Interim Results

24th September 2008
RNS Number : 1430E
Real Estate Investors PLC
24 September 2008
 

Real Estate Investors PLC 

(“REI” or “the Company”)

Interim Results for six months ended 30 June 2008

Real Estate Investors PLC (AIM: RLE), the AIM listed property group, announces its results for the six months ended 30 June 2008.

Highlights to date:

  • Balance Sheet cash at 30 June 2008 of £22 million (2006: £11 million)

  • Portfolio valuation plus inventories of £49 million (increase of £6 million)

  • Profit before tax for the period of £663,000

  • Net assets at 30 June 2008 of £35.8 million

  • £2.4 million acquisition of Bridge StreetWalsall

  • £4 million purchase of York House, Birmingham city centre (post 30 June 2008)

  • Lettings to Adroit Construction, United Business Centres, Vantis PLC and Cafe Nero, plus additional upward rent reviews and lease renewals (post June 2008) of approximately £200,000p.a

For further information please contact:

Enquiries:

Real Estate Investors plc                                                           +44 (0)121 524 1174

Paul Bassi

Smith & Williamson Corporate Finance Limited                       +44 (0)20 7131 4000

Azhic Basirov / Siobhan Sergeant

Notes to Editors

  • REI is an AIM listed property investment and development company specialising in commercial property throughout the Midlands and Central England

  • REI is focused on delivering shareholder value through returns generated from strong yields and capital enhancements. This is achieved by targeting investments in orphaned, distressed, part-let and underperforming commercial property assets

  • REI’s Board is led by respected property investor Paul Bassi, who has over 23 years of property experience. Mr Bassi is also co-founder and chairman of Bond Wolfe Auctioneers and deputy chairman of Bigwood Chartered Surveyors – the combined businesses place them in the UK‘s top 50 property auction houses and estate agents  

  • REI was admitted to trading on AIM in June 2004. In December 2006, REI successfully raised £25 million to aggressively grow its property portfolio, at that time, estimated to be worth approximately £28 million. Paul Bassi is the largest shareholder in the Company

  • Further information on REI can be found at www. reiplc.com

  

CHIEF EXECUTIVE’S STATEMENT

We continue to have a robust business model that is able to capitalise on the property and financial market turmoil. We are beginning to see the benefits of our strategy of acquiring property to which we can add value through asset management, thus benefitting from increased rental income and enhanced capital values, and this should be reflected in our results over the next 12 months. We anticipate the next 12-18 month period as an ideal environment in which to significantly grow the group.  

Our cash deposits continue to attract premium interest rates and these will only be employed where we see real value, and quality investment opportunities. We still have significant funding in place with our funders, with the ability to establish a £150 million portfolio over the next few years.

Strategy

Our strategy is to capitalise on market opportunities within our specific geographic focus, where we can secure attractive yields and capital growth via constructive asset management. We do not rely upon yield compression or inflation to secure capital growth, and this strategy continues to serve us well.  

West Midlands Investments

We continue to concentrate on the West Midlands region and to benefit from our extensive network and association with Bond Wolfe and Bigwood Chartered Surveyors. These relationships provide first hand insight into the property climate and market conditions.

We previously stated that we would monitor market conditions and we have done precisely that, choosing to concentrate on speeding up our refurbishment programme and on achieving new lettings rather than significant new acquisitions. Refurbishments at Colmore Row and Bennetts Hill are now complete and Waterloo Street will be complete before the year end. I am pleased to announce new lettings to Adroit Construction, Cafe Nero, United Business Centres and Vantis PLC, together with successful rent reviews and lease renewals.  The benefits from these lettings are five fold:

  • an increase in rental income

  • an increase in capital value

  • service charge recovery

  • insurance charge recovery

  • covering the vacant non-domestic rates liability, which amounted to £116,000 paid in first 6 months 

All these factors should contribute further to our earnings, and will be reflected in our results over the next 12 months, providing significant support to our portfolio valuation even if on a macro basis, property values and market sentiment deteriorate further mitigating further falls in property values.

Occupier demand within our markets remains strong and additionally, as a result of the slowing down in property development due, principally, to lack of funding, occupiers are turning to existing property and we anticipate being beneficiaries of this occupier demand.

Historical Portfolio

Our historical and prudently valued portfolio, predominantly small retail investment lot sizes, inherited from the previous management team, continues to perform well. We have revised the valuations on these properties downwards by £900,000 to reflect current market values. However, I continue to believe that we could readily find purchasers for these properties at or above our book valuations, as achieved with our recent disposals, and evidenced in the London auction houses. However, it is not necessary or prudent to sell these until further asset management and market recovery takes place, allowing us to fully benefit from their values. The majority are let on long leases, to strong tenants on attractive debt terms.

 

Since 30 June 2008, we have sold 22 Cornfield Road, in Eastbourne, for the sum of £682,000 and have acquired York House, Great Charles StreetBirmingham city centre, for the sum of £4 million in cash.

Outlook & Prospects

With our geographic focus, I remain positive about occupier market, our prospects and our ability to capitalise on the market turmoil. We are in legals on a number of further lettings and I and anticipate increased acquisition activity over the next 12 months. We have a number of acquisitions currently under consideration from distressed sellers, corporate/institutional vendors, as well as the principal banks who are restructuring their loan books, and I believe we are in a strong negotiating position and will only be making such acquisitions on our terms. 

The turmoil in the property markets is an ideal marketplace in which to grow prudently Real Estate Investors PLC. We will continue to acquire quality property throughout the West Midlands providing attractive yields and significant capital growth potential.

My confidence and commitment to Real Estate Investors PLC is demonstrated by the increase in my shareholding to 22.13%. All of my shareholding has been acquired at a significant premium to the current market value and I look forward to increasing my shareholding when the opportunity arises.

It is a pleasure to write to you on such positive terms, particularly against a background economic environment that has its challenges.

Paul Bassi

Chief Executive

24 September 2008

  

CONSOLIDATED INCOME STATEMENT

 

 

 

for the 6 months ended 30 June 2008

 

 

 

 

 

 

Six months to

Six months to

Year ended

 

30 June 2008

30 June 2007

31 December 2007

 

(Unaudited)

(Unaudited)

 

 

£’000

£’000

£’000

 

 

 

 

Revenue

1,066 

833 

3,160 

 

 

 

 

Cost of sales

(154)

(1,113)

 

 

 

 

Gross profit

912 

833 

2,047 

 

 

 

 

Administrative expenses

(441)

(337)

(967)

Surplus on disposal of investment property 

171 

Share of operating profit of joint venture

37 

Net valuation gains

629 

2,356 

807 

 

 

 

 

Profit on ordinary activities before interest

1,101 

2,889 

2,063 

 

 

 

 

Finance income

561 

550 

768 

Finance costs

(999)

(553)

(1,054)

 

 

 

 

Profit on ordinary activities before taxation

 663

2,886 

1,777

 

 

 

 

Income tax expense

(176)

(846)

(548)

 

 

 

 

Retained profit for the year

487 

2,040 

1,229 

 

 

 

 

Basic earnings per share

0.14p

0.60p

0.36p

Diluted earnings per share

0.13p

0.57p

0.34p

  

CONSOLIDATED BALANCE SHEET

 

 

 

 

for the 6 months ended 30 June 2008

 

 

 

 

 

 

 

 

 

 

Share

Share

Capital

Other

Retained

Total

 

capital

premium

redemption

reserves

earnings

 

 

 

account

reserve

 

 

 

 

£’000

£’000

£’000

£’000

£’000

£’000

 

 

 

 

 

 

 

At 31 December 2006

3,407 

29,472 

45 

121 

1,012 

34,057 

 

 

 

 

 

 

 

Net profit for the period and total recognised income and expense for the period

2,040 

2,040 

 

 

At 30 June 2007

3,407 

29,472 

45 

121 

3,052 

36,097 

 

 

 

 

 

 

 

Net loss for the period and total recognised income and expense for the period

(811)

(811)

 

 

At 31 December 2007

3,407 

29,472 

45 

121 

2,241 

35,286 

 

 

 

 

 

 

 

Net profit for the period and total recognised income and expense for the period

487 

487 

 

 

 

 

 

 

 

At 30 June 2008

3,407 

29,472 

45 

121 

2,728 

35,773 

 

 

 

 

 

 

 

  

CONSOLIDATED BALANCE SHEET

 

as at 30 June 2008

 

 

 

30 June 2008

30 June 2007

31 December 2007

 

(Unaudited)

(Unaudited)

 

 

£’000

£’000

£’000

 

 

 

 

Assets

 

 

 

Non current asset

 

 

Investment property

40,399 

33,443 

36,661 

Property, plant and equipment

25 

50 

39 

Goodwill

172 

172 

171 

Investment in joint venture

328 

330 

328 

 

 

40,924 

33,995 

37,199 

 

 

 

 

Current assets

 

 

Inventories

8,603 

9,703 

8,603 

Trade and other receivables

888 

396 

1,177 

Investments

470 

444 

489 

Cash at bank

21,619 

10,480 

4,866 

 

 

 

 

 

31,580 

21,023 

15,135 

 

 

 

 

Total assets

72,504 

55,018 

52,334 

 

 

 

 

Liabilities

 

 

Current liabilities

 

 

 

Bank loans

437 

370 

437 

Provision for current taxation

307 

319 

Trade and other payables

979 

996 

1,295 

 

 

 

 

 

1,723 

1,366 

2,051 

 

 

 

 

Non-current liabilities

 

 

 

Bank loans

34,162 

16,354 

14,327 

Convertible debt

325 

325 

325 

Deferred tax liabilities

521 

876 

345 

 

 

 

 

 

35,008 

17,555 

14,997 

 

 

Total liabilities

36,731 

18,921 

17,048 

 

 

 

 

Net assets

35,773 

36,097 

35,286 

 

 

 

 

Equity

 

 

 

Share capital

3,407 

3,407 

3,407 

Share premium account

29,472 

29,472 

29,472 

Capital redemption reserve

45 

45 

45 

Other reserves

121 

121 

121 

Profit and loss account

2,728 

3,052 

2,241 

Shareholders’ funds

35,773 

36,097 

35,286 

  

CONSOLIDATED CASHFLOW STATEMENT

for the 6 months ended 30 June 2008

 

 

Six months to

Six months to

Year ended

 

30 June 2008

30 June 2007

31 December 2007

 

(Unaudited)

(Unaudited)

 

 

£’000

£’000

£’000

 

 

 

 

Cashflows from operating activities

 

Profit/(loss) after taxation

487 

2,040 

1,229 

 

 

 

 

Adjustments for:

 

 

Depreciation

13

11

26

Net valuation gains

(629)

(2,356)

(807)

Surplus on sale of investment property

(171)

Share of profit of joint venture

(1)

(37)

(5)

Finance income

(561)

(550)

(768)

Finance costs

999 

553 

1,054 

Taxation expense/(credit) recognised in profit and loss

176 

846 

548 

Decrease in inventories

1,100

Decrease/(Increase) in trade and other receivables

289

92

(756)

(Decrease)/increase in trade and other payables

(316)

77

526

Decrease/(increase) in held to maturity investments

19

11

(54)

 

 

 

476

687

1,922

 

 

 

 

Interest paid

(999)

(553)

(1,054)

Income taxes paid

(12)

(13)

(11)

 

 

 

 

Net cash from operating activities

(535)

121

857

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Purchase of investment properties

(3,109)

(16,900)

(23,067)

Purchase of property, plant and equipment

(4)

Proceeds from sale of investment property

1,571

Investment in joint venture

31

1

Interest received

561 

550

771

 

 

 

 

 

(2,548)

(16,319)

(20,728)

 

 

 

 

Cash flow from financing activities

 

 

 

 

 

New bank loan raised

20,000

Payment of bank loans

(165)

(191)

(2,151)

Payment of finance lease liability

(1)

 

 

 

 

 

19,835

(191)

(2,152)

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

16,752

(16,389)

(22,023)

 

 

 

 

Cash and cash equivalents at beginning of period

4,866

26,869

26,889

 

 

 

 

Cash and cash equivalents at end of period

21,619

10,480

4,866

NOTES TO THE INTERIM REPORT

for the 6 months ended 30 June 2008

  • BASIS OF PREPARATION

Real Estate Investors PLC, a Public Limited Company, is incorporated and domiciled in the United Kingdom.

The interim financial statements for the period ended 30 June 2008 (including the comparatives for the year ended  31 December 2007 and the period ended 30 June 2007) were approved by the board of directors on 24 September 2008.  Under the Security Regulations Act of the EU, amendments to the financial statements are not permitted after they have been approved.

It should be noted that accounting estimates and assumptions are used in preparation of the interim financial information. Although these estimates are based on management’s best knowledge and judgement of current events and action, actual results may ultimately differ from these estimates. The areas involving a higher degree of judgement or compexity, or areas where assumptions and estimates are significant to the interim financial information are set out in note 3 to the interim financial information.

The interim financial information contained within this report does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The full acounts for the year ended 31 December 2007 received an unqualified report from the auditors and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985.

2.     ACCOUNTING POLICIES

The interim financial report has been prepared under the historical cost convention.  

The principal accounting policies and methods of computation adopted to prepare the interim financial information are consistent with those detailed in the 2007 financial statements published by the Company on 30 April 2008.

3.     CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Critical accounting estimates and assumptions

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of asets and liabilities within the next accounting year are as follows:

Investment property revaluation

The Group uses the the valuations performed by its independent valuers or the directors as the fair value of its investment properties. The valuation is based upon assumptions including future rental income, anticipated maintenace costs, anticipated purchaser costs and the appropriate discount rate. The valuer and the directors also make reference to market evidence of transaction prices for similar properties.

4    SEGMENTAL REPORTING

Primary reporting – business segment

The only material business that the Group has is that of investment in and trading of commercial properties. Turnover relates entirely to rental income from investment properties and sale of trading properties within the UK.

Secondary reporting format – geographical segment

The only material segment that the Group operates in is the UK.

5    INVESTMENT PROPERTIES

The carrying amount of investment properties for the periods presented in the interim financial information is reconciled as follows:

 

£’000

 

 

Carrying amount at 31 December 2006

14,187

 

 

Additions

16,900

 

 

Revaluation

2,356

 

 

Carrying amount at 30 June 2007

33,443

 

 

Additions

6,168

 

 

Disposals

(1,400)

 

 

Revaluation

(1,550)

 

 

Carrying amount at 31 December 2007

36,661

 

 

Additions

3,109

 

 

Revaluation

629

 

 

Carrying amount at 30 June 2008

40,399

6    EARNINGS PER SHARE

The calculation of the earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period. The calculation of the diluted earnings per share is based on the basic earnings per share adjusted to allow for all dilutive potential ordinary shares.

Earnings per share have been calculated on the profit for the period of £487,000 (31 December 2007 £1,229,000 and 30 June 2007 £2,040,000) and on 340,714,327 ordinary shares, being the weighted average number of shares in issue during the period.

The diluted earnings per share has been calculated on a profit for the period of £487,000 (31 December 2007 £1,229,000 and 30 June 2007 £2,040,000) and on 363,693,372 ordinary shares, to inlude the effect on the ordinary shares of the conversion of the convertible loan notes and the exercise of the share warrants.

This information is provided by RNS
The company news service from the London Stock Exchange
 

END

 
 

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