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Directors' report and audited consolidated financial statements for the period 26 October 2012 to 31 March 2013
GoGlobal Properties Limited
(Incorporated in Bermuda)
(Registration number 47031)
BSX share code: GGB.BH
JSE share code: GGP ISIN: BMG945551023
(“GoGlobal” or “the Company”)
Directors’ report and audited consolidated financial statements for the period 26 October
2012 to 31 March 2014
GoGlobal Properties Limited
Directors’ report and audited consolidated financial statements
for the period 26 October 2012 to 31 March 2014
Contents Page
Company information 1
Directors’ report 2 - 5
Directors’ responsibilities statements 6
Independent auditor’s report 7
Consolidated statement of comprehensive income 8
Consolidated statement of financial position 9
Consolidated statement of changes in equity 10
Consolidated statement of cash flows 11
Notes to the consolidated financial statements 12 - 36
Company information
Company registration No. 47031
Date of incorporation 26 October 2012
Directors Gerald Leissner (Chief Executive Officer)
Hennie Esterhuizen
David Smith
Cobus Josling
James Keyes
Sean Melnick
David Brown
Registered office 20 Reid Street
Williams House
Hamilton, HM11
Bermuda
Principal bankers Barclays Private Clients International
Limited, Guernsey
National Westminster Bank PLC, United
Kingdom
Santander UK PLC, United Kingdom
Auditor Deloitte LLP
Regency Court
Glategny Esplanade
St Peter Port, Guernsey
GY1 3HW
Company Secretary Apex Fund Services Limited, Bermuda
Legal advisors Berwin Leighton Paisner LLP, United
Kingdom
Lawrence Graham LLP, United Kingdom
Mourant Ozannes, Guernsey
Administrator Praxis Fund Services Limited, Guernsey
Property manager McCafferty Asset Management Ltd, United
Kingdom
Investment advisor ApexHi UK Limited, United Kingdom
Independent property
Valuer Jones Lang LaSalle, United Kingdom
Directors’ report
The directors present their report together with the audited consolidated non-statutory
financial statements (“the financial statements”) for GoGlobal Properties Limited (“the
Company” or “GoGlobal”) and its wholly owned subsidiaries APF1 Limited (“APF1”) and GGP1
Limited (“GGP1”), together referred to as the Group, for the period from 26 October 2012
to 31 March 2014.
INCORPORATION AND LISTING
The Company was incorporated in Bermuda on 26 October 2012 in accordance with section 14
of the Companies Act 1981 as a Bermudan exempted company.
On 15 March 2013, the company was listed on the Bermuda Stock Exchange, (“BSX”) with
250,000 shares by way of introduction. The BSX listing constitutes the Company’s primary
listing.
During April 2013, the company made an offer to invited investors to subscribe for a
further 250,000 shares (“the private placement”) and applied for a secondary listing of
the Company’s issued share capital on the Alternative Exchange of the JSE Limited
(“AltX”)
in South Africa. The private placement was fully subscribed and the Company listed on the
AltX on 29 April 2013.
On 25 March 2014 the Company acquired the entire issued share capital of APF1 Limited
(“APF1”), a UK property income fund listed on the Channel Islands Securities Exchange
(“CISE”). The consideration of GBP17,034,603 was satisfied by the issue of 15,486,003
consideration shares at an issue price of GBP1.10 per share. The consideration shares
were
listed simultaneously on BSX and on AltX.
SHARE CAPITAL
The Company was incorporated with an issued share capital of 1,000 shares. A further
249,000 shares were issued on 21 February 2013, prior to the primary listing on BSX. On
29 April 2013, a further 250,00 shares were issued, prior to its secondary listing on
AltX. On 25 March 2014, a further 15,486,003 shares were issued as consideration shares
for the acquisition of APF1.
PRINCIPAL ACTIVITY
GoGlobal was established with the intention of investing in high-yielding real estate
companies and assets with the prospect of an income return to shareholders coupled with
that of capital appreciation.
The Group invests in all classes of commercial property in Europe, being office, retail
and industrial. Acquisitions are focused in the secondary markets. Investment
opportunities are evaluated on the basis of:
- initial yield;
- strength of tenant covenant;
- lease terms in excess of 5 years;
- location of the asset within regional areas / showing good or improving fundamentals;
- rental level; and
- sustainability of future income flows taking account of the ability to renew the
lease as well the durability of the asset as regards age, location, use and tenant
requirements.
Investors will receive a cash return through the payment of dividends, on a quarterly
basis.
BUSINESS REVIEW
During February 2013, the Company invested GBP208,759 in four listed Real Estate
Investment
Trusts as a basis to commence activity with real estate in the European market and for
liquidity management purposes.
On 25 March 2014, the Company acquired 100 per cent of the issued share capital of APF1
Limited. APF1 is an investment property company owning UK commercial Real Estate. APF1
Limited was acquired as a basis for the Group to commence investment in real estate in
the European market (see note 21).
Following the acquisition of APF1 Limited, the Group owns eight investment properties
with a current valuation of GBP27.5million as at the reporting date.
Salient details of the portfolio as at the reporting date are set out below:
March 2014
Net initial yield 8.65%
Value in London and the South East 44%
Rentals in London and the South East 48%
Weighted average unexpired lease term 6.27
Rentals expiring in greater than 8 years 36%
Rentals expiring in greater than 6 years 100%
Office space (based on rent) 48%
Warehousing space (based on rent) 35%
Industrial space (based on rent) 17%
Number of tenancies 8
Valuation at the period-end GBP27.5m
Capital outstanding on the APF1 Santander Bank plc facility agreement is
GBP10.4million.This represents a 37.8% loan to value (“LTV”) ratio against the value of
the
property portfolio secured. No further drawdowns took place during the reporting period.
The facility terms are set out in note 20 to the financial statements.
In accordance with the terms of the facility agreement, interest on 60% of the principle
outstanding is hedged via interest rate swaps. Whilst the hedge provides cash flow
certainty it exposes the Group to fair value movements arising from the swap valuations.
As at 31 March 2014, on the basis of 3 month LIBOR, the fixed rate on the interest rate
swaps entered into (see note 20 to the financial statements) and the marginal rate, the
blended cost of gearing to the Group is 3.73%.
On 2 April 2014, as part of an internal group restructure the property assets and
property rental business of APF1 Limited were disposed of to a fellow subsidiary GGP1
Limited (“GGP1”). The APF1 bank facility was repaid with funding from a corresponding
GGP1 Santander Bank plc facility. Further the APF1 interest rate swaps were novated to
GGP1.
RESULTS
The financial results are set out in the financial statements on pages 8 to 36.
The financial statements are prepared in accordance with International Financial
Reporting Standards ("IFRS") and reflect a loss of GBP30,924 for the period.
The Group has net assets of GBP17,433,541 attributable to ordinary shareholders
OUTLOOK
The successful acquisition of APF1 Limited has provided shareholders with an initial UK
based property portfolio which has a proven resilient income stream. The Group remains
committed to growing the size of the portfolio to a level which would make a JSE main
board listing of the shares in the company viable and which would provide shareholders
with a more liquid investment.
The focus of the investment advisor is to explore opportunities for growth by way of
acquiring a large portfolio rather than a number of smaller, time and cost consuming
acquisitions. The focus of such capital raising efforts takes longer to realise.
An improving macro outlook, good relative value in real estate and ongoing normalisation
in the lending markets have contributed to positive momentum in the number of investment
opportunities, particularly in non-core and non-prime sectors.
As such, there is a realistic opportunity for buyers, purchasing at reasonable debt
levels, to build a large diversified high yielding portfolio with a resilient income
stream.
DIVIDENDS
The directors do not recommend a dividend for the period.
CHARITABLE AND POLITICAL DONATIONS
There were no charitable donations or political contributions in the period.
DIRECTORS
The following directors have held office during the period and since the
reporting date:
- J Keyes (appointed 26 October 2012)
- G Leissner (appointed 3 December 2012)
- H Esterhuizen (appointed 3 December 2012)
- C Josling (appointed 3 December 2012)
- S Melnick (appointed 3 December 2012)
- S Ward (appointed 3 December 2012 and resigned 25 September 2013)
- P Goetsch (appointed 3 December 2012 and resigned 30 April 2014)
- D Brown (appointed 25 September 2013)
- D Smith (appointed 1 May 2014)
The directors do not have any direct interest in the shares of the Company.
Sean Melnick is the deputy chairman of and has a beneficial interest of 16.7% in the
issued share capital of Peregrine Holdings Limited (“Peregrine”) as at 31 March 2014.
Peregrine has an indirect interest of 29.4% in the issued share capital of GoGlobal.
GOING CONCERN
The Group’s business activities are set out above. As at the reporting date, the Group
has cash resources of GBP1.4million and an investments in listed and liquid Real Estate
Investment Trusts (“REITs”) in the amount of GBP236,766. The Directors have reviewed the
Group’s activities and, having regard to the level of liquid resources in relation to the
Company’s operating expense base, have a reasonable expectation that the Group has
adequate resources to continue in existence for the foreseeable future. The financial
statements have thus been prepared on a going concern basis.
As detailed in note 24, certain expenses of the Group have been borne by related parties.
SUBSEQUENT EVENTS
On 2 April 2014, the UK investment properties held by APF1 Limited (“APF1”) were
transferred to a fellow wholly owned subsidiary GGP1 Limited (“GGP1”). The APF1 bank
facility of GBP10.4million was repaid (as detailed in note 20) and replaced by a new GGP1
bank facility also with Santander UK plc for GBP10.4million. The SWAP contracts were
novated from APF1 to GGP1.
At the end of April 2014, the Investment Committee decided against proceeding with the
acquisition of the portfolio of German properties (as detailed in note 24 and note 26).
AUDITOR
Deloitte LLP was appointed as auditor in the period and are willing to be reappointed as
auditor to the Group. A resolution to reappoint Deloitte LLP will be proposed at the next
Annual General Meeting.
DISCLOSURE OF INFORMATION TO THE AUDITOR
Each director at the date of approval of this report has confirmed that:
- so far as each director is aware, there is no relevant audit information of which the
Group's auditor is unaware, and
- each director has taken all the steps he ought to have taken as a director in order
to make himself aware of any relevant audit information and to establish that the
Group's auditor is aware of that information.
Approved by the board of directors and signed on their behalf.
C Josling D Smith
Director Director
Date: 11 June 2014 Date: 11 June 2014
Directors’ responsibilities statement
The directors are responsible for preparing accounts for each financial period which give
a true and fair view of the state of affairs of the Group as at the end of the financial
period and of the profit or loss of the Group for that period. The directors have elected
to prepare financial statements for the Group in accordance with International Financial
Reporting Standards (“IFRSs”). International Accounting Standard 1 requires that
financial statements present fairly for each financial period the Group’s financial
position, financial performance and cash flows. This requires the faithful representation
of the effects of transactions, other events and conditions in accordance with the
definitions and recognition criteria for assets, liabilities, income and expenses set out
in the International Accounting Standards Board’s ‘Framework for the Preparation and
Presentation of Financial Statements’. In virtually all circumstances, a fair
presentation will be achieved by compliance with all applicable IFRSs.
In preparing the accounts, the directors are required to:
- select suitable accounting policies and then apply them consistently;
- state whether applicable accounting standards have been followed;
- make judgements and estimates that are reasonable and prudent; and
- prepare the accounts on the going concern basis unless it is inappropriate to presume
that the company will continue in business.
The directors are responsible for keeping proper accounting records, which disclose with
reasonable accuracy at any time the financial position of the Group. They are also
responsible for the system of internal control, for safeguarding the assets of the Group
and hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
The directors are responsible for the maintenance and integrity of the corporate and
financial information included on the company’s website. Legislation in Guernsey and the
United Kingdom governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Independent Auditor’s report to the members of GoGlobal Properties Limited
We have audited the non-statutory consolidated financial statements of GoGlobal
Properties Ltd (“the Company”) and its subsidiary companies APF1 Limited and GGP1 Limited
(together "the Group") for the period from 26 October 2012 to 31 March 2014 which
comprise the consolidated statement of comprehensive income, the consolidated statement
of financial position, the consolidated statement of changes in equity, the consolidated
statement of cash flows and the related notes 1 to 27. The financial reporting framework
that has been applied in their preparation is applicable law and International Financial
Reporting Standards ("IFRS") as issued by the International Accounting Standards Board
("IASB").
This report is made solely to the Company’s members, in accordance with our engagement
letter dated 21 May 2014. Our audit work has been undertaken so that we might state to
the Company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law we do not accept
or assume responsibility to anyone other than the Company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ responsibilities statement, the directors are
responsible for the preparation of the consolidated financial statements and for being
satisfied that they give a true and fair view. Our responsibility is to audit and express
an opinion on the non-statutory consolidated financial statements in accordance with
applicable law and International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the non-statutory consolidated financial statements
An audit involves obtaining evidence about the amounts and disclosures in the
consolidated financial statements sufficient to give reasonable assurance that the
consolidated financial statements are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether the accounting policies are
appropriate to the Group's circumstances and have been consistently applied and
adequately disclosed; the reasonableness of significant accounting estimates made by the
directors; and the overall presentation of the consolidated financial statements.
In addition, we read all the financial and non-financial information in the annual report
to identify material inconsistencies with the audited non-statutory consolidated
financial statements and to identify any information that is apparently materially
incorrect based on, or materially inconsistent with, the knowledge acquired by us in the
course of performing the audit. If we become aware of any apparent material misstatements
or inconsistencies we consider the implications for our report.
Opinion
In our opinion the non-statutory consolidated financial statements:
- give a true and fair view of the state of the Group's affairs as at 31 March 2014 and
of its loss for the period from 26 October 2012 to 31 March 2014; and
- have been properly prepared in accordance with IFRS as issued by the IASB.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where we are required to
report to you if, in our opinion:
- proper accounting records have not been kept; or
- the financial statements are not in agreement with the accounting records; or
- we have not received all the information and explanations we require for our audit.
Deloitte LLP
Chartered Accountants
St Peter Port, Guernsey
Consolidated statement of comprehensive income
for the period 26 October 2012 to 31 March 2014
26 October
2012 to
31 March 2014
Note GBP
Net rental income 5 45,052
Operating costs 6 (91,168)
(46,116)
Impairment of goodwill 21 (8,038)
Operating loss (54,154)
Investment revenues 8 11,930
Other gains and losses 9 28,007
Net finance costs 10 (10,164)
Loss for the period before taxation (24,381)
Taxation 11 (6,543)
Loss for the period after taxation (30,924)
Other comprehensive income
Fair value movement on interest rate swaps 3,719
Total comprehensive loss for the period (27,205)
Attributable to the owners of the company (27,205)
Loss per share
- EPS Basic (pence) 13 (5.80)
- EPRA EPS Basic (pence) 13 (5.80)
- Diluted EPS (pence) 13 (5.80)
- Headline EPS (pence) 13 (4.29)
All items in the above statement are derived from property acquisitions and related
activities in the current period. The accompanying notes on pages 12 to 36 form an
integral part of the consolidated financial statements.
Consolidated statement of financial position
as at 31 March 2014
31 March 2014
Note
Non current assets
Investment properties 15 27,500,000
Investments 16 236,766
Total non-current assets 27,736,766
Current assets
Trade and other receivables 17 212,931
Cash and cash equivalents 18 1,380,526
Total current assets 1,593,457
Total assets 29,330,223
Current liabilities
Trade and other payables 19 1,423,781
Total current liabilities 1,423,781
Non-current liabilities
Borrowings 20 10,400,000
Derivative financial instruments 20 72,901
Total non-current liabilities 10,472,901
Net assets 17,433,541
Equity
Ordinary share capital and share premium 17,460,746
Retained deficit (30,924)
Cash flow hedge reserve 3,719
Total equity 17,433,541
All items in the above statement are derived from property acquisitions and related
activities in the current period. The accompanying notes on pages 12 to 36 form an
integral part of the consolidated financial statements.
The consolidated financial statements were approved by the board of directors on
11 June 2014.
C Josling D Smith
Director Director
Consolidated statement of change in equity
for the period 26 October 2012 to 31 March 2014
Attributable
Cash flow to owners
Share Share hedge Retained of the
Capital premium reserve deficit Company
Note GBP GBP GBP GBP
Balance at 26 - - - - -
October 2012
Proceeds from issue 16 17,534,587 - - 17,534,603
of ordinary shares 12
Share issue and (73,857) - - (73,857)
listing costs 12
Total
comprehensive loss - - 3,719 (30,924) (27,205)
for the period
Balance at 31
March 2014 16 17,460,730 3,719 (30,924) 17,433,541
All items in the above statement are derived from property acquisitions and related
activities in the current period. The accompanying notes on pages 12 to 36 form an
integral part of the consolidated financial statements.
Consolidated statement of cash flows
for the period 26 October 2012 to 31 March 2014
26 October 2012
to 31 March 2014
Note
Operating activities
Operating loss (54,154)
Impairment of goodwill 21 8,038
Increase in trade and other receivables (42,855)
Increase in trade and other payables 166,135
Interest received 191
Net cash from operating activities 77,355
Investing activities
Dividends received from trading activities 8,961
Purchases of trading investments (208,759)
Cash obtained on acquisition of subsidiary 21 1,016,287
Net cash from investing activities 816,489
Financing activities
Proceeds on issue of ordinary shares 12 500,000
Listing costs paid (13,318)
Net cash from financing activities 486,682
Cash and cash equivalents at beginning of the period -
Net increase in cash and cash equivalents 18 1,380,526
Cash and cash equivalents at end of the period 1,380,526
All items in the above statement are derived from property acquisitions and related
activities in the current period. The accompanying notes on pages 12 to 36 form an
integral part of the consolidated financial statements.
Notes to the consolidated financial statements for the period 26 October 2012 to
31 March 2014
1. General information
The primary objective of the Group is investing in high-yielding real estate companies
and assets with the prospect of providing an income return to shareholders coupled with
that of capital appreciation.
GoGlobal Properties Limited (“the Company”) was incorporated in Bermuda on
26 October 2012 in accordance with section 14 of the Companies Act 1981 of Bermuda as a
Bermudan exempted company. The Board of the Company, which meets and conducts its
business from Guernsey, is responsible for the management, control and strategic
decision-making of the Group.
At 31 March 2014, the Company has issued 15,986,003 shares which have a primary listing
on BSX and a secondary listing on AltX.
As the Company was incorporated in the current reporting period, there is no comparative
information.
2. Adoption of new and revised Standards
In the current period, the following new and revised Standards and Interpretations have
been adopted:
- IFRS 10 Consolidated financial statements
- IFRS 11 Joint arrangements
- IFRS 12 Disclosure of interests in other entities
- IFRS 13 Fair value measurement
At the date of authorisation of these financial statements, the following standards and
interpretations which have not been applied to these financial statements, were in issue
but not yet effective. They are effective for periods commencing on or after the
disclosed date:
- IFRS 9 Financial instruments: classification and measurement (no mandatory
effective date)
- IFRS 10 Investment entities: exemption from consolidation requirements
(1 January 2014)
- IAS 32 Offsetting financial assets and financial liabilities (1 January 2014)
- IAS 36 Recoverable amount disclosure for non-financial assets
(1 January 2014)
- IAS 39 Novation of derivatives and continuation of hedge accounting (1 January 2014)
- IFRIC 21 Levies (1 January 2014)
In addition the IASB completed its Annual Improvements 2011-2013 Cycles, which have
amended 2010-2012 and a number of existing standards commencing on or after 1 July 2014.
The directors do not expect that the adoption of the Standards listed above will have a
material impact on the financial statements of the Group in the future period.
3. Significant accounting policies
Basis of accounting
The financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRSs). The financial statements have been prepared on the
historical cost basis, except for the revaluation of certain properties and financial
instruments that are measured at fair values at the end of each reporting period, as
explained in the accounting policies below. Historical cost is generally based on the
fair value of the consideration given in exchange for goods and services. The principal
accounting policies are set out below.
In addition, for financial reporting purposes, fair value measurements are categorised
into Level 1,2 or 3 based on the degree to which the inputs to the fair value
measurements are observable and the significance of the inputs to the fair value
measurement in its entirety, which are described as follows:
Level 1 - Inputs are quoted prices (unadjusted) in active markets for identical
assets or liabilities that the entity can access at the measurement date;
Level 2 - Inputs are inputs, other than quoted prices included within Level 1, that
are observable for the asset or liability, either directly or indirectly;
and
Level 3 - Inputs are unobservable inputs for the asset or liability
The statements are presented in pounds sterling, being the currency of the primary
economic environment in which the Group operates.
Basis of consolidation
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary
and ceases when the Company loses control of the subsidiary. Specifically, the results of
the subsidiaries acquired or disposed of during the period are included in the
consolidated income statement from the date the Company gains control until the date when
the Company ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the
owners of the Company and to the non-controlling interests. Total comprehensive income of
the subsidiaries is attributed to the owners of the Company and to the non-controlling
interests even if this results in the non-controlling interests having a deficit balance.
Where necessary, adjustments are made to the financial statements of subsidiaries to
bring the accounting policies used into line with the Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating
to transactions between the members of the Group are eliminated on consolidation.
When the Group loses control of a subsidiary, the gain or loss on disposal recognised in
profit or loss is calculated as the difference between (i) the aggregate of the fair
value of the consideration received and the fair value of any retained interest and (ii)
the previous carrying amount of the assets (including goodwill), less liabilities of the
subsidiary and any non-controlling interests.
All amounts previously recognised in other comprehensive income in relation to that
subsidiary are accounted for as if the Group had directly disposed of the related assets
or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to
another category of equity as specified/permitted by applicable IFRS). The fair value of
any investment retained in the former subsidiary at the date when control is lost is
regarded as the fair value on initial recognition for subsequent accounting under IAS 39
Financial Instruments: Recognition and Measurement or, when applicable, the costs on
initial recognition of an investment in an associate or jointly controlled entity.
Going concern
The Group is forecasting positive operating cash flows and considers the investment
properties owned, to be occupied by good quality tenants, with a history of no rent
default. The Group debt facility covenants are being complied with.
The directors have, at the time of approving the financial statements, a reasonable
expectation that the Company and the Group have adequate resources to continue in
operational existence for the foreseeable future. Thus they continue to adopt the going
concern basis of accounting in preparing the financial statements.
Business combinations
The Group applies the acquisition method to account for business combinations. The cost
of the acquisition is measured at the aggregate of the fair values, at the date of
completion, of assets given, liabilities incurred or assumed and equity instruments
issued by the Group in exchange for control of the acquired. The acquiree’s identifiable
assets, liabilities and contingent liabilities that meet the conditions for recognition
under IFRS 3 are recognised at their fair value at the acquisition.
Revenue recognition
The Group earns returns from investments in listed property securities and direct
property assets. Revenue is recognised when it is probable that the economic benefits
associated with the transaction will flow to the Group and the amount of revenue can be
measured reliably.
Revenue includes dividends and capital returns from investments in listed REITs as well
as amounts receivable in respect of property rental income and service charges earned in
the normal course of business, net of sales-related taxes.
Rental income from operating leases is recognised in income on straight-line basis over
the lease term. Deferred revenue thus generally represents the proportion of rentals
invoiced in advance as at the reporting date.
Contingent rents, such as turnover rents, rent reviews and indexation, are recorded as
income in the periods in which they are earned.
Dividend income from listed securities is recognised at the date the dividend is
declared. Interest income is recognised in the consolidated statement of comprehensive
income under the effective interest method as it accrues.
Foreign currencies
The Group’s functional and presentation currency is pounds sterling. Transactions in
foreign currencies are translated into the functional currency at the exchange rate
ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated on the
balance sheet date at the closing rate prevailing on this day. Gains or losses resulting
from the settlement of such transactions and from the translation, at year-end exchange
rates, of monetary assets and liabilities denominated in foreign currencies are
recognised in the statement of comprehensive income.
Borrowing costs
Interest costs are recognised in the consolidated statement of comprehensive income using
the effective interest rate method.
Taxation
The tax expense represents the sum of the tax currently payable.
Current tax
Tax currently payable is based on the profit of the UK property rental business. The
Group’s liability for current tax is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the
carrying amounts of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable profit, and is accounted for
using the balance sheet liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are recognised
to the extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from the initial recognition of goodwill or
from the initial recognition (other than in a business combination) of assets and
liabilities in a transaction that affects neither the accounting profit nor the tax
profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on
investments in subsidiaries and associates, and interests in joint ventures, except where
the Group is able to control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and is
reduced to the extent that it is no longer probable that sufficient taxable profits will
be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when
the liability is settled or the asset is realised. Deferred tax is charged or credited in
the income statement, except when it relates to items charged or credited directly to
equity, in which case the deferred tax is also dealt with in other comprehensive income.
Deferred tax assets and liabilities are offset when there is a legally enforceable right
to set off and when they relate to income taxes levied by the same taxation authority and
the Group intends to settle its current tax assets and liabilities on a net basis.
Investment properties
Properties held to earn rentals and for capital appreciation are classified as investment
properties. Investment properties comprise both freehold and leasehold land and
buildings.
Investment properties are recognised as assets when:
- it is probable that the future economic benefits that are associated with the
investment property will flow to the Group;
- there are no material conditions precedent which could prevent completion, and
- the cost of the investment property can be measured reliably.
Investment properties are measured initially at cost, including related transaction
costs. After initial recognition, investment properties are carried at fair value. The
Group has appointed Jones Lang LaSalle as independent property valuers to prepare
valuations on an annual basis. Valuations are undertaken in accordance with the
appropriate sections of the current Practice Statements contained in the Royal
Institution of Chartered Surveyors Standards, 7th Edition.The valuers adopt the
investment approach which applies a capitalisation rate, as a multiplier, against the
current, and, if any, revisionary income streams. The difference between the fair value
of a property at the reporting date and its carrying amount prior to re-measurement is
included in the consolidated statement of comprehensive income as a valuation surplus or
deficit.
Financial instruments
Classification
A financial instrument is a contract that gives rise to a financial asset to one entity
and a financial liability or equity instrument to another. The classification of
financial assets and financial liabilities depends on the nature and purpose of the
instrument and is determined at the time of initial recognition. Debt and equity
instruments are classified as either financial liabilities or as equity in accordance
with the substance of the contractual agreement.
Financial assets
The Group classifies its financial assets as – at fair value through profit and loss and
as loans and receivables.
Financial assets designated at fair value through profit or loss (“FVTPL”)
Financial assets designated at fair value through profit or loss include the Company’s
investment in listed securities.
Financial assets are classified in this category if they are so designated by management
and the asset forms part of a group of financial instruments that is managed, evaluated
and reported to the appropriate level of management using a fair value basis in
accordance with a documented risk management or investment strategy.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They include current assets with
maturities or terms greater than 12 months after the reporting dates which are classified
as non-current assets.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt
instrument and of allocating interest income over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash receipts
(including all fees and points paid or received that from an integral part of the
effective interest rate, transaction costs and other premiums or discounts) through the
expected life of the debt instrument, or, where appropriate, a shorter period, to the net
carrying amount on initial recognition.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at
the end of each reporting period. Financial assets are considered to be impaired when
there is objective evidence that, as a result of one or more events that occurred after
the initial recognition of the financial asset, the estimated future cash flows of the
investments have been affected.
Objective evidence of impairment could include:
- significant financial difficulty of the issuer or counterparty, or
- breach of contract, such as a default or delinquency in interest or principal
payments, or
- it becoming probable that the borrower will enter bankruptcy or financial
reorganisation
For financial assets carried at amortised cost, the amount of the impairment loss is
measured as the difference between the asset’s carrying amount and present value of the
estimated future cash flows, discounted at the financial assets original effective
interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for
all financial assets, with the exception of trade receivables, where the carrying amount
is reduced through the use of a provision account. When a trade receivable is considered
uncollectable, it is written off against the provision account. Changes in the carrying
amount of the provision account are recognised in the statement of comprehensive income
in the period.
For financial assets measured at amortised cost if, in a subsequent period, the amount of
the impairment loss decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised, the previously recognised impairment loss
is reversed through the statement of comprehensive income to the extent that the carrying
amount of the investment at the date the impairment is reversed does not exceed what the
amortised cost would have been hade the impairment not been recognised.
Financial liabilities
The Group’s financial liabilities comprise interest-bearing borrowings, loans and
payables and trade payables.
Recognition and derecognition
Purchases and sales of listed securities are recognised on the trade date which is when
the Company commits to purchase or sell the assets. Other financial assets and
liabilities are recognised when the Company becomes party to the contractual provisions
of the instrument.
The Company derecognises a financial asset when the contractual rights to the cash flows
from the asset have expired or have been transferred and the Company has transferred
substantially all risks and rewards of ownership of the asset to another entity. The
Company derecognises financial liabilities when the company’s obligations are discharged,
cancelled or they expire.
Measurement
Financial assets and financial liabilities are initially measured at fair value.
Transaction costs that are directly attributable to the acquisition or issue of financial
assets and financial liabilities (other than financial assets at FVTPL) are added to or
deducted from the fair value of the financial assets or financial liabilities, as
appropriate, on initial recognition.
Transactions costs directly attributable to the acquisition of financial assets at FVTPL
are recognised immediately in the statement of comprehensive income.
After initial recognition, the Group measures financial assets designated at FVTPL at
fair values without any deduction for transaction costs it may incur on their disposal.
The fair value of quoted financial assets is their bid price at the financial year-end.
If the market for a financial asset is not active, the fair value is estimated using
valuation techniques. These include a review of recent arm’s length transactions,
references to current fair market value of another instrument that is substantially the
same as that being valued and discounted cash flow analysis. Where discounted cash flow
analysis is used, estimated future cash flows are based on management’s estimates and the
discount rate is a market-related rate at the financial year-end for a financial asset
with similar terms and conditions. Where other pricing models are used, inputs are based
on observable market indicators at the financial year-end.
Realised and unrealised gains and losses arising from changes in fair value of financial
assets at FVTPL are included in the statement of comprehensive income in the period in
which they arise.
Loan and receivables are measured at amortised cost using the effective interest method,
less impairment losses which are recognised in the statement of comprehensive income.
Financial liabilities are measured at amortised cost using the effective interest rate
method. In the case of short-term trade receivables and payables, the impact of
discounting is not material and cost approximates amortised cost.
Hedge accounting and derivative financial instruments
The Group uses interest rate swaps to manage its interest rate risk. Under its existing
facility agreement, the Group is required to hedge at least 60% of the nominal value of
its exposure under the agreement. Derivative financial instruments which form part of the
qualifying designated hedging relationships are classified as either cash flow hedges or
fair value hedges depending on the nature of the risk being hedged. At the time a
financial instrument is designated as a hedge, the Group documents the relationship
between the hedging instrument and hedge items, including the risk management objectives
and its strategy in undertaking the hedge transaction.
The Group also documents its assessment, both at hedge inception and on an ongoing basis
of whether the instruments that are used in the hedging transactions are highly effective
in offsetting changes in cash flows or fair values of hedged items.
Hedge accounting is discontinued when the company revokes the hedging relationship, the
hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies
for hedge accounting. Any gain or loss recognised in other comprehensive income at that
time is accumulated in equity and is recognised when the forecast transaction is
ultimately recognised in the statement of comprehensive income. When a forecast
transaction is no longer expected to occur, the gain or loss accumulated in equity is
recognised immediately in the statement of comprehensive income.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of
the Group after deducting all its liabilities. Ordinary shares are classed as equity.
Equity instruments issued by the Group are recorded at the proceeds received, net of
direct issue costs.
Trade and other receivables
These are valued at their normal value (less accumulated impairment losses) as the time
value of money is immaterial for these current assets. Impairment losses are estimated at
the year-end by reviewing amounts outstanding and assessing the likelihood of
recoverability.
Trade and other payables
Trade and other payables are valued at their normal value as the time value of money is
immaterial for these current liabilities.
Provisions
A provision is recognised in the statement of financial position when the Group has a
present legal or constructive obligation as a result of a past event, it is probable that
an outflow of economic benefits will be required to settle the obligation and the
obligation can be reliably measured. If the effect is material, provisions are determined
by discounting the expected future cash flows at a rate that reflects the current market
assessments of the time value of money and where appropriate, the risks specific to the
obligation. The Group did not recognise any provisions at the reporting date.
Dividends
Dividends to the Group’s ordinary shareholders are recognised when they become legally
payable. This is when they are approved by the Board.
Segmental analysis
As at the reporting date, the Group has a single geographical and business segment, being
investment in European investment properties. The directors consider that the investment
in REIT shares was for liquidity management purposes only and formed the basis of
activity with European real estate.
Earnings/(Loss) per share
Earnings per share is calculated on the weighted average number of shares in
issue in respect of the current period and is based on the profit attributable to
the ordinary shareholders.
4 Critical accounting judgements and key sources of estimation uncertainty
The preparation of the financial statements in accordance with IFRS requires the use of
certain critical accounting estimates. It also requires management to exercise judgement
in the process of applying the Group’s accounting policies. Although the estimates are
based on management’s best knowledge of the amount, events or actions, actual results may
ultimately differ from those estimates.
The key assumptions concerning the future, and other key sources of estimation
uncertainty at the end of the reporting year, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next
financial year, are discussed below.
- Investment properties
The preparation of the financial statements requires management to make estimates
affecting the reported amounts of assets and liabilities, of revenues and expenses, and
of gains and losses. As described below, the Group’s investment properties are stated at
estimated fair value, based on an independent external appraisal. The valuation of the
company's property portfolio is inherently subjective due to a number of factors
including the individual nature of the property, its location and the expectation of
future rentals. As a result, the valuations placed on the property portfolio are subject
to a degree of uncertainty and are made on the basis of assumptions that may not prove to
be accurate particularly in years of volatility or low transaction flow in the market.
The estimated market value may differ from the price at which the Group's assets could be
sold at a particular time, since actual selling prices are negotiated between willing
buyers and sellers. As a result, if the assumptions prove to be false, actual results of
operations and realisation of net assets could differ from the estimates set forth in
these financial statements, and the difference could be significant.
5. Revenue 26 October 2012
to 31 March
2014
a) Rental and other income GBP
Rental income 45,053
Other income - tenant recharges 1,072
46,125
b) Direct property costs
Property maintenance 40
Property insurance 1,033
1,073
Net rental income 45,052
6. Operating costs
26 October 2012
to 31 March
2014
Operating costs GBP
Administration fees (including director emoluments) 38,123
Investment advisory fee 5,830
Legal & professional fees 35,669
Audit fee 10,575
Bank charges 971
91,168
7. Employees’ and directors’ emoluments
The Group has no employees and hence incurred no wages or social security charges during
the period. The Group pays fees to directors which amounted to GBP25,754 for the period.
USD GBP
J Keyes 6,833 4,374
S Ward 4,105 2,624
D Brown 2,562 1,642
H Esterhuizen n/a 6,667
C Josling n/a 6,667
S Melnick 2,000 1,260
G Leissner 2,000 1,260
P Goetsch 2,000 1,260
25,754
8. Investment revenues
26 October 2012
to 31 March 2014
Investment revenues GBP
Dividends receivable 11,930
11,930
9. Other gains and losses
26 October 2012
to 31 March 2014
Other gains and losses GBP
On financial assets at fair value
fair value movement through profit & loss 28,007
28,007
10. Finance costs
26 October 2012
to 31 March 2014
a) Interest receivable GBP
Cash and cash equivalents 191
191
b) Finance costs
Bank interest payable 6,376
Unutilised facility fee 756
Amortisation of facility costs 3,223
10,355
Net finance costs 10,164
11. Taxation
26 October 2012
to 31 March 2014
GBP
UK corporation tax at 23% 6,543
6,543
The Group is subject to UK corporation tax on the profits of the UK property rental
business.
12. Share capital
31 March 2014
GBP
Authorised
1,000,000,000 ordinary shares with a par value of GBP0.000001 each 1,000
1,000
Issued
Share capital 16
Share premium 17,534,587
Listing costs (73,857)
17,460,746
Consideration
Issue date Note No of shares per share Cost
GBP GBP
26 October 2012 1,000 1.00 1,000
21 February 2013 249,000 1.00 249,000
29 April 2013 250,000 1.00 250,000
25 March 2014 21 15,486,003 1.10 17,034,603
15,986,003 17,534,603
Transaction costs of GBP73,857, attributable to the issue of shares, have been accounted
for as a deduction from share premium in accordance with IAS 32: Financial Investments.
13. Loss per share
26 October 2012
to 31 March 2014
- EPS basic (pence) (5.80)
- Diluted EPS (pence) (5.80)
- EPRA EPS basic (pence) (5.80)
- Headline EPS (pence) (4.29)
13. Loss per share (continued)
26 October 2012
to 31 March 2014
Earnings GBP
Loss for the period after taxation (30,924)
Adjustments to arrive at EPRA profit:
- Unrealised deficit on revaluation of investment properties -
EPRA loss attributable to ordinary shareholders (30,924)
Further adjustments to arrive at Headline loss:
- Impairment of goodwill 8,038
Headline loss attributable to ordinary shareholders (22,886)
Weighted average number of ordinary shares in issue 533,175
14. Net asset value
The calculation of net asset value per share at the reporting date is set out below:
26 October 2012
to 31 March 2014
GBP
Net asset value
- IFRS NAV per share 1.09
- EPRA NAV per share 1.09
IFRS net asset value 17,433,541
Adjustments to arrive at EPRA net asset value:
- Reversal of revaluation of derivative financial
Instruments ( 72,901)
17,360,640
Number of shares in issue 15,986,003
European Public Real Estate Association (“EPRA”)
The EPRA measure takes into account the fair value of assets and liabilities as at the
reporting date, other than fair value adjustments, deferred tax and goodwill (as a result
of deferred tax). As the Group has adopted fair value accounting for investment property
per IAS40, adjustments to reflect the EPRA NAV include only those relating to the
revaluation of derivative financial instruments.
15. Investment properties
31 March 2014
Cost Note GBP
Acquired with subsidiaries 21 27,500,000
Carrying amount 27,500,000
Fair value 27,500,000
The fair value of the Group’s investment properties at 31 March 2014 has been determined
by Jones Lang LaSalle on the basis of fair value.
It is the Group’s policy to carry investment properties at fair value in accordance with
IAS 40 investment Property. The fair value of the Group’s Investment property at
31 March 2014 has been determined on the basis of fair valuations carried out by Jones
Lang Lasalle who are the external independent valuers to the Group.
The properties are categorised as level 3 in the IFRS 13 fair value hierarchy. There are
no transfers of property between levels 1, 2 and 3.
The Group’s policy is to recognise transfers into and out of a fair value hierarchy
levels as of the event or change in circumstances that caused the transfer.
Valuation process
The Group’s investment properties have been value at fair value on 31 March 2014 by the
directors on the advice from independent valuers, Jones Lang Lasalle, on the basis of
fair valuation in accordance with the current practice statements contained in the Royal
Institution of Chartered Surveyors Valuation-Professional Standards, (“Red Book”).
Estimated Relationship of
Fair Valuation Rental Gross Gross Equivalent unobservable
Value Technique ERV Value Rent Rent Yield inputs to fair
Segment GBPm (GBP000’s) (GBPpsf)(GBP000’s) (GBPpsf) (%) value
Business 12.2 Income 1,022 14.78 1,323 19.14 7.91% The higher the
Capitalisation rental value
Distri- and the lower
bution 10.3 841 4.11 943 4.6 7.67% the yield, the
Indus- higher the
trial 5.0 390 3.5 475 4.27 7.39% fair value
Total 27.5 2,253 2,741
The fair value at 31 March 2014 represents the highest and the best use.
All revenue is derived from the underlying tenancies given on the investment properties.
There are interrelationships between all these unobservable inputs as they are determined
by the market conditions. The existence of an increase in more than one unobservable
input would be to magnify the impact on the valuation. The impact in the valuation will
be mitigated by the interrelationship of two unobservable inputs moving in the opposite
directions e.g. an increase in rent may be offset by an increase in yield, resulting in
no net impact on the valuation. Expected vacancy rates may impact the yield with higher
vacancy rates resulting in higher yield.
16. Financial investments
Trading investments comprise a portfolio of four listed Real Estate Investment Trusts
(“REITS”).
31 March 2014
GBP
Additions – cost 208,759
Fair value movement 28,007
Fair value 236,766
17. Trade and other receivables
31 March 2014
Trade and other receivables GBP
Trade receivables 141,702
Prepayments and accrued income 28,260
Other receivables 42,969
212,931
18. Cash and cash equivalents
31 March 2014
GBP
Cash at bank 1,380,526
All cash held at banks is on demand.
19. Trade and other payables
31 March 2014
GBP
Accruals 434,052
Deferred income 695,116
Other payables 294,613
1,423,781
20. Borrowings - bank loans
31 March 2014
Note GBP
Acquired with subsidiaries 21 10,396,777
Amortisation of transaction fees 3,223
10,400,000
- Maturing between 2 and 3 years 10,400,000
The Group has a GBP15million facility agreement with Santander UK plc. (“the facility
agreement”), which was acquired during the period (see note 21). As at the reporting
date, the Group has drawn-down GBP10.4million against the facility in order to finance
the
acquisition of investment property. The facility is secured by a debenture and by a legal
charge over the property portfolio. Interest is serviced quarterly and the capital
repayable by 22 December 2016. The facility has four covenant ratios: Interest Service
Cover (“ISC”) 200%, Asset Concentration Ratio (“ASR”) 50%, Loan to value (“LTV”) 50%, and
Average Occupational Leases (“AOL”) 3 years. All covenants were complied with during the
period. The facility has a minimum hedging requirement of 60%.
As at 31 March 2014, on the basis of 3 month LIBOR, the fixed rate on the interest rate
swaps entered into and the marginal rate, the blended cost of gearing to the company is
3.73%.
Such contracts enable the Group to mitigate the risk of changing interest rates on the
cash flow exposures arising from the variable rate debt held. The fair value of interest
rate swaps at the reporting date is determined by discounting the future cash flows
arising from the swap agreement using the yield curve at the reporting date, and are
disclosed below.
The following interest rate SWAP contracts are designated as effective cash flow hedges:
Effective Termination SWAP Notional Principal Fair value
Date Date Rate 31 March 2014 31 March 2014
GBP GBP
22-Mar-12 22-Dec-16 1.66% 1,000,000 (10,772)
28-Mar-12 22-Dec-16 1.70% 5,240,000 (62,129)
6,240,000 (72,901)
On 2 April 2014, APF1 Limited was released from all obligations, the new borrower became
GGP1 Limited (“GGP1”) and the interest rate swaps were novated to GGP1.
21. Acquisition of subsidiary
On 25 March 2014, the Group acquired 100 per cent of the issued share capital of APF1
Limited. APF1 Limited is an investment property company owning UK commercial real estate.
It was acquired as a basis for the Group to commence investment in real estate in the
European market.
The amounts recognised in respect of the identifiable assets acquired and liabilities
assumed are as set out in the table below.
Note GBP
Investment properties 27,500,000
Accounts receivable 167,105
Bank Loans (10,396,777)
Financial liabilities (76,620)
Accounts payable (1,183,430)
Net identifiable assets 16,010,278
Goodwill 8,038
Total consideration 16,018,316
Satisfied by:
Consideration shares (15,486,003 x GBP1.10) 12 17,034,603
Less: Cash and cash equivalent balanced acquired (1,016,287)
16,018,316
The directors considered the goodwill to be of no value and accordingly, the Group has
written it off during the period.
22. Operating lease rental income
Future minimum rentals receivable under non-collectable operating leases as at 31 March
2014 are as follows:
31 March 2014
GBP
- Within one year 2,740,723
- In the second year 2,740,723
- In the third to fifth year (inclusive) 8,222,169
- After five years 4,567,204
18,270,819
23. Financial risk management
The Group’s use of financial instruments exposes it to a variety of financial risks
including: credit risk, liquidity risk and market risk. The overall risk management
strategy seeks to minimise the potential adverse effects of risk exposures on the Group’s
financial performance.
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 these risks, and
the Group’s management of capital. Further quantitative disclosures are included
throughout these audited financial statements where relevant. The Group’s Board of
Directors has overall responsibility for the establishment and oversight of the Group’s
risk management framework.
The Board has established the Risk and Audit Committee which, in due course, in line with
the growth in the Group, will assume responsibility for developing and monitoring the
Group’s risk management policies. The Risk and Audit Committee will participate in
management’s process of formulating and implementing the risk management plan and will
report on the plan adopted by management to the Board.
The objective of risk management is to identify, assess, manage and monitor the risks to
which the business is exposed, including, but not limited to, information technology
risk. The Board will be responsible for ensuring the adoption of appropriate risk
management policies by management. The Group’s risk management policies are established
to identify and analyse the risks faced by the Group, to set appropriate risk limits and
controls and to monitor risks and adherence to limits. Risk management policies are
reviewed regularly to reflect changes in market conditions and the Group’s activities.
The Board will also ensure that there are processes in place between itself and
management enabling complete, timely, relevant, accurate and accessible risk disclosure
to shareholders.
To enable the Risk and Audit Committee to meet its responsibilities, the Risk and Audit
Committee will set standards and management will implement systems of internal control
and an effective risk-based internal audit, comprising policies, procedures, systems and
information to assist in:
- safeguarding assets and reducing the risk of loss, error, fraud and other
irregularities;
- ensuring the accuracy and completeness of accounting records and reporting;
- preparing timely, reliable financial statements and information in compliance with
relevant legislation and generally accepted accounting policies and practices; and
- increasing the probability of anticipating unpredictable risk.
The Committee oversees how management monitors compliance with the Group’s risk
management policies and procedures and reviews the adequacy of the risk management
framework in relation to risks faced by the Group.
23.1 Financial risk exposures
Credit risk
The Group’s principal financial assets are cash and cash equivalents and trade and other
receivables. The credit risk arising from deposits with banks is managed through a policy
of utilising only independently rated banks with acceptable credit ratings.
The credit quality of cash and cash equivalents can be assessed by reference to external
credit ratings of the counterparty where the account or deposit is placed. A summary of
the Standard & Poors European financial institutions credit ratings is as follows:
31 March 2014
- National Westminster Bank plc. A -
- Santander UK plc. A
- Barclays Private Clients International Ltd A
At the time of acquisition of a property, the company reviews the quality of the tenant
to ensure that rental contracts are in place with tenants meeting acceptable covenants.
Trade receivables are presented in the statement of financial position net of allowances
for doubtful receivables. An allowance for impairment is made where there is an
indefinable loss event, which based on previous experience, may give risk to a non
recovery of a receivable.
The credit risk in respect of debtors is concentrated to a relatively small tenant base,
as eight tenants account for the total rental income. However, none of these is noted as
being of a poor credit rating, which is shown by strong Dun and Bradstreet (“D&B”)
ratings. 84% of rentals are backed by 4A financial strength covenants (being tangible net
worth from GBP15 million) and 100% of rentals have a risk rating score of 1 (being
minimum
risk of business failure).
The carrying amount of financial assets represents the maximum credit exposure at the
reporting date.
In respect of trade and other receivables and cash and cash equivalents this amounts to
GBP1,593,457 as shown in the statement of financial position.
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash resources, the
availability of funding through appropriate and adequate credit lines and managing the
ability of tenants to settle within lease obligations. The Group ensures, through the
forecasting and budgeting of cash requirements that adequate committed resources are
available.
By its nature, the market for investment property is not immediately liquid. As a result
of this illiquidity, the Group’s ability to vary its portfolio in a timely fashion and to
receive a fair price in response to changes in economic and other conditions may be
limited. Furthermore, where the Group acquires investment properties for which there is
not a readily available market, the Group’s ability to deal in any such investment or
obtain reliable information about the value of such investment or risks to which such
property investment is exposed may be limited.
The Group’s short term liquidity risk is secured by the existence of cash balances,
through the fact that rental income exceeds the Group’s cost structures and through
ensuring that facilities are managed within debt covenants.
The following table details the Group’s remaining contractual maturity for its financial
liabilities. The table has been drawn up based on the undiscounted contractual maturities
of the financial liabilities, including interest that will accrue to those liabilities,
except where there Group is entitled and intends to repay the liability before its
maturity. The discount column represents the possible future cash flows included in the
maturity analysis, such as future interest or potential payments that have not been
included in the carrying amount of the financial liability. The table also includes a
reconciliation to the carrying value in the statement of financial position.
Less than One to Three to
one three twelve One to five Unaccrued
month months months years interest Total
GBP GBP GBP GBP GBP
GBP
Interest bearing loans - 96,850 290,550 11,077,950 (1,057,911) 10,407,439
Financial liabilities - - - 72,901 - 72,901
Other payables 119,995 2,126 172,492 - - 294,613
Accruals 160,205 266,408 - - - 426,613
Deferred income 223,877 471,239 - - - 695,116
At 31 March 2014 504,077 864,622 463,042 11,150,851 (1,057,911) 11,896,682
A contingent liability, as detailed in note 25, will only become payable against a
successful future capital raising which will include sufficient capital to cover the
costs incurred.
Fair value of financial instruments
The following table summarises the Group’s financial assets and liabilities into
categories required by IFRS7 Financial instruments – disclosures. The directors consider
that the carrying amounts of financial assets and financial liabilities recorded at
amortised cost in the financial statements approximate their fair values.
Held at fair value Held at fair value
through other through Held at Total carrying
comprehensive profit and amortised amount
income loss cost 31 March 2014
Financial assets GBP GBP GBP GBP
- Trading investments - 236,766 236,766
- Cash and cash equivalents - - 1,380,526 1,380,526
- Accounts receivable - - 212,931 212,931
- 236,766 1,593,457 1,830,223
Financial liabilities
- Loans - - 10,400,000 10,400,000
- Interest rate swaps 72,901 - - 72,901
- Accounts payable - - 1,423,781 1,423,781
72,901 - 11,823,781 11,896,682
Market risk
Market risk is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market prices. Market risk comprises
three types of risk: foreign currency risk, interest rate risk and price risk. The
objective of market risk management is to manage and control market risk exposures within
acceptable parameters, while optimising returns to shareholders.
Investment in property is subject to varying degrees of risk. The main factors which
affect the value of the investment in property include:
- changes in the general economic climate;
- local conditions in respective markets, such as oversupply, or a reduction in demand,
for commercial space in a specific area;
- competition from other available properties; and
- government regulations, including planning, environmental and tax laws.
Whilst a large number of these factors are outside the control of the management, market
and property specific factors relevant to maintain a sustainable income stream within the
Group’s yield parameters are considered as part of the initial due diligence. Properties
and tenant leases are actively managed.
The ultimate strategy of the Group is to achieve diversification through growth in the
size of the investment portfolio. The Group will focus on acquisitions that are expected
to sustain income per share and that enhance the diversity and thus lower the risk of its
income stream.
Foreign currency risk
The Group’s functional currency is pounds sterling. Foreign currency risk is the risk
that the fair value or future cash flows of a financial instrument will fluctuate because
of changes in foreign currency or exchange rates. At the reporting date, the Group has
exposure to foreign currency risk in respect of
- listed securities with a carrying value of GBP53,891, which securities are quoted in
euros;
- trade receivables with a carrying value of GBP989, which assets are quoted in US
dollars;
- trade payables with a carrying value of GBP12,276, which liabilities are payable in
US dollars;
- trade payables with a carrying value of GBP151,054, which liabilities are payable in
euros, and
- trade payables with a carrying value of GBP7,168, which liabilities are payable in
South African Rand.
Foreign currency sensitivity analysis
The sensitivity analysis measures the impact on the Group’s exposure in pounds (based on
a change in the reporting date spot rate) and the impact on the Group’s sterling
profitability, given a simultaneous change in the foreign currencies to which the Group
is exposed at the reporting date.
A positive number below indicates an increase in profit and other equity following a 10%
strengthening of the pound against the foreign currencies. For a 10% weakening of the
pound, there would be an equal and opposite impact on the profit and the balance would be
negative.
2014
GBP
Euros 8,833
US Dollars 1,026
South African Rand 652
10,511
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market interest rates. As stated in note
20, borrowings from credit institutions are protected against movements in interest rates
to the extent of 60% of the principal borrowed. The company uses interest rate swaps to
manage its interest rate exposure.
A movement of 100 base points in the UK Libor interest rates would lead to a
GBP42thousand change in interest payable.
Market price risk
Market price risk is the risk that the Group is exposed to market risk on financial
instruments that are valued at market prices. Specifically, a risk that the ultimate
selling price of such financial instruments may differ from their estimated fair values
at the reporting dates. The Group is exposed to price risk as a result of its investment
in listed securities. The table below sets out the impact on the Group’s sterling
profitability of a 10% change in the market price of the listed securities in its
portfolio.
A positive number below indicates an increase in profit and other equity following a 10%
strengthening of market prices across the portfolio. For a 10% fall in market prices
there would be an equal and opposite impact on profit and the balance below would be
negative.
2014
GBP
Profit 23,676
23.2 Fair value hierarchy
The table below analyses financial instruments carried at fair value, by valuation
method. The different levels have been defined as follows:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or
liabilities
Level 2 - Inputs, other than quoted prices included with Level 1 that are observable
For the asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices)
Level 3 - Inputs for the asset or liability that are not based on observable market
Data (unobservable inputs)
Total assets /
liabilities
recognised Designated at fair value
at fair value Level 1 Level 2 Level 3
GBP GBP GBP GBP
Assets
Investment properties 27,500,000 27,500,000
Investment in listed
Securities 236,766 236,766 - -
Total assets 27,736,766 236,766 - 27,500,000
Liabilities
Derivative financial
Liabilities 72,901 - 72,901 -
Total liabilities 72,901 - 72,901 -
Details of changes in valuation techniques
There have been no significant changes in valuation techniques during the period under
review.
Significant transfers between Level, 1 Level 2 and Level 3
There have been no significant transfers during the period under review.
Capital risk management
The capital structure of the Group consists of debt, which includes the borrowings
disclosed in note 20, cash and cash equivalents and equity attributable to ordinary
shareholders of the company, comprising issued capital, reserves and retained earnings as
disclosed in the statement of changes in equity. The Group is not subject to any external
capital requirements. The Group strategy is to maintain a debt to equity ratio and loan
to value (LTV) to ensure that property performance is translated into an enhanced return
for shareholders whilst at the same time ensuring that it will be able to continue as a
going concern through changing market conditions. The directors are of the opinion that a
40% LTV in respect of secured external borrowings is appropriate to the sector of the
market in which the Group operates.
24. Related party transactions
Parties are considered related if one party has control, joint control and significant
influence over the other party in making financial and operating decisions. Other than
those listed below, there were no transactions with related parties during the period
under review.
Incorporation and set up costs
An entity in which Gerald Leissner and Pauline Goetsch have a direct and indirect
beneficial interest respectively is one of the promoters of GoGlobal Properties Limited
(“the Company”).
An entity in which Sean Melnick has an indirect beneficial interest, arising from his
indirect beneficial interest in Peregrine Holdings Limited, is one of the promoters of
the Company.
In undertaking due diligence on a portfolio of properties in Germany, the promoters have
provided GBP300,000 to the Group. At 31 March 2014 estimated costs incurred amount to
GBP271,088, and should no further costs be incurred, this GBP28,912 would be repayable to
the
promoters. To the extent that the Group successfully raises further capital the costs
will be settled by the Group.
In addition, the promoters have paid and underwritten further expenses and costs
associated with the issue and listing of shares on the BSX and AltX in the amount of
GBP206,132 (an additional GBP73,857 having been borne by the Group). To the extent that
the
Group successfully raises further capital, the full amount of these expenses together
with any underwriting premium will be repaid out of the proceeds of such further capital
raising.
At 31 March 2014, no further capital raising is envisaged in the near future.
ApexHi Property Fund Limited (“ApexHi”), a UK REIT
Gerald Leissner, Pauline Goetsch and Sean Melnick are directors of ApexHi.
On 25 March 2014, the Group acquired the entire share capital of APF1 Limited, a
subsidiary of ApexHi, for a consideration of GBP17,034,603 with a share for share
exchange
as detailed in the Directors report on page 2 and note 21.
ApexHi UK Limited (“APUK”), the investment advisor to the Group.
Pauline Goetsch, Gerald Leissner and Sean Melnick are directors of APUK.
Under the terms of a property advisory agreement entered into between ApexHi and APUK,
which was novated to the Company on 26 March 2014, APUK is responsible for advising the
Group in relation to its financial strategy and business plans, including all aspects of
investment in property and for managing the properties acquired by the Group. In respect
thereof, APUK is paid a fee equal to one quarter of 1.25% of the aggregate of the Group’s
net asset value and the Group’s indebtedness which is payable quarterly in arrears.
During the period, the Group was charged GBP5,830 by APUK for investment advisory
services
in accordance with the agreement. Unpaid fees at 31 March 2014 amount to GBP87,282.
ApexHi Fund Services Limited (“AFSL”), the Bermudan Company Secretary.
Sharon Ward and David Brown are employee and a director respectively of AFSL.
During the period AFSL charged fees of GBP1,838 to the Group. At 31 March 2014, the Group
owed AFSL GBP1,226.
Directors interests in the company
Details of directors shareholding in the Group are disclosed in the Directors report on
pages 2 to 5. Details of directors emoluments are disclosed in note 7 (on page 22).
25 Contingent liability
The promoters of the Group have underwritten an amount of GBP600,000 (at 31 March 2014,
GBP300,000 has been received), to cover acquisition costs that may be incurred by the
Group, prior to the completion of any further capital raising, in undertaking due
diligence on a portfolio of properties in Germany. To date, the Group has engaged
lawyers, valuers and other professional advisors for the purposes of such due diligence
incurring costs amounting to GBP271,088. To the extent that the company successfully
completes a further capital raising for the purposes of acquisition of such portfolio or
part thereof the costs will be settled by the Group as part of such acquisition.
In addition, the promoters of the Group have underwritten an amount of GBP320,000 for
incorporation, capital raising and listing costs. To date, the estimated promoters
liability amounts to GBP206,132. To the extent that the company successfully completes a
further capital raising, the full amount of these expenses will be reimbursed by the
Group together with any underwriting premium.
26. Events after the reporting period
Subsequent to the balance sheet date, the following events have occurred:
- At the end of April 2014 the Investment Committee decided against proceeding with the
acquisition of the portfolio of German properties (as detailed in note 25).
- On 2 April 2014 the UK investment properties held by APF1 Limited (“APF1”) were
transferred to a fellow wholly owned subsidiary GGP1 Limited (“GGP1”). The APF1 bank
facility of GBP10.4m was repaid and replaced by a new GGP1 bank facility also with
Santander UK plc for GBP10.4m. The SWAP contracts were novated from APF1 to GGP1.
27. Subsidiaries
Details of the Group’s subsidiaries as at 31 March 2014 are as follows:
Name Place of Voting & Principal activity
Incorporation Ownership
APF1 Limited Guernsey 100% Property investment
GGP1 Limited Guernsey 100% Dormant
GoGlobal Properties Limited
(Incorporated in Bermuda)
(Registration number 47031)
BSX share code: GGB.BH
JSE share code: GGP ISIN: BMG945551023
(“GoGlobal” or “the company”)
This document is important and requires your immediate attention. If
you are in any doubt as to any aspect of this notice, you should consult
your stockbroker or other registered dealer in securities, bank manager,
solicitor, professional accountant or other professional advisor.
When considering what action you should take, you are recommended to
seek your own personal financial advice from a suitable adviser.
If you sell or have sold or transferred all your shares in GoGlobal
Properties Limited you should hand this document and the documents
accompanying it to the purchaser or agent through whom the sale was
effected for transmission to the purchaser.
NOTICE IS HEREBY GIVEN that the second annual general meeting (the
“AGM”) of the Members of GoGlobal Properties Limited will be
held at Sarnia House, Le Truchot, St Peter Port, Guernsey, GY1 4NA on
Thursday, 10 July 2014 at 2:00 p.m. (UK) for the purposes of
considering and, if thought fit, passing, with or without modification,
the following resolutions:
ORDINARY RESOLUTIONS:
1. THAT the Annual Directors’ report and audited consolidated financial
statements for the period 26 October 2012 to 31 March 2014 be
adopted.
2. THAT Mr David Smith, offering himself for election as a director of
the Company in accordance with the Bye-Laws of the Company, be
appointed as a director.
3. THAT Mr Hennie Esterhuizen, offering himself for election as a
director of the Company in accordance with the Bye-Laws of the
Company, be appointed as a director.
4. THAT Mr Cobus Josling, offering himself for election as a director
of the Company in accordance with the Bye-Laws of the Company, be
appointed as a director.
5. THAT Mr Sean Melnick, offering himself for election as a director of
the Company in accordance with the Bye-Laws of the Company, be
appointed as a director.
6. THAT Mr Gerald Leissner, offering himself for election as a director
of the Company in accordance with the Bye-Laws of the Company, be
appointed as a director.
7. THAT Mr David Brown, offering himself for election as a director of
the Company in accordance with the Bye-Laws of the Company, be
appointed as a director.
8. THAT Mr James Keyes, offering himself for election as a director of
the Company in accordance with the Bye-Laws of the Company, be
appointed as a director.
9. THAT Deloitte LLP, of Regency Court, Glategny Esplanade, St Peter
Port, Guernsey, Channel Islands, be appointed as Auditors of the
Company for the year ending 31 March 2015 and the terms, conditions
and fees be determined by the directors of the Company.
10. THAT all actions taken by the Directors and Officers of the Company
up to the date of the last unaudited financial statements be
ratified and confirmed.
11. THAT the directors of the Company be and are hereby authorised
unconditionally to allot and issue securities of the Company or to
grant any offers, agreements or options which would or might require
securities to be issued, allotted or disposed of; provided that this
general mandate does not permit the directors to allot or agree to
allot more than twenty percent of the exiting issued share capital
of the issuer from time to time.
12. THAT, subject to the passing of resolution 11 by the requisite
majority of shareholders, the directors of the Company be and are
hereby authorised unconditionally to allot and issue securities of
the Company or to grant any offers, agreements, or options which
would or might require securities to be issued, allotted or disposed
of in excess of the 20% limitation prescribed under the authority
granted in resolution 11, provided that this mandate shall only
continue in force until the earlier of:
a. the conclusion of the first annual general meeting of the
Company following the passing of this resolution at which time
it shall lapse unless, by ordinary resolution passed at the
annual general meeting, the mandate is renewed, either
unconditionally or subject to conditions; or
b. this resolution is revoked or varied by ordinary resolution of
the shareholders in general meeting.
BY ORDER OF THE BOARD
Sharon Ward
Signing for and on behalf of
Apex Fund Services Ltd.
Corporate Secretary
13 June 2014
Note: Shareholders unable to attend are requested to complete the
attached form of proxy and return it for the attention of Ms Sharon Ward
at the address stated in the notes to the form of proxy or via facsimile
number +1 441 292 1884.
FORM OF PROXY
GoGlobal Properties Limited
(Incorporated in Bermuda)
(Registration number 47031)
BSX share code: GGB.BH
JSE share code: GGP ISIN: BMG945551023
(“GoGlobal” or “the company”)
Form of proxy for use by holders of ordinary shares at the annual general meeting
of the Company convened for 10 July 2014 at 2:00 p.m.
I/We _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
(full name(s) in block capitals)
of _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
(address in block capitals)
being a Shareholder(s) of the Company, hereby appoint the Chairman of the annual
general meeting and grant authority to the Chairman to appoint any such person to
act in his stead whom he deems fit, failing whom
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
(name and address of proxy in block capitals)
as my/our proxy to attend, and on a poll, vote for me/us and on my/our behalf at
the annual general meeting of the Company to be held on 10th July 2014 at 2.00
p.m. and at any adjournment thereof.
I/We wish my/our proxy to vote as indicated below in respect of the resolutions
to be proposed at the meeting. Please indicate which way you wish your proxy to
vote by ticking the appropriate box alongside each resolution. (see note 2
below).
ORDINARY RESOLUTIONS *FOR *AGAINST
1. THAT the Annual Directors’ report and audited consolidated financial
Statements for the period 26 October 2012 to 31 March 2014 be
adopted.
2. THAT Mr David Smith, offering himself for election as a director of
the Company in accordance with the Bye-Laws of the Company, be
appointed as a director.
3. THAT Mr Hennie Esterhuizen, offering himself for election as a
director of the Company in accordance with the Bye-Laws of the
Company, be appointed as a director.
4. THAT Mr Cobus Josling, offering himself for election as a director
of the Company in accordance with the Bye-Laws of the Company, be
appointed as a director.
5. THAT Mr Sean Melnick, offering himself for election as a director of
the Company in accordance with the Bye-Laws of the Company, be
appointed as a director.
6. THAT Mr Gerald Leissner, offering himself for election as a director
of the Company in accordance with the Bye-Laws of the Company, be
appointed as a director.
7. THAT Mr David Brown, offering himself for election as a director of
the Company in accordance with the Bye-Laws of the Company, be
appointed as a director.
8. THAT Mr James Keyes, offering himself for election as a director of
the Company in accordance with the Bye-Laws of the Company, be
appointed as a director.
9. THAT Deloitte LLP, of Regency Court, Glategny Esplanade, St Peter
Port, Guernsey, Channel Islands, be appointed as Auditors of the
Company for the year ending 31 March 2015 and the terms, conditions
and fees be determined by the directors of the Company.
10. THAT all actions taken by the Directors and Officers of the Company
up to the date of the last unaudited financial statements be
ratified and confirmed.
11. THAT the directors of the Company be and are hereby authorised
unconditionally to allot and issue securities of the Company of not
more than 20% of the existing issued share capital of the Company.
12. THAT, subject to the passing of resolution 11 by the requisite
majority of shareholders, the directors of the Company be and are
hereby authorised unconditionally to allot and issue securities of
the Company in excess of the existing issued share capital of the
Company.
*Please indicate how you wish your proxy to vote by placing a tick on
the appropriate box. If you do not do so, your proxy will abstain or
vote for or against the ordinary resolution(s) at his or her discretion.
Signature _ _ _ _ _ _ _ _ Date_ _ _ _ _ _ _ _ _ _ 2014
NOTES:
1. If you wish to appoint as your proxy some person other than the
Chairman of the Meeting, please insert in BLOCK CAPITALS the full
name of the person of your choice, delete the words "the Chairman of
the Meeting, failing whom" and initial the amendment.
2. This proxy should be returned in the first instance via facsimile
number 441-292-1884 or via email to sharon@apex.bm, by Friday 4th
July 2014, duly signed and witnessed.
2. In the second instance, every effort should be made to mail the
original proxy to Apex Fund Services Ltd., 20 Reid Street, Williams
House, 3rd Floor, Hamilton HM11, Bermuda, attention: Ms. Sharon Ward,
prior to the date of the meeting.
3. If the appointer is a Corporation, this proxy must be executed under
its Common Seal or under the hand of any Officer or Attorney duly
authorized on its behalf.
In the case of joint holders, any one such person may sign.
PLEASE RETURN TO:
Apex Fund Services Ltd.
20 Reid Street
Williams House, 3rd Floor
Hamilton HM11 BERMUDA
Attention: Ms. Sharon Ward
Date: 13/06/2014 02:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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