Wrap Text
Interim results for the six months ended 28 February 2019
RDI REIT P.L.C.
("RDI" or the "Company" or the "Group")
(Registration number 010534V)
LSE share code: RDI
JSE share code: RPL
ISIN: IM00BH3JLY32
LEI: 2138006NHZUMMRYQ1745
INTERIM RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2019
STRONG OPERATIONAL METRICS DESPITE HEADWINDS
RDI, the income focused UK-REIT, which has a primary listing on the London Stock Exchange and a secondary listing on the
Johannesburg Stock Exchange, today announces its results for the six months ended 28 February 2019.
Six months ended
28 February 2019 Six months ended Six months ended
Financial highlights (excluding Aviva portfolio) 28 February 2019 28 February 2018
Income statement
Underlying earnings (GBPm) 22.7 26.4 27.4
Underlying earnings per share (p) 5.97 6.94 7.32(1)
Dividend per share (p) 4.00 4.00 6.75(1)
As at As at As at
Balance sheet 28 February 2019 28 February 2019 31 August 2018
EPRA NAV per share (p) 190.2 204.4 213.8
Portfolio valuation (incl. JV share) (GBPm) 1,440.4 1,617.6(2) 1,620.4
Loan-to-value (%) 45.4 48.5 46.2
The table above includes non-IFRS performance measures which are explained and reconciled in the Alternative Performance Measures table
(1) Prior period has been re-presented as a result of the 1 for 5 share consolidation
(2) 1.8 per cent like-for-like valuation decline on a constant currency basis
Strong operational performance and asset management
- Net rental income increased 0.2 per cent on a like-for-like basis or 1.9 per cent when excluding GBP0.7 million of hotel
refurbishment charges
- EPRA occupancy remains high at 96.9 per cent (31 August 2018: 97.1 per cent)
- Long WAULT of 6.5 years to first break and 8.1 years to lease expiry (excluding hotels managed by RBH and the London
serviced office portfolio)
- 100 lease events completed in the period, 3.4 per cent ahead of ERV
- UK retail occupancy and net income remained broadly stable with strong leasing activity across the retail parks portfolio
- Footfall across UK Shopping Centre portfolio increased 1.1 per cent, outperforming national average (down 3.3 per cent)
Financial highlights
- Underlying earnings per share of 6.94 pence (5.2 per cent down on H1 2018: 7.32 pence; 1.2 per cent up on H2 2018: 6.86
pence)
- EPRA diluted NAV per share ("EPRA NAV") declined by 4.4 per cent to 204.4 pence per share (31 August 2018: 213.8 pence
per share)
- Like-for-like portfolio value declined by 2.5 per cent (1.8 per cent on a constant currency basis) impacted by lower values for UK
Shopping Centres and strengthening of Sterling against the Euro
- Excluding UK Retail, valuations broadly stable
- First half dividend of 4.0 pence per share. Full year dividends to be weighted towards second half with expectation to revert to
regular pay-out ratio alongside full year results
Robust demand from operational platforms
- RBH managed hotels continue to trade in line with expectations; occupancy increased marginally to 83.9 per cent and average
room rates and revenue per available room increased by 1.4 per cent and 2.3 per cent respectively
- London serviced offices continue to trade ahead of expectations; occupancy improved to 94.5 per cent, EBITDA per sqft
increased by 0.9 per cent over the period and EBITDA conversion remains high at 63.4 per cent
Focusing capital allocation to sectors backed by occupational demand
- GBP26.3 million acquisition of Southwood Business Park Industrial Estate, Farnborough reflecting a net initial yield of 6.2 per cent
- GBP26.0 million forward funding of two distribution units at Link 9 in Bicester; targeting a yield on cost of 6.5 per cent
- Material reduction to retail exposure targeted through the proposed disposal of four UK shopping centres financed by Aviva
(GBP177.2 million, 11.0 per cent by market value) and the planned German retail portfolio disposal (GBP244.2 million, 15.1 per cent by
market value)
Stronger capital structure to be prioritised
- LTV increased to 48.5 per cent (31 August 2018: 46.2 per cent)
- Pro-forma LTV of 45.4 per cent excluding the Aviva financed UK Shopping Centre portfolio - consensual sales process agreed
- Further reductions in LTV to be delivered through the disposal of the German portfolio, whilst enabling a single geographic focus
- Revised medium-term LTV target of 30 - 40 per cent in line with stronger capital structure
- GBP275.0 million UK debt facility extended for five years on favourable terms
Gavin Tipper, Chairman, commented:
"While this has been a challenging period on a number of fronts, operational performance has remained robust. Excluding the
impact of the Aviva financed UK Shopping Centre portfolio, the core business delivered strong results and is well positioned for the
future. I am confident that the current initiatives to further reduce retail exposure and facilitate a stronger capital structure will deliver
sustained long term shareholder value."
Mike Watters, Chief Executive, commented:
"We have faced some challenging market conditions during the period which have emphasised the defensive nature of our income,
following the progress made against our strategic objectives over the last three years. Strong operational results continue to be
achieved across the majority of our portfolio which highlights the strength of the underlying business and the success of our asset
management efforts.
"Following unprecedented weak sentiment towards the UK retail sector and the resulting negative impact on asset valuations, RDI
has reached an inflexion point that will see us taking decisive action to accelerate delivery against our strategic priorities. These
include a lower leverage capital structure, more focused capital allocation and continued reduction to retail exposure. These
priorities will support a simplified, single geography investment proposition with an enhanced portfolio weighted towards our
preferred sectors of beds, sheds and desks.
"Notwithstanding the near term impact on earnings, we remain confident that delivery against our strategic objectives will best
position RDI for the future whilst enabling us to maximise shareholder returns from a more robust business that offers attractive
income growth opportunities."
Results presentation, webcast and conference call
A meeting for analysts and investors will take place on Thursday, 25 April 2019 at 9.00 a.m. BST (10.00 a.m. SA time) at FTI
Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. This will be accompanied by a live webcast, which can be
accessed via the homepage of the Company's website: www.rdireit.com.
Conference call dial-in numbers and access code
Participant Access Code: 851879
United Kingdom Toll Free: 0800 640 6441
United Kingdom (Local): 020 3936 2999
South Africa Toll Free: 080 017 2952
South Africa (Local): 087 550 8441
All other locations: +44 20 3936 2999
For further information, please contact:
RDI REIT P.L.C.
Mike Watters, Stephen Oakenfull Tel: +44 (0) 20 7811 0100
FTI Consulting
UK Public Relations Adviser
Dido Laurimore, Claire Turvey, Ellie Sweeney Tel: +44 (0) 20 3727 1000
rdireit@fticonsulting.com
Instinctif Partners
SA Public Relations Adviser
Frederic Cornet Tel: +27 (0) 11 447 3030
JSE Sponsor
Java Capital Tel: +27 (0) 11 722 3050
Disclaimer
This release includes statements that are forward-looking in nature. These statements are based on the current expectations of the management of
RDI and are naturally subject to uncertainty and changes in circumstances. Forward-looking statements include statements typically containing
words such as "will", "may", "should", "believe", intends", "expects", "anticipates", "targets", "aims", "plans", "estimates" and words of similar
nature. Forward-looking statements by their nature involve known and unknown risks, uncertainties and other factors which may cause the actual results,
performance or achievements of RDI to be materially different from any future results, performance or achievements expressed or implied by such
forward-looking statements. Many factors can cause actual results and developments to differ materially from those expressed or implied by such
forward-looking statements. These factors include but are not limited to: local and global political and economic conditions; changes in consumer
habits and preferences; foreign exchange rate fluctuations; legal or regulatory developments and changes; the impact of any acquisitions, disposals
or similar transactions; competitive pricing pressures; success of business initiatives; and changes in the level of capital investment. Other unknown
or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements. Any information contained in this
release on the price at which shares or other securities in RDI have been bought or sold in the past, or on the yield on such shares or other
securities, should not be relied upon as a guide to future performance.
CHIEF EXECUTIVE'S REPORT
We have made significant progress against our strategic objectives over the last three and a half years which has resulted in a far
higher quality portfolio. At the same time we have been subject to very challenging market conditions including heightened political
and economic risks and significant uncertainty around the future of retail at many levels, including consumer behaviour, changing
requirements for retailers' delivery channels and their future relationship with physical real estate.
These risks and uncertainties have resulted in difficulties during the last six months; principally in relation to the valuation of the UK
Shopping Centre portfolio and more specifically in addressing the Aviva financing facility. However, outside of these largely retail
issues, strong operational results continue to be achieved which highlights the strength of the underlying business when viewed in
isolation to the negative impact and sentiment associated with a limited number of retail assets.
In order to address long-term shareholder value, we believe many of our existing strategic initiatives including reducing leverage
and retail exposure, need to be delivered more aggressively. Further detail in this regard is set out below.
Earnings and dividend
Operational performance across the portfolio remained strong, including a resilient income performance from the UK Retail
portfolio. EPRA occupancy remains high at 96.9 per cent (31 August 2018: 97.1 per cent) and occupational demand remains
positive across the majority of the portfolio.
Proportionate net rental income totalling GBP50.5 million grew by 0.2 per cent on a like-for-like basis. Underlying earnings decreased
by 3.7 per cent to GBP26.4 million (28 February 2018: GBP27.4 million), in part a reflection of the stronger first half results in 2018 which
were supported by the phased acquisition of the IHL Hotel portfolio. Underlying earnings per share decreased by 5.2 per cent to
6.94 pence per share (28 February 2018: 7.32 pence per share) but were marginally higher when compared to the second half of
the last financial year.
As previously announced, underlying earnings for the period have not been matched by cashflow as a result of the net operating
cashflows from the Aviva financed UK Shopping Centre portfolio being retained within the facility. At period end, GBP11.6 million of
cash, including cash previously injected into the facility, was restricted and retained within the facility. In this context, the Board has
declared a first half dividend of 4.0 pence per share.
It is the Company's intention to continue to meet the UK REIT rules in respect of distributions, therefore, total dividends for the year
can be expected to be weighted towards the second half and reflect a regular full year pay-out ratio of at least 90 per cent of
underlying earnings, excluding earnings attributable to the Aviva financed UK Shopping Centre portfolio.
Balance sheet and financing
EPRA NAV decreased by 4.4 per cent to 204.4 pence per share (31 August 2018: 213.8 pence per share) largely as a result of a
GBP22.3 million (7.7 per cent) valuation decline in the UK Shopping Centre portfolio. We have actively improved the quality of the
overall portfolio by reducing exposure to UK shopping centres to 16.6 per cent (2015: 33.0 per cent) and increasing exposure to
sectors and assets supported by structural change and occupier demand. Outside of UK Retail, representing 28.2 per cent of the
portfolio, valuations were broadly stable on a constant currency basis.
Leverage increased slightly to 48.5 per cent (31 August 2018: 46.2 per cent) as a result of the lower portfolio valuation, but remains
below 50 per cent following the ongoing focus on leverage and liquidity. Leverage excluding the Aviva financed UK Shopping
Centre portfolio and financing facility was 45.4 per cent.
Early refinancing of AUK facility
As previously announced, the early extension of our principal UK loan facility was completed in January. The total facility
commitments of GBP275.0 million includes a GBP137.5 million term loan and a GBP137.5 million revolving credit facility. The facility is
currently drawn to GBP250.0 million with the revolving credit facility providing flexibility in managing the Company's capital and liquidity.
The term of the facility has been extended to January 2024, extending the Group's average debt maturity profile and securing a key
financing facility at attractive rates.
The early refinancing resulted in a non-recurring charge of GBP0.9 million which will be reflected as an increase in finance costs for the
current financial year. The ongoing interest cost of the refinanced facility has increased by approximately 25 basis points.
Aviva shopping centre facility
Four of the Company's UK shopping centres namely Grand Arcade (Wigan), Weston Favell (Northampton), Birchwood (Warrington)
and Byron Place (Seaham), are financed by a long-term fixed rate debt facility with Aviva. The facility is non-recourse to the
Company and had an outstanding principal balance of GBP144.7 million at period end with a fixed rate of 5.5 per cent per annum and a
maturity date in April 2042.
As announced on 8 April 2019, the lender instructed a valuation of the assets post period end which resulted in the loan to value
covenant of 85 per cent being exceeded. A standstill period has subsequently been agreed to 11 October 2019 during which time
Aviva has confirmed that it will not take any action to accelerate its security under the facility agreement (the "Standstill
Agreement"). RDI and Aviva have agreed to progress a consensual sales process or restructuring of the facility during this standstill
period. Notwithstanding the Standstill Agreement, Aviva will retain all of its rights under the facility agreement.
As is customary with long-dated fixed rate debt, material break costs are associated with early repayment and a disposal of one or
all of the assets is not expected to result in any equity being realised from the net disposal proceeds. As previously disclosed, the
Aviva financed UK Shopping Centre portfolio currently contributes approximately GBP6.5 million in net operating cashflows on an
annualised basis and GBP54.1 million in EPRA net assets, or 14.2 pence per share. Until late April when the Standstill Agreement was
finalised, these net operating cashflows continued to be retained in the facility.
A disposal would result in an improvement in the Group's LTV ratio which would reduce from 48.5 per cent to 45.4 per cent and
reduce exposure to UK Retail from 28.2 per cent to 19.3 per cent, by value.
The Board has agreed not to commit further capital to the facility to reduce the loan to value ratio to below the covenant of 85 per
cent. In arriving at the current position, the Board has carefully considered the options available including injecting additional capital
into the facility and potential restructuring options. However, given the ongoing and potentially long-term structural challenges facing
the retail sector, combined with concerns over certain department stores and mid-market fashion brands, a comprehensive
restructuring of the facility including a material reduction in leverage would be necessary to ensure sufficient covenant headroom
going forward. Given the strategic objectives of reducing leverage and retail exposure, utilising capital for new opportunities in our
preferred sectors and maintaining lower leverage is expected to be of greater benefit to long term shareholder value.
Discussions with Aviva have been cooperative with the lender recognising RDI's constructive approach and strong asset
management credentials.
Further details are contained in the Financial Review.
Strategic priorities
Despite near term challenges in the UK Shopping Centre portfolio, our strategic priorities remain unchanged with a focus on
delivering sustainable and growing income returns to our shareholders.
Over the last three and a half years we have made material progress against a set of challenging strategic objectives. Acquisitions
totalling GBP809.0 million have been successfully completed over that period delivering a significantly enhanced portfolio and
crystallising disposal proceeds of GBP452.6 million at an average premium of 10.0 per cent to the prevailing book values. Recent
acquisitions, accounting for over 45 per cent of the current portfolio by value, have delivered strong results improving the long-term
growth prospects of the portfolio. Leverage has been reduced over this period and remains below 50 per cent LTV despite the
recent valuation declines within the UK Shopping Centre portfolio.
Notwithstanding the progress that has been made, the Board is actively progressing options to accelerate the delivery of a lower
leverage capital structure, a more focused allocation of capital and a reduction in exposure to retail assets.
Capital allocation
Our capital allocation strategy will continue to focus on increasing exposure to assets in stronger demographics and sectors
benefiting from structural change. Over the last three and a half years we have successfully reduced overall exposure to retail
assets from 59 per cent in 2015 to 43.2 per cent, in favour of stronger demographics and sectors benefiting from sustained occupier
demand. These include the distribution and industrial sectors, London serviced offices and limited serviced hotels.
Reducing retail exposure
In order to deliver on our strategic priorities, a disposal of the German portfolio is being actively progressed. The assets make up
15.1 per cent of our portfolio and consist of 13 principally retail assets valued at EUR284.8 million (GBP244.2 million) at a relatively low net
initial yield of 4.9 per cent; in part a reflection of the current strength of the German investment market. The portfolio is financed with
debt totalling EUR162.3 million (GBP139.2 million) at a weighted average cost of 2.0 per cent and a gross LTV of 56.6 per cent. A disposal
of the portfolio would support a material reduction in retail exposure and leverage, with the additional benefit of streamlining the
portfolio and corporate structure.
The potential disposal of the German retail portfolio and the Aviva financed UK Shopping Centre portfolio are aimed at accelerating
a reduction in retail exposure and leverage. The combined effect of these potential disposals, and certain mature assets, would
reduce retail exposure by approximately 20 per cent on a pro-forma basis resulting in retail assets comprising circa 22 per cent of
the remaining portfolio prior to any reinvestment assumptions. The remaining retail assets are largely well-located retail parks with a
proven track record of strong occupational demand and are currently operating at an occupancy rate of 96.5 per cent.
Lower leverage capital structure
The benefit of a lower leverage capital structure has become increasingly important and, in the Board's opinion, more highly valued
by investors. We expect the near-term impact of disposals and lower leverage on income returns to be outweighed in the longer
term by greater financial flexibility, enhanced access to capital and more consistent shareholder returns across real estate and
economic cycles.
Leverage of between 30 - 40 per cent LTV will be targeted over the medium-term with an immediate focus on the Aviva facility,
which would reduce the existing Group LTV to 45.4 per cent. The disposal of the EUR284.8 million (GBP244.2 million) German portfolio
and approximately GBP88.2 million of mature assets would support a further material reduction in leverage.
Maintaining operational efficiency
The existing EPRA cost ratio target of below 15 per cent will be retained. A disposal of the German portfolio would result in a
reduction in overhead and administration costs of approximately GBP1.4 million (approximately ten per cent of the gross rental income
from the German portfolio) representing a proportionately higher ratio than the current Group average of seven per cent. A disposal
of the Aviva financed UK Shopping Centre portfolio would also provide scope for a further reduction in overheads and
administration costs.
2019 Annual General Meeting ("AGM") update statement
As required by Provision 4 of the 2018 UK Corporate Governance Code, the Company wishes to provide its update statement
relating to the four resolutions which received substantial votes against.
Resolutions 15 and 16, relating to the Directors authority to issue shares. Although the authority levels were below standard UK
recommendations, they exceeded South African guidelines. This position is not uncommon, with most of our dual listed peers
receiving similar votes against. The Company will liaise with shareholders before the next AGM, to agree an authority level that may
be more acceptable to our South African shareholder base.
Resolutions 10 and 12, concerning the re-appointment of two directors. The Company has engaged with the shareholders to
understand their concerns.
Pursuant to Provision 4 of the Code, the Company will include a final statement in its Annual Report and in the AGM notice, of the
actions taken or changes to the resolutions proposed.
Share consolidation
On 11 February 2019 every five ordinary shares were consolidated into one ordinary share of 40 pence each. The consolidation
resulted in 380,089,923 new consolidated ordinary shares being in issue which trade under the new International Securities
Identification Number code (ISIN) of IM00BH3JLY32. Historic per share metrics throughout this statement have been adjusted to
reflect the consolidation in order that the current per share metrics for this period are comparable to historic figures.
Board Appointment
Following Bernie Nackan's retirement from the Board in January 2019, Pieter Prinsloo was appointed as a non-executive director of
the Company, with effect from 24 April 2019 and represents Redefine Properties Limited, RDI's largest shareholder, on the Board,
alongside Marc Wainer.
Pieter has over 30 years of experience in property development, management and finance. In the last five years he has held the
post of CEO of Hyprop Investments Limited, a South African property REIT and this year accepted the position of CEO of Redefine
Europe B.V., a subsidiary of Redefine Properties Limited.
Growing our business sustainably
Embedded within our core business strategy and operations is our firm commitment to measuring and benchmarking our
environmental, social and governance performance via our annual response to the Global Real Estate Sustainability Benchmark
("GRESB") Real Estate Assessment. We continue to voluntarily collect and report data in accordance with the latest EPRA
Sustainability Best Practices Recommendations ("SBPR") and in September 2018 we were awarded a Bronze Level Certificate for
compliance with EPRA Sustainability Best Practices Recommendations for our 2017 CSR Annual Report. Our established building
certification strategy promotes independent green ratings for our assets. We were pleased to be awarded a BREEAM In-Use rating
of Very Good for the Holiday Inn Express Southwark and we are planning for further certifications across other asset classes this
year. We have committed to introducing an Environmental Management System certified to ISO 14001 standard at St George's
Shopping Centre, Harrow, as we continue to adopt a responsible approach to managing our environmental risks. Good progress
has been made following completion of asset level energy, water and waste management audits which have identified various
opportunities for progression toward our 25 per cent energy reduction target set last year.
Outlook
Notwithstanding the challenges during this interim period, we are confident about the future of our business and our ability to deliver
on our strategic priorities of a lower leverage capital structure, reduced retail exposure and a simplified investment proposition. Our
strategy of superior, sustainable and growing income remains unchanged but with a clearer focus on our preferred sectors of beds,
sheds and desks.
Mike Watters
Chief Executive Officer
25 April 2019
OPERATING REVIEW
Portfolio overview
The portfolio has strong income characteristics with clear visibility of the medium-term income profile and growth opportunities.
Key portfolio characteristics include:
- a weighted average lease length, excluding serviced space, of 6.5 years to the first potential lease break and 8.1 years to
expiry;
- 26.7 per cent of gross rental income subject to inflation-linked or fixed increases;
- rental growth potential with a reversionary yield of 6.2 per cent, 50 basis points higher than the current portfolio net initial yield;
- high and stable occupancy demonstrating robust occupier demand;
- RBH managed hotels and London serviced offices (excluding leases to gym operators) account for 30.2 per cent of the
portfolio by annualised gross rental income and deliver robust income growth supported by strong occupier demand; and
- over 500 tenants with no single tenant accounting for more than 3.2 per cent of gross rental income.
Annualised EPRA EPRA
Market gross rental EPRA topped Reversionary occupancy
Portfolio summary value income ERV NIY up yield yield WAULT by ERV Indexed
28 February 2019 GBPm GBPm(1) GBPm % % % yrs(2) %(2) %
UK Commercial 553.0 31.6 33.9 5.1 5.2 5.6 4.6 96.9 15.4
UK Retail 455.5 39.2 34.6 6.8 7.3 7.0 7.3 95.9 22.1
UK Hotels 364.9 25.9 26.1 5.7 5.7 6.4 17.7 100.0 9.3
Total UK 1,373.4 96.7 94.6 5.8 6.0 6.3 6.8 96.5 16.5
Europe 244.2 14.5 14.2 4.9 5.0 5.4 5.1 98.9 94.9
Total 1,617.6 111.2 108.8 5.7 5.9 6.2 6.5 96.9 26.7
Controlled assets 1,593.0 109.4 107.0 5.7 5.9 6.2 6.5 96.9 26.3
Held in JVs
(proportionate
share) 24.6 1.8 1.8 6.5 6.5 6.8 5.0 99.9 51.8
(1) Annualised gross rental income for the London serviced office portfolio included as EBITDA net of management fees.
(2) Excluding the RBH managed hotels and London serviced office portfolios. Relevant operational metrics disclosed separately.
Capital allocation and portfolio strategy
To support the strategic objectives of a lower leverage capital structure and a continued reduction in retail exposure, a number of
disposals are being actively considered or progressed. The targeted disposals of the German Retail portfolio and the Aviva
financed UK Shopping Centre portfolio are aimed at accelerating a reduction in retail and leverage. Marketing of the German
portfolio is well progressed and an agreement has been reached with Aviva to commence a consensual sales process. In addition,
a number of mature assets, principally secondary retail and regional office assets, are being considered for sale subject to various
ongoing asset management initiatives. A successful disposal of these assets has the potential to reduce overall retail exposure from
43 per cent to approximately 22 per cent. The remaining retail exposure, consisting predominantly of well-located and performing
retail parks, would have an approximate 62 per cent weighting by value to Greater London.
The potential repositioning of the portfolio would provide a materially higher residual exposure to growth areas from within the
existing portfolio including strong operational platforms across hotels and serviced offices, increased exposure to the distribution
and industrial portfolio and a significant re-weighting of the overall portfolio to Greater London and the South East with
approximately 79 per cent of the pro-forma portfolio located in these stronger economic locations.
Annualised EPRA Weighted EPRA
Market gross rental topped Reversionary average voids
Portfolio summary value income ERV EPRA up yield yield lease (by ERV) Indexed
28 February 2019(3) % GBPm GBPm(1) GBPm NIY % % length(2) %(2) %
UK Hotels 23.0 364.9 25.9 26.1 5.7 5.7 6.4 17.7 100.0 9.3
UK Offices 17.0 277.3 15.9 16.8 5.1 5.2 5.5 3.2 99.5 4.2
UK Industrial &
distribution 13.0 216.5 11.3 12.3 4.9 4.9 5.3 5.3 98.5 28.5
UK Retail Parks &
Other 15.0 249.3 17.5 16.3 5.6 6.3 6.1 6.0 97.5 12.2
68.0 1,108.0 70.6 71.5 5.4 5.5 5.9 6.2 98.3 12.0
Identified for disposal
Shopping centres -
Aviva 11.0 177.2 18.1 14.8 8.0 8.3 7.6 8.7 94.5 36.1
Germany 15.0 244.2 14.5 14.2 4.9 5.0 5.4 5.1 98.9 94.9
Mature 6.0 88.2 8.0 8.3 7.3 7.6 8.7 5.5 91.6 12.1
Total 100.0 1,617.6 111.2 108.8 5.7 5.9 6.2 6.5 96.9 26.7
(1) Annualised gross rental income for the London serviced office portfolio included as EBITDA net of management fees and FF&E.
(2) Excluding the RBH managed hotels and London serviced office portfolios. Relevant operational metrics disclosed separately.
(3) Assuming no reinvestment.
Valuation overview
The like-for-like portfolio value decreased by GBP39.0 million or 2.5 per cent net of capital expenditure; impacted by further declines in
UK Shopping Centre valuations and a 4.6 per cent decline in the Euro relative to Sterling. On a local currency basis, like-for-like
valuations decreased by 1.8 per cent. The portfolio valuation reflects a 5.9 per cent EPRA topped up net initial yield and a 6.2 per
cent reversionary yield.
UK valuation movements excluding shopping centres were broadly stable and resulted in a modest 0.6 per cent reduction in like-
for-like values. The UK Commercial portfolio delivered modest growth increasing GBP1.2 million or 0.2 per cent, largely as a result of
the strength of the Industrial and Distribution portfolio which increased 1.2 per cent or GBP2.2 million. Valuations for UK retail parks
were down 2.5 per cent despite strong letting activity during the period. UK Hotels decreased by GBP2.8 million or 0.7 per cent.
UK Shopping Centres (16.6 per cent of the portfolio by market value) declined by GBP22.3 million or 7.7 per cent despite occupancy
being maintained at 95.9 per cent (31 August 2018: 96.4 per cent) and triple net annualised rental income increasing 2.8 per cent
since 31 August 2018. The valuation decline was driven by a 60 basis point outward shift in the topped up net initial yield reflecting
an exceptionally weak investment market.
In Germany, the like-for-like portfolio value was largely unchanged in local currency terms but declined by GBP10.5 million or 4.7 per
cent in Sterling terms.
Local EPRA
Valuation Market Market currency topped up Reversionary
Overview value value Gain/(loss) gain/(loss) NIY yield
28 February 2019 % GBPm GBPm % % %
London serviced offices 10.1 163.4 - - 5.8 5.8
London & regional offices 10.7 173.1 (1.0) (0.6) 5.0 5.9
Distribution, industrial & automotive 11.2 180.6 2.2 1.2 4.9 5.3
UK Commercial 32.0 517.1 1.2 0.2 5.2 5.7
Shopping centres 16.6 269.1 (22.3) (7.7) 7.9 7.6
Retail parks & other 11.5 186.4 (4.6) (2.5) 6.4 6.1
UK Retail 28.1 455.5 (26.9) (5.6) 7.3 7.0
Managed hotels 19.6 316.5 (3.6) (1.1) 5.9 6.6
Travelodge portfolio 3.0 48.4 0.8 1.9 4.7 5.0
UK Hotels 22.6 364.9 (2.8) (0.7) 5.7 6.4
Total UK 82.7 1,337.5 (28.5) (2.1) 6.1 6.3
Shopping centres 9.3 150.7 (8.0) (0.7) 4.7 5.1
Retail parks & other 3.8 62.2 (2.5) 0.6 5.8 6.5
Europe 13.1 212.9 (10.5) (0.3) 5.0 5.4
Total (like-for-like) 95.8 1,550.4 (39.0) (1.8) 5.9 6.2
Acquisitions 2.3 35.9
Development 1.9 31.3
Total property portfolio market value 100.0 1,617.6
Leasing activity
It has been an active period with 100 leasing events being concluded totalling GBP6.8 million, a 31.2 per cent (GBP1.6 million) increase in
annualised gross rental income, (including 19 previously vacant units), and a 3.4 per cent (GBP0.2 million) increase above ERV.
Proactive asset management ensured that the portfolio occupancy remained high and stable at 96.9 per cent (31 August 2018: 97.1
per cent).
Annualised gross Annualised gross
rental income rental income
Lease events Number of lease Lettable area 28 February 2019 31 August 2018 Relative to ERV
28 February 2019 events sqft GBPm GBPm GBPm
UK Commercial 8 191,116 2.2 +0.6 +0.4
UK Retail 36 140,961 2.6 +0.8 -0.2
Europe 56 133,774 2.0 +0.2 -
Total 100 465,851 6.8 +1.6 +0.2
- 41 rent reviews were completed in the period resulting in total rent of GBP4.0 million, a 9.6 per cent (GBP0.3 million) increase above
the previous passing rent and 5.1 per cent (GBP0.2 million) ahead of ERV;
- 27 leases amounting to 50,727 sqft were renewed on break or expiry accounting for a total rent of GBP1.5 million, 15.7 per cent
(GBP0.2 million) ahead of passing rent and 12.6 per cent (GBP0.2 million) ahead of ERV; and
- 32 new leases were signed, including new lettings of vacant space totalling 46,217 sqft across 19 units, generating an
additional GBP1.3 million in gross annualised rent.
Acquisitions
The Company increased its exposure to the industrial and distribution sector through the GBP26.0 million forward funding of a
development of two modern distribution units in Bicester and the acquisition of a multi-let industrial estate in Farnborough for
GBP26.3 million (excluding costs). Both investments are in line with the strategy of increasing exposure to assets underpinned by
strong demographics and occupier demand supported by structural change.
Southwood Business Park, Farnborough
Southwood Business Park is within an established commercial area in Farnborough, Hampshire and conveniently located within the
M3 corridor, approximately 41 miles from Central London. The nine-acre estate consists of 18 warehouse units totalling 154,849
sqft (14,385 sqm) with a low site cover of 37 per cent. On acquisition in September 2018 the asset was 91.9 per cent occupied with
a weighted average lease length of over five years to expiry. There is limited available space within competing industrial units in the
surrounding area with demand being driven by research & development occupiers linked to the aerospace and technology sectors.
The asset currently produces annualised net income of GBP1.8 million with average rents of GBP13.0 per sqft (GBP12.9 per sqft on
acquisition). The acquisition provides an attractive net initial yield of 6.2 per cent and opportunities to support medium to long term
income growth through identified asset management initiatives.
Bicester forward funding
Approximately 13.5 acres of land was acquired in Bicester as part of a GBP26.0 million forward funding opportunity with Albion Land to
develop two high quality distribution units of 120,000 sqft and 168,000 sqft respectively. The site is part of the successful Link 9
industrial and distribution development with good access to the M40.
Unit 1a of 120,000 sqft was completed in April 2019 and unit 1b is anticipated to be completed in late 2019. The supply of modern
distribution units along this section of the M40 corridor remains limited and current enquiries demonstrate healthy levels of interest.
The transaction provides an opportunity to increase exposure to well-located modern distribution units and is anticipated to deliver a
6.5 per cent yield on total cost once fully let.
Development and capital expenditure
A number of successful developments and capital projects have been completed or have reached key milestones. Development
activity is typically income-led and focused on redeveloping existing assets to provide space that meets modern occupier
requirements. Total committed and outstanding capital expenditure at the period end was GBP22.7 million, including outstanding
commitments in respect of the Bicester forward funding agreement.
Outstanding Total Yield
capital capital on
expenditure expenditure cost
Significant projects Description Completion GBPm GBPm %
City Arcaden, Ingolstadt Phase 2 - office and residential development September 2019 2.5 2.8 8.5(1)
UK Retail Park expansions Drive through pods October 2019 1.0 2.0 12.7
(1) Yield reflects overall scheme yield
City Arcaden, Ingolstadt
The completion of the 7,000 sqm (75,000 sqft) Primark unit in March 2018 has significantly de-risked the development. Of the total
anticipated rent roll of EUR2.4 million, 87 per cent has been secured with the works to complete the remaining 3,000 sqm (22,000 sqft)
of offices and residential units anticipated to complete in 2019.
UK retail park expansions
The construction of a new Costa 'drive-thru' unit at The Arches Retail Park, Watford is expected to complete in October 2019. The
development will deliver additional rental income of GBP0.2 million reflecting a rental of over GBP85 per sqft and a highly accretive 15.0
per cent yield on cost. A further Costa 'drive-thru' unit at Milton Link, Edinburgh has received planning permission with construction
expected to complete in May 2019 and is expected to yield approximately 8.5 per cent on cost.
Charing Cross Road, London
An application for planning permission has been submitted for an extension to the Charing Cross Road office in London in order to
increase the existing lettable area of 40,000 sqft by approximately 50 per cent. The property remains fully occupied. Timing of any
potential development will be subject to market conditions, but could commence in 2021 subject to planning.
Sustainability
Two significant awards have been received during the period as a result of initiatives commenced in 2017. The Holiday Inn
Express, Southwark received a Very Good BREEAM In-Use ("BIU") rating, the first BIU operational green building certificate since
RDI's long-term objective was set to improve portfolio certification in 2017, and the Company's CSR Annual Report for the 2017
financial year was awarded a Bronze Certificate for achieving compliance with EPRA Sustainability Best Practices
Recommendations. The Company has improved disclosure of its environmental performance significantly; aligning to the EPRA
Best Practice Reporting (3rd version) in the Company's 2018 and 2019 financial years, including social and governance measures
in addition to environmental reporting.
Progress on the CSR objective to undertake third party verification of our EPRA environmental performance measures (utilities data
for managed assets) is underway. Third party assurance of our sustainability data is of growing importance to the Company, its
investors and the broader stakeholder community. To underpin this exercise, closer attention has been given to enabling the robust
collation of energy, water and waste data. This has been combined with social and governance measures to align with EPRA and to
support our annual response to the GRESB Real Estate assessment. The Group achieved an 11 per cent year on year
improvement in its GRESB score.
Progress to date on the CSR objectives has been focused on meeting corporate energy targets including a commitment to reduce
energy usage by 25 per cent by 2030. The Real Estate Environmental Benchmark (REEB) is a publicly available operational
benchmark of environmental performance for commercial property in the UK. Good progress has been made following the
completion of individual asset audits in order to ensure the asset managers and CSR Committee are aware of opportunities to
reduce energy usage. REEB measures are one of the only benchmarks based on the performance of buildings 'in-use' are
increasingly becoming the industry standard used by investors, fund managers and property owners to compare the performance of
their assets with similar assets from portfolios across the UK.
UK Commercial (34.2 per cent of portfolio by market value)
The UK Commercial portfolio has been significantly repositioned over the last three years. The office portfolio, including the recently
acquired serviced office portfolio, is now 82.4 per cent weighted to Greater London. The portfolio has positive exposure to locations
benefiting from Crossrail, the regeneration of London's Southbank and the positive structural change taking place as a result of
occupiers' requirements for highly serviced and flexible office space. Exposure to the distribution and industrial sector has been
increased at attractive prices and through the forward funding of well located, modern distribution units in areas of limited supply.
Annualised EPRA EPRA
Market gross rental EPRA topped Reversionary occupancy
UK Commercial value income ERV NIY up yield yield WAULT by ERV Indexed
28 February 2019 GBPm GBPm(1) GBPm % % % yrs(2) %(2) %
Offices - Serviced 163.4 10.6 10.7 5.8 5.8 5.8 n/a n/a -
Offices - Greater
London 113.9 5.3 6.1 4.1 4.2 4.9 3.2 99.5 12.8
Offices - Regions 59.2 4.4 4.8 6.4 6.5 7.7 4.6 89.6 22.0
UK Offices 336.5 20.3 21.6 5.3 5.4 5.9 3.8 95.1 8.1
Distribution & Industrial 172.8 8.4 10.0 4.5 4.5 5.4 3.4 98.2 3.6
Automotive 43.7 2.9 2.3 6.3 6.3 4.9 10.9 100.0 100.0
UK Commercial 553.0 31.6 33.9 5.1 5.2 5.6 4.6 96.9 15.4
(1) Annualised gross rental income for the London serviced office portfolio included as EBITDA net of management fees.
(2) Excluding London serviced office portfolio. Relevant operational metrics disclosed separately.
London Serviced Offices ("LSO"; 10.1 per cent of portfolio by value)
Demand for serviced office space continues to show strong growth in London. Demand for flexible, highly serviced space is being
driven by multiple factors including the adoption of technology and its impact on flexible working arrangements, the strategic
importance of real estate to large corporates in attracting and retaining talent and a general trend towards flexible lease
arrangements that offer both value and service to clients. This is expected to represent a permanent structural change in the way in
which offices are occupied.
The London serviced office portfolio has performed strongly despite a marked increase in supply of flexible office space in London.
This is a function of the assets proximity to transport supported by a high quality and professional service for customers at mid-
market desk rates. Unlike many competitors operating leasehold models, ownership of the assets allows direct benefit from and
control over asset management initiatives and the cost base resulting in higher and more sustainable profit margins. The portfolio is
highly cash generative with EBITDA as a percentage of total revenue at 63.4 per cent.
RDI's strategic operating partner Office Space in Town ('OSIT') prioritises client retention over short term profitability. Density is on
average 80 sqft per available desk compared to certain competitors at approximately 50 sqft per desk. The design led offices
provide high levels of amenity space, natural light, good sound insulation and industry leading IT.
Since acquisition in January 2018, the portfolio has maintained a high occupancy rate. Occupancy currently stands at 94.5 per cent
(31 August 2018: 92.2 per cent) and total revenue per available desk has increased to GBP826, 0.9 per cent higher than the position at
31 August 2018. The average length of stay has increased to 30 months demonstrating the resilience of the income stream. Net
service income representing approximately 25 per cent of EBITDA has delivered good growth largely as a result of improved
meeting room occupancy and margin improvements from catering and cafe facilities. A number of operational improvements and
marketing initiatives have also started to deliver measurable improvements across sales and marketing channels. The quality of the
OSIT service is reflected in consistent five star customer ratings on Google.
The market value of the London serviced office portfolio held steady at GBP163.4 million.
London serviced office portfolio
Operational metrics 28 February 2019 31 August 2018 At acquisition
Total EBITDA per sqft (GBP) 69.0 68.3 68.1
EBITDA conversion from total revenue (%) 63.4 63.4 63.4
Average total revenue per available desk (GBP) 826.2 819.1 815.2
Average monthly desk rate - license fee only (GBP) 685 685 695
Desk occupancy (%) 94.5 92.2 93.8
Average weighted stay (months) (1) 30 29(1) 28(1)
(1) Excluding St. Dunstan's which opened in 2015.
Greater London and regional offices (10.7 per cent of portfolio by value)
Outside of London serviced offices, the portfolio is well positioned to capture growth from locations benefiting from major
regeneration and capital investment into infrastructure and transport projects. Further progress has been made on planning and
development options at Charing Cross Road and strong rent reviews have been captured at both Newington Causeway, Southwark
and Canbury Business Park, Kingston.
The portfolio decreased in value by 0.6 per cent on a like-for-like basis with a 10 basis point adverse shift in the topped up net initial
yield, which was partly offset by a 1.9 per cent increase in ERVs.
Key asset management initiatives and leasing activity completed during the period:
- A new lease was completed at Newington Causeway, Southwark on the 5,950 sqft third floor generating GBP0.2 million of
annualised gross rental income from a previously vacant unit; and
- An application for planning permission has been submitted for an extension to the Charing Cross Road office in London in
order to increase the existing lettable area of 40,000 sqft by approximately 50 per cent. The property remains fully occupied.
Distribution, industrial and automotive (13.4 per cent of portfolio by value)
The industrial and distribution sector continues to see strong structural support as retailers adjust their business models to fewer
stores and enhanced distribution networks. Rental growth prospects in the sector are driving strong investment demand with the
weight of capital targeting the sector pushing yields lower. Despite strong occupational demand, some caution is required around
pricing of new investments given the competitive nature of the investment market. In light of this, RDI has sought to increase
exposure to the sector through forward funding arrangements or acquisitions providing higher yields.
The distribution portfolio continued to produce capital growth through a combination of rental uplifts, reversionary potential and
tightening investment yields. The portfolio increased in value by 1.2 per cent on a like-for-like basis.
Key asset management initiatives and leasing activity completed during the period:
- Express Park in Bridgwater - a rent review was completed on a 133,651 sqft unit delivering GBP0.9 million of gross annualised
rent; 13.6 per cent ahead of previous passing and 8.0 per cent above ERV;
- BP petrol filling station, Egerton Park - a rent review was completed with an agreed rent of GBP0.2 million, a 13.1 per cent
increase on passing rent and 2.1 per cent lower than ERV; and
- Further, rent reviews across the distribution and industrial portfolio are progressing in line with expectations. Post period end a
rent review was concluded at Camino Park, Crawley generating GBP2.5 million gross annualised rent (+GBP0.9 million or +55.4 per
cent on previous passing rent). A further GBP0.4 million of rental income is subject to review at Camino Park, Crawley and is
anticipated to conclude in 2019 and achieve an average increase of over 60 per cent.
UK Retail (28.1 per cent of portfolio by market value)
General investor sentiment towards the sector remains weak, influenced by the ongoing themes of structural change, the impact of
online retailing, slowing retail sales and weaker consumer confidence. As a result, there is continued pressure on certain retailers to
rationalise their physical store portfolios to fit the new retail landscape.
Annualised EPRA EPRA
Market gross rental EPRA topped Reversionary occupancy
UK Retail value income ERV NIY up yield yield WAULT by ERV Indexed
28 February 2019 GBPm GBPm GBPm % % % yrs % %
Shopping centres - Aviva 177.2 18.1 14.8 8.0 8.3 7.6 8.7 94.5 36.1
Shopping centres - Other 91.9 8.2 7.6 7.1 7.3 7.5 4.5 98.6 9.3
Shopping centres 269.1 26.3 22.4 7.7 7.9 7.6 7.4 95.9 27.7
Retail parks 181.6 12.3 11.8 5.5 6.3 6.1 7.4 96.5 11.1
Other retail 4.8 0.6 0.4 6.4 9.8 8.4 3.6 79.7 -
UK Retail 455.5 39.2 34.6 6.8 7.3 7.0 7.3 95.9 22.1
Shopping centres (16.6 per cent of portfolio by value)
The majority of the UK Shopping Centre exposure outside Greater London is focused on food, discount and convenience retailing
to local communities. This part of the market continues to be more resilient in terms of consumer spend, footfall and the impact of
online retailing. This is evidenced by the ongoing high occupancy of 95.9 per cent (31 August 2018: 96.4 per cent) and a stable
income position, with annualised gross rental income marginally down (0.2 per cent) compared to the position at 31 August 2018.
Net rental income on an annualised basis improved by 2.8 per cent, supported by operating cost efficiencies across the portfolio
and contracted rent free periods coming to an end. Footfall across the UK Shopping Centre portfolio increased by 1.1 per cent,
significantly outperforming the national average over the same period which was down by 3.3 per cent (source: Springboard).
Despite maintaining net income and occupancy levels, the market value of the shopping centre portfolio declined 7.7 per cent on a
like-for-like basis due to a 60 basis point outward yield shift in the topped up net initial yield, reflecting continued weak investor
sentiment and concerns over certain retailers including department stores and certain mid-market fashion brands.
Key asset management initiatives and leasing events completed during the period:
- 8 rent reviews were agreed providing total rent of GBP1.0 million, 2.1 per cent above the passing rent however 4.0 per cent lower
than ERV;
- 26 new lettings or renewals were completed in the period providing total rent of GBP0.9 million, 13.4 per cent (GBP0.2 million) below
ERV. The underperformance against ERV was largely a result of one lease agreed at Grand Arcade, Wigan which does not
reflect potential income from an agreed top-up rent above certain levels of turnover;
- Of the 26 new lettings and renewals, 10 new leases were signed on 15,629 sqft of previously vacant space amounting to
GBP0.4 million of gross annualised rental income, which more than offset the gross annualised rent on 9 units (59,251 sqft)
vacated during the period (loss of GBP0.2 million); and
- In-house commercialisation activities, many of which have a strong community and CSR foundation, resulted in GBP0.6m of rent
received for the six months ended 28 February 2019, an increase of 2.8 per cent compared to the prior year. Demand remains
robust from both national and local operators with three new long-term leases, 23 lease renewals and 239 short-term licences
signed across the portfolio during the period.
Retail parks and other retail (11.5 per cent of portfolio by value)
RDI remains confident in the longer term demand for its well located retail parks, with over 80 per cent of its portfolio by value in
London, Edinburgh and the Southern part of the UK underpinned by strong demographics. Occupancy in retail parks increased to
96.2 per cent (31 August 2018: 94.7 per cent). These assets present further high yielding development opportunities to fulfil strong
demand from 'drive-thru' occupiers.
Despite successful letting activity during the period, the market value of the retail park portfolio decreased 2.5 per cent on a like-for-
like basis. This was largely due to a 40 basis point outward shift in the topped up net initial yield and a modest 0.6 per cent decline
in ERVs.
Key asset management initiatives and leasing events completed during the period:
- At Priory Retail Park in Merton, South West London two units, that were previously subject to a Company Voluntary
Arrangement ("CVA"), were signed to Aldi and The Gym Group on long leases of 20 years and 15 years respectively. These
new lettings have been agreed on more attractive terms and higher rents compared to the pre-CVA terms, with no void period
in the interim. Priory Retail Park remains fully occupied and the new tenants complement the current mix of bulky goods
retailers and F&B operators, continuing to drive footfall at this well-located asset;
- Bargain Buys, a new concept from the team behind Poundstretcher, has increased its unit size at Banbury Cross Retail Park in
Oxfordshire, signing a seven year term on the 7,477 sqft adjoining unit increasing its store to 17,533 sqft; and
- At Queens Drive Retail Park in Kilmarnock, the gross annualised rent on a 10,000 sqft unit, which was previously subject to a
CVA, has been reinstated to the previous passing rent of GBP0.2 million, resulting in a 33 per cent increase on the previously
reported figure.
UK Hotels (22.6 per cent of portfolio by market value)
The UK hotel market has experienced a sustained period of growth supported by a rise in both business and leisure travel. PwC
has forecast growth in the average rate per available room ("RevPar") for 2019 in London and the Regions of 0.3 per cent and 1.2
per cent respectively, driven by expectations of modest reductions in occupancy but continued nominal room rate growth. This
lower growth outlook for London hotels reflects a forecast 2.8 per cent net increase in the number of rooms in 2019 following the
strong increases in supply in previous years. Despite pressure from rising labour and operating costs, continued growth in London
RevPars highlights the City's resilience as a leading global hotel market.
Following the IHL acquisition in 2018, the UK Hotels portfolio is weighted close to 90 per cent by value to Greater London,
Edinburgh and Gatwick airport with 10.9 per cent of the total net rental income subject to uncapped CPI escalations, principally from
the Travelodge portfolio. The RBH managed hotel portfolio, including 13 limited service hotels, has seen positive movements on all
key operational metrics. This was largely driven by the seven London limited service hotels and the Hampton by Hilton hotel at
Gatwick Airport which continues to produce trading results ahead of management expectations. Following a very strong 2018, the
Edinburgh hotel market has slowed slightly and occupancy in the three smaller regional hotels has been affected by weaker trading
conditions.
RBH managed hotel portfolio (excluding IHL)
Operational metrics 28 February 2019 31 August 2018 28 February 2018
Weighted average room rate (GBP) 95.5 96.6 94.2
Weighted average revenue per available room (RevPAR) (GBP) 81.3 82.4 79.5
Weighted average occupancy (%) 83.9 84.8 83.3
Like-for-like net income during the period decreased by GBP0.7 million, or 6.2 per cent, following additional refurbishment costs
allocated to maintaining the quality of these assets. Underlying gross rental income, excluding the increased investment, was
consistent with the prior period. The Travelodge portfolio is expected to show continued income growth over the next few years
through upward only inflation linked rent reviews.
The portfolio was valued at GBP364.9 million, a like-for-like decrease of 0.7 per cent.
Annualised EPRA EPRA
Market gross rental EPRA topped Reversionary occupancy
UK Hotels value income ERV NIY up yield yield WAULT by ERV Indexed
28 February 2019 GBPm GBPm GBPm % % % yrs(1) %(1) %
Greater London 186.7 12.3 12.3 5.5 5.5 6.2 n/a n/a -
Regional 129.9 11.2 11.2 6.4 6.4 7.3 n/a n/a 0.9
RBH managed portfolio 316.6 23.5 23.5 5.9 5.9 6.6 n/a n/a 0.4
Travelodge(2) 48.3 2.4 2.6 4.7 4.7 5.0 17.7 100.0 95.3
UK Hotels 364.9 25.9 26.1 5.7 5.7 6.4 17.7 100.0 9.3
(1) Excluding RBH managed hotels portfolio. Relevant operational metrics disclosed separately.
(2) Three of the five hotels let to Travelodge carry landlord lease extension options of eight years or more.
Strategic operational partner - RBH
Operating performance from the managed portfolio is supported by the Company's strategic partnership with RBH (formerly
RedefineBDL). RBH has established itself as the leading independent hotel operator in the UK. Alignment of interests is ensured
through RDI's ownership of a 25.3 per cent stake in RBH.
The holding in RBH contributed GBP0.5 million to underlying earnings during the six months.
Europe (15.1 per cent of portfolio by market value)
The momentum in the German investment market has remained strong driven largely by domestic investors. However, investors
are becoming increasingly discerning with a focus on rental levels, particularly in the retail sector. The portfolio is heavily weighted
to Berlin and Hamburg, two of Europe's strongest investment destinations. The centres in these cities are integrally linked into the
public transport network providing high levels of footfall.
The portfolio decreased in value by 0.1 per cent in local currency and on a like-for-like basis due to a 10 basis point adverse shift in
topped up net initial yields whilst local currency ERVs were marginally down.
Annualised EPRA EPRA
Market gross rental EPRA topped Reversionary occupancy
Europe value income ERV NIY up yield yield WAULT by ERV Indexed
28 February 2019 GBPm GBPm GBPm % % % yrs % %
German shopping
centres 182.0 10.2 9.9 4.6 4.7 5.1 5.1 99.2 95.0
German supermarkets
and retail parks 62.2 4.3 4.3 5.8 5.8 6.5 5.1 98.3 94.7
Europe 244.2 14.5 14.2 4.9 5.0 5.4 5.1 98.9 94.9
Occupancy across the German portfolio remains high at 98.9 per cent (31 August 2018: 98.0 per cent) with annualised gross rental
income 1.7 per cent higher on a like-for-like basis and in constant currency terms; largely due to a new retail letting to Action at
Bremen on an 8,740 sqft unit delivering GBP0.1 million of gross annualised rent. Rental income from the portfolio benefits from high
levels of indexation, with 94.9 per cent of annualised gross rental income subject to various forms of inflation linked rent reviews.
Following a period of exceptionally low inflation, the benefit of index linked rents is expected to increase with consumer price
inflation expected to reach 1.3 per cent in March 2019.
56 lease events were completed during the period, totalling GBP2.0 million of gross annualised rental income at an average premium
of 13.7 per cent to the previous passing rent and 2.1 per cent above ERV. This included:
- 27 rent reviews providing total rent of GBP1.3 million, 6.4 per cent (GBP0.1 million) above the passing rent although 0.6 per cent
below ERV. The largest rent review included a fixed rental uplift on the 40,273 sqft MediaMarkt lease at Hamburg, up 7.3
percent on the previous passing rent;
- 29 new lettings or renewals were completed in the period providing total rent of GBP0.8 million, 6.7 per cent above ERV; and
- Of the 29 new lettings and renewals, 7 new leases were signed on 13,235 sqft of previously vacant space amounting to
GBP0.1 million, which more than offset gross annualised rent on 5 small units (3,499 sqft) vacated during the period (loss of less
than GBP0.1 million).
FINANCIAL REVIEW
Overview
Despite a challenging first half, the Group's operational performance has remained robust across all segments in which we operate.
Occupancy remains high at 96.9 per cent and was underpinned by strong leasing activity in the period which saw 100 lease events
concluded at rental levels above both previous passing rent and ERV.
As indicated alongside our Full Year Results in October, the Group has prioritised leverage and liquidity in the short term. Although
this resulted in a 3.7 per cent reduction in underlying earnings (versus the same period last year), we believe this was the right
decision to have taken.
On a per share basis, underlying earnings fell 5.2 per cent to 6.94 pence, compared to 7.32 pence per share for the first half of
2018, albeit the first half of 2018 was particularly strong due to the phased acquisition of nine hotels comprising the International
Hotel Properties Group, which concluded in November 2017. The second half of 2018 resulted in a more comparable 6.86 pence
per share in underlying earnings.
EPRA Net Asset Value per share fell 4.4 per cent from 213.8 pence to 204.4 pence. This was the result of valuation decline,
principally in the UK retail segment, and an adverse movement in the Euro relative to Sterling, recording a 4.6 per cent decline
across the period.
The Group's principal debt facility, a GBP303.0 million term loan and revolving credit facility, was refinanced in January 2019 at a
reduced level of GBP275.0 million. This resulted in a marginal increase to finance costs, but locked in a competitive rate for a new five-
year term and removed the associated refinancing risk.
Share consolidation and subsequent re-presentation
Following Shareholder approval at the Company's Annual General Meeting, the Company completed a consolidation of its shares
on a one for five basis, with the nominal value per share increasing from 8 pence to 40 pence per share. The Company's issued
share capital on the record date for the consolidation, being Friday, 8 February 2019, was 1,900,449,536. On Monday, 11 February
2019, the first day of trading in the newly consolidated shares, the Company's issued share capital stood at 380,089,923. Where
applicable throughout this review and the condensed consolidated financial statements which follow, the comparative 'per share'
numbers have been re-presented accordingly.
Aviva financed UK Shopping Centre portfolio
Four of the Group's UK shopping centres, namely Grand Arcade, Wigan; Weston Favell, Northampton; Birchwood, Warrington and
Byron Place, Seaham, are financed by a GBP144.7 million long-term fixed-rate debt facility with Aviva.
During the period, given the deterioration in values for UK Shopping Centres as well as concerns over certain key retailers, Aviva
undertook a valuation of the four assets secured by the facility. The valuation resulted in a lender's LTV exceeding the 85 per cent
loan to value covenant. The Group paid GBP9.7 million to cure the loan to value covenant and in addition all net operating cashflows
from the portfolio were retained within the facility to reduce the outstanding facility balance.
Net operating cashflows from the four shopping centres, after interest costs, are approximately GBP6.5 million on an annualised basis.
In April, post period end, a further valuation was called by Aviva, resulting in a further 5.7 per cent decline in value and a lenders
LTV of 89.4 per cent. After careful consideration, the level of capital required to maintain compliance was not considered to be in
the best interests of long-term shareholder value. The Group therefore agreed with Aviva that a consensual disposal of the
properties, or the introduction of third-party capital, would be in the best interests of both parties.
Given the facilities term and fixed rate of interest, a significant break cost would ordinarily become payable on early termination.
Although the facility remains non-recourse to the Group, given the termination charge that will be applied by the lender on sale, no
equity is expected to be returned to the Group following disposal. As a result, we set out below the pro-forma impact of the disposal
on underlying earnings and net asset value, both at 28 February 2019.
UK retail
Underlying portion of
Underlying earnings EPRA net portfolio
earnings per share EPRA net asset value Loan to Cost of market
(6 months) (6 months) asset value per share value debt value
28 February 2019 GBPm pence GBPm pence % % %
As reported 26.4 6.94 779.7 204.4 48.5 3.5 28.2
Aviva portfolio(1) (3.7) (0.97) (54.1) (14.2) (3.1) (0.4) (8.9)
Excluding Aviva portfolio(1) 22.7 5.97 725.6 190.2 45.4 3.1 19.3
(1) Four Aviva financed UK Shopping Centre portfolio
The above illustrates a scenario where a disposal is concluded and no net disposal proceeds are received by the Group. This
results in a decrease in net asset value of GBP54.1 million (14.2 pence per share) and a reduction in underlying earnings of
approximately GBP6.5 million per year (1.7 pence per share). It should be noted that restricted cash, held by Aviva of GBP11.6 million at
28 February 2019, is included in the net asset value stated above.
Other planned disposals
As announced in the CEO's report, the Group has embarked on a marketing exercise for the sale of the Group's residual German
portfolio. Although contemplated by the Board for some time, the decision to seek offers for this separately identifiable line of
business was taken post period end and has therefore not been disclosed as held for sale within these condensed consolidated
financial statements.
Acquisitions
In September 2018, the Group increased its exposure to the industrial and distribution sectors via the acquisition of two property
interests located in the South East of England. The first, a GBP26.3 million (excluding costs) acquisition of an industrial estate in
Farnborough, Hampshire; and the second, a GBP7.9 million (excluding costs), 13.5 acre land interest in Bicester, Oxfordshire. The
land interest was consented for the development of two distribution units totalling 288,000 sqft in size. At the same time, the Group
entered into a development agreement for the construction of the units and made a commitment to further payments on completion
of the units of GBP7.8 million and GBP10.3 million. Completion of unit one took place in early April and unit two is due to complete in
December 2019.
Performance against strategic financial targets
28 February 31 August 28 February 31 August 28 February
Strategic metrics Medium term target 2019 2018 2018 2017 2017
Growth in underlying EPS (%) 3.0 - 5.0 (5.2) 3.3 8.2 n/a n/a
Dividend pay-out ratio (%) 90.0 - 95.0 57.6 95.1 92.5 94.5 96.3
Income growth (like-for-like) (%) 2.0 - 5.0 0.2 2.1 2.1 3.7 3.3
Rent collection >95% within 7 days 95.3 98.0 89.3 94.3 94.0
LTV (%) Reduced to 30.0 - 40.0 48.5 47.3(1) 48.0 50.0(1) 49.9
Interest cover (times) >3.0 3.1 3.5 3.5 3.2 3.1
Cost of debt (%) 3.2 - 3.4 3.5 3.4 3.3 3.1 3.3
EPRA cost ratio (excl. direct
vacancy costs) (%) <15.0 16.2 15.6 15.7 19.8 20.7
(1) Pro forma adjusted to reflect transactions post year end until the date of results announcements
Earnings decreased in the first half due to prioritising higher liquidity levels and maintaining a focus on leverage reduction.
The Group fell short of its like-for-like income growth target this period due the commitment of additional funds to the refurbishment
of the UK Hotels portfolio, a sector that has performed well in recent years. Excluding the additional charge of GBP0.7 million, like-for-
like growth of 1.9 per cent would have been achieved.
LTV increased during the period, driven by declining asset valuations, principally UK Retail portfolio valuations. Notwithstanding
this, the Group's focus on leverage reduction has ensured LTV has remained within target range. The planned disposal of the
European portfolio, and the consensual sale or restructure of the Aviva financed UK Shopping Centre portfolio, should materially
reduce the Group's LTV. Once these disposals are concluded, the Group expects to adjust its LTV downwards and target gearing
between 30 - 40 per cent.
Cost of debt has increased marginally above the target range at 3.5 per cent, but has reduced to 3.4 per cent post period end.
The EPRA cost ratio remains above target, notwithstanding the progress made in the past two years. The planned disposal of the
European portfolio should result in a net improvement in the ratio due to the modest scale of the residual portfolio and the relatively
high cost of maintaining the requisite operational platform in Germany.
The dividend pay-out ratio has fallen significantly below the Group's target of 90 - 95 per cent. This is discussed in more detail at
the conclusion of this financial review. All other metrics remain within target.
Presentation of financial information
The Board reviews information and reports presented on a proportionately consolidated basis, which includes the Group's share of
interests in joint ventures. To align with how the Group is managed, this financial review has been presented on the same basis.
28 February 2019 28 February 2018
IFRS Joint Group IFRS Joint Group
basis Ventures Total basis Ventures Total
Income statement GBPm GBPm GBPm GBPm GBPm GBPm
Gross rental income 55.8 0.9 56.7 54.6 0.9 55.5
Property operating expenses (6.2) - (6.2) (4.8) (0.1) (4.9)
Net rental income 49.6 0.9 50.5 49.8 0.8 50.6
Other income 1.3 - 1.3 0.6 - 0.6
Administrative expenses (7.3) 0.1 (7.2) (7.2) (0.1) (7.3)
Net operating income 43.6 1.0 44.6 43.2 0.7 43.9
Net finance costs (15.9) (0.5) (16.4) (14.3) (0.3) (14.6)
Joint venture profits (allocated to individual line items) 0.3 (0.3) - 0.2 (0.2) -
Tax and other 0.3 (0.2) 0.1 (1.2) (0.2) (1.4)
Non-controlling interest (2.5) - (2.5) (1.8) - (1.8)
EPRA earnings 25.8 - 25.8 26.1 - 26.1
Company Adjustments:
Debt fair value accretion adjustments 0.4 - 0.4 0.4 - 0.4
Foreign exchange loss 0.2 - 0.2 0.9 - 0.9
Underlying earnings 26.4 - 26.4 27.4 - 27.4
Fair value (loss)/gain on investment property, assets
held for sale and listed shares (30.4) (0.2) (30.6) 8.5 (0.2) 8.3
(Loss)/gain on disposal of investment property and
non-current assets held for sale (0.2) - (0.2) 0.4 - 0.4
Gain on disposal of subsidiaries - - - 14.3 - 14.3
Net gain on acquisition of subsidiaries - - - 4.6 - 4.6
Fair value movement on derivatives (2.2) 0.1 (2.1) 5.2 0.6 5.8
Deferred tax provision movement 1.7 - 1.7 0.1 (0.2) (0.1)
Tax and other (1.1) 0.1 (1.0) (2.6) (0.2) (2.8)
Non-controlling interest 0.9 - 0.9 (2.7) - (2.7)
IFRS profit attributable to shareholders (4.9) - (4.9) 55.2 - 55.2
Weighted average ordinary shares (millions) 380.1 374.2
EPRA earnings per share (pence) 6.79 6.97
Underlying earnings per share (pence) 6.94 7.32
Net rental income was broadly in line with the prior period, marginally down in absolute terms but 0.2 per cent higher on a like-for-
like basis. The increase in property operating expenses is attributable to the operational nature of the Group's recently acquired
London Serviced Office portfolio. This also accounts for the increase in Other Income, the result of the various additional services
provided to licensees at a margin.
Administrative costs have fallen marginally, however, not yet at a rate sufficient to achieve the Group's EPRA cost ratio target,
which recorded a deterioration from 15.7 per cent to 16.2 per cent.
Net finance costs increased by GBP1.8 million, GBP0.9 million of which relates to a charge on refinancing the Group's principal debt
facility in January 2019. Compared to the prior period, the residual increase arises from capital recycled from Germany to the UK in
January 2018 and the related finance cost differential across the two geographies.
Non-controlling interests reflects the share of income attributable to the minority shareholders, most notably within our UK Hotels
portfolio and London Serviced Offices portfolio. The increase arises due to the timing of acquisitions in the prior period, which did
not reflect a full six month period.
Like-for-like net rental income analysis
Six months ended Six months ended Local currency
28 February 2019 28 February 2018 Change change
Net rental income GBPm GBPm % %
UK Commercial 9.2 8.5 8.2 8.2
UK Retail 17.6 17.6 - -
UK Hotels 10.9 11.6 (6.0) (6.0)
UK Total 37.7 37.7 - -
Europe 5.4 5.3 1.9 2.5
Like-for-like net rental income 43.1 43.0 0.2 0.3
Acquisitions 6.5 1.6
Disposals - 5.7
Development and other 0.9 0.3
Total net rental income 50.5 50.6
Like-for-like income in the UK Commercial portfolio increased 8.2 per cent, largely due to successful reviews, principally at
Camino Park, Crawley and Express Park, Bridgwater.
Despite headwinds, UK Retail net rents were stable. This was driven by focused asset management ensuring occupancy remained
high and income was maximised through commercialisation of available space within the centres.
The decrease of 6.0 per cent in like-for-like income in UK Hotels is primarily due to additional funds being committed towards the
refurbishment of the UK Hotels, a sector that has performed well in recent years. This ensures the portfolio is kept current and helps
maintain occupancy levels. Refurbishment costs are recognised as tenant incentives and are charged to income.
Europe like-for-like net rent in local currency was up 2.5 per cent, primarily due to a number of lease events completed during the
period. In Sterling terms, income was up 1.9 per cent, reflecting the weaker average EUR/GBP rate in the first six months of 2019.
Balance sheet 28 February 2019 31 August 2018
Joint Group Joint Group
IFRS Ventures Total IFRS Ventures Total
GBPm GBPm GBPm GBPm GBPm GBPm
Property portfolio carrying value(1) 1,593.6 24.6 1,618.2 1,598.0 25.4 1,623.4
Investment in and loans to joint ventures 7.0 (7.0) - 7.1 (7.1) -
Net borrowings (765.2) (14.3) (779.5) (730.6) (14.8) (745.4)
Other assets and liabilities (7.6) (3.3) (10.9) (11.7) (3.5) (15.2)
Non-controlling interest (59.8) - (59.8) (59.5) - (59.5)
IFRS NAV 768.0 - 768.0 803.3 - 803.3
Fair value of derivatives 3.7 1.9
Deferred tax liabilities 8.0 9.8
EPRA NAV 779.7 815.0
Diluted number of shares (millions) 381.4 381.2
EPRA NAV per share (pence) 204.4 213.8
(1) Market value adjusted to reflect finance lease liabilities and lease incentives
Property portfolio
Valuation(1) Local currency
28 February 2019 31 August 2018 Gain/(loss) Gain/(loss) Gain/(loss)
Market value of the property portfolio GBPm GBPm GBPm % %
UK Commercial 517.1 515.9 1.2 0.2 0.2
UK Retail 455.5 481.0 (26.9) (5.6) (5.6)
UK Hotels 364.9 364.9 (2.8) (0.7) (0.7)
UK Total 1,337.5 1,361.8 (28.5) (2.1) (2.1)
Europe 212.9 223.0 (10.5) (4.7) (0.3)
Like-for-like property portfolio 1,550.4 1,584.8 (39.0) (2.5) (1.8)
Acquisitions 35.9 -
Disposals - 3.4
Development 31.3 32.2
Total property portfolio market value 1,617.6 1,620.4
(1) Valuation includes the effect of capital expenditure, amortisation of head leases, tenant lease incentives and foreign currency translation where
applicable.
UK Commercial valuations were broadly flat across the half year, with the strongest performance in distribution and industrial assets
and the weakest in regional offices.
The downward valuation in UK Retail of GBP26.9 million, driven by the UK Shopping Centres, reflects the broad negative investor
sentiment towards this sector. As occupancy and income within the portfolio were high and stable relative to 31 August 2018, the
valuation decline was almost entirely attributable to yield shift.
The Hotel portfolio value decreased by GBP2.8 million, primarily due to capital expenditure and tenant incentives in the period.
In local currency terms, the German portfolio held steady, down by 0.3 per cent. An adverse 4.6 per cent movement in the
exchange rate reduced the Sterling value by GBP10.5 million, or 4.7 per cent.
Debt and gearing
28 February 2019
(excluding Aviva portfolio) 28 February 2019 31 August 2018
GBPm GBP GBPm
Nominal value of drawn debt (689.2) (833.9) (808.2)
Cash and short-term deposits 35.7 49.4 59.8
Net debt (653.5) (784.5) (748.4)
Market value of the property portfolio 1,440.4 1,617.6 1,620.4
LTV (%) 45.4 48.5 46.2
LTV (%, pro forma)(1) - - 47.3
Weighted average debt maturity (years) 3.7 7.1 6.7
Weighted average interest rate (%) 3.1 3.5 3.4
Interest cover (times) 3.6 3.1 3.5
Debt with interest rate protection (%) 92.3 93.6 99.6
(1) Pro forma LTV adjusted for transactions completed between 31 August 2018 and 25 October 2018.
The increase in net debt of GBP36.1 million is principally due to the acquisition of two industrial and distribution property interests in
Farnborough and Bicester in September 2018.
Loan to value increased to 48.5 per cent due to the reduction in valuation of the UK Retail portfolio but remains within the Group's
previous target range of 45 - 50 per cent.
Debt maturity increased following refinancing activities completed in January, with interest cover falling due to costs associated with
the refinancing which were incurred in the period.
Given the significance of the four Aviva financed UK Shopping Centres on the above debt and gearing metrics, these have been
presented on a pro-forma basis to illustrate the position excluding these four shopping centres and their related net debt
contribution.
Cash flow 28 February 2019 28 February 2018
Joint Group Joint Group
IFRS Ventures Total IFRS Ventures Total
GBPm GBPm GBPm GBPm GBPm GBPm
Operating cash flows 25.7 0.3 26.0 25.4 0.6 26.0
Disposals 2.6 - 2.6 142.6 - 142.6
Acquisitions and development (39.9) - (39.9) (99.9) - (99.9)
Other (0.8) (0.1) (0.9) (0.7) 0.2 (0.5)
Investing cash flows (38.1) (0.1) (38.2) 42.0 0.2 42.2
Net debt drawn/(repaid) 31.6 (0.2) 31.4 (44.1) (0.4) (44.5)
Dividends paid (25.7) - (25.7) (18.8) - (18.8)
Other (3.7) - (3.7) (2.4) - (2.4)
Financing cash flows 2.2 (0.2) 2.0 (65.3) (0.4) (65.7)
Impact of foreign exchange movement (0.2) - (0.2) (1.0) - (1.0)
Net cash flow (10.4) - (10.4) 1.1 0.4 1.5
Operating cash flows are aligned to the Group's underlying earnings and are a key metric for ensuring dividend cover. The overall
net cash outflow reflects reinvestment activity since 31 August 2018 which followed significant capital recycling activity in the prior
year. The final dividend for the year ended 31 August 2018 was paid entirely in cash in December 2018. Cash on the balance
sheet at 28 February 2019 was GBP49.4 million, of which GBP12.3 million was held in restricted accounts, principally with Aviva.
Dividend
As set out above, during the period cash totalling GBP11.6 million was applied or retained in the Aviva UK Shopping Centre facility.
Consequently, this cash is restricted and is unavailable to the Group to fund its operations or to allocate to shareholders in the form
of dividend.
The Board has had to carefully consider its liquidity requirements in the context of the above restriction. Given these circumstances,
the Board has declared a more modest first half dividend of 4.0 pence per share, which will be payable on 25 June 2019 to
shareholders on the register on 7 June 2019.
It remains the Company's intention to continue to meet the UK REIT rules in respect of distributions. These rules require the
Company to pay a minimum of 90 per cent of its UK Group property rental profits to shareholders within 12 months of its financial
year end. As a guide, in respect to this six-month period ended 28 February 2019, the Group could reasonably be expected to pay
an additional GBP5 million to shareholders alongside its required distribution for the second half of the year.
Donald Grant
Chief Financial Officer
25 April 2019
Alternative Performance Measures
An alternative performance measure (APM) is a financial measure of historical or future financial performance, position or cash
flows of an entity which is not a financial measure defined or specified in IFRS. APMs are presented to provide a balanced view and
useful information to the readers of the Group's results and are consistent with industry standards. The Group has considered the
European Securities and Markets Authority (ESMA) 'Guidelines on Alternative Performance Measures' in disclosing additional
information on its APMs.
All APMs are prepared on a proportionate basis to align with how the Group is managed. Further discussion of these measures can
be found in the Financial review. The table below summarises the APMs included in these results, each of which has been
reconciled to the appropriate IFRS measure as referenced in the table.
28 28 31
Note/ February February August
Measure Definition of measure Reference 2019 2018 2018
EPRA earnings adjusted for the impact of non-cash debt
Underlying accretion charges and FX gains and losses reflected in the
earnings income statement Note 30 GBP26.4m GBP27.4m GBP53.5m
An earnings per share measure required by the JSE, which
Headline excludes separately identifiable remeasurements in
earnings accordance with Circular 04/2018 Note 30 GBP23.6m GBP28.9m GBP57.1m
Total nominal value of the Group's proportionate bank
Net debt borrowings less cash and cash equivalents Note 19 GBP784.5m GBP789.8m GBP748.4m
The ratio of net debt divided by the market value of Financial
Loan-to-value investment property review 48.5% 48.0% 46.2%(1)
The Group's net rental income divided by net finance Financial
Interest Cover expenses review 3.1 3.5 3.5
Dividend pay- Total dividend per share paid out to shareholders relative to Financial
out ratio the underlying earnings per share during the year review 57.6% 92.5% 95.1%
(1) Pro forma adjusted to 47.3% to reflect transactions between 31 August 2018 and 25 October 2018
PRINCIPAL RISKS
Below are the key risks to which the Group is exposed, along with their potential impact and mitigation factors.
Strategic risk
Risk Impact potential Mitigation factors
Failure to formulate and execute - Declining net asset value and total - Annual review of investment strategy
appropriate investment strategy, property return (income and capital), - Defined asset appraisal process
including but not limited to gearing levels particularly with respect to UK - Investment Committee reviews all
and diversification Shopping Centres opportunities against pre-determined
- Declining total shareholder returns criteria
and increased share price volatility - Monitoring of macro economic and
property market trends
- Flexible and agile decision making
- Dedicated investor relations resource
- Clear messaging of Group strategy to
the market and to analysts
- Ongoing dialogue and communication
with lenders and brokers
Continuing uncertainty surrounding the - Ongoing and heightened economic - Close relationships with key
political and economic climate, for and political uncertainty leading to shareholders and lenders
example, negotiations on the UK exit general market dislocation, increased - Close monitoring of loan covenants
from the European Union results in volatility with potential impact on and required cash cures
increased uncertainty over future policy property valuations, share price and - Ongoing monitoring of proposals and
and legislation delayed strategic decision making of emerging policy and legislation
investors, lenders and occupiers - Balance sheet structure provides a
- Constrained access to debt or capital degree of flexibility
markets impacting ability to address
liquidity or covenant concerns
Significant business interruption or - Inability to access or operate - Close relationships with key
terrorist event properties shareholders and lenders
- Operational interruption and disruption - Close monitoring of loan covenants
- Significant reduction in footfall and required cash cures
- Injury or loss of life of occupier, - Ongoing monitoring of proposals and
customer, employee or contractor emerging policy and legislation
- Loss of key employee or supplier - Balance sheet structure provides a
degree of flexibility
Change in investment strategy of - Adverse movement in share price - Close relationships maintained with
significant shareholder or joint venture - Perceived loss of confidence key shareholders and partners
partner - Dedicated investor relations resource
- Clear income focused total return
strategy targeting upper quartile
performance
- Actively target new investors
Financial Risks
Risk Impact potential Mitigation factors
Decline in market conditions and - Reduced availability of financing and - Mix of lenders and maturities of
structural changes in retail consumer refinancing at acceptable cost facilities
behaviour - Inability to fund property investments - Non-recourse debt structure
- Increased cost of finance - Early refinancing of debt
- Declining valuations leading to - Sufficient liquidity to meet
covenant breaches commitments and plausible stress
- Pressure on income and dividend scenarios
sustainability - Regular assessment of market
conditions including bi-annual external
valuations and monitoring of
covenants
- Detailed capital planning and
forecasting
- Portfolio diversified across sectors and
geography
Adverse interest rate movements and - Increased cost of borrowing and - Interest rate hedging policy providing
inflationary pressures hedging reducing financial and interest rate protection
operational flexibility - Target staggered debt maturities
- Adverse impact on property valuations - Early refinancing where economically
viable to lock in lower rates for longer
Adverse foreign currency movements - Decreased asset values - Debt facilities arranged in the currency
- Reduced operating income of the related investment act as a
- Reduced liquidity partial hedge
- Exchange rates continuously
monitored
- Amounts converted to Sterling at
earliest opportunity
- Foreign currency forward contracts
entered into prior to significant
transactions
Operational risks
Risk Impact potential Mitigation factors
Failure to anticipate changes in the - Reduced investment demand and - Bi annual external valuation of
property cycle declining property values properties
- Potential pressure on banking - Diversified portfolio
covenants - Active asset management
- Regular monitoring of covenants,
including scenario modelling
Reduced occupier demand for space, - Reduced rental income and cash flow - Diverse tenant base
increased supply, or occupier defaults - Loss of key tenants - Long leases and strong tenant
- Increased void costs covenants
- Declining property values - Open dialogue with tenants and
property managers
- Review consumer trends
- Regular monitoring of tenants at risk
- Reputable property managers and
efficient rent collection procedures
Inappropriate cladding or construction - Increased devastation in case of fire - Annual fire risk assessment
materials - Comprehensive review of cladding
and insulation in place across portfolio
and close liaison with national Health
& Safety Executive
Legal & regulatory risks
Risk Impact potential Mitigation factors
Health, safety and environmental risk - Loss or injury to employees, tenants - Policies in place with audit and risk
or contractors assessments undertaken
- Impact on reputation, adverse publicity - Environmental programme in place
or financial impact - All properties actively managed
- Appointed dedicated Health & Safety
Manager
- Comprehensive tendering process for
contractors
Changes in or breach of regulatory or - Financial or reputational impact - Sound governance and internal
legislative requirements - Reduced financial returns as a result policies
of increased taxes across non-REIT - Appointment of appropriately qualified
business employees, corporate advisers and
- Adverse tenant behaviour administrators in all jurisdictions with
active engagement
- Regular review of compliance e.g.
REIT legislation
- Proactive identification of changes in
legal and regulatory environment with
planned response to changes prior to
implementation
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the condensed consolidated interim financial statements, in accordance with applicable
laws and regulations.
We confirm that to the best of our knowledge:
- the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as
adopted by the EU;
- the interim management report includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules , being an indication of important events that have
occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and
a description of the principal risks and uncertainties for the remaining six months of the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have materially affected the financial position or performance of
the entity during that period; and any changes in the related party transactions described in the last annual report that
could do so.
The operating and financial review refers to important events which have taken place during the period.
Related party transactions are set out in Note 29 to the condensed consolidated interim financial statements.
By order of the Board
Mike Watters Donald Grant
Chief Executive Chief Financial Officer
25 April 2019
Independent Review Report to RDI REIT P.L.C.
Conclusion
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for
the six months ended 28 February 2019 which comprises condensed consolidated balance sheet, condensed consolidated income
statement, condensed consolidated statement of other comprehensive income, condensed consolidated statement of changes in
equity, condensed consolidated statement of cash flows and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in
the half-yearly financial report for the six months ended 28 February 2019 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the DTR") of
the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in
the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-
yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information
in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified
in an audit. Accordingly, we do not express an audit opinion.
The impact of uncertainties due to the UK exiting the European Union on our review
Uncertainties related to the effects of Brexit are relevant to understanding our review of the condensed financial statements. Brexit
is one of the most significant economic events for the UK, and at the date of this report its effects are subject to unprecedented
levels of uncertainty of outcomes, with the full range of possible effects unknown. An interim review cannot be expected to predict
the unknowable factors or all possible future implications for a company and this is particularly the case in relation to Brexit.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for
preparing the half-yearly financial report in accordance with the DTR of the UK FCA.
The annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as
adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-
yearly financial report in accordance with IAS 34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial
report based on our review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.
Richard Kelly
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
25 April 2019
CONDENSED CONSOLIDATED INCOME STATEMENT
for the six months ended 28 February 2019
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
Note 28 February 28 February 31 August
Revenue 3 57.1 55.2 112.0
Rental income 4 55.8 54.6 110.2
Rental expense 5 (6.2) (4.8) (11.1)
Net rental income 49.6 49.8 99.1
Other income 6 1.3 0.6 1.8
Administrative costs and other fees 7 (7.3) (7.2) (14.2)
Net operating income 43.6 43.2 86.7
(Loss)/gain on revaluation of investment property 13 (30.4) 8.5 10.8
Gain on revaluation of investment property held for sale 13 - - 0.9
(Loss)/gain on disposal of investment property 13 (0.2) 0.6 1.5
(Loss)/gain on disposal of investment property held for sale - (0.1) 1.8
Net gain on disposal of subsidiaries 8 - 14.3 15.4
Net (loss)/gain on business combinations 9 (0.1) 4.6 4.4
Other income and expense 16 (0.1) (0.3) (0.4)
Foreign exchange loss (0.2) (0.9) (0.8)
Profit from operations 12.6 69.9 120.3
Finance income 10 0.3 0.4 0.6
Finance expense 10 (16.2) (14.5) (29.3)
Other finance expense 11 - (0.6) (0.6)
Change in fair value of derivative financial instruments (2.2) 5.2 6.1
(5.5) 60.4 97.1
Loss on sale of joint venture interests - - (0.1)
Net impairment reversal on loans to joint ventures 0.1 0.1 0.1
Share of post-tax profit from joint ventures 0.2 - -
Share of post-tax profit from associate 15 0.5 0.3 0.3
(Loss)/profit before tax (4.7) 60.8 97.4
Taxation 12 1.4 (1.1) (1.1)
(Loss)/profit for the period (3.3) 59.7 96.3
(Loss)/profit attributable to:
Equity holders of the Parent (4.9) 55.2 88.9
Non-controlling interests 1.6 4.5 7.4
(3.3) 59.7 96.3
Earnings per share (re-presented)
Weighted average number of shares (millions) 30 380.1 374.2(1) 377.3(1)
Diluted weighted average number of shares (millions) 30 381.4 375.1(1) 378.5(1)
Basic earnings per share (pence) 30 (1.3) 14.8(1) 23.6(1)
Diluted earnings per share (pence) 30 (1.3) 14.7(1) 23.5(1)
(1) As a result of the share consolidation approved at the Annual General Meeting on 24 January 2019, the compae weighted average number of
shares and related earnings per share have been re-presented for comparability (refer to note 23).
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 28 February 2019
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
28 February 28 February 31 August
2019 2018 2018
Continuing operations GBPm GBPm GBPm
(Loss)/profit for the period (3.3) 59.7 96.3
Other comprehensive expense
Items that may be transferred to the income statement
Foreign currency translation on subsidiary foreign operations (4.8) (6.7) (5.3)
Foreign currency translation on joint ventures held by subsidiary
foreign operations - (0.3) (0.2)
Total other comprehensive expense (4.8) (7.0) (5.5)
Total comprehensive (expense)/income for the period (8.1) 52.7 90.8
Total comprehensive (expense)/income attributable to:
Equity holders of the Parent (9.7) 48.2 83.4
Non-controlling interests 1.6 4.5 7.4
(8.1) 52.7 90.8
The accompanying notes form an integral part of these condensed consolidated interim financials statements.
CONDENSED CONSOLIDATED BALANCE SHEET
as at 28 February 2019
Unaudited Audited
28 February 31 August
2019 2018
Note GBPm GBPm
Non-current assets
Investment property 13 1,593.6 1,598.0
Investment in joint ventures 14 2.0 1.9
Loans to joint ventures 14 5.0 5.2
Investment in associate 15 9.2 9.1
Other non-current assets 16 1.1 1.3
Derivative financial instruments 20 0.2 1.1
Trade and other receivables 17 12.6 11.2
Total non-current assets 1,623.7 1,627.8
Current assets
Trade and other receivables 17 9.3 7.1
Cash and cash equivalents 18 48.6 59.0
Total current assets 57.9 66.1
Total assets 1,681.6 1,693.9
Non-current liabilities
Borrowings, including finance leases 19 (774.1) (784.2)
Derivative financial instruments 20 (3.9) (2.9)
Deferred tax 21 (7.4) (9.5)
Trade and other payables 22 (0.1) (0.2)
Total non-current liabilities (785.5) (796.8)
Current liabilities
Borrowings, including finance leases 19 (39.7) (5.4)
Trade and other payables 22 (27.9) (26.9)
Tax liabilities (0.7) (2.0)
Total current liabilities (68.3) (34.3)
Total liabilities (853.8) (831.1)
Net assets 827.8 862.8
Equity
Share capital 23 152.0 152.0
Share premium 23 534.6 534.6
Other components of equity 81.4 116.7
Total attributable to equity holders of the Parent 768.0 803.3
Non-controlling interests 25 59.8 59.5
Total equity 827.8 862.8
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
The condensed consolidated interim financial statements were approved by the Board of Directors on 25 April 2019 and were
signed on its behalf by:
Mike Watters Donald Grant
Chief Executive Officer Chief Financial Officer
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 28 February 2019
Foreign Total
currency attributable to Non-
Share Share Retained Other translation equity holders controlling Total
capital premium earnings reserves reserve of the Parent interests equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 September 2018 152.0 534.6 95.5 3.3 17.9 803.3 59.5 862.8
(Loss)/profit for the period - - (4.9) - - (4.9) 1.6 (3.3)
Foreign currency translation on subsidiary foreign
operations - - - - (4.8) (4.8) - (4.8)
Total comprehensive income for the period - - (4.9) - (4.8) (9.7) 1.6 (8.1)
Transactions with equity holders of the Parent
Dividends paid 23 - - (25.7) - - (25.7) - (25.7)
Release of share-based payments reserve 24 - - 1.7 (1.7) - - - -
Release of non-distributable reserve 24 - - 1.0 (1.0) - - - -
Additional payment in relation to restricted stock plan 24 - - (0.2) - - (0.2) - (0.2)
Fair value of share-based payments - - - 0.3 - 0.3 - 0.3
- - (23.2) (2.4) - (25.6) - (25.6)
Changes in ownership interests in subsidiaries
Dividends paid to non-controlling interests 25 - - - - - - (1.3) (1.3)
- - - - - - (1.3) (1.3)
Balance at 28 February 2019 152.0 534.6 67.4 0.9 13.1 768.0 59.8 827.8
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 28 February 2019
Foreign Total
currency attributable to Non-
Share Share Retained Other translation equity holders controlling Total
capital premium earnings reserves reserve of the Parent interests equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 September 2017 146.2 511.8 54.8 4.2 23.4 740.4 21.8 762.2
Profit for the period - - 55.2 - - 55.2 4.5 59.7
Foreign currency translation on subsidiary foreign
operations - - - - (6.7) (6.7) - (6.7)
Foreign currency translation on joint venture interests held
by subsidiary foreign operations - - - - (0.3) (0.3) - (0.3)
Total comprehensive income for the period - - 55.2 - (7.0) 48.2 4.5 52.7
Transactions with equity holders of the Parent
Issue of shares 4.9 19.4 - - - 24.3 - 24.3
Dividends paid - - (18.8) - - (18.8) - (18.8)
Scrip dividends 23 1.3 4.4 (5.7) - - - - -
Release of share-based payments reserve 24 - - 1.9 (2.0) - (0.1) - (0.1)
Fair value of share-based payments - - - 0.5 - 0.5 - 0.5
6.2 23.8 (22.6) (1.5) - 5.9 - 5.9
Changes in ownership interests in subsidiaries
Dividends paid to non-controlling interests 25 - - - - - - (1.7) (1.7)
Non-controlling interests on business combinations 25 - - - - - - 33.8 33.8
Net gain on acquisition of non-controlling interests 25 - - 0.1 - - 0.1 0.1 0.2
- - 0.1 - - 0.1 32.2 32.3
Balance at 28 February 2018 152.4 535.6 87.5 2.7 16.4 794.6 58.5 853.1
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 28 February 2019
Total
Foreign attributable
currency to equity Non-
Share Share Retained Other translation holders of controlling Total
capital premium profit reserves reserve the Parent interests equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 September 2017 146.2 511.8 54.8 4.2 23.4 740.4 21.8 762.2
Profit for the year - - 88.9 - - 88.9 7.4 96.3
Items that may be transferred to the income statement
Foreign currency translation on subsidiary foreign operations - - - - (5.3) (5.3) - (5.3)
Foreign currency translation on joint venture interests held by
subsidiary foreign operations 14 - - - - (0.2) (0.2) - (0.2)
Total comprehensive income for the year - - 88.9 - (5.5) 83.4 7.4 90.8
Transactions with equity holders of the Parent
Issue of shares 23 4.9 19.4 - - - 24.3 - 24.3
Scrip dividends 23 2.0 7.5 (9.0) - - 0.5 - 0.5
Buy-back of shares 23 (1.1) (4.1) - - - (5.2) - (5.2)
Dividends paid - - (41.1) - - (41.1) - (41.1)
Release of share-based payment reserve - - 1.8 (1.9) - (0.1) - (0.1)
Fair value of share-based payments - - - 1.0 - 1.0 - 1.0
5.8 22.8 (48.3) (0.9) - (20.6) - (20.6)
Changes in ownership interests in subsidiaries
Dividends paid to non-controlling interests 25 - - - - - - (3.4) (3.4)
Recognition of non-controlling interest on acquisition of
subsidiaries 25 - - - - - - 33.8 33.8
Net gain on acquisition of non-controlling interests 26 - - 0.1 - - 0.1 (0.1) -
- - 0.1 - - 0.1 30.3 30.4
Balance at 31 August 2018 152.0 534.6 95.5 3.3 17.9 803.3 59.5 862.8
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 28 February 2019
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
28 February 28 February 31 August
2019 2018 2018
Continuing operations Note GBPm GBPm GBPm
Cash generated from operations 27 40.2 40.3 87.0
Interest received 0.3 0.2 0.4
Interest paid (14.8) (14.0) (27.7)
Capitalised interest paid (1) - (0.3) (0.7)
Net tax paid - (0.8) (0.9)
Net cash inflow from operating activities 25.7 25.4 58.1
Cash flows from investing activities
Net cash acquired on acquisition of subsidiaries - 7.8 7.8
Acquisition of subsidiaries (0.3) (80.7) (80.6)
Net cash disposed on sale of subsidiaries 8 - (1.6) (1.8)
Net proceeds on sale of subsidiaries (0.3) 112.7 126.2
Net proceeds on sale of investment property 2.9 20.7 22.7
Net proceeds on sale of investment property held for sale - 10.8 39.6
Purchase and development of investment property (39.6) (28.5) (33.6)
Acquisition of property, plant and equipment 16 (0.1) (0.5) (0.6)
Additional costs on sale of joint venture interests - - (0.1)
Movement in loans to joint ventures 14 0.1 (0.3) (0.3)
Distributions from associate (including held for sale) 0.3 0.3 0.7
Disposal of other non-current assets held for sale - 1.3 1.3
Settlement of taxes relating to investment held at fair value (1.1) - -
Net cash (outflow)/inflow from investing activities (38.1) 42.0 81.3
Cash flows from financing activities
Buy-back of shares 23 - - (5.2)
Share issue costs paid - (0.1) (0.1)
Proceeds from borrowings 19 38.7 10.0 10.0
Repayment of borrowings 19 (7.1) (54.1) (91.9)
Other finance expense (2.3) (0.5) (0.6)
Derivative financial instruments purchased and settled (0.1) - -
Dividends paid to equity holders (25.7) (18.8) (41.1)
Dividends paid to non-controlling interests (1.3) (1.7) (3.4)
Acquisitions from non-controlling interests 25 - (0.1) 0.1
Movement in restricted cash and cash equivalents (11.6) - -
Net cash outflow from financing activities (9.4) (65.3) (132.2)
Net (decrease)/increase in unrestricted cash and cash equivalents (21.8) 2.1 7.2
Effect of exchange rate fluctuations on cash and cash equivalents (0.2) (1.0) (1.0)
Unrestricted cash and cash equivalents at 1 September 58.3 52.1 52.1
Unrestricted cash and cash equivalents at end of the period 36.3 53.2 58.3
Restricted cash and cash equivalents 18 12.3 0.7 0.7
Cash and cash equivalents at end of the period 48.6 53.9 59.0
(1) Investment property under development is now substantially complete and there is no capitalised interest during the period to 28 February 2019.
The accompanying notes form an integral part of these condensed consolidated interim financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the six months ended 28 February 2019
1. GENERAL INFORMATION
RDI REIT P.L.C. was incorporated in the Isle of Man on 28 June 2004 (Registered Number: 111198C) and was re-registered under
the Isle of Man Companies Act 2006 on 3 December 2013 (Registered Number: 010534V).
On 4 December 2013, the Company converted to a UK-REIT and transferred its tax residence from the Isle of Man to the United
Kingdom ("UK").
The Company holds a primary listing on the Main Market of the London Stock Exchange ("LSE") and a secondary listing on the
Main Board of the Johannesburg Stock Exchange ("JSE").
The financial information contained in these interim financial statements does not constitute a complete set of financial statements
and does not include all of the information required for full annual financial statements (including all comparative figures and all
required notes) prepared in accordance with International Financial Reporting Standards ("IFRS"). The comparative figures for the
financial year ended 31 August 2018 are not in the same format as the company's statutory accounts for that financial year. Those
accounts have been reported on by the company's auditor and delivered to the registrar of companies. The report of the auditor
was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The interim
financial statements should therefore be read in conjunction with the consolidated financial statements as at and for the year ended
31 August 2018 which are available on the Company's website (www.rdireit.com).
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 STATEMENT OF COMPLIANCE
These condensed consolidated interim financial statements ("interim financial statements") for the six months ended 28 February
2019 have been prepared in accordance with IAS 34 'Interim Financial Reporting' ("IAS 34") as issued by the International
Accounting Standards Board ("IASB"). The relevant new standards, amendments and interpretations that have been adopted during
the period are set out in the following table:
International Financial Reporting Standard
IFRS 9 'Financial Instruments' ("IFRS 9")
IFRS 15 'Revenue from Contracts with Customers' ("IFRS 15")
IAS 40 'Investment Property' (amendment)
The adoption of these amendments is considered below. The accounting policies applied by the Group are the same as those
applied in the audited consolidated financial statements as at and for the year ended 31 August 2018, as set out on pages 125-130
of the 2018 Annual Report, with the exception of the application of two new standards IFRS 9 and IFRS 15 and the amendment to
IAS 40 from 1 September 2018.
IFRS 9 applies to the recognition, classification, measurement and derecognition of financial assets and financial liabilities,
introduces new rules for hedge accounting and a new impairment model for financial assets and is effective for the Group from 1
September 2018. The changes required to the recognition and classification of financial instruments do not have a quantitative
impact on the financial statements and the Group does not apply hedge accounting. The changes required in assessing substantial
modification of financial liabilities, namely consideration of the transaction as a whole, will not result in adjustments to the treatment
of debt restructurings that have been recognised in the Group's financial statements. The introduction of the expected credit losses
model replaces the incurred loss model but does not have a material impact on the net asset position of the Group as it applies
primarily to trade receivables and loans to joint ventures. As at 28 February 2019, trade receivables, before impairment, accounted
for GBP1.6 million or 0.2 per cent of total net assets of GBP827.8 million. At 28 February 2019, the Group's recognised joint venture was
in a net asset position, had serviced all payment obligations under the loan advanced and the loan was not considered impaired.
The introduction of the credit loss model would not result in an impairment of this loan on transition to IFRS 9 as the probability of
default is low. The expanded disclosure requirements and changes to presentation change the nature and extent of the disclosures
made by the Group.
IFRS 15 is the new standard for the recognition of revenue, replaces IAS 18 'Revenue' and IAS 11 'Construction Contracts' and is
effective for the Group from 1 September 2018. The new standard is based on the principle that revenue is recognised when control
of a good or service transfers to a customer and sets out a five-step model for revenue recognition. IFRS 15 does not apply to
rental income (which is currently measured in accordance with IAS 17, to be replaced by IFRS 16 as discussed below) which is the
Group's primary revenue stream but does apply to other sources of income generated by the Group such as: service and
management fee income and income from corporate and property disposals. The Group has considered the criteria of IFRS 15, in
particular with reference to the income generated from several ancillary services offered to the customers in the serviced offices
(GBP2.6 million for the year annualised) and has determined that the new standard does not have a material quantitative impact on the
Group and has resulted in minimal qualitative changes to revenue disclosures.
The Group adopted the amendments to IAS 40 using the prospective application method permitted by the standard. The Group has
assessed the impact of the amendment to IAS 40 on the classification of existing property as at 1 September 2018 and has
concluded that no reclassifications are required on adoption of the amendment.
Disclosed in the table below are the relevant new standards, amendments and interpretations that have been issued by the IASB
but are not yet effective or have not been early adopted.
Effective annual periods
International Financial Reporting Standards beginning on or after:
Annual improvements to IFRSs 2015-2017 cycle
IFRS 3 'Business combinations' (amendment) ("IFRS 3") 1 January 2019
IFRS 11 'Joint arrangements' (amendment) ("IFRS 11") 1 January 2019
IAS 12 'Income Taxes' (amendment) ("IAS 12") 1 January 2019
IAS 23 'Borrowing costs' (amendment) ("IAS 23") 1 January 2019
Other amendments
IFRS 9 'Financial Instruments' (amendment) ("IFRS 9") 1 January 2019
IFRS 16 'Leases' ("IFRS 16") 1 January 2019
IAS 19 'Employee benefits' (amendment) ("IAS 19") 1 January 2019
IAS 28 'Investments in Associates and Joint Ventures' (amendment) ("IAS 28") 1 January 2019
The Group has assessed the impact of the new standards and those standards which could be expected to have an impact on the
consolidated financial statements are discussed in further detail below.
IFRS 16 is the new leasing standard and will be effective for the Group from 1 September 2019. Accounting for leases whereby the
Group is the lessor will not significantly change under the new leasing standard. Changes required to leasing arrangements
whereby the Group acts as lessee, however, will result in the recognition of operating leases as a liability on the Group's balance
sheet with a corresponding right-of-use asset. The Group holds long leasehold interests in certain hotel and serviced office
properties acquired during 2018 that have been treated as operating leases. At the effective date, additional estimated lease
liabilities of GBP40.9 million and corresponding right-of-use assets which will be disclosed within Investment Property, could be
expected to be recognised.
2.2 BASIS OF PREPARATION
The interim financial statements are presented in Great British Pounds, which is the functional currency of the Company and the
presentational currency of the Group and rounded to the nearest hundred thousand pounds. They are prepared using the historical
cost basis except for investment property, derivative financial instruments and financial instruments designated at fair value through
profit and loss, all of which are carried at fair value.
GOING CONCERN
The Directors are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future
and for this reason the interim financial statements have been prepared on a going concern basis.
SHARE CONSOLIDATION AND SUBSEQUENT RE-PRESENTATION
Following Shareholder approval at the Company's Annual General Meeting, the Company completed a consolidation of its shares
on a one for five basis, with the nominal value per share increasing from 8 pence to 40 pence per share. The Company's issued
share capital on the record date for the consolidation, being Friday 8 February 2019, was 1,900,449,536. On Monday 11 February
2019, the first day of trading in the newly consolidated shares, the Company's issued share capital stood at 380,089,923. Where
applicable throughout the condensed consolidated financial statements, the comparative 'per share' numbers have been re-
presented accordingly.
2.3 KEY JUDGEMENTS AND ESTIMATES
The preparation of the interim financial statements in conformity with IFRS requires the use of judgements and estimates that affect
the reported amounts of assets and liabilities at the reporting date and the reported amounts of revenues and expenses during the
period. Although these estimates are based on the Directors' best knowledge of the amount, event or actions, actual results may
differ materially from those estimates.
The principal areas where such judgements and estimates have been made are detailed below:
INVESTMENT PROPERTY VALUATION
Accounting estimate
The Group uses valuations determined by independent valuers in accordance with IFRS 13 'Fair Value Measurement' ("IFRS 13")
as the fair value of its investment property. The valuations are based upon assumptions including estimated rental values, future
rental income, anticipated maintenance costs, future development costs and appropriate market yields. The valuers also make
reference to market evidence of transaction prices for similar properties. Where there is a lack of comparable transactional
evidence then the degree of potential variability in valuations may widen. Further details in respect of assumptions and estimation
uncertainties are provided in Note 13.
CORPORATE AND PROPERTY ACQUISITIONS
Accounting judgement
When control is obtained over an entity or group of entities, judgement is required in determining whether the transaction
constitutes a business combination with reference to the inputs, processes and outputs of the subsidiary or subsidiary group
acquired. If it is determined that the transaction is a business combination, the requirements of IFRS 3 are applied.
In addition, when a property is acquired directly, the Directors have regard to the substance of the transaction and whether related
processes and activities have been assumed which would represent a business. When such an acquisition is considered to be the
acquisition of a business, the requirements of IFRS 3 apply as above, otherwise the transaction is treated as an acquisition of a
property asset in line with IAS 40.
CLASSIFICATION OF UK HOTELS AS INVESTMENT PROPERTY
Accounting judgement
The UK Hotels are held for capital appreciation and to earn rental income. Apart from five Travelodge branded hotels, the hotels
have been let to wholly-owned subsidiaries of RBH Hotel Group Limited (collectively "RBH" - formerly named RedefineBDL Hotel
Group Limited), on lease terms which are subject to annual review. At each review, the revised rent is set with reference to the
forecast EBITDA of each hotel. RBH runs the hotels' operating businesses and is therefore exposed to fluctuations in the underlying
trading performance of each hotel under management. RBH is responsible for the key decision making of the business operations
and the day-to-day upkeep of the properties. The Group is not involved with the operation of the hotel management business and
there are limited transactions between RDI and RBH. As a result, the hotels are classified as investment property in accordance
with IAS 40.
The Group cumulatively holds a 25.3 per cent shareholding in RBH. Having considered the guidance in IFRS 10 'Consolidated
Financial Statements' ("IFRS 10"), the respective rights of each of the shareholders in RBH and the relative size of the Group's
shareholding, the Directors have determined that the Group has the ability to exercise significant influence over but does not control
RBH. The investment in RBH has therefore been classified as an associate.
FAIR VALUE OF RESTRUCTURED LIABILITIES
Accounting judgement
New borrowings or existing borrowings which have been substantially modified are recognised at fair value. The determination of
fair value involves the application of judgement. The Group determines fair value by discounting the cash flows associated with the
liability at a market discount rate. The key judgement surrounds the determination of an appropriate market benchmark.
Management determine the discount rate on a loan by loan basis having regard to the term, duration and security arrangements of
the new liability and an estimation of the current rates charged in the market for similar instruments issued to companies of similar
sizes.
This judgement is made more difficult given the bespoke nature of certain loans obtained by the Group. Any difference between the
nominal value of the loan and its fair value equivalent is recognised immediately in the income statement insofar as the fair value
measurement is based on observable inputs. The deemed fair value adjustment will subsequently be accreted through the income
statement over the term of the loan using the effective interest rate method.
LEASE CLASSIFICATION
Accounting judgement
The Group considers the appropriateness of the classification of its leasehold interests in investment property as operating or
finance leases on a property-by-property basis, based on the terms and conditions of each lease on inception. The assessment is
based on a balanced evaluation of both the specific contractual terms and substance of each arrangement, such as: the lease term
constituting a major part of the economic life of the property; the fair value of each asset relative to the present value of the
minimum lease payments; a qualitative review of the transfer of the significant risks and rewards of ownership; and the allocation of
the lease payments to the land and building elements of each property.
2.4 SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Rental income, including fixed stepped rent, is recognised in the income statement on a straight-line basis over the lease term.
Tenant lease incentives, including rent-free periods granted and cash contributions paid, which are an integral part of securing
leases, are amortised as a reduction of rental income over the lease term. Surrender premiums that are paid by the Group to
tenants to vacate a property are also treated as lease incentives if the surrender results in an enhanced future rental income
stream. Licence fee income from customers of the London Serviced Office portfolio is recognised on a basis consistent with rental
income from other tenants of the Group, albeit shorter term in nature. Room-hire income of this portfolio is recognised at the fair
value of the consideration receivable once the room has been used.
Contingent rents are recognised as they arise. Rent reviews are recognised as income or as a reduction thereof from the date it is
probable that the revised terms will be agreed. Surrender premiums paid by the tenant to terminate a lease early are recognised
immediately in the income statement.
Other income includes service fees, management fees and other general property related income. Service fee income is recognised
when the services have been rendered by the Group, the associated costs and recharge margin on those costs can be measured
reliably and with reference to the stage of completion of the service. Management fees receivable from joint ventures are
recognised in other income during the year in which the services are rendered and specific performance fees are recognised when
the conditions are satisfied. All sources of other income are only recognised when it is probable that the economic benefits will flow
to the Group.
Dividends from listed property investments are recognised on the date the Group's right to receive payment is established.
Interest earned on loans receivable and on cash invested is recognised on an accruals basis using the effective interest rate
method.
FINANCIAL INSTRUMENTS - RECOGNITION, CLASSIFICATION AND MEASUREMENT
Non-derivative financial instruments
A financial instrument is recognised when the Group becomes a party to the contractual provisions of the instrument. Financial
assets are derecognised when the Group's contractual rights to the cash flows from those assets expire or when the Group
transfers the assets to another party without retaining control or substantially all risks and rewards of ownership. Regular way
purchases and sales of financial assets are accounted for at trade date. Financial liabilities are derecognised when the Group's
obligations specified in the contract expire.
Non-derivative financial instruments are recognised initially at fair value plus, for those instruments not designated at fair value
through profit or loss, any directly attributable transaction costs. Non-derivative financial instruments comprise investments in equity
securities, trade and other receivables, cash and cash equivalents, loans and borrowings and trade and other payables. Loan
receivables and payables are subsequently measured at amortised cost using the effective interest rate method.
Investments at fair value through profit or loss
An instrument is classified at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition.
Financial instruments are designated as fair value through profit or loss if the Group manages such investments and makes
purchase and sale decisions based on their fair value. Upon initial recognition, attributable transaction costs are recognised in profit
or loss as incurred. Financial instruments at fair value through profit or loss comprise equity securities and are measured at fair
value with changes therein at each reporting date recognised in the income statement. Fair values are determined by reference to
their quoted bid price at the reporting date.
Derivative financial instruments
The Group holds derivative financial instruments to manage its interest rate risk exposures. Derivatives are recognised initially at
fair value on the date the Group becomes party to the contract; any attributable transaction costs are recognised in the income
statement as incurred. Derivatives are subsequently re-measured to fair value at each reporting date, and changes therein are
accounted for in the income statement and presented under change in fair value of derivative financial instruments. The Group does
not apply hedge accounting.
Impairment of financial assets
The Group assesses the expected credit losses associated with its financial assets carried at amortised cost on a forward-looking
basis. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Financial
assets are specifically impaired when there is no reasonable expectation of recovery. Indicators that there is no reasonable
expectation of recovery include, among others, the probability of insolvency or significant financial difficulties of the debtor. Impaired
debts are derecognised when they are assessed as uncollectible. For general provisioning, the Group's financial assets are subject
to the expected credit loss model. The Group applies the simplified approach permitted by IFRS 9 to trade receivables, which
requires expected lifetime losses to be recognised from initial recognition of the receivables. Expected loss rates are based on the
historic payment profiles of customers and the corresponding historical credit losses experienced over the same period. The
resulting loss rates are then adjusted to reflect current and forward-looking information on macroeconomic factors: namely
economic, regulatory, technological and environmental factors, (industry outlook, GDP, employment and politics); external market
indicators; and the current tenant base.
INVESTMENT PROPERTY
In accordance with IAS 40, Paragraph 14, judgement may be required to determine whether a property qualifies as investment
property. The Group has developed criteria so that it can exercise judgement consistently in recognising investment property,
namely: property held for long-term capital appreciation; property owned (or held under finance leases) and leased out under one or
more operating leases; and property that is being developed for future use as investment property. The recognition and
classification of property as investment property principally assumes that the Group:
- does not retain significant exposure to the variation in cash flows arising from the underlying operations of tenants; and
- will recover the carrying value through continuing rental income streams and longer-term capital appreciation.
Investment properties are initially recognised at cost, including directly attributable transaction costs, and subsequently measured at
fair value. The portfolios are valued on a bi-annual basis by external, independent and professionally qualified valuers, having
recent experience in the location and category of the property being valued. The fair values are based on market values, being the
estimated amount for which the property could be exchanged on a highest and best use basis between a willing buyer and seller in
an arm's length transaction.
The valuations are determined by considering comparable and timely market transactions for sales and lettings and having regard
for the current leases in place. In the case of lettings, this includes consideration of the aggregate net annual market rents
achievable for the property and associated costs. A yield which reflects the risks inherent in the future cash flows is applied to the
net annual rents to arrive at the property valuation.
The bi-annual valuations of investment property are based upon estimates and subjective judgements that may vary materially from
the actual values and sales prices that may be realised by the Group upon ultimate disposal. The critical assumptions made in
determining the valuations have been included in Note 13 to the financial statements.
In determining fair value, the market value of the property as determined by the independent valuers is reduced by the carrying
amount of tenant lease incentives and increased by the carrying amount of fixed head leases.
Gains or losses arising from changes in the fair value of investment property are included in the income statement in the year in
which they arise.
Subsequent expenditure is capitalised to investment property when the expenditure incurred enhances the future economic benefits
associated with the property, such as enhanced future rental income, capital appreciation or both. Contributions to tenant
refurbishments under lease arrangements are treated as tenant lease incentives and amortised against rental income over the term
of the lease.
As the fair value model is applied, property under construction or redevelopment for future use as investment property continues to
be measured at fair value unless the fair value cannot be measured reliably and the property is measured at cost. All finance costs
directly associated with the acquisition and construction of a qualifying development property are capitalised during the period of
active development until practical completion. The rate applied is the actual rate payable on specific borrowings or the weighted
average cost of debt of the Group for development spend that is financed out of general funds.
Acquisitions and disposals of investment property are recognised when the significant risks and rewards attached to the property
have transferred to, or from, the Group. This will ordinarily occur on exchange of contracts unless there are significant conditions to
be met prior to completion. Such transactions are recognised when these conditions are satisfied. The profit or loss on disposal of
investment property is recognised separately in the income statement and is the difference between the net sales proceeds and the
opening fair value asset plus any capital expenditure during the period to disposal.
A property ceases to be recognised as investment property and is transferred at its fair value to property held for sale when it meets
the criteria of IFRS 5.
Property held by the Group under long term leases is also treated as investment property in line with IAS 40 'Investment Property'
("IAS 40"). The Group's leasehold interests are classified as either finance or operating leases dependent on whether the risks and
rewards of ownership of the property have substantially transferred to the Group. Finance leases are recognised as both an asset
and a liability and are measured at the lower of fair value and the present value of any future minimum lease payments. The finance
lease obligation to the superior leaseholder is recognised within borrowings on the balance sheet. Lease payments are apportioned
between the finance charges and the capital reduction of the lease obligation so as to achieve a constant rate of interest on the
remaining balance of the liability over the lease term. Finance charges are charged through profit or loss as they arise. Operating
lease payments are charged to the income statement as a rental expense on a straight-line basis over the lease term.
SHARE CAPITAL
Ordinary share capital
Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares, net of tax, are shown as a
deduction from any recognised share premium.
Where the Company's own equity instruments are purchased as the result of a share buy-back, the consideration paid by the
Group, including any directly attributable incremental costs net of tax, is deducted from equity attributable to the owners as treasury
shares until the shares are cancelled or reissued.
Where the Company performs a share consolidation the number of shares is reduced for the current period and re-presented for
the prior period comparative.
Dividends
Dividends to shareholders are recognised when they become legally payable. In the case of interim dividends, this is when the
dividends are declared by the Board.
EARNINGS PER SHARE
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the
profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding
during the year. Diluted EPS is determined by dividing the profit or loss attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding, adjusted for the effects of all dilutive potential ordinary shares.
Where the Company performs a share consolidation the weighted average number of shares is reduced without any consideration
for time apportionment so that the effect of the share consolidation on EPS is constant for current and prior period comparatives
and subsequent periods. The prior period comparative weighted average number of shares is also reduced for comparability.
In line with the JSE Listing Requirements, the Group also presents headline earnings per share.
3. SEGMENTAL REPORTING
As required by IFRS 8 'Operating Segments' ("IFRS 8"), the information provided to the Board, which is the Chief Operating
Decision Maker, has been classified into the following segments:
UK Commercial: The Group's portfolio of Greater London and regional offices, London serviced offices, roadside service
stations and logistics distribution centres;
UK Retail: The Group's portfolio of shopping centres, retail parks and other high street retail assets;
UK Hotels: The Group's hotel portfolio comprising 18 predominantly limited-service branded hotels:
- five Travelodge branded and externally managed hotels; and
- thirteen RBH managed hotels, of which ten are Holiday-Inn Express, two Hilton branded and one
Crowne Plaza.
The Group's hotel interests also include the 25.3 per cent investment in RBH. RBH is an independent hotel
management company engaged in developing and managing a diverse portfolio of hotels in partnership
with reputable international hotel brands;
Europe: The Group's portfolio in Germany, comprised of shopping centres, discount supermarkets and retail parks.
On 29 December 2017, the Group disposed of its interests in the Leopard Portfolio which comprised 66
retail properties, being a mixture of stand-alone supermarkets, food-store anchored retail parks and cash &
carry stores; and
Other: The Group's holding and management companies that carry out the head office and centralised asset
management activities of the Group.
Management information, as presented to the Chief Operating Decision Maker, is prepared on a proportionately consolidated basis.
Segmental reporting is therefore reported in line with management information, with the Group's share of joint ventures presented
line-by-line. Joint venture adjustments are disclosed to reconcile segmental performance and position to the condensed
consolidated financial statements.
Joint
UK UK Venture IFRS
Segmental income statement Commercial Retail Other Total Adj Total
for the six months ended 28 February 2019 GBPm GBPm GBPm GBPm GBPm GBPm
Continuing operations
Revenue
Rental income 18.7 19.3 - 56.7 (0.9) 55.8
Other income 0.8 - 0.5 1.3 - 1.3
Total revenue 19.5 19.3 0.5 58.0 (0.9) 57.1
Rental income 18.7 19.3 - 56.7 (0.9) 55.8
Rental expense (3.0) (1.7) - (6.2) - (6.2)
Net rental income 15.7 17.6 - 50.5 (0.9) 49.6
Other income 0.8 - 0.5 1.3 - 1.3
Gain/(loss) on revaluation of investment property 0.3 (27.0) - (30.6) 0.2 (30.4)
Loss on disposal of investment property - - - (0.2) - (0.2)
Net loss on business combinations - - - (0.1) - (0.1)
Foreign exchange gain/(loss) 0.3 0.2 (0.2) (0.2) - (0.2)
Other underlying finance income - - 0.1 0.1 0.2 0.3
Finance expense (5.0) (7.1) - (16.5) 0.3 (16.2)
Change in fair value of derivative financial instruments (1.1) (0.6) - (2.1) (0.1) (2.2)
Share of post-tax profit from associate - - - 0.5 - 0.5
Total per reportable segments 11.0 (16.9) 0.4 2.7 (0.3) 2.4
Unallocated income and expenses: (1)
Administrative costs and other fees (7.2) (0.1) (7.3)
Amortisation of intangible assets (0.1) - (0.1)
Profit before tax (4.6) (0.4) (5.0)
Taxation 1.3 0.1 1.4
(3.3) (0.3) (3.6)
Joint venture adjustments:
Share of post-tax profit from joint ventures - 0.2 0.2
Reversal of impairment of loans to joint ventures - 0.1 0.1
IFRS profit for the period (3.3) - (3.3)
(1) Unallocated income and expenses are items incurred centrally which are neither directly attributable nor can be reasonably allocated to
individual segments.
(2) As detailed in Note 14, the share of losses no longer exceeded the costs of the Group's joint venture interest in the Esplanade and the Group
has started recognising its share of profits by way of reversal of impairment of the loan to the joint venture. On a proportionate basis, the
Group's share in the net liabilities of the Esplanade are recognised line-by-line.
Joint
UK UK UK Venture IFRS
Segmental balance sheet Commercial Retail Hotels Europe Total Adj Total
as at 28 February 2019 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Investment property 553.1 459.2 362.6 243.3 1,618.2 (24.6) 1,593.6
Investment in associate - - 9.2 - 9.2 - 9.2
Trade and other receivables 4.3 8.4 3.4 3.6 19.7 (0.4) 19.3
Cash and cash equivalents 10.8 20.5 8.2 2.9 42.4 (0.8) 41.6
Borrowings, including finance leases (257.5) (270.0) (161.7) (139.7) (828.9) 15.1 (813.8)
Trade and other payables (9.5) (11.9) (2.8) (2.0) (26.2) 0.5 (25.7)
Segmental net assets 301.2 206.2 218.9 108.1 834.4 (10.2) 824.2
Unallocated assets and liabilities:
Other non-current assets 1.1 - 1.1
Trade and other receivables 2.6 - 2.6
Cash and cash equivalents 7.0 - 7.0
Net derivative financial instruments (6.3) 2.6 (3.7)
Deferred tax (8.0) 0.6 (7.4)
Trade and other payables (2.3) - (2.3)
Current tax liabilities (0.7) - (0.7)
827.8 (7.0) 820.8
Joint venture adjustments:
Investment in joint ventures - 2.0 2.0
Loans to joint ventures - 5.0 5.0
IFRS net assets 827.8 - 827.8
(1) As detailed in Note 14, the Group's interest in the Esplanade has been reduced to GBPNil in the financial statements in line with IAS 28. On a
proportionate basis, the Group's share in the net liabilities of the Esplanade are recognised line-by-line. The cumulative losses of this joint
venture that the Group has not recognised on an equity accounted basis at the reporting date are presented to reconcile segmental
information to the IFRS statements.
Joint
UK UK UK Venture IFRS
Segmental income statement Commercial Retail Hotels Europe Other Total Adj Total
for the six months ended 28 February 2018 GBPm GBPm GBPm GBPm GBPm GBP GBPm GBPm
Continuing operations
Revenue
Rental income 13.2 19.6 12.2 10.5 - 55.5 (0.9) 54.6
Other income 0.2 - - - 0.4 0.6 - 0.6
Total revenue 13.4 19.6 12.2 10.5 0.4 56.1 (0.9) 55.2
Rental income 13.2 19.6 12.2 10.5 - 55.5 (0.9) 54.6
Rental expense (1.5) (1.2) (0.6) (1.6) - (4.9) 0.1 (4.8)
Net rental income 11.7 18.4 11.6 8.9 - 50.6 (0.8) 49.8
Other income 0.2 - - - 0.4 0.6 - 0.6
Gain/(loss) on revaluation of investment
property 10.3 (12.1) 4.0 6.1 - 8.3 0.2 8.5
Gain/(loss) on disposal of investment property 0.7 - - (0.1) - 0.6 - 0.6
Loss on disposal of investment property held
for sale (0.1) - - - - (0.1) - (0.1)
Net gain on disposal of subsidiaries - (1.9) - 16.2 - 14.3 - 14.3
Net gain on business combinations (0.9) - 5.5 - - 4.6 - 4.6
Loss on disposal of other non-current assets
held for sale - - (0.1) - - (0.1) - (0.1)
Foreign exchange loss - - - (0.9) - (0.9) - (0.9)
Finance income on loans to joint ventures - - - - - - 0.2 0.2
Other underlying finance income - - - - 0.2 0.2 - 0.2
Finance expense (3.3) (7.4) (2.5) (1.6) - (14.8) 0.3 (14.5)
Other finance expense - - - (0.6) - (0.6) - (0.6)
Change in fair value of derivative financial
instruments 1.7 1.8 1.1 1.2 - 5.8 (0.6) 5.2
Reversal of impairment of loan to joint venture 0.1 - - - - 0.1 - 0.1
Share of post-tax profit from associate - - 0.3 - - 0.3 - 0.3
Total per reportable segments 20.4 (1.2) 19.9 29.2 0.6 68.9 (0.7) 68.2
Unallocated income and expenses: (1)
Administrative costs and other fees (7.3) 0.1 (7.2)
Amortisation of intangible assets (0.2) - (0.2)
Profit before tax 61.4 (0.6) 60.8
Taxation (1.3) 0.2 (1.1)
60.1 (0.4) 59.7
Joint venture adjustments:
Movement of losses restricted in joint ventures (3) (0.4) 0.4 -
IFRS profit for the period 59.7 - 59.7
(1) Other income includes management fee income from joint ventures. On a proportionate basis, and for segmental reporting purposes, the
Group share of the total joint venture investment management expense has been reclassified from administrative costs and other fees.
(2) Unallocated income and expenses are items incurred centrally which are neither directly attributable nor can be reasonably allocated to
individual segments.
(3) As detailed in Note 14, the Group's joint venture interest in the Esplanade has been reduced to GBPNil in the financial statements in line with
IAS 28. On a proportionate basis, the Group's share in the net liabilities of the Esplanade are recognised line-by-line. Movements in the
losses of the Esplanade that are not recognised on an equity accounted basis during each reporting period are presented to reconcile
segmental information to the IFRS statements.
Joint
UK UK UK Venture IFRS
Segmental balance sheet Commercial Retail Hotels Europe Total Adj Total
as at 28 February 2018 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Investment property 512.2 499.0 359.6 253.5 1,624.3 (25.3) 1,599.0
Investment in associate - - 9.2 - 9.2 - 9.2
Trade and other receivables 6.1 8.6 6.5 2.6 23.8 (0.1) 23.7
Cash and cash equivalents 23.2 10.4 6.1 5.8 45.5 (1.0) 44.5
Non-current assets held for sale 26.9 - - - 26.9 - 26.9
Borrowings, including finance leases (221.6) (321.8) (167.3) (130.2) (840.9) 15.8 (825.1)
Trade and other payables (9.0) (10.7) (5.8) (2.5) (28.0) 0.7 (27.3)
Segmental net assets 337.8 185.5 208.3 129.2 860.8 (9.9) 850.9
Unallocated assets and liabilities:
Other non-current assets 1.4 - 1.4
Trade and other receivables 1.3 - 1.3
Cash and cash equivalents 9.4 - 9.4
Net derivative financial instruments (5.6) 2.9 (2.7)
Deferred tax (10.5) 0.6 (9.9)
Trade and other payables (1.8) - (1.8)
Current tax liabilities (2.1) - (2.1)
852.9 (6.4) 846.5
Joint venture adjustments:
Joint venture non-controlling interests (0.1) 0.1 -
Cumulative losses restricted in joint ventures (1) 0.3 (0.3) -
Investment in joint ventures - 1.9 1.9
Loans to joint ventures - 4.7 4.7
IFRS net assets 853.1 - 853.1
(1) As detailed in Note 14, the Group's interest in the Esplanade has been reduced to GBPNil in the financial statements in line with IAS 28. On a
proportionate basis, the Group's share in the net liabilities of the Esplanade are recognised line-by-line. The cumulative losses of this joint
venture that the Group has not recognised on an equity accounted basis at the reporting date are presented to reconcile segmental
information to the IFRS statements.
Joint
UK UK UK venture IFRS
Segmental income statement Commercial Retail Hotels Europe Other Total adj total
for the year ended 31 August 2018 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Continuing operations
Revenue
Rental income 31.3 38.4 24.5 17.8 - 112.0 (1.8) 110.2
Other operating income 1.1 - - - 0.7 1.8 - 1.8
Total revenue 32.4 38.4 24.5 17.8 0.7 113.8 (1.8) 112.0
Rental income 31.3 38.4 24.5 17.8 - 112.0 (1.8) 110.2
Rental expense (4.5) (2.8) (1.3) (2.7) - (11.3) 0.2 (11.1)
Net rental income 26.8 35.6 23.2 15.1 - 100.7 (1.6) 99.1
Other operating income 1.1 - - - 0.7 1.8 - 1.8
Gain/(loss) on revaluation of investment
property 24.3 (26.1) 6.2 6.2 - 10.6 0.2 10.8
Gain on revaluation of investment property
held for sale 0.9 - - - - 0.9 - 0.9
Gain/(loss) on disposal of investment property 1.6 - - (0.1) - 1.5 - 1.5
Gain on disposal of investment property held
for sale 1.8 - - - - 1.8 - 1.8
Net gain/(loss) on disposal of subsidiaries 1.2 (1.9) - 16.1 - 15.4 - 15.4
Net gain/(loss) on acquisition of subsidiaries (1.1) - 5.5 - - 4.4 - 4.4
Loss on disposal of other non-current assets
held for sale - - (0.1) - - (0.1) - (0.1)
Foreign exchange loss - - - - (0.8) (0.8) - (0.8)
Finance income on loans to joint ventures - - - - - - 0.3 0.3
Other underlying finance income - - - - 0.3 0.3 - 0.3
Finance expense (7.1) (15.0) (5.1) (2.9) - (30.1) 0.8 (29.3)
Other finance expense (0.1) - - (0.5) - (0.6) - (0.6)
Change in fair value of derivative financial
instruments 2.4 2.8 0.9 0.7 - 6.8 (0.7) 6.1
Reversal of impairment of loan to joint venture 0.1 - - - - 0.1 - 0.1
Loss on sale of joint venture interests - - - (0.1) - (0.1) - (0.1)
Share of post-tax profit from associate - - 0.3 - - 0.3 - 0.3
Total per reportable segments 51.9 (4.6) 30.9 34.5 0.2 112.9 (1.0) 111.9
Unallocated income and expenses: (1)
Administrative costs and other fees (14.4) 0.2 (14.2)
Amortisation of intangible assets (0.3) - (0.3)
Profit before tax 98.2 (0.8) 97.4
Taxation (1.3) 0.2 (1.1)
96.9 (0.6) 96.3
Joint venture adjustments:
Movement of losses restricted in joint ventures(2) (0.6) 0.6 -
IFRS profit for the year 96.3 - 96.3
(1) Unallocated income and expenses are items earned or incurred centrally which are neither directly attributable nor can be reasonably
allocated to individual segments.
(2) As detailed in Note 15, the Group's joint venture interest in the Esplanade has been reduced to GBPNil in the financial statements in line with
IAS 28. On a proportionate basis, the Group's share in the net liabilities of the Esplanade are recognised line-by-line. Movements in the
losses of the Esplanade that are not recognised on an equity accounted basis during each reporting period are presented to reconcile
segmental information to the IFRS statements.
Joint
UK UK UK venture IFRS
Segmental balance sheet Commercial Retail Hotels Europe Total adj total
as at 31 August 2018 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Investment property 515.9 485.4 364.1 258.0 1,623.4 (25.4) 1,598.0
Investment in associate - - 9.1 - 9.1 - 9.1
Trade and other receivables 4.0 6.7 1.7 3.9 16.3 (0.5) 15.8
Cash and cash equivalents 20.1 9.9 7.5 5.1 42.6 (0.8) 41.8
Borrowings, including finance leases (199.8) (309.1) (164.9) (131.4) (805.2) 15.6 (789.6)
Trade and other payables (9.0) (11.4) (2.6) (2.3) (25.3) 0.6 (24.7)
Segmental net assets 331.2 181.5 214.9 133.3 860.9 (10.5) 850.4
Unallocated assets and liabilities:
Other non-current assets 1.3 - 1.3
Trade and other receivables 2.5 - 2.5
Cash and cash equivalents 17.2 - 17.2
Net derivative financial instruments (4.6) 2.8 (1.8)
Deferred tax (10.1) 0.6 (9.5)
Trade and other payables (2.4) - (2.4)
Current tax liabilities (2.0) - (2.0)
862.8 (7.1) 855.7
Joint venture adjustments:
Investment in joint ventures - 1.9 1.9
Loans to joint ventures - 5.2 5.2
IFRS net assets 862.8 - 862.8
(1) As detailed in Note 14, the Group's interest in the Esplanade is carried at GBPNil in the financial statements in line with IAS 28. On a
proportionate basis, the Group's share in the net liabilities of the Esplanade are recognised line-by-line. At 31 August 2018, cumulative
losses equalled the Group's net investment in the joint venture (31 August 2017: exceeded by GBP0.7 million).
4. RENTAL INCOME
Unaudited Unaudited Audited
28 February 28 February 31 August
2019 2018 2018
GBPm GBPm GBPm
Gross lease payments from third parties 45.5 43.6 88.2
Gross lease payments from related parties (Note 29) 10.3 11.0 22.0
Rental income 55.8 54.6 110.2
The future aggregate minimum rent receivable under non-cancellable operating lreases at the balance sheet date is as follows:
Not later than one year 105.0 96.9 104.8
Later than 1 year not later than 5 years 300.7 294.6 312.2
Later than 5 years 268.3 338.8 351.5
674.0 730.3 768.5
5. RENTAL EXPENSE
Unaudited Unaudited Audited
28 February 28 February 31 August
2019 2018 2018
GBPm GBPm GBPm
Non-recoverable service charge 2.8 1.9 3.3
Direct property operating expenses 1.1 1.8 4.9
Operating lease expense 0.8 0.6 1.4
Letting costs 0.4 0.3 0.6
Serviced office portfolio direct staff and sales costs 1.1 0.2 0.9
Rental expense 6.2 4.8 11.1
6. OTHER INCOME
Unaudited Unaudited Audited
28 February 28 February 31 August
2019 2018 2018
GBPm GBPm GBPm
Service fee income 1.4 0.4 1.8
Service fee expense (0.5) (0.2) (0.8)
Service fee margin (1) 0.9 0.2 1.0
Management fees from joint ventures (Note 29) - - 0.1
Insurance rebates 0.2 0.1 0.3
Salary recharges 0.2 0.2 0.3
Other property related income - 0.1 0.1
Other income 1.3 0.6 1.8
(1) Service fees relates to recoverable costs incurred by the Group in the serviced office portfolio that are recharged to tenants at a margin.
7. ADMINISTRATIVE COSTS AND OTHER FEES
Unaudited Unaudited Audited
28 February 28 February 31 August
2019 2018 2018
GBPm GBPm GBPm
General administrative expenses 1.9 1.8 3.4
Professional fees 1.1 1.6 2.9
Staff costs 3.8 3.7 7.3
Investment management fees to related party (Note 29) 0.5 0.1 0.6
Administrative costs and other fees 7.3 7.2 14.2
8. DISPOSAL OF SUBSIDIARIES
There were no disposals of subsidiaries in the six months to 28 February 2019.
The impact of corporate disposals during the year to 31 August 2018 and the related net cash inflow is presented below:
Lochside
View, Paragon Leopard 31 August
Edinburgh Square, Hull Portfolio 2018
GBPm GBPm GBPm GBPm
Carrying value of net assets disposed
Investment property (11.2) (12.9) (158.4) (182.5)
Trade and other receivables (0.4) - (0.2) (0.6)
Cash and cash equivalents (0.2) - (1.6) (1.8)
Borrowings - - 73.1 73.1
Trade and other payables 0.2 0.2 0.8 1.2
Net assets disposed (11.6) (12.7) (86.3) (110.6)
Consideration received (1) 13.0 11.0 103.6 127.6
Transaction costs (1) (0.2) (0.2) (1.2) (1.6)
(1) Net cash received at 31 August 2018 was GBP126.2 million as transaction costs on the Lochside disposal had not been paid at the reporting date.
The Leopard Portfolio comprised 66 retail properties - a mixture of stand-alone supermarkets, food-store anchored retail parks and
cash and carry stores. On 29 December 2017, the Group disposed of all but one of the property-owning subsidiaries of the Leopard
Portfolio to an external party for GBP103.6 million (EUR116.6 million), after the deduction of transaction costs of GBP1.2 million (EUR1.3 million).
On the date of sale, the carrying value of investment property within these subsidiaries was GBP158.4 million (EUR178.4 million), on
which GBP73.1 million (EUR82.3 million) of bank debt was secured. The net assets of the target group on the date of sale was GBP86.3
million (EUR97.2 million) and the Group recognised a gain on disposal of GBP16.1 million (EUR18.1 million). The investment property of the
remaining property-owning entity was acquired by the same party by way of a direct asset sale (see Note 13).
Redefine Paragon Square Limited, a wholly owned subsidiary of the Group, owned the House of Fraser department store in Hull.
On 15 November 2017, the Group disposed of this subsidiary for GBP11.0 million. The net assets of the subsidiary were GBP12.7 million
on disposal and the Group recognised a loss of GBP1.9 million in the income statement, after transaction costs. Net cash received at
the balance sheet date, after transactions costs paid, was GBP10.8 million.
Redefine Lochside View Edinburgh Limited, a wholly owned subsidiary of the Group, owned a regional office in Edinburgh. On 31
August 2018, the Group disposed of this subsidiary for GBP13.0 million subject to a completion adjustment. The net assets of the
subsidiary were GBP11.6 million on disposal and the Group recognised a gain of GBP1.2 million in the income statement, after transaction
costs. Net cash received at the balance sheet date was GBP13.0 million as transaction costs had not yet been paid.
9. BUSINESS COMBINATIONS
There were no business combinations in the six months to 28 February 2019. Further transactions costs of GBP0.1 million were
incurred during the six months to 28 February 2019 relating to the acquisition of International Hotel Properties Limited ("IHL").
The impact of business combinations during the year to 31 August 2018 and the related net cash outflow is presented below:
31 August
LSO IHL 2018
GBPm GBPm GBPm
Fair value of identifiable net assets acquired
Investment property 161.7 115.4 277.1
Trade and other receivables 0.9 1.9 2.8
Cash and cash equivalents 5.7 2.1 7.8
Borrowings (73.5) (54.4) (127.9)
Derivative financial instruments 0.4 (1.0) (0.6)
Trade and other payables (6.2) (2.2) (8.4)
Net assets acquired 89.0 61.8 150.8
Consideration transferred:
- Equity (share-for-share exchange) - (19.3) (19.3)
- Cash(1) (71.2) (7.5) (78.7)
(71.2) (26.8) (98.0)
Investment in associate (Note 15) - (13.5) (13.5)
Non-controlling interests proportionate share of the identifiable net assets (Note 26) (17.8) (16.0) (33.8)
Transaction costs(1) (1.1) - (1.1)
Net (loss)/gain on business combinations (1.1) 5.5 4.4
(1) Net cash paid at 31 August 2018 was GBP80.6 million including transaction costs and settlement of tax liabilities assumed of GBP0.8 million.
LSO
On 12 January 2018, RDI completed the corporate acquisition of 80 per cent of the issued share capital of St Dunstan's HoldCo
Limited and LSO Services Limited ("LSO Portfolio"), for an equity consideration of GBP71.2 million. The LSO portfolio consists of the
freehold and long-leasehold interests in four established high-quality flexible offices in London. This acquisition significantly
enhanced the quality of the overall property portfolio of the Group with strong property fundamentals and reduced leverage. Our
strategic partner, OSIT, operates the serviced office business of each property under management contracts, while the Group
employs staff directly for the day-to-day operations.
It has been determined that the transaction constitutes a business combination after due consideration of the assets and related
processes that have been assumed, notably the management contract with OSIT.
The fair value of the net assets acquired on 12 January 2018 was GBP89.0 million. OSIT's minority share of the identifiable net assets
is GBP17.8 million. As the consideration was determined with reference to net asset value, the Group did not pay a premium or obtain
a discount. Transaction costs of GBP1.1 million were incurred by the Group which have been expensed in the income statement within
the net gain on business combinations. This portfolio has been classified as investment property in line with the Group's accounting
policies. Receivables acquired were GBP0.9 million, all of which were fully collectable. Revenue from LSO since acquisition was GBP10.8
million comprising rental and net services income. Had the acquisition occurred on 1 September 2017, LSO would have generated
GBP16.2 million assuming a consistent revenue stream throughout the year.
IHL
International Hotel Properties Limited ("IHL") is established as a hotel investment company and was listed on the Euro MTF market
of the LuxSE and on the AltX of the JSE. IHL comprises nine limited service UK hotels and at 31 August 2017 the Group held a
17.2 per cent interest, classified as an investment at fair value through profit or loss. During the 2017 financial year, RDI submitted
a proposal to the IHL board to increase its shareholding in IHL by way of a scheme of arrangement. RDI would acquire the shares
of all scheme participants, being the minority interests (29.3 per cent) of IHL. IHL shareholder approval was obtained on 15
September 2017, at which point the transaction became subject only to Court approval. The Group was considered to have
significant influence over IHL from this date and the investment was reclassified as an investment in associate (Note 15).
On 13 November 2017 and on fulfilment of all conditions precedent to the scheme of arrangement, the Group acquired 16.4 million
shares in IHL from scheme participants and 1.9 million shares from Redefine Properties, increasing RDI's interest in IHL from 26.2
to 58.9 per cent. The value attributed to each IHL share was GBP1, settled in a share-for-share exchange with RDI shares at a value of
40.0 pence. 45.9 million RDI shares were issued in total representing gross consideration of GBP18.3 million. On 17 November 2017,
8.5 million shares in IHL were purchased at GBP1 per share. Consideration for these shares was GBP7.5 million in cash and the issuance
of 2.5 million RDI shares at 40.0 pence per share (GBP1.0 million in total). The transactions increased the Group's interest in IHL to
74.1 per cent. The residual 25.9 per cent non-controlling interest in IHL is held by one party, Southern Sun Africa ("TSogo Sun").
Since 13 November 2017, the Group has directed the operating and financial decisions of IHL and has been exposed to its variable
returns. RDI acquired control of IHL on this date, which is also considered the acquisition date for the purposes of IFRS 3. The
transaction has been accounted for as a business combination, having regard for the integrated set of assets, processes and
outputs that were acquired and that are capable of producing a return for the Group.
The fair value of the net assets of IHL acquired on the acquisition date of 15 September 2017 was GBP61.8 million. The fair value of
the cash and equity consideration transferred was GBP26.8 million, while the carrying value of the Group's associate interest was
GBP13.5 million. TSogo Sun's proportionate share of the identifiable net assets was GBP16.0 million and, as a result, the Group has
recognised a net gain on bargain purchase of IHL of GBP5.5 million. This represents the difference between the share price and swap
ratio agreed with shareholders and the net assets based on a third-party valuation of the investment property at completion date.
The gain has been recognised in the income statement within the net gain on business combinations. Minimal acquisition costs
were incurred by the Group on account of the structuring of the transaction. RDI share issue costs have been recognised directly in
equity as a reduction of share premium. The hotels acquired have been classified as investment property on initial recognition as
outlined in Note 13. Receivables acquired were GBP1.9 million, all of which were settled subsequent to acquisition.
10. FINANCE INCOME AND FINANCE EXPENSE
Unaudited Unaudited Audited
28 February 28 February 31 August
2019 2018 2018
GBPm GBPm GBPm
Finance income on bank deposits 0.1 - -
Finance income on loans to external parties - 0.2 0.2
Finance income on loans to joint ventures (Note 29) 0.2 0.2 0.3
Finance income on loans to other related parties (Note 29) - - 0.1
Finance income 0.3 0.4 0.6
Finance expense on bank and external loans (14.7) (13.4) (27.2)
Interest capitalised to qualifying investment property under development - 0.3 0.7
Amortisation of debt issue costs (0.6) (0.6) (1.2)
Accretion of fair value adjustments (0.4) (0.4) (0.8)
Finance lease interest (0.5) (0.4) (0.8)
Finance expense (16.2) (14.5) (29.3)
Net finance expense (15.9) (14.1) (28.7)
There was no capitalised interest during the period to 28 February 2019 as the qualifying investment property under development is
now substantially complete. Interest was capitalised on the basis of the Group's weighted average cost of debt of 3.4 per cent at 31
August 2018 (3.3 per cent at 28 February 2018) applied to the cost of property under development during that year.
11. OTHER FINANCE EXPENSE
Unaudited Unaudited Audited
28 February 28 February 31 August
2019 2018 2018
GBPm GBPm GBPm
Write-off of unamortised debt issue costs - 0.1 0.2
Other finance costs - 0.5 0.4
Other finance expense - 0.6 0.6
12. TAXATION
a) Tax recognised in the consolidated income statement:
Re-presented(1)
Unaudited Unaudited Audited
28 February 28 February 31 August
2019 2018 2018
GBPm GBPm GBPm
Current income tax
Income tax in respect of current period 0.1 0.5 0.8
Adjustments in respect of prior periods 0.2 0.6 0.8
Deferred tax
On fair value of investment property (0.4) 6.0 6.0
On non-UK losses (1.3) (1.3) (1.4)
On derivatives - - (0.4)
Reversal on disposal of Leopard portfolio - (4.7) (4.7)
Tax (credit)/charge for the period recognised in the consolidated income
statement (1.4) 1.1 1.1
(1) Tax has been re-presented at 28 February 2018 to split out the reversal on disposal of the Leopard portfolio
There was no tax recognised in equity or other comprehensive income during the period (28 February 2018: GBPnil, 31 August 2018:
GBPnil).
b) Reconciliation
The tax rate for the period is lower than the average standard rate of corporation tax in the UK of 19.0 per cent (28 February 2018:
19.0 per cent, 31 August 2018: 19.0 per cent). The differences are explained below:
Re-presented(1)
Unaudited Unaudited Audited
28 February 28 February 31 August
2019 2018 2018
GBPm GBPm GBPm
(Loss)/profit before tax (4.7) 60.8 97.4
(Loss)/profit before tax multiplied by standard rate of corporation tax (0.9) 11.6 18.5
Effect of:
- Revaluation of investment property 5.4 (0.3) (1.0)
- Gain on disposal of investment property - (0.1) (0.7)
- Gain on disposal of subsidiaries - (2.7) (2.9)
- Gain on business combinations - (0.9) (0.9)
- Change in fair value of derivative financial instruments 0.4 (1.0) (1.6)
- Income not subject to UK income tax (0.9) (1.5) (2.5)
- REIT exempt property rental profits (5.2) (4.9) (8.3)
- Losses utilised - - (0.1)
- Non-UK losses carried forward (1.3) (1.3) (1.3)
- Unutilised losses carried forward 0.4 1.1 0.1
- Impact of foreign tax 0.1 0.5 0.6
- Expenses not deductible for tax 0.3 - 0.4
- Adjustments in respect of prior periods 0.3 0.6 0.8
Tax (credit)/charge for the period recognised in the consolidated income
statement (1.4) 1.1 1.1
(1) Tax has been re-presented at 28 February 2018 to split out the reversal on disposal of the Leopard portfolio
In the reconciliation above for the period ended 28 February 2019, the effective tax rate of the Group was negative 29.8 per cent
(28 February 2018: 1.8 per cent, 31 August 2018: 1.1 per cent).
The enactment of Finance (No. 2) Act 2015 and Finance Act 2016 reduced the main rate of corporation tax from 20 per cent to 19
per cent with effect 1 April 2017, with a further reduction to 17 per cent from April 2020.
On 4 December 2013, the Group converted to a UK-REIT. As a result, the Group does not pay UK Corporation Tax on the profits
and gains from qualifying rental business in the UK provided certain conditions are met. Non-qualifying profits and gains of the
Group continue to be subject to corporation tax such as the profits and gains outside of the UK. The Directors intend the Group to
continue as a REIT for the foreseeable future. As a result, deferred tax is no longer recognised on temporary differences relating to
the UK property rental business which is within the REIT structure.
13. INVESTMENT PROPERTY
UK UK UK
Commercial Retail Hotels Europe(1) Total Freehold Leasehold
28 February 2019 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Opening carrying value at 1 September 2018 504.6 485.4 364.1 243.9 1,598.0 1,165.8 432.2
Acquisition of property 36.5 - - - 36.5 36.5 -
Capitalised expenditure 0.4 0.7 1.3 1.1 3.5 0.8 2.7
Disposals through sale of property - - - (3.3) (3.3) (3.3) -
Gain/(loss) on revaluation of investment
property 0.6 (26.9) (2.8) (1.3) (30.4) (15.2) (15.2)
Foreign exchange movement in foreign
operations - - - (10.7) (10.7) (9.2) (1.5)
IFRS carrying value at 28 February 2019 542.1 459.2 362.6 229.7 1,593.6 1,175.4 418.2
Adjustments:
Minimum payments under head leases
(Note 19) (1.9) (10.1) (0.4) (1.4) (13.8) - (13.8)
Tenant lease incentives (Note 17) 1.8 6.4 2.7 2.3 13.2 8.6 4.6
Market value of Group portfolio at 28
February 2019 542.0 455.5 364.9 230.6 1,593.0 1,184.0 409.0
Joint ventures
Share of joint venture investment property
(Note 14) 11.0 - - 13.6 24.6 24.6 -
Market value of total portfolio at 28 February
2019
(on a proportionately consolidated basis) 553.0 455.5 364.9 244.2 1,617.6 1,208.6 409.0
UK UK UK
Commercial Retail Hotels Europe(1) Total Freehold Leasehold
31 August 2018 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Opening carrying value at 1 September 2017 344.1 507.5 239.3 404.0 1,494.9 1,239.7 255.2
Business combinations (Note 9) 161.7 - 115.4 - 277.1 104.9 172.2
Acquisition of property 20.9 - - - 20.9 20.9 -
Capitalised expenditure 0.9 4.0 3.2 6.0 14.1 4.0 10.1
Capitalised finance costs - - - 0.7 0.7 - 0.7
Disposals through sale of subsidiaries (Note 8) (11.1) - - (158.4) (169.5) (169.5) -
Disposals through the sale of property (15.3) - - (6.0) (21.3) (20.3) (1.0)
Transfer to assets held for sale (23.1) - - - (23.1) (23.1) -
Gain on revaluation of investment property prior
to reclassification as held for sale 0.9 - - - 0.9 0.9 -
Transfer from assets held for sale 0.9 - - 3.6 4.5 3.6 0.9
(Loss)/gain on revaluation of investment
property 24.6 (26.1) 6.2 6.1 10.8 16.0 (5.2)
Foreign exchange movement in foreign
operations - - - (12.0) (12.0) (11.3) (0.7)
IFRS carrying value at 31 August 2018 504.6 485.4 364.1 243.9 1,598.0 1,165.8 432.2
Adjustments:
Minimum payments under head leases
(Note 19) (1.9) (10.1) (0.4) (1.5) (13.9) - (13.9)
Tenant lease incentives (Note 17) 1.9 5.7 1.2 2.1 10.9 6.9 4.0
Market value of Group portfolio at
31 August 2018 504.6 481.0 364.9 244.5 1,595.0 1,172.7 422.3
Joint ventures
Share of joint venture investment property
(Note 15) 11.3 - - 14.1 25.4 25.4 -
Market value of total portfolio at
31 August 2018 (on a proportionately
consolidated basis) 515.9 481.0 364.9 258.6 1,620.4 1,198.1 422.3
(1) Included within the Europe segment at 28 February 2019 is property under development of GBP31.3 million (31 August 2018: GBP32.1 million;
28 February 2018: GBP30.4 million).
The tables above present both segmental and market value investment property information prepared on a proportionately consolidated basis.
Properties that have been classified as held for sale in the current year are also included so that the market value of the total portfolio can be
determined. This format is not a requirement of IFRS and is for informational purposes as it is used in reports presented to the Group's Chief
Operating Decision Maker.
Recognition
Judgement may be required to determine whether a property qualifies as an investment property. Investment property comprises a
number of retail and commercial properties in the UK and Europe that are leased to unconnected third parties.
The UK Hotel portfolio is held for capital appreciation and to earn rental income. Apart from the five Travelodge branded hotels, the
hotel portfolio has been let to RBH to separately manage the operating business of each hotel for a fixed rent. The rent is subject to
annual review which takes into account the forecast EBITDA. As detailed in the key judgements and estimates in Note 2, aside from
the Group's associate interest in RBH and the receipt of rental and dividend income, RDI is not involved in the hotel management
business and there are limited transactions between RDI and RBH. As a result, the Directors consider it appropriate to classify the
hotel portfolio as investment property in line with IAS 40.
On acquisition of control of the IHL group, the operating businesses of five of the nine hotels acquired were managed internally,
such that these hotels were considered owner-occupied prior to acquisition by RDI. With effect from 1 September 2017, RDI
restructured the operating business model of these hotels to a property rental business model by disposing of the operating
businesses to RBH to manage in the same manner as Group's existing hotel portfolio. The Group therefore considers classification
as investment property on initial recognition to be appropriate.
Valuation
The carrying amount of investment property is the market value of the property as determined by appropriately qualified
independent valuers and adjusted for minimum payments under head leases and tenant lease incentives. Valuations are based on
what is determined to be the highest and best use. When considering the highest and best use a valuer will consider, on a property
by property basis, and in limited circumstances in aggregation with other assets, its actual and potential uses which are physically,
legally and financially viable. Where the highest and best use differs from the existing use, the valuer will consider the cost and the
likelihood of achieving and implementing this change to determine an appropriate valuation.
The fair value of the Group's property for the period ended 28 February 2019 was assessed by independent and appropriately
qualified valuers in accordance with the Royal Institute of Chartered Surveyors ("RICS") Valuation - Global Standards 2017
(incorporating the IVSC International Valuation Standards), if relevant, the RICS Valuation - Professional Standards UK January
2014 (revised April 2015) and IFRS 13. The valuations are performed by BNP Paribas Real Estate for the UK Shopping Centres
and the Esplanade and by Savills for rest of the portfolio. The valuations are reviewed internally by senior management and
presented to the Audit and Risk Committee. The presentation includes discussion around the assumptions used by the external
valuers, as well as a review of the resulting valuations.
Valuation inputs
The fair value of the property portfolio has been determined using either a discounted cash flow or a yield capitalisation technique,
whereby contracted and market rental values are capitalised at a market rate. The resulting valuations are cross-checked against
the net initial yield and the fair market values per square foot of comparable recent market transactions.
The valuation techniques described above are consistent with IFRS 13 and use significant unobservable inputs. Valuation
techniques can change at each valuation round depending on prevailing market conditions and the property's highest and best use
at the reporting date. Where there is a lack of market comparable transactions, the level of estimation and judgement increases on
account of less observable inputs and the degree of variability could be expected to widen. This is of particular relevance to the
Group's UK Retail sector where there is continued weakening of investor sentiment, retail failures and ongoing structural change in
consumer behaviour.
The Group considers that all of its investment property falls within 'Level 3', as defined by IFRS 13 (refer to Note 28). There has
been no transfer of property within the fair value hierarchy during the period.
Acquisitions
The Group acquired 13.5 acres of land interest in Bicester, Oxfordshire for GBP7.9 million (excluding costs) and an industrial estate in
Farnborough, Hampshire (Southwood Business Park) for a total consideration of GBP26.3 million (excluding costs).
Disposals
The Group made one disposal during the period to 28 February 2019 from the European portfolio, namely a retail warehouse in
Eilenberg, Germany. The sale at book value realised a net loss after costs of GBP0.2 million.
Sales Disposal Net sales Carrying Gain/(loss)
proceeds costs proceeds value on disposal
28 February 2019 GBPm GBPm GBPm GBPm GBPm
Eilenburg 3.3 (0.2) 3.1 3.3 (0.2)
Disposals during the period 3.3 (0.2) 3.1 3.3 (0.2)
Committed expenditure
The Group was contractually committed to expenditure of GBP22.7 million for the future development and enhancement of investment
property at 28 February 2019 (31 August 2018: GBP8.3 million).
Commercial Property Price Risk
The Board draws attention to the risks associated with commercial property investments. Although over the long term property is
considered a low risk asset, investors must be aware that significant short and medium term risk factors are inherent in the asset
class. Investments in property are relatively illiquid and usually more difficult to realise than listed equities or bonds and this restricts
the Group's ability to realise value in cash in the short-term.
14. INVESTMENT IN AND LOANS TO JOINT VENTURES
Unaudited Audited
28 February 31 August
2019 2018
GBPm GBPm
Investment in joint ventures
Opening balance at 1 September 1.9 1.9
Additional investment in joint ventures - 0.1
Share of post-tax profit from joint ventures 0.2 -
Foreign currency translation (0.1) (0.1)
Investment in joint ventures 2.0 1.9
Loans to joint ventures
Opening balance at 1 September 5.2 4.3
Increase in loans to joint ventures - 1.0
Repayment of loans by joint ventures (0.1) (0.1)
Reversal of impairment of loans to joint ventures 0.1 0.1
Foreign currency translation (0.2) (0.1)
Loans to joint ventures 5.0 5.2
Carrying value of interests in joint ventures 7.0 7.1
During the period ended 28 February 2019, the Group's material investments in joint ventures which are presented in the tables of
this note included the following interests:
(i) 52 per cent interest in RI Menora German Holdings S.a.r.l., a joint venture with Menora Mivtachim, which ultimately owns
properties in Waldkraiburg, Huckelhoven and Kaiserslautern, Germany. The Group acquired an additional 1.5 per cent interest
in the joint venture in November 2017 following the acquisition of a non-controlling interest. Notwithstanding the economic
shareholding, the contractual terms provide for joint control and so the Company does not control the entity;
(ii) 49 per cent interest in Wichford VBG Holding S.a.r.l., a joint venture with Menora Mivtachim, which owned Government-let
properties in Dresden, Berlin, Stuttgart and Cologne, Germany. The joint venture disposed of its property-owning subsidiaries
on 1 January 2017 as detailed below; and
(iii) 50 per cent interest in TwentySix The Esplanade Limited, a joint venture with Rimstone Limited, which owns an office building
in St. Helier, Jersey.
The Group's interest in joint venture entities is in the form of:
1) an interest in the share capital of the joint venture companies; and
2) loans advanced to the joint venture entities.
RI Menora German Holdings S.a.r.l. and Wichford VBG Holding S.a.r.l. both have accounting year ends of 31 December which
differ from the Group so as to align with the year end of the joint venture partner, Menora Mivtachim.
Wichford VBG Holding S.a.r.l.
On 1 January 2017, Wichford VBG Holding S.a.r.l. exchanged on the sale of its four German office assets. During the year ended
31 August 2018, the Group incurred additional transaction costs of GBP0.1 million which have been presented as a loss on sale of the
joint venture.
Interest in joint ventures previously not recognised
Under the equity method, the Esplanade was carried at nil in the Group's financial statements at the prior period end on 28
February 2018. At 28 February 2019, the share of these cumulative losses no longer exceeds the Group's cumulative cost of
investment in and loans to, the Esplanade. As such, the Group can begin to recognise its share of profits by way of reversal of
previous impairment charges taken against the loans made to the joint venture. On a proportionate basis and for segmental
reporting purposes, the Group's interest in the Esplanade is recognised on a line-by-line basis. Refer to Note 3.
Summarised Financial Information
The summarised financial information of the Group's joint ventures is set out separately below:
RI Elimination
Wichford Menora of joint
VBG German venture
Holding Holdings partners' Proportionate
S.a.r.l. S.a.r.l. Esplanade Total interest Total
28 February 2019 GBPm GBPm GBPm GBPm GBPm GBPm
Percentage ownership interest 49% 52% 50%
Summarised Income Statement
Rental income - 0.9 0.9 1.8 (0.9) 0.9
Rental expense - (0.1) - (0.1) 0.1 -
Net rental income - 0.8 0.9 1.7 (0.8) 0.9
Administrative costs and other fees - (0.1) 0.3 0.2 (0.1) 0.1
Net operating (expense)/income - 0.7 1.2 1.9 (0.9) 1.0
Gain/(loss) on revaluation of investment property - 0.2 (0.6) (0.4) 0.2 (0.2)
Finance expense on loans from joint venture partners - (0.3) - (0.3) 0.1 (0.2)
Finance expense - (0.1) (0.5) (0.6) 0.3 (0.3)
Change in fair value of derivative financial
instruments - - 0.3 0.3 (0.1) 0.2
(Loss)/profit before tax - 0.5 0.4 0.9 (0.4) 0.5
Taxation (0.1) - (0.1) (0.2) 0.1 (0.1)
(Loss)/profit and total comprehensive
(expense)/income (0.1) 0.5 0.3 0.7 (0.3) 0.4
Reconciliation to IFRS:
Elimination of non-controlling and joint venture
partners' interests - (0.2) (0.2) (0.4) 0.3 (0.1)
Movement in losses restricted in joint ventures - - (0.1) (0.1) - (0.1)
Group share of joint venture results (0.1) 0.3 - 0.2 - 0.2
Summarised Balance Sheet
Investment property - 26.2 21.9 48.1 (23.6) 24.5
Trade and other receivables - 0.8 0.1 0.9 (0.4) 0.5
Cash and cash equivalents 0.8 0.3 0.6 1.7 (0.8) 0.9
Total assets 0.8 27.3 22.6 50.7 (24.8) 25.9
External borrowings - (13.0) (16.8) (29.8) 14.6 (15.2)
Loans from joint venture partners - (8.9) (6.6) (15.5) 7.7 (7.8)
Derivative financial instruments - - (5.3) (5.3) 2.6 (2.7)
Deferred tax - (1.2) - (1.2) 0.6 (0.6)
Trade and other payables (0.1) (0.7) (0.3) (1.1) 0.5 (0.6)
Total liabilities (0.1) (23.8) (29.0) (52.9) 26.0 (26.9)
Non-controlling interests - (0.3) - (0.3) 0.1 (0.2)
Net assets/(liabilities) 0.7 3.2 (6.4) (2.5) 1.3 (1.2)
Reconciliation to IFRS:
Elimination of joint venture partners' interests (0.3) (1.6) 3.2 1.3 (1.3) -
Loan to joint ventures (1) (Note 29) - 4.9 0.1 5.0 - 5.0
Cumulative losses restricted (2) - - 3.2 3.2 - 3.2
Carrying value of interests in joint ventures 0.4 6.5 0.1 7.0 - 7.0
(1) Loans to joint ventures include the opening balance, any advances or repayments and foreign currency movements during the period.
(2) Cumulative losses restricted represent the Group's share of losses in the Esplanade which previously exceeded the cost of the Group's investment. At 28 February
2019 the Group's share of losses in the Esplanade no longer exceeded the cost of the Group's investment and the Group has started recognising its share of profits
by way of reversal of impairment of the loan to the joint venture.
RI Elimination
Wichford Menora of joint
VBG German venture
Holding Holdings partners' Proportionate
S.a.r.l. S.a.r.l. Esplanade Total interest total
31 August 2018 GBPm GBPm GBPm GBPm GBPm GBPm
Percentage ownership interest 49% 52% 50%
Summarised income statement
Rental income - 1.8 1.7 3.5 (1.7) 1.8
Rental expense - (0.3) - (0.3) 0.1 (0.2)
Net rental income - 1.5 1.7 3.2 (1.6) 1.6
Administrative costs and other fees (0.2) (0.2) - (0.4) 0.2 (0.2)
Net operating (expense)/income (0.2) 1.3 1.7 2.8 (1.4) 1.4
Gain/(loss) on revaluation of investment property - 0.2 (0.6) (0.4) 0.2 (0.2)
Finance expense on loans from joint venture partners - (0.6) - (0.6) 0.3 (0.3)
Finance expense - (0.3) (1.1) (1.4) 0.7 (0.8)
Change in fair value of derivative financial
instruments - - 1.4 1.4 (0.7) 0.7
(Loss)/profit before tax (0.2) 0.6 1.4 1.8 (0.9) 0.8
Taxation - (0.4) - (0.4) 0.2 (0.2)
(Loss)/profit and total comprehensive
(expense)/income (0.2) 0.2 1.4 1.4 (0.7) 0.7
Reconciliation to IFRS:
Elimination of non-controlling and joint venture
partners' interests 0.1 (0.1) (0.7) (0.7) 0.7 -
Movement in losses restricted in joint ventures - - (0.7) (0.7) - (0.7)
Group share of joint venture results (0.1) 0.1 - - - -
Summarised balance sheet
Investment property - 27.2 22.5 49.7 (24.3) 25.4
Trade and other receivables - 0.8 0.2 1.0 (0.5) 0.5
Cash and cash equivalents 0.8 0.3 0.4 1.5 (0.7) 0.8
Total assets 0.8 28.3 23.1 52.2 (25.5) 26.7
External borrowings - (13.7) (17.0) (30.7) 15.1 (15.6)
Loans from joint venture partners - (9.4) (6.6) (16.0) 7.8 (8.2)
Derivative financial instruments - - (5.5) (5.5) 2.7 (2.8)
Deferred tax - (1.2) - (1.2) 0.6 (0.6)
Trade and other payables - (0.7) (0.6) (1.3) 0.5 (0.8)
Total liabilities - (25.0) (29.7) (54.7) 26.7 (28.0)
Non-controlling interests - (0.3) - (0.3) 0.2 (0.1)
Net assets/(liabilities) 0.8 3.0 (6.6) (2.8) 1.4 (1.4)
Reconciliation to IFRS:
Elimination of joint venture partners' interests (0.4) (1.5) 3.3 1.4 (1.4) -
Loan to joint ventures(1) (Note 32) - 5.2 - 5.2 - 5.2
Cumulative losses restricted(2) - - 3.3 3.3 - 3.3
Carrying value of interests in joint ventures 0.4 6.7 - 7.1 - 7.1
(1) Loans to joint ventures include the opening balance, any advances or repayments and foreign currency movements during the period.
(2) Cumulative losses restricted represent the Group's share of losses in the Esplanade which equalled the cost of the Group's investment at
31 August 2018. As a result, the carrying value of the investment was GBPNil in accordance with the requirements of IAS 28.
15. INVESTMENT IN ASSOCIATE
Unaudited Audited
28 February 31 August
2019 2018
GBPm GBPm
Associate investment in IHL and RBH
Opening balance at 1 September 9.1 9.4
IHL
Transfer from investment at fair value through profit or loss - 8.5
Additions - 5.0
Reclassification as investment in subsidiary (Note 9) - (13.5)
RBH
Share of post-tax profit from associate 0.5 0.3
Distributions from associate (Note 29) (0.4) (0.6)
Carrying value of net investment in associate 9.2 9.1
IHL
On 15 September 2017, the Group obtained consent from the shareholders of IHL to acquire 16.4 million shares (29.3 per cent)
being all of the non-controlling interest in IHL via a scheme of arrangement. From this date, the Group was considered to have
significant influence over IHL and the investment was reclassified from an investment at fair value through profit or loss. On 26
October 2017, the Group acquired an additional 5.0 million shares in IHL for GBP5.0 million from Redefine Properties and increased its
interest to 26.2 per cent. The additional interests acquired allowed RDI to continue to participate in the financial and operating
decisions of IHL, but not to direct those decisions, and therefore the cumulative investment of GBP13.5 million continued to be
classified as an associate.
On 13 November 2017, the scheme of arrangement completed, and the Group acquired 16.4 million shares from scheme
participants and 1.9 million shares from Redefine Properties, increasing RDI's interest in IHL from 26.2 to 58.9 per cent (increased
to 74.1 per cent at period end). The Group could, from this date, direct the operating and financial decisions of IHL and was
exposed to the variable returns of the property group as a result. RDI had acquired control of IHL from this date and this is
considered the acquisition date for the purposes of IFRS 3. The fair value of the Group's associate interest in IHL of GBP13.5 million
was, therefore, included in the determination of net gain on bargain purchase of IHL as a stepped acquisition.
RBH
The summarised financial information of RBH is set out below.
Unaudited Audited
28 February 31 August
2019 2018
GBPm GBPm
Summarised Income Statement
Revenue 37.1 78.3
Other income 2.0 1.6
Expenses (36.6) (78.1)
Profit from operations 2.5 1.8
Taxation (0.5) (0.7)
Profit for the period 2.0 1.1
Elimination of third party interest (1.5) (0.8)
Group share of results 0.5 0.3
Classified as:
Share of post-tax profit 0.5 0.3
Summarised Balance Sheet
Non-current assets 4.1 4.1
Intangible asset 28.1 28.1
Trade and other receivables 9.3 9.3
Cash and cash equivalents 4.0 3.9
Total assets 45.5 45.4
Current liabilities (13.2) (13.6)
Total liabilities (13.2) (13.6)
Net assets 32.3 31.8
Capital contribution adjustment 1.1 1.1
Adjusted net assets 33.4 32.9
Elimination of third party interest (25.0) (24.6)
Share of net assets attributable to the Group 8.4 8.3
Recoverable amount of excess net investment in associate 0.8 0.8
Carrying value of the Group's net investment in associate 9.2 9.1
Distributions received from the associate for the period ended 28 February 2019 of GBP0.4 million (31 August 2018 of GBP0.6 million).
Following an internal impairment assessment and on receipt of an independent valuation of RBH, the Directors considered that the
recoverable amount of the Group's net investment in RBH was GBP9.4 million at 31 August 2017. At 28 February 2019, the Directors
considered this valuation still to be an appropriate reference for assessing the carrying value of RBH and any impairment indicators.
There is no objective evidence of impairment at the reporting date.
16. OTHER NON-CURRENT ASSETS
INTANGIBLE ASSETS
Unaudited Audited
28 February 31 August
2019 2018
GBPm GBPm
Opening balance at 1 September 0.8 1.1
Amortisation (0.1) (0.3)
Closing balance 0.7 0.8
Intangible assets were recognised on the acquisition of Redefine International Management Holdings Limited Group ("RIMH") and
represented the fair value of the advisory agreements acquired by the Group. The value attributed to the contracts between RIMH
and third parties, including joint ventures of the Group and the non-controlling interests, was GBP1.9 million. The intangible asset is
being amortised on a straight-line basis over the remaining term of the contracts, which have an average life of eight years, and a
remaining life of just under three years at 28 February 2019.
PROPERTY, PLANT AND EQUIPMENT
Unaudited Audited
28 February 31 August
2019 2018
GBPm GBPm
Opening balance at 1 September 0.5 0.1
Additions 0.1 0.6
Depreciation (0.1) (0.2)
Disposals net of accumulated depreciation (0.1) -
Closing balance 0.4 0.5
Total other non-current assets 1.1 1.3
17. RECEIVABLES
Unaudited Audited
28 February 31 August
2019 2018
GBPm GBPm
Non-current
Tenant lease incentives (1) 9.0 8.1
Tenant lease incentives to related parties (1) (Note 29) 0.8 0.4
Loans to external parties 1.6 1.6
Letting costs 1.2 1.1
Total non-current other receivables 12.6 11.2
Current
Rent receivable 1.6 1.0
Tenant lease incentives (1) 1.5 1.6
Tenant lease incentives to related parties (1) (Note 29) 1.9 0.8
Other amounts receivable from related parties (Note 29) - 0.3
Prepayments and accrued income 2.7 2.5
Other receivables 1.6 0.9
Total current trade and other receivables 9.3 7.1
Total receivables 21.9 18.3
(1) Total tenant lease incentives of GBP13.2 million (31 August 2018: GBP10.9 million) have been deducted from investment property in determining
fair value at the balance sheet date. Refer to Note 13.
18. CASH AND CASH EQUIVALENTS
Unaudited Audited
28 February 31 August
2019 2018
GBPm GBPm
Unrestricted cash and cash equivalents 36.3 58.3
Restricted cash and cash equivalents 12.3 0.7
Cash and cash equivalents 48.6 59.0
At 28 February 2019, cash and cash equivalents to which the Group did not have instant access amounted to GBP12.3 million (31
August 2018: GBP0.7 million). GBP0.7 million of the restricted cash is held on deposit in Germany under an hereditable building right
agreement for the property at Ingolstadt and GBP11.6 million is held by Aviva in respect of a facility which has a charge against four
shopping centres, namely: Grand Arcade, Wigan; Weston Favell, Northampton; Birchwood, Warrington and Byron Place, Seaham.
The Group's share of total cash and cash equivalents, including its share of joint venture cash, at 28 February 2019 was GBP49.4
million (31 August 2018: GBP59.8 million), with a further GBP25.0 million of undrawn committed facilities available (31 August 2018: GBP75.0
million).
19. BORROWINGS, INCLUDING FINANCE LEASES
Unaudited Audited
28 February 31 August
2019 2018
GBPm GBPm
Non-current
Bank loans 779.0 787.9
Less: unamortised debt issue costs (4.9) (2.7)
Less: fair value adjustments (13.6) (14.1)
760.5 771.1
Other external loan 0.6 -
Finance leases 13.0 13.1
Total non-current borrowings, including finance leases 774.1 784.2
Current
Bank loans 39.8 4.7
Less: unamortised debt issue costs (0.3) (0.2)
Less: fair value adjustments (0.6) (0.6)
38.9 3.9
Other external loan - 0.7
Finance leases 0.8 0.8
Total current borrowings, including finance leases 39.7 5.4
Total borrowings, including finance leases 813.8 789.6
Analysis of movement in net borrowings, including finance leases
The table below presents the movements in net borrowings for the period ended 28 February 2019, split between cash and non-
cash movements and as required by IAS 7.
Cash and cash
Non-current Current equivalents Net debt
GBPm GBPm GBPm GBPm
Opening balance at 1 September 2018 784.2 5.4 (59.0) 730.6
Financing activities (cash)
Borrowings drawn 38.7 - (38.7) -
Borrowings repaid (4.7) (2.4) 7.1 -
Debt issue cost additions (3.0) - 3.0 -
31.0 (2.4) (28.6) -
Financing activities (non-cash)
Debt issue costs movements 0.6 - - 0.6
Accretion of fair value adjustments 0.4 - - 0.4
Reclassification between current and non-current (36.7) 36.7 - -
(35.7) 36.7 - 1.0
Other net cash movements - - 39.0 39.0
Foreign currency translation (5.4) - - (5.4)
Closing balance as at 28 February 2019 774.1 39.7 (48.6) 765.2
Bank loans
28 February 2019 31 August 2018
Carrying Nominal Fair Carrying Nominal Fair
Value Value Value Value Value Value
GBPm GBPm GBPm GBPm GBPm GBPm
Non-current liabilities
Bank loans 779.0 779.0 779.0 787.9 787.9 787.9
Less: unamortised debt issue costs (4.9) - - (2.7) - -
Less: fair value adjustments (13.6) - (10.8) (14.1) - (10.3)
Total non-current bank loans 760.5 779.0 768.2 771.1 787.9 777.6
Current liabilities
Bank loans 39.8 39.8 39.8 4.7 4.7 4.7
Less: unamortised debt issue costs (0.3) - - (0.2) - -
Less: fair value adjustments (0.6) - (0.6) (0.6) - (0.6)
Total current bank loans 38.9 39.8 39.2 3.9 4.7 4.1
Total IFRS bank loans 799.4 818.8 807.4 775.0 792.6 781.7
Joint ventures
Share of joint ventures bank loans 15.1 15.1 15.1 15.6 15.6 15.6
Total bank loans (on a proportionately
consolidated basis) 814.5 833.9 822.5 790.6 808.2 797.3
Cash and cash equivalents (48.6) (48.6) (48.6) (59.0) (59.0) (59.0)
Share of joint ventures cash and cash
equivalents (0.8) (0.8) (0.8) (0.8) (0.8) (0.8)
Net debt (on a proportionately
consolidated basis) 765.1 784.5 773.1 730.8 748.4 737.5
The table above presents bank loans, cash and cash equivalents and net debt information prepared on a proportionately consolidated basis. This
format is not a requirement of IFRS and is presented for informational purposes only as it is used in reports presented to the Group's Chief
Operating Decision Maker.
The Group's bank loans are secured over investment property of GBP1,559.3 million (31 August 2018: GBP1,525.4 million) and are
carried at amortised cost. On a proportionately consolidated basis, bank loans are secured over investment property of GBP1,584.0
million (31 August 2018: GBP1,550.8 million).
The Group's nominal value of drawn debt (on a proportionately consolidated basis) has increased during the period to GBP833.9
million (31 August 2018: GBP808.2 million) following refinancings, drawdowns and most significantly the major transactions the Group
has been engaged in over the last six months. These include:
- in September 2018, following the Eilenburg disposal from the Premium portfolio, EUR3.1 million of sales proceeds were repaid
against the loan held with Munchener Hypothekenbank eG;
- on 12 October 2018, the Group drew EUR19.4 million from a new facility, which matures in June 2023, secured over its property at
Ingolstadt in Germany following completion of the main development and handover to Primark;
- at 31 August the total drawn balance on the AUK facility was GBP228.0 million and on 21 September 2018 the group drew a
further GBP15m on the AUK revolving credit facility ("RCF");
- in October 2018 the Group voluntarily cancelled GBP28.0 million of the AUK facility reducing the total available facility from GBP303.0
million to GBP275.0 million (with a drawn balance of GBP243.0 million and an undrawn balance of GBP32.0 million);
- in late October 2018, following a lender valuation, the Group was notified that the lenders loan to value on the Aviva facility was
in excess of its 85 per cent covenant. The loan, which is secured against four of the Group's UK Shopping Centres (namely
Grand Arcade, Wigan, Weston Favell, Northampton, Birchwood, Warrington and Byron Place, Seaham) has an outstanding
principal balance of GBP144.7 million (at 28 February 2019), a fixed rate of interest of 5.5 per cent and matures in April 2042. As
permitted within the facility agreement, the Group subsequently paid GBP9.7 million to cure the loan to value covenant to below 85
per cent. Since October 2018 and at the compliance reporting date in January 2019, the Group remained in an operational
cash trap whereby net operating cashflows are retained within the facility and are anticipated to be used to reduce the principal
balance outstanding. At 28 February 2019 the cash paid to cure the covenant, together with the trapped operational cashflow
(GBP11.6 million), is disclosed as Restricted Cash within Note 18. In April 2019, post period end, a further event of default
occurred. See Note 33 for further details;
- in January 2019 the group reported an event of default on a facility held with Santander secured over three hotels controlled by
the Group, namely the Holiday Inn Express, Dunstable; the Holiday Inn Express, Southampton; and the Holiday Inn Express,
Redditch. The event of default was in respect to both historic interest service cover and historic loan to EBITDA. As permitted
within the facility agreement, the Group subsequently prepaid GBP3.0 million against the facility. No further covenant concerns
have arisen;
- in January 2019 the Group completed the early refinancing of the AUK facility with total facility commitments of GBP275.0 million
and the Group drew down an additional GBP7.0 million on refinancing to bring the total drawn amount to GBP250.0 million with an
undrawn facility commitment of GBP25.0 million. The refinancing is not a substantial modification and related debt issue costs are
being amortised over the remaining term of the refinanced facility; and
- in January 2019 the Group prepaid GBP3.0 million of the IHL debt to strengthen the related covenant.
Maturity
The maturity of Group bank loans, gross of unamortised debt issue costs and fair value adjustments is as follows:
Unaudited Audited
28 February 31 August
2019 2018
GBPm GBPm
Less than one year 39.8 4.7
Between one year and five years 613.0 585.5
More than five years 166.0 202.4
818.8 792.6
Certain borrowing agreements contain financial and other covenants that, if contravened, could alter the repayment profile.
Fair value disclosures
The nominal value of floating rate borrowings is considered to be a reasonable approximation of fair value. The fair value of fixed
rate borrowings at the reporting date has been calculated by discounting cash flows under the relevant agreements at a market
interest rate for similar debt instruments. The market interest rate has been determined having regard to the term, duration and
security arrangements of the relevant loan and an estimation of the current rates charged in the market for similar instruments
issued to companies of similar sizes.
The Group considers that all bank loans, including the Group's share of joint venture bank loans at a total carrying value of GBP833.9
million, fall within 'Level 3' as defined by IFRS 13 (refer to Note 28).
Finance leases
Obligations under finance leases at the reporting date are as follows:
Unaudited Audited
28 February 31 August
2019 2018
GBPm GBPm
Minimum lease payments under finance lease obligations:
Not later than one year 0.8 0.8
Later than one year not later than five years 3.2 3.2
Later than five years 109.2 109.6
113.2 113.6
Less: finance charges allocated to future periods (99.4) (99.7)
Present value of minimum lease payments 13.8 13.9
Not later than one year 0.8 0.8
Later than one year not later than five years 2.7 2.6
Later than five years 10.3 10.5
Finance lease obligations relate to the Group's leasehold interests in investment property. Finance leases are effectively secured
obligations, as the rights to the leased asset revert to the lessor in the event of default. The discount rates used in calculating the
present value of the minimum lease payments range from 1.8 to 6.3 per cent. The fair value of the finance lease obligations at 28
February 2019 was GBP17.1 million (31 August 2018: GBP15.9 million) and the Group considers that these liabilities fall within 'Level 3' as
defined by IFRS 13 (refer to Note 28).
20. DERIVATIVE FINANCIAL INSTRUMENTS
The Group enters into interest rate swap and interest rate cap agreements to manage the risks arising from the Group's operations
and its sources of finance.
Interest rate swaps and caps are employed by the Group to manage the interest rate profile of financial liabilities. In accordance
with the terms of the majority of bank debt arrangements, the Group has entered into interest rate swaps to convert the rates from
floating to fixed which has eliminated exposure to interest rate fluctuations. Likewise, interest rate caps are used to limit the
downside exposure to significant changes to the low interest rates currently prevailing in the market.
It is the Group's policy that no economic trading in derivatives is undertaken.
Unaudited Audited
28 February 31 August
2019 2018
GBPm GBPm
Derivative Assets
Non-current
Interest rate caps 0.2 0.4
Interest rate swaps - 0.7
0.2 1.1
Derivative Liabilities
Non-current
Interest rate swaps (3.9) (2.9)
(3.9) (2.9)
Net derivative financial instruments (3.7) (1.8)
The Group holds interest rate cap assets at rates of 1.0 to 3.0 per cent, maturing between November 2019 and June 2023. The
interest rate swap assets are held at a rate of 1.1 per cent, maturing from July 2020 to November 2021. The interest rate swap
liabilities have maturities from February 2020 to February 2024 and the rates range from 0.4 to 2.0 per cent.
21. DEFERRED TAX
The table below presents the recognised deferred tax liability and movement during the period:
On
On derivative On losses
investment financial carried
property instruments forward Total
GBPm GBPm GBPm GBPm
Opening balance 1 September 2017 10.4 - - 10.4
Expense/(credit) for the year recognised in the
income statement 1.3 (0.4) (1.4) (0.5)
Foreign currency translation (0.4) - - (0.4)
Opening balance 1 September 2018 11.3 (0.4) (1.4) 9.5
Credit for the period recognised in the income
statement (0.4) - (1.3) (1.7)
Foreign currency translation (0.5) - 0.1 (0.4)
Closing balance at 28 February 2019 10.4 (0.4) (2.6) 7.4
There are no unrecognised deferred tax assets at 28 February 2019 (31 August 2018: None).
22. TRADE AND OTHER PAYABLES
Unaudited Audited
28 February 31 August
2019 2018
GBPm GBPm
Non-current
Other sundry payables 0.1 0.2
Total non-current trade and other payables 0.1 0.2
Current
Amounts payable to related parties (Note 29) 0.7 0.4
Rent received in advance 5.0 5.0
Trade payables 0.7 0.7
Service charge 4.3 4.6
Accrued interest 3.4 2.7
VAT payable 5.7 4.7
Accruals 5.2 5.9
Tenant deposits(1) 2.9 2.9
Total current trade and other payables 27.9 26.9
Total trade and other payables 28.0 27.1
(1) At 28 February 2019, GBP2.9 million of tenant deposits relate to the London Serviced Office portfolio acquired during the year ended 31 August 2018.
23. SHARE CAPITAL AND SHARE PREMIUM
Authorised
AUTHORISED Number of Share Capital
Shares GBPm
- At 31 August 2018 (Ordinary shares of 8 pence each) 3,000,000,000 240.0
- Share consolidation (1 share for every 5 shares issued) - 11 February 2019 (2,400,000,000) -
- At 28 February 2019 (Ordinary shares of 40 pence each) 600,000,000 240.0
Share Share
ISSUED, CALLED UP AND FULLY PAID Number of capital premium
Shares GBPm GBPm
At 31 August 2017 1,828,060,146 146.2 511.8
Share issuance - 1 November 2017 12,500,000 1.0 4.0
Share issuance - 13 November 2017 41,074,224 3.3 13.1
Share issuance - 13 November 2017 4,783,697 0.4 1.5
Share issuance - 24 November 2017 2,496,630 0.2 0.8
Scrip dividend - issued December 2017 16,218,190 1.3 4.5
At 31 August 2018 1,900,449,536 152.0 534.6
Share consolidation (1 share for every 5 shares issued) - 11 February 2019 (1,520,359,613) - -
At 28 February 2019 380,089,923 152.0 534.6
SHARE TRANSACTIONS
On 1 November 2017, the Group issued 12.5 million shares to Redefine Properties at 40.0 pence per share to acquire 5.0 million
shares in IHL valued at GBP1 per share.
On 13 November 2017 and on fulfilment of the scheme of arrangement, the Group issued 41.1 million shares at 40.0 pence per
share in consideration for the acquisition of 16.4 million shares in IHL from scheme participants. On the same date, the Group also
issued 4.8 million shares to Redefine Properties at 40.0p per share to acquire 1.9 million shares in IHL valued at GBP1 per share.
On 24 November 2017, the Group issued 2.5 million shares to Redefine Properties at 40.0p per share in settlement of the 1.0
million shares in IHL that had been acquired on 17 November 2017 at GBP1 per share.
In October 2017, the Company declared a second interim dividend of 1.3 pence per share for the six months ended 31 August 2017
and offered shareholders an election to receive either a cash dividend or a scrip dividend by way of an issue of new RDI shares
credited as fully paid up. The Company received election forms from shareholders holding 512.9 million ordinary shares of 8 pence
each representing a 27.2 per cent take up by shareholders, in respect of which 16.2 million scrip dividend shares were issued in
December 2017.
Following an announcement on 9 May 2018, the Company entered into a share buy-back programme between 15 May 2018 and
8 June 2018. In total, 14.0 million shares were acquired for total consideration of GBP5.2 million, including transaction costs.
In May 2018, the Company declared an interim dividend of 1.35 pence per share for the six months ended 28 February 2018 and
offered shareholders an election to receive either a cash dividend or a scrip dividend by way of an issue of new RDI shares credited
as fully paid up. The Company received election forms from shareholders holding 282.1 million ordinary shares of 8 pence each
representing a 14.9 per cent take up by shareholders, in respect of which 9.3 million scrip dividend shares were issued in June 2018.
In October 2018, the Company declared a second interim dividend of 1.35 pence per share for the year ending 31 August 2018 to
be paid in cash.
Following approval by the Board on 24 January 2019 the Group consolidated every five Ordinary Shares issued and to be issued
on 11 February 2019 into one ordinary share of 40 pence each. The consolidation resulted in 380,089,923 ordinary shares of 40
pence each being in issue.
24. RESERVES
OTHER RESERVES
Share-Based Payment Reserve
The share-based payment reserve at 28 February 2019 of GBP0.9 million (31 August 2018: GBP2.3 million) arises from conditional
awards of shares in the Company made to certain employees and the Executive Directors. The awards will vest on the third
anniversary of the grant, subject to certain performance conditions being achieved over the vesting period. The Group released
from the reserve to retained earnings GBP1.7 million of cumulative IFRS 2 charge on lapsed and vested awards. The Group incurred a
further GBP0.2 million in relation to awards that vested with certain employees and has recognised the charge directly in retained
earnings such that the net credit to retained earnings for the period in relation to share-based payments was GBP1.4 million. Detailed
information on the share-based payment plans in place is included in the 2018 Annual Report.
Other Reserves
Other reserves of GBP1.0 million at 31 August 2018 arose from the acquisition of subsidiaries. During the period ended 28 February
2019 this reserve was released on liquidation of the related subsidiary.
FOREIGN CURRENCY TRANSLATION RESERVE
The foreign currency translation reserve at 28 February 2019 of GBP13.1 million (31 August 2018: GBP17.9 million) represents exchange
differences arising from the translation of the Group's net investment in foreign operations, including both subsidiary and joint
venture interests.
25. NON - CONTROLLING INTERESTS
Unaudited Audited
28 February 31 August
2019 2018
GBPm GBPm
Opening balance at 1 September 59.5 21.8
Comprehensive income for the period:
Share of profit for the period 1.6 7.4
Foreign currency translation on subsidiary foreign operations - -
Changes in ownership interest in subsidiaries:
Recognition of non-controlling interests on business combinations (Note 9) - 33.8
Acquisition of non-controlling interests (Note 26) - (0.1)
Dividends paid to non-controlling interests (1.3) (3.4)
Total non-controlling interests 59.8 59.5
The following table summarises the financial information relating to the Group's material non-controlling interests in LSO, IHL and RHHL, before
any intra-group eliminations.
28 February 2019
Total non- Total non-
controlling controlling
LSO IHL RHHL Other interest LSO IHL RHHL Other interest
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
United United United United United United
Principal place of business Kingdom Kingdom Kingdom Kingdom Kingdom Kingdom
Country of incorporation Isle of Man BVI BVI Isle of Man BVI BVI
NCI % 20.0% 25.9% 17.52% 20.0% 25.9% 17.52%
Summarised balance sheet
Investment property 163.4 117.4 228.5 509.3 163.4 119.0 229.0
Derivative assets 0.2 - - 0.2 0.3 - 0.1
Other non-current assets 0.1 - 0.8 0.9 - - -
Trade and other receivables 0.5 0.9 1.6 3.0 0.8 0.2 2.6
Cash and cash equivalents 5.8 3.0 5.2 14.0 4.0 2.7 4.7
Borrowings, including finance leases (72.3) (48.3) (113.4) (234.0) (72.8) (51.7) (113.3)
Derivative liabilities - (0.1) - (0.1) - - -
Trade and other payables (3.5) (6.5) (1.5) (11.5) (5.1) (3.1) -
Adjusted net assets 94.2 66.4 121.2 281.8 90.6 67.1 123.1
NCI share of adjusted net assets 18.8 17.2 21.2 57.2 18.1 17.4 21.6
Tax attributable to NCI - - - - - - -
Carrying amount of NCI 18.8 17.2 21.2 2.6 59.8 18.1 17.4 21.6 2.4 59.5
Summarised statement of
comprehensive income
Revenue 7.9 4.3 6.8 19.0 9.8 9.1 14.6
Profit/(loss) for the period 3.9 (0.5) 4.3 7.7 6.6 7.3 15.9
Profit/(loss) attributable to NCI 0.8 (0.1) 0.8 0.1 1.6 1.3 1.9 2.8 1.4 7.4
Other comprehensive income
attributable to NCI - - - - - - - - - -
Dividends paid to NCI 0.3 - 1.1 - 1.4 1.0 0.6 1.8 - 3.4
Summarised cash flow statement
Cash inflow from operating activities 3.6 1.9 6.7 10.7 5.5 4.1
Cash outflow from investing activities - (0.9) - (0.5) - 5.6
Cash outflow from financing activities (1.8) (0.7) (6.2) (10.4) (2.8) (5.7)
Net increase in cash and cash
equivalents 1.8 0.3 0.5 (0.2) 2.7 4.0
26. TRANSACTIONS WITH NON-CONTROLLING INTERESTS
There were no transactions with equity holders during the period ended 28 February 2019.
At 1 September 2016, 4C Investments was a non-controlling shareholder of RHHL, with an 11.43 per cent equity interest (1,938
shares) in the issued share capital. The Company had a loan balance outstanding from 4C Investments, for which a share charge
was created in favour of the Company over 4C Investment's entire shareholding in RHHL. The total loan balance outstanding, of
both principal and interest, was GBP14.2 million on maturity at 31 December 2016. In the absence of repayment, the Company
exercised its security over the shares. On 7 February 2017, the 1,938 shares formally transferred to the Company for an agreed
transfer price of GBP6,295 per share, valuing the total shareholding at GBP12.1 million. The carrying value of the non-controlling interest
at the date of transfer was GBP12.7 million and, as a result, a gain of GBP0.4 million was recognised directly in equity after transaction
costs including tax paid by the Group on behalf of 4C Investments. During the period ended 28 February 2018, the Group clawed
back historic tax paid on behalf of 4C Investments. This has been treated as an adjustment to the carrying amount of the non-
controlling interest acquired and has resulted in a gain of GBP0.6 million directly in equity.
In advance of the Leopard Portfolio disposal (refer to Note 8), the non-controlling interest of a Leopard Portfolio subsidiary, Leopard
Germany Property Ed 2 GmbH & Co. KG ("LGPEd2") was acquired by the Group for GBP0.4 million. The non-controlling interest's
share of net liabilities at the date of sale were GBP0.1 million and therefore a loss of GBP0.5 million has been recognised directly in equity.
Unaudited Audited
28 February 31 August
2019 2018
GBPm GBPm
Carrying amount of non-controlling interest acquired:
4C Investments - 0.5
- 0.5
Consideration paid to non-controlling interests of LGPEd2 - (0.4)
Increase in equity attributable to equity holders of the Parent - 0.1
27. CASH GENERATED FROM OPERATIONS
Unaudited Unaudited Audited
28 February 28 February 31 August
2019 2018 2018
Continuing operations Note GBPm GBPm GBPm
Cash flows from operating activities
(Loss)/profit before tax (4.7) 60.8 97.4
Adjustments for:
Straight lining of rental income (0.4) - (0.5)
Depreciation 16 0.1 0.1 0.2
Fair value of share-based payments 24 0.2 0.4 1.0
Employee share award costs recognised directly in equity (0.2) - -
Loss/(gain) on revaluation of investment property 13 30.4 (8.5) (10.8)
Gain on revaluation of investment property held for sale 13 - - (0.9)
Loss/(gain) on disposal of investment property 0.2 (0.6) (1.5)
Loss/(gain) on disposal of investment property held for sale - 0.1 (1.8)
Net gain on disposal of subsidiaries 8 - (14.3) (15.4)
Net gain on business combinations 9 - (4.6) (4.4)
Other income and expense 16 0.1 0.3 0.4
Foreign exchange loss 0.2 0.9 0.8
Finance income 10 (0.3) (0.4) (0.6)
Finance expense 10 16.2 14.5 29.3
Other finance expense 11 - 0.6 0.6
Change in fair value of derivative financial instruments 2.2 (5.2) (6.1)
Loss on sale of joint ventures - - 0.1
Net impairment reversal on loans to joint ventures (0.1) (0.1) (0.1)
Share of post-tax profit from joint venture (0.2) - -
Share of post-tax profit from associate 15 (0.5) (0.3) (0.3)
43.2 43.7 87.4
Changes in working capital (3.0) (3.4) (0.4)
Cash generated from operations 40.2 40.3 87.0
28. FAIR VALUE OF FINANCIAL INSTRUMENTS
BASIS FOR DETERMINING FAIR VALUES
The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making
the measurements.
Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.
Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This
category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for
identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant
inputs are directly or indirectly observable from market data.
Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation
technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's
valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant
unobservable adjustments or assumptions are required to reflect differences between the instruments.
The fair value of financial instruments that are traded in active markets is based on quoted market prices or dealer price quotations.
For all other financial instruments, the Group uses valuation techniques to arrive at a fair value that reflects a price that would have
been determined by willing market participants acting at arm's length at the reporting date. For common and simple financial
instruments, such as over-the-counter interest rate swaps and caps, the Group uses widely recognised valuation models for
determining the fair value. The models use only observable market data and require little management judgement which reduces
the uncertainty associated with the determination of fair values. For other financial instruments, the Group determines fair value
using net present value or discounted cash flow models and comparisons to similar instruments for which market observable prices
exist. Varying degrees of judgement are required in the determination of an appropriate market benchmark. Assumptions and inputs
used in valuation techniques include risk-free and benchmark interest rates, credit spreads and other premia used in estimating
discount rates, foreign currency exchange rates and expected price volatilities and correlations. Availability of observable market
prices and inputs vary depending on the products and markets and is prone to changes based on specific events and general
conditions in the financial markets.
The tables below present information about the Group's financial instruments carried at fair value as of 28 February 2019 and
31 August 2018.
Total
Level 1 Level 2 Level 3 Fair Value
GBPm GBPm GBPm GBPm
28 February 2019
Financial assets
Derivative financial assets (Note 20) - 0.2 - 0.2
- 0.2 - 0.2
Financial liabilities
Derivative financial liabilities (Note 20) - (3.9) - (3.9)
- (3.9) - (3.9)
31 August 2018
Financial assets
Derivative financial assets (Note 20) - 1.1 - 1.1
- 1.1 - 1.1
Financial liabilities
Derivative financial liabilities (Note 20) - (2.9) - (2.9)
- (2.9) - (2.9)
Derivative financial instruments have been categorised as 'Level 2', as although they are priced using directly observable inputs,
the instruments are not traded in an active market.
As stated in Note 13, the Group considers investment property to be categorised as 'Level 3'. As stated in Note 19, the Group
considers all bank loans to be categorised as 'Level 3'. Finance lease obligations are as classified as 'Level 3, the fair value of
which is presented in Note 19.
The carrying values of trade and other receivables, cash and cash equivalents and trade and other payables are considered to be a
reasonable approximation of fair value.
29. RELATED PARTY TRANSACTIONS
Related parties of the Group include: associate undertakings; joint ventures; Directors and key management personnel; connected
parties; the major shareholder Redefine Properties Limited ("RPL"); as well as entities connected through common directorships.
Unaudited Unaudited
six months six months Audited
ended ended Year ended
28 February 28 February 31 August
2019 2018 2018
GBPm GBPm GBPm
Related Party Transactions
Revenue Transactions
Rental income
RBH 10.3 11.0 22.0
Other income
Joint Venture investment management and performance fee income
RI Menora German Holdings S.a.r.l. - - 0.1
- - 0.1
Administration costs and other fees
OSIT investment management fees (Note 7) (0.5) (0.1) (0.6)
Finance income
Joint Venture loan interest income
Wichford VBG Holding S.a.r.l. - - -
RI Menora German Holdings S.a.r.l. (Note 10) 0.2 0.2 0.3
Related parties of Menora joint venture - - 0.1
0.2 0.2 0.4
Unaudited Audited
As at As at
28 February 31 August
2019 2018
GBPm GBPm
Capital Transactions
Investment property (capitalised expenditure)
Project monitoring fee to RBH - construction works 0.1 0.2
Investment in associate
Transfer price of 4C Investments interests in RBH - (1.3)
Dividends received from RBH (including held for sale investment) (Note 15) (0.4) (0.7)
Non-controlling interests
Adjustment to carrying value of the non-controlling interest in RHHL (Note
26) - 0.6
Total capital transactions (0.3) (1.2)
Related Party Balances
Loans to joint ventures
RI Menora German Holdings S.a.r.l. (Note 14) 4.9 5.2
26 The Esplanade 0.1 -
5.0 5.2
Trade and other receivables
RBH - tenant lease incentives (Note 17) 2.7 1.2
RI Menora German Holdings S.a.r.l.- interest receivable (Note 17) - 0.3
2.7 1.5
Trade and other payables
RI Menora German Holdings S.a.r.l. - other payables (Note 22) (0.7) (0.4)
(0.7) (0.4)
Total related party balances 7.0 6.3
Unaudited Audited
28 February 31 August
2019 2018
GBPm GBPm
Related Party Transactions with equity holders of the Parent
Redefine Properties Limited - IHL acquisition - share-for-share exchange - 7.9
Redefine Properties Limited - IHL acquisition - cash - 7.5
Redefine Properties Limited - cash dividends 7.6 14.8
Total related party transactions with equity holders of the Parent 7.6 30.2
REDEFINE PROPERTIES LIMITED
On 1 November 2017, the Group issued 12.5 million shares to Redefine Properties at 40.0 pence per share to acquire 5.0 million
shares in IHL valued at GBP1 per share. On 13 November 2017, the Group issued 4.8 million shares to Redefine Properties at 40.0
pence per share to acquire 1.9 million shares in IHL valued at GBP1 per share. On 24 November 2017, the Group issued 2.5 million
shares to Redefine Properties at 40.0 pence per share in settlement of the 1.0 million shares in IHL that had been acquired with
effect from 17 November 2017 at GBP1 per share. On the same date, the Group paid Redefine Properties GBP7.5 million in settlement of
7.5 million shares in IHL that had transferred at GBP1 per share with effect from 17 November 2017.
4C UK INVESTMENTS LIMITED
On 7 February 2017, the Company entered into a lock-up agreement with 4C Investments whereby the latter had the right to buy
back the transferred shares in RHHL and RBH on or before 31 January 2018 at the transfer price. 4C Investments did not exercise
the right to reacquire the RHHL shares before 31 January 2018. The right to acquire the RBH shares was formally extended and 4C
Investments formally re-acquired the shares on 14 February 2018. As part of the transaction, 4C Investments contractually agreed
to reimburse the Group for historic non-resident landlord tax paid on 4C Investments behalf in relation to its non-controlling interest
in RHHL. This reimbursement has been treated as an adjustment to the carrying amount of the non-controlling interest. Refer to
Note 26.
OSIT
OSIT indirectly holds the 20 per cent non-controlling interest in the newly acquired LSO portfolio and is contracted as the manager
of each property. RDI entered into revised management contracts on acquisition for OSIT to continue as manager for a minimum
term of ten years. Management fees are payable on a ratcheted basis with reference to the forecast EBITDA of each property.
OSIT has charged GBP0.6 million of management fees since the Group acquired control of the portfolio on 12 January 2018 up to 31
August 2018 and GBP0.5 million of management fees for the six months ended 28 February 2019.
DIRECTORS
Non-executive Directors and Executive Directors represent key management personnel. The remuneration paid to Non-executive
Directors for the period ended 28 February 2019 was GBP0.2 million (31 August 2018: GBP0.5 million) which represents Directors fees
only. The remuneration payable to Executive Directors for the period ended 28 February 2019 was GBP1.7 million (31 August 2018:
GBP2.6 million), representing salaries, benefits and bonuses. 1.3 million contingent share awards were issued to Executive Directors
during the period (31 August 2018: 1.2 million, re-presented for comparability as a result of the share consolidation). The IFRS 2
share-based payment charge associated with the cumulative contingent share awards to the Executive Directors was GBP1.6 million
(31 August 2018: GBP0.9 million) for the period.
The table below shows Directors dealings in shares for the period 1 September 2017 to 28 February 2019:
Number of Price per
ordinary shares ordinary share
Name Date of Transaction Transaction acquired acquired
Marc Wainer 13 November 2017 IHL consideration 631,569 200.0p
Mike Watters 13 November 2017 IHL consideration 14,158 200.0p
Donald Grant 16 January 2018 Share acquisition 5,000 179.70p
Mike Watters 17 January 2018 Share acquisition 13,400 179.75p
Bernard Nackan 25 June 2018 Scrip dividend 133 177.0p
Adrian Horsburgh 25 June 2018 Scrip dividend 398 177.0p
The Directors dealings above are adjusted for the effects of the share consolidation referred to in note 23.
30. EARNINGS PER SHARE
Earnings per share is calculated on the weighted average number of shares in issue and the profit attributable to shareholders.
Unaudited Unaudited Audited
28 February 28 February 31 August
2019 2018 2018
GBPm GBPm GBPm
Profit attributable to equity holders of the Parent (4.9) 55.2 88.9
Group Adjustments:
Loss/(gain) on revaluation of investment property 30.4 (8.5) (10.8)
Gain on revaluation of investment property held for sale - - (0.9)
Loss/(gain) on disposal of investment property 0.2 (0.6) (1.5)
Loss/(gain) on disposal of investment property held for sale - 0.1 (1.8)
Net gain on disposal of subsidiaries - (14.3) (15.4)
Loss/(gain) on business combinations 0.1 (4.6) (4.4)
Loss on disposal of other non-current assets held for sale - - 0.1
Amortisation of intangible assets 0.1 0.2 0.3
Other finance costs 0.1 0.5 0.4
Change in fair value of derivative financial instruments 2.2 (5.2) (6.1)
Gain on sale of joint venture interests - - 0.1
Net impairment reversal of joint ventures (0.2) (0.1) (0.1)
Deferred tax (1.7) - (0.5)
Current tax 0.3 0.6 0.7
Joint Venture Adjustments:
Loss on revaluation of investment property 0.2 0.2 0.2
Change in fair value of derivative financial instruments (0.1) (0.6) (0.7)
Deferred tax - 0.2 0.2
Elimination of joint venture unrecognised profits (1) - 0.3 0.4
Non-Controlling Interest Adjustments:
Gain on revaluation of investment property (0.8) 1.1 1.4
Change in fair value of derivative financial instruments (0.1) 0.3 0.2
Gain on disposal of subsidiaries - 1.3 1.1
Deferred tax - - 0.1
EPRA earnings 25.8 26.1 51.9
Company Specific Adjustments:
Accretion of fair value adjustments 0.4 0.4 0.8
Foreign currency movements 0.2 0.9 0.8
Underlying earnings 26.4 27.4 53.5
Number of ordinary shares (millions)
- Weighted average 380.1 374.2 377.3
Dilutive effect of:
Contingently issuable share awards under the Long Term Performance Share Plan 1.1 0.7 0.9
Contingently issuable share awards under the Long Term Restricted Stock Plan 0.2 0.2 0.3
- Diluted weighted average 381.4 375.1 378.5
Earnings per share (pence)
- Basic 1.3 14.8 23.6
- Diluted 1.3 14.7 23.5
EPRA earnings per share (pence) 6.79 6.97 13.76
Diluted EPRA earnings per share (pence) 6.76 6.96 13.71
Underlying earnings per share (pence) 6.94 7.32 14.18
Dividend per share (pence) 4.0 6.75 13.5
First interim dividend per share (pence) 4.0 6.75 6.75
Second interim dividend per share (pence) - - 6.75
(1) Cumulative losses restricted represent the Group's share of losses in the Esplanade which previously exceeded the cost of the Group's investment.
At 28 February 2019 the Group's share of losses in the Esplanade no longer exceeded the cost of the Group's investment and the Group has started
recognising its share of profits by way of reversal of impairment of the loan to the joint venture (refer to note 14). This adjustment eliminates
the restricted losses for the period attributable to the Esplanade.
Headline earnings per share is calculated in accordance with Circular 04/2018 issued by the South African Institute of Chartered
Accountants ("SAICA"), a requirement of the Group's JSE listing. This measure is not a requirement of IFRS.
Unaudited Unaudited Audited
28 February 28 February 31 August
2019 2018 2018
GBPm GBPm GBPm
Profit attributable to equity holders of the Parent (4.9) 55.2 88.9
Group Adjustments:
Loss/(gain) on revaluation of investment property 30.4 (8.5) (10.8)
Gain on revaluation of investment property held for sale - - (0.9)
Loss/(gain) on disposal of investment property 0.2 (0.6) (1.5)
Loss/(gain) on disposal of investment property held for sale - 0.1 (1.8)
Net gain on disposal of subsidiaries 0.1 (14.3) (15.4)
Loss/(gain) on acquisition of subsidiaries 0.2 (5.5) (5.5)
Loss on disposal of other non-current assets held for sale - 0.1 0.1
Loss on sale of joint venture interests - - 0.1
Net impairment reversal of joint ventures and associate interests 0.1 (0.1) (0.1)
Deferred tax (1.7) - 1.3
Joint Venture Adjustments:
Loss on revaluation of investment property 0.3 0.2 0.2
Deferred tax - 0.2 0.2
Elimination of joint venture unrecognised profits/(losses) (1) (0.3) (0.3) (0.3)
Non-Controlling Interest Adjustments:
Gain on revaluation of investment property (0.8) 1.1 1.4
Gain on disposal of subsidiaries - 1.3 1.1
Deferred tax - - 0.1
Headline earnings attributable to equity holders of the Parent 23.6 28.9 57.1
Number of ordinary shares (millions)
- Weighted average 380.1 374.2 377.3
- Diluted weighted average 381.4 375.1 378.5
Headline earnings per share (pence)
- Basic 6.2 7.7 15.1
- Diluted 6.2 7.7 15.1
(1) Cumulative losses restricted represent the Group's share of losses in the Esplanade which previously exceeded the cost of the Group's investment.
At 28 February 2019 the Group's share of losses in the Esplanade no longer exceeded the cost of the Group's investment and the Group has started
recognising its share of profits by way of reversal of impairment of the loan to the joint venture (refer to note 14). This adjustment eliminates
the restricted losses for the period attributable to the Esplanade.
31. NET ASSET VALUE PER SHARE
Unaudited Audited
28 February 31 August
2019 2018
GBPm GBPm
Net assets attributable to equity holders of the Parent 768.0 803.3
Group Adjustments:
Fair value of derivative financial instruments 3.7 1.8
Deferred tax 7.4 9.5
Joint Venture Adjustments:
Fair value of derivative financial instruments 2.6 2.8
Elimination of unrecognised derivative financial instruments (1) (2.6) (2.8)
Deferred tax 0.6 0.6
Non-Controlling Interest Adjustments:
Fair value of derivative financial instruments - 0.1
Deferred tax - (0.3)
EPRA NAV 779.7 815.0
Group Adjustments:
Fair value of derivative financial instruments (3.7) (1.8)
Excess of fair value of debt over nominal value (26.0) (3.7)
Deferred tax (7.4) (9.5)
Joint Venture Adjustments:
Fair value of derivative financial instruments (2.6) (2.8)
Elimination of unrecognised derivative financial instruments (1) 2.6 2.8
Deferred tax (0.6) (0.6)
Non-Controlling Interest Adjustments:
Fair value of derivative financial instruments - (0.1)
Deferred tax 0.1 0.3
EPRA NNNAV 742.1 799.6
Number of ordinary shares (millions)
- In issue 380.1 380.1
Dilutive effect of:
Contingently issuable share awards under the Long Term Performance Share Plan 1.1 0.9
Contingently issuable share awards under the Long Term Restricted Stock Plan 0.2 0.2
- Diluted 381.4 381.2
Net asset value per share (pence):
- Basic 202.1 211.3
- Diluted 201.4 210.7
EPRA diluted NAV per share (pence) 204.4 213.8
EPRA diluted NNNAV per share (pence) 194.6 209.7
(1) Cumulative losses restricted represent the Group's share of losses in the Esplanade which previously exceeded the cost of the Group's investment.
At 28 February 2019 the Group's share of losses in the Esplanade no longer exceeded the cost of the Group's investment and the Group has started
recognising its share of profits by way of reversal of impairment of the loan to the joint venture (refer to note 14). This adjustment eliminates
the restricted losses for the period attributable to the Esplanade.
32. CONTINGENCIES, GUARANTEES AND COMMITMENTS
At 28 February 2019, the Group was contractually committed to expenditure of GBP22.7 million (31 August 2018: GBP9.5 million), of
which GBP22.7 million (31 August 2018: GBP8.3 million) was committed to the future development and enhancement of investment
property.
A former subsidiary of the Group, Redefine Australian Investments Limited, has undergone a review by the Australian Tax Office in
respect of its calculation of Capital Gains Tax arising on the disposal of securities formerly held in Cromwell Property Group during
2013, 2014 and 2015. The Directors remain of the view, having sought advice from reputable tax agents and advisers, that the
respective filing positions were correct and therefore following the orderly wind down of activities, the Directors placed the company
in liquidation in January 2018.
33. SUBSEQUENT EVENTS
In March 2019, the Board approved a marketing exercise for the prospective sale of the Europe portfolio, a separately identifiable
line of business containing the Group's investment properties located in Germany. Subsequently, the segment is now considered as
held for sale.
On 8 April 2019 the Group announced it had been informed by Aviva, the lender with security against four of the Group's UK
Shopping Centres, namely Grand Arcade (Wigan), Weston Favell (Northampton), Birchwood (Warrington) and Byron Place
(Seaham), that following a further valuation the lender's loan to value exceeded the 85 per cent loan to value covenant. After careful
consideration the Board concluded that the level of capital required to maintain compliance was not considered to be in the best
interests of long-term shareholder value and therefore agreed with Aviva that an orderly and consensual disposal of the properties
or the introduction of third party capital was in both parties' best interests. As a consequence, at conclusion of the contractual cure
period on 23 April 2019, the Group ceased to control the assets. Subsequent to this date, income from these four centres ceased to
accrue to the Group and the net asset value was derecognised. Had loss of control occurred on 1 September 2018, the Group's
profit after tax for the period ended 28 February 2019 would have been GBP14.5 million higher and the Group's net asset value at 28
February 2019 would have been GBP54.1 million lower.
On 12 April 2019 the Group took practical completion of a distribution unit constructed at Bicester. This follows the September 2018
announcement that the Group had acquired a 13.5 acre land interest in Bicester, Oxfordshire for GBP7.9 million and committed to two
forward funding payments following practical completion of two distribution units, collectively totalling 288,000 sqft in size. Following
practical completion, the Group will pay now GBP7.8 million on 1 May 2019, with a second and final payment of GBP10.3 million
anticipated to be made in December 2019 following completion of the second unit.
GLOSSARY
Annualised gross rental income Annualised gross rent generated by the asset at the balance sheet date, which is made up of
the contracted rent, including units that are in rent-free periods, and estimates of turnover rent
AUK Aegon UK property portfolio
Aviva Aviva Commercial Finance Limited
Board The Board of Directors of RDI REIT P.L.C.
BVI British Virgin Islands
CPI Consumer Price Index
EBITDA Earnings Before Interest, Tax, Depreciation and Amortisation
EPRA European Public Real Estate Association
EPRA cost ratio Administrative and operating costs expressed as a percentage of gross rental income as
defined by EPRA
EPRA earnings Earnings from operational activities as defined by EPRA's Best Practice guidelines
EPRA NAV European Public Real Estate Association Net Asset Value
EPRA NIY European Public Real Estate Association Net Initial Yield. The annualised rental income based
on the cash rents passing at the balance sheet date, less non-recoverable property operating
expenses, divided by the gross market value of the property
EPRA NNNAV European Public Real Estate Association Triple Net Asset Value
EPRA occupancy Occupancy expressed as a percentage of ERV, representing a measure of let space
EPRA topped-up initial yield Net initial yield adjusted for the expiration of rent free periods or other incentives
EPS Earnings per share
ERV The estimated market rental value of lettable space which could reasonably be expected to be
obtained on a new letting or rent review
EU European Union
EUR or Euro Euro, the lawful common currency of participating member states of the European Monetary
Union
GBP, Pound or Sterling Great British Pound, the legal currency of the UK
GRESB Global Real Estate Sustainability Benchmark
IASB International Accounting Standards Board
IFRS International Financial Reporting Standards
IHL International Hotel Properties Limited
Indexed leases A lease with rent review provisions which are dependent upon calculations with reference to an
index such as the consumer price index or the retail price index
IPD Investment Property Databank
JSE JSE Limited, licensed as an exchange and a public company incorporated under the laws of
South Africa and the operator of the Johannesburg Stock Exchange
Lease incentives Any incentives offered to occupiers to enter into a lease. Typically, the incentive will be an initial
rent-free period, or a cash contribution to fit out or similar costs
Like-for-like net rental income Net income generated by assets which were held by the Group throughout both the current and
comparable periods for which there has been no significant development which materially
impacts upon income and used to illustrate change in comparable income values
Like-for-like property Property which has been held at both the current and comparative balance sheet dates for
which there has been no significant development and used to illustrate change in comparable
capital values
LSE The London Stock Exchange plc
LSO London Serviced Office Portfolio
Loan-to-value or LTV The ratio of net debt divided by the market value of investment property. Calculated on a
proportionate (share of value) basis. See Financial Review for basis of calculation
LuxSE The Luxembourg Stock Exchange
NAV Net Asset Value
NCI Non-controlling interest
Net debt Total nominal value of bank borrowings less cash and cash equivalents
OSIT Office Space in Town, the Group's strategic partner and non-controlling shareholder in the LSO
portfolio
RCF Revolving Credit Facility
RDI REIT P.L.C. RDI, the RDI REIT P.L.C. and, when taken together with all its subsidiaries and Group undertakings,
Company or the Group collectively referred to as the "Group"
RBH RBH Hotel Group Limited, formerly RedefineBDL Hotel Group Limited
Redefine Properties or RPL Redefine Properties Limited, a company listed on the JSE, and the majority shareholder of the
Company
Reversionary yield The anticipated yield to which the initial yield will rise (or fall) once the rent reaches the ERV
RevPar Revenue per available room
RICS Royal Institute of Chartered Surveyors
RIHL Redefine International Holdings Limited
RIMH Redefine International Management Holdings Limited
RHHL Redefine Hotel Holdings Limited
SAICA South African Institute of Chartered Accountants
TSogo Sun Southern Sun Africa Limited
UK United Kingdom
UK-REIT A UK Real Estate Investment Trust. A REIT must be a publicly quoted company with at least
three-quarters of its profits and assets derived from a qualifying property rental business.
Income and capital gains from the property rental business are exempt from tax but the REIT is
required to distribute at least 90 per cent of those profits to shareholders. Tax is payable on
non-qualifying activities of the residual business
Underlying earnings EPRA earnings adjusted for the impact of non-cash debt accretion charges and FX gains and
losses reflected in the income statement
WAULT Weighted average unexpired lease term
Date: 25/04/2019 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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