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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.
Date: 18/08/2014 11:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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