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Interim consolidated unaudited financial statements for the ten months ended 31 December 2013
MAS Real Estate Inc.
(Formerly MAS plc)
Registered in British Virgin Islands
Registration number 1750199
Registered as an external company in the Republic of South Africa
Registration number 2010/000338/10
SEDOL (XLUX): B96VLJ5
SEDOL (ALTX): B96TSD2
JSE share code: MSP
ISIN: VGG5884M1041
("MAS" or "the company")
Interim consolidated unaudited financial statements for the ten months ended
31 December 2013
HIGHLIGHTS
- Net asset value increase of 6% to 102,8 euro cents per share
- Shareholder equity surpasses Euro 100 million
- Completed acquisition of Karoo fund
- Disposal of Aldi Tuttlingen at healthy profit
- Financial year-end changed to 30 June 2014 to align with that of major
shareholder Attacq Limited
- Main board listing targeted after capital raise
MAS is a real estate investment company with a portfolio of commercial
properties in Western Europe. The Company aims to provide investors with an
attractive, sustainable euro-based dividend and strong growth in value over
time through its acquisition and asset management strategy. Its current
investment focus is on Germany, Switzerland and the United Kingdom. MAS has
a primary listing on the Euro MTF market of the Luxembourg Stock Exchange
and a secondary listing on the Alternative Exchange of the LSE.
REPORTING CURRENCY
The company's results are reported in euro.
MARKET OVERVIEW
There is good reason to be optimistic about the global real estate market at
the end of 2013, as the world economy regains some vigour, business
confidence improves and strong corporate balance sheets encourage increasing
capital expenditure. Most major markets are recording sales volume growth -
Europe had a 3% higher investment volume compared to 2012, while the
peripheral markets achieved a strong 19% year on year growth. The top three
European markets, being the UK, Germany and France, continued to dominate,
accounting for some three-quarters of the total investment volume.
Most real estate investors are still chasing prime opportunities across all
market segments. In the UK, there has been continued strong investment into
London, especially by overseas investors. However, 2013 has also seen
increased levels of activity in other areas of the country. The combination
of a widening yield gap between London and the regions (as well as between
prime and secondary assets) has led to a rise in investor interest in assets
outside London, which in turn is leading to a re-pricing of some regional
assets, with prime provincial office, retail and industrial yields all
expected to trend downwards over the next period of time.
Germany's strong economic and property fundamentals remain. There is thus a
strong demand from both domestic and international investors for German
real estate, although it is still dominated by domestic buyers, who account
for about two thirds of the total transaction volume. Prime yields across
all the main sectors remained stable during 2013, which encouraged banks and
private equity funds to sell off historically distressed assets into a
strong market.
In Switzerland, direct real estate investments remain in demand with the
annual growth rate for prices of investment properties still well in
positive territory, even though momentum has ebbed from that seen in 2012.
With long-term interest rates expected to continue rising in the medium
term, and initial yields still decreasing, the flow of new money coming into
the market has started to slow as some investors perceive the market to be
close to its peak.
PORTFOLIO OVERVIEW (Euros)
Property portfolio
Gross Net rentals
property Property Gross (after
by value equity (1) rentals interest)
(per cent) (per cent) (per cent) (per cent)
Switzerland 26 18 26 22
Germany 14 6 18 11
United Kingdom 60 76 56 67
1 Property equity is the property value less the amount of bank debt
borrowed against the property
PORTFOLIO VALUE
31 December 2013 28 February 2013
Less than Euro 5 000 000 - 3 488 444
Euro 5 000 001 - Euro 10 000 000 40 526 215 38 386 359
Greater than Euro 10 000 000 30 032 690 18 626 334
Total 70 558 905 60 501 137
Investment portfolio
INVESTMENT
31 December 2013 28 February 2013
Karoo Fund 34 650 536 -
The portfolio remains in a build-up phase. As a result of the purchase of
the remaining shares in Artisan Investment Projects 10 Limited ("Artisan
IP10") and the continued development of both this asset and the Santon North
Street property in Lewes, the weighting of the portfolio has shifted towards
the United Kingdom. A rebalance towards Germany and Switzerland in the
coming year is likely with a number of prospective investment acquisitions
on continental Europe in the pipeline.
Artisan IP10, the owner of the former Caltongate site in Edinburgh is
performing particularly well. December saw the conclusion of an Agreement
for Lease with the UK's largest hospitality company, Whitbread Group plc. It
involves the development of two new hotels - a 127-room Premier Inn, and a
130-room Hub by Premier Inn. Both hotel leases are on 20-year, fully
repairing and insuring terms and are guaranteed by Whitbread Group plc. Such
a development will give the Company solid exposure to the robust hospitality
industry in Scotland's capital.
Towards the end of the period MAS completed the acquisition of 41% of the
Karoo Investment Fund S.C.A SICAV-SIF ("Karoo Fund") for Euro 34.2 million.
The Karoo Fund owns a high-quality portfolio of both listed and unlisted
property assets in Germany and the UK. The deal appealed to the Company as
the shares were purchased at a discount to its NAV. It will provide MAS with
both an attractive income over the next three years and a potential gain in
the Karoo Fund when it ultimately redeems.
MAS has also exchanged contracts for the sale of one of its six Aldi stores
in the German state of Baden-Wurttemberg, located in the town of
Tuttlingen, for a disposal price of just over Euro 3 million. This
transaction will result in the company booking a healthy profit with the
property currently carried at a book value of Euro 2.16 million. This
confirms the latent value in the high-quality sites that were selected in
the original sale-and-leaseback transaction with Aldi. The Company expects
the Tuttlingen sale to be completed by the end of January 2014 and the
financial effects of the transaction are accordingly not included in the
results in the period under review.
Metchley Hall, the student residential development in Birmingham, saw
excellent occupancy levels in the new university year. This continues a
trend seen in previous years where high-quality student accommodation
continues to perform well despite the increased tuition fees that hurt the
broader market.
The balance of the portfolio continues to perform broadly in line with both
previous years and budget expectations. Rental escalations built into a
number of the existing lease contracts will help produce inflation-protected
returns on relatively low-risk tenant exposures.
INTEREST RATE HEDGES
The commercial benefit of the existing interest rate hedges on the
portfolio's conservative gearing is considerable, as highly visible positive
yield spreads are locked in over the life of the investments between rising
rents and fixed or capped interest rates on borrowings. However, extremely
long leases, long-term borrowings and hence long interest rate hedges,
result in substantial fluctuations in non-cash mark-to-market valuations for
the hedging instruments causing some non-cash income statement volatility.
However, the directors remain focused on cash generation within the
business, and not the volatility arising from the revaluation of long-term
financial hedging instruments.
PROSPECTS
The Company intends raising capital in February 2014, and intends following
this by migrating its listing to the JSE's Main Board, subject to the
necessary approvals. The purposes of the proposed capital raising are to
fund the acquisition of a strong pipeline, and the construction of phase one
of the Caltongate development. The increasing scale and profile of the
Company alongside a portfolio that reflects the capability of management to
deliver on investment objectives, is beginning to reflect in an increased
demand for MAS shares, as well as in a slowly improving liquidity in its
trade.
BASIS OF PREPARATION AND ACCOUNTING POLICIES
These interim consolidated unaudited financial statements have been prepared
in accordance with the measurement and recognition requirements of
International Financial Reporting Standards (IFRS), the principles of IAS
34: Interim Financial Reporting, and the Listings Requirements of the JSE
Limited, except to the extent that interim comparative information has not
been presented as indicated below. This is a departure from the requirements
of IAS 34: Interim Financial Reporting. The accounting policies adopted in
the preparation of the interim consolidated unaudited financial statements
are consistent with those applied in the financial statements for the year
ended 28 February 2013. The interim consolidated unaudited financial
statements have not been reviewed or reported on by the Company's external
auditors
CHANGE IN YEAR-END AND COMPARATIVES
In order to align the year-end of the Company with that of its major
shareholder, Attacq Limited, the Company has changed its year-end from 28
February to 30 June. Accordingly, the next year-end of the Company will be
30 June 2014. The ten months under review constitute an interim period and
these accounts have been prepared in order to transition to the 30 June 2014
year-end. As a result of the change, no comparative figures for the same
period in the previous year are readily available and have therefore not
been presented.
VALUATION OF INVESTMENT PROPERTIES
Investment properties are valued annually, at financial year-ends, by
approved independent third-party valuers. In the interim accounts, the
directors remain comfortable with the valuations of the properties for the
year ended 28 February 2013. Considerable judgement is required in
interpreting market data to determine the estimates of value and;
accordingly the estimates of value presented in the financial statement are
not necessarily indicative of the amounts that the Company could realise in
a market exchange. The use of different market assumptions and / or
estimation methodologies may have a material effect on the estimated fair
values.
EVENTS AFTER THE REPORTING DATE
The directors are not aware of any matters or circumstances arising
subsequent to the interim period that require any additional disclosure or
adjustment to the interim consolidated unaudited financial statements.
DIVIDEND
A dividend of Euro 1 680 229 has been proposed. Further information in this
regard will be published in due course.
By order of the board
Ron Spencer Lukas Nakos
Chairman Chief executive officer
Douglas, Isle of Man
27 January 2014
Registered office
In the British Virgin Islands:
Midocean Chambers
Road Town
Tortola
British Virgin Islands
Directors
Jaco Jansen (non-executive)
Malcolm Levy (chief financial officer)
Lukas Nakos (chief executive officer)
Gideon Oosthuizen (non-executive)
Ron Spencer (non-executive chairman)
Company secretary
Helen Cullen
JSE sponsor
Java Capital
For correspondence
25 Athol Street
Douglas
Isle of Man
IM1 1LB
ABRIDGED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Audited
Ten months Year
ended ended
31 December 28 February
2013 2013
Euro Euro
Revenue
Gross rental income 3 450 408 4 090 484
Expenses
Portfolio related expenses (402 560) (676 254)
Investment adviser fees (831 786) (618 836)
Administration expenses (535 581) (685 462)
Net operating income 1 680 481 2 109 931
Net fair value adjustments on investment property - (1 170 695)
Gain/(loss) from financial instruments 726 899 (60 616)
Equity accounted earnings 1 479 20 128
Exchange differences 1 341 039 (848 219)
Profit before net financing expenses 3 749 898 50 530
Finance income 186 220 11 614
Finance expense (556 241) (755 724)
Profit/(loss) before taxation 3 379 877 (693 581)
Taxation (127 842) (193 313)
Profit/(loss) for the period 3 252 035 (886 893)
Other comprehensive income
Foreign currency translation differences 46 707 (217 330)
Total comprehensive income/(loss)
for the period 3 298 742 (1 104 223)
Earnings/(loss) per share (euro cents)* 4.40 (2.06)
Headline earnings per share (euro 4.40 0.66
Adjusted core income per share (euro cents)* 2.27 4.21
Weighted average number of ordinary
shares in issue 73 936 931 43 055 472
Adjusted core income 1 680 229 1 811 492
*The Company has no dilutionary instruments in issue
ABRIDGED INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Audited
Ten months Year
ended ended
31 December 28 February
2013 2013
Euro Euro
Non-current assets
Goodwill 1 371 537 -
Investment property 70 640 221 57 012 693
Investments 34 650 536 -
Investment in associate - 1 055 174
Loan to associate - 2 433 270
Plant and equipment 55 512 47 577
Total non-current assets 106 717 806 60 548 715
Current assets
Short term loans receivable 262 341 256 885
Trade and other receivables 1 243 925 753 610
Cash and cash equivalents 18 385 502 24 708 091
Total current assets 19 891 768 25 718 585
Total assets 126 609 574 86 267 300
Equity
Share capital 107 980 979 67 423 236
Retained (losses) (1 415 864) (3 674 324)
Foreign currency translation reserve 513 312 466 605
Shareholder equity 107 078 427 64 215 517
Non-current liabilities
Long term loans payable 15 671 626 17 465 162
Financial instruments 1 513 121 2 522 790
Total non-current liabilities 17 184 747 19 987 952
Current liabilities
Short term loans payable 638 086 491 460
Trade and other payables 1 708 314 1 572 371
Total current liabilities 2 346 400 2 063 831
Total liabilities 19 531 147 22 051 783
Total equity and liabilities 126 609 574 64 215 517
Actual number of ordinary shares in issue 104 158 624 66 238 363
Net asset value per share (euro cents) 102.8 96.9
ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Audited
Ten months Year
ended ended
31 December 28 February
2013 2013
Euro Euro
Cash generated from operating activities 937 693 1 947 319
Cash (used in) investing activities (46 933 089) (5 755 370)
Cash generated from financing activities 39 626 100 22 673 370
Cash and equivalents at the beginning
of the period 24 708 091 5 742 861
Effect of exchange rate fluctuations 46 707 99 911
Cash and cash equivalents at the end
of the period 18 385 502 24 708 091
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Foreign
currency
Share Retained transaction
capital losses reserve Total
Euro Euro Euro Euro
Restated opening
balance at
01 March 2012
(audited) 42 154 015 (1 295 506) 683 935 41 542 444
(Loss) for the period - (886 893) - (886 893)
Other comprehensive (loss) - - (217 330) (217 330)
Total comprehensive income - (886 893) (217 330) (1 104 223)
Issue of shares 25 269 221 - - 25 269 221
Dividends paid - (1 491 925) - (1 491 925)
Closing balance at
28 February 2013
(audited) 67 423 236 (3 674 324) 466 605 64 215 517
Profit for the period - 3 252 035 - 3 252 035
Other comprehensive income - - 46 707 46 707
Total comprehensive (loss) - 3 252 035 46 707 3 298 742
Issue of shares 39 668 696 - - 39 668 696
Dividends paid 889 047 (993 575) - (104 528)
Closing balance at
31 December 2013
(unaudited) 107 980 979 (1 415 864) 513 312 107 078 427
SEGMENT REPORT - 31 December 2013
United
Switzerland Germany Kingdom
Euro Euro Euro
Statement of comprehensive income
Revenue 621 682 889 396 1 939 330
Net profit/(loss) for the period 947 807 638 988 1 774 715
Statement of financial position
Total assets 19 010 166 10 031 720 41 356 947
SEGMENT REPORT - 31 December 2013
Investments Corporate Total
Euro Euro Euro
Statement of comprehensive income
Revenue - - 3 450 408
Net profit/(loss) for the period 180 033 (289 508) 3 252 035
Statement of financial position
Total assets 34 650 536 21 558 625 126 607 994
SEGMENT REPORT - 28 February 2013
United
Switzerland Germany Kingdom
Euro Euro Euro
Statement of comprehensive income
Revenue 1 079 540 732 108 2 278 836
Net profit/(loss) for the period 811 821 (117 805) 598 218
Statement of financial position
Total assets 18 881 246 9 959 003 33 231 251
SEGMENT REPORT - 28 February 2013
Investments Corporate Total
Euro Euro Euro
Statement of comprehensive income
Revenue - - 4 090 484
Net profit/(loss) for the period - (2 179 127) (886 893)
Statement of financial position
Total assets - 24 195 800 86 267 300
RECONCILIATION OF PROFIT/(LOSS) FOR THE PERIOD TO HEADLINE EARNINGS
Unaudited Audited
Ten months Year
ended ended
31 December 28 February
2013 2013
Euro Euro
Profit/(loss) for the period 3 252 035 (886 893)
Adjusted for:
Revaluation of investment property - 1 170 695
Headline earnings 3 252 035 283 802
Weighted average number of ordinary
shares in issue 73 936 931 42 989 676
Headline earnings per share (cents) 4.40 0.66
RECONCILIATION OF PROFIT/(LOSS) FOR THE PERIOD TO CORE INCOME AND ADJUSTED
CORE INCOME ? SUPPLEMENTARY INFORMATION (UNAUDITED)
Ten months Year
ended ended
31 December 28 February
2013 2013
Euro Euro
Profit/(loss) for the period 3 252 035 (886 893)
Adjusted for:
Movement in fair value adjustments (726 899) 1 170 695
Fair value adjustments in associate - 60 616
Exchange differences (1 341 039) 848 219
Capital raising fees & structure costs 191 801 359 085
Core income 1 375 898 1 551 721
Income shortfall guarantee 304 330 259 771
Adjusted core income 1 680 229 1 811 492
Date: 27/01/2014 12:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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