Redefine International P.L.C. Half year results for the six months ended 29 February 2012

Transcription

1 Redefine International P.L.C. Half year results for the six months ended 29 February

2 Redefine International P.L.C. ( Redefine International or the Company ) Results for the six months ended 29 February Redefine International, the diversified income focused property company, today announces its halfyear results for the six months ended 29 February. These results reflect the first set of halfyear results for the enlarged Group following the reverse acquisition of Wichford. Highlights Earnings available for distribution of 12.9 million (February : 8.4 million), an increase of 53.6% Interim dividend of 2.10 pence per share (February : 2.03 pence), an increase of 3.5% IFRS loss per share of pence (February : 2.32 pence profit), due to noncash valuation declines Adjusted fully diluted EPRA NAV per share of pence Fully diluted NAV per share of pence (August : pence) Fully diluted EPRA NAV per share of pence (August : pence) Operational Highlights Greg Clarke assumes Chairmanship with effect from 1 December Strong performance from Cromwell and the Hotel portfolio, supporting the Company s diversification strategy Secure cashflows delivered from the UK Stable Income and European portfolios despite further valuation declines, principally from the former Wichford portfolio Detailed negotiations on Delta and Gamma refinancing are progressing in line with the Company s strategy and exposure to regional offices is anticipated to reduce significantly Substantial progress with the disposal of legacy Wichford assets (VBG 1, 2 and Halle) Disposal of 7 11 High Street, Reigate for an effective price of 3.15 million, 5.9% above the carrying value of the property and in line with discussions to consolidate the portfolio and focus on larger better quality assets Additional 24.2 million investment in Cromwell securing Redefine International s strategic shareholder position Greg Clarke, Chairman, said: I am pleased to report on my first halfyear results which also reflect the first set of interim results for the enlarged Group following the successful reverse acquisition between Redefine International plc and Wichford P.L.C. Notwithstanding the continuing adverse business conditions in the UK and Europe, the Company has met its earnings targets and continues to be well placed to benefit from any upturn in economic growth going forward. Despite the valuation decline of the UK Stable Income portfolio, the diversification of the Group s portfolio means that shareholders have benefited from the excellent performance of the Australian and hotel investments, clearly supporting the Company s strategy to invest in these markets at a low point in the economic cycle. The Company continues to meet its targets and expects to deliver on the earnings forecast and strategic objectives set out in the prospectus at the time of the reverse acquisition of Wichford P.L.C. in the summer of For further information, please contact: Redefine International Property Management Limited FTI Consulting LLP Michael Watters, Stephen Oakenfull Stephanie Highett/Dido Laurimore Tel: +44 (0) Tel: +44 (0)

3 Group Overview Group Overview Introduction Redefine International is an income focused property investment company with exposure to a broad range of properties and geographical areas. The Company is domiciled in the Isle of Man and has investments in the UK, Germany, Switzerland, the Channel Islands, the Netherlands and Australia. Investment strategy The Group s strategy is focused on delivering sustainable and growing income returns through investment into income yielding assets let to high quality occupiers on long leases. Development exposure is generally limited to asset management and ancillary development of existing assets in order to enhance and protect capital values. The Group aims to distribute the majority of its earnings available for distribution on a semiannual basis, providing investors with attractive income returns and exposure to capital growth opportunities. Investment markets The Group is focused on real estate investment in large, well developed economies with established and transparent real estate markets. The investment portfolio is geographically diversified across the UK, Europe and Australia providing exposure to the retail, office, industrial and hotel sectors. Group structure Redefine International is listed on the main market of the London Stock Exchange (the LSE ) and is part of the Redefine Properties Limited group. The ultimate holding company, Redefine Properties Limited ( Redefine Properties ), is listed on the Johannesburg Stock Exchange (the JSE ) and has a market capitalisation of approximately 2 billion. This announcement makes various references to companies within the Redefine International Group which are summarised below. Company name Abbreviation Description Redefine International P.L.C. Redefine International Holdings Limited Redefine Properties International Limited Redefine Properties Limited Wichford P.L.C. Redefine International Property Management Limited Cromwell Property Group Redefine International, the Company, and together with its subsidiaries, associates, and joint ventures, the Group RIHL RIN Redefine Properties Wichford RIPML or Investment Adviser Cromwell The enlarged company following the reverse acquisition between Wichford and Redefine International Holdings Limited The previously AIM listed property investment company party to the reverse acquisition (previously named Redefine International plc) The Company s largest shareholder, listed on the JSE, whose sole asset is Redefine International Ultimate parent company of the Group, listed on the JSE The previously LSE listed property investment company party to the reverse acquisition Investment Adviser to the Company Associate company of Redefine International, listed on the ASX Board and Management The Board is responsible for setting the Group s strategy and providing leadership to the Company. It supports the principles of good corporate governance as set out in the UK Corporate Governance Code published by the Reporting Council in May Following the listing of RIN on the JSE, the Board has resolved to comply with the provisions of the third King Report on Governance for South Africa The Board of the Company is entirely nonexecutive and comprises nine directors. The Chairman and five other directors are considered to be independent of the Investment Adviser. The Company is pleased to confirm the appointment of Stewart Shaw Taylor as Chairman of the Audit Committee. Stewart is a Chartered Accountant with extensive financial experience and, having recently stepped down from the Board of Redefine International Fund Managers Limited, is deemed to be an independent nonexecutive Director. Stewart replaces Gavin Tipper who, as Chairman of Redefine Properties International Limited, is not regarded as independent. The Group is advised on an exclusive basis by RIPML. The Investment Adviser has a management team with extensive property and finance experience in the listed property sector, which has been active in the UK and Europe for over a decade. Chairman s Statement Business Portfolio Summary Statements Change in Equity Cash Flows Notes Statements Glossary 2

4 Chairman s statement The halfyear results for the six months ended 29 February reflect the first set of interim results for the enlarged Group following the successful reverse acquisition between Redefine International plc and Wichford. The reporting period has continued to be dominated by the Eurozone sovereign debt and EU banking crises. This uncertain and volatile economic environment together with tighter regulatory reforms in the banking sector, continues to impact the performance of the commercial property market in the UK and Western Europe. Although there are limited signs of renewed economic activity, a lack of bank funding and a general liquidity squeeze is continuing to restrict growth and dampen consumer sentiment. Notwithstanding these tough business conditions, the Company s underlying performance remains sound. The tenant covenant strength of the UK Stable Income portfolio, strong performance of the Hotel and European portfolios and a very solid contribution from Cromwell, the Australian listed property trust in which the Company holds a 23% interest, have more than offset the weaker performance of the UK Retail and Stable Income portfolios, illustrating the benefit of Redefine International s diversified portfolio. results It is pleasing to report that the new enlarged Group is on track to meet the Company s distributable earnings forecast for the year ending 31 August as set out in the reverse acquisition prospectus (dated 13 July ) with earnings available for distribution of 2.23 pence per share for the halfyear period. EPRA net asset value decreased to pence per share from pence at 31 August, largely as a result of valuation declines in the UK regional office (former Wichford) properties. This was partially offset by gains in the Cromwell investment and fair value adjustments to interest rate swap agreements. The Board has declared an interim dividend of 2.10 pence per share. This reflects an increase of 3.5% from the comparable period in. Operations Overall performance of the Group s investment portfolio was supported by sound underlying performance of Cromwell and the Hotel portfolio. Values in the UK Retail and UK Stable Income portfolios suffered from weak tenant and investment demand, however occupancies remained resilient at 96.4% despite tough trading conditions. The Company strengthened its strategic holding in Cromwell by supporting Cromwell s capital raising in December and increasing its interest to 23.16% (August : 22.36%). Cromwell continues to deliver on earnings targets and the recent capital raising to support the acquisition of the HQ North office in Brisbane for AUD186 million provides a stronger platform for continued growth. Although the impact of lower UK GDP growth is starting to feed through, is still expected to be a record year for London with major attractions such as the Olympics and the Queen s Jubilee. This would in turn be expected to have an impact on the value of the Hotel portfolio. The UK Retail portfolio maintained a healthy overall occupancy rate of 95%, which has stabilised since February and compares favourably with recent research suggesting the average void rate in secondary UK towns is 12.7% (source: Colliers CRE October ). The redevelopment of 46,000 sq ft of new retail space at the Birchwood Warrington Shopping Centre, to accommodate larger unit requirements of certain key tenants, is on track for practical completion in November. The European portfolio continues to deliver stable and increasing rental income. The Company s strategic focus on discount retail stores in Germany has proved defensive despite Eurozone sovereign debt issues. The Company has agreed, in respect of two separate transactions, to acquire a 50% interest in two newly developed German retail stores for a total consideration of 13.4 million, which is expected to complete post period end. Both assets are newly constructed, fully let retail units anchored by multinational discount retailers. 3

5 Group Overview Prospects/Strategy The remainder of will be focused on agreeing a refinancing and/or restructuring of the Delta and Gamma debt facilities and the associated capital raising. Negotiations with the servicer to these debt facilities has progressed materially in the first half of this financial year and it is the Company s intention to approach shareholders once terms on the debt restructuring have been agreed. It is currently anticipated that the previously announced capital raising will take place after the current financial year end. Real progress has been made with the sale of the VBG and Halle assets, both of which are noncore to the Company s strategy. As a result these assets are held for sale as at 29 February and it is anticipated that completion of the sales process will take place before the end of the current financial year. Once completed, the sale of the VBG1, VBG2 and Halle assets is expected to have a significant impact on the Group s overall gearing ratios, removing million of debt associated with those assets from the statement of financial position which will result in an approximate 2.45 pence increase in NAV. These sales, together with the restructuring of the Delta and Gamma facilities, are significant steps towards securing a stable capital structure and exiting legacy assets. As previously stated, the Company is closely monitoring changes to existing legislation to assess the possibility of converting to a UK REIT. The Group s diversified asset base continues to provide exposure to performing markets, offsetting the challenges currently experienced in UK retail and regional office markets. With a defined strategy to strengthen the Company s balance sheet and take advantage of future investment opportunities, Redefine International remains on track to become a significant participant in the UK listed real estate market. Greg Clarke Chairman Chairman s Statement Business Portfolio Summary Statements Change in Equity Cash Flows Notes Statements Glossary 4

6 Business review Top 15 properties by value Name Anchor tenants Market value ( million) Ownership interest (%) Portfolio type Lettable area (sq ft) Annualised gross rental ( million) Let by area (%) Weighted average unexpired lease term (years) Wigan, Grand Arcade Harrow, St Georges Debenhams, TK Maxx, BHS Wilkinsons, Boots Retail Retail 471, , Coventry, West Orchards Halle, Justizzentrum Warrington, Birchwood Dresden, VBG Debenhams Ministry of Justice ASDA VBG Retail Office Retail Office 210, , , , Brentford Lock, Holiday Inn RHM Hotels 61, Stuttgart, VBG VBG Office 134, Limehouse, Holiday Inn Express RHM Hotels 61, Southwark, Holiday Inn Express Royal Docks, Holiday Inn Express Bradford, Centenary Court RHM 1 RHM 1 HMRC Hotels Hotels Office 23,476 49,094 46, Leeds, Castle House HMRC Office 78, The Hague, ICC Royal Dutch Gov Office 138, Seaham, Byron Place ASDA Retail 115, Notes: 1 Redefine Hotel Management Limited 2 Assets are classified as held for sale 5

7 Group Overview Overview The integration of Redefine International plc and Wichford has been completed with limited disruption and operationally the Group is well set for the future. The period under review was the first full halfyear reporting period for the Group as a merged entity. The challenges brought about by the acquisition of the Wichford legacy assets and the expiring debt facilities are being addressed and prioritised by the management team. It is expected that by the end of the financial year substantial progress will have been made in restructuring the Company s statement of financial position and either refinancing or exiting a number of funding agreements. Highlights for the period included: Contracts exchanged, in respect of two separate acquisitions for a 50% stake in two German retail properties (located in Kaiserslautern and Waldkraiburg for an aggregate purchase consideration of 16.0 million ( 13.4 million). These acquisitions are being made in a joint venture with a major pension fund and are expected to complete post period end. Significant progress made in debt restructuring discussions with the loan servicer for the Delta and Gamma facilities The AUD 35 million ( 22.6 million), participation in the Cromwell entitlement offer, increasing the Company s interest to 23.16% from 22.36% as at 31 August The raising of 4.7 million of new capital through a share placement with RIN Disposal of 7 11 High Street, Reigate for an effective price of 3.15 million, 5.9% above the carrying value of the property Substantial progress with the disposal of legacy Wichford assets (VBG 1, 2 and Halle) Performance In a difficult economic environment, the Group s investment portfolio has benefited from diversification across both sectors and geographies. While regional office markets and UK retailers have suffered, exposure to discount retail units in Germany, Greater London limited service hotels and the Company s Australian investment, Cromwell has benefited the Company as these segments have performed well. Overall occupancy of 96.4%, a weighted average unexpired lease length of 8.8 years and in excess of 37% of rental income subject to indexation or fixed uplifts, provides for defensive income returns. Business Segments UK Stable Income: UK Retail: Europe: Hotels: Cromwell: Predominantly UK offices, but includes petrol filling stations, KwikFit centres, retail and residential units. Major UK shopping centres. Consists of the Group s properties in Continental Europe, located in Germany, Switzerland and the Netherlands. Consists of all the Group s hotel properties. The hotels are let to Redefine Hotel Management Limited on a fixed rental basis with annual reviews. Relates to the Group s investment in the Cromwell Property Group, Australia. Property portfolio by business segment at 29 February Market values Occupancy Lettable area Annualised gross rental ( million) (%) (sq ft 000) income ( million) UK Stable Income , UK Retail , Hotels Europe , Cromwell , Total 1, , Notes: 1 UK Retail includes the Grand Arcade, Wigan Shopping Centre which is held through a joint venture. Lettable area excludes the Wigan APCOA parking space of 326,315 sq ft. 2 Figures reflect Redefine International s effective 23.16% share of Cromwell s property assets and net rental income. The investment value is million (based on a GBP:AUD exchange rate of 1.00:AUD1.479). Figures assume 100% ownership of property assets in subsidiaries and joint ventures. Chairman s Statement Business Portfolio Summary Statements Change in Equity Cash Flows Notes Statements Glossary 6

8 Business review Continued UK Stable Income The UK Stable Income portfolio performed ahead of expectations at an operating level. Occupancy levels remained robust at 95%, supporting strong income returns. A number of government leases with break options have been renewed or are at advanced stages of negotiation which is providing encouraging evidence that cost effective space remains an operational requirement to deliver front line government services. Despite this strong operational performance, investment sentiment together with structural supply/demand imbalances has however resulted in a sharp decline in transactional activity and the values of many regional properties. Overall exposure to regional office markets is anticipated to reduce significantly as part of the refinancing of the Delta and Gamma portfolios, leaving a core portfolio of assets with better long term growth potential. In the near term the focus will remain on maintaining occupancy levels and protecting income. Rent reviews during the period provided an additional 0.63 million of income resulting from rent reviews subject to CPI indexation or fixed increases. Rental income subject to inflation or fixed increases rose slightly to 55.3% (: 54.6%). Lyon House and Equitable House, Harrow As announced in January, the planning application for a residentialled mixed use scheme for the adjoining Lyon House and Equitable House sites in Harrow was submitted in November. The application is for a new development comprising approximately 316,000 sq ft of residential and commercial space including 223 private residential units and 85 affordable housing units. A conditional development agreement has been concluded with Metropolitan Housing Trust for the affordable element of the scheme. A post application meeting has been held with the local Council in order to assess the design of certain elements of the scheme and a revised scheme proposal has subsequently been submitted. Subject to a further public consultation period, a hearing date is anticipated in May this year. UK Retail The Group s UK Retail portfolio consists of five subregional shopping centres which dominate their catchment areas and a town centre redevelopment scheme located in Crewe. The centres have generally performed well and delivered consistent returns against a backdrop of severe stress in the retailing environment caused by low consumer confidence, weak economic conditions, debtburdened retailers and the growing impact of technology on shopping patterns. Against this difficult economic backdrop, the retail market is becoming increasingly polarised as the influence of technology gathers pace and those retailers failing to invest are beginning to underperform. Successful retailers are focusing on a seamless shopping experience whether it be through their mobile website, traditional website, call centre or physical shops. The success of the luxury brands, particularly in London, and volume retailers continues. Exposure to volume brands impacts positively on the UK Retail portfolio as borne out by the healthy footfall figures. Space requirements for retailers are also changing, with a tendency towards fewer but larger format stores for the major high street fashion brands. The current economic climate has seen a flight to prime for some national and international brands, although it is unclear whether this will become a structural feature of the market or one typified by the poor economic climate. There were a number of high profile insolvencies during the period, of which Peacocks, Bon Marche, La Senza and Game affected the portfolio (three Peacocks, one Bon Marche, two La Senza and two Game units). However, Redefine International has only lost three out of the eight units let to these tenants, equating to 0.6% of total floor space, reflecting the portfolio s locally dominant status. Despite the number of retailer administrations, the Company has succeeded in maintaining footfall across its portfolio and an occupancy rate of 95%. The investment market for shopping centres continued to soften during the period. Although the portfolio declined 4.1% in value, this reflected a relatively positive outcome with the wider market seeing larger negative yield shifts. This reinforces the strength of the portfolio and reflects Redefine International s strategy to acquire assets with a dominant hold over their catchment area. 7

9 Group Overview UK Retail at a glance 29 February 31 August Market value million million Occupancy (by lettable area) 94.8% 97.4% Annualised gross rental income 20.6 million 21.4 million Estimate rental value ( ERV ) 21.2 million 21.5 million Annual footfall million 30.1 million Footfall % change 1 1.6% 2 (0.9%) Net initial yield 7.4% 7.3% Lettable area ( 000) 1,580 sq ft 1,580 sq ft Figures assume 100% ownership of property assets in subsidiaries and joint ventures 1. Excludes Crewe 2. Reflects increase in footfall against the comparable 12 month period to February Hotels The Group owns six hotel properties branded as Holiday Inn, Holiday Inn Express and Crowne Plaza, five of which are located in Greater London and one in Reading. The focus on branded, limited service hotels in Greater London provides for defensive underlying occupancies in line with the Company s income focus. Although the Greater London hotel market is beginning to feel the impact of lower UK GDP growth and Eurozone uncertainty as the private and public sector cut back on meetings and accommodation demand, is still seen as a potential record year due to anticipated strong demand over the third calendar quarter with the Queen s Jubilee, the biannual Farnborough Air Show and the Olympics. The tenant, Redefine Hotel Management Limited, performed in line with its competitors for the period under review. Key activity during the period included: Hotels The Southwark Holiday Inn Express is awaiting planning approval for an additional 50 rooms which, if approved, will see an investment of up to 13 million to double the existing capacity of the hotel. The extension is being driven by high occupancy and excess demand and, although there has been significant room capacity growth in Central and East London it is anticipated that with the continual growth in international leisure, particularly from the East, will result in this surplus being absorbed in a short time period. The initial phase of a modernisation and refurbishment programme for the Southwark and Royal Dock hotels is underway. The Royal Dock public area new look has been completed and work on the Southwark and Royal Docks bedrooms and corridors are largely complete. The Limehouse hotel will have the new public area refurbished before the Olympics whilst the Park Royal hotel lobby upgrade has been completed. The Brentford hotel will undergo a refurbishment of the food and beverage area in cooperation with the Intercontinental Hotel Group and a new HUB food concept, launched recently in the USA, will be put into operation at the hotel. Europe Despite a backdrop of continued macroeconomic instability and the sovereign debt crisis, the European portfolio has performed strongly at an operating level with occupancy levels close to 100% and consistent cash flows from rental income. The results of a concerted effort over the past 12 months to reduce nonrecoverable costs have started to take effect, with significant expense reductions having been achieved. Several lease extensions with anchor tenants, ranging from five to 13 years, were agreed. Further lease extensions involving anchor tenants within the portfolio are at advanced stages of negotiations. Chairman s Statement Business Portfolio Summary Statements Change in Equity Cash Flows Notes Statements Glossary 8

10 Business review Continued VBG portfolio A marketing process has been completed in relation to the sale of the VBG tenanted properties located in Dresden, Berlin, Cologne and Stuttgart (part of the former Wichford portfolio). A number of offers were submitted and negotiations are currently in place with a preferred party to finalise a sale and purchase agreement. It is anticipated that completion of the sales process will take place before the end of the current financial year. Further information is provided within the. Cromwell On 16 December the Company announced that it had increased its strategic stake in the ASXlisted Cromwell to 24.32% (22.36% at 31 August ) by subscribing for 51,470,588 new Cromwell stapled securities for an amount of AUD35 million ( 22.6 million), in terms of an underwriting agreement. The subscription formed part of an institutional placement and prorata nonrenounceable entitlement offer (the entitlement offer ) undertaken by Cromwell to fund the acquisition of HQ North office tower in Fortitude Valley, Brisbane for AUD186 million. AUD9,424,997 ( 6,098,348) of the subscription was funded through an existing facility with Investec Bank (Australia) Limited and the balance was funded from available cash resources. The Company received a fee of AUD875,000 ( 566,160) from Cromwell in consideration for providing an AUD35 million underwriting commitment for the entitlement offer. The new Cromwell stapled securities were admitted to trading on the ASX on 21 December and entitled holders to receive a prorata share of the distributions from Cromwell for the quarter ended 31 December. The increase of Redefine International s interest in Cromwell is in line with one of the Company s objectives of increasing its presence in the Australian property market and is expected to be earnings enhancing for shareholders in the medium to long term. The Cromwell distribution, amounting to AUD3.8 million ( 2.6 million) for the quarter ended 31 December, was received on 16 February. The total net distributions received for the six months ended 29 February amounted to AUD 7.5 million ( 4.9 million). On 1 February the Company exercised its option to place new shares with RIN at the sterling equivalent of AUD7.5 million at 37.0 pence per share to cover part of the cost of the underwriting. Cromwell s performance and outlook Cromwell produced strong operating and financial results for their halfyear ending 31 December. Highlights included: Operating earnings of AUD37.0 million (3.8 cents per security), up 13% Statutory accounting loss of AUD6.8 million (0.7 cents per security) impacted by fair value adjustment on interest rate swaps Earnings from property investments of AUD37.5 million, up 15% Acquisition of HQ North Tower, Brisbane for AUD186 million Agreed terms to reacquire Bundall Corporate Centre, Gold Coast for AUD63.4 million Successful completion of a two year capital raising programme which places the Group in a position to drive earnings and Net Tangible Asset growth from capital recycling opportunities and funds management activities Commenced AUD49 million equity raising for unlisted Ipswich City Heart Trust Launch of Cromwell Real Estate Partners, targeting wholesale opportunity fund investors Guidance for FY12 operating earnings maintained at 7.3 cents per security and distributions of 7.0 cents per security 9

11 Portfolio summary Portfolio overview by business segment Business segments market values UK Stable Income UK Retail Hotels Europe Cromwell 1 Total investment portfolio Properties (No.) Lettable Area (sq ft 000) 3,709 1, ,910 1,391 8,859 Market Value ( million) ,313.3 Segmental Split by Value (%) Net initial Yield (%) Notes: 1. Figures reflect Redefine International s effective 23.16% share of Cromwell s property assets and net rental income. The investment value is million. The Cromwell property portfolio consists of 23 assets with a market value of AUD 1.66 billion as at 31 December Figures (excluding Cromwell1) assume 100% ownership of property assets held in subsidiaries and joint ventures Group Overview Chairman s Statement Business Portfolio Summary Business segments income UK Stable Income UK Retail Hotels Europe Cromwell Total investment portfolio Annualised gross Rental income ( million) Average rent per (sq ft) Weighted average unexpired lease term (years) Occupancy by area (%) Notes: 1. Cromwell rental income reflects 23.16% stake Figures (excluding Cromwell) assume 100% ownership of property assets held in subsidiaries and joint ventures Indexation and fixed increases (%) Statements Change in Equity Cash Flows Notes Statements Glossary 10

12 Portfolio summary Business segments valuation movement UK Stable Income UK Retail Hotels Europe Cromwell 1 Total likeforlike portfolio Acquisitions 2 Total investment portfolio Notes: 1. Cromwell reflects investment value at a closing share price of 72.5 Australian cents per security as at 29 February 2. Acquisition of million Cromwell stapled securities 3. Includes effect of currency changes Portfolio overview by sector Property sectors at 29 February Proportion of portfolio by value (%) Market value 29 February ( million) , ,185.3 Valuation movement six months ended 29 February (%) (9.2) (4.1) (8.4) (5.9) 11.4 (5.6) Retail Office Industrial Hotels Other Total Market value ( million) ,052.8 Occupancy by area (%) Lettable area (sq ft 000) 2,344 3, ,468 Annualised gross rental income ( million) Notes: Excludes Cromwell and assumes 100% ownership of property assets held in subsidiaries and joint ventures 11

13 review Overview These results reflect the first set of halfyear results for the enlarged Group following the reverse acquisition. As reverse acquisition accounting was applied on the transaction between RIHL and Wichford with RIHL being identified as the accounting acquirer, the comparative figures shown are those of RIHL. Consequently, gross rental income is 38.6 million, up 233% on the comparable period and total investment property assets (including assets held for sale) have increased from 348 million to 914 million. Earnings available for distribution are 12.9 million, up 54.1% from the six month period ended 28 February. The Group delivered a loss attributable to equity holders of the parent of 60.7 million for the six months ended 29 February. Key items impacting the results of the Group for the period since 31 August include: A net decrease in the fair value of the Group s investment property of 57.8 million (5.6% decrease) of which 44.3 million relates to the historic Wichford UK portfolio million increase in finance costs due to the amortisation of the fair value adjustment of the VBG, Gamma and Delta facilities as at the date of the reverse acquisition of Wichford. These are noncash, IFRS adjustments, which may reverse upon sale or restructuring of the underlying assets on which the loans are secured. The placement of 12,750,000 shares to RIN on 1 February, at a price of 37.0 pence per share to assist with the underwriting commitment in connection with the Cromwell capital raising. A net fair value increase in the interest rate derivatives held by the Group of 5.3 million. The gain was principally due to the nearterm expiry of the Delta and Gamma interest rate swaps, as indicative five year swap rates moved from 1.97% to 1.58% during the period. AUD7.5 million ( 4.9 million) of distributions received from Cromwell, including the AUD148,000 ( 97,000) prorata distribution received from the additional million shares acquired during the period and a AUD875,000 ( 566,166) fee received in respect of the underwriting commitment. The effect of certain of the above items has led to a decrease in the EPRA net asset value per share from pence as at 31 August to pence per share as at 29 February. The net asset value, however, includes items which, in the opinion of the Board need to be adjusted in order to allow shareholders to gain a better understanding of the underlying value of the Group. An adjusted EPRA net asset value has therefore been calculated as presented below: Note Pence per share Fully diluted IFRS NAV per share as at 29 February Adjusted for derivatives and deferred tax 3.15 Fully diluted EPRA NAV per share as at 29 February Reversal of VBG amortisation of the fair value adjustment Write back of Gamma and Delta negative equity Adjusted fully diluted EPRA NAV per share Notes 1. In accordance with IFRS, the assets and liabilities of Wichford as at 31 August following the reverse acquisition were acquired at fair value. Consequently, the VBG debt was valued at an amount of million, which was million below the outstanding principal value. The interest charge reflected in the accounts includes an amount of 14.9 million, relating to the accretion of the fair value of the loan to its principal value over the remaining term of the loan. This amount may however reverse upon disposal of the assets and loan and therefore has been added back in the calculation. 2. The net Delta and Gamma portfolio debt values are in excess of the current investment property values. Should the proposed restructuring take place, it may remove the negative net asset value position, leading to a positive effect on net asset value per share of 6.09 pence. Earnings available for distribution The Company s policy is to distribute the majority of its earnings available for distribution in the form of dividends to shareholders. Considering the earnings available for distribution at the period end, the Board has declared an interim dividend of 2.10 pence per share and is on track to achieve the forecast distribution per share for the year ending 31 August in the reverse acquisition prospectus. Group Overview Chairman s Statement Business Portfolio Summary Statements Change in Equity Cash Flows Notes Statements Glossary 12

14 review Continued The earnings available for distribution excludes any capital and oneoff items and the figure is used by the Board as its measure of underlying earnings performance. The statement of earnings available for distribution is presented as follows: Gross rental income from investment properties Property operating expenses Net operating income from investment properties Investment income Fee income Other income Total revenue Expenses Administrative expenses Investment management fees Professional fees Net operating profit Share of distributable income from associates and joint ventures Gain on financial assets and liabilities Noncontrolling interest Adjusted operating profit Net finance charges Interest paid Interest received Foreign exchange loss Taxation Profit before earnings adjustments Wichford acquired earnings Distributable earnings for the period Interim distribution Earnings available for distribution at period end Earnings available for distribution per share Earnings available for distribution Number of ordinary shares in issue ( 000) Earnings available for distribution per share (pence) Not reviewed 6 months ended 29 February Total 38,633 (2,437) 36, ,395 (5,022) (855) (2,780) (1,387) 32,373 5,471 (1,160) 36,684 (22,979) (23,162) 183 (161) (604) 12,940 12,940 12,940 12, , Not reviewed 6 months ended 28 February Total 11,718 (1,598) 10,120 3, ,989 (2,164) (252) (1,170) (743) 12,825 1, (232) 14,712 (5,982) (9,176) 3,194 (142) (193) 8,395 8,395 8,395 8, , Unaudited Year ended 31 August Total 27,335 (2,957) 24,378 3,875 1, ,540 (4,245) (774) (2,431) (1,040) 25,295 7, (569) 32,749 (14,978) (23,112) 8,134 (329) (291) 17,151 3,166 20,317 (8,395) 11,922 11, , Summary Distribution per share (pence) Interim Second interim

15 Group Overview position The nominal value of senior debt facilities at 29 February was million ( million including the Group s attributable share of debt in subsidiaries and joint ventures). Overall gearing levels have been influenced by a decrease in property values, however, significant progress has been made towards the restructure of the Delta and Gamma facilities. Chairman s Statement The key financing statistics are summarised in the table below: Key financing statistics Total investment portfolio Gross debt Cash and shortterm deposits Net debt Weighted average debt maturity Weighted average interest rate % of debt at fixed/capped rates Loantovalue 29 February 1,038, ,380 (33,866) 821, years 5.09% 93.6% 79.1% 31 August 1,076, ,149 (51,368) 811, years 5.01% 92.9% 75.4% Business Portfolio Summary UK REIT Update The revised UK REIT rules, as communicated in the Annual Report, will take effect from the date on which the Finance Act receives Royal Assent (expected to be in late July or early August ). If conversion were to take place prior to the date on which Finance Act receives Royal Assent, the advantages afforded by the new legislation would not be available. An initial feasibility study has been performed and once the Finance Act has been enacted, the Company will make a decision as to whether conversion to REIT status is in the best interests of shareholders. Principal risks and uncertainties The principal risk for the upcoming period is liquidity risk linked to the debt maturity profile of the Group s funding. As at 29 February the Group has current loan liabilities of million. These liabilities are classified as current due to maturities within the next 12 months and or as a result of ongoing covenant breaches. With respect to the VBG 1 and VBG 2 loan facilities totalling million the loan servicer is marketing the associated assets for sale and it is expected that they will be disposed of and the loans settled within the next 612 months. As a result the associated assets are classified as held for sale as at 29 February. It should be noted that the liabilities are nonrecourse to the Group. Discussions are ongoing with the finance providers in respect of the Delta and Gamma which total million and have a maturity date of October as well as with the finance provider for the Delamere Place Crewe facility which totals million and with the funding providers for the other facilities which are due to mature in the next 6 to 12 months. There can be no certainty that agreement will be reached on restructuring the facility but the Board is of the view that this will not impact the continued operations of the Group. The Board has a reasonable expectation that the Company and Group have adequate resources to continue in operation for the foreseeable future. Directors Responsibilities Each of the Directors confirms that to the best of each person s knowledge and belief: a) the condensed consolidated interim financial statements comprising the condensed consolidated statement of comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flows and related notes have been prepared in accordance with IAS 34 Interim Reporting as adopted by the EU. Statements Change in Equity Cash Flows Notes Statements Glossary 14

16 review Continued b) The interim management commentary includes a fair review of the information required by: i) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; ii) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during the period; and any changes in the related party transactions described in the last annual report that could do so. The Board of Directors 30 April 15

17 Group Overview Independent Auditors Report to Redefine International P.L.C. We have been engaged to review the condensed consolidated set of financial statements in the halfyearly financial report of Redefine International P.L.C. for the six months ended 29 February which comprise the condensed consolidated statement of financial position, the condensed consolidated statement of comprehensive income, the condensed consolidated cash flow statement, the condensed consolidated statement of changes in equity and the related explanatory notes. We have read the other information contained in the halfyearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. This report is made solely to the Company in accordance with our engagement letter to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ( the DTR ) of the UK s Services Authority ( the FSA ). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached. Directors Responsibilities The halfyearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the halfyearly financial report in accordance with the DTR of the FSA. As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The Directors are responsible for ensuring that the condensed consolidated set of financial statements included in this halfyearly financial report has been prepared in accordance with IAS 34 Interim Reporting as adopted by the EU. Our Responsibility Our responsibility is to express to the Company a conclusion on the condensed consolidated set of financial statements in the halfyearly financial report based on our review. Scope of We conducted our review in accordance with the International Standards on Engagements (UK and Ireland) 2410 of Interim Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board. 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 Ireland) 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. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated set of financial statements in the halfyearly report for the six months ended 29 February is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA. Darina Barrett Senior Statutory Auditor For and on behalf of KPMG Chartered Accountants Registered Auditor Dublin Ireland 30 April Chairman s Statement Business Portfolio Summary Statements Change in Equity Cash Flows Notes Statements Glossary 16

18 Statements Condensed Consolidated Comprehensive Income For the six months ended 29 February Revenue Gross rental income Investment income Other income Total revenue Expenses Administrative expenses Investment adviser and professional fees Property operating expenses Net operating income Net gains from financial assets and liabilities Equity accounted profit/(loss) Impairment of loans Net fair value losses on investment property Impairment of intangible assets (Loss)/profit from operations Interest income Interest expense Share based payment Foreign exchange loss (Loss)/profit before tax Taxation (Loss)/profit after tax Loss/profit attributable to: Equity holders of the parent Noncontrolling interests (Loss)/profit after tax Notes Other comprehensive income Foreign currency translation on foreign operations subsidiaries Foreign currency translation on foreign operations joint ventures and associates Share of foreign currency movement recognised in associate undertaking Share of cash flow hedge reserve movement recognised in associate undertaking Total comprehensive income for the period/year Total comprehensive income attributable to: Equity holders of the parent Noncontrolling interests Total comprehensive income for the period/year Basic (loss)/earnings per share (pence) 17 Diluted (loss)/earnings per share (pence) Months ended 29 Feb 38,537 1,199 39,736 (855) (4,473) (2,437) 31,971 4,748 1,879 (57,824) (19,226) 4,911 (45,805) (375) (945) (61,440) (1,164) (62,604) (60,710) (1,894) (62,604) 95 3,692 (58,817) (56,915) (1,902) (58,817) (10.67) (10.67) 6 Months ended Year ended 28 Feb 31 Aug 11,588 3, ,457 (252) (2,083) (1,595) 12,527 17,100 (6,784) (15) (6,802) 16,026 3,194 (9,320) (294) (143) 9,463 (193) 9,270 9,457 (187) 9, ,459 12,705 12,882 (177) 12, ,823 3,875 1,592 32,290 (774) (4,664) (2,368) 24,484 13,540 (3,088) (444) (10,627) (591) 23,274 8,134 (24,305) (768) (1,224) 5,111 (1,360) 3,751 5,035 (1,284) 3,751 1,927 4,882 1,494 (155) 11,899 13,157 (1,258) 11,

19 Statements Condensed Consolidated Position As at 29 February Group Overview Assets Noncurrent assets Investment property Longterm receivables Investments at fair value Intangible assets Investments in joint ventures Investments in associate Total noncurrent assets Current assets Assets held for sale Trade and other receivables Cash at bank Total current assets Total assets Equity and liabilities Capital and reserves Share capital Share premium Reverse acquisition reserve Retained (loss)/earnings Capital instrument Currency translation reserve Other reserves Cash flow hedge reserve Total equity attributable to equity holders of the parent Noncontrolling interests Total equity Noncurrent liabilities Borrowings Derivatives Deferred tax Total noncurrent liabilities Current liabilities Borrowings Derivatives Trade and other payables Total current liabilities Total liabilities Total equity and liabilities Net asset value per share (pence) Fully diluted net asset value per share (pence) Number of ordinary shares in issue Notes Feb 805,249 91, , ,795 1,029, ,231 23,847 33, ,898 1,196,553 41, , ,295 (160,229) 14,143 14,432 3, ,176 3, , ,360 5,487 2, , ,377 11,340 32, , ,559 1,196, ,454, Feb 348,183 87,809 86, ,647 16, ,903 19,288 10,763 30, ,954 10, ,420 94,011 (73,865) 13,294 3,326 3,912 2, ,333 5, , ,872 1, ,132 20, ,995 43, , , ,898, Aug 986, ,080 1,123 2, ,680 1,199,144 23,785 51,368 75,153 1,274,297 40, , ,295 (87,598) 13,768 10,637 3, ,304 5, , ,415 6,824 2, , ,071 16,291 37, , ,487 1,274, ,643,792 Chairman s Statement Business Portfolio Summary Statements Change in Equity Cash Flows Notes Statements Glossary 18

20 Condensed Consolidated Changes in Equity For the period ended 29 February Balance at 1 September 2010 Total profit for the period Foreign currency translation effect Effective portion of cash flow hedges Total comprehensive income Shares issued Share issue costs Scrip dividend paid to equity stakeholders Dividend paid to equity stakeholders Dividends paid to noncontrolling interests Group acquisition of noncontrolling interest Convertible shares to be issued Share based payment Contribution of noncontrolling shareholders Balance at 28 February Adjustment to present Wichford capital structure Restated balance at 28 February Balance at 28 February Total loss for the period Foreign currency translation effect Effective portion of cash flow hedges Total comprehensive income Shares issued Share issue costs Dividend paid to equity stakeholders Share capital 3,047 1, ,129 6,492 10,621 4, Share premium 211,359 52,961 (2,631) ,923 (100,503) 161, ,923 20,135 (396) Treasury shares Reverse acquisition reserve 94,011 94,011 Retained (loss)/ earnings (78,327) 9,457 9,457 (238) (4,786) 29 (73,865) (73,865) (73,865) (4,422) (4,422) (9,179) Other reserves 3,912 3,912 3,912 3,912 Currency translation reserve 2, ,326 3,326 3,326 7,311 7,311 Cash Flow hedge reserve 155 2,459 2,459 2,614 2,614 2,614 (2,614) (2,614) Capital instrument 13, ,294 13,294 13,294 Total attributable to equity shareholders 142,506 9, ,459 12,882 54,039 (2,631) (4,786) 29 13, , , ,333 (4,422) 7,311 (2,614) ,528 (396) (9,179) NCI 2,254 (187) 10 (177) (46) (457) 3,598 5,172 5,172 5,172 (1,097) 16 (1,081) Total equity 144,760 9, ,459 12,705 54,039 (2,631) (4,786) (46) (428) 13, , , , ,505 (5,519) 7,327 (2,614) (806) 20,528 (396) (9,179) 19

21 Group Overview Dividends paid to noncontrolling interests Share based payment Decrease in noncontrolling interest Contribution of noncontrolling shareholders Adjustment to present Wichford capital structure Shares issued pursuant to reverse acquisition Cancellation of shares Share issue costs Balance at 31 August Balance at 1 September Total loss for the period Foreign currency translation effect Total comprehensive income Shares issued Shares taken into treasury Treasury share sold Dividend paid to equity stakeholders Share based payment Disposal of noncontrolling interest Decrease in noncontrolling interest Balance at 29 February Share capital 6,099 32,557 (2,308) 40,870 40, ,721 Share premium (120,242) 161, ,420 3,519 (317) ,902 Treasury shares (67) 67 Reverse acquisition reserve Retained (loss)/ earnings (132) 114,143 19,978 2,308 (2,134) 134,295 (87,598) 134,295 (87,598) (60,710) (60,710) (11,921) 134,295 (160,229) Other reserves Currency translation reserve 3,912 10,637 3,912 10,637 3,795 3,795 3,912 14,432 Cash Flow hedge reserve Capital instrument ,768 13, ,143 Total attributable to equity shareholders 474 (132) 52,535 (2,134) 277, ,304 (60,710) 3,795 (56,915) 4,370 (384) 347 (11,921) ,176 NCI Total equity (35) (35) (1) 1,319 1,319 52,535 (2,134) 5, ,810 5,506 (1,894) 282,810 (62,604) (8) 3,787 (1,902) (58,817) 4,370 (384) 347 (11,921) (450) (450) 3, ,994 Chairman s Statement Business Portfolio Summary Statements Change in Equity Cash Flows Notes Statements Glossary 20

22 Condensed Consolidated Cash Flows For the six months ended 29 February Notes 6 Months Ended 29 Feb 6 Months Ended 28 Feb Year Ended 31 Aug Cash flows from operating activities (Loss)/profit for the period before tax Adjusted for: (61,440) 9,463 5,111 Straightlining of rental income Impairment of intangible assets Net fair value losses on investment property Foreign exchange loss Gain from financial assets and liabilities Equity accounted (profits)/losses Impairment of loans Investment income Interest income Interest expense Share based payment Cash generated by operations Changes in working capital Cash generated by operations Interest income Interest paid Taxation paid Distribution received Distributions received from associate and joint ventures Net cash generated from operating activities , (4,748) (1,879) (4,911) 45, ,148 (5,251) 26,897 3,754 (26,193) (718) 5,083 8,823 6, (17,100) 6, (3,875) (3,194) 9, ,652 1,542 10, (7,710) (193) 5,040 8, ,627 1,224 (13,540) 3, (3,875) (8,134) 24, , ,871 4,540 (22,867) (152) 3,875 5,986 12,253 Cash flows from investing activities Increase in investment properties Investment in associate and joint ventures Cash acquired on reverse acquisition Acquisition of subsidiaries Disposal of subsidiaries Decrease in longterm receivables (Increase)/decrease in loans to related parties Purchases of financial assets (Increase)/decrease in restricted cash balances Net cash utilised in investing activities Cash flows from financing activities 8 (1,126) (24,222) ,057 (208) (1,958) (15,842) (132,141) (1,916) (84) (477) 35 18,117 (116,466) (211,083) (18,586) 32,340 (307) (477) 3,990 (1,565) 14,616 (181,072) Proceeds from loans and borrowings Repayment of loans and borrowings Dividends paid to noncontrolling interests Dividends paid to equity shareholders 11 18,776 (24,369) (11,921) 88,847 (37,637) (46) (4,786) 152,831 (21,846) (81) (13,964) 21

23 Group Overview Acquisition of treasury shares Proceeds from issue of shares from treasury Proceeds from issue of share capital Share issue and reverse acquisition costs Additional contribution from noncontrolling shareholders Net cash (utilised in)/generated from financing activities Net (decrease)/increase in cash Effect of exchange rate fluctuations on cash held Net cash at the beginning of period Net cash at the end of the period Notes 11 6 Months Ended 29 Feb (384) 347 4,370 (13,181) (20,200) ,937 20,431 6 Months Year Ended Ended 28 Feb 31 Aug 53,115 (2,631) 5, ,062 (6,251) (280) 16,969 10,438 73,644 (3,993) 4, ,395 22, ,969 39,937 Chairman s Statement Business Portfolio Summary Statements Change in Equity Cash Flows Notes Statements Glossary 22

24 Notes to the Condensed Consolidated Statements For the six months ended 29 February 1. General information Redefine International P.L.C. was incorporated on 28 June 2004 under the laws of the Isle of Man and is listed on the Main Market of the London Stock Exchange. On 23 August the Company s financial year end was changed to 31 August from 30 September. With effect from 23 August, Redefine International plc (subsequently renamed Redefine International Holdings Limited ( RIHL )) was legally acquired by Wichford P.L.C. ( Wichford ) subsequently renamed Redefine International P.L.C. As a result of the terms of the transaction, reverse acquisition accounting has been applied under IFRS 3 Business Combinations (2008) and RIHL has been identified as the accounting acquirer. Consequently, the comparative figures shown for the condensed consolidated statement of financial position 28 February and the condensed consolidated statement of comprehensive income are those of RIHL. The condensed consolidated statement of financial position reflects the reserves, assets and liabilities of RIHL and the capital, reserves, assets and liabilities of Redefine International (formerly Wichford), effectively acquired by RIHL at fair value as at 31 August. As Wichford was the legal acquirer, the Wichford capital structure remains that of the Company. The preparation of the condensed consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ materially from these estimates. The significant judgements made by management in applying the Company s accounting policies and the key sources of estimation uncertainty are discussed further in Note 2.4 Basis of preparation. These condensed consolidated financial statements have been prepared on a going concern basis as the Directors consider this the most appropriate basis. 2. Basis of preparation 2.1 compliance These condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Reporting as adopted by the EU. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the period ended 31 August. Comparative figures for have been regrouped on a basis consistent with the current year. A reverse acquisition reserve has been created so that the capital structure of the Group reflects that of the Company. Certain balances have also been reclassified in the statement of cashflows to more accurately reflect the activity to which they relate. Both halfyear figures for the six months ended 29 February and the comparative amounts for the six months ended 28 February are unaudited and does not constitute statutory accounts as defined in the Isle of Man Companies Act (as amended). Both sets of interim figures have however been reviewed by the Auditors. The summary financial statements for the year ended 31 August, as presented in the condensed consolidated interim financial statements, represent an abbreviated version of the Group s full accounts for that period, on which independent auditors issued an unqualified audit report. The consolidated financial statements of the Group as at and for the period ended 31 August are available upon request from the Company s Registered Office at Top Floor, 14 Athol Street, Douglas, Isle of Man, IM1 1JA or at www. redefineinternational.com. The condensed consolidated interim financial statements were approved by the Board of Directors on 27 April. 23

25 Group Overview 2.2 Basis of measurement and functional currency The condensed consolidated financial statements of the Company for the 6 months ended 29 February consolidate the Company and its subsidiaries (together referred to as the Group ). They are presented in pound sterling which represents the functional currency of the Company and are rounded to the nearest thousand. The report is prepared on the historical cost basis except for investment properties, derivative financial instruments and financial instruments designated at fair value through profit or loss. Chairman s Statement Business 2.3 Significant Accounting policies The accounting policies applied by the Group in these condensed consolidated financial statements are the same as those applied by the Group in its audited financial statements as at and for the year ended 31 August, except for the additional accounting policies noted below: Disposal groups and noncurrent assets held for sale A noncurrent asset or a disposal group comprising assets and liabilities is classified as held for sale if it is expected that its carrying amount will be recovered principally through sale rather than through continuing use, it is available for immediate sale and the sale is highly probable to occur within one year. For the sale to be highly probable, the appropriate level of management must be committed to a plan to sell the asset or disposal group. On initial classification as held for sale, generally, noncurrent assets and disposal groups are measured at the lower of the previous carrying amount and fair value less costs to sell, with any adjustments taken to the income statement. The same applies to gains and losses on subsequent remeasurement. However, certain items such as financial assets within the scope of IAS 39 and investment property in the scope of IAS 40 continue to be measured in accordance with those standards. Impairment losses subsequent to classification of assets as held for sale are recognised in the income statement. Increases in fair value less costs to sell assets that have been classified as held for sale are recognised in the income statement to the extent that the increase is not in excess of any cumulative impairment loss previously recognised in respect of the asset. Assets classified as held for sale are not depreciated. Gains and losses on remeasurement and impairment losses subsequent to classification as disposal groups and noncurrent assets held for sale are shown within continuing operations in the income statement, unless they qualify as discontinued operations. Disposal groups and noncurrent assets held for sale are presented separately from other assets and liabilities on the statement of financial position. Prior periods are not reclassified. New standards and interpretations not yet adopted The Directors have considered all IFRSs and interpretations that have been issued, but which are not yet effective and are currently assessing whether they will have a significant impact on how the results of operations and financial position of the Group are prepared and presented. Portfolio Summary Statements Change in Equity Cash Flows Notes Statements Glossary 24

26 Notes to the Condensed Consolidated Statements Continued 2.4. Critical judgements and estimates The preparation of the condensed consolidated 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 reported. Although these estimates are based on the Directors best knowledge of the amount, event or actions, actual results may differ from those estimates. The principal areas where such judgements and estimates have been made are: Application of the going concern basis of accounting These financial statements have been prepared on a going concern basis as the Directors consider this the most appropriate basis. After considering the relevant factors, the Directors have a reasonable expectation that the Group has adequate resources to continue in operation for the foreseeable future. The principal issues the Board considered in its enquiries included, inter alia, the maturity of the Delta and Gamma facilities which total million in October, the maturities of the VBG2 and VBG1 facilities totalling million (both of which have expired but are the subject of a standstill agreement with the facility provider until 14 April ), the maturity of the Crewe facility which total million in March and the maturity of a number of other facilities totalling 35 million over the next 12 months. Following the conclusion of the reverse acquisition the Group s capital structure improved benefiting from RIHL s attractive long term facilities as well as a commitment from its major shareholder to support a proposed capital raising of their share of up to 100 million (i.e. 67 million). The Directors are confident that the maturity of the Delta and Gamma facilities will be addressed. With regard to both the VBG1 and VBG2 facilities the Board is confident that these facilities will not be required to be repaid at maturity. The Board notes that these facilities are ringfenced to certain investment properties with no recourse to any other assets pledged to other Group facilities. Discussions are ongoing with respect to the sale of the VBG and Halle assets, both noncore to the Company s strategy. As a result, the VBG1 and VBG2 assets are included in assets held for sale as at 29 February. There can however be no certainty as to the outcome of current negotiations or sales proceedings however the Board remains of the view that there would be no impact on the continued operations of the Group. Discussions are ongoing on the refinancing of the Crewe facility. Aviva credit approval has been obtained to extend the expiration of the Delamere Place Crewe facility until 31 May, from its previous expiry date of 16 March, to allow for further time for the refinancing of the facility. The Board notes that this facility is ringfenced with no recourse to any other assets pledged to other Group facilities. There can be no certainty that agreement will be reached on restructuring the facility but the Board is of the view that this will not impact the continued operations of the Group. Discussions are also ongoing on the other facilities maturing in the next 12 months. Again, these facilities are recourse only to the properties on which they are secured. The Board has a reasonable expectation that the Company and Group have adequate resources to continue in operation for the foreseeable future. Investment Property Valuation The Group uses the valuation performed by its independent valuers as a fair value of its investment properties. The valuation is based upon assumptions including estimated rental values, future rental income, anticipated maintenance costs, future development costs and appropriate discount rates. The valuers also make reference to market evidence of transaction prices for similar properties. 25

27 Group Overview Classification of Investment Property The hotel properties are held for capital appreciation and to earn rental income. The properties have been let to Redefine Hotel Management Limited ( RHML ) for a fixed rent which is subject to annual review. RHML operates the hotel business on its own account and is exposed to the fluctuations in the underlying trading performance of the hotels. It is responsible for the day to day upkeep of the properties and retains the key decision making responsibility for the business. Aside from the payment of rental income to Redefine International there are limited or no transactions between the two entities. As a result, in line with guidance in IAS 40, Redefine International classifies the hotel properties as investment properties. Taxation The Group is exposed to the risk of changes to tax legislation in the various countries in which the Group operates. It is also exposed to different interpretations of tax regulations between the tax authorities and the Group. Deferred Taxation The Group considers that the value of the property portfolio is likely to be realised by both the sale and the use over time. The Group bases its deferred taxation provision on the assumption that the residual value of the investment properties is not less than the present value as provided by its external valuers. The Group makes an initial estimate of the length of time that each property will be held in order to determine the initial recognition exemption for both the in use and on sale elements for each property. Periodically the Group will review the length of time for which each property will continue to be held and this can be significantly different from the residual of the time from the initial estimate. The resulting provision, being subject to assumptions on the length of the time that each property will be held by the Group which can change over time, can lead to significantly different results for each property from one period to another. The recoverability of any deferred tax asset is assessed and, where it is thought unlikely that a recovery will be made, is not included in the Group s provision. 3. Segment reporting The Group s identified reportable segments are set out below. These segments are generally managed by separate management teams. As required by IFRS 8, Operating Segments, the information provided to the Board of directors, who are the Chief Operating Decision Makers, can be classified in the following segments: UK Stable Income: UK Retail: Consists predominantly of UK offices, but includes petrol filling stations, KwikFit centres, retail and residential units. Consists of the Group s major UK shopping centres. Chairman s Statement Business Portfolio Summary Statements Change in Equity Cash Flows Europe: Hotels: Wichford: Cromwell: Consists of the Group s properties in Continental Europe, located in Germany, Switzerland and the Netherlands. Consists of all the Group s hotel properties. The hotels are let to Redefine Hotel Management Limited on a fixed rental basis with annual reviews. Consists of the Group s investment in Wichford, up to the date of the reverse acquisition. Relates to the Group s investment in the Cromwell Property Group, Australia. Notes Statements Glossary 26

28 Notes to the Condensed Consolidated Statements Continued Relevant revenue, assets and capital expenditure information is set out below: i. Information about reportable segments UK Stable Income UK Retail Europe Hotels Wichford Cromwell Total At 29 February Rental income Investment income Net fair value loss on investment property Gain/(loss) from financial assets and liabilities Equity accounted (losses)/profits Interest income Interest expense bank debt Property operating expenses 18,258 (45,599) 6,481 (165) 801 (11,779) (1,001) 6,858 (9,250) (363) 2,397 (4,861) (795) 8,721 (2,744) (292) (144) 92 (20,464) (641) 4,700 (231) (540) 1,554 (1,841) 2, (1,012) 38,537 (57,824) 5,286 1,879 4,861 (39,957) (2,437) Investment property Assets held for sale Investments designated at fair value Investments in joint ventures Investment in associates Loans and receivables 418, , , ,821 94, , , ,775 31, , , , , ,795 91,881 Borrowings bank loans 411, , , ,083 25, ,737 At 28 February Rental income Investment income Net fair value (losses)/gains on investment property Losses from financial assets and liabilities Equity accounted profits/(losses) Impairment of loans to joint ventures Interest income Interest expense Share based payment Property operating expenses 1,924 (115) 4, (15) 849 (606) (94) 4,612 (5,556) (1,878) 1,168 (3,851) (294) (1,196) 3, (1,085) (305) 2,043 (1,588) 1, (1,577) (5,430) 3,875 10,350 11,588 3,875 (6,802) 17,100 (6,784) (15) 2,807 (7,119) (294) (1,595) Investment property Investments designated at fair value Investments in joint ventures Investment in associates Loans and receivables 52, , ,914 25,335 76,379 1, ,600 1,352 34,500 16,731 85, ,183 86,958 2,647 16,731 87,809 Borrowings bank loans (45,152) (116,547) (58,995) (107,445) (328,139) 27

29 Group Overview UK Stable Income UK Retail Europe Hotels Wichford Cromwell Total Chairman s Statement At 31 August Rental income Investment income Net fair value (losses)/gains on investment property Gains/(losses) from financial assets and liabilities Equity accounted profits/(losses) Impairment of loans to joint ventures Interest income Interest expense bank debt Property operating expenses 3,965 (354) 4, (444) 2,316 (1,204) (102) 10,656 (8,485) 519 (2,137) 3,348 (8,400) (1,896) 5,816 (2,298) (2,270) (303) 6, (2,225) 2,397 (2,460) (67) (4,224) 3,875 10,046 2,627 (727) 26,823 3,875 (10,627) 13,540 (3,088) (444) 8,061 (15,061) (2,368) Business Portfolio Summary Investment property Investments designated at fair value Investments in joint ventures Investment in associates Loans and receivables Borrowings bank loans 467, ,889 82, ,804 (378,793) (139,818) 312, ,784 (186,511) 123,775 31,387 (75,778) 104,680 (17,344) 986,654 1,123 2, , ,080 (798,244) Statements Change in Equity Cash Flows Notes Statements Glossary 28

30 Notes to the Condensed Consolidated Statements Continued ii. Reconciliation of reportable segment profit or loss 29 February 28 February 31 August Rental income Total rental income for reported segments Profit or loss 38,537 11,588 26,823 Investment income 3,875 3,875 Net fair value losses on investment property (57,824) (6,802) (10,627) Gains from financial assets and liabilities 5,286 17,100 13,540 Equity accounted profits/( losses) 1,879 (6,784) (3,088) Impairment of loans (15) (444) Interest income 4,861 2,807 8,061 Interest expense (39,957) (7,119) (15,061) Share based payment (294) Property operating expenses (2,437) (1,595) (2,368) Total (loss)/gain per reportable segments (49,655) 12,761 20,711 Other profit or loss unallocated amounts Other income 1, ,592 Administrative expenses (855) (252) (774) Investment advisor and professional fees (4,473) (2,083) (4,664) Impairment of intangible assets (591) Loss from financial assets and liabilities Interest income Interest expense Share based payment Foreign exchange loss (538) 50 (5,848) (375) (945) 387 (2,201) (143) 73 (9,244) (768) (1,224) Consolidated (loss)/profit before tax (61,440) 9,463 5, Gains from financial assets and liabilities The following table details the net gains and losses earned by the Group during the period: 29 February 28 February 31 August Fair value through profit or loss Equity investments Derivative financial instruments assets carried at amortised cost Impairment of loans and receivables Other Loss on sale of subsidiaries (Note 20) liabilities carried at amortised cost Redemption of loans and borrowings Total net gains from financial assets and liabilities realised unrealised realised unrealised 5,286 (438) (100) 4,748 10,350 3,540 2,781 (484) ,100 10,350 3,540 (856) (73) (334) ,540 29

31 Group Overview 5. Interest income The following table details the net gains and losses earned by the Group during the period: 29 February 28 February 31 August Chairman s Statement Interest income on bank deposits Interest income from mezzanine financing Total interest income 183 4,728 4, ,093 3, ,998 8,134 Business 6. Interest expense The following table details the interest expense at amortised cost incurred by the Group during the period: Interest expense on secured bank loans Finance lease interest Interest expense on other financial liabilities Interest expense on mezzanine financing Total interest expense 29 February (39,958) (369) (285) (5,193) (45,805) 28 February (6,330) (140) (2,850) (9,320) 31 August (15,060) (386) (868) (7,991) (24,305) Interest expense on secured bank loans includes 17.8 million in finance costs due to the amortisation of the fair value adjustment of the VBG, Gamma and Delta loan facilities arising due to reverse acquisition of Wichford Portfolio Summary Statements 7. Taxation Income tax expense 29 February 28 February 31 August Change in Equity a) Tax recognised in profit or loss Current income tax Income tax in respect of current period Withholding tax Deferred tax Origination and reversal of temporary differences Cash Flows Total income tax expense reported in the statement of comprehensive income b) Recognised deferred tax liability and movement during the period Deferred tax and movement for the period is attributable to the following: Deferred tax liability Opening balance Deferred tax liability acquired Deferred tax liability recognised Closing balance 1,164 2, , ,360 1, ,239 Notes Statements Glossary 30

32 Notes to the Condensed Consolidated Statements Continued c) Factors affecting the tax charge in the period As the largest portion of the Group s properties are principally in the UK and owned by companies registered in the Isle of Man or in the British Virgin Islands, the Company regards the UK s income tax rate of 20% (: 20%), as payable under the UK s Non Resident Landlord Scheme, to be most relevant tax rate for the reconciliation of the theoretical tax charge on accounting profits to the tax charge for the period shown through the profit or loss. The Group invests in Swiss property and therefore is liable to cantonal and federal taxes in Switzerland. The rates depend largely on the canton in which the property is situated and the property value. The effective rate of tax ranges from 22% to 23.23%. The Group also invests in German properties held either in corporates or partnerships. The effective rate of tax ranges from % to 25%. The Group s investment in the Australian resident, Cromwell is held through an Irish Section 110 company. Unfranked dividends received from Cromwell are subject to an Australian withholding tax of 7.5%. Following the change in the accounting for the Cromwell investment to equity accounting with effect from 1 March, withholding taxes on the distributions received have been disclosed within equity accounted profits (Refer note 10 for details on taxes withheld during the period). The tax for the period is higher than the 20% payable under the UK s NRL Scheme. The differences are explained below: 29 February (61,440) (12,288) 28 February 9,463 1, August 5,111 1,022 (Loss)/profit before tax (Loss)/profit before tax multiplied by NRL rate of UK income tax (20%) Effect of: exempt property revaluations income not subject to UK income tax gain/(loss) in financial assets and liabilities losses carried forward expenses not deductible for tax withholding tax Total tax charge for the period 11,565 1,846 (950) ,164 1,360 (93) (3,420) ,125 (321) (2,708) , Investment property The cost of properties as at 29 February was 1.19 billion (28 February : million, 31 August : 1.19 billion). The carrying amount of investment property, apart from the investment properties in Delamere Place Crewe, is the fair value of the property as determined by a registered independent appraiser having an appropriate recognised professional qualification and recent experience in the location and category of the property being valued (together referred to as valuers ). The carrying amount of the investment properties in Crewe as at 29 February is the fair value as determined by directors valuation. The fair value of each of the properties for the year ended 31 August was assessed by the valuers in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors ( Red Book ). For the six months ended 29 February, the valuers updated the valuations as prepared at 31 August, on a desktop basis. The valuers have used the following key assumptions: The market value of investment properties has been primarily derived using comparable market transactions on arm slength terms and an assessment of market sentiment. The aggregate of the net annual rents receivable from the properties and, where relevant, associated costs, have been valued at an average yield of 8% which reflect the risks inherent in the net cash flows. Valuations reflect, where appropriate, the type of tenants actually in occupation or likely to be in occupation after letting of vacant accommodation and the market s perception of their creditworthiness and the remaining useful life of the property. 31

33 Group Overview The directors have estimated the recoverable value of the property under development in Crewe based on expected/ agreed development plans and have made a number of assumptions in deriving this value, including, in their view, various reasonable longterm assumptions relating to likely interest and the ultimate rental potential of the development and likely expected yields in the range of 6%7%. Based on these calculations, which, given current market conditions and the uncertainties in projecting forward these assumptions, are subjective, the Directors have valued the property under development at a value of million (: million). In terms of IAS 40 Investment property: Paragraph 14, judgement is needed to determine whether a property qualifies as an investment property. The Group has developed criteria so that it can exercise its judgement consistently in recognising investment properties. These include inter alia; property held for longterm capital appreciation, property owned (or under finance leases) and leased out under one or more operating leases; and property that is being constructed or developed for future use as an investment property. The recognition and classification of property as investment property principally assures that the Group does not retain significant exposure to the variation in cash flows arising from the underlying operations of the properties. Investment property comprises a number of commercial and retail properties that are leased to third parties. All investment properties are income generating, as is the investment property under development. The hotel properties are held for capital appreciation and to earn rental income. The properties have been let to Redefine Hotel Management Limited ( RHML ) for a fixed rent which is subject to annual review. RHML operates the hotel business on its own account and is exposed to the fluctuations in the underlying trading performance of the hotels. It is responsible for the day to day upkeep of the properties and retains the key decision making responsibility for the business. Aside from the payment of rental income to Redefine International there are limited or no transactions between the two entities. As a result, in line with guidance in IAS 40, Redefine International classifies the hotel properties as investment properties. Property operating expenses in the consolidated statement of comprehensive income relate solely to income generating properties. Opening balance Properties acquired during the period Capitalised expenditure Disposals Impact of reverse acquisition Investment property at fair value Finance leases Impact of acquisition of subsidiaries Foreign exchange movements in foreign operations Recognition of finance leases Net fair value losses on investment property Reclassification to assets held for sale (refer Note 19) Closing balance 29 February 986,654 1,126 (3,150) (12,326) (57,824) (109,231) 805, February 227, ,141 (6,543) 1,712 (6,802) 348, August 227, ,424 13,659 (6,543) 546, ,275 3,625 2,381 6,073 9,712 (10,627) 986,654 Chairman s Statement Business Portfolio Summary Statements Change in Equity Cash Flows Notes Statements Glossary 32

34 Notes to the Condensed Consolidated Statements Continued A reconciliation of investment property valuations to the condensed consolidated statement of financial position are shown below: 29 February 28 February 31 August Investment property at market value as determined by external valuers (excluding head leases, see below) Freehold Freehold and long leasehold Leasehold Investment property at directors valuation Adjustments for items presented separately on the consolidated statement of financial position: Add minimum payment under head leases separately included under borrowings Condensed consolidated statement of financial position carrying value of investment property 774, ,801 15, ,642 17,150 13, , , ,048 74,985 17, , , ,430 17, ,837 17,150 13, , Longterm receivables 29 February 28 February 31 August Security deposits with banks Amounts due from related parties (refer Note 16) Amounts due from Mezzanine Capital Limited , , ,500 91,881 87, ,080 Security deposits with banks bear interest at a rate of 6.725% with maturity between 1 and 3 years. The loans from related parties are unsecured, bear interest at rates between 0% and 7% and are repayable on demand, but the expectation is that the term will be greater than 12 months. The loans from Mezzanine Capital Limited are secured, bear interest at rates between 10% and 12% and are repayable between 1 and 3 years. Included in amounts due from Mezzanine Capital Limited is rolled up interest in respect of 7.1 million (28 February : 4.6 million, 31 August : 6.0 million). 33

35 Group Overview 10. Investments in associates Opening balance Investment at cost Reclassified from investments designated at fair value Change in carrying value due to foreign currency translation Equity accounted profit/(loss) Impairment of investment Share of foreign currency movement recognised Share of cash flow hedge reserve movement recognised Distribution received Cancellation of investment at fair value Closing balance 29 February 104,680 24,222 3,789 2,187 (5,083) 129, February 18, (3,335) (2,133) 779 2,459 16, August 18,923 16,449 85,128 4,963 4,729 (6,326) 1,494 (155) (5,986) (14,539) 104,680 Chairman s Statement Business Portfolio Summary The Company increased its holding in Cromwell through the AUD 35 million ( 22.6 million), participation in the Cromwell entitlement offer in December. Additional acquisitions of Cromwell shares over the period totalling 1.6 million increased the Company s interest to 23.16% from 22.36% as at 31 August. The closing price of Cromwell on 29 February was 72 Australian cents per security and the total fair value of shares held is AUD million ( million). During the six month period ended 29 February, the Group received AUD 7,796,143 (28 February : nil, 31 August : AUD 7,062,222) as a distribution, before withholding tax of AUD 248,249 (28 February : nil, 31 August : AUD 196,730), resulting in a net distribution of AUD 7,547,894 (28 February : nil, 31 August : AUD 6,865,492). The GBP equivalent of the above gross distribution is 5.08 million (28 February : nil, 31 August : 4.49 million). There are no restrictions on the ability of Cromwell to transfer funds to its shareholders in the form of cash, distributions and loan repayments. 11. Cash at bank Cash at bank consists of the following: Unrestricted cash balances Bank balances Call deposits Restricted cash balances 29 February 20,431 10,677 9,754 13,389 33, February 10,438 3,190 7, , August As at 29 February, there was million (31 August : million) of cash at bank, to which the Group did not have instant access. The principal reason for this is that rents received are primarily held in locked bank accounts as interest and other related expenses are paid from these monies on the interest payment dates. Also included in the restricted cash balance is 2.57 million held with Aviva with regards to proposed developments in Birchwood Warrington Limited. 39,937 35,742 4,195 11,431 51,368 Statements Change in Equity Cash Flows Notes Statements Glossary 34

36 Notes to the Condensed Consolidated Statements Continued 12. Capital and reserves Share capital In accordance with IFRS 3 Business Combinations, with a reverse acquisition the issued equity instruments information relates to that of the legal acquirer, Wichford. The prior period numbers have therefore been adjusted to refl ect the capital structure of Wichford. 29 February 28 February 31 August Authorised Ordinary shares of 1 penny each number Ordinary shares of 7.2 pence each number 1,000,000,000 72,000 5,000,000,000 50,000 1,000,000,000 72,000 Issued, called and fully paid Opening: ordinary shares of 1 penny each number Allotted: ordinary shares of 1 penny each number Consolidation from 1 pence to 7.2 pence each number Cancellation of ordinary shares of 7.2 pence each number Ordinary shares acquired into treasury of 7.2 pence each number Shares issued during the period of 7.2 pence each number new issue out of treasury Closing: ordinary shares of 7.2 pence each number 567,643,792 40,870 (939,000) (67) 12,750,000 11,811, , ,454,792 41,721 1,062,095,584 10,621 1,062,095,584 10,621 1,062,095,584 10,621 3,255,711,718 32, ,695,459 43,178 (32,051,667) (2,308) 567,643,792 40,870 The Company acquired 939,000 shares into treasury on 18 November. The Company issued 12,750,000 shares to RIN on 1 February, at a price of 37.0 pence per share. The placement was made to assist with the funding of the Company s underwriting commitment in connection with the Cromwell capital raising. The shares (including an issue of 939,000 shares out of treasury) were admitted to trading on the LSE on 6 February. Following this placement and as at 29 February, the Company had 579,454,792 shares in issue. 35

37 Group Overview Distributions In terms of the dividend policy, the Company will seek to distribute the majority of its recurring earnings available for distribution in the form of dividends subject to realisable profits. However, there is no assurance that the Company will pay a dividend, or if a dividend is paid the amount of such dividend. During the six month period ended 29 February, the interim dividend of 2.10 pence per share, for the financial period ended 31 August, was distributed. Reverse acquisition reserve The reverse acquisition reserve comprises the difference between the capital structure of the Company and RIHL. Other reserves These are nondistributable reserves arising from the acquisition of subsidiaries. 13. Capital instrument As part of the Aviva debt restructuring the Company has entered into a 13 million facility with Aviva. The loan bears interest at 6% per annum, and all interest is rolled up until payment or conversion. The capital plus rolled up interest is repayable or convertible three years after the date of the agreement or on any earlier date if there is an event of default. Should the drawings together with interest not be repaid, the Company will be required to issue shares to discharge the outstanding amount due, the number of which is calculated by dividing the outstanding amount by 50 pence per ordinary share. The capital instrument is an equity instrument under IAS 32 as it is to be settled in either cash or a fixed number of equity shares at the discretion of the Company. The fixed number of shares to be issued changes over time but is fully predetermined based on the time the Company chooses to settle the instrument. The additional shares that arise over time are charged to profit or loss in each period as a share based payment charge and is credited to the equity reserve. Opening balance Capital instrument issued Share based payment Closing balance 14. Borrowings Noncurrent Bank loans Less: deferred finance costs Finance leases Total Current Bank loans Less: deferred finance costs Total Total borrowings 29 February 13, , February 458,397 (2,343) 13, , ,334 (957) 458, , February 13, , February 307, ,872 20,267 20, , August 13, , August 800,518 (2,440) 13, , ,822 (751) 117, ,486 Chairman s Statement Business Portfolio Summary Statements Change in Equity Cash Flows Notes Statements Glossary 36

38 Notes to the Condensed Consolidated Statements Continued a) Loans This note provides information about the contractual terms of the Group s loans and borrowings, which are measured at amortised cost. The terms and conditions of outstanding loans are as follows: Facility Gamma Delta Redefine Hotel Holdings Limited VBG1 West Orchards Coventry Limited*** Zeta VBG2 St George s Harrow Limited Halle Redefine Australian Investments Limited Delamere Place Crewe Limited Hague Birchwood Warrington Limited*** Ciref Berlin 1 Limited Byron Place Seaham Limited*** Kalihora Holdings Limited Princes Street Investments Limited Gibson Property Holdings Limited ITB Schwandorf B.V. ITB Herzogenrath B.V. Newington House Limited CEL Portfolio Limited & Co. KG InkstoneZweiGrundstucksverwaltung Limited & Co.KG InkstoneGrundstucksverwaltung Limited & Co.KG Ciref German Portfolio Limited Ciref Reigate Limited Ciref Kwikfit Stafford Limited Ciref Kwikfit Stockport Limited Total bank loans Amor tising No No Yes Yes Yes No Yes Yes No No No Yes No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No No Lender Windermere XI CMBS Windermere VIII CMBS Aareal Talisman 3 Aviva Lloyds TSB Talisman 4 Landesbank Berlin Windermere XIV CMBS Investec Aviva SNS Property Finance Aviva RBS Aviva UBS HSBC Aviva Bayern LB Bayern LB AIB Valovis Barclays Barclays RBS RBS KBC KBC Loan Interest rate LIBOR % LIBOR % LIBOR % EURIBOR + 1.1% 6.29%* LIBOR % EURIBOR + 1.1% LIBOR + 2.5% EURIBOR % BBSY + 4% 6.49%* EURIBOR + 2.3% 6.1%* EURIBOR + 1.2% 6.44%* 2.87%* LIBOR + 2.5% 6.37%* EURIBOR + 1.3% EURIBOR + 1.3% LIBOR + 2.5% 4.95%* 5.91%* 5.75%* EURIBOR + 1.2% LIBOR + 2.5% LIBOR + 2.5% LIBOR + 2.5% Currency GBP GBP GBP EUR GBP GBP EUR GBP EUR AUD GBP EUR GBP EUR GBP CHF GBP GBP EUR EUR GBP EUR EUR EUR EUR GBP GBP GBP Maturity date October October November 2015 January July 2027 May 2013 April April 2016 April 2014 February 2013 May July 2014 September 2035 September 2014 September 2031 October 2018 September 2016 June 2029 October 2017 October 2017 September 2013 November 2014 August August September 2014 June 2015 April April 29 Feb 198, ,177 75,295 51,620 49,273 46,000 41,751 41,400 25,590 25,693 17,150 16,216 16,738 15,234 15,176 12,099 11,710 10,978 7,469 6,178 6,409 4,134 3,374 3,713 3, ,514 Mezzanine Capital Limited**** Coronation Group Investments Limited** Loans secured by cash deposits CEL Portfolio Limited & Co. KG Total secured loans 7.10% 10%* 4%* 7.00%* 0%* GBP GBP GBP GBP , , Feb 68,445 49,212 17,150 16,457 15,782 15,193 11,917 11,128 7,795 6,447 6,609 4,305 3,898 3,506 3,365 2, ,709 82, , Aug 197, ,759 75,778 47,420 49,227 46,000 36,446 41,630 25,975 17,344 17,150 16,879 16,629 16,242 15,182 13,522 11,053 7,971 6,593 6,509 4,427 3,986 3,603 3,447 2, , ,847 10, ,340 37

39 Group Overview All bank loans are secured over investment property (except Redefine Australian Investments Limited which is secured by Cromwell securities), and bear interest at the specified interest rates. * Fixed rates ** Loan secured over Redefine Australian Investments Limited. *** These facilities are cross collateralised against each other and against facilities to Redefine Wigan Limited. See Note 23. **** Loans are extendable at the request of the Company. There have been a number of covenant breaches within the Group during the period. Material covenants under discussion or subject to waivers are summarised below: Facility VBG 1 VBG 2 Delamere Place Crewe Ciref Berlin 1 Limited Lender Talisman 3 Talisman 4 Aviva RBS Original Maturity Jan12 Apr11 Nov11 Sep14 Principal 51,620 41,751 17,150 15,234 ICR Covenant % VBG 1 The loan has a current LTV of 122%. There was an existing LTV waiver and standstill agreement until 14 April. The loan is nonrecourse to the Group. The loan servicer is marketing the associated assets for sale and it is expected that they will be disposed of and loan settled within the next 612 months. VBG 2 The loan has a current LTV of 129%. There was an existing LTV waiver until 14 April. The loan is nonrecourse to the Group. The loan servicer is marketing the associated assets for sale and it is expected that they will be disposed of and loan settled within the next 612 months. Delamere Place Crewe Aviva credit approval has been obtained to extend the expiration of the Delamere Place Crewe facility until 31 May, from its previous expiry date of 16 March, to allow for further time for the refinancing of the facility. The loan is nonrecourse to the Group. RBS (Ciref Berlin 1 Limited) There is currently an LTV breach. A number of asset management initiatives have been identified, many of which are at an advanced stage of negotiations with the relevant tenants. Once these initiatives have been completed, it is expected that they will provide a sufficient value uplift to cure the temporary LTV breach. Negotiations are currently in place with RBS to waive the LTV breach in the interim. ICR ratio % LTV covenant % N/a N/a N/a 90 LTV ratio % N/a N/a N/a 93 Chairman s Statement Business Portfolio Summary Statements Change in Equity Cash Flows Notes Statements Glossary 38

40 Notes to the Condensed Consolidated Statements Continued Current and noncurrent borrowings 29 February 28 February 31 August Noncurrent liabilities Secured loans Total noncurrent borrowings The maturity of noncurrent borrowings is as follows: Between one year and five years More than five years Current liabilities Secured loans Total current borrowings Total borrowings 458, , , , , , , , , , , , ,872 20,267 20, , , , , , , , , ,340 Exposure to credit, interest rate and currency risks arise in the normal course of the Group s business. Derivative financial instruments are used to reduce exposure to fluctuations in interest rates. Refer to Note 15, 21 and 22 for further details. b) Finance Leases Obligations under finance leases at the reporting dates are analysed as follows: 29 February 28 February 31 August Gross finance leases liabilities repayable: Not later than 1 year Later than 1 year not later than 5 years Later than 5 years Less: finance charges allocated to future periods Present value of minimum lease payments Present value of finance lease liabilities repayable: Not later than 1 year Later than 1 year not later than 5 years Later than 5 years Present value of minimum lease payments 680 2,720 48,005 51,405 (38,099) 13, ,821 10,974 13, ,720 48,344 51,744 (38,407) 13, ,821 11,005 13,337 39

41 Group Overview 15. Derivatives The Group enters into interest rate swaps and interest rate cap agreements. The purpose is to manage the interest rate risks arising from the Group s operations and its sources of finance. The interest rate swaps employed by the Group to convert the Group s borrowings to fixed interest ones fall into two categories, as explained in a), i) and ii) below. The interest rate caps employed by the Group limit the exposure to upward movements in interest rates. These are detailed in b) below. It is the Group s policy that no economic trading in derivatives shall be undertaken. a) Interest rate swap agreements In accordance with the terms of the borrowing arrangements, the Group has entered into interest swap agreements. The interest rate swaps are used to manage the interest rate profile of financial liabilities. The Group has employed interest rate swaps to eliminate future exposure to interest rate fluctuations as well as being charged fixed rate interest on those facilities described as having lender level swaps. Chairman s Statement Business Portfolio Summary i) Lender level interest rate swap agreements Lender level interest rate swaps agreements are those from which the Group benefits but which do not have any Group entity as a counterparty, instead the lender is the counterparty with the commercial banking entity providing the interest rate swap. These arise where the loan agreements call for interest rate swaps to be taken out to allow a fixed interest charge to be made to the borrowing subsidiaries and these borrowers have given indemnities to the lenders in respect to these interest rate swaps. The interest rate swaps for the Delta, Gamma and Halle facilities, from which the Group benefits by both eliminating any interest rate fluctuations in the market over the course of the facilities and also from any benefit (or cost) of closing these instruments out, are lender level interest rate swaps. The swaps are between the CMBS vehicles (the lenders) and commercial banking counterparties. The Group recognises these embedded derivatives separately as, while the Group is charged interest at a fixed rate on these facilities, the terms of the facilities mean the Group ultimately receives their benefit or pay their burdens. As a result of the use of interest rate swaps, the fixed rate profile of the Group s lender level interest rate swaps was: Facility Delta Gamma Halle Effective date 21/07/ /05/ /02/2007 Maturity date 15/10/ 20/10/ 22/04/2014 Swap rate 4.95% 4.77% 4.19% 29 February (2,653) (4,404) (2,205) (9,262) 28 February 31 August (5,062) (8,426) (2,325) (15,813) Statements Change in Equity Cash Flows Notes Statements Glossary 40

42 Notes to the Condensed Consolidated Statement Continued ii) Borrower level interest rate swap agreements Borrower level interest rate swap agreements are those that have a Group company as the counterparty to the commercial bank providing the interest rate swap. As a result of the use of interest rate swaps, the fixed rate profile of the Group was: Facility Subsidiaries Redefine Hotel Holdings Limited Hague Zeta Ciref Berlin 1 Limited Ciref Berlin 1 Limited Redefine Hotel Holdings Limited Ciref German Portfolio Limited Redefine International Holdings Limited Princes Street Investments Limited Matterhorn Vich SARL Matterhorn Brig SARL Newington House Limited Ciref Reigate Limited Held in joint ventures Ciref Jersey Limited Churchill Court Limited Premium Portfolio Limited & Co. KG Ciref Jersey Limited Premium Portfolio Limited & Co. KG Effective date 30/11/ /08/ /07/ /06/ /07/ /06/ 31/07/ /03/ 30/09/ 30/01/ 30/01/ 03/09/ /09/ /07/ /04/ /03/ /01/ /03/2008 Maturity date 30/11/ /08/ /05/ /04/ /04/ /11/ /04/ /03/ /09/ /10/ /10/ /09/ /06/ /07/ /04/ /12/ /07/ /12/2014 Swap rate 2.45% 4.89% 2.73% 4.61% 4.20% 2.32% 4.20% 5.45% 1.69% 0.73% 0.73% 1.54% 2.03% 5.48% 5.08% 4.13% 4.80% 4.23% 29 February (2,428) (1,632) (966) (678) (537) (336) (241) (227) (219) (169) (78) (54) (7,565) (6,534) (1,585) (1,463) (503) (146) (10,231) 28 February 1,351 (634) (470) (211) (3,808) (1,088) (1,319) (196) (379) (6,790) 31 August (2,105) (1,751) (1,141) (735) (569) (290) (256) (305) (82) (68) (7,302) (5,532) (1,554) (1,486) (371) (435) (9,378) b) Interest rate cap agreements The Group has entered into interest rate caps in order to take advantage of the low interest rates in the market while at the same time protecting the Group against any significant increases in these interest rates. The current interest rate cap agreements are detailed below: Facility St George s Harrow Limited ITB Herzogenrath B.V. ITB Schwandorf B.V. Effective date 27/04/ 31/05/ 31/05/ Maturity date 27/04/ /05/ /05/2017 Swap rate 2.85% 4.50% 4.50% 29 February February 31 August

43 Group Overview c) Summary of fair value of interest rate swaps and interest rate caps Fair value of lender level interest rate swaps Fair value of borrower level interest rate swaps Fair value of interest rate cap agreements* Fair value of the Group s derivative instruments *Interest rate cap and other derivative assets are included in investments at fair value in the statement of of financial position. 16. Related party transactions 29 February (9,262) (7,565) (16,827) 307 (16,520) 28 February August (15,813) (7,302) (23,115) 761 (22,354) Investment adviser The investment adviser duties are carried out in accordance with the Investment Adviser s Agreement (as approved on 13 July ) between the Company and RIPML. The director Michael Watters is a director of associated companies of the investment adviser. Chairman s Statement Business Portfolio Summary Trading transactions Rental income received from Redefine Hotel Management Limited Fee income from Redefine Hotel Management Limited Fee income from the Cromwell Property Group Portfolio management fees charged by Redefine International Property Management Limited Portfolio management fees charged by Redefine International Fund Managers Limited Portfolio management fees charged by Redefine International Fund Managers Europe Limited Redefine International Hotels Limited Administration fees charged by Redefine International Group Services Limited Loans receivable Pearl House Swansea Limited Redefine Hotel Management Limited Redefine Properties International Limited Cromwell Property Group Ciref Crawley Investments Limited Swansea Estates Limited Ciref Kwikfit Stafford Limited Ciref Kwikfit Stockport Limited Loans Payable Redefine International Fund Managers Limited Redefine International Fund Managers Europe Limited Redefine International Group Services Limited Redefine Properties International Limited Redefine International Property Management Limited 29 February 4, (1,717) (261) (494) (309) 74 3, , February 2, (980) (190) (78) 116 2, ,188 1,355 2, August 6, (2,028) (403) (153) 116 2, , , Statements Change in Equity Cash Flows Notes Statements Glossary 42

44 Notes to the Condensed Consolidated Statements Continued Loans payable to Redefine International Fund Managers Limited, Redefine International Fund Managers Europe Limited and Redefine International Group Services Limited are not secured, bear no interest and are expected to be repaid in cash within 12 months. Please also see Note 12 for details of shares issued to RIN during the period. Directors Further details of Directors remuneration will be included within the Annual Report to shareholders. 17. Earnings per share Earnings per share are calculated on the weighted average number of shares in issue and the profit/(loss) attributable to shareholders. (Loss)/profit attributable to shareholders Weighted average number of ordinary shares in issue Effect of potential share based payment transactions performance fee arrangements Effect of potential share based payment transactions capital instrument (Refer Note 13) Diluted weighted average number of ordinary shares Number of ordinary shares In issue Weighted average Diluted weighted average (Loss)/earnings per share (pence) Basic Diluted 1 Antidilutive given losses incurred during the period 29 February (60,710) 569,139 28, , , , ,425 (10.67) (10.67) 1 28 February 9, ,121 28, , , , , August 5, ,125 26, , , , ,

45 Group Overview 18. Net asset value per share The net asset value per share amount is calculated by dividing the net assets at 29 February attributable to equity holders of the parent of million (28 February : million, 31 August : million) by the number of ordinary shares in issue as at 29 February of 579,454,792 (28 February : 412,898,995, 31 August : 567,643,792). The diluted net asset value per share is calculated on the following basis: The potential number of ordinary shares to be issued to Aviva at 50 pence per share under the capital instrument at 29 February is million (28 February : million, 31 August : million) which is based on the value of the capital instrument on 29 February is million (28 February : million, 31 August : million). Chairman s Statement Business 29 February 28 February 31 August Portfolio Summary Net assets attributable to equity shareholders () Number of Ordinary Shares ( 000 s) Effect of potential share based payment transactions performance fee arrangements Effect of potential share based payment transactions capital instrument Diluted number of shares ( 000 s) Net asset value per share (pence): Basic Diluted 213, ,455 28, , , ,899 26, , Noncurrent assets and assets held for sale Discussions are ongoing regarding the sale of VBG 1, 2 and Halle assets with disposals expected to be finalised within the next 12 months. As a result the property assets have been reclassified to held for sale in the period. Assets held for sale VBG 1 VBG 2 Halle Total 29 February 44,177 34,354 30, , February 277, ,644 27, ,181 Loan liabilities totalling million which are recourse only to these properties are included in loans and borrowings. Of the million, million are included in current liabilities due to repayment dates within the next 12 months August Statements Change in Equity Cash Flows Notes Statements Glossary 44

46 Notes to the Condensed Consolidated Statements Continued 20. Disposal of subsidiaries The Group disposed of the Ciref Reigate Limited in the period ended 29 February (TYS Holdings Limited and Ciref Streatham Limited during the financial year ended 31 August ): The assets and liabilities arising from those disposals were as follows: 29 February 28 February 31 August Assets disposed: Investment Property Longterm receivables Trade and other receivables Trade and other payables Derivative liabilities Loans and borrowings Total Add : Noncontrolling interest shareholder loans Noncontrolling interest share of net deficit Less: loss on sale of subsidiary Net cash acquired/(disposed) 3, (7) (79) (80) (3,160) (664) (100) 615 6,543 (5,244) (42) (1,400) (143) (334) (477) 6,543 (5,244) (42) (1,400) (143) (334) (477) 21. Interest rate risk The Group s exposure to the risk of the changes in market interest rates relates primarily to the Group s longterm debt obligations with floating interest rates. The Group uses interest rate derivatives to fully mitigate its exposure to interest rate fluctuations. At the period end, as a result of the use of interest rate swaps, the majority of the Group s borrowings were at fixed interest rates. The Group s profit before tax has limited exposure to interest rate fluctuations until the repayment dates of the loans for which the interest rate swaps have been arranged. Refer Note 15 for further details on the Group s interest rate swap agreements. 22. Liquidity risk The Group s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group s reputation. The Group s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient rental income to service its financial obligations when they fall due. The monitoring of liquidity risk is assisted by the monthly review of financial covenants imposed by financial institutions, such as interest and loantovalue covenant ratios. Renegotiation of loans takes place in advance of any potential covenant breaches in so far as the factors are within the control of the Board. In periods of increased market uncertainty the Board will ensure sufficient cash resources are available for potential loan repayments/cash deposits as may be required by financial institutions. 45

47 Group Overview As at 29 February the Group has current loan liabilities of million. These liabilities are classified as current due to maturities within the next 12 months and or as a result of ongoing covenant breaches. With respect to the VBG 1 and VBG 2 loan facilities totalling million the loan servicer is marketing the associated assets for sale and it is expected that they will be disposed of and the loans settled within the next 612 months. As a result the assets on which these loans are secured are classified as held for sale as at 29 February. It should be noted that the liabilities are recourse only to this specific pool of assets. See Note 19 for details. Discussions are ongoing with the finance providers in respect of the Delta and Gamma which total million and have a maturity date of October as well as with the finance provider for the Delamere Place Crewe facility which totals million and with the funding providers for the other facilities which are due to mature in the next 6 to 12 months. Further details of these loans and the status of the refinancings are given in note 2.4 and note Contingencies, guarantees and capital commitments The Group has capital commitments of 2.6 million (31 August : 3 million) in respect of capital expenditure contracted for at the reporting date, but not yet incurred, for future transactions approved by the Board. The Group has entered into a corporate guarantee agreement with IHG Hotels Limited, the contingent liability of which is not expected to exceed 0.3million. External financing totalling million to Redefine Wigan Limited, a joint venture of Redefine International which holds Grand Arcade Wigan Limited, has been cross collateralised against properties held directly by the Group. The value of Grand Arcade Wigan Limited as at 29 February is 83 million (31 August : 85 million). However, there is currently no exposure for the Group, as the combined LTV of the cross collateralised properties is greater than 100%. Contracts have been exchanged to acquire an effective 50% interest in two newly developed retail stores in Germany. The gross purchase price of the properties, located in Kaiserslautern and Waldkraiburg, is 6.4 million ( 5.3 million) and 9.7 million ( 8.1 million) respectively. Terms have been agreed for bank funding at a 70% loantovalue, the equity committed is therefore.2.4 million ( 2.0 million). 24. Subsequent events The Board has resolved to declare an interim dividend of 2.10 pence per share. The last day to trade cum dividend in order to participate in the dividend will be 8 May. The shares will commence trading ex dividend on 9 May and the record date will be 11 May. The dividend will be paid to shareholders on 24 May. Chairman s Statement Business Portfolio Summary Statements Change in Equity Cash Flows Notes Statements Glossary 46

48 Glossary AUD Cromwell Enlarged Group EPRA Estimated Rental Value (ERV) Eurozone Euro or Finance lease FSA GBP or or Sterling Headlease GDP IFRS Interestrate swap ICR JSE LIBOR Listing Rules Loantovalue (LTV) LSE NAV REIT sq ft UK WAULT Australian Dollar made up of 100 cents. Cromwell Property Group is an Australian Securities Exchange listed stapled security (ASX:CMW) comprising the Cromwell Corporation Limited and Cromwell Property Securities Limited, which acts as the responsible entity of the Cromwell Diversified Property Trust. The Redefine International P.L.C. Group following the reverse acquisition of Wichford P.L.C. by Redefine International Holdings Limited. European Public Real Estate Association. The estimated market rental value of lettable space which could reasonably be expected to be obtained on a new letting or rent review. The geographic and economic region that consists of all the European Union countries that have fully incorporated the Euro as their national currency. The lawful common currency of participating member states of the European Monetary Union. A lease that transfers substantially all the risks and rewards of ownership from the lessor to the lessee. The UK Services Authority. Great British Pound, the legal currency of the UK A lease under which the Group holds an investment property. Gross Domestic Product International Reporting Standards. A financial instrument where two parties agree to exchange an interest rate obligation for a predetermined amount of time. These are used by the Group to convert floatingrate debt or investments to fixed rates. Interest Cover Ratio JSE Limited, licensed as an exchange and a public company incorporated in terms of the laws of South Africa. The London Interbank Offered Rate, the interest rate charged by one bank to another for lending money. The UK Listing Authority rules for listed companies. A ratio of debt divided by the market value of investment property. The London Stock Exchange plc Net Asset Value Real Estate Investment Trust. A REIT must be a publicly quoted company with at least threequarters 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% of those profits to shareholders. Corporation tax is payable on nonqualifying activities in the normal way. Square feet The United Kingdom of Great Britain and Northern Ireland. Weighted average unexpired lease term. 47

49 Notes Group Overview Chairman s Statement Business Portfolio Summary Statements Change in Equity Cash Flows Notes Statements Glossary 48

50 Notes 49

51 Notes 50

52 Redefine International P.L.C.