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MAS REAL ESTATE INC - Abridged audited consolidated results for the sixteen month period ended 30 June 2014

Release Date: 18/08/2014 11:30
Code(s): MSP     PDF:  
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Abridged audited consolidated results for the sixteen month period ended 30 June 2014

MAS Real Estate Inc. (Registered in the British Virgin Islands) 

(Registration number 1750199)

(Registered as an external company in the Republic of South Africa)

(Registration number 2010/000338/10)

JSE share code: MSP / SEDOL (XLUX): B96VLJ5 / SEDOL (ALTX): B96TSD2

ISIN: VGG5884M1041

("MAS" or "the company" or "the group")


Abridged audited consolidated results for the sixteen 

month period ended 30 June 2014


- Adjusted NAV* per share increased 7.1% from 96.9 euro cents to 

  103.8 euro cents

- Capital raise of Euro 180 million drove market capitalisation increase 

  from R0.9 billion to R5.4 billion at period end

- Acquired 41.5% of Karoo Investment Fund

- Strong progress on acquisition of pipeline assets



*Adjusted NAV is calculated as the NAV excluding deferred taxation.



MAS aims to achieve a high-quality income distribution from a diversified 

Western European investment property portfolio. By the end of 2016, the 

directors aim to have 90% of the portfolio invested in income-producing 

assets and the remainder invested in development and value-add 

opportunities. They are targeting strong total returns through a combination 

of income from the investment property portfolio, and growth on both this 

portfolio and through development and active asset management.



MAS has its primary listing on the Euro MTF market of the Luxembourg Stock 

Exchange and a secondary listing on the ALTX of the Johannesburg Stock 

Exchange.



Reporting currency

The company's results are reported in euro.



Review

The 16 months to 30 June 2014 have been transformational for the business. 

The acquisition of the company's stake in the Karoo Fund, together with the 

significant capital raise in the first quarter of 2014, have resulted in an 

increase in net assets to Euro 289.3 million, from Euro 64.2 million at the 

previous financial year-end, and a market capitalisation on the JSE of R5.4 

billion compared to R900 million at the previous year-end. This capital 

raise bolsters the balance sheet, increases the number of valued 

shareholders in the company, and enlarges the universe of assets that can be 

acquired.



The confidence expressed by investors in the strategy of the company through 

their capital support is clear. Despite a changing economic environment and 

the quickly "shifting sands" of capital markets seeking exposure to European 

real estate, our thesis for investing in European real estate remains as 

strong as ever. We believe now is a most opportune time to be expanding our 

existing assets, and fashioning a more diverse portfolio of well-located 

Western European property assets. The company is diligently forging ahead 

with these on behalf of shareholders as the capital raised is placed in our 

growing pipeline.



The Eurozone investment markets and global capital markets have stabilised 

in comparison to the same time last year. This has been evidenced by 

hardening real estate market yields, which are responding to near record 

levels of both local and cross-border capital flows into the asset class. In 

an environment of lower GDP growth than European central banks would like, 

low interest rates look set to remain for some time. This is likely to 

continue to fuel the demand for core commercial real estate given its 

relative higher income yielding attributes.



Key milestones

Aug 13

- Acquisition of 100% of New Waverley



Dec 13

- Acquisition of Karoo Fund

- Signing of 3x hotel agreements for lease



Feb 14

- Sale of Aldi Tuttlingen property



Mar 14

- Capital raise Euro 180 million

- Sale of Metchley Hall student property



Jul/Aug 14

- Internalisation discussions

- Signature of agreement to acquire 3x new German retail properties

- Completion of first of pipeline acquisitions



H2 2014

- Further pipeline acquisitions

- Completion of proposed internalisation (subject to approval)

- Transition to JSE main board



2016

- 90/10 target for portfolio composition



Strategy

The target is for the portfolio to deliver a core income in excess of 6% on 

the capital invested in the company.



Target portfolio

                       Investment   Development                   Corporate

                         property      property   Investments  and treasury

Pre-capital raise

Net assets (Euro 107 million)

(31 Dec 2013)

Current                       31%           20%           32%           17%



Net assets (Euro 289 million)

(30 Jun 2014)                  8%            9%           12%           71%



Target portfolio 2016         90%           10%



The company has continued to seek new and interesting deals in its core 

markets of Germany, Switzerland and the UK. Since the autumn of 2013 there 

has been a strong focus on creating a pipeline of good assets for the 

company to acquire and the initial elements of that pipeline were presented 

during the roadshow to investors in February 2014. Since then, the company 

has progressed and secured much of that original pipeline as well as 

pursuing further attractive investments, with a particular focus on 

supporting and improving the income return to investors.



                       Investment   Development                   Corporate

                         property      property   Investments  and treasury

Current

Net assets (Euro 289 million)

(30 Jun 2014)            Euro 23m      Euro 25m      Euro 35m     Euro 206m



                                                      Capital

                                                        raise           New

                                                     pipeline      pipeline

Pipeline in exclusivity (30 Jun 2014)               Euro 108m      Euro 99m



Capital raise pipeline

German Builders Markets Euro 40 million completing September 2014

- Under offer, SPA signed

- Closed on first acquisition

New Waverley Euro 60 million with build start August 2014

- Final negotiations underway on fast tracking Residential & Offices

Other existing portfolio projects (Lewes) Euro 8 million

- Projects being progressed



New pipeline - in exclusivity

Retail / office

- Euro 28 million

Retail park

- Euro 15 million

Toom centre retail

- Euro 23 million

Supermarket

- Euro 13 million

Retail industrial

- Euro 20 million

Total

- Euro 99 million



Performance

The underlying portfolio continues to perform well, but given the level of 

investable cash on the balance sheet, the focus of the company is on the 

pipeline portfolio. This pipeline currently has a bias towards Germany, 

where the cost of debt and relative income yields remain an enticing 

combination.



Core income yield (annualised)



                       Investment   Development                   Corporate

                         property      property   Investments  and treasury

Target                         6%            

Adjusted core income yield   8.2%          1.9%          1.8%          0.4%



Post year-end, the company has completed an acquisition in Donaueschingen, 

Germany, and signed for another three in strong catchment areas in central 

Germany. These investment properties are set to bolster the income property 

portfolio with 15-year net yields of some 7.4% being delivered from 

completion of the acquisitions. We believe that further transactions in the 

coming weeks are equally positive, and will continue to add depth and 

diversification to the existing investment portfolio.



In August 2013, the company bought out the other shareholders in the New 

Waverley (formerly "Caltongate") development site on the Royal Mile in the 

heart of Edinburgh's old town. Significant progress has been made with the 

development, with updated planning received in early 2014, opening the way 

for construction to begin. The signing of 20-year, institutional quality 

leases with the Whitbread and Adagio groups underpin the development's 

value, and the next phase of dealmaking has now begun. Construction also 

begins in the coming weeks and the "cranes on site" will provide a 

significant boost to already strong occupier demand in this exciting 

location. A decision has therefore been made to accelerate the phasing of 

the New Waverley development site in Edinburgh, as demand in this city's 

occupier and investment markets is heating up in a timeous manner.



In addition, the sale of two properties - the Metchley Hall student 

residential development and one of the Aldi stores in Germany - both for 

healthy profits - gives further confidence in the value of the portfolio 

being constructed.



Internalisation

Through deliberation, input from the company's corporate advisers, Java 

Capital, and significant support from key stakeholders, the board has asked 

the investment adviser to consider the possibility of an "internalisation of 

the company's management". An announcement will be made once the board has 

come to a final decision.



Prospects

The board is pleased with the progress made in deploying the capital raised 

earlier this year and are excited about the outlook for the future.



Dividend

The directors have proposed a final dividend for the sixteen month period of 

1.24 euro cents per share. Details and timing of payment of the final 

dividend will be published in due course. This brings the total dividend for 

the year to 1.84 euro cents per share. The decline in dividend yield 

compared to prior periods has been previously highlighted, and the yield is 

expected to pick up again once the proceeds from the capital raise are 

invested in the pipeline assets.



Basis of preparation

These results have been prepared in accordance with International Financial 

Reporting Standards as adopted by the EU, the rules of the Luxembourg Stock 

Exchange and the Listings Requirements of the JSE Limited.



Accounting policies

The financial statements on which these abridged results are based, have 

been audited by the group's auditors, KPMG Audit LLC, and their unqualified 

audit report is available on request from the company secretary and will be 

released together with the annual report. The accounting policies adopted 

are consistent with those of the previous year.



Consolidated statement of comprehensive income



                                                      Audited      

                                                sixteen month       Audited

                                                 period ended    year ended

Euro                                              30 Jun 2014   28 Feb 2013

Revenue             

Gross rental income                                 5 247 429     4 090 484



Expenses            

Portfolio related expenses                           (665 096)     (676 254)

Investment adviser fees                            (2 410 812)     (618 836)

Administration expenses                              (884 564)     (685 462)



Net operating income                                1 286 957     2 109 932



Net gain/(loss) on investment property activity       528 974    (1 231 311)

Equity accounted earnings                               1 479        20 128

Exchange differences                                3 931 722      (848 219)



Profit before net financing costs                   5 749 132        50 530



Net finance income/(costs)                            509 539      (744 110)



Profit/(loss) before taxation                       6 258 671      (693 580)



Taxation                                           (1 198 435)     (193 313)



Profit/(loss) for the period/year                   5 060 236      (886 893)



Other comprehensive income:

Items that may be reclassified subsequently to profit or loss:

Exchange difference on translating 

foreign operations                                    156 323      (217 330)



Total comprehensive income/(loss) 

for the period/year                                 5 216 559    (1 104 223)

             

Earnings/(loss) per share (euro cents)**                 2,76         (2,06)

Headline earnings per share (euro cents)**               3,10          0,66

Adjusted core income per share (euro cents)              2,82          4,21

Weighted average number of 

ordinary shares in issue                          183 068 848    43 055 472

Adjusted core income                                5 157 102     1 811 492



**The company has no dilutionary instruments in issue



Consolidated statement of financial position



                                                      Audited       Audited

                                                        as at         as at

Euro                                              30 Jun 2014   28 Feb 2013

Non-current assets             

Goodwill                                            1 371 537             -

Investment property                                64 751 842    57 012 693

Investments                                        35 743 617             -

Investment in associate                                     -     1 055 174

Loan to associate                                           -     2 433 270

Plant and equipment                                         -        47 577

Deferred taxation asset                                52 886             -

Total non-current assets                          101 919 882    60 548 714



Current assets

Short-term loans receivable                                 -       256 885

Trade and other receivables                         2 270 221       753 610

Cash and cash equivalents                         205 800 188    24 708 091

Total current assets                              208 070 409    25 718 586



Total assets                                      309 990 291    86 267 300



Equity

Share capital                                     289 978 080    67 423 236

Retained (loss)                                    (1 276 580)   (3 674 324)

Foreign currency translation reserve                  622 928       466 605

Shareholder equity                                289 324 428    64 215 517



Non-current liabilities            

Long-term loans                                    14 340 752    17 465 162

Financial instruments                               2 104 606     2 522 790

Deferred taxation liability                           926 285             -

Total non-current liabilities                      17 371 643    19 987 952



Current liabilities             

Short-term loans payable                            1 757 425       491 460

Trade and other payables                            1 536 795     1 572 371

Total current liabilities                           3 294 220     2 063 831

Total liabilities                                  20 665 863    22 051 783

             

Total shareholder equity and liabilities          309 990 291    86 267 300

Actual number of ordinary shares in issue         279 483 998    66 238 363

Net asset value per share (euro cents)                  103,5          96,9

Adjusted net asset value per share (euro cents)         103,8          96,9



Abridged consolidated statement of cash flows



                                                      Audited

                                                sixteen month       Audited

                                                 period ended    year ended

Euro                                              30 Jun 2014   28 Feb 2013

Cash (used in)/generated from 

operating activities                                 (575 325)    1 947 320

Cash generated from/(used in) 

investing activities                                3 563 687    (5 755 370)

Cash generated from financing activities          177 209 574    22 673 370

Cash and cash equivalents at the 

beginning of the period                            24 708 091     5 742 860

Effect of exchange rate fluctuations                  894 161        99 911

Cash and cash equivalents at 

the end of the period/year                        205 800 188    24 708 091



Consolidated statement of changes in equity



                                                      Foreign

                                                     currency

                            Share      Retained   translation

Euro                      capital        income       reserve         Total

Opening balance at 

1 March 2012 - audited 42 154 015    (1 295 506)      683 935    41 542 444

Loss for the year               -      (886 893)            -      (886 893)

Other comprehensive loss        -             -      (217 330)     (217 330)

Total comprehensive loss        -      (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           -     5 060 236             -     5 060 236

Other comprehensive income      -             -       156 323       156 323

Total comprehensive income      -     5 060 236       156 323     5 216 559

Issue of shares       221 665 796             -             -   221 665 796

Dividends paid            889 048    (2 662 492)            -    (1 773 444)

Closing balance at 

30 June 2014 

- audited             289 978 080    (1 276 580)      622 928   289 324 428



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



                                                      Audited

                                                sixteen month       Audited

                                                 period ended    year ended

Euro                                              30 Jun 2014   28 Feb 2013

Profit/(loss) for the period/year                   5 060 236      (886 893)

Adjusted for:           

- Revaluation of investment property                  623 630     1 170 695



Headline earnings                                   5 683 866       283 802



Weighted average number of 

ordinary shares in issue                          183 068 848    43 055 472

Headline earnings per share (euro cents)                 3,10          0,66



Reconciliation of profit/(loss) for the period/year to adjusted core income 

- unaudited



                                                Sixteen month

                                                 period ended    Year ended

Euro                                              30 Jun 2014   28 Feb 2013

Profit / (loss) for the period/year                 5 060 236      (886 893)

Adjusted for:           

- Capital raising fees and structure costs            595 893       359 085

- Net gain/(loss) on investment property activity    (528 974)    1 231 311

- Exchange differences                             (3 931 722)      848 219

- Deferred taxation                                   873 399             -

Realised profit on disposals***                     2 453 147             -

Income shortfall guarantee                            635 123       259 770

Adjusted core income                                5 157 102     1 811 492



***Realised profits can be distributed or reinvested at the board's 

discretion. In the current period the board has elected to distribute the 

realised retained earnings from the disposal of Metchley Hall property and 

the Aldi Tuttlingen store in order to supplement the core income 

distribution as the portfolio is in the build up phase.

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