REI Regulatory News (RLE)

9 Jun 2005 07:30

Real Estate Investors PLC09 June 2005 REAL ESTATE INVESTORS PLC Preliminary results for the period ended 31 December 2004 Real Estate Investors PLC ("REI" or "the Company"), the commercial propertyinvestment company, today announces the preliminary results for the period ended31 December 2004. Highlights: * Portfolio now valued at £19.8m, following active acquisition programme* Rental income, increased to £1.4m pa, from £0.35m at float* Net assets, increased since flotation to £3.6m at 31 December 2004* Portfolio typified by quality investment properties, let on long leases to strong tenant covenants* Targets set at time of flotation achieved* 25 year, fixed interest, institutional long term debt in place* 15 million new REI shares issued at premium to market price (and asset value) since float* 4.2 million new shares placed at 12p, in August 2004 (to satisfy demand, post successful float)* Recent completion of acquisition of KBR portfolio for £3.5m For further information please contact:Peter Lewin - Chief Executive 01923 776633Malcolm Lewin - Finance Director CHAIRMAN'S STATEMENT I am delighted to be able to report to you on REI's considerable progress, sinceflotation, in June 2004. The results to 31 December 2004 reflect the start up phase for REI and includepart year rental income for three property acquisitions. We have achieved the targets set by the directors, despite low borrowing costsin the UK which we believe has fuelled the most competitive and active propertymarket in recent memory. Our investment portfolio is currently valued at £19.8m, an increase of £15.6msince flotation. Gross rental income has increased from £0.35m to £1.4m and 15million new shares have been issued, at a premium to underlying net asset value,and as a result our shareholder base has widened considerably. We have concentrated our efforts on the purchase of medium sized commercialproperty investments, let to strong tenant covenants on secure leases. Theportfolio is further diversified, by property type, geographic location andtenant. Fixed interest, long term financing is the backbone of our business and I ampleased to say that several such new mortgage facilities have been put in placewith institutional lenders; the largest being a £7.6m, 25 year, fixedcoupon facility with Norwich Union. Our portfolio is growing as a result of significant acquisitions, several ofwhich I should like to mention. In October 2004, we purchased a newly refurbished industrial complex, inCoventry, which is let to PHS Group PLC. At the end of the year, we completed the acquisition of the share capital of3147398 Limited (formerly Bacchus Estates Limited), for a total consideration of£9m in respect of the underlying properties. The company owns a diverseportfolio of 13 commercial investments, throughout Southern England andgenerates income of £0.65m, with good prospects of rental growth and capitalappreciation. We have recently completed the acquisition of the five property KBR portfolio,let to tenants including Barclays Bank, Whitbread, JJB Sports, St AustellBrewery and JJ Coral, for a total consideration of £3.5m.The locations are inNewport, Portsmouth, Wakefield, Ilfracombe and Manchester. Other activity includes the purchase of a retail investment in Hemel HempsteadTown Centre, let to Centrica PLC and the disposal of an A3 leisure property, inLondon SW11, let to Cafe Rouge. The latter was sold at a surplus overacquisition and book cost and will release £0.35m of cash, for our activeacquisition programme. All of these acquisitions involved the issue, to the vendors, of new ordinaryshares in REI, at a premium to underlying asset value and we welcome thosevendors to the shareholder list. At the time of flotation, in June last year, weset out the financing strategy for our acquisition programme and, despite thestrength of the commercial property investment market and competition forquality investments, we have been able to find attractive opportunities, wherevendors are prepared to invest in REI. Your directors have the experience and depth of knowledge to generate the leveland quality of business that will form the platform for our further expansion.We believe that the property investment sector is exhibiting classic signs ofoverheating and, with our low overhead structure, there will be increasingopportunities for us to improve profitability. At this stage, your directors are not recommending the payment of a dividend. With an eye to avoiding unnecessary costs, we are not preparing an illustratedannual report to accompany the financial statements. Instead we hope that youwill visit our website, www.reiplc.com, where financial information, propertydetails, photographs and continuously updated news on REI can be viewed, withannouncements by the Company e-mailed directly to you. The progress made over the past 16 months has been achieved through the hardwork and dedication of our small but loyal staff; I should like to express mythanks to them, for their very considerable effort and support.I shall look forward to the announcement of further significant progress,shortly. John J Jack, Chairman. GROUP PROFIT AND LOSS ACCOUNT For the period from 16 February to 31 December 2004 £000 £000 TurnoverContinuing operations 16Acquisitions 198 ----- 214Administration expenses (218) ------ Operating profitContinuing operations (192)Acquisitions 188 ------ (4) Net interest payable and similar charges (93) ------ Loss on ordinary activities before taxation (97) Tax on loss on ordinary activities 30 ------ Loss on ordinary activities after taxation (67) Dividends - ------ Loss retained (67) ====== Basic and diluted loss per share (0.36p) GROUP BALANCE SHEET AT 31 DECEMBER 2004 Note £000Fixed assetsIntangible assets - goodwill 4 148 - negative goodwill 4 (906) ------ (758) Tangible assets 5,574 ------ 4,816 Current assetsStock 9,655Debtors 334Cash at bank 2,028 ------- 12,017 Creditors: amounts falling due within one year (9,279) -------Net current assets 2,738 -------Total assets less current liabilities 7,554 Creditors: amounts falling due after more than one yearConvertible debt (325)Other (3,628) ------- (3,953) -------Net assets 3,601 =======Capital and reservesCalled up share capital 7 320Share premium account 2,703Capital redemption reserve 45Shares to be issued 600Profit and loss account (67) ------Shareholders' funds 3,601 ====== GROUP CASH FLOW STATEMENT For the period from 16 February 2004 to 31 December 2004 £000 Net cash inflow from operating activities 84 -----Returns on investments and servicing of financeInterest received 21Interest paid (95) -----Net cash outflow from returns on investments and servicing of finance (74) Taxation (20) Capital expenditure and financial investmentPurchase of tangible fixed assets (1,205) -------Net cash outflow from capital expenditure and financial investment (1,205) Acquisitions and disposalsPurchase of subsidiary undertakings (218)Payment of exchange deposit for 3147398 Limited acquisition (300)Payment of amounts owed by subsidiaries to vendors (837)Net cash from purchase of subsidiaries 763 -----Net cash outflow from acquisitions and disposals (592) FinancingNet proceeds from issue of shares 2,563Receipts from borrowing 3,000Repayments of borrowing (1,728) -------Net cash inflow from financing 3,835 -------Increase in cash 2,028 ======= NOTES TO THE PRELIMINARY ANNOUNCEMENTFor the period from 16 February 2004 to 31 December 2004 1. Basis of preparation The preliminary results of the group set out in this preliminary announcement donot constitute statutory accounts as defined in Section 240 of the Companies Act1985. The financial information for the period ended 31 December 2004 has beenextracted from the group's statutory financial statements to that date, uponwhich the auditor's opinion is unqualified and does not include any statementunder Section 237 of the Companies Act 1985. The statutory financial statementshave not yet been filed with the Registrar of Companies. 2. Principal accounting policies The group's statutory financial statements for the period ended 31 December 2004are the first it has prepared, andThe principal accounting policies applied are set out below. Accounting policiesThe financial statements are prepared in accordance with applicable UnitedKingdom accounting standards. Accounting conventionThe financial statements are prepared under the historical cost convention asmodified by the revaluation of investment properties. Basis of consolidationThe consolidated financial statements incorporate the financial statements ofReal Estate Investors Plc and its subsidiaries for the period ended 31 December2004. Subsidiaries have been consolidated under the acquisition method ofaccounting and the results of companies acquired are included from the date ofacquisition. GoodwillGoodwill on consolidation represents the excess of the purchase considerationover the fair value of net assets acquired, and is amortised to the profit andloss account over 20 years or its useful economic life, whichever is theshorter. Negative goodwillNegative goodwill represents the excess of the fair value of net assets acquiredover the purchase consideration, and is credited to the profit and loss accountin the periods in which the acquired non-monetary assets are recovered throughdepreciation or sale. TurnoverTurnover, which excludes value added tax, comprises rental income which isrecognised evenly over the term of the lease to which it relates and theproceeds from the sale of trading properties. Investment propertiesThe groups properties are held for long term investment and are included in thebalance sheet on the basis of market value in accordance with SSAP 19. Thesurpluses or deficits on annual revaluations of such properties are transferredto the revaluation reserve. Depreciation is not provided in respect of freeholdinvestment properties. Leasehold investment properties are not amortised wherethe unexpired term is over 20 years. This policy represents a departure from statutory accounting principles, whichrequire depreciation to be provided on all fixed assets. The directors considerthis policy is necessary in order that the financial statements give a true andfair view, because current values and changes in current values are of primeimportance rather than the calculation of systematic annual depreciation.Depreciation is only one of many factors reflected in the annual valuation andthe amount, which might otherwise be shown, cannot be separately identified orquantified. DepreciationDepreciation is calculated to write down the cost to residual value of alltangible fixed assets, excluding investment properties, by equal annualinstalments over their expected useful economic lives over the followingperiods: Leasehold improvements - length of leaseOffice equipment - four years InvestmentsInvestments in subsidiary undertakings are recorded at cost less provision forimpairment. Properties held for tradingProperties held for trading are included in the balance sheet at the lower ofcost and net realisable value or, in the case of subsidiaries acquired, the fairvalue of the properties at the date of acquisition. Financing costsThe costs of arranging finance for the group are written off to profit and lossaccount over the terms of the associated finance. Operating leasesAnnual rentals under operating leases are charged to the profit and loss accountas incurred. Deferred taxDeferred tax is recognised on all timing differences where the transactions orevents give the group an obligation to pay more tax in the future, or a right topay less tax in the future, have occurred by the balance sheet date. Deferredtax assets are recognised when it is more likely than not that they will berecovered. Deferred tax is measured using the rates of tax that have beenenacted or substantially enacted by the balance sheet date. Deferred tax is measured on a undiscounted basis at the tax rates that areexpected to apply in the periods in which timing differences reverse, based ontax rates and laws enacted or substantially enacted at the balance sheet date. Unprovided deferred taxation will crystallise on the sale of assets at theirbalance sheet value. 3. Loss per share The calculation of loss per share is based on the loss retained for theperiod of £67,000 and on 18,927,814 ordinary shares of 1p each which is theweighted average number of shares in issue during the period ended 31 December2004 4. Intangible fixed assets Goodwill on consolidation Negative goodwill Total £000 £000 £000GroupCostAdditions 152 (906) (754)At 31 December 2004 152 (906) (754) ---- ----- -----AmortisationProvided during theyear 4 - 4 ---- ----- -----At 31 December 2004 4 - 4 ---- ----- -----Net book amount at31 December 2004 148 (906) (758) ==== ====== ===== 5. Acquisitions a) On 10 June 2004, on flotation, the company acquired the whole issued sharecapital of Eurocity (Crawley) Limited. The results of Eurocity (Crawley) Limited prior to the acquisition were asfollows: Period from 1 January to 10 June 2004 £000 Turnover 134Administration expenses (3) ----- Operating profit 131Net interest payable (57) -----Profit on ordinary activities beforetaxation 74Taxation (24) -----Profit for the financial period aftertaxation 50 ===== The acquisition of Eurocity (Crawley) Limited has been accounted for by theacquisition method of accounting. The following table sets out theadjustments made to the book value of assets and liabilities acquired toarrive at fair values included in the consolidated financial statements atthe date of acquisition. Book value Revaluation Fair value £000 £000 £000 Investment property 3,000 100 3,100Creditors (716) - (716)Corporation tax (43) - (43)Borrowings (1,717) (1,717) ------- ------ ------- 524 100 624Goodwill ======= ====== 128 ------- 752 ======= Satisfied by:Cash 102Issue of shares 325Unsecured convertible loan notes 325 ------- 752 ======= The fair value adjustment relates to the revaluation of the investment propertyto open market value. The subsidiary undertaking acquired during the period made the followingcontribution to group cash flow: 2004 £000 Net cash inflow from operating activities 92Tax (20)Financing activities (72) ------Increase in cash - ====== Analysis of net outflow of cash in respect of the purchase of the subsidiaryundertaking: 2004 £000 Cash consideration (102) ====== b) On 10 June 2004, on flotation, the company acquired the whole issued sharecapital of Boothmanor Limited. The results of Boothmanor Limited prior to the acquisition were as follows: Period from 1 February to 10 June 2004 £000 Turnover 23Administration expenses (9) ----Operating profit 14Net interest payable (21) ----Profit on ordinary activities beforetaxation (7)Taxation - ----Profit for the financial period aftertaxation (7) ==== The acquisition of Boothmanor Limited has been accounted for by the acquisitionmethod of accounting. The following table sets out the book value of assets andliabilities acquired, which are also the fair values included in theconsolidated financial statements at the date of acquisition. Book value and fair value £000 Investment property 1,100Debtors 2Cash at bank and in hand 12Creditors (215)Borrowings (807) ------ 92Goodwill 24 ------ 116 ====== Satisfied by:Cash 116 ====== The subsidiary undertaking acquired during the period made the followingcontribution to group cash flow. 2004 £000 Net cash inflow from operating activities 28Financing activities (7) ----Increase in cash 21 ==== Analysis of net outflow of cash in respect of the purchase of the subsidiaryundertaking: 2004 £000 Cash at bank and in hand acquired 12Cash consideration (116) ----- (104) ===== c) The acquisition of 3147398 Limited was the subject of a conditional contractscheduled to be completed on 23 December 2004, on which date funds were drawndown for the completion and all conditions satisfied, save only that one item ofbanking documentation relating to the discharge of security could not be madeavailable before Christmas. The directors consider that control of 3147398Limited had effectively passed to Real Estate Investors Plc prior to 31 December2004, and the consolidated financial statements have therefore been drawn up toinclude the assets and liabilities of 3147398 Limited, as at 31 December 2004.This has no effect on the consolidated profit and loss account. On completion on 5 January 2005 the existing bank loans of 3147398 Limited,amounting to £6,102,000, were repaid and replaced by a new facility of£7,600,000 of which £7,200,000 was made immediately available to the group. Thefacility is repayable by instalments over a period of 25 years at a fixedinterest rate of 6.04%. At the same time payments of approximately £2,150,000were made to the vendor in connection with the completion of the transaction,which have not been reflected in these accounts. The effect of these was toreduce the group's cash balances from £2,028,000 to £967,000. The company hasincluded the assets and liabilities of 3147398 Limited as at the 31 December2004 in its consolidated financial statements although legal completion of theacquisition took place on 5 January 2005. The results of 3147398 Limited prior to 31 December 2004 were as follows: Period from 1 October to 31 December 2004 £'000 Turnover 1,667Cost of sales (1,352) -------Gross profit 315Administration expenses (52) -------Operating profit 263Net interest payable (98) -------Profit on ordinary activitiesbefore taxation 165Taxation (58) -------Profit for the financial periodafter taxation 107 ======= The acquisition of 3147398 Limited has been accounted for by the acquisitionmethod of accounting. The following table sets out the adjustments made to thebook value of assets and liabilities acquired, to arrive at fair values includedin the consolidated financial statements at the date of acquisition: Book value Revaluation Fair value £000 £000 £000 Properties held for trading 5,863 3,792 9,655Debtors 170 - 170Cash at bank 752 - 752Creditors (110) - (110)Corporation tax (163) - (163)Borrowings (6,102) - (6,102) ------- ------ ------- 410 3,792 4,202 ======= ======Negative goodwill (906) ------- 3,296 ======= Satisfied by:Deferred consideration 2,696Issue of shares 600 ------ 3,296 ====== The fair value adjustments relate to the revaluation of the properties held fortrading to open market value. The subsidiary undertaking acquired during the period made no contribution togroup cash flow. Analysis of net inflow of cash in respect of the purchase of the subsidiaryundertaking: 2004 £000 Cash at bank 752 ===== On 5 January 2005, the cash consideration to be paid in relation to thisacquisition was made. On 7 January 2005, 5,853,658 ordinary shares of 1p each were issued for £600,000as part consideration for the acquisition of 3147398 Limited. 6. Financial instruments Maturity of financial liabilities The group financial liabilities analysis at 31 December 2004 was as follows: Group Company 2004 2004 £000 £000 In less than one yearBank borrowings 6,272 24In more than one year but less than two yearsBank borrowings 176 26In more than two years but less than five yearsBank borrowings 557 89In more than five yearsBank borrowings 2,956 881 ----- ----- 9,961 1,020 Deferred arrangement costs (61) (18) ----- ----- 9,900 1,002 ===== ===== Borrowing facilities The group has no undrawn committed borrowing facilities at 31 December 2004. At 31 December 2004 the group had, subject to final release, secured refinancingin relation to the acquisition of 3147398 Limited (note 5). 7. Share capital Number of £000 sharesAuthorised:Ordinary shares of 1p each 1,000,000,000 10,000 ============= ======Allotted, called up and fully paidOrdinary shares of 1p each 31,984,615 320 ============= ====== On 16 February 2004, 2 ordinary shares of £1 each were issued for £2 in cash. On 17 March 2004, 49,998 ordinary shares of £1 each were issued for £49,998 incash. On 4 June 2004 each issued £1 ordinary shares was subdivided into 10 ordinaryshares of 1p each and one deferred share of 90p. The deferred shares wereredeemed for 1p in the aggregate. On 10 June 2004, 22,650,000 ordinary shares of 1p each were issued for£2,265,000 in cash and 3,250,000 ordinary shares of 1p each were issued for£325,000 as part consideration for the acquisition of the share capital ofEurocity (Crawley) Limited. On 31 August 2004, 4,200,000 ordinary shares of 1p each were issued for £504,000in cash. On 28 October 2004, 1,384,615 ordinary shares of 1p each were issued for£180,000 as part consideration for the acquisition of Unit 1, Coventry. The excess of the total consideration of shares issued of £3,279,000 over thenominal value of £320,000 has been credited to the share premium account. 8. Post balance sheet events On 9 March 2005, the Company completed the acquisition of a freehold property inHemel Hempstead, Hertfordshire, for a consideration of £1,085,000, satisfied asto £900,000 in cash and £185,000 by the issue of 1,450,980 ordinary shares of1p. On 27 April 2005, the Company's subsidiary Boothmanor Limited exchangedconditional contracts to dispose of a leasehold property in London, SW11, for aconsideration of £1,190,000 payable in cash on completion. On 27 May 2005, the Company completed the acquisition of five freeholdproperties in Wakefield, Devon, Manchester, Portsmouth and Newport, South Wales,for a consideration of £3,499,320, satisfied as to £3,284,388 in cash and£214,932 by the issue of 1,999,367 ordinary shares of 1p. 9. Copies of announcement Copies of this announcement are available from the Company's business premisesat REI House, Bury Lane, Rickmansworth, Hertfordshire WD3 1ED. This information is provided by RNS The company news service from the London Stock Exchange