Condensed unaudited interim consolidated financial statements for the six months ended 31 December 2014
MAS Real Estate Inc.
Registered in British Virgin Islands Registration number 1750199
Registered as an external company in the Republic of South Africa Registration number 2010/000338/10
SEDOL (XLUX) B96VLJ5
SEDOL (JSE) B96TSD2
Jse share code MSP
ISIN VGG5884M1041
("MAS" or "the Company")
CONDENSED UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2014
- Adjusted net asset value per share increase of 5,8% to 109,8 euro cents per share
- Acquired investment properties with a combined value of EUR76,7 million and capitalised development expenditure of EUR 8,7 million
- Acquired further investment properties of EUR45,7 million post period end with firm commitments of an additional EUR11,7 million
- Committed EUR58,6 million to fund development property
- Successfully migrated listing to the Main Board of the JSE
- Internalised the investment adviser
MAS is a real-estate investment company with a portfolio of commercial properties in Western Europe. The Company aims to
provide investors with an attractive, sustainable euro-based distribution and strong growth in value over time through its acquisition
and asset management strategy. Its current investment focus is on Germany, Switzerland and the United Kingdom.
REPORTING CURRENCY
The Company's results are reported in euro.
MARKET OVERVIEW
During the reporting period European bond yields dropped dramatically. In Germany, government yields continue to slide, with
5 year bunds now in negative territory as the safe-haven effect continues. As a result the gap between investment yields on
real-estate and the extremely low cost of funding is creating some of the widest yield spreads seen in recent times. MAS is
diligently taking advantage of this, locking in strong income yields on real-estate, while working towards gearing the investment
property portfolio efficiently to take advantage of the low cost of funding.
The declining European bond yields and increasing prospect of deflation led investors to search for yield throughout 2014.
Transaction volumes were robust, with a 13,0% year-on-year increase in European real-estate transactions. Despite the political
uncertainty, we are optimistic about Europe's outlook for 2015. The European Central Bank ("ECB") has enacted quantitative easing
for the first time in January this year. This move is likely to drive real asset prices, as has been the case elsewhere.
The Swiss National Bank unexpectedly abandoned its currency management and stabilisation policy in recent weeks, which
caused some short-term market dislocation. The Swiss franc appreciated by 16,8% in a one day period, with even more exaggerated
intra-day swings. This volatility will likely see investors seek a more active hedging strategy but is unlikely to diminish the safe haven
status that Switzerland enjoys. We continue to find attractive opportunities in Switzerland, despite the stronger currency.
From a currency perspective, the Company's exposure is in a basket of sterling, euros and Swiss francs. With respect to euros, this
exposure reflects investment into Germany, the economic core of the European Union. Accordingly, currency concerns about the future
of the euro are unlikely to have any substantial impact on the business.
PERFORMANCE
The adjusted NAV per share of the Company has continued to grow, and was up by a further 5,8%, reaching 109,8 euro cents per
share at 31 December 2014. This increase is driven by a combination of gains in our investment in Karoo Investment Fund S.C.A
SICAV-SIF ("Karoo Fund"), and exchange gains from the stronger pound sterling. The uplift in the Karoo Fund has been recognised
in reserves, and will be released to the profit or loss as the fund redeems. The Karoo Fund did in fact redeem some 17,5% of its
shares in November 2014, realising some of the gains achieved.
The increased number of property transactions entered into by the Company has resulted in EUR5,7 million of write-downs in relation
to acquisition costs incurred which is in-line with market norms for real-estate transactions. This is the typical J-curve of property
values at the time of acquisition. Essentially, the costs associated with a transaction, which are not insubstantial in an asset class
such as real-estate, have to be written off as property value write-downs after acquisition, as opposed to spread over the life of the
asset. Such technical write-downs mask the true performance of the underlying portfolio which is in build up phase. This effect is
likely to continue in the second half of the financial year, as further investments are made.
In October 2014, MAS increased the future operating profitability of the portfolio by internalising the investment adviser. The cost
savings from a group perspective will be significant. The excess of the purchase price over the fair value of the attributable net
assets has been recognised as goodwill on the balance sheet.
Adjusted core income for the period is EUR3,3 million or 1,18 euro cents per share.
INVESTMENT PROPERTY
The first six months of the 2015 financial year have seen the investment property portfolio increase in value from EUR64,8 million to
EUR153,7 million, an increase of 137,2%. Some EUR45,7 million of income-generating investment property has been acquired post interim
period end, and a further EUR11,7 million has been firmly committed to a transaction in Germany. EUR58,6 million has also been committed
to funding the development of the three pre-let hotels and public realm in phase 1 of the development of New Waverley in Edinburgh.
Investment Property
- 30 Jun 2014
- Income-generating property and Development property: EUR64,8 million
- 31 Dec 2014
- Income-generating property and Development property: EUR153,7 million
- Income-generating property, Development property, Income-generating property – acquired post interim period end,
Income-generating property – firm commitments and Development property – committed expenditure: EUR269,7million
- Income-generating property, Development property, Income-generating property – acquired post interim period end,
Income-generating property – firm commitments, Development property – committed expenditure and Deal pipeline: EUR374,7 million
Net Assets
- Net assets 30 June 2014
- Income Income-generating property: 8%
- Development property: 9%
- Investments: 12%
- Corporate and treasury: 71%
- Net assets 31 December 2014
- Income Income-generating property: 27%
- Development property: 16%
- Investments: 17%
- Corporate and treasury: 40%
In December 2014, the Company completed the acquisition of its single largest investment to date, a substantial industrial
warehouse and office park situated close to the town centre of Chippenham in Wiltshire, England, for a purchase price (before
acquisition expenses) of EUR40,3 million. The property covers an area of almost 20 hectares, and offers strong core income and a
unique value adding opportunity.
The development property portfolio is also progressing well. Phase 1 of the New Waverley development is underway, with the first
deliveries of complete properties expected in late 2016. The planning application for Santon North Street, in Lewes, East Sussex in
England, has been submitted and we look forward to the results of this application later this year.
The investment property portfolio continues to perform in line with management's expectations. Upwards rent indexation built into
a number of the existing lease contracts will help to protect returns on relatively low-risk tenant exposures, in inflationary and
deflationary environments.
INVESTMENTS
The investment portfolio continued to perform strongly, driven by gains in the value of the Karoo Fund. This fund is being wound up,
and we expect to receive redemptions throughout the next 12 months, which will be reinvested in our investment property portfolio.
A further EUR10,0 million has been spent on our investment portfolio via the acquisition of a 4,2% shareholding in Sirius Real Estate
Limited ("Sirius"), where we already have an indirect exposure through the Karoo Fund. Our investment in Sirius has performed well
since acquisition, increasing in value by some EUR1,1 million (11,0%). Sirius is an owner and leading operator of mixed-use, multi-
tenanted, branded business parks throughout Germany. Gains totalling EUR17,4 million in respect of both the Karoo Fund and Sirius
Real Estate have been recognised directly in reserves.
Euro
Investment 31 Dec 2014 31 Dec 2013 31 Jun 2014
Karoo Fund 43 486 680 34 650 536 35 743 617
Sirius Real Estate Limited 11 053 629 – –
54 540 309 34 650 536 35 743 617
TREASURY
Due to the low interest rate environment, management sought better returns on the Company's cash over the course of the last
year. Some EUR30,0 million was invested in a portfolio of European real-estate equities. This portfolio has also been performing well,
with a gain of EUR1,8 million at 31 December 2014, and further gains at the time of writing. This treasury strategy is nearing its end, as
the cash is withdrawn and invested into direct real-estate opportunities.
BASIS OF PREPARATION AND ACCOUNTING POLICIES
These condensed interim consolidated financial statements have been prepared in accordance with the measurement and
recognition requirements of International Financial Reporting Standards (IFRS), the principles of IAS 34: Interim Financial Reporting,
and the JSE Listings Requirements.
The accounting policies applied in the preparation of these condensed interim consolidated financial statements are consistent with
those applied in the preparation of the consolidated financial statements for the sixteen months period ended 30 June 2014.
These financial results have not been reviewed or reported on by the Company's auditors.
COMPARATIVE INFORMATION
The comparative period is for ten months as a result of the Company changing its year end from 28 February to 30 June.
VALUATION OF INVESTMENT PROPERTIES
Investment properties are valued annually at the financial year-end, by approved independent third-party valuers. In the interim
financial statements, the directors remain comfortable with the valuations of the properties at the year ended 30 June 2014 or, in the
case of more recent acquisitions, with the valuations obtained at the time of purchase. Considerable judgement is required in
interpreting market data to determine the estimates of value; accordingly the estimates of value presented in the financial state-
ments are not necessarily indicative of the amounts that the Company could realise in a market exchange. The use of different
market assumptions and / or estimation methodologies may have a material effect on the estimated fair values.
PROSPECTS
The substantial yield spread in the market is attractive. To take advantage of this, the Company has initiated a gearing programme
for the investment property portfolio, to lock in the present low costs of funding in the Eurozone. We remain confident of achieving
our 31 December 2016 target of a run-rate of 6% core income yield on capital invested by shareholders, based on assumptions
that a stable macroeconomic economic environment prevails, no major corporate failure occurs and planned investment and
gearing programmes are implemented successfully. This translates into a core income run-rate per share of above 6.2 euro cents
per share.
This forecast is the responsibility of the board and has not been reviewed or reported on by the Company's auditors.
DISTRIBUTION
A distribution of 1,15 euro cents per share has been proposed. Further information in this regard will be published in due course. As
the Company annually pays out adjusted core income as a distribution, the Company has elected to adopt distribution per share as
the relevant measure upon which to update the market regarding its performance.
CHANGES TO THE BOARD
Given the Company's successful migration to the Main Board of the JSE the Company has appointed further Board members;
Morné Wilken (CEO, Attacq Limited) as non-executive director, Jonathan Knight as chief investment officer (formerly a member of
the investment committee of the investment adviser) and Pierre Goosen (formerly a member of the investment committee of the
investment adviser).
By order of the board
Ron Spencer Lukas Nakos
Chairman Chief executive officer
Douglas, Isle of Man
4 March 2015
Registered office
In the British Virgin Islands:
Midocean Chambers
Road Town
Tortola
British Virgin Islands
Registrar
Computershare Investor Services (BVI)
Limited
Registration number 003287V
Woodbourne Hall
PO Box 3162
Road Town, Tortola
British Virgin Islands
For correspondence:
25 Athol Street
Douglas
Isle of Man
IM1 1LB
Transfer secretary
Computershare Investor Services
(Proprietary)
Limited
Ground floor
70 Marshall Street
Johannesburg, 2001
South Africa
Directors
Lukas Nakos (chief executive officer)
Malcolm Levy (chief financial officer)
Jonathan Knight (chief investment officer)
Ron Spencer (non-executive chairman)
Gideon Oosthuizen (non-executive)
Jaco Jansen (non-executive)
Morné Wilken (non-executive)
Pierre Goosen (non-executive)
Company secretary
Helen Cullen
JSE sponsor
Java Capital
CONDENSED INTERIM CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six month ten month sixteen month
period ended period ended period ended
Euro 31 Dec 2014 31 Dec 2013 30 Jun 2014
Continuing operations
Revenue
Gross rental income 2 625 058 3 450 408 5 247 429
Expenses
Portfolio related expenses (489 420) (402 560) (665 096)
Investment adviser fees (1 248 330) (831 786) (2 410 812)
Administration expenses (841 855) (535 581) (884 564)
Net operating profit 45 453 1 680 481 1 286 957
Net (loss)/gain on investment property activity (6 179 716) 726 899 528 974
Equity accounted earnings – 1 479 1 479
Exchange differences 2 543 511 1 341 039 3 931 722
(Loss)/profit before net financing costs (3 590 752) 3 749 898 5 749 132
Net finance income/(expense) 4 920 617 (370 021) 509 539
Profit before taxation 1 329 865 3 379 877 6 258 671
Taxation 373 865 (127 842) (1 198 435)
Profit for the period attributable to the owners of the Company 1 703 730 3 252 035 5 060 236
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss
Foreign operations – foreign currency translation differences 94 500 46 707 156 323
Available-for-sale financial assets – net change in fair value 17 421 010 – –
Total comprehensive income for the period 19 219 240 3 298 742 5 216 559
attributable to the owners of the Company
Earnings per share (euro cents)* 0,60 4,40 2,76
Headline earnings per share (euro cents)* 2,62 4,40 3,10
Adjusted core income per share (euro cents)* 1,18 2,27 2,82
Weighted average number of ordinary shares in issue 283 885 876 73 936 931 183 068 848
Adjusted core income 3 342 239 1 680 229 5 157 102
*The Company has no dilutionary instruments in issue
CONDENSED INTERIM CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
as at as at as at
Euro 31 Dec 2014 31 Dec 2013 30 Jun 2014
Non-current assets
Goodwill 26 475 251 1 371 537 1 371 537
Investment property 153 722 421 70 640 221 64 751 842
Investments 54 540 309 34 650 536 35 743 617
Property, plant and equipment 17 838 55 512 –
Deferred taxation asset 659 187 – 52 886
Total non-current assets 235 415 006 106 717 806 101 919 882
Current assets
Short term loans – 262 341 –
Other investments 31 933 437 – –
Trade and other receivables 2 147 757 1 243 925 2 270 221
Cash and cash equivalents 71 256 824 18 385 502 205 800 188
Total current assets 105 338 018 19 891 768 208 070 409
Total assets 340 753 024 126 609 574 309 990 291
Equity
Share capital 304 161 079 107 980 979 289 978 080
Retained (loss) (3 159 348) (1 415 864) (1 276 580)
Foreign currency translation reserve 717 428 513 312 622 928
Available-for-sale reserve 17 421 010 – –
Equity attributable to the owners of the Company 319 140 169 107 078 427 289 324 428
Non-current liabilities
Long term loans 13 984 633 15 671 626 14 340 752
Financial instruments 2 564 315 1 513 121 2 104 606
Deferred taxation liability 713 904 – 926 285
Total non-current liabilities 17 262 852 17 184 747 17 371 643
Current liabilities
Short term loans payable 890 919 638 086 1 757 425
Trade and other payables 3 459 084 1 708 314 1 536 795
Total current liabilities 4 350 003 2 346 400 3 294 220
Total liabilities 21 612 855 19 531 147 20 665 863
Total shareholder equity and liabilities 340 753 024 126 609 574 309 990 291
Actual number of ordinary shares in issue 290 602 608 104 158 624 279 483 999
Net asset value per share (euro cents) 109,8 102,8 103,5
Adjusted net asset value per share (euro cents)* 109,8 102,8 103,8
* Adjusted net asset value per share excludes deferred taxation.
CONDENSED INTERIM CONSOLIDATED
STATEMENT OF CHANGES IN EQUITY
Foreign
currency
Share Retained transaction Available for
Euro capital earnings/(loss) reserve sale reserve Total
Balance at 28 Feb 2013 (audited) 67 423 236 (3 674 324) 466 605 – 64 215 517
Comprehensive income for the period
Profit for the period – 3 252 035 – – 3 252 035
Other comprehensive income – – 46 707 – 46 707
Total comprehensive income for the period – 3 252 035 46 707 – 3 298 742
Transactions with the owners of the Company
Issue of shares 39 668 696 – – – 39 668 696
Distributions 889 047 (993 575) – – (104 528)
Total transactions with the owners 40 557 743 (993 575) – – 39 564 168
of the Company
Balance at 31 Dec 2013 (unaudited) 107 980 979 (1 415 864) 513 312 – 107 078 427
Comprehensive income for the period
Profit for the period – 1 808 201 – – 1 808 201
Other comprehensive income – – 109 616 – 109 616
Total comprehensive income for the period – 1 808 201 109 616 – 1 917 817
Transactions with the owners of the Company
Issue of shares 181 997 101 – – – 181 997 101
Distributions – (1 668 917) – – (1 668 917)
Total transactions with the owners 181 997 101 (1 668 917) – – 180 328 184
of the Company
Balance at 30 Jun 2014 (audited) 289 978 080 (1 276 580) 622 928 – 289 324 428
Comprehensive income for the period
Profit for the period – 1 703 730 – – 1 703 730
Other comprehensive income – – 94 500 17 421 010 17 515 510
Total comprehensive income for the period – 1 703 730 94 500 17 421 010 19 219 240
Transactions with the owners of the Company
Issue of shares 12 489 097 – – – 12 489 097
Distributions 1 693 902 (3 586 498) – – (1 892 596)
Total transactions with the owners 14 182 999 (3 586 498) – – 10 596 501
of the Company
Balance at 31 Dec 2014 (unaudited) 304 161 079 (3 159 348) 717 428 17 421 010 319 140 169
CONDENSED INTERIM CONSOLIDATED
STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
six month ten month sixteen month
period ended period ended period ended
Euro 31 Dec 2014 31 Dec 2013 30 Jun 2014
Cash generated from operating activities 299 519 937 643 (575 325)
Cash (used in) investing activities (133 320 881) (46 933 089) 3 563 687
Cash (used in)/generated from financing activities (3 530 316) 39 626 100 177 209 574
Cash and equivalents at the beginning of the period 205 800 188 24 708 091 24 708 091
Effect of exchange rate fluctuations 2 008 314 46 757 894 161
Cash and cash equivalents at the end of the period 71 256 824 18 385 502 205 800 188
SEGMENT REPORT – 31 December 2014
Income-generating Development Corporate
Euro property property Investments and treasury Total
Statement of comprehensive income
Revenue 2 445 959 179 099 – – 2 625 058
Profit/(loss) for the period (3 974 333) (1 120 919) 3 208 379 3 590 603 1 703 730
Statement of financial position
Total assets 106 544 805 51 382 815 54 540 309 128 285 095 340 753 024
SEGMENT REPORT – 31 December 2013
Income-generating Development Corporate
Euro property property Investments and treasury Total
Statement of comprehensive income
Revenue 3 140 125 310 283 – – 3 450 408
Profit/(loss) for the period 2 371 176 (43 732) – 924 591 3 252 035
Statement of financial position
Total assets 51 454 311 23 177 845 34 650 536 17 326 882 126 609 574
SEGMENT REPORT – 30 June 2014
Income-generating Development Corporate
Euro property property Investments and treasury Total
Statement of comprehensive income
Revenue 4 741 159 506 270 – – 5 247 429
Profit for the period 3 233 819 6 531 870 308 949 578 5 060 236
Statement of financial position
Total assets 42 271 435 26 175 051 35 743 617 205 800 188 309 990 291
RECONCILIATION OF PROFIT FOR THE PERIOD TO
HEADLINE EARNINGS
Unaudited Unaudited Audited
six month ten month sixteen month
period ended period ended period ended
Euro 31 Dec 2014 31 Dec 2013 30 Jun 2014
Profit for the period 1 703 730 3 252 035 5 060 236
Adjusted for:
Revaluation of investment property 5 732 013 – 623 630
Headline earnings 7 435 743 3 252 035 5 683 866
Weighted average number of ordinary shares in issue 283 885 876 73 936 931 183 068 848
Headline earnings per share (euro cents) 2,62 4,40 3,10
RECONCILIATION OF PROFIT FOR THE PERIOD TO
ADJUSTED CORE INCOME – SUPPLEMENTARY INFORMATION
Unaudited Unaudited Audited
six month ten month sixteen month
period ended period ended period ended
Euro 31 Dec 2014 31 Dec 2013 30 Jun 2014
Profit for the period 1 703 730 3 252 035 5 060 236
Adjusted for:
Net fair value adjustments on investment property activity 6 179 716 (726 899) (528 974)
Net fair value adjustments on treasury investments (1 847 018) –
Exchange differences (2 543 511) (1 341 039) (3 931 722)
Capital raising fees & structure costs 375 450 191 802 595 891
Deferred taxation (526 128) – 873 399
Income shortfall guarantee – 304 330 635 123
Realised profit on disposal – – 2 453 149
Adjusted core income 3 342 239 1 680 229 5 157 102
Company Information
MAS Real Estate Inc.
Registered in British Virgin Islands Registration number 1750199
Registered as an external company in the Republic of South Africa Registration number 2010/000338/10
SEDOL (XLUX) B96VLJ5
SEDOL (JSE) B96TSD2
Jse share code MSP
ISIN VGG5884M1041
("MAS" or "the Company")
9 March 2015
Date: 09/03/2015 12:00:00
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