TIDMRDI
RNS Number : 0039M
RDI REIT PLC
25 April 2018
RDI REIT P.L.C.
("RDI" or the "Company" or the "Group")
(Registration number 010534V)
LSE share code: RDI
JSE share code: RPL
ISIN: IM00B8BV8G91
LEI: 2138006NHZUMMRYQ1745
INTERIM RESULTS FOR THE SIX MONTHSED 28 FEBRUARY 2018
STRONG FIRST HALF DELIVERING SUPERIOR, SUSTAINABLE AND GROWING
INCOME
RDI, the FTSE 250 income focused UK-REIT, which has a primary
listing on the London Stock Exchange and a secondary listing on the
Johannesburg Stock Exchange, today announces its results for the
six months ended 28 February 2018.
Financial highlights Six months Six months
ended ended
28 February 28 February
2018 2017 Change
============================ ============= ============= ========
Income statement
============================ ============= ============= ========
Underlying earnings (GBPm) 27.4 24.3 +12.8%
============================ ============= ============= ========
Underlying earnings per
share (p) 1.46 1.35 +8.2%
============================ ============= ============= ========
Dividend per share (p) 1.35 1.3 +3.9%
============================ ============= ============= ========
As at As at
28 February 31 August
2018 2017 Change
============================ ============= ============= ========
Balance sheet
============================ ============= ============= ========
EPRA NAV per share (p) 42.3 41.4 +2.2%
============================ ============= ============= ========
Portfolio valuation (incl.
JV share) (GBPm) 1,646.9 1,538.7
============================ ============= ============= ========
Loan-to-value (%) 48.0 50.0 (1) -200bps
============================ ============= ============= ========
(1) Pro forma adjusted from 51.3% to reflect transactions
completed between 31 August 2017 and 26 October 2017
Strong growth in underlying earnings per share
-- Underlying earnings per share of 1.46 pence, an increase of
8.2%, well ahead of medium term growth targets
-- Gross rental income increased 2.1% on a like-for-like basis
(HY2017: increased by 3.3% like-for-like) with strong performance
across the majority of the portfolio
-- EPRA cost ratio (excluding direct vacancy costs) improved to 15.7% (HY2017: 20.7%)
-- Cost of debt increased 20bps to 3.3% following transactional
activity, however remains within target range
-- Interim dividend of 1.35 pence per share, an increase of
3.9%, fully covered by a pay-out ratio of 92.5%
Further progress in strengthening the balance sheet
-- EPRA NAV per share increased 2.2% to 42.3 pence
-- Portfolio valuation up 0.3% like-for-like in local currency terms
-- LTV continues to trend downwards, now reduced to 48.0%
-- Total annualised accounting return (growth in NAV plus
dividend paid) of 10.7% for the period
Portfolio quality enhanced
-- Disposal proceeds totalling GBP211.8 million at an average
premium of 8.7% to August 2017 market values
-- Increased stake in GBP104.4 million IHL hotel portfolio to
74.1% (31 August 2017: 17.2%) at an implied net initial yield of
6.9% and yield on equity of over 10%
-- Acquisition of an 80% interest in the GBP161.7 million London
serviced office portfolio at an implied net initial yield in excess
of 6% and yield on equity of over 9%
-- Continued reduction in overall retail exposure to 45.3% (31
August 2017: 60.0%) with UK Shopping Centres now down to 18.8% by
market value
Income-led active asset management reflected in solid
operational metrics
-- EPRA occupancy remains high at 97.3% (31 August 2017: 97.7%)
-- Long WAULT of 6.8 years to first break (8.2 years to lease
expiry); this metric excludes hotels managed by RBH and the newly
acquired London serviced office portfolio
-- London serviced offices trading ahead of expectation;
occupancy stable at 92.9% with average desk rates increasing
marginally since acquisition
-- RBH managed hotel portfolio trading in-line with
expectations; occupancy averaging over 80% in the period and
revenue per available room 2.6% above the same period last year
Greg Clarke, Chairman, commented:
"RDI has once again demonstrated its commitment to becoming the
UK's leading income focused REIT with another strong set of
results. The strategy of improving the quality of the portfolio is
well on track, following the completion of a number of successful
disposals and well-timed income enhancing acquisitions."
Mike Watters, Chief Executive, commented:
"We continue to make good progress against our strategic
priorities, with underlying earnings per share growth of 8.2%,
which is well ahead of target. The income producing qualities of
our portfolio have improved through further recycling of capital
out of low growth assets into assets and sectors aligned with our
strategy of delivering long term sustainable and growing income. We
are also seeing an increasing opportunity for real estate owners to
become high quality service providers. We are well positioned to
take advantage of this trend, given our operational platforms and
experience with our hotel portfolio and the more recent expansion
into London serviced offices.
"We are confident that our income-led business model, designed
to deliver market leading shareholder distributions, remains
attractive in a world starved of predictable and recurring
income."
Results presentation, webcast and conference call
A meeting for analysts and investors will take place on
Wednesday 25 April 2018 at 9.00 a.m. (UK time) at FTI Consulting,
200 Aldersgate, Aldersgate Street, London, EC1A 4HD. There will be
a presentation and a live webcast for analysts at 9.00 a.m. (UK
time), 10.00 a.m. (SA time) on Wednesday 25 April 2018, 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: 436667
United Kingdom: 0800 640 6441
United Kingdom (Local): 020 3936 2999
South Africa (Local): 087 550 8441
South Africa Toll Free: 080 017 2952
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
Janine Ackermann 7811 0100
FTI Consulting
UK Public Relations Adviser
Dido Laurimore, Claire Tel: +44 (0) 20
Turvey, Ellie Sweeney 3727 1000
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. Forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of RDI REIT P.L.C. to be materially
different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Any
information contained in this release on the price at which shares
or other securities in RDI REIT P.L.C. have been bought or sold in
the past, or on the yield on such shares or other securities,
should not be relied upon as a guide to future performance.
STRATEGIC REPORT
Chief Executive's Report
I am pleased to report a solid set of interim results which
demonstrate clear progress against our strategic objectives. Our
portfolio has been enhanced through the sale of mature assets and
efficient reinvestment into assets and sectors with stronger growth
prospects. Leverage has been reduced, liquidity and operating
efficiencies have improved and underlying earnings per share has
been delivered ahead of guidance.
We are focused on delivering superior, sustainable and growing
dividends to our shareholders. Dividends per share for the period
delivered an annualised yield of 6.3 per cent on EPRA NAV compared
to 4.2 per cent across the UK-REIT sector. This has been achieved
through an income-led investment and active asset management
approach together with financial discipline and operating
efficiencies.
Results and dividend
Underlying earnings increased by 12.8 per cent to GBP27.4
million (28 February 2017: GBP24.3 million). Underlying earnings
per share increased by 8.2 per cent to 1.46 pence per share (28
February 2017: 1.35 pence per share), well ahead of our medium term
growth target of 3.0 to 5.0 per cent per annum.
EPRA NAV increased by 2.2 per cent to 42.3 pence per share (31
August 2017: 41.4 pence per share) supported by disposal proceeds
of GBP211.8 million at an aggregate 8.7 per cent premium to the 31
August 2017 book value. The Group's portfolio increased 0.3 per
cent on a like-for-like basis in local currency terms. This
excludes a GBP14.4 million or 5.4 per cent increase in market value
of the recently acquired International Hotel Properties Limited
("IHL") and London serviced office ("LSO") portfolios relative to
agreed acquisition pricing.
The Board has declared an interim dividend of 1.35 pence per
share, a 3.9 per cent increase on the same period last year. The
dividend reflects a pay-out ratio of 92.5 per cent of underlying
earnings, in line with our strategic priority of distributing
superior income returns which are fully covered by underlying
earnings and aligned with operating cash flow.
The total accounting return for the period was 10.7 per cent on
an annualised basis.
Strategic priorities
In February 2017 we set out our medium term strategic
priorities. These are aligned to our investment proposition of
delivering superior, sustainable and growing income for our
shareholders and our commitment to be the UK's leading income
focused REIT.
Enhancing our income focused portfolio
The quality of our portfolio has improved significantly over the
last three years. The portfolio has been further enhanced over the
last six months through a significant level of capital recycling.
GBP195.0 million of mature and ex-growth assets have been sold at
8.7 per cent above last reported market value, with proceeds
reinvested in assets and sectors aligned with our strategy of
delivering long term, sustainable and growing income. Our overall
retail exposure has been reduced to 45.3 per cent (31 August 2017:
60.0 per cent) with UK Shopping Centres now representing just 18.8
per cent of our portfolio by market value. Our portfolio continues
to demonstrate strong income characteristics with clear visibility
of the medium term income profile and growth opportunities.
Capital recycling
It has been a busy period with three major transactions having
concluded. We increased our exposure to the limited service hotel
sector by increasing our investment in IHL from 17.2 per cent to
74.1 per cent. The subsequent de-listing of IHL will deliver a
number of cost savings and efficiencies. The Leopard Portfolio of
German supermarkets was sold in December 2017 for EUR205 million,
EUR20 million above the 31 August 2017 market values. Finally, we
entered the London serviced office sector through the acquisition
of an 80.0 per cent interest in a GBP161.7 million portfolio of
four high quality London serviced offices managed by Office Space
in Town ("OSIT"), one of the UK's leading serviced office
operators.
The efficient and timely reinvestment of the Leopard proceeds
into London serviced offices, with only two weeks between
transactions, again demonstrates our relentless focus on delivering
income and our ability to effectively execute large
transactions.
All these transactions are in line with our strategy of reducing
exposure to mature assets and reinvesting in locations and sectors
benefiting from structural change, infrastructure investment and
changes in the way real estate is being used with a strong emphasis
on customer service.
Efficient capital structure
Our LTV continues to trend downwards and has been reduced to
48.0 per cent, within our medium term target range of 45 per cent -
50 per cent. We are committed to making further progress on
strengthening our balance sheet. Our weighted average cost of debt
edged up to 3.3 per cent as a result of a net increase in the
average debt funding costs between disposals and acquisitions. The
transactions, however, remained yield accretive given the higher
income yields at a property level. Interest cover at Group level
improved to 3.5 times (31 August 2017: 3.2 times) which, combined
with an average debt maturity of 7.0 years and material covenant
headroom, ensures strong operating cash flow cover and limited
refinancing risk.
Financial discipline
In February 2017 we improved the transparency of our earnings
metric and its alignment to operational cash flow. We set a range
of medium term targets which directly link to management incentives
to drive accountability and ensure commitment to growing income
across all aspects of the business. Strong progress has been made
against key metrics. We are particularly pleased with the 8.2 per
cent growth in underlying earnings per share and the continued
downward trend in leverage. In respect to the forthcoming interim
dividend, given the Company's share price relative to net asset
value, we intend to match the scrip alternative through a share
buy-back programme so as to minimise the dilutive effect that would
otherwise occur through the issuance of new ordinary shares.
Board changes
In November 2017 Liz Peace was appointed to the Board as an
independent Non-executive Director. Her wealth of relevant
experience has brought additional strength, diversity, and
expertise to the RDI Board. Liz joined the CSR Committee in January
2018 and will take over as chair in due course to drive our CSR
initiatives forward.
Following seven years serving as Chairman, Greg Clarke announced
his intention to step down in 2018. The Nominations Committee, now
chaired by Michael Farrow, and supported by the addition of Robert
Orr as an independent Non-executive Director, has commenced the
search for a new Chairman and further updates will be provided in
due course.
Growing our business sustainably
We are committed to measuring and benchmarking our
environmental, social and governance performance through
participation on the Global Real Estate Sustainability Benchmark
("GRESB") Real Estate Assessment. We are also voluntarily
collecting data to satisfy the latest EPRA Sustainability Best
Practices Recommendations ("SBPR") and have established a green
building certification strategy including independent ratings for
assets. This process started with the Southwark Holiday Inn Express
extension and refurbishment which is undergoing a BREEAM In-Use
certification. Once complete, this will be one of only a few hotels
certified under the In-Use scheme in the UK. We were proud to
receive an SKA bronze rating for fit-out sustainability in respect
of our recently refurbished food court at West Orchards, Coventry.
Other initiatives include electric vehicle charging points
established at three of our shopping centres which have been a
resounding success with 750 reported charging cycles completed by
customers and over two tonnes of CO(2) saved in the process.
Outlook
Occupational and investment demand across the majority of the
sectors we are invested in has remained robust, despite the
heightened economic and political risks. We expect to see continued
divergence in asset performance, with those assets benefiting from
positive structural change, sustainable occupier demand and strong
demographics likely to outperform. We are also seeing a requirement
for real estate and real estate owners to be providers of high
quality services. We are well positioned to take advantage of this
trend, given our scalable operational platforms and with nearly a
third of our portfolio invested in hotels and London serviced
offices. Through proactive asset management and weighting towards
non-discretionary retailers, we have maintained high occupancy
levels across our retail portfolio. We do however expect continued
rationalisation of certain retailers' physical store requirements
and are therefore actively managing our overall exposure.
With the UK-REIT sector evolving to place greater importance on
income and investors increasingly conscious of the quality and
longevity of income returns, we believe our income focused
investment strategy remains well placed. At an operational level,
our portfolio has been significantly enhanced, our balance sheet
has been strengthened and the efficiency with which we convert
gross rental income to underlying earnings is strong and improving.
Our dividend policy is clearly aligned to underlying earnings and
operational cash flow with dividend cover. In a world characterised
by ageing populations and low interest rates, sustainable asset
backed income is increasingly important.
We will continue to recycle capital out of mature assets and
into assets demonstrating support from structural factors and deep
occupational demand. A further reduction in leverage will be
targeted through reinvestment and refinancing at lower levels of
debt, whilst operating costs will continue to be closely managed.
Looking to the next six months our medium term targets remain
unchanged.
Mike Watters
Chief Executive Officer
25 April 2018
STRATEGIC REPORT
Operating Review
Portfolio overview
The portfolio provides strong income characteristics with clear
visibility of the medium term income profile and growth
opportunities.
Key portfolio characteristics include:
-- Income from RBH managed hotels and London serviced offices
accounts for almost 30 per cent of the portfolio by market value,
with robust income supported by experienced operational partners
with aligned interests and strong occupier demand;
-- a weighted average lease length of 6.8 years to the first
potential lease break and 8.2 years to expiry;
-- 25.9 per cent of gross rental income subject to inflation-linked or fixed increases;
-- rental growth potential with a reversionary yield of 6.3 per
cent, 60 bps higher than the current portfolio net initial yield
(excluding growth potential on RBH managed hotels and London
serviced offices);
-- high and stable occupancy demonstrating robust occupier demand; and
-- over 500 tenants with no single tenant accounting for more
than 3.8 per cent of gross rental income.
Annualised
gross EPRA
Portfolio rental topped EPRA
summary Market income EPRA up Reversionary WAULT occupancy
28 February value GBPm ERV NIY yield yield yrs by ERV Indexed
2018 GBPm (1) GBPm % % % (2) % (2) %
------------------------ -------- ----------- ------ ----- -------- ------------- ------ ----------- --------
UK Commercial 539.5 32.5 34.2 5.3 5.5 5.8 4.9 97.1 15.2
UK Retail 494.1 39.3 38.3 6.7 6.9 7.1 7.7 97.5 22.0
UK Hotels 361.2 25.9 26.1 6.0 6.0 6.5 18.7 100.0 9.7
------------------------ -------- ----------- ------ ----- -------- ------------- ------ ----------- --------
Total UK 1,394.8 97.7 98.6 5.9 6.1 6.5 7.2 97.5 16.5
Europe 252.1 13.5 15.0 4.5 4.6 5.5 4.9 96.9 93.9
------------------------ -------- ----------- ------ ----- -------- ------------- ------ ----------- --------
Total 1,646.9 111.2 113.6 5.7 5.9 6.3 6.8 97.3 25.9
------------------------ -------- ----------- ------ ----- -------- ------------- ------ ----------- --------
Controlled
assets 1,621.6 109.4 111.8 5.7 5.9 6.3 6.8 97.3 25.4
Held in joint
ventures
(proportionate
share) 25.3 1.8 1.8 6.4 6.4 6.7 6.0 100.0 52.5
------------------------ -------- ----------- ------ ----- -------- ------------- ------ ----------- --------
(1) Gross annualised rent 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.
Portfolio positioning by business plan
The portfolio's ability to deliver sustainable income returns
and growth has improved significantly over the last three years.
This has been achieved through active recycling of capital into new
income-led opportunities. RDI's ability to create marginal revenue
and enhance the quality of assets is fundamental to its overall
strategy. The Company's medium term target to deliver rental income
growth of between 2.0 per cent and 5.0 per cent is supported by
47.0 per cent of the portfolio, split between "Growth Income" and
assets subject to more intensive asset management plans.
Core income assets typically exhibit long lease lengths, high
cash-on-cash returns and are predominantly multi-let, often with
some form of indexation. Growth income assets are typically lower
yielding but with higher intrinsic growth prospects. Asset
management plans underway are typically income-led with a
significant percentage of pre-let income being secured before
development commences.
Annualised
Portfolio Annualised gross EPRA
by business gross rental topped EPRA
plan rental income EPRA up Reversionary WAULT occupancy
28 February income GBPm ERV NIY yield yield yrs by ERV Indexed
2018 % (1) GBPm % % % (2) % (2) %
------------------ ----------- ----------- ------ ----- -------- ------------- ------ ----------- --------
Core Income 48.0 53.1 51.8 6.1 6.2 6.4 7.8 97.8 42.8
Growth Income 35.0 39.2 40.0 5.9 5.9 6.3 6.3 100.0 0.7
Asset Management 12.0 12.8 15.6 4.0 4.4 5.8 4.6 96.9 40.7
Mature 5.0 6.1 6.2 6.3 7.2 7.4 2.8 92.2 9.6
------------------ ----------- ----------- ------ ----- -------- ------------- ------ ----------- --------
Total 100.0 111.2 113.6 5.7 5.9 6.3 6.8 97.3 25.9
------------------ ----------- ----------- ------ ----- -------- ------------- ------ ----------- --------
(1) Gross annualised rent 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.
Valuation overview
The like-for-like portfolio value decreased marginally by GBP4.7
million or 0.4 per cent on a like-for-like basis, however this
included the impact of a weaker Euro relative to Sterling at the
end of the period. On a local currency basis, like-for-like
valuations increased 0.3 per cent. The change in value was driven
by a 4.4 per cent increase in net rental income and a 20bps outward
shift in net initial yields on a like-for-like basis. The overall
portfolio currently reflects a 5.7 per cent EPRA net initial yield
and a 6.3 per cent reversionary yield.
The UK Commercial portfolio delivered the strongest value growth
increasing GBP10.2 million or 2.9 per cent, largely as a result of
the strength of the industrial and distribution portfolio and
London offices. UK Hotels and Europe increased 1.1 and 1.5 per cent
respectively in local currency demonstrating steady performance. UK
Retail declined GBP12.1 million or 2.4 per cent, weighted heavily
to UK shopping centres which continue to experience challenging
trading conditions and a weak investment market.
Leasing activity
In the last 6 months, 103 lease events were agreed providing a
total rent of GBP8.3 million, an 8.8 per cent (GBP0.6 million)
increase above the previous passing rent and a 1.5 per cent (GBP0.1
million) increase on ERV. Pro-active asset management ensured that
the portfolio occupancy remained high and stable at 97.3 per cent
(31 August 2017: 97.7 per cent).
Acquisitions
Investment activity over the period totalled GBP284.9 million
including the strategic acquisitions of the IHL and London serviced
office portfolios. Capital recycling activity has focussed on
allocating our capital to assets, sectors and locations
experiencing strong occupier demand supported by infrastructure
investment and structural changes in the way real estate is being
utilised.
Market
Value Net rental Implied Expected
at income NIY on yield
Completion Ownership acquisition(3) at acquisition(1) acquisition on equity
Acquisitions date % GBPm GBPm % %
------------------- ------------ ---------- ---------------- ------------------- ------------- -----------
November
IHL portfolio 2017 74.1 104.4 7.7 6.9 >10.0
Canbury Business December
Park, Kingston 2017 100.0 18.8 1.2 5.8 n/a(2)
London services January
office portfolio 2018 80.0 161.7 10.3 >6.0 >9.0
------------------- ------------ ---------- ---------------- ------------------- ------------- -----------
Total 284.9 19.2 >6.3
--------------------------------- ---------- ---------------- ------------------- ------------- -----------
(1) Gross annualised rent for the London serviced office
portfolio included as EBITDA net of management fees.
(2) Canbury Business Park, Kingston has no debt funding.
(3) Value of IHL reflects agreed acquisition pricing. Valuation
details relevant to the date the group acquired control of IHL, are
set out in Note 9.
International Hotel Properties Limited ("IHL")
Our investment in IHL increased significantly from 17.2 per cent
to 74.1 per cent, with IHL subsequently being de-listed from the
JSE and LuxSE following a successful scheme of arrangement. The
majority of the acquisition was settled by way of a share-for-share
exchange with IHL shareholders. Further information is contained
within Note 9 to the financial statements.
The IHL portfolio comprises nine high quality UK hotels. Four
Travelodge hotels, comprising 27.7 per cent of the portfolio, are
let on long term leases with an average unexpired lease term of
over 20 years. These assets reflect an implied net initial yield of
5.3 per cent and benefit from five yearly upward only CPI
escalations that provide attractive rental growth prospects,
particularly in a higher inflationary environment. The remaining
five hotels are leased to the Company's associate, RBH Hotel Group.
Four of the hotels are franchised to Holiday Inn Express and one to
Hampton by Hilton. The five franchised hotels are expected to
deliver a net initial yield of over 7.5 per cent.
The portfolio is currently financed at 45.9 per cent
loan-to-value, at an all-in cost of debt of 3.3 per cent. Following
the transaction, UK Hotels now make up 21.9 per cent of the Group's
portfolio. The integration of the IHL business is progressing to
plan with associated cost savings being achieved through the
de-listing and integration of the hotel assets into the Company's
existing hotel portfolio and REIT status.
As at 28 February 2018, the IHL portfolio was valued at GBP117.8
million, an impressive 12.8 per cent increase in the portfolio
value on acquisition pricing.
Canbury Business Park, Kingston
On 22 December 2017, Canbury Business Park was acquired for
GBP18.8 million excluding transaction costs and reflects a net
initial yield of 5.8 per cent. The property is within a short
walking distance of the Kingston-upon-Thames mainline railway
station and forms part of a wider strategic site with medium to
long term development potential. The business park includes 3,480
sqm (37,457 sqft) of offices and a number of smaller light
industrial and business units. The acquisition provides a
combination of an attractive near-term yield and medium term
redevelopment opportunities. The acquisition is in line with our
strategy of increasing exposure to assets with strong fundamentals,
including positive demographics with proximity to good transport
links.
London Serviced Office Portfolio ("LSO")
On 15 January 2018, RDI announced it had acquired an 80.0 per
cent interest in a portfolio of four London serviced offices valued
at GBP161.7 million. OSIT, the Company's strategic partner, will
continue as the operator of these assets. As one of the sector's
most experienced managers with a track record of over 25 years
developing and managing serviced offices in the UK. OSIT is led by
founders Giles Fuchs and Niki Fuchs, who have extensive industry
experience and will have a strong alignment of interests through
OSIT's 20.0 per cent co-investment and an EBITDA based management
fee.
London is the global leader in the serviced office market, where
structural and behavioural changes are driving strong demand for
quality, flexible, cost efficient space. In a global workplace with
technology supporting employee mobility and flexibility, businesses
are demanding the ability to adapt and save costs. This trend is
not only visible in small and start-up companies, but also large
corporates which are increasingly embracing flexible space.
The acquisition is in line with the Company's strategy of
recycling capital into assets and locations benefiting from
sustainable long term growth opportunities, structural change in
occupational demand and strategic infrastructure investment. Two of
the assets are located within close proximity to the new Elizabeth
Line Crossrail stations, with Boundary Row, Waterloo adding to the
Company's existing exposure to the rapidly developing Southbank
area.
LSO provides a premium flexible office service at mid-market
rates which has consistently delivered high levels of occupancy and
client satisfaction. The newly acquired assets offer a high ratio
of good quality shared and amenity space, while design and services
are focused on key client requirements including sound attenuation
and market leading IT services. All four properties have been
extensively refurbished and redeveloped by OSIT in the last four
years and each presents a unique offering with flexibility in
design to accommodate customers' bespoke requirements.
The portfolio value of GBP161.7 million at acquisition reflected
an implied net initial yield of over 6.0 per cent. The acquisition
included existing debt facilities of GBP73.5 million reflecting an
LTV of 45 per cent, in line with the strategic priority of reducing
Group leverage. The net cash yield on equity is anticipated to be
in excess of 9.0 per cent.
Disposals
Our active programme of recycling capital out of mature and
ex-growth assets has continued with successful disposals generating
GBP211.8 million, representing an average premium of 8.7 per cent
to the 31 August 2017 market values.
The sale of the German supermarket portfolio completed on 29
December 2017. The consideration reflected a purchase price for the
portfolio of EUR205 million, a 10.8 per cent (EUR20 million)
premium to the 31 August 2017 market value. The disposal
capitalised on a very strong German investment market, enabling
capital to be recycled out of mature assets. The portfolio
consisted of 66 individual retail assets with a small average
individual lot size of EUR3.1 million. The disposal provides a
reduction in overall retail exposure and an effective increase in
the average lot size of the remaining portfolio.
Other strategic disposals included regional offices in Bristol,
Plymouth and Edgbaston reducing our exposure to a maturing regional
office investment market. The House of Fraser department store in
Hull was also sold in the period for GBP11.0 million, despite a
discount to book value, we decided to proactively remove exposure
to a potential covenant risk.
EPRA Reversionary
Net NIY on yield
Market Sales rental sales on sales
value price income price price
Disposals Completion GBPm GBPm GBPm % %
-------------------- ------------ --------- -------- -------- --------- -------------
German supermarket December
portfolio 2017 163.7(1) 181.5 11.3 5.8 6.1
House of Fraser, November
Hull 2017 12.9 11.0 0.8 9.7 9.7
Regional offices Various 18.4 19.3 1.7 8.1 8.6
-------------------- ------------ --------- -------- -------- --------- -------------
Total 195.0 211.8 13.8 6.3 6.5
---------------------------------- --------- -------- -------- --------- -------------
(1) Market value at 31 August 2017 retranslated at the date of
disposal, 29 December 2017.
Development and capital expenditure
Development activity is largely income-led and focused on
refurbishing existing assets and adding incremental space to meet
occupier demand. Total committed and outstanding capital
expenditure at period end was GBP8.5 million.
Outstanding Total
capital capital Yield
expenditure expenditure on cost
Significant Projects Description Completion GBPm GBPm %
---------------------- --------------------- ------------ ------------- ------------- ---------
Albion Street, February
Derby TK Maxx development 2018 - 1.4 9.8
City Arcaden, March
Ingolstadt Primark development 2018 3.5 22.0 4.6
UK Retail Park Drive through December
expansions pods 2018 1.6 1.9 13.7
Total 5.1 25.3 5.5
----------------------------------------------------------- ------------- ------------- ---------
(1) Albion Street, Derby and City Arcaden, Ingolstadt yields
reflect overall scheme yields.
Albion Street, Derby
The redevelopment of 9-11 Albion Street to accommodate a new
2,005 sqm (21,581 sqft) store for TK Maxx completed in February
2018 which will improve the retail pitch materially. The location
links Derby's Intu Shopping Centre to Primark and the historic old
town. The seven adjoining retail units totalling 3,014 sqm (32,446
sqft) have all been let, leaving only two small basement units
vacant.
City Arcaden, Ingolstadt
The scheme totals 12,000 sqm (129,000 sqft) including two retail
units let to Primark and H&M of approximately 9,700 sqm
(104,000 sqft). The 7,000 sqm (75,000 sqft) unit developed for
Primark was handed over in March 2018. The works to complete the
remaining 3,000 sqm (32,000 sqft) of offices and residential units
are anticipated to complete in 2019. Of the total anticipated rent
roll of EUR2.5 million, 83 per cent has been secured.
UK Retail Park expansions
Two drive through pods are to be developed for Costa at Watford
and Edinburgh, with work scheduled to begin shortly subject to
planning consent.
UK Commercial
The UK Commercial portfolio has undergone significant capital
recycling activity in response to our view on the future
performance of certain assets as well as reinvestment in assets
with structural support, notably well-located London serviced
offices. We have continued to dispose of regional offices into a
strong, but maturing, investment market, particularly where we have
completed asset management initiatives and where rental growth
opportunities appear limited. The industrial and distribution
sector continues to see strong structural support as retailers
adjust their business models to fewer stores and enhanced
distribution networks, however the weight of capital targeting the
sector has made additional investment challenging.
Annualised EPRA
gross topped EPRA
UK Commercial Market rental EPRA up Reversionary occupancy
28 February value income ERV NIY yield yield WAULT by ERV Indexed
2018 GBPm GBPm(1) GBPm % % % yrs(2) %(2) %
----------------- ------- ----------- ------ ----- -------- ------------- -------- ----------- --------
Offices -
Serviced 162.7 10.9 10.9 6.0 6.0 6.0 n/a n/a -
Offices -
Greater London 111.6 4.7 6.0 3.3 3.7 5.0 3.5 96.7 14.5
Offices -
Regions 96.7 7.7 7.5 6.6 7.4 7.2 3.5 97.2 15.9
----------------- ------- ----------- ------ ----- -------- ------------- -------- ----------- --------
UK Offices 371.0 23.3 24.4 5.3 5.7 6.0 3.5 97.0 8.1
Distribution
& Industrial 125.0 6.3 7.6 4.7 4.7 5.7 4.6 96.3 3.1
Automotive 43.5 2.9 2.2 6.2 6.2 4.8 11.8 100.0 98.5
----------------- ------- ----------- ------ ----- -------- ------------- -------- ----------- --------
UK Commercial 539.5 32.5 34.2 5.3 5.5 5.8 4.9 97.1 15.2
----------------- ------- ----------- ------ ----- -------- ------------- -------- ----------- --------
(1) Gross annualised rent 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
The London serviced office market has seen remarkable growth in
2017. Serviced office operators are reported to have accounted for
18 per cent of leasing transactions in the City and the West End
last year (source: Savills), highlighting the rapid growth of the
sector. It is estimated that serviced offices now account for
approximately 7.0 per cent of total Central London office stock
with the potential to reach 30.0 per cent by 2030 (source:
JLL).
The growth of the sector has been driven by changes in the way
in which offices are being utilised by occupiers. The provision of
space for smaller and growing companies is being formalised and
delivered professionally with a focus on flexibility and service
quality. Service sectors are witnessing disproportionate employment
growth and technology is supporting the creation of new firms and
their ability to compete. However, there is also a marked shift in
the strategies of large corporates who are recognising the benefits
of a more flexible model as well as the need to provide spaces and
services required to attract talent. We believe the London serviced
office portfolio provides a high-quality product at mid-market
rates which, combined with the strategic benefit of owning the
underlying assets, creates an attractive offer to clients and a
defensive investment.
The acquisition completed on 12 January 2018. Although our
ownership during the reporting period was under two months, income
performance is currently ahead of expectations. Occupancy and desk
rates were stable and new client enquiries continue to prove
robust. The portfolio was valued at GBP162.7 million, a 0.6 per
cent increase on the purchase price of GBP161.7 million.
London serviced office
portfolio 28 February
Operational metrics 2018 At acquisition Change %
------------------------ ------------ --------------- ---------
Average monthly desk
rate (GBP) 697 695 +0.3
Desk occupancy (%) 92.9 93.8 -0.9
Average stay (months)
(1) 30 28 +7.1
------------------------ ------------ --------------- ---------
(1) Excluding St. Dunstan's which opened in 2015.
Distribution and Industrial
The distribution portfolio produced exceptional growth largely
as a result of rental uplifts and lower investment yields at Camino
Park, Crawley. The portfolio increased in value by 11.5 per cent on
a like-for-like basis supported by ERV growth of 3.5 per cent. Over
60 per cent of rental income at Camino Park, Crawley is subject to
rent review in the next six months. The current average topped up
passing rent of GBP7.60 per sqft is expected to show strong growth
against both passing rent and ERV.
UK Retail
General investor sentiment towards the sector remains weak with
the ongoing themes of structural change, the impact of online
retailing combined with slowing retail sales and weaker consumer
confidence. As a result, certain retailers are having to
rationalise their physical store portfolios to be fit for purpose
in the new retail landscape. We retain a more positive outlook on
our well-located retail parks. Vacancy rates across the UK retail
park sector of c.6 per cent remain at their lowest level for ten
years.
We have been pro-active in the management of our portfolio to
address many of these challenges. Overall UK Retail exposure has
reduced to 30.0 per cent of the portfolio and occupancy across the
UK Retail portfolio remained high at 97.5 per cent (31 August 2017:
96.8 per cent).
Occupancy and income have been supported by active engagement
with retailers and local communities. Our in-house
commercialisation activities, many of which have a strong community
and CSR foundation, delivered GBP0.7 million in the period, a
modest decrease on the same period last year.
The start of 2018 has seen a number of retail failures although
many of these were largely anticipated. Our exposure to retailers
such as Toys R Us, New Look and Maplin was relatively modest.
As previously reported, the former 3,838 sqm (41,315 sqft) BHS
unit at Grand Arcade, Wigan was let to Poundland.
At West Orchards, Coventry, the food court has been refurbished
delivering a GBP0.5 million turnaround in net income and a 19 per
cent return on the GBP2.6 million capital investment with a further
two smaller units still to be let to further enhance the
return.
Annualised EPRA
gross topped EPRA
UK Retail Market rental EPRA up Reversionary occupancy
28 February value income ERV NIY yield yield WAULT by ERV Indexed
2018 GBPm GBPm GBPm % % % yrs % %
------------------ ------- ----------- ------ ----- -------- ------------- ------ ----------- --------
Shopping Centres 309.9 26.3 26.1 6.9 7.0 7.7 7.7 97.9 27.8
Retail Parks 178.9 12.4 11.7 6.1 6.4 6.1 7.9 96.6 10.7
Other Retail 5.3 0.6 0.5 6.2 9.3 7.6 4.4 100.0 -
------------------ ------- ----------- ------ ----- -------- ------------- ------ ----------- --------
UK Retail 494.1 39.3 38.3 6.7 6.9 7.1 7.7 97.5 22.0
------------------ ------- ----------- ------ ----- -------- ------------- ------ ----------- --------
The portfolio declined 2.4 per cent on a like-for-like basis
with yields moving out 30 bps reflecting weaker investment
sentiment.
UK Hotels
2017 was a very strong year for hotels in London with RevPar
growth anticipated to have reached 6 per cent. Trading performances
have been supported by a stronger global and Eurozone economy. The
weaker pound has supported London as a tourist destination,
although business travel has been tempered reflecting current
economic and business uncertainty.
Supply of new hotel rooms continues to grow. Following the
additional 8,500 new rooms in London in 2017, a further 7,500 are
anticipated to open in 2018; a factor expected to moderate RevPar
growth this year. PwC has forecast RevPar growth for 2018 in London
and the Regions at 2.4 per cent and 2.3 per cent respectively,
driven in large part by expectations of rate growth. This more
moderate growth when compared to 2017 reflects the recent supply
response and general economic uncertainty. Notwithstanding these
factors, positive growth expectations highlight London's resilience
and the fact that London benefits from some of the highest global
occupancy levels averaging above 80 per cent over the last 10
years.
The Group's hotel portfolio remains heavily weighted to Greater
London. Following the IHL acquisition, UK Hotels has increased to
21.9 per cent of the overall portfolio (31 August 2017: 15.6 per
cent). The acquisition will provide further exposure to Edinburgh
and to Gatwick Airport, the UK's second busiest airport. In
addition, the acquisition of a further four Travelodge hotels
provides exposure to long-dated inflation linked income.
Annualised EPRA
gross topped EPRA
UK Hotels Market rental EPRA up Reversionary occupancy
28 February value income ERV NIY yield yield WAULT by ERV Indexed
2018 GBPm GBPm GBPm % % % yrs(1) %(1) %
---------------- ------- ----------- ------ ----- -------- ------------- -------- ----------- --------
Greater London 186.0 12.5 12.5 5.8 5.8 6.3 n/a n/a -
Regional 128.7 11.0 11.0 6.7 6.7 7.2 n/a n/a 0.9
---------------- ------- ----------- ------ ----- -------- ------------- -------- ----------- --------
RBH managed
portfolio 314.7 23.5 23.5 6.2 6.2 6.7 n/a n/a 0.4
Travelodge
(2) 46.5 2.4 2.6 4.9 4.9 5.2 18.7 100.0 100.0
---------------- ------- ----------- ------ ----- -------- ------------- -------- ----------- --------
UK Hotels 361.2 25.9 26.1 6.0 6.0 6.5 18.7 100.0 9.7
---------------- ------- ----------- ------ ----- -------- ------------- -------- ----------- --------
(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.
The portfolio increased in value by 1.1 per cent on a
like-for-like basis supported by occupancy and RevPar growth. This
excludes a GBP13.4 million or 12.8 per cent increase on the
recently acquired IHL portfolio.
RBH managed hotel portfolio
(excluding IHL)
Operational metrics HY 18 FY 17 HY 17
----------------------------- ------- ------ ------
RevPar (GBP) 80.2 76.6 78.5
Average occupancy (%) 80.4 83.9 81.3
----------------------------- ------- ------ ------
RBH
Our 25.3 per cent stake in RBH (formerly RedefineBDL)
contributed GBP0.3 million to underlying earnings during the
period, a 6.2 per cent increase on the same period last year. RBH
has established itself as the leading independent hotel operator in
the UK after being awarded the management contract for a further 26
four-star luxury hotels located throughout the UK. RBH now manages
more than 11,000 rooms across 75 hotels in the UK.
Europe
The German market remains buoyant supported by a stronger
economy and low unemployment. Investor appetite has remained strong
with over EUR57 billion in commercial property transactions last
year, assisted by large portfolio transactions and international
capital looking for safe-haven investments.
We are witnessing a number of trends which are not dissimilar to
those experienced over the last few years in the UK, notably the
strength of the industrial and distribution sector, the rise of
alternative models including flexible and co-working office space
and some early signs of slowing retailer demand, particularly in
mid-market fashion. In the short-term, the weight of capital
chasing good quality and value add investments remains significant
and supportive of values.
Annualised EPRA
gross topped EPRA
Europe Market rental EPRA up Reversionary occupancy
28 February value income ERV NIY yield yield WAULT by ERV Indexed
2018 GBPm GBPm GBPm % % % yrs % %
--------------------- ------- ----------- ------ ----- -------- ------------- ------ ----------- --------
German Shopping
Centres 184.8 8.9 10.2 4.1 4.1 5.2 4.6 97.2 93.2
German Supermarkets
and Retail
Parks 67.3 4.6 4.8 5.8 5.8 6.6 5.4 96.2 95.4
--------------------- ------- ----------- ------ ----- -------- ------------- ------ ----------- --------
Europe 252.1 13.5 15.0 4.5 4.6 5.5 4.9 96.9 93.9
--------------------- ------- ----------- ------ ----- -------- ------------- ------ ----------- --------
Several asset management initiatives at the Schloss Strassen
Centre, Berlin were delivered during the period. The 1,076 sqm (100
sqm) extension to the dm pharmacy has been completed with the lease
being extended for a 10 year term. The marginal increase in rent
reflects a 8.8 per cent yield on the cost of EUR0.1 million. The
previously announced 171 sqm (1,840 sqft) REWE extension is
anticipated to be completed in late 2018. A new ten-year lease has
been agreed with the marginal increase in rent reflecting a 8.3 per
cent yield on a cost of EUR0.1 million. These initiatives have
reduced the number of in-line units and provide a greater weighting
toward food, discount and convenience shopping.
The portfolio increased in value by 1.5 per cent in local
currency terms and on a like-for-like basis.
STRATEGIC REPORT
Financial Review
Overview
The first half of the year has seen a continued theme of capital
recycling, building on the solid foundation of 2017 with ongoing
improvement to the portfolio's quality and positioning. Overall,
the period has delivered an annualised accounting return of 10.7
per cent, comprising the dividend paid in December 2017 and the
growth in EPRA NAV during the period.
Underlying earnings were GBP27.4 million or 1.46 pence per
share, representing growth of 8.2 per cent when compared to the
first six months of 2017. This is the combined result of growth in
net rents following the IHL acquisition, reduced finance costs
flowing through from debt restructuring activity in 2017 and lower
gearing levels. Further contributing to this growth is an improved
cost ratio, resulting from termination charges incurred in the
prior year being non-recurring.
Acquisition and disposal activity during the six months has
added GBP19.3 million or 1.0 pence per share to EPRA net asset
value. This was driven from the disposal of a EUR185.0 million
German supermarket portfolio in December which generated, after
costs, an EUR18.2 million (GBP16.2 million) profit. The majority of
the proceeds from this sale were recycled into a GBP161.7 million
portfolio of four London serviced offices at an initial yield of
over 6 per cent. The acquisition completed just two weeks later, in
early January.
In November, control of the former listed hotel group,
International Hotel Properties Limited ("IHL") was acquired. A gain
of GBP5.5 million was recognised on acquisition.
Four further small disposals were completed during the period at
a net loss of GBP1.4 million to the 31 August 2017 book value. The
loss was driven by the disposal of the House of Fraser unit in
Hull, where a discount to book value was accepted to remove what
was considered a potential covenant risk.
The above, coupled with modest like-for-like valuation growth,
has delivered a 2.2 per cent increase in the Group's EPRA net asset
value per share, which has risen from 41.4 pence at 31 August 2017
to 42.3 pence at 28 February 2018, with the property portfolio
valued at GBP1.65 billion.
These results continue to demonstrate solid progress against the
Group's key financial targets. We continue to strike a balance
between income growth and leverage reduction and we end the period
with an LTV of 48.0 per cent, down from 50.0 per cent at 31 August
2017.
IHL
The IHL acquisition was completed in stages. The first, in late
October, saw the Group acquire an 8.9 per cent interest from
Redefine Properties Limited ("RPL") in consideration for the issue
of 12.5 million new shares in RDI. In November, a scheme of
arrangement completed whereby minority shareholders holding 29.3
per cent of IHL were issued 2.5 new shares in RDI for every 1 IHL
share held, and a further 3.4 per cent interest in IHL was acquired
from Redefine Properties Limited in return for the issue of 45.9
million new RDI shares collectively. Finally, the Group acquired
Redefine Properties Limited's residual 15.2 per cent holding in IHL
for GBP7.5 million in cash and a further 2.5 million new RDI
shares.
In aggregate, the transaction value of GBP31.8 million was
settled by the issue of 60.9 million new ordinary shares and the
payment of GBP7.5 million in cash. The transactions took the
Group's interest in IHL from 17.2 per cent to 74.1 per cent. IHL is
now accounted for as a subsidiary of the Group with its results and
position reflected in the consolidated income statement, balance
sheet and cash flow statement on a line by line basis.
Following the IHL transactions, the Group has no further
investments or joint ventures with its major shareholder, Redefine
Properties Limited.
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.
Income Statement
Six months ended
---------------------------------------------------------------
28 February 2018 28 February 2017
----------------------------------------------------- -------------------------------- -----------------------------
Joint Group Joint Group
IFRS Ventures(1) Total IFRS Ventures Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------------------- ------- ------------- -------- ------- ---------- --------
Rental income 54.6 0.9 55.5 45.8 5.0 50.8
Rental expense (4.8) (0.1) (4.9) (4.3) (0.5) (4.8)
----------------------------------------------------- ------- ------------- -------- ------- ---------- --------
Net rental income 49.8 0.8 50.6 41.5 4.5 46.0
Other income 0.6 - 0.6 4.8 (2.0) 2.8
Administrative expenses (7.2) (0.1) (7.3) (8.4) (0.4) (8.8)
----------------------------------------------------- ------- ------------- -------- ------- ---------- --------
Net operating income 43.2 0.7 43.9 37.9 2.1 40.0
Net finance costs (14.3) (0.3) (14.6) (11.6) (3.4) (15.0)
Joint venture profits/(losses) allocated to
individual line items 0.2 (0.2) - (1.2) 1.2 -
Current tax and other (1.2) (0.2) (1.4) 0.3 0.1 0.4
Non-controlling interests (1.8) - (1.8) (1.6) - (1.6)
EPRA earnings 26.1 - 26.1 23.8 - 23.8
Company Specific Adjustments:
Debt fair value accretion adjustments 0.4 - 0.4 0.5 - 0.5
Foreign exchange gain 0.9 - 0.9 - - -
----------------------------------------------------- ------- ------------- -------- ------- ---------- --------
Underlying earnings 27.4 - 27.4 24.3 - 24.3
----------------------------------------------------- ------- ------------- -------- ------- ---------- --------
Net gain on sale of joint ventures interests - - - 5.2 (0.2) 5.0
Fair value gain/(loss) on investment property,
assets held for sale and listed shares 8.5 (0.2) 8.3 3.6 (0.6) 3.0
Gain on disposal of investment property and
non-current assets held for sale 0.4 - 0.4 5.9 - 5.9
Gain on disposal of subsidiaries 14.3 - 14.3 - - -
Net gain on business combinations 4.6 - 4.6 - - -
Other finance expenses (0.5) - (0.5) (1.5) - (1.5)
Change in fair value of derivatives 5.2 0.6 5.8 4.4 0.9 5.3
Share of non-underlying joint venture gains/(losses)
allocated to individual line items (0.2) 0.2 - (1.5) 1.5 -
Deferred tax provision 0.1 (0.2) (0.1) (0.4) (0.7) (1.1)
Current tax and other (1.9) (0.4) (2.3) (0.6) (0.9) (1.5)
Non-controlling interests (2.7) - (2.7) 1.4 - 1.4
IFRS profit attributable to shareholders 55.2 - 55.2 40.8 - 40.8
----------------------------------------------------- ------- ------------- -------- ------- ---------- --------
Diluted weighted average ordinary shares (millions) 1,875.5 1,804.4
EPRA earnings per share (pence) 1.39 1.3
Underlying earnings per share (pence) 1.46 1.35
----------------------------------------------------- ------- ------------- -------- ------- ---------- --------
(1) Reallocates joint venture EPRA earnings of GBP0.2 million
(28 February 2017: loss of GBP1.2 million) from a single line item
as required by IFRS to presentation on a line-by-line basis.
Gross rental income increased by GBP4.7 million which included
GBP3.7 million related to the net impact of investment and disposal
activity during the period. Gross rental income from the
like-for-like portfolio increased 2.1 per cent driven by growth in
the UK Commercial portfolio and the Group's like-for-like hotel
portfolio.
UK Commercial experienced the strongest performance following
positive rent review activity, particularly at the Group's Camino
Park Distribution Centre in Crawley. The London office market
continues to perform well with focused asset management efforts
driving rental growth.
Despite the challenges in the retail portfolio, like-for-like
income has held firm at GBP19.3 million, largely a result of
occupancy levels remaining high at 97.5 per cent.
Underlying trading in the hotel portfolio remains strong. The UK
achieved average occupancy of 82 per cent and 4.6 per cent RevPar
growth in 2017 (source: PwC). This contributed to a 4.1 per cent
increase in the hotel portfolio like-for-like income, relative to
the first half of 2017.
In Sterling terms rental income from our investments in Europe
was flat at GBP6.2 million like-for-like. In local currency terms a
2.0 per cent fall was recorded due to decreased footfall impacting
turnover rents, in particular at our Berlin shopping centre.
Income from acquisitions including IHL and the serviced office
portfolio added GBP4.5 million and GBP2.1 million in gross income
respectively, with the residual arising from a smaller acquisition
of a commercial property in Kingston, south west London.
Six months ended Local currency
------------------------------------
28 February 2018 28 February 2017 Change Change Change
Gross rental income GBPm GBPm GBPm % %
UK Commercial 10.6 10.0 0.6 6.0 6.0
UK Retail 19.3 19.3 0.0 0.0 0.0
UK Hotels 7.7 7.4 0.3 4.1 4.1
----------------------------------- ----------------- ----------------- ------- ------- ---------------
UK Total 37.6 36.7 0.9 2.5 2.5
Europe 6.2 6.2 0.0 0.0 (2.0)
----------------------------------- ----------------- ----------------- ------- ------- ---------------
Like-for-like gross rental income 43.8 42.9 0.9 2.1 1.8
Acquisitions 6.8 0.0
Disposals 4.7 7.8
Development 0.2 0.1
----------------------------------- ----------------- ----------------- ------- ------- ---------------
Total gross rental income 55.5 50.8
----------------------------------- ----------------- ----------------- ------- ------- ---------------
Net rental income has risen in line with gross rental income,
reflecting the efficient nature of the newly acquired IHL
portfolio's operating cost structure.
Other income was GBP2.2 million lower due to the non-recurring
performance fee generated on disposal of the VBG portfolio in the
comparative period.
Administrative costs have reduced by GBP1.5 million, largely due
to the termination fee charged in the previous financial year in
respect of a legacy asset management contract. Notwithstanding
non-recurring items, the Group's EPRA cost ratio has improved from
18.0 per cent in the first half of 2017 to 15.7 per cent for the
first half of 2018, demonstrating good progress towards the Group's
target EPRA cost ratio of 15 per cent or less.
Net finance costs have reduced GBP0.4 million or 2.7 per cent,
reflecting both lower leverage and refinancing activity completed
in early 2017. The reduction in finance charges combined with
growth in rental income has enhanced interest cover from 3.2 times
to 3.5 times.
Non-controlling interests reflects the share of income
attributable to the minority shareholders, most notably in IHL
(25.9 per cent), the London serviced office portfolio (20.0 per
cent) and the legacy hotel portfolio (17.5 per cent).
Due to market expectations of rising interest rates, a
significant credit has been recorded in respect of the fair value
of the Group's interest rate derivative contracts. This credit is
removed from both the Group's underlying earnings measure and EPRA
earnings.
Balance sheet
EPRA NAV per share increased by 2.2 per cent or 0.9 pence to
42.3 pence per share. This was driven by the gain on disposal of
the German supermarket portfolio and the gain recognised on
acquisition of control of IHL.
28 February 2018 31 August 2017
--------------------------- ------------------------------ ------------------------------
Joint Group Joint Group
IFRS Ventures Total IFRS Ventures Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- -------- ---------- -------- -------- ---------- --------
Property portfolio
carrying value (1) 1,625.9 25.3 1,651.2 1,520.7 25.6 1,546.3
Net borrowings (771.2) (14.8) (786.0) (769.0) (15.7) (784.7)
Other assets, liabilities
and NCI (60.1) (10.5) (70.6) (11.3) (9.9) (21.2)
--------------------------- -------- ---------- -------- -------- ---------- --------
IFRS NAV 794.6 - 794.6 740.4 - 740.4
--------------------------- -------- ---------- -------- -------- ---------- --------
Fair value of derivatives 2.9 7.4
Deferred tax liabilities 10.3 10.5
--------------------------- -------- ---------- -------- -------- ---------- --------
EPRA NAV 807.8 758.3
--------------------------- -------- ---------- -------- -------- ---------- --------
Diluted number of
shares (millions) 1,909.4 1,830.1
EPRA NAV per share
(pence) 42.3 41.4
--------------------------- -------- ---------- -------- -------- ---------- --------
(1) Market value adjusted to reflect finance leases and tenant
lease incentives.
Property portfolio
Local
Valuation(1) currency
28 February 2018 31 August 2017 Gain/(loss) Gain/(loss) Gain/(loss)
Market value of the property portfolio GBPm GBPm GBPm % %
UK Commercial 357.0 345.8 10.2 2.9 2.9
UK Retail 494.1 501.8 (12.1) (2.4) (2.4)
UK Hotels 243.4 239.6 2.6 1.1 1.1
---------------------------------------- ----------------- --------------- ------------ ------------ ------------
UK Total 1,094.5 1,087.2 0.7 0.1 0.1
Europe 221.3 226.5 (5.4) (2.4) 1.5
---------------------------------------- ----------------- --------------- ------------ ------------ ------------
Like-for-like property portfolio 1,315.8 1,313.7 (4.7) (0.4) 0.3
Acquisitions 300.7 -
Disposals - 201.6
Development 30.4 23.4
---------------------------------------- ----------------- --------------- ------------ ------------ ------------
Total property portfolio market value 1,646.9 1,538.7
---------------------------------------- ----------------- --------------- ------------ ------------ ------------
(1) Valuation includes the effect of capital expenditure,
amortisation of head leases, tenant lease incentives and foreign
currency translation where applicable.
The above like-for-like capital comparison excludes gains
realised from capital recycling, in particular the EUR20 million
uplift on the German Supermarket portfolio generated since the last
balance sheet date.
The UK Commercial portfolio recorded a solid 2.9 per cent gain
for the first half of the year led by distribution warehouses and
London offices.
Challenges continue to be experienced across the UK Retail
portfolio. The Group's retail parks have not been impacted in the
same manner as secondary UK shopping centres, which continue to
suffer from a weak investment market driven by falling retailer
sales and increased online retailing.
The UK Hotel portfolio saw a 1.1 percent valuation uplift, which
excludes the newly acquired IHL portfolio. This performance was
somewhat subdued as pressure on UK household income and increased
supply rein in expectations for RevPar and ADR growth.
The European portfolio increased in value by 1.5 per cent in
local currency terms, following a good performance in the centrally
located Hamburg shopping centre, accompanied by a general increase
across the portfolio reflecting the strong German investment
market. The Euro to Sterling rate has weakened by 3.7 per cent
since the last balance sheet date, offsetting local currency
growth, albeit from a relatively strong position at 31 August
2017.
Debt and gearing
Since 31 August 2017, progress has been made in reducing
leverage. The Group LTV has been reduced to 48.0 per cent, within
our medium term target of 45 to 50 per cent. Drawn debt remained
broadly unchanged at GBP844.7 million despite the level of
recycling and net investment activity during the period which has
resulted in a seven per cent increase in the portfolio to GBP1.65
billion.
28 February 31 August
2018 2017
GBPm GBPm
--------------------------------------- ----------- ---------
Nominal value of drawn debt (844.7) (842.2)
Cash and short-term deposits 54.9 53.4
--------------------------------------- ----------- ---------
Net debt (789.8) (788.8)
Market value of the property portfolio 1,646.9 1,538.7
--------------------------------------- ----------- ---------
LTV (%) 48.0 51.3
Pro forma LTV (%) (1) - 50.0
Weighted average debt maturity (years) 7.0 7.3
Weighted average interest rate (%) 3.3 3.1
Interest cover (times) 3.5 3.2
Debt with interest rate protection
(%) 99.2 93.0
--------------------------------------- ----------- ---------
(1) Pro forma LTV adjusted from 51.3 per cent to reflect
transactions completed between 31 August 2017 and 26 October
2017.
The proceeds from the disposal of the German supermarket
portfolio, which at 31 August 2017 was geared at 58.9 per cent,
were reinvested into four Central London serviced offices at a
gearing level of 45.0 per cent. Successful leverage reduction was
achieved by prepayment of the Group's revolving credit facility,
following smaller disposals.
The weighted average cost of debt has increased to 3.3 per cent
from 3.1 per cent as a result of the increase in average debt
funding costs between disposals and acquisitions, however, interest
cover has continued to improve demonstrating the higher yields
being achieved at the property level.
Debt with interest rate protection remains comfortably in line
with Group targets.
Cash flow
Six months ended
----------------------------------------------------------
28 February 2018 28 February 2017
---------------------------- ----------------------------
Joint Group Joint Group
IFRS Ventures Total IFRS Ventures Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ------- ---------- ------- ------- ---------- -------
Operating cash flows 25.4 0.6 26.0 29.0 1.5 30.5
Disposals 142.6 - 142.6 66.8 (0.6) 66.2
Acquisitions and development (99.9) - (99.9) (7.8) - (7.8)
Other (0.7) 0.2 (0.5) 0.6 (0.6) -
====================================== ------- ---------- ------- ------- ---------- -------
Investing cash flows 42.0 0.2 42.2 59.6 (1.2) 58.4
Net debt repaid (44.1) (0.4) (44.5) (35.4) (0.6) (36.0)
Dividends paid (18.8) - (18.8) (21.6) - (21.6)
Other (2.4) - (2.4) (2.0) - (2.0)
-------------------------------------- ------- ---------- ------- ------- ---------- -------
Financing cash flows (65.3) (0.4) (65.7) (59.0) (0.6) (59.6)
Impact of foreign exchange movements (1.0) - (1.0) 0.1 - 0.1
-------------------------------------- ------- ---------- ------- ------- ---------- -------
Net cash flow 1.1 0.4 1.5 29.7 (0.3) 29.4
-------------------------------------- ------- ---------- ------- ------- ---------- -------
Operating cash flows during the period of GBP26.0 million
provides cover for the dividend paid. Asset disposals, net of
reinvestment activities generated GBP42.7 million, which has been
primarily applied towards leverage reduction.
Cash and undrawn committed facilities at 28 February 2018 were
GBP99.9 million, with capital commitments of GBP8.5 million.
Performance against strategic financial targets
In February 2017 we set out a range of medium term strategic
targets with clear linkage to our strategic priorities and long
term incentives to drive accountability. These targets focus on
income growth and strengthening the balance sheet across all
aspects of the business. Progress since February 2017 is set out
below, which for all metrics other than rent collection
demonstrates performance in line with medium term targets, or
progress in the right direction. Although rent collection for the
March 2018 quarter day was not as strong as we would have liked,
the target was comfortably exceeded by day 21, demonstrating
subsequent collection.
Strategic metrics Medium 28 February 31 August 28 February
term target 2018 2017 2017
------------------------ -------------- ------------ ---------- ------------
Growth in underlying 3.0 - 5.0 8.2 n/a n/a
EPS (%)
Dividend pay-out 90.0 -
ratio (%) 95.0 92.5 94.5 96.3
Rental income growth
(like-for-like) (%) 2.0 - 5.0 2.1 3.7 3.3
>95% within
Rent collection 7 days 89.3 94.3 94.0
45.0 -
LTV (%) 50.0 48.0 50.0 (1) 49.9
Interest cover (times) >3.0 3.5 3.2 3.1
Cost of debt (%) 3.2 - 3.4 3.3 3.1 3.3
EPRA cost ratio (excl.
direct vacancy costs)
(%) <15.0 15.7 19.8 (2) 20.7 (2)
------------------------ -------------- ------------ ---------- ------------
(1) Pro forma adjusted from 51.3 per cent to reflect
transactions between 31 August 2017 and 26 October 2017.
(2) 17.2 per cent and 18.0 per cent respectively when adjusted
for non-recurring items.
Principal risks and uncertainties
The Directors have concluded that there have been no significant
changes to the principal risks and uncertainties faced by the
Group, nor are there anticipated to be any significant changes
during the remaining six months to 31 August 2018. Full disclosure
of the risks and uncertainties faced by the Group are set out on
pages 16 and 17 of the 2017 Annual Report.
Dividend
The Directors have declared an interim dividend of 1.35 pence
per share for the first six months of 2018. When paid, this will
represent an annualised yield of 6.4 per cent on EPRA NAV at 28
February 2018 or 7.8 per cent based on the Company's closing share
price on 28 February 2018.
The dividend represents a 92.5 per cent pay-out ratio on
underlying earnings and is covered by operational cash flows.
Subject to South African Reserve Bank approval, the Company
intends to continue to offer a scrip alternative. Given the
Company's share price currently trades at a significant discount to
net asset value, the Directors intend to match the scrip allocation
by a share buy-back programme to minimise the dilutive impact of
issuing new ordinary shares.
An announcement will be made once the circular and timetable
becomes available on the Company's website. A dividend payment date
of 25 June 2018 has been proposed.
Donald Grant
Chief Financial Officer
25 April 2018
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the condensed
consolidated interim financial statements, in accordance with
applicable laws and regulations.
We confirm to the best of our knowledge:
-- the condensed consolidated interim financial statements have
been prepared in accordance with IAS 34 'Interim Financial
Reporting';
-- the condensed consolidated interim financial statements
include a true and fair view of the information required by
Sections DTR 4.2.7R and DTR 4.2.8R of the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
The operating and financial review refers to important events
which have taken place during the period.
Related party transactions are set out in Note 31 to the
condensed consolidated interim financial statements.
By order of the Board
Mike Watters Donald Grant
Chief Executive Chief Financial Officer
25 April 2018
Independent Review Report to RDI REIT P.L.C.
Introduction
We have been engaged by RDI REIT P.L.C. ("the Group") to review
the condensed set of consolidated financial statements ("the
consolidated financial statements") in the half-yearly financial
report for the six months ended 28 February 2018 which comprise the
condensed consolidated income statement, the condensed consolidated
statement of comprehensive income, the condensed consolidated
balance sheet, the condensed consolidated statement of changes in
equity, the condensed consolidated statement of cash flows and the
related explanatory notes. Our review was conducted having regard
to the Financial Reporting Council's ("FRC") International Standard
on Review Engagements ("ISRE") (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity'.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the consolidated financial statements in
the half-yearly report for the six months ended 28 February 2018 is
not prepared, in all material respects, in accordance with IAS 34
'Interim Financial Reporting' as issued by the International
Accounting Standards Board ("IASB") and the Disclosure and
Transparency Rules of the UK's Financial Conduct Authority
("FCA").
Basis of our report, responsibilities and restriction on use
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the UK's FCA. As disclosed
in note 2, the annual financial statements of the Group are
prepared in accordance with International Financial Reporting
Standards ("IFRSs") as issued by the IASB. The Directors are
responsible for ensuring that the consolidated financial statements
included in this half-yearly financial report have been prepared in
accordance with IAS 34 'Interim Financial Reporting' as issued by
the IASB. Our responsibility is to express to the Group a
conclusion on the consolidated financial statements in the
half-yearly financial report based on our review.
We conducted our review having regard to the FRC's ISRE (UK and
Ireland) 2410 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity'. A review of interim
financial information consists of making enquiries, primarily of
persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (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.
We read the other information contained in the half-yearly
financial report to identify material inconsistencies with the
information in the consolidated financial statements and to
identify any information that is apparently materially incorrect
based on, or materially inconsistent with, the knowledge acquired
by us in the course of performing the review. If we become aware of
any apparent material misstatements or inconsistencies we consider
the implications for our report.
This report is made solely to the Group in accordance with the
terms of our engagement to assist the Group in meeting the
requirements of the Disclosure and Transparency Rules of the UK's
FCA. Our review has been undertaken so that we might state to the
Group 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
Group for our review work, for this report, or for the conclusions
we have reached.
N. Marshall 25 April 2018
For and on behalf of
KPMG
Chartered Accountants, Statutory Audit Firm,
1 Harbourmaster Place
International Financial Services Centre
Dublin 1
Ireland
CONDENSED Consolidated Income Statement
for the six months ended 28 February 2018
Reviewed Reviewed
Six months Six months Audited
ended ended Year ended
28 February 28 February 31 August
2018 2017 2017
Continuing operations Note GBPm GBPm GBPm
----------------------------------------------------- ---- ------------ ------------ -----------
Revenue 3 55.2 50.6 102.1
----------------------------------------------------- ---- ------------ ------------ -----------
Rental income 4 54.6 45.8 97.2
Rental expense 5 (4.8) (4.3) (9.0)
----------------------------------------------------- ---- ------------ ------------ -----------
Net rental income 49.8 41.5 88.2
Other income 6 0.6 4.8 4.7
Administrative costs and other fees 7 (7.2) (8.4) (15.3)
----------------------------------------------------- ---- ------------ ------------ -----------
Net operating income 43.2 37.9 77.6
Gain on revaluation of investment property 8.5 2.6 10.8
Loss on revaluation of investment property held
for sale - - (3.9)
Gain on disposal of investment property 0.6 5.9 9.2
(Loss)/gain on disposal of investment property
held for sale 20 (0.1) - 1.5
Net gain on disposal of subsidiaries 8 14.3 - -
Net gain on business combinations 9 4.6 - -
Distributions from investment at fair value - - 0.2
Gain/(loss) on revaluation of investment at fair
value - 1.0 (0.3)
Amortisation of intangible assets (0.2) (0.1) (0.2)
Loss on disposal of other non-current assets
held for sale 20 (0.1) - -
Foreign exchange loss (0.9) - -
----------------------------------------------------- ---- ------------ ------------ -----------
Profit from operations 69.9 47.3 94.9
Finance income 10 0.4 2.9 3.4
Finance expense 10 (14.5) (14.5) (28.4)
Other finance expense 11 (0.6) (1.5) (6.5)
Change in fair value of derivative financial
instruments 5.2 4.4 4.5
----------------------------------------------------- ---- ------------ ------------ -----------
60.4 38.6 67.9
Net gain on sale of joint venture interests - 5.0 4.9
Net impairment reversal/(impairment) of joint
ventures and associate interests 0.1 0.7 (0.1)
Share of post-tax loss from joint ventures - (2.6) (2.3)
Share of post-tax profit from associate 0.3 0.3 1.1
Transfer of foreign currency translation on disposal
of joint venture interest - - 2.0
Profit before tax 60.8 42.0 73.5
Taxation 12 (1.1) (1.0) (3.9)
Profit for the period 59.7 41.0 69.6
----------------------------------------------------- ---- ------------ ------------ -----------
Profit attributable to:
Equity holders of the Parent 55.2 40.8 66.1
Non-controlling interests 4.5 0.2 3.5
59.7 41.0 69.6
----------------------------------------------------- ---- ------------ ------------ -----------
Earnings per share
Weighted average number of shares (millions) 33 1,871.2 1,802.0 1,809.9
Diluted weighted average number of shares (millions) 33 1,875.5 1,804.4 1,811.9
Basic earnings per share (pence) 33 3.0 2.3 3.7
Diluted earnings per share (pence) 33 3.0 2.3 3.6
----------------------------------------------------- ---- ------------ ------------ -----------
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 2018
Continuing operations Reviewed Reviewed
Six months Six months Audited
ended ended Year ended
28 February 28 February 31 August
2018 2017 2017
GBPm GBPm GBPm
-------------------------------------------------------------------------- ------------ ------------ -----------
Profit for the period 59.7 41.0 69.6
Other comprehensive income/(expense)
Transfer of foreign currency translation on disposal of joint venture
interests - (2.2) (4.2)
Foreign currency translation on subsidiary foreign operations (6.7) 2.1 15.9
Foreign currency translation on joint ventures held by subsidiary foreign
operations (0.3) 0.4 1.0
Total other comprehensive (expense)/income (7.0) 0.3 12.7
--------------------------------------------------------------------------- ------------ ------------ -----------
Total comprehensive income for the period 52.7 41.3 82.3
--------------------------------------------------------------------------- ------------ ------------ -----------
Total comprehensive income attributable to:
Equity holders of the Parent 48.2 41.1 78.7
Non-controlling interests 4.5 0.2 3.6
--------------------------------------------------------------------------- ------------ ------------ -----------
52.7 41.3 82.3
-------------------------------------------------------------------------- ------------ ------------ -----------
The accompanying notes form an integral part of these condensed
consolidated interim financial statements.
CONDENSED Consolidated BALANCE SHEET
as at 28 February 2018
Note Reviewed Audited
28 February 31 August
2018 2017
GBPm GBPm
------------------------------------- ----- ------------ ----------
Non-current assets
Investment property 13 1,599.0 1,494.9
Investment at fair value through
profit or loss 14 - 8.5
Investment in joint ventures 15 1.9 1.9
Loans to joint ventures 15 4.7 4.3
Investment in associate 16 9.2 9.4
Intangible assets 17 0.9 1.1
Property, plant and equipment 0.5 0.1
Derivative financial instruments 22 0.8 0.4
Trade and other receivables 18 10.2 8.4
------------------------------------- ----- ------------ ----------
Total non-current assets 1,627.2 1,529.0
------------------------------------- ----- ------------ ----------
Current assets
Trade and other receivables 18 14.8 15.5
Cash and cash equivalents 19 53.9 52.8
------------------------------------- ----- ------------ ----------
68.7 68.3
Non-current assets held for sale 20 26.9 27.3
Total current assets 95.6 95.6
------------------------------------- ----- ------------ ----------
Total assets 1,722.8 1,624.6
------------------------------------- ----- ------------ ----------
Non-current liabilities
Borrowings, including finance leases 21 (816.5) (818.9)
Derivative financial instruments 22 (3.5) (7.8)
Deferred tax 23 (9.9) (10.4)
Trade and other payables 24 (0.1) -
------------------------------------- ----- ------------ ----------
Total non-current liabilities (830.0) (837.1)
------------------------------------- ----- ------------ ----------
Current liabilities
Borrowings, including finance leases 21 (8.6) (2.9)
Trade and other payables 24 (29.0) (21.2)
Tax liabilities (2.1) (1.2)
------------------------------------- ----- ------------ ----------
Total current liabilities (39.7) (25.3)
------------------------------------- ----- ------------ ----------
Total liabilities (869.7) (862.4)
------------------------------------- ----- ------------ ----------
Net assets 853.1 762.2
------------------------------------- ----- ------------ ----------
Equity
Share capital 25 152.4 146.2
Share premium 25 535.6 511.8
Other components of equity 106.6 82.4
------------------------------------- -----
Total attributable to equity holders
of the Parent 794.6 740.4
Non-controlling interests 27 58.5 21.8
------------------------------------- ----- ------------ ----------
Total equity 853.1 762.2
------------------------------------- ----- ------------ ----------
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 2018 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 2018
Total
attributable
Foreign to equity
currency holders
Share Share Retained Other translation of the Non-controlling Total
capital premium earnings reserves reserve 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 15 - - - - (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 25 1.3 4.4 (5.7) - - - - -
Release of
share-based
payments
reserve 26 - - 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 27 - - - - - - (1.7) (1.7)
Non-controlling
interests
on business
combinations 27 - - - - - - 33.8 33.8
Net gain on
acquisition
of
non-controlling
interests 28 - - 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.
Total
attributable
Foreign to equity
Reverse currency holders
Share Share acquisition Retained Other translation of the Non-controlling Total
capital premium reserve loss reserves reserve Parent interests equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1
September
2016 143.6 502.1 134.3 (94.2) 3.2 10.8 699.8 33.6 733.4
Profit for the
period - - - 40.8 - - 40.8 0.2 41.0
Transfer of
foreign currency
translation on
disposal
of joint venture
interests - - - - - (2.2) (2.2) - (2.2)
Foreign currency
translation
on subsidiary
foreign
operations - - - - - 2.1 2.1 - 2.1
Foreign currency
translation
on joint venture
interests
held by
subsidiary
foreign
operations - - - - - 0.4 0.4 - 0.4
----------------- ---- ------- ------- ----------- -------- -------- ----------- ------------ --------------- ------
Total
comprehensive
income
for the period - - - 40.8 - 0.3 41.1 0.2 41.3
Transactions with
equity
holders of the
Parent
Dividends paid - - - (21.6) - - (21.6) - (21.6)
Scrip dividends 25 1.3 5.3 - (6.6) - - - - -
Fair value of
share-based
payments - - - - 0.5 - 0.5 - 0.5
----------------- ---- ------- ------- ----------- -------- -------- ----------- ------------ --------------- ------
1.3 5.3 - (28.2) 0.5 - (21.1) - (21.1)
Changes in
ownership
interests
in subsidiaries
Reclassification
of
non-controlling
interest
shareholder
loans
to liabilities - - - - - - - (0.3) (0.3)
Dividends paid to
non-controlling
interests - - - - - - - (0.6) (0.6)
Acquisition of
non-controlling
interests - - - 0.6 - - 0.6 (12.7) (12.1)
- - - 0.6 - - 0.6 (13.6) (13.0)
Balance at 28
February
2017 144.9 507.4 134.3 (81.0) 3.7 11.1 720.4 20.2 740.6
----------------- ---- ------- ------- ----------- -------- -------- ----------- ------------ --------------- ------
The accompanying notes form an integral part of these condensed
consolidated interim financial statements.
Total
attributable
Foreign to equity
Reverse Retained currency holders
Share Share acquisition profit/ Other translation of the Non-controlling Total
capital premium reserve (loss) reserves reserve Parent interests equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1
September
2016 143.6 502.1 134.3 (94.2) 3.2 10.8 699.8 33.6 733.4
Profit for the
year - - - 66.1 - - 66.1 3.5 69.6
Transfer of
foreign currency
translation on
disposal
of joint venture
interests 26 - - - - - (4.2) (4.2) - (4.2)
Foreign currency
translation
on subsidiary
foreign
operations - - - - - 15.8 15.8 0.1 15.9
Foreign currency
translation
on joint venture
interests
held by
subsidiary
foreign
operations 15 - - - - - 1.0 1.0 - 1.0
----------------- ---- ------- ------- ----------- -------- -------- ----------- ------------ --------------- ------
Total
comprehensive
income
for the year - - - 66.1 - 12.6 78.7 3.6 82.3
Transactions with
equity
holders of the
Parent
Dividends paid - - - (39.5) - - (39.5) - (39.5)
Scrip dividends 25 2.6 9.7 - (12.3) - - - - -
Merger reserve
release 26 - - (134.3) 134.3 - - - - -
Fair value of
share-based
payments - - - - 1.0 - 1.0 - 1.0
----------------- ---- ------- ------- ----------- -------- -------- ----------- ------------ --------------- ------
2.6 9.7 (134.3) 82.5 1.0 - (38.5) - (38.5)
Changes in
ownership
interests
in subsidiaries
Reclassification
of
non-controlling
interest
shareholder
loans
to liabilities 27 - - - - - - - (0.3) (0.3)
Dividends paid to
non-controlling
interests 27 - - - - - - - (1.7) (1.7)
Non-controlling
interests
on acquisition
of control
of former joint
venture - - - - - - - (0.7) (0.7)
Acquisition of
non-controlling
interests 28 - - - 0.4 - - 0.4 (12.7) (12.3)
- - - 0.4 - - 0.4 (15.4) (15.0)
Balance at 31
August 2017 146.2 511.8 - 54.8 4.2 23.4 740.4 21.8 762.2
----------------- ---- ------- ------- ----------- -------- -------- ----------- ------------ --------------- ------
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 2018
Reviewed Reviewed
Six months Six months Audited
ended ended Year ended
28 February 28 February 31 August
2018 2017 2017
Continuing operations Note GBPm GBPm GBPm
------------------------------------------------------- ---- ------------ ------------ -----------
Cash generated from operations 29 40.3 40.7 75.6
Interest received 0.2 3.5 2.6
Interest paid (14.3) (13.9) (27.0)
Net tax paid (0.8) (1.3) (1.8)
Net cash inflow from operating activities 25.4 29.0 49.4
------------------------------------------------------- ---- ------------ ------------ -----------
Cash flows from investing activities
Net cash disposed on sale of subsidiaries 8 (1.6) - -
Net proceeds on sale of subsidiaries (1) 112.7 - -
Net cash acquired on business combinations 9 7.8 - -
Cash paid on business combinations (2) (79.2) - -
Escrow funds transferred on business combinations (1.5) - -
Purchase and development of investment property (28.5) (7.8) (18.9)
Net proceeds on sale of investment property 20.7 48.7 54.9
Net proceeds on sale of investment property held
for sale 10.8 - 40.9
Distributions from investments at fair value - 0.5 0.7
Net proceeds received on sale of joint venture
interests - 18.1 18.7
Acquisition of control of joint venture - - (42.1)
Cash transferred on acquisition of control of
joint venture - - 2.3
Increase in investments in joint ventures (0.1) - -
Movement in loans to joint ventures (0.2) 0.6 0.7
Distributions from associate (including held
for sale) 0.3 1.1 1.2
Acquisition of property, plant and equipment (0.5) - -
Disposal of other non-current assets held for
sale 1.3 - -
Increase in loan to external party - (1.6) (2.1)
Net cash inflow from investing activities 42.0 59.6 56.3
------------------------------------------------------- ---- ------------ ------------ -----------
Cash flows from financing activities
Share issue costs paid (0.1) - -
Proceeds from borrowings 10.0 16.8 199.5
Repayment of borrowings (54.1) (52.2) (236.8)
Payment of Aviva share of profit - (1.1) (1.4)
Settlement of Aviva profit share right on refinancing - - (5.5)
Other finance expense (0.5) (0.2) (0.6)
Derivative financial instruments purchased and
settled - (0.1) (0.1)
Dividends paid to equity holders (18.8) (21.6) (39.5)
Dividends paid and loans re-paid to non-controlling
interests (1.7) (0.6) (1.5)
Acquisitions from non-controlling interests (0.1) - -
Movement in restricted cash and cash equivalents - - 2.6
Net cash outflow from financing activities (65.3) (59.0) (83.3)
------------------------------------------------------- ---- ------------ ------------ -----------
Net increase in unrestricted cash and cash equivalents 2.1 29.6 22.4
Effect of exchange rate fluctuations on cash
and cash equivalents (1.0) 0.1 1.0
Unrestricted cash and cash equivalents at 1 September 52.1 28.7 28.7
------------------------------------------------------- ---- ------------ ------------ -----------
Unrestricted cash and cash equivalents at end
of the period 53.2 58.4 52.1
Restricted cash and cash equivalents 0.7 3.3 0.7
------------------------------------------------------- ---- ------------ ------------ -----------
Cash and cash equivalents at end of the period 53.9 61.7 52.8
------------------------------------------------------- ---- ------------ ------------ -----------
(1) Includes transaction costs paid of GBP1.3 million.
(2) Includes transaction costs paid of GBP0.6 million.
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 2018
1. General Information
RDI REIT P.L.C. (formerly Redefine International P.L.C.) was
incorporated in the Isle of Man on 28 June 2004 (Registered Number:
111198C) and was re-registered under the Isle of Man Companies Act
2006 on 3 December 2013 (Registered Number: 010534V).
On 4 December 2013, the Company converted to a UK-REIT and
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 interim financial
statements should therefore be read in conjunction with the
consolidated financial statements as at and for the year ended 31
August 2017 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 2018 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
-----------------------------------------------------------------------------
Annual improvements to IFRSs 2014-2016 cycle
-----------------------------------------------------------------------------
IFRS 12 'Disclosure of Interests in Other Entities' (amendment) ("IFRS 12")
-----------------------------------------------------------------------------
IAS 28 'Investments in Associates and Joint Ventures' (amendment) ("IAS 28")
-----------------------------------------------------------------------------
Other amendments
-----------------------------------------------------------------------------
IAS 7 'Statement of Cash Flows' (amendment) ("IAS 7")
-----------------------------------------------------------------------------
IAS 12 'Income Taxes' (amendment) ("IAS 12")
-----------------------------------------------------------------------------
The adoption of these improvements and amendments has not had a
material impact on the interim financial statements of the Group.
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 2017, as set out on pages 106-110 of
the 2017 Annual Report, with the exception of the following
addition to the Investment Property accounting policy. The change
is required as a result of certain operating leasehold interests
acquired through business combinations since 31 August 2017.
Investment Property Amendment
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.
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. The
impact of these improvements and amendments on the consolidated
financial statements of the Group is being assessed.
International Financial Reporting Standard Effective annual periods 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) 1 January 2019
------------------------------------------------------------------- ------------------------------------------------
IAS 23 'Borrowing costs' (amendment) ("IAS 23") 1 January 2019
------------------------------------------------------------------- ------------------------------------------------
Other amendments
------------------------------------------------------------------- ------------------------------------------------
IFRS 2 'Share-Based Payment' (amendment) ("IFRS 2") 1 January 2018
------------------------------------------------------------------- ------------------------------------------------
IFRS 9 'Financial Instruments' ("IFRS 9") 1 January 2018
------------------------------------------------------------------- ------------------------------------------------
IFRS 9 'Financial Instruments' (amendment) ("IFRS 9") 1 January 2019
------------------------------------------------------------------- ------------------------------------------------
IFRS 15 'Revenue from Contracts with Customers' ("IFRS 15") 1 January 2018
------------------------------------------------------------------- ------------------------------------------------
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) 1 January 2019
------------------------------------------------------------------- ------------------------------------------------
IAS 40 'Investment Property' (amendment) 1 January 2018
------------------------------------------------------------------- ------------------------------------------------
Interpretations
------------------------------------------------------------------- ------------------------------------------------
IFRIC 22 'Foreign Currency Transactions and Advance Consideration' 1 January 2018
------------------------------------------------------------------- ------------------------------------------------
IFRIC 23 'Uncertainty over Income Tax Treatments' 1 January 2019
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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, certain assets held for
sale, derivative financial instruments and financial instruments
designated at fair value through profit and loss, all of which are
carried at fair value.
Going Concern
The Directors are satisfied that the Group has adequate
resources to continue in operational existence for the foreseeable
future and for this reason the interim financial statements have
been prepared on a going concern basis.
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
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.
Further details are provided in Note 13.
corporate and property acquisitions
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
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
business 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
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
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 present value of 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.
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 (nine of which
were acquired as part of the IHL transaction
- refer to Note 9):
* 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 (an additional
5.1 per cent, previously classified as held
for sale, was disposed on 14 February 2018).
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. In the prior period, the Group's
interests also included Government-let offices
until 1 January 2017; 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.
Segmental income statement Joint
for the six months ended 28 February 2018 UK UK UK Venture IFRS
Commercial Retail Hotels Europe Other Total Adj Total
GBPm GBPm GBPm GBPm GBPm GBPm 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 (2) (0.4) 0.4 -
---------------------------------------------- ----------- ------- ------- ------ ----- ------ -------- ------
IFRS profit for the period 59.7 - 59.7
---------------------------------------------- ----------- ------- ------- ------ ----- ------ -------- ------
(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 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 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 15, 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
Other segmental information Commercial Retail Hotels Europe Total Adj Total
as at 28 February 2018 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ----------- ------- ------- ------ ----- -------- ------
Additions to investment property during the period
per reportable segment:
Business combinations 161.7 - 115.4 - 277.1 - 277.1
Acquisition of property 20.7 - - - 20.7 - 20.7
Capitalised expenditure 0.6 3.6 0.9 4.9 10.0 - 10.0
Capitalised finance costs - - - 0.3 0.3 - 0.3
183.0 3.6 116.3 5.2 308.1 - 308.1
---------------------------- ----------- ------- ------- ------ ----- -------- ------
Segmental income statement Joint
for the six months ended 28 February 2017 UK UK UK Venture IFRS
Commercial Retail Hotels Europe Other Total Adj Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Continuing operations
Revenue
Rental income 12.8 19.9 7.4 10.7 - 50.8 (5.0) 45.8
Other income (1) - - - - 2.8 2.8 2.0 4.8
Total revenue 12.8 19.9 7.4 10.7 2.8 53.6 (3.0) 50.6
---------------------------------------------- ----------- ------- ------- ------ ----- ------ -------- ------
Rental income 12.8 19.9 7.4 10.7 - 50.8 (5.0) 45.8
Rental expense (0.6) (2.8) (0.1) (1.3) - (4.8) 0.5 (4.3)
---------------------------------------------- ----------- ------- ------- ------ ----- ------ -------- ------
Net rental income 12.2 17.1 7.3 9.4 - 46.0 (4.5) 41.5
Other income (1) - - - - 2.8 2.8 2.0 4.8
(Loss)/gain on revaluation of investment
property 10.3 (1.8) (2.2) (4.3) - 2.0 0.6 2.6
Gain on disposal of investment property 5.9 - - - - 5.9 - 5.9
Gain on revaluation of investment at fair
value - - 1.0 - - 1.0 - 1.0
Finance income on loans to joint ventures - - - - - - 2.4 2.4
Other underlying finance income - - - 0.5 0.5 - 0.5
Finance expense (3.3) (8.1) (1.6) (2.5) - (15.5) 1.0 (14.5)
Other finance expenses (0.1) (1.3) - - (0.1) (1.5) - (1.5)
Change in fair value of derivative financial
instruments 2.5 1.6 (0.1) 1.3 - 5.3 (0.9) 4.4
Group gain on sale of joint venture interests - - - 5.2 - 5.2 (0.2) 5.0
Joint venture loss on sale of subsidiaries - - - (0.2) - (0.2) 0.2 -
Reversal of impairment of investment in
associate - - 0.6 - - 0.6 - 0.6
Share of post-tax profit from associate - - 0.3 - - 0.3 - 0.3
Total per reportable segments 27.5 7.5 5.3 8.9 3.2 52.4 0.6 53.0
Unallocated income and expenses: (2)
Administrative costs and other fees (1) (8.8) 0.4 (8.4)
Amortisation of intangible assets (0.1) - (0.1)
Profit before tax 43.5 1.0 44.5
Taxation (1.6) 0.6 (1.0)
---------------------------------------------- ----------- ------- ------- ------ ----- ------ -------- ------
41.9 1.6 43.5
Joint venture adjustments:
Movement of losses restricted in joint
ventures (3) (0.9) 0.9 -
Reversal of impairment of loans to joint
ventures - 0.1 0.1
Share of post-tax loss from joint ventures - (2.6) (2.6)
---------------------------------------------- ----------- ------- ------- ------ ----- ------ -------- ------
IFRS profit for the period 41.0 - 41.0
---------------------------------------------- ----------- ------- ------- ------ ----- ------ -------- ------
(1) Other income includes management fee income from joint
ventures. 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 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 28 February 2017 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------------------- ----------- ------- ------- ------- ------- -------- -------
Investment property 369.5 526.4 228.8 303.1 1,427.8 (99.8) 1,328.0
Investment at fair value through profit or loss - - 9.8 - 9.8 - 9.8
Investment in associate - - 10.0 - 10.0 - 10.0
Trade and other receivables 2.8 5.8 1.1 3.0 12.7 (1.6) 11.1
Cash and cash equivalents 7.4 8.9 5.5 9.3 31.1 (2.0) 29.1
Non-current assets held for sale 17.4 16.8 1.3 5.5 41.0 - 41.0
Borrowings, including finance leases (171.3) (333.1) (111.2) (173.1) (788.7) 53.2 (735.5)
Trade and other payables (5.7) (9.7) (1.7) (2.8) (19.9) 2.0 (17.9)
Segmental net assets 220.1 215.1 143.6 145.0 723.8 (48.2) 675.6
Unallocated assets and liabilities:
Other non-current assets 1.3 - 1.3
Trade and other receivables 2.7 - 2.7
Cash and cash equivalents 32.6 - 32.6
Net derivative financial instruments (11.1) 3.8 (7.3)
Deferred tax (5.7) 1.9 (3.8)
Trade and other payables (2.3) - (2.3)
Current tax liabilities (1.7) - (1.7)
739.6 (42.5) 697.1
Joint venture adjustments:
Fair value adjustment on acquisition of joint
venture interest 0.9 (0.9) -
Joint venture non-controlling interest (0.6) 0.6 -
Cumulative losses restricted in joint ventures (1) 0.7 (0.7) -
Investment in joint ventures - 3.0 3.0
Loans to joint ventures - 40.5 40.5
-------------------------------------------------- ----------- ------- ------- ------- ------- -------- -------
IFRS net assets 740.6 - 740.6
-------------------------------------------------- ----------- ------- ------- ------- ------- -------- -------
(1) As detailed in Note 15, 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
Other segmental information Commercial Retail Hotels Europe Total Adj Total
as at 28 February 2017 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ----------- ------- ------- ------ ----- -------- ------
Additions to investment property during the period
per reportable segment:
Capitalised expenditure 0.7 0.9 1.2 5.2 8.0 - 8.0
Capitalised finance costs - - 0.2 0.2 0.4 - 0.4
0.7 0.9 1.4 5.4 8.4 - 8.4
---------------------------- ----------- ------- ------- ------ ----- -------- ------
Segmental income statement Joint
for the year ended 31 August 2017 UK UK UK Venture IFRS
Commercial Retail Hotels Europe Other Total Adj Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Continuing operations
Revenue
Rental income 24.8 39.8 14.8 23.7 - 103.1 (5.9) 97.2
Other income (1) - - - 0.1 2.6 2.7 2.0 4.7
Distributions from investment at fair value - - 0.2 - - 0.2 - 0.2
Total revenue 24.8 39.8 15.0 23.8 2.6 106.0 (3.9) 102.1
---------------------------------------------- ----------- ------- ------- ------ ----- ------ -------- ------
Rental income 24.8 39.8 14.8 23.7 - 103.1 (5.9) 97.2
Rental expense (1.0) (5.1) - (3.5) - (9.6) 0.6 (9.0)
---------------------------------------------- ----------- ------- ------- ------ ----- ------ -------- ------
Net rental income 23.8 34.7 14.8 20.2 - 93.5 (5.3) 88.2
Other income (1) - - - 0.1 2.6 2.7 2.0 4.7
(Loss)/gain on revaluation of investment
property 27.8 (21.2) 6.6 (3.3) - 9.9 0.9 10.8
Loss on revaluation of investment property
held for sale - (3.9) - - - (3.9) - (3.9)
Gain on disposal of investment property 5.9 3.3 - - - 9.2 - 9.2
Gain on disposal of investment property held
for sale 0.9 - - 0.6 - 1.5 - 1.5
Distributions from investment at fair value - - 0.2 - - 0.2 - 0.2
Loss on revaluation of investment at fair
value - - (0.3) - - (0.3) - (0.3)
Finance income on loans to joint ventures - - - - - - 2.7 2.7
Other underlying finance income - - - - 0.7 0.7 - 0.7
Finance expense (6.3) (15.6) (3.3) (4.5) - (29.7) 1.3 (28.4)
Other finance income and expense (0.1) (6.3) - 0.3 (0.1) (6.2) (0.3) (6.5)
Change in fair value of derivative financial
instruments 2.8 2.2 (0.7) 1.3 - 5.6 (1.1) 4.5
Group gain on sale of joint venture interests - - - 5.6 - 5.6 (0.7) 4.9
Joint venture loss on sale of subsidiaries - - - (0.7) - (0.7) 0.7 -
Impairment of investment in associate - - (0.5) - - (0.5) - (0.5)
Share of post-tax profit from associate - - 1.1 - - 1.1 - 1.1
Transfer of foreign currency translation on
disposal of joint venture interest - - - 2.0 - 2.0 - 2.0
Total per reportable segments 54.8 (6.8) 17.9 21.6 3.2 90.7 0.2 90.9
Unallocated income and expenses: (2)
Administrative costs and other fees (1) (15.6) 0.3 (15.3)
Amortisation of intangible assets (0.2) - (0.2)
Profit before tax 74.9 0.5 75.4
Taxation (4.4) 0.5 (3.9)
---------------------------------------------- ----------- ------- ------- ------ ----- ------ -------- ------
70.5 1.0 71.5
Joint venture adjustments:
Movement of losses restricted in joint
ventures (3) (0.9) 0.9 -
Reversal of impairment of loans to joint
ventures - 0.4 0.4
Share of post-tax loss from joint ventures - (2.3) (2.3)
---------------------------------------------- ----------- ------- ------- ------ ----- ------ -------- ------
IFRS profit for the year 69.6 - 69.6
---------------------------------------------- ----------- ------- ------- ------ ----- ------ -------- ------
(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 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 2017 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------------------- ----------- ------- ------- ------- ------- -------- -------
Investment property 355.7 507.5 239.3 418.0 1,520.5 (25.6) 1,494.9
Investment at fair value through profit or loss - - 8.5 - 8.5 - 8.5
Investment in associate - - 9.4 - 9.4 - 9.4
Trade and other receivables 3.6 7.8 0.8 7.8 20.0 (0.4) 19.6
Cash and cash equivalents 28.1 5.2 5.0 5.3 43.6 (0.6) 43.0
Non-current assets held for sale 9.3 12.9 1.5 3.6 27.3 - 27.3
Borrowings, including finance leases (188.9) (317.3) (113.1) (218.8) (838.1) 16.3 (821.8)
Trade and other payables (2.9) (9.4) (1.2) (4.3) (17.8) 0.8 (17.0)
Segmental net assets 204.9 206.7 150.2 211.6 773.4 (9.5) 763.9
Unallocated assets and liabilities:
Other non-current assets 1.2 - 1.2
Trade and other receivables 4.3 - 4.3
Cash and cash equivalents 9.8 - 9.8
Net derivative financial instruments (10.9) 3.5 (7.4)
Deferred tax (10.8) 0.4 (10.4)
Trade and other payables (4.2) - (4.2)
Current tax liabilities (1.2) - (1.2)
761.6 (5.6) 756.0
Joint venture adjustments:
Joint venture non-controlling interest (0.1) 0.1 -
Cumulative losses restricted in joint ventures (1) 0.7 (0.7) -
Investment in joint ventures - 1.9 1.9
Loans to joint ventures - 4.3 4.3
-------------------------------------------------- ----------- ------- ------- ------- ------- -------- -------
IFRS net assets 762.2 - 762.2
-------------------------------------------------- ----------- ------- ------- ------- ------- -------- -------
(1) As detailed in Note 15, 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
Other segmental information Commercial Retail Hotels Europe Total Adj Total
as at 31 August 2017 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------------- ----------- ------- ------- ------ ----- -------- ------
Additions to investment property during the year
per reportable segment:
Capitalised expenditure 1.0 3.5 2.9 12.2 19.6 - 19.6
Capitalised finance costs - - 0.2 0.3 0.5 - 0.5
Acquisition of control of former joint venture - - - 80.8 80.8 75.0 155.8
----------------------------------------------- ----------- ------- ------- ------ ----- -------- ------
1.0 3.5 3.1 93.3 100.9 75.0 175.9
----------------------------------------------- ----------- ------- ------- ------ ----- -------- ------
4. Rental INcome
Reviewed Reviewed Audited
28 February 28 February 31 August
2018 2017 2017
GBPm GBPm GBPm
---------------------------------------------------- ------------ ------------ ----------
Gross lease payments from third parties 43.6 38.8 83.2
Gross lease payments from related parties (Note 31) 11.0 7.0 14.0
---------------------------------------------------- ------------ ------------ ----------
Rental income 54.6 45.8 97.2
---------------------------------------------------- ------------ ------------ ----------
The future aggregate minimum rent receivable under
non-cancellable operating leases at the balance sheet date is as
follows:
Not later than one year 96.9 87.6 98.0
Later than 1 year not later than 5 years 294.6 290.0 329.8
Later than 5 years 338.8 331.8 347.7
----------------------------------------- ----- ----- -----
730.3 709.4 775.5
----------------------------------------- ----- ----- -----
5. RENTAL EXPENSE
Reviewed Reviewed Audited
28 February 28 February 31 August
2018 2017 2017
GBPm GBPm GBPm
------------------------------------------------- ------------ ------------ ----------
Non-recoverable service charge 1.9 1.9 4.1
Direct property operating expenses 1.8 2.4 4.7
Operating lease expense 0.6 - -
Letting costs 0.3 - 0.2
Serviced office portfolio direct staff and sales
costs 0.2 - -
Rental expense 4.8 4.3 9.0
------------------------------------------------- ------------ ------------ ----------
6. Other Income
Reviewed Reviewed Audited
28 February 28 February 31 August
2018 2017 2017
GBPm GBPm GBPm
------------------------------------------------------------ ------------ ------------ ----------
Service fee income 0.4 - -
Service fee expense (0.2) - -
------------ ------------ ----------
Service fee margin (1) 0.2 - -
Management fees from joint ventures - including performance
fee (2) (Note 31) - 4.4 3.8
Insurance rebates 0.1 0.2 0.4
Salary recharges 0.2 0.1 0.3
Other property related income 0.1 0.1 0.2
Other income 0.6 4.8 4.7
------------------------------------------------------------ ------------ ------------ ----------
(1) Service fees relates to recoverable costs incurred by the
Group in the newly acquired serviced office portfolio that are
recharged to tenants at a margin.
(2) The Group was responsible for the investment management of
the property portfolio of the Wichford VBG Holding S.à.r.l. joint
venture. The Group was incentivised during the investment period by
a Performance Fee dependent on the internal rate of return achieved
on disposal which occurred during the year ended 31 August
2017.
7. ADMINISTRATIVE COSTS and other fees
Reviewed Reviewed Audited
28 February 28 February 31 August
2018 2017 2017
GBPm GBPm GBPm
---------------------------------------------------- ------------ ------------ ----------
Administrative and other operating expenses 1.8 2.0 4.5
Professional fees 1.6 2.7 2.7
Staff costs 3.2 3.2 5.5
Fair value of share-based payments 0.5 0.5 1.0
Investment management fees (Note 31) 0.1 - -
Non-recurring investment management fees (including
termination fee) - - 1.6
Administrative costs and other fees 7.2 8.4 15.3
---------------------------------------------------- ------------ ------------ ----------
8. DISPOSAL of subsidiaries
The impact of corporate disposals during the period and the net
cash inflow is presented below:
Reviewed
Paragon Leopard 28 February
Square, Hull Portfolio 2018
GBPm GBPm GBPm
-------------------------------------------- ------------- ---------- ------------
Carrying value of net assets disposed
Investment property (12.9) (158.4) (171.3)
Trade and other receivables - (0.3) (0.3)
Cash and cash equivalents - (1.6) (1.6)
Borrowings - 73.1 73.1
Trade and other payables 0.2 0.8 1.0
-------------------------------------------- ------------- ---------- ------------
Net assets disposed (12.7) (86.4) (99.1)
Gross consideration received 11.0 103.0 114.0
Transaction costs (0.2) (1.2) (1.4)
Deferred consideration - 0.8 0.8
Net gain/(loss) on disposal of subsidiaries (1.9) 16.2 14.3
-------------------------------------------- ------------- ---------- ------------
The Leopard Portfolio was comprised of 66 retail properties - a
mixture of stand-alone supermarkets, food-store anchored retail
parks and cash & 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 GBP103.0 million
(EUR116.0 million), after the deduction of transaction costs of
GBP1.2 million (EUR1.3 million) and subject to a completion
adjustment. A completion adjustment of GBP0.8 million (EUR0.9
million) in the Group's favour has been submitted to the buyer for
approval and is considered recoverable at the balance sheet date.
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
GBP86.4 million (EUR97.3 million) and the Group has recognised a
gain on disposal of GBP16.2 million (EUR18.2 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 GBP10.9
million.
No subsidiaries of the Group were disposed of during the year
ended 31 August 2017.
9. BUSINESS COMBINATIONS
The impact of business combinations during the period and the
net cash outflow is presented below:
Reviewed
28 February
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 (71.1) (7.5) (78.6)
* Deferred (0.1) - (0.1)
------ ------ ------------
(71.2) (26.8) (98.0)
Investment in associate (Note 16) - (13.5) (13.5)
Non-controlling interests proportionate share of
the identifiable net assets (Note 27) (17.8) (16.0) (33.8)
Transaction costs (0.9) - (0.9)
------------------------------------------------- ------ ------ ------------
Net gain/(loss) on business combinations (0.9) 5.5 4.6
------------------------------------------------- ------ ------ ------------
LSO
On 12 January 2018, RDI completed the corporate acquisition of
80 per cent of the issued share capital of St Dunstan's Hold Co
Limited and LSO Services Limited, for initial consideration of
GBP71.1 million subject to a completion adjustment. 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. Total consideration paid and payable at the
balance sheet date was the GBP71.2 million while OSIT's minority
share of the identifiable net assets is GBP17.8 million. As the
final consideration has been determined with reference to net asset
value, the Group has not paid a premium or obtained a discount.
Transaction costs of GBP0.9 million have been 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
are fully collectable. Revenue from LSO since acquisition was
GBP2.1 million.
IHL
International Hotel Properties Limited was established as a
hotel investment company and 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 of loss (see Note 14). 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 16).
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, 5.0 million shares in IHL were purchased at GBP1 per share.
Consideration for these shares was GBP7.5 million 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 interests
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").
From 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 GBP5.5 million, all of which are fully collectable. Revenue
from IHL since acquisition was GBP4.5 million.
10. FINANCE INCOME AND FINANCE EXPENSE
Reviewed Reviewed Audited
28 February 28 February 31 August
2018 2017 2017
GBPm GBPm GBPm
------------------------------------------------------- ------------ ------------ ----------
Finance income on loans to external parties 0.2 - 0.2
Finance income on loans to joint ventures 0.2 2.4 2.7
Finance income on loans to other related parties
(Note 31) - 0.5 0.5
Finance income 0.4 2.9 3.4
Finance expense on secured bank loans (13.4) (12.9) (25.8)
Interest capitalised to qualifying investment property
under development 0.3 - 0.4
Amortisation of debt issue costs (0.6) (0.7) (1.3)
Accretion of fair value adjustments (0.4) (0.5) (0.9)
Finance lease interest (0.4) (0.4) (0.8)
------------------------------------------------------- ------------ ------------ ----------
Finance expense (14.5) (14.5) (28.4)
Net finance expense (14.1) (11.6) (25.0)
------------------------------------------------------- ------------ ------------ ----------
11. Other Finance Expense
Reviewed Reviewed Audited
28 February 28 February 31 August
2018 2017 2017
GBPm GBPm GBPm
------------------------------------------- ------------ ------------ ----------
Aviva profit share:
- share of earnings for the period - - 0.2
- re-measurement of financial liability - 1.3 1.3
Net change in fair value adjustments
on substantial modification of borrowings - - 4.3
Write-off of unamortised debt issue
costs 0.1 - 0.4
Other finance costs 0.5 0.2 0.3
Other finance expense 0.6 1.5 6.5
------------------------------------------- ------------ ------------ ----------
Aviva profit share
As part of the Aviva debt restructure in 2013, Aviva retained
the right to participate in 50 per cent of the income generated by
Grand Arcade Shopping Centre, Wigan (after all costs, expenses and
interest). The profit share participation right was recognised as a
financial liability, initially at fair value and was subsequently
measured at amortised cost. During the year ended 31 August 2017
the debt was again restructured and, following a break cost payment
of GBP5.5 million to terminate the existing facility, the Group was
released from the historic profit arrangement and, therefore,
released the financial liability of GBP4.2 million. This resulted
in a net charge of GBP1.3 million to the income statement. Aviva
was entitled to GBP0.2 million of the net income of Grand Arcade
Shopping Centre up to date of termination.
12. taxation
a) Tax recognised in the consolidated income statement:
Reviewed Reviewed Audited
28 February 28 February 31 August
2018 2017 2017
GBPm GBPm GBPm
-------------------------------------- ------------ ------------ ----------
Current income tax
Income tax in respect of current
period 0.5 0.6 0.3
Adjustments in respect of prior
periods 0.6 - 0.1
Deferred tax
On revaluation of investment property 1.4 0.4 3.5
On non-UK losses (1.4) - -
Tax charge for the period recognised
in the consolidated income statement 1.1 1.0 3.9
-------------------------------------- ------------ ------------ ----------
There was no tax recognised in equity or other comprehensive
income during the period (28 February 2017: GBPNil, 31 August 2017:
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
2017: 20.0 per cent, 31 August 2017: 19.58 per cent). The
differences are explained below:
Reviewed Reviewed Audited
28 February 28 February 31 August
2018 2017 2017
GBPm GBPm GBPm
------------------------------------------ ------------ ------------ ----------
Profit before tax 60.8 42.0 73.5
Profit before tax multiplied by standard
rate of corporation tax 11.6 8.4 14.4
Effect of:
- Revaluation of investment property (1.7) (0.1) 1.3
- Gain on disposal of investment
property - (1.2) (2.1)
- Gain on disposal of subsidiaries (2.7) - -
- Gain on business combinations (0.9) - -
- Loss on revaluation of investment
at fair value - - 0.1
- Debt fair value adjustments - - 1.0
- Change in fair value of derivative
financial instruments (1.0) (0.9) (0.9)
- Income not subject to UK income
tax (1.5) (2.6) (3.4)
- REIT exempt property rental profits (4.8) (4.1) (7.9)
- Non-resident landlord tax attributable
to non-controlling interest - 0.5 -
- Losses utilised - - (0.1)
- Unutilised losses carried forward 1.1 0.9 0.7
- Impact of foreign tax 0.4 - 0.3
- Expenses not deductible for tax - 0.1 0.4
- Adjustments in respect of prior
periods 0.6 - 0.1
------------------------------------------ ------------ ------------ ----------
Tax charge for the period recognised
in the consolidated income statement 1.1 1.0 3.9
------------------------------------------ ------------ ------------ ----------
In the reconciliation above for the period ended 28 February
2018, the effective tax rate of the Group was 1.8 per cent (28
February 2017: 2.4 per cent, 31 August 2017: 5.3 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. 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 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 20.7 - - - 20.7 20.7 -
Capitalised expenditure 0.6 3.6 0.9 4.9 10.0 2.9 7.1
Capitalised finance
costs - - - 0.3 0.3 - 0.3
Disposals through the
sale of subsidiaries
(Note 8) - - - (158.4) (158.4) (158.4) -
Disposals through the
sale of property (14.1) - - (6.0) (20.1) (20.1) -
Transfer to assets
held for sale (Note
20) (23.6) - - - (23.6) (23.6) -
Transfer from assets
held for sale (Note
20) 0.9 - - 3.6 4.5 3.6 0.9
Gain/(loss) on revaluation
of investment property 10.6 (12.1) 4.0 6.0 8.5 2.4 6.1
Foreign exchange movement
in foreign operations - - - (14.9) (14.9) (13.9) (1.0)
-------- ---------
IFRS carrying value
at 28 February 2018 500.9 499.0 359.6 239.5 1,599.0 1,158.2 440.8
Adjustments:
Non-current assets
held for sale (Note
20) 26.9 - - - 26.9 23.6 3.3
Minimum payments under
head leases
(Note 21) (1.9) (10.1) (0.4) (1.6) (14.0) - (14.0)
Tenant lease incentives
(Note 18) 2.3 5.2 2.0 0.2 9.7 7.2 2.5
-------- ---------
Market value of Group
portfolio at 28 February
2018 528.2 494.1 361.2 238.1 1,621.6 1,189.0 432.6
--------------------------- ----------- ------- ------- ---------- ------- -------- ---------
Joint ventures
Share of joint venture
investment property
(Note 15) 11.3 - - 14.0 25.3 25.3 -
--------------------------- ----------- ------- ------- ---------- ------- -------- ---------
Market value of total
portfolio at 28 February
2018
(on a proportionately
consolidated basis) 539.5 494.1 361.2 252.1 1,646.9 1,214.3 432.6
--------------------------- ----------- ------- ------- ---------- ------- -------- ---------
UK UK UK
Commercial Retail Hotels Europe(1) Total Freehold Leasehold
31 August 2017 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ----------- ------- ------- ---------- ------- -------- ---------
Opening carrying value
at 1 September 2016 407.3 541.9 229.6 217.6 1,396.4 1,052.2 344.2
Capitalised expenditure 1.0 3.5 2.9 12.2 19.6 7.0 12.6
Capitalised finance
costs - - 0.2 0.3 0.5 0.2 0.3
Acquisition of control
of former joint venture
(Note 32) - - - 155.8 155.8 155.8 -
Disposals through the
sale of property (42.6) (2.1) - - (44.7) (42.9) (1.8)
Transfer to non-current
assets held for sale
(Note 20) (49.0) (16.8) - (9.7) (75.5) (65.3) (10.2)
Head lease movements (0.5) 2.2 - (0.1) 1.6 71.6 (70.0)
(Loss)/gain on revaluation
of investment property 27.9 (21.2) 6.6 (2.5) 10.8 32.1 (21.3)
Foreign exchange movement
in foreign operations - - - 30.4 30.4 29.0 1.4
-------- ---------
IFRS carrying value
at 31 August 2017 344.1 507.5 239.3 404.0 1,494.9 1,239.7 255.2
Adjustments:
Non-current assets
held for sale (Note
20) 9.2 12.9 - 3.7 25.8 19.3 6.5
Minimum payments under
head leases
(Note 21) (2.6) (10.1) (0.4) (1.7) (14.8) - (14.8)
Tenant lease incentives
(Note 18) 1.9 4.3 0.7 0.3 7.2 5.2 2.0
-------- ---------
Market value of Group
portfolio at 31 August
2017 352.6 514.6 239.6 406.3 1,513.1 1,264.2 248.9
--------------------------- ----------- ------- ------- ---------- ------- -------- ---------
Joint ventures
Share of joint venture
investment property
(Note 15) 11.6 - - 14.0 25.6 25.6 -
--------------------------- ----------- ------- ------- ---------- ------- -------- ---------
Market value of total
portfolio at 31 August
2017
(on a proportionately
consolidated basis) 364.2 514.6 239.6 420.3 1,538.7 1,289.8 248.9
--------------------------- ----------- ------- ------- ---------- ------- -------- ---------
(1) Included within the Europe segment at 28 February 2018 is
property under development of GBP30.4 million (31 August 2017:
GBP23.4 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 period are also included so that the market
value of the total portfolio can be determined. This format is not
a requirement of IFRS and is for informational purposes 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
business' of five of the nine hotels acquired was 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
business' 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 2018 was assessed by independent and appropriately
qualified valuers in accordance with the Royal Institute of
Chartered Surveyors ("RICS") standards 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. The Group considers that all of its
investment property falls within 'Level 3', as defined by IFRS 13
(refer to Note 30). There has been no transfer of property within
the fair value hierarchy during the period.
Acquisitions
The Group acquired four serviced offices and nine hotels for
GBP161.7 million and GBP115.4 million respectively, by way of
business combinations during the period. Refer to Note 9 for
further information. The Group also acquired a commercial property
during the period for GBP20.7 million, including acquisition costs,
in Kingston, Southwest London.
Disposals
The Group disposed of one asset from the UK Commercial portfolio
and two assets from the European portfolio (part of the Leopard
Portfolio disposal) during the period, realising a net gain after
disposal costs, of GBP0.6 million (31 August 2017: GBP9.2 million).
As at 28 February 2018, net proceeds of GBP20.7 million had been
received by the Group (31 August 2017: GBP54.9 million). The Group
also disposed of all remaining properties in the Leopard Portfolio
through the disposal of subsidiaries. Refer to Note 8 for further
information.
Sales
proceeds Disposal costs Net sales proceeds Carrying value Gain/(loss) on disposal
28 February 2018 GBPm GBPm GBPm GBPm GBPm
------------------------- --------- -------------- ------------------ -------------- -----------------------
The Crescent Centre,
Bristol 15.0 (0.2) 14.8 14.1 0.7
Bunde & Uelzen, Germany
(Leopard asset disposal) 5.9 - 5.9 6.0 (0.1)
Disposals during the
period 20.9 (0.2) 20.7 20.1 0.6
-------------------------- --------- -------------- ------------------ -------------- -----------------------
Committed expenditure
The Group was contractually committed to expenditure of GBP8.5
million for the future development and enhancement of investment
property at 28 February 2018 (31 August 2017: GBP16.5 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 at fair value THROUGH Profit or loss
The following table details the movement in the Group's
investment in International Hotel Properties Limited, designated at
fair value through profit or loss:
Reviewed Audited
28 February 31 August
2018 2017
GBPm GBPm
------------------------------------- ------------ ----------
Opening balance at 1 September 8.5 7.9
Transfer to investment in associate
(Note 16) (8.5) -
Additions - 0.9
Loss on revaluation of investment at
fair value - (0.3)
Closing balance - 8.5
------------------------------------- ------------ ----------
As at 31 August 2017, the Group held 9.7 million of IHL's 56.0
million total issued shares at a fair value of GBP8.5 million and
the Directors determined that the classification of IHL as an
investment at fair value through profit or loss was
appropriate.
On 15 September 2017, the Group obtained consent from the
shareholders of IHL to acquire 16.4 million shares (29.3 per cent)
from minority shareholders via a scheme of arrangement. From this
date, the Group was considered to have significant influence over
IHL and the investment was reclassified as an investment in
associate (Note 16).
15. INvestment in and loans to joint ventures
Reviewed Audited
28 February 31 August
2018 2017
GBPm GBPm
----------------------------------------------- ------------ ----------
Investment in joint ventures
Opening balance at 1 September 1.9 5.8
Additional investment in joint ventures 0.1 -
Acquisition of control of former joint
venture - (1.1)
Loss on disposal of joint venture interests - (0.7)
Share of post-tax loss from joint ventures - (2.3)
Foreign currency translation (0.1) 0.2
----------------------------------------------- ------------ ----------
Investment in joint ventures 1.9 1.9
Loans to joint ventures
Opening balance at 1 September 4.3 52.9
Increase in loans to joint ventures 0.6 -
Decrease in loans to unrecognised joint
ventures (0.1) -
Reversal of impairment of loan to unrecognised
joint venture 0.1 -
Acquisition of control of former joint
venture - (36.6)
Disposal of loan to joint venture - (12.5)
Repayment of loans by joint ventures - (0.7)
Reversal of impairment of loans to
joint ventures - 0.4
Foreign currency translation (0.2) 0.8
----------------------------------------------- ------------ ----------
Loans to joint ventures 4.7 4.3
Carrying value of interests in joint
ventures 6.6 6.2
----------------------------------------------- ------------ ----------
During the period ended 28 February 2018, 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.à.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.à.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.à.r.l. and Wichford VBG Holding
S.à.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.à.r.l.
On 1 January 2017, Wichford VBG Holding S.à.r.l. exchanged on
the sale of its four German office assets. The disposal was
structured as a share sale of the joint venture's property-owning
subsidiaries. The joint venture recognised a net loss on disposal
of these subsidiaries of GBP1.4 million (Group share: GBP0.7
million) after settlement of loans with nominal carrying values
with the joint venture partners. The Group, however, recognised a
net gain on disposal of GBP4.9 million, including cumulative
foreign currency translation of GBP2.2 million for the year ended
31 August 2017.
Leopard Portfolio
The Group originally held a 50 per cent interest in the Leopard
Portfolio, a joint venture with Redefine Properties Limited
("RPL"), the Company's largest shareholder. This portfolio included
66 retail properties in Germany comprising a mix of stand-alone
supermarkets, food-store anchored retail parks and cash & carry
stores.
During the 2017 financial year, the Group acquired 88 per cent
of RPL's equity interest and all RPL's shareholder loan interests
in the Leopard Portfolio. The Leopard Portfolio became a controlled
subsidiary group with economic effect from 1 March 2017. The
Group's joint venture equity and loan interests were derecognised
on loss of joint control and the acquisition of control. See Note
32 for further details.
The Group has subsequently sold the majority of its interest in
the Leopard Portfolio as detailed in Note 8.
Interest in joint ventures not recognised
Under the equity method, the Esplanade was carried at GBPNil in
the Group's financial statements at 1 September 2017 and remains at
GBPNil at 28 February 2018. This investment is in a net liability
position with the cumulative losses exceeding the cost of the
Group's investment. The Group has ceased to recognise further
losses beyond the original cost of this joint venture and loans
advanced have been fully impaired in line with IAS 28. The Group
share of cumulative losses amounted to GBP0.3 million at 28
February 2018 (31 August 2017: GBP0.7 million). On a proportionate
basis and for segmental reporting purposes, the Group's interest in
the Esplanade is recognised line-by-line. Refer to Note 3.
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.à.r.l. S.à.r.l. Esplanade Total interest Total
28 February 2018 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 (0.9) 0.8
Administrative costs and
other fees (1) (0.1) (0.1) - (0.2) 0.1 (0.1)
---------------------------------- -------------- -------------- --------- ------ ----------- -------------
Net operating (expense)/income (0.1) 0.7 0.9 1.5 (0.8) 0.7
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 - (0.4) - (0.4) 0.2 (0.2)
Finance expense - (0.1) (0.6) (0.7) 0.4 (0.3)
Change in fair value of
derivative financial instruments - - 1.2 1.2 (0.6) 0.6
(Loss)/profit before tax (0.1) 0.4 0.9 1.2 (0.6) 0.6
Taxation - (0.4) - (0.4) 0.2 (0.2)
---------------------------------- -------------- -------------- --------- ------ ----------- -------------
(Loss)/profit and total
comprehensive (expense)/income (0.1) - 0.9 0.8 (0.4) 0.4
Reconciliation to IFRS:
Elimination of non-controlling
and joint venture partners'
interests 0.1 - (0.5) (0.4) 0.4 -
Movement in losses restricted
in joint ventures - - (0.4) (0.4) - (0.4)
---------------------------------- -------------- -------------- --------- ------ ----------- -------------
Group share of joint venture
results - - - - - -
Summarised Balance Sheet
Investment property - 27.0 22.6 49.6 (24.3) 25.3
Trade and other receivables - 0.1 0.1 0.2 (0.1) 0.1
Cash and cash equivalents 1.0 0.3 0.6 1.9 (0.9) 1.0
---------------------------------- -------------- -------------- --------- ------ ----------- -------------
Total assets 1.0 27.4 23.3 51.7 (25.3) 26.4
---------------------------------- -------------- -------------- --------- ------ ----------- -------------
External borrowings - (13.7) (17.5) (31.2) 15.4 (15.8)
Loans from joint venture
partners - (8.6) (6.6) (15.2) 7.2 (8.0)
Derivative financial instruments - - (5.8) (5.8) 2.9 (2.9)
Deferred tax - (1.2) - (1.2) 0.6 (0.6)
Trade and other payables - (0.8) (0.6) (1.4) 0.7 (0.7)
---------------------------------- -------------- -------------- --------- ------ ----------- -------------
Total liabilities - (24.3) (30.5) (54.8) 26.8 (28.0)
---------------------------------- -------------- -------------- --------- ------ ----------- -------------
Non-controlling interests - (0.3) - (0.3) 0.2 (0.1)
---------------------------------- -------------- -------------- --------- ------ ----------- -------------
Net assets/(liabilities) 1.0 2.8 (7.2) (3.4) 1.7 (1.7)
Reconciliation to IFRS:
Elimination of joint venture
partners' interests (0.5) (1.4) 3.6 1.7 (1.7) -
Loan to joint ventures
(3) (Note 31) - 4.7 - 4.7 - 4.7
Interest in joint ventures
not recognised - - 3.3 3.3 - 3.3
Cumulative losses restricted
(4) - - 0.3 0.3 - 0.3
---------------------------------- -------------- -------------- --------- ------ ----------- -------------
Carrying value of interests
in joint ventures 0.5 6.1 - 6.6 - 6.6
---------------------------------- -------------- -------------- --------- ------ ----------- -------------
RI Elimination
Wichford Menora of joint
VBG German venture
Holding Holdings Leopard partners' Proportionate
S.à.r.l. S.à.r.l. Portfolio Esplanade Total interest Total
31 August 2017 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- -------------- -------------- ---------- --------- ------ ----------- -------------
Percentage ownership
interest 49% 50.5% 50% 50%
Summarised Income Statement
Rental income 2.4 1.8 6.0 1.7 11.9 (6.0) 5.9
Rental expense (0.3) (0.1) (0.8) - (1.2) 0.6 (0.6)
--------------------------- -------------- -------------- ---------- --------- ------ ----------- -------------
Net rental income 2.1 1.7 5.2 1.7 10.7 (5.4) 5.3
Administrative costs
and other fees (1) (4.0) (0.2) (0.5) - (4.7) 2.4 (2.3)
--------------------------- -------------- -------------- ---------- --------- ------ ----------- -------------
Net operating
(expense)/income (1.9) 1.5 4.7 1.7 6.0 (3.0) 3.0
Loss on revaluation
of investment property - (0.9) (0.6) (0.2) (1.7) 0.8 (0.9)
Loss on sale of
subsidiaries (1.4) - - - (1.4) 0.7 (0.7)
Finance expense on
loans from joint venture
partners (1.6) (0.5) (3.0) - (5.1) 2.4 (2.7)
Finance expense (0.5) (0.5) (0.6) (1.2) (2.8) 1.5 (1.3)
Other finance income - 0.6 - - 0.6 (0.3) 0.3
Change in fair value
of derivative financial
instruments 0.2 0.2 0.1 1.8 2.3 (1.2) 1.1
(Loss)/profit before
tax (5.2) 0.4 0.6 2.1 (2.1) 0.9 (1.2)
Taxation (0.8) 0.2 (0.3) (0.3) (1.2) 0.7 (0.5)
--------------------------- -------------- -------------- ---------- --------- ------ ----------- -------------
(Loss)/profit and total
comprehensive
(expense)/income (6.0) 0.6 0.3 1.8 (3.3) 1.6 (1.7)
Reconciliation to IFRS:
Elimination of
non-controlling
and joint venture
partners'
interests 3.0 (0.3) (0.2) (0.9) 1.6 (1.6) -
Movement in losses
restricted in joint
ventures - - - (0.9) (0.9) - (0.9)
--------------------------- -------------- -------------- ---------- --------- ------ ----------- -------------
Group share of joint
venture results (3.0) 0.3 0.1 - (2.6) - (2.6)
Presented as:
Reversal of impairment
of loans to joint ventures - 0.3 0.1 - 0.4 - 0.4
Loss on disposal of
joint venture interests
(2) (0.7) - - - (0.7) - (0.7)
Share of post-tax loss
from joint ventures (2.3) - - - (2.3) - (2.3)
--------------------------- -------------- -------------- ---------- --------- ------ ----------- -------------
Summarised Balance
Sheet
Investment property - 27.8 - 23.2 51.0 (25.4) 25.6
Trade and other receivables 0.6 0.1 - 0.1 0.8 (0.4) 0.4
Cash and cash equivalents 0.5 0.2 - 0.5 1.2 (0.6) 0.6
--------------------------- -------------- -------------- ---------- --------- ------ ----------- -------------
Total assets 1.1 28.1 - 23.8 53.0 (26.4) 26.6
--------------------------- -------------- -------------- ---------- --------- ------ ----------- -------------
External borrowings - (14.8) - (17.6) (32.4) 16.1 (16.3)
Loans from joint venture
partners - (8.2) - (6.6) (14.8) 7.2 (7.6)
Derivative financial
instruments - - - (6.9) (6.9) 3.4 (3.5)
Deferred tax - (0.8) - - (0.8) 0.4 (0.4)
Trade and other payables - (1.0) - (0.7) (1.7) 0.9 (0.8)
--------------------------- -------------- -------------- ---------- --------- ------ ----------- -------------
Total liabilities - (24.8) - (31.8) (56.6) 28.0 (28.6)
--------------------------- -------------- -------------- ---------- --------- ------ ----------- -------------
Non-controlling interests - (0.3) - - (0.3) 0.2 (0.1)
--------------------------- -------------- -------------- ---------- --------- ------ ----------- -------------
Net assets/(liabilities) 1.1 3.0 - (8.0) (3.9) 1.8 (2.1)
Reconciliation to IFRS:
Elimination of joint
venture partners'
interests (0.6) (1.6) - 4.0 1.8 (1.8) -
Loan to joint ventures
(3) (Note 31) - 4.3 - - 4.3 - 4.3
Interest in joint ventures
not recognised - - - 3.3 3.3 - 3.3
Cumulative losses
restricted
(4) - - - 0.7 0.7 - 0.7
--------------------------- -------------- -------------- ---------- --------- ------ ----------- -------------
Carrying value of interests
in joint ventures 0.5 5.7 - - 6.2 - 6.2
--------------------------- -------------- -------------- ---------- --------- ------ ----------- -------------
(1) Included within administrative costs and other fees of
Wichford VBG at 31 August 2017 is the Performance Fee expense of
GBP3.4 million, payable to the Group as investment manager, on
disposal of the property portfolio.
(2) Presented within 'Net gain on sale of joint venture
interests' in the condensed consolidated income statement.
(3) Loans to joint ventures include the opening balance, any
advances or repayments and foreign currency movements during the
period.
(4) Cumulative losses restricted represent the Group's share of
losses in the Esplanade which exceed the cost of the Group's
investment. As a result, the carrying value of the investment is
GBPNil in accordance with the requirements of IAS 28.
16. Investment in associate
Reviewed Audited
28 February 31 August
2018 2017
GBPm GBPm
---------------------------------------------- ------------ ----------
Associate investment in IHL and RBH
Opening balance at 1 September 9.4 10.2
IHL
Transfer from investment at fair value
through profit or loss (Note 14) 8.5 -
Additions 5.0 -
Reclassification as investment in subsidiary
(Note 9) (13.5) -
RBH
Share of post-tax profit from associate 0.3 0.9
Distributions from associate (Note 31) (0.5) (1.2)
Net impairment of investment in associate - (0.5)
Carrying value of net investment in associate 9.2 9.4
---------------------------------------------- ------------ ----------
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 (Note 14).
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.
Reviewed Audited
28 February 31 August
2018 2017
GBPm GBPm
---------------------------------------------------------- ------------ ----------
Summarised Income Statement
Revenue 6.6 12.6
Other income - 2.5
Expenses (5.0) (9.6)
---------------------------------------------------------- ------------ ----------
Profit from operations 1.6 5.5
Taxation (0.3) (1.3)
---------------------------------------------------------- ------------ ----------
Profit for the period 1.3 4.2
---------------------------------------------------------- ------------ ----------
Elimination of third party interest (1.0) (3.1)
---------------------------------------------------------- ------------ ----------
Group share of results 0.3 1.1
Classified as:
Share of post-tax profit 0.3 0.9
Impairment adjustment - 0.2
Summarised Balance Sheet
Non-current assets 4.7 4.7
Intangible asset 28.1 28.1
Trade and other receivables 7.8 6.3
Cash and cash equivalents 1.3 3.7
---------------------------------------------------------- ------------ ----------
Total assets 41.9 42.8
---------------------------------------------------------- ------------ ----------
Current liabilities (8.1) (8.7)
---------------------------------------------------------- ------------ ----------
Total liabilities (8.1) (8.7)
---------------------------------------------------------- ------------ ----------
Net assets 33.8 34.1
---------------------------------------------------------- ------------ ----------
Elimination of third party interest (25.4) (25.5)
---------------------------------------------------------- ------------ ----------
Share of net assets attributable to the Group 8.4 8.6
Recoverable amount of excess net investment in associate 0.8 0.8
---------------------------------------------------------- ------------ ----------
Carrying value of the Group's net investment in associate 9.2 9.4
---------------------------------------------------------- ------------ ----------
During the year ended 31 August 2017, the Group's cumulative
investment in RBH increased from 25.3 to 30.4 per cent. On 7
February 2017, the Group acquired an additional 5.1 per cent
interest in RBH for GBP1.3 million which was classified as held for
sale on initial recognition as the shares were acquired exclusively
with a view to subsequent re-sale. The shares were subsequently
sold on 14 February 2018. Refer to Note 20 for further information.
The table above includes movements in the Group's existing 25.3 per
cent interest in RBH only.
Distributions from the associate for the period ended 28
February 2018 of GBP0.5 million (31 August 2017 of GBP1.2 million)
were comprised of cash distributions of GBP0.2 million and accrued
dividend income of GBP0.3 million (31 August 2017: cash only).
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. The independent valuation was determined
on a value-in-use basis but was also cross-checked to market
comparables. Using a discount rate range of 11.5 - 12.5 per cent,
an enterprise value range of GBP33.5 - GBP40.5 million was
attributed to the investment, with a mid-point valuation of GBP37.0
million (Group share: GBP9.4 million). This resulted in an
impairment charge of GBP0.5 million. The Directors considered this
valuation still to be appropriate at 28 February 2018, as adjusted
for excess distributions received or receivable over share of
profits.
17. INTANGIBLE ASSETS
Reviewed Audited
28 February 31 August
2018 2017
GBPm GBPm
------------------------------- ------------ ----------
Opening balance at 1 September 1.1 1.3
Amortisation (0.2) (0.2)
Closing balance 0.9 1.1
------------------------------- ------------ ----------
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.
18. TRade and other receivables
Reviewed Audited
28 February 31 August
2018 2017
GBPm GBPm
---------------------------------------------- ------------ ----------
Non-current
Tenant lease incentives (1) 6.4 5.4
Tenant lease incentives to related parties
(1) (Note 31) 0.8 0.4
Loans to external parties 1.9 1.6
Letting costs 1.1 1.0
---------------------------------------------- ------------ ----------
Total non-current trade and other receivables 10.2 8.4
---------------------------------------------- ------------ ----------
Current
Rent receivable 2.1 1.1
Rent receivable from related parties
(Note 31) 3.3 -
Tenant lease incentives (1) 1.3 1.0
Tenant lease incentives to related parties
(1) (Note 31) 1.2 0.4
Other amounts receivable from related
parties (Note 31) 0.6 0.5
Consideration outstanding on disposal
of investment property held for sale - 6.6
Loans to external parties - 2.2
Prepayments and accrued income 3.3 2.1
Other receivables 3.0 1.6
---------------------------------------------- ------------ ----------
Total current trade and other receivables 14.8 15.5
---------------------------------------------- ------------ ----------
Total trade and other receivables 25.0 23.9
---------------------------------------------- ------------ ----------
(1) Total tenant lease incentives of GBP9.7 million (31 August
2017: GBP7.2 million) have been deducted from investment property
in determining fair value at the balance sheet date. Refer to Note
13.
19. cash and cash equivalents
Reviewed Audited
28 February 31 August
2018 2017
GBPm GBPm
--------------------------------------- ------------ ----------
Unrestricted cash and cash equivalents 53.2 52.1
Restricted cash and cash equivalents 0.7 0.7
--------------------------------------- ------------ ----------
Cash and cash equivalents 53.9 52.8
--------------------------------------- ------------ ----------
At 28 February 2018, cash and cash equivalents to which the
Group did not have instant access amounted to GBP0.7 million (31
August 2017: GBP0.7 million). The restricted cash is held on
deposit in Germany under an hereditable building right agreement
for the property at Ingolstadt.
The Group's share of total cash and cash equivalents, including
its share of joint venture cash, at 28 February 2018 was GBP54.9
million (31 August 2017: GBP53.4 million), with a further GBP45.0
million of undrawn committed facilities available (31 August 2017:
GBP10.0 million).
20. Non-Current assets held for sale
UK UK UK
Commercial Retail Hotels Europe Total
GBPm GBPm GBPm GBPm GBPm
----------------------------- ----------- ------- ------- -------- ------
Investment property
Opening balance at
1 September 2017 9.2 12.9 - 3.7 25.8
Transfers from investment
property (Note 13) 23.6 - - 23.6
Transfers to investment
property (Note 13) (0.9) - - (3.6) (4.5)
Disposals through the
sale of subsidiary - (12.9) - - (12.9)
Disposals through the
sale of property (5.0) - - - (5.0)
Foreign currency translation - - - (0.1) (0.1)
----------------------------- ----------- ------- ------- -------- ------
26.9 - - - 26.9
----------------------------- ----------- ------- ------- -------- ------
Investment in associate
Opening balance at
1 September 2017 - - 1.5 - 1.5
Distributions from
associate (Note 31) - - (0.1) - (0.1)
Disposals - - (1.4) - (1.4)
- - - - -
Closing balance at
28 February 2018 26.9 - - - 26.9
----------------------------- ----------- ------- ------- -------- ------
All non-current assets held for sale fall within 'Level 3', as
defined by IFRS 13 (refer to Note 30). Accordingly, there has been
no transfer within the fair value hierarchy during the period.
Investment property held for sale
As at 31 August 2017, the Group carried six properties as held
for sale. During the period ended 28 February 2018, one property
was reclassified as held for sale, while two were transferred back
to investment property (Note 13). Two properties from the UK
Commercial portfolio remain classified as held for sale at the
reporting date as they were being actively marketed and management
are committed to a plan for their sale. It is considered highly
probable that the carrying value of these assets will be recovered
through a sale transaction, rather than through continuing use,
within the next twelve months.
The Group disposed of two held for sale assets, one from the UK
Retail portfolio and one from the UK Commercial portfolio during
the period realising a net loss, after disposal costs, of GBP0.1
million (31 August 2017: GBP1.5 million). As at 28 February 2018,
net proceeds of GBP10.8 million had been received by the Group
which included the net proceeds from a prior year sale (31 August
2017: GBP40.9 million). The Group also disposed of Paragon Square,
Hull as a disposal of subsidiary. Refer to Note 8 for further
details.
Sales Carrying Finance lease
proceeds Disposal costs Net sales proceeds value liability Loss on disposal
28 February 2018 GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- --------- -------------- ------------------ -------- -------------------- ----------------
Duchess Place,
Edgbaston 1.6 - 1.6 2.3 (0.7) -
West Point and Centre
Court, Plymouth 2.7 (0.1) 2.6 2.7 - (0.1)
Disposals during the
period 4.3 (0.1) 4.2 5.0 (0.7) (0.1)
--------------------- --------- -------------- ------------------ -------- -------------------- ----------------
The Company also exchanged contracts for the disposal of City
Point, Leeds and Severalls, Colchester post period end (refer to
Note 36).
Investment in associate held for sale
On 7 February 2017, as part of the settlement of the loan
outstanding from 4C UK Investments Limited ("4C Investments"), the
Company acquired 659 shares in RBH for an attributed value of
GBP1,942 per share (refer to Note 31). This represented 5.1 per
cent of the issued share capital of RBH. As part of the settlement
agreement, 4C Investments had the right to buy back the shares at
the transfer price of GBP1.3 million at any time on or before 31
January 2018 subject to written notice. This right was extended by
the Group and 4C Investments served notice and formally re-acquired
the shares on 14 February 2018. As the carrying value of the
investment was GBP1.4 million, the Group has recognised a loss of
GBP0.1 million in the income statement on disposal.
21. borrowings, including Finance Leases
Reviewed Audited
28 February 31 August
2018 2017
GBPm GBPm
-------------------------------------------- ------------ ----------
Non-current
Bank loans 820.6 822.8
Less: unamortised debt issue costs (3.1) (3.9)
Less: fair value adjustments (14.2) (14.7)
------------ ----------
803.3 804.2
Other external loans - 0.8
Finance leases 13.2 13.9
-------------------------------------------- ------------ ----------
Total non-current borrowings, including
finance leases 816.5 818.9
-------------------------------------------- ------------ ----------
Current
Bank loans 8.2 3.1
Less: unamortised debt issue costs (0.2) (0.3)
Less: fair value adjustments (0.8) (0.8)
------------ ----------
7.2 2.0
Other external loans 0.6 -
Finance leases 0.8 0.9
Total current borrowings, including finance
leases 8.6 2.9
-------------------------------------------- ------------ ----------
Total borrowings, including finance leases 825.1 821.8
-------------------------------------------- ------------ ----------
Cash and cash equivalents (53.9) (52.8)
-------------------------------------------- ------------ ----------
Net borrowings, including finance leases 771.2 769.0
-------------------------------------------- ------------ ----------
Analysis of movement in net borrowings, including finance
leases
The table below presents the movements in net borrowings for the
period ended 28 February 2018, split between cash and non-cash
movements and as required by IAS 7.
Cash and
Non-current Current cash equivalents Net debt
GBPm GBPm GBPm GBPm
----------------------------- ----------- ------- ----------------- --------
Opening balance at 1
September 2017 818.9 2.9 (52.8) 769.0
Financing activities
(cash)
Borrowings drawn 10.0 - (10.0) -
Borrowings repaid (52.2) (1.9) 54.1 -
----------- ------- ----------------- --------
(42.2) (1.9) 44.1 -
Financing activities
(non-cash)
Debt release on disposal
of subsidiaries (Note
8) (73.1) - - (73.1)
Debt assumed on business
combinations (Note 9) 127.9 - - 127.9
Debt issue costs movements 0.8 - - 0.8
Accretion of fair value
adjustments 0.4 - - 0.4
Finance lease movements (0.7) - - (0.7)
Reclassification between
current and non-current (7.6) 7.6 - -
----------- ------- ----------------- --------
47.7 7.6 - 55.3
Other net cash movements - - (45.2) (45.2)
Foreign currency translation (7.9) - - (7.9)
----------------------------- ----------- ------- ----------------- --------
Closing balance as at
28 February 2018 816.5 8.6 (53.9) 771.2
----------------------------- ----------- ------- ----------------- --------
Bank loans
28 February 2018 31 August 2017
-------------------------
Carrying Nominal Fair Carrying Nominal Fair
Value Value Value Value Value Value
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- -------- ------- ------ -------- ------- ------
Non-current liabilities
Bank loans 820.6 820.6 820.6 822.8 822.8 822.8
Less: unamortised
debt issue costs (3.1) - - (3.9) - -
Less: fair value
adjustments (14.2) - (10.4) (14.7) - (10.6)
------------------------------- -------- ------- ------ -------- ------- ------
Total non-current
bank loans 803.3 820.6 810.2 804.2 822.8 812.2
------------------------------- -------- ------- ------ -------- ------- ------
Current liabilities
Bank loans 8.2 8.2 8.2 3.1 3.1 3.1
Less: unamortised
debt issue costs (0.2) - - (0.3) - -
Less: fair value
adjustments (0.8) - (0.6) (0.8) - 0.1
Total current bank
loans 7.2 8.2 7.6 2.0 3.1 3.2
------------------------------- -------- ------- ------ -------- ------- ------
Total IFRS bank loans 810.5 828.8 817.8 806.2 825.9 815.4
------------------------------- -------- ------- ------ -------- ------- ------
Joint ventures
Share of joint ventures
bank loans 15.9 15.9 15.9 16.3 16.3 16.3
Share of joint ventures
unamortised debt
issue costs - - - - - -
------------------------------- -------- ------- ------ -------- ------- ------
Total bank loans
(on a proportionately
consolidated basis) 826.4 844.7 833.7 822.5 842.2 831.7
------------------------------- -------- ------- ------ -------- ------- ------
Cash and cash equivalents (53.9) (53.9) (53.9) (52.8) (52.8) (52.8)
Share of joint ventures
cash and cash equivalents (1.0) (1.0) (1.0) (0.6) (0.6) (0.6)
------------------------------- -------- ------- ------ -------- ------- ------
Net debt (on a proportionately
consolidated basis) 771.5 789.8 778.8 769.1 788.8 778.3
------------------------------- -------- ------- ------ -------- ------- ------
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
GBP1,567.2 million (31 August 2017: GBP1,484.1 million) and are
carried at amortised cost. On a proportionately consolidated basis,
bank loans are secured over investment property of GBP1,592.6
million (31 August 2017: GBP1,509.7 million).
The Group's nominal value of drawn debt (on a proportionately
consolidated basis) has increased marginally during the period to
GBP844.7 million (31 August 2017: GBP842.2 million) following
scheduled amortisation payments, principal repayments following
disposals, some minor refinancings and most significantly the major
transactions the Group has been engaged in over the last six
months. These include;
- the acquisition of the IHL portfolio in November 2017. The
Group assumed a number of facilities with Santander for a
cumulative total of GBP54.4 million. The facilities have a range of
rates from 2.7 - 3.4 per cent and are due to mature between July
2020 and December 2021;
- in December 2017, the disposal of the majority of the Group's
interest in the Leopard Portfolio. As part of the transaction, all
associated bank debt with Berlin Hyp and BayernLB was settled. The
Berlin Hyp debt was held at rates of 1.3 - 2.9 per cent;
- in January 2018, the assumption of a further GBP73.5 million
of bank debt on completion of the LSO transaction. The balance is
held across facilities with Barclays and Deutsche Bank, due to
mature in December 2019 and August 2022 respectively. The rates as
at 28 February 2018 ranged from 2.6 - 2.9 per cent and they are
capped from 3.1 - 4.1 per cent;
- in September 2017, following the Brückmuhl disposal from the
Premium Portfolio, GBP3.7 million of sales proceeds were repaid
against the loan held with MunchenerHyp;
- in September and October 2017, the Group also finalised
extensions for the BayernLB facilities secured against one property
in the RI Menora joint venture (June 2024) and both German OBI
properties (December 2022). These included prepayments of GBP0.2
million (Group share) and GBP0.1 million respectively and under the
amended agreements, the loans will carry fixed interest rates of
1.59 - 1.72 per cent; and
- during the period, the Group also applied GBP35.0 million of
available cash against the AUK revolving credit facility
("RCF").
Maturity
The maturity of Group bank loans, gross of unamortised debt
issue costs and fair value adjustments is as follows:
Reviewed Audited
28 February 31 August
2018 2017
GBPm GBPm
-------------------------------- ------------ ----------
Less than one year 8.2 3.1
Between one year and five years 621.1 620.5
More than five years 199.5 202.3
828.8 825.9
-------------------------------- ------------ ----------
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
GBP695.0 million, fall within 'Level 3' as defined by IFRS 13
(refer to Note 30). At 31 August 2017, GBP131.6 million of fixed
rate debt was classified by the Group as 'Level 2' as a result of
refinancing activity. As the fair value of the restructured debt is
no longer determined with reference to observable inputs at the
reporting date, it has been transferred to 'Level 3'.
Finance leases
Obligations under finance leases at the reporting date are as
follows:
Reviewed Audited
28 February 31 August
2018 2017
GBPm GBPm
------------------------------------------ ------------ ----------
Minimum lease payments under finance
lease obligations:
Not later than one year 0.8 0.9
Later than one year not later than five
years 3.2 3.3
Later than five years 110.0 113.9
114.0 118.1
Less: finance charges allocated to future
periods (100.0) (103.3)
------------------------------------------ ------------ ----------
Present value of minimum lease payments 14.0 14.8
------------------------------------------ ------------ ----------
Present value of minimum finance lease
obligations:
Not later than one year 0.8 0.9
Later than one year not later than five
years 2.6 2.8
Later than five years 10.6 11.1
Present value of minimum lease payments 14.0 14.8
------------------------------------------ ------------ ----------
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.
22. 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.
Reviewed Audited
28 February 31 August
2018 2017
GBPm GBPm
------------------------------------- ------------ ----------
Derivative Assets
Non-current
Interest rate caps 0.7 0.2
Interest rate swaps 0.1 0.2
0.8 0.4
Derivative Liabilities
Non-current
Interest rate swaps (3.5) (7.8)
(3.5) (7.8)
------------------------------------- ------------ ----------
Net derivative financial instruments (2.7) (7.4)
------------------------------------- ------------ ----------
The Group holds interest rate cap assets at rates of 1.0 to 3.0
per cent, maturing between December 2019 and November 2021. The
interest rate swap assets are held at a rate of 1.1 per cent,
maturing from April 2021 to January 2022. The interest rate swap
liabilities have maturities from January 2019 to January 2022 and
the rates range from 0.4 to 2.0 per cent.
23. Deferred tax
The table below presents the recognised deferred tax liability
and movement during the period:
On investment property On losses carried forward Total
GBPm GBPm GBPm
--------------------------------------------------------- ---------------------- ------------------------- -----
Opening balance 1 September 2016 3.4 - 3.4
Additions on acquisition of control of joint venture 2.8 - 2.8
Expense for the year recognised in the income statement 3.5 - 3.5
Foreign currency translation 0.7 - 0.7
---------------------------------------------------------- ---------------------- ------------------------- -----
Opening balance 1 September 2017 10.4 - 10.4
Expense/(credit) for the period recognised in the income
statement 1.4 (1.4) -
Foreign currency translation (0.5) - (0.5)
---------------------------------------------------------- ---------------------- ------------------------- -----
Closing balance at 28 February 2018 11.3 (1.4) 9.9
---------------------------------------------------------- ---------------------- ------------------------- -----
No unrecognised deferred tax assets at 28 February 2018 (31
August 2017: GBP0.2 million).
24. trade and other payables
Reviewed Audited
28 February 31 August
2018 2017
GBPm GBPm
------------------------------------------- ------------ ----------
Non-current
Other sundry payables 0.1 -
------------------------------------------- ------------ ----------
Total non-current trade and other payables 0.1 -
------------------------------------------- ------------ ----------
Current
Amounts payable to related parties (Note
31) 1.5 0.6
Rent received in advance 4.2 4.3
Trade payables 2.2 1.1
Accrued interest 2.8 2.4
VAT payable 4.9 4.0
Accruals 7.8 6.1
Other payables 5.6 2.7
------------------------------------------- ------------ ----------
Total current trade and other payables 29.0 21.2
------------------------------------------- ------------ ----------
Total trade and other payables 29.1 21.2
------------------------------------------- ------------ ----------
25. share capital and share premium
Authorised Authorised
Number of Share Capital
Shares GBPm
--------------------------------------- ------------- --------------
- At 31 August 2017 (Ordinary shares
of 8 pence each) 3,000,000,000 240.0
- At 28 February 2018 (Ordinary shares
of 8 pence each) 3,000,000,000 240.0
--------------------------------------- ------------- --------------
Issued, Called Up and Fully Paid Share Share
Number of capital premium
Shares GBPm GBPm
-------------------------------------- ------------- -------- --------
At 31 August 2016 1,794,598,650 143.6 502.1
Scrip dividend - issued December 2016 17,141,172 1.3 5.3
Scrip dividend - issued June 2017 16,320,324 1.3 4.4
------------- -------- --------
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 4.4
At 28 February 2018 1,905,132,887 152.4 535.6
-------------------------------------- ------------- -------- --------
Share capital and Share premium
In October 2016, the Company declared a second interim dividend
of 1.575 pence per share for the six months ended 31 August 2016
and offered shareholders an election to receive either a cash
dividend or a scrip dividend by way of an issue of new RDI shares
credited as fully paid up. The Company received election forms from
shareholders holding 489.1 million ordinary shares of 8 pence each
representing a 27.3 per cent take up by shareholders, in respect of
which 17.1 million scrip dividend shares were issued in December
2016.
In April 2017, the Company declared an interim dividend of 1.3
pence per share for the six months ended 28 February 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 522.2 million ordinary shares of 8 pence each
representing a 28.8 per cent take up by shareholders, in respect of
which 16.3 million scrip dividend shares were issued in June
2017.
On 1 November 2017, the Group issued 12.5 million shares to
Redefine Properties at 40.0p 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 formally 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.
26. RESERVES
Reverse acquisition reserve
The reverse acquisition reserve of GBP134.3 million arose on the
reverse acquisition of Wichford P.L.C. (subsequently renamed
Redefine International and now RDI REIT P.L.C.) by Redefine
International Holdings Limited ("RIHL") in August 2011 and
reflected the difference between the capital structure of the
Company, as the legal acquirer, and RIHL, as the accounting
acquirer, at the date of the transaction.
On 28 July 2017, the capital of RIHL was reduced by way of a
capital reduction and transferred to retained earnings. On
consolidation, this capital reduction has resulted in the release
of GBP134.3 million from the reverse acquisition reserve which has
also been transferred to the retained earnings of the Group.
Other Reserves
Share-Based Payment Reserve
The share-based payment reserve at 28 February 2018 of GBP1.7
million (31 August 2017: GBP3.2 million) arises from conditional
awards of shares in the Company made to certain employees and the
Executive Directors. The awards will vest on the third anniversary
of the grant, subject to certain performance conditions being
achieved over the vesting period. The Group released from the
reserve to retained earnings GBP2.0 million of cumulative IFRS 2
charge on lapsed and vested awards. The Group incurred a further
GBP0.1 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 GBP1.9 million.
Detailed information on the share-based payment plans in place is
included in the 2017 Annual Report.
Other Reserves
Other reserves of GBP1.0 million (31 August 2017: GBP1.0
million) arose from the acquisition of subsidiaries.
Foreign Currency Translation Reserve
The foreign currency translation reserve at 28 February 2018 of
GBP16.4 million (31 August 2017: GBP23.4 million) represents
exchange differences arising from the translation of the Group's
net investment in foreign operations, including both subsidiary and
joint venture interests. GBP4.2 million of cumulative translation
gains were transferred to the income statement during the year
ended 31 August 2017 on disposal of joint venture interests.
27. Non - controlling Interests
Reviewed Audited
28 February 31 August
2018 2017
GBPm GBPm
------------------------------------------------------------------ ------------ ----------
Opening balance at 1 September 21.8 33.6
Comprehensive income for the period:
Share of profit for the period 4.5 3.5
Foreign currency translation on subsidiary foreign operations - 0.1
Changes in ownership interest in subsidiaries:
Recognition of non-controlling interests on business combinations
(Note 9) 33.8 -
Acquisition of non-controlling interests (Note 28) 0.1 (12.7)
Dividends paid to non-controlling interests (1.7) (1.7)
Recognition of non-controlling interests on acquisition of
control of former joint venture (1) - (0.7)
Reclassification of non-controlling interest shareholder loans
to liabilities - (0.3)
Total non-controlling interests 58.5 21.8
------------------------------------------------------------------ ------------ ----------
(1) On acquisition of control of the Leopard Portfolio (Note
32), the non-controlling interest's proportionate share (6 per
cent) of the identifiable net assets of GBP0.7 million was
recognised (debit balance).
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 2018 31 August 2017
-------------- ----------------------------------------------------------------- -----------------------------------
Other Other
individually Total individually Total non-
immaterial non-controlling immaterial controlling
LSO IHL RHHL subsidiaries interest RHHL subsidiaries interest
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- --------- ---------- ---------- ------------ ---------------- -------- ------------ -----------
Principal
place of United United United United
business Kingdom Kingdom Kingdom Kingdom
Country of Isle of
incorporation Man BVI BVI BVI
NCI % 20.0% 25.9% 17.52% 17.52%
Summarised
balance sheet
Investment
property 162.7 117.5 226.0 223.7
Derivative
financial
instruments 0.5 0.1 0.2
Trade and
other
receivables 0.6 3.7 4.9 8.0
Cash and cash
equivalents 4.2 1.4 4.7
Borrowings,
including
finance
leases (73.2) (54.1) (113.2) (113.1)
Trade and
other
payables (5.0) (3.9) (1.9) (1.0)
Adjusted net
assets 89.8 64.7 120.7 117.6
-------------- --------- ---------- ---------- ------------ ---------------- -------- ------------ -----------
NCI share of
adjusted net
assets 18.0 16.7 21.2 20.6
Tax
attributable
to NCI - - - -
-------------- --------- ---------- ---------- ------------ ---------------- -------- ------------ -----------
Carrying
amount of NCI 18.0 16.7 21.2 2.6 58.5 20.6 1.2 21.8
-------------- --------- ---------- ---------- ------------ ---------------- -------- ------------ -----------
Summarised
statement of
comprehensive
income
Revenue 2.3 4.5 7.3 14.0
-------------- --------- ---------- ---------- ------------ ---------------- -------- ------------ -----------
Profit for the
period 2.0 4.9 8.3 14.2
-------------- --------- ---------- ---------- ------------ ---------------- -------- ------------ -----------
Profit
attributable
to NCI 0.4 1.3 1.4 1.4 4.5 3.0 0.5 3.5
Other
comprehensive
income
attributable
to NCI - - - - - - 0.1 0.1
-------------- --------- ---------- ---------- ------------ ---------------- -------- ------------ -----------
Dividends paid
to NCI 0.2 0.6 0.9 - 1.7 1.6 0.1 1.7
Summarised
cash flow
statement
Cash inflow
from
operating
activities - 2.1 5.0 11.4
Cash outflow
from
investing
activities - (0.4) (0.2) (3.0)
Cash outflow
from
financing
activities (1.5) (2.4) (5.2) (5.4)
-------------- --------- ---------- ---------- ------------ ---------------- -------- ------------ -----------
Net increase
in cash and
cash
equivalents (1.5) (0.7) (0.4) 3.0
-------------- --------- ---------- ---------- ------------ ---------------- -------- ------------ -----------
28. TRANSACTIONS WITH non--controlling interests
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
interests 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.
Reviewed Audited
28 February 31 August
2018 2017
GBPm GBPm
Carrying amount of non-controlling interest acquired:
4C Investments 0.6 12.7
Non-controlling interests of LGPEd2 (0.1) -
------------ ----------
0.5 12.7
Transfer value attributed to 4C Investments (net of transaction costs) - (12.3)
Consideration paid to non-controlling interests of LGPEd2 (0.4) -
Increase in equity attributable to equity holders of the Parent 0.1 0.4
----------------------------------------------------------------------- ------------ ----------
29. cash GENERATED FROM OPERATIONS
Reviewed Reviewed Audited
28 February 28 February 31 August
2018 2017 2017
Continuing operations Note GBPm GBPm GBPm
-------------------------------------- ---- ------------ ------------ ----------
Cash flows from operating activities
Profit before tax 60.8 42.0 73.5
Adjustments for:
Straight lining of rental income - (0.8) (1.1)
Depreciation 0.1 - -
Share-based payments (1) 0.4 0.5 1.0
Gain on revaluation of investment
property (8.5) (2.6) (10.8)
Loss on revaluation of investment
property held for sale - - 3.9
Gain on disposal of investment
property (0.6) (5.9) (9.2)
Loss/(gain) on disposal of investment
property held for sale 20 0.1 - (1.5)
Net gain on disposal of subsidiaries 8 (14.3) - -
Net gain on business combinations 9 (4.6) - -
Distributions from investment
at fair value - - (0.2)
(Gain)/loss on revaluation of
investment at fair value - (1.0) 0.3
Amortisation of intangible asset 0.2 0.1 0.2
Loss on disposal of other non-current
assets held for sale 0.1 - -
Foreign exchange loss 0.9 - -
Finance income 10 (0.4) - (3.4)
Finance expense 10 14.5 11.6 28.4
Other finance expense 11 0.6 1.5 6.5
Change in fair value of derivative
financial instruments (5.2) (4.4) (4.5)
Net gain on sale of joint venture
interests - (5.0) (4.9)
Net impairment/(reversal of
impairment) of joint ventures
and associate interests (0.1) (0.7) 0.1
Share of post-tax loss from
joint ventures - 2.6 2.3
Share of post-tax profit from
associate (0.3) (0.3) (1.1)
Transfer of foreign currency
translation on disposal of joint
venture interest - - (2.0)
43.7 37.6 77.5
Changes in working capital (3.4) 3.1 (1.9)
-------------------------------------- ---- ------------ ------------ ----------
Cash generated from operations 40.3 40.7 75.6
-------------------------------------- ---- ------------ ------------ ----------
(1) Fair value of share-based payments for the period ended 28
February 2018 of GBP0.5 million, as adjusted for GBP0.1 million of
costs incurred by the Group on settling vested employee awards.
30. 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 2018 and 31
August 2017.
Level Level Level Total
1 2 3 Fair Value
GBPm GBPm GBPm GBPm
------------------------------------------- ------ ------ ------ -----------
28 February 2018
Financial assets
Derivative financial assets (Note 22) - 0.8 - 0.8
- 0.8 - 0.8
Financial liabilities
Derivative financial liabilities (Note 22) - (3.5) - (3.5)
- (3.5) - (3.5)
31 August 2017
Financial assets
Investment at fair value (Note 14) 8.5 - - 8.5
Derivative financial assets (Note 22) - 0.4 - 0.4
8.5 0.4 - 8.9
Financial liabilities
Derivative financial liabilities (Note 22) - (7.8) - (7.8)
- (7.8) - (7.8)
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. In the 2017
financial year, the investment in IHL was categorised as a 'Level
1' investment and priced using quoted prices in an active market;
the AltX of the JSE.
As stated in Note 13 and 20 respectively, the Group considers
investment property and non-current assets held for sale to be
categorised as 'Level 3'. As stated in Note 21, the Group considers
all bank loans to be categorised as 'Level 3'. GBP131.6 million of
fixed rate debt was reclassified by the Group from 'Level 2' during
the period.
The carrying values of loans to joint ventures, trade and other
receivables, cash and cash equivalents, finance leases and trade
and other payables are considered to be a reasonable approximation
of fair value.
31. related party transactions
Related parties of the Group include: associate undertakings;
joint ventures; Directors and key management personnel; connected
parties; the major Shareholder Redefine Properties Limited ("RPL");
as well as entities connected through common directorships.
Reviewed Reviewed
six months six months Audited
ended ended Year ended
28 February 28 February 31 August
2018 2017 2017
GBPm GBPm GBPm
Related Party Transactions
Revenue Transactions
Rental income
RBH 11.0 7.0 14.0
Other income
Joint Venture investment management and performance fee income
Leopard Portfolio - 0.3 0.3
Wichford VBG Holding S.à.r.l. - 4.1 3.5
4.4 3.8
Administration costs and other fees
OSIT investment management fees (0.1) - -
Finance income
Joint Venture loan interest income
Leopard Portfolio - 1.5 1.5
Wichford VBG Holding S.à.r.l. - 0.8 0.8
RI Menora German Holdings S.à.r.l. 0.2 0.1 0.4
4C UK Investments Limited - 0.5 0.5
0.2 2.9 3.2
Reviewed Audited
As at As at
28 February 31 August
2018 2017
GBPm GBPm
Capital Transactions
Investment property (capitalised expenditure)
Project monitoring fee to RBH - construction works - 0.1
Investment at fair value through profit or loss
International Hotel Properties Limited (shares acquired/transferred at cost) - 1.0
Investment in associate
Transfer price of 4C Investments interests in RBH (1.3) 1.3
Dividends received from RBH (including held for sale investment) (0.6) (1.2)
Non-controlling interests
Transfer price of 4C UK Investments Limited's interests in RHHL - 12.1
Adjustment to carrying value of the non-controlling interest in RHHL (Note
29) 0.6 -
Related Party Balances
Loans to joint ventures
RI Menora German Holdings S.à.r.l. 4.7 4.3
Trade and other receivables
RBH - tenant lease incentives 2.0 0.8
RBH - rent receivable 3.3 -
RBH - distribution receivable 0.3 -
RI Menora German Holdings S.à.r.l.- interest receivable 0.3 0.5
5.9 1.3
Trade and other payables
RBH - other payables (1.5) -
Wichford VBG Holding S.à.r.l - other payables - (0.6)
(1.5) (0.6)
Reviewed Audited
28 February 31 August
2018 2017
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 7.3 13.8
Redefine Properties Limited - scrip dividends - 1.7
Redefine Properties Limited
On 1 November 2017, the Group issued 12.5 million shares to
Redefine Properties at 40.0p 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 40.0p 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 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. All transactions are considered to be at
arms-length.
4C UK Investments Limited
On 7 February 2017, the Company exercised its security against a
loan advanced to 4C Investments that had matured. In settlement of
the GBP14.2 million balance outstanding, the following investments
were transferred to the Group:
- 4C Investments non-controlling interest in RHHL for a transfer
price of GBP12.1 million (Note 28);
- 4C Investments shareholding in RBH for a transfer price of GBP1.3 million (Note 20); and
- 4C Investments shareholding in IHL for a transfer price of GBP1.0 million.
As the total transfer price for the shares was GBP14.4 million,
GBP0.2 million cash was paid back by the Company to 4C Investments.
On the same date, 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 28.
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 GBP0.1 million of management fees since
the Group acquired control of the portfolio on 12 January 2018.
Directors
Non-executive Directors and Executive Directors represent key
management personnel. The remuneration paid to Non-executive
Directors for the period ended 28 February 2018 was GBP0.2 million
(31 August 2017: GBP0.4 million) which represents Directors fees
only. The remuneration payable to Executive Directors for the
period ended 28 February 2018 was GBP1.4 million (31 August 2017:
GBP2.7 million), representing salaries, benefits and bonuses. 5.8
million contingent share awards were issued to Executive Directors
during the period (31 August 2017: 4.9 million). The IFRS 2
share-based payment charge associated with the cumulative
contingent share awards to the Executive Directors was GBP0.5
million (31 August 2017: GBP0.9 million) for the period.
The table below shows Directors dealings in shares for the
period 1 September 2016 to 28 February 2018:
Number of Price per
ordinary shares ordinary share
Name Date of Transaction Transaction acquired acquired
Adrian Horsburgh 25 November 2016 Scrip dividend 347 38.9p
Bernie Nackan 25 November 2016 Scrip dividend 682 38.9p
Stephen Oakenfull 27 February 2017 Share acquisition 50,000 36.6p
Adrian Horsburgh 27 February 2017 Share acquisition 50,000 36.4p
Donald Grant 27 February 2017 Share acquisition 50,000 36.3p
Adrian Horsburgh 26 June 2017 Scrip dividend 1,842 36.2p
Bernie Nackan 26 June 2017 Scrip dividend 619 36.2p
Marc Wainer 13 November 2017 IHL consideration 3,157,846 40.0p
Mike Watters 13 November 2017 IHL consideration 70,790 40.0p
Donald Grant 16 January 2018 Share acquisition 25,000 35.94p
Mike Watters 17 January 2018 Share acquisition 67,000 35.95p
32. ACQUISITION OF SUBSIDIARIES (ASSET ACQUISITION)
On 6 April 2017, the Group reached a conditional agreement to
acquire the controlling interest in the Leopard Portfolio,
previously held as a joint venture with RPL (refer to Note 15).
Shareholder approval was subsequently received on 25 April 2017 and
the transaction completed with economic effect from 1 March 2017.
Aggregate consideration paid to RPL was EUR49.0 million (GBP41.9
million) and allocated as follows:
- EUR0.3 million (GBP0.3 million) for the equity interests acquired; and
- EUR48.7 million (GBP41.6 million) for the shareholder loans acquired.
Including transaction costs, the total cash outflow in respect
of the acquisition was GBP42.1 million.
On completion, the Group obtained control of the Leopard
Portfolio, becoming exposed to the variable returns of the
portfolio and having the ability to affect those returns by
directing its activities. The Group therefore began consolidating
the Leopard Portfolio on a line-by-line basis from 1 March 2017,
with the resulting elimination of intra-group shareholder loans.
The transaction was not considered a business combination, having
regard to associated processes acquired, and was therefore
recognised as an asset acquisition. The net assets of Leopard on
acquisition were EUR87.2 million (GBP74.5 million). The carrying
value of the Group's existing joint venture interest, which was
derecognised on loss of joint control, was EUR44.3 million (GBP37.7
million).
The premium paid to RPL on acquisition of EUR6.8 million (GBP5.9
million) including transactions costs, was solely allocated to
investment property as it was not separately identifiable. The
carrying value of the Leopard property portfolio on 1 March 2017
was EUR175.5 million (GBP149.9 million) and, as a result, the total
amount recognised as an addition on consolidation was EUR182.3
million (GBP155.8 million). Refer to Note 13.
The Group has subsequently sold the majority of its interest in
the Leopard Portfolio during the period ended 28 February 2018 as
further outlined in Note 8.
33. earnings per share
Earnings per share is calculated on the weighted average number
of shares in issue and the profit attributable to shareholders.
Reviewed Reviewed Audited
28 February 28 February 31 August
2018 2017 2017
GBPm GBPm GBPm
------------ ----------
Profit attributable to equity holders of the Parent 55.2 40.8 66.1
Group Adjustments:
Gain on revaluation of investment property (8.5) (2.6) (10.8)
Loss on revaluation of investment property held for sale - - 3.9
Gain on disposal of investment property (0.6) (5.9) (9.2)
Loss/(gain) on disposal of investment property held for sale 0.1 - (1.5)
Net gain on disposal of subsidiaries (14.3) - -
Net gain on business combinations (4.6) - -
(Gain)/loss on revaluation of investment at fair value - (1.0) 0.3
Amortisation of intangible assets 0.2 0.1 0.2
Re-measurement of financial liability - 1.3 1.3
Net change in fair value adjustments on substantial modification of borrowings - - 4.3
Other finance costs 0.5 0.2 0.3
Change in fair value of derivative financial instruments (5.2) (4.4) (4.5)
Gain on sale of joint venture interests - (5.2) (5.6)
Net (impairment reversal)/impairment of joint ventures and associate interests (0.1) (0.6) 0.2
Deferred tax - 0.4 3.5
Current tax 0.6 - -
Joint Venture Adjustments:
Loss on revaluation of investment property 0.2 0.6 0.9
Loss on sale of subsidiaries - 0.2 0.7
Change in fair value of derivative financial instruments (0.6) (0.9) (1.1)
Deferred tax 0.2 0.7 0.6
Elimination of joint venture unrecognised profits (1) 0.3 0.8 0.8
Non-Controlling Interest Adjustments:
Gain/(loss) on revaluation of investment property 1.1 (0.8) 1.1
Change in fair value of derivative financial instruments 0.3 - (0.1)
Gain on disposal of subsidiaries 1.3 - -
Reversal of impairment/(impairment) of investment in associate - 0.1 (0.1)
Deferred tax - - (0.4)
EPRA earnings 26.1 23.8 50.9
Company Specific Adjustments:
Accretion of fair value adjustments 0.4 0.5 0.9
Foreign currency movements 0.9 - (2.0)
Underlying earnings 27.4 24.3 49.8
Number of ordinary shares (millions)
- Weighted average 1,871.2 1,802.0 1,809.9
Dilutive effect of:
Contingently issuable share awards under the Long Term Performance Share
Plan 3.4 1.3 1.3
Contingently issuable share awards under the Long Term Restricted Stock Plan 0.9 1.1 0.7
------------ ------------ ----------
- Diluted weighted average 1,875.5 1,804.4 1,811.9
------------ ------------ ----------
Earnings per share (pence)
- Basic 3.0 2.3 3.7
- Diluted 3.0 2.3 3.6
EPRA earnings per share and diluted EPRA earnings per share (pence) 1.4 1.3 2.8
Underlying earnings per share (pence) 1.46 1.35 2.75
Dividend per share (pence) 1.35 1.3 2.6
First interim dividend per share (pence) 1.35 1.3 1.3
Second interim dividend per share (pence) - - 1.3
------------ ------------
(1) The Group has ceased to recognise the Esplanade in the IFRS
statements as the cumulative losses of the joint venture exceed the
cost of the Group's investment (refer to Note 15). This adjustment
eliminates the restricted losses for the period attributable to the
Esplanade.
Headline earnings per share is calculated in accordance with
Circular 2/2015 issued by the South African Institute of Chartered
Accountants ("SAICA"), a requirement of the Group's JSE listing.
This measure is not a requirement of IFRS.
Reviewed Reviewed Audited
28 February 28 February 31 August
2018 2017 2017
GBPm GBPm GBPm
----------------------------------------------------------- ------------ ------------ ----------
Profit attributable to equity holders of the Parent 55.2 40.8 66.1
Group Adjustments:
Gain on revaluation of investment property (8.5) (2.6) (10.8)
Loss on revaluation of investment property held for
sale - - 3.9
Gain on disposal of investment property (0.6) (5.9) (9.2)
Loss/(gain) on disposal of investment property held
for sale 0.1 - (1.5)
Net gain on disposal of subsidiaries (14.3) - -
Net gain on acquisition of subsidiaries (5.5) - -
Loss on disposal of other non-current assets held
for sale 0.1 - -
Gain on sale of joint venture interests - (5.2) (5.6)
Net (impairment reversal)/impairment of joint ventures
and associate interests (0.1) - 0.2
Transfer of foreign currency translation on disposal
of joint venture interests - - (2.0)
Deferred tax - 0.4 3.5
Joint Venture Adjustments:
Loss on revaluation of investment property 0.2 0.6 0.9
Loss on sale of subsidiaries - 0.2 0.7
Deferred tax 0.2 0.7 0.6
Elimination of joint venture unrecognised profits/(losses)
(1) (0.3) 0.1 (0.1)
Non-Controlling Interest Adjustments:
Gain/(loss) on revaluation of investment property 1.1 (0.8) 1.1
Gain on disposal of subsidiaries 1.3 - -
Reversal of impairment/(impairment) of investment
in associate - - (0.1)
Deferred tax - - (0.4)
Headline earnings attributable to equity holders
of the Parent 28.9 28.3 47.3
Number of ordinary shares (millions)
- Weighted average 1,871.2 1,802.0 1,809.9
- Diluted weighted average 1,875.5 1,804.4 1,811.9
----------------------------------------------------------- ------------ ------------ ----------
Headline earnings per share (pence)
- Basic 1.5 1.6 2.6
- Diluted 1.5 1.6 2.6
----------------------------------------------------------- ------------ ------------ ----------
(1) The Group has ceased to recognise the Esplanade in the IFRS
statements as the cumulative losses of the joint venture exceed the
cost of the Group's investment (refer to Note 15). This adjustment
eliminates the restricted losses for the period attributable to the
Esplanade.
34. net asset value per share
Reviewed Audited
28 February 31 August
2018 2017
GBPm GBPm
----------------------------------------------- ------------ ----------
Net assets attributable to equity holders
of the Parent 794.6 740.4
Group Adjustments:
Fair value of derivative financial instruments 2.7 7.4
Deferred tax 9.9 10.4
Joint Venture Adjustments:
Fair value of derivative financial instruments 2.9 3.5
Elimination of unrecognised derivative
financial instruments (1) (2.9) (3.5)
Deferred tax 0.6 0.4
Non-Controlling Interest Adjustments:
Fair value of derivative financial instruments 0.2 -
Deferred tax (0.2) (0.3)
EPRA NAV 807.8 758.3
Group Adjustments:
Fair value of derivative financial instruments (2.7) (7.4)
Excess of fair value of debt over carrying
value (4.1) (5.0)
Deferred tax (9.9) (10.4)
Joint Venture Adjustments:
Fair value of derivative financial instruments (2.9) (3.5)
Elimination of unrecognised derivative
financial instruments (1) 2.9 3.5
Deferred tax (0.6) (0.4)
Non-Controlling Interest Adjustments:
Fair value of derivative financial instruments (0.2) -
Deferred tax 0.2 0.3
----------------------------------------------- ------------ ----------
EPRA NNNAV 790.5 735.4
Number of ordinary shares (millions)
- In issue 1,905.1 1,828.1
Dilutive effect of:
Contingently issuable share awards under
the Long Term Performance Share Plan 3.4 1.3
Contingently issuable share awards under
the Long Term Restricted Stock Plan 0.9 0.7
------------ ----------
- Diluted 1,909.4 1,830.1
----------------------------------------------- ------------ ----------
Net asset value per share (pence):
- Basic 41.7 40.5
- Diluted 41.6 40.5
EPRA diluted NAV per share (pence) 42.3 41.4
EPRA diluted NNNAV per share (pence) 41.4 40.2
----------------------------------------------- ------------ ----------
(1) The Group has ceased to recognise the Esplanade in the IFRS
statements as the cumulative losses of the joint venture exceed the
cost of the Group's investment (refer to Note 15). This adjustment
eliminates the derivative financial instruments attributable to the
Esplanade from the proportionate adjustments.
35. contingencies, guarantees and commitments
At 28 February 2018, the Group was contractually committed to
expenditure of GBP8.5 million (31 August 2017: GBP16.8 million), of
which GBP8.5 million (31 August 2017: GBP16.5 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.
36. SUBSEQUENT events
In early April 2018, the Group exchanged contracts to dispose of
Severalls, Colchester for GBP3.4 million and City Point, Leeds for
GBP26.1 million. The sales completed on 16 April and 19 April 2018
respectively.
GLOSSARY
ADR Average daily rate
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 income Income generated by assets which were held by the Group throughout both
the current and comparable
periods for which there has been no significant development which
materially impacts upon
income and used to illustrate change in comparable income values
Like-for-like property Property which has been held at both the current and comparative
balance sheet dates for which
there has been no significant development and used to illustrate change
in comparable capital
values
LSE The London Stock Exchange
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
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 Company or the Group RDI REIT P.L.C. and, when taken together with all its subsidiaries and
Group undertakings,
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 a 29.79%
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
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
WAULT Weighted average unexpired lease term
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR PGUUWCUPRGBC
(END) Dow Jones Newswires
April 25, 2018 02:01 ET (06:01 GMT)
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