Condensed consolidated interim financial statements
- six-month period ended 31 December 2017
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
ISIN: VGG5884M1041
SEDOL (XLUX): B96VLJ5
SEDOL (JSE): B96TSD2
JSE share code: MSP
("MAS" or "the company")
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
SIX-MONTH PERIOD ENDED 31 DECEMBER 2017
HIGHLIGHTS
DISTRIBUTION PER SHARE OF 3.58 EURO CENTS PROPOSED
9% INCREASE IN EPRA NAV PER SHARE
STRONG BALANCE SHEET EUR387M OF EQUITY AVAILABLE FOR INVESTMENT
GROWING PIPELINE OF INVESTMENT AND DEVELOPMENT OPPORTUNITIES
DIRECTORS' REPORT
DISTRIBUTABLE EARNINGS
The group achieved distributable earnings of EUR17.1 million for the six month reporting period, a growth of
98% relative to the comparative period in the previous financial year. This improvement in distributable earnings
was driven by the full period effect of accretive acquisitions, completion of developments and the deployment of
capital into PKM Developments Limited. The impact of the capital raised in 2017 has a dilutive impact on
the per share earnings growth, until the capital raised is deployed into the income-generating and development
pipeline.
DISTRIBUTION
The Board of Directors has proposed a distribution of 3.58 euro cents per share in respect of the first half of the
2018 financial year, which includes a supplement of 0.88 euro cents per share from reserves. This per share
distribution represents an increase of 34.6% over the comparative period in the previous financial year.
Shareholders continue to have the option to receive the distribution in cash or as a return of capital by way of
an issue of new shares. Further details regarding the distribution will follow in due course.
As the group pursues various earnings accretive property investments and developments, both directly and indirectly through PKM
Developments, the board will continue to consider distributing retained income, capital and other profits
during forthcoming financial periods to produce an even distribution per share growth profile during this transition period.
CAPITAL MANAGEMENT
Mitigating the group's future funding obligations in relation to PKM Developments has been a strategic
priority. Accordingly, the group took advantage of the opportunity to raise adequate equity to fully meet its
commitments to PKM Developments and to finance suitable acquisition opportunities.
To manage the timeline towards draw down of funding commitments by PKM Developments, the group has
made investments in a portfolio of liquid European REITs, totalling circa EUR200 million at period end, with a
predominantly retail focus. This strategy enables the group to:
- generate a return on funds earmarked for PKM Developments before drawdown, compared to
the negative euro interest rates on cash;
- efficiently match the asset/liability profile;
- gain access to a collateral pool for a debt facility at low margins that could be used to act quickly to
secure investment opportunities and to efficiently manage the capital requirements of the group going forward; and
- gain exposure to high quality positions in investments with similar risk exposures.
These REIT investments will be disposed of in the periods ahead as the drawdowns for the PKM Developments are made.
INCOME-GENERATING PORTFOLIO
Recycling capital out of mature assets is a strategic priority. In Germany, the Aldi portfolio has been disposed of in
its entirety, together with a non-core office building, all at a profit to book value. Attractive offers for
components of the New Waverley development have also been received, facilitating the potential to recycle
capital from areas where value has been created and prices are high to better yielding opportunities that allow
the group to leverage its ability to asset manage and create value from such assets.
The acquisition pipeline under due diligence, across both western Europe and CEE, totals in excess of EUR400
million, significantly up from EUR150 million as reported in November 2017. Substantial acquisitions are expected
to complete in the next six months.
DEVELOPMENTS AND EXTENSIONS
NEW WAVERLEY, EDINBURGH, SCOTLAND
The office component of the New Waverley development, pre-let to the UK Government on a 25-year lease,
was forward-sold under a funding agreement to Legal and General for approximately EUR23.5 million, with
further development profits to be paid upon completion of the construction.
The transaction reflects the strong income stream, covenant strength and rare prime city centre location
afforded by the New Waverley development. The risk-free nature of the income stream from the UK
Government lease and guarantee attracted significant interest from large institutional investors. The
disposal facilitates the recycling of capital into further opportunities as part of the group's stated investment
and growth strategy. The last remaining undeveloped component of New Waverley is the residential element. Proposals from residential
developers have been received and are currently being reviewed and compared against in-house delivery options.
LANGLEY PARK, CHIPPENHAM, UK
The development site with residential planning consent at Langley Park, in Chippenham, UK, is in the process of
being sold and initial offers from housebuilders have been received. The construction of the hotel, pre-let to
Travelodge, will also commence shortly together with the sale of the supermarket land site to Aldi. This will
complete the acquisition business plan for this property, with strong income continuing to be generated from
tenants, including Siemens, on the adjacent Technology Park, where further extensions are now under consideration.
GALLERIA PORTFOLIO, BULGARIA (PRIME KAPITAL INVESTMENT JV)
In response to strong performance and tenant demand, a 15,000 square metre GLA extension and a
reconfiguration are being considered in relation to Galleria Burgas (37,500 square metre GLA pre-extension). The
extension will increase the fashion and leisure offering and consolidate the mall's dominance in its catchment area
of approximately 480,000 people within 60 minutes' drive (supplemented by a significant number of tourists during the summer
holiday season, as the city is near the most popular Black Sea resorts on the Bulgarian coast). A major refurbishment and reconfiguration is
also planned to improve the design and commercial layout of Galleria Stara Zagora (21,300 square metre GLA), the only dominent mall in
Stara Zagora.
NOVA PARK SHOPPING MALL, GORZÓW, POLAND (PRIME KAPITAL INVESTMENT JV)
An adjacent land plot was acquired, and detailed design work is underway, to extend the 32,600 square metre
GLA regional mall to consolidate its dominant position in its catchment area of 460,000 people within 60
minutes' drive, enhance footfall and add further to net operating income. The planned extension of approximately 7,000 square
metres of GLA includes a cinema as well as additional fashion and leisure offering.
PKM DEVELOPMENTS
The secured development pipeline in CEE amounted to approximately EUR785 million, as at the trading update issued in
November 2017. After this date PKM Developments has completed the first three Kaufland convenience value centre extensions,
made substantial positive progress in relation to planning, permitting and leasing of the retail developments
(super-regional and regional malls and convenience value centre developments), and significantly advanced the
planning and design of the two residential developments in the fast growing Bucharest market. However, substantial regulatory
difficulties were encounted with the development process of Emonika in Slovenia. PKM Developments has consequently informed its
counterparties during February 2018 of its decision to indefinitely suspend its development efforts in relation to the project.
Further to this, PKM Developments decided that it was prudent to remove this project (approximately EUR290 million) from its secured
development pipeline. The decision is not expected to have an impact on MAS' distribution growth targets communicated to the market.
Further details on the development pipeline are provided below.
EMONIKA MIXED USE PROJECT
As previously reported to the market, PKM Developments conditioned its payment obligations to the seller on
finalising various outstanding regulatory and related issues with the Slovenian Railways ("SZ"), the Municipality of
Ljubljana and the Republic of Slovenia. Although in-principle commercial agreement was reached with SZ, and
despite continuing encouraging progress on various fronts, it became evident in January 2018 that certain
regulatory issues were insurmountable. The resulting position left matters on a footing that did not meet the minimum
commercial and other requirements of all the parties. As a result, PKM Developments took the decision to
suspend further work on the project to focus its attention elsewhere. Since the development was structured to limit
costs in case of failure to resolve regulatory issues, the current potential aborted costs are expected to be
limited to approximately EUR1.5 million. MAS' share of this is approximately EUR600,000.
REDEVELOPMENT OF ERA SHOPPING PARK IASI INTO MALL OF MOLDOVA, A SUPER-REGIONAL MALL
As noted in the November trading update and following on from the acquisition of the senior secured debt,
PKM Developments acquired the entire equity interests of the former indirect owners of Era Shopping Park
Iasi. The intention is to redevelop the asset into the planned 100,000 square metre GLA super-regional Mall of
Moldova with an extensive retail and leisure offering, making it the largest retail and leisure development in
Romania outside Bucharest. The acquisition of the equity interests has accelerated the redevelopment
timetable anticipated at the time of the acquisition of the senior debt, bringing forward the expected
opening of the enlarged centre to the end of the 2019 calendar year. Retailer interest in the planned redevelopment
is exceptionally strong, design work is advanced, and the permitting process is underway.
ARGES MALL
A lease agreement has been concluded with Carrefour to anchor the 50,000 square metre GLA, regionally dominant shopping mall
that PKM Developments plans to develop in a central, high density location in Pitesti, Romania. Several
other major tenants expressed strong interest in the planned retail consolidation for the Pitesti and wider
Arges region. Work is ongoing in relation to permitting.
DAMBOVITA MALL
Permitting is underway in respect of the 31,000 square metre GLA regional shopping mall,
in Targoviste, Romania, the first mall in the Dambovita county. This forms part of, and is complemented by,
a wider urban regeneration project undertaken by the local authorities within 2 km of the city centre, in a
densely populated residential area.
PLOIESTI VALUE CENTRE
As previously reported, PKM Developments plans to develop a 26,500 square metre GLA retail value
centre with a high concentration of anchor tenants on a plot of land in a densely populated residential area in
close proximity to the city's main train station, tram station and bus station with high visibility and very good road
access. The land acquisition was placed at risk due to one of the sellers becoming insolvent. At the date of this
report, this matter has been resolved in favour of PKM Developments, the creditors of the insolvent vendor
having approved the proposed restructuring of the transaction and the sale of land to PKM Developments.
Interest from anchor tenants is strong and planning is currently ongoing.
DN1 VALUE CENTRE
Leasing is progressing well in relation to the 28,000 square metre GLA convenience value extension of the
existing Hornbach and planned Lidl units in Balotesti, a rapidly developing affluent residential area, approximately
25km north of Bucharest. Agreements have been concluded with anchor tenants such as Carrefour
(hypermarket), Jysk, Noriel, Pepco and Animax. The permitting process is underway but there are certain
remaining planning risks that may cause the opening date of the first phase of the development to be
delayed beyond the end of the 2018 calendar year.
BAIA MARE VALUE CENTRE
Leasing is progressing well in relation to the approximately 22,000 square metre GLA development. Agreements
have been entered into with Carrefour (hypermarket) and Pepco. Permitting is ongoing and the centre is expected
to open for trade by the end of the 2018 calendar year, as scheduled.
ROMAN VALUE CENTRE
PKM Developments completed the acquisition of the 6.1 hectares of land in Roman, Romania (as of January
2018). In response to positive feedback from prospective tenants, the planned development was increased to 19,000
square metres of GLA. Lease agreements have been concluded with Carrefour (the first hypermarket in
town) and Pepco. Permitting is ongoing and the centre is expected to open for trade by the end of the 2018
calendar year, as scheduled.
KAUFLAND VALUE CENTRE EXTENSIONS (30,500 SQUARE METRES AGGREGATE GLA)
The first three convenience value extensions of existing Kaufland mini-hypermarkets opened for trade
by the end of the 2017 calendar year. A fourth development opened in February 2018 and an additional three
developments are expected to be completed by the end of 2018.
AVALON ESTATE
As previously reported, Prime Kapital is planning to develop an upmarket modern housing estate near the new
developing central business district and commercial centre in the affluent, northern part of Bucharest. Since the
date of the last report, substantial additional detailed design optimisation work with regard to the planned
individual units has been undertaken and the number of planned units was increased to a total of 767 (previously
550) high quality houses, townhouses and apartments. As a result, the permitting process is extended, and it
is currently estimated that the first units will be available for occupation in the second quarter of the 2019
calendar year.
MARMURA APARTMENTS
Zoning is in progress in respect of the 1.5-hectare site in the expanding north-west of Bucharest where a
large-scale residential block development with up to 380 apartments is planned.
PROSPECTS
MAS benefits from a strong balance sheet, access to a development business with demonstrated
competitive advantages in identifying and executing exceptional opportunities, a strong development
and acquisition pipeline and remains focussed on meeting its distribution growth targets of 30% per annum until
June 2019. Given the substantial acquisition and development pipeline in place and further opportunities
being pursued and on the assumption that a stable macro-economic environment will prevail, that no major
corporate failures will occur, that the investments and developments reported on above will progress in
accordance with expectations, that budgeted rental income based on contractual escalations and market
related renewals are collected the board is confident that the group is well placed to achieve its targeted
distribution per share growth of 30% per annum until June 2019 (this forecast has not been audited or
reviewed by our auditors). At the same time, the board is cognisant of heated property markets fuelled by
liquidity and owners and developers eager to dispose of over-rented properties at yields that are high by
historical standards. As a result, the board is determined to retain investment discipline in relation to
pursuing only quality developments and acquisitions with value-add potential and with strong long-term
growth prospects. Longer term prospects will not be sacrificed in order to meet shorter term distribution
growth targets.
MAS will continue to pursue profitable growth through further acquisition and development opportunities in its
markets. Further announcements will be made as appropriate.
By order of the Board of Directors
DIRECTORS
Ron Spencer
(Non-Executive Chairman)
Morné Wilken
(Chief Executive Officer)
Malcolm Levy
(Chief Financial Officer)
Jonathan Knight
(Chief Investment Officer)
Gideon Oosthuizen
(Non-Executive Director)
Pierre Goosen
(Non-Executive Director)
Jaco Jansen
(Non-Executive Director)
Glynnis Carthy
(Non-Executive Director)
Lukas Nakos resigned as a director on 31 December 2017. There have been no
other changes to the directorate in the period.
SUPPLEMENTARY INFORMATION
Where applicable, the figures have been extracted from the supplementary information after the
condensed consolidated interim financial statements and related notes.
REPORTING CURRENCY
The company's results are reported in euros.
LISTINGS
MAS holds a dual listing on the main board of the Johannesburg Stock Exchange and the Euro-MTF market
of the Luxembourg Stock Exchange.
INDEPENDENT AUDITOR'S REVIEW REPORT ON INTERIM FINANCIAL STATEMENTS
TO THE SHAREHOLDERS OF MAS REAL ESTATE INC.
We have reviewed the condensed consolidated financial statements of MAS Real Estate Inc., contained in the accompanying
interim report, which comprise the condensed consolidated statement of financial position as at 31 December 2017 and the
condensed consolidated statements of profit or loss, other comprehensive income, changes in equity and cash flows for the
six months then ended, and selected explanatory notes.
DIRECTORS' RESPONSIBILITY FOR THE INTERIM FINANCIAL STATEMENTS
The directors are responsible for the preparation and presentation of these interim financial statements in accordance with
the International Financial Reporting Standard, (IAS) 34 Interim Financial Reporting, the JSE Listings Requirements, the Rules
and Regulations of the Luxembourg Stock Exchange and applicable legal and regulatory requirements of the BVI Business
Companies Act 2004, and for such internal control as the directors determine is necessary to enable the preparation of
interim financial statements that are free from material misstatement, whether due to fraud or error.
AUDITOR'S RESPONSIBILITY
Our responsibility is to express a conclusion on these interim financial statements. We conducted our review in accordance
with International Standard on Review Engagements (ISRE) 2410, Review of Interim Financial Information Performed by the
Independent Auditor of the Entity. ISRE 2410 requires us to conclude whether anything has come to our attention that causes
us to believe that the interim financial statements are not prepared in all material respects in accordance with the applicable
financial reporting framework. This standard also requires us to comply with relevant ethical requirements.
A review of interim financial statements in accordance with ISRE 2410 is a limited assurance engagement. We perform
procedures, primarily consisting of making inquiries of management and others within the entity, as appropriate, and applying
analytical procedures, and evaluate the evidence obtained.
The procedures performed in a review are substantially less than and differ in nature from those performed in an audit
conducted in accordance with International Standards on Auditing. Accordingly, we do not express an audit opinion on these
financial statements.
CONCLUSION
Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed
consolidated financial statements of MAS Real Estate Inc. for the six months ended 31 December 2017 are not prepared, in all
material respects, in accordance with the International Financial Reporting Standard, (IAS) 34 Interim Financial Reporting, the
JSE Listings Requirements, the Rules and Regulations of the Luxembourg Stock Exchange and applicable legal and
regulatory requirements of the BVI Business Companies Act 2004.
KPMG Audit LLC
Chartered Accountants
Heritage Court
41 Athol Street
Douglas
Isle of Man
IM99 1HN
23 February 2018
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
Six-month period ended 31 December 2017
Reviewed Reviewed
Six-month Six-month Audited
period ended period ended year ended
31 December 31 December 30 June
Euro Note 2017 2016 2017
Rental income 4 18,974,145 11,067,791 27,032,238
Service charges and other recoveries 2,147,390 1,541,342 4,550,190
Revenue 21,121,535 12,609,133 31,582,428
Service charges and other property operating expenses (5,859,557) (2,421,484) (7,598,036)
Net rental income 15,261,978 10,187,649 23,984,392
Sales of inventory property 6,398,637 - -
Cost of sales of inventory property (5,339,258) - -
Profit on sales of inventory property 5 1,059,379 - -
Other income 89,831 - -
Corporate expenses (2,500,957) (1,885,474) (3,498,209)
Investment expenses 6 (1,335,379) (186,519) (281,061)
Net operating income 12,574,852 8,115,656 20,205,122
Fair value adjustments 7 (613,755) (3,265,620) 25,592,290
Exchange differences (586,186) (2,908,077) (4,684,895)
Share of profit from equity accounted investee, net of taxation 14 1,543,057 36,154 178,397
Goodwill impairment 10 (1,274,346) - -
Profit before finance income/costs 11,643,622 1,978,113 41,290,914
Finance income 8 3,950,621 39,527 1,207,196
Finance costs 8 (2,477,372) (841,656) (2,238,497)
Profit before taxation 13,116,871 1,175,984 40,259,613
Current taxation 9 (2,078,633) (424,496) (1,741,449)
Deferred taxation 9 1,047,747 (76,462) (3,942,153)
Profit for the period/year 12,085,985 675,026 34,576,011
Attributable to:
Owners of the group 11,703,478 (397,549) 33,587,948
Non-controlling interest 21 382,507 1,072,575 988,063
Basic earnings/(loss) per share (euro cents) 26 2.25 (0.11) 8.43
Diluted earnings/(loss) per share (euro cents) 26 2.25 (0.11) 8.43
The notes form part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
Six-month period ended 31 December 2017
Reviewed Reviewed
Six-month Six-month Audited
period ended period ended year ended
31 December 31 December 30 June
Euro Note 2017 2016 2017
Profit for the period/year 12,085,985 675,026 34,576,011
Other comprehensive income
Items that are or may be reclassified subsequently
to profit or loss
Foreign operations - foreign currency translation difference (1,187,667) (2,765,558) (5,371,692)
Total comprehensive profit/(loss) for the period/year 10,898,318 (2,090,532) 29,204,319
Attributable to:
Owners of the group 10,515,811 (3,163,107) 28,216,256
Non-controlling interest 21 382,507 1,072,575 988,063
The notes form part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Six-month period ended 31 December 2017
Reviewed Reviewed Audited
As at As at As at
31 December 31 December 30 June
Euro Note 2017 2016 2017
Non-current assets
Intangible assets 10 22,515,572 24,499,280 23,967,355
Investment property 11 489,518,759 473,690,010 564,291,928
Financial investments 12 200,120,816 - -
Financial assets 13 129,103,276 - 101,134,245
Investment in equity accounted investee 14 21,751,615 20,057,968 20,205,297
Property, plant and equipment 548,181 230,277 560,019
Deferred taxation asset 9 756,280 1,047,599 758,055
Total non-current assets 864,314,499 519,525,134 710,916,899
Current assets
Financial assets 13 - - 66,097
Trade and other receivables 15 7,688,545 27,378,402 8,707,035
Cash and cash equivalents 16 187,341,606 20,794,725 33,017,502
Investment property held for sale 17 53,647,686 3,393,501 6,336,915
Total current assets 248,677,837 51,566,628 48,127,549
Total assets 1,112,992,336 571,091,762 759,044,448
Equity
Share capital 18 837,465,772 410,113,075 557,556,273
Geared share purchase plan shares 18 (21,056,010) - (21,056,010)
Retained earnings 60,633,693 26,753,444 55,888,038
Share-based payment reserve 19 702,521 - 225,973
Foreign currency translation reserve (11,747,970) (7,954,169) (10,560,303)
Equity attributable to owners of the group 865,998,006 428,912,350 582,053,971
Non-controlling interest 21 1,030,314 1,072,595 988,063
Total equity 867,028,320 429,984,945 583,042,034
Non-current liabilities
Interest bearing borrowings 23 166,657,495 117,948,266 141,751,953
Financial liabilities 22 25,304,748 6,187,015 1,670,086
Provisions - 40,410 -
Deferred taxation liability 9 3,761,990 1,652,903 4,998,374
Total non-current liabilities 195,724,233 125,828,594 148,420,413
Current liabilities
Interest bearing borrowings 23 27,929,088 3,796,331 5,461,444
Financial liabilities 22 9,991,544 1,344,932 11,211,990
Trade and other payables 24 12,279,787 10,059,974 10,816,762
Provisions 39,364 76,986 91,805
Total current liabilities 50,239,783 15,278,223 27,582,001
Total liabilities 245,964,016 141,106,817 176,002,414
Total shareholder equity and liabilities 1,112,992,336 571,091,762 759,044,448
Actual number of ordinary shares in issue 18 633,915,786 380,583,836 467,366,299
IFRS Net Asset Value per share (euro cents) 136.6 112.7 124.5
The notes form part of these condensed consolidated interim financial statements.
These condensed consolidated interim financial statements were approved by the Board of Directors on 23 February 2018
and signed on their behalf by:
Ron Spencer Malcolm Levy
Chairman Chief financial officer
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six-month period ended 31 December 2017
Equity
Geared Foreign attributable
share Share-based currency to owners Non-
Share purchase Retained payment translation of the controlling Total
Euro Note capital plan shares earnings reserve reserve group interest equity
Balance at 30 June 2016 (audited) 378,530,556 - 27,503,007 - (5,188,611) 400,844,952 - 400,844,952
Comprehensive income for the period
(Loss)/profit for the period - - (397,549) - - (397,549) 1,072,575 675,026
Other comprehensive income - - - - (2,765,558) (2,765,558) - (2,765,558)
Total comprehensive (loss)/profit for the period - - (397,549) - (2,765,558) (3,163,107) 1,072,575 (2,090,532)
Transactions with the owners of the group and
non-controlling interests
Issue of shares 18 39,576,609 - - - - 39,576,609 - 39,576,609
Distributions 18 (7,994,090) - (352,014) - - (8,346,104) - (8,346,104)
Acquisition of subsidiary with non-controlling - - - - - - 20 20
interests
Total transactions with the owners of the group 31,582,519 - (352,014) - - 31,230,505 20 31,230,525
and non-controlling interests
Balance at 31 December 2016 (reviewed) 410,113,075 - 26,753,444 - (7,954,169) 428,912,350 1,072,595 429,984,945
Comprehensive income for the period
Profit/(loss) for the period - - 33,985,497 - - 33,985,497 (84,532) 33,900,965
Other comprehensive loss - - - - (2,606,134) (2,606,134) - (2,606,134)
Total comprehensive profit/(loss) for the period - - 33,985,497 - (2,606,134) 31,379,363 (84,532) 31,294,831
Equity transactions
Share-based payment reserve 19 - - - 225,973 - 225,973 - 225,973
Total equity transactions - - - 225,973 - 225,973 - 225,973
Transactions with the owners of the group
Issue of shares 18 152,715,833 (21,056,010) - - - 131,659,823 - 131,659,823
Distributions 18 (5,272,635) - (4,850,903) - - (10,123,538) - (10,123,538)
Total transactions with the owners of the group 147,443,198 (21,056,010) (4,850,903) - - 121,536,285 - 121,536,285
Balance at 30 June 2017 (audited) 557,556,273 (21,056,010) 55,888,038 225,973 (10,560,303) 582,053,971 988,063 583,042,034
Comprehensive income for the period
Profit for the period - - 11,703,478 - - 11,703,478 382,507 12,085,985
Other comprehensive loss - - - - (1,187,667) (1,187,667) - (1,187,667)
Total comprehensive profit/(loss) for the period - - 11,703,478 - (1,187,667) 10,515,811 382,507 10,898,318
Equity transactions
Share-based payment reserve 19 - - - 476,548 - 476,548 - 476,548
Total equity transactions - - - 476,548 - 476,548 - 476,548
Transactions with the owners of the group and
non-controlling interests
Issue of shares 18 290,334,223 - - - - 290,334,223 - 290,334,223
Distributions 18,21 (10,424,724) - (6,957,823) - - (17,382,547) (340,256) (17,722,803)
Total transactions with the owners of the group 279,909,499 - (6,957,823) - - 272,951,676 (340,256) 272,611,420
and non-controlling interests
Balance at 31 December 2017 (reviewed) 837,465,772 (21,056,010) 60,633,693 702,521 (11,747,970) 865,998,006 1,030,314 867,028,320
The notes form part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six-month period ended 31 December 2017
Reviewed Reviewed
Six-month Six-month Audited
period ended period ended year ended
31 December 31 December 30 June
Euro Note 2017 2016 2017
Profit for the period/year 12,085,985 675,026 34,576,011
Adjustments for:
Depreciation 18,098 13,504 27,864
Provisions (52,441) 53,950 -
Share-based payment expense 403,302 - 245,419
Fair value adjustments 7 613,755 3,265,620 (25,592,290)
Exchange differences 586,186 2,908,077 4,684,895
Finance income 8 (3,950,621) (39,527) (1,207,196)
Finance costs 8 2,477,372 841,656 2,238,497
Share of profit from equity accounted investee 14 (1,543,057) (36,154) (178,397)
Goodwill impairment 10 1,274,346 - -
Taxation expense 9 1,030,886 500,958 5,683,602
Other income (89,831) - -
Profit on sales of inventory property 5 (1,059,379) - -
Changes in:
Trade and other receivables 2,235,006 (16,114,319) 2,557,048
Trade and other payables (536,479) 1,763,779 2,520,565
Cash generated from/(used in) operating activities 13,493,128 (6,167,430) 25,556,018
Taxation paid 9 (215,056) (190,941) (1,066,198)
Net cash generated from/(used in) operating activities 13,278,072 (6,358,371) 24,489,820
Investing activities
Acquisition of investment property 11 - (155,151,088) (156,414,516)
Capitalised acquisition costs on investment property 11 - (3,057,070) (3,993,439)
Capitalised expenditure on investment property 11 (6,606,326) (11,893,005) (17,907,155)
Settlement of investment property acquisition retentions - (1,545,000) (3,318,865)
Proceeds from the sale of investment property 11 23,826,034 274,480 7,999,160
Capitalised expenditure on investment property held for sale 17 (95,786) - -
Proceeds from the sale of investment property held for sale 17 5,140,745 - -
Expenditure on inventory property 5 (5,153,579) - -
Proceeds from sales of inventory property 5 5,153,579 - -
Acquisition of subsidiary net of cash acquired - - (61,326,012)
Acquisition of PKM Developments preference shares - - (100,000,000)
Capitalised transaction costs of equity accounted investee 14 (3,261) (30,098) (35,184)
Acquisition of property, plant and equipment (30,251) (14,767) (34,425)
Capitalised expenditure on intangible assets (35,428) (111,338) (222,519)
Proceeds from the sale of financial investments 12 - 47,045,042 47,045,042
Acquisition of financial investments 12 (198,165,906) - -
Dividend income received 12 83,217 - -
Settlement of financial asset/liability (1,251,903) (3,327,225) (3,327,225)
Interest received 8 3,191 39,527 72,951
Negative interest paid on cash and cash equivalents 8 (146,796) (1,461) (6,830)
Cash used in investing activities (177,282,470) (127,772,003) (291,469,017)
Proceeds from the issue of share capital 279,909,499 31,592,882 157,984,909
Proceeds from interest bearing borrowings 23 53,000,000 80,430,900 111,657,786
Transaction costs related to interest bearing borrowings 23 (699,386) (1,456,967) (2,168,837)
Repayment of capital on interest bearing borrowings 23 (4,409,446) (1,135,900) (7,098,329)
Interest paid on interest bearing borrowings 23 (2,161,092) (842,927) (2,470,916)
Distributions paid 18 (6,957,823) (352,014) (5,202,917)
Cash generated from financing activities 318,681,752 108,235,974 252,701,696
Net increase/(decrease) in cash and cash equivalents 154,677,354 (25,894,400) (14,277,501)
Cash and cash equivalents at the beginning of the period/year 33,017,502 47,997,978 47,997,978
Effect of movements in exchange rate fluctuations on cash held (353,250) (1,308,853) (702,975)
Cash and cash equivalents at the end of the period/year 16 187,341,606 20,794,725 33,017,502
The notes form part of these condensed consolidated interim financial statements.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Six-month period ended 31 December 2017
1. CORPORATE INFORMATION
MAS Real Estate Inc. (the "company" or "MAS") is domiciled in the British Virgin Islands ("BVI"). These condensed
consolidated interim financial statements are as at and for the six-month period ended 31 December 2017 and
comprise the company and its subsidiaries (together referred to as the "group").
MAS is a real estate investment group with a portfolio of real estate investments across Europe. The group aims to
deliver sustainable and growing distributions to shareholders over time.
2. BASIS OF PREPARATION
STATEMENT OF COMPLIANCE
These condensed consolidated interim financial statements have been prepared in accordance with International
Financial Reporting Standard ("IFRS") IAS 34: Interim Financial Reporting, the Johannesburg Stock Exchange
("JSE") Listings Requirements, the Rules and Regulations of the Luxembourg Stock Exchange and applicable legal and
regulatory requirements of the BVI Business Companies Act 2004.
SIGNIFICANT JUDGEMENTS AND ESTIMATES
In the preparation of these condensed consolidated interim financial statements the directors have made judgements,
estimates and assumptions that affect the application of the group's accounting policies and the reported amounts in the
condensed consolidated interim financial statements. The directors continually evaluate these judgements and
estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses based upon historical experience and
on other factors that they believe to be reasonable under the circumstances. Actual results may differ from the
judgements, estimates and assumptions. The key areas of judgement are disclosed in the integrated annual report. In
addition the group made the following significant judgements and estimates in respect of the six-month
period ended 31 December 2017:
- Inventory property: The group entered into an agreement to dispose of the office land at New Waverley
in Edinburgh, Scotland to Legal & General and to develop the office on a forward funding basis for Legal & General.
Although the forward funding agreement is not a typical construction contract, the directors are of the view that in
legal terms and substance the development represents a continuous transfer of work in progress to Legal &
General, see note 5. In addition, the directors have made the following key assumptions:
- Construction costs; and
- Stage of completion.
- Investment in equity accounted investee: The group recognises interest income from its associate as a result
of the investment in the PKM Developments Limited ("PKM Developments") preference shares, see note 13.
Where interest is capitalised against qualifying assets held at fair value in the associate, the group does not
consider this to give rise to an asset in the associate and accordingly interest income is not eliminated and is
presented in finance income.
- Goodwill impairment: During the period, the group impaired the New Waverley goodwill, see note 10. The
recoverable amount of the cash generating unit (CGU) is determined as fair value less costs to sell. A significant
proportion of the net assets consist of investment property and investment property held for sale. These
assets have been measured at fair value during the period which is determined by external property
valuation experts or where relevant, firm offers from market participants looking to acquire the assets. The
external property valuation experts use recognised valuation techniques and apply the principals of IFRS 13:
Fair value measurement. The significant methods and assumptions used by the valuers are set out in notes
11 and 17.
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies applied in the preparation of these condensed consolidated interim financial statements are
consistent with those applied in the preparation of the consolidated financial statements for the year ended
30 June 2017, with the exception of:
INVENTORY PROPERTY
Property acquired or being constructed for sale in the ordinary course of business, rather than to be held for rental
or capital appreciation, is held as inventory property and is measured at the lower of cost or net realisable value.
The cost of inventory property recognised in profit or loss on disposal is determined with reference to the specific
costs incurred on the property sold.
The group has adopted this accounting policy in the current period and therefore it has no impact on the
comparative periods.
SALES OF INVENTORY PROPERTY
When the group enters into a contract to sell completed property, revenue is recognised when the significant risks
and rewards of ownership are transferred from the group. Where the terms of the contract represent a continuous
transfer of work in progress to the purchaser, revenue is recognised using the percentage of completion method as
work progresses. Continuous transfer of work in progress is applied when:
- The land on which the property is being developed is owned by the purchaser;
- the buyer carries the risks and rewards of the incomplete property; and
- when the buyer cannot put the incomplete property back to the group.
The percentage of work completed is measured based on the costs incurred up until the end of the reporting period as
a proportion of total costs expected to be incurred.
The group has adopted this accounting policy in the current period and therefore it has no impact on the
comparative periods.
INVESTMENT IN EQUITY ACCOUNTED INVESTEE
Equity accounted investee comprises investments in associates. Associates are entities in which the group has
significant influence over the financial and operating policies. Significant influence is the power to participate in the
financial and operating policy decisions of the investee but does not result in control or joint control of those entities.
Interests in associates are initially recognised at cost including transaction costs. Subsequently, they are
accounted for using the equity method. The group recognises its share of profit or loss and other
comprehensive income of the associate from the date on which significant influence commences, until the date on
which significant influence ceases.
Unrealised gains arising from financing arrangements with equity accounted investees are eliminated to the extent
that they give rise to an asset in the associate. Interest capitalised against qualifying assets held at fair value in the
associate do not give rise to an asset in the associate and accordingly interest income is not eliminated and is
presented in finance income.
Unrealised losses on transactions are eliminated in the same way as unrealised gains, but only to the extent that
there is no evidence of impairment.
When the group's share of losses exceeds its interest in an equity accounted investee, the carrying amount of the
investment, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further
losses is discontinued except to the extent that the group has an obligation or has made payments on behalf of the
investee.
Interests in associates are assessed for impairment if there is an impairment indicator. An impairment loss in
respect of an equity accounted investee is measured by comparing the recoverable amount of the investment with
its carrying amount. An impairment loss is recognised in profit or loss, and is reversed if there is a favourable change
in the estimates used to determine the recoverable amount.
NEW AND AMENDED STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
Below is a summary of new standards and amendments/ improvements to existing standards and interpretations that
are not yet effective:
Effective for annual
Amendments/improvements to standards and periods beginning on
interpretations not yet effective or after
IFRS 9 (2014) - Financial Instruments 1 January 2018
IFRS 15 - Revenue from Contracts with 1 January 2018
Customers
IAS 40 - Amendment to clarify 1 January 2018
transfers of property to, or from,
investment property
IFRS 16 - Leases 1 January 2019
IFRS 9 (2014) - FINANCIAL INSTRUMENTS
The group early adopted IFRS 9 (2013) in the financial year ended 30 June 2015.
The changes to IFRS 9 (2014) are in respect of the impairment model, which is based on the premise of
providing for expected credit losses and will apply to financial assets measured at amortised cost, fair value
through other comprehensive income and loan commitments. The standard requires a loss allowance for
financial instruments to be recognised equal to the 12-month expected credit losses that result from default events on
financial instruments that are possible within 12 months of the reporting date. At 31 December 2017 the group held the
following financial instruments that are in the scope of the impairment model: financial assets; cash and cash
equivalents; and trade and other receivables (except prepayments).
The group has assessed the potential impact resulting from the amendments and does not expect there to be any
significant impact at this time.
The group will adopt the new standard for the year ending 30 June 2019.
IFRS 15 - REVENUE FROM CONTRACTS WITH CUSTOMERS
The standard applies to all contracts with customers except for: lease contracts, financial insurance contracts, financial
instruments and non-monetary exchanges between entities in the same business. The majority of the group's revenue is
derived from lease contracts.
The group has assessed the impact on revenue resulting from the amendments and does not expect any significant
impact.
The group will adopt the new standard for the year ending 30 June 2019.
IAS 40 - AMENDMENT TO CLARIFY TRANSFERS OF PROPERTY TO, OR FROM, INVESTMENT PROPERTY
The amendment clarifies whether a property under construction or development that was previously classified
as inventory could be transferred to investment property when there is an evident change in use.
The group has assessed the impact of adopting the amendment to IAS 40 in respect of transfer to and from
investment property and does not expect any significant impact.
The group will adopt the new standard for the yearending 30 June 2019.
IFRS 16 - LEASES
The standard applies to all lease contracts, the changes require lessees to recognise assets and liabilities for all leases
unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as
operating or finance, substantially unchanged from IAS 17.
The group will provide additional disclosure on operating leases it enters into as lessor. Other than that, the group is
lessee under a lease contract for the group's head office. The group has assessed the impact of this lease and it is
unlikely that there will be a significant impact.
The group will adopt the new standard for the year ending 30 June 2020.
4. RENTAL INCOME
Rental income derived from the following tenants represents more than 10% of the group's rental income and is included
within the income-generating segment of the group:
Reviewed Reviewed
Six-month Six-month
period period Audited
ended 31 ended 31 Year ended
December December 30 June
Euro 2017 2016 2017
Edeka MIHA AG 2,918,539 2,630,622 5,316,024
Toom Baumarkt GmbH n/a 1,134,034 n/a
2,918,539 3,764,656 5,316,024
The future aggregate minimum rental receivable under non-cancellable operating leases is as follows:
Reviewed Reviewed Audited
As at As at As at
31 December 31 December 30 June
Euro 2017 2016 2017
No later than 1 year 33,942,945 28,108,091 34,403,438
Greater than 1 year and less than 5 years 113,581,661 99,462,055 116,200,143
Greater than 5 years 178,163,445 185,296,845 190,513,803
325,688,051 312,866,991 341,117,384
Turnover rent of EUR1,767,573 (December 2016: EURnil; June 2017: EUR1,710,060) is included in rental income.
5. PROFIT ON SALES OF INVENTORY PROPERTY
Reviewed Reviewed
Six-month Six-month
period period Audited
ended 31 ended 31 Year ended
December December 30 June
Euro 2017 2016 2017
Sales of inventory property 6,398,637 - -
Cost of sales of inventory property (5,339,258) - -
Closing balance 1,059,379 - -
On 13 July 2017 the group entered into a lease with the UK Government ("the Pre-let Agreement") for the office component
of the New Waverley development in Edinburgh, Scotland ("the Pre-let Office"). The Pre-let Agreement encompasses a lease,
with a UK Government guarantee, for a term of 25 years commencing upon practical completion of the development.
Under the terms of the Pre-let Agreement, the group is obligated to pay GBP21,593,520 (approx. EUR24,338,056) for the office
fit-out when the UK Government takes occupation of the Pre-let Office. This is referred to as the capital contribution to the
UK Government in relation to the office fit-out ("capital contribution"). The group is also committed to granting the UK
Government a rent-free period.
On 17 October 2017, the group entered into an agreement to dispose of the office land at New Waverley to Legal & General
("Disposal of Land") and to develop the Pre-let Office on a forward-sold basis for Legal & General ("the Forward Funding
Agreement"). In terms of the Forward Funding Agreement, the group has sold the rights and obligations of the Pre-let
Agreement to Legal & General. Therefore, Legal & General has acquired the land, the Pre-let Agreement and the obligations
for the rent-free period and the capital commitment from MAS and appointed MAS to develop the Pre-let Office under the
Forward Funding Agreement. The Forward Funding Agreement provides for funds to be drawn down by the group, as
developer, from Legal & General against development costs incurred. The group received GBP20,841,671 (approximately
EUR23,490,647) for the sale of the office land, with further development profits likely to be received under the Forward Funding
Agreement upon practical completion.
The amounts relating to the rent-free period and the capital contribution are included in the development costs and are
funded by Legal & General under the Forward Funding Agreement subject to there being sufficient developer profits.
Accordingly, the group has recognised:
- a financial liability due to the UK Government in respect of the capital contribution (see note 22); and financial asset due
from Legal & General in respect of the capital contribution (see note 13). The financial liability and financial asset have
not been offset because the offsetting criteria in IAS 32 - Financial Instruments: Presentation, have not been met.
- a financial liability due to Legal & General in respect of the rent-free period; and financial asset due from Legal & General
in respect of the rent-free period. The financial liability and financial asset have been offset because the offsetting criteria
in IAS 32 - Financial Instruments: Presentation, have been met.
The financial assets and financial liabilities referred to above have been discounted at a market related interest rate as they are
only due upon practical completion. This has resulted in the recognition of deemed interest income and deemed interest
expense on financial assets and financial liabilities respectively.
Although the Forward Funding Agreement is not a typical construction contract, the legal terms are such that the
development project undertaken by the group on behalf of Legal & General represents a continuous transfer of work in
progress to Legal & General. Accordingly, this aspect of the accounting for the Forward Funding Agreement has been
determined by applying IAS 11 by analogy even though the contract is not part of the normal operations of the group. Income
is recognised based on the stage of completion. The stage of completion is determined based on the proportion that costs
incurred to date bear to the estimated total costs of the transaction. Development expenditure incurred in respect of
inventory property is recognised in profit or loss and classified as cost of sales of inventory property.
Included in the development costs in the Forward Funding Agreement is the land and buildings transaction tax ("LBTT")
on the office land sale. The group is obligated to settle these costs with Legal & General on practical completion and may use
the funding provided by Legal & General to do so, subject to there being sufficient developer profits. The financial liabilities
due to Legal & General in respect of the LBTT have been offset by the financial asset due from Legal & General in respect of
the funding available under the Forward Funding Agreement. The group expects to settle these financial liabilities on a net
basis under the terms of the Forward Funding Agreement.
RECONCILIATION OF INVENTORY PROPERTY:
Reviewed Reviewed Audited
As at As at As at
31 December 31 December 30 June
Euro 2017 2016 2017
Opening balance - - -
Development expenditure 5,339,258 - -
Disposals (recognised in cost of sales of inventory property) (5,339,258) - -
Closing balance - - -
The amount paid in the period in relation to expenditure on inventory property was EUR5,153,579 (December 2016: EURnil, June 2017: EURnil).
The amount received in the period in relation to sales of inventory property was EUR5,153,579 (December 2016: EURnil, June 2017: EURnil).
6. INVESTMENT EXPENSES
Reviewed Reviewed
Six-month Six-month Audited
period ended period ended Year ended
31 December 31 December 30 June
Euro 2017 2016 2017
Transaction fees on listed real estate equity securities 716,956 - -
Transaction fees on investment property/other 618,423 186,519 281,061
1,335,379 186,519 281,061
7. FAIR VALUE ADJUSTMENTS
Reviewed Reviewed
Six-month Six-month Audited
period ended period ended Year ended
31 December 31 December 30 June
Euro 2017 2016 2017
Gain/(loss) on fair value of financial investments 1,954,910 (4,569,026) (4,569,026)
(Loss)/gain on fair value of investment property (4,140,178) 598,369 36,763,196
Gain/(loss) on fair value of financial instruments 2,778 678,563 (7,388,675)
Gain on fair value of investment property held for sale 1,568,735 26,474 786,795
(613,755) (3,265,620) 25,592,290
Summarised as follows:
Reviewed Reviewed
Six-month Six-month Audited
period ended period ended Year ended
31 December 31 December 30 June
Note 2017 2016 2017
Fair value movement in financial investments
Real estate equities portfolio 12 1,954,910 - -
Sirius Real Estate Limited ("Sirius") 12 - (4,569,026) (4,569,026)
1,954,910 (4,569,026) (4,569,026)
Fair value movement in investment property
Income-generating 11 521,643 677,340 19,437,659
Development 11 (5,725,938) (78,971) 17,325,537
Land bank 11 1,064,117 - -
(4,140,178) 598,369 36,763,196
Fair value movement in financial instruments
Interest rate swaps 22 (46,353) 559,117 769,594
Development management fee 22 (152,455) 205,516 (1,885,457)
Forward currency contract - (86,070) -
Priority participating profit dividend 22 201,586 - (6,272,812)
2,778 678,563 (7,388,675)
Fair value movement in investment property held for sale
Investment property held for sale 17 1,568,735 26,474 786,795
1,568,735 26,474 786,795
8. FINANCE INCOME AND FINANCE COSTS
The group's finance income and finance costs comprise:
Reviewed Reviewed
Six-month Six-month Audited
period ended period ended Year ended
31 December 31 December 30 June
Euro Note 2017 2016 2017
Finance income
Interest on bank deposits 3,191 39,527 72,951
Interest on PKM Developments preference shares 13 3,795,207 - 1,134,245
Capital Contribution - unwind of discount 13 152,223 - -
3,950,621 39,527 1,207,196
Finance costs
Interest on interest bearing borrowings 23 (2,156,911) (840,195) (2,231,667)
Negative interest on bank deposits (146,796) (1,461) (6,830)
Capital Contribution - unwind of discount 22 (152,223) - -
Other finance costs (21,442) - -
(2,477,372) (841,656) (2,238,497)
9. TAXATION
The company, which is domiciled in the BVI, is not subject to tax in that jurisdiction. Operating subsidiaries of the group,
however, are exposed to taxation in the jurisdictions in which they operate and, potentially, in the jurisdictions through which
the subsidiary investment companies are held.
The group's taxation includes the following:
Reviewed Reviewed
Six-month Six-month Audited
period ended period ended Year ended
31 December 31 December 30 June
Euro 2017 2016 2017
Current taxation 2,078,633 424,496 1,741,449
Deferred taxation (income)/expense (1,047,747) 76,462 3,942,153
Taxation expense 1,030,886 500,958 5,683,602
The current taxation, including under/over-provisions in respect of earlier periods, for each jurisdiction is as follows:
Reviewed Reviewed
Six-month Six-month Audited
period ended period ended Year ended
31 December 2017 31 December 2016 30 June 2017
Applicable Applicable Applicable
Euro rate (%) Taxation rate (%) Taxation rate (%) Taxation
Income/corporation taxation
UK - income tax 20.0 526,616 20.0 256,173 20.0 420,835
UK - corporation tax 19.0 1,860,399 - - - -
Switzerland 26.8 32,288 26.2 - 26.8 -
Germany 15.8 (30,351) 15.8 143,965 15.8 623,902
Poland 19.0 (280,221) - - 19.0 194,812
Romania 16.0 - - - 16.0 -
Bulgaria 10.0 - - - 10.0 -
Withholding taxation
Poland 5.0 - - - 5.0 448,612
Wealth taxation
Switzerland 0.2 887 0.2 1,801 0.2 5,944
Luxembourg 0.5 (30,985) 0.5 22,557 0.5 47,344
2,078,633 424,496 1,741,449
The amount of taxation paid in the period was EUR215,056 (December 2016: EUR190,941; June 2017: EUR1,066,198).
RECONCILIATION OF DEFERRED TAXATION:
Reviewed Reviewed
Six-month Six-month Audited
period ended period ended Year ended
31 December 31 December 30 June
Euro 2017 2016 2017
Deferred taxation brought forward 4,240,319 521,449 521,449
Current period/year deferred taxation (1,047,747) 76,462 3,942,153
Foreign currency translation difference (30,638) 7,393 (425,070)
Acquisition of subsidiary - deferred taxation asset - - 380,711
Sale of investment property (156,224) - (178,924)
Deferred taxation liability carried forward 3,005,710 605,304 4,240,319
The net deferred taxation liability which relates to temporary differences between accounting and fiscal value of investment
property results from the following:
Reviewed Reviewed Audited
As at As at As at
31 December 31 December 30 June
Euro 2017 2016 2017
Deferred taxation asset 756,280 1,047,599 758,055
Deferred taxation liability 3,761,990 1,652,903 4,998,374
Net deferred taxation liability 3,005,710 605,304 4,240,319
RECONCILIATION OF EFFECTIVE TAXATION RATE
Reviewed Reviewed
Six-month Six-month Audited
period ended period ended Year ended
31 December 31 December 30 June
Euro % 2017 % 2016 % 2017
Profit before taxation 13,116,871 1,175,984 40,259,613
Taxation using the company's domestic rate 0.0 - 0.0 - 0.0 -
Effect of tax rates in foreign jurisdictions (15.8) (2,078,633) (36.10) (424,496) (4.3) (1,741,449)
Change in recognised deductible temporary
differences
- Revaluation of investment property 14.0 1,833,632 34.7 408,498 (9.4) (3,767,882)
- Change in tax base (6.0) (785,885) (41.2) (484,960) (0.4) (174,271)
(7.8) (1,030,886) (42.6) (500,958) (14.1) (5,683,602)
10. INTANGIBLE ASSETS
Reviewed Reviewed Audited
As at As at As at
31 December 31 December 30 June
Euro 2017 2016 2017
Goodwill 22,265,340 24,387,942 23,744,836
Other intangible assets 250,232 111,338 222,519
22,515,572 24,499,280 23,967,355
Other intangible assets consist of costs capitalised on the implementation of a new property management and accounting
system. The accounting system is currently in the process of implementation, it is not yet available for use and therefore is not
amortised.
Reconciliation of the group's carrying amount of goodwill:
MAS Property New
Advisors Waverley 10
Euro Limited Limited Total
Balance at 30 June 2016 (audited) 23,901,016 1,361,802 25,262,818
Foreign currency translation difference (827,715) (47,161) (874,876)
Closing balance 31 December 2016 (reviewed) 23,073,301 1,314,641 24,387,942
Foreign currency translation difference (608,440) (34,666) (643,106)
Closing balance 30 June 2017 (audited) 22,464,861 1,279,975 23,744,836
Foreign currency translation difference (199,521) (5,629) (205,150)
Impairment - (1,274,346) (1,274,346)
Closing balance 31 December 2017 (reviewed) 22,265,340 - 22,265,340
IMPAIRMENT
The recoverable amounts of the group's CGUs are the higher of their value-in-use and fair value less costs to sell.
MAS PROPERTY ADVISORS LIMITED
As there were no indicators of impairment at 31 December 2017, no impairment test was performed. Goodwill will be tested
for impairment at 30 June 2018. No impairment charge arose as a result of the group's previous annual impairment test of
goodwill in relation to MAS Property Advisors Limited (December 2016: nil; June 2017: nil).
NEW WAVERLEY 10 LIMITED
An impairment of EUR1,274,346 (December 2016: EURnil; June 2017: EURnil) was recognised as a result of the group's impairment test
of the New Waverley 10 goodwill.
An impairment test was carried out because there was an indicator of impairment at 31 December 2017. As a result of fair
valuing the investment property in the New Waverley 10 Limited CGU, the carrying amount of the CGU exceeded the
recoverable amount, which resulted in all the goodwill attributable to the CGU being impaired.
The recoverable amount of the New Waverley 10 Limited goodwill was calculated using the fair value less costs to sell of
the New Waverley business and is classified as level 3 in the fair value hierarchy. The majority of New Waverley net assets
comprise of investment property and investment property held for sale, the valuation techniques of which have been
disclosed in notes 11 and 17, respectively.
11. INVESTMENT PROPERTY
The group's investment property comprises:
Segment Detail
Income-generating property Property that is currently producing income and held for the purpose of earning a
yield. There may be further asset management opportunities on these properties,
which could further enhance income returns.
Development property Property that is being developed in order to create income producing property held
for the purpose of earning a better yield than by acquiring standing property.
Land bank Land plots held for schemes that have not yet commenced and residential
developments.
The carrying amount of the group's investment property was as follows:
As at 31 December 2017 (reviewed)
Euro Fair value Cost Total
Income-generating property 450,304,737 - 450,304,737
Development property - 457,184 457,184
Land bank - 38,756,838 38,756,838
450,304,737 39,214,022 489,518,759
As at 31 December 2016 (reviewed)
Euro Fair value Cost Total
Income-generating property 425,203,212 - 425,203,212
Development property - 7,583,361 7,583,361
Land bank - 40,903,437 40,903,437
425,203,212 48,486,798 473,690,010
As at 30 June 2017 (audited)
Euro Fair value Cost Total
Income-generating property 494,519,173 - 494,519,173
Development property 26,413,036 3,668,759 30,081,795
Land bank - 39,690,960 39,690,960
520,932,209 43,359,719 564,291,928
As at 31 December 2017 (reviewed)
Income-
Euro generating Development Land bank Total
Opening balance 494,519,173 30,081,795 39,690,960 564,291,928
Property disposals - (23,826,034) - (23,826,034)
Transfer (9,941) (2,738,011) 2,747,952 -
Transfer to investment property held for sale (see note 17) (42,960,539) (531,094) (7,618,037) (51,109,670)
Capitalised expenditure 225,006 3,202,877 3,178,443 6,606,326
Finance costs capitalised (see note 23) - 220,659 88,245 308,904
Fair value adjustment (see note 7) 521,643 (5,725,938) 1,064,117 (4,140,178)
Foreign currency translation difference (1,990,605) (227,070) (394,842) (2,612,517)
Closing balance 450,304,737 457,184 38,756,838 489,518,759
As at 31 December 2016 (reviewed)
Income-
Euro generating Development Land bank Total
Opening balance 242,625,172 22,430,253 41,940,654 306,996,079
Property acquisitions 155,151,088 - - 155,151,088
Capitalised acquisition costs 3,057,070 - - 3,057,070
Capitalised retentions (see note 22) 600,000 - - 600,000
Property disposal - (274,480) - (274,480)
Transfer 25,458,248 (23,907,416) (1,550,832) -
Capitalised expenditure (22,373) 9,995,649 1,919,729 11,893,005
Finance costs capitalised (see note 23) - 182,256 45,953 228,209
Fair value adjustment (see note 7) 677,340 (78,971) - 598,369
Foreign currency translation difference (2,343,333) (763,930) (1,452,067) (4,559,330)
Closing balance 425,203,212 7,583,361 40,903,437 473,690,010
As at 30 June 2017 (audited)
Income-
Euro generating Development Land bank Total
Opening balance 242,625,172 22,430,253 41,940,654 306,996,079
Property acquisitions 156,414,516 - - 156,414,516
Property acquisitions as part of business combinations 61,330,722 - - 61,330,722
Capitalised acquisition costs 3,993,439 - - 3,993,439
Property disposal (7,737,076) (262,084) - (7,999,160)
Transfer 24,786,917 (23,276,980) (1,509,937) -
Capitalised expenditure 840,436 15,407,910 1,658,809 17,907,155
Finance costs capitalised (see note 23) - 447,749 121,549 569,298
Fair value adjustment (see note 7) 19,437,659 17,325,537 - 36,763,196
Transfer to investment property held for sale (see note 17) (2,180,000) (115,378) - (2,295,378)
Foreign currency translation reserve (4,992,612) (1,875,212) (2,520,115) (9,387,939)
Closing balance 494,519,173 30,081,795 39,690,960 564,291,928
INTEREST BEARING BORROWINGS
The group's bank borrowings are secured against investment property to the value of EUR385,391,557 (December 2017:
EUR220,249,616; June 2017: EUR428,538,519), see note 23. The group has bank borrowings of EUR187,047,930 designated as general
borrowings (December 2016: EUR107,417,874; June 2017: EUR111,657,786).
RELATED PARTIES
The group has a development management agreement with the developer New Waverley Advisers Limited, a related party,
for the development and construction of the New Waverley site in Edinburgh. A development management fee and priority
participating profit dividend have been recognised in relation to the New Waverley development, see note 22. In addition, the
group has capitalised costs incurred from related parties, see note 27.
MEASUREMENT OF FAIR VALUES
VALUATION PROCESS FOR LEVEL 3 INVESTMENT PROPERTY
On an annual basis the fair value of investment property is determined where applicable, by external independent property
valuation experts or, where relevant, by firm offers from market participants. External valuers have appropriate recognised
professional qualifications and recent experience in the location and category of the property being valued. At the interim
reporting date, the fair value of investment property is determined by the directors either by reviewing the most recent
external valuation and updating for any material changes to the significant inputs or by reference to other relevant
information generated by market transactions.
For all investment properties their current use equates to the highest and best use. The external valuations received are
initially reviewed by the relevant internal asset manager and compared to their expectation of what fair value would be for
individual investment properties. If the asset manager is in agreement with the valuation, the valuation reports are then
checked by the finance team to confirm their numerical and methodological accuracy.
FAIR VALUE HIERARCHY
The fair value measurement of all the group's investment properties have been categorised as level 3 in the fair value hierarchy
based upon the significant unobservable inputs into the valuation techniques used.
The following table shows the carrying amount and fair value of the group's investments in the fair value hierarchy:
As at 31 December 2017 (reviewed)
Fair value
Euro Carrying amount Level 1 Level 2 Level 3
Income-generating property 450,304,737 - - 450,304,737
450,304,737 - - 450,304,737
As at 31 December 2016 (reviewed)
Fair value
Euro Carrying amount Level 1 Level 2 Level 3
Income-generating property 425,203,212 - - 425,203,212
425,203,212 - - 425,203,212
As at 30 June 2017 (audited)
Fair value
Euro Carrying amount Level 1 Level 2 Level 3
Income-generating property 494,519,173 - - 494,519,173
Development property 26,413,036 - - 26,413,036
520,932,209 - - 520,932,209
VALUATION TECHNIQUES AND SIGNIFICANT UNOBSERVABLE INPUTS
The following table shows the valuation techniques used in measuring the fair value of investment property, as well as the
significant unobservable inputs used.
As at 31 December 2017, 31 December 2016 and 30 June 2017
Investment Inter-relation between key
property Significant unobservable unobservable inputs and fair
type Valuation technique inputs value measurement
Income- Discounted cash flows: - Risk adjusted discount rates The estimated fair value would
generating The valuation model considers the present - Market rent increase/(decrease) if:
property value of net cash flows to be generated - Net rental growth - Expected market rental
from the property, taking into account - Reversionary discount rate growth was higher/ (lower)
expected rental growth rate, void periods, - The occupancy rate was
occupancy rate, lease incentive costs such higher/(lower)
as rent-free periods and other costs not - The reversionary discount
paid by tenants. The expected net cash rate was lower/(higher)
flows are discounted using risk-adjusted - The risk adjusted discount
discount rates. Among other factors, the rate was lower/(higher)
discount rate estimation considers the - The estimated rental value
quality of a building and its location, tenant was higher/(lower)
credit quality and lease terms.
Capitalisation rate: The valuation model - Capitalisation rate The estimated fair value would
considers the value of the property based - Market rent increase/(decrease) if:
on actual location, size and quality of the - Passing rent the capitalisation rate was
properties taking into account market data lower/(higher)
and the capitalisation rate of future income the passing rent was higher/
streams at the valuation date. (lower)
the market rent was higher/
(lower)
As at 30 June 2017
Investment Inter-relation between key
property Significant unobservable unobservable inputs and fair
type Valuation technique inputs value measurement
Development Firm offers: - Offers The estimated fair value would
property The valuation model takes into account the increase/(decrease) if:
amount a third party is willing to pay. - The number of the
interested parties was
higher/(lower)
- The availability of
comparable properties
lower/(higher)
12. FINANCIAL INVESTMENTS
The group invested in a portfolio of listed real estate equity securities during the period.
The group classifies its investments in listed real estate equity securities as financial assets at fair value through profit or
loss ("FVTPL"). Accordingly, they are measured at fair value at the reporting date with changes in fair value being recognised
in profit or loss as they arise.
The group's financial investments comprise:
As at 31 December 2017 (reviewed)
Share price Number of Fair value
(Euro) shares (Euro)
Klepierre SA 36.66 1,626,364 59,630,636
Unibail - Rodamco SE 210.00 264,618 55,569,780
Eurocommercial Properties NV 36.31 497,333 18,058,161
Hufvudstaden AB 13.35 1,083,000 14,463,917
Fonciere des Regions SA 94.48 150,300 14,200,344
Mercialys SA 18.45 697,934 12,873,393
Land Securities Group PLC 11.36 1,115,000 12,663,602
British Land Company PLC 7.79 1,625,000 12,660,983
200,120,816
Reconciliation of financial investments:
Reviewed Reviewed Audited
As at As at As at
31 December 31 December 30 June
Euro 2017 2016 2017
Opening balance - 51,614,068 51,614,068
Purchases 198,165,906 - -
Disposals - (47,045,042) (47,045,042)
Fair value adjustment (see note 7) 1,954,910 (4,569,026) (4,569,026)
Closing balance 200,120,816 - -
During the period dividend income of EUR83,217 was received (31 December 2016: EURnil; 30 June 2017: EURnil).
FAIR VALUE HIERARCHY
As at 31 December 2017 (reviewed) Fair value
Carrying
Euro amount Level 1 Level 2 Level 3
Financial investments 200,120,816 200,120,816 - -
200,120,816 200,120,816 - -
13. FINANCIAL ASSETS
Reviewed Reviewed Audited
As at As at As at
31 December 31 December 30 June
Euro Note 2017 2016 2017
Non-current assets
PKM Developments preference shares 104,929,452 - 101,134,245
Capital contribution 5 24,173,824 - -
129,103,276 - 101,134,245
Current assets
Forward currency contract - - 66,097
- - 66,097
PKM DEVELOPMENTS PREFERENCE SHARES
In 2017, the group provided EUR100,000,000, to acquire 7.5% preference shares in PKM Developments. The preference share
asset is held at amortised cost.
CAPITAL COMMITMENT
As described in note 5, a financial asset and corresponding financial liability have been recognised in respect of the capital
contribution due from Legal & General, and due to the UK Government, under the terms of the Pre-Let Agreement. Both the
financial asset and financial liability are held at amortised cost, see note 22.
FORWARD CURRENCY CONTRACT
The group entered into a Polish Zloty forward contract to hedge the exposure on VAT receivable in relation to the Nova Park
acquisition. This forward currency contract was settled during the period.
Reconciliation of the group's financial assets held at amortised cost:
PKM
Developments
preference Capital
shares contribution Total
Balance at 30 June 2016 (audited) - - -
Balance at 31 December 2016 (reviewed) - - -
Purchase of shares 100,000,000 - 100,000,000
Finance income 1,134,245 - 1,134,245
Balance at 30 June 2017 (audited) 101,134,245 - 101,134,245
Finance income 3,795,207 - 3,795,207
Capital contribution - 24,022,280 24,022,280
Finance income - unwind of discount - 152,223 152,223
Foreign currency translation reserve - (679) (679)
Balance at 31 December 2017 (reviewed) 104,929,452 24,173,824 129,103,276
14. INVESTMENT IN EQUITY ACCOUNTED INVESTEE
Reviewed Reviewed
As at As at Audited
31 December 31 December As at 30 June
Euro 2017 2016 2017
PKM Developments 21,751,615 20,057,968 20,205,297
RECONCILIATION OF INVESTMENT IN EQUITY ACCOUNTED INVESTEE
Reviewed Reviewed
As at As at Audited
31 December 31 December As at 30 June
Euro 2017 2016 2017
Opening balance 20,205,297 19,991,716 19,991,716
Capitalised acquisition costs 3,261 30,098 35,184
20,208,558 20,021,814 20,026,900
Share of profit 1,543,057 36,154 178,397
Closing balance 21,751,615 20,057,968 20,205,297
In addition to the investment in the ordinary shares, and the investment in PKM Developments 7.5% preference shares, the
group intends to fund up to a further EUR250,000,000 over four years through the investment in additional 7.5% preference
shares to be issued by PKM Developments.
The following table summarises the financial information of PKM Developments as included in its own financial statements:
Reviewed Reviewed Audited
As at As at As at
31 December 31 December 30 June
Euro 2017 2016 2017
Statement of financial position - PKM Developments
Non-current assets 94,396,995 20,051,534 48,139,879
Current assets 71,220,021 30,696,114 105,905,277
Total assets 165,617,016 50,747,648 154,045,156
Non-current liabilities 105,630,824 - 101,134,247
Current liabilities 5,762,253 737,035 2,544,687
Total liabilities 111,393,077 737,035 103,678,934
Net assets 54,223,939 50,010,613 50,366,222
Percentage ownership interest 40% 40% 40%
Group share of net assets 21,689,576 20,004,245 20,146,489
Capitalised costs 62,039 53,723 58,808
Carrying amount 21,751,615 20,057,968 20,205,297
Reviewed Reviewed
Six-month Six-month Audited
period ended period ended Year ended
31 December 31 December 30 June
Euro 2017 2016 2017
Statement of profit or loss and other comprehensive income -
PKM Developments
Revenue 546,610 - 2,009
Net service charge and property operating expenses (104,739) - -
Corporate expenses (286,361) (39,191) (131,992)
Finance expense (419) (15,049) (13,739)
Finance income 89,806 144,624 190,867
Other income 99,282 - 284,363
Exchange differences (58,583) - 115,719
Investment expenses (935,331) - (1,235)
Fair value adjustments of investment property 4,507,377 - -
Total profit and other comprehensive income 3,857,642 90,384 445,992
Percentage ownership interest 40% 40% 40%
Group's share of total comprehensive profit 1,543,057 36,154 178,397
15. TRADE AND OTHER RECEIVABLES
Reviewed Reviewed Audited
As at As at As at
31 December 31 December 30 June
Euro 2017 2016 2017
Trade receivables from lessees 4,239,022 2,456,071 4,964,146
Receivable from sale of inventory property 1,216,516 - -
Other 884,304 692,895 940,235
Prepayments 694,187 578,672 854,941
VAT receivable 634,516 20,911,114 947,766
Property retentions held in escrow 20,000 2,115,000 500,000
Margin collateral - interest rate swap - 624,650 499,947
7,688,545 27,378,402 8,707,035
The carrying amount of the group's trade and other receivables approximates the fair value.
16. CASH AND CASH EQUIVALENTS
Reviewed Reviewed Audited
As at As at As at
31 December 31 December 30 June
Euro 2017 2016 2017
Bank balances 76,981,588 20,794,725 33,017,502
Trading account 110,360,018 - -
187,341,606 20,794,725 33,017,502
17. INVESTMENT PROPERTY HELD FOR SALE
Reviewed Reviewed Audited
As at As at As at
31 December 31 December 30 June
Euro 2017 2016 2017
United Kingdom
- Hotel 43,224,089 - 1,137,200
- Retail 2,807,872 3,393,501 3,019,715
- Land bank 7,615,725 - -
53,647,686 3,393,501 4,156,915
Germany
- Retail - - 2,180,000
- - 2,180,000
Closing balance 53,647,686 3,393,501 6,336,915
Reconciliation of the group's investment property held for sale were as follows:
Reviewed Reviewed Audited
As at As at As at
31 December 31 December 30 June
Euro Note 2017 2016 2017
Opening balance 6,336,915 3,515,237 3,515,237
Transfer from investment property 11 51,109,670 - 2,295,378
Disposals (5,140,745) - -
Capitalised expenditure 95,786 - -
Retention release (275,000) - -
Fair value adjustment 7 1,568,735 26,474 786,795
Foreign currency translation reserve (47,675) (148,210) (260,495)
Closing balance 53,647,686 3,393,501 6,336,915
The group continues to hold two vacant land plots in the United Kingdom which were classified as held for sale at 30 June
2017. As at 31 December 2017 these plots of land had a fair value of EUR2,807,872, and during the period a fair value adjustment
of EUR162,343 (loss) was recognised. Both plots of land are expected to be sold within six months and therefore continue to be
classified as held for sale.
MEASUREMENT OF FAIR VALUES
FAIR VALUE HIERARCHY
The fair value measurement of all the group's investment property held for sale has been categorised as level 3 in the fair
value hierarchy based upon the significant unobservable inputs into the valuation technique used.
The following table shows the carrying amount and fair value of the group's investment property held for sale in the fair value
hierarchy:
As at 31 December 2017 (reviewed) Fair value
Carrying
Euro amount Level 1 Level 2 Level 3
United Kingdom
- Hotel 43,224,089 - - 43,224,089
- Retail 2,807,872 - - 2,807,872
- Land bank 7,615,725 - - 7,615,725
53,647,686 - - 53,647,686
As at 31 December 2016 (reviewed) Fair value
Carrying
Euro amount Level 1 Level 2 Level 3
German
- Retail 3,393,501 - - 3,393,501
3,353,501 - - 3,353,501
As at 30 June 2017 (audited) Fair value
Carrying
Euro amount Level 1 Level 2 Level 3
United Kingdom
- Hotel 1,137,200 - - 1,137,200
- Retail 3,019,715 - - 3,019,715
German
- Retail 2,180,000 - - 2,180,000
6,336,915 - - 6,336,915
VALUATION TECHNIQUE AND SIGNIFICANT UNOBSERVABLE INPUTS
The following table shows the valuation technique used in measuring the fair value of investment property held for sale, as
well as the significant unobservable inputs used.
Interrelation between key
unobservable inputs and fair value
Valuation technique Significant unobservable inputs measurement
Discounted cash flows: The valuation - Risk adjusted discount rates The estimated fair value would increase/
model considers the present value - Estimated rental value (decrease) if:
of net cash flows to be generated - Net rental growth - Expected market rental growth was
from the property taking into account - Reversionary discount rate higher/ (lower)
expected rental growth rate, void - The estimated rental value was
periods, occupancy rate, lease incentive higher/ (lower)
costs such as rent-free periods and - The reversionary discount rate was
other costs not paid by tenants. The lower/ (higher)
expected net cash flows are discounted - The risk adjusted discount rate was
using risk-adjusted discount rates. lower/ (higher)
Among other factors, the discount rate
estimation considers the quality of a
building and its location, tenant credit
quality and lease terms.
Firm offers: - Offers The estimated fair value would increase/
The valuation model takes into account (decrease) if:
the amount a third party is willing to - The number of the interested parties
pay. was higher/(lower)
- The availability of comparable
properties lower/(higher)
18. SHARE CAPITAL AND GEARED SHARE PURCHASE PLAN SHARES
The ordinary share capital of the company has no par value. The reconciliation of share capital for the period was as follows:
Geared share
Share capital purchase plan shares Total
Number of Number of Number of
Shares Euro shares Euro Shares Euro
Balance at 30 June 2016 (audited) 348,625,219 378,530,556 - - 348,625,219 378,530,556
Issued during the period
- Issue of share capital 25,641,026 31,592,882 - - 25,641,026 31,592,882
- Distributions reinvested 6,317,591 7,983,727 - - 6,317,591 7,983,727
31,958,617 39,576,609 - - 31,958,617 39,576,609
Distributed during the year
- Scrip distributions - (7,994,090) - - - (7,994,090)
Balance at 31 December 2016 (reviewed) 380,583,836 410,113,075 - - 380,583,836 410,113,075
Issued during the period
- Issue of share capital 83,333,332 126,392,027 - - 83,333,332 126,392,027
- Geared share purchase plan shares (treated as 12,850,000 21,056,010 (12,850,000) (21,056,010) - -
treasury shares)
- Distributions reinvested 3,449,131 5,267,796 - - 3,449,131 5,267,796
99,632,463 152,715,833 (12,850,000) (21,056,010) 86,782,463 131,659,823
Distributed during the year
- Scrip distributions - (5,272,635) - - - (5,272,635)
Balance at 30 June 2017 (audited) 480,216,299 557,556,273 (12,850,000) (21,056,010) 467,366,299 536,500,263
Issued during the period
- Issue of share capital 160,299,409 279,921,998 - - 160,299,409 279,921,998
- Distributions reinvested 6,250,078 10,412,225 - - 6,250,078 10,412,225
166,549,487 290,334,223 - - 166,549,487 290,334,223
Distributed during the year
- Scrip distributions - (10,424,724) - - - (10,424,724)
Balance at 31 December 2017 (reviewed) 646,765,786 837,465,772 (12,850,000) (21,056,010) 633,915,786 816,409,762
Distributions reinvested represent scrip dividends for which shareholders elect to receive shares by way of a return of capital.
CAPITAL RAISE
On 28 September 2017 the group issued 77,541,988 shares at an issue price of EUR1.63 (ZAR25.50) as part of an accelerated
book build, raising cash of EUR125,926,058. On 6 December 2017 a further 82,757,421 shares were issued by the group at an issue
price of EUR1.90 (ZAR31.00) as part of a further accelerated book build, raising cash of EUR155,670,514. The group incurred
expenses of EUR1,674,574 (December 2016: EUR199,328; June 2017: EUR942,908) in relation to shares issued during the period, which
were offset against share capital.
DISTRIBUTIONS
The holders of the company's shares are entitled to distributions as declared and to one vote per share at shareholders
meetings of the company. Distributions of the company can be paid from retained earnings or as a return of capital in
accordance with the BVI Business Companies Act 2004, subject to solvency and liquidity requirements.
The following distributions were paid by the group:
Reviewed Reviewed
Six-month Six-month Audited
period ended period ended Year ended
31 December 31 December 30 June
2017 2016 2017
Cash 6,957,823 352,014 5,202,917
Scrip 10,424,724 7,994,090 13,266,725
Total 17,382,547 8,346,104 18,469,642
Distributions paid per share (euro cents) 3.19 2.23 4.89
19. SHARE-BASED PAYMENT RESERVE
The share-based payment reserve relates to the option expense of the group's geared share purchase plan (see note 20).
Reconciliation of geared share purchase plan:
Reviewed Reviewed Audited
As at As at As at
31 December 31 December 30 June
Euro 2017 2016 2017
Opening balance 225,973 - -
Recognised during the period/year 517,701 - 319,248
Non-forfeitable distribution (41,153) - (93,275)
Closing balance 702,521 - 225,973
20. SHARE-BASED PAYMENT ARRANGEMENTS
The total expense recognised in employment benefits was EUR444,455 (December 2016 EURnil; June 2017: EUR245,419).
The remaining term of the loans at 31 December 2017 was 9.19 years (December 2016: nil; June 2017: 9.69 years).
On 15 June 2017 it was announced that Lukas Nakos, CEO, would be leaving the group. Lukas Nakos ceased to be a
director on 31 December 2017, with a condition of his departure being his exit from the share scheme with no vesting of shares
occurring.
Refer to note 27 for further disclosures of the share-based payment expense included in key management compensation
and directors' remuneration.
21.NON-CONTROLLING INTEREST (NCI)
Reviewed Reviewed Audited
As at As at As at
31 December 31 December 30 June
Euro 2017 2016 2017
Prime Kapital CEE Property Investment Management Limited 1,030,314 1,072,595 988,063
1,030,314 1,072,595 988,063
RECONCILIATION OF NCI
Reviewed Reviewed Audited
As at As at As at
31 December 31 December 30 June
Euro 2017 2016 2017
Opening balance 988,063 - -
Share of profit 382,507 1,072,575 988,063
Distribution to NCI (340,256) - -
Acquisition of subsidiary with non-controlling interests - 20 -
Closing balance 1,030,314 1,072,595 988,063
During the period Prime Kapital CEE Property Investment Management Limited declared and paid a dividend of EUR340,256
(December 2016: EURnil; June 2017 EURnil) to its shareholders.
22. FINANCIAL LIABILITIES
Reviewed Reviewed Audited
As at As at As at
31 December 31 December 30 June
Euro Note 2017 2016 2017
Non-current liabilities
Capital contribution 5 24,173,824 - -
Interest rate swaps 1,130,924 2,488,440 1,170,086
Deferred consideration - Bruchsal - 1,615,000 -
Deferred consideration - Heppenheim Park - - 500,000
Development management fee - 2,083,575 -
25,304,748 6,187,015 1,670,086
Current liabilities
Priority participating profit dividend 27 5,823,594 - 6,078,256
Development management fee 27 4,167,950 - 4,052,171
Deferred consideration - Heppenheim Park - 658,865 -
Deferred consideration - Edeka Thales portfolio - 600,000 -
Forward currency contract - 86,067 -
Interest rate swaps - - 1,081,563
9,991,544 1,344,932 11,211,990
FINANCIAL LIABILITIES AT AMORTISED COST
CAPITAL CONTRIBUTION
As described in note 5, a financial liability and corresponding financial asset have been recognised in respect of the capital
contribution due from Legal & General, and due to the UK Government, under the terms of the Pre-let Agreement. Both the
financial asset and financial liability are held at amortised cost.
DEFERRED CONSIDERATION
Where the group enters into a deferred consideration commitment as part of a property transaction this is recognised as a
financial liability held at amortised cost until it is paid or released.
During the period the group paid EUR225,000 of the deferred consideration in relation to Heppenheim Park. The remaining
deferred consideration amount of EUR275,000 was released due to the vendor not completing the agreed retention works. The
deferred consideration was originally recognised as part of the purchase price of the asset, and, accordingly, the EUR275,000
release of the retention has been recognised as a fair value adjustment to investment property in profit or loss.
Reconciliation of the group's financial liabilities held at amortised cost:
Edeka Thales
Bruchsal Heppenheim portfolio
deferred Park deferred deferred Capital
consideration consideration consideration contribution
Balance at 30 June 2016 (audited) 1,615,000 2,203,865 - -
Purchase price retained - - 600,000 -
Purchase price released - (1,545,000) - -
Balance at 31 December 2016 (reviewed) 1,615,000 658,865 600,000 -
Purchase price released (1,615,000) (158,865) (600,000) -
Balance at 30 June 2017 (audited) - 500,000 - -
Purchase price released - (500,000) - -
Capital contribution - - - 24,022,280
Finance cost - unwind of discount - - - 152,223
Foreign currency translation reserve (679)
Balance at 31 December 2017 (reviewed) - - - 24,173,824
FINANCIAL LIABILITIES AT FVTPL
INTEREST RATE SWAPS
The group has hedged some of the interest rate exposure on the interest bearing borrowings using interest rate swaps, see
note 23. These interest rate swaps are classified as FVTPL. Accordingly, they are measured at fair value at the reporting date
with changes in fair value being recognised in profit or loss. During the period the remaining Aldi store in the Aldi portfolio
was sold, consequently the interest bearing borrowings secured against the portfolio were repaid and the interest rate swap
was settled on 6 July 2017.
DEVELOPMENT MANAGEMENT FEE AND PRIORITY PARTICIPATING PROFIT DIVIDEND
The group has a development management agreement under which a fee is payable to the developer in relation to the
development of the New Waverley site in Edinburgh.
A priority participating profit dividend is also payable to the developer based on the value of the site following
development.
FORWARD CURRENCY CONTRACT
The group entered into a Polish Zloty forward contract to hedge the exposure on VAT receivable in relation to the Nova Park
acquisition in the prior period. This forward currency contract was held as a fair value asset at 30 June 2017 of EUR66,097, and
was settled during the period, see note 13.
Reconciliation of the group's financial liabilities held at FVTPL:
Priority
Development participating
Interest rate management profit
swaps fee dividend
Balance at 30 June 2016 (audited) 3,029,495 2,367,448 -
Fair value adjustment (see note 7) (559,117) (205,516) -
Foreign currency translation difference in other comprehensive Income 18,062 (78,357) -
Balance at 31 December 2016 (reviewed) 2,488,440 2,083,575 -
Fair value adjustment (see note 7) (210,477) 2,090,973 6,272,812
Foreign currency translation difference in other comprehensive income (26,314) (122,377) (194,556)
Balance at 30 June 2017 (audited) 2,251,649 4,052,171 6,078,256
Fair value adjustment (see note 7) 46,353 152,455 (201,586)
Foreign currency translation difference in other comprehensive income (74,078) (36,676) (53,076)
Settlement (1,093,000) - -
Balance at 31 December 2017 (reviewed) 1,130,924 4,167,950 5,823,594
FAIR VALUE HIERARCHY
The following table shows the carrying and fair value of the group's financial liabilities held at fair value in the fair value hierarchy:
As at 31 December 2017 (reviewed) Fair value
Carrying
amount Level 1 Level 2 Level 3
Non-current liabilities
Zurich interest rate swap 1,006,914 - 1,006,914 -
Nova Park interest rate swap 124,010 - 124,010 -
1,130,924 - 1,130,924 -
Current liabilities
Development management fee 4,167,950 - - 4,167,950
Priority participating profit dividend 5,823,594 - - 5,823,594
9,991,544 - - 9,991,544
As at 31 December 2016 (reviewed) Fair value
Carrying
amount Level 1 Level 2 Level 3
Non-current liabilities
Zurich interest rate swap 1,339,491 - 1,339,491 -
Aldi portfolio interest rate swap 1,148,949 - 1,148,949 -
Development management fee 2,083,575 - - 2,083,575
4,572,015 2,488,440 2,083,575
Current liabilities
Forward currency contract 86,067 - 86,067 -
86,067 - 86,067 -
As at 30 June 2017 (audited) Fair value
Carrying
amount Level 1 Level 2 Level 3
Non-current liabilities
Zurich interest rate swap 1,170,086 - 1,170,086 -
1,170,086 - 1,170,086 -
Current liabilities
Development management fee 4,052,171 - - 4,052,171
Priority participating profit dividend 6,078,256 - - 6,078,256
Aldi portfolio interest rate swap 1,081,563 - 1,081,563 -
11,211,990 1,081,563 10,130,427
LEVEL 2 FINANCIAL INSTRUMENTS
VALUATION TECHNIQUES AND UNOBSERVABLE INPUTS
The following table shows the valuation technique used to measure financial instruments held at fair value as well as the
unobservable inputs used for level 2 financial instruments.
As at 31 December 2017, 31 December 2016 and 30 June 2017
Inter-relationship between
inputs and fair value
Financial instrument Valuation technique Inputs measurement
Interest rate swaps The fair value is based on - 3 month Euro libor / Swiss The estimated fair value
discounting future cash libor would increase/(decrease) if:
flows using the interest rate - Swap rate - 3 month Euro libor/Swiss
swap curves plus the historic - Notional loan value libor was higher/ (lower)
charged credit margin at the - Fixed rate of interest - Swap rate was lower/
dates when the cash flows (higher)
will take place. - Notional loan value was
lower/ (higher)
- Fixed rate of interest was
lower/ (higher)
LEVEL 3 FINANCIAL INSTRUMENTS
VALUATION PROCESS OF LEVEL 3 FINANCIAL LIABILITIES
The fair value of the level 3 financial liabilities in respect of New Waverley Advisers Limited and New Waverley Holdings
Limited is calculated semi-annually. The investment property valuation process (see note 11) is part of this valuation process
as the financial liability is derived from the fair value of New Waverley investment property.
VALUATION TECHNIQUES AND UNOBSERVABLE INPUTS
The following table shows the valuation technique used to measure financial instruments held at fair value as well as the
significant unobservable inputs used for level 3 financial instruments:
As at 31 December 2017, 31 December 2016 and 30 June 2017
Inter-relationship between
inputs and fair value
Financial instrument Valuation technique Inputs measurement
Development management Gross development value: - Value of investment The estimated fair value
fee and priority participating Fair value is based on the property would increase/(decrease) if:
profit dividend value of the properties in the - Value of investment
New Waverley development. property was higher/(lower)
23.INTEREST BEARING BORROWINGS
Reviewed Reviewed Audited
As at As at As at
31 December 31 December 30 June
Euro 2017 2016 2017
Non-current - secured bank loans
UK investment property 7,604,642 31,691,617 30,284,516
German investment property 102,402,299 77,943,361 103,478,073
Swiss investment property 7,296,148 8,313,288 7,989,364
CEE investment property 49,354,406 - -
166,657,495 117,948,266 141,751,953
Current - secured bank loans
UK investment property 23,228,329 1,530,080 1,489,732
German investment property 2,381,698 1,903,083 3,614,901
Swiss investment property 333,294 363,168 356,811
CEE investment property 1,985,767 - -
27,929,088 3,796,331 5,461,444
194,586,583 121,744,597 147,213,397
The carrying value of interest bearing borrowings approximates their fair value.
Interest bearing borrowings are held at amortised cost. Accordingly, interest on interest bearing borrowings drawn down
to fund development property is capitalised. All other interest is charged to profit or loss at the effective interest rate.
Reconciliation of the group's carrying amount of interest bearing borrowings:
Reviewed Reviewed Audited
As at As at As at
31 December 31 December 30 June
Euro Note 2017 2016 2017
Opening balance 147,213,397 44,578,595 44,578,595
Drawn down 53,000,000 80,430,900 111,657,786
Capitalised transaction costs (699,386) (1,456,967) (2,168,837)
Capital repayment (4,409,446) (1,135,900) (7,098,329)
Finance costs - income statement 8 2,156,911 840,195 2,231,667
Finance costs - capitalised 11 308,904 228,209 569,298
Interest paid (2,161,092) (842,927) (2,470,916)
Foreign currency translation difference (822,705) (897,508) (85,867)
Closing balance 194,586,583 121,744,597 147,213,397
Interest on general borrowings of EUR308,904 was capitalised to investment property during the period (December 2016:
EUR228,209; June 2017: EUR569,298), see note 11.
SUMMARY OF INTEREST BEARING BORROWING TERMS AND COVENANTS
The group is subject to both fixed and variable interest rates on its interest bearing borrowings:
Reviewed Reviewed
As at As at Audited
31 December 31 December As at
Euro 2017 2016 30 June 2017
Fixed debt 145,605,748 69,368,769 112,857,253
Variable debt 48,980,835 52,375,828 34,356,144
194,586,583 121,744,597 147,213,397
The borrowing terms and covenants are consistent with those disclosed in the integrated annual report except for the loan
which was drawn down during the period, the terms of which are:
Annual
capital
repayment
Borrowing terms Term of debt Currency (Euro) Margin Base rate
CEE investment property
- Variable debt 4.5 years Euro 530,000 2.50% 12M Euribor
Debt service
Covenants cover ratio Loan to value
CEE investment property
- CEE variable debt 120% 65%
24. TRADE AND OTHER PAYABLES
Reviewed Reviewed Audited
As at 31 As at 31 As at
December December 30 June
Euro 2017 2016 2017
Trade payables 6,406,362 6,152,030 6,722,430
Current taxation payable 3,149,540 593,793 1,020,201
Deferred income 940,543 1,373,463 854,603
Other 847,300 - 5,363
VAT payable 785,656 1,233,088 984,790
Construction payables 150,386 707,600 1,229,375
12,279,787 10,059,974 10,816,762
Construction payables relate to amounts owed to developers for the construction of the group's development properties.
25. OPERATING SEGMENTS
The group's chief operating decision maker is determined to be the executive management team. During the current
period the segmentation to monitor group performance was refined because the group invested in real-estate equities. As
a result, there are now five reportable segments (there were no financial investments in December 2016 and June 2017).
Performance is now considered as follows:
Reportable segment Description
Income-generating property Property that is currently producing income and held for the purpose of earning a yield.
There may be further asset management angles on these properties, which could further
enhance income returns.
Development property Property that is being developed in order to create income producing property held for the
purpose of earning a better yield than by acquiring standing property.
Land bank and inventory Inventory property and land plots held for schemes that have not yet commenced and
residential developments.
Financial investments Investment in real estate equities.
Corporate Consists of the cash holdings outside of the other reporting segments and goodwill.
The executive management team analyses the performance and position of the group by aggregating the group into
the five reportable segments. These reportable segments have different risk profiles and generate income from different
sources, accordingly, this allows the executive management team to make better informed strategic decisions for the group.
Management reports are prepared and reviewed on a quarterly basis by the executive management team to facilitate this
process.
Income-
generating Development Land bank Financial
Euro property property and inventory investments Corporate Total
Statement of comprehensive income
External revenue 20,980,965 (1,741) 119,486 - 22,825 21,121,535
Segment profit/(loss) before tax 13,789,374 (1,618,388) 2,505,231 1,321,171 (2,880,517) 13,116,871
Other material items
Finance income 3,174 3,795,205 152,242 - - 3,950,621
Finance cost (2,178,353) - (152,223) - (146,796) (2,477,372)
Depreciation - - - - (18,098) (18,098)
Current taxation (217,206) 139 1,855,943) - (5,623) (2,078,633)
Deferred taxation (1,358,739) - 2,406,486 - - 1,047,747
Share of profit from investment in equity accounted - 1,543,057 - - - 1,543,057
investee
Fair value adjustments 1,448,741 (5,676,807) 1,659,401 1,954,910 - (613,755)
Foreign exchange (149,616) - - - (436,570) (586,186)
Statement of financial position
Segment non-current assets 451,061,018 127,138,251 62,930,662 200,120,816 23,063,752 864,314,499
- Investment in equity accounted investee - 21,751,615 - - - 21,751,615
Segment current assets 67,278,364 573,059 18,504,267 - 162,322,147 248,677,837
Segment non-current liabilities 171,550,409 - 24,173,824 - - 195,724,233
Segment current liabilities 36,614,315 9,994,023 2,484,870 - 1,146,575 50,239,783
31 December 2016 (reviewed)
Income-
generating Development Land bank
Euro property property and inventory Corporate Total
Statement of comprehensive income
External revenue 12,379,928 1,823 227,382 - 12,609,133
Segment profit/(loss) before tax 10,240,594 161,924 (4,488,483) (4,738,051) 1,175,984
Other material items
Finance income 157 - 17 39,353 39,527
Finance cost (840,545) - - (1,111) (841,656)
Depreciation - - - (13,504) (13,504)
Share of profit from investment in equity accounted investee 36,154 36,154
Fair value adjustments 1,150,391 126,544 (4,542,555) - (3,265,620)
Foreign exchange (57,672) 22 - (2,850,427) (2,908,077)
Statement of financial position
Segment non-current assets 427,871,884 27,646,524 40,933,425 23,073,301 519,525,134
- Investment in equity accounted investee - - 20,057,968 - 20,057,968
Segment current assets 37,765,491 106,723 4,460,800 9,233,614 51,566,628
Segment non-current liabilities 123,704,609 2,083,575 - 40,410 125,828,594
Segment current liabilities 13,192,414 712,180 592,926 780,703 15,278,223
30 June 2017 (audited)
Income-
generating Development Land bank
Euro property property and inventory Corporate Total
Statement of comprehensive income
External revenue 31,532,298 - 34,632 15,498 31,582,428
Segment profit/(loss) before tax 49,460,087 872,805 (5,003,657) (5,069,622) 40,259,613
Other material items
Finance income 1,350 1,134,247 16 71,583 1,207,196
Finance cost (2,235,473) - - (3,024) (2,238,497)
Depreciation (23,977) (1,963) (1,924) - (27,864)
Current taxation (1,741,449) - - - (1,741,449)
Deferred taxation (3,942,153) - - - (3,942,153)
Share of profit from investment in equity accounted investee - 178,397 - - 178,397
Fair value adjustments 30,161,319 - (4,569,029) - 25,592,290
Exchange differences (819,456) 18 - (3,865,457) (4,684,895)
Statement of financial position
Segment non-current assets 495,615,079 152,701,312 39,690,960 22,909,548 710,916,899
- Investment in equity accounted investee - 20,205,297 - - 20,205,297
Segment current assets 20,171,923 1,708,107 2,347,199 23,900,320 48,127,549
Segment non-current liabilities 147,306,309 881,180 232,924 - 148,420,413
Segment current liabilities 14,450,775 11,975,661 545,684 609,881 27,582,001
Where assets/liabilities and income/expense are shared by reportable segments they are allocated to each respective reportable segment based on a
rational driver of use or ownership of the assets/liabilities or income/expense.
GEOGRAPHICAL INFORMATION
The geographical information below analyses the group's revenue and non-current assets by the jurisdiction in which the
underlying assets are held.
REVENUE
Reviewed Reviewed
Six-month Six-month Audited
period ended period ended Year ended
31 December 31 December 30 June
Euro 2017 2016 2017
UK 4,000,304 3,208,219 7,073,814
Germany 7,379,906 8,075,817 17,041,915
Switzerland 577,782 619,086 1,212,855
Bulgaria 5,172,778 - 1,527,194
Poland 3,990,765 706,011 4,726,650
21,121,535 12,609,133 31,582,428
NON-CURRENT ASSETS
Reviewed Reviewed Audited
As at As at As at
31 December 31 December 30 June
Euro 2017 2016 2017
UK 177,159,719 170,476,751 203,013,452
Germany 214,346,362 215,437,599 214,648,055
Switzerland 14,442,739 19,722,816 15,461,810
Romania (Prime Kapital development joint venture and PKM Preference Shares) 126,681,067 20,057,968 121,305,189
Poland 89,707,103 93,830,000 156,488,393
Bulgaria 67,181,279 - -
France 142,274,153 - -
Netherlands 18,058,161 - -
Sweden 14,463,916 - -
864,314,499 519,525,134 710,916,899
26. EARNINGS/(LOSS) PER SHARE
The calculation of basic and diluted earnings/(loss) per share has been based on the following profit attributable to
ordinary shareholders.
Reviewed Reviewed
Six-month Six-month Audited
period ended period ended Year ended
31 December 31 December 30 June
Euro 2017 2016 2017
Profit/(loss) for the period/year attributable to the owners of the group 11,703,478 (397,549) 33,587,948
BASIC EARNINGS/(LOSS) PER SHARE
The calculation of basic earnings/(loss) per share has been based on the following weighted-average number of ordinary
shares outstanding.
Reviewed Reviewed
Six-month Six-month Audited
period ended period ended Year ended
31 December 31 December 30 June
Euro 2017 2016 2017
Issued ordinary shares at start of the period/year 467,366,299 348,625,219 348,625,219
Effect of shares issued for capital raises 50,858,057 21,599,777 44,608,360
Effect of shares issued for scrip distributions 2,751,393 2,025,750 5,023,402
Weighted-average number of ordinary shares 520,975,749 372,250,746 398,256,981
BASIC EARNINGS/(LOSS) PER SHARE
Reviewed Reviewed
Six-month Six-month Audited
period ended period ended Year ended
31 December 31 December 30 June
Euro 2017 2016 2017
Profit/(loss) attributable to ordinary shareholders 11,703,478 (397,549) 33,587,948
Weighted-average number of ordinary shares 520,975,749 372,250,746 398,256,981
Basic earnings/(loss) per share (euro cents) 2.25 (0.11) 8.43
DILUTED EARNINGS/(LOSS) PER SHARE
The calculation of diluted earnings per share has been based on the following weighted-average number of ordinary shares
outstanding after adjusting for the effects of all dilutive potential ordinary shares.
Reviewed Reviewed
Six-month Six-month Audited
period ended period ended Year ended
31 December 31 December 30 June
Euro 2017 2016 2017
Weighted-average number of ordinary shares (basic) 520,975,749 372,250,746 398,256,981
Effect of share options 255,935 - -
Weighted-average number of ordinary shares (diluted) 521,231,684 372,250,746 398,256,981
DILUTED EARNINGS/(LOSS) PER SHARE
Reviewed Reviewed
Six-month Six-month Audited
period ended period ended Year ended
31 December 31 December 30 June
Euro 2017 2016 2017
Profit/(loss) attributable to ordinary shareholders 11,703,478 (397,549) 33,587,948
Weighted-average number of ordinary shares 521,231,684 372,250,746 398,256,981
Diluted earnings/(loss) per share (euro cents) 2.25 (0.11) 8.43
At 31 December 2017, options on 2,873,333 shares were excluded from the diluted weighted-average number of ordinary
shares because their effect would have been anti-dilutive.
The average market value of the company's shares for the purpose of calculating the dilutive effect of the share options
was based on quoted market prices for the period during which the options were outstanding.
HEADLINE EARNINGS/(LOSS) AND HEADLINE EARNINGS/(LOSS) PER SHARE
Reviewed
Six-month period ended
31 December 2017
Euro Note Gross Net
Profit attributable to ordinary shareholders 11,703,478 11,703,478
Adjusted for:
Revaluation of investment property 11 4,140,178 2,306,546
Revaluation of investment property in associate 14 (1,802,951) (1,802,951)
Revaluation of investment property held for sale 17 (1,568,735) (1,568,735)
Goodwill impairment 10 1,274,346 1,274,346
Headline earnings 13,746,316 11,912,684
Basic headline earnings per share
Weighted-average number of ordinary shares (basic) 520,975,749 520,975,749
Headline earnings per share (euro cents) 2.64 2.29
Diluted headline earnings per share
Weighted-average number of ordinary shares (diluted) 521,231,684 521,231,684
Headline earnings per share (euro cents) 2.64 2.29
Reviewed
Six-month period ended
31 December 2016
Euro Gross Net
Loss attributable to ordinary shareholders (397,549) (397,549)
Adjusted for:
Revaluation of investment property (598,369) (1,006,867)
Headline loss (995,918) (1,404,416)
Basic and diluted headline loss per share
Weighted-average number of ordinary shares 372,250,746 372,250,746
Headline loss per share (euro cents) (0.27) (0.38)
Audited
Year ended
30 June 2017
Euro Gross Net
Profit attributable to ordinary shareholders 33,587,948 33,587,948
Adjusted for:
Revaluation of investment property (36,763,196) (32,995,314)
Revaluation of investment property held for sale (786,795) -
Headline (loss)/earnings (3,962,043) 592,634
Basic and diluted headline (loss)/earnings per share
Weighted-average number of ordinary shares 398,256,981 398,256,981
Headline (loss)/earnings per share (euro cents) (0.99) 0.15
The JSE Listings Requirements require the calculation of headline earnings and diluted headline earnings per share and
the disclosure of a detailed reconciliation of headline earnings to the earnings numbers used in the calculation of basic
earnings per share, as required by IAS 33 - Earnings per Share. Disclosure of headline earnings is not an IFRS requirement.
The directors do not use headline earnings or headline earnings per share in their analysis of the group's performance, and
do not consider it to be a useful or relevant metric for the group. The directors make no reference to headline earnings
or headline earnings per share in their commentaries, instead, the directors use distributable earnings as a more relevant
measure.
27.RELATED PARTIES
PARENT AND ULTIMATE CONTROLLING PARTY
The group has no ultimate controlling party, but is controlled by its ordinary shareholders in aggregate.
RELATED PARTY RELATIONSHIPS
ARTISAN REAL ESTATE INVESTORS LIMITED ("ARTISAN")
Artisan is a real estate management company with a measure of commonality of directors with the company.
NEW WAVERLEY ADVISERS LIMITED ("NW ADVISERS")
NW Advisers is a real estate developer and is a 100% owned subsidiary of New Waverley Holdings. As such it is controlled
by Artisan which is a related party of the group.
Expenses on-charged from NW Advisers in relation to the development of New Waverley are capitalised as part of
the New Waverley development within investment property. On-charges are charged to the group in accordance with
the development management agreement, they are on an arm's length basis, and relate to the construction costs of the
development.
In addition, the group has provided for a development management fee. This fee is in accordance with the development
management agreement and is on an arm's length basis.
NEW WAVERLEY HOLDINGS LIMITED ("NW HOLDINGS")
NW Holdings is a real estate developer and is a 60% owned subsidiary of Artisan. As such it is controlled by Artisan which
is a related party of the group.
CORONA REAL ESTATE PARTNERS LIMITED ("CORONA")
Corona is a real estate management company with four staff members and is owned 100% by Jonathan Knight who is the
chief investment officer of the group.
PKM DEVELOPMENTS LIMITED
PKM Developments is an associate of the group and MAS owns 40% of the ordinary shares (see note 14).
In 2017, the group provided EUR100,000,000 to acquire 7.5% preference shares in PKM Developments (see note 13). The
group has committed to fund up to a further EUR250,000,000 over the next four years.
MOMATS
Momats provides corporate services and is a director on MAS BVI (Holdings) Limited, a 100% owned subsidiary of the
company.
KEY MANAGEMENT
Key management during the period consists of all directors and the Company secretary:
Lukas Nakos Chief executive officer ("CEO") (resigned 31 December 2017)
Malcolm Levy Chief financial officer ("CFO")
Jonathan Knight Chief investment officer ("CIO")
Ron Spencer Chairman
Morné Wilken Non-executive director ("NED") (appointed CEO 1 January 2018)
Pierre Goosen Non-executive director ("NED")
Gideon Oosthuizen Non-executive director ("NED")
Jaco Jansen Non-executive director ("NED")
Glynnis Carthy Non-executive director ("NED")
Helen Cullen Company secretary
Related party transactions
Income/(expenses) Capitalised for the Balances receivable/(payable)
for the period/year ended period/year ended as at
Reviewed Reviewed Audited Reviewed Reviewed Audited Reviewed Reviewed Audited
31 December 31 December 30 June 31 December 31 December 30 June 31 December 31 December 30 June
Euro 2017 2016 2017 2017 2016 2017 2017 2016 2017
NW Advisers
- Oncharged development costs - - (293) 230,704 12,049,068 12,860,460 163,350 (90,587) (214,680)
- Development management fee(1) (152,455) 913,946 (1,684,723) - - - (4,167,950) (2,083,575) (4,052,171)
(152,455) 913,946 (1,685,016) 230,704 12,049,068 12,860,460 (4,004,600) (2,174,162) (4,266,851)
NW Holdings
- Development priority participation profit 201,586 - (6,078,256) - - - (5,823,594) - (6,078,256)
dividend(1)
201,586 - (6,078,256) - - - (5,823,594) - (6,078,256)
Corona
- Investment advisory services (472,760) (486,539) (889,482) 96,931 74,861 176,266 - - (83,857)
(472,760) (486,539) (889,482) 96,931 74,861 176,266 - - (83,857)
Artisan
- Oncharged administrative expenses 22,825 (6,179) (13,583) - - - 8,388 (2,920) -
22,825 (6,179) (13,583) - - - 8,388 (2,920) -
PKM Developments
- Investment in equity accounted investees 1,543,057 36,154 178,397 - - - 21,751,615 20,057,968 20,205,297
(see note 14)
- PKM Developments preference shares (see 3,795,207 - 1,134,245 - - - 104,929,452 - 101,134,245
note 8)
5,338,264 36,154 1,312,642 - - - 126,681,067 20,057,968 121,339,542
Momats
- Directors fees and legal and professional (11,840) - - - - - - - -
fees
(11,840) - - - - - - - -
4,925,620 457,382 (7,353,695) 327,635 12,123,929 13,036,726 116,861,261 17,880,886 110,910,578
(1) Differences between the income/(expense) and the corresponding receivable/(payable) related to foreign exchange movements recognised in OCI.
TRANSACTIONS WITH KEY MANAGEMENT
Six months ended 31 December 2017 (reviewed)
IFRS 2
Short-term Long-term option
Euro Role Basic salary Benefits(2) incentive incentive Total expense
Lukas Nakos(1) CEO - - - - - -
Malcolm Levy CFO - - - - - 242,008
Jonathan Knight CIO 33,970 - - - 33,970 107,413
Ron Spencer Chairman 15,000 - - - 15,000 -
Gideon Oosthuizen NED 13,750 - - - 13,750 -
Jaco Jansen NED 12,500 - - - 12,500 -
Morné Wilken NED 10,000 13,163 - - 23,163 -
Pierre Goosen NED 10,000 - - - 10,000 -
Glynnis Carthy NED 13,750 - - - 13,750 -
Helen Cullen Company secretary 48,540 - - - 48,540 35,804
157,510 13,163 - - 170,673 385,225
(1) During January 2018 the Board of Directors approved an exit payment of EUR157,794 to Lukas Nakos.
(2) During the six-month period to 31 December 2017, the group paid EUR13,163 in relation to Morné Wilken's relocation.
Six months ended 31 December 2016 (reviewed)
Basic Short-term Long-term
Euro Role salary Benefits incentive incentive Total
Lukas Nakos CEO 95,120 - 190,240 - 285,360
Malcolm Levy CFO 89,175 - 178,350 - 267,525
Jonathan Knight CIO 35,670 - 89,176 - 124,846
Ron Spencer Chairman 15,000 - - - 15,000
Gideon Oosthuizen NED 13,750 - - - 13,750
Jaco Jansen NED 13,750 - - - 13,750
Morné Wilken NED 10,000 - - - 10,000
Pierre Goosen NED 10,000 - - - 10,000
Helen Cullen Company secretary 46,700 - 19,800 - 66,500
329,165 - 477,566 - 806,731
Year ended 30 June 2017 (audited)
IFRS 2
Short-term Long-term option
Euro Role Basic salary Benefits incentive incentive Total expense
Lukas Nakos CEO 125,000 - 181,952 - 306,952 -
Malcolm Levy CFO 117,656 - 170,580 - 288,236 149,237
Jonathan Knight CIO 68,232 - 85,290 - 153,522 66,238
Ron Spencer Chairman 30,000 - - - 30,000 -
Gideon Oosthuizen NED 27,500 - - - 27,500 -
Jaco Jansen NED 27,500 - - - 27,500 -
Morné Wilken NED 20,000 - - - 20,000 -
Pierre Goosen NED 20,000 - - - 20,000 -
Glynnis Carthy NED - - - - - -
Helen Cullen Company secretary 96,822 - 20,538 - 117,360 22,079
532,710 - 458,360 - 991,070 237,554
28. SUBSEQUENT EVENTS
After the reporting date the group completed its acquisition of the listed real estate equity securities with the purchase of a further
75,100 shares of Mercialys SA. As at 16 February 2018 the listed real estate equity securities had a fair value of EUR185,224,054.
SUPPLEMENTARY INFORMATION - UNAUDITED
Six-month period ended 31 December 2017
STATEMENT OF DIRECT AND INDIRECT INVESTMENT RESULT
IFRS IFRS
Six-month Six-month
period ended period ended IFRS
31 December 31 December Year ended
Euro 2017 2016 30 June 2017
DIRECT INVESTMENT RESULT
Gross rental income 18,974,145 11,067,791 27,032,238
Service charge income and other recoveries 2,147,390 1,541,342 4,550,190
21,121,535 12,609,133 31,582,428
Service charge and other property operating expenses (5,859,557) (2,421,484) (7,597,216)
Net rental income 15,261,978 10,187,649 23,985,212
Other income 89,831 - -
Corporate expenses (2,500,957) (1,885,474) (3,253,610)
Net operating income 12,850,852 8,302,175 20,731,602
Share of gain from equity accounted investees 137,672 36,154 132,602
Profit before net financing costs 12,988,524 8,338,329 20,864,204
Finance income 3,950,621 39,527 1,207,196
Finance costs (2,477,372) (841,656) (2,238,497)
Profit before taxation 14,461,773 7,536,200 19,832,903
Current taxation (218,234) (424,496) (1,741,449)
Non-controlling interest (676,312) (42,098) (192,276)
TOTAL DIRECT INVESTMENT RESULT 13,567,227 7,069,606 17,899,178
INDIRECT INVESTMENT RESULT
Sales of inventory property 6,398,637 - -
Cost of sales of inventory property (5,339,258) - -
Profit on sales of inventory property 1,059,379 - -
Fair value adjustments (613,755) (3,265,620) 25,592,290
Goodwill impairment (1,274,346) -
Share of gain from equity accounted investees 1,405,385 - 45,795
Investment expenses (1,335,379) (186,519) (281,061)
Other expenses - - (245,419)
- Service charges and other property operating expenses - - (820)
- Corporate expenses - - (244,599)
Exchange differences (586,186) (2,908,077) (4,684,895)
Current taxation (1,860,399) - 245,419
- Capital gain taxation (1,659,117) - -
- Inventory property sales (201,282) - -
Deferred taxation 1,047,747 (76,462) (3,942,153)
Non-controlling interest 293,805 (1,030,477) (795,787)
TOTAL INDIRECT INVESTMENT RESULT (1,863,749) (7,467,155) 15,688,770
Profit/(loss) for the period/year 11,703,478 (397,549) 33,587,948
Non-controlling interest 382,507 1,072,575 988,063
IFRS PROFIT - DIRECT PLUS INDIRECT INVESTMENT RESULT 12,085,985 675,026 34,576,011
Six-month Six-month
period ended period ended
31 December 31 December
Euro 2017 2016
Direct investment result 13,567,227 7,069,606
Company specific adjustments:
Elimination of direct earnings in associate (137,672) -
Net attributable profit on sales of inventory property 643,573 -
Prior period adjustments - 1,372,699
Distributable earnings before effect of shares issued during the period 14,073,128 8,442,305
Weighted average number of shares in issue 520,975,749 372,250,746
Distributable earnings per share (euro cents per share) 2.70 2.27
Distributable earnings before effect of shares issued during the period 14,073,128 8,442,305
Adjustment relating to shares issued during the period 3,050,851 188,987
Distributable earnings (after adjustment for shares issued during the 17,123,979 8,631,292
period)
Closing number of shares in issue 633,915,786 380,583,836
Euro cents
Distributable earnings per share 2.70 2.27
Adjustment from reserves per share 0.88 0.39
Distribution per share 3.58 2.66
EPRA PERFORMANCE MEASURES
The European Public Real Estate Association (EPRA) is an organisation that promotes, develops and represents the
European public real estate sector. EPRA sets out best practice reporting guidelines on a number of financial and
operational performance indicators relevant to the real estate sector. As the business of the group matures, it is intended
to adopt the EPRA performance measures on a comprehensive basis. However, as the business goes through the current
stage of rapid change and growth, not all of the metrics are currently considered to be relevant. Initially, EPRA NAV and
EPRA NAV per share have been computed, which provides an industry standard methodology for the computation of the
net asset value per share of the group.
Reconciliation of IFRS NAV to EPRA NAV
As at As at
31 December 31 December As at
Euro Note 2017 2016 30 June 2017
Equity attributable to owners of the group 865,998,006 428,912,350 582,053,971
Adjustments for:
Fair value of interest rate swaps 1,130,924 2,448,440 2,251,649
Deferred tax 3,005,710 605,304 4,240,319
NCI in respect of the above adjustments (247,180) - (102,479)
EPRA NAV 869,887,460 432,006,094 588,443,460
Fully diluted number of shares 634,171,721 380,583,836 467,366,299
Closing number of shares in use 633,915,786 380,583,836 467,366,299
Effect of share options 26 255,935 - -
EPRA NAV per share (euro cents) 137.17 113.51 125.91
GLOSSARY
BVI British Virgin Islands
CEE Central and Eastern Europe
CGU Cash-generating unit
Company MAS Real Estate Inc.
Development property Property that is being developed in order to create income-producing
property held for the purpose of earning a better yield than by acquiring
standing property
Distributable earnings Earnings attributable to the owners of the company that are available for
distribution. This includes: net rental income, dividends received, finance
income on preference shares, profit on sales of inventory property and the
related taxation and non-controlling interest adjustments. This excludes:
exchange differences, changes in fair value, goodwill impairment, investment/
transaction expenses not capitalised, related taxation and non-controlling
interest adjustments, and deferred taxation. Other adjustments may be made
in order to reflect the underlying earnings of the group. This final number is
adjusted for the dilutionary impact of shares issued during the period.
Distributable earnings per share Distributable earnings before the impact of shares issued during the period
divided by the basic weighted average number of shares in issue.
Distribution per share The distribution per share to be paid to shareholders as determined by the
directors at their discretion. The group's policy is to pay out all distributable
earnings per share on a semi-annual basis, as well as capital or other profits
as the directors may, at their discretion, determine.
EPRA European Public Real Estate Association
EPRA Net Asset Value IFRS net assets adjusted for the dilutive impact of share options, deferred
taxation on property and derivative valuations and the mark-to-market of
effective cash flow hedges and related adjustments.
EPRA NAV per share EPRA Net Asset Value divided by the IFRS diluted number of shares in issue
at the end of the period.
ERV Estimated rental value
Financial investments Investment in listed real estate equities.
FVTPL Fair value through profit and loss
GLA Gross leasable area
Group MAS Real Estate Inc. and its subsidiaries
IASB International Accounting Standards Board
IFRS International Financial Reporting Standards, as issued by the IASB
Income-generating property Property that is currently producing income and held for the purpose of
earning a yield. There may be further asset management opportunities on
these properties, which could further enhance income returns.
Investment property Income-generating property, Development property and Land-Bank
Investment property The value of external debt divided by the fair value of investment property
Loan-to-Value (LTV) and financial investments. This measure ignores cash balances.
IOM Isle of Man
JSE Johannesburg Stock Exchange
Land bank Land plots held for schemes that have not yet commenced and residential
developments.
Land bank and inventory Land plots held for schemes that have not yet
commenced, residential developments and inventory property.
Lease incentives Incentives offered to lessees to enter into a lease, typically in the form of
a rent-free period or cash contribution towards fit-out costs.
LuxSE Luxembourg Stock Exchange
Median daily share volume The median number of shares traded per day during the financial period on
the JSE.
NAV Net asset value
IFRS NAV per share IFRS Net Asset Value divided by the IFRS basic number of shares in issue at
the end of the period. For clarity ths excludes the geared share purchase plan
shares.
Scrip distribution Distributions elected to be received in the form of shares in the Company,
typically paid as a return of capital.
WE Western Europe
WALT Weighted average lease term across the portfolio weighted by passing rent.
WACD Weighted average cost of debt
26 February 2018
Sponsor
Java Capital
Date: 26/02/2018 09:00:00
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