Wrap Text
Interim results for the six months ended 28 February 2017
REDEFINE INTERNATIONAL P.L.C.
("Redefine International" or the "Company" or the "Group")
(Registration number 010534V)
LSE share code: RDI
JSE share code: RPL
ISIN: IM00B8BV8G91
INTERIM RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2017
COMMITTED TO BEING THE UK'S LEADING INCOME-FOCUSED REIT
Redefine International, the FTSE 250 income-focused UK-REIT, which has a primary listing on the London Stock Exchange and a
secondary listing on the Johannesburg Stock Exchange, today announces its results for the six months ended 28 February 2017.
Financial Highlights
Six months ended Six months ended Year ended
Income statement 28 February 2017 29 February 2016 31 August 2016
EPRA earnings (GBPm) 23.8 23.1 44.1
Underlying earnings (re-based) (1) (GBPm) 24.3 21.5 46.3
Underlying earnings per share (re-based) (p) 1.35 1.4 2.8
Dividend per share (p) 1.3 1.625 3.2
Balance sheet
Portfolio valuation (incl. JV share, GBPm) 1,459.4 1.524.4 1,529.0
Loan-to-value (%)(2)
49.9 52.5 53.4
EPRA NAV per share (p) 40.4 40.3 40.0
(1) Refer to Glossary for explanation
(2) LTV as reported at 28 February 2016 was pro-forma adjusted for AUK completion on 1 March 2016 and excludes The Hague
- Underlying earnings per share of 1.35 pence, in line with guidance
- Weighted average cost of debt reduced to 3.3% (31 August 2016: 3.4%)
- Interest cover improved to 3.1 times (31 August 2016: 2.7 times)
- Cash and available facilities of GBP100.3 million (31 August 2016: GBP57.3 million)
Operating Highlights
- Disposals totalling GBP95.0 million at an average premium of 12.4% to August 2016 market value
- 40 new leases completed in the period for a gross annual rent of GBP2.2 million, 2.3% ahead of ERV
- Occupancy increased to 98.0% (31 August 2016: 97.7%)
- Weighted average unexpired lease term of 7.5 years (31 August 2016: 7.8 years)
- Acquisition of controlling interest in the German supermarket portfolio, previously held in joint venture, for EUR49.4 million (GBP42.2
million) including costs, post period end
Greg Clarke, Chairman, commented:
"Against an uncertain backdrop, Redefine International has delivered a solid performance underpinned by a strategy which is
expected to deliver a much stronger Company, portfolio and capital structure for the benefit of shareholders over the long-term.
Following a number of transactions, the portfolio is now well on the way to being successfully repositioned for future income growth,
meaning we can look to the future with renewed confidence."
Mike Watters, Chief Executive, commented:
"The disposals achieved during the period, in addition to the selective re-investment of proceeds, illustrate our commitment to
improving the overall quality of the portfolio. Simultaneously, we have strengthened our capital structure, underpinning sustainable
shareholder value and enhanced long-term growth prospects. Our first-class asset management team continues to identify new
opportunities to create value and sustain high occupancy levels, supporting our ability to deliver superior income-led total returns in
this historic low interest rate environment.
"With optimism in the long-term outlook of the markets we operate in, we remain committed to driving Redefine International forward
to cement the Company's position as the UK's leading income-focused diversified REIT."
Results presentation, webcast and conference call
A meeting for analysts and investors will take place at 9.00 a.m. (UK time) at 'etc.venues', Monument, 8 Eastcheap, London, EC3M
1AE. The presentation and a live webcast will be available at 9.00 a.m. (UK time), 10.00 a.m. (SA time) which can be accessed via
the homepage of the Company's website: www.redefineinternational.com.
Conference call dial-in numbers
United Kingdom Local: 020 3059 8125
South Africa Local: 0318 197 008 or 0800 999 282
All other locations: +44 20 3059 8125
Conference code: Redefine
For further information, please contact:
Redefine International P.L.C.
Mike Watters, Stephen Oakenfull Tel: +44 (0) 20 7811 0100
FTI Consulting
UK Public Relations Adviser
Dido Laurimore, Claire Turvey, Ellie Sweeney Tel: +44 (0) 20 3727 1000
Instinctif Partners
SA Public Relations Adviser
Frederic Cornet, Lizelle du Toit Tel: +27 (0) 11 447 3030
JSE Sponsor
Java Capital Tel: + 27 (0) 11 722 3050
Disclaimer
This release includes statements that are forward-looking in nature. Forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or achievements of Redefine International P.L.C. to be materially different
from any future results, performance or achievements expressed or implied by such forward-looking statements. Any information contained in this
release on the price at which shares or other securities in Redefine International P.L.C. have been bought or sold in the past, or on the yield on
such shares or other securities, should not be relied upon as a guide to future performance.
STRATEGIC REPORT
Chief Executive's Report
In February 2017, the Company held its first Capital Markets Day where it set out its strategic priorities. With the Company
experiencing a period of significant growth, we recognised the need to strengthen our portfolio and balance sheet in order to continue
to deliver sustainable shareholder value and enhance growth prospects for the future.
I am pleased to report that we have already delivered solid progress against these objectives including a reduction in leverage to 49.9
per cent, the successful disposal of GBP95.0 million of assets at a 12.4 per cent premium to the August 2016 market value and the re-
investment post period end of EUR49.4 million (including transaction costs) to acquire control of the German supermarket portfolio,
previously held in a joint venture.
Results and dividends
Re-based underlying earnings increased by 13.0 per cent to GBP24.3 million (29 February 2016: GBP21.5 million) due to the full period
impact of the AUK acquisition, the second tranche of which completed in March 2016. EPRA NAV per share increased by 1.0 per
cent to 40.4 pence (31 August 2016: 40.0 pence) which was largely the result of both realised and unrealised gains on the property portfolio.
The Board has declared an interim dividend of 1.3 pence per share (29 February 2016: 1.625 pence per share), on earnings of 1.35
pence per share, which is in line with our re-based earnings metric and highlights progress towards our distribution pay-out target
previously communicated.
Strategic priorities
Scalable business
There are a number of long-term benefits associated with greater scale, including enhanced access to capital markets, greater
liquidity, lower cost of capital, overhead efficiencies and operational flexibility. However, these benefits will remain secondary to
securing the right investment opportunities and the actions we are currently taking, including strengthening the balance sheet, places
the Company in a stronger position to capitalise on future opportunities that may arise whilst weathering any potential Brexit volatility.
Income-focused portfolio
The portfolio continues to be enhanced through capital recycling and re-investment into income-led asset management opportunities
within the existing portfolio. The disposals completed in the period reflected an average net initial yield of 6.1 per cent and an average
reversionary yield of 5.8 per cent, illustrating our strategy of recycling out of assets with weak rental or income growth potential and
concentrating the portfolio on assets with stronger growth prospects.
Efficient capital structure
The Group's loan-to-value ratio reduced to 49.9 per cent (31 August 2016: 53.4 per cent) largely as a result of a GBP58.3 million reduction
in our proportionate share of debt to GBP792.3 million (31 August 2016: GBP850.6 million) and an increase in cash balances to GBP63.7 million
(31 August 2016: GBP34.3 million). A further GBP29.0 million of disposals have been completed or are under offer post period end.
The Group's weighted average cost of debt reduced to 3.3 per cent (31 August 2016: 3.4 per cent) following a period of pro-active
refinancing which has continued post period end, providing visibility of further reductions in the cost of debt and creating greater
interest cost certainty as debt facilities are extended.
The long-term debt secured against four of our UK shopping centres has been successfully restructured post period end to reduce
leverage and interest costs. The aggregate facility of GBP167.8 million has been reduced to GBP146.1 million and extended to April 2042.
This restructuring included the termination of the historic profit share arrangement on Grand Arcade, Wigan. The aggregate
prepayment and restructuring costs of GBP27.6 million will provide a marginal return of c.10 per cent, which will be accretive to earnings
and efficient in terms of reduction in leverage.
Financial discipline
As previously announced, our earnings metric has been revised to an EPRA based measure which better aligns our earnings and
dividend policy to operating cashflow. The dividend announced today of 1.3 pence reflects a pay-out against underlying earnings of
96 per cent. Our medium-term guidance on the pay-out ratio remains 90 - 95 per cent of underlying earnings, with dividends in the
shorter term likely to be at the higher end of that range.
The combination of lower leverage and a reduced cost of debt has improved interest cover at a Group level to 3.1 times (31 August
2016: 2.7 times).
Outlook
The UK economy has proved more resilient since the June 2016 EU referendum than was widely anticipated, with growth forecasts
recently revised upwards to 2.0 per cent for 2017. Unemployment has remained low and recent growth appears to be widespread
across most regions. Notwithstanding this, the UK faces a number of uncertainties including an imminent General Election and the
subsequent Brexit negotiations, as well as rising inflation.
The UK triggered Article 50 on 29 March 2017 which started the formal process of leaving the European Union. Despite the possibility
of a protracted period of negotiation and market volatility, the UK continues to be a truly global real estate market supported by many
factors including its skills base. London now employs more people in the information and communications sector than it does in the
traditional finance and insurance sectors, evidenced by the continued strength in the occupier market in recent months.
The outlook for the German economy appears stable with modest growth and one of the lowest unemployment rates in Europe at 4.3
per cent. Prime yields in Germany's core markets are now at, or below, their last peak, but continuing scarcity of investment product
and strong investment demand, particularly for prime assets, suggests ongoing support for valuations.
Our diversified portfolio, which includes a 21 per cent weighting to Germany (25 per cent following the German supermarket portfolio
acquisition) and no direct exposure to the financial services markets in London, gives us relative confidence in our outlook.
Inflation and interest rates will continue to be closely monitored. General expectations are for official UK interest rates to rise in the
next 24 months but for future increases to be gradual. Interest rates in Europe are also anticipated to remain low for an extended
period, although the European Central Bank monetary stimulus is likely to be reduced. Our pro-active approach to refinancing and
extending debt maturities early in the current low interest rate environment places us in a strong position over the medium term in
respect of interest cost certainty and mitigates refinancing risk.
Whilst there is ongoing political and economic uncertainty, we are focused on our strategic priorities and the fundamentals of our
business. We will continue to enhance our portfolio by allocating capital to assets and opportunities that can provide sustainable and
growing rental income and we will deliver that income to shareholders efficiently from a robust balance sheet.
Based on the results for the first half and current trading conditions, the Company's earnings guidance remains unchanged for the
2017 financial year, between 2.7 to 2.8 pence per share.
Mike Watters
Chief Executive
26 April 2017
Operating review
Portfolio Overview
The income characteristics of the portfolio continue to be enhanced through disciplined capital allocation and active asset
management. We are focused on all aspects of income growth including income-led development, asset management opportunities
and ancillary income generation through our commercialisation process. With long-term real estate returns proven to be driven largely
by income returns, the portfolio is being progressively positioned to provide consistent and sustainable income with potential for
capital growth:
- 32.3 per cent of the portfolio is subject to inflation-linked or fixed rental increases providing guaranteed income growth in a rising
inflationary environment.
- Our weighted average lease length of 7.5 years is complemented by only 21 per cent of leases by rental income being subject
to tenant breaks or expiries in the next five years.
- Our portfolio, diversified by sector and geography, provides a broad range of high quality tenants with little concentration risk.
- Our internally managed commercialisation function is actively enhancing the quality of advertising and promotional activity within
our retail assets. Commercialisation income of GBP1.1 million has already been secured in 2017, a 20 per cent increase on the
same period last year.
Annualised EPRA EPRA
Market gross rental EPRA topped Reversionary voids
Portfolio summary value income ERV NIY up yield yield WAULT (by ERV) Indexed
28 February 2017 (GBPm) (GBPm) (GBPm) (%) (%) (%) (yrs) (%) (%)
UK Retail 537.0 40.3 40.3 6.2 6.4 7.0 8.3 2.5 15.6
UK Commercial 386.1 24.9 25.4 5.6 5.9 6.1 5.9 3.3 25.6
UK Hotels 229.3 15.3 15.5 6.2 6.2 6.3 9.8 - 5.2
Total UK 1,152.4 80.5 81.2 6.0 6.2 6.6 7.8 2.3 16.7
Europe 307.0 19.6 20.4 5.3 5.4 6.2 6.1 1.0 96.5
Total 1,459.4 100.1 101.6 5.9 6.0 6.5 7.5 2.0 32.3
Wholly owned 1,359.6 92.4 94.2 5.8 6.0 6.5 7.5 2.1 27.7
Held in joint ventures
(proportionate) 99.8 7.7 7.4 6.6 6.6 6.9 8.1 0.8 88.2
Leasing activity
Portfolio occupancy by ERV increased to 98.0 per cent (31 August 2016: 97.7 per cent) driven largely by successful lettings in the
UK Commercial portfolio totalling 42,500 sqft (3,900 sqm).
Leasing activity summary
New lettings and lease renewals
Number 40
Annualised rental income from new lettings GBP2.2 million
Comparison to ERV 2.3%
Rent reviews
Number 57
Passing rent agreed GBP3.8 million
Comparison to previous passing rent 4.2%
Comparison to ERV 8.4%
Key leasing activity completed during the period:
- City Point, Leeds - all of the remaining vacant space at City Point, Leeds, comprising 10,900 sqft (1,000 sqm) on the second
floor, was filled following the signing of a 10 year lease to Blacks Solicitors in January 2017, which was completed at GBP25.0 psf,
in line with ERV. The 61,500 sqft (5,700 sqm) office building is now fully occupied and has a strong tenant mix including Ashcourt
Rowan p.l.c., GVA, Savills, JLL, Starbucks and HSBC.
- Schloss Strassen Centre, Berlin - REWE has agreed to a 10 year reversionary lease creating a 15 year unbroken term which
will see it increase its floor area by approximately 1,900 sqft (200 sqm) subject to obtaining vacant possession of a neighbouring
unit. The agreed annualised rent of EUR0.4 million p.a. is in line with the current passing rent of the combined units.
Rateable values
In January 2016 the UK Valuation Office Agency published an updated rating list for England and Wales which has been adopted
from 1 April 2017. The change in rateable values for commercial real estate will have a direct impact on business rates and therefore
the total cost of occupation to tenants and the cost of vacant space to landlords. In general, rates are expected to increase materially
in London while many regional centres are anticipated to see a reduction in rateable values. Across our UK portfolio (excluding the
UK Hotel portfolio) our expectation is for rates to reduce by approximately 6.9 per cent. Our hotels, which are largely London focused,
are anticipated to see a 51 per cent increase in rates. The impact of the change in rates is to be phased in over a three year period,
however, the change is now reflected in hotel property values.
Acquisitions
On 7 April 2017, the Company announced the acquisition of a controlling interest in the Leopard portfolio from its joint venture partner,
Redefine Properties.
The Leopard portfolio comprises 66 properties and totals 1,505,500 sqft (140,000 sqm) of lettable area. It includes a mixture of stand-
alone supermarkets, foodstore anchored retail parks and cash & carry stores. The properties are well located within their respective
micro markets, with 86.4 per cent of the total annual rental income located in Western Germany and Berlin and the remainder in
Eastern Germany.
Key portfolio attributes include:
- Gross rental income of EUR13.9 million.
- Edeka, Netto, Real and Rossmann account for over 85.6 per cent of gross rental income, providing strong tenant covenants.
- WAULT of 8.4 years.
- Portfolio occupancy of 99.2 per cent by estimated market rental value.
- 99.2 per cent of gross rental income is indexed, typically between 60 - 70 per cent of German CPI, subject to cumulative
indexation reaching a hurdle of 10 per cent since the last rent review date.
The portfolio provides exposure to high quality, secure, indexed-linked cashflows with opportunities to extend existing stores and re-
gear leases.
Annualised gross Reversionary
Leopard portfolio Market value rental income ERV EPRA NIY yield WAULT Indexed
28 February 2017 (EURm) (EURm) (EURm) (%) (%) (yrs) (%)
Edeka 90.8 6.8 6.5 7.1 6.7 9.7 100.0
Netto 25.4 2.1 2.0 7.7 7.3 8.9 100.0
Real 28.8 2.4 2.2 7.9 7.1 6.3 100.0
Multi-let 30.5 2.6 2.5 7.9 7.7 6.3 93.2
Total 175.5 13.9 13.2 7.4 7.0 8.4 99.2
The acquisition provides an efficient re-investment of capital from recent disposals into a portfolio in which the Company already held
a 50 per cent share. The acquisition also further simplifies the Company's portfolio and structure, with the Leopard portfolio assets
now under our control, providing greater flexibility over future asset management and investment decisions.
Disposals
It has been an active period with GBP95.0 million of assets sold in seven separate transactions, with a further GBP29.0 million completed
or under offer post period end. Our disposal strategy has focused on assets where business plans have been successfully executed
and values maximised, as well as assets with negative rental and/or capital growth expectations. Disposals completed during the
period reflected a 12.4 per cent premium to August 2016 market value. Net rental income associated with these disposals totals
GBP6.1 million.
Reversionary
Market value Net rental EPRA NIY yield
31 August 2016 Sales price income on sales price on sales price
Disposals since 31 August 2016 Completion (GBPm) (GBPm) (GBPm) (%) (%)
Brandenburg, Germany September 2016 0.1 0.2 - 15.4 12.1
Exchange House, Watford October 2016 11.8 13.3 1.0 6.9 5.8
VBG portfolio, Germany January 2017 40.6 44.4 3.3 7.2 4.9
201 Deansgate, Manchester January 2017 25.5 29.2 1.1 3.6 7.0
Parliament Square, Edinburgh February 2017 3.5 4.0 0.4 9.3 4.1
Delta 900, Swindon February 2017 2.7 3.6 0.3 7.3 8.0
Recklinghausen, Germany February 2017 0.3 0.3 - 6.1 7.6
Total 84.5 95.0 6.1 6.1 5.8
Exchange House, Watford
As announced with our prior year end results, the sale of Exchange House was completed in October 2016 for GBP13.3 million, a 12.7
per cent premium to August 2016 market value. The sale price reflects a net initial yield of 6.9 per cent and a reversionary yield of
5.8 per cent. The 63,000 sqft (5,900 sqm) office building is occupied by the Department of Work and Pensions until March 2023 with
a break option in March 2018. The annual passing rent was GBP1.0 million.
VBG
On 18 January 2017, the Company completed on the sale of four German office assets for a gross consideration of EUR106.0 million.
The assets, which were disposed of via a share sale and included related debt facilities, were held in a joint venture with the Menora
Mivtachim Group. The Company's 49 per cent share reflects an 8.6 per cent premium to the August 2016 market value in Euro terms.
The Company's net proceeds of EUR24.9 million, which includes a performance fee of EUR2.4 million, delivered an IRR of 27 per cent over
the investment period.
The properties, situated in Berlin, Dresden, Cologne and Stuttgart, total 485,900 sqft (45,100 sqm), and are let to a German
government-backed social insurance body, VBG, on a combined WAULT of just under seven years. The portfolio generated a total
annual gross rental income of EUR8.1 million, of which EUR4.0 million was attributable to Redefine International.
Deansgate, Manchester
On 31 January 2017, the Company completed on the disposal of 201 Deansgate in Manchester for GBP29.2 million. The property
provides 83,700 sqft (7,800 sqm) of office space and delivered an annual net rental income of GBP1.1 million, with a WAULT of 4.1
years. The office was originally acquired as part of the AUK Portfolio in March 2016 and the sales price represents a net initial yield
of 3.6 per cent and a 14.3 per cent premium to the last reported market value. The geared IRR over the investment period was 22
per cent.
Development and capital expenditure
Development activity is focused on refurbishing existing assets and adding incremental space and income to meet additional occupier demand.
Capital
expenditure Yield on cost
Scheme Description (GBPm) Start Completion (%)
City Arcaden, Ingolstadt Primark development 15.8 Q1 2016 Q3 2017 5.4
Holiday Inn Express, Southwark 12 room extension and refurbishment 3.6 Q4 2016 Q3 2017 6.0
Albion Street, Derby Redevelopment (pre-let) 2.2 Q1 2016 Q2 2018 9.7
Retail Parks 5 additional units 2.6 Various 2017/2018 12.2
Foodstore extensions, Germany 3 extensions 4.3 Various 2017/2018 7.7
Total 28.5 6.8
City Arcaden, Ingolstadt
The redevelopment of this prime retail asset is anticipated to be completed in June 2017 and will transform the existing retail pitch.
The completed scheme will total approximately 129,000 sqft (12,000 sqm) including two retail units let to Primark and H&M of
approximately 100,000 sqft (9,500 sqm). The scheme is anticipated to generate EUR2.1 million in rental income resulting in a yield on
cost of 5.4 per cent.
Holiday Inn Express, Southwark
The twelve room extension and upgrade to the front and rear façade is on target with development works anticipated to be completed
in the third quarter of 2017. The hotel's operating business continues to deliver consistent underlying revenue growth with revenue
up 1.3 per cent year-to-date despite the disruptions from the extension and refurbishment works.
Albion Street, Derby
Terms have been agreed for a new 15 year lease with an international discount fashion retailer at a rent of GBP0.2 million p.a. The
introduction of a well-known international brand will strengthen the retail pitch considerably and support the letting of the remaining
vacant shop units.
Retail Parks
Four additional pods are at advanced stages of planning approval and the new Pure Gym unit at Banbury Cross Retail Park is under
construction. In total, the new units will provide an additional GBP0.3 million of rental income reflecting a yield on cost of 12.2 per cent.
Foodstore extensions, Germany
Three extensions to foodstore units are being progressed which include extending the existing leases to new 15 year terms. The
extensions for tenants such as REWE, Edeka and Netto will provide long-term indexed-linked income returns from strong covenants.
They total over 12,900 sqft (1,200 sqm) and are expected to provide a yield on cost of 7.7 per cent.
UK Retail
UK consumer confidence has recovered quickly post the initial shock of the EU referendum result. However, inflationary pressure
following Sterling weakness and its impact on import prices is yet to be fully reflected in economic terms. The outlook therefore
remains cautious with value oriented retailers likely to be more resilient.
Occupancy across the UK Retail portfolio declined marginally to 97.5 per cent (31 August 2016: 98.7 per cent). The portfolio value
was broadly unchanged at GBP537.0 million (31 August 2016: GBP537.1 million). UK Shopping Centres declined 0.7 per cent largely as a
result of a 0.5 per cent reduction in gross rental income reflecting a 150 bps increase in vacancy. Conversely, UK Retail Parks and
Other Retail increased by 1.1 per cent to GBP202.0 million (31 August 2016: GBP199.9 million).
Annualised EPRA EPRA
Market gross rental EPRA topped Reversionary voids
UK Retail value income ERV NIY up yield yield WAULT (by ERV) Indexed
28 February 2017 (GBPm) (GBPm) (GBPm) (%) (%) (%) (yrs) (%) (%)
UK Shopping Centres 335.0 26.2 27.2 6.2 6.4 7.6 7.7 3.4 22.6
UK Retail Parks 169.8 11.7 10.8 6.2 6.5 6.0 7.9 - 3.1
UK Retail - Other 32.2 2.4 2.3 6.4 6.4 6.7 16.6 3.3 -
UK Retail 537.0 40.3 40.3 6.2 6.4 7.0 8.3 2.5 15.6
Shopping Centres
Occupancy across the UK shopping centre portfolio declined to 96.6 per cent (31 August 2016: 98.1 per cent). Rental income across
the shopping centre portfolio declined marginally with annualised gross rental income down 0.5 per cent. ERVs have remained broadly
unchanged. The 41,300 sqft (3,800 sqm) former BHS unit at Grand Arcade, Wigan is now under offer to a national operator.
Asset management activity has been targeted at income-led opportunities including the refurbishment of the food court and the
reconfiguration of retail space at West Orchards, Coventry to drive new lettings, including 4,000 sqft (400 sqm) let to Footasylum. In
aggregate, asset management initiatives at West Orchards are targeting additional net rental income of GBP0.5 million which would
reflect an approximate yield on cost of 18.0 per cent.
Retail Parks
Our retail park portfolio remains fully occupied which, when combined with generally low vacancy rates across the sector, gives us
cautious optimism in relation to occupier demand and rental value growth.
Asset management activity is focused on adding marginal income through the introduction of convenience food and beverage
offerings, extensions for leisure use and commercialisation opportunities across the portfolio. Pre-let agreements have been secured
for GBP0.3 million of rental income including a new 10 year lease with Pure Gym at Banbury Cross Retail Park. The 7,500 sqft (700 sqm)
extension will deliver GBP0.2 million of rental income and a yield on cost of 15.0 per cent.
UK Commercial
The regional office market has remained robust with the availability of Grade A space well below historic averages.
Occupancy across the UK Commercial portfolio increased to 96.7 per cent (31 August 2016: 94.6 per cent) following over 42,500 sqft
(3,900 sqm) of new lettings and renewals in the office portfolio and the sale of 201 Deansgate, Manchester which included 16,600
sqft (1,500 sqm) of vacant office space.
The portfolio value increased by 2.7 per cent on a like-for-like basis to GBP386.1 million. The overall increase was driven predominantly
by strong uplifts in the distribution and industrial assets and in the office at Charing Cross Road, London, reflecting a strong investment
market and clear evidence of underlying rental growth.
Annualised EPRA EPRA
Market gross rental EPRA topped Reversionary voids
UK Commercial value income ERV NIY up yield yield WAULT (by ERV) Indexed
28 February 2017 (GBPm) (GBPm) (GBPm) (%) (%) (%) (yrs) (%) (%)
UK Offices - Greater London 87.1 3.4 4.4 3.0 3.5 4.7 7.1 - 19.9
UK Offices - Regional 127.9 11.0 10.6 7.3 7.8 7.7 3.7 5.2 25.5
UK Offices 215.0 14.4 15.0 5.6 6.1 6.5 4.5 3.7 24.2
UK Distribution and Industrial 104.1 6.2 7.0 5.3 5.6 6.3 5.5 4.0 -
UK Automotive 67.0 4.3 3.4 6.0 6.0 4.7 11.3 - 67.2
UK Commercial 386.1 24.9 25.4 5.6 5.9 6.1 5.9 3.3 25.6
Office Portfolio
An active period of leasing combined with the sale of 201 Deansgate, Manchester has increased occupancy across the portfolio to
96.3 per cent (31 August 2016: 93.1 per cent). Three leases totalling 15,100 sqft (1,400 sqm) were completed in the period providing
rental income of GBP0.3 million, marginally ahead of ERV.
Our office at Charing Cross Road continues to benefit from the large-scale investment in the immediate area in connection with the
Crossrail Tottenham Court Road Station which is due to start operating in 2018. Crossrail will link the West End to Canary Wharf in
twelve minutes, Stratford in thirteen and Heathrow in less than 30, bringing an additional 1.5 million people to within a 45 minute
commute of the popular retail and entertainment district. We have received strong occupational and investment demand providing a
range of asset management options for the property. A pre-planning application has been submitted and the detailed planning process
is on-going.
The major letting during the period was to Blacks Solicitors at City Point, Leeds. The firm of solicitors took the remaining 10,900 sqft
(1,000 sqm) on a 10 year lease at a headline rent of GBP25.0 psf which was in line with ERV.
Distribution and Industrial Portfolio
The distribution and industrial sectors remain beneficiaries of the ongoing change in all aspects of retail. Demand from online retailers
resulted in a record 34 million sqft of warehouse space being transacted in the UK during 2016. This demand, coupled with relatively
low levels of supply and a relatively modest development pipeline, should be supportive of rents.
Given the strength of the occupational market, the investment market has been equally strong with GBP2.6 billion of acquisitions in 2016.
Prime yields stand at around 5.0 per cent although investment demand is placing further downward pressure on yields.
These trends are evident in our own portfolio, particularly at Camino Park, Crawley where GBP1.6 million of rental income is subject to
rent review in late 2017. Average passing rents on acquisition in March 2016 were GBP7.5 psf. Recent lettings have been completed at
GBP10.3 psf and more recent evidence indicates rents of GBP13.0 psf which would reflect an increase of approximately 73 per cent on
passing rent since acquisition.
The refurbishment of 53,400 sqft (5,000 sqm) of vacant space at Colchester has been completed and is now being actively marketed.
UK Hotels
Following a relatively weak start to the financial year, underlying trading during recent months has recovered strongly with revenue
figures for the six month period to 28 February 2017 ahead of management's budgets and the prior period performance by 1.3 and
3.9 per cent respectively. This recent strong trading performance has been partly offset by the anticipated impact of higher rates,
particularly across the London portfolio.
The outlook for London hotels is mixed with uncertainty around the impact of the vote to leave the EU, security concerns and tighter
corporate travel budgets offset by the positive impact of the significant fall in Sterling which is expected to support tourism and
investment demand. Occupancy and RevPar are forecast by PwC to grow by 0.9 per cent and 3.3 per cent respectively. We have
experienced a similar trend, with current trading performance showing modest growth over the same period last year. Supply of hotel
space is expected to grow by approximately five per cent in London over 2017 with the majority still focused on budget hotels.
The portfolio value remained broadly unchanged at GBP229.3 million (31 August 2016: GBP229.2 million).
Annualised EPRA EPRA
Market gross rental EPRA topped Reversionary voids
UK Hotels value income ERV NIY up yield yield WAULT (by ERV) Indexed
28 February 2017 (GBPm) (GBPm) (GBPm) (%) (%) (%) (yrs) (%) (%)
Greater London Portfolio 181.2 12.0 12.2 6.2 6.2 6.3 8.8 - -
Edinburgh, DoubleTree by
Hilton 33.1 2.6 2.6 7.2 7.2 7.2 9.0 - 3.4
RBDL Managed Hotels (1) 214.3 14.6 14.8 6.4 6.4 6.4 8.8 - 0.6
London, Enfield Travelodge 15.0 0.7 0.7 4.5 4.5 4.5 30.4 - 100.0
UK Hotels 229.3 15.3 15.5 6.2 6.2 6.3 9.8 - 5.2
(1) Subject to annual review with reference to forecast EBITDA of the RedefineBDL managed portfolio.
RedefineBDL
The Company's 30.4 per cent stake in RedefineBDL, the largest independent hotel management company in the UK, produced
underlying earnings of GBP0.3 million during the period, a decrease of GBP0.9 million over the same period last year which included a GBP1.1
million contract termination fee.
International Hotel Properties Limited
The Company's 17.2 per cent investment in International Hotel Properties Limited ("IHL") had a market value of GBP9.8 million at
28 February 2017 resulting in a fair value gain of GBP1.0 million for the first half of the year. No dividend has yet been declared in respect
of the current financial period.
Europe
Strong fundamentals in Germany combined with low interest rates and uncertainty in other European investment markets has led to
sustained capital flows into commercial real estate and significant competition for good quality investment opportunities. These
dynamics have led to yields reaching historic lows in many markets, particularly for core assets. Given the strength of the investment
market, returns will be increasingly reliant on income and rental growth with further yield compression likely to be limited.
The European portfolio occupancy increased to 99.0 per cent (31 August 2016: 98.5 per cent) following 64,200 sqft (6,000 sqm) of
new lettings and renewals.
The portfolio value increased by 0.2 per cent on a like-for-like basis in local currency terms to EUR337.1 million. The shopping centre
portfolio, including development property, increased in value by 2.0 per cent to EUR192.4 million reflecting strong investment demand,
particularly for core assets in Berlin and Hamburg.
Annualised EPRA EPRA
Market gross rental EPRA topped Reversionary voids
Europe value income ERV NIY up yield yield WAULT (by ERV) Indexed
28 February 2017 (GBPm) (GBPm) (GBPm) (%) (%) (%) (yrs) (%) (%)
Shopping Centres 164.3 8.8 9.8 4.3 4.5 5.6 4.9 0.1 95.8
Supermarkets and Retail
Parks 142.7 10.8 10.6 6.4 6.4 6.9 7.1 1.9 97.0
Europe 307.0 19.6 20.4 5.3 5.4 6.2 6.1 1.0 96.5
Asset management activity has focused on the Schloss-Strassen Centre in Berlin with plans to modernise the existing food court and
improve the food offering, as well as increase the allocation of space to food and convenience offerings.
Bakery Junge, have taken 1,900 sqft (200 sqm) of previously vacant space at an annual rent of EUR0.1 million. The national operator
provides a popular concept and will broaden the food offer to cater for commuter footfall associated with the centre's strong
transport links.
REWE has agreed to a conditional lease extension which would create a 15 year unbroken term and increase its floor area by
approximately 1,900 sqft (200 sqm). The agreed annualised rent of EUR0.4 million p.a. is in line with the current passing rent of the
combined units.
The pharmacy chain, dm, has also agreed to extend their floor area by 1,100 sqft (100 sqm) into the neighbouring vacant unit on a
new 10 year lease for a total rent of EUR0.3 million.
Overview
The Group had an active first half of 2017, particularly with respect to capital recycling and leverage reduction. In total, GBP95.0 million
of assets were disposed at an aggregate premium of GBP10.5 million (12.4 per cent) on 31 August 2016 valuations. Most notable were
the disposals of the VBG portfolio in Germany and an office building in Deansgate, Manchester which achieved IRRs over the
investment period of 27 per cent and 22 per cent respectively.
The proceeds generated reduced the Group's loan-to-value ratio and supported re-investment into assets with improved property
fundamentals, post period end. Three small facilities were also refinanced, typically at lower gearing levels and with lower
associated margins.
The Company hosted a Capital Markets Day in early February to provide an update on business activities and give further guidance
and explanation of the strategic rationale surrounding the change to the Group's key earnings measure and dividend policy.
The combined effect of aligning earnings to an EPRA based measure, whilst lowering the Group's pay-out ratio, has provided
headroom to operational cashflow, a degree of financial flexibility for investment, progression of asset management initiatives and
leverage reduction.
The Group's key earnings metric, underlying earnings, is based on EPRA earnings. This is then adjusted to remove the impact of
foreign exchange gains and losses and non-cash IFRS debt accretion charges which are recurring in nature and significant in size.
Underlying earnings as reported for the first half of 2016 were GBP25.4 million (1.7 pence per share). Re-basing the comparative period,
which removes the impact of discontinued company adjustments, would have resulted in earnings of GBP21.5 million (1.4 pence per share).
The reduction in earnings per share to 1.35 pence for the first half of 2017 is attributable to both the income lost following
disposals and certain non-recurring administrative costs, discussed in more detail below.
The Board has today declared a distribution of 1.3 pence per share for the first half of 2017 representing a 96 per cent pay-out ratio
on re-based underlying earnings, slightly above our medium-term target range of 90 - 95 per cent. Group LTV has reduced to 49.9
per cent from 53.4 per cent at 31 August 2016, bringing us within the upper end of our medium-term LTV target range of
45 - 50 per cent.
EPRA NAV per share increased by one per cent to 40.4 pence, driven primarily by both realised and unrealised gains on the Group's
property portfolio.
Presentation of financial information
Internally the Board focuses on and reviews information and reports presented on a proportionately consolidated basis, which includes
the Group's share of interests in joint ventures. To align with how the Group is managed, this financial review has therefore been
presented on the same basis.
Income statement Six months ended Six months ended
28 February 2017 29 February 2016
Joint Group Joint Group
IFRS Ventures Total IFRS Ventures Total
GBPm GBPm GBPm GBPm GBPm GBPm
Gross rental income 45.8 5.0 50.8 40.2 4.7 44.9
Property operating expenses (4.3) (0.5) (4.8) (2.5) (0.5) (3.0)
Net rental income 41.5 4.5 46.0 37.7 4.2 41.9
Other income 4.8 (2.0) 2.8 1.3 0.5 1.8
Administrative expenses (8.4) (0.4) (8.8) (5.2) (0.3) (5.5)
Net operating income 37.9 2.1 40.0 33.8 4.4 38.2
Net finance costs (11.6) (3.4) (15.0) (12.2) (3.2) (15.4)
Loss from joint ventures (EPRA) (1.2) 1.2 - (0.4) 0.4 -
Tax, FX, NCI and other (1.3) 0.1 (1.2) 1.9 (1.6) 0.3
EPRA earnings 23.8 - 23.8 23.1 - 23.1
Company Adjustments:
Debt fair value accretion adjustments 0.5 - 0.5 1.1 - 1.1
Foreign exchange gain - - - (2.7) - (2.7)
Underlying earnings (re-based) 24.3 - 24.3 21.5 - 21.5
Net gain on sale of joint ventures interests 5.2 (0.2) 5.0 - - -
Fair value gain/(loss) on investment property 2.6 (0.6) 2.0 (17.3) (0.5) (17.8)
Gain on disposal of investment property 5.9 - 5.9 3.4 - 3.4
Fair value gain on listed securities 1.0 - 1.0 1.0 - 1.0
Fair value movement on derivatives 4.4 0.9 5.3 (2.5) (1.4) (3.9)
Other finance expenses (1.5) - (1.5) (0.8) (0.8)
Loss from joint ventures (non-underlying) (1.5) 1.5 - (0.6) 0.6 -
Tax, NCI and other 0.4 (1.6) (1.2) 2.1 1.3 3.4
IFRS profit attributable to shareholders 40.8 - 40.8 6.8 - 6.8
Financial review
Six months ended Six months ended
28 February 2017 29 February 2016
Joint Group Joint Group
IFRS Ventures Total IFRS Ventures Total
GBPm GBPm GBPm GBPm GBPm GBPm
Diluted weighted average ordinary shares (millions) 1,804.4 1,494.8
EPRA earnings per share (pence) 1.3 1.5
Underlying earnings per share (re-based) (pence) 1.35 1.4
In comparison to the first half of 2016, EPRA earnings have increased by GBP0.7 million or 3.0 per cent. This is due to the additional net
rental income from the integrated AUK portfolio, offset by a termination fee of GBP1.2 million in respect of the cancellation of the portfolio's
historic asset management contract which remained in place at acquisition.
Gross rental income increased by GBP5.9 million, the result of an additional GBP6.7 million in gross rent following completion of the second
tranche of the AUK acquisition on 1 March 2016, offset by income lost following disposals during the first half of the year.
As illustrated below, like-for-like income across the UK portfolio was flat. UK Commercial increased 1.8 per cent following a number
of rent reviews. UK Hotels recorded a marginal decrease as a result of lease incentive payments extended for general improvements
to the portfolio.
In Sterling terms, European like-for-like income increased 14.6 per cent, the result of Sterling's weakness in the first half of 2017
compared to the same period last year. The underlying currency performance recorded a decrease in like-for-like income following a
fall in turnover rents which can vary depending on tenants' trading performance.
Included within acquisitions is income from the AUK acquisition which completed on 1 March 2016, resulting in the overall increase
in rental income. Although not yet like-for-like, the portfolio's performance over the six months to 28 February 2017, compared to the
six months to 31 August 2016, saw an improvement of GBP0.3 million or 2.2 per cent in gross rental income.
Six months ended Six months ended Local currency
28 February 2017 29 February 2016 Change Change
Gross rental income GBPm GBPm % %
UK Retail 14.7 14.7 - -
UK Commercial 5.7 5.6 1.8 1.8
UK Hotels 7.4 7.5 (1.3) (1.3)
UK Total 27.8 27.8 - -
Europe 9.4 8.2 14.6 (2.1)
Like-for-like gross rental income 37.2 36.0 3.3 (0.5)
Acquisitions 12.1 5.4
Disposals 1.4 3.3
Development 0.1 0.2
Total gross rental income 50.8 44.9
Property operating expenses have increased in line with the enlarged portfolio.
Other income of GBP2.8 million includes a GBP2.0 million performance fee generated following the sale of the VBG portfolio in January
2017. The Group, which provided asset management services to the joint venture, was due a performance fee based on the IRR
achieved on exit. This represents the Group's proportionate share of the fee payable by Menora Mivtachim, the joint venture partner.
The proceeds from the sale of the VBG portfolio have been re-invested post period end through the acquisition of the controlling
interest in the German supermarket portfolio, also previously held in joint venture.
Administrative expenses of GBP8.8 million reflect a significant increase on the prior period. As previously guided, the first half of 2017
includes a non-recurring charge of GBP1.2 million relating to the termination of the AUK asset management contract previously held with
Kames Capital. The recurring cost base has increased in line with the enlarged portfolio as, amongst other services, asset
management activities are now performed in-house.
A GBP5.0 million gain was recognised following the disposal of the VBG portfolio, which includes cumulative foreign currency gains now
realised in the income statement that arose during the investment period.
Net finance costs decreased by GBP0.4 million despite the larger portfolio, reflecting the Group's continuing efforts to drive down the
overall cost of debt.
Other finance costs include GBP1.3 million charged in respect of the profit share arrangement with Aviva, the senior debt lender with
security on the Grand Arcade shopping centre, Wigan. Terms were agreed post period end to refinance the facility and in doing so,
terminate the existing profit share arrangement. In total, a profit share provision of GBP5.5 million was fully provided at 28 February 2017
and this was settled on refinancing in April 2017.
Gains on disposals of investment property of GBP5.9 million were recorded following the sale of six properties, most notably 201
Deansgate, Manchester and Exchange House, Watford.
Balance sheet 28 February 2017 31 August 2016
Joint Group Joint Group
IFRS Ventures Total IFRS Ventures Total
GBPm GBPm GBPm GBPm GBPm GBPm
Property portfolio 1,367.7 99.8 1,467.5 1,396.4 140.9 1,537.3
Net debt (673.8) (51.2) (725.0) (733.6) (74.5) (808.1)
Other assets, liabilities and NCI 26.5 (48.6) (22.1) 37.0 (66.4) (29.4)
IFRS NAV 720.4 - 720.4 699.8 - 699.8
Fair value of derivatives 7.5 12.4
Deferred tax 5.7 5.2
EPRA NAV 733.6 717.4
Diluted number of shares (millions) 1,814.2 1,795.4
EPRA NAV per share (pence) 40.4 40.0
EPRA NAV per share increased one per cent, or 0.4 pence, to 40.4 pence. This was the result of realised and unrealised gains on
the property portfolio and the net impact of earnings for the period, less dividends paid.
Property portfolio
Overall the portfolio increased in value on a like-for-like basis by 0.6 per cent.
UK IPD All Property Index reported a 1.4 per cent increase in capital values since August 2016 with the retail sector recording a more
modest 0.3 per cent increase. Capital values have remained relatively flat in the Group's UK Retail portfolio, the result of a good
performance in retail parks offsetting the weaker valuation performance of the UK shopping centres.
Asset management initiatives across the UK Commercial portfolio have resulted in some strong valuation gains at an asset level,
particularly from the AUK portfolio.
UK Hotel valuations remained broadly unchanged, down 1.0 per cent when adjusted for capital expenditure. Increased business
rates, particularly with respect to the London based hotels offset an otherwise positive trading performance year-to-date.
In Europe, modest gains on the Group's shopping centre assets in Berlin and Hamburg drove valuations up 0.2 per cent in local
currency terms, 0.8 per cent in Sterling terms on a like-for-like basis.
Valuation(1) Local currency
28 February 2017 31 August 2016 Gain/(loss) Gain/(loss) Gain/(loss)
Market value of the property portfolio GBPm GBPm GBPm % %
UK Retail 537.0 537.1 (1.8) (0.3) (0.3)
UK Commercial 386.1 374.0 10.2 2.7 2.7
UK Hotels 229.3 229.2 (2.2) (1.0) (1.0)
UK Total 1,152.4 1,140.3 6.2 0.5 0.5
Europe 288.0 285.7 2.3 0.8 0.2
Like-for-like property portfolio 1,440.4 1,426.0 8.5 0.6
Disposals - 84.5
Development 19.0 18.5
Total property portfolio 1,459.4 1,529.0
(1) Valuation includes the effect of capital expenditure, amortisation of head leases, tenant lease incentives and foreign currency translation
where applicable.
Debt and gearing
During the first half of 2017, GBP50.7 million was refinanced, repaid or prepaid. This included the repayment of the GBP5.4 million AIB
facility secured on Newington House and the refinancing of the asset under the AUK facility. The transfer of UK assets into this facility
on refinancing has allowed the Group to benefit from a ratcheted margin structure, and with it reduce the overall cost of debt.
The EUR11.6 million facility on Ingolstadt was repaid in full and a GBP5.2 million prepayment was made against the facility secured over
West Orchards, Coventry in November 2016.
These interventions continue to improve the Group's cost of debt and importantly have reduced LTV to 49.9 per cent from 53.4 per
cent at 31 August 2016.
Re-investment of sale proceeds from mature assets will continue to focus on opportunities to lower the Group's LTV.
Key debt and gearing metrics are presented in the table below.
28 February 2017 31 August 2016
GBPm GBPm
Nominal value of drawn debt 792.3 850.6
Cash and short-term deposits (63.7) (34.3)
Net debt 728.6 816.3
Market value of the property portfolio 1,459.4 1,529.0
LTV (%) 49.9 53.4
Weighted average debt maturity (years) 6.8 6.9
Weighted average interest rate (%) 3.3 3.4
Interest cover (times) (1) 3.1 2.7
Debt with interest rate protection (%) 97.0 95.4
(1) Net rental income divided by net finance costs
The Group's weighted average debt maturity has been maintained at just under 7 years, with over 85 per cent maturing in 2020 or
later. Interest cover has improved from 2.7 to 3.1 times.
The proportion of debt with interest rate protection, which includes the use of interest rate caps and swaps, has increased from 95.4
per cent to 97.0 per cent at the half year. This is in line with the Group policy that at least 75 per cent of debt carries interest rate
certainty. The net fair value liability of these hedging instruments on a proportionate basis at 28 February 2017 was GBP11.1 million.
Cash flow Six months ended Six months ended
28 February 2017 29 February 2016
Joint Group Joint Group
IFRS Ventures Total IFRS Ventures Total
GBPm GBPm GBPm GBPm GBPm GBPm
Operating cash flows 29.0 1.5 30.5 17.9 2.0 19.9
Purchase and development of property (7.8) - (7.8) (272.1) (0.2) (272.3)
Disposals 66.8 (0.6) 66.2 107.5 - 107.5
Other 0.6 (0.6) - 6.1 (0.9) 5.2
Investing cash flows 59.6 (1.2) 58.4 (158.5) (1.1) (159.6)
Issue of shares - - - 110.2 - 110.2
Net debt (repaid)/drawn (35.4) (0.6) (36.0) 110.6 (1.2) 109.4
Dividends paid (21.6) - (21.6) (13.2) - (13.2)
Other (2.0) - (2.0) (7.2) - (7.2)
Financing cash flows (59.0) (0.6) (59.6) 200.4 (1.2) 199.2
Net cash flow 29.6 (0.3) 29.3 59.8 (0.3) 59.5
Operating cash flows increased by GBP10.6 million to GBP30.5 million during the six months ended 28 February 2017 relative to the
comparative interim period, primarily as a result of the increased net rental income from the AUK acquisition and a reduction in net
working capital.
Investing cash inflows were generated from disposal proceeds, the most significant being the disposal of the Group's joint venture
interest in the VBG portfolio in Germany and an office building in Deansgate, Manchester. Cash outflows of GBP7.8 million were applied
primarily towards developments at Ingolstadt in Germany and a twelve bedroom extension to our Southwark Hotel on London's Southbank.
Financing activities comprised the net repayment and prepayment of debt and dividends paid, including withholding tax arising in
respect of the second interim dividend for the year ended 31 August 2016. Scrip take-up of 27.3 per cent resulted in a cash saving of
GBP6.6 million.
Cash balances, including the proportionate share of cash in joint ventures, were GBP63.7 million at 28 February 2017, with an additional
GBP36.6 million available from committed undrawn facilities.
Principal risks and uncertainties
The Directors have concluded that there have been no significant changes to the principal risks and uncertainties faced by the Group,
nor is there anticipated to be any significant changes during the remaining six months to 31 August 2017. Full disclosure of risks and
uncertainties faced by the Company are set out within the 2016 Annual Report.
Dividends
The Directors have declared an interim dividend for the period of 1.3 pence per share representing a 96 per cent pay-out ratio on
underlying earnings. This reflects an annualised yield of 6.4 per cent when based on 28 February 2017 EPRA NAV and 7.0 per cent
when compared to the Group's share price at the same date.
The Directors intend to offer shareholders the option of receiving a cash dividend or a scrip dividend by way of an issue of new
Redefine International shares. An announcement containing details of the tax components of the dividend, the timetable and the scrip
dividend will be released separately on Friday 28 April 2017. The dividend payment date has been set for Monday 26 June 2017 to
all shareholders on the register at Friday 9 June 2017.
Donald Grant
Chief Financial Officer
26 April 2017
Statement of Directors' responsibilities
The Directors are responsible for preparing the condensed consolidated interim financial statements, in accordance with applicable
laws and regulations.
We confirm to the best of our knowledge:
- the condensed consolidated interim financial statements have been prepared in accordance with IAS 34 'Interim Financial
Reporting';
- the condensed consolidated interim financial statements include a true and fair view of the information required by
Sections DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
The operating and financial review refers to important events which have taken place during the period.
Related party transactions are set out in Note 29 to the condensed consolidated interim financial statements.
By order of the Board
Mike Watters Donald Grant
Chief Executive Officer Chief Financial Officer
26 April 2017
Independent review report to Redefine International P.L.C.
Introduction
We have been engaged by Redefine International P.L.C. ("the Company") to review the condensed set of consolidated financial
statements in the half-yearly financial report for the six months ended 28 February 2017 which comprise the condensed consolidated
income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the
condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flows and the related
explanatory notes. The financial reporting framework that has been applied in their preparation is International Financial Reporting
Standards as issued by the IASB ("IFRSs"). Our review was conducted in accordance with the International Standard on Review
Engagements ("ISRE") 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity'.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of consolidated financial
statements in the half-yearly report for the six months ended 28 February 2017 is not prepared, in all material respects, in accordance
with IAS 34 'Interim Financial Reporting' and the Disclosure and Transparency Rules of the UK's Financial Conduct Authority.
Basis of our report, responsibilities and restriction on use
The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for
preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the UK's Financial Conduct
Authority. As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with IFRSs as issued
by the IASB. The Directors are responsible for ensuring that the condensed set of consolidated financial statements included in this
half-yearly financial report has been prepared in accordance with IAS 34 'Interim Financial Reporting'. Our responsibility is to express
to the Company a conclusion on the condensed set of consolidated financial statements in the half-yearly financial report based on
our review.
We conducted our review in accordance with the International Standard on Review Engagements 2410 'Review of Interim Financial
Information Performed by the Independent Auditor of the Entity'. A review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review
is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does
not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
We read the other information contained in the half-yearly financial report to identify material inconsistencies with the information in
the condensed set of 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 review. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our report.
This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the
requirements of the Disclosure and Transparency Rules of the UK's Financial Conduct Authority. Our review has been undertaken
so that we might state to the Company those matters we are required to state to it in this 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 for our review work, for
this report, or for the conclusions we have reached.
N. Marshall 26 April 2017
For and on behalf of
KPMG
Chartered Accountants, Statutory Audit Firm,
1 Harbourmaster Place
International Financial Services Centre
Dublin 1
Ireland
CONDENSED CONSOLIDATED INCOME STATEMENT
for the six months ended 28 February 2017
Re-presented
Reviewed Reviewed
Six months Six months Audited
ended ended Year ended
28 February 29 February 31 August
2017 2016 2016
Continuing operations Note GBPm GBPm GBPm
Revenue 3 50.6 41.5 89.6
Rental income 4 45.8 40.2 86.6
Rental expense (4.3) (2.5) (6.2)
Net rental income 41.5 37.7 80.4
Other income 5 4.8 1.3 2.5
Administrative costs and other fees 6 (8.4) (5.2) (10.9)
Net operating income 37.9 33.8 72.0
Gain/(loss) on revaluation of investment property 2.6 (17.3) (42.5)
Gain on disposal of investment property 5.9 3.4 3.2
Gain on disposal of subsidiary 7 - - 12.2
Distributions from investment at fair value - - 0.5
Gain/(loss) on revaluation of investment at fair value 1.0 1.0 (0.8)
Amortisation of intangible assets (0.1) (0.1) (0.2)
Gain on disposal of non-current assets held for sale - 0.2 0.2
Foreign exchange gain - 2.7 0.9
Profit from operations 47.3 23.7 45.5
Net finance expense 8 (11.6) (12.2) (26.4)
Other finance expenses 9 (1.5) (0.8) (1.9)
Change in fair value of derivative financial instruments 4.4 (2.5) (11.1)
38.6 8.2 6.1
Net gain on sale of joint venture interests (1) 10 5.0 - -
Net impairment reversal/(impairment) of joint ventures and
associate interests 0.7 (0.7) (0.6)
Share of post-tax (loss)/profit from joint ventures (2.6) (0.3) 1.4
Share of post-tax profit from associate 0.3 1.2 1.7
Profit before tax 42.0 8.4 8.6
Taxation 11 (1.0) (0.1) (1.1)
Profit for the period 41.0 8.3 7.5
Profit attributable to:
Equity holders of the Parent 40.8 6.8 7.9
Non-controlling interests 0.2 1.5 (0.4)
41.0 8.3 7.5
Earnings per share
Basic earnings per share (pence) 30 2.3p 0.5p 0.5p
Diluted earnings per share (pence) 30 2.3p 0.5p 0.5p
(1) Net gain on sale of joint venture interests relates to the disposal of the property-owning subsidiaries of one of the Group's joint ventures, Wichford
VBG Holding S.à.r.l. While the holding structure has been retained, the business of the joint venture has been disposed and Wichford VBG Holding
S.à.r.l. holds only residual cash to settle working capital and deferred consideration receivable .
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 28 February 2017
Reviewed Reviewed
Six months Six months Audited
ended ended Year ended
28 February 29 February 31 August
2017 2016 2016
Continuing operations Note GBPm GBPm GBPm
Profit for the period 41.0 8.3 7.5
Other comprehensive income/(expense)
Items that are or may be subsequently reclassified to the income statement:
Transfer of foreign currency translation to the income statement
on disposal of subsidiaries 7 - - (3.6)
Transfer of foreign currency translation to the income statement
on disposal of joint venture interests 10 (2.2) - -
Foreign currency translation on subsidiary foreign operations 2.1 2.4 8.9
Foreign currency translation on joint ventures held by subsidiary
foreign operations 0.4 0.9 8.6
Total other comprehensive income 0.3 3.3 13.9
Total comprehensive income for the period 41.3 11.6 21.4
Total comprehensive income attributable to:
Equity holders of the Parent 41.1 10.1 21.1
Non-controlling interests 0.2 1.5 0.3
41.3 11.6 21.4
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED BALANCE SHEET
as at 28 February 2017
Re-presented
Reviewed Audited
28 February 31 August
Note 2017 2016
GBPm GBPm
Non-current assets
Investment property 12 1,328.0 1,396.4
Investment at fair value through profit or loss 13 9.8 7.9
Investment in joint ventures 14 3.0 5.8
Loans to joint ventures 14 40.5 52.9
Investment in associate 15 10.0 10.2
Intangible assets 1.2 1.3
Property, plant and equipment 0.1 0.1
Derivative financial instruments 20 0.9 0.8
Trade and other receivables 16 7.1 4.7
Total non-current assets 1,400.6 1,480.1
Current assets
Trade and other receivables 16 6.7 26.7
Cash and cash equivalents 17 61.7 32.0
68.4 58.7
Non-current assets held for sale 18 41.0 -
Total current assets 109.4 58.7
Total assets 1,510.0 1,538.8
Non-current liabilities
Borrowings, including finance leases 19 (713.9) (752.8)
Derivative financial instruments 20 (8.2) (12.6)
Deferred tax 21 (3.8) (3.4)
Total non-current liabilities (725.9) (768.8)
Current liabilities
Borrowings, including finance leases 19 (21.6) (12.8)
Trade and other payables 22 (20.2) (21.4)
Tax liabilities (1.7) (2.4)
Total current liabilities (43.5) (36.6)
Total liabilities (769.4) (805.4)
Net assets 740.6 733.4
Equity
Share capital 23 144.9 143.6
Share premium 23 507.4 502.1
Other components of equity 68.1 54.1
Total attributable to equity holders of the Parent 720.4 699.8
Non-controlling interests 25 20.2 33.6
Total equity 740.6 733.4
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
The condensed consolidated interim financial statements were approved by the Board of Directors on 26 April 2017 and were
signed on its behalf by:
Mike Watters Donald Grant
Chief Executive Officer Chief Financial Officer
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 28 February 2017
Total
Foreign attributable
Reverse currency to equity Non-
Share Share acquisition Retained Other translation holders of controlling Total
capital premium reserve loss reserves reserve the Parent interests equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 September 2016 143.6 502.1 134.3 (94.2) 3.2 10.8 699.8 33.6 733.4
Profit for the period - - - 40.8 - - 40.8 0.2 41.0
Transfer of foreign currency translation to the income
statement on disposal of joint venture interests 10 - - - - - (2.2) (2.2) - (2.2)
Foreign currency translation on subsidiary foreign
operations - - - - - 2.1 2.1 - 2.1
Foreign currency translation on joint venture interests
held by subsidiary foreign operations 14 - - - - - 0.4 0.4 - 0.4
Total comprehensive income for the period - - - 40.8 - 0.3 41.1 0.2 41.3
Transactions with equity holders of the Parent
Dividends paid - - - (21.6) - - (21.6) - (21.6)
Scrip dividends 23 1.3 5.3 - (6.6) - - - - -
Fair value of share-based payments - - - - 0.5 - 0.5 - 0.5
1.3 5.3 - (28.2) 0.5 - (21.1) - (21.1)
Changes in ownership interest in subsidiaries
Decrease in non-controlling interest 25 - - - - - - - (0.3) (0.3)
Dividends paid to non-controlling interests 25 - - - - - - - (0.6) (0.6)
Acquisition of non-controlling interests 26 - - - 0.6 - - 0.6 (12.7) (12.1)
- - - 0.6 - - 0.6 (13.6) (13.0)
Balance at 28 February 2017 144.9 507.4 134.3 (81.0) 3.7 11.1 720.4 20.2 740.6
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 29 February 2016
Total
Foreign attributable
Reverse currency to equity Non-
Share Share acquisition Retained Other translation holders of controlling Total
capital premium reserve loss reserves reserve the Parent interests equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 September 2015 117.9 395.0 134.3 (48.8) 2.0 (2.4) 598.0 38.8 636.8
Profit for the period - - - 6.8 - - 6.8 1.5 8.3
Foreign currency translation on subsidiary foreign
operations - - - - - 2.4 2.4 - 2.4
Foreign currency translation on joint venture interests
held by subsidiary foreign operations - - - - - 0.9 0.9 - 0.9
Total comprehensive income for the period - - - 6.8 - 3.3 10.1 1.5 11.6
Transactions with equity holders of the Parent
Shares issued for cash 23 21.7 87.4 - - - - 109.1 - 109.1
Dividends paid - - - (13.2) - - (13.2) - (13.2)
Scrip dividends 23 1.7 9.5 - (11.2) - - - - -
Fair value of share-based payments - - - - 0.5 - 0.5 - 0.5
23.4 96.9 - (24.4) 0.5 - 96.4 - 96.4
Changes in ownership interest in subsidiaries
Decrease in non-controlling interests - - - - - - - (0.2) (0.2)
Dividends paid to non-controlling interests - - - - - - - (0.5) (0.5)
- - - - - - - (0.7) (0.7)
Balance at 29 February 2016 141.3 491.9 134.3 (66.4) 2.5 0.9 704.5 39.6 744.1
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 August 2016
Total
Foreign attributable
Reverse currency to equity Non-
Share Share acquisition Retained Other translation holders of controlling Total
capital premium reserve loss reserves reserve the Parent interests equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 September 2015 117.9 395.0 134.3 (48.8) 2.0 (2.4) 598.0 38.8 636.8
Profit for the year - - - 7.9 - - 7.9 (0.4) 7.5
Transfer of foreign currency translation to the income
statement on disposal of subsidiary 7 - - - - - (3.6) (3.6) - (3.6)
Foreign currency translation on subsidiary foreign
operations - - - - - 8.2 8.2 0.7 8.9
Foreign currency translation on joint venture interests
held by subsidiary foreign operations 14 - - - - - 8.6 8.6 - 8.6
Total comprehensive income for the year - - - 7.9 - 13.2 21.1 0.3 21.4
Transactions with equity holders of the Parent
Shares issued for cash 23 21.7 87.4 - - - - 109.1 - 109.1
Dividends paid - - - (29.4) - - (29.4) - (29.4)
Scrip dividends 23 4.0 19.7 - (23.7) - - - - -
Fair value of share-based payments - - - - 1.2 - 1.2 - 1.2
25.7 107.1 - (53.1) 1.2 - 80.9 - 80.9
Changes in ownership interest in subsidiaries
Decrease in non-controlling interests 25 - - - - - - - (1.2) (1.2)
Dividends paid to non-controlling interests 25 - - - - - - - (2.2) (2.2)
Acquisition of non-controlling interests 26 - - - (0.2) - - (0.2) (2.1) (2.3)
- - - (0.2) - - (0.2) (5.5) (5.7)
Balance at 31 August 2016 143.6 502.1 134.3 (94.2) 3.2 10.8 699.8 33.6 733.4
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 28 February 2017
Re-presented
Reviewed Reviewed
Six months Six months Audited
ended ended Year ended
28 February 29 February 31 August
2017 2016 2016
Continuing operations Note GBPm GBPm GBPm
Cash generated from operations 27 40.7 31.5 69.2
Interest received 3.5 2.5 3.3
Interest paid (13.9) (13.0) (27.8)
Net tax paid (1.3) (3.1) (5.1)
Net cash inflow from operating activities 29.0 17.9 39.6
Cash flows from investing activities
Net cash disposed on sale of subsidiary - - (0.4)
Purchase and development of investment property (7.8) (272.1) (489.9)
Net proceeds on sale of investment property 48.7 34.2 38.8
Distributions from investments at fair value 0.5 - -
Disposal of investment at fair value - 80.2 80.2
Acquisition of investment at fair value - (6.9) (8.4)
Net proceeds received on sale of joint venture interests (1) 18.1 - -
Increase in loans to joint ventures - (0.5) (0.5)
Decrease in loans to joint ventures 0.6 1.4 2.6
Distributions from associate 1.1 1.4 2.0
Disposal of non-current assets held for sale - 0.2 0.2
Increase in loan to external party (1.6) - -
Increase in loans to related parties - (2.0) (2.0)
Decrease in loans to related parties - 5.7 7.7
Purchase of property, plant and equipment - (0.1) -
Net cash inflow/(outflow) from investing activities 59.6 (158.5) (369.7)
Cash flows from financing activities
Issue of share capital - 115.0 115.0
Share issue costs paid - (4.8) (5.9)
Proceeds from borrowings 16.8 155.0 332.5
Repayment of borrowings (52.2) (44.4) (134.7)
Payment of Aviva profit share (1.1) - (0.3)
Other finance expenses (0.2) (3.1) (4.0)
Derivative financial instruments purchased and settled (0.1) (2.4) (2.4)
Dividends paid to equity holders (21.6) (13.2) (29.4)
Dividends paid and loans re-paid to non-controlling interests (0.6) (0.7) (2.3)
Acquisitions from non-controlling interests - - (2.3)
Movement in restricted cash and cash equivalents - (1.0) 4.6
Net cash (outflow)/inflow from financing activities (59.0) 200.4 270.8
Net increase/(decrease) in unrestricted cash and cash equivalents 29.6 59.8 (59.3)
Effect of exchange rate fluctuations on cash and cash equivalents 0.1 0.7 2.3
Unrestricted cash and cash equivalents at 1 September 28.7 85.7 85.7
Unrestricted cash and cash equivalents at end of the period 58.4 146.2 28.7
Restricted cash and cash equivalents 3.3 8.9 3.3
Cash and cash equivalents at end of the period 61.7 155.1 32.0
(1) Net proceeds of GBP18.1 million received by 28 February 2017 on disposal of joint ventures interests of Wichford VBG Holding S.à.r.l. are comprised
of the Group's 49 per cent share of the proceeds received of GBP36.9 million after the deduction of the performance fee of GBP4.0 million (gross cash
proceeds: GBP40.9 million) and includes the repayment of loans advanced by the Group to the joint venture of GBP12.3 million. The performance fee
received has been separately presented under operating activities.
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the six months ended 28 February 2017
1. GENERAL INFORMATION
Redefine International P.L.C. was incorporated in the Isle of Man on 28 June 2004 (Registered Number: 111198C) and was re-
registered under the Isle of Man Companies Act 2006 on 3 December 2013 (Registered Number: 010534V).
On 4 December 2013, the Company converted to a UK-REIT and moved its tax residence from the Isle of Man to the United Kingdom ("UK").
The Company holds a primary listing on the Main Market of the London Stock Exchange ("LSE") and a secondary listing on the Main
Board of the Johannesburg Stock Exchange ("JSE").
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 STATEMENT OF COMPLIANCE
These condensed consolidated interim financial statements ("interim financial statements") for the six months ended 28 February
2017, have been prepared in accordance with IAS 34 'Interim Financial Reporting' ("IAS 34") as issued by the International Accounting
Standards Board ("IASB").
Selected explanatory notes are included to explain events and transactions that are significant to understanding the changes in
financial position and performance of the Group since the last annual consolidated financial statements as at and for the year ended
31 August 2016.
The financial information contained in these interim financial statements does not constitute a complete set of financial statements
and does not include all of the information required for full annual financial statements (including all comparative figures and all
required notes) prepared in accordance with International Financial Reporting Standards ("IFRS"). The interim financial statements
should therefore be read in conjunction with the consolidated financial statements as at and for the year ended 31 August 2016 which
are available on the Group's website, www.redefineinternational.com.
The relevant new standards, amendments and interpretations that have been adopted during the period are set out in the following table:
Effective annual periods
International Financial Reporting Standard beginning on or after:
Annual improvements to IFRSs 2012-2014 cycle
IFRS 5 'Non-Current Assets Held for Sale and Discontinued Operations' (amendment) ("IFRS 5") 1 January 2016
IFRS 7 'Financial Instruments: Disclosures' (amendment) ("IFRS 7") 1 January 2016
IAS 34 'Interim Financial Reporting' 1 January 2016
Other amendments
IAS 1 'Presentation of Financial Statements' (amendment) ("IAS 1") 1 January 2016
IAS 16 'Property, Plant and Equipment' (amendment) ("IAS 16") 1 January 2016
IAS 27 'Consolidated and Separate Financial Statements' ("IAS 27") 1 January 2016
IAS 38 'Intangible Assets' (amendment) ("IAS 38") 1 January 2016
Investment Entities: Applying the Consolidation Exception [Amendments to IFRS 10 'Consolidated
Financial Statement' ("IFRS 10"), IFRS 12 'Disclosure of Interests in Other Entities' (amendment)
("IFRS 12"), IAS 28 'Investments in Associates and Joint Ventures' (amendment) ("IAS 28")] 1 January 2016
IFRS 11 'Joint Arrangements' (amendment) ("IFRS 11") 1 January 2016
The adoption of these improvements and amendments has not had a material impact on the interim financial statements of the Group
and otherwise the accounting policies applied by the Group are the same as those applied in the audited consolidated financial
statements as at and for the year ended 31 August 2016, as set out on pages 91-95 of the 2016 Annual Report.
The relevant new standards, amendments and interpretations that have been issued by the IASB but are not yet effective, or have
not been adopted early, are disclosed in the table below. The impact of these improvements and amendments on the consolidated
financial statements of the Group is being assessed.
Effective annual periods
International Financial Reporting Standard beginning on or after:
Annual improvements to IFRSs 2014-2016 cycle
IFRS 12 'Disclosure of Interests in Other Entities' (amendment) 1 January 2017
IAS 28 'Investments in Associates and Joint Ventures' (amendment) 1 January 2018
Other amendments
IAS 7 'Statement of Cash Flows' (amendment) ("IAS 7") 1 January 2017
IAS 12 'Income Taxes' (amendment) ("IAS 12") 1 January 2017
IFRS 2 'Share Based Payment' (amendment) ("IFRS 2") 1 January 2018
IFRS 9 'Financial Instruments' (amendment) ("IFRS 9") 1 January 2018
IFRS 15 'Revenue from Contracts with Customers' ("IFRS 15") 1 January 2018
IAS 40 'Investment Property' (amendment) ("IAS 40") 1 January 2018
IFRS 16 'Leases' ("IFRS 16") 1 January 2019
2.2 BASIS OF PREPARATION
The interim financial statements are presented in Great British Pounds, which is the functional currency of the Company and the
presentational currency of the Group, rounded to the nearest hundred thousand pounds. They are prepared using the historical cost
basis except for investment property, certain assets held for sale, derivative financial instruments and financial instruments designated
at fair value through profit and loss, all of which are carried at fair value.
GOING CONCERN
The Directors are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future
and for this reason the interim financial statements have been prepared on a going concern basis.
RE-PRESENTATION OF PRIOR PERIOD COMPARATIVES
Consistent with the presentation in the financial statements for the year ended 31 August 2016, the Group has re-presented its
interests in joint venture entities for the comparative interim period, 29 February 2016. Payments of equity which are permanent and
loss absorbing in nature are disclosed as 'Investments in joint ventures', while advances of loans with either contractual maturities or
amounts that are callable on demand, are disclosed as 'Loans to joint ventures'. Interest payments made by joint ventures under loan
agreements are presented as finance income whereas distributions received from investments reduce the carrying value of the
Group's investment in joint ventures.
The impact of this change on the key financial statement line items for the period ended 29 February 2016 was as follows:
Consolidated income statement GBPm
Net finance expense reduced by 1.2
Share of post-tax profit from joint ventures reduced by (1.2)
Consolidated statement of cash flows GBPm
Interest received increased by 1.1
Distributions from joint ventures and associates reduced by (1.1)
Consolidated balance sheet (1) GBPm
Investments in joint ventures reduced by (11.0)
Loans to joint ventures increased by 11.0
(1) The consolidated balance sheet as at 29 February 2016 is not presented in these condensed consolidated financial statements. The re-presentations
required are disclosed for information purposes only.
As there has been no change in either net asset value or profit for the period, there has been no impact on net asset value per share
or earnings per share. There has also been no impact on net cash flows.
Certain other presentational changes were made to the comparative balance sheet to ensure consistency with the current period.
This has resulted in a reclassification of tenant lease incentives of GBP3.8 million and other receivables of GBP0.9 million as non-current
assets in line with the requirements of IAS 1, Paragraph 60, as at 31 August 2016 these amounts would not have been settled or
recovered within twelve months of the balance sheet date. In addition, current tax liabilities of GBP2.4 million as at 31 August 2016 have
been presented separately on the consolidated balance sheet in accordance with IAS 1, Paragraph 54 (n). Current tax liabilities were
previously included in trade and other payables.
2.3 KEY JUDGEMENTS AND ESTIMATES
The preparation of the interim financial statements in conformity with IFRS requires the use of judgements and estimates that affect
the reported amounts of assets and liabilities at the reporting date and the reported amounts of revenues and expenses during the
period. Although these estimates are based on the Directors' best knowledge of the amount, event or actions, actual results may
differ materially from those estimates.
The principal areas where such judgements and estimates have been made are detailed below:
2.3.1 INVESTMENT PROPERTY VALUATION
The Group uses valuations performed by independent valuers in accordance with IFRS 13 'Fair Value Measurement' ("IFRS 13") as
the fair value of its investment property. The valuations are based upon assumptions including estimated rental values, future rental
income, anticipated maintenance costs, future development costs and appropriate market yields. The valuers also make reference to
market evidence of transaction prices for similar properties. Further details are provided in Note 12.
2.3.2 PROPERTY ACQUISITIONS
Where properties are acquired through the acquisition of corporate interests, the Directors have regard to the substance of the assets
and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business. Where such
acquisitions are not considered to be an acquisition of a business, the transactions are accounted for as if the Group had acquired
the underlying property directly. Accordingly, no goodwill arises on initial recognition of the asset purchase. Corporate acquisitions
are otherwise accounted for as business combinations.
2.3.3 CLASSIFICATION OF INVESTMENT PROPERTY FOR UK HOTELS
The UK Hotels are held for capital appreciation and to earn rental income. Apart from one of the properties, the hotels have been let
to Redefine Hotel Management Limited ("RHML") and Redefine Earls Court Management Limited ("RECML"), on lease terms which
are subject to annual review. At each review, the revised rent is set with reference to the forecast EBITDA of the hotels. RHML and
RECML run the hotels' operating business and are therefore exposed to fluctuations in the underlying trading performance of each
hotel under management. They are responsible for the key decision making of the business operations and the day-to-day upkeep of
the properties.
The Group cumulatively holds a 30.4% shareholding in RedefineBDL Hotel Group Limited ("RedefineBDL"), which in turn controls
RHML and RECML. Having considered the guidance in IFRS 10, the respective rights of each of the shareholders in RedefineBDL
and the relative size of the Group's shareholding, the Directors have determined that the Group has the ability to exercise significant
influence over RedefineBDL. The Group does not control RedefineBDL and hence does not control RHML or RECML. The investment
in RedefineBDL is classified as an associate.
Aside from the payment of rental income to the Group, which is reset annually, and the Group's shareholding in RedefineBDL, the
Group is not involved with the operation of the hotel management business. There are also limited transactions between the two
entities and, as a result, the hotels are classified as investment property in line with IAS 40.
2.3.4 CLASSIFICATION OF THE GROUP'S INVESTMENT IN INTERNATIONAL HOTEL PROPERTIES LIMITED ("IHL") AT FAIR VALUE THROUGH PROFIT OR LOSS
On 14 October 2015, the Company acquired, by way of private placement, 3.8 million shares in the newly listed International Hotel
Properties Limited (formerly International Hotel Group Limited) for GBP3.8 million. On the date of listing this investment represented
25.4% of the entity's issued share capital and the investment was recognised as an associate of the Group under the equity method.
On 20 October 2015, the Group ceased to recognise IHL as an associate when its shareholding was diluted to 13.2% and the
investment was reclassified as a financial instrument at fair value through profit or loss. At 31 August 2016, the Group held a 15.5%
interest in IHL. During the six months ended 28 February 2017, the Group's shareholding increased by 1.7% to 17.2%. Refer to Note
13 for further details on changes in the Group's ownership interests in IHL.
The degree of judgement relating to this classification has increased given that the Company currently has representation on IHL's
board of directors. In drawing their conclusion, the Directors have considered the criteria for significant influence in paragraphs 5-9 of
IAS 28, the relative size of the Group's shareholding and the fact the Group does not have the right to appoint a director. Having
considered all the facts and circumstances, the Directors believe that the designation of the Company's investment as a financial
asset at fair value through profit or loss continues to be appropriate.
2.3.5 AVIVA PROFIT SHARE AND CAPITAL APPRECIATION RIGHTS
As part of the Aviva debt restructure in 2013, Aviva, the lender with security over the Group's shopping centre asset, Grand Arcade,
Wigan had a right under the facility agreement to participate in 50 per cent of the valuation uplifts of the property in excess of the
value of the drawn debt ("capital appreciation right"). Once the value of the property exceeded GBP90 million, Aviva had the additional
right to realise tranches of the excess valuation at any time, with corresponding reductions to their right to profit share participation.
While the Group has recognised a financial liability in respect of Aviva's right to participate in the profits of the shopping centre in prior
periods and as at 28 February 2017, a provision has not been recognised to date in respect of Aviva's capital appreciation right. A
reliable estimate of the provision could not be made and it has not been considered probable that a payment to Aviva would be
required. In prior periods, the contractual obligation has been disclosed as a contingent liability. At 28 February 2017, the possibility
of payment was considered remote based on the revised terms under negotiation in the debt restructure that completed post period
end. Disclosure of the contingent liability was therefore not required.
Both Aviva's existing capital appreciation and profit participation rights have been formally extinguished on completion of the debt
restructure after the reporting date.
3. SEGMENTAL REPORTING
As required by IFRS 8 'Operating Segments' ("IFRS 8"), the information provided to the Board, which is the Chief Operating Decision
Maker, has been classified into the following segments:
UK Retail: the Group's portfolio of shopping centres, retail parks and other retail assets;
UK Commercial: the Group's portfolio of offices, motor trade outlets, roadside service stations and logistics distribution centres;
UK Hotels: the Group's hotel portfolio which comprises eight hotels in Greater London and South East England and one
hotel in Edinburgh, Scotland;
The Group's 30.4% associate interest in RedefineBDL (5.1% of which is classified as held for sale) which leases
and manages all of the Group's hotel properties except for the Enfield Travelodge; and
The Group's 17.2% interest in IHL, a hotel and leisure focused property investment company listed on the Euro
MTF Market of the Luxembourg Stock Exchange ("LUXSE") and the AltX of the JSE;
Europe: the Group's portfolio in Germany. The portfolio is comprised of shopping centres, discount supermarkets and,
until 1 January 2017, Government-let offices. In the comparative periods, the Group's interest in the last legacy
asset, The Hague, which was disposed on 31 August 2016 is also included; and
Other: the Group's holding and subsidiary management companies that carry out the head office and centralised asset
management activities of the Group.
Management information, as presented to the Chief Operating Decision Maker, is prepared on a proportionately consolidated basis.
Segmental reporting is therefore reported in line with management information, with the Group's share of joint ventures presented
line-by-line. Joint venture adjustments are disclosed to reconcile segmental performance and position to the condensed consolidated
financial statements.
Joint
UK UK UK Venture IFRS
Segmental income statement Retail Commercial Hotels Europe Other Total Adj Total
for the six months ended 28 February 2017 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Continuing operations
Revenue
Rental income 19.9 12.8 7.4 10.7 - 50.8 (5.0) 45.8
Other income (1) - - - - 2.8 2.8 2.0 4.8
Total revenue 19.9 12.8 7.4 10.7 2.8 53.6 (3.0) 50.6
Rental income 19.9 12.8 7.4 10.7 - 50.8 (5.0) 45.8
Rental expense (2.8) (0.6) (0.1) (1.3) - (4.8) 0.5 (4.3)
Net rental income 17.1 12.2 7.3 9.4 - 46.0 (4.5) 41.5
Other income (1) - - - - 2.8 2.8 2.0 4.8
(Loss)/gain on revaluation of investment property (1.8) 10.3 (2.2) (4.3) - 2.0 0.6 2.6
Gain on disposal of investment property - 5.9 - - - 5.9 - 5.9
Gain on revaluation of investment at fair value - - 1.0 - - 1.0 - 1.0
Finance income - - - 2.4 0.5 2.9 - 2.9
Finance expense (8.1) (3.3) (1.6) (4.9) - (17.9) 3.4 (14.5)
Other finance expenses (1.3) (0.1) - - (0.1) (1.5) - (1.5)
Change in fair value of derivative financial
instruments 1.6 2.5 (0.1) 1.3 - 5.3 (0.9) 4.4
Group gain on sale of joint venture interests (2) - - - 5.2 - 5.2 (0.2) 5.0
Joint venture loss on sale of subsidiaries (2) - - - (0.2) - (0.2) 0.2 -
Reversal of impairment of investment in associate - - 0.6 - - 0.6 - 0.6
Share of post-tax profit from associate - - 0.3 - - 0.3 - 0.3
Total per reportable segments 7.5 27.5 5.3 8.9 3.2 52.4 0.6 53.0
Unallocated income and expenses: (3)
Administrative costs and other fees (1) (8.8) 0.4 (8.4)
Amortisation of intangible assets (0.1) - (0.1)
Profit before tax 43.5 1.0 44.5
Taxation (1.6) 0.6 (1.0)
41.9 1.6 43.5
Joint venture adjustments:
Movement of losses restricted in joint ventures (4) (0.9) 0.9 -
Reversal of impairment of loans to joint ventures - 0.1 0.1
Share of post-tax loss from joint ventures - (2.6) (2.6)
IFRS profit for the period 41.0 - 41.0
(1) Other income includes management fee income from joint ventures of GBP4.4 million on an IFRS basis, of which GBP4.0 million relates to the Performance
Fee on disposal of joint venture interests (Refer to Note 5). On a proportionate basis, and for segmental reporting purposes, the net Performance Fee
of GBP2.0 million fee has been recognised in other income with the related Group share of the joint venture expense of GBP2.0 million reclassified from
administrative costs and other fees.
(2) The GBP5.2 million gain recognised by the Group and the loss of GBP0.2 million recognised by the joint venture relate to the share sale of the property-
owning subsidiaries of Wichford VBG Holding S.à.r.l. on 1 January 2017. The net gain on sale of GBP5.0 million has been recognised as single line item
within the consolidated income statement under 'Net gain on sale of joint venture interests' (Refer to Note 10).
(3) Unallocated income and expenses are items incurred centrally which are neither directly attributable nor can be reasonably allocated to individual segments.
(4) As detailed in Note 14, the Group's interest in 26 Esplanade No 1 Limited joint venture ("the Esplanade") has reduced to GBPNil in the financial
statements in line with IAS 28. On a proportionate basis, the Group's share of the net assets of the Esplanade is included line-by-line. Movements in
the losses of the Esplanade not recognised during each reporting period on an equity accounted basis are presented to reconcile segmental
information to the IFRS statements.
Joint
UK UK UK Venture IFRS
Other segmental information Retail Commercial Hotels Europe Other Total Adj Total
for the six months ended 28 February 2017 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Inter-segmental revenue and expense:
Management fee income - - - - 0.5 0.5 - 0.5
Management fee expense - - - (0.5) - (0.5) - (0.5)
- - - (0.5) 0.5 - - -
Inter-segmental revenue and expense relate to intercompany investment management fees that eliminate on consolidation.
Joint
UK UK UK Venture IFRS
Segmental balance sheet Retail Commercial Hotels Europe Total Adj Total
as at 28 February 2017 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Investment property 526.4 369.5 228.8 303.1 1,427.8 (99.8) 1,328.0
Investment at fair value through profit or loss - - 9.8 - 9.8 - 9.8
Investment in associate - - 10.0 - 10.0 - 10.0
Trade and other receivables 5.8 2.8 1.1 3.0 12.7 (1.6) 11.1
Cash and cash equivalents 8.9 7.4 5.5 9.3 31.1 (2.0) 29.1
Non-current assets held for sale 16.8 17.4 1.3 5.5 41.0 - 41.0
Borrowings, including finance leases (333.1) (171.3) (111.2) (173.1) (788.7) 53.2 (735.5)
Trade and other payables (9.7) (5.7) (1.7) (2.8) (19.9) 2.0 (17.9)
Segmental net assets 215.1 220.1 143.6 145.0 723.8 (48.2) 675.6
Unallocated assets and liabilities:
Other non-current assets 1.3 - 1.3
Trade and other receivables 2.7 - 2.7
Cash and cash equivalents 32.6 - 32.6
Net derivative financial instruments (11.1) 3.8 (7.3)
Deferred tax (5.7) 1.9 (3.8)
Trade and other payables (2.3) - (2.3)
Tax liabilities (1.7) - (1.7)
739.6 (42.5) 697.1
Joint venture adjustments:
Fair value adjustment on acquisition of joint venture
interest 0.9 (0.9) -
Joint venture non-controlling interest (0.6) 0.6 -
Cumulative losses restricted in joint ventures (1) 0.7 (0.7) -
Investment in joint ventures - 3.0 3.0
Loans to joint ventures - 40.5 40.5
IFRS net assets 740.6 - 740.6
(1) As detailed in Note 14, the Group's interest in the Esplanade has reduced to GBPNil in the financial statements in line with IAS 28. On a proportionate
basis, the Group's share of the Esplanade is included line-by-line. The cumulative losses of this joint venture that the Group has not recognised at the
reporting date on an equity accounted basis are presented to reconcile segmental information to the IFRS statements.
Joint
UK UK UK Venture IFRS
Other segmental information Retail Commercial Hotels Europe Total Adj Total
as at 28 February 2017 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Additions to investment property during the period per reportable segment:
Capitalised expenditure 0.9 0.7 1.2 5.2 8.0 - 8.0
Capitalised finance costs - - 0.2 0.2 0.4 - 0.4
0.9 0.7 1.4 5.4 8.4 - 8.4
Re-presented
Joint Re-presented
UK UK UK Venture IFRS
Segmental income statement Retail Commercial Hotels Europe Other Total Adj Total
for the six months ended 29 February 2016 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Continuing operations
Revenue
Rental income 17.4 9.3 7.5 10.7 - 44.9 (4.7) 40.2
Other income (1) - 0.5 - 0.4 0.9 1.8 (0.5) 1.3
Total revenue 17.4 9.8 7.5 11.1 0.9 46.7 (5.2) 41.5
Rental income 17.4 9.3 7.5 10.7 - 44.9 (4.7) 40.2
Rental expense (1.7) (0.3) - (1.0) - (3.0) 0.5 (2.5)
Net rental income 15.7 9.0 7.5 9.7 - 41.9 (4.2) 37.7
Other income (1) - 0.5 - 0.4 0.9 1.8 (0.5) 1.3
(Loss)/gain on revaluation of investment property (2) (20.8) 4.9 (0.6) (1.3) - (17.8) 0.5 (17.3)
Gain on disposal of investment property - 3.4 - - - 3.4 - 3.4
Gain on revaluation of investment at fair value - - 1.0 - - 1.0 - 1.0
Gain on disposal of non-current assets held for sale - 0.2 - - - 0.2 - 0.2
Foreign exchange gain - - - - 2.7 2.7 - 2.7
Finance income - - - - 3.2 3.2 - 3.2
Finance expense (8.0) (3.1) (1.9) (5.6) - (18.6) 3.2 (15.4)
Other finance expenses (0.7) (0.1) - - - (0.8) - (0.8)
Change in fair value of derivative financial
instruments (1.0) (1.9) 0.2 (1.2) - (3.9) 1.4 (2.5)
Share of post-tax profit from associate - - 1.2 - - 1.2 - 1.2
Total per reportable segments (14.8) 12.9 7.4 2.0 6.8 14.3 0.4 14.7
Unallocated income and expenses: (3)
Administrative costs and other fees (5.5) 0.3 (5.2)
Amortisation of intangible assets (0.1) - (0.1)
Profit before tax 8.7 0.7 9.4
Taxation (0.3) 0.2 (0.1)
8.4 0.9 9.3
Joint venture adjustments:
Movement of losses restricted in joint ventures (4) (0.1) 0.1 -
Impairment of loans to joint ventures - (0.7) (0.7)
Share of post-tax loss from joint ventures - (0.3) (0.3)
IFRS profit for the period 8.3 - 8.3
(1) Other income in the 'Other' segment includes management fee income from joint ventures of GBP0.1 million.
(2) Included in (loss)/gain on revaluation of investment property is GBP22.6 million of costs incurred on the acquisition of the AUK portfolio.
(3) Unallocated income and expenses are items incurred centrally which are neither directly attributable nor can be reasonably allocated to individual segments.
(4) As detailed in Note 14, the Group's interest in the Esplanade has reduced to GBPNil in the financial statements in line with IAS 28. On a proportionate
basis, the Group's share of the net assets of the Esplanade is included line-by-line. Movements in the losses of the Esplanade not recognised during
each reporting period on an equity accounted basis are presented to reconcile segmental information to the IFRS statements.
Joint
UK UK UK Venture IFRS
Other segmental information Retail Commercial Hotels Europe Other Total Adj Total
for the six months ended 29 February 2016 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Inter-segmental revenue and expense:
Management fee income - - - - 0.4 0.4 - 0.4
Management fee expense - - - (0.4) - (0.4) - (0.4)
- - - (0.4) 0.4 - - -
Inter-segmental revenue and expense relate to intercompany investment management fees that eliminate on consolidation.
Joint
UK UK UK Venture IFRS
Segmental balance sheet Retail Commercial Hotels Europe Total Adj Total
as at 29 February 2016 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Investment property 560.1 418.6 235.8 320.7 1,535.2 (129.0) 1,406.2
Investment at fair value through profit or loss - - 7.9 - 7.9 - 7.9
Investment in associate - - 7.8 - 7.8 - 7.8
Trade and other receivables 4.2 1.4 11.1 4.0 20.7 (1.0) 19.7
Cash and cash equivalents 13.1 6.2 1.5 10.4 31.2 (2.1) 29.1
Borrowings, including finance leases (283.8) (147.9) (109.9) (208.7) (750.3) 71.5 (678.8)
Trade and other payables (59.9) (165.0) (1.0) (5.2) (231.1) 3.2 (227.9)
Segmental net assets 233.7 113.3 153.2 121.2 621.4 (57.4) 564.0
Unallocated assets and liabilities:
Other non-current assets 1.6 - 1.6
Trade and other receivables 16.3 - 16.3
Cash and cash equivalents 126.0 - 126.0
Net derivative financial instruments (7.4) 4.5 (2.9)
Other non-current liabilities (8.4) 5.4 (3.0)
Trade and other payables (8.2) 0.8 (7.4)
741.3 (46.7) 694.6
Joint venture adjustments:
Fair value of retained joint venture interest 1.4 (1.4) -
Cumulative losses restricted in joint ventures (1) 1.4 (1.4) -
Re-presented investment in joint ventures - 4.3 4.3
Re-presented loans to joint ventures - 45.2 45.2
IFRS net assets 744.1 - 744.1
(1) As detailed in Note 14, the Group's interest in the Esplanade has reduced to GBPNil in the financial statements in line with IAS 28. On a proportionate
basis, the Group's share of the Esplanade is included line-by-line. The cumulative losses of this joint venture that the Group has not recognised at the
reporting date on an equity accounted basis are presented to reconcile segmental information to the IFRS statements.
Joint
UK UK UK Venture IFRS
Other segmental information Retail Commercial Hotels Europe Total Adj Total
as at 29 February 2016 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Additions to investment property during the period per reportable segment:
Additions from acquisition of investment property 213.1 276.6 - - 489.7 - 489.7
Acquisition costs 10.5 12.1 - - 22.6 - 22.6
Capitalised expenditure 1.9 - 1.3 1.1 4.3 (0.1) 4.2
225.5 288.7 1.3 1.1 516.6 (0.1) 516.5
Joint
UK UK UK Venture IFRS
Segmental income statement Retail Commercial Hotels Europe Other Total Adj Total
for the year ended 31 August 2016 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Continuing operations
Revenue
Rental income 37.0 22.2 15.0 22.3 0.1 96.6 (10.0) 86.6
Other income (1) - 0.8 - 0.4 1.9 3.1 (0.6) 2.5
Distributions from investment at fair value - - 0.5 - - 0.5 - 0.5
Total revenue 37.0 23.0 15.5 22.7 2.0 100.2 (10.6) 89.6
Rental income 37.0 22.2 15.0 22.3 0.1 96.6 (10.0) 86.6
Rental expense (4.1) (0.9) - (2.3) - (7.3) 1.1 (6.2)
Net rental income 32.9 21.3 15.0 20.0 0.1 89.3 (8.9) 80.4
Other income (1) - 0.8 - 0.4 1.9 3.1 (0.6) 2.5
(Loss)/gain on revaluation of investment property (2) (40.1) 5.0 (7.3) 1.2 - (41.2) (1.3) (42.5)
Gain on disposal of investment property - 3.2 - - - 3.2 - 3.2
Gain on disposal of subsidiary - - - 12.2 - 12.2 12.2
Distributions from investment at fair value - - 0.5 - - 0.5 - 0.5
Loss on revaluation of investment at fair value - - (0.8) - - (0.8) - (0.8)
Gain on disposal of non-current assets held for sale - 0.2 - - - 0.2 - 0.2
Foreign exchange gain - - - - 0.9 0.9 - 0.9
Finance income - - - - 6.3 6.3 - 6.3
Finance expense (16.1) (7.1) (3.8) (12.3) (0.1) (39.4) 6.7 (32.7)
Other finance expenses (1.5) (0.3) (0.1) (0.1) - (2.0) 0.1 (1.9)
Gain on financial liabilities - - - 2.5 - 2.5 (2.5) -
Change in fair value of derivative financial
instruments (5.0) (5.5) (0.7) (1.6) - (12.8) 1.7 (11.1)
Impairment of investment in associate - - (3.2) - - (3.2) - (3.2)
Share of post-tax profit from associate - - 1.7 - - 1.7 - 1.7
Total per reportable segments (29.8) 17.6 1.3 22.3 9.1 20.5 (4.8) 15.7
Unallocated income and expenses: (3)
Administrative costs and other fees (11.4) 0.5 (10.9)
Amortisation of intangible assets (0.2) - (0.2)
Profit before tax 8.9 (4.3) 4.6
Taxation (1.6) 0.5 (1.1)
7.3 (3.8) 3.5
Joint venture adjustments:
Movement of losses restricted in joint ventures (4) 0.2 (0.2) -
Impairment of loans to joint ventures - 2.6 2.6
Share of post-tax profit from joint ventures - 1.4 1.4
IFRS profit for the year 7.5 - 7.5
(1) Other income in the 'Other' segment includes management fee income from joint ventures of GBP0.7 million. Refer to Note 29 for further details.
(2) Included in (loss)/gain on revaluation of investment property is GBP22.6 million of costs incurred on the acquisition of the AUK portfolio.
(3) Unallocated income and expenses are items incurred centrally which are neither directly attributable nor can be reasonably allocated to individual segments.
(4) As detailed in Note 14, the Group's interest in the Esplanade has reduced to GBPNil in the financial statements in line with IAS 28. On a proportionate
basis, the Group's share of the net assets of the Esplanade is included line-by-line. Movements in the losses of the Esplanade not recognised during
each reporting period on an equity accounted basis are presented to reconcile segmental information to the IFRS statements.
Joint
UK UK UK Venture IFRS
Other segmental information Retail Commercial Hotels Europe Other Total Adj Total
for the year ended 31 August 2016 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Inter-segmental revenue and expense:
Management fee income - - - - 3.9 3.9 - 3.9
Management fee expense (1.4) (1.1) - (0.8) (0.6) (3.9) - (3.9)
(1.4) (1.1) - (0.8) 3.3 - - -
Inter-segmental revenue and expense relate to intercompany investment management fees that eliminate on consolidation.
Joint
UK UK UK Venture IFRS
Segmental balance sheet Retail Commercial Hotels Europe Total Adj Total
as at 31 August 2016 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Investment property 541.9 419.0 229.6 346.8 1,537.3 (140.9) 1,396.4
Investment at fair value through profit or loss - - 7.9 - 7.9 - 7.9
Investment in associate - - 10.2 - 10.2 - 10.2
Trade and other receivables 4.8 3.3 1.7 5.9 15.7 (1.0) 14.7
Cash and cash equivalents 8.3 2.5 2.0 9.0 21.8 (2.3) 19.5
Borrowings, including finance leases (324.9) (201.6) (109.9) (206.0) (842.4) 76.8 (765.6)
Trade and other payables (6.6) (6.4) (1.7) (7.7) (22.4) 3.9 (18.5)
Segmental net assets 223.5 216.8 139.8 148.0 728.1 (63.5) 664.6
Unallocated assets and liabilities:
Other non-current assets 1.4 - 1.4
Trade and other receivables 16.7 - 16.7
Cash and cash equivalents 12.5 - 12.5
Net derivative financial instruments (16.5) 4.7 (11.8)
Deferred tax (5.3) 1.9 (3.4)
Trade and other payables (2.9) - (2.9)
Tax liabilities (2.4) - (2.4)
731.6 (56.9) 674.7
Joint venture adjustments:
Fair value on acquisition of joint venture interest 0.9 (0.9) -
Joint venture non-controlling interest (0.7) 0.7 -
Cumulative losses restricted in joint ventures (1) 1.6 (1.6) -
Investment in joint ventures - 5.8 5.8
Loans to joint ventures - 52.9 52.9
IFRS net assets 733.4 - 733.4
(1) As detailed in Note 14, the Group's interest in the Esplanade has reduced to GBPNil in the financial statements in line with IAS 28. On a proportionate
basis, the Group's share of the Esplanade is included line-by-line. The cumulative losses of this joint venture that the Group has not recognised at the
reporting date on an equity accounted basis are presented to reconcile segmental information to the IFRS statements.
Joint
UK UK UK Venture IFRS
Other segmental information Retail Commercial Hotels Europe Total Adj Total
as at 31 August 2016 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Additions to investment property during the year per reportable segment:
Additions from acquisition of investment property 213.1 276.6 - - 489.7 - 489.7
Acquisition costs 10.5 12.1 - - 22.6 - 22.6
Capitalised expenditure 3.0 0.3 1.8 2.8 7.9 (0.1) 7.8
226.6 289.0 1.8 2.8 520.2 (0.1) 520.1
4. RENTAL INCOME
Reviewed Reviewed Audited
28 February 29 February 31 August
2017 2016 2016
GBPm GBPm GBPm
Gross lease payments from third parties 38.8 33.0 71.9
Gross lease payments from related parties (1) 7.0 7.2 14.7
Rental income 45.8 40.2 86.6
The future aggregate minimum rentals receivable under non-cancellable operating leases for the period are as follows:
Not later than 1 year 87.6 72.0 91.1
Later than 1 year not later than 5 years 290.0 221.4 302.2
Later than 5 years 331.8 293.5 366.2
709.4 586.9 759.5
(1) Amounts received from RedefineBDL as a result of lease agreements in place between the Group, RHML and RECML (wholly owned subsidiaries
of RedefineBDL).
5. OTHER INCOME
Reviewed Reviewed Audited
28 February 29 February 31 August
2017 2016 2016
GBPm GBPm GBPm
Performance fee (1) 4.0 - -
Investment management fees from joint ventures 0.4 0.1 0.7
Insurance rebates 0.2 0.5 0.5
Salary recharges 0.1 0.2 0.3
Other income from related parties - 0.3 0.3
Other property related income 0.1 0.2 0.7
Other income 4.8 1.3 2.5
(1) The Group was responsible for the investment management of the property portfolio of the Wichford VBG Holding S.à.r.l. joint venture. The Group
was incentivised during the investment period by a performance fee dependent on the internal rate of return achieved on disposal. The return on
disposal on 1 January 2017 resulted in a fee of GBP4.0 million payable from the joint venture to the Group. The income has been recognised within other
income and the Group share of the related expense incurred by the joint venture has been recognised within share of post-tax (loss)/profit from joint
ventures. On a proportionate basis, and for segmental reporting purposes, the net performance fee of GBP2.0 million fee earned by the Group has been
recognised in other income. Refer to Note 3.
6. ADMINISTRATIVE COSTS AND OTHER FEES
Reviewed Reviewed Audited
28 February 29 February 31 August
2017 2016 2016
GBPm GBPm GBPm
Administrative and other operating expenses 2.0 1.4 2.3
Professional fees 2.7 1.1 2.5
Staff costs 3.2 2.2 4.9
Share-based payments 0.5 0.5 1.2
Administrative costs and other fees 8.4 5.2 10.9
7. DISPOSAL OF SUBSIDIARIES
No entities were disposed of during the six months ended 28 February 2017.
On 31 August 2016, the Group disposed of its 100% shareholding in Cooperative Redefine International Real Estate UA (Netherlands)
for a consideration of EUR1. The disposed subsidiary undertaking holds the entire issued share capital of Redefine International Dan
Haag B.V (Netherlands). This company is the beneficial and legal owner of the Group's investment in The Justice Center, The Hague.
The impact of the disposal on the Group and the net cash flow is shown below:
Audited
31 August
2016
GBPm
Carrying value of net liabilities/(assets)
Investment property (5.5)
Trade and other receivables (0.7)
Cash and cash equivalents (0.4)
Borrowings 15.0
Trade and other payables 0.2
Net liabilities disposed 8.6
Consideration -
Transfer of foreign currency translation on disposal of foreign operations to the income statement 3.6
Gain on disposal of subsidiary 12.2
8. NET FINANCE EXPENSE
Re-presented
Reviewed Reviewed Audited
28 February 29 February 31 August
2017 2016 2016
GBPm GBPm GBPm
Finance income on bank deposits - 0.1 0.2
Finance income on loans to joint ventures 2.4 2.5 5.0
Finance income on loans to other related parties 0.5 0.6 1.1
Finance income 2.9 3.2 6.3
Finance expense on secured bank loans (12.9) (13.1) (27.3)
Amortisation of debt issue costs (0.7) (0.7) (1.5)
Accretion of fair value adjustments (1) (0.5) (1.1) (3.1)
Finance lease interest (0.4) (0.5) (0.8)
Finance expense (14.5) (15.4) (32.7)
Net finance expense (11.6) (12.2) (26.4)
(1) The accretion during the year ended 31 August 2016 included the release of the residual fair value adjustments on refinanced facilities.
9. OTHER FINANCE EXPENSES
Reviewed Reviewed Audited
28 February 29 February 31 August
2017 2016 2016
GBPm GBPm GBPm
Aviva profit share:
- share of earnings for the period - (0.7) (1.5)
- re-measurement of financial liability (1.3) - -
Termination of derivative financial instruments - (0.1) (0.2)
Other finance costs (0.2) - (0.2)
Other finance expenses (1.5) (0.8) (1.9)
10. NET GAIN ON SALE OF JOINT VENTURE INTERESTS
On 1 January 2017, Wichford VBG Holding S.à.r.l. ("Wichford VBG"), exchanged contracts to dispose of all of its property-owning
subsidiaries. The value attributed by the purchaser to the properties held by these subsidiaries was EUR106.0 million (GBP90.6 million).
The carrying value was EUR97.6 million (GBP83.4 million) at 31 August 2016. Total consideration was agreed at EUR49.7 million (GBP42.5 million),
subject to final completion adjustments, and the transaction completed on the 13 January 2017. The equity of the subsidiaries was
acquired for nominal value and so the consideration receivable was comprised of:
- EUR29.4 million (GBP25.1 million) in settlement of the Shareholder Loans outstanding to the joint venture partners (Group share: EUR14.4
million/GBP12.3 million); and
- EUR20.3 million (GBP17.4 million) in settlement of loans that had been advanced by the retained structure of Wichford VBG ("Finco
Loans") to the disposed subsidiaries (Group share: EUR9.9 million/GBP8.5 million). The Finco Loans had eliminated on consolidation
of the joint venture.
Cash consideration of EUR47.9 million (GBP40.9 million) was received by the joint venture after the deduction of transaction costs of EUR0.8
million (GBP0.7 million) by the purchaser. In addition, EUR1.0 million (GBP0.9 million) was deferred pending the outcome of certain conditions.
The conditions precedent were subsequently satisfied and, as a result, the deferred consideration has been recognised as a
receivable at the balance sheet date. The net assets of the subsidiaries on disposal were EUR11.2 million (GBP9.6 million) and, after
adjusting for the Shareholder Loans and additional transaction costs incurred of EUR1.7 million (GBP1.4 million), an initial gain on sale of
EUR6.6 million (GBP5.7 million) was recognised by the joint venture. The Group share of this gain was EUR3.2 million (GBP2.8 million). The Group
recognised a total gain of GBP5.0 million after the recycling of cumulative foreign currency translation of GBP2.2 million to the consolidated
income statement. The Directors believe that the recycling of the translation reserve is appropriate as the retained Wichford VBG
structure only has a receivable in relation to the deferred consideration and cash to settle final working capital balances prior to
liquidation at 28 February 2017.
The Finco Loans originated during the Wichford VBG restructuring in September 2012, when a financing vehicle of the retained
structure acquired the residual bank debt from the existing lender for nominal value. Loan notes of EUR1 ("Finco Loan Notes") were
issued to the joint venture partners by the vehicle to finance the acquisition of the Finco Loans. Under the terms of the Finco Loan
Notes, any termination payments received under the Finco Loans would be payable to the Finco Loan Note holders after settlement
of the Performance Fee (refer to Note 5) and any interest outstanding so that surplus cash could be repatriated efficiently to the joint
venture partners. Following the disposal of the Finco Loans, a loss was therefore recognised in the financial statements of the joint
venture on settlement of Finco Loan Notes (Group share: EUR3.4 million/GBP3.0 million) and a corresponding gain was recognised by the
joint venture partners. The net impact of the Finco Loan Note settlement is GBPNil in the Group consolidated financial statements. For
presentation purposes and to reflect the substance of the transaction, all gains and losses incurred by both the Group (GBP5.2 million
gain) and the joint venture on an equity accounted basis (GBP0.2 million loss), as a result of the disposal, are included within one line in
the consolidated income statement, 'Net gain on sale of joint venture interests'.
The table below illustrates the financial impact of the transaction on the joint venture and on the Group on a total basis, eliminating
the effect of the Finco Loan Note settlement for simplicity.
GBPm
Carrying value of net (assets)/liabilities
Investment property (83.4)
Trade and other receivables (0.4)
Cash and cash equivalents (0.5)
Borrowings 48.0
Loans from joint venture partners 25.1
Derivative financial instruments 0.4
Deferred tax 1.1
Trade and other payables 0.1
Net assets disposed by joint venture (9.6)
Settlement of loans from joint venture partners (25.1)
Adjusted net assets disposed by joint venture (34.7)
Cash consideration received 40.9
Deferred consideration receivable 0.9
Additional transaction costs incurred (1.4)
Gain on sale of subsidiaries attributable to joint venture 5.7
Elimination of joint venture partners' interest (2.9)
Gain on sale of joint venture interests attributable to Group 2.8
Transfer of foreign currency translation to the income statement on disposal of joint venture interests 2.2
Net gain on sale of joint venture interests 5.0
Attributable to:
Joint venture (Group share) (0.2)
Group 5.2
Total cash proceeds received by the Group at the balance sheet date on disposal were GBP22.1 million, including the receipt of the Performance Fee of
GBP4.0 million (refer to Note 5). In the consolidated statement of cash flows, the Performance Fee has been presented under operating activities and
the balance of GBP18.1 million has been presented under investing activities.
11. TAXATION
a) Tax recognised in the condensed consolidated income statement:
Reviewed Reviewed Audited
28 February 29 February 31 August
2017 2016 2016
GBPm GBPm GBPm
Current income tax
Income tax in respect of current period 0.6 0.4 0.6
Adjustments in respect of prior periods - (1.1) (0.7)
Deferred tax
On fair value of investment property 0.2 0.8 (0.2)
On accelerated capital allowances 0.2 - 1.4
Tax charge for the period recognised in the income statement 1.0 0.1 1.1
There was no tax recognised in equity or other comprehensive income during the period (29 February 2016: GBPNil, 31 August 2016: GBPNil).
b) Reconciliation
The tax rate for the period is lower than the standard rate of corporation tax in the UK of 20 per cent (29 February 2016: 20 per
cent, 31 August 2016: 20 per cent). The differences are explained below:
Reviewed Reviewed Audited
28 February 29 February 31 August
2017 2016 2016
GBPm GBPm GBPm
Profit before tax 42.0 8.4 8.6
Profit before tax multiplied by standard rate of corporation tax 8.4 1.7 1.7
Effect of:
- (Gain)/loss on revaluation of exempt UK investment property (0.5) 4.1 8.4
- Deferred tax adjustment on revaluation of European investment
property 0.2 - (0.2)
- Accelerated capital allowances on European investment property 0.2 - 1.4
- Gain on disposal of exempt investment property (1.2) (0.7) (0.6)
- Gain on disposal of subsidiary - - (2.4)
- Change in fair value of derivative financial instruments (0.9) 0.5 2.2
- Income not subject to UK income tax (6.7) (5.2) (9.7)
- Non-resident landlord tax attributable to non-controlling interest 0.5 0.2 0.4
- Group relief utilised - - (0.1)
- Unutilised losses carried forward 0.9 0.6 0.3
- Other taxable income - - 0.1
- Expenses not deductible for tax 0.1 - 0.3
- Adjustments in respect of prior periods - (1.1) (0.7)
Tax charge for the period recognised in the income statement 1.0 0.1 1.1
In the reconciliation above for the period ended 28 February 2017, the effective tax rate of the Group was 2.4 per cent (29 February
2016: 1.2 per cent, 31 August 2016: 12.8 per cent).
On 4 December 2013, the Group converted to a UK-REIT. As a result, the Group does not pay UK Corporation Tax on the profits and
gains from qualifying rental business in the UK provided certain conditions are met. Non-qualifying profits and gains of the Group
continue to be subject to corporation tax. The Directors intend for the Group to continue as a REIT for the foreseeable future, with the
result that deferred tax is no longer recognised on temporary differences relating to the UK property rental business which is within
the REIT structure.
12. INVESTMENT PROPERTY
UK UK UK (1)
Retail Commercial Hotels Europe Total Freehold Leasehold
28 February 2017 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Opening carrying value at 1 September 2016 541.9 407.3 229.6 217.6 1,396.4 1,052.2 344.2
Capitalised expenditure 0.9 0.7 1.2 5.2 8.0 2.6 5.4
Capitalised finance costs - - 0.2 0.2 0.4 0.2 0.2
Disposals through the sale of property - (42.6) - - (42.6) (40.8) (1.8)
Transfer to non-current assets held for sale
(Note 18) (16.8) (17.4) - (5.5) (39.7) (33.8) (5.9)
Head lease additions and disposals 2.2 (0.5) - - 1.7 - 1.7
(Loss)/gain on revaluation of investment
property (1.8) 10.2 (2.2) (3.6) 2.6 13.6 (11.0)
Foreign exchange movement in foreign
operations - - - 1.2 1.2 1.0 0.2
IFRS carrying value at 28 February 2017 526.4 357.7 228.8 215.1 1,328.0 995.0 333.0
Adjustments:
Non-current assets held for sale (Note 18) 16.8 17.4 - 5.5 39.7 33.8 5.9
Minimum payments under head leases
(Note 19) (10.1) (2.6) (0.4) (1.6) (14.7) - (14.7)
Tenant lease incentives (Note 16) 3.9 1.8 0.9 - 6.6 3.9 2.7
Market value of Group portfolio at 28
February 2017 537.0 374.3 229.3 219.0 1,359.6 1,032.7 326.9
Joint ventures
Share of joint ventures investment property
(Note 14) - 11.8 - 88.0 99.8 99.8 -
Market value of total portfolio at 28 February
2017
(on a proportionately consolidated basis) 537.0 386.1 229.3 307.0 1,459.4 1,132.5 326.9
UK UK UK (1)
Retail Commercial Hotels Europe Total Freehold Leasehold
31 August 2016 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Opening carrying value at 1 September 2015 355.4 153.8 235.1 190.1 934.4 642.6 291.8
Additions from acquisition of property (2) 213.1 276.6 - - 489.7 407.9 81.8
Acquisition costs 10.5 12.1 - - 22.6 20.1 2.5
Capitalised expenditure 3.0 0.3 1.8 2.7 7.8 4.8 3.0
Disposals through the sale of property (2) - (40.3) - - (40.3) (10.7) (29.6)
Disposals through the sale of subsidiary
(Note 7) - - - (5.5) (5.5) (5.5) -
Disposal of head leases - (0.4) - - (0.4) - (0.4)
(Loss)/gain on revaluation of investment
property (40.1) 5.2 (7.3) (0.3) (42.5) (35.2) (7.3)
Foreign exchange movement in foreign
operations - - - 30.6 30.6 28.2 2.4
IFRS carrying value at 31 August 2016 541.9 407.3 229.6 217.6 1,396.4 1,052.2 344.2
Adjustments:
Minimum payments under head leases
(Note 19) (7.9) (3.1) (0.4) (1.6) (13.0) - (13.0)
Tenant lease incentives (Note 16) 3.1 1.6 - - 4.7 1.9 2.8
Market value at 31 August 2016 537.1 405.8 229.2 216.0 1,388.1 1,054.1 334.0
Joint ventures
Share of joint ventures investment property
(Note 14) - 11.7 - 129.2 140.9 140.9 -
Market value at 31 August 2016
(on a proportionately consolidated basis) 537.1 417.5 229.2 345.2 1,529.0 1,195.0 334.0
(1) Included within the Europe segment at 28 February 2017 is property under development of GBP19.0 million (31 August 2016: GBP18.5 million)
(2) Additions from acquisitions and disposals through the sale of property in UK Commercial have been grossed up to reflect the acquisition and
subsequent sale of 16 Grosvenor Street.
The tables above present both segmental and market value investment property information prepared on a proportionately consolidated basis.
Properties that have been classified as held for sale in the current period are also included so that the market value of the total portfolio can be
determined. This format is not a requirement of IFRS and is for informational purposes only as it is used in reports presented to the Group's Chief
Operating Decision Maker.
Recognition
In accordance with IAS 40, Paragraph 14, judgement is needed to determine whether a property qualifies as an investment property.
The Group has developed criteria so that it can exercise its judgement consistently in recognising investment property. These include
property held for long-term capital appreciation, property owned (or under finance leases) and leased out under one or more operating
leases and property that is being developed for future use as investment property. The recognition and classification of property as
investment property principally assumes that the Group does not retain significant exposure to the variation in cash flows arising from
the underlying operations of properties.
Investment property comprises a number of retail and commercial properties in the UK and Europe that are leased to unconnected
third parties. In addition, the hotel properties are held for capital appreciation and to earn rental income. The properties have been let
to RHML and RECML (with the exception of Travelodge, Enfield) for a fixed rent which is subject to annual review. The annual rent
review takes into account the forecast EBITDA for the hotel portfolio when setting the revised rental level. As detailed in the key
judgements and estimates in Note 2.3.3, aside from the Group's shareholding in RedefineBDL and the receipt of rental income,
Redefine International is not involved in the hotel management business and there are limited transactions between Redefine
International, RHML and RECML. As a result, the Directors consider it appropriate to classify the hotel properties as investment
property in line with IAS 40.
Valuation
The carrying amount of investment property is the fair value of the property as determined by appropriately qualified independent
valuers and adjusted for minimum payments under head leases and tenant lease incentives. Valuations are based on what is
determined to be the highest and best use. When considering the highest and best use a valuer will consider, on a property by
property basis, and in limited circumstances, in aggregation with other assets, its actual and potential uses which are physically,
legally and financially viable. Where the highest and best use differs from the existing use, the valuer will consider the cost and the
likelihood of achieving and implementing this change in arriving at its valuation.
The fair value of the Group's property for the period ended 28 February 2017 was assessed by the valuers in accordance with the
Royal Institute of Chartered Surveyors ("RICS") standards and IFRS 13. The valuations performed by the independent valuers are
reviewed internally by senior management and by the Audit and Risk Committee. This includes discussion of the assumptions used
by the external valuers, as well as a review of the resulting valuations.
Valuation inputs
The fair value of the property portfolio has been determined using either a discounted cash flow or a yield capitalisation technique,
whereby contracted and market rental values are capitalised at a market capitalisation rate. The resulting valuations are cross-
checked against the net initial yield and the fair market values per square foot derived from comparable recent market transactions.
The valuation techniques described above are consistent with IFRS 13 and uses significant unobservable inputs. Valuation techniques
can change at each valuation round depending on prevailing circumstances and the property's highest and best use at the reporting date.
The Group considers that all of its investment property falls within 'Level 3', as defined by IFRS 13 (refer to Note 28). There has
been no transfer of property within the fair value hierarchy over the period.
Committed expenditure
The Group was contractually committed to expenditure of GBP12.3 million for the future development and enhancement of investment
property at 28 February 2017 (31 August 2016: GBP15.8 million).
Disposals
The Group disposed of four assets in the UK Commercial portfolio during the period realising a gain, after disposal costs, of GBP5.9 million:
Sales Disposal Tenant Net sales Carrying Gain on
proceeds costs incentives proceeds value disposal
28 February 2017 GBPm GBPm GBPm GBPm GBPm GBPm
201. Deansgate, Manchester 29.2 (0.3) - 28.9 25.5 3.4
Exchange House, Watford 13.3 (0.2) - 13.1 11.8 1.3
1A Parliament Square, Edinburgh 4.0 - - 4.0 3.5 0.5
Delta 900, Swindon 3.6 (0.1) (1.0) 2.5 1.8 0.7
Disposals during the period 50.1 (0.6) (1.0) 48.5 42.6 5.9
13. INVESTMENT AT FAIR VALUE THROUGH PROFIT OR LOSS
The following table details the movement in investments designated at fair value through profit or loss:
Reviewed Audited
28 February 31 August
2017 2016
GBPm GBPm
Opening balance at 1 September 7.9 -
Transfer from investment in associate (Note 15) - 3.8
Addition of investment at fair value 0.9 4.9
Gain/(loss) on revaluation of investment at fair value 1.0 (0.8)
Closing balance 9.8 7.9
On 14 October 2015, the Company acquired, by way of private placement, 3.8 million shares in the newly listed International Hotel
Properties Limited (formerly International Hotel Group Limited) for GBP3.8 million. On the date of listing this represented 25.4% of the
group's issued share capital and the shareholding was recognised as an investment in associate under the equity method.
On 20 October 2015, the Company acquired 3.1 million additional shares for GBP3.1 million as part of a GBP13.0 million private placement
by IHL, diluting the Group's interest to 13.2%. Significant influence over the operations of IHL was deemed to have ceased from this
date and therefore the shareholding was re-classified from investment in associate to investment at fair value through profit or loss
(refer to Note 15).
On 31 March 2016, the Company acquired an additional 1.5 million shares in IHL for GBP1.5 million, as a result of a GBP7.0 million private
placement, thereby increasing its interest to 15.3%.
On 20 April 2016, IHL acquired RBDL Capital Managers Limited from RedefineBDL for consideration of GBP1.0 million which was settled
in the form of 1.0 million shares in IHL. RedefineBDL distributed these shares in relative proportion to its shareholders, of which the
Group received 254,084 shares.
On 7 February 2017, as part of a settlement of the balance outstanding from 4C UK Investments Limited ("4C Investments"), the
Company assumed 1,000,000 shares in IHL (refer to Note 29). The value attributed to the shares by the Group as part of this
settlement was GBP1.0 per share. The fair value of these shares on transfer was GBP0.95 and the shares were recognised at fair value.
The transfer of the shares increased the Group's investment in IHL by 1.7% to 17.2%.
As at 28 February 2017, the Group's investment at fair value of GBP9.8 million (31 August 2016: GBP7.9 million) relates to its investment in
9,656,834 shares of IHL's 56 million issued shares (31 August 2016: 8,656,834).
No change in the Group's influence over IHL has occurred since 20 October 2015, when the investment was initially classified as fair
value through profit or loss. Refer to Note 2.3.4 for further information on the classification of IHL as an investment at fair value through
profit or loss.
14. INVESTMENT IN AND LOANS TO JOINT VENTURES
Reviewed Audited
28 February 31 August
2017 2016
Investment in joint ventures GBPm GBPm
Opening balance at 1 September 5.8 3.6
Loss on disposal of joint venture interests (0.2) -
Share of post-tax (loss)/profit from joint ventures (2.6) 1.4
Foreign currency translation - 0.8
Closing balance 3.0 5.8
Reviewed Audited
28 February 31 August
2017 2016
Loans to joint ventures GBPm GBPm
Opening balance at 1 September 52.9 44.6
Increase in loans to joint ventures - 0.5
Disposal of loan to joint venture (12.3) -
Repayment of loans by joint ventures (0.6) (2.6)
Reversal of impairment of loans to joint ventures 0.1 2.6
Foreign currency translation 0.4 7.8
Closing balance 40.5 52.9
Carrying value of interests in joint ventures 43.5 58.7
The Group's joint ventures consist of the following material investments as presented in the tables of this note:
(i) 50% interest in Leopard Holding Germany 1 S.à.r.l., Leopard German Property Ed1, Ed2, Ed3 and Ed4, LGP ME1 and ME2
S.à.r.l. and LGP Ed2 GmbH & Co KG, a joint venture with Redefine Properties Limited ("RPL"), the Company's largest shareholder.
These companies hold 56 retail properties in Germany comprising a mix of stand-alone supermarkets, food-store anchored retail
parks and cash & carry stores. Collectively known as the Leopard portfolio, the joint venture also includes two entities in which
the Group previously held a 100% ownership interest, Ciref Berlin 1 Limited and CEL Portfolio 2 Limited & Co.KG, and that hold
ten retail properties;
(ii) 50.5% interest in RI Menora German Holdings S.à.r.l., a joint venture with Menora Mivtachim, which ultimately owns properties in
Waldkraiburg, Huckelhoven and Kaiserslautern, Germany. Notwithstanding the economic shareholding the contractual terms
provide for joint control and so the Company does not control the entity;
(iii) 49% interest in Wichford VBG Holding S.à.r.l., a joint venture with Menora Mivtachim, which owned government-let properties in
Dresden, Berlin, Stuttgart and Cologne, Germany until 1 January 2017; and
(iv) 50% interest in 26 Esplanade No 1 Limited, a joint venture with Rimstone Limited, which owns an office building in St. Helier, Jersey.
The Group's interest in joint venture entities is in the form of:
1) an interest in the share capital of the joint venture companies; and
2) loans advanced to the joint venture entities. The loans outstanding at 28 February 2017 bear interest at 4.75 - 8.0 per cent and
have remaining maturities of 10 years.
RI Menora German Holdings S.à.r.l. and Wichford VBG Holding S.à.r.l. both have accounting year ends of 31 December which differ
from the year-end of the Group, the purpose of which is to align with the year-end of the joint venture partner, Menora Mivtachim.
Interest in joint ventures not recognised
Under the equity method, the Esplanade is carried at GBPNil value in the opening joint venture balance of the Group's financial
statements at 1 September 2016 and remains at GBPNil at 28 February 2017. This investment is in a net liability position with the
cumulative losses exceeding the cost of the Group's investment. The Group does not recognise losses below its original cost in this
joint venture but continues to impair the loans advanced to their recoverable amount in line with IAS 28. The Group share of losses
amounted to GBP0.7 million at 28 February 2017 (31 August 2016: GBP1.6 million). On a proportionate basis and for segmental reporting
purposes, the Group's interest in the Esplanade is recognised line-by-line. Refer to Note 3.
Wichford VBG Holding S.à.r.l.
On 1 January 2017, Wichford VBG Holding S.à.r.l. exchanged on the sale of its four German office assets. The disposal was structured
as a share sale of the joint venture's property-owning subsidiaries. The joint venture recognised a net loss on disposal of these
subsidiaries of GBP0.4 million (Group share: GBP0.2 million). See Note 10 for further details.
Summarised Financial Information
The summarised financial information of the Group's material joint ventures are set out separately below:
RI Elimination
Wichford Menora of joint
VBG German venture
Holding Holdings Leopard partners' Proportionate
S.à.r.l. S.à.r.l. Portfolio Esplanade Total interest Total
28 February 2017 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Percentage ownership interest 49% 50.5% 50% 50%
Summarised Income Statement
Rental income 2.3 0.9 6.0 0.9 10.1 (5.1) 5.0
Rental expense (0.3) - (0.8) - (1.1) 0.6 (0.5)
Net rental income 2.0 0.9 5.2 0.9 9.0 (4.5) 4.5
Administrative costs and other fees (1) (4.2) (0.1) (0.5) - (4.8) 2.4 (2.4)
Net operating (expense)/income (2.2) 0.8 4.7 0.9 4.2 (2.1) 2.1
(Loss)/gain on revaluation of investment
property - (0.8) (0.6) 0.2 (1.2) 0.6 (0.6)
Loss on sale of subsidiaries (0.4) - - - (0.4) 0.2 (0.2)
Net finance expense (2.0) (0.5) (3.6) (0.7) (6.8) 3.4 (3.4)
Change in fair value of derivative financial
instruments 0.2 0.1 0.1 1.3 1.7 (0.8) 0.9
(Loss)/profit before tax (4.4) (0.4) 0.6 1.7 (2.5) 1.3 (1.2)
Taxation (0.9) - (0.3) - (1.2) 0.6 (0.6)
(Loss)/profit and total comprehensive (5.3) (0.4) 0.3 1.7 (3.7) 1.9 (1.8)
(expense)/income
Reconciliation to IFRS:
Elimination of non-controlling and joint venture
partners' interest 2.7 0.2 (0.2) (0.8) 1.9 (1.9) -
Movement in losses restricted in joint ventures - - - (0.9) (0.9) - (0.9)
Group share of joint venture results (2.6) (0.2) 0.1 - (2.7) - (2.7)
Presented as:
Reversal of impairment of loans to joint - - 0.1 - 0.1 - 0.1
ventures
Loss on disposal of joint venture interests (2) (0.2) - - - (0.2) - (0.2)
Share of post-tax loss from joint ventures (2.4) (0.2) - - (2.6) - (2.6)
Summarised Balance Sheet
Investment property - 25.8 149.9 23.6 199.3 (99.5) 99.8
Derivative financial instruments - - 0.1 - 0.1 (0.1) -
Trade and other receivables 1.1 0.9 1.0 0.1 3.1 (1.5) 1.6
Cash and cash equivalents 0.7 0.4 2.3 0.5 3.9 (1.9) 2.0
Total assets 1.8 27.1 153.3 24.2 206.4 (103.0) 103.4
External borrowings - (15.0) (73.4) (17.8) (106.2) 53.0 (53.2)
Loans from joint venture partners - (7.6) (83.3) (6.6) (97.5) 48.8 (48.7)
Derivative financial instruments - (0.1) (0.1) (7.3) (7.5) 3.7 (3.8)
Deferred tax - (1.1) (2.7) - (3.8) 1.9 (1.9)
Trade and other payables (0.1) (0.6) (2.8) (0.5) (4.0) 2.0 (2.0)
Total liabilities (0.1) (24.4) (162.3) (32.2) (219.0) 109.4 (109.6)
Non-controlling interests - (0.5) (0.4) - (0.9) 0.3 (0.6)
Net assets/(liabilities) 1.7 2.2 (9.4) (8.0) (13.5) 6.7 (6.8)
Reconciliation to IFRS:
Elimination of joint venture partners' interests (0.9) (1.1) 4.7 4.0 6.7 (6.7) -
Fair value on acquisition of joint venture interest - - 0.9 - 0.9 - 0.9
Loan to joint ventures (3) - 3.8 41.6 - 45.4 - 45.4
Interest in joint ventures not recognised - - - 3.3 3.3 - 3.3
Cumulative losses restricted (4) - - - 0.7 0.7 - 0.7
Carrying value of interests in joint ventures 0.8 4.9 37.8 - 43.5 - 43.5
RI Elimination
Wichford Menora of joint
VBG German venture
Holding Holdings Leopard partners' Proportionate
S.à.r.l. S.à.r.l. Portfolio Esplanade Total interest Total
31 August 2016 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Percentage ownership interest 49% 50.5% 50% 50%
Summarised Income Statement
Rental income 6.2 1.6 10.8 1.5 20.1 (10.1) 10.0
Rental expense (0.4) (0.2) (1.7) - (2.3) 1.2 (1.1)
Net rental income 5.8 1.4 9.1 1.5 17.8 (8.9) 8.9
Other income - - 0.1 1.0 1.1 (0.5) 0.6
Administrative costs and other fees (0.5) (0.1) (0.3) (0.1) (1.0) 0.5 (0.5)
Net operating income 5.3 1.3 8.9 2.4 17.9 (8.9) 9.0
Gain/(loss) on revaluation of investment
property 2.7 0.5 (0.2) (0.4) 2.6 (1.3) 1.3
Net finance expense (5.7) (0.8) (5.9) (0.9) (13.3) 6.6 (6.7)
Other finance expense - (0.1) (0.1) - (0.2) 0.1 (0.1)
Gain/(loss) on financial liabilities 7.3 (0.6) (1.4) - 5.3 (2.8) 2.5
Change in fair value of derivative financial
instruments - 0.1 (1.5) (2.1) (3.5) 1.8 (1.7)
Profit/(loss) before tax 9.6 0.4 (0.2) (1.0) 8.8 (4.5) 4.3
Taxation (0.3) (0.2) (0.5) - (1.0) 0.5 (0.5)
Profit/(loss) and total comprehensive
income/(expense) 9.3 0.2 (0.7) (1.0) 7.8 (4.0) 3.8
Reconciliation to IFRS:
Elimination of non-controlling and joint
venture partners' interest (4.7) (0.1) 0.3 0.5 (4.0) 4.0 -
Movement in losses restricted in joint
ventures - - - 0.2 0.2 - 0.2
Group share of joint venture results 4.6 0.1 (0.4) (0.3) 4.0 - 4.0
Presented as:
Impairment reversal / (impairment) of
loans to joint ventures 3.6 (0.3) (0.4) (0.3) 2.6 - 2.6
Share of post-tax profit from joint ventures 1.0 0.4 - - 1.4 - 1.4
Summarised Balance Sheet
Investment property 82.9 26.5 150.4 23.4 283.2 (142.3) 140.9
Derivative financial instruments - - 0.1 - 0.1 - 0.1
Trade and other receivables - 1.0 1.0 0.1 2.1 (1.1) 1.0
Cash and cash equivalents 1.5 0.3 2.4 0.4 4.6 (2.3) 2.3
Total assets 84.4 27.8 153.9 23.9 290.0 (145.7) 144.3
External borrowings (47.7) (15.0) (73.7) (18.0) (154.4) 77.6 (76.8)
Loans from joint venture partners (24.9) (7.7) (83.8) (6.6) (123.0) 61.7 (61.3)
Derivative financial instruments (0.6) (0.2) (0.1) (8.7) (9.6) 4.8 (4.8)
Deferred tax - (1.0) (2.9) - (3.9) 2.0 (1.9)
Trade and other payables (4.2) (1.0) (2.9) (0.4) (8.5) 4.6 (3.9)
Total liabilities (77.4) (24.9) (163.4) (33.7) (299.4) 150.7 (148.7)
Non-controlling interests (0.1) (0.3) (0.3) - (0.7) - (0.7)
Net assets/(liabilities) 6.9 2.6 (9.8) (9.8) (10.1) 5.0 (5.1)
Reconciliation to IFRS:
Elimination of joint venture partners' interests (3.5) (1.4) 5.0 4.9 5.0 (5.0) -
Fair value on acquisition of joint venture
interest - - 0.9 - 0.9 - 0.9
Loan to joint ventures (4) 12.2 3.9 41.9 - 58.0 - 58.0
Interest in joint ventures not recognised - - - 3.3 3.3 - 3.3
Cumulative losses restricted (5) - - - 1.6 1.6 - 1.6
Carrying value of interests in joint
ventures 15.6 5.1 38.0 - 58.7 - 58.7
(1) Included within administrative costs and other fees of Wichford VBG is the Performance Fee of GBP4.0 million payable to the Group on disposal of the
property portfolio.
(2) Presented within 'Net gain on sale of joint venture interests' in the consolidated income statement.
(3) Loans to joint ventures include the opening balance, any advances or repayments and foreign currency movements during the period.
(4) Cumulative losses restricted represent the Group's share of losses in the Esplanade which exceed the cost of the Group's investment. As a result,
the carrying value of the investment is GBPNil in accordance with the requirements of IAS 28.
15. INVESTMENT IN ASSOCIATE
Reviewed Audited
28 February 31 August
2017 2016
GBPm GBPm
Opening balance at 1 September 10.2 8.0
Additions - 9.8
Transfer to investment at fair value through profit or loss (Note 13) - (3.8)
Share of post-tax profit from associate 0.3 1.7
Distributions from associate (1.1) (2.3)
Impairment reversal/(impairment) of investment in associate 0.6 (3.2)
Carrying value of net investment in associate 10.0 10.2
On 14 October 2015, the Company acquired, by way of private placement, 3.8 million shares in the newly listed IHL for GBP3.8 million.
On the date of listing this represented 25.4% of the entity's issued share capital and the investment was classified as an associate
on initial recognition. On 20 October 2015, this interest was diluted to 13.2% resulting in reclassification to investment at fair value
through profit or loss (refer to Note 13).
On 30 August 2016, the Group settled amounts advanced to RedefineBDL by way of an equity contribution of GBP6.0 million. The equity
contribution did not result in a further issue of shares to the Group or increase the Group's percentage interest in the associate. The
equity contribution has been recognised in other reserves in the underlying financial statements of RedefineBDL.
During the period ended 28 February 2017, the Group's cumulative investment in RedefineBDL increased from 25.3% to 30.4%. On
7 February 2017, the Group acquired an additional 5.1% interest in RedefineBDL as part consideration (GBP1.3 million) for the settlement
of the loan advanced to 4C Investments. This portion of the Group's investment has been classified as held for sale on initial
recognition as the shares were acquired exclusively with a view to subsequent re-sale. Refer to Note 18 for further information. The
table above presents movements in the Group's existing 25.3% interest in RedefineBDL.
Following an impairment review at 28 February 2017, the Directors consider that the recoverable amount of the Group's net
investment in RedefineBDL is consistent with the attributed value at 31 August 2016 of circa GBP10 million. This has resulted in a reversal
of the prior year impairment by GBP0.6 million (31 August 2016: impairment charge of GBP3.2 million) as distributions received had
exceeded share of earnings.
Distributions from associate for the period ended 28 February 2017 of GBP1.1 million (31 August 2016: GBP2.3 million) comprised cash
distributions only (31 August 2016: GBP0.3 million of the GBP2.3 million distributed related to the distribution in specie of 254,084 shares in
IHL).
Summarised Financial Information
The summarised financial information of RedefineBDL is set out below.
Reviewed Audited
28 February 31 August
2017 2016
GBPm GBPm
Summarised Income Statement
Revenue 7.3 12.6
Other income 1.6 6.3
Expenses (6.8) (10.9)
Profit from operations 2.1 8.0
Taxation (0.9) (1.4)
Profit for the period 1.2 6.6
Elimination of third party interest (0.9) (4.9)
Share of post-tax profit from associate 0.3 1.7
Summarised Balance Sheet
Non-current assets 7.5 7.8
Intangible asset 28.1 28.1
Trade and other receivables 3.7 6.7
Cash and cash equivalents 2.6 3.2
Total assets 41.9 45.8
Current liabilities (9.6) (10.6)
Total liabilities (9.6) (10.6)
Net assets 32.3 35.2
Elimination of third party interest (24.2) (26.3)
Share of net assets attributable to the Group 8.1 8.9
Net contributions attributable to Group less impairment charge 1.9 1.3
Carrying value of net investment in associate 10.0 10.2
16. TRADE AND OTHER RECEIVABLES
Re-presented (1)
Reviewed Audited
28 February 31 August
2017 2016
GBPm GBPm
Non-current
Tenant lease incentives (2) 5.3 3.8
Loans to external parties 1.3 0.7
Letting costs 0.5 0.2
Total non-current trade and other receivables 7.1 4.7
Current
Amounts receivable from related parties (Note 29) 0.7 20.0
Loans to external parties 1.6 -
Rent receivable 0.3 1.5
Prepayments and accrued income 1.2 1.2
Tenant lease incentives (2) 1.3 0.9
Other receivables 1.6 3.1
Total current trade and other receivables 6.7 26.7
Total trade and other receivables 13.8 31.4
(1) Prior period trade and other receivables have been re-presented to correctly classify certain receivables as non-current and ensure consistency
with the current period. Refer to Note 2.2.
(2) Total tenant lease incentives of GBP6.6 million (31 August 2016: GBP4.7 million) have been deducted from investment property in determining fair value
at the balance sheet date. Refer to Note 12.
17. CASH AND CASH EQUIVALENTS
Reviewed Audited
28 February 31 August
2017 2016
GBPm GBPm
Bank balances 58.4 28.7
Unrestricted cash and cash equivalents 58.4 28.7
Restricted cash and cash equivalents 3.3 3.3
Cash and cash equivalents 61.7 32.0
At 28 February 2017, cash and cash equivalents to which the Group did not have instant access amounted to GBP3.3 million (31 August
2016: GBP3.3 million). This amount is held with Aviva in relation to the shopping centre developments at Byron Place Seaham, Birchwood
Warrington, Weston Favell and proposed developments at Grand Arcade Wigan. The amounts held with Aviva were released
subsequent to the balance sheet date as part of the Aviva debt restructure (refer to Note 33).
Cash and cash equivalents at 28 February 2017 were GBP61.7 million (31 August 2016: GBP32.0 million). The Group's share of cash and
cash equivalents, including its share of joint venture cash, at 28 February 2017 was GBP63.7 million (31 August 2016: GBP34.3 million),
with a further GBP36.6 million undrawn committed facilities available.
18. NON-CURRENT ASSETS HELD FOR SALE
Investment Investment in
property associate Total
GBPm GBPm GBPm
Opening balance at 1 September - - -
Transfers from investment property (Note 12) 39.7 - 39.7
Additions of investment in associate - 1.3 1.3
Closing balance at 28 February 39.7 1.3 41.0
Investment property held for sale
At 28 February 2017, five investment properties, comprising of one UK Retail property (GBP16.8 million), three UK Commercial offices
(GBP17.4 million) and one German supermarket (GBP5.5 million), have been classified as held for sale. Four assets are being actively
marketed and management are committed to a plan for their sale. It is considered highly probable that the carrying amount of these
four assets will be recovered through a sale transaction, rather than through continuing use, within the next twelve months. The
Company completed the disposal of one of these assets, The Observatory, Chatham, post period end (refer to Note 33).
The Company exchanged contracts for the disposal of the fifth asset held for sale, a UK Commercial office in 2 Duchess Place,
Edgbaston, on 16 September 2016 for GBP1.6 million. The purchaser has the right to call completion at any point up to 1 April 2018. As
there is a firm commitment from the purchaser to acquire the property and from the Company for its disposal, the asset has been
classified as held for sale at 28 February 2017.
Investment in associate held for sale
On 7 February 2017, as part of the settlement of the loan outstanding from 4C Investments (refer to Note 29), the Company acquired
659 shares in RedefineBDL for an attributed value of GBP1,942 per share (an approximation of fair value on the date of acquisition).
This represented 5.1% of the issued share capital of RedefineBDL. As part of the settlement agreement, 4C Investments has the right
to buy back the shares at the transfer price of GBP1.3 million on or before 31 January 2018. If this right is not exercised the remaining
shareholders of RedefineBDL will be offered the shares in proportion to their shareholding at the transfer price. It is considered highly
probable that the value of the investment will be recovered through re-sale on or before 31 January 2018 and therefore the investment
acquired has been classified as held for sale at 28 February 2017. The Directors have determined that the value inherent in the option
to reacquire the shares is not material.
The Group considers that all non-current assets held for sale fall within 'Level 3', as defined by IFRS 13 (refer to Note 28). Accordingly,
there has been no transfer within the fair value hierarchy during the period.
19. BORROWINGS, INCLUDING FINANCE LEASES
Reviewed Audited
28 February 31 August
2017 2016
GBPm GBPm
Non-current
Bank loans 723.2 759.8
Less: unamortised debt issue costs (4.4) (4.1)
Less: fair value adjustments (18.9) (19.4)
Aviva profit share - 4.2
Finance leases 14.0 12.3
Total non-current borrowings, including finance leases 713.9 752.8
Current
Bank loans 15.8 13.8
Less: unamortised debt issue costs (0.3) (1.2)
Less: fair value adjustments (1.1) (1.1)
Other external loans 1.0 0.6
Aviva profit share 5.5 -
Finance leases 0.7 0.7
Total current borrowings, including finance leases 21.6 12.8
Total borrowings, including finance leases 735.5 765.6
Bank loans
28 February 2017 31 August 2016
Carrying Nominal Fair Carrying Nominal Fair
Value Value Value Value Value Value
GBPm GBPm GBPm GBPm GBPm GBPm
Non-current liabilities
Bank loans 723.2 723.2 735.0 759.8 759.8 781.6
Less: unamortised debt issue costs (4.4) - - (4.1) - -
Less: fair value adjustments (18.9) - - (19.4) - -
Total non-current bank loans 699.9 723.2 735.0 736.3 759.8 781.6
Current liabilities
Bank loans 15.8 15.8 15.8 13.8 13.8 13.8
Less: unamortised debt issue costs (0.3) - - (1.2) - -
Less: fair value adjustments (1.1) - - (1.1) - -
Total current bank loans 14.4 15.8 15.8 11.5 13.8 13.8
Total IFRS bank loans 714.3 739.0 750.8 747.8 773.6 795.4
Joint ventures
Share of joint ventures bank loans 53.3 53.3 53.3 77.0 77.0 77.0
Share of joint ventures unamortised debt
issue costs (0.1) - - (0.2) - -
Total bank loans (on a proportionately
consolidated basis) 767.5 792.3 804.1 824.6 850.6 872.4
Cash and cash equivalents (61.7) (61.7) (61.7) (32.0) (32.0) (32.0)
Share of joint ventures cash and cash
equivalents (2.0) (2.0) (2.0) (2.3) (2.3) (2.3)
Net debt (on a proportionately
consolidated basis) 703.8 728.6 740.4 790.3 816.3 838.1
The table above presents bank loans, cash and cash equivalents and net debt information prepared on a proportionately consolidated basis. This
format is not a requirement of IFRS and is presented for informational purposes only as it is used in reports presented to the Group's Chief Operating
Decision Maker.
The Group's bank loans are secured over investment property of GBP1,335.3 million (31 August 2016: GBP1,383.0 million) and are carried
at amortised cost. On a proportionately consolidated basis, bank loans are secured over investment property of GBP1,435.2 million (31
August 2016: GBP1,523.9 million).
The Group has reduced the nominal value of drawn debt (on a proportionate basis) during the period to GBP792.3 million (31 August
2016: GBP850.6 million) following a number of successful refinancings. Firstly, in November 2016 the facility held against West Orchards
Coventry was restructured after the repayment of GBP5.2 million which reduced the balance outstanding to GBP11.9 million and extended
maturity to 2021. This was not considered a significant modification and no extinguishment of the existing loan is deemed to have
occurred. In December 2016 and January 2017, the Group drew down on funds from the revolving credit facility ("RCF") secured
against the AUK portfolio and repaid loans previously held with AIB Group (UK) p.l.c. (GBP5.4 million) and Commerzbank AG (GBP9.7 million).
During the six month period ended 28 February 2017, the Group sold four properties secured against the AUK facility and
applied GBP30.0 million of sales proceeds against the RCF to maintain a lower interest rate margin of 1.75 per cent (ratcheted based on
LTV). As noted in Notes 10 and 14, Wichford VBG disposed of its property-owning subsidiaries including associated bank debt with
DG Hyp (Group share: GBP23.5 million), effective 1 January 2017. Other small refinancings have occurred across the portfolio during
the period and continue to be negotiated as highlighted in the subsequent events note (refer to Note 33).
The Group considers that all bank loans fall within 'Level 3', as defined by IFRS 13 (refer to Note 28).
The fair value of fixed rate borrowings has been calculated by discounting cash flows under the relevant agreements at a market
interest rate for similar debt instruments. The market interest rate has been determined having regard to the term, duration and
security arrangements of the relevant loan and an estimation of the current rates charged in the market for similar instruments issued
to companies of similar sizes. The nominal value of floating rate borrowings is considered to be a reasonable approximation of fair value.
The maturity of Group bank loans, gross of unamortised debt issue costs and fair value adjustments is as follows:
Reviewed Audited
28 February 31 August
2017 2016
GBPm GBPm
Non-current
Between one year and five years 545.3 471.8
More than five years 177.9 288.0
723.2 759.8
Current
Less than one year 15.8 13.8
15.8 13.8
Certain borrowing agreements contain financial and other covenants that, if contravened, could alter the repayment profile.
Aviva profit share
As part of the Aviva debt restructure in 2013, Aviva retained the right to participate in 50 per cent of the income generated by Grand
Arcade Shopping Centre, Wigan (after all costs, expenses and interest). The profit share participation right was recognised as a
financial liability, initially at fair value and subsequently measured at amortised cost. At 28 February 2017, the profit share financial
liability has been increased by GBP1.3 million to GBP5.5 million (31 August 2016: GBP4.2 million), being the best estimate of the agreed cost
to the Company to extinguish Aviva's right to the profit participation. The terms of the Aviva debt restructure have been finalised post
period end as detailed in Note 33.
Finance leases
Obligations under finance leases at the reporting date are as follows:
Reviewed Audited
28 February 31 August
2017 2016
GBPm GBPm
Minimum lease payments under finance leases obligations:
Not later than one year 0.7 0.7
Later than one year not later than five years 3.3 3.0
Later than five years 117.4 88.6
121.4 92.3
Less: finance charges allocated to future periods (106.7) (79.3)
Present value of minimum lease payments 14.7 13.0
Present value of minimum finance lease obligations:
Not later than one year 0.7 0.7
Later than one year not later than five years 2.8 2.5
Later than five years 11.2 9.8
Present value of minimum lease payments 14.7 13.0
Finance lease obligations relate to the Group's leasehold interests in investment property. Finance leases are effectively secured
obligations, as the rights to the leased asset revert to the lessor in the event of default.
20. DERIVATIVE FINANCIAL INSTRUMENTS
The Group enters into interest rate swap and interest rate cap agreements to manage the risks arising from the Group's operations
and its sources of finance.
Interest rate swaps and caps are employed by the Group to manage the interest rate profile of financial liabilities. In accordance with
the terms of bank debt arrangements, the Group has entered into interest rate swaps to convert the rates from floating to fixed which
has eliminated potential exposure to interest rate fluctuations. Likewise, interest rate caps are used to limit the downside exposure to
significant changes to the current low interest rates prevailing in the market.
The Group has also entered into a forward foreign currency option agreement whereby the Group has the right but not the obligation
to convert a fixed amount of Euro currency to Sterling quarterly at an agreed rate between 1 November 2016 and 31 August 2017.
The fair value of the contract was negligible at 28 February 2017.
It is the Group's policy that no economic trading in derivatives is undertaken.
Reviewed Audited
28 February 31 August
2017 2016
GBPm GBPm
Derivative Assets
Non-current
Interest rate cap 0.7 0.8
Interest rate swaps 0.2 -
0.9 0.8
Derivative Liabilities
Non-current
Interest rate swaps (8.2) (12.6)
(8.2) (12.6)
Net derivative financial instruments (7.3) (11.8)
The Group's interest rate cap asset is at a rate of 3.0 per cent and matures in November 2021. The interest rate swap assets are
held at a rate of 0.4 per cent, maturing in September 2020. Interest rate swap liabilities have maturities from January 2019 until April
2021, at a range of swap rates of 0.7 - 2.0 per cent.
21. DEFERRED TAX
The table below presents the recognised deferred tax liability and movement during the period:
Fair value of Accelerated
investment capital
property allowances Total
GBPm GBPm GBPm
Opening balance 1 September 2015 0.6 1.6 2.2
(Income)/expense for the year recognised in the income statement (0.2) 1.4 1.2
Opening balance 1 September 2016 0.4 3.0 3.4
Expense for the period recognised in the income statement 0.2 0.2 0.4
Closing balance at 28 February 2017 0.6 3.2 3.8
Net deferred tax assets not recognised at 28 February 2017 amounted to GBP0.3 million (31 August 2016: GBP7.3 million).
22. TRADE AND OTHER PAYABLES
Restated (1)
Reviewed Audited
28 February 31 August
2017 2016
GBPm GBPm
Rent received in advance 4.4 4.8
Trade payables 1.5 0.5
Accrued interest 2.5 2.9
VAT payable 4.5 4.3
Accruals 5.5 3.8
Other payables 1.8 5.1
Trade and other payables 20.2 21.4
(1) Current tax liabilities of GBP2.4 million that were previously presented within trade and other payables at 31 August 2016 have been separately
presented on the face of the consolidated balance sheet. Refer to Note 2.2.
23. SHARE CAPITAL AND SHARE PREMIUM
AUTHORISED Authorised
Number of Share Capital
Shares GBPm
- At 31 August 2016 (Ordinary shares of 8 pence each) 3,000,000,000 240.0
- At 28 February 2017 (Ordinary shares of 8 pence each) 3,000,000,000 240.0
ISSUED, CALLED UP AND FULLY PAID Share Share
capital premium
Number of Shares GBPm GBPm
At 31 August 2015 1,474,331,331 117.9 395.0
Scrip dividend - issued December 2015 21,235,556 1.7 9.5
Share placement - issued February 2016 270,588,236 21.7 87.4
Scrip dividend - issued June 2016 28,443,527 2.3 10.2
At 31 August 2016 1,794,598,650 143.6 502.1
Scrip dividend - issued December 2016 17,141,172 1.3 5.3
At 28 February 2017 1,811,739,822 144.9 507.4
SHARE CAPITAL AND SHARE PREMIUM
In October 2015, the Company declared a second interim dividend of 1.65 pence per share for the six months ended August 2015
and offered shareholders an election to receive either a cash dividend or a scrip dividend by way of an issue of new Redefine
International shares credited as fully paid up. The Company received election forms from shareholders holding 699.1 million ordinary
shares of 8 pence each representing a 47 per cent take up by shareholders, in respect of which 21.2 million scrip dividend shares
were issued in December 2015.
In February 2016, the Company completed a placing of 270.6 million new ordinary shares of 8 pence each for an aggregate nominal
value of GBP21.7 million. The placing generated proceeds of GBP109.1 million (net of costs).
In April 2016, the Company declared an interim dividend of 1.625 pence per share for the six months ended 29 February 2016 and
offered shareholders an election to receive either a cash dividend or a scrip dividend by way of an issue of new Redefine International
shares credited as fully paid up. The Company received election forms from shareholders holding 907.4 million ordinary shares of 8
pence each representing a 51 per cent take up by shareholders, in respect of which 28.4 million scrip dividend shares were issued in
June 2016.
In October 2016, the Company declared a second interim dividend of 1.575 pence per share for the six months ended 31 August
2016 and offered shareholders an election to receive either a cash dividend or a scrip dividend by way of an issue of new Redefine
International shares credited as fully paid up. The Company received election forms from shareholders holding 489.1 million ordinary
shares of 8 pence each representing a 27.3 per cent take up by shareholders, in respect of which 17.1 million scrip dividend shares
were issued in December 2016.
24. RESERVES
REVERSE ACQUISITION RESERVE
The reverse acquisition reserve of GBP134.3 million arose on the reverse acquisition of Wichford P.L.C. (subsequently renamed Redefine
International) by Redefine International Holdings Limited ("RIHL") and comprises the difference between the capital structure of the
Company and RIHL.
OTHER RESERVES
Share-Based Payment Reserve
The share-based payment reserve at 28 February 2017 of GBP2.7 million (31 August 2016: GBP2.2 million) arises from conditional awards
of shares in the Company made to certain employees and the Executive Directors. The awards will vest on the third anniversary of
grant, subject to certain performance conditions.
Other Reserves
Other reserves of GBP1.0 million (31 August 2016: GBP1.0 million) arose from the acquisition of subsidiaries.
FOREIGN CURRENCY TRANSLATION RESERVE
The foreign currency translation reserve at 28 February 2017 of GBP11.1 million (31 August 2016: GBP10.8 million) represents exchange
differences arising from the translation of the net investment in foreign operations. GBP2.2 million cumulative translation was transferred
to the income statement during the period on disposal of joint venture interests (31 August 2016: GBP3.6 million on disposal of subsidiary).
25. NON-CONTROLLING INTERESTS
Reviewed Audited
28 February 31 August
2017 2016
GBPm GBPm
Opening balance at 1 September 33.6 38.8
Comprehensive income/(expense) for the year:
Profit/(loss) for the period attributable to non-controlling interest 0.2 (0.4)
Foreign currency translation on subsidiary foreign operations - 0.7
Changes in ownership interest in subsidiaries:
Acquisition of non-controlling interest (Note 26) (12.7) (2.1)
Repayment of non-controlling interest shareholder loans - (0.1)
Reclassification of non-controlling interest shareholder loans to liabilities (0.3) (1.1)
Dividends paid to non-controlling interest (0.6) (2.2)
Total non-controlling interests 20.2 33.6
The following table summarises the financial information relating to the Group's only subsidiary that has a material NCI, RHHL,
before any intra-group eliminations.
Re-presented
Reviewed 28 February 2017 Audited 31 August 2016
Redefine Other Redefine Other
Hotel individually Total non- Hotel individually Total non-
Holdings immaterial controlling Holdings immaterial controlling
Limited subsidiaries interest Limited subsidiaries interest
GBPm GBPm GBPm GBPm GBPm GBPm
United United
Principal place of business Kingdom Kingdom
Country of incorporation BVI BVI
NCI % 17.52% 28.95%
Summarised balance sheet
Investment property and other non-current assets 215.1 216.2
Current assets 9.8 7.0
Non-current liabilities (111.2) (109.9)
Current liabilities (1.5) (1.7)
Elimination of tax paid wholly attributable NCI 0.6 0.4
Adjusted net assets 112.8 112.0
NCI share of adjusted net assets 19.8 32.4
Tax attributable to NCI (0.6) (0.4)
Carrying amount of NCI 19.2 1.0 20.2 32.0 1.6 33.6
Summarised statement of comprehensive income
Revenue 7.0 14.7
Profit/(loss) for the year 2.8 (0.7)
Profit/(loss) attributable to NCI (1) 0.5 (0.3) 0.2 (0.6) 0.2 (0.4)
Other comprehensive income attributable to NCI - - - - 0.7 0.7
Dividends paid to NCI 0.5 0.1 0.6 1.8 0.4 2.2
Summarised cash flow statement
Cash inflow from operating activities 5.6 10.5
Cash outflow from investing activities (1.4) (0.9)
Cash outflow from financing activities (0.7) (7.8)
Net increase in cash and cash equivalents 3.5 1.8
(1) Profit/(loss) attributable to NCI includes a non-resident landlord tax charge of GBP0.5 million (31 August 2016: GBP0.4m) which is fully attributable to the
minority shareholders of RHHL. The cumulative tax attributable to the remaining 17.52% minority shareholder in RHHL for 2016 and 2017 is GBP0.6m.
26. TRANSACTIONS WITH NON CONTROLLING INTERESTS
On 1 June 2016, Ciref Europe Limited, a subsidiary of the Group, acquired the non-controlling interests in its subsidiaries CEL Portfolio
1 Ltd & Co. KG and Chelvey Holdings Limited, of 20.0% and 33.0% respectively, from Ellis Ventures Limited. Consideration for this
transaction was GBP2.3 million (EUR2.7 million) including the acquisition of shareholder loans for GBP1.9 million (EUR2.2 million). A loss on
acquisition of non-controlling interest of GBP0.2 million was recognised directly in equity.
At 31 August 2016, 4C Investments was a non-controlling shareholder of RHHL with an 11.43% equity interest (1,938 shares) in the
issued share capital. The Company had a loan balance outstanding from 4C Investments (refer to Note 29), for which a share charge
was created in favour of the Company over 4C Investment's entire shareholding in RHHL. The total loan balance outstanding, of both
principal and interest, was GBP14.2 million on maturity at 31 December 2016. In the absence of repayment, the Company exercised its
security over the shares. On 7 February 2017, the 1,938 shares formally transferred to the Company for an agreed transfer price of
GBP6,295 per share, valuing the total shareholding at GBP12.1 million. The carrying value of the non-controlling interest on transfer was
GBP12.7 million and, as a result, a gain of GBP0.6 million has been recognised directly in equity.
4C Investments has the right to reacquire the RHH shares on or before 31 January 2018 at the transfer price of GBP12.1 million. The
exercise of this right is considered improbable however and the Directors are satisfied that there is no material value attributable to
the option. The other non-controlling interest has formally waived the pre-emptive right to acquire its relative proportion of the shares
on 31 January 2018. Dividends from these shares are payable to the Company on transfer and 4C Investments has no representation
on the Board of RHHL in the intervening period.
Reviewed Audited
28 February 31 August
2017 2016
GBPm GBPm
Carrying amount of non-controlling interest acquired 12.7 2.1
Consideration paid to non-controlling interest - (2.3)
Transfer value attributed to non-controlling interest (12.1) -
Increase/(decrease) in equity attributable to equity holders of the Parent 0.6 (0.2)
27. CASH GENERATED FROM OPERATIONS
Re-presented
Reviewed Reviewed Audited
28 February 29 February 31 August
2017 2016 2016
Continuing operations Note GBPm GBPm GBPm
Cash flows from operating activities
Profit before tax 42.0 8.4 8.6
Adjustments for:
Straight lining of rental income (0.8) 0.2 (1.5)
Depreciation - 0.1 -
(Gain)/loss on revaluation of investment property (2.6) 17.3 42.5
Gain on disposal of investment property (5.9) (3.4) (3.2)
Gain on disposal of subsidiary 7 - - (12.2)
Distributions from investment at fair value - - (0.5)
(Gain)/loss on revaluation of investment at fair value (1.0) (1.0) 0.8
Amortisation of intangible asset 0.1 0.1 0.2
Gain on disposal of non-current assets held for sale - (0.2) (0.2)
Foreign exchange gain - (2.7) (0.9)
Net finance expense 8 11.6 12.2 26.4
Other finance expenses 9 1.5 0.8 1.9
Change in fair value of derivative financial instruments (4.4) 2.5 11.1
Net gain on sale of joint venture interests 10 (5.0) - -
Net (impairment reversal)/impairment of joint ventures and associate (0.7) 0.7 0.6
interests
Share of post-tax loss/(profit) from joint ventures 2.6 0.3 (1.4)
Share of post-tax profit from associate (0.3) (1.2) (1.7)
Fair value of share-based payments 6 0.5 0.5 1.2
37.6 34.6 71.7
Changes in working capital 3.1 (3.1) (2.5)
Cash generated from operations 40.7 31.5 69.2
28. FAIR VALUE OF FINANCIAL INSTRUMENTS
BASIS FOR DETERMINING FAIR VALUES
The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements.
Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.
Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This
category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical
or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are
directly or indirectly observable from market data.
Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation
technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's
valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant
unobservable adjustments or assumptions are required to reflect differences between the instruments.
Fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer
price quotations. For all other financial instruments, the Group determines fair values using net present value and discounted cash
flow models and comparisons to similar instruments for which market observable prices exist. Assumptions and inputs used in
valuation techniques include risk-free and benchmark interest rates, credit spreads and other premia used in estimating discount
rates, foreign currency exchange rates and expected price volatilities and correlations. The objective of valuation techniques is to
arrive at a fair value determination that reflects the price of the financial instrument at the reporting date that would have been
determined by market participants acting at arm's length.
The Group uses widely recognised valuation models for determining the fair value of common and more simple financial instruments
such as interest rate swaps and caps that use only observable market data and require little management judgement and estimation.
Observable prices and model inputs are usually available in the market for simple over the counter derivatives, e.g. interest rate
swaps. Availability of observable market prices and model inputs reduces the need for management judgement and estimation and
also reduces the uncertainty associated with determination of fair values. Availability of observable market prices and inputs varies
depending on the products and markets and is prone to changes based on specific events and general conditions in the
financial markets.
The tables below present information about the Group's financial assets and liabilities measured at fair value as of 28 February 2017
and 31 August 2016.
Total
Level 1 Level 2 Level 3 Fair Value
GBPm GBPm GBPm GBPm
28 February 2017
Financial assets
Investment at fair value (Note 13) 9.8 - - 9.8
Derivative financial assets (Note 20) - 0.9 - 0.9
9.8 0.9 - 10.7
Financial liabilities
Derivative financial liabilities (Note 20) - (8.2) - (8.2)
- (8.2) - (8.2)
31 August 2016
Financial assets
Investment at fair value (Note 13) 7.9 - - 7.9
Derivative financial assets (Note 20) - 0.8 - 0.8
7.9 0.8 - 8.7
Financial liabilities
Derivative financial liabilities (Note 20) - (12.6) - (12.6)
- (12.6) - (12.6)
No financial instruments were transferred between levels during the period.
The investment in IHL has been categorised as a Level 1 investment and priced using quoted prices in an active market; the AltX of
the JSE. Derivative financial instruments have been categorised as Level 2 as although they are priced using directly observable
inputs, the instruments are not traded in an active market.
As stated in Note 12, 18 and 19 respectively, the Group considers investment property, non-current assets held for sale and loan
borrowings to be categorised as Level 3.
The carrying values of loans to joint ventures, trade and other receivables, cash and cash equivalents, finance leases and trade and
other payables are considered to be a reasonable approximation of fair value.
29. RELATED PARTY TRANSACTIONS
Related parties of the Group include: associate undertakings; joint ventures; Directors and key management personnel; connected
parties; the major Shareholder Redefine Properties Limited ("RPL"); as well as entities connected through common directorships.
Reviewed Audited
28 February 31 August
2017 2016
GBPm GBPm
Related Party Transactions
Revenue Transactions
Rental income
RedefineBDL 7.0 14.7
Other income
International Hotel Properties Limited - 0.3
Joint Ventures
Leopard Portfolio 0.3 0.5
Wichford VBG Holding S.à.r.l. (including Performance Fee of GBP4.0 million) 4.1 0.1
RI Menora German Holdings S.à.r.l. - 0.1
4.4 1.0
Distributions from investments at fair value
International Hotel Properties Limited - 0.5
Finance income
Joint Ventures
Leopard Portfolio 1.5 2.6
Wichford VBG Holding S.à.r.l. 0.8 2.2
RI Menora German Holdings S.à.r.l. 0.1 0.2
International Hotel Properties Limited - 0.1
4C UK Investments Limited 0.5 1.0
2.9 6.1
Capital Transactions
Investment property (capitalised expenditure)
Project monitoring fee to RedefineBDL - construction works - 0.3
Investment at fair value through profit or loss
International Hotel Properties Limited (shares acquired at cost) 9.7 8.7
Investment in associate
Acquisition of 4C UK Investments Limited's interests in RedefineBDL 1.3 -
Capital contribution to RedefineBDL - 6.0
Dividends received from RedefineBDL (1.1) (2.3)
Non-controlling interests
Acquisition of 4C UK Investments Limited's interests in RHHL 12.1 -
Related Party Balances
Loans to joint ventures
Leopard Portfolio 36.7 36.8
Wichford VBG Holding S.à.r.l. - 12.2
RI Menora German Holdings S.à.r.l. 3.8 3.9
40.5 52.9
Trade and other receivables
Leopard Portfolio 0.5 1.9
Wichford VBG Holding S.à.r.l. - 1.7
4C UK Investments Limited - 14.2
RedefineBDL 0.2 1.7
International Hotel Properties Limited - 0.5
0.7 20.0
Related Party Transactions with equity holders of the Parent
Redefine Properties Limited - capital raise - 34.6
Redefine Properties Limited - underwriting fee - 2.5
Redefine Properties Limited - cash dividends 8.5 8.0
Redefine Properties Limited - scrip dividends - 8.0
4C UK INVESTMENTS LIMITED
On 7 February 2017, the Company exercised its security against a loan extended to 4C Investments. In settlement of the GBP14.2 million
balance outstanding, the following investments were transferred to the Group:
- 4C Investments non-controlling interest in RHHL for a transfer price of GBP12.1 million (Note 26)
- 4C Investments shareholding in RedefineBDL for a transfer price of GBP1.3 million (Note 18)
- 4C Investments shareholding in IHL for a transfer price of GBP1.0 million (Note 13)
As the total transfer price for the shares was GBP14.4 million, GBP0.2 million cash was paid back by the Company to 4C Investments. The
treatment on initial recognition of the transferred shares is explained in the referenced notes.
On the same date, the Company entered into a lock-up agreement with 4C Investments whereby the latter has the right to buy back
the transferred shares in RHHL and RedefineBDL on or before 31 January 2018 at the transfer price. Under the terms of the lock-up agreement:
- the Company cannot dispose of the transferred shares;
- 4C Investments must be notified of material transactions; and
- any dividends declared by RHHL and RedefineBDL will be payable to the Company.
4C Investments is controlled by Bashir Nathoo. Bashir Nathoo was a Director of RHHL and RedefineBDL. Bashir Nathoo resigned
from his directorships with immediate effect on transfer of the shares.
REDEFINE PROPERTIES LIMITED
During the year ended 31 August 2016, the Group paid Redefine Properties a fee of GBP2.5 million in consideration for the financial
guarantee to support the AUK Portfolio acquisition by underwriting up to GBP70.0 million in the capital raise. On completion, Redefine
Properties was allocated 81,373,179 shares, representing 30.07% of the total placing and this equated to an aggregate amount of
GBP34.6 million of the total funds raised.
At 28 February 2017, Redefine Properties held a 29.79% interest in the issued share capital of the Company.
DIRECTORS
Non-executive Directors and Executive Directors represent key management personnel. The remuneration paid to Non-executive
Directors for the period ended 28 February 2017 was GBP0.3 million (29 February 2016: GBP0.2 million) which represents Directors fees
only. The remuneration paid to Executive Directors for the period ended 28 February 2017 was GBP1.3 million (29 February 2016: GBP1.2 million),
representing salaries, benefits and bonuses. 4.9 million contingent share awards were issued to Executive Directors during
the period (29 February 2016: 5.0 million). The share-based payment charge associated with the cumulative contingent share awards
outstanding was GBP0.5 million (29 February 2016: GBP0.5 million) for the period.
Certain Directors acquired shares on 27 February 2017 as follows:
Number of Price per
ordinary shares ordinary share
Name acquired acquired
Stephen Oakenfull 50,000 36.57p
Adrian Horsburgh 50,000 36.45p
Donald Grant 50,000 36.32p
Certain Directors participated in the February 2016 share placing as follows:
Number of Percentage
Number of ordinary shares of enlarged
placing held on share capital
Name shares admission (%)
Mike Watters 352,941 6,515,638 0.37
Adrian Horsburgh 10,000 10,000 0.00
Robert Orr 23,529 23,529 0.00
Gavin Tipper 100,000 508,630 0.03
Marc Wainer 195,000 1,676,545 0.09
30. EARNINGS PER SHARE
Earnings per share is calculated on the weighted average number of shares in issue and the profit attributable to shareholders.
Reviewed Reviewed Audited
28 February 29 February 31 August
2017 2016 2016
GBPm GBPm GBPm
Profit attributable to equity holders of the Parent 40.8 6.8 7.9
Group Adjustments:
(Gain)/loss on revaluation of investment property (2.6) 17.3 42.5
Gain on disposal of investment property (5.9) (3.4) (3.2)
Gain on disposal of subsidiary - - (12.2)
(Gain)/loss on revaluation of investment at fair value (1.0) (1.0) 0.8
Amortisation of intangible assets 0.1 0.1 0.2
Gain on disposal of non-current asset held for sale - (0.2) (0.2)
Re-measurement of financial liability 1.3 - -
Refinancing costs 0.2 0.1 0.2
Change in fair value of derivative financial instruments (4.4) 2.5 11.1
Gain on sale of joint venture interests (5.2) - -
Impairment reversal of investment in associate (0.6) - -
Capital gains tax refund on disposal of Swiss properties - (1.1) (1.4)
Deferred tax adjustments 0.4 0.8 1.2
Joint Venture Adjustments:
Loss/(gain) on revaluation of investment property 0.6 0.5 (1.3)
Loss on sale of subsidiaries 0.2 - -
Change in fair value of derivative financial instruments (0.9) 1.4 1.7
Deferred tax adjustments 0.7 0.1 0.3
Elimination of joint venture unrecognised losses (1) 0.8 (0.8) (1.2)
Non-Controlling Interest Adjustments:
Loss on revaluation of investment property (0.8) (0.1) (2.2)
Change in fair value of derivative financial instruments - 0.1 (0.1)
Impairment reversal of investment in associate 0.1 - -
EPRA earnings 23.8 23.1 44.1
Adjustments:
Accretion of fair value adjustments 0.5 1.1 3.1
Foreign exchange gain - (2.7) (0.9)
Underlying earnings (re-based) 24.3 21.5 46.3
Discontinued Company adjustments - 3.9 5.9
Distributable earnings 24.3 25.4 52.2
Number of ordinary shares
- Weighted average 1,802.0 1,493.4 1,637.2
- Diluted weighted average 1,804.4 1,494.8 1,637.9
Earnings per share (pence)
- Basic 2.3p 0.5p 0.5p
- Diluted 2.3p 0.5p 0.5p
EPRA earnings per share (pence) 1.3p 1.5p 2.7p
Diluted EPRA earnings per share (pence) 1.3p 1.5p 2.7p
Underlying earnings per share (re-based) (2) 1.35p 1.40p 2.80p
Distributable earnings per share (pence) 1.35p 1.70p 3.20p
Dividend per share (pence) 1.30p 1.625p 3.20p
First interim dividend per share (pence) 1.30p 1.625p 1.625p
Second interim dividend per share (pence) - - 1.575p
(1) As per Note 14, the Group has ceased to recognise the Esplanade in the IFRS statements as the cumulative losses of the joint venture exceed the
cost of the Group's investment. This adjustment eliminates the restricted losses for the period attributable to the Esplanade.
(2) The calculation of underlying earnings was revised during the six months ended 28 February 2017 to align to the EPRA earnings metric as adjusted
for foreign exchange and debt fair value movements only. The Directors consider this to be a more appropriate measure of recurring earnings that
provides better alignment with operational cash flow. Additional distributable and other non-recurring adjustments made in the prior periods have now
been discontinued and are presented on an aggregate basis within 'Discontinued Company adjustments' above. The calculation of prior period re-
based underlying earnings has been disclosed for informational and comparative purposes.
Headline earnings per share is calculated in accordance with Circular 2/2015 issued by the South African Institute of Chartered
Accountants ("SAICA"), a requirement of the Group's JSE listing. This measure is not a requirement of IFRS.
Reviewed Reviewed Audited
28 February 29 February 31 August
2017 2016 2016
GBPm GBPm GBPm
Profit attributable to equity holders of the Parent 40.8 6.8 7.9
Group Adjustments:
(Gain)/loss on revaluation of investment property (2.6) 17.3 42.5
Gain on disposal of investment property (5.9) (3.4) (3.2)
Gain on disposal of subsidiary - - (12.2)
Gain on disposal of non-current assets held for sale - (0.2) (0.2)
Gain on sale of joint venture interests (5.2) - -
Deferred tax 0.4 0.6 1.2
Joint Venture Adjustments:
Loss/(gain) on revaluation of investment property 0.6 0.5 (1.3)
Loss on sale of subsidiaries 0.2 - -
Deferred tax 0.7 0.1 0.3
Elimination of joint venture unrecognised losses (1) 0.1 (0.1) (0.2)
Non-Controlling Interest Adjustments:
Loss on revaluation of investment property (0.8) (0.1) (2.2)
Headline earnings attributable to equity holders of the Parent 28.3 21.5 32.6
Number of ordinary shares
- Weighted average 1,802.0 1,493.4 1,637.2
- Diluted weighted average 1,804.4 1,494.8 1,637.9
Headline earnings per share (pence)
- Basic 1.6p 1.4p 2.0p
- Diluted 1.6p 1.4p 2.0p
(1) As per Note 14, the Group has ceased to recognise the Esplanade in the IFRS statements as the cumulative losses of the joint venture exceed the
cost of the Group's investment. This adjustment eliminates the restricted losses for the period attributable to the Esplanade.
31. NET ASSET VALUE PER SHARE
Reviewed Audited
28 February 31 August
2017 2016
GBPm GBPm
Net assets attributable to equity holders of the Parent 720.4 699.8
Group Adjustments:
Fair value of derivative financial instruments 7.3 11.8
Deferred tax adjustments 3.8 3.4
Joint Venture Adjustments:
Fair value of derivative financial instruments 3.8 4.7
Elimination of unrecognised derivative financial instruments (1) (3.7) (4.3)
Deferred tax adjustments 1.9 1.9
Non-Controlling Interest Adjustments:
Fair value of derivative financial instruments 0.1 0.2
Deferred tax adjustments - (0.1)
EPRA NAV 733.6 717.4
Group Adjustments:
Fair value of derivative financial instruments (7.3) (11.8)
Excess of fair value of debt over carrying value (31.8) (42.4)
Deferred tax adjustments (3.8) (3.4)
Joint Venture Adjustments:
Fair value of derivative financial instruments (3.8) (4.7)
Elimination of unrecognised derivative financial instruments (1) 3.7 4.3
Deferred tax adjustments (1.9) (1.9)
Non-Controlling Interest Adjustments:
Fair value of derivative financial instruments (0.1) (0.2)
Deferred tax adjustments - 0.1
EPRA NNNAV 688.6 657.4
Number of ordinary shares
- In issue 1,811.7 1,794.6
- Diluted 1,814.2 1,795.4
Net asset value per share (pence):
- Basic 39.8p 39.0p
- Diluted 39.7p 39.0p
EPRA diluted NAV per share (pence) 40.4p 40.0p
EPRA diluted NNNAV per share (pence) 38.0p 36.6p
(1) As per Note 14, the Group has ceased to recognise the Esplanade in the IFRS statements as the cumulative losses of the joint venture exceed
the cost of the Group's investment. This adjustment eliminates the derivative financial instruments attributable to the Esplanade from the
proportionate adjustments.
32. CONTINGENCIES, GUARANTEES AND COMMITMENTS
At 28 February 2017, the Group was contractually committed to expenditure of GBP13.4 million (31 August 2016: GBP15.8 million), of
which GBP12.3 million was committed to the future development and enhancement of investment property.
33. SUBSEQUENT EVENTS
On 28 March 2017, the Group disposed of its investment property at The Observatory, Chatham for GBP4.0 million. The carrying value
of the property at the date of disposal was GBP3.6 million.
On 7 April 2017, the Group reached a conditional agreement to acquire the controlling interest in the Leopard Portfolio which is
currently held as a joint venture with Redefine Properties. Redefine Properties is the majority shareholder of Redefine International
P.L.C. and, due to the related party nature of the transaction, shareholder approval was sought and subsequently received on 25
April 2017. The transaction, which completes today, took effect from 1 March 2017 and resulted in aggregate consideration paid of
EUR49.0 million, EUR0.3 million with respect to the equity interest acquired and EUR48.7 million in respect of the shareholder loans acquired.
The net asset value of the portfolio at 28 February 2017, adjusted to reflect shareholder loans, was EUR86.3 million (EUR43.2 million being
attributed to Redefine Properties).
On 10 April 2017, the Group refinanced GBP167.8 million of existing debt facilities secured over four of its UK Shopping Centre assets
with Aviva. Following a repayment of GBP21.7 million, the four facilities were amalgamated into one facility carrying a fixed rate of interest
of 5.52 per cent (previous range: 5.7 per cent - 6.4 per cent). In addition, following a payment of GBP5.5 million, the Group terminated
the historic profit and capital appreciation arrangement with Aviva in respect to the Grand Arcade, Wigan.
On 25 April 2017, the Group formally agreed a refinancing of its HSH Nordbank facility, secured over CMC Shopping Center Altona,
Hamburg. The refinancing will take effect from 28 April 2017 with the facility will be extended to February 2024. Following a
prepayment of EUR6.5 million, the nominal value of debt outstanding under the facility was reduced to EUR45.0 million.
GLOSSARY
Annualised gross rental income Annualised gross rent generated by the asset at the balance sheet date, which is made up of the
contracted rent, including units that are in rent-free periods, and estimates of turnover rent.
AUK Aegon UK property portfolio
Aviva Aviva Commercial Finance Limited
Board The Board of Directors of Redefine International P.L.C.
Brexit / Article 50 Article 50 of the Lisbon Treaty gives any European Union member the right to withdraw from the
EU and outlines the procedure for doing so. On 29 March 2017, Article 50 was triggered by the
UK Government following the vote to leave in June 2016 (the "EU Referendum") which is
colloquially referred to as Brexit, and must be concluded by March 2019.
BVI British Virgin Islands
Discontinued Company Items previously added back to distributable earnings, for example, debt issue costs and share
adjustments based payment charges.
EBITDA Earnings Before Interest, Tax, Depreciation and Amortisation
EPRA European Public Real Estate Association
EPRA earnings Earnings from operational activities as defined by EPRA's Best Practice guidelines
EPRA NAV European Public Real Estate Association Net Asset Value
EPRA NIY European Public Real Estate Association Net Initial Yield. The annualised rental income based on
the cash rents passing at the balance sheet date, less non-recoverable property operating
expenses, divided by the gross market value of the property.
EPRA NNNAV European Public Real Estate Association Triple Net Asset Value
EPRA topped-up initial yield Net initial yield adjusted for the expiration of rent free periods or other incentives.
EPRA voids Voids are expressed as a percentage of ERV and represent a measure of unlet space
EPS Earnings per share
ERV The estimated market rental value of lettable space which could reasonably be expected to be
obtained on a new letting or rent review.
EU European Union
EUR or Euro Euro, the lawful common currency of participating member states of the European Monetary
Union.
GBP, Pound or Sterling Great British Pound, the legal currency of the UK
IASB International Accounting Standards Board
IFRS International Financial Reporting Standards
IHL International Hotel Properties Limited (formerly: International Hotel Group Limited)
Indexed leases A lease with rent review provisions which are dependent upon calculations with reference to an
index such as the consumer price index or the retail price index
IPD Investment Property Databank
IRR Internal rate of return
JSE JSE Limited, licensed as an exchange and a public company incorporated under the laws of
South Africa and the operator of the Johannesburg Stock Exchange.
Lease incentives Any incentives offered to occupiers to enter into a lease. Typically, the incentive will be an initial
rent-free period, or a cash contribution to fit out or similar costs.
Like-for-like income Income generated by assets which were held by the Group throughout both the current and
comparable periods for which there has been no significant development which materially impacts
upon income and used to illustrate change in comparable income values.
Like-for-like property Property which has been held at both the current and comparative balance sheet dates for which
there has been no significant development and used to illustrate change in comparable capital
values.
LSE The London Stock Exchange
Loan-to-value or LTV The ratio of net debt divided by the market value of investment property. Calculated on a
proportionate (share of value) basis.
LUXSE The Luxembourg Stock Exchange
NAV Net Asset Value
NCI Non-controlling interest
Net debt Total nominal value of borrowings less cash and cash equivalents
RCF Revolving Credit Facility
Redefine International, RI PLC, Redefine International P.L.C., also referred to as the "Company" taken together with all its
the Company or the Group subsidiaries and Group undertakings are collectively referred to as the "Group".
RedefineBDL or RBDL RedefineBDL Hotel Group Limited
Redefine Properties or RPL Redefine Properties Limited, listed on the JSE, 29.79% Shareholder of the Company.
RECML Redefine Earls Court Management Limited
Reversionary yield The anticipated yield to which the initial yield will rise (or fall) once the rent reaches the ERV.
RevPar Revenue per available room
RICS Royal Institute of Chartered Surveyors
RIHL Redefine International Holdings Limited
RIMH Redefine International Management Holdings Limited
RHHL Redefine Hotel Holdings Limited
RHML Redefine Hotel Management Limited
SAICA South African Institute of Chartered Accountants
UK United Kingdom
UK-REIT A UK Real Estate Investment Trust. A REIT must be a publicly quoted company with at least
three-quarters of its profits and assets derived from a qualifying property rental business. Income
and capital gains from the property rental business are exempt from tax but the REIT is required
to distribute at least 90 per cent of those profits to shareholders. Tax is payable on non-qualifying
activities of the residual business.
Underlying earnings (re-based) The calculation of underlying earnings was revised during the six months ended 28 February
2017 to align to the EPRA earnings metric as adjusted for foreign exchange gains and debt fair
value accretion adjustments only.
WAULT Weighted average unexpired lease term
Date: 26/04/2017 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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