 567,644
Restated
31 August 31 August
2012 2011
£'000 £'000
- Weighted average 574,325 426,125
- Diluted weighted average 603,397 452,605
Earnings per share (pence)
- Basic (21.72) 1.18
- Diluted (21.72) 1.11
There are also contingently issuable shares under the performance agreement. The conditions for recognising these
shares had not been met at the year end.
23. NET ASSETS PER SHARE
Restated
31 August 31 August
2012 2011
£'000 £'000
Net assets attributable to equity shareholders (£'000) 132,914 278,209
Number of Ordinary Shares ('000's) 579,455 567,644
Effect of potential share based payment transactions - capital instrument 29,072 27,537
Diluted number of shares ('000's) 608,527 595,181
Net asset value per share (pence):
- Basic 22.94 49.01
- Diluted 21.84 46.74
24. DISPOSAL OF SUBSIDIARIES
The Group disposed of the following subsidiaries during the financial year ended 31 August 2012:
? Ciref Reigate Limited on 29 February 2012
? Banstead Property Holdings Limited on 11 June 2012
? Justizzentrum Halle mbh & Co. KG on 29 June 2012
? Ciref Coventry Limited on 31 August 2012
The 2011 disposals relate to the disposals of TYS Holdings and CIREF Streatham on 1 December 2010.
The assets and liabilities arising from those disposals were as follows:
31 August 31 August
2012 2011
£'000 £'000
Assets disposed
Investment Property 74,004 6,543
Long Term Receivables 5,838 -
Trade and other receivables 1,411 (5,244)
Liabilities
Trade and other payables (5,702) (42)
Derivative liabilities (2,108) -
Loans and borrowings (87,099) (1,400)
Total (13,656) (143)
Add: 3,210 -
Non-controlling interest shareholder loans 1,767 -
Non-controlling interest share of net deficit (4,977) -
31 August 31 August
2012 2011
£'000 £'000
Provision for liabilities and commitments 12,079 -
Transfer of FCTR to income statement on disposal of foreign operation 381 -
Net loss on sale of subsidiaries (2,195) (334)
Net cash disposed (181) (477)
On 31 August 2012, the Group disposed of a 31.25% shareholding in Ciref Coventry Limited for a nominal amount,
resulting in the investment being re-classified from an 81.25% held subsidiary to a 50% jointly controlled entity. External
loan facilities to the jointly controlled entities Redefine Wigan Limited and Ciref Coventry Limited, which have a nominal
value of £197.97 million are cross collateralised against properties held directly by the Group. These external loan
liabilities are in excess of the value of the properties held by the jointly controlled entities. A provision has been created in
the current year based on the estimated potential future cash outflows for the Group related to this cross collateralisation.
As the acquirer of Ciref Coventry Limited may benefit from the cross collateralisation of the Ciref Coventry loan facilities, a
provision was created of £12.1 million. This provision has been included in calculating the loss on sale of Coventry of
£1.32 million.
On 29 June 2012, the Wichford Halle II, III and IV shares in Justizzentrum in Halle, Germany were sold for a consideration
of 1.0 million (GBP: £816,000). These shares represented a 96% shareholding and, as a result of the disposal, property
with a value of 36.3 million (GBP £29.1million) and borrowings amounting to 37.1 million have been removed from the
Groups balance sheet, together with the loans to non-controlling shareholders. The disposal resulted in the recognition of
a loss on disposal of £0.82 million.
On 29 February 2012, the Group disposed of its 61.36% shareholding in Ciref Reigate Limited for a nominal amount. As at
the disposal date, the fair value of the assets exceeded the fair value of the liabilities and hence a loss on sale of £0.10
million was recognised.
On 11 June 2012, the Group disposed of its 71.43% shareholding in Banstead Property Holdings Limited for a nominal
amount. As at the disposal date, the fair value of the liabilities exceeded the fair value of the assets and hence a gain on
sale of £0.05 million was recognised.
25. 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.
The Group's profit before tax has limited exposure to interest rate fluctuations until the repayment dates of the loans for
which the interest rate swaps have been arranged. Refer Note 19 for further details on the Group's interest rate swap
agreements.
26. LIQUIDITY RISK
The Groups 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 Groups reputation.
The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient rental income
to service its financial obligations when they fall due. The monitoring of liquidity risk is assisted by the monthly review of
financial covenants imposed by financial institutions, such as interest and loan to value covenant ratios. Renegotiation of
loans takes place in advance of any potential covenant breaches in so far as the factors are within the control of the
Board. In periods of increased market uncertainty the Board will ensure sufficient cash resources are available for
potential loan repayments/cash deposits as may be required by financial institutions. Refer to Note 3 for further details on
the going concern assumption adopted by the Board.
27. CONTINGENCIES, GUARANTEES AND CAPITAL COMMITMENTS
The Group has capital commitments of £2.6 million (2011: £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.
External loan facilities to the jointly controlled entities (Redefine Wigan Limited and Ciref Coventry Limited) with a nominal
value of £197.97 million are cross collateralised against properties held directly by the Group. These external loan
liabilities are in excess of the value of the properties held by the jointly controlled entities. A provision of £12 million has
been created in the current year based on the estimated potential future cash outflows for the Group related to this cross
collateralisation. This provision is an estimate of the potential future outflow of resources from the Group and is based on
the underlying fair values of properties against which the loan facilities are cross collateralised and the current carrying
value of those facilities in the Group accounts.
Terms have been agreed to acquire an effective 50% interest in a newly developed retail store in Germany. The gross
purchase price of the property located in Kaiserslatern is 6.4 million.
28. SUBSEQUENT EVENTS
On 20 September 2012, the Board resolved to declare a second interim dividend of 2.30 pence per share. Taken together
with the first interim dividend of 2.10 pence per share, the total dividend for the financial year ended 31 August 2012 was
4.40 pence per share. The record date for the second interim dividend was 28 September 2012. The dividend will be paid
to shareholders on 22 November 2012.
VBG
The Company announced that it had completed on the restructuring of all four VBG assets and the associated financing
facilities on 8 October 2012. The restructuring and refinancing of the VBG portfolio and financing facilities will result in the
Company owning a 50% interest in the VBG assets together with a major pension fund as its joint venture partner.
As part of the restructuring the Company has agreed to sell, for a nominal amount, 50% of its interest in the VBG holding
company to a major pension fund. This newly established joint venture company, together with certain of its subsidiaries,
has reached agreement with the servicer of the VBG facilities to dispose of the VBG assets to new subsidiary companies
within the joint venture vehicle. The proceeds from the disposal of approximately 80.0 million will be used to settle the
original VBG facilities in full. The facilities have a current outstanding balance of 117.3 million.
The gross acquisition cost (inclusive of transaction costs) of approximately 84.9 million will be partly funded by the joint
venture company with a new five year 57.0 million debt facility secured from a German bank, with both joint venture
partners injecting 14.0 million (£11.7 million) for their 50% interests. The new debt facility has been secured at a margin
of 1.72% p.a. which, together with current five year swap rates, provides an indicative all in rate of 2.8% p.a. This will
result in an initial yield on equity in excess of 19.0% on the Group's investment.
DELTA
The Company announced on 15 October 2012 the agreement to extend and restructure the £114.6 million Delta facility.
The restructure involved repaying £33.5 million of debt in consideration for the release of a portfolio of seven assets, which
comprise the Lyon House, Harrow development site and six other assets let to predominantly UK central government
occupiers. The seven assets were released from security and will be ungeared going forward. The repayment of debt
associated with the six income producing assets reflects a net initial yield of 7.6% and a weighted average unexpired
lease term in excess of 17 years.
The maturity date of the Delta facility will be extended to 15 April 2015 subject to the Company meeting annual disposal
targets, which the Company considers achievable, in respect of the remaining 16 Delta portfolio assets. The disposal
proceeds, together with planned scheduled repayments, will be applied to reducing the remaining £81.1 million facility
balance.
GAMMA
The Company is in discussions with the servicer of the Gamma facility to restructure the facility which matured on 15
October 2012. There is currently a standstill agreement in place until 15 November 2012.
EQUITY RAISING
On 13 September 2012, Redefine International announced details of a proposed Firm Placing and Open Offer to raise
£127,500,000 (£122,475,000 net of expenses) through the issue of 490,384,616 New Ordinary Shares at an Issue Price of
26 pence per New Ordinary Share. The Open Offer closed for acceptances at 11.00 am on 3 October 2012.
The Company announced on 4 October 2012, that it has received valid applications under the Open Offer in respect of
386,517,950 New Ordinary Shares from Qualifying Shareholders. In addition, 89,223,606 Firm Placed Shares have been
placed with certain institutional and other investors pursuant to the terms of the Firm Placing. As a consequence the
Company raised, through its Firm Placing and Open Offer, gross proceeds of £127,500,000.
Admission of the New Ordinary Shares to the Premium Segment of the Official List of the UK Listing Authority and to
trading on the London Stock Exchange's Main Market for listed securities, for which application was made, occurred at
8:00 a.m. on 9 October 2012. These New Ordinary Shares were not eligible for the second interim dividend, as announced
on 20 September 2012, but will rank pari passu in all other respects with the existing ordinary shares as at the date of
issue.
Glossary
AUD Australian Dollar made up of 100 cents.
Cromwell Cromwell Property Group is an Australian Securities Exchange listed stapled
security (ASX:CMW) comprising the Cromwell Corporation Limited and
Cromwell Property Securities Limited, which acts as the responsible entity of the
Cromwell Diversified Property Trust. www.cromwell.com.au.
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.
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.
IPD Investment Property Databank. A global real estate information business
providing independent research and analysis on the commercial real estate
market.
JSE JSE Limited, licensed as an exchange and a public company incorporated in
terms of the laws of South Africa.
LIBOR The London Interbank Offered Rate, the interest rate charged by one bank to
another for lending money.
LTV A ratio of debt divided by the market value of investment property.
LSE The London Stock Exchange plc.
Market value A ratio of debt divided by the market value of investment property.
NAV Net Asset Value.
Pre-let A lease signed with an occupier prior to completion of a development.
Redefine International P.L.C. The enlarged company following the reverse acquisition between Wichford and
(Redefine International, the Company Redefine International plc.
or the Group)
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.
RIN Redefine Properties International Limited. The Companys largest shareholder
listed on the JSE, whose sole asset is its shareholding in Redefine International.
Redefine Properties Limited Ultimate parent company of the Redefine Group, listed on the JSE.
(Redefine Properties)
REIT Real Estate Investment Trust. A REIT must be a publicly quoted company with
at least three-quarters of its profits and assets derived from a qualifying property
rental business. Income and capital gains from the property rental business are
exempt from tax but the REIT is required to distribute at least 90% of those
profits to shareholders. Corporation tax is payable on non-qualifying activities in
the normal way.
Revpar Revenue per available room (calculated by multiplying the hotels average daily
room rate by its occupancy rate).
UK The United Kingdom of Great Britain and Northern Ireland.
WAULT Weighted average unexpired lease term.
Wichford P.L.C. (Wichford) The previously LSE listed property investment company party to the reverse
acquisition.
Sponsor to Redefine Properties International Limited
Java Capital
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