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MAS PLC - Interim consolidated unaudited financial statements for the six months ended 31 August 2012

Release Date: 07/11/2012 15:00
Code(s): MSP     PDF:  
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Interim consolidated unaudited financial statements for the six months ended 31 August 2012

MAS plc
(Incorporated in the Isle of Man) 
(Registration number 2893V) 
(Registered as an external company in the Republic of South Africa) 
(Registration number 2010/000338/10) 
JSE share code: MSP
ISIN: IM00B4LFGH00
("MAS" or "the company")

Interim consolidated unaudited financial statements for the six months ended 31 August 2012

Highlights
- Braehead property acquisition completed
- Growing portfolio delivering strong income
- Good progress with developments in the portfolio 
- 817 748 adjusted core income generated

MAS is a real estate investment company with a portfolio of commercial properties in Western 
Europe. The company aims to provide investors with an attractive, sustainable euro-based dividend 
and strong growth in value over time through its acquisition and asset management strategy. 
The company's current investment focus is on Germany, Switzerland and the United Kingdom.

The company announced its maiden dividend in December 2010 and has paid a dividend twice yearly since.

The company is a closed-end investment company with an infinite life. It was listed on the 
Euro-MTF market of the Bourse de Luxembourg on 12 August 2009, where it has its primary listing, 
and on the Alternative Exchange ("AltX") of the Johannesburg Stock Exchange ("JSE") on 
31 August 2009, where it has its secondary listing.

Reporting currency

The company's results are reported in euros.

Market update

The weak sentiment across Europe at the beginning of the year eased as the year progressed and 
it became clear that the European Central Bank remains committed to the common currency. 
The euro, however, has reached new lows against the Swiss franc and British pound. The UK 
continued to feel the effects of the government's austerity measures, coupled with a continued 
lack of bank funding. As a result, real-estate transaction volumes remained muted except in 
the case of very prime assets.

These market dislocations have continued to create unique investment opportunities 
for the company. The end of April 2012 saw the completion of the Breahead acquisition, 
a 10,5 acre industrial site in Braehead, Glasgow, let to James Howden and Company Limited, 
at an initial yield of 9,9%. The current annual rent roll of £595 000 has contributed the 
continued growth in rental income.

Overview of the portfolio
                            Gross
                         property         Gross      Property           Net
                         by value       rentals        equity       rentals
                                                     (refer 1        (After
                                                        below)     interest)
                             Euro          Euro          Euro          Euro
Aldi portfolio/Germany         16%           19%            3%           11%
DPD property/Switzerland       30%           28%           20%           24%
Metchley Hall/UK               14%           20%           20%           24%
Sauchiehall property/UK         9%           11%           13%           14%
Santon North/UK                12%            9%           17%           11%
Braehead property/UK           13%           13%           19%           16%
Artisan IP 10/UK                6%            0%            8%            0%

(1) Property equity is the property value less the amount of bank debt -borrowed against the property.

Carrying value Euro                                 28 Feb 12     31 Aug 12
DPD property                                       18 953 317    19 021 152 
Aldi portfolio                                      9 930 000     9 930 000
Metchley Hall                                       8 632 660     9 256 610
Sauchiehall property                                5 669 280     6 054 720
Santon North                                        6 850 380     7 857 028
Braehead property                                           -     8 060 975
Artisan IP 10                                       3 581 578     3 745 424
Total                                              53 617 215    63 925 909

Adjusted core income for the six months of 817 748 (31 August 2011: 510 261) confirmed the 
soundness of the investment strategies adopted in the various markets in which the company operates. 
The directors expect to build on this income by investing additional funds that are to be 
raised from shareholders. 

Several of the properties in the portfolio have the benefit of being single tenanted. 
The Aldi portfolio in Baden-Württemberg, Germany and the DPD logistics and office centre
outside Zürich, Switzerland continued to perform well. With long leases (20 and 15 years 
respectively) and substantially fixed or capped debt, the properties provide good 
visibility of income for many years into the future. Indeed, the strong Swiss franc has 
led to healthy gains in the net asset value of the DPD property. Both the Aldi portfolio
and the DPD property continue to trade strongly in their respective countries. The 
Sauchiehall property, located in the prime retail area of Sauchiehall Street in Glasgow, 
is leased to HMV (UK), with a parent company guarantee from the EMI Group plc. Similarly, 
the recently acquired Braehead property also benefits from a single, strong industrial tenant.

Metchley Hall, the student residential development in Birmingham, started generating income 
from September 2011, with a guaranteed gross annual rental of £604 000. In terms of the 
nomination agreement with the University of Birmingham, occupancy levels are underwritten at 97%. 

The two investments with current development aspects in the portfolio have progressed 
particularly well. Santon North Street in Lewes, in Sussex, has significantly improved 
short-term income from its variety of small tenants, and the investment has encouraging 
prospects. Change-of-use planning applications are expected to be made mid-2013. 
In addition, Artisan IP 10 continues to receive a positive response. The potential 
profitability on this large-scale development on the Royal Mile in Edinburgh is substantial 
for a combination of reasons: a favourable acquisition price, a prime location and the high 
level of interest shown by potential tenants. Further updates on this development in 
particular are expected to be announced in the coming months.

Interest rate hedges

The commercial benefit of the interest rate hedges is considerable, as highly visible 
positive yield spreads are locked in over the life of the investment. However, extremely 
long leases, and hence very long interest rate hedges, result in unusually substantial 
non-cash mark-to-market valuations for the hedging instruments. The directors therefore 
remain focused on the cash generation within the business, and not the volatility arising 
from the revaluation of long-term financial hedging instruments.

Prospects

The company continues to progress well and significant headway has been made with securing 
investment opportunities for the capital the board expects to raise early in 2013. 

Dividend

The directors have approved an interim dividend for the six months ended 31 August 2012
of 1,91 euro cents per share relating to the adjusted core income generated in the first 
half of the year. Details and timing of the final dividend will be published in due course.

Basis of preparation and accounting policies

These interim consolidated unaudited financial statements have been prepared in accordance 
with the measurement and recognition requirements of International Financial Reporting 
Standards (IFRS), the principles of IAS 34: Interim Financial Reporting, and the Listings 
Requirements of the JSE Limited. The accounting policies adopted in the preparation of the 
interim consolidated unaudited financial statements are consistent with those applied in 
the financial statements for the year ended 28 February 2012. The interim consolidated 
financial statements have not been reviewed or reported on by the company's external auditors.

The directors are not aware of any matters or circumstances arising subsequent to the 
interim period that require any additional disclosure or adjustment to the interim consolidated 
unaudited financial statements.

By order of the board

Ron Spencer        Lukas Nakos
Chairman           Chief executive

Douglas, Isle of Man
Monday, 5 November 2012

Registered office

Isle of Man
25 Athol Street, Douglas, Isle of Man, IM1 1LB

South Africa
Emwil House West, 15 Pony Street, Tiger Valley Office Park, Silver Lakes, 0081

Transfer secretary
Computershare Investor Services (Pty) Limited
Ground Floor, 70 Marshall Street, Johannesburg, 2001, South Africa

Directors
Jaco Jansen 
Non-executive

Malcolm Levy 
Chief financial officer

Lukas Nakos 
Chief executive officer

Gideon Oosthuisen 
Non-executive

Ron Spencer 
Non-executive chairman

CREST Registrar and paying agent 
Computershare Investor Services (IOM) Limited
International House, Castle Hill, Victoria Road, Douglas, Isle of Man, IM2 4RB

JSE sponsor
Java Capital

Company secretary
Helen Cullen


Abridged consolidated statement of comprehensive income
     
                                      Unaudited     Unaudited       Audited
                                     Six months    Six months          Year
                                          ended         ended         ended
                                      31 Aug 12     31 Aug 11     28 Feb 12
                                           Euro          Euro          Euro
Revenue               
Gross rental income                   1 969 075       902 461     2 242 381
Expenses
Property related expenses              (295 343)     (124 058)     (432 204)
Investment adviser fees                (305 760)     (147 990)     (457 195)
Other operating expenses               (257 998)     (476 517)     (746 905)
Net operating income                  1 109 974       153 896       606 077
Net fair value adjustments on 
investment property                           -             -       (16 389)
Loss from financial instruments        (339 718)     (818 377)   (1 606 081)
Equity accounted earnings                20 409             -        74 460
Exchange differences                  1 906 005        82 658       167 095
Profit/(loss) before net 
finance expense                       2 696 670      (581 823)     (774 838)
Finance income                            8 067       372 200       713 690
Finance expense                        (435 798)     (339 787)     (672 850)
Profit/(loss) before taxation         2 268 939      (549 410)     (733 998)
Taxation                               (102 809)            -       (36 721)
Profit/(loss) for the period          2 166 130      (549 410)     (770 719)
Other comprehensive income
Foreign currency translation 
differences                             114 249       353 144       264 028
Total comprehensive income/(loss) 
for the period                        2 280 379      (196 266)     (506 691)
Earnings/(loss) per share 
(euro cents)*                              5.13         (2.75)        (2.18)
Headline earnings/(loss) 
per share (euro cents)*                    5.13         (2.75)        (2.46)
Weighted average number of 
ordinary shares in issue             42 203 345    19 955 783    35 420 878
Adjusted core income                    817 748       510 261     1 108 070

*The company has no dilutionary instruments in issue

Abridged consolidated statement of financial position

                                      Unaudited     Unaudited       Audited
                                     Six months    Six months          Year
                                          ended         ended         ended
                                      31 Aug 12     31 Aug 11     28 Feb 12
                                           Euro          Euro          Euro
Non-current assets
Investment property                  60 180 485    35 019 620    50 035 637
Investment in associate               1 096 484             -     1 101 268
Loans to associate                    2 648 940             -     2 480 310
Plant and equipment                      66 572             -        27 423
Total non-current assets             63 992 481    35 019 620    53 644 638
Current assets 
Short-term loans receivable             253 497     3 421 272     3 782 783
Trade and other receivables           1 053 212       504 850       563 745
Cash and cash equivalents               852 377    11 469 566     5 742 861
Total current assets                  2 159 086    15 395 688    10 089 389
Total assets                         66 151 567    50 415 308    63 734 027
Equity
Share capital                        42 811 728    20 173 271    42 154 015
Retained loss                          (576 982)   (1 847 306)   (2 068 646)
Foreign currency translation reserve    798 184       773 051       683 935
Shareholder equity                   43 032 930    19 099 016    40 769 304
Non-current liabilities
Long-term loans                      17 735 184    18 413 305    17 813 364
Financial instruments                 2 822 659     1 721 300     2 478 405
Total non-current liabilities        20 557 843    20 134 605    20 291 769
Current liabilities 
Short-term loans payable                499 680       517 260       497 898
Trade and other payables              2 061 114    10 664 427     2 175 056
Total current liabilities             2 560 794    11 181 687     2 672 954
Total liabilities                    23 118 637    31 316 292    22 964 723
Total equity and liabilities         66 151 567    50 415 308    63 734 027
Actual number of ordinary 
shares in issue                      42 798 832    20 173 271    42 154 015
Net asset value per share 
(euro cents)                              100.5          94.7          96.7

Abridged consolidated statement of cash flows

                                      Unaudited     Unaudited       Audited
                                     Six months    Six months          Year
                                          ended         ended         ended
                                      31 Aug 12     31 Aug 11     28 Feb 12
                                           Euro          Euro          Euro
Cash generated from operating
activities                              405 537    10 097 809     1 020 670
Cash (used in) investing 
activities                           (4 030 643)   (4 061 796)  (22 288 818)
Cash (used in)/generated from 
financing activities                 (1 379 627)   (1 034 831)   20 398 504
Cash and equivalents at the 
beginning of the period               5 742 861     6 611 800     6 611 798
Effect of exchange rate fluctuations    114 249      (143 416)          707
Cash and equivalents at 
the end of the period                   852 377    11 469 566     5 742 861

Abridged consolidated statement of changes in equity

                                                      Foreign
                                                     currency
                            Share      Retained   translation
                          capital          loss       reserve         Total
                             Euro          Euro          Euro          Euro
Opening balance as at 
28 February 2011 
- audited              19 762 959      (451 170)      419 907    19 731 696
Loss for the period             -      (549 410)            -      (549 410)
Other comprehensive 
income                          -             -       353 144       353 144
Total comprehensive 
income                          -      (549 410)      353 144      (196 266)
Issue of shares           410 312             -             -       410 312
Dividends paid                  -      (846 757)            -      (846 757)
Closing balance as at 
31 August 2011 
- unaudited            20 173 271    (1 847 337)      773 051    19 098 985
Loss for the period             -      (221 309)            -      (221 309)
Other comprehensive loss        -             -       (89 116)      (89 116)
Total comprehensive loss        -      (221 309)      (89 116)     (310 425)
Issue of shares        21 980 744             -             -    21 980 744
Dividends paid                  -             -             -             -
Closing balance as at 
28 February 2012 
- audited              42 154 015    (2 068 646)      683 935    40 769 304
Profit for the period           -     2 166 130             -     2 166 130
Other comprehensive income      -             -       114 249       114 249
Total comprehensive income      -     2 166 130       114 249     2 280 379
Issue of shares           657 713             -             -       657 713
Dividends paid                  -      (674 466)            -      (674 466)
Closing balance as at 
31 August 2012 
- unaudited            42 811 728      (576 982)      798 184    43 032 930

Reconciliation of (loss)/profit for the period to headline (loss)/earnings

                                      Unaudited     Unaudited       Audited
                                     Six months    Six months          Year
                                          ended         ended         ended
                                      31 Aug 12     31 Aug 11     28 Feb 12
                                           Euro          Euro          Euro
Profit/(loss) for the period          2 166 130      (549 410)     (770 719)
Adjusted for:
Revaluation of investment property            -             -       (19 044)
Revaluation of investment property 
in associate                                  -             -       (82 861)
Headline earnings/(loss)              2 166 130      (549 410)     (872 624)
               
Weighted average number of 
ordinary shares in issue             42 203 345    19 955 783    35 420 878
Headline earnings/(loss)
per share (cents)                          5.13         (2.75)        (2.46)

Supplementary information

Reconciliation of profit to core income - unaudited
                                     Six months    Six months          Year
                                          ended         ended         ended
                                      31 Aug 12     31 Aug 11     28 Feb 12
                                           Euro          Euro          Euro
Profit/(loss) for the period          2 166 130      (549 410)     (770 719)
Adjusted for:               
Movement in fair value adjustments      339 718       818 377     1 622 470
Fair value adjustments in associate           -             -       (82 861)
Exchange differences                 (1 906 005)      (82 658)     (167 095)
Capital raising fees and 
structure costs                          85 987       323 952       481 322
Non-distributable interest expense            -             -             -
Core income                             685 830       510 261     1 083 117
Income shortfall guarantee              131 918             -        24 953
Adjusted core income                    817 748       510 261     1 108 070



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