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Redefine International PLC - Results for the six months ended 28 February 2013
REDEFINE PROPERTIES INTERNATIONAL LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2010/009284/06)
JSE share code: RIN ISIN code: ZAE000149282
(“RIN”)
Set out below is an announcement which was released by Redefine International P.L.C. (“Redefine
International”), the London Stock Exchange-listed subsidiary of RIN, on the Regulatory News
Service (“RNS”) of the London Stock Exchange today, Monday, 29 April 2013.
REDEFINE INTERNATIONAL P.L.C.
(‘Redefine International’ or the ‘Company’ or the ‘Group’)
RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2013
REDEFINE DEMONSTRATES GOOD PROGRESS ON INCOME FOCUSED STRATEGY WITH
IMPROVED CAPITAL STRUCTURE AND STRONG GROWTH IN EARNINGS
Redefine International, the diversified income focused property company, today announces its half year results for the six
months ended 28 February 2013.
Financial Highlights
- Earnings available for distribution of £14.4 million (February 2012: £12.9 million), an increase of 11.6%
- Group profit after tax attributable to equity holders of £16.9 million (February 2012: loss of £60.7 million)
- Basic earnings per share of 1.91 pence (restated February 2012: 11.87 pence loss)
- Interim dividend declared of 1.475 pence per share (February 2012: 2.10 pence), following the increased number of
shares in issue post capital raise
(1)
- Adjusted NAV per share of 40.29 pence (August 2012 pro forma : 36.41 pence), an increase of 10.7%
- Fully diluted IFRS NAV per share of 26.69 pence (restated August 2012: 24.14 pence)
(2)
- Like-for-like portfolio valued at £969.2 million (August 2012: £917.4 million), an increase of 5.2%
- Group loan to value reduced to 51.2% (August 2012: 81.7%) and weighted debt maturity increased to 8.18 years
(1)
August 2012 adjusted EPRA NAV per share of 39.06 pence adjusted for the issuance of 490,384,616 new ordinary
shares at 26 pence per share and the subsequent 0.9:1 share consolidation
(2)
Excludes the Delta and Gamma portfolios
Operational Highlights
- Strong progress in further improving the capital structure following the £127.5 million capital raise supporting the
Company’s drive for delivering high quality income
- Strong operating performance from Cromwell reflected by 25.3% Australian dollar, (29.8% in Sterling) increase in the
market value of securities held throughout the period
- Supported Cromwell capital raise with £26.1 million investment at 78.5 cents per security
- Successful capital recycling with disposal of £52.8 million Cromwell securities at a weighted average price of 90.1 cents
per security in April 2013
- Restructuring of legacy Wichford assets and associated financing facilities largely complete
- Acquisition of a 60% interest in the Earls Court Holiday Inn Express, London and the commencement of the Southwark
Holiday Inn Express redevelopment
- €6.5 million acquisition of a newly developed retail park in Kaiserslautern, Germany, in joint venture with a pension fund
partner
- €11.5 million acquisition of OBI Huckelhoven, Germany; a newly developed property let to Germany’s leading DIY chain,
in joint venture with a pension fund partner
- Portfolio occupancy stable at 95.9% by area (August 2012: 95.5%)
- Continued portfolio improvement through asset management and disposal of non-core assets
Greg Clarke, Chairman, said:
“The capital raise was a transformational event for the Company placing us on a firm financial footing for future growth. The
shift from restructuring the legacy financing facilities and simplifying the ownership structure to enhancing the quality of the
portfolio is progressing well, with a number of new accretive investment opportunities being explored.
“The Company’s business model is focused around a diversified portfolio. This not only provides quality income but also the
ability to recycle capital between asset types and geographical areas in order to benefit from property’s inherent cyclicality.
The sale of a portion of Cromwell securities, our best performing investment over the last 12 months, is a clear illustration of
how our diversified portfolio is being used to benefit shareholders in a counter cyclical manner. The intention is to continue
to recycle capital across the portfolio into opportunities that provide the best risk-adjusted returns.
“The future is considered to be brighter than it has been for some time and the Company is looking forward to a dynamic
period where it can cement its place as a significant participant in the UK listed real estate market offering a strongly
capitalised, diversified, income focused investment opportunity.”
Meeting and conference call
A meeting for analysts and institutional investors will take place today at 09.00 (UK local time) at the offices of Investec Bank
plc, 7th Floor, 2 Gresham Street, London, EC2V 7QP. 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 Company’s website
http://www.redefineinternational.com/investor-relations/financial-reports
D
ial in number: UK Local +44(0)20 7136 20501 South Africa Local +27(0)11 019 7015
Confirmation Code: 1094079
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
Chairman’s Statement
I am pleased to report a solid set of operating and financial results for the six months ended 28 February 2013. The results
are the first since the successful £127.5 million capital raising in October 2012 and reflect a significantly stronger balance
sheet.
The Group’s financial position has enabled a renewed focus on enhancing the property portfolio as evidenced by the number
of successful asset management initiatives and new investments completed during the past six months.
Although performance within the Group’s business segments varied significantly, the benefits of our diversified portfolio,
enhanced by the larger allocation of capital to performing sectors, has proved successful in delivering both earnings and
NAV growth. Overall occupancy levels improved marginally to 95.9% and the like-for-like value of the investment portfolio,
including Cromwell at market value, increased 5.6% in Sterling terms.
The decision to invest in Australia (through Cromwell) has been a successful strategy which, together with the relative
stability of our German and Swiss assets, illustrates the benefit of the Group’s diversified business model. Simultaneously,
exposure to UK regional offices has been significantly reduced given the structural issues within a number of these markets.
Financial Results
Earnings available for distribution for the six months were 1.5 pence per share with basic earnings per share of 1.91 pence.
Given the impact of the capital raising in October 2012, and that the new investments have not contributed to earnings for
the full period, it is pleasing to have achieved this.
The overall increase in investment values supported an increase in the Adjusted NAV per share to 40.29 pence, a 10.7%
increase over the comparable figure, post the capital raising.
The Group’s Adjusted NAV removes the negative equity associated with the Gamma and Delta non-recourse financing
facilities and accounts for the investment in Cromwell at market value as opposed to the equity accounted net asset value
reflected on the balance sheet.
Leverage has been materially reduced following the capital raising and the successful restructuring of a number of debt
facilities. The Group’s LTV of 51.2% and weighted debt maturity in excess of 8 years places the Company on a significantly
stronger financial footing.
Operations
The overall performance of the Group’s investment portfolio was supported by sound performances from Cromwell and the
European portfolio, as well as a stronger Australian Dollar and Euro against Pound Sterling.
The UK retail environment continues to be challenging with pressure on consumers’ disposable income and structural
changes to the retail market suppressing rental growth and general demand for space. The general market trend of less
frequent visits to shopping centres but higher expenditure per visit was reflected in our portfolio with footfall down across the
portfolio although most retailers are reporting stable or higher turnover. Despite this footfall trend, the 0.4% increase in
occupancy to 95.9% by area, together with the redevelopment and refurbishment initiatives being carried out at Birchwood,
Warrington and St George’s, Harrow shopping centres supported a 1.0% increase in values.
Exposure to UK regional offices has been significantly reduced and will continue to reduce as assets are sold as part of the
Delta portfolio restructuring. In the interim there have been a number of successful lettings, maintaining occupancy and
securing government-backed income returns.
The acquisition of the Earls Court Holiday Inn Express strengthened the Hotel portfolio and complements the strategy of
investing in branded London-based limited service hotels. The London hotel market has had a slow start to the calendar
year but the quality of the Group’s Hotel portfolio and its long term prospects remain sound.
The European portfolio provided a resilient income contribution backed by strong covenants and inflation-linked leases.
Investment into newly developed convenience retail assets in Germany and the sale of smaller non-core assets continues to
strengthen the quality of the portfolio.
Cromwell produced an outstanding performance which included a well-supported capital raise and improvements in key
operating and financial measures. This, together with inclusion in the ASX 300 index, supported a 25.3% increase in the
security price during the period.
The Company took the opportunity in April 2013 (post period end) to capitalise on the strength of the Cromwell security price
and Australian Dollar, selling 86.0 million Cromwell securities at a weighted average price of AUD 90.1 cents, delivering
£52.8 million of capital and a profit of approximately £12.9 million. The Company remains committed to its shareholding,
which, following this sale, equates to a 16.12% shareholding, but will take opportunities to recycle capital where
opportunities exist to reinvest capital into earnings enhancing investments.
Wichford legacy assets and debt facilities
As previously announced, despite on-going negotiations to restructure the £199.7 million Gamma loan facility, the servicer
confirmed in January 2013 that it would be accelerating the loan. The loan facility is entirely non-recourse to the Company
and, as a result of the negative net asset value position of the Gamma portfolio, the Company did not attribute any economic
value to the portfolio. The Company’s Adjusted NAV reflects this by removing the residual non-recourse debt associated with
the portfolio.
Dividend
The Board has declared an interim dividend of 1.475 pence per share reflecting a pay-out ratio of 98% of earnings available
for distribution, which is payable on 24 May 2013 to shareholders on the register at the close of business on 10 May 2013.
Corporate Restructuring and UK REIT Conversion
A formal application has been submitted to the South African Reserve Bank following notification that it was agreeable to
considering an application for an inward listing onto the Johannesburg Stock Exchange (“JSE”). An inward listing will enable
the Group to simplify its corporate structure and consolidate its shareholder base by distributing Redefine Properties
International Limited’s current 65.8% shareholding in the Company. This should have the impact of enhancing the
Company’s liquidity and free float with existing shareholders in Redefine Properties International Limited becoming direct
shareholders in the Company through a dual listing on the LSE and the JSE.
The Company has also previously highlighted its intention to convert to a UK REIT. Recent changes to the UK REIT regime
enacted in the UK Finance Bill 2012 including, inter alia, the abolition of the 2% entry charge has made the conversion to a
UK REIT more attractive to the Group and its shareholders. The Company is at an advanced stage with an internal tax
restructuring review in order to facilitate a potential conversion. The Board is also considering proposals to internalise the
management function. An announcement will be made as soon as a formal decision to proceed is taken by the Board.
Prospects
The capital raise was a transformational event for the Company, placing us on a firm financial footing. The shift from
restructuring the legacy financing facilities and simplifying the ownership structure to enhancing the quality of the portfolio, is
progressing well with a number of new accretive investment opportunities being explored.
The Company’s business model is focused around a diversified portfolio. This not only provides good quality income but also
the ability to recycle capital between asset types and geographical areas, in order to benefit from property’s inherent
cyclicality. The sale of a portion of Cromwell securities, our best performing investment over the last 12 months, is a clear
illustration of how our diversified portfolio is being used to benefit shareholders in a counter cyclical manner. The intention is
to continue to recycle capital across the portfolio into opportunities that provide the best risk-adjusted returns.
We remain committed to investing in and upgrading our properties; specifically the shopping centres, retail parks and hotels.
We are also considering an active development programme on some existing well located properties that have reached the
end of their life cycle, but where there is evidence of future strong occupational demand. Furthermore, the Company’s
enhanced balance sheet position and on-going work in relation to the portfolio and simplifying the corporate structure should,
in due course, provide the ability to attract capital from a wider range of sources.
The future is considered to be brighter than it has been for some time and the Company is looking forward to a dynamic
period where it can cement its place as a significant participant in the UK listed real estate market offering a strongly
capitalised, diversified, income focused investment opportunity.
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 Listings Requirements of the JSE
Limited, RIN is required to publish a trading statement as soon as 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 RIN’s 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 capital raise in October 2012, is broadly consistent with the latest
published analyst guidance for Redefine International. The financial results on which RIN’s trading statement is based have not been
reviewed or reported on by RIN’s external auditors.
Our Business
Investment Strategy
The Group’s 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 Group’s UK shopping centre portfolio which includes four shopping centres (two
of which are held through jointly controlled entities) and two retail parks.
Europe Consists of all the Group’s 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 Group’s hotel properties. The hotels are let to Redefine Hotel Management
Limited and Redefine Earls Court Management Limited on a fixed rental basis with annual
reviews. The portfolio comprises six London based hotels and one hotel in Reading, branded
under the Holiday Inn, Holiday Inn Express and Crowne Plaza franchises.
Cromwell The Group’s investment in the Cromwell Property Group, a commercial real estate company
listed in Australia with major lettings to listed companies and government tenants. As at 28
February 2013 Cromwell’s market capitalisation was AUD 1.4 billion (£926 million) and the
Company’s shareholding was 22.01%.
Property portfolio by business segment at 28 February 2013
Occupancy by Annualised gross
Business segments Market values lettable area Lettable area rental income
(£’million) (%) (‘000 sqft) (£’million)
UK Stable Income 175.4 91.0 1,651 14.1
UK Retail 226.3 95.9 1,602 20.5
Hotels 150.2 100.0 288 11.1
Europe 213.5 99.0 1,661 17.9
(1)
Cromwell 281.4 94.9 1,358 30.0
Total investment portfolio 1,046.8 95.5 6,560 93.6
Delta portfolio 56.1 99.3 612 7.6
Total 1,102.9 95.9 7,172 101.2
Note:
1. Figures for Cromwell reflect the Company’s 22.01% share of Cromwell’s property assets and net rental income. The investment value
based on the 28 February 2013 share price of AUD 0.94 is £203.8 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
Principal value interest area rent area lease term
Name occupiers (£m) (%) Sector (sqft) (£m) (%) (years)
Debenhams,
Wigan, Grande Arcade BHS 76.4 50.0% Retail 471,355 7.38 99% 12.7
Harrow, St Georges Debenhams 57.5 100.0% Retail 217,595 4.22 96% 6.4
Coventry, West Orchards Debenhams 37.0 50.0% Retail 210,221 3.95 99% 7.4
Warrington, Birchwood ASDA 29.2 100.0% Retail 403,268 2.64 90% 17.5
Earls Court, 1
Holiday Inn Express RHM 27.0 42.6% Hotels 19,957 2.10 100% 12.8
Dresden, VBG VBG 25.7 49.0% Europe 187,818 2.38 100% 11.2
1
Brentford Lock, Holiday Inn RHM 25.6 71.0% Hotels 61,064 1.50 100% 12.8
Limehouse, Holiday Inn 1
Express RHM 24.1 71.0% Hotels 61,860 1.50 100% 12.8
Stuttgart, VBG VBG 24.1 49.0% Europe 134,059 2.02 100% 11.9
2
25-26 The Esplanade St JFSC , Capita 23.7 50.0% Office 59,352 1.63 100% 10.5
Helier
Southwark,
Holiday Inn Express RHM 22.6 71.0% Hotels 23,476 1.50 100% 12.8
Royal Docks, 1
Holiday Inn Express RHM 22.6 71.0% Hotels 49,094 1.50 100% 12.8
Malthurst Portfolio Malthurst 21.6 100.0% Industrial 503,777 1.49 100.0% 12.4
The Hague, ICC Royal Dutch Gov. 18.1 100.0% Europe 138,618 1.93 100.0% 1.3
Seaham, Byron Place ASDA 17.1 100.% Retail 115,377 1.36 100.0% 12.6
Notes:
1. Redefine Hotel Management Limited
2. Jersey Financial Services Commission
UK Stable Income
Market
Investment and occupational demand in regional office markets remains limited although longer-term secure income
remains in demand from both private investors with access to capital as well as property funds looking to generate income
returns. The public sector remains under intense Treasury scrutiny over new leases and lease renewals, with much of the
emphasis still on reduction of estate costs. In contrast, the private sector is starting to stabilise and there has been a
marked improvement in interest in office space since the beginning of the year. However, the regional office market
continues to be a tenant’s market where lease renewals and break clauses represent an opportunity to negotiate better
lease terms. In response, the Company has reduced its exposure to this market and is active in engaging with occupiers to
secure future occupation and income streams.
Performance
Values declined 6.1% in the period since 31 August 2012, largely as a result of declining lease lengths, but the portfolio
continues to provide a high income yield underpinned by a largely government tenant base.
Occupancy (including the Delta portfolio) remained stable at 93.2% (31 August 2012: 93.3%) and there have been a number
of successes in retaining tenants or re-letting vacant space. A large percentage of the vacancy at 28 February 2013 related
to Sapphire House, Telford and Valiant House, Crawley. Both properties have agreed terms for sale post period end at a
total book value of £2.5 million, which will reduce vacancy and associated operating costs. Occupancy is expected to
increase to 98.0% following the sale of these two assets.
There are currently on-going lease negotiations totalling approximately 25,000 sqft, at the Crescent Centre in Bristol, Wren
House, Chelmsford and The Observatory, Chatham.
Investment and asset management
Lyon and Equitable House, Harrow
Further progress has been made in satisfying the Section 106 conditions and pre-commencement planning conditions at
Lyon and Equitable House, Harrow.
Crescent Centre, Bristol
Refurbishment of the Crescent Centre in Bristol is now complete offering affordable, refurbished space in a strong location.
URS Infrastructure & Environment Group took 4,552 sqft on a five year lease at £11.50 per sqft during the period.
Strategy and Outlook
Overall exposure to regional offices has reduced significantly since the last financial year end. The UK Stable Income
portfolio now represents £175.4 million or 16% of the Group’s gross investment portfolio, down from 33.7% at 31 August
2012.
Of the remaining exposure, £56.1 million relates to the Delta portfolio which will be sold under the terms of the restructuring
agreement over the period to April 2015. The Company has no economic exposure to changes in valuation of the Delta
portfolio but will continue to receive 65% of net income after interest costs, subject to meeting certain sales targets.
UK Retail
UK Retail at a glance
28 February 31 August 29 February
2013 2012 2012
Market value £226.3 million £224.1 million £247.4 million
Occupancy (by lettable area) 95.9% 95.2% 94.8%
Annualised gross rental income £20.5 million £20.5 million £20.6 million
Estimated rental value (“ERV”) £20.9 million £20.4 million £21.2 million
1
Footfall % change (2.6%) (0.8%) 1.6%
Net initial yield 7.5% 7.5% 7.4%
Lettable area (‘000) 1,602 sqft 1,602 sqft 1,602 sqft
Notes:
Figures assume 100% ownership of property assets in subsidiaries and jointly controlled entities.
1 Excludes Crewe
Market
Despite the well documented challenges for retailers, and in light of the limited availability of prime stock, investment
demand for good quality secondary retail centres strengthened. Income yields on secondary, but sustainable centres are
now looking attractive.
Performance
The UK Retail portfolio (including Wigan and Coventry which are held in jointly controlled entities) was valued at £226.3
million (31 August 2012: £224.1 million) reflecting a 1.0% uplift. This reflects significant outperformance compared with the
4.9% decline recorded by the IPD Monthly Shopping Centre Index for the same period. The valuations were supported by
various asset management and redevelopment initiatives, particularly at St Georges, Harrow and Birchwood, Warrington.
Net income increased by 1.58% across the portfolio for the period, which again reflects favourably compared to the 1.9%
decline as measured by the IPD Shopping Centre rental value growth index for the same period. This highlights the
stabilisation of the shopping centre markets following the successive waves of retailer insolvencies, renewed tenant demand
for good quality secondary centres, together with an active asset management strategy.
Footfall across the portfolio decreased 2.6% compared to the same period last year. This appeared to be a consistent trend
across most retail portfolios with consumers shopping less often but spending more per visit. This compared to the national
benchmark provided by Experian estimated at -3.8%.
Occupancy increased to 95.9% (31 August 2012: 95.2%). Eight leases totalling 18,320 sqft were completed during the
period which reflects positively against five leases totalling 4,231 sqft that expired or were subject to break options.
The portfolio was subject to retail administrations at two Republic stores and one HMV store, all of which are in advanced
negotiations regarding new lettings.
Marketing and omni-channel development
The effects of technology and the internet on retailing are becoming clearer. Having listened to our retailers and undertaken
consistent research, the Company believes the following initiatives are the best way to protect the portfolio and maintain a
competitive edge.
The following initiatives are in progress:
• Introducing free Wi-Fi across the portfolio to provide essential customer requirements and CRM (customer relationship
management) opportunities;
• Introducing mobile-enabled websites across the portfolio;
• Introducing CRM initiatives including promotional based consumer applications;
• Introducing navigable, detailed Goad plans for all centres on Google maps (android mobile version);
• Refocusing marketing towards digital advertising and CRM, supported by events, promotions and above the line media
where appropriate;
• Exploring true omni-channel initiatives such as digital personal shoppers; and
• Exploring ideas and partnerships to deliver a customer focused and efficient click and collect system.
Commercialisation
The Company has instructed Asset Space to coordinate commercialisation at a portfolio level and introduce bespoke mall
kiosks, media and promotions. The three year target is to create additional annual gross income in excess of £0.5 million.
Investment and asset management
St Georges, Harrow
The initiatives to modernise the centre and bolster the leisure offer are progressing well and the first phase of the works is
almost complete. This phase has seen the Deichmann store completed as well as the enabling works to introduce full height
shop fronts to the units concentrated around the eastern side of the atrium. The existing outdated low ceiling in the area
approaching the atrium has also been raised and modernised.
A twenty year lease has been agreed with Nando’s for 3,520 sqft at a rent of £ 82,720 p.a. Terms have also been agreed
with another multi-national restaurant chain for 4,210 sqft. The lease term is twenty-five years at a rent of £101,040 p.a. It is
anticipated that both these lettings will support the strategy to drive further footfall to the centre.
Phase two has commenced which will see the installation of full height shop fronts, the creation of two new modern kiosks
for commercialisation and a new architectural treatment of the entrance and facade.
Birchwood, Warrington
Phases one to three of the scheduled redevelopment are now complete and both QVC and Home Bargains have taken
occupation of their units. QVC opened for trade in early November and is trading exceptionally well.
The remaining large unit of 10,000 sqft has been let to 99p Stores and the enabling works have commenced with handover
scheduled for the end of June 2013.
Phase four of the redevelopment programme which focuses on the refurbishment of existing mall areas started in early
February 2013 and is progressing on schedule. Included in this phase is the refurbishment of the old plant room to create a
new 1,550 sqft unit facing the public realm area on the south eastern corner of the centre. The final phase will be an
extension of the car park to provide an additional 221 spaces.
Strategy and Outlook
Investment and asset management will remain focused on occupancy and income protection in the short term. A number of
new development projects have been identified to leverage off the strength of foodstore anchors and in particular to
establish Birchwood and Seaham as dominant well anchored retail parks.
Hotels
The London hotel market has had a slow start to the year. Despite improvements in average daily rates, the overall increase
in supply and a weaker leisure sector is likely to see RevPar declines for the London market as a whole in 2013.
While the current business environment and ‘Olympic overhang’ are providing some short term challenges, the Company is
confident that the focus on branded London-based limited service hotels will provide long term outperformance.
The value of the portfolio remained broadly unchanged at £150.2 million.
Underlying operating performance
There were signs of pressure on operating margins in the first two months of 2013 although this was largely anticipated and
related to lower average room rates rather than volume. The impact of the Olympics and the supply of additional rooms into
the London market will need to be absorbed, but the continued growth of London is anticipated to support longer term trends
in investment and occupational demand.
The hotels are operated by Redefine Hotel Management Limited (“RHM”). The Company sets a fixed annual rental which is
reviewed annually.
Investment
Earls Court Holiday Inn Express
In November, the Company, through its 71% held subsidiary Redefine Hotel Holdings Limited (“RHH”), acquired a 60%
share in BNRI Earls Court Limited, the owner of the 150 bedroom Earls Court Holiday Inn Express Hotel in London (the
“Hotel”), for a consideration of £8.7 million. The effective purchase price of the Hotel of £27.0 million plus transaction costs
of £0.4 million, reflected a net yield of 7.5% and was funded by the Company and its co-investors in RHH on a pro-rata
basis.
The hotel is well located close to the Earls Court Exhibition Centre and Arena and the Olympia Exhibition Centre. The area
is earmarked for large-scale redevelopment and the hotel is expected to complement the Group’s existing portfolio of six
high quality limited service hotels.
Holiday Inn Express, Southwark
The construction of an additional 50 bedrooms commenced in February 2013 and is anticipated to be completed in January
2014. The Company has forward funded the additional rooms at a yield of 10.0% with certain guarantees being provided by
the developer.
Holiday Inn, Brentford Lock
A new InterContinental Hotels Group open lobby design concept has been launched at the Holiday Inn Brentford Lock
making it the first hotel in Europe to pilot this new concept. The new design combines the front desk, lobby, restaurant, bar,
lounge area and business centre into one area providing a contemporary feel and relaxed guest experience. The
refurbishment was completed in November 2012.
Strategy and Outlook
The strategy remains firmly focused on branded London-based limited service hotels as evidenced by the recent acquisition
of the Earls Court Holiday Inn Express.
Europe
Market
Despite continued volatility in the Eurozone, Germany, which accounts for the majority of the portfolio, proved resilient with
strong employment figures and slow but positive GDP growth of 0.7% in 2012. The investment market in Germany was
buoyant with transactional values up 10% making 2012 the most active year since 2008.
Performance
The European portfolio (including jointly controlled entities) was valued at €247.8 million (31 August 2012: €240.5 million).
The like-for-like portfolio declined 2.6% in local currency terms but was offset by a stronger Euro resulting in a 5.1% increase
in Sterling terms.
Occupancy decreased marginally to 99.0% (31 August 2012: 99.3%). However a number of leases have been agreed after
the period end which have subsequently increased occupancy to 99.6%.
Asset management during the period focused on the extension and renovation of three discount food store anchors in return
for new lease terms of between 10 to 15 years. A number of smaller leases were extended providing additional income
security.
Investment and asset management
Kaiserslautern and Huckelhoven acquisitions
The Kaiserslautern retail park and OBI Huckelhoven acquisitions were completed in October 2012 and December 2012
respectively. The newly developed retail properties in Germany were acquired through the Group’s jointly controlled entity RI
Menora German Holdings S.a.r.l.
The Kaiserslautern property, valued at €6.5 million, was acquired directly from the developers at a net initial yield of 6.8%.
The property comprises eight retail units and one office, with 150 parking bays. The retail units are occupied by leading
German retails chains, accounting for approximately 75% of the gross rental income.
The Huckelhoven property, valued at €11.6 million, was acquired directly from the developers at a net initial yield of 7.3%.
The property is leased to OBI AG on a 15 year lease linked to German CPI. OBI AG is Germany’s leading DIY chain with
over 580 stores throughout Europe.
Sale of non-core assets
The sale of three smaller non-core assets valued at €3.1million was agreed post period end. The proceeds will be utilised to
pay down the associated financing facilities.
Strategy and Outlook
Recent investments into newly developed, well-let retail assets and the sale of certain smaller non-core assets is providing
on-going improvements to the portfolio and income security. The relative strength of the German economy and a stronger
property lending market remain attractive and the Company has a number of opportunities under review.
Cromwell
Cromwell Property Group (“Cromwell”) is an internally managed Australian Real Estate Investment Trust (A-REIT) with an
Australian property portfolio valued in excess of AUD 1.9 billion and a fund management business that promotes and
manages unlisted property investments. Cromwell’s income is underpinned by a focus on quality income producing office
properties with strong tenant covenants.
Redefine International holds a strategic shareholding in Cromwell, as its largest shareholder, with the Redefine Group and
has two directors on the Cromwell Board.
Cromwell Capital Raising
Cromwell completed a successful capital raising during the period raising AUD 143.0 million from an institutional placement
and a further AUD 40.0 million from existing security holders through a security purchase plan. Both were materially
oversubscribed.
Redefine International subscribed for AUD 40.0 million (£26.1 million) worth of new securities in the capital raising at 78.5
cents per security. The placement was subject to a sub-underwriting commitment from Redefine Australian Investments
Limited (the Company’s 100% owned subsidiary) for which it received a cash fee of AUD 0.8 million (£0.52 million).
The Company’s shareholding at 28 February was 321.5 million securities or 22.01% (August 2012: 22.08%).
Operating performance
Cromwell produced a strong set of operating and financial results for its half-year ended 31 December 2012. Highlights
included:
• Statutory accounting profit of AUD 29.5 million, compared to a prior year loss of AUD 6.8 million
• Operating earnings of AUD 45.9 million, up 24% from AUD 37.0 million in 1H12
• Like-for-like increase of 3.8% in net property income
• Reduction in gearing from 51% at June 2012 to 44%
• AUD 143.0 million raised from institutional placements and AUD 39.0 million raised from security purchase plan
• Completed the acquisition of the balance of the Cromwell Property Fund
• Fund management momentum continued with completion of Ipswich fund and launch of Box Hill Trust
• FY13 operating earnings guidance maintained at not less than 7.5 cps, with distributions of 7.25 cps
Security price performance
Cromwell’s security price increased 25.3% during the period from AUD 75.0 cents at August 2012 to AUD 94.0 cents at 28
February 2013. This reflects a 29.8% increase in Sterling terms. Since the period end the Cromwell security price has
consistently traded in the range of AUD 94.0 cents to AUD 1.04.
The Company took the opportunity to capitalise on the strength of the security price and Australian dollar, selling 86 million
securities at a weighted average price of AUD 90.1 cents (after expenses), delivering £52.8 million of capital. The Company
remains committed to its shareholding but will recycle capital where opportunities exist to reinvest capital into earnings
enhancing investments.
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) (%) (%)
1
UK Stable Income 75 1,651 175.4 15.9 7.5
UK Retail 6 1,602 226.3 20.5 7.5
Hotels 7 288 150.2 13.6 7.0
Europe 37 1,661 213.5 19.4 7.9
2
Cromwell 26 1,358 281.4 25.5 8.4
Total investment portfolio 151 6,560 1,046.8 94.9 7.7
3
Delta portfolio 16 612 56.1 5.1 12.6
Total 167 7,172 1,102.9 100.0 8.0
Notes:
1. Excludes the Gamma portfolio valued at £155.7 million
2. Cromwell’s market value reflects the Group’s 22.01% stake in Cromwell as at 28 February 2013. The Cromwell property portfolio consist
of 26 assets with a market value of AUD 1.89 billion as at 31 December 2012
3. The Delta portfolio reflects the assets that remain in the restructured Delta facility and are held for sale. The seven assets acquired as
part of the restructuring are included in the UK Stable Income portfolio
Figures (excluding Cromwell) reflect 100% ownership of property assets held through subsidiaries and jointly controlled entities
Business segments – gross rental income
Weighted
Annualised average Occupancy Indexation
gross Average unexpired by lettable and fixed
rental income rent per lease term area increases
(£’million) (sqft) (years) (%) (%)
1
UK Stable Income 14.1 8.5 9.2 91.0 56.2
UK Retail 20.5 12.8 11.0 95.9 5.3
Hotels 11.1 38.6 10.3 100.0 0.0
Europe 17.9 10.8 8.0 99.0 100.0
2
Cromwell 30.0 22.1 6.0 94.9 91.0
Total investment portfolio 93.6 14.3 8.5 95.5 57.9
Delta Portfolio (held for sale) 7.6 12.4 4.7 99.3 64.0
Total 101.2 14.1 8.2 95.9 58.4
Notes:
1. Excludes the Gamma portfolio
2. Cromwell’s gross rental income reflects the Group’s 22.01% stake in Cromwell as at 28 February 2013
Figures (excluding Cromwell) reflect 100% ownership of property assets
Business segments - valuation movement since 31 August 2012
Valuation movement
Proportion Market value six months ended
of portfolio 28 February 28 February
by value 2013 2013
(%) (£’million) (%)
1
UK Stable Income 17.1 175.4 (6.1)
UK Retail 22.1 226.3 1.0
Hotels 12.0 123.2 (0.1)
Europe 19.3 197.9 5.9
2
Cromwell 16.7 171.5 29.8
Total like-for-like portfolio 87.2 894.3 4.8
3
Acquisitions 7.3 74.9 9.8
Total investment portfolio 94.5 969.2 5.2
Delta portfolio 5.5 56.1 (8.7)
Total 100.0 1,025.3 4.3
Notes:
1. Excludes the Gamma portfolio
2. Cromwell reflects market value at a closing share price of AUD 0.94 per security
3. Acquisitions include Earls Court Holiday Inn Express, retail assets in Huckelhoven and Kaiserslautern (held in a jointly controlled entity)
and 50.95 million Cromwell securities
Includes the effect of foreign exchange movement during the period.
Portfolio overview by sector
Property sectors at 28 February 2013
Occupancy Annualised gross
Market value by lettable area Lettable area rental income
(£’million) (%) (sqft’000) (£’million)
Retail 334.3 96.8 2,534 28.2
Office 296.2 90.0 2,259 27.9
Industrial 36.2 100.0 663 2.5
Hotels 150.2 100.0 288 11.1
Other 4.6 100.0 72 1.5
Total
821.5 94.7 5,814 71.2
Note:
Excludes Cromwell and Delta and assumes 100% ownership of property assets held in subsidiaries and jointly controlled entities.
Financial Review
Overview
The Group’s profit after tax attributable to equity holders was £16.9 million, compared to a loss of £60.7 million for the si x
months ended 29 February 2012. Earnings available for distribution were £14.4 million, up by £1.5 million from the
comparable period. Basic earnings per share were 1.91 pence compared to a loss per share of 11.87 pence (as restated
following the 0.9:1 share consolidation) for the six months ended 29 February 2012.
Adjusting for the effects of the capital raise and the 0.9:1 share consolidation in October 2012, the Adjusted NAV increased
by 3.89 pence from 36.41 pence at 31 August 2012 to 40.29 pence at 28 February 2013, an increase of 10.7%. This was as
a result of a small underlying GBP increase in investment property values of £0.9 million and an increase in the market value
of the Cromwell securities.
Earnings available for distribution
The Company’s policy is to distribute the majority of its earnings available for distribution in the form of dividends to
shareholders. The earnings available for distribution exclude any capital and one-off items and is one of the figures used by
the Board as its measure of underlying earnings performance.
Considering the earnings available for distribution for the six months ended 28 February 2013, the Board declared an interim
dividend of 1.475 pence per share, which is payable on 24 May 2013 to shareholders on the register at the close of business
on 10 May 2013. This is a satisfactory increase in underlying earnings in a period where income continued to be placed
under pressure by further retail administrations.
The statement of earnings available for distribution is as follows:
Six months Six months
ended ended Year ended
28 February 29 February 31 August
2013 2012 2012
Total Total Total
£'000 £’000 £'000
Gross rental income from investment properties 20,690 38,633 73,394
Property operating expenses (1,500) (2,437) (4,688)
Net operating income from investment properties 19,190 36,196 68,706
Cromwell distributions received 6,522 5,083 11,467
Other income 984 1,199 1,866
Total revenue 26,696 42,478 82,039
Administrative expenses (576) (855) (1,538)
Investment management fees (2,145) (2,780) (5,451)
Professional fees (670) (1,387) (2,684)
Net operating profit 23,305 37,456 72,366
Share of distributable income from associates and jointly 388
controlled entities 1,428 847
Adjusted operating profit 24,733 37,844 73,213
Net finance charges (8,229) (22,979) (43,273)
Interest paid (8,550) (23,162) (43,519)
Interest received 321 183 246
Foreign exchange loss (5) (161) (240)
Taxation (928) (604) (2,216)
Profit before non-controlling interest 15,571 14,100 27,484
Non-controlling interest (1,152) (1,160) (1,996)
Earnings available for distribution for the period/year 14,419 12,940 25,488
First interim distribution - - (12,168)
Earnings available for distribution for the period/year 14,419 12,940 13,320
Earnings available for distribution per share
Earnings available for distribution 14,419 12,940 13,320
Number of ordinary shares in issue ('000) 962,855 579,454 579,454
Earnings available for distribution per share (pence) at
period/year end 1.50 2.23 2.30
Summary
Distribution per share (pence) 1.475 2.10 4.40
First interim (pence) 1.475 2.10 2.10
Second interim (pence)
- - 2.30
Net assets
The EPRA NAV per share has increased from 27.63 pence at 31 August 2012 (pro-forma) to 28.36 pence per share. EPRA
NAV is used as a reporting measure to better reflect the 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 28 February 2013, 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 NAV has therefore been calculated as follows:
1
Pro-forma
28 February 2013 31 August 2012
Note Pence per share Pence per share
Fully diluted IFRS NAV per share 26.69 25.83
Adjusted for derivatives and deferred tax 1.67 1.80
EPRA NAV per share 28.36 27.63
Write back of VBG negative equity - 1.76
Write back of Gamma negative equity 2 4.82 4.44
Write back of Delta negative equity 3 2.52 1.81
Cromwell fair value write-up 4 4.59 0.77
Adjusted NAV per share 40.29 36.41
Notes
1. Pro-forma position of the 31 August 2012 NAV per share figures after adjusting for the effects of the capital raise and the 0.9:1 share
consolidation in October 2012.
2. Notwithstanding the appointment of a receiver to the assets held in the Gamma portfolio, the residual non-recourse debt associated with
the portfolio of £47.9 million will remain on the Group balance sheet until such time as it can be legally extinguished or Redefine
International loses control of Wichford Gamma Limited. Refer Note 2.2.1 and Note 24 of the condensed consolidated financial
statements for further detail.
3. Following the successful completion of the Delta restructuring announced on 15 October 2012, the negative net asset value position of
2.52 pence per share is expected to reverse over the remaining term of the loan.
4. Cromwell has been equity accounted at a net asset value of AUD 68.0 cents per security at 28 February 2013. The market price of
Cromwell at 28 February 2013 was 94.0 cents per security and should the Cromwell investment have been accounted for at fair value at
this date would have led to a write-up of 4.59 pence per share.
Financing and capital
The completion of the VBG and Delta restructurings and the £127.5 million capital raising have significantly improved the
strength of the balance sheet.
A key component of the profit after tax is the realised gain of £16.4 million on the restructuring of the VBG portfolio and
associated financing facilities. The gain reflects the release of the negative net asset value in the underlying portfolio prior to
its disposal, being primarily the property portfolio value of €94.0 million less the debt of €116.0 million.
The nominal value of the Group’s debt facilities at 28 February 2013 was £438.8 million (£576.5 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 during the period.
28 February 31 August 29 February
2013 2012 2012
Key financing statistics £’000 £’000 £’000
Total investment portfolio 744,319 889,588 1,038,808
(1)
Gross debt 438,821 744,733 855,380
Cash and short-term deposits (57,879) (17,726) (33,866)
Net debt 380,942 727,007 821,474
Weighted average debt maturity 8.18 years 2.57 years 4.13 years
Weighted average interest rate 4.25% 5.02% 5.09%
% of debt at fixed/capped rates 99.9% 93.3% 93.6%
Loan-to-value 51.2% 81.7% 79.1%
Notes
1. Excludes the Gamma residual non-recourse debt (see commentary below)
The Delta financing facility will continue to reduce as disposals are made to meet agreed disposal targets. The facility
remains non-recourse to the Group.
Notwithstanding the appointment of a receiver to the assets held in the Gamma portfolio, according to accounting rules, the
residual non-recourse debt associated with the portfolio of £47.9 million will remain on the balance sheet until such time as it
can be legally extinguished or Redefine International loses control of Wichford Gamma Limited. Refer to Note 2.2 and Note
24 of the condensed consolidated interim financial statements for further detail.
The £46.0 million Zeta facility matures in May 2013. Credit approved terms have been received to refinance the Zeta
portfolio for a three year term at a margin of 3.25% p.a.
Principal risks and uncertainties
The principal risks of the business are set out on pages 26-27 of the 2012 Annual report alongside their potential impact and
related mitigations. These risks fall into four categories: strategic, financial, operational, legal and other. The Board has
reviewed the principal risks in the context of the second half of the current financial year.
The Board believes that the risks outlined in the Annual Report have not changed and that the existing mitigation measures
within the business remain relevant for the risks highlighted.
Statement of Directors’ Responsibilities
Each of the Directors (whose details are provided in the 2012 Annual Report) confirms that to the best of each person’s
knowledge and belief:
a) the condensed consolidated interim financial statements comprising the condensed consolidated income statement, the
condensed consolidated statement of comprehensive income, the condensed consolidated statement of financial
position, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash
flows and related notes have been prepared in accordance with IAS 34 Interim Financial Reporting.
b) The interim management commentary includes a fair review of the information required by:
i. DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact on the condensed set of financial statements; and a
description of the principal risks and uncertainties for the remaining six months of the year; and
ii. DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the
first six months of the current financial year and that have materially affected the financial position or performance of
the entity during the period; and any changes in the related party transactions described in the last annual report that
could do so.
The Board
29 April 2013
Independent Auditors’ Review Report to Redefine International P.L.C.
We have been engaged to review the condensed consolidated set of financial statements in the half-yearly financial report of
Redefine International P.L.C. for the six months ended 28 February 2013 which comprise the condensed consolidated
income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement
of financial position, the condensed consolidated statement of changes in equity, the condensed consolidated statement of
cash flows, and the related explanatory notes.
We have read the other information contained in the half-yearly financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with our engagement letter to assist the Company in meeting the
requirements of the Disclosure and Transparency Rules (“the DTR”) of the UK’s Financial Conduct Authority (“the FCA”).
Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company for our review work, for this report, or for the conclusions we have reached.
Directors’ Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are
responsible for preparing the half-yearly financial report in accordance with the DTR of the FCA.
As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRS.
The Directors are responsible for ensuring that the condensed consolidated set of financial statements included in this half-
yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed consolidated set of financial statements in
the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with the International Standards on Review Engagements (UK and Ireland) 2410
Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices
Board. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an
audit conducted in accordance with International standards on Auditing (UK and Ireland) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated set of
financial statements in the half-yearly report for the six months ended 28 February 2013 is not prepared, in all material
respects, in accordance with IAS 34 and the DTR of the UK FCA.
Darina Barrett
Senior Statutory Auditor
For and on behalf of KPMG
Chartered Accountants
Dublin, Ireland
CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 28 February 2013
Restated
Reviewed Reviewed Audited
6 Months 6 Months Year ended
ended ended 31 August
28 Feb 2013 29 Feb 2012 2012
Total Total Total
Notes £'000 £'000 £'000
Revenue
Gross rental income 29,421 38,537 76,150
Other income 1,012 1,199 1,917
Total revenue 30,433 39,736 78,067
Expenses
Administrative expenses (721) (855) (1,639)
Investment adviser and professional fees (3,159) (4,473) (9,006)
Property operating expenses (1,875) (2,437) (4,707)
Net operating income 24,678 31,971 62,715
Net gains from financial assets and liabilities 4 3,081 4,848 1,943
Redemption of loans and borrowings - - 6,080
Gain/(loss) on sale of subsidiaries 23 16,491 (100) (2,195)
Equity accounted profit 5,082 1,879 6,325
Net fair value losses on investment property and assets
held for sale 8,11 (15,680) (57,824) (126,871)
Profit/(loss) from operations 33,652 (19,226) (52,003)
Interest income 5 6,125 4,911 9,776
Interest expense 6 (20,174) (45,805) (81,344)
Share based payment – finance cost (387) (375) (768)
Foreign exchange loss (1,137) (945) (542)
Profit/(loss) before taxation 18,079 (61,440) (124,881)
Taxation 7 (2,535) (1,124) (3,370)
Profit/(loss) after taxation 15,544 (62,564) (128,251)
Profit/(loss) attributable to:
Equity holders of the parent 16,918 (60,670) (124,755)
Non-controlling interest (1,374) (1,894) (3,496)
15,544 (62,564) (128,251)
Basic earnings/(loss) per share (pence) 21 1.91 (11.87) (24.16)
Diluted earnings/(loss) per share (pence) 21 1.85 (11.87) (24.16)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 28 February 2013
Restated
Reviewed Reviewed Audited
6 Months 6 Months Year ended
ended ended 31 August
28 Feb 2013 29 Feb 2012 2012
Total Total Total
£'000 £'000 £'000
Profit/(loss) for the period 15,544 (62,564) (128,251)
Other comprehensive income
Transfer of FCTR to income statement on disposal of
foreign operation 23 298 - (381)
Foreign currency translation on foreign operations - (98) 95 497
subsidiaries
Foreign currency translation on foreign operations -
associates and jointly controlled entities 12,13 5,338 3,692 (1,546)
Total comprehensive income for the period 21,082 (58,777) (129,681)
Total comprehensive income attributable to:
Equity holders of the parent 22,507 (56,875) (125,881)
Non-controlling interest (1,425) (1,902) (3,800)
21,082 (58,777) (129,681)
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 28 February 2013
Restated
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
Total Total Total
Notes £'000 £'000 £'000
Assets
Non-current assets
Investment property 8 487,349 805,249 631,278
Long-term receivables 9 103,559 91,881 98,470
Investments at fair value 10 99 529 399
Investments in jointly controlled entities 12 14,068 2,201 2,159
Investment in associates 13 158,208 129,795 124,507
Total non-current assets 763,283 1,029,655 856,813
Current assets
Assets held for sale 11 60,326 109,231 136,009
Trade and other receivables 32,269 23,847 23,359
Cash at bank 14 57,879 33,820 17,726
Total current assets 150,474 166,898 177,094
Total assets 913,757 1,196,553 1,033,907
Equity and liabilities
Capital and reserves
Share capital 15 77,029 41,721 41,721
Share premium 187,106 164,939 164,939
Reverse acquisition reserve 134,295 134,295 134,295
Retained loss (164,400) (159,321) (232,991)
Capital instrument 16 14,923 14,143 14,536
Foreign currency translation reserve 15,100 14,432 9,511
Other reserves 903 3,912 903
Total equity attributable to equity shareholders 264,956 214,121 132,914
Non-controlling interest 10,150 3,818 5,342
Total equity 275,106 217,939 138,256
Non-current liabilities
Borrowings 17 450,013 469,360 353,707
Derivatives 18 2,120 5,487 4,244
Deferred tax 7 3,219 1,692 2,489
Total non-current liabilities 455,352 476,539 360,440
Current liabilities
Borrowings 17 141,938 458,377 400,455
Liabilities held for sale 17 - - 91,935
Derivatives 18 4,235 11,340 5,379
Provision for liabilities and commitments 19 12,079 - 12,079
Trade and other payables 25,047 32,358 25,363
Total current liabilities 183,299 502,075 535,211
Total liabilities 638,651 978,614 895,651
Total equity and liabilities 913,757 1,196,553 1,033,907
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period ended 28 February 2013
Foreign Total
Reverse currency attributable Non-
Share Share acquisition Retained translation Capital Other to equity controlling Total
Capital Premium reserve loss reserve instrument reserves shareholders interest equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 September 2011 40,870 161,420 134,295 (87,598) 10,637 13,768 3,912 277,304 5,506 282,810
Change in accounting policy for deferred tax - - - 905 - - 905 - 905
Restated balance at 1 September 2011 40,870 161,420 134,295 (86,693) 10,637 13,768 3,912 278,209 5,506 283,715
Total loss for the period (restated) - - - (60,670) - - - (60,670) (1,894) (62,564)
Foreign currency translation effect - - - - 3,795 - - 3,795 (8) 3,787
Total comprehensive income (restated) - - - (60,670) 3,795 - - (56,875) (1,902) (58,777)
Shares issued 851 3,519 - - - - - 4,370 - 4,370
Share taken into treasury - - (67) (317) - - - (384) - (384)
Treasury shares sold - - 67 280 - - - 347 - 347
Dividend paid to equity stakeholders - - - (11,921) - - - (11,921) - (11,921)
Share based payment - - - - - 375 - 375 - 375
Decrease in non-controlling interest - - - - - - - - (272) (272)
Disposal of subsidiaries/non-controlling
interests - - - - - - - - 486 486
Balance at 29 February 2012 41,721 164,939 134,295 (159,321) 14,432 14,143 3,912 214,121 3,818 217,939
Foreign Total
Reverse currency attributable Non-
Share Share acquisition Retained translation Capital Other to equity controlling Total
Capital Premium reserve loss reserve instrument reserves shareholders interest equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Total loss for the period - - - (64,085) - - - (64,085) (1,602) (65,687)
Foreign currency translation effect - - - - (4,921) - - (4,921) (296) (5,217)
Total comprehensive income - - - (64,085) (4,921) - - (69,006) (1,898) (70,904)
Dividend paid to equity stakeholders - - - (12,168) - - - (12,168) - (12,168)
Increase in non-controlling interest (426) (426) 426 -
Share based payment - - - - - 393 - 393 - 393
Increase in non-controlling interest - - - - - - - - 272 272
Disposal of subsidiaries/non-controlling interests - - 3,009 - - (3,009) - 2,724 2,724
Balance at 31 August 2012 41,721 164,939 134,295 (232,991) 9,511 14,536 903 132,914 5,342 138,256
Balance at 1 September 2012 41,721 164,939 134,295 (232,991) 9,511 14,536 903 132,914 5,342 138,256
Total profit for the period - - - 16,918 - - - 16,918 (1,374) 15,544
Foreign currency translation effect - - - - 5,589 - - 5,589 (51) 5,538
Total comprehensive income - - - 16,918 5,589 - - 22,507 (1,425) 21,082
Shares issued 35,308 92,192 - - - - - 127,500 - 127,500
Share issue costs - (5,025) - - - - - (5,025) - (5,025)
Foreign Total
Reverse currency attributable Non-
Share Share acquisition Retained translation Capital Other to equity controlling Total
Capital Premium reserve loss reserve instrument reserves shareholders interest equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Reduction of share premium - (65,000) - 65,000 - - - - - -
Dividend paid to equity stakeholders - - - (13,327) - - - (13,327) - (13,327)
Dividends paid to non-controlling interest - - - - - - - - (96) (96)
Share based payment - - - - - 387 - 387 - 387
Increase in non-controlling interest - - - - - - - - 6,547 6,547
Disposal of subsidiaries/non-controlling
interests - - - - - - - - (218) (218)
Balance at 28 February 2013 77,029 187,106 134,295 (164,400) 15,100 14,923 903 264,956 10,150 275,106
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 28 February 2013
Reviewed Reviewed
6 Months 6 Months Audited
ended ended Year ended
28 February 29 February 31 August
2013 2012 2012
Notes £'000 £'000 £'000
Cash flows from operating activities
Profit/(loss) before taxation 18,079 (61,440) (124,881)
Adjustments for:
Straight lining of rental income 99 177 504
Net fair value losses on investment property and assets held
for sale 8,11 15,680 57,824 126,871
Exchange rate losses 1,137 945 542
Net gains from financial assets and liabilities 4 (3,081) (4,848) (1,943)
Redemption of loans and borrowings - - (6,080)
Equity accounted profit 12,13 (5,082) (1,879) (6,325)
(Gain)/loss on sale of subsidiaries 23 (16,491) 100 2,195
Interest income 5 (6,125) (4,911) (9,776)
Interest expense 6 20,174 45,805 81,344
Share based payments – finance cost 16 387 375 768
Cash generated by operations 24,777 32,148 63,219
Changes in working capital 3,655 (5,251) (6,915)
Cash flow from operations 28,432 26,897 56,304
Interest income 3,221 3,754 7,908
Interest paid (18,321) (26,193) (54,012)
Taxation paid (2,088) (718) (1,412)
Distributions from associates and jointly controlled entities 7,591 5,083 11,263
Net cash generated from operating activities 18,835 8,823 20,051
Cash flows from investing activities
Purchase of investment properties 8 (29,798) (1,126) (3,893)
Disposal of investment properties 6,937 - -
Investments in associates and jointly controlled entities 12,13 (42,781) (24,222) (25,863)
Disposal of subsidiaries – net cash disposed 23 (1,693) 615 (181)
Increase in loans to related parties (6,066) (208) -
(Increase)/decrease in long term receivables (5,089) 11,057 (2,600)
Increase in restricted cash balances (3,867) (1,958) (592)
Net cash utilised in investing activities (82,357) (15,842) (33,129)
Cash flows from financing activities
Proceeds from loans and borrowings 33,385 18,776 19,443
Repayment of loans and borrowings (48,957) (24,369) (20,826)
Dividends paid to equity shareholders (13,327) (11,921) (24,089)
Dividends paid to non-controlling interests (96) - -
Acquisition of treasury shares - (384) (384)
Proceeds from issue of shares from treasury - 347 347
Proceeds from issue of share capital 127,500 4,370 4,370
Share issue costs (5,025) - -
Increase in contribution from non-controlling shareholders 6,547 - -
Net cash generated from financing activities 100,027 (13,181) (21,139)
Net increase/(decrease) in cash 36,505 (20,200) (34,217)
Effect of exchange rate fluctuations on cash held (219) 694 (17)
Opening cash 5,703 39,937 39,937
Net cash at end of period 14 41,989 20,431 5,703
The accompanying notes form an integral part of these condensed consolidated interim financial statements
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 28 February 2013
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.
The financial information presented herein does not amount to statutory financial statements.
The preparation of the condensed consolidated interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and
liabilities, income and expenses. Actual results may differ materially from these estimates. The significant
judgements made by management in applying the Group’s accounting policies and the key sources of estimation
uncertainty are discussed further in Note 2.2.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 BASIS OF PREPARATION
Statement of compliance
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34
“Interim Financial Reporting” as issued by the IASB. Selected explanatory notes are included to explain events
and transactions that are significant to an understanding of the changes in financial position and performance of
the Group since the last annual consolidated financial statements as at and for the year ended 31 August 2012.
The condensed consolidated interim financial statements do not include all of the information required for full
annual financial statements prepared in accordance with International Financial Reporting Standards and should
be read in conjunction with the consolidated financial statements as at and for the year ended 31 August 2012.
Significant accounting policies
The accounting policies applied by the Group in these condensed consolidated financial statements are the same
as those applied by the Group in its audited financial statements as at and for the year ended 31 August 2012.
As noted in the consolidated financial statements as at and for the year ended 31 August 2012 the Group 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. The amendment was applied
retrospectively as required by IAS 8 and consequently there has been adjustments to the financial information
presented here for the six month to 29 February 2012.
The early adoption had the effect of reducing the 2011 deferred taxation balance with a corresponding increase in
the opening 2012 reserves of £0.9 million and a decrease in the deferred tax charge for the six months to 29
February 2012 of £0.04 million. This therefore reduced the previously reported deferred tax liability as at 29
February 2012 by £0.94m.
2.2 JUDGEMENTS AND ESTIMATES
The preparation of the condensed consolidated interim financial statements requires the use of judgements and
estimates that affect the reported amounts of assets and liabilities at the reporting date and the reported amounts
of revenues and expenses 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 include in the area of financing and going
concern, investment property valuation and classification and taxation. These areas are discussed in more detail
below.
2.2.1 FINANCING AND THE GOING CONCERN BASIS OF ACCOUNTING
Application of the Going Concern Basis of Accounting
These condensed consolidated interim financial statements have been prepared on a going concern basis as
after considering the relevant factors, the Directors have a reasonable expectation that the Group has adequate
resources to continue in operation for the foreseeable future. Completion of the restructuring on the Delta and
VBG Facilities in the period has significantly improved the going concern expectation of the Group.
The Board has also had regard to the funds raised as part of the equity raising which completed in October 2012
and saw the Company raise gross proceeds of £127.5 million. This additional capital has allowed the Group to
further reduce its leverage.
The Board has also considered the working capital forecast for the Group and believes that based on a detailed
analysis of cashflow projections, the level of capital raised post year end and the progress made on loan
refinancing that the Group has adequate resources to continue in operation for the foreseeable future.
The Board remains of the view that the Gamma facility and related portfolio of assets has limited impact on the
continued operations of the Group considering the non-recourse nature of the facility.
Accounting for Gamma
Following the appointment of a Fixed Charge Receiver (“the Receiver”) to the property subsidiaries which secure
the Gamma facility, the Board considered whether the Group should continue to consolidate the underlying
property companies.
Under IAS 27 the requirement for consolidation is based on control, which is the power to govern, either directly
or indirectly, the financial and operating policies of an entity so as to obtain benefits from its activities.
As a result of the powers and the responsibilities of the Receiver as set out under UK law, the Directors believe
that the Group has lost control of the underlying property companies. It no longer has the power to govern their
operating activities and or dispose of any of the underlying assets. It is also not in a position to exercise any
power to obtain benefits from the underlying subsidiaries activities. Redefine International has therefore ceased to
consolidate the underlying property companies from the date control was lost i.e the date the Receiver was
appointed.
Wichford Gamma Limited is the primary obligor for the debt although it is recourse only to the subsidiary
companies on which it is secured. The Group is deemed to continue to control this company as a receiver has not
been appointed and at 28 February 2013 Redefine International continues to have the ability to govern the
activities of Wichford Gamma Limited.
The Directors have considered the impact of the appointment of the Receiver to the underlying property
subsidiaries on the carrying value of the loan facility in the books of Wichford Gamma Limited.
IAS 39 does not provide specific guidance on whether or not the appointment by the lender of a receiver over the
secured assets constitutes partial settlement of the debt. In the opinion of the Directors, the receiver is acting on
behalf of the lender and consequently they consider that the transfer of the secured assets to the Receiver is in
substance the transfer of those assets to the lender.
As a result the loan facility recorded in the books of Wichford Gamma Limited and hence consolidated by
Redefine International has been reduced by the fair value of the net assets of the property subsidiaries at the date
the Receiver was appointed. This is a key judgement.
The Group will continue to recognise the residual debt until such time as that element of the debt is legally
extinguished or legally released by the Security Trustee or it can be evidenced that Redefine International no
longer has the power to control Wichford Gamma Limited.
Redefine International is currently taking steps to transfer the property companies included in the legal ownership
of Wichford Gamma Limited but not secured against the Gamma facility to other group entities. Following which, it
is likely that the Security Trustee will be seen to control the Wichford Gamma Group resulting in the
deconsolidation of Wichford Gamma Limited and the remaining residual debt. Failing this, the Company will seek
a legal extinguishment of the debt from the Security Trustee following the sale of the Gamma portfolio, which is
currently being marketed.
2.2.2 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.
2.2.3 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. The annual
review takes into account the forecasted EBITDA for the hotel portfolio when setting the revised rental level.
RHML operates the hotel business 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 which resets
annually, there are limited or no transactions between the two entities. As a result, Redefine International
classifies the hotel properties as investment properties in line with IAS 40.
2.2.4 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.
2.2.5 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 expected sales proceeds 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 Group’s statement of financial position.
3. SEGMENTAL REPORTING
The Group's identified reportable segments are set out below. These segments are generally managed by
separate management teams. As required by IFRS 8, Operating Segments, the information provided to the Board
of directors, who are the Chief Operating Decision Makers, can be classified in the following segments:
UK Stable Income: Consists predominantly of UK offices, but includes petrol filling stations, Kwik-Fit
centres, retail and residential units.
UK Retail: Consists of the Group’s major UK shopping centres and retail parks.
Europe: Consists of the Group’s properties in Continental Europe, located in Germany,
Switzerland and the Netherlands.
Hotels: Consists of the Group’s hotel properties. The hotels are let to Redefine Hotel
Management Limited on a fixed rental basis with annual reviews.
Cromwell: Relates to the Group’s 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 Cromwell Total
£'000 £'000 £'000 £'000 £'000 £'000
At 28 February 2013
Rental income 15,681 4,519 4,149 5,072 - 29,421
Net fair value losses on investment
property and assets held for sale (13,658) 844 (2,144) (722) - (15,680)
Net gain/(loss) from financial assets
and liabilities 1,798 (48) 700 387 244 3,081
Gain on sale of subsidiaries 71 - 16,420 - - 16,491
Equity accounted profit/(loss) 439 (1,003) (3,133) - 8,779 5,082
Interest income 1,157 2,976 2 1,687 10 5,832
Interest expense - bank debt (5,837) (2,199) (2,230) (1,906) (1,043) (13,215)
Property operating expenses (734) (850) (291) - - (1,875)
150,62
Investment property 137,161 112,929 86,634 5 - 487,349
Assets held for sale 56,630 - 3,696 - - 60,326
Investments designated at fair value - 79 20 - - 99
Investment in jointly controlled entities 276 - 13,792 - - 14,068
Investment in associates - - - - 158,208 158,208
Loans and receivables 17,208 49,790 - 36,561 - 103,559
Borrowings (321,639) (73,072) (69,950) (86,831) (40,459) (591,951)
At 29 February 2012
Rental income 18,258 6,858 8,721 4,700 - 38,537
Net fair value losses on investment
property and assets held for sale (45,599) (9,250) (2,744) (231) - (57,824)
Net gain/(loss) from financial assets
and liabilities 6,073 (363) (322) (540) - 4,848
Loss on sale of subsidiaries (100) - - - - (100)
Equity accounted (loss) / profit (165) - (143) - 2,187 1,879
Interest income 801 2,397 92 1,554 17 4,861
Interest expense - bank debt (11,779) (4,862) (20,464) (1,841) (1,012) (39,958)
Property operating expenses (1,001) (795) (641) - - (2,437)
123,77
Investment property 418,703 167,911 94,860 5 - 805,249
Assets held for sale - - 109,231 - - 109,231
UK
Stable UK
Income Retail Europe Hotels Cromwell Total
£'000 £'000 £'000 £'000 £'000 £'000
Investments designated at fair value 222 228 79 - - 529
Investment in jointly controlled entities 657 - 1,544 - - 2,201
Investment in associates - - - - 129,795 129,795
Loans and receivables 17,673 42,821 - 31,387 - 91,881
119,08
Borrowings 411,150 177,525 194,285 3 25,694 927,737
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)
Net gain/(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
Loss on sale of subsidiaries (51) (1,323) (821) - - (2,195)
Equity accounted (loss)/profit (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 (389,080) (73,191) (159,902) (74,961) (24,740) (721,874)
Liabilities held for sale - - (91,935) - - (91,935)
ii) Reconciliation of reportable segment profit or loss
Restated
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Rental income
Total rental income for reported segments 29,421 38,537 76,150
Profit or loss
Net fair value losses on investment property and assets
held for sale (15,680) (57,824) (126,871)
Net gains from financial assets and liabilities 3,081 4,848 1,943
Redemption of loans and borrowings - - 6,080
Gain/(loss) on sale of subsidiaries 16,491 (100) (2,195)
Equity accounted profit 5,082 1,879 6,325
Interest income 5,832 4,861 9,776
Interest expense - secure bank loans (13,215) (39,958) (70,056)
Property operating expenses (1,875) (2,437) (4,707)
Total profit/(loss) per reportable segments 29,137 (50,194) (103,555)
Other profit or loss - unallocated amounts
Other income 1,012 1,199 1,917
Administrative expenses (721) (855) (1,639)
Investment adviser and professional fees (3,159) (4,473) (9,006)
Restated
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Interest income 293 50 -
Interest expense (6,959) (5,847) (11,288)
Share based payment – finance cost (387) (375) (768)
Foreign exchange loss (1,137) (945) (542)
Consolidated profit/(loss) before income tax 18,079 (61,440) (124,881)
4. NET GAINS FROM FINANCIAL ASSETS AND LIABILITIES
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Fair value through profit or loss
Equity investments - unrealised (149) - (141)
Derivative financial instruments 3,248 5,286 10,001
Financial assets carried at amortised cost
Impairment of loans and receivables (18) (438) (7,917)
Net gains from financial assets and liabilities 3,081 4,848 1,943
5. INTEREST INCOME
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Interest income on bank deposits 767 183 250
Interest receivable from mezzanine financing 5,358 4,728 9,526
Total interest income 6,125 4,911 9,776
6. INTEREST EXPENSE
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Interest expense on secured bank loans (13,773) (39,958) (70,056)
Finance lease interest (244) (369) (693)
Interest expense on other financial liabilities (300) (285) (509)
Interest expense on mezzanine financing (5,857) (5,193) (10,086)
Total interest expense (20,174) (45,805) (81,344)
nterest expense on secured bank loans for the year ended 31 August 2012 includes £25.93 million (29 February
2012: £14.82 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 in August 2011. Swap interest expense
is included in interest expense.
7. TAXATION
a) Tax recognised in profit or loss
Restated
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Current income tax
Income tax in respect of current year 1,460 604 1,950
Withholding tax 226 162 265
Deferred tax
Restated
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Origination and reversal of temporary differences 849 358 1,155
Total income tax expense 2,535 1,124 3,370
No tax was recognised on equity or other comprehensive income during the period (2012: nil).
b) Recognised deferred tax liability and movement during the period
Restated Restated
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Deferred tax movement for the year is attributable to the
following:
Deferred tax liability
Opening balance 2,489 1,334 1,334
Deferred tax liability recognised on investment properties 372 (28) (55)
Deferred tax liability recognised on associates 477 366 1,210
Impact of the loss of control of subsidiary property
companies securing the Gamma facility (119) - -
Closing balance 3,219 1,672 2,489
The Group elected to early adopt IAS 12 in its 31 August 2012 annual consolidated financial statements with the
resulting amendments applied retrospectively. The early adoption had the effect of reducing the 2011 deferred
taxation balance with a corresponding increase in opening 2012 reserves of £0.91 million. The Group has also
restated the deferred tax charge for the six month period ended 29 February 2012 resulting in a decrease in the
income statement charge of £0.04 million.
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:
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Profit/(loss) before tax 18,079 (61,440) (124,881)
Profit/(loss) before tax multiplied by NRL rate of UK
income tax (20%) 3,616 (12,288) (24,976)
Effect of:
- exempt property valuations 3,136 11,565 25,373
- income not subject to UK income tax (9,474) 1,846 (4,918)
- gain from financial assets and liabilities (616) (950) (388)
- losses carried forward 4,216 565 6,680
- expenses not deductible for tax 1,431 224 1,334
- withholding tax 226 162 265
Total tax charge for the year 2,535 1,124 3,370
Net deferred tax assets not recognised amounted to £46.03 million (31 August 2012: £43.75 million).
From the reconciliation above, the effective tax rate of the Group was 14% (29 February 2012: 1.8%, 31 August
2012: 2.7%).
8. INVESTMENT PROPERTY
The cost of the consolidated investment properties as at 28 February 2013 was £0.9 billion (29 February 2012:
£1.19 billion, 31 August 2012: £1.07 billion). The carrying amount of investment property is the fair value of the
property as determined by a registered independent appraiser having an appropriate recognised professional
qualification and recent experience in the location and category of the property being valued (together referred to
as “valuers”).
The fair value of each of the properties for the year ended 31 August 2012 was assessed by the valuers in
accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors (“Red
Book”). For the six months ended 28 February 2013, the independent valuers updated the valuations as prepared
at 31 August 2012.
The valuers have used the following key assumptions:
The market value of investment properties has been primarily derived using comparable market transactions on
arm’s-length terms and an assessment of market sentiment. The aggregate of the net annual rents receivable
from the properties and, where relevant, associated costs, have been valued at 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 market’s 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 (“RHML”) for a fixed rent which is subject to annual review. The annual rent review takes
into account the forecasted EBITDA for the hotel portfolio when setting the revised rental level.
RHML operates the hotel business 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 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.
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Opening balance 631,278 986,654 986,654
Properties acquired during the period 27,000 - 349
Capitalised expenditure 2,798 1,126 3,893
Disposals during the period (7,985) (3,150) (44,626)
Disposals through the sale of property (6,937) - -
Disposals through sale of subsidiaries (refer Note 23) (1,048) (3,150) (44,626)
Impact of the loss of control of subsidiary property
companies securing the Gamma facility (refer Note 24) (158,040) - -
Foreign exchange movement in foreign operations 6,854 (12,326) (17,081)
Net fair value losses on investment property (10,330) (57,824) (127,230)
Reclassification to assets held-for sale (refer Note 11) (4,226) (109,231) (170,681)
Closing balance 487,349 805,249 631,278
Acquisitions
Earls Court Holiday Inn Express 27,000 - -
Petersfield - - 349
27,000 - 349
Disposals
Trito Petersfield Limited (refer Note 23) (735) - -
Inkstone (3,447) - -
Princes Street Investments (3,490) - -
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Banstead (refer Note 23) - - (1,015)
West Orchards Coventry (refer Note 23) - - (37,000)
Reigate (refer Note 23) - (3,150) (3,150)
Finance leases (refer Note 23) (313) - (3,461)
(7,985) (3,150) (44,626)
On 21 November 2012, the Company, through its 71% held subsidiary, Redefine Hotel Holdings Limited
completed the acquisition of 60% of the issued shares in BNRI Earls Court Limited. BNRI Earls Court Limited
owns the 150 bedroom Holiday Inn Express in Earls Court, London valued at £27 million. This acquisition was
financed by contributions from Redefine International, bank debt and a £6.55 million contribution from non-
controlling interests.
The Inkstone properties located in Hamburg and Wedel were disposed for €4 million in October 2012. The
proceeds of the sale were utilised to settle the outstanding Barclays facility within Inkstone Grundstuckverwaltung
& Co. KG
Three petrol station properties in the Princes Street Investments portfolio were sold to Malthurst Limited (the
tenant) on 7 September 2012.
Disposals of properties have also been effected through the disposal of the corporate entity as was the case for
Trito Petersfield Limited and as a result of the loss of control of the underlying property companies as was the
case for Gamma. Further details of the impact of the disposals is provided in Notes 23 and 24.
A reconciliation of investment property valuations to the consolidated statement of financial position is shown
below:
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Investment property at market value as determined by
external valuers 540,516 774,793 757,468
Freehold 378,000 552,801 580,203
Freehold and long leasehold 12,530 15,350 15,350
Leasehold 149,986 206,642 161,915
Investment property at directors' valuation - 17,150 -
Adjustments for items presented separately on the
Statement of Financial Position:
- Add minimum payment under head leases separately
included under Borrowings 7,159 13,306 9,819
- Investment properties classified as assets held for sale
(note 11) (60,326) - (136,009)
Statement of financial position carrying value of
investment property 487,349 805,249 631,278
9. LONG TERM RECEIVABLES
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Amounts due from related parties (refer Note 20) 74 74 158
Amounts due from Mezzanine Capital Limited 103,485 91,343 98,312
Security deposits with banks - 464 -
103,559 91,881 98,470
The loans to 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 to 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 to 28
February 2013 of £7.6 million (31 August 2012: £7.6 million, 29 February 2012 of £7.6 million).
10. INVESTMENTS AT FAIR VALUE
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Derivative financial instruments (refer Note 18) 27 307 178
Other investments – designated at fair value 72 222 221
Closing balance 99 529 399
11. 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 at 31 August 2012 the Group had committed to a sale plan involving the loss of control of a number of
subsidiaries and, as a result, all the assets and liabilities of those subsidiaries were classified as held for sale.
These subsidiaries were subsequently sold in October 2012.
Assets held for sale
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Opening balance 136,009 - -
Transfers in (refer Note 8) 4,226 109,231 170,681
Disposals through sale of subsidiaries (refer Note 23) (76,307) - (29,378)
Foreign exchange movement in foreign operations 1,748 - (5,653)
Net fair value (losses)/gains on assets held for sale (5,350) - 359
Total 60,326 109,231 136,009
Assets held for sale include the following property assets:
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Delta 56,100 - 61,450
Telford 530 - -
Inkstone 3,463 - -
Ciref Berlin 1 Limited - Delmenhorst 233 - -
VBG - 78,531 74,559
Halle - 30,700 -
Total 60,326 109,231 136,009
LIABILITIES HELD FOR SALE
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Opening balance 91,935 - -
Disposals (refer Note 23) (91,935) - 91,935
Total - - 91,935
The Group finalised 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 saw the Group sell 51% of its
interest in the VBG holding company to a major pension fund and resulted in Redefine International owning a
49% interest in the VBG assets. The resulting jointly controlled entity also reached agreement with the servicer of
the VBG facilities which saw the payment of approximately €80.0 million to settle the original VBG facilities in full.
See note 23 for further details.
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. The maturity date of the Delta facility was extended to 15 April 2015 subject to the Company
meeting annual disposal targets, in respect of the remaining 16 Delta portfolio assets. The Group has undertaken
to sell these properties over a two year period with sales targets required to be met each year. The Group is
unable to specifically identify in which time period which of the Delta assets will be sold. As the Group is
committed to the sale of the Delta property portfolio, all of the properties have been included in assets held for
sale.
12. INVESTMENTS IN JOINTLY CONTROLLED ENTITIES
The Group’s 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 properties in Waldkraiburg, Hucklehoven and Kaiserslautern in Germany.
(ix) 49% interest in VBG Holdings S.a.r.l., a joint venture with Menora Mivtachim which ultimately owns
government let properties in Dresden, Berlin, Stuttgart and Cologne, Germany.
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Opening balance 2,159 2,606 2,607
Increase in investment 16,660 - 1,641
Equity accounted loss (3,697) (308) (1,772)
Foreign currency translation 53 (97) (317)
Distributions received (1,107) - -
Closing balance 14,068 2,201 2,159
The investment in jointly controlled entities includes investments at nil value in the balance carried forward on 1
September 2012.
The increase in investment over the period is comprised largely of the investment made in VBG Holdings S.a.r.l.
of £12.6 million. Additional investments totalling £3.02 million were also made in RI Menora German Holdings
S.a.r.l, to help fund, in conjunction with bank debt, the acquisition of properties in Hucklehoven and
Kaiserslautern in Germany.
13. INVESTMENTS IN ASSOCIATES
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Opening balance 124,507 104,680 104,680
Increase in investment 26,121 24,222 24,222
Impact of foreign currency translation 5,285 3,789 (1,229)
Equity accounted profits 3,302 2,187 8,097
Distribution received from associates (6,484) (5,083) (11,263)
Reversal of impairment previously recorded 5,477 - -
Closing balance 158,208 129,795 124,507
The Company further increased its holding in the Cromwell Property Group (“Cromwell”) through a AUD 40
million (£26.1 million) participation in the Cromwell entitlement offer in December 2012. The Company’s interest
in Cromwell at 28 February 2013 was 22.01%. This was diluted post the interim period to 16.12% following the
disposal of 86 million stapled securities for AUD 77.5 million (£52.8 million).
Following an assessment of the recoverable value of Cromwell and having regard for its share price, the
impairment previously recorded has been reversed.
The closing price of Cromwell on 28 February 2013 was 94 Australian cents per security and the total fair value
of shares held is AUD 302.2 million (£203.8 million).
During the period ended 28 February 2013, the Group received AUD 9,989,241 (29 February 2012: AUD
7,796,143, 31 August 2012: AUD 17,266,471) as a distribution, before withholding tax of AUD 347,482 (29
February 2012: AUD 248,249, 31 August 2012: AUD 400,279), resulting in a net distribution of AUD 9,641,759
(29 February 2012: AUD 7,547,894, 31 August 2012: AUD 16,866,192). The GBP equivalent of the above gross
distribution is £6.48 million (28 February 2013: £5.08 million, 31 August 2012: £11.26 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.
14. CASH AT BANK
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Cash at bank consists of the following:
Unrestricted cash balances 41,989 20,431 5,703
Bank balances 41,989 10,677 5,694
Call deposits - 9,754 9
Restricted cash balances 15,890 13,389 12,023
57,879 33,820 17,726
As at 28 February 2013, there was £15.9 million (29 February 2012: £13.4 million, 31 August 2012: £12.0 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.
This includes a balance of £5.7 million held by Wichford Gamma Limited related to the properties in the Gamma
facility over which a fixed charge receiver was appointed in January 2013. This cash balance includes rent of
approximately £2 million received following the appointment of the Receiver.
Also included in the restricted cash balance at 28 February 2013 is £1.2 million held with Aviva with regards to
the development in Birchwood Warrington Limited (29 February 2012: £2.57m, 31 August 2012: £1.6m).
15. CAPITAL AND RESERVES
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Authorised
Ordinary shares of 8 pence each (29 February 2012 and
31 August 2012 7.2 pence each)
- number 1,800,000,000 1,000,000,000 1,000,000,000
- £'000 144,000 72,000 72,000
Issued, called and fully paid
Opening: Ordinary Shares of 7.2 pence each
- number 579,454,792 579,454,792 567,643,792
- £'000 41,721 40,870 40,870
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 490,384,616 12,750,000 12,750,000
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
- new issue 490,384,616 11,811,000 11,811,000
- out of treasury - 939,000 939,000
- £'000 35,308 918 918
Consolidation from 7.2 pence to 8 pence each (9 shares
alloted for every 10 previously owned)
- number (106,983,941) - -
Closing: Ordinary Shares of 8 pence each (29 February
2012 & 31 August 2012: 7.2 pence each)
- number 962,855,467 579,454,792 579,454,792
- £'000 77,029 41,721 41,721
The Company issued 490,384,616 shares on 4 October 2012, at a price of 26.0 pence per share. The shares
were admitted to trading on the LSE on 9 October 2012. On this date the Company announced a share
consolidation where 9 shares were issued to shareholders for every 10 shares held previously.
As a result of the share issue in October 2012 the share premium account increased by £92,192k.
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 period ended 28 February 2013, the second interim dividend of 2.30 pence per share for the period
ended 31 August 2012 was distributed.
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.
Reduction in the share premium
In February 2013, following the receipt of shareholder approval and approval from the Isle of Man High Court,
share premium was reduced by £65 million and transferred to distributable reserves.
16. CAPITAL INSTRUMENT
As part of the Aviva debt restructuring in 2010 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 which is
credited to the equity reserve.
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Opening balance 14,536 13,768 13,768
Share based payment 387 375 768
Closing balance 14,923 14,143 14,536
17. BORROWINGS
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Non-current
Loan facilities 444,685 458,397 345,819
Less: deferred finance costs (1,831) (2,343) (1,926)
Finance leases 7,159 13,306 9,814
Total non-current borrowings 450,013 469,360 353,707
Current
Loan facilities 143,585 459,334 401,330
Less: deferred finance costs (1,647) (957) (875)
Total 141,938 458,377 400,455
Liabilities held for sale (refer Note 11) - - 91,935
Total borrowings 591,951 927,737 846,097
a) Loans
This note provides information about the contractual terms of the Group’s loans and borrowings, which are
measured at amortised cost.
SECURED BORROWINGS
The terms and conditions of outstanding loans are as follows:
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Facility Amortising Lender Loan interest rate Currency Maturity date Carrying Value Carrying Value Carrying Value
Windermere VIII
Gamma******* No CMBS LIBOR + 0.75% GBP October 2012 47,904 198,719 199,678
Windermere XI
Delta****** No CMBS LIBOR + 0.75% GBP October 2014 81,116 114,177 114,608
Redefine Hotel Holdings Limited Yes Aareal LIBOR + 2.45% GBP November 2015 86,831 75,295 74,961
Zeta No Lloyds TSB LIBOR + 1.15% GBP May 2013 46,000 46,000 46,000
Landesbank
St Georges Harrow Limited Yes Berlin LIBOR + 2.5% GBP April 2016 40,940 41,400 41,170
Windermere XIV
Halle No CMBS EURIBOR + 0.85% EUR April 2014 - 25,590 -
Redefine Australian Investments
Limited No Investec BBSY + 4%** AUD March 2016 40,459 25,693 24,740
Delamere Place Crewe Limited No Aviva 6.49% GBP March 2012 - 17,150 -
SNS Property
Hague Yes Finance EURIBOR + 2.3% EUR July 2014 17,223 16,216 15,576
Birchwood Warrington Limited*** No Aviva 6.10% GBP September 2035 16,979 16,738 16,856
Ciref Berlin 1 Limited Yes RBS EURIBOR + 1.2% EUR September 2014 15,425 15,234 14,262
Byron Place Seaham Limited*** Yes Aviva 6.44% GBP September 2031 15,153 15,176 15,165
Kalihora Holdings Limited Yes UBS LIBOR + 1.25% CHF October 2018 12,377 12,099 11,820
Princes Street Investments
Limited Yes HSBC LIBOR + 2.5% GBP September 2016 9,147 11,710 11,590
Gibson Property Holdings Limited Yes Aviva 6.37%* GBP June 2029 10,820 10,978 10,900
ITB Herzogenrath B.V. Yes Bayern LB EURIBOR + 1.3% EUR October 2017 7,521 6,178 6,989
ITB Schwandorf B.V. Yes Bayern LB EURIBOR + 1.3% EUR October 2017 6,221 7,469 5,781
Newington House Limited Yes AIB LIBOR + 2.50% GBP September 2013 6,194 6,409 6,304
CEL Portfolio Limited & Co. KG Yes Valovis 4.95%* EUR November 2014 4,116 4,134 3,851
Inkstone Grundstucksverwaltung
Limited & Co. KG Yes Barclays 5.75%* EUR August 2012 - 3,374 3,173
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
Facility Amortising Lender Loan interest rate Currency Maturity date £'000 £'000 £'000
Inkstone Zwei
Grundstucksverwaltung Limited &
Co. KG Yes Barclays 5.91%* EUR August 2012 3,786 3,713 3,482
Ciref German Portfolio Limited Yes RBS EURIBOR + 1.2% EUR September 2014 3,281 3,237 3,033
VBG1***** Yes Talisman 3 EURIBOR + 1.1% EUR January 2012 - 51,620 50,585
VBG2***** Yes Talisman 4 EURIBOR + 1.1%*** EUR April 2011 - 41,751 41,350
West Orchards Coventry
Limited*** Yes Aviva 6.29% GBP July 2027 - 49,273 -
Ciref Kwik-Fit Stafford Limited No KBC LIBOR + 2.50% GBP April 2012 - 718 -
Ciref Kwik-Fit Stockport Limited No KBC LIBOR + 2.50% GBP April 2012 - 463 -
Total Bank loans 471,493 820,514 721,874
Mezzanine Capital Limited**** 7.10% - 10%* GBP Extendable 116,106 95,915 108,825
Coronation Group Investments
Limited** 4%* GBP 2011 - - 7,768
Loans secured by cash deposits 7.00%* GBP 2012 - 650 -
CEL Portfolio Limited & Co. KG 0%* GBP 2029 671 652 617
Total secured loans 588,270 917,731 839,084
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 Note 19.
**** Loans are extendable at the request of the Company.
***** In the period to 28 February 2013 the Group sold a 51% shareholding in the VBG Group to a major pension fund resulting in the deemed sale of the VBG entities and the
acquisition of a 49% shareholding in a jointly controlled entity. The jointly controlled entity reached agreement with the servicer of the VBG facilities in October 2012 which saw the
payment of approximately €80.0 million to settle the original VBG facilities in full.
****** The maturity date of the Delta facility has been extended to 15 April 2015 subject to the Group meeting annual disposal targets in respect of the remaining 16 Delta portfolio
assets.
******* During the period a Fixed Charge Receiver was appointed to the property company subsidiaries that secured the Gamma debt resulting in the lender having been deemed to have
taken control of the assets and resulting in the extinguishing of part of the related debt. See Note 2.2.1 and Note 24 for further details.
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Non-current liabilities
Secured bank loans 444,685 458,397 345,819
Total non-current loans and borrowings 444,685 458,397 345,819
The maturity of non-current borrowings is as follows:
Between one year and five years 391,089 345,570 283,561
More than five years 53,596 112,827 62,258
444,685 458,397 345,819
Current liabilities
Secured loans 143,585 459,334 401,330
Liabilities held for sale (refer Note 11) - - 91,935
Total current loans and borrowings 143,585 459,334 493,265
Total loans and borrowings 588,270 917,731 839,084
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 Note 18 for further
details.
b) Finance leases
Obligations under finance leases at the reporting dates are analysed as follows:
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Gross finance leases liabilities repayable:
Not later than one year 318 680 460
Later than one year not later than five years 1,274 2,720 1,840
Later than five years 20,019 48,005 32,354
21,611 51,405 34,654
Less: finance charges allocated to future periods (14,452) (38,099) (24,840)
Present value of minimum lease payments 7,159 13,306 9,814
Present value of finance lease liabilities repayable:
Not later than one year 318 511 313
Later than one year not later than five years 1,108 1,821 1,124
Later than five years 5,733 10,974 8,377
Present value of minimum lease payments 7,159 13,306 9,814
18. DERIVATIVES
The Group enters into interest rate swaps and interest rate cap agreements. The purpose is to manage the
interest rate risks arising from the Group’s operations and its sources of finance.
The interest rate swaps employed by the Group to convert the Group’s borrowings from floating to fixed interest
rates, fall into two categories, as explained in a) i) and ii) below.
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 Group’s 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 benefitted 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 recognised these embedded derivatives separately as, while the Group was charged interest at
a fixed rate on these facilities, the terms of the facilities mean the Group ultimately received their benefit or
paid their burdens.
As a result of the use of lender level interest rate swaps, the fixed rate profile of the Group’s interest rate
swaps was:
Fair value
Reviewed Reviewed Audited
28 February 29 February 31 August
Effective Maturity Swap 2013 2012 2012
Facility date date rate £'000 £'000 £'000
Gamma 21/07/2006 15/10/2012 4.95% - (4,404) (557)
Delta 23/05/2005 20/10/2012 4.77% - (2,653) (921)
Halle 19/02/2007 22/04/2014 4.19% - (2,205) -
- (9,262) (1,478)
The Delta and Gamma swaps expired during the six months to 28 February 2013 and Justizzentrum Halle
GmbH & Co. K.G 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. The following table sets out the Borrower level
interest rate swaps.
Fair value
Reviewed Reviewed Audited
28 February 29 February 31 August
Effective Maturity Swap 2013 2012 2012
Facility date date rate £’000 £’000 £’000
Newington
House
Limited 03/09/2010 19/09/2013 1.54% (42) (54) (62)
Princes
Street
Investments
Limited 30/09/2011 30/09/2016 1.69% (318) (219) (422)
Ciref Berlin 1
Limited 05/06/2007 15/04/2014 4.61% (449) (678) (534)
Ciref Berlin 1
Limited 31/07/2007 15/04/2014 4.20% (361) (537) (427)
Ciref
German
Portfolio
Limited 31/07/2007 15/04/2014 4.20% (162) (241) (192)
Redefine
Hotel
Holdings
Limited 30/11/2010 30/11/2015 2.45% (2,936) (2,428) (3,278)
Redefine
Hotel
Holdings
Limited 30/06/2011 30/11/2015 2.32% (364) (336) (409)
Redefine
International
Holdings
Limited 04/03/2011 04/03/2013 5.45% - (227) (244)
Hague 01/08/2008 01/08/2014 4.89% (1,273) (1,632) (1,569)
Zeta 20/07/2010 09/05/2013 2.73% (216) (966) (677)
Matterhorn
Brig SARL 30/01/2012 08/10/2018 0.73% (73) (78) (103)
Matterhorn
Vich SARL 30/01/2012 08/10/2018 0.73% (161) (169) (228)
(6,355) (7,565) (8,145)
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
Reviewed Reviewed Audited
28 February 29 February 31 August
Effective Maturity Cap 2013 2012 2012
Facility date date rate £’000 £’000 £’000
St Georges
Harrow 27/04/2011 27/04/2016 2.85% 7 228 118
ITB Herzogenrath
B.V. 31/05/2011 31/05/2017 4.50% 11 43 41
ITB Schwandorf
B.V. 31/05/2011 31/05/2017 4.50% 9 36 19
Delta 16/10/2012 15/04/2015 4.95% - - -
27 307 178
c) Summary of fair value of interest rate swaps and interest rate caps
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
Facility £'000 £'000 £'000
Fair value of lender level interest rate swaps - (9,262) (1,478)
Fair value of borrower level interest rate swaps (6,355) (7,565) (8,145)
(6,355) (16,827) (9,623)
Fair value of interest rate cap agreements* 27 307 178
Fair value of the Group's derivative instruments (6,328) (16,520) (9,445)
*Interest rate cap assets are included in investments designated at fair value (please refer Note 10).
19. PROVISION FOR LIABILITIES AND COMMITMENTS
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Opening balance 12,079 - -
Increase in provisions - - 12,079
Total 12,079 - 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 is held for the estimated potential future cash outflows for the Group related to this cross
collateralisation.
The Group is currently in discussions with Aviva Commercial Finance Limited with a view to re-negotiating the
terms of this debt.
20. 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.
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Trading transactions
Rental income received from Redefine Hotel Management
Limited 5,072 4,700 9,400
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Fee income from the Cromwell Property Group 513 566 566
Portfolio management fees charged by Redefine
International Property Management Limited (1,234) (1,717) (3,328)
Portfolio management fees charged by Redefine
International Fund Managers Limited (352) (261) (610)
Portfolio management fees charged by Redefine
International Fund Managers Europe Limited (367) (494) (817)
Redefine International Hotels Limited (342) (309) (617)
Fee payable to Redefine Properties Limited - - (130)
Amounts receivable
Pearl House Swansea Limited 74 74 74
ITB FMZ Waldkraiburg B.V. - - 84
Redefine Hotel Management Limited 3,080 3,352 3,314
Ciref Crawley Investments Limited 87 140 104
Swansea Estates Limited 87 86 86
26 The Esplanade No 1 Limited 78 - 48
Banstead Property Holdings Limited 496 - 518
Osiris Properties International Limited - - 369
Corovest Offshore Limited 162 - -
VBG Holdings S.a.r.l. 243 - -
Bashir Nathoo* 5,038 - -
Amounts Payable
Redefine International Fund Managers Limited** 352 368 320
Osiris Properties Services Limited 3 - 6
Redefine International Fund Managers Europe Limited** 336 531 352
Redefine International Group Services Limited** - 43 -
Redefine Properties International Limited 45 47 35
Corovest Offshore Limited - 2,363 868
Coronation Group Investments Limited - 10,910 7,768
Redefine International Hotels Limited 342 - 154
Redefine International Property Management Limited 464 1,061 660
* Loan receivable from Bashir Nathoo bears interest at 10% and matures on 31 December 2013.
** Loans payable to Redefine International Fund Managers Limited, Redefine International Fund Managers
Europe Limited and Redefine International Hotels 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 5, 6, 9 and 17.
DIRECTORS
The remuneration paid to directors for the period ended 28 February 2013 was £179,970 which represents
directors’ fees only (29 February 2012: £134,558, 31 August 2012: £334,565).
21. 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 Restated
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Net profit/(loss) attributable to shareholders (Basic and
diluted) 16,918 (60,670) (124,755)
Weighted average number of ordinary shares 883,545 511,194 516,380
Effect of potential share based payment transactions - capital
instrument 29,846 28,286 29,072
Restated Restated
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Diluted weighted average number of ordinary shares 913,391 539,480 545,452
Number of ordinary shares
- In issue 962,855 521,510 521,510
- Weighted average 883,545 511,194 516,380
- Diluted weighted average 913,391 539,480 545,452
Earnings/(loss) per share (pence)
1 1
- Basic 1.91 (11.87) (24.16)
1 1
- Diluted 1.85 (11.87) (24.16)
Note
1. The 2012 share balances have been restated to reflect the impact of the 0.9:1 share consolidation in October
2012
There are also contingently issuable shares in terms of the Investment Adviser agreement. The conditions for
recognising these shares had not been met at the year end.
22. NET ASSETS PER SHARE
Restated Restated
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Net assets attributable to equity shareholders (£'000) 264,956 214,121 132,914
Number of Ordinary Shares ('000's) 962,855 521,510 521,510
Effect of potential share based payment transactions -
capital instrument 29,846 28,286 29,072
Diluted number of shares ('000's) 992,701 549,796 550,582
Net asset value per share (pence):
- Basic 27.52 41.06 25.94
- Diluted 26.69 38.95 24.14
The 2012 share balances have been restated to reflect the impact of the 0.9:1 share consolidation in October
2012.
23. DISPOSAL OF SUBSIDIARIES
The Group disposed of the following subsidiaries during the period ended 28 February 2013:
- VBG Holdings S.a.r.l. on 11 October 2012
- Trito Petersfield on 28 February 2013 – conditional sale
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 assets and liabilities of the subsidiaries at their respective dates of disposal were as follows:
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Assets
Investment property 77,355 3,150 74,004
Long term receivables - 405 5,838
Reviewed Reviewed Audited
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Trade and other receivables 422 (7) 1,411
Liabilities
Trade and other payables (1,040) (79) (5,702)
Derivative liabilities - (80) (2,108)
Loans and borrowings (94,405) (3,160) (87,099)
Total (17,668) 229 (13,656)
Add: (218) 486 3,210
Non-controlling shareholder interest (396) (178) (1,767)
Non-controlling interest share of net deficit 178 664 4,977
Provision for liabilities and commitments - - 12,079
Transfer of FCTR to income statement on disposal of
foreign operation (298) - 381
Net gain/(loss) on sale of subsidiaries 16,491 (100) (2,195)
Net cash disposed (1,693) 615 (181)
The Company announced that it had completed the restructuring of all four VBG assets and the associated
financing facilities on 8 October 2012.
As part of the restructuring, the Company sold, for a nominal amount, 51% of its shareholding in VBG Holdings
S.a.r.l. to a major pension fund. From this date VBG Holdings S.a.r.l. was deconsolidated as a subsidiary within
the group and is now accounted for as a jointly controlled entity. 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 million was used to settle the original VBG facilities in full. The facilities had an outstanding
balance of €116 million.
The gain recognised by the Group in respect of this transaction and the resulting settlement of the original VGB
facilities was £16.42 million.
On 28 February 2013, RIHL sold its shares in Trito Petersfield for £0.47 million realising a gain on disposal of
£0.07 million.
24. LOSS OF CONTROL OF CERTAIN GAMMA SUBSIDIARIES
A Receiver was appointed to certain property subsidiaries which secure the Gamma facility in January 2013. As a
result of the powers and the responsibilities of the Receiver the Group has lost control of the underlying property
companies as it no longer has the power to govern their operating activities and or dispose of any of the
underlying assets. Redefine International has therefore ceased to consolidate the underlying property companies
from the date control was lost i.e the date the Receiver was appointed.
The Group is deemed to continue to control Wichford Gamma Limited who is the primary obligor for the loan
facility.
IAS 39 does not provide specific guidance on whether or not the appointment by the lender of a receiver over the
secured assets constitutes partial settlement of the debt. In the opinion of the Directors, the receiver is acting on
behalf of the lender and consequently they consider that the transfer of the secured assets to the receiver is in
substance the transfer of those assets to the lender.
As a result the loan facility recorded in the books of Wichford Gamma Limited and hence consolidated by
Redefine International has been reduced by the value of the net assets of the property subsidiaries at the date the
Receiver was appointed.
The impact of the appointment of a receiver and loss of control of the underlying property companies is as follows:
Reviewed
28 February
2013
£'000
Assets
Investment Property 158,040
Trade and other receivables 819
Reviewed
28 February
2013
£'000
Liabilities
Finance lease payables (2,315)
Trade and other payables (4,770)
Net asset impact to the Group 151,774
Gamma loan facility 199,678
Residual debt 47,904
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 18 for further details on the Group's
interest rate swap agreements.
26. LIQUIDITY RISK
The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient
liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to the Group’s reputation.
The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient
rental income to service its financial obligations when they fall due. The monitoring of liquidity risk is assisted by
the monthly review of financial covenants imposed by financial institutions, such as interest and loan to value
covenant ratios. Renegotiation of loans takes place in advance of any potential covenant breaches in so far as
the factors that is within the control of the Board. In periods of increased market uncertainty the Board strive to
ensure sufficient cash resources are available for potential loan repayments/cash deposits as may be required by
financial institutions. In certain cases the Company may take a decision not to support non-recourse facilities.
Refer to Note 2.2 for further details on the going concern assumption adopted by the Board.
27. CONTINGENCIES, GUARANTEES AND CAPITAL COMMITMENTS
The Group has capital commitments of £2.3 million (31 August 2012: £2.6 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 £12.1 million is held based on the estimated potential future cash outflows for the Group related to
this cross collateralisation.
28. SUBSEQUENT EVENTS
The Board resolved to declare an interim dividend of 1.475 pence per share. The record date for the interim
dividend is 10 May 2013. The dividend will be paid to shareholders on 24 May 2013.
The Company announced on 3 April 2013 that it has disposed of 86 million securities in Cromwell. The Cromwell
securities were sold on the ASX at prices ranging from AUD90 cents to AUD96.53 cents for which the Company
received a total consideration of AUD77.5 million (GBP52.8 million). Following the Transaction the Company’s
holding in Cromwell reduced from 22.01% to 16.12%.
Glossary
Board The board of directors of Redefine International
AUD Australian Dollar made up of 100 cents.
Cromwell Cromwell Property Group is an Australian Securities Exchange listed stapled
security (ASX:CMW) comprising the Cromwell Corporation Limited and
Cromwell Property Securities Limited, which acts as the responsible entity of the
Cromwell Diversified Property Trust. www.cromwell.com.au.
EPRA European Public Real Estate Association.
ERV The estimated market rental value of lettable space which could reasonably be
expected to be obtained on a new letting or rent review.
Eurozone The geographic and economic region that consists of all the European Union
countries that have fully incorporated the Euro as their national currency.
Euro or € The lawful common currency of participating member states of the European
Monetary Union.
Fair value movement An accounting adjustment to change the book value of an asset or liability to its
market value.
Finance lease A lease that transfers substantially all the risks and rewards of ownership from
the lessor to the lessee.
FCTR Foreign Currency Translation Reserve.
GBP or £ Great British Pound, the legal currency of the UK.
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 Loan to value. A ratio of debt divided by the market value of investment
property.
LSE The London Stock Exchange plc.
NAV Net Asset Value.
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 Company’s 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 hotel’s 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.
29 April 2013
Sponsor
Java Capital
Date: 29/04/2013 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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