REI Regulatory News (RLE)

21 Sep 2007 07:01

Real Estate Investors PLC21 September 2007 REAL ESTATE INVESTORS PLC("REI" or "the Company") Interim results for the six months ended 30 June 2007 Real Estate Investors PLC (AIM: RLE), the AIM listed property group, announcesits results for the six months ended 30 June 2007. Highlights: * Portfolio valuation plus inventories £43 million * Six months profit before tax £2.9 million (including revaluation surplus) * Six months profit before tax, excluding revaluation surplus, £530,000 (2006: loss of £267,000) * Net assets at 30 June 2007 up 6% to £36 million * Balance sheet cash at 30 June 2007 of £10.9 million * £4.5 million acquisition of Guardian House, West Bromwich * Purchase for £5.2 million of Bromsgrove office investment and terms agreed for major letting * New acquisitions purchased from cash resources * Refurbishment and new lettings at £6.35 million acquisition in Colmore Row/ Bennett's Hill Birmingham Commenting on the interim results, Peter Lewin, Chairman of REI, stated: "In April, I reported on a year of great progress in REI's activities and I amhappy to say that the Company has since accelerated its activities with severalstrategic acquisitions and disposals. The changing property market that is nowemerging suits REI's strategy. The Company's cash balances, plus its debt freeproperties which are benefiting from rising rental income and capital values,will enable it to take advantage of market opportunities." For further information please contact: Paul Bassi - Chief Executive 0121 524 1174Real Estate Investors PLCwww.reiplc.com Azhic BasirovSiobhan SergeantSmith & Williamson Corporate Finance Limited 020 7131 4000 CHAIRMAN'S STATEMENT Overview In April I reported on a year of great progress in REI's activities and I amhappy to say that the Company has since accelerated its activities with severalstrategic acquisitions and disposals. Confidence in the Company's management,following the £25 million institutional placing in December 2006, has beenfurther enhanced by substantial market purchases of ordinary shares by our chiefexecutive, Paul Bassi, resulting in his shareholding increasing to 17.46%. These16.6 million ordinary shares have been acquired at 11.5p and 12p - a significantpremium to the current market price. We believe that the Company is on course to achieving its objective of buildinga £150 million portfolio and the recent off market purchases have establishedREI as a well respected investor in the West Midlands commercial propertymarkets. Through the close relationship with Bond Wolfe Auctioneers and Bigwood CharteredSurveyors, REI enjoys excellent market intelligence enabling it to act quicklyand complete transactions that it would otherwise have to compete for in thewider market. The strategy of adding value to the portfolio is exemplified by refurbishmentsand subsequent lettings which, together with rent reviews, improve yields andcapital values, contributing to profitability. The financial statements for the six months to 30 June 2007 do not fully reflectthe full benefit of the uplift in potential capital values and rental income,which will not be seen for between 6 to 12 months from acquisition. Weanticipate that the results for the year to 31 December 2007 will betterillustrate the Company's performance. The acquisitions at Colmore Row andBennetts Hill, Birmingham and Avon House, Bromsgrove, for a total considerationof £11.5 million, have achieved new lettings and renewals to Investbx, BigwoodsChartered Surveyors, Select PLC and Weststaff UK. In addition, terms for a majorletting have been agreed at Avon House and further details will follow shortly. The Company has over £10.9 million of cash available to it to fund acquisitions.Since the fundraising in December 2006, all acquisitions have been made from theCompany's cash resources and, at present, there is no intention to refinance.This balance sheet strength places REI in a dominant position to take advantageof opportunities in what is becoming an in increasingly opportunistic market. The Company's gross property assets, excluding inventories, increased in the sixmonths to 30 June 2007 by 135% from £14 million to £33 million, with rentalincome increasing to £1.8 million per annum from £1.4 million per annum. TheCompany's net assets increased 6% to £36 million. Net asset value per share is currently estimated to be 10.6p. International Financial Reporting Standards ("IFRS") In compliance with AIM requirements, REI has adopted IFRS for the first time inthese interim financial statements. The IFRS accounting policies adopted areconsistent with those to be used for the Company's financial statements as at 31December 2007. Please refer to Notes 1 and 2, as well as the note entitled "Transition toIFRS", of the interim consolidated financial statements to understand the keyadjustments implemented to ensure compliance with and transition to IFRS for theCompany's reporting purposes. Trading Operations In June, the Company announced the off market purchase from Warner Estates ofGuardian House, West Bromwich for £4.5 million in cash. Providing 42,000 sq ftof high quality office accommodation, the property is let in its entirety to theSecretary of State and Challinors solicitors. This town centre investment offersrental and capital growth opportunities. On 10 September 2007, the Company announced the disposal of a property inSouthend, from its trading portfolio, together with the sale of an investmentproperty in Portsmouth. The total sale consideration represents a surplus of£260,000 over the December 2006 valuation. Following debt repayment, the Companyhas received net cash proceeds of over £1 million, which will be utilised in itsproperty acquisition programme. Prospects The changing property market that is now emerging suits REI's strategy. TheCompany's cash balances, plus its debt free properties which are benefiting fromrising rental income and capital values, will enable it to take advantage ofmarket opportunities. The transfer of the head office to West Bromwich has gone smoothly. TheCompany's website (www.reiplc.com) provides updated information on itsactivities and the share price. It is a pleasure for me to write to you in such positive terms and I lookforward to communicating with you again shortly. Peter LewinChairman21 September 2007 CONSOLIDATED INTERIM INCOME STATEMENTfor the six months ended 30 June 2007 Six months to Six months to Year ended Note 30 June 2007 30 June 2006 31 December 2006 (Unaudited) (Unaudited) (Unaudited) £'000 £'000 £'000 Revenue 833 646 1,425 Administrative expenses (337) (245) (588)Director's bonus andcompensation payments (160) (160)Transfer re share warrants - (121) (121)Surplus on disposal ofinvestment property - 45 45Share of profit of joint venture 37 18 57Net valuation gains/(deficits) 2,356 - (142)Finance costs (553) (470) (1,030)Interest income 550 20 90 ---------- ---------- ------------ Profit/(loss) before tax 2,886 (267) (424) Income tax expense (846) - 90 ---------- ---------- ------------Net profit/(loss) forthe period 2,040 (267) (334) ========== ========== ============ Basic earnings/(loss)per share 4 0.60p (0.50p) (0.40p) ---------- ---------- ------------ Diluted earnings/(loss) per share 4 0.57p (0.50p) (0.40p) ---------- ---------- ------------ CONSOLIDATED INTERIM BALANCE SHEETas at 30 June 2007 30 June 2007 30 June 2006 31 December 2006 (Unaudited) (Unaudited) (Unaudited) £'000 £'000 £'000 AssetsNon current assetsInvestment property 33,443 10,877 14,187Property, plant and equipment 50 73 61Goodwill 172 117 171Investment in joint venture 330 207 324 ----------- ---------- ------------- 33,995 11,274 14,743 ----------- ---------- -------------Current assetsInventories 9,703 9,703 9,703Trade and other receivables 396 701 488Cash and cash equivalents 10,924 2,998 27,324 ----------- ---------- ------------- 21,023 13,402 37,515 ----------- ---------- -------------Total assets 55,018 24,676 52,258 =========== ========== =============LiabilitiesCurrent liabilitiesShort term borrowings 370 370 370Trade and other payables 996 809 792 ----------- ---------- ------------- 1,366 1,179 1,162 ----------- ---------- -------------Non-current liabilities Long term borrowings 16,354 14,326 16,545Convertible debt 325 325 325Deferred tax liabilities 876 212 169 ----------- ---------- ------------- 17,555 14,863 17,039 ----------- ---------- -------------Total liabilities 18,921 16,042 18,201 =========== ========== ============= Net assets 36,097 8,634 34,057 =========== ========== =============EquityIssued capital 3,407 765 3,407Share premium account 29,472 6,624 29,472Capital redemption reserve 45 45 45Other reserves 121 121 121Profit and loss account 3,052 1,079 1,012 ----------- ---------- -------------Total equity 36,097 8,634 34,057 =========== ========== ============= STATEMENT OF CHANGES IN EQUITY 30 June 2007 30 June 2006 31 December 2006 (Unaudited) (Unaudited) (Unaudited) £'000 £'000 £'000 Opening equity 34,057 6,500 6,500Profit/(loss) for the period 2,040 (267) (334)Share issue - 2,280 27,770Transfer re share warrants - 121 121 ----------- ---------- --------------Closing equity 36,097 8,634 34,057 =========== ========== ============== CONSOLIDATED CASH FLOW STATEMENTfor the six months ended 30 June 2007 Six months to Six months to Year ended 30 June 2007 30 June 2006 31 December 2006 (Unaudited) (Unaudited) (Unaudited) £'000 £'000 £'000Cash flows from operating activitiesProfit after taxation 2,040 (267) (334) Adjustments for:Depreciation 11 13 25Net valuation (gains)/deficits (2,356) - 142Surplus on sale of investmentproperty - (45) (45)Share of profit of joint venture (37) (18) (57)Interest income (550) (20) (90)Finance costs 553 470 1,030Taxation expense recognisedin profit and loss 846 - (90)Transfer re share warrants - 121 121Decrease/(increase) in tradeand other receivables 92 12 (69)Increase/(decrease) in tradeand other payables 77 96 (105) ---------- ---------- ----------Cash generated from operations 676 362 528Interest paid (553) (470) (1,030)Income taxes paid (13) - - ---------- ---------- -----------Net cash from operating activities 110 (108) (502) ---------- ---------- ----------- Cash flows from investing activitiesAcquisition of subsidiariesnet of cash acquired - - (566)Purchase of investment properties (16,900) (1,053) (2,011)Proceeds from sale of investment property - - 456Investment in joint venture 31 (199) (224)Interest received 550 20 90 ---------- ---------- ----------Net cash used in investingactivities (16,319) (1,232) (2,255) ---------- ---------- ----------Cash flows from financing activitiesProceeds from issue of share capital - 2,112 26,769Proceeds from long term borrowing - 825 1,752Payment of long term borrowing (191) (944) (784)Payment of finance lease liability (2) (3) ---------- ---------- ----------Net cash used in financingactivities (191) 1,991 27,734 ---------- ---------- ----------Net (decrease)/increase incash and cash equivalents (16,400) 651 24,977Cash and cash equivalents atbeginning of period 27,324 2,347 2,347 ---------- ---------- ----------Cash and cash equivalents atend of period 10,924 2,998 27,324 ========== ========== ========== NOTES TO THE CONSOLIDATED STATEMENTS 1. Basis of preparation These interim consolidated financial statements are for the six months ended 30June 2007. They have been prepared in accordance International FinancialReporting Standards (IFRS), as adopted by the European Union, and therequirements of IFRS 1 First-time Adoption of International Financial ReportingStandards relevant to interim reports, because they are part of the periodcovered by the group's first IFRS financial statements for the year ending 31December 2007. They do not include all of the information required for full annual financialstatements, and should be read in conjunction with the consolidated financialstatements of the group for the year ended 31 December 2006. These financial statements have been prepared under the historical costconvention, except for revaluation of investment properties. 2. Principal differences between IFRS and UK GAAP: The principal differences between IFRS and UK GAAP applicable to the Group'sfinancial statements are: i) under UK GAAP gains on revaluation of investment properties are included as arevaluation reserve. Under IFRS these gains are taken to the Income Statement. ii) under UK GAAP deferred tax on the revaluation gains of investment propertiesare disclosed as a note to the accounts. Under IFRS the tax on these revaluationgains are included in the Income Statement. iii) under UK GAAP negative goodwill is carried in the Balance Sheet. Under IFRSthe excess of assets acquired over the fair value of consideration paid isrecognised in the Income Statement. iv) under UK GAAP goodwill is amortised but under IFRS it is tested annually forimpairment. 3. Summary of significant accounting policies The principal accounting policies intended to be adopted for the financialstatements for the year ending 31 December 2007 are set out below. i) Basis of preparation The consolidated financial information has been prepared under the historicalcost convention, as modified by the revaluation of investment properties. ii) Basis of consolidation The consolidated financial statements include the financial statements of theCompany and its subsidiaries. The results of the subsidiaries are included fromthe effective date of acquisition. Business combinations are accounted under thepurchase method. Any excess of the purchase price of business combinations overthe fair value of the assets and liabilities acquired and the resulting deferredtax thereon is recognised as goodwill. Any discount received is credited to theIncome Statement in the period of acquisition. Joint ventures are accounted for under the equity method of accounting. iii) Goodwill Goodwill arising on consolidation represents the excess of the cost ofacquisition over the fair value of the assets and liabilities acquired. Goodwillis recognised as an asset and reviewed for impairment annually. iv) Revenue Rental income is recognised on a straight line basis over the term of the lease.Where the group provides lease incentives to its tenants the cost of theincentives are recognised over the lease term on a straight line basis as areduction in income. Revenue for the sale of assets is recognised when the significant risks andreturns have been transferred to the buyer. In the case of the sale ofinvestment properties this is generally taken on completion. v) Investment property Investment property is held at fair value based on a professional valuation.Changes in the fair value of investment property are recognised in the IncomeStatement. vi) Inventories Properties held for trading are stated at the lower of cost and net realisablevalue. vii) Taxation The tax expense represents the sum of the tax currently arising and deferred taxfor the period. The tax currently payable is based on the taxable profit for the period. Deferred tax is provided in full, using the liability method, on all temporarydifferences arising between the tax bases of assets and liabilities and theircarrying amounts in the consolidated financial statements. Deferred tax isprovided in full on the difference between the original cost of investmentproperties and their carrying amount at the reporting date. A deferred tax assetis regarded as recoverable and therefore recognised only when, on the basis ofall available evidence, it can be regarded as more likely than not that therewill be suitable taxable profits from which the future reversal of theunderlying temporary differences can be deducted. 4. Earnings per share Earnings per share have been calculated on the profit for the period of£2,040,000 (31 December 2006: loss £334,000 and 30 June 2006: loss £267,000) andon 340,714,327 (31 December 2006: 82,085,371 and 30 June 2006: 53,204,277)ordinary shares, being the weighted average number of shares in issue during theperiod. The diluted earnings per share has been calculated on a profit for the period of£2,040,000 and on 359,056,372 ordinary shares (to include the effect of2,954,545 ordinary shares on the conversion of the convertible loan notes and15,387,500 ordinary shares on the exercise of the share warrants). Theconversion of the convertible loan notes and the exercise of the share warrantswould not be dilutive to the loss per share for 2006. TRANSITION TO IFRS Reconciliation of profitCONSOLIDATED INTERIM INCOME STATEMENTfor the year ended 31 DECEMBER 2006 Year ended 31 December 2006 (Unaudited) UK GAAP Effect of transition to IFRS IFRS Goodwill Revaluation of amortisation investment property (Note a) (Note b) £'000 £'000 £'000 £'000 Revenue 1,425 - - 1,425Administrative expenses (594) 6 - (588)Director's bonus andcompensation payments (160) (160)Transfer re share warrants (121) (121)Surplus on disposal ofinvestment property 45 - - 45Share of profit of jointventure 57 - - 57Net valuation gains/(deficits) (272) - 130 (142)Finance costs (1,030) - - (1,030)Interest income 90 - - 90 ------- --------- ------------- -------Profit before tax (560) 6 130 (424)Income tax expense 47 - 43 90 ------- --------- ------------- -------Net profit for the period (513) 6 173 (334) ======= ========= ============= ======= Reconciliation of profitCONSOLIDATED INTERIM INCOME STATEMENTfor the year ended 30 JUNE 2006 Six months to 30 June 2006 (Unaudited) UK GAAP Effect of transition to IFRS IFRS Goodwill Revaluation of amortisation investment property (Note a) (Note b) £'000 £'000 £'000 £'000 Revenue 646 - - 646Administrative expenses (248) 3 - (245)Director's bonus andcompensation payments (160) - - (160)Transfer re share warrants (121) - - (121)Surplus on disposal ofinvestment property 45 - - 45Share of profit of jointventure 18 - - 18Finance costs (470) - - (470)Interest income 20 - - 20 ------- ---------- ------------- -------Profit before tax (270) 3 - (267)Income tax expense - - - - ------- ---------- ------------- -------Net profit for the period (270) 3 - (267) ======= ========== ============= ======= CONSOLIDATED BALANCE SHEETas at 1 JANUARY 2006 As at 1 JANUARY 2006 Note UK GAAP Effect of transition to IFRS IFRS £'000 £'000 £'000AssetsNon current assetsInvestment property 10,130 - 10,130Property, plant andequipment 86 - 86Goodwill a&c (786) 903 117 -------- -------------- -------- 9,430 903 10,333 -------- -------------- --------Current assetsInventories 9,703 - 9,703Trade and other receivables 189 - 189Cash and cashequivalents 2,347 - 2,347 -------- -------------- -------- 12,239 - 12,239 -------- -------------- --------Total assets 21,669 903 22,572 ======== ============== ========LiabilitiesCurrent liabilitiesShort term borrowings 1,127 - 1,127Trade and otherpayables 713 - 713 -------- -------------- -------- 1,840 - 1,840 -------- -------------- --------Non-current liabilitiesLong term borrowings 13,695 - 13,695Convertible debt 325 - 325Deferred taxliabilities b - 212 212 -------- -------------- -------- 14,020 212 14,232 -------- -------------- --------Total liabilities 15,860 212 16,072 ======== ============== ========Net assets 5,809 691 6,500 ======== ============== ======== EquityIssued capital 523 - 523Share premium account 4,586 - 4,586Capital redemptionreserve 45 - 45Revaluation reserve b 708 (708) -Profit and lossaccount a&c (53) 1,399 1,346 -------- -------------- --------Shareholders' funds 5,809 691 6,500 ======== ============== ======== CONSOLIDATED BALANCE SHEETas at 31 DECEMBER 2006 As at 31 December 2006 Note UK GAAP Effect of transition to IFRS IFRS £'000 £'000 £'000AssetsNon current assetsInvestment property 14,187 - 14,187Property, plant andequipment 61 - 61Goodwill a&c (738) 909 171Investment in jointventure 324 324 -------- -------------- -------- 13,834 909 14,743 -------- -------------- --------Current assetsInventories 9,703 - 9,703Trade and otherreceivables 488 - 488Cash and cashequivalents 27,324 - 27,324 -------- -------------- -------- 37,515 - 37,515 -------- -------------- --------Total assets 51,349 909 52,258 ======== ============== ========LiabilitiesCurrent liabilitiesShort term borrowings 370 - 370Trade and otherpayables 792 - 792 ------- -------------- ------- 1,162 - 1,162 ------- -------------- -------Non-current liabilitiesLong term borrowings 16,545 - 16,545Convertible debt 325 - 325Deferred taxliabilities b 169 169 ------- -------------- -------- 16,870 169 17,039 -------- -------------- --------Total liabilities 18,032 169 18,201 ======== ============== ======== Net assets 33,317 740 34,057 ======== ============== ========EquityIssued capital 3,407 - 3,407Share premium account 29,472 - 29,472Capital redemptionreserve 45 - 45Revaluation reserve b 838 (838) -Other reserves 121 - 121Profit and loss account b&c (566) 1,578 1,012 -------- -------------- --------Shareholders' funds 33,317 740 34,057 ======== ============== ======== CONSOLIDATED BALANCE SHEETSas at 30 JUNE 2006 As at 30 June 2006 Note UK GAAP Effect of transition to IFRS IFRS £'000 £'000 £'000AssetsNon current assetsInvestment property 10,877 - 10,877Property, plant andequipment 73 - 73Goodwill a&c (789) 906 117Investment in jointventure 207 207 -------- -------------- -------- 10,368 906 11,274 -------- -------------- --------Current assetsInventories 9,703 - 9,703Trade and otherreceivables 701 - 701Cash and cashequivalents 2,998 - 2,998 -------- -------------- -------- 13,402 - 13,402 -------- -------------- --------Total assets 23,770 906 24,676 ======== ============== ======== LiabilitiesCurrent liabilitiesShort term borrowings 370 - 370Trade and otherpayables 809 - 809 -------- -------------- -------- 1,179 - 1,179 -------- -------------- --------Non-current liabilitiesLong term borrowings 14,326 - 14,326Convertible debt 325 - 325Deferred taxliabilities b - 212 212 -------- -------------- -------- 14,651 212 14,863 -------- -------------- --------Total liabilities 15,830 212 16,042 ======== ============== ======== Net assets 7,940 694 8,634 ======== ============== ======== EquityIssued capital 765 - 765Share premium account 6,624 - 6,624Capital redemptionreserve 45 - 45Revaluation reserve b 708 (708) -Other reserves 121 - 121Profit and loss account b&c (323) 1,402 1,079 -------- -------------- --------Shareholders' funds 7,940 694 8,634 ======== ============== ======== NOTES TO TRANSITION TO IFRS a) Goodwill is no longer amortised and is recognised as an asset and reviewedfor impairment. b) Gains on revaluation of investment property, together with the associateddeferred tax, are taken to the income statement. c) Under UK GAAP negative goodwill is carried in the Balance Sheet. Under IFRSthe excess of assets acquired over the fair value of consideration paid isrecognised in the Income Statement. This information is provided by RNS The company news service from the London Stock Exchange