Wrap Text
Audited results for the year ended 31 August 2013
REDEFINE INTERNATIONAL P.L.C.
(“Redefine International” or the “Company” or the “Group”)
(Incorporated in the Isle of Man)
(Registered number 111198C)
LSE share code: RDI
JSE share code: RPL
ISIN: IM00B8BV8G91
AUDITED RESULTS FOR THE YEAR ENDED 31 AUGUST 2013
REDEFINE INTERNATIONAL REPOSITIONED TO DELIVER STRONG INCOME RETURNS UNDER REIT REGIME
Redefine International, the diversified income focused property company, which holds a primary listing on the London Stock
Exchange (“LSE”) and a secondary listing on the Johannesburg Stock Exchange (“JSE”), today announces its results for the
year ended 31 August 2013.
Financial Highlights
? Earnings available for distribution of GBP30.1 million (31 August 2012: 25.5 million), an increase of 18.0%
? Basic earnings per share of 6.66 pence (Restated 31 August 2012: 24.16 pence loss), a return to profit
? Adjusted NAV per share of 38.66 pence (31 August 2012: 36.41 pence, re-stated), an increase of 6.2%
? Successful capital raisings totalling GBP144.3 million
? Second interim dividend of 1.635 pence per share (31 August 2012: 2.30 pence), a decrease of 28.9% reflecting an
additional 388.5 million shares in issue at 31 August 2013
? Total declared dividends for the year of 3.11 pence per share (31 August 2012: 4.40 pence), a decrease of 29.3%
? Pro-forma Group LTV ratio reduced to 56.8% (31 August 2012: 81.7%)
? Total shareholder return for the year of 58.9%
Operational Highlights
? Portfolio quality enhanced through asset management, sales and new acquisitions
? Acquisition of three high quality German shopping centres with a combined market value of EUR189.0 million
? Exchange of contracts for the acquisition of Weston Favell Shopping Centre for a purchase price of GBP84.0 million
post year end at an accretive 7.2% net initial yield
? Significant post year end restructuring of Aviva debt, secured against the UK Retail portfolio
? Portfolio occupancy improved to 97.3% (28 February 2013: 95.9%)
? Rationalisation of the shareholding structure approved post year end
? Successful secondary listing on the JSE post year end
? Proposed conversion to a UK-REIT and management internalisation well advanced
Greg Clarke, Chairman, commented:
“I am pleased to report another active and constructive period for the Company in which it achieved not only a strong set of
results but also its long awaited goal of simplifying the shareholding structure to provide a single company with a dual listing on
the LSE and JSE. The next key steps in terms of the Company’s proposed conversion to a UK-REIT and internalisation of
management are well advanced and further announcements to be made in due course.
“Further positive progress was made in restructuring the balance sheet post year end through an acquisition and debt
restructuring with Aviva. The positive changes have reduced the leverage in the UK Retail portfolio and the long-term fixed-rate
financing is expected to be beneficial. The reduction in servicing the Group’s indebtedness has meant that the Company has
increased its earnings available for distribution from its rationalised and higher quality investment portfolio.
“The economic outlook for the year ahead is increasingly positive and we firmly believe that, with an internalised management
and industry benchmarked REIT structure, the Company is well positioned to deliver strong returns to shareholders.”
Meeting, webcast and conference call
A meeting for analysts and institutional investors will take place today at 09.00 (UK local time) at FTI Consulting, Holborn Gate,
26 Southampton Buildings, London, WC2A 1PB. The meeting can also be accessed via a conference call dial in facility and
webcast link, 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.
Conference call
Dial in numbers: United Kingdom Local +44(0)20 3427 1907 and South Africa Local +27(0)11 019 7076
Confirmation Code: 5271098
Webcast link: http://www.brrmedia.co.uk/event/117252/?popup=true
For further information, please contact:
Redefine International Property Management Limited FTI Consulting LLP
Michael Watters, Stephen Oakenfull Stephanie Highett, Dido Laurimore
Tel: +44 (0)20 7811 0100 Tel: +44 (0)20 7831 3113
Chairman’s Statement
The 2013 financial year has seen a significant improvement in the performance of the Company from both an operational and
shareholder return perspective.
The successful strengthening of the Group’s financial position has allowed a shift in focus from its legacy portfolio and financing
issues to enhancing the property portfolio and growing the business. This resulted in two major transactions, namely the
acquisition of a portfolio of three prime German shopping centres with a combined market value of EUR189 million and the
exchange of contracts for the acquisition of the Weston Favell Shopping Centre for a purchase price of GBP84 million post year
end.
Following successful share placements to raise GBP16.8 million of new capital to support the recent acquisition in Germany and
a further placement to fund the settlement of the Aviva convertible instrument, the Company’s market capitalisation reached
GBP500 million for the first time.
Corporate Restructuring
It is very pleasing to report that the much anticipated rationalisation of the shareholding structure, which involved the unbundling
by RIN of its sole asset, being a 61.8% shareholding in the Company (the “Unbundling”), has been approved. Following the
Unbundling, previous shareholders in RIN will become direct shareholders in the Company, simplifying the corporate structure
and enhancing liquidity. The Company also completed a secondary listing on the JSE on 28 October 2013.
The benefits of a larger free float and improved liquidity should allow the Company to be admitted to the relevant FTSE and
EPRA indices in future.
The final step in the restructuring is the proposed conversion to a UK-REIT and internalisation of management, which are
subject to various shareholder and regulatory approvals, is expected to be implemented in December 2013. Further
announcements will be made in due course.
Financial Results
The Company produced a profit after tax attributable to equity holders of GBP61.5 million for the year which showed an
encouraging, albeit gradual, improvement in the UK and European property markets. However, uncertainty around commodity
markets impacted the Australian Dollar which declined 17.2% against Pound Sterling for the six months to 31 August 2013
which affected the return on the Cromwell investment.
Earnings available for distribution for the year were 3.11 pence per share which is a strong result given the increased number of
shares following the capital raising activity and the impact of holding cash while the acquisition of new investments were
completed. The impact of the weaker Australian Dollar reduced earnings by approximately 0.05 pence.
The Adjusted NAV per share as at 31 August 2013 was 38.66 pence, up 6.2% from 31 August 2012. This is after accounting for
the issue of 490,384,616 new shares (441,346,154 as adjusted for the share consolidation which occurred in October 2012) at
26.0 pence in October 2012. The Adjusted NAV per share declined 4.0% in the second half of the financial year, largely as a
result of the weaker Australian Dollar.
Operations
The performance of the Group’s property portfolio was solid, underpinned by signs of improving investor and occupier
sentiment. The overall occupancy of the property portfolio increased from 95.9% as at 28 February 2013 to 97.3% as at 31
August 2013 and valuations generally stabilised or rose in the second half of the year reflecting a stronger economic outlook
and more positive investment market conditions. Where valuation declines were experienced they related primarily to declining
lease lengths.
The UK Retail portfolio performed in line with national trends and encouragingly good lettings have been achieved at the
revamped St George’s Centre in Harrow (“St George’s”) and the Birchwood Centre in Warrington (“Birchwood”). In particular
the lettings to Nando’s and Frankie & Benny’s in St George’s have been very well received.
The holding of Government-let offices has successfully been reduced to 11.6% by market value of the directly owned property
portfolio (excluding non-core assets) by market value. The remaining portfolio now provides a combination of high yielding
assets let to tenants with strong covenants and opportunities to recycle capital from redevelopment assets into income
producing investments.
The European portfolio provided a resilient income contribution backed by strong covenants and inflation-linked leases. The
acquisition of three high quality German shopping centres with a number of asset enhancement opportunities is expected to
provide a stronger asset base from which to drive rental growth.
The Hotel portfolio performed well during a period that was expected to be weak after last year’s Olympic Games. Room rates
and occupancies held up well considering the outperformance in 2012. The newly acquired Holiday Inn Express in Earls Court
performed above expectations after taking into account the recent 50 bedroom extension.
Cromwell produced a record operating profit of AUD 102.4 million (7.6 cps) and increased its distribution by 3.67% to 7.25 cps.
This was unfortunately offset by a weaker Australian dollar against Pound Sterling. Cromwell was also admitted to the ASX 200
Index during the period which should further enhance its profile and liquidity.
Dividend
The Board declared a second interim dividend of 1.635 pence per share on 28 October 2013, resulting in a total dividend of 3.11
pence per share for the year ended 31 August 2013, and reflecting a pay-out ratio of 100% of earnings available for distribution.
Further details on the timing of the second interim dividend are set out in the Financial Review below.
Prospects
The 2013 financial year was another transformative year for the Group. It is now on a substantially firmer footing which has
already enabled the Company to make the recently announced accretive investments. The Company’s business model will
continue to be focused around a diversified portfolio allowing capital to be recycled into growth areas.
The economic outlook for the year ahead appears positive and, with internalised management operating within an industry
benchmarked by the UK-REIT structure, the Company is well poised to deliver strong returns to shareholders.
Greg Clarke
Chairman
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 the ancillary development of existing assets in order to enhance and protect capital values. The Group aims to distribute the
majority of its earnings available for distribution on a semi-annual basis, providing investors with attractive income returns and
exposure to capital growth opportunities.
Investment Markets
The Group is focused on real estate investment in large, well developed economies with established and transparent real estate
markets. The investment portfolio is geographically diversified across the UK, Europe and Australia and provides exposure to
the office, retail, industrial and hotel sectors.
Business Segments
UK Stable Income Comprises offices let to the UK Government, motor trade and roadside services, retail and residential
units.
UK Retail Comprises the Group’s UK shopping centre portfolio which includes three shopping centres (two of
which are held through jointly controlled entities) and two out of town retail parks.
Hotels Comprises all the Group’s hotel properties situated in the United Kingdom. The hotels are let to
Redefine Hotel Management Limited on a fixed rental basis with annual reviews. The portfolio
comprises seven London based hotels and one hotel in Reading, branded under the Holiday Inn,
Holiday Inn Express and Crowne Plaza franchises.
Europe Comprises all the Group’s properties in Continental Europe, located in Germany, Switzerland and the
Netherlands. The portfolio comprises shopping centres, discount supermarkets and government-let
offices.
Cromwell Comprises 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 31
August 2013 Cromwell’s market capitalisation was GBP1.01 billion and the Group’s shareholding was
13.70%.
Property portfolio by business segment at 31 August 2013
Occupancy by Annualised gross
Business segments Market values lettable area Lettable area rental income
2
31 August 2013 (GBP’million) (%) (m ) (GBP’million)
UK Stable Income 151.2 97.8 122,800 12.1
UK Retail 174.6 95.0 115,686 14.4
Hotels 150.3 100.0 26,744 11.1
Europe 284.4 98.6 113,572 16.2
Total (excl non-core assets) 760.5 97.3 378,802 53.8
Non-core assets 67.5 97.6 69,770 9.0
Total 828.0 97.3 448,572 62.8
Notes:
1. Figures reflect the Group’s share of jointly controlled entities.
2. The table excludes the Group’s interest in Cromwell.
3. Non-core assets comprise the Delta portfolio and the Justice Centre in the Hague.
Top 10 properties by value
Annual- Weighted
ised average
Market Owner- Lett- gross Let unexpired
value ship able rental by lease
Portfolio Analysis (GBP'milli interest area (GBP'milli area term
Top 10 investments Anchor tenants on) (%) Sector (m2) on) (%) (years)
Wigan, Grand Arcade Debenhams, BHS 77.7 50.0 Retail 43,353 6.8 97.2 12.4
Schloss Centre, Berlin Primark 75.9 100.0 Retail 19,026 4.3 99.0 7.1
Bahnhoff Altona, Hamburg Media Markt 61.4 100.0 Retail 15,513 3.7 100.0 3.5
Harrow, St George’s Vue, Wilkinsons 59.8 100.0 Retail 20,312 4.2 97.6 6.7
Coventry, West Orchards Debenhams 37.4 50.0 Retail 19,530 3.8 97.2 6.5
Warrington, Birchwood ASDA 30.0 100.0 Retail 36,290 2.6 91.7 17.9
Brentford Lock, Holiday Inn RHM 25.3 71.0 Hotels 5,673 1.9 100.0 12.3
Dresden, VBG VBG 24.9 49.0 Office 17,449 2.0 100.0 10.7
Limehouse, Holiday Inn Express RHM 24.7 71.0 Hotels 5,747 1.8 100.0 12.3
Stuttgart, VBG VBG 24.7 49.0 Office 12,454 0.4 100.0 11.4
Note:
1. Figures reflect 100% of the asset values; ownership percentages are provided above.
UK Stable Income
Market
Improving economic conditions and confidence have started filtering through to the occupational market. Property consultants,
GVA reported take-up across regional centres in the third quarter of 2013 at 10% above the five-year quarterly average, a
significant turnaround from recent periods.
A stronger investment market generally and an increase in investment activity outside London and the South East provided
improved liquidity and valuation support to regional assets. The pace of valuation decline has slowed significantly and, in many
cases, reversed for better quality secondary assets in major regional centres.
Performance
Valuations were supported by the improvements to the investment market as well as the on-going process of rationalising the
portfolio to those assets with better long term growth potential. The portfolio value declined marginally by 1.0% in the six month
period ended 31 August 2013. The Government-let portfolio declined by approximately 1.9%, largely as a result of declining
lease lengths reflecting the current environment in which negotiations around lease extensions are typically left until the end of
the lease period, and are then subject to an often protracted approval process. Despite this, the Company is confident that the
majority of leases will be extended or re-let in due course. Positive revaluations elsewhere in the portfolio, most notably offices
owned in London’s Southbank area, offset some of the decline in values of regional offices.
Occupancy (excluding the Delta portfolio) improved to 98.0% by area (28 February 2013: 93.2%) following the sale of Sapphire
House, Telford and the letting of 9,000 sq ft of vacant space. A further 65,000 sq ft was under offer at year end, which will
support a continued reduction in operating costs.
Investment and asset management
The Company has agreed terms to sell Lyon and Equitable House. The transaction is subject to contract and further details will
be announced in due course.
The lease with the Secretary of State (UK Passport Service) at Rochdale was regeared by removing the 2016 break and
extending the term certain to November 2021. Leasing activity was otherwise limited to a number of small lettings with few
lease events being triggered in the period.
Delta portfolio
The Delta portfolio remains held for sale. Three assets were sold post year end for a total disposal price of GBP4.1 million in
order to achieve the necessary sales targets under the restructured facility agreement. The remainder of the portfolio is
anticipated to be sold before April 2015. The Company has no economic exposure to the valuation movements on the Delta
portfolio but continues to receive 65% of net rental income after debt service costs. Further details of the Delta finance facility
are set out in the Finance Review.
Strategy and Outlook
The restructuring of the ex-Wichford Government-let regional office portfolio is largely complete resulting in a portfolio with
reduced letting risk and a stronger income profile. Government-let offices now represent 11.6% of the directly held property
portfolio (excluding non-core assets) by value.
Rental levels on good quality secondary stock are expected to stabilise, particularly in the South East, where a sustained level
of demand is being experienced. Asset management will remain focused on income security and repositioning assets with
higher value alternative uses.
Outlook
Despite the recent focus on restructuring the portfolio, a stronger economy and improving occupier sentiment are creating
opportunities to acquire relatively high yielding assets in areas with improving property fundamentals. The immediate focus will
be on recycling capital from redevelopment sites into new investments.
UK Retail
Market
Consumer-related economic indicators have improved throughout 2013 which, if sustained, should start to support demand for
retail space. However, despite a number of leading indicators, including retail sales volumes, showing signs of improvement,
real rental growth may still take some time to come through. Administrations across all retail sectors reduced significantly in the
first half of 2013 providing further evidence that the market is stabilising.
The investment market for good quality secondary shopping centres has seen a sharp increase in activity with a number of
investors attracted to shopping centres that offer relatively high but sustainable yields.
Performance
The portfolio value increased by 2.9% in the six months to 31 August 2013 reflecting the impact of a successful leasing and
asset management strategy as well as evidence from a stronger investment market.
2
Occupancy declined marginally to 95.0% by area (28 February 2013: 95.9%). 1,096 m or 19.0% of the void space relates to the
remaining newly developed units at Birchwood and St George’s which are in the process of being marketed. ERVs increased
2.4% in the six month period from 28 February 2013. Early signs of stability appear to be returning to the occupational market
outside of London which, together with recent investment, leasing and asset management initiatives, are expected to provide
support to future rental levels.
Footfall declined 3.8% against a comparative Experian benchmark decline of 4.0%, reflecting a relatively common recent trend
of fewer individual visits, but higher expenditure per visit.
UK Retail at a glance
2
31 August 2013 31 August 2012
Market value GBP174.6 million GBP167.4 million
Occupancy (by lettable area) 95.0% 95.7%
Annualised gross rental income GBP14.4 million GBP14.3 million
Estimated rental value (“ERV”) GBP15.7 million GBP15.0 million
3
Footfall % change (3.8%) (0.8%)
Net initial yield 7.0% 7.4%
2 2
Lettable area 115,686 m 116,287 m
1 Figures reflect the Group’s share of jointly controlled entities
2 31 August 2012 figures have been restated to reflect the Group’s share of jointly controlled entities (previously reported at 100%)
3 Excludes Delamere Place Shopping Centre, Crewe
Investment and asset management
Recent asset management initiatives, particularly those at St George’s, are expected to show strong returns on investment with
capital having been invested early in the cycle ahead of anticipated improvements in the retail environment.
St George’s, Harrow
A number of key lettings, lease extensions and refurbishments were completed during the period as part of the asset
management plan to establish St George’s as the leisure and shopping destination of choice in the wider catchment area.
- Unit 10/11: Nando’s has taken a 3,491 sq ft unit plus an additional 220 sq ft seating area at a rental of GBP82,000 p.a on a
new 20 year lease.
- Unit 12/13: Frankie & Benny’s has taken a 4,270 sq ft unit at a rental of GBP102,480 p.a on a new 25 year lease with a
tenant only break at year 15.
- Unit 1/2: H&M has regeared its lease and taken a reconfigured 7,786 sq ft unit at a rental of GBP175,000 p.a on a 10 year
lease with a tenant only break at year seven.
- Unit 28: Pizza Express has regeared its lease and taken a 2,859 sq ft unit at a rental of GBP79,300 p.a on a new 25 year
lease with a tenant only break at year 15.
- The units occupied by Vue, Prezzo, McDonalds and TK Maxx were comprehensively refurbished.
Birchwood, Warrington
- NU13: 99p Stores have taken a 10,000 sq ft unit at a gross rental of GBP100,000 p.a. on a new 10 year lease.
Weston Favell Shopping Centre, Northampton (“Weston Favell”)
Contracts were exchanged post year end for the acquisition of Weston Favell for a purchase price of GBP84.0 million reflecting
a net initial yield of 7.2%. The property, situated on the edge of Northampton, comprises approximately 307,763 sq ft of retail
accommodation arranged over two floors with 1,150 free parking spaces. Anchored by one of the largest Tesco Extra
supermarkets in the UK (156,987 sq ft, with a 14.3 year unexpired lease term), the centre has a total of 56 retail units and seven
kiosks let to a variety of national and local retailers.
The key investment attractions include the centre’s dominance in the wider catchment area, the lack of supermarket competition
in the north east of Northampton and the strength of the Tesco covenant which accounts for 53% of the net passing rent. The
current void rate is 3.4% by ERV and 2.2% by area.
Digital strategy
The installation of Wi-Fi has been completed at Grand Arcade Shopping Centre, Wigan (“Grand Arcade”), West Orchards
Shopping Centre, Coventry (“West Orchards”) and Birchwood with the installation at Byron Place Shopping Centre, Seaham
(“Byron Place”) in progress. A mobile and tablet enabled website and consumer app is being trialled at West Orchards and will
be used to inform a strategy across the UK Retail portfolio.
Commercialisation
The Company recently appointed consultants to drive additional income through use of good quality operational management,
market contacts and ‘portfolio leverage’. It is anticipated that an additional GBP150,000 p.a of new income will be generated in
2014.
Strategy and Outlook
The UK retail market strengthened in 2013 with signs of improving consumer and occupier demand. The retail recovery
remains fragile, which combined with on-going structural changes in retailing and consumer behaviour, provides some
uncertainty. However, market sentiment suggests the value, convenience and leisure subsectors are more resilient in terms of
consumer demand, and showing greater resistance to the effects of the internet.
The Company’s retail strategy has therefore focused on two key areas of growth, namely convenience and discount shopping
and leisure, food and beverage. Efficient capital expenditure and strategic leasing have encouraged a number of retailers to
invest in modernising their stores. The results, particularly at St George’s, where retailers have reported clear improvements in
footfall and profitability, provide strong evidence that appropriately directed investment can provide sustainable retail assets and
investment returns.
The year ahead will focus on letting the remaining 8,600 sq ft of new retail space under development at Birchwood and
continued capital expenditure programmes at St George’s and West Orchards.
Hotel properties
Market
Following a slow start to the 2013 calendar year, there was a marked improvement in operating performance from June
onwards. PriceWaterhouseCoopers (UK hotels forecast 2014) expects occupancy across all London hotels to reach
approximately 82% in 2014 despite new supply, particularly in East London. As expected, the wider London hotel market has
seen room rates significantly reduced from the peak at the time of the 2012 Olympic Games. However, improved economic
prospects and tangible improvements in operating metrics suggest room rates are likely to rise again in 2014.
Performance
Underlying operating metrics have improved markedly in recent months which is encouraging going into the new financial year.
Average occupancies for the financial year were 33.1% across the portfolio. Continued high occupancies should support
increased rates and RevPar in 2014. RevPar averaged GBP72.60 across the portfolio for the financial year.
The portfolio value of GBP150.3 million remained broadly unchanged from 28 February 2013 (GBP150.2 million).
Investment and asset management
An effective 42.6% share of the Holiday Inn Express, Earl’s Court was acquired in November 2012. The effective purchase price
of GBP27.0 million (including GBP0.4 million of transaction costs) reflected a net initial yield of 7.5%. The addition of 50 rooms
in 2012 has been easily absorbed by the market with occupancies and RevPar remaining stable; a strong indication of the
underlying demand locally and in London generally.
The construction of the Southwark redevelopment to add 48 bedrooms is well advanced, with completion anticipated in the first
half of 2014. A planning application for an additional 10 bedrooms to be located alongside the entrance façade has been
submitted for planning.
Strategy
Opportunities to make further acquisitions are expected to be limited in the current market, partly as a result of the limited
number of suitable investment opportunities coming to the market and partly as a result of current pricing expectations. The
immediate focus will therefore remain on adding additional rooms where possible and on revenue growth.
During the period, the Redefine Hotel Management Group, the lessee of the Company’s hotel portfolio, announced a merger
with the BDL Hotel Group to form Redefine BDL Hotel Group Limited. This group is now one of the largest independent hotel
management companies in the UK and manages 60 hotels representing 6,700 rooms for major hotel brands such as
Intercontinental Hotels Group, Wyndham Worldwide, Starwood Hotels & Resorts, Hilton Hotels and Resorts and Best Western.
The Company’s focus remains on London based limited service hotels and the establishment of a leading management
company within the wider Group will provide improved access to market opportunities.
Outlook
Following a year of adjustment post the Olympics, the London hotel market is set to revert back to more normal trends.
Occupancy has strengthened recently, and, despite continued new supply, opportunities for higher rates and RevPars are
expected in 2014. In nominal terms, rates and RevPars are expected to return to peak levels.
Given the historic close relationship between RevPar and GDP, the existing portfolio is well positioned, particularly following the
Group’s recent capital investment program, to benefit from any sustained improvement in the UK economy.
Europe
Market
Although investment volumes in Europe declined overall, volumes in Germany continued to rise supporting Germany’s status as
a relative safe haven in Europe. Investment in Germany remains concentrated on prime assets where values continued to rise
increasing the pricing differential between prime and secondary assets. Increasing risk appetite may however see investment
demand for secondary assets improving in the near future.
Performance
Voids in the like-for-like portfolio remained nominal with occupancy of the total portfolio reducing only marginally to 98.6%
following the acquisition of City Arkaden Shopping Centre, Ingolstadt, which was 87.1% occupied at 31 August 2013 and is
subject to obtaining vacant possession on a number of units as part of the management strategy for the asset.
Valuations were up 2.2% in local currency terms from 28 February 2013 reflecting the active asset management within the
portfolio in negotiating lease renewals or extensions. However, a weaker Euro against the Pound Sterling resulted in valuations
increasing 1.3% in Sterling terms.
Investment and asset management
The acquisition of three prime shopping centres in Berlin, Hamburg and Ingolstadt (the “CMC transaction”) was a significant
transaction for the Group and a notable step in improving the overall quality of the European portfolio.
The three German shopping centres were acquired for a headline value of EUR189.0 million reflecting a net initial yield of 5.5%
before taking into account effective adjustments as a result of the consideration being part paid in ordinary shares of the
Company and part paid in cash at a discount of approximately 4.0% to the equity value. The three German shopping centres
were acquired together with stapled debt of EUR140.8 million at an average all-in cost of 3.14% p.a. providing an initial income
return on equity in excess of 12%.
The Delmonhorst property (part of the Lidl Portfolio) was sold for EUR250,000. The sale removes 2,500 sq ft of vacant space
and is in line with the Company’s strategy of selling smaller non-core assets. The proceeds of the sale have been used to part
repay the loan on the remaining portfolio.
Leasing activity was limited with few lease events in the period.
Strategy and Outlook
A number of asset management initiatives were identified as part of the recent CMC transaction. Opportunities to add additional
retail space supported by the introduction of additional or new anchor tenants are at various stages of development. Certain of
these initiatives have been progressed and are anticipated to result in yield enhancements over a two year period.
Further sales of smaller non-core assets are anticipated during the next financial year with the intention of reducing the number
of assets in the portfolio and concentrating on opportunities to drive income and value.
Cromwell
Cromwell’s business
Cromwell is an internally managed Australian Real Estate Investment Trust (A-REIT) with a property investment portfolio in
excess of AUD 2.5 billion (GBP1.5 billion) together with a fund management business that promotes and manages unlisted
property investments. Cromwell’s strategy is to provide defensive, superior risk-adjusted returns from Australian commercial
property.
Cromwell trades on the Australian Stock Exchange as a stapled security comprising Cromwell Corporation Limited (which
manages the funds management brand and the property operations) and Cromwell Diversified Property Trust (which owns the
AUD 2.5 billion property portfolio).
Financial and operating results
Cromwell produced a strong set of operating and financial results for their financial year ended 30 June 2013. Highlights
included:
Financial
? Record operating profit of AUD 102.4 million (7.6 AUD cents per security)
? Operating profit derived 94.9% from property portfolio
? Increase in like-for-like property income of 2.89%
? Distribution per security increased by 3.57% to 7.25 AUD cents per security
? Net tangible assets excluding interest rate swaps increased to AUD 0.72
? Net gearing reduced to 46% loan to value.
Operating
? Property portfolio continued to support earnings growth despite a more difficult climate
? Government and listed companies provided 46% and 37% of property income respectively
? Occupancy maintained at 96% with minimal lease expiries over the next two years
? Property exposure remains focused on commercial assets with a balanced allocation to Brisbane, Sydney, Melbourne and
Canberra
For further information please visit www.cromwell.com.au
Our investment
Following a period of strong share price appreciation supported by a strong Australian dollar relative to Sterling, the Company
took the opportunity to sell 86,000,000 securities for a total disposal consideration of GBP52.8 million and thereby crystallising a
profit of GBP10.5 million. As a result of the disposal and a further Cromwell placement in June 2013 in which the Company did
not take part, Redefine International’s shareholding in Cromwell reduced from 23.08% to 13.70% currently.
Portfolio Summary
Portfolio overview by business segment
Business segments – market values
Segmental
Lettable Market split by Net initial
Properties area value value yield
2
(No.) (m ) (GBP’million) (%) (%)
UK Stable Income 73 122,800 151.2 18.3 7.5
UK Retail 6 115,686 174.6 21.1 7.0
Hotels 7 26,744 150.3 18.1 7.0
Europe 36 113,572 284.4 34.3 6.4
Total (excl. non-core portfolio) 122 378,802 760.5 91.8 6.9
Non-core portfolio 17 69,770 67.5 8.2 12.5
Total 139 448,572 828.0 100.0 7.3
Notes:
1. Figures reflect the Group’s share of jointly controlled entities.
2. The non-core portfolio includes the Delta portfolio and the Justice Centre in the Hague.
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
2
(GBP’million) (m ) (years) (%) (%)
UK Stable Income 12.1 98.2 9.1 98.0 56.1
UK Retail 14.4 124.1 11.0 95.0 7.8
Hotels 11.1 415.0 12.3 100.0 -
Europe 16.2 143.0 6.4 98.6 98.8
Total (excl. non-core portfolio) 53.8 141.9 9.4 97.3 48.4
Non-core portfolio 9.0 128.4 4.3 97.6 72.7
Total 62.8 139.8 8.7 97.3 51.2
Notes:
1. Figures reflect the Group’s share of jointly controlled entities.
2. The non-core portfolio includes the Delta portfolio and the Justice Centre in the Hague.
Business segments - valuation movement since 28 February 2013
Valuation movement
Proportion Market value six months ended
of portfolio 31 August 31 August
by value 2013 2013
(%) (GBP’million) (%)
UK Stable Income 18.3 151.2 (1.0)
UK Retail 21.1 174.6 2.9
Hotels 18.2 150.3 0.1
Europe 1 15.4 127.8 1.3
Total like-for-like portfolio 72.9 603.9 0.9
Acquisitions/(disposals) 18.9 156.6 -
Total (excl. non-core portfolio) 91.8 760.5 0.9
Non-core portfolio 3 8.2 67.5 (8.9)
Total (incl. non-core assets) 100.0 828.0 (0.2)
Notes:
1. Includes the effect of foreign exchange movement during the period. .
2. Figures reflect the Group’s share of jointly controlled entities.
3. The non-core portfolio includes the Delta portfolio and the Justice Centre in the Hague.
Portfolio overview by sector
Property sectors at 31 August 2013
Occupancy Annualised gross
Market value by lettable area Lettable area rental income
(GBP’million) (%) (sq ft’000) (GBP’million)
Retail 422.0 96.4 207,618 27.6
Office 220.1 97.1 152,662 21.6
Industrial 35.6 100.0 61,549 2.5
Hotels 150.3 100.0 26,744 11.1
Total 828.0 97.3 448,573 62.8
Notes:
1. Figures reflect the Group’s share of jointly controlled entities.
Financial Review
Overview
The Group delivered a profit before tax of GBP67.2 million, compared to a loss of GBP124.9 million for the previous year. The
disposal of 86 million Cromwell securities for a profit of GBP10.5 million and the subsequent change in accounting treatment to
recognise the Cromwell investment at fair value, contributed significantly to the profit. The restructuring of the VBG portfolio
resulted in a GBP16.4 million debt cancellation, also contributing to the profit figure. Earnings available for distribution were
GBP30.1 million, up by GBP4.6 million from the year ended 31 August 2012. Basic earnings per share were 6.66 pence
compared to a loss of 24.16 pence per share (restated) in the previous year.
Adjusting for the effects of the capital raise and 9:10 share consolidation in October 2012, the Adjusted NAV increased by 6.2%
from 36.41 pence at 31 August 2012 to 38.66 pence at 31 August 2013. The 2.25 pence increase together with the 3.11 pence
dividend payment for the 2013 financial year represents a 13.9% return on equity.
Earnings available for distribution and dividend
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 items and is the figure used by the Board as its
measure of underlying performance. The earnings also exclude any earnings from Gamma and include only the Group’s share
of the net income from the Delta portfolio. Considering the earnings available for distribution at the year end, the Board declared
a second interim dividend of 1.635 pence per share on 28 October 2013. No final dividend is proposed. Taken together with the
first interim dividend of 1.475 pence per share, the full year dividend was 3.11 pence per share. The distribution reflects a yield
of 8.0% on the Adjusted NAV per share at 31 August 2013.
The second interim dividend for the six months ended 31 August 2013 is payable to shareholders in accordance with the
abbreviated timetable set out below:
Announcement of Pound Sterling to ZAR conversion rate
(relevant for shareholders on the South African sub-register only) Friday, 8 November 2013
Last day to trade “cum” dividend on the JSE Friday, 15 November 2013
Shares trade “ex” dividend on the JSE Monday, 18 November 2013
Shares trade “ex” dividend on the LSE Wednesday, 20 November 2013
Record date on the JSE and the LSE Friday, 22 November 2013
Dividend paid to shareholders on the Isle of Man and SA share registers Friday, 29 November 2013
There may be no dematerialisation or rematerialisation, nor any transfer of shares between sub-registers in the Isle of Man and
South Africa between Monday, 18 November 2013 and Friday, 22 November 2013, both days inclusive.
Shareholders on the South African sub-register will receive dividends in South African Rand, based on the exchange rate to be
obtained by the Company on or before 8 November 2013. A further announcement in this respect will be made on or before 8
November 2013.
The reconciliation of earnings available for distribution is as follows:
Year ended Year ended
31 August 31 August
2013 2012
Total Total
GBP'000 GBP'000
Profit/(loss) attributable to equity holders of the parent 61,521 (124,755)
Changes in fair value of investment property (net of deferred tax) 23,299 125,410
Net fair value losses on investment property 20,721 126,871
Deferred taxation 234 (55)
Effect of non-controlling interest on above (1,069) (3,387)
Share of net fair value losses on investment property in jointly controlled entities 3,413 1,981
Gain on loss of significant influence of Cromwell (net of capital gains tax) (44,643) -
Gain on loss of significant influence of Cromwell (46,690) -
Capital gains tax on Cromwell disposal 2,047 -
Impairment of receivables 1,538 7,917
(Cash)/loss on sale of subsidiaries (17,285) 2,195
Headline earnings attributable to equity holders of the parent 24,430 10,767
Gain on financial assets and liabilities 208 (9,860)
Redemption of loans and borrowings - (6,080)
Straight-lining of rental income 620 496
Fair value interest adjustment 983 25,927
Net interest on mezzanine financing 1,375 560
Amortisation of debt issue costs 1,972 917
Share based payment 803 768
Deferred tax liability recognised on Cromwell 2,320 1,210
Unrealised foreign exchange gain (4,357) 302
Non-distributable income from Gamma facility entities (1,314) -
Year ended Year ended
31 August 31 August
2013 2012
Total Total
GBP'000 GBP'000
Non-distributable income from Delta facility entities (1,846) -
Non-distributable income from VBG (22) (1,916)
Earnings on new investments 1,156 -
Non-distributable equity accounted profits (1,049) 4,064
Capital costs included in professional fees 293 -
Investment advisors fees - performance fee 6,430 -
Impact of non-distributable items on non-controlling interest (1,889) (1,667)
Earnings available for distribution 30,113 25,488
First interim dividend (14,202) (12,168)
Earnings available for distribution at year end 15,911 13,320
Number of ordinary shares in issue at year end 967,964 579,455
Dividend per share (pence) 3.110 4.400
First interim dividend per share (pence) 1.475 2.100
Second interim dividend per share (pence) 1.635 2.300
Net assets
The EPRA NAV per share has increased by 8.6%, from 27.63 pence at 31 August 2012 (pro-forma) to 30.00 pence per share at
31 August 2013. EPRA NAV is used as a reporting measure to better reflect underlying net asset value attributable to
shareholders by removing the cumulative fair value movements of interest rate derivatives and deferred tax.
The EPRA NAV as at 31 August 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” per share has therefore been calculated as follows:
1
Pro-forma
31 August
31 August 2013 2012
Pence per Pence per
Note share share
Fully diluted IFRS NAV per share 29.05 25.83
Adjusted for derivatives and deferred tax 0.95 1.80
EPRA NAV per share 30.00 27.63
Gamma residual debt 2 4.21 4.44
Delta negative equity 3 2.36 1.81
Other negative equity/provision 4 1.66 -
Cromwell fair value write-up 5 - 0.77
Write back of VBG negative equity 6 - 1.76
Performance fee 7 0.43 -
Adjusted NAV per share 38.66 36.41
Notes:
1. Pro-forma position of 31 August 2012 NAV per share figure 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 GBP41.9 million and accrual interest of GBP0.9 million will remain on the Group’s statement of financial position until such time
as it can be legally extinguished or Redefine International loses control of Wichford Gamma Limited. Refer to Note 2.2.2 and Note 38 of the
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 2.36
pence per share is expected to reverse at the end of the loan term.
4. A provision of GBP12.1 million (1.19 pence per share) is currently held relating to the external loan facilities provided to certain of the UK
shopping centres funded by Aviva. The facilities provided to the jointly controlled Grand Arcade Wigan and West Orchards Coventry
centres, which have a nominal value of GBP199.88 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. Following the announcement of the
restructuring agreement entered into on 17 October 2013, this provision will no longer be necessary post the period end. In addition, as a
result of the non-recourse nature of the debt relating to the Justice Centre in the Hague, Netherlands the negative net asset value position of
0.47 pence per share has been written back.
5. As Cromwell is accounted for as an investment at fair value in the statement of financial position as at 31 August 2013, the adjustment from
equity accounting is no longer relevant. Cromwell was equity accounted at a net asset value of 69.8 AUD cents per security at 31 August
2012. The market price of Cromwell at 31 August 2012 was 75.0 AUD cents per security leading to an Adjusted NAV write-up of 0.77 pence
per share.
6. The net VBG portfolio debt value as at 31 August 2012 was in excess of the current investment property value. Following the restructuring
the negative net asset value position was reversed, leading to a positive effect on net asset value per share of 1.76 pence per share.
7. As a result of the proposed internalisation of the investment adviser, it is not expected that the 14,697,143 shares relating to the
performance fee reserve will be issued. Notes 2, 3 and 4 above have been calculated excluding the dilutionary effect of these shares.
Financing and capital
The removal of the Gamma debt, completion of the VBG and Delta restructurings, as well as the GBP127.5 million capital
raising in October 2012, have significantly improved the financial position of the Group and the LTV measures.
The Group’s LTV ratio reduced to 60.4% (31 August 2012: 81.7%) following the various capital raising activities and debt
restructurings during the period. The pro-forma position of 56.8% reflects the positive effect of the Aviva arrangements agreed
post 31 August 2013, as well as the exclusion of the debt against the Delta portfolio, the Justice Centre in the Hague and the
residual Gamma debt. The slightly higher than planned LTV is largely as a result of the take-on of EUR140.8 million of existing
debt related to the acquisition of the three German shopping centres at an attractive all in rate of 3.14% p.a.
The weighted average maturity of debt (on a pro-forma basis) has increased substantially, to over nine years. Securing longer
term facilities and rates in the current low interest rate environment will continue to be a priority in 2014. The nominal value of
the Group’s total debt facilities (excluding Gamma) at 31 August 2013 was GBP815.9 million (GBP635.1 million including its
share of debt in subsidiaries and jointly controlled entities).
31 August 31 August
Pro-forma 2013 2012
Key financing statistics GBP’000 GBP’000 GBP’000
Total investment portfolio 1,126,052 1,111,702 889,588
Gross debt 696,686 815,932 744,733
Cash and short-term deposits (10,657) (33,657) (17,726)
Net debt 686,063 782,275 727,007
Weighted average debt maturity 9.01 years 4.67 years 2.57 years
Weighted average interest rate 4.59% 3.94% 5.02%
% of debt at fixed/capped rates 99.9% 99.9% 93.3%
Loan-to-value 56.8% 60.4% 81.7%
Details of the repayment and restructuring of facilities which took place during the year are set out below:
VBG
The Company announced that it had completed the restructuring of all four VBG assets and the associated financing facilities
on 8 October 2012. The restructuring and refinancing of the VBG portfolio and financing facilities has resulted in the Company
owning a 49% interest in the VBG assets with Menora as its joint venture partner.
As part of the restructuring, the Company agreed to sell, for a nominal amount, 51% of its interest in the VBG holding company
to Menora. This 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 EUR80.0 million were used to settle the original VBG facilities in full. The facilities had an outstanding
balance of EUR117.3 million.
The gross acquisition cost (inclusive of transaction costs) of approximately EUR84.9 million was partly funded by the joint
venture company with a new five year EUR57.0 million debt facility secured from DG Hyp, with both joint venture partners
injecting EUR14.0 million (GBP12.6 million) for their joint interests. The new debt facility has been secured at a margin of 1.72%
p.a. which, together with a swap rate of 0.915% p.a., provides an all-in rate of 2.64% p.a., resulting in an initial yield on equity in
excess of 19.0% on the Group's investment.
Delta
The Company announced on 15 October 2012 that the agreement to extend and restructure the GBP114.6 million Delta facility
had been completed. The restructuring involved the repayment of GBP33.5 million of debt in consideration for the release from
charge of a portfolio of seven assets, including the Lyon House, Harrow development site and six other assets let to
predominantly UK central government occupiers. The repayment of debt associated with the six income producing assets
reflects a net initial yield of 7.6% and a weighted average unexpired lease term in excess of 17 years.
The maturity date of the Delta facility has been extended to 15 April 2015 subject to the Company meeting certain limited annual
disposal targets in respect of the remaining 16 Delta portfolio assets. The disposal proceeds, together with amortisation
requirements, will be applied to reducing the remaining GBP81.1 million facility balance. The facility remains non-recourse to
the Group.
Gamma
Notwithstanding the appointment of a receiver to the assets held in the Gamma portfolio and according to IFRS, the residual
non-recourse debt associated with the portfolio of GBP41.9 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 2.2.2 and Note 38 of the
consolidated financial statements for further detail. It is expected that the release of this debt will occur by 2015 as the Gamma
assets have, subsequent to the year end, been disposed of by the receivers. The facility is non-recourse to the Group.
Zeta
As announced on 29 May 2013, the Company completed the refinancing of the GBP46.0 million Zeta facility with Lloyds TSB
Bank PLC.
A new GBP38.5 million facility, reflecting a 55% loan to value ratio, was agreed for a three year term with options to extend for
two further one year periods. 75% of the loan amount was fixed for the initial three year term at an all-in rate of 4.06% with the
balance of the loan bearing interest at a rate of 3.25% above three month Libor.
The GBP7.5 million reduction in the loan balance was funded with GBP5.5 million of cash already secured by the facility
following a lease surrender and the subsequent sale of the Telford property. The remainder was funded utilising existing cash
resources. The loan is secured against the Company’s UK Government let offices (excluding the Delta portfolio assets).
Aviva Instrument
On 13 September 2013 the GBP13 million 6% convertible loan instrument issued to Aviva in September 2010, was settled in full
and financed by the issue of 36,587,873 new ordinary shares of 8 pence each at an issue price of 41.925 pence per share.
Aviva Restructure
On 17 October 2013 the Company announced that it had agreed a debt restructuring with Aviva with respect to the Company’s
UK shopping centre portfolio. As part of the restructuring the Company exchanged contracts to purchase the Weston Favell
Shopping Centre, Northampton for GBP84 million. Aviva will provide Redefine International with a finance facility of GBP50
million, with the balance of the purchase consideration being funded through internal cash resources. The interest rate on this
Aviva facility will be fixed at circa 5.7% fixed per annum and the loan will be repayable in November 2038. Completion of the
transaction is subject to certain conditions, which the Company expects to be fulfilled by 6 December 2013.
The transaction, once completed, will result in a restructuring of the Aviva debt secured against Grand Arcade and West
Orchards. The debt against the West Orchards property will be legally settled at the current market value of the property
(GBP37 million) and will result in the property becoming unencumbered. The debt against the Grand Arcade property will be
reduced by approximately 50% to GBP73 million in consideration for a cash payment of GBP7 million. The Company will
assume 100% ownership but Aviva will retain the right to participate in 50% of the income and capital growth generated by
Grand Arcade (after all costs, expenses and interest) going forward. The Company will have the right to “buy-back” the profit
share for a maximum cash payment of GBP18.5 million, in five instalments, upon the valuation of Grand Arcade increasing by
certain agreed benchmarks.
Following completion of the transaction, the facilities currently provided by Aviva with respect to two of the Company’s other
shopping centres, at Birchwood (Warrington) and Byron Place (Seaham) as well as Grand Arcade, will be cross collateralised
with the facility to be provided for Weston Favell.
Equity Raisings
The Company completed a GBP127.5 million (GBP122.5 million net of expenses) Firm Placing and Open Offer on 9 October
2012 through the issue of 490,384,616 new ordinary shares of 7.2 pence each at an issue price of 26.0 pence per new ordinary
share. The new ordinary shares were consolidated on 11 October 2012 on a 9 for 10 basis, following which the Company’s
issued ordinary share capital comprised of 962,855,467 ordinary shares of 8.0 pence each.
A further 5,108,290 shares were issued on 4 July 2013 to acquire certain non-controlling interests in the period.
Pursuant to the acquisition of the three prime shopping centres in Germany which completed on 30 August 2013, the Company
raised GBP16.8 million (before expenses) through a placing of 40,000,000 new ordinary shares of 8 pence each, at a price of
42.0 pence per share. The shares were admitted to trading on the LSE on 3 September 2013. The consideration in respect of
the German retail assets comprised the issue of 12,606,061 new ordinary shares on 3 September 2013 and a further tranche of
approximately 19,635,340 new ordinary shares will be issued on 6 December 2013 at an effective issue price of 40.0 pence per
share.
In addition, 36,587,873 new ordinary shares were issued on 18 September 2013 to fund the settlement of the Aviva capital
instrument.
Cashflow
The cash flow statement reflects net cash generated from operating activities of GBP36.9million (31 August 2012:
GBP20.0 million), an 84.5% increase from 2012.
A net increase of GBP48.7 million in acquisitions over the prior year (excluding the Cromwell disposal) was directly related to
the deployment of the GBP127.5 million raised in October 2012.
The net repayment of loans and borrowings include GBP35.4 million with respect to the Delta restructure and GBP7.6 million
with respect to the Zeta refinancing.
Dividends paid during the period, being the final 31 August 2012 dividend and the February 2013 interim dividend, amounted to
GBP27.5 million.
Hedging
The Group utilises derivative instruments, including interest rate swaps and interest rate caps to manage its interest-rate
exposure. At 31 August 2013, the net fair value liability of the Group’s derivative financial instruments was GBP4.7 million (31
August 2012: GBP9.4 million).
The Group has a hedging policy which requires at least 75% of all interest rate exposures exceeding one year to be on a fixed
or capped rate basis. At 31 August 2013, Group debt (including its economic interest of subsidiaries and jointly controlled
entities) was 99.9% fixed. For facilities with interest rate swaps or caps attached, the interest rates are fixed or capped for the
duration of the facility. The Group has not applied hedge accounting during the current period and changes in the fair value of
the Group’s hedging instruments have been recognised in profit or loss.
Taxation
Election for UK-REIT status
Background
The Company has previously announced its intention to convert to a UK Real Estate Investment Trust (“UK-REIT”) as the Board
believes the advantages afforded by the recently enacted legislation, in particular the removal of the 2% gross asset convers ion
charge, provide an efficient method for the Group to convert to a transparent and tax efficient regime. The UK-REIT regime is
the preferred structure for both UK and international real estate investors and will provide the Company with access to a broader
range of investors.
The first significant changes since the introduction of the UK-REIT regime in 2007 were enacted in July 2012, when the Finance
Bill 2012 received Royal Assent. By converting to UK-REIT status, the Group will no longer pay UK direct tax on profits and
gains from its qualifying property rental business in the UK, provided it meets certain conditions. This removal of tax at the
company level enables investors to be taxed broadly as though they held the property directly. The taxation of the Group's non-
UK assets will remain unchanged, subject to changes in relevant jurisdictions, tax legislation or policy. Other profits and gains
arising on UK assets of the Group will be subject to UK corporation tax.
The Company is not currently eligible for Group UK-REIT status because it is not resident for tax purposes solely in the UK.
However, subject to obtaining shareholder and regulatory approvals, the Company intends altering its residency in order to
become UK tax resident and satisfy the requirements of the UK-REIT legislation, including those related to the composition of
the Board.
The Company will, following its proposed conversion to a UK-REIT, be required, annually to distribute 90% of the income profits
of its UK property rental business each year to Shareholders. As the Company’s focus is primarily on income-bearing assets,
the Company’s business model is well-suited to the UK-REIT regime. The Board believes that providing this level of distribution,
which is consistent with the existing dividend policy, will be beneficial for Shareholders as a whole and will assist in attracting
potential new investors.
AUDITED FINANCIAL STATEMENTS AND NOTES lFOR THE YEAR ENDED 31 AUGUST 2013
Directors’ report
The Board present their report together with the audited consolidated financial statements for the period ended 31 August 2013.
Principal activity
Redefine International 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 review
A review of the activities and prospects of the Group is given in the Chairman’s Statement and Business review.
Principal risks and uncertainties
The principal risks pertaining to the Group and the way in which it manages and controls have not changed significantly since
the prior year. These risks will be outlined in the Annual report to shareholders.
Results and proposed dividends
The consolidated statement of comprehensive income is set out below and shows a profit attributable to equity holders of the
parent of GBP61.5 million.
The Board has declared a second interim dividend of 1.635 pence per share, which will be paid on 29 November 2013 to those
shareholders on the register as at 22 November 2013, and will result in a total dividend of 3.11 pence per share for the financial
year. This reflects a pay-out ratio of 100% of earnings available for distribution.
Share capital
Details of the authorised and issued share capital, together with details of the movements in Redefine International’s issued
share capital during the period are shown in Note 23 to the consolidated financial statements. Redefine International has one
class of share; all shares rank equally and are fully paid.
As at 31 August 2013 the Company’s total issued share capital was 967,963,757 ordinary shares of 8.0 pence each and this is
reflected in the financial statements.
On 3 September 2013, Redefine International issued 40,000,000 ordinary shares pursuant to a GBP16.8 million placing and a
further 12,606,061 ordinary shares were issued as part consideration for the acquisition of three prime shopping centres in
Berlin, Hamburg and Ingolstadt. Following which, the Company's issued ordinary share capital comprised 1,020,569,818
ordinary shares of 8.0 pence each in the capital of the Company.
On 13 September 2013 the Company repaid its GBP13 million 6% convertible loan instrument issued to Aviva Commercial
Finance Limited (“Aviva”) in September 2010 (the "Capital Instrument"). This repayment was financed by the issue of
36,587,873 new ordinary shares of 8 pence each in the Company to Redefine Properties Limited at an issue price of 41.925
pence per share. These shares were issued and admitted to trading on 18 September 2013, following which, the Company’s
issued share capital comprised of 1,057,157,691 ordinary shares of 8.0 pence each.
On 6 December 2013 a further circa 19,635,340 ordinary shares will be issued as consideration for the Berlin shopping centre
(the precise number being determined pursuant to the Sterling: Euro exchange rate on 29 November 2013). These shares will
be issued and admitted to trading after the final dividend for the year ended 31 August 2013 has been declared and paid, and
as such will not rank for such dividend.
There are no specific restrictions on the size of a holding nor on the transfer of Ordinary Shares. The Directors are not aware of
any agreements between holders of Redefine International’s Ordinary Shares that may result in restrictions on the transfer of
securities or on voting rights.
No shares were held in Treasury during the year.
Going concern
These consolidated financial statements have been prepared on a going concern basis as after considering the relevant factors,
the Directors have a reasonable expectation that the Group has adequate resources to continue in operation for the foreseeable
future. Completion of the restructuring on the Delta, Zeta and VBG facilities in the year, as well as the restructuring of the UK
Shopping Centre portfolio debt financed by Aviva which was agreed post year end, 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 raisings which completed in October 2012 and
September 2013 which saw the Company raise gross proceeds of GBP127.5 million and GBP16.8 million respectively. This
additional capital has allowed the Group to further reduce its leverage.
The Board remains of the view that the Gamma facility and related portfolio of assets has negligible impact on the continued
operations of the Group considering the non-recourse nature of the facility.
The Board has also considered a working capital forecast for the Group and believes that based on a detailed analysis of
cashflow projections, the level of capital raised during the year and the progress made on loan refinancing that the Group has
adequate resources to continue in operation for the foreseeable future.
Directors
The Directors of Redefine International, who served during the period, were as follows:
Director Date of Appointment Appointment Letter
Ita McArdle 28/06/2004 19/12/2007
Richard Melhuish 08/11/2007 19/12/2007
Robert Mark Taylor 08/11/2007 19/12/2007
Gavin Tipper 22/08/2011 03/10/2011
Michael Farrow 22/08/2011 03/10/2011
Stewart Shaw Taylor 22/08/2011 03/10/2011
Marc Wainer 22/08/2011 03/10/2011
Michael Watters 22/08/2011 03/10/2011
Greg Clarke 04/10/2011 03/10/2011
Details of the interests of the current Directors in the Ordinary Shares of Redefine International are set out in Note 33 “Related
Party Transactions” to the consolidated financial statements.
Redefine International maintains insurance for the Directors in respect of liabilities arising from the performance of their duties.
Share options
There are no share options granted to Directors.
Charitable and Political donations
During the period Redefine International made no charitable or political donations.
Payment of suppliers
The policy of the Group is to settle supplier invoices within the terms of trade agreed with individual suppliers. Where no specific
terms have been agreed, payment is usually made within one month of receipt of the goods or service.
Compliance with the Code
The Company has substantially complied with the provisions of the UK Corporate Governance Code, for which the Company is
classified as a smaller company. A statement on corporate governance will be included in the Annual Report to shareholders,
including areas of non-compliance.
Stakeholder pensions and employee share schemes
As there are no employees, no pension plan or employee share schemes are in place.
Auditors
KPMG have expressed their willingness to continue in office and a resolution to re-appoint them may be proposed at the Annual
General Meeting.
Included in net operating income in the consolidated statement of comprehensive income are the following fees paid to KPMG
during the year:
Year ended Year ended
31 August 2013 31 August 2012
GBP’000 GBP’000
Audit fees 246 202
Disbursements 21 20
Total 267 222
Non-audit fees
Taxation 105 75
Assurance Services 250 -
Total 355 75
Statement of Directors responsibility
The Directors are responsible for preparing the Directors’ Report and the Financial Statements in accordance with applicable
law and regulations.
Isle of Man Companies Acts 1931-2004 (as amended) requires the Directors to prepare Group and parent Company financial
statements (which will be included in the Annual Report to shareholders) for each financial year. Under the Listing Rules issued
by the London Stock Exchange, the Directors are required to prepare the Group financial statements in accordance with the
International Financial Reporting Standards (“IFRS”) as issued by the IASB and have elected to prepare the parent Company
financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (“UK GAAP”) and as applied
in accordance with the Isle of Man Companies Acts 1931-2004 (as amended).
The Group and parent Company financial statements are required by law, IFRS as issued by the IASB and UK GAAP, to
present fairly the financial position and performance of the Group and Company respectively. The Isle of Man Companies Acts
1931-2004 (as amended) provide in relation to such financial statements, that references in the relevant part of the law to
financial statements giving a true and fair view, are references to their achieving a fair presentation.
In preparing each of the Group and parent Company financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state that the financial statements comply in the case of the Group with IFRS as issued by the IASB and in the case of the
parent Company with UK GAAP as applied in accordance with the Isle of Man Companies Acts 1931-2004 (as amended);
and
- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the
parent Company will continue in business.
Under applicable law and the requirements of the Listing Rules issued by the London Stock Exchange, the Directors are also
responsible for preparing a Directors’ Report and reports relating to Directors’ remuneration and corporate governance that
comply with that law and those Rules. In particular, in accordance with the Disclosure and Transparency Rules (the “DTR”), the
Directors are required to include in their report a fair review of the business and a description of the principal risks and
uncertainties facing the Group and the Company and a responsibility statement, included below, relating to these and other
matters.
The Directors are responsible for keeping proper books of account that disclose with reasonable accuracy at any time the
financial position of the Group and parent Company and enable them to ensure that the financial statements comply with the
Isle of Man Companies Acts 1931-2004 (as amended) and, as regards the Group financial statements, Article 4 of the IAS
Regulation. They are also responsible for taking such steps as are reasonably open to them to safeguard the assets of the
Group and to prevent and detect fraud and other irregularities.
Responsibility statement, in accordance with the transparency regulations
Each of the Directors confirms that to the best of each person’s knowledge and belief;
- the Group financial statements, prepared in accordance with IFRS as issued by the IASB, give a true and fair view of the
assets, liabilities and financial position of the Group at 31 August 2013 and its profits for the year then ended;
- the parent Company financial statements, prepared in accordance with UK GAAP and as applied in accordance with the
Isle of Man Companies Acts 1931-2004 (as amended), give a true and fair view of the assets, liabilities and financial
position of the parent Company at 31 August 2013; and
- the Report of the Directors contained in the Annual Report together with the Business Review include a fair review of the
development and performance of the business and the position of the Group and parent Company, together with a
description of the principal risks and uncertainties that they face.
The Board of Directors
28 October 2013
Consolidated Income Statement
For the year ending 31 August 2013
Year ended Year ended
31 August 2013 31 August 2012
Total Total
Notes GBP'000 GBP'000
Revenue
Gross rental income 5 51,407 76,150
Investment income 6 2,511 -
Other income 7 2,129 1,917
Total revenue 56,047 78,067
Expenses
Administrative expenses (1,601) (1,639)
Investment adviser and professional fees 8 (14,067) (9,006)
Property operating expenses (3,445) (4,707)
Net operating income 36,934 62,715
Gains from financial assets and liabilities 9 44,944 1,943
Redemption of loans and borrowings 10 - 6,080
Gain/(loss) on sale of subsidiaries 37 17,285 (2,195)
Equity accounted profit 11 11,106 6,325
Net fair value (losses) on investment property and assets held for sale 15,18 (20,721) (126,871)
Profit /(loss) from operations 89,548 (52,003)
Interest income 12 12,106 9,776
Interest expense 13 (37,960) (81,344)
Share based payment on the capital instrument (803) (768)
Foreign exchange gain/(loss) 4,352 (542)
Profit /(loss) before tax 67,243 (124,881)
Taxation 14 (6,179) (3,370)
Profit /(loss) after tax 61,064 (128,251)
Profit /(loss) attributable to:
Equity holders of the parent 61,521 (124,755)
Non-controlling interest (457) (3,496)
61,064 (128,251)
Basic earnings/(loss) per share (pence) 34 6.66 (24.16)
Diluted earnings/(loss) per share (pence) 34 6.23 (24.16)
Basic headline earnings per share (pence) 34 2.64 2.09
Diluted headline earnings per share (pence) 34 2.44 2.09
Consolidated Statement of Comprehensive Income
For the year ended 31 August 2013
Year ended Year ended
31 August 2013 31 August 2012
Total Total
GBP'000 GBP'000
Profit/(loss) for the year 61,064 (128,251)
Other comprehensive income
Items that may be reclassified to profit and loss
Transfer of FCTR to income statement on disposal of foreign operation 9, 37 (10,334) (381)
Foreign currency translation on foreign operations - subsidiaries (316) 497
Foreign currency translation on foreign operations - associates & jointly
controlled entities 19,20 6,846 (1,546)
Total comprehensive income for the year 57,260 (129,681)
Total comprehensive income attributable to:
Equity holders of the parent 57,775 (125,881)
Non-controlling interest (515) (3,800)
57,260 (129,681)
The accompanying notes form an integral part of these financial statements.
Consolidated Balance Sheet
As at 31 August 2013
Year ended Year ended
31 August 2013 31 August 2012
Total Total
Notes GBP'000 GBP'000
Assets
Non-current assets
Investment property 15 643,892 631,278
Long-term receivables 16 103,928 98,470
Investments designated at fair value 17 139,092 399
Investments in jointly controlled entities 19 15,150 2,159
Investments in associates 20 - 124,507
Total non-current assets 902,062 856,813
Current assets
Assets held for sale 18 57,250 136,009
Trade and other receivables 21 69,705 23,359
Cash at bank 22 33,657 17,726
Total current assets 160,612 177,094
Total assets 1,062,674 1,033,907
Equity and liabilities
Capital and reserves
Share capital 23 77,437 41,721
Share premium 188,690 164,939
Reverse acquisition reserve 134,295 134,295
Retained loss (134,667) (232,991)
Capital instrument 24 15,339 14,536
Foreign currency translation reserve 5,765 9,511
Other reserves 12,940 903
Total equity attributable to equity shareholders 299,799 132,914
Non-controlling interest 10,649 5,342
Total equity 310,448 138,256
Non-current liabilities
Borrowings 25 504,218 353,707
Derivatives 26 776 4,244
Deferred tax 14 4,924 2,489
Total non-current liabilities 509,918 360,440
Current liabilities
Borrowings 25 173,294 400,455
Liabilities held for sale 18 - 91,935
Year ended Year ended
31 August 2013 31 August 2012
Total Total
Notes GBP'000 GBP'000
Derivatives 26 4,038 5,379
Provision for liabilities and commitments 27 12,079 12,079
Trade and other payables 28 52,897 25,363
Total current liabilities 242,308 535,211
Total liabilities 752,226 895,651
Total equity and liabilities 1,062,674 1,033,907
The accompanying notes form an integral part of these financial statements.
The consolidated statements were approved by the Board of Directors on 28 October 2013.
Consolidated Statement of Changes In Equity
For the year ended 31 August 2013
Total
Attri-
For- butable
Reverse eign to Non-
Share Acqui- currency Capital equity Control-
Share Prem- sition Retain- trans- Instru- share- ling Total
Capital ium reserve ed Other lation ment holders interest equity
GBP'0 GBP'00 GBP'00 loss reserves reserve GBP'00 GBP'00 GBP'00 GBP'00
00 0 0 GBP'000 GBP'000 GBP'000 0 0 0 0
Balance at 1
September 2011 40,870 161,420 134,295 (86,693) 3,912 10,637 13,768 278,209 5,506 283,715
Total loss for the (124,755 (128,251
period - - - (124,755) - - - ) (3,496) )
Foreign currency
translation effect - - - - - (1,126) - (1,126) (304) (1,430)
Total
comprehensive (125,881 (129,681
income - - - (124,755) - (1,126) - ) (3,800) )
Shares issued 851 3,519 - - - - - 4,370 - 4,370
Shares taken into
treasury - - (67) (317) - - - (384) - (384)
Treasury shares
sold - - 67 280 - - - 347 - 347
Dividend paid to
equity stakeholders - - - (24,089) - - - (24,089) - (24,089)
Decrease in non-
controlling interest - - - (426) - - - (426) 426 -
Share based
payment - - - - - - 768 768 - 768
Disposal of
subsidiaries/non-
controlling interests - - - 3,009 (3,009) - - - 3,210 3,210
Balance at 31
August 2012 41,721 164,939 134,295 (232,991) 903 9,511 14,536 132,914 5,342 138,256
Balance at 1
September 2012 41,721 164,939 134,295 (232,991) 903 9,511 14,536 132,914 5,342 138,256
Total profit for the
period - - - 61,521 - - - 61,521 (457) 61,064
Foreign currency
translation effect - - - - - (3,746) - (3,746) (58) (3,804)
Total
comprehensive
income - - - 61,521 - (3,746) - 57,775 (515) 57,260
Shares issued for
cash 35,308 92,192 - - - - - 127,500 - 127,500
Shares issued to
acquire NCI shares 408 1,584 - - - - - 1,992 - 1,992
Shares issue costs - (5,025) - - - - - (5,025) - (5,025)
Reduction of share
premium - (65,000) - 65,000 - - - - - -
Dividend paid to
equity stakeholders - - - (27,530) - - - (27,530) - (27,530)
Dividends paid to
non-controlling
interest - - - - - - - - (96) (96)
Share based
payment – Capital
instrument (refer
Note 24) - - - - - - 803 803 - 803
Total
Attri-
For- butable
Reverse eign to Non-
Share Acqui- currency Capital equity Control-
Share Prem- sition Retain- trans- Instru- share- ling Total
Capital ium reserve ed Other lation ment holders interest equity
GBP'0 GBP'00 GBP'00 loss reserves reserve GBP'00 GBP'00 GBP'00 GBP'00
00 0 0 GBP'000 GBP'000 GBP'000 0 0 0 0
Share based
payment –
incentive fee (refer
Note 41) - - - - 6,430 - - 6,430 - 6,430
Share based
payment – share
consideration (refer
Note 40) - - - - 5,515 - - 5,515 - 5,515
Increase in non-
controlling interest - - - - - - - - 6,547 6,547
Acquisition of non-
controlling interests - - - (667) 92 - - (575) (873) (1,448)
Disposal of
subsidiaries/non-
controlling interests - - - - - - - - 244 244
Balance at
31 August 2013 77,437 188,690 134,295 (134,667) 12,940 5,765 15,339 299,799 10,649 310,448
The accompanying notes form an integral part of these financial statements.
Consolidated Cash Flow Statement
For the year ended 31 August 2013
Year ended Year ended
31 August 2013 31 August 2012
Total Total
Notes GBP'000 GBP'000
Cash flows from operating activities
Profit /(loss) before tax 67,243 (124,881)
Adjustments for:
Straight lining of rental income 620 504
Share based payment - incentive fee 8 6,430 -
Net fair value losses on investment property and assets held for sale 15,18 20,721 126,871
Exchange rate (gains)/losses (4,352) 542
Gains from financial assets and liabilities 9 (44,944) (1,943)
Redemption of loans and borrowings 10 - (6,080)
Equity accounted (profits) 11 (11,106) (6,325)
(Gain)/loss on sale of subsidiaries 37 (17,285) 2,195
Investment income 6 (2,511) -
Interest income 12 (12,106) (9,776)
Interest expense 13 37,960 81,344
Share based payment – capital instrument 24 803 768
Cash generated by operations 41,473 63,219
Changes in working capital 36.1 6,381 (6,915)
Cash flow from operations 47,854 56,304
Interest income 5,953 7,908
Interest paid (30,080) (54,012)
Taxation paid (1,923) (1,412)
Investment income 2,511 -
Distributions from associates and jointly controlled entities 20 12,554 11,263
Net cash generated from operating activities 36,869 20,051
Cash flows from investing activities
Purchase of investment properties 15 (34,187) (3,893)
Disposal of investment properties 15,18 10,383 -
Investment in associates and jointly controlled entities 19,20 (43,709) (25,863)
Disposal of shares in associate (net of costs) 52,270 -
Net cash outflow on acquisition of subsidiaries 40 (16,792) -
Disposal of subsidiaries – net cash disposed 37 (1,337) (181)
Loss of control of Gamma 38 (6,042)
Net increase in loans to jointly controlled entities (38,728) -
Year ended Year ended
31 August 2013 31 August 2012
Total Total
Notes GBP'000 GBP'000
Net increase in loans to related parties (1,465) -
Net increase in loans to other parties (5,147) -
Increase in long term receivables (5,458) (2,600)
Decrease /(increase) in restricted cash balances 22 8,063 (592)
Net cash utilised in investing activities (82,149) (33,129)
Cash flows from financing activities
Proceeds from loans and borrowings 95,820 19,443
Repayment of loans and borrowings (127,480) (20,826)
Dividends paid to equity shareholders (27,530) (24,089)
Dividends paid to non-controlling interests (96) -
Acquisition of treasury shares - (384)
Proceeds from issue of shares from treasury - 347
Proceeds from issue of share capital 127,500 4,370
Share issue costs (5,025) -
Increase in contribution from non-controlling shareholders 6,547 -
Net cash generated/(utilised) from financing activities 69,736 (21,139)
Net increase /(decrease) in cash 24,456 (34,217)
Effect of exchange rate fluctuations on cash held (561) (17)
Opening cash 5,703 39,937
Net cash at 31 August 29,598 5,703
The accompanying notes form an integral part of these financial statements
1. GENERAL INFORMATION
Redefine International P.L.C 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 preparation of the consolidated financial statements requires management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.
Actual results may differ materially from these estimates. The significant judgements made by management in applying
the Company’s accounting policies and the key sources of estimation uncertainty are discussed further in Note 2.2
Basis of preparation.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 STATEMENT OF COMPLIANCE
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the IASB.
The accounting policies applied by the Group in these consolidated financial statements are the same as those applied
by the Group in its audited financial statements as at and for the year ended 31 August 2012.
The Group has however adopted the amendments to IAS 1 which are applicable to annual periods beginning on or
after 1 July 2012. These amendments require the Company preparing financial statements in accordance with IFRSs to
group together items within other comprehensive income that may be reclassified to the profit or loss section of the
income statement. The amendments also reaffirm existing requirements that items in other comprehensive income and
profit or loss should be presented as either a single statement or two consecutive statements. The adoption of these
amendments had no impact on the balances recorded but impacted the disclosure in the consolidated statement of
comprehensive income.
2.2 BASIS OF PREPARATION
The consolidated financial statements are presented in Great British Pounds, which is the functional currency of the
Company and the presentational currency of the Group, rounded to the nearest thousand pounds. They are prepared
using the historical cost basis except for investment property, derivative financial instruments and financial instruments
designated at fair value through profit or loss.
The preparation of financial statements in conformity with IFRS requires the use of judgements and estimates that
affect the reported amounts of assets and liabilities at the reporting date and the reported amounts of revenues and
expenses during the period reported. Although these estimates are based on the Directors’ best knowledge of the
amount, event or actions, actual results may differ from those estimates.
The principal areas where such judgements and estimates have been made are:
2.2.1 APPLICATION OF THE GOING CONCERN BASIS OF ACCOUNTING
These consolidated financial statements have been prepared on a going concern basis as, after considering the
relevant factors, the Directors have a reasonable expectation that the Group has adequate resources to continue in
operation for the foreseeable future. Completion of the restructuring on the Delta, Zeta and VBG Facilities in the year as
well as the restructuring of the UK Shopping Centre portfolio debt, financed by Aviva, which was agreed post year end,
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 raisings which completed in October 2012 and
September 2013 which saw the Company raise gross proceeds of GBP127.5 million and GBP16.8 million respectively.
This additional capital has allowed the Group to further reduce its leverage.
The Board remains of the view that the Gamma facility and related portfolio of assets has negligible impact on the
continued operations of the Group considering the non-recourse nature of the facility.
The Board has also considered a working capital forecast for the Group and believes that based on a detailed analysis
of cashflow projections, the level of capital raised during the year and the progress made on loan refinancing that the
Group has adequate resources to continue in operation for the foreseeable future.
2.2.2 ACCOUNTING FOR GAMMA
Following the appointment of a Fixed Charge Receiver (“the Receiver”) to the property subsidiaries which secure the
Gamma facility, 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 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 to it
and at 31 August 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 to those companies. This is a key judgement.
The Group will continue to recognise the residual debt until such time as that element of the debt is legally extinguished
or legally released by the Security Trustee or it can be evidenced that Redefine International no longer has the power to
control Wichford Gamma Limited.
The Company will seek a legal extinguishment of the debt from the Security Trustee following the sale by the Receiver
of all of the properties securing the Gamma facility.
2.2.3 INVESTMENT PROPERTY VALUATION
The Group uses the valuations performed by its independent valuers as the fair value of its investment properties. The
valuations are based upon assumptions including estimated rental values, future rental income, anticipated
maintenance costs, future development costs and appropriate discount rates. The valuers also make reference to
market evidence of transaction prices for similar properties. Further details are provided in note 3.3.5 and note 15.
2.2.4 CLASSIFICATION OF INVESTMENT PROPERTY FOR HOTELS
The hotel properties are held for capital appreciation and to earn rental income. The properties have been let to
Redefine Hotel Management Limited (“RHML”) for a fixed rent which is subject to annual review. The annual review
takes into account the forecast EBITDA for the hotel portfolio when setting the revised rental level. RHML 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.
2.2.5 CLASSIFICATION OF THE GROUP’S INVESTMENT IN CROMWELL AT FAIR VALUE THROUGH PROFIT OR LOSS
During the period, the Group’s shareholding in Cromwell was diluted both through the sale of shares and due to the fact
that the Group did not participate in certain share issues by Cromwell.
The Group sold 86 million shares of its Cromwell holding in April 2013 reducing its shareholding to 16.1%. This was
further diluted as the Group did not participate in certain Cromwell share placements. At year end the Group had a
13.70% shareholding in Cromwell.
The Group ceased to account for Cromwell as an associate from the date its shareholding fell below 20% as it was no
longer deemed to have significant influence over the operations of Cromwell. The investment was designated at Fair
Value through Profit or Loss on that date as it is managed on a fair value basis.
While there is a presumption that significant influence does not exist if the holding is less than 20% this may be refuted
if an ability, or lack of ability, to exercise significant influence is clearly demonstrated.
At the year end the Company has Cromwell board representation and as such this increases the judgement involved in
determining whether significant influence over the operations of Cromwell exists.
The Board has considered whether significant influence continues to exist notwithstanding the fact that the
shareholding is below 20%. Significant influence is usually evidenced by one or more of the following:
- representation on the board of directors or equivalent governing body of the investee;
- participation in the policy-making processes;
- material transactions between the investor and the investee;
- an interchange of managerial personnel; or
- provision of essential technical information.
A single factor in isolation does not necessarily indicate significant influence. Having considered all of the facts and
circumstances the Directors do not believe that the Company has significant influence over the operations of Cromwell.
In making this determination the Board have considered the size of the Company’s shareholding, the size of the
Cromwell board, the nature of the directorship currently held on the Cromwell Board (independent non executive
director), the fact that the Company does not have a right to appoint a director and the fact that in practice the
Company is unable to significantly influence the decisions and business focus of the Cromwell group. The Directors
believe that significant influence over Cromwell no longer exists and that the designation of the Company’s residual
investment at Fair Value through Profit or Loss is appropriate.
2.2.6 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.
2.2.7 DEFERRED TAXATION
The Group considers that the value of the property portfolio is likely to be realised through sale. The Group bases its
deferred taxation provision on the assumption that the residual value of the investment properties is not less than the
present value as provided by its external valuers.
The recoverability of any deferred tax asset is assessed and, where it is thought unlikely that a recovery will be made,
the deferred tax amount is not included in the Group’s assets.
2.2.8 PROPERTY ACQUISITIONS
Where properties are acquired through the acquisition of corporate interests, the Directors have regard to the
substance of the assets and activities of the acquired entity in determining whether the acquisition represents the
acquisition of a business.
Where such acquisitions are not judged to be an acquisition of a business the transactions are accounted for as if the
Group had acquired the underlying property directly. Accordingly, no goodwill arises, rather the cost of the corporate
entity is allocated between the identifiable assets and liabilities of the entity based on their relative fair values at the
acquisition date.
Otherwise corporate acquisitions are accounted for as business combinations.
2.3 BASIS OF CONSOLIDATION
2.3.1 INVESTMENT IN SUBSIDIARIES
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to
govern the financial and operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries are included in the Group results from the effective dates of acquisition to the effective dates
of disposal. Any difference between the purchase price of a subsidiary and the Group’s share of the fair value of the
identifiable net assets acquired is treated in accordance with the Group’s accounting policy for intangible assets and
goodwill.
The financial statements of the subsidiaries are prepared for the same reporting period as the parent company using
consistent accounting policies.
The initial interest of non-controlling interests is stated at the non-controlling interest’s proportion of the net asset value
of the company or the fair value.
Transactions with non-controlling interests are accounted for as transactions with equity holders in their capacity as
equity holders and therefore neither goodwill nor profit or loss is recognised as a result of such transactions.
2.3.2 TRANSACTIONS ELIMINATED ON CONSOLIDATION
Intragroup balances, transactions and any unrealised gains and losses or income and expenses arising from intragroup
transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the
same way as unrealised gains, but only to the extent that there is no evidence of impairment.
2.3.3 INVESTMENT IN ASSOCIATES AND JOINTLY CONTROLLED ENTITIES
Associates are entities over whose financial and operating policies the Group has the ability to exercise significant
influence but not control and which are neither subsidiaries nor jointly controlled entities. Jointly controlled entities and
joint ventures are those entities over which the Group exercises joint control under the terms of a contractual
agreement.
Investments in associated undertakings and jointly controlled entities are initially recorded at cost and increased (or
decreased) each year by the Group’s share of the post-acquisition net income (or loss), and other movements reflected
directly in the equity of the associated undertaking.
Where the Group acquires an additional shareholding or where it obtains significant influence such that an investment
which was previously accounted for as a simple investment under IAS 39 is now deemed to be an associate
undertaking, the Group’s previously held interest is re-measured to fair value through profit or loss for the period. The
cost of the associate is determined as the fair value of the original investment plus the fair value of any additional
consideration given to achieve significant influence.
Goodwill arising on the acquisition of an associated undertaking or jointly controlled entity is included in the carrying
amount of the investment. When the Group’s share of losses in an associate or jointly controlled entity has reduced the
carrying amount to zero, including any other unsecured receivables, the Group does not recognise further losses,
unless it has incurred obligations to make payments on behalf of the associate or jointly controlled entity.
The Group’s share of the results of associated or jointly controlled entity undertakings after tax reflects the Group’s
proportionate interest in the relevant undertaking and is based on financial statements drawn up to a date not earlier
than three months before the period end reporting date, adjusted to conform with the accounting policies of the Group.
Since goodwill that forms part of the carrying amount of the investment in an associate or jointly controlled entity is not
recognised separately, it is therefore not tested for impairment separately. Instead, the entire amount of the investment
in an associate or jointly controlled entity is tested for impairment as a single asset when there is objective evidence
that the investment in an associate or jointly controlled entity may be impaired.
Reversals of impairments are recorded as an adjustment to the investment balance to the extent that the recoverable
amount of the associate or jointly controlled entity increases.
Associates and jointly controlled entities are carried at cost less impairments in the company financial statements.
Unrealised gains and losses arising from transactions with associates and jointly controlled entities are eliminated to the
extent of the Group’s interest in the entities.
When the Group ceases to have significant influence over an associate or joint control over a jointly controlled entity, it
is accounted for as a disposal of the entire interest in that investee, with a resulting gain or loss being recognised in
profit or loss. Any interest retained in that former investee at the date when significant influence or joint control is lost is
recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset or, when
appropriate, the cost on initial recognition of an investment in an associate.
2.3.4 GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets are carried at cost less accumulated impairment losses. In respect of equity accounted
investments the carrying amount of goodwill is included in the carrying amount of the investment and an impairment
loss on such an investment is not allocated to any asset, including goodwill that forms part of the carrying amount of the
investee.
Amortisation of intangible assets is recognised in profit or loss on a straight-line basis over their estimated useful life,
from the date that they are available for use.
2.4 CURRENCY TRANSLATION RESERVE
2.4.1 FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional
currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are
recognised in the income statement. Non-monetary assets and liabilities denominated in foreign currencies that are
stated at fair value are translated to the functional currency at the foreign exchange rates ruling at the dates that the
values are determined.
2.4.2 FOREIGN OPERATIONS
Exchange differences arising from the translation of the net investment in foreign operations are taken to the currency
translation reserve (FCTR). They are released into the income statement upon disposal. On consolidation, the
statements of financial position of foreign subsidiaries and associates are translated at the closing rate and the income
statement and statement of comprehensive income are translated at the rates at the dates of the transaction or at an
average rate for the period where this is a reasonable approximation.
2.5 INVESTMENT PROPERTY
Investment properties are those which are held either to earn rental income or for capital appreciation or for both.
Investment properties are stated at fair value. External, independent valuation companies, having professionally
qualified valuers and recent experience in the location and category of property being valued, value the portfolios on an
annual basis. The fair values are based on market values, being the estimated amount for which a property could be
exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after
proper marketing wherein the parties had each acted knowledgeably and without compulsion.
The valuations are prepared by considering comparable market transactions for sales and letting and having regard for
the current leases in place. In the case of lettings this includes considering the aggregate of the net annual market rents
receivable from the properties and where relevant, associated costs. A yield which reflects the risks inherent in the net
cash flows is applied to the net annual rentals to arrive at the property valuation.
As the fair value model is applied, property under construction or redevelopment for future use as investment property
is measured at fair value. However, where the fair value of investment property under redevelopment is not reliably
measurable, the property is measured at cost.
Property held under leases for the same purpose is also classified as investment property, accounted for as held under
a finance lease and initially recognised at the sum of any premium paid on acquisition and the present value of any
further minimum lease payments. The corresponding liability to the superior leaseholder is included in the consolidated
statement of financial position as a finance lease obligation.
Thereafter investment property is measured at fair value, which reflects market conditions at the reporting date. For the
purposes of the historical financial information, the assessed fair value is:
- reduced by the carrying amount of any accrued income and expense resulting from the spreading of lease
incentives and/or minimum lease payments; and
- increased by the carrying amount of any liability to the superior leaseholder included in the consolidated statement
of financial position as a finance lease obligation.
The annual valuations of investment property are based upon estimates and subjective judgements that may vary from
the actual values and sales prices that may be realised by the Group upon ultimate disposal. The critical assumptions
made relating to valuations have been disclosed in Note 3 and Note 15 to the financial statements.
Gains or losses arising from changes in the fair value of investment property are included in the profit or loss in the year
in which they arise. Profits or losses on the disposal of investment property are recognised at contract completion for
the disposal.
Disposals of investment properties are recognised on completion and the profit or loss on disposal is calculated as the
difference between the sale proceeds and the latest carrying value of the property after adding attributable costs of the
disposal.
2.5.1 BORROWING COSTS AND COST OF CONSTRUCTION
All costs directly associated with the purchase and construction of a property are capitalised.
Borrowing costs are capitalised if they are directly attributable to the acquisition, construction or production of a
qualifying asset. Capitalisation of borrowing costs commences when the activities to prepare the asset are in progress
and expenditures and borrowing costs are being incurred. Capitalisation of borrowing costs may continue until the
assets are substantially ready for their intended use. If the resulting carrying amount of the asset exceeds its value, an
impairment loss is recognised. The capitalisation rate is arrived at by reference to the actual rate payable on borrowings
for development purposes or, with regard to that part of the development cost financed out of general funds, to the
average rate.
2.6 FINANCIAL INSTRUMENTS – RECOGNITION, CLASSIFICATION AND MEASUREMENT
Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity securities, trade and other receivables, cash and
cash equivalents, loans and borrowings, and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value plus, for instruments not designated at fair
value through profit or loss, any directly attributable transaction costs, except as described below. Loan receivables and
payables are subsequently measured at amortised cost using the effective interest rate method.
A financial instrument is recognised when the Group becomes a party to the contractual provisions of the instrument.
Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or
if the Group transfers the financial assets to another party without retaining control or substantially all risks and rewards
of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e. the date that the
Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group’s obligations
specified in the contract expire.
Investments at fair value through profit or loss
An instrument is classified at fair value through profit or loss if it is held for trading or is designated as such upon initial
recognition. Financial instruments are designated as fair value through profit or loss if the Group manages such
investments and makes purchase and sale decisions based on their fair value. Upon initial recognition, attributable
transaction costs are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss
comprise equity securities and are measured at fair value, and changes therein are recognised in the income
statement. Fair values are determined by reference to their quoted bid price at the reporting date, where such a price is
available. Investments in investment property funds are recorded at the net asset value per share reported by the
managers of such funds, which is the best estimate of fair value.
Derivative financial instruments
The Group holds derivative financial instruments to manage its interest rate risk exposures. Embedded derivatives are
separated from the host contract and accounted for separately if the economic characteristics and risks of the host
contract and the embedded derivative are not closely related, a separate instrument with the same terms as the
embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair
value through profit or loss.
Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss when
incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted
for in profit or loss and disclosed in losses/gains from financial assets and liabilities.
2.7 FINANCIAL LEASES
Finance leases, which are the ground rents payable to the superior landlord on leasehold properties, are capitalised at
the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease
payments. Lease payments are apportioned between the finance charges and the reduction of the lease liability so as
to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged through
profit or loss as they arise.
2.8 IMPAIRMENT
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether
there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss
event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the
estimated future cash flows of that asset that can be estimated reliably.
Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by
a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise,
indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers
in the Group, economic conditions that correlate with defaults or the disappearance of an active market for a security.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between
its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective
interest rate. Losses are recognised in profit or loss and reflected in an allowance account against loans and
receivables. Interest on the impaired asset continues to be recognised. When a subsequent event (e.g. repayment by a
debtor) causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit
or loss.
2.9 CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash balances on hand, cash deposited with financial institutions and short-term
call deposits. Cash and cash equivalents have a maturity of less than three months.
Restricted cash comprises cash deposits which are restricted until the fulfilment of certain conditions.
2.10 SHARE CAPITAL
Ordinary share capital
Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares are shown as a
deduction from equity, net of tax.
Treasury shares
When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly
attributable costs, net of any tax effects, is recognised as a deduction from equity. The shares are available for reissue
in the future.
2.11 LEASEHOLD PROPERTY
Leasehold properties that are leased out to tenants under operating leases are classified as investment properties as
appropriate, and included in the statement of financial position at fair value.
Land interests held under an operating lease are classified and accounted for as investment property on a property by
property basis when they are held to earn rentals or for capital appreciation on both the land and the property elements.
Any such property interest under an operating lease classified as investment property is carried at fair value.
2.12 LOANS AND BORROWINGS
Interest-bearing borrowings are recognised initially at fair value less directly attributable transaction costs. Subsequent
to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and
redemption value being recognised in the income statement over the period of the borrowings on an effective interest
basis.
Finance costs
Finance costs recognised in the income statement comprises interest payable on borrowings calculated using the
effective interest method, net of interest capitalised.
Restructured debt
A financial liability is derecognised when it is extinguished (i.e. it is discharged, cancelled or expires) which may happen
when a payment is made to the lender, the borrower legally is released from primary responsibility for the financial
liability or where there is an exchange of debt instruments with substantially different terms or a substantial modification
of the terms of an existing debt instrument.
Any difference between the carrying amount of the original liability and the consideration paid is recognised in profit or
loss. The consideration paid includes non-financial assets transferred and the assumption of liabilities, including the
new modified financial liability. Any new financial liability recognised is measured initially at fair value. Any costs or fees
incurred are recognised as part of the gain or loss on extinguishment and do not adjust the carrying amount of the new
liability.
2.13 DIVIDENDS
Dividends to shareholders are recognised when they become legally payable. In the case of interim dividends, this is
when declared and paid by the directors. In the case of final dividends, this is when approved by the shareholders at a
general meeting.
2.14 RENTAL INCOME
Rental income from investment property leased out under operating leases is recognised in the income statement on a
straight-line basis over the term of the leases. Lease incentives granted are recognised as an integral part of the total
rental income and amortised over the term of the leases.
Contingent rental income is recognised as it arises. Premiums to terminate leases are recognised in profit or loss as
they arise.
2.15 SERVICE CHARGES
Where the Group invoices service charges, these amounts are not recognised as income as the risks in relation to the
provision of these goods and services are primarily borne by the Group’s customers. Any servicing expenses suffered
by the Group are included within property operating expenses in the income statement.
2.16 INVESTMENT INCOME
Dividends from listed property investments are recognised on the date the Group’s right to receive payment is
established. Interest earned on cash invested with financial institutions is recognised on an accrual basis using the
effective interest rate method.
2.17 INCOME TAX
Income tax on the profit or loss for the period comprises current and deferred tax. Income tax is recognised in the
income statement except to the extent that it relates to items recognised directly in other comprehensive income or
equity, in which case it is recognised in other comprehensive income or equity.
Deferred tax is provided using the statement of financial position liability method, providing for temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for
taxation purposes. The following temporary differences are not provided for: those arising from goodwill not deductible
for tax purposes, those arising from the initial recognition of assets or liabilities that affect neither accounting or taxable
profit, nor differences relating to investments in subsidiaries to the extent described below. The amount of deferred tax
provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities,
using tax rates enacted or substantively enacted at the reporting date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available
against which the asset can be utilised and is reduced to the extent that it is no longer probable that the related tax
benefit will be realised.
Deferred tax is not provided on temporary differences arising on investments in subsidiaries and jointly controlled
entities where the timing of the reversal can be controlled and it is probable that the temporary difference will not
reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the
liability settled. Deferred tax on the fair value adjustment on investment properties and listed securities has been
provided at the capital gains taxation rate based on the manner in which each asset is expected to be realised.
Deferred taxation is provided only to the extent that there are not sufficient tax losses to shield the charge.
2.18 EARNINGS PER SHARE
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by
dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of
ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to
ordinary shareholders by the weighted average number of ordinary shares outstanding adjusted for the effects of all
dilutive potential ordinary shares.
In calculating headline earnings per share headline earnings include fair value adjustments for financial liabilities and
accounting adjustments required to account for lease income on a straight-line basis, as well as other non-cash
accounting adjustments that do not affect distributable earnings.
2.19 SEGMENT REPORTING
An operating segment is a component of the Group that engages in business activities from which it may earn revenues
and in respect of which it may incur expenses, including revenues and expenses that relate to the transactions with any
of the Group’s other components. An operating segment’s operating results are reviewed regularly by the Chief
Operating Decision Maker (“CODM”) to make decisions about resources to be allocated to the segment and to assess
its performance, and for which discrete financial information is available. See Note 4 for further details.
2.20 CAPITAL INSTRUMENT
A financial instrument or its component parts is classified on initial recognition as a financial liability, a financial asset or
an equity instrument in accordance with the substance of the contractual arrangement.
An instrument is classified as equity where there is no contractual obligation to deliver cash or another financial asset to
another party, or to exchange financial assets or financial liabilities with another party under potentially unfavourable
conditions (for the issuer of the instrument) or where the instrument will or may be settled for a fixed number of the
entity’s own equity instruments.
Equity instruments are recognised initially at their fair value with any directly attributable costs allocated to the
instrument. The equity instrument is not re-measured subsequent to initial recognition.
Payments in relation to the capital instrument are deemed to be share based payments and are recorded in the income
statement due to the unavoidable nature of the obligation. See Note 24 for further details.
2.21 SHARE BASED PAYMENTS
For share based payment arrangements with the Investment Manager, which is classified as a non-employee, the
Company measures the goods or services from the non-employee at each measurement date at their fair value with the
share-based payment exchanged for the goods or services measured and recorded at an equal amount (subject to the
non market EPRA EPS performance condition within the agreement being met).
This represents a change in accounting policy driven by consideration of whether the Investment Manager could be
deemed to be an employee. Consistent with developments in the market place it has been determined that the
Investment Manager is not an employee. This has no impact on the balances recorded in the prior period as the non
market performance condition associated with the share based payment had not been met.
2.22 DISPOSAL GROUPS AND NON-CURRENT ASSETS HELD FOR SALE
A non-current asset or a disposal group comprising assets and liabilities is classified as held for sale if it is expected
that its carrying amount will be recovered principally through sale rather than through continuing use, it is available for
immediate sale and the sale is highly probable to occur within one year. For the sale to be highly probable, the
appropriate level of management must be committed to a plan to sell the asset or disposal group.
Where the Group is committed to a sale plan involving the loss of control of a subsidiary it classifies all the assets and
liabilities of that subsidiary as held for sale when the criteria set out above and detailed in IFRS 5 “Non-current Assets
Held for Sale and Discontinued Operations” are met, regardless of whether the Group will retain a non-controlling
interest in its former subsidiary after the sale.
On initial classification as held for sale, generally, non-current assets and disposal groups are measured at the lower of
the previous carrying amount and fair value less costs to sell, with any adjustments taken to the income statement. The
same applies to gains and losses on subsequent re-measurement. However, certain items such as financial assets
within the scope of IAS 39 and investment property in the scope of IAS 40 continue to be measured in accordance with
those standards.
Impairment losses subsequent to classification of assets as held for sale are recognised in the income statement.
Increases in fair value less costs to sell of assets that have been classified as held for sale are recognised in the
income statement to the extent that the increase is not in excess of any cumulative impairment loss previously
recognised in respect of the asset. Assets classified as held for sale are not depreciated.
Gains and losses on re-measurement and impairment losses subsequent to classification as disposal groups and
noncurrent assets held for sale are shown within continuing operations in the income statement, unless they qualify as
discontinued operations.
Disposal groups and non-current assets held for sale are presented separately from other assets and liabilities on the
statement of financial position. Prior periods are not reclassified.
2.23 PROVISIONS
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can
be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the liability.
Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated
reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is
remote.
2.24 CONSIDERATION
Consideration associated with the acquisition of assets and liabilities to be transferred by the Group is recognised at fair
value at the acquisition date. Subsequent changes to the fair value of the consideration that is deemed to be an asset
or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive
income. Consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for
within equity.
2.25 STANDARDS NOT YET EFFECTIVE
The following new accounting standards and amendments to existing standards approved by the IASB, but not early
adopted by the Group, will impact the Group’s financial reporting in future periods. The Group is currently considering
the impacts of these amendments. The new accounting standards and amendments which are more relevant to the
Group are detailed below.
The following will be applied in 2014 unless otherwise noted:
Consolidation Standards
IFRS 10 Consolidated Financial Statements
IFRS 10 replaces the consolidation guidance in IAS 27 Consolidated and Separate Financial Statements and SIC-12
Consolidation – Special Purpose Entities by introducing a single consolidation model for all entities based on control,
irrespective of the nature of the investee.
IFRS 10 builds on existing principles by identifying the concept of control as the determining factor in whether an entity
should be included within the consolidated financial statements of the parent company. This new standard will not
change consolidation procedures for the Group, but will require management to assess whether an entity should be
consolidated.
IFRS 11 Joint Arrangements
IFRS 11 introduces new accounting requirements for joint arrangements, replacing IAS 31 Interests in jointly controlled
entities, by focusing on the rights and obligations of the arrangement, rather than its legal form. The option to apply the
proportional consolidation method when accounting for jointly controlled entities is removed. The impact on the Group
will be dependent on the formation of new joint arrangements by the Group.
IFRS 12 Disclosure of Interests in Other Entities
IFRS 12 sets out the required disclosures for entities reporting under the two new standards, IFRS 10 ‘Consolidated
financial statements’ and IFRS 11 ‘Joint arrangements’; it also replaces the disclosure requirements currently found in
IAS 28 ‘Investments in Associates’.
The required disclosures aim to provide information to enable users to evaluate the nature of, and risks associated with,
an entity’s interests in other entities and the effects of those interests on the entity’s financial position, financial
performance and cash flows. This basic principle is further supported by more detailed disclosure objectives and
requirements. This new standard will result in enhanced disclosures on the Group’s subsidiaries and associates as well
as unconsolidated structured entities.
IAS 27 Separate Financial Statements (revised 2011)
The requirements relating to separate financial statements are unchanged and are included in the amended IAS 27.
The other sections of IAS 27 are replaced by IFRS 10. IAS 27 is renamed ‘Separate financial statements’ and is now a
standard dealing solely with separate financial statements. The existing guidance and disclosure requirements for
separate financial statements are unchanged.
IAS 28 Investments in Associates and Jointly Controlled Entities (revised 2011)
This standard prescribes the accounting for investments in associates and sets out the requirements for the application
of the equity method when accounting for investments in associates and joint ventures. IAS 28 (revised 2011) does not
include any disclosure requirements; these are now included in IFRS 12 Disclosure of Interests in Other Entities.
IFRS 13 Fair Value Measurement
This standard, which applies prospectively for annual periods beginning on or after 1 January 2013, establishes a
single source of guidance for fair value measurements under IFRSs. IFRS 13 defines fair value, provides guidance on
its determination and introduces consistent requirements for disclosures on fair value measurements. IFRS 13 requires
entities to disclose information about the valuation techniques and inputs used to measure fair value, as well as
information about the uncertainty inherent in fair value measurements. This information will be required for both
financial and non-financial assets and liabilities. The impact of the standard is being assessed by the Group and may
result in additional disclosures.
Offsetting Financial Assets and Financial Liabilities – Amendments to IAS 32, and Disclosures
Offsetting Financial Assets and Financial Liabilities – Amendments to IFRS 7
In December 2011, the IASB issued amendments to IAS 32 and IFRS 7 which clarify the accounting requirements for
offsetting financial instruments and introduce new disclosure requirements that aim to improve the comparability of
financial statements prepared in accordance with IFRS and US GAAP.
The amendments to IFRS 7 will require more extensive disclosures than are currently required. The disclosures focus
on quantitative information about recognised financial instruments that are offset in the statement of financial position,
as well as those recognised financial instruments that are subject to master netting or similar arrangements,
irrespective of whether they are offset. The amended offsetting disclosures are to be retrospectively applied, with an
effective date of annual periods beginning on or after 1 January 2013.
The amendments to IAS 32 clarify that the right of set-off must be currently available and legally enforceable for all
counterparties in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The IAS
32 changes are effective for annual periods beginning on or after 1 January 2014 and apply retrospectively.
The following will be applied after 2014:
IFRS 9 Financial instruments
In 2009, the IASB commenced the implementation of its project plan for the replacement of IAS 39. This consists of
three main phases:
Phase 1: Classification and measurement
In November 2009, the IASB issued IFRS 9 Financial Instruments, covering classification and measurement of financial
assets, as the first part of its project to replace IAS 39 and simplify the accounting for financial instruments. The new
standard endeavours to enhance the ability of investors and other users of financial information to understand the
accounting for financial assets and to reduce complexity.
IFRS 9 uses a single approach to determine whether a financial asset is measured at amortised cost or fair value,
replacing the many different rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial
instruments (its business model) and the contractual cash flow characteristics of the financial assets.
In October 2010, the IASB reissued IFRS 9 incorporating new requirements on accounting for financial liabilities, and
carrying over from IAS 39 the requirements for derecognition of financial assets and financial liabilities. IFRS 9 does not
change the basic accounting model for financial liabilities under IAS 39.Two measurement categories continue to exist:
fair value through profit or loss (“FVTPL”) and amortised cost. Financial liabilities held for trading are measured at
FVTPL, and all other financial liabilities are measured at amortised cost unless the fair value option is applied. IFRS 9
requires gains and losses on financial liabilities designated as at fair value through profit or loss to be split into the
amount of change in the fair value that is attributable to changes in the credit risk of the liability, which should be
presented in other comprehensive income, and the remaining amount of change in the fair value of the liability which
should be presented in profit or loss.
? The basic premise for the derecognition model in IFRS 9 (carried over from IAS 39) is to determine whether the
asset under consideration for derecognition is:
? an asset in its entirety; or
? specifically identified cash flows from an asset (or a group of similar financial assets); or
? a fully proportionate (pro rata) share of the cash flows from an asset (or a group of similar financial assets); or
? a fully proportionate (pro rata) share of specifically identified cash flows from a financial asset (or a group of
similar financial assets).
? A financial liability should be removed from the statement of financial position when, and only when, it is
extinguished, that is, when the obligation specified in the contract is either discharged or cancelled or expires.
? All derivatives, including those linked to unquoted equity investments, are measured at fair value. Value changes
are recognised in profit or loss unless the entity has elected to treat the derivative as a hedging instrument in
accordance with IAS 39, in which case the requirements of IAS 39 apply.
Phase 2: Impairment methodology
An exposure draft issued by the IASB in November 2009 proposes an ‘expected loss model’ for impairment. Under this
model, expected losses are recognised throughout the life of a loan or other financial asset measured at amortised
cost, not just after a loss event has been identified. The expected loss model avoids what many see as a mismatch
under the incurred loss model – front-loading of interest revenue (which includes an amount to cover the lender’s
expected loan loss) while the impairment loss is recognised only after a loss event occurs. The impairment phase of
IFRS 9 is subject to on-going deliberations and has not yet been finalised.
Phase 3: Hedge accounting
In December 2010, the IASB issued an exposure draft on hedge accounting which will ultimately be incorporated into
IFRS 9. The exposure draft proposes a model for hedge accounting that aims to align accounting with risk management
activities. It is proposed that the financial statements will reflect the effect of an entity’s risk management activities that
use financial instruments to manage exposures arising from particular risks that could affect profit or loss. This aims to
convey the context of hedge instruments to allow insight into their purpose and effect. This phase of IFRS 9 is not yet
finalised.
The effective date for implementation of IFRS 9 has been deferred due to delays in completing phases 2 and 3 of the
project as well as the delay in the insurance project. It is expected that the effective date will be announced soon.
Since significant aspects of the standard have yet to be finalised, it is impracticable for the Group to quantify the impact
(if any) of IFRS 9 at this stage.
3. FINANCIAL RISK MANAGEMENT
The Group has exposure to the following risks from its use of financial instruments:
? credit risk
? liquidity risk
? market risk.
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies
and processes for measuring and managing risk, and the Group’s management of capital. Further quantitative
disclosures are included throughout the consolidated financial statements.
The Group’s Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk
management framework. The Board is responsible for developing and monitoring the Group’s risk management
policies.
The Group’s risk management policies require the identification and analysis of the risks faced by the Group, the setting
of appropriate risk limits and controls, and the monitoring of risks and adherence to limits. Risk management policies
and systems are reviewed regularly and adjusted to reflect changes in market conditions and the Group’s activities.
The Group Audit Committee oversees management’s monitoring of compliance with the Group’s risk management
policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by
the Group.
3.1 CREDIT RISK
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the Group’s receivables from tenants and on investment securities.
3.1.1 TRADE AND OTHER RECEIVABLES
The Group is exposed to concentrations of sectored credit risk. Concentrations of tenant risk exist in each individual
property portfolio. The Board of Directors monitors the concentration of credit risk with individual tenants and
counterparties across the portfolio. The level of concentration is addressed both with regards to the sector of property,
the industry in which the tenant operates and the credit history of the tenant/customer. An allowance is made where
there is an identified loss event which is evidence of a reduction in the recoverability of the cash flows. See Note 29 for
further details.
3.1.2 CASH AND CASH EQUIVALENTS
The Group limits its exposure to credit risk by only investing in liquid securities and only with counterparties that have a
credit rating of at least investment grade from Standard & Poor’s or Moody’s, except where specific exemptions are
granted by the Board. Given the credit quality, management does not expect any counterparty to fail to meet its
obligations. Cash transactions are limited to high-credit-quality financial institutions. The Board of Directors monitors the
exposure of the Group to any one financial institution and ensures that this is limited by diversification of deposits and
lending from each institution across the portfolio.
3.1.3 LOAN COUNTERPARTIES
The Group limits its exposure to loan counterparty risk by firstly, diversifying its property related loans over a number of
high credit rated financial institutions and secondly, only enters into single interest rate swap agreements with the
respective financial institution providing the loan. Mezzanine counterparties are assessed for suitability prior to entering
into loan agreements and are reviewed regularly in line with the Group’s risk management policies.
3.1.4 LONG-TERM RECEIVABLES
The Group limits its exposure to credit risk by ensuring all loans are made to high-credit-quality financial institutions and
counterparties, whose investments are secured over their underlying property assets. See Note 16 for further details.
3.2 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 are within the
control of the Board. In periods of increased market uncertainty the Board will ensure sufficient cash resources are
available for potential loan repayments/cash deposits as may be required by financial institutions. Refer to Note 2.2 for
further details on the going concern assumption adopted by the Board.
3.3 MARKET RISK
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices
will affect the Group’s income or the value of its investments in financial instruments. The objective of market risk
management is to manage and control market risk exposures within acceptable parameters, while optimising the return
on risk.
The Group enters into derivative financial instruments in the ordinary course of business, and incurs financial liabilities,
in order to manage market risks. The Board of Directors receives reports on a quarterly basis with regards to currency
exposures as well as interest rate spreads and takes the necessary steps to hedge/limit the risk the Group is exposed
to. The Group does not apply hedge accounting. See Note 25, 26 and 30 for further details.
3.3.1 CURRENCY RISK
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures,
primarily with respect to the Euro (“EUR”), Australian Dollar (“AUD”) and Swiss Franc (“CHF”). Foreign exchange risk
arises from current exposures the Group has to foreign currencies, recognised monetary assets and liabilities and net
investments in foreign operations.
The Group’s investments in foreign subsidiaries and associates are not hedged as the currency positions are
considered to be long-term in nature. See Note 31 for further details.
3.3.2 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 and caps, 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 26 for further details on the Group's interest rate swap
and cap agreements.
3.3.3 EQUITY PRICE RISK
Equity price risk arises from investment securities held by the Group. These investments are held at fair value. Their
performance is actively monitored and managed on a fair value basis.
3.3.4 COMMERCIAL PROPERTY PRICE RISK
The Directors draw attention to the risks associated with commercial property investments. Although over the long term
property is considered a low risk asset, investors must be aware that significant short and medium term risk factors are
inherent in the asset class.
Investments in property are relatively illiquid and usually more difficult to realise than listed equities or bonds and this
restricts the Group’s ability to realise value in cash in the short-term.
3.3.5 ESTIMATES OF FAIR VALUE OF INVESTMENT PROPERTIES
The best evidence of fair value is current prices in an active market for similar lease and other contracts. In the absence
of such information, the Group determines the amount within a range of reasonable estimates. The Group considers a
variety of information including:
? valuations from independent valuers;
? current prices in an active market for properties of a different nature, condition or location, adjusted for those
differences;
? recent prices from similar properties in less active markets, with adjustments to reflect differences in economic
conditions;
? discounted cash flow projections based on reliable estimates of future cash flows, derived from the terms of any
existing lease and from external evidence such as current market rents for similar properties in the same location
and condition, and using discount rates that reflect current market assessments.
3.4 CAPITAL MANAGEMENT
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to
sustain future development of the business. The Board of Directors monitors both the demographic spread of
shareholders, as well as the return on capital, which the Group defines as total shareholders’ equity, excluding non-
controlling interests, and the dividends paid to ordinary shareholders.
The Company has the necessary shareholder authorisation to purchase its own shares on the market. The timing of
these purchases will depend on market conditions and purchase and sale decisions will be made on a transaction by
transaction basis by the Board of Directors. No share purchases took place in the period. The Group does not have a
defined share buy-back plan.
Neither the Company nor any of its subsidiaries are subject to externally imposed regulatory capital requirements. The
level of the Company’s borrowings, in terms of its articles of association, shall not at any time, without the previous
sanction of an ordinary resolution of the Company exceed ten times the aggregate of:
i. the amount paid up on the issued share capital of the Company
ii. the total of capital and revenue reserves
The Company’s dividend policy is to distribute the majority of its earnings available for distribution to shareholders.
4. SEGMENTAL REPORTING
The Group's identified reportable segments are set out below. These segments are generally managed by separate
management teams. As required by IFRS 8, Operating Segments, the information provided to the Board of directors,
who are the Chief Operating 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 situated in the United Kingdom. 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 UK
Stable Retail UK
Income GBP'00 Hotels Europe Cromwell Total
GBP'000 0 GBP'000 GBP'000 GBP'000 GBP'000
At 31 August 2013
Rental income 24,748 8,540 10,622 7,497 - 51,407
Investment income - - - - 2,511 2,511
Net fair value loss on investment
property and assets held for sale (15,217) 2,715 (622) (7,597) - (20,721)
Gains/(loss) from financial assets
and liabilities 2,141 (279) 1,416 514 41,152 44,944
Gain on sale of subsidiaries 82 - - 17,203 - 17,285
Equity accounted (loss) / profit 313 (1,930) - (615) 13,338 11,106
Interest income 1,448 5,979 3,505 2 25 10,959
Interest expense - bank debt (8,557) (4,104) (3,938) (3,251) (2,370) (22,220)
Property operating expenses (1,024) (1,850) (9) (562) - (3,445)
Investment property 137,327 117,010 150,725 238,830 - 643,892
Assets held for sale 57,250 - - - - 57,250
Investments designated at fair
value 72 66 - 45 138,909 139,092
Investment in jointly controlled - - - 15,150 - 15,150
UK UK
Stable Retail UK
Income GBP'00 Hotels Europe Cromwell Total
GBP'000 0 GBP'000 GBP'000 GBP'000 GBP'000
entities
Long term receivables 17,577 49,790 36,561 - - 103,928
Borrowings - bank loans 184,568 72,792 85,903 176,772 34,522 554,557
At 31 August 2012
Rental income 40,856 9,303 9,400 16,591 - 76,150
Net fair value loss on investment
property and assets held for sale (101,215) (20,213) (341) (5,102) - (126,871)
Gains/(loss) from financial assets
and liabilities 11,969 (8,391) (1,463) (233) 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 3,128 122 32 9,776
Interest expense (23,755) (9,645) (3,672) (30,624) (2,360) (70,056)
Property operating expenses (2,112) (1,696) - (899) - (4,707)
Investment property 309,489 110,669 123,725 87,395 - 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
Long term receivables 17,208 49,790 31,388 84 - 98,470
Borrowings - bank loans (389,080) (73,191) (74,961) (67,967) (24,740) (629,939)
Liabilities held for sale - - - (91,935) - (91,935)
ii) Reconciliation of reportable segment profit or loss
31 August 31 August
2013 2012
GBP'000 GBP'000
Rental income
Total rental income for reported segments 51,407 76,150
Profit or loss
Investment income 2,511 -
Net fair value losses on investment property and assets held for sale (20,721) (126,871)
Gains from financial assets and liabilities 44,944 1,943
Redemption of loans and borrowings - 6,080
Gain/(loss) on sale of subsidiaries 17,285 (2,195)
Equity accounted profit 11,106 6,325
Interest income 10,959 9,776
Interest expense (22,220) (70,056)
Property operating expenses (3,445) (4,707)
Total profit/(loss) per reportable segments 91,826 (103,555)
Other profit or loss - unallocated amounts
Other income 2,129 1,917
Administrative expenses (1,601) (1,639)
Investment advisor and professional fees (7,637) (9,006)
Share based payment – incentive fee (6,430) -
Interest income 1,147 -
Interest expense (15,740) (11,288)
Share based payment – capital instrument (803) (768)
Foreign exchange gain/(loss) 4,352 (542)
Consolidated profit/(loss) before income tax 67,243 (124,881)
Redefine Hotel Management Limited, which leases the Group’s hotel properties, constitutes a major customer paying
rent of GBP10.62 million (2012: GBP9.40 million).
5. GROSS RENTAL INCOME
31 August 31 August
2013 2012
GBP'000 GBP'000
Gross lease payments collected/accrued from third parties 40,785 66,750
Gross lease payments collected/accrued from related parties (refer Note 33) 10,622 9,400
Gross rental income 51,407 76,150
The future aggregate minimum rentals receivable under non-cancellable
operating leases are as follows:
Not later than 1 year 52,663 71,472
Later than 1 year not later than 5 years 180,516 253,949
Later than 5 years 295,004 341,133
528,183 666,554
6. INVESTMENT INCOME
31 August 31 August
2013 2012
GBP'000 GBP'000
Dividends received from equity securities designated at fair value through
profit or loss 2,511 -
Total investment income 2,511 -
7. OTHER INCOME
31 August 31 August
2013 2012
GBP'000 GBP'000
Fee income from related parties (refer Note 33) 631 566
Other property income 1,498 1,351
Total other income 2,129 1,917
8. INVESTMENT ADVISER AND PROFESSIONAL FEES
31 August 31 August
2013 2012
GBP'000 GBP'000
Investment adviser fees (refer Note 33) 10,989 5,747
– Management fee 4,559 5,747
– Incentive fee 6,430 -
Independent Auditor’s remuneration
– for audit 267 222
– for tax compliance and advisory work 355 75
Legal fees 154 593
Other professional fees 2,302 2,369
Total 14,067 9,006
Under the amended Investment Advisory Agreement dated 13 July 2011 (the “IAA”), the Company pays to Redefine
International Property Management Limited (“RIPML”) an asset management fee of 0.5 per cent on the aggregate
gross value of the Group’s assets (including cash) and a commission of 0.75 per cent in respect of sales and
acquisitions, or 1 per cent where sub-agent costs are incurred. RIPML will also receive a fee of 3 per cent of the annual
rents in respect of multi-let retail property and 1 per cent for any other properties.
In addition to the asset management fee, an incentive fee is payable by the Company to RIPML, and will be satisfied by
the issue of ordinary shares in Redefine International at no cost to RIPML. The number of ordinary shares to be issued
in terms of the award will be determined by reference to their average middle market price for the 20 working days prior
to the final day of the relevant three year award period. The amount of any award is calculated as 20 per cent of the
amount by which the total return on the Ordinary Shares in the Company exceeds 10 per cent.
The award is subject to EPRA Earnings Per Share in respect of the first period and second period being equal to or
greater than 19.44 per cent of the EPRA Net Asset Value per Share as at the date immediately prior to the first day of
the relevant 3 year period and 20 per cent for all subsequent 3 year periods. Further details of the incentive fee payable
are provided in Note 41.
9. GAINS FROM FINANCIAL ASSETS AND LIABILITIES
The following table details the net gains and losses earned/(incurred) by the Group during the year:
31 August 31 August
2013 2012
GBP'000 GBP'000
Fair value through profit or loss
Equity investments – gain on loss of significant influence of Cromwell 46,690 -
Equity investments – net unrealised loss (5,657) (141)
Derivative financial instruments – net unrealised gain 5,449 10,001
Financial assets carried at amortised cost
Impairment of loans and receivables (1,538) (7,917)
Net gains from financial assets and liabilities 44,944 1,943
During the year the Group sold 86 million of the securities it held in Cromwell for proceeds of AUD 77.49 million
(GBP52.27 million net of fees) realising a gain on disposal of AUD14.64 million (GBP9.97 million) (net of fees paid of
GBP0.53 million).
This sale reduced the Group’s percentage holding to 16%. The Group was no longer deemed to have significant
influence over Cromwell and so ceased to equity account for its investment from that date. The investment in Cromwell
was designated at Fair Value through Profit or Loss and thereafter held at fair value. The Group’s shareholding in
Cromwell was subsequently further diluted to 13.70% as it did not participate in certain Cromwell security issues.
The Group recognised a gain on loss of significant influence of GBP46.69 million being:
? the difference between the carrying value and the fair value of the remaining Cromwell securities on the date
significant influence was lost, of GBP26.09 million;
? the gain realised on sale of the securities of GBP9.97 million (net of fees payable to the Investment Advisor of
GBP0.53 million); and
? the recycle of the foreign currency translation reserve related to Cromwell of GBP10.63 million.
The fair value of the Group’s investment in Cromwell at the year end was AUD241.42 million (GBP138.91 million)
resulting in a fair value movement from the date significant influence was lost of a negative GBP5.51 million (refer Note
17 for details).
10. REDEMPTION OF LOANS AND BORROWINGS
31 August 31 August
2013 2012
GBP'000 GBP'000
Redemption of loans and borrowings - 6,080
In May 2012, agreement was reached with Aviva with respect to the loan facility for Delamere Place, Crewe. The
outstanding loan balance of GBP17.5 million in Delamere Place Crewe was replaced by Mezzanine Capital Limited
and subsequently settled with Aviva for a GBP11.0 million cash payment.
11. EQUITY ACCOUNTED PROFIT
31 August 31 August
2013 2012
GBP'000 GBP'000
Investment in jointly controlled entities (refer Note 19) (2,232) (1,772)
Investments in associates (refer Note 20) 7,861 8,097
Investments in associates – reversal of impairment (refer Note 20) 5,477 -
Total equity accounted profit 11,106 6,325
12. INTEREST INCOME
31 August 31 August
2013 2012
GBP'000 GBP'000
Interest income on bank deposits 267 250
Interest income on loans to jointly controlled entities (refer Note 33) 377 -
Interest income on loans advanced to other parties 567 -
Interest receivable from mezzanine financing 10,895 9,526
Total interest income 12,106 9,776
13. INTEREST EXPENSE
31 August 31 August
2013 2012
GBP'000 GBP'000
Interest expense on secured bank loans (25,176) (70,056)
Finance lease interest (426) (693)
Interest expense on amounts due to related parties (refer Note 33) (70) (193)
Interest expense on other financial liabilities (18) (316)
Interest expense on mezzanine financing (12,270) (10,086)
Total interest expense (37,960) (81,344)
Interest expense on secured bank loans includes GBP1 million (31 August 2012: GBP25.93 million) in finance costs
due to the amortisation of the fair value adjustment of the Hague, VBG, Gamma and Delta loan facilities arising due to
reverse acquisition of Wichford in August 2011. Swap interest expense is included in the interest expense above.
14. TAXATION
a) Tax recognised in profit or loss
31 August 31 August
2013 2012
GBP'000 GBP'000
Current income tax
Income tax in respect of current year 3,228 1,950
Withholding tax 397 265
Deferred tax
Origination and reversal of temporary differences 2,554 1,155
Total income tax expense 6,179 3,370
No tax was recognised on equity or other comprehensive income during the year (2012: nil)
b) Recognised deferred liability and movement during the period
31 August 31 August
2013 2012
GBP'000 GBP'000
Deferred tax movement for the year is attributable to the following:
Deferred tax liability
Opening balance 2,489 1,334
Deferred tax liability recognised on investment properties 234 (55)
Deferred tax liability recognised on Cromwell 2,320 1,210
Closing balance 5,043 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 GBP0.91 million.
c) The tax for the period is higher (lower in 2012) than the 20% payable under the UK's NRL Scheme. The
differences are explained below:
31 August 31 August
2013 2012
GBP'000 GBP'000
Profit/(loss) before tax 67,243 (124,881)
Profit/(loss) before tax multiplied by NRL rate of UK income tax (20%) 13,449 (24,976)
Effect of:
- exempt property valuations 4,144 25,373
- income not subject to UK income tax (9,898) (3,527)
- gain from financial assets and liabilities (8,989) (388)
- impact of foreign tax (Australian tax on Cromwell) 4,367 1,210
- losses carried forward 1,193 4,770
- expenses not deductible for tax 609 489
- share based payment – incentive fee 1,447 154
- withholding tax 397 265
Total tax charge for the period 6,179 3,370
Net deferred tax assets not recognised amounted to GBP45.06 million (31 August 2012: GBP43.75 million).
From the reconciliation above, the effective tax rate of the Group was 9.2% (31 August 2012: 2.7%).
d) Unrecognised deferred tax assets and liabilities
Deferred tax assets have not been recognised in respect of the following items:
31 August 31 August
2013 2012
GBP'000 GBP'000
Fair value adjustment - investment property 13,171 41,685
Fair value adjustment - derivatives 846 2,061
Net deferred taxation asset not recognised 14,017 43,746
The net deferred tax asset of GBP14.02 million (2012: GBP43.75 million) has not been recognised because it is not
probable that future taxable profits will be available against which the Group can utilise the benefits.
15. INVESTMENT PROPERTY
The cost of properties as at 31 August 2013 was GBP1.02 billion (31 August 2012: GBP1.07 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 has been assessed by the valuers in accordance with the Appraisal and
Valuation Standards of the Royal Institution of Chartered Surveyors (“Red Book”). In particular, the Market Value has
been assessed in accordance with the Valuation Standard (VS) 3.2 of the Red Book. Under this provision, the term
“Market Value” means “the estimated amount for which a property should exchange on the date of valuation between a
willing buyer and a willing seller in an arms-length transaction after proper marketing wherein the parties have each
acted knowledgeably, prudently and without compulsion”.
In undertaking the valuations on the basis of Market Value, the valuers have applied the interpretative commentary
which has been settled by the International Valuation Standard Committee and which is included in VS 3.2. The RICS
considers that the application of the Market Value definition provides the same result as Open Market Value, a basis of
value supported by previous editions of the Red Book.
The valuation does not include any adjustments to reflect any liability for taxation that may arise on disposal, nor for any
costs associated with disposals incurred by the owner. No allowance has been made to reflect any liability to repay any
government or other grants, or taxation allowance that may arise on disposals.
The valuers have used the following key assumptions:
The market value of investment properties has been primarily derived using comparable market transactions on 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 based on yields ranging from 5% to 16% 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 (“RIHML”) for a fixed rent which is subject
to annual review. The annual rent review takes into account the forecast EBITDA for the hotel portfolio when setting the
revised rental level.
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 the Group 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.
31 August 31 August
2013 2012
GBP'000 GBP'000
Opening balance 631,278 986,654
Properties acquired during the period 27,000 349
Capitalised expenditure 7,187 3,893
Disposals during the period (7,985) (44,626)
31 August 31 August
2013 2012
GBP'000 GBP'000
Disposals through the sale of property (7,250) -
Disposals through the sale of subsidiaries (735) (44,626)
Impact of the loss of control of subsidiary property companies securing
the Gamma facility (158,040) -
Impact of acquisition of subsidiaries (refer Note 40) 158,330 -
Foreign exchange movement in foreign operations 5,854 (17,081)
Net fair value losses on investment property (13,406) (127,230)
Reclassification to assets held-for sale (refer Note 18) (6,326) (170,681)
Closing balance 643,892 631,278
Acquisitions
Earls Court Holiday Inn Express, London 27,000 -
Properties acquired through the acquisition of subsidiaries 158,330 -
Bahnhof Altona Shopping Centre, Hamburg 60,060 -
City Arkaden Shopping Mall, Ingolstadt 19,478 -
Schloss-Strassen Shopping Centre, Berlin 77,032 -
Finance leases acquired 1,760 -
Petersfield - 349
185,330 349
Disposals
Trito Petersfield Limited (refer Note 37) (735) -
Inkstone (3,447) -
Princes Street Investments (3,490) -
Finance leases (313) (3,461)
Banstead - (1,015)
West Orchards Coventry - (37,000)
Reigate - (3,150)
7,985 (44,626)
On 21 November 2012, the Company effectively acquired through its shareholding in Redefine Hotels Holdings Limited
a 42.6% interest a 150 bedroom Holiday Inn express in Earls Court, London valued at GBP27 million on acquisition.
This acquisition was financed by contributions from Redefine International, bank debt and a GBP6.55 million
contribution from non-controlling interests. Redefine International were deemed to control the entity holding the property
and so have consolidated its operations including the investment property and the related income and expenses.
The Inkstone properties located in Hamburg and Wedel were disposed for EUR4 million in October 2012. The proceeds
of the sale were utilised to settle the outstanding Barclays facility within the Inkstone Grundstuckverwaltung & Co.KG.
Three petrol station properties in the Princes Street Investment portfolio were sold to Malthurst Limited (the tenant) on 7
September 2012. Sapphire House, Telford was also sold during the year for GBP530,000.
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 are provided in Notes 37 and 38.
On 10 August 2013, the Company effectively completed the acquisition of three prime shopping centres in Germany.
Further details of the acquisition are provided in Note 40.
A reconciliation of investment property valuations to the consolidated statement of financial position is shown below:
31 August 31 August
2013 2012
GBP'000 GBP'000
Investment property at market value as determined by external valuers 692,256 757,468
Freehold 525,377 580,203
Freehold and long leasehold 12,530 15,350
Leasehold 154,349 161,915
Investment property at directors' valuation -
Adjustments for items presented separately on the Consolidated Statement
of Financial Position:
- Add minimum payment under head leases separately included under
Borrowings 8,886 9,819
- Investment properties classified as assets held for sale (refer Note 18) (57,250) (136,009)
Consolidated statement of financial position carrying value of investment
property 643,892 631,278
16. LONG TERM RECEIVABLES
31 August 31 August
2013 2012
GBP'000 GBP'000
Amounts due from Mezzanine Capital Limited 103,854 98,312
Loans 128,946 123,404
Impairment (25,092) (25,092)
Amounts due from jointly controlled entities (refer Note 33) 74 158
Closing balance 103,928 98,470
The loans from jointly controlled entities are unsecured, bear interest at coupon rates between 0% and 7% and are
repayable on demand, but the expectation is that the term will be greater than 12 months.
The loans from Mezzanine Capital Limited are secured, bear interest at rates between 10% and 12% and are repayable
between one and three years.
Included in amounts due from Mezzanine Capital Limited is rolled up interest in respect of the period of Nil (2012:
GBP7.6 million).
17. INVESTMENTS DESIGNATED AT FAIR VALUE
The following table details Investments designated at fair value.
31 August 31 August
2013 2012
GBP'000 GBP'000
Derivative financial instruments (Refer Note 26) 111 178
Investment in Cromwell 138,909 -
Other investments 72 221
Closing balance 139,092 399
The movement in investments designated at fair value may be reconciled as follows:
31 August 31 August
2013 2012
GBP'000 GBP'000
Opening balance 399 1,123
Recognition of Cromwell shares at fair value at the date significant influence
was lost 144,417 -
Movement in unrealised gains and losses on derivative assets (66) (583)
Movement in unrealised gains and losses on other investments (149) (141)
Movement in unrealised gains and losses on Cromwell (5,508) -
Closing balance 139,092 399
The Company disposed of 86 million securities in Cromwell at prices ranging from AUD90 cents to AUD96.53 cents in
April 2013 for a total consideration of AUD77.49 million (GBP52.27 million net of fees paid of GBP0.53 million).
Significant influence over the operations of Cromwell was deemed to have ceased from the date of this disposal and
the Group ceased to use the equity accounting method of accounting for its investment. The fair value of the remaining
shareholding in Cromwell on that date was AUD211.98 million (GBP144.42 million). The investment was designated at
fair value through profit or loss on that date.
As detailed in Note 9 the Group recognised a gain on loss of significant influence of GBP46.69 million (net of fees paid
of GBP0.53 million).
The Company’s interest in Cromwell at 31 August 2013 was 13.70%. The closing price of Cromwell on 31 August 2013
was 1.025 Australian cents per security and the total fair value of the securities held is AUD241.42 million (GBP138.91
million), resulting in a negative fair value movement from the date significant influence was lost of GBP5.51 million.
18. 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 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. Certain
of these subsidiaries were subsequently sold in October 2012.
Assets held for sale
31 August 31 August
2013 2012
GBP'000 GBP'000
Opening balance 136,009 -
Transfers in (Note 15) 6,326 170,681
Disposals during the period (79,440) (29,378)
Disposals through the sale of property (3,133) -
Disposals through the sale of subsidiaries (76,307) (29,378)
Foreign exchange movement in foreign operations 1,670 (5,653)
Net fair value (losses)/gains on assets held for sale (7,315) 359
Total 57,250 136,009
Assets held for sale at the year end include the following:
31 August 31 August
2013 2012
GBP'000 GBP'000
Delta 55,150 61,450
West Tullos, Aberdeen 2,100 -
VBG - 74,559
Total 57,250 136,009
Disposals in the period were as follows
VBG (refer Note 37) (76,307) -
Inkstone (2,390) -
Teleford (530) -
Ciref Berlin 1 Limited – Delmenhorst (213) -
Halle - 29,378
79,440 29,378
Liabilities held for sale
31 August 31 August
2013 2012
GBP'000 GBP'000
Opening balance 91,935 -
Transfers in from borrowings (Note 25) - 91,935
Disposals through sale of subsidiaries (VBG) (refer Note 37) (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 through VBG Holdings S.a.r.l . See Note 37 for further details.
The Company announced on 15 October 2012 the agreement to extend and restructure the GBP114.6 million Delta
facility. The restructure involved repaying GBP33.5 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 which are required to be met each year. The Group is unable to
specifically identify in which financial year each of the Delta assets will be sold. As the Group is committed to the sale of
the Delta property portfolio, all of the properties have been included in assets held for sale.
The Group has also commenced the sales process for West Tullos in Aberdeen and expects to complete the sale within
the next 12 months.
19. 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
a property in Waldkraiburg, Germany.
(ix) 49% interest in VBG Holdings S.a.r.l., a joint venure with Menora Mitvachim which ultimately owns government let
properties in Dresden, Berlin, Stuttgart and Cologne, Germany.
31 August 31 August
2013 2012
GBP'000 GBP'000
Opening balance 2,159 2,607
Increase in investment 17,588 1,641
Equity accounted loss (2,232) (1,772)
Distributions received (2,317) -
Foreign currency translation (48) (317)
Closing balance 15,150 2,159
The increase in the investment over the period is comprised largely of the investment made in VBG Holdings S.a.r.l. of
GBP12.6 million. Additional investments totalling GBP3.02 million were also made in RI Menora Germany Holdings
S.a.r.l, to help fund, in conjunction with bank debt, the acquisition of properties in Hucklehoven and Kaiserslautern in
Germany.
Summarised financial information
The summarised financial information derived from the gross balance sheets of the jointly controlled entities is set out
below:
31 August 31 August
2013 2012
GBP'000 GBP'000
Investment property 280,537 185,189
Current assets 14,157 8,601
Total assets 294,694 193,790
Capital and reserves 12,220 (19,119)
Long term liabilities 262,083 199,482
Current liabilities 20,391 13,427
Total equity and liabilities 294,694 193,790
Revenue 20,206 19,097
Net loss (6,085) (12,880)
The investment in jointly controlled entities includes investments at nil value in the balance carried forward on 1
September 2012.
These include a 50% holding in Redefine Wigan Limited which owns Grand Arcade Wigan Limited and Standishgate
Wigan Limited and which was acquired out of administration in September 2010 as part of the Group’s debt
restructuring with Aviva.
Jointly controlled entities also include Ciref Coventry Limited. The Group disposed of a 31.25% shareholding in this
company effective 31 August 2012, resulting in a loss of control for the Group and the investment being re-classified
from an 81.25% held subsidiary to a 50% jointly controlled entity as at that date. At the date control was lost, the fair
value of Group’s remaining 50% investment was deemed to be nil as the liabilities of the jointly controlled entity
exceeded its assets.
Loan facilities to Redefine Wigan Limited and to Ciref Coventry Limited have been cross collateralised against
properties held directly by the Group. The loan liabilities of Redefine Wigan Limited and Ciref Coventry Limited are in
excess of the value of the properties ultimately held by these companies. As a result a provision was created in the
prior year based on the estimated potential future cash outflows for the Group related to this cross collateralisation. See
Note 27 for further details.
20. INVESTMENTS IN ASSOCIATES
31 August 31 August
2013 2012
GBP'000 GBP'000
Opening balance 124,507 104,680
Investment at cost 26,121 24,222
Impact of foreign currency translation 6,894 (1,229)
Equity accounted profits 7,861 8,097
Distribution received from associates (10,237) (11,263)
Reversal of impairment previously recorded 5,477 -
Disposal of shares (42,298) -
Change in accounting treatment on loss of significant influence (118,325) -
Closing balance - 124,507
During the year the Company further increased its holding in the Cromwell Property Group (“Cromwell”) through a AUD
40 million (GBP26.1 million) participation in the Cromwell entitlement offer in December 2012.
Following an assessment of the recoverable value of Cromwell and having regard for its share price, the impairment
previously recorded was reversed in February 2013.
In April 2013, the Company disposed of 86 million securities in Cromwell at prices ranging from AUD90 cents to
AUD96.53 cents in April 2013 for a total consideration of AUD77.5 million (GBP52.8 million).
Significant influence over the operations of Cromwell was deemed to have ceased from the date of this disposal and
the Group ceased to equity account its investment.
The fair value of the Cromwell securities on that date was AUD289.48 million (GBP197.34million). As detailed in note 9,
the Group recognised a gain on loss of significant influence of GBP46.69 million being GBP26.09 million related to the
difference between the carrying value and the fair value of the remaining Cromwell securities on the date significant
influence was lost, a realised gain on sale of the 86 million securities of GBP9.97 million (net of fees payable to the
Investment Advisor of GBP0.53 million) and the recycle of the foreign currency translation reserve related to Cromwell
of GBP10.63 million.
The fair value of the remaining shareholding in Cromwell on the date the Group ceased to equity account its investment
was AUD211.98 million (GBP144.42 million). This investment has been designated at fair value through profit or loss,
see Note 17 for further details.
In the period up to loss of significant influence, the Group received AUD 15,817,084 (31 August 2012: AUD17,266,471)
as a distribution, before withholding tax of AUD542,628 (31 August 2012: AUD400,279), resulting in a net distribution of
AUD15,274,456 (31 August 2012: AUD16,866,192). The GBP equivalent of the above gross distribution is GBP10.24
million (31 August 2012: GBP11.26 million).
The Group received a further dividend of AUD4,629,093 before withholding tax AUD75,209 in the period in which
Cromwell was held at fair value through profit or loss. The GBP equivalent of the gross dividend of GBP2,511,231 has
been reflected in the Income Statement as investment income.
Summarised financial information
The summarised financial information derived from the gross statements of financial position of associates is set out
below. The financial information represents that as reported by Cromwell in its audited financial statements. As
Cromwell is not held as an associate at year end summarised financial information for 2013 has not been presented.
30 June
2012
GBP'000
Investment property 1,122,656
Other non-current assets 19,982
Current assets 53,717
Total assets 1,196,355
Capital and reserves 513,665
Long term liabilities 630,799
Current liabilities 51,891
Total equity and liabilities 1,196,355
Revenue 121,681
Net profit 15,024
21. TRADE AND OTHER RECEIVABLES
31 August 31 August
2013 2012
GBP'000 GBP'000
Interest receivable 878 494
Rent receivable and prepayments (net of provision of GBP541k (2012:
GBP407k)) 1,728 1,298
Service charges recoverable from tenants 259 1,719
Amounts receivable from related parties (refer Note 33) 43,442 4,070
Net receivables – Mezzanine Capital Limited 11,259 5,989
Gross receivables 15,354 9,585
Impairment of receivables (4,095) (3,596)
VAT recoverable - 298
Consideration outstanding on disposed subsidiaries 4,850 5,219
Loans advanced to other parties 5,147 -
Sundry receivables (net of provision of GBP905k (2012: Nil)) 2,142 4,272
69,705 23,359
Short term loans to jointly controlled entities are unsecured, bear no interest and are expected to mature within 12
months. Loans advanced to other parties bear interest at a rate of 10% and mature on 31 December 2013.
22. CASH AT BANK
31 August 31 August
2013 2012
GBP'000 GBP'000
Cash at bank consists of the following:
Unrestricted cash balances 29,598 5,703
Bank balances 29,580 5,694
Call deposits 18 9
Restricted cash balances 4,059 12,023
33,657 17,726
At 31 August 2013, there was GBP4.1 million (31 August 2012: GBP12.0 million) of cash at bank balances to which the
Group did not have instant access. This included balances totalling GBP1.52 million acquired as part of the CMC
acquisition. The principal reason for the restriction is that rents received are primarily held in locked bank accounts as
interest and other related expenses are paid from these monies.
Also included in the restricted cash balance at 31 August 2013 is GBP0.7 million held with Aviva with regards to the
development in Birchwood Warrington Limited (31 August 2012: GBP1.6 million).
Restricted cash in the prior year included cash related to Wichford Gamma Limited of GBP1.4 million. The Group lost
control of these cash accounts during the year (refer Note 38) for details.
23. CAPITAL AND RESERVES
31 August 31 August
2013 2012
Authorised
Ordinary shares of 8 pence each (31 August 2012: 7.2 pence each)
- number 1,800,000,000 1,000,000,000
- GBP'000 144,000 72,000
Issued, called and fully paid
Opening: Ordinary Shares of 7.2 pence each
- number 579,454,792 567,643,792
- GBP'000 41,721 40,870
Ordinary Shares acquired into treasury of 7.2 pence each
- number - (939,000)
- GBP'000 - (67)
Shares issued during the period of 7.2 pence each
- number 490,384,616 12,750,000
- new issue 490,384,616 11,811,000
- out of treasury - 939,000
- GBP'000 35,308 918
Consolidation from 7.2 pence to 8 pence each
(9 shares allotted for every 10 previously owned) (106,983,941) -
31 August 31 August
2013 2012
Shares issued to acquire non-controlling interests
- number 5,108,290 -
- GBP'000 408 -
Closing: Ordinary Shares of 8 pence each (31 August 2012: 7.2 pence each)
- number 967,963,757 579,454,792
- GBP'000 77,437 41,721
Share capital and share premium
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 in
terms of which 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 GBP92.19 million.
On 4 July 2013, the Company acquired the remaining non-controlling interests in Newington House, Ciref Malthurst
Limited and Trito Kwik-fit Limited for an aggregate purchase price of GBP1,992,223, payable through the issue of
5,108,290 shares of 8 pence each in the share capital of the Company.
As a result of the share issue in July 2013 the share premium account increased by GBP1.58 million.
Costs of GBP5.03 million were incurred on the issue of shares. In line with the Group’s accounting policy these costs
are shown as a deduction from equity, net of tax.
As at 31 August 2013, the Company had 967,963,757 shares in issue.
Other reserves
Other reserves comprise the Share consideration reserve, the share based payment reserve and other reserves.
Share consideration reserve
The Company acquired three new subsidiaries in August 2013 (the “CMC acquisition”). Under the terms of the
acquisition agreement the consideration for this purchase is part settled in shares at the election of the seller. On initial
recognition the entire consideration was recorded as a liability.
Prior to the year end, the seller determined that GBP5.5 million of the consideration due would be settled by the issue
of a fixed amount of shares at an agreed EUR:GBP conversion rate.
As a result at year end, while not yet issued, the number of shares to be issued to acquire the subsidiaries holding the
Bahnhof Altona Shopping Centre in Hamburg and the City Arkaden Shopping Mall in Ingolstadt was known.
The obligation to issue a fixed number of 12,606,061 shares for a fixed amount of GBP5.5 million has been recorded in
equity. These shares were issued post year end.
The number of shares to be issued to acquire the subsidiary holding the Schloss-Strassen Shopping Centre, Berlin is
as yet unknown. The consideration for the Berlin asset is to be settled on 6 December 2013 and will include the issue of
approximately 19,635,340 new ordinary shares of 8 pence each. The precise number of shares will be determined
pursuant to the Sterling: Euro exchange rate on 29 November 2013. As the exact number of shares is unknown, the fair
value of the deferred consideration has been reflected as a liability at year end. Further details of this acquisition are
provided in Note 40.
Share based payment reserve
An incentive fee is payable by the Company to RIPML, if certain conditions are met. This fee is satisfied through the
issue of ordinary shares in Redefine International at no cost to RIPML. At year end an incentive fee expense and a
share based payment reserve have been set up. Further detail is provided in Note 41.
Other reserves
These are non-distributable reserves arising from the acquisition of subsidiaries.
Distributions
In terms of the dividend policy, the Company will seek to distribute the majority of its recurring earnings available for
distribution in the form of dividends, subject to realisable profits. However, there is no assurance that the Company will
pay a dividend or, if a dividend is paid, the amount of such dividend.
During the year ended 31 August 2013, the second interim dividend of 2.30 pence per share for the period ended 31
August 2012 was distributed, as well as the first interim dividend of 1.475 pence per share for the six-month period
ended 28 February 2013.
Reverse acquisition reserve
The reverse acquisition reserve comprises the difference between the capital structure of the Company and RIHL.
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 GBP65 million and transferred to distributable reserves.
24. CAPITAL INSTRUMENT
As part of the Aviva debt restructuring in 2010 the Company entered into a GBP13 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 into equity three years after the date of the agreement or on any earlier date if there
is an event of default.
Should the drawings together with interest not be repaid, the Company will be required to issue shares to discharge the
outstanding amount due, the number of which is calculated by dividing the outstanding amount by 50 pence per
ordinary share.
The capital instrument is an equity instrument under IAS 32 as it is to be settled in either cash or a fixed number of
equity shares at the discretion of the Company. The fixed number of shares to be issued changes over time but is fully
predetermined based on the time the Company chooses to settle the instrument. The additional shares that arise over
time are charged to profit or loss in each period as a share based payment charge and a corresponding amount is
credited to the equity reserve.
On 13 September 2013 the instrument was settled in cash which was financed through the issue of 36,587,873 new
ordinary shares in the Company to Redefine Properties Limited.
31 August 31 August
2013 2012
GBP'000 GBP'000
Opening balance 14,536 13,768
Share based payment 803 768
Closing balance 15,339 14,536
25. BORROWINGS
31 August 31 August
2013 2012
GBP'000 GBP'000
Non-current
Secured loans 497,230 345,819
Less: deferred finance costs (1,369) (1,926)
Finance leases 8,357 9,814
Total 504,218 353,707
Current
Secured loans 174,097 401,330
Less: deferred finance costs (1,333) (875)
Finance leases 530 -
Total 173,294 400,455
Liabilities held for sale (refer Note 18) - 91,935
Total borrowings 677,512 846,097
a) Loans
This note provides information about the contractual terms of the Group’s loans and borrowings, which are measured at
amortised cost.
25.1 SECURED BORROWINGS
The terms and conditions of outstanding loans are as follows:
Facility Amor- Lender Loan Cur Maturity 31 31 31 31
tising interest date August August August August
rate 2013 2012 2013 2012
GBP'00 GBP'00 GBP'00 GBP'00
0 0 0 0
Nominal Nominal Carrying Carrying
Value Value Value Value
Windermere LIBOR + October
Gamma 7 No VIII CMBS 0.75% GBP 2012 41,862 199,678 41,862 199,678
Windermere LIBOR +
Delta 6 Partly XI CMBS 0.75% GBP April 2015 79,165 114,608 79,165 114,608
Redefine Hotel LIBOR + November
Holdings Limited Yes Aareal 2.45% GBP 2015 85,903 74,961 85,903 74,961
LIBOR +
Zeta 8 Yes Lloyds TSB 3.25% GBP May 2016 37,695 46,000 37,695 46,000
St Georges Harrow Landesbank LIBOR +
Limited Partly Berlin 2.5% GBP April 2016 40,538 41,170 40,538 41,170
Facility Amor- Lender Loan Cur Maturity 31 31 31 31
tising interest date August August August August
rate 2013 2012 2013 2012
GBP'00 GBP'00 GBP'00 GBP'00
0 0 0 0
Redefine Australian BBSY +
Investments Limited No Investec 4% 2 AUD March 2016 34,522 24,740 34,522 24,740
SNS
Property EURIBOR
Hague No Finance + 2.3% EUR July 2014 18,206 17,194 17,148 15,576
Birchwood
Warrington Limited September
3 Partly Aviva 6.10% GBP 2035 29,150 29,150 17,112 16,856
Ciref Berlin 1 EURIBOR September
Limited Partly RBS + 1.2% EUR 2014 14,980 14,262 14,980 14,262
Byron Place September
Seaham Limited3 Partly Aviva 6.44% GBP 2031 16,750 16,831 15,142 15,165
Kalihora Holdings LIBOR + October
Limited Yes UBS 1.25% CHF 2018 11,927 11,820 11,927 11,820
Princes Street LIBOR + September
Investments Limited Yes HSBC 2.5% GBP 2016 9,027 11,590 9,027 11,590
Gibson Property
Holdings Limited Partly Aviva 6.37% 1 GBP June 2029 10,735 10,900 10,735 10,900
ITB Herzogenrath EURIBOR October
B.V. Yes Bayern LB + 1.3% EUR 2017 7,369 6,989 7,369 6,989
ITB Schwandorf EURIBOR October
B.V. Yes Bayern LB + 1.3% EUR 2017 6,096 5,781 6,096 5,781
Newington House LIBOR + October
Limited Yes AIB 2.50% GBP 2013 6,084 6,304 6,084 6,304
CEL Portfolio November
Limited & Co. KG Yes Valovis 4.95% 1 EUR 2014 4,015 3,851 4,015 3,851
Ciref German EURIBOR September
Portfolio Limited Yes RBS + 1.2% EUR 2014 3,232 3,033 3,232 3,033
Bahnhof Altona HSH
Shopping Centre, Nordbank 1.48% + February
Hamburg Yes AG 2.20% EUR 2020 47,304 - 44,299 -
City Arkaden
Shopping Mall, Eurohypo 0.65% +
Ingolstadt Yes AG 1.15% EUR June 2016 11,358 - 10,457 -
Schloss-Strassen HSH
Shopping Centre, Nordbank 0.94% +
Berlin Yes AG 2% EUR August 2017 61,433 - 57,249 -
Inkstone
Grundstucksverwalt
ung Limited & Co.
KG Yes Barclays 5.75% 1 EUR August 2012 - 3,173 - 3,173
Inkstone Zwei
Grundstucksverwalt
ung Limited & Co.
KG Yes Barclays 5.91% 1 EUR August 2012 - 3,482 - 3,482
EURIBOR January
VBG1 5 Yes Talisman 3 + 1.1% EUR 2012 - 50,585 - 50,585
EURIBOR
VBG2 5 Yes Talisman 4 + 1.1% EUR April 2011 - 41,350 - 41,350
Total bank loans 577,351 737,452 554,557 721,874
Mezzanine Capital 7.10% -
Limited 4 10% 1 GBP 2013 116,107 108,825 116,107 108,825
Coronation Group
Investments Limited
2 4% 1 GBP 2012 - 7,768 - 7,768
CEL Portfolio
Limited & Co. KG 0% 1 GBP 2029 663 617 663 617
Total secured
loans 694,121 854,662 671,327 839,084
All bank loans are secured over investment property, and bear interest at the specified interest rates.
1. Fixed rates.
2. Loan secured over Redefine Australian Investments Limited.
3. These facilities are cross collateralised against each other and against facilities to Redefine Wigan Limited. See
Note 27.
4. Loans are extendable at the request of the Company.
5. In the year to 31 August 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 a jointly controlled
entity. The jointly controlled entity reached agreement with the servicer of the VBG facilities in October 2012 which
saw it pay approximately GBP80 million to settle the original VBG facilities in full.
6. 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.
7. During the year a Fixed Charge Receiver was appointed to the property company subsidiaries that secured the
Gamma debt resulting in the lender having been deemed to have taken control of the assets and resulting in the
extinguishment of part of the related debt. See Note 38 for further details.
8. In May 2013, the Group completed the refinancing of the GBP46.0 million Zeta facility with Lloyds TSB Bank PLC.
A new GBP38.5 million facility, reflecting a 55% LTV, was agreed for a three year term with options to extend for
two further one year periods. 75% of the loan amount has been fixed for the initial three year term at an all-in rate
of 4.06% with the balance of the loan bearing interest at a rate of 3.25% above three month Libor.
31 August 31 August
2013 2012
GBP'000 GBP'000
Non-current liabilities
Secured loans 497,230 345,819
Total non-current loans and borrowings 497,230 345,819
The maturity of non-current borrowings is as follows:
Between one year and five years 398,015 283,561
More than five years 99,215 62,258
497,230 345,819
Current liabilities
Secured loans 174,097 401,330
Liabilities held for sale (refer Note 18) - 91,935
Total current loans and borrowings 174,097 493,265
Total loans and borrowings 671,327 839,084
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 to Note 26 for further details.
b) Finance leases
Obligations under finance leases at the reporting dates are as follows:
31 August 31 August
2013 2012
GBP'000 GBP'000
Gross finance leases liabilities repayable:
Not later than one year 404 460
Later than one year not later than five years 1,615 1,840
Later than five years 21,652 32,354
23,671 34,654
Less: finance charges allocated to future periods (14,784) (24,840)
Present value of minimum lease payments 8,887 9,814
Present value of finance lease liabilities repayable:
Not later than one year 404 313
Later than one year not later than five years 1,428 1,124
Later than five years 7,055 8,377
Present value of minimum lease payments 8,887 9,814
26. 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 is undertaken.
a) Interest rate swap agreements
In accordance with the terms of borrowing arrangements, the Group has entered into interest rate 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 and to be 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 loan agreements call for interest rate swaps to be taken out to allow a fixed
interest charge to be made to the borrowing subsidiaries and these borrowers have given indemnities to the lenders in
respect to these interest rate swaps.
The interest rate swaps for the Delta and Gamma facilities, from which the Group benefits by both eliminating any
interest rate fluctuations in the market over the course of the facilities and also from any benefit (or cost) of closing
these instruments out, are lender level interest rate swaps. Swaps are between the CMBS vehicles (the lenders) and
commercial banking counterparties.
The Group recognises these embedded derivatives separately as, while the Group is charged interest at a fixed rate on
these facilities, the terms of the derivatives mean the Group ultimately receives their benefit or pays 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 Nominal
31 August 31 August 31 August 31 August
Effective Maturity Swap 2013 2012 2013 2012
Facility date date rate GBP'000 GBP'000 GBP'000 GBP'000
Gamma 21/07/2006 15/10/2012 4.95% - (557) - 199,678
Delta 23/05/2005 20/10/2012 4.77% - (921) - 114,608
- (1,478) - 314,286
The Delta and Gamma swaps expired during the 12 months to 31 August 2013.
ii) Borrower level interest rate swap agreements
Borrower level interest rate swap agreements are those that have a Group company as the counter-party to the
commercial bank providing the interest rate swap. As a result of the use of interest rate swaps, the fixed rate profile of
the Group was:
Fair value Nominal
31 31 31 31
August August August August
Effective Maturity Swap 2013 2012 2013 2012
Facility date date rate GBP'000 GBP'000 GBP'000 GBP'000
Newington House Limited 03/09/2010 19/09/2013 1.54% (10) (62) 6,304 6,304
Princes Street Investments Limited 30/09/2011 30/09/2016 1.69% (176) (422) 11,590 11,590
Ciref Berlin 1 Limited 05/06/2007 15/04/2014 4.61% (257) (534) 7,599 7,599
Ciref Berlin 1 Limited 31/07/2007 15/04/2014 4.20% (212) (427) 6,745 6,745
Ciref German Portfolio Limited 31/07/2007 15/04/2014 4.20% (95) (192) 3,061 3,061
Redefine Hotel Holdings Limited 30/11/2010 30/11/2015 2.45% (2,017) (3,278) 67,695 67,695
Redefine Hotel Holdings Limited 30/06/2011 30/11/2015 2.32% (255) (409) 7,599 7,599
Redefine International Holdings
Limited 04/03/2011 04/03/2013 5.45% - (244) 16,733 16,733
Hague 01/08/2008 01/08/2014 4.89% (814) (1,569) 17,193 17,193
Zeta 22/07/2013 24/05/2016 0.81% 2 (677) 28,271 46,000
Kalihora Holdings Limited - Matterhorn
Brig SARL 30/01/2012 08/10/2018 0.73% (17) (103) 3,794 3,794
Kalihora Holdings Limited -Matterhorn
Vich SARL 30/01/2012 08/10/2018 0.73% (36) (228) 8,265 8,265
CMC Hamburg – SC Altona 27/02/2013 28/02/2020 1.48% (371) - 61,433 -
CMC Berlin- Grundstueck Einkauf 03/01/2013 30/08/2017 0.94% (281) - 47,304 -
Redefine Australian Investments
Limited 03/03/2013 04/03/2016 3.30% (275) - 51,116 -
(4,814) (8,145) 338,398 202,578
b) Interest rate cap agreements
The Group has entered into interest rate caps in order to take advantage of the low interest rates in the market while at
the same time protecting the Group against any significant increases in these interest rates. The current interest rate
cap agreements are detailed below:
Fair value Nominal
31 31 31 31
August August August August
Effective Maturity 2013 2012 2013 2012
Facility date date Cap rate GBP'000 GBP'000 GBP'000 GBP'000
St Georges Harrow 27/04/2011 27/04/2016 2.85% 67 118 41,400 41,400
ITB Herzogenrath B.V. 31/05/2011 31/05/2017 4.50% 24 41 6,989 6,989
ITB Schwandorf B.V. 31/05/2011 31/05/2017 4.50% 20 19 5,781 5,781
111 178 54,170 54,170
c) Summary of fair value of interest rate swaps and interest rate caps
31 August 31 August
2013 2012
Facility GBP'000 GBP'000
Fair value of lender level interest rate swaps - (1,478)
Fair value of borrower level interest rate swaps (4,814) (8,145)
(4,814) (9,623)
Fair value of interest rate cap agreements* 111 178
Fair value of the Group's derivative instruments (4,703) (9,445)
*Interest rate cap assets are included in investments designated at fair value (please refer Note 17).
27. PROVISION FOR LIABILITIES AND COMMITMENTS
31 August 31 August
2013 2012
GBP'000 GBP'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 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 based on the estimated potential future cash
outflows for the Group related to this cross collateralisation.
The Group entered into a non-binding agreement with Aviva to restructure the debt facilities which fund part of the
Company’s UK Retail portfolio. The restructure is being undertaken as part of a simultaneous significant acquisition.
Further details of this transaction are provided in Note 43.
28. TRADE AND OTHER PAYABLES
31 August 31 August
2013 2012
GBP'000 GBP'000
Rent received in advance 1,876 2,789
Trade creditors 831 40
Accrued interest 4,725 5,546
Short-term loans from jointly controlled entities (refer Note 33) 16 16
Amounts owing to other related parties (refer Note 33) 1,121 2,395
Amount owing to Mezzanine Capital Limited (refer Note 33) 11,798 6,574
VAT payable 731 1,863
Income tax payable 4,013 1,988
Other accruals 9,251 4,152
Deferred consideration re CMC acquisition (refer Note 40) 18,535 -
52,897 25,363
Short term loans from jointly controlled entities are unsecured, bear no interest and are expected to mature within 12
months.
29. CREDIT RISK
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit risk exposure. The maximum exposure to credit
risk at the reporting date was:
31 August 31 August
2013 2012
GBP'000 GBP'000
Loans and receivables 103,928 98,470
Trade and other receivables 69,705 23,359
Cash and cash equivalents 33,657 17,726
207,290 139,555
The concentration of credit risk per segment is set out below:
UK Stable Income 25,445 35,909
UK Retail 97,316 53,282
Europe 3,825 6,132
Hotels 40,461 35,086
Australia 963 963
1
Other 39,280 8,183
207,290 139,555
1 Includes GBP24.57 million (2012: GBP2.14 million) of cash held by the Company and its subsidiary, RIHL.
Included in loans and receivables and trade and other receivables are debtors with the following age profile:
2013 2013 2013 2012 2012 2012
GBP’000 GBP000 GBP’000 GBP’000 GBP’000 GBP’000
Gross Impairment Net Gross Impairment Net
Not past due 182,979 (25,092) 157,887 136,459 (25,092) 111,367
Past due 0 – 120 days 1,542 - 1,542 1,354 - 1,354
Past due – 120 days 18,456 (5,000) 13,456 12,704 (3,596) 9,108
Bad debt provisions of GBP541k (2012: GBP407k) have also been booked against rent receivable balances as detailed
in Note 21. These provisions are specific to tenants that went into administration.
30. LIQUIDITY RISK
The following are the contractual maturities of financial liabilities, including interest payments and excluding the impact
of netting agreements:
Carrying Contractual 6 months 6 – 12 1–2 2–5 More than
Amount Cash flows Or less Months Years Years 5 years
GBP’000 GBP’000 GBP’000 GBP’000 GBP’000 GBP’000 GBP’000
31 August 2013
Financial liabilities at
amortised cost
Secured loans 670,488 (772,835) (25,288) (138,519) (73,805) (393,864) (141,359)
Finance leases 8,887 (32,615) (265) (265) (530) (1,590) (29,965)
Trade and other payables 52,897 (52,897) (52,897) - - - -
Derivative financial
liabilities
Interest rate swaps used
for economic hedging 4,814 (10,819) (2,057) (1,746) (2,660) (3,457) (899)
737,086 (869,166) (80,507) (140,530) (76,995) (398,911) (172,223)
31 August 2012
Financial liabilities at
amortised cost
Secured loans 762,727 (817,837) (28,346) (327,063) (116,126) (264,910) (81,392)
Finance leases 9,814 (34,654) (230) (230) (460) (1,380) (32,354)
Liabilities held for sale 91,935 (92,637) (92,637) - - - -
Trade and other payables 25,363 (25,363) (25,363) - - - -
Derivative financial
liabilities
Interest rate swaps used
for economic hedging 9,623 (10,356) (3,764) (2,071) (2,520) (1,920) (81)
889,462 (980,847) (150,340) (329,364) (119,106) (268,210) (113,827)
Cash flows on financial liabilities at amortised cost and derivative financial liabilities were based on the respective loan
interest rates as per Notes 25 and 26.
31. CURRENCY RISK
Structural risk
The investments in subsidiaries in Germany, the Netherlands, Switzerland and Australia represent structural currency
risk as these investments have functional currencies of Euro, Swiss Franc and Australian Dollar respectively.
31 August 31 August
2013 2012
GBP'000 GBP'000
Assets
EUR 212,637 145,858
CHF 22,229 21,347
AUD - 125,470
Liabilities
EUR 180,728 171,577
CHF 16,493 12,339
Transactional risk
The Group’s income from income-producing rental properties is denominated in the same currencies as the loans that
are financing those properties. Loans have been made by the Group to subsidiary companies in Swiss Francs totalling
GBP4.207 million (2012 GBP4.0 million).
As at 31 August 2012 the Group’s transactional risk associated with Cromwell of GBP34.52 million (2012: GBP24.74
million) represented the sterling equivalent of the AUD loan facility used to finance part of the investment, and
GBP138.91 million being the sterling equivalent of the AUD investment.
Sensitivity analysis
A five percent strengthening in the GBP exchange rate against the following currencies at year end would have
decreased equity and profit by the amounts shown below. This analysis assumes that all other variables remain
constant. The analysis is performed on the same basis for 2012.
Equity Profit or loss
GBP'000 GBP'000
31 August 2013
EUR 1,609 (2)
CHF 278 (3)
AUD - (4,971)
31 August 2012
EUR 3,238 76
CHF 480 (4)
AUD (5,907) 1,178
A five percent weakening in the GBP exchange rate against the above currencies at year end would have had the
equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables
remain constant.
The Group’s total net exposure to fluctuations in foreign currency exchange rates at the reporting date was as above.
This reflects the total and financial and non-financial assets and liabilities in foreign currencies.
The following exchange rates were applied during the year:
Average rate Period end rate
2013 2012 2013 2012
EUR 1.198 1.188 1.172 1.262
CHF 1.461 1.451 1.441 1.516
AUD 1.568 1.531 1.738 1.536
32. FAIR VALUES
Fair values versus carrying amounts
The fair values of financial assets and liabilities, together with the carrying amounts shown in the consolidated
statement of financial position, are as follows:
31 August 2013 31 August 2012
Carrying Fair Carrying Fair
Note
GBP’000 GBP’000 GBP’000 GBP’000
Financial assets
Loans and receivables 16, 21 173,633 173,633 121,829 120,997
Designated at fair value through profit or loss 17 139,092 139,092 399 399
Cash and cash equivalents 22 33,657 33,657 17,726 17,726
346,382 346,382 139,954 139,122
Financial liabilities
Amortised cost 25, 28 (730,409) (664,533) (871,460) (791,136)
Derivatives at fair value through profit or loss 26 (4,814) (4,814) (9,623) (9,623)
(735,223) (669,347) (881,083) (800,759)
Basis for determining fair values
The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used
in making the measurements.
Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.
Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from
prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments;
quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation
techniques where all significant inputs are directly or indirectly observable from market data.
Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the
valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect
on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar
instruments where significant unobservable adjustments or assumptions are required to reflect differences between the
instruments.
Fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market
prices or dealer price quotations. For all other financial instruments the Company determines fair values using net
present value and discounted cash flow models and comparisons to similar instruments for which market observable
prices exist. Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates, credit
spreads and other premia used in estimating discount rates, foreign currency exchange rates and expected price
volatilities and correlations. The objective of valuation techniques is to arrive at a fair value determination that reflects
the price of the financial instrument at the reporting date that would have been determined by market participants acting
at arm’s length.
The Group uses widely recognised valuation models for determining the fair value of common and more simple
financial instruments such as interest rate swaps that use only observable market data and require little management
judgement and estimation. Observable prices and model inputs are usually available in the market for simple over the
counter derivatives, e.g. interest rate swaps. Availability of observable market prices and model inputs reduces the
need for management judgement and estimation and also reduces the uncertainty associated with determination of fair
values. Availability of observable market prices and inputs varies depending on the products and markets and is prone
to changes based on specific events and general conditions in the financial markets.
The following is a summary of the classifications of the financial assets and liabilities:
Total
Level 1 Level 2 Level 3 Fair value
GBP’000 GBP’000 GBP’000 GBP’000
31 August 2013
Financial assets
Designated at fair value through profit or loss –equity securities 138,909 72 - 138,981
Derivative financial assets - 111 - 111
138,909 183 - 139,092
Financial liabilities
Interest rate swaps - (4,814) - (4,814)
- (4,814) - (4,814)
31 August 2012
Financial assets
Designated at fair value through profit or loss –equity securities - 221 - 221
Derivative financial assets - 178 - 178
- 399 399
Financial liabilities
Interest rate swaps - 9,623 9,623
- 9,623 9,623
No financial instruments were transferred between levels during the year.
The investment in Cromwell is categorised as a Level 1 investment as it has been priced using quoted prices in an
active market.
Certain financial assets designated at fair value through profit and loss have been categorised as Level 2 as they have
been priced using quoted prices for identical instruments in markets that are considered less than active.
Interest rate swaps have been categorised as Level 2 as although they are priced using directly observable input, the
instruments are not traded in an active market.
No instruments have been categorised as Level 3.
33. RELATED PARTY TRANSACTIONS
Related parties of the Group include subsidiary undertakings, associate undertakings and jointly controlled entities, the
Investment Advisor, Directors who are deemed to be key management personnel, and connected parties, including
Redefine International Properties Limited and Redefine Properties Limited, as well as entities connected through
common directors.
Investment Adviser
The investment adviser duties are carried out in accordance with the Investment Adviser's Agreement (as approved on
13 July 2011) between the Company and RIPML. The director Michael Watters is a director of associated companies of
the investment adviser.
31 August 31 August
2013 2012
GBP'000 GBP'000
Trading transactions
Rental income received from Redefine Hotel Management Limited 10,622 9,400
Fee income from the Cromwell Property Group 631 566
Interest receivable from West Orchards Coventry Limited 377 -
Portfolio management fees charged by Redefine International Property
Management Limited (2,728) (3,328)
Portfolio management fees charged by Redefine International Fund Managers
Limited (727) (610)
Portfolio management fees charged by Redefine International Fund Managers
Europe Limited (590) (817)
Redefine International Hotels Limited (514) (617)
Incentive fees payable to Redefine International Property Management Limited (6,430) -
Fee payable to Redefine Properties Limited - (130)
Interest payable to Coronation Group Investments Limited (70) (193)
Amounts receivable
Pearl House Swansea Limited 74 74
West Orchards Coventry Limited*** 37,989 -
Corovest Offshore Limited 162 -
Kaiserslautern Merkerstrasse GmbH 400 -
Grand Arcade Wigan Limited 487 -
ITB FMZ Waldkraiburg B.V. - 84
Redefine Hotel Management Limited 3,642 3,314
Ciref Crawley Investments Limited 87 104
Swansea Estates Limited 87 86
26 The Esplanade No 1 Limited 78 48
Banstead Property Holdings Limited 510 518
Osiris Properties International Limited - 369
Amounts Payable
Redefine International Fund Managers Limited 374 320
Osiris Properties Services Limited 6 6
Redefine Properties International Limited 7 35
Redefine International Hotels Limited 480 154
Redefine International Property Management Limited 176 660
VGB Holdings 78 -
Pearl House Swansea 16 16
Redefine International Fund Managers Europe Limited - 352
Corovest Offshore Limited - 868
Coronation Group Investments Limited - 7,768
** 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.
*** Amounts receivable from West Orchards Coventry includes an amount of GBP37.75 million which bear interest at a
rate of 6.29% and mature within 12 months.
Equity placement
The Company’s parent, Redefine Properties International Limited, (“RIN”) subscribed for 20,000,000 ordinary shares in
the GBP16.8 million equity placement (“the Placing”), announced to the market on 23 August 2013. RIN participated in
the non-pre-emptive fundraising at 42 pence per share alongside certain existing shareholders and new investors.
As part of the Placing, RIFM, the parent entity of the investment adviser, received a commission of 2% which was
payable by the Company for procuring certain investors as part of the Placing. This amounted to GBP234,990.
RIFM received a similar commission rate for procuring investors pursuant to the Placing and Open offer completed on 9
October 2012, amounting to a net fee earned of GBP662,814.
Mezzanine Capital Limited
Details of transactions with Mezzanine Capital Limited are provided in notes 12,13, 16, 21, 25 and 28.
Directors’ remuneration
The Directors (other than alternate Directors) shall be paid by the Company for their services as Directors such
aggregate sums as the Board may determine, provided that such sum shall not exceed in the aggregate GBP350,000,
or as the Company may by ordinary resolution approve. Any such sums shall be distinct from any salary, remuneration
or other amounts payable to a Director pursuant to other provisions of the Articles of Association.
Directors will not be entitled to additional remuneration in respect of their service on committees of the Board save that
the chairman of any audit and risk committee from time to time may receive an additional sum at the discretion of the
Board.
The Directors are entitled to be paid all reasonable travel, hotel and other expenses properly incurred in attending
meetings of the Board, committees of the Board, general meetings or otherwise in connection with the business of
Redefine International.
Basic fees
The table below shows the actual fees paid to each of the Directors for the 12 month period ended 31 August 2012 and
for the 12 month period ending 31 August 2013:
2012/2013 2011/2012
Annual Annual
Fees Fees
Paid Payable
Director GBP GBP
Ita McArdle 30,000 30,000
Richard Melhuish 30,000 30,000
Robert Mark Taylor 35,000 35,000
Gavin Tipper 40,000 40,000
Michael Farrow 35,000 35,000
Stewart Shaw Taylor 40,000 40,000
Marc Wainer 30,000 30,000
Michael Watters 30,000 30,000
Greg Clarke 75,000 75,000
No Share Option, bonus or pension schemes are offered to the Directors.
Directors’ interests
The interests (all of which are beneficial unless otherwise stated) of the Directors, their immediate family members and
persons connected with them in the share capital of Redefine International, the existence of which is known to or could
with reasonable diligence be ascertained by that Director, whether or not held through another party, are as shown in
the table below.
Pursuant to the Open Offer in October 2012, all Directors who were also shareholders, who in aggregate held
4,600,040 ordinary shares in the Company, irrevocably undertook to acquire their Open Offer Entitlements in respect of
an aggregate of 3,184,642 ordinary shares in the Company. On 11 October 2012 the Company’s ordinary shares of 7.2
pence were consolidated on a 9 for 10 basis, following which the Company’s issued ordinary share capital comprised
ordinary shares of 8.0 pence each.
No additional shares were acquired by Directors during the financial year ended 31 August 2013 (or during the period
ended 29 October 2013) other than through indirect shareholding changes through parent entities.
The number of Redefine International Ordinary Shares held by Directors is therefore shown below for:-
- the year ended 31 August 2012;
- following the take up of the Directors Open Offer Entitlements and subsequent share consolidation on 11 October
2012;
- the year ended 31 August 2013; and
- the period ended 29 October 2013, following the placement of 40,000,000 shares and issue of 36,587,873 shares
to fund the repayment of the Aviva Capital Instrument.
Ordinary shares of 7.2 pence Ordinary shares of 8.0 pence
As at 31 August 2012 As at 11 October 2012
Number of Percentage of Number of Percentage of
Ordinary shares issued share Ordinary shares issued share
Director held capital held capital
Greg Clarke - - - -
1
Michael Watters 2,011,213 0.35 3,063,231 0.32
Gavin Tipper 261,358 0.05 398,068 0.04
Ita McArdle 2,083 0.00 3,172 0.00
Richard Melhuish 11,111 0.00 16,922 0.00
Robert Mark Taylor - - - -
Michael Farrow - - - -
Stewart Shaw Taylor 570,000 0.10 868,152 0.09
2
Marc Wainer 2,951,466 0.51 3,426,832 0.36
Total 5,807,231 1.01 7,776,377 0.81
Ordinary shares of 8.0 pence Ordinary shares of 8.0 pence
As at 31 August 2013 As at 29 October 2013
Number of Percentage of Number of Percentage of
Ordinary shares issued share Ordinary shares issued share
Director held capital held capital
Greg Clarke - - - -
1
Michael Watters 3,250,816 0.34 3,250,816 0.31
Gavin Tipper 398,068 0.04 398,068 0.04
Ita McArdle 3,172 0.00 3,172 0.00
Richard Melhuish 16,922 0.00 16,922 0.00
Robert Mark Taylor - - - -
Michael Farrow - - - -
Stewart Shaw Taylor 868,152 0.09 868,152 0.08
2
Marc Wainer 3,305,193 0.34 3,529,633 0.33
Total 7,842,323 0.81 8,066,763 0.76
Notes:
1 The interest attributed to Michael Watters is held by a discretionary trust of which members of Michael Watters’s
family are discretionary beneficiaries. The trust’s interest is held via intermediate companies.
2 Marc Wainer’s shareholding is held indirectly through his shareholding in Redefine Properties. The number of
shares disclosed is therefore determined by Redefine Properties’ percentage shareholding in Redefine
International.
Save as disclosed above, none of the Directors nor any member of their respective immediate families, nor any person
connected with the Directors within the meaning of section 252 of the UK Companies Act 2006, has any interest
whether beneficial or non-beneficial in any share capital of Redefine International.
34. EARNINGS PER SHARE AND HEADLINE 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 in the comparative period is based on the capital
structure in place after the reverse acquisition.
Restated
31 August 31 August
2013 2012
GBP'000 GBP'000
Net profit/(loss) attributable to shareholders (Basic and diluted) 61,521 (124,755)
Weighted average number of ordinary shares 924,394 516,380
Effect of potential share based payment transactions - capital instrument 36,587 29,072
Effect of potential share based payment transactions - incentive fee
arrangements 14,697 -
Effect of potential share based payment transactions - consideration payable
on CMC (refer Note 40) 12,502 -
Diluted weighted average number of ordinary shares 988,180 545,452
Number of ordinary shares
- In issue 967,964 521,510
- Weighted average 924,394 516,380
- Diluted weighted average 988,180 545,452
Earnings/(loss) per share (pence)
- Basic 6.66 (24.16)*
- Diluted 6.23 (24.16)*
Headline earnings per share (pence)
- Basic 2.64 2.09
- Diluted 2.44 2.09
Basic profit/(loss) is reconciled to headline earnings as follows:
Net profit/(loss) attributable to shareholders (Basic and diluted) 61,521 (124,755)
Changes in fair value of investment property (net of deferred tax) 23,299 125,410
Net fair value losses on investment property 20,721 126871
Deferred taxation 234 (55)
Effect of non-controlling interest on above (1,069) (3,387)
Net fair value losses in jointly controlled entities 3,413 1,981
Gain on loss of significant influence of Cromwell (net of capital gains tax) (44,643) -
Gain on loss of significant influence of Cromwell (46,690) -
Capital gains tax on Cromwell disposal 2,047 -
Impairment of receivables 1,538 7,917
Restated
31 August 31 August
2013 2012
GBP'000 GBP'000
(Profit)/loss on disposal of subsidiaries (17,285) 2,195
Headline earnings attributable to shareholders 24,430 10,767
* The 2012 share balances have been restated to reflect the impact of the 9:10 share consolidation in October 2012.
There are also contingently issuable shares under the performance agreement. The conditions for recognising these
shares had not been met at the year end.
35. NET ASSETS PER SHARE
Restated
31 August 31 August
2013 2012
GBP'000 GBP'000
Net assets attributable to equity shareholders (GBP'000) 299,799 132,914
Number of Ordinary Shares ('000's) 967,964 521,510
Effect of potential share based payment transactions - capital instrument 36,587 29,072
Effect of potential share based payment transactions - incentive fee
arrangements 14,697 -
Effect of potential share based payment transactions - consideration payable
on CMC (Note 40) 12,606 -
Diluted number of shares ('000's) 1,031,854 550,582
Net asset value per share (pence):
- Basic 30.97 25.94
- Diluted 29.05 24.14
36. CASH FLOW INFORMATION
36.1 CHANGES IN WORKING CAPITAL
31 August 31 August
2013 2012
GBP'000 GBP'000
Decrease/(increase) in trade receivables 2,079 (1,602)
Increase/(decrease) in trade payables 4,302 (5,313)
6,381 (6,915)
36.2 PROCEEDS FROM ISSUE OF SHARE CAPITAL
31 August 31 August
2013 2012
GBP'000 GBP'000
Proceeds from shares issued - cash 127,500 4,370
Acquisition of treasury shares - (384)
Proceeds from issue of treasury shares - 347
Share issue costs (5,025) -
122,475 4,333
Please see Note 23 for details of share transactions.
37. DISPOSAL OF SUBSIDIARIES
The Group disposed of the following subsidiaries during the financial year ended 31 August 2013:
? VBG Holding S.a.r.l. on 11 October 2012
? Trito Petersfield on 28 February 2013
A receiver was also appointed to Inkstone Grundstucksverwaltungs Limited & Co KG and Inkstone Zwei
Grundstucksverwaltungs Limited & Co KG such that the Group no longer controls these entities and so ceased to
consolidate them from the date the receiver was appointed.
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 Gmbh & Co. KG on 29 June 2012
? Ciref Coventry Limited on 31 August 2012
The assets and liabilities arising from those disposals were as follows:
31 August 31 August
2013 2012
GBP'000 GBP'000
Assets disposed
Investment property 77,042 74,004
Long term receivables - 5,838
Trade and other receivables 1,037 1,411
Liabilities
Trade and other payables (1,222) (5,702)
Derivative liabilities - (2,108)
Loans and borrowings (95,430) (87,099)
Total (18,573) (13,656)
Add: 244 3,210
Non-controlling interest shareholder loans (1,997) (1,767)
Non-controlling interest share of net deficit 2,241 4,977
Provision for liabilities and commitments - 12,079
Transfer of FCTR to income statement on disposal of foreign operation (293) 381
Net gain/(loss) on sale of subsidiaries 17,285 (2,195)
Net cash disposed (1,337) (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 Holding 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.
Subsequent to this, each of the joint venture partners invested additional capital into VBG Holdings S.a.r.l, with the
Company investing GBP12.6 million. VBG Holdings S.a.r.l drew down a new EUR57 million loan facility from DG Hyp
and reached agreement with the original servicer of the VBG facilities to pay approximately EUR80.0 million to settle
the original VBG facilities in full. The facilities had an outstanding balance of EUR116 million.
The gain recognised by the Group on sale of the subsidiary in respect of this transaction and the resulting settlement of
the original VBG facilities was GBP16.42 million.
In February 2013, RIHL sold its shares in Trito Petersfield for GBP0.47 million realising a gain on disposal of GBP0.07
million.
The Group also lost control of Inkstone Grundstucksverwaltungs Limited & Co KG and Inkstone Zwei
Grundstucksverwaltungs Limited & Co KG following the appointment of a receiver and ceased to consolidate these
entities. A gain on loss of control of GBP0.8 million has been recognised being the excess liabilities over assets in
these entities.
38. 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 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 which is the primary obligor of the loan facility.
IAS 39 does not provide specific guidance on whether or not the appointment by the lender of the 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.
The impact of the appointment of a receiver and loss of control of the underlying property companies is as follows:
31 August
2013
GBP'000
Assets
Investment Property 158,040
Trade and other receivables 819
Liabilities
Finance lease payables (2,315)
Trade and other payables (4,770)
Net assets impact on the Group 151,774
Cash held by Wichford Gamma over which the Receiver has a lien 6,042
Gamma loan facility (199,678)
Residual carrying amount of the debt (41,862)
39. OTHER MOVEMENTS IN NON-CONTROLLING INTEREST
31 August 2013 31 August 2012
Non- Non-
Retained Retained
controlling controlling
earnings earnings
interest interest
GBP’000 GBP’000
GBP’000 GBP’000
Acquisition of NCI (575) (873) (426) 426
Increase in NCI re Redefine Hotel Holdings Limited - 6,547 - -
(575) 5,674 (426) 426
In 2013 the Group acquired the remaining non-controlling interests in Newington House Limited, Ciref Malthurst Limited
and Trito Kwik-Fit Limited for an aggregate purchase price of GBP1,992,223.
The purchase price has been settled by the issue of 5,108,290 shares of 8 pence each in the share capital of the
Company to the non-controlling interests’ shareholders at a price of 39 pence per Consideration Share.
There was an increase in Non-Controlling interests in 2013 linked to the acquisition of Earl Court Holiday Inn Express,
London.
40. ACQUISITION OF SUBSIDIARIES
In August 2013, the Group acquired three subsidiaries which own three shopping centres in Germany, Schloss-
Strassen Shopping Centre, Berlin, Bahnhof Altona Shopping Centre, Hamburg, and City Arkaden Shopping Mall,
Ingolstadt.
Management considers that at the date of acquisition, the acquisition of these three subsidiaries constituted groups of
net assets, rather than businesses as defined in IFRS 3, ‘Business combinations’’.
The consideration for the acquisition comprised a fixed cash payment with the seller CMC Capital Limited having the
option to elect to receive the remaining consideration either entirely in cash or partly in cash and partly in new ordinary
shares in the Company at an effective issue price of 40.0 pence per share. On initial recognition the entire
consideration was recorded as a liability.
Prior to the year end, the seller determined that GBP5.5 million of the consideration due would be settled by the issue
of a fixed amount of shares at an agreed EUR:GBP conversion rate.
As a result at year end, while not yet issued, the number of shares to be issued to acquire the subsidiaries holding the
Bahnhof Altona Shopping Centre in Hamburg and the City Arkaden Shopping Mall in Ingolstadt is known.
The obligation to issue a fixed number of shares of 12,606,061 shares for a fixed amount of GBP5.5 million has been
recorded in equity. These shares were issued post year end.
The number of shares to be issued to acquire the subsidiary holding the Schloss-Strassen Shopping Centre, Berlin is
as yet unknown. The consideration for the Berlin asset is to be settled on 6 December 2013 and will include the issue of
approximately 19,635,340 new ordinary shares of 8 pence each. The precise number of shares will be determined
pursuant to the Sterling: Euro exchange rate on 29 November 2013. As the exact number of shares is unknown, the fair
value of the deferred consideration has been reflected as a liability at year end.
31 August
2013
GBP'000
Assets and liabilities acquired
Investment property 156,570
Finance lease assets 1,760
Trade and other receivables 1,147
Cash and cash equivalents 3,058
Trade and other payables (4,218)
Derivatives (652)
Finance lease liability (1,760)
Loans and borrowings (112,005)
Total fair value of assets and liabilities acquired 43,900
Settled as
Fair value of shares to be issued as consideration 5,515
Cash consideration 19,850
Fair value of deferred consideration classified as a liability (Note 28) 18,535
Total fair value of consideration 43,900
Net cash outflow to the Group 16,792
Further consideration in respect of the Ingolstadt and Hamburg properties being a share in the potential uplift in
property values following redevelopment may be payable within 3 years of the completion date if certain conditions are
met. The fair value of this further consideration recognised at the date of acquisition is deemed to be Nil given the
uncertainty surrounding the development of the properties in the three year time period.
The fair value of the assets and liabilities noted above are based on best estimates at year end and may be subject to
change as further information is obtained.
41. SHARE BASED PAYMENT – INCENTIVE FEE
In addition to the asset management fee, an incentive fee is payable by the Company to RIPML, and will be satisfied by
the issue of ordinary shares in Redefine International at no cost to RIPML. The number of ordinary shares to be issued
in terms of the award will be determined by reference to average middle market share price for the 20 working days
prior to the final day of the relevant three year award period. The amount of any award is calculated as 20 per cent of
the amount by which the total return on the Ordinary Shares in the Company exceeds 10 per cent per annum.
The award is subject to EPRA Earnings Per Share in respect of the first period and second period being equal to or
greater than 19.44 per cent of the EPRA Net Asset Value per Share as at the date immediately prior to the first day of
the relevant 3 year period and 20 per cent for all subsequent 3 year periods.
The fee is payable to RIPML for rendering services to the Company.
The Company measures the goods or services from RIPML as non-employees at their fair value (direct measurement)
with the share-based payment exchanged for the goods or services measured at an equal amount.
The Company has determined a fair value for the services received in 2013 of GBP6.43 million. This is also the value of
the share based payment recognised in equity at 31 August 2013.
42. CONTINGENCIES, GUARANTEES AND CAPITAL COMMITMENTS
The Group has capital commitments of GBP1.3 million (2012: GBP2.6 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 GBP0.3 million.
External loan facilities to the jointly controlled entities (Redefine Wigan Limited and Ciref Coventry Limited) with a
nominal value of GBP199.88 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
GBP12.1 million is held based on the estimated potential future cash outflows for the Group related to this cross
collateralisation.
43. SUBSEQUENT EVENTS
On 28 October 2013, the Board resolved to declare a second interim dividend of 1.635 pence per share. Taken
together with the first interim dividend of 1.475 pence per share, the total dividend for the financial year ended 31
August 2013 was 3.11 pence per share.
Completion of German Shopping Centre Acquisitions
On 30 August 2013, the Company completed the acquisition of the entities owning three shopping centres in Germany
from various funds managed by CMC Capital Limited valued at EUR187.7 million and reflecting a blended net initial
yield of 5.5%. The properties being Schloss-Strassen Shopping Centre in Berlin, Bahnhof Altona Shopping Centre in
Hamburg and City Arkaden Shopping Mall in Ingolstadt.
The consideration in respect of the Hamburg and Ingolstadt assets was EUR19.3 million in cash and 12,606,061 new
ordinary shares of 8 pence each in Redefine International (the "Hamburg and Ingolstadt Consideration Shares"). The
Hamburg and Ingolstadt Consideration Shares were issued and admitted to trading on 3 September 2013.
It was confirmed that the consideration for the Berlin asset to be settled on 6 December 2013 will be made up by way of
an issue of approximately 19,635,340 new ordinary shares of 8 pence each in Redefine International (the precise
number being determined pursuant to the Sterling: Euro exchange rate on 29 November 2013) (the "Berlin
Consideration Shares") at an effective issue price of 40.0 pence per share and EUR12.1 million in cash. The Berlin
Consideration Shares are expected to be issued and admitted to trading after the final dividend for the year ended 31
August 2013 has been declared and paid, and as such will not rank for such dividend.
The total consideration payable in respect of the transaction will therefore comprise approximately 32,241,401 new
ordinary shares of 8 pence each in Redefine International ("Ordinary Shares") at an effective issue price of 40.0 pence
per share and EUR31.4 million in cash, with the consideration for the Berlin asset being deferred to 6 December 2013
as described above. The final number of Berlin Consideration Shares will be determined on 29 November 2013.
Repayment of Capital Instrument
On 13 September 2013 the Company repaid its GBP13 million 6% convertible loan instrument issued to Aviva in
September 2010 (the "Capital Instrument"). This repayment was financed by the issue of 36,587,873 new ordinary
shares of 8 pence each in the Company to Redefine Properties Limited at an issue price of 41.925 pence per share.
These shares were issued and admitted to trading on 18 September 2013.
Aviva restructuring
On 17 October 2013 the Company announced that it had agreed a debt restructuring with Aviva with respect to the
Company’s UK shopping centre portfolio. As part of the restructuring the Company exchanged contracts to purchase
the Weston Favell Shopping Centre, Northampton for GBP84 million. Aviva will provide Redefine International with a
finance facility of GBP50 million, with the balance of the purchase consideration being funded by internal cash
resources. The interest rate on this Aviva facility will be fixed at circa 5.7% fixed per annum and the loan will be
repayable in November 2038. Completion of the Transaction is subject to certain conditions, which the Company
expects to be fulfilled by 6 December 2013.
The transaction, once completed, will result in a restructuring of the Aviva debt secured against Grand Arcade
Shopping Centre in Wigan (“Grand Arcade”) and West Orchards Shopping Centre in Coventry (“West Orchards”). The
debt against the West Orchards property will be repaid in cash at the current market value of the property (GBP37
million) and will result in the property becoming unencumbered. The debt against the Grand Arcade property will be
reduced by approximately 50% to GBP73 million in consideration for a cash payment of GBP7 million. The Company
will assume 100% ownership however Aviva will retain the right to participate in 50% of the income and capital growth
generated by Grand Arcade (after all costs, expenses and interest) going forward. The Company will have the right to
“buy-back” the profit share for a maximum cash payment of GBP18.5 million in five instalments upon the valuation of
Grand Arcade increasing by certain agreed benchmarks.
Following completion of the transaction, the facilities currently provided by Aviva with respect to two of the Company’s
other shopping centres, at Birchwood (Warrington) and Byron Place (Seaham) as well as Grand Arcade, will be cross
collateralised with the facility to be provided for Weston Favell.
Listing on the JSE
On 19 September 2013, following receipt of approval from the South African Reserve Bank, the Company announced
its intention to inwardly list on the JSE.
The listing on the JSE was confirmed on 28 October 2013. The Company therefore, currently holds a primary listing on
the Main Market of the London Stock Exchange and a secondary listing on the “Real Estate – Real Estate Holding and
Development” sector of the Main Board of the JSE.
44. APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved by the board on 28 October 2013.
45. GLOSSARY
Aviva Aviva Commercial Finance Limited
Board The board of directors of Redefine International
AUD Australian Dollar made up of 100 cents.
Cromwell Cromwell Property Group is an Australian Securities Exchange listed stapled
security (ASX:CMW) comprising the Cromwell Corporation Limited and Cromwell
Property Securities Limited, which acts as the responsible entity of the Cromwell
Diversified Property Trust. www.cromwell.com.au.
EPRA European Public Real Estate Association.
ERV The estimated market rental value of lettable space which could reasonably be
expected to be obtained on a new letting or rent review.
Euro or EUR 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.
GBP or GBP Great British Pound, the legal currency of the UK.
GDP Gross domestic product
GVA GVA Grimley Limited
IFRS International Financial Reporting Standards.
Interest rate swap A financial instrument where two parties agree to exchange an interest rate
obligation for a predetermined amount of time. These are used by the Group to
convert floating-rate debt or investments to fixed rates.
JSE JSE Limited, licensed as an exchange and a public company incorporated in terms
of the laws of South Africa and the operator of the Johannesburg Stock Exchange.
LIBOR The London Interbank Offered Rate, the interest rate charged by one bank to
another for lending money.
LTV Loan to value. A ratio of debt divided by the market value of investment property.
LSE The London Stock Exchange plc.
NAV Net Asset Value.
Redefine International P.L.C. The enlarged company following the reverse acquisition between Wichford and
(Redefine International, the Redefine International plc.
Company or the Group)
RBDL Redefine BDL Hotel 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 holding 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.
29 October 2013
JSE Sponsor
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