RNS Number:7943P
International Real Estate Plc
16 September 2003
INTERNATIONAL REAL ESTATE ANNOUNCES
INTERIM RESULTS
International Real Estate Plc, ("IRE" or "the Company"), has today announced its
interim results for the six months to 30 June 2003.
* Profits on ordinary activities before taxation of Euro50,000 (2002: Euro628,000)
* Disposal of 36,288 square metre warehouse and office property in
Aartselaar near Antwerp, Belgium for Euro11.314 million. The addition to
shareholders' funds was Euro446,000 and led to a cash contribution of Euro5.6
million for the Group.
* Net Asset Value at 30 June 2003 of Euro2.60 per share (31 December 2002:
Euro2.62 per share)
* Net Asset Value including unrecognised trading stock value would be Euro3.88
per share before tax (31 December 2002 Euro4.07 per share) or Euro3.43 net of
taxes (31 December 2002: Euro3.56)
* Net borrowings at 30 June 2003 reduced to Euro34.256m (31 December 2002:
Euro43.885m)
* Interim dividend of 3.0 pence (4.4 eurocents) (30 June 2002: 3.0 pence or
4.8 eurocents)
Commenting on the results, Rolf L Nordstrom, Chairman, said:
"We are pleased with the disposal of the Aartselaar property, which has
generated a useful profit and led to the addition of Euro446,000 to shareholder's
funds and a cash contribution of Euro5.6 million.
"The ongoing litigation with Stratford UK Properties LLC ("Oaktree") is
continuing. However, we are encouraged by the positive legal advice received and
the fact that the Company was granted leave to appeal to the House of Lords.
"The outlook for the second half of the year is difficult to project. It will
depend largely on whether the outcome of the Appeal to the House of Lords has
been decided, developments relating to the Basingstoke property and other
property disposals or purchases during the period."
Daniel Akselson, CEO, commented:
"Our major property assets in central Brussels are continuing to perform well
despite the challenging letting market. Encouragingly, recent lettings have been
secured at record levels that continue to improve."
-ends-
Date: 16 September 2003
For further details contact:
International Real Estate Plc City Profile Group
Tel: 00 44 (0) 20 7839 8686 Simon Courtenay
Rolf L Nordstrom, Chairman Tel: 00 44 (0) 20 7448 3244
Mobile: 00 44 (0) 7776 137 400
Daniel Akselson, Chief Executive
Mobile: 00 31 (0)653 30 4590
e-mail:info@IREplc.com
INTERNATIONAL REAL ESTATE PLC
Chairman's Statement
The Interim Report and Accounts to 30 June 2003 reflect the refocused Group with
the majority of its operations now located in Belgium.
Currently the main activity of the Group is related to its two trading
properties in Belgium - the IT Tower and QPT Tower office blocks in Brussels.
The effects of the slowdown in economic activity have been less of a problem for
the Brussels property market, compared to most other European capitals. Whilst
the investment market remains very strong Brussels has had some problems,
especially with the office letting market. During the current period several
property acquisitions were considered and a number are being analysed.
With respect to the IT Tower, the 22,778 square metre landmark office tower
situated on Avenue Louise, our main efforts have been focused on the letting
situation, the rolling refurbishment programme and the investment programme for
the communal areas.
The major parts of the investment programme are finished, in line with previous
plans and budgets.
To date we have been able to secure contracts for 2,660 square metres at rental
levels between Euro180 and Euro190, an improvement on previous levels. The full effect
of these lettings will not be realised until 2004, as a number of agreements are
for areas where the refurbishment works have not yet been completed or for space
that requires tenant fit out. The occupancy ratio, based on total square metres,
is 82% as at 16 September 2003.
Fully let, the property is forecast to produce rents of Euro4.32 million per annum,
giving a gross yield of 9.4% on cost including refurbishment.
The 11,255 square metre QPT Tower located at Quai aux Pierres de Taille in
Brussels is fully let to high quality tenants with an average length of leases
of more than 4 years
The property is producing rents of Euro1.07 million per annum, giving a gross yield
of 11.3% on cost.
On 4 April 2003, the Group sold the 36,288 square metre warehouse and office
property in Aartselaar near Antwerp, Belgium. The sale for Euro11.314 million
generated a profit before tax of Euro153,000. In addition previously provided
deferred tax under FRS 19 of Euro293,000 was no longer required. The addition to
shareholders' funds was Euro446,000, with a cash contribution of Euro5.6 million for
the Group. However the sale will result in a significant reduction in gross
rental income pending re-investment in property.
A full explanation of the ongoing litigation with our Joint Venture Partners,
Stratford UK Properties LLC ("Oaktree") and Mr Aubrey Glaser, the former
Managing Director, is included in Note 6 'Contingent liabilities' in the
attached Interim Accounts.
On the basis of legal advice received, the Board of Directors considers that the
Company is unlikely to incur any material loss as a result of the Oaktree
litigation and therefore no provision has been included in the accounts, however
the matter will be kept under review. The Company was granted leave to appeal to
the House of Lords.
The UK portfolio consists of the Limited Partnership property in Basingstoke, in
which the Group has a 25% interest. Note 10 explains the status of the limited
partnership and the fundamental uncertainties surrounding it.
The net asset value as at 30 June 2003 was Euro2.60 per share (31 December 2002:
Euro2.62 per share).
The net asset value including unrecognised trading stock value, would be Euro3.88
per share before tax (31 December 2002: Euro4.07 per share) or Euro3.43 net of taxes
(31 December 2002: Euro3.56)
As previously reported, the Company has implemented FRS 19 resulting in full
provision without discounting, for deferred taxes relating to its Belgian
operations at the current Belgian tax rate of 33.99%. During the period the sale
of the Company owning the Aartselaar property took place resulting in a net tax
credit for the period. However additional provisions for deferred tax are likely
to be required in the second half of the year.
Once there has been the appropriate change in legislation the Group intends to
only publish its annual accounts and interim statements on the Internet
(www.IREplc.com) in order to speed up distribution and to reduce costs.
The outlook for the second half of the year is difficult to project. It will
depend largely on whether the Appeal to the House of Lords has been decided,
developments relating to the Basingstoke property and the limited partnership
and other property disposals or purchases during the period.
The overall rental income is expected to be sufficient to cover our financing
costs and administrative expenses.
The Company's net borrowings at 30 June 2003 have reduced to Euro34.256 million
from Euro43.885 million at 31 December 2002 due to the sale of the Aartselaar
property.
The share price reflects a substantial discount to net asset value and your
Board of Directors continues to examine ways of reducing this discount.
The Board proposes to pay an interim dividend of 3.0 pence (4.4 eurocents) per
share (30 June 2002: 3.0 pence or 4.8 eurocents per share) partly out of
reserves, payable on 21 October 2003, to shareholders on the register on 24
September 2003. The Board will carefully review the level of the final dividend
based on the second half result.
I would like to take this opportunity to thank my fellow directors, Management
team and all of our staff and consultants who have worked so hard and diligently
during the period.
Rolf L Nordstrom, Chairman
16 September 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2003
Six month Six month
period ended period ended Year ended
30.06.2003 30.06.2002 31.12.2002
Note Euro'000 Euro'000 Euro'000
Unaudited Unaudited Audited
Turnover 2
Net rental income 1,906 2,713 5,133
Property sales 11,314 - 285
________________________________________________________________________________________________________________________
13,220 2,713 5,418
Cost of sales (11,161) - (80)
________________________________________________________________________________________________________________________
Gross Profit 3 (a) 2,059 2,713 5,338
Exceptional charges - Litigation 3 (b) (38) - (141)
Impairment in value of investment property 3 (b) - - (139)
Other administrative expenses (866) (997) (1,959)
Total administrative expenses (904) (997) (2,239)
Other operating income - - 58
________________________________________________________________________________________________________________________
Operating Profit and Profit on Ordinary
Activities before Interest and Taxation 2 1,155 1,716 3,157
Interest receivable and similar income 128 171 299
Interest payable and similar charges (1,033) (1,259) (2,355)
Movement in fair value of derivatives (200) - (252)
Total interest payable (1,233) (1,259) (2,607)
________________________________________________________________________________________________________________________
Profit on Ordinary
Activities before Taxation 50 628 849
Tax credit / (charge) on profit on ordinary 4 151 (363) (752)
activities
________________________________________________________________________________________________________________________
Profit on Ordinary Activities after Taxation 201 265 97
and Profit for the Financial Period
________________________________________________________________________________________________________________________
Equity dividends (318) (354) (697)
________________________________________________________________________________________________________________________
Retained Loss for the Financial Period (117) (89) (600)
________________________________________________________________________________________________________________________
Basic and diluted earnings per share 5 Euro0.03 Euro 0.04 Euro 0.01
The results for the above periods reflect the continuing operations of the group.
There are no recognised gains or losses in any of the above periods other than
the loss for the periods.
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2003
30.06.2003 30.06.2002 31.12.2002
________________________________________________________________________________________________________________________
Note Euro'000 Euro'000 Euro'000
Fixed Assets Unaudited Unaudited Audited
Investment properties 10 957 1,157 1,017
Other tangible assets 17 66 37
Investments 2 2 2
________________________________________________________________________________________________________________________
976 1,225 1,056
________________________________________________________________________________________________________________________
Current Assets
Stock - trading properties 7 55,634 63,367 65,746
Debtors 1,500 1,726 1,426
Cash at bank and in hand 6,412 5,884 2,806
________________________________________________________________________________________________________________________
63,546 70,977 69,978
Current Liabilities
Creditors: amounts falling due
within one year
- Borrowings (965) (1,433) (1,234)
- Other (4,075) (4,401) (4,281)
________________________________________________________________________________________________________________________
(5,040) (5,834) (5,515)
________________________________________________________________________________________________________________________
Net Current Assets 58,506 65,143 64,463
________________________________________________________________________________________________________________________
Total Assets Less Current Liabilities 59,482 66,368 65,519
Creditors: amounts falling due
after more than one year
- Borrowings (39,703) (46,045) (45,457)
Provisions for liabilities and charges:
Deferred taxation (650) (566) (816)
________________________________________________________________________________________________________________________
Net Assets 19,129 19,757 19,246
________________________________________________________________________________________________________________________
Capital and Reserves
Called up share capital 4,683 4,683 4,683
Share premium account 8 7,957 7,957 7,957
Capital redemption reserve 8 291 291 291
Profit and loss account 8 6,198 6,826 6,315
________________________________________________________________________________________________________________________
Equity Shareholders' Funds 19,129 19,757 19,246
________________________________________________________________________________________________________________________
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2003
Six month Six month Year ended
period ended period ended 31.12.2002
30.06.2003 30.06.2002
________________________________________________________________________________________________________________________
Note Euro'000 Euro'000 Euro'000
Profit for the financial period 201 265 97
Dividends (318) (354) (697)
________________________________________________________________________________________________________________________
Net reduction in Shareholders' funds (117) (89) (600)
Opening Shareholders' funds 19,246 19,846 19,846
________________________________________________________________________________________________________________________
Closing Shareholders' funds 19,129 19,757 19,246
________________________________________________________________________________________________________________________
CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2003
Six month Six month
period ended period ended Year ended
30.06.2003 30.06.2002 31.12.2002
________________________________________________________________________________________________________________________
Notes Euro'000 Euro'000 Euro'000
Net cash inflow from
operating activities 9 (a) 5,403 2,166 936
Returns on investments and
servicing of finance
Interest paid (1,033) (1,121) (2,272)
Interest received 64 170 299
________________________________________________________________________________________________________________________
(969) (951) (1,973)
________________________________________________________________________________________________________________________
Taxation paid (33) (940) (707)
Capital expenditure and
financial investment
Purchase of other tangible fixed assets - (14) (14)
________________________________________________________________________________________________________________________
- (14) (14)
________________________________________________________________________________________________________________________
Equity dividends paid (447) (775) (1,196)
________________________________________________________________________________________________________________________
Cash inflow/(outflow) before financing 9 (b) 3,954 (514) (2,954)
Financing
New loans drawn down - - -
Repayment of amounts borrowed (463) (530) (1,322)
________________________________________________________________________________________________________________________
(463) (530) (1,322)
________________________________________________________________________________________________________________________
Increase/(decrease) in cash 3,491 (1,044) (4,276)
________________________________________________________________________________________________________________________
Reconciliation of net cash flow
to movement in net debt
Increase/(decrease) in cash 3,491 (1,044) (4,276)
Cash outflow from decrease in debt 463 530 1,322
________________________________________________________________________________________________________________________
Movement in net debt 3,954 (514) (2,954)
Non cash movements 9 (c) 5,493 - -
Exchange movements 182 (201) (52)
Net debt at 1 January (43,885) (40,879) (40,879)
________________________________________________________________________________________________________________________
Net debt at end of period 9 (b) (34,256) (41,594) (43,885)
________________________________________________________________________________________________________________________
NOTES TO THE ACCOUNTS
1 Preparation of the interim financial information
This financial information has been prepared on the basis of the
accounting policies set out in the full accounts for the year ended
31 December 2002.
________________________________________________________________________________________________________________________
2 Segmental Analysis
Six month period Year ended
ended
30.06.2002
Operating Net Operating Net
Turnover (Loss) / Assets Turnover (Loss)/Profit Assets Turnover
Profit
_______________________________________________________________________________________________________________________
Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000
Euro'000
United Kingdom
Investment (41) (81) 93 69 69 (234) 136
Trading (13) - - - - 2,198 (26)
Administration - (906) (990) - (715) -
and other
______________________________________________________________________________________________________________________
(54) (987) 69 (646) 1,964 110
______________________________________________________________________________________________________________________
Continental (897)
Europe
Trading 13,274 2,142 20,026 2,644 2,362 17,793 5,308
______________________________________________________________________________________________________________________
13,220 1,155 19,129 2,713 1,716 19,757 5,418
______________________________________________________________________________________________________________________
3 Income and charges
(a) Turnover and gross profits include Euro11,314,000 and Euro153,000 respectively
relating to the disposal of the Aartselaar trading property on 4 April
2003. The post tax profit on disposal was Euro446,000, reflecting the release
of deferred tax provisions.
Six month Six month Year
period ended period ended ended
30.06.2003 30.06.2002 31.12.2002
_____________________________________________________________________________________________________________________
Euro'000 Euro'000 Euro'000
(b) Other litigation and related 38 - 141
exceptional costs
Provision for impairment in - - 139
value of investment properties
_____________________________________________________________________________________________________________________
38 - 280
_____________________________________________________________________________________________________________________
4 Tax on Profit on Ordinary
Activities
Six month Six month period ended Year
Period ended 30.06.2002 ended
30.06.2003 31.12.2002
_____________________________________________________________________________________________________________________
The tax credit/(charge) on the Euro'000 Euro'000 Euro'000
profit on ordinary activities
for the period was as follows:
UK Corporation tax at 30.00% - - -
Adjustment in respect of prior (10) (16) (150)
year
_____________________________________________________________________________________________________________________
Current tax charge (10) (16) (150)
Deferred taxation 161 (347) (602)
_____________________________________________________________________________________________________________________
151 (363) (752)
_____________________________________________________________________________________________________________________
5 Earnings per share
Six month Six month period ended Year
period ended 30.06.2002 ended
30.06.2003 31.12.2002
_____________________________________________________________________________________________________________________
Earnings per share are calculated as
follows:
Profit for the Euro201,000 Euro265,123 Euro96,706
period
Weighted average number of 7,357,446 7,357,446 7,357,446
shares in issue
_____________________________________________________________________________________________________________________
Basic and diluted earnings per Euro0.03 Euro 0.04 Euro 0.01
share
_____________________________________________________________________________________________________________________
6 Contingent
Liabilities
By a circular dated 11 February 1998, the Company announced its entry into
a limited partnership with Stratford UK Properties LLC ('Oaktree'), an
entity owned by Oaktree Capital Management LLC which is based in the
United States of America. On 30 March 2000 a Supplemental Agreement
('Agreement') was entered into with Oaktree purporting to vary the terms
of the partnership. It was executed on behalf of the Company, by the then
Managing Director, Aubrey Glaser, and the then Company Secretary. This
Agreement purported to give Oaktree the right (inter alia) to require the
Company to buy out the Oaktree share of the partnership on terms highly
beneficial to Oaktree in the event of a change of control of the Company
or the departure or non involvement in management of the Chairman (who had
no knowledge of the Agreement) or Aubrey Glaser.
In June 2001 Oaktree purported to invoke the terms of the Agreement
requiring the Company to buy out the Oaktree share on the basis set out
above, which on current estimates would cost the Company approximately
Euro12 million, increasing annually at a rate of 25% compounded monthly.
The Company claims the Agreement is unenforceable and accordingly on
10 July 2001 the Company issued proceedings in the High Court for an order
that the Agreement be set aside. On the Company's application for summary
judgement Mr. Justice Hart found in favour of the Company and made a
declaration that the Agreement was unenforceable against it. The Court of
Appeal reversed the decision, but the House of Lords has granted leave to
appeal. On the basis of legal advice it has received, the Board of
Directors continues to believe that the Company is unlikely to incur a
material loss as a result of the Agreement and therefore no provision has
been included in the accounts for this contingent liability, but the
matter will be kept under review.
In September 2001 the Company received a claim from Mr. Glaser for
compensation for loss of office totalling Euro404,000 (#280,000). The Company
is vigorously defending this claim and having regard to the legal advice
received by the Company, no provision has been included in the accounts
for this contingent liability.
7 Stocks - trading properties
Trading properties at 30 June 2003 comprise the IT Tower and the QPT
Tower, Brussels.
8 Reserves Share Capital Redemption Reserve Profit and Loss
Premium Account
Account
______________________________________________________________________________________________________________________
Euro'000 Euro'000 Euro'000
At 1 January 2003 7,957 291 6,315
Retained loss for the - - (117)
financial period
______________________________________________________________________________________________________________________
7,957 291 6,198
______________________________________________________________________________________________________________________
9 Cash Flow Statement
(a) Reconciliation of operating Six Month period ended Six month period ended
profit to operating cash flows
______________________________________________________________________________________________________________________
30.06.2003 30.06.2002
Euro'000 Euro'000
Operating 1,155 1,716
profit
Depreciation and amortisation 20 44
charges
Impairment in value of investment - -
property
Decrease/(increase) in trading 4,619 (1,341)
properties (see note 10(c))
(Increase)/decrease in debtors (75) 423
(Decrease)/increase in (316) 1,324
creditors
______________________________________________________________________________________________________________________
Net cash inflow from operating 5,403 2,166
activities
______________________________________________________________________________________________________________________
(b) Analysis of net debt At 1 January 2003 Cash Flow Other non-cash movements Exchange movements
______________________________________________________________________________________________________________________
Euro'000 Euro'000 Euro'000 Euro'000
Cash at bank and in 2,806 3,491 - 115
hand
Debt due within one (1,234) 463 (261) 67
year
Debt due after one (45,457) - 5,754 -
year
______________________________________________________________________________________________________________________
(43,885) 3,954 5,493 182
______________________________________________________________________________________________________________________
(c) Major non-cash transactions
As part of the consideration following the disposal of the Aartselaar
trading property on 4 April 2003, Euro5,493,000 of debt was transferred to
the purchaser. The decrease in stock for the period ended 30 June 2003 has
been reduced by this amount in the reconciliation of operating profit to
operating cash flows.
10 BASINGSTOKE PARTNERSHIP
Investment property comprises the Company's 25% share of the investment in
Mobius House, Basingstoke. The property, which was un-let, was valued at
#2,650,000 (Euro4,068,000) by FPD Savills, Chartered Surveyors, in accordance
with the requirements of the Royal Institute of Chartered Surveyors on
31 December 2002 on the basis of open market value. The Company's 25%
share has been retranslated to Euro957,000 at 30 June 2003.
The property is owned by a limited partnership between the Company and
Stratford UK Properties LLC ("Oaktree"). The company is in litigation with
Oaktree, details of which are set out in Note 6.
The partnership is financed as follows:
1. A senior loan of #1,800,000 (Euro2,601,000) which is non recourse to the
Company and in respect of which the Company has given a guarantee on
any interest shortfall.
2. A junior loan of #980,000 (Euro1,416,000) in respect of which the Company
has given a guarantee on both principal and any interest shortfall.
The Company has the benefit of a counter-indemnity from Oaktree for its
75% share of any payments under the guarantees.
The Group has proportionally consolidated its 25% share of the
partnership's property, loans and other assets and liabilities. At 30 June
2003 interest payments were up to date. No provision has been included for
any of the guarantees and counter indemnities at 30 June 2003.
Since 30 June 2003 notice has been served by the senior lender that its
non-recourse loan is in default and repayment has been demanded. As a
consequence of this, the junior lender's loan is now in default. Although
the Company and Oaktree have agreed a plan with the lenders for the early
realisation of the Basingstoke property, in these circumstances, there are
fundamental uncertainties as to:
* the value that may be realised;
* the Company's liability under the guarantees, which may be
crystallised if the sale of the property realises less than the
value of #2,650,000 set out above; and
* the amount that the Company will be able to recover under its
counter-indemnity from Oaktree, in the event that it has a liability
under the guarantees.
The interim statement does not reflect any adjustments that would be
required if the property is sold for less than #2,650,000 and if the
Company is unable to recover any payments under guarantees from Oaktree.
The directors estimate that the maximum potential loss to the company
arising from these uncertainties is less than #1 million (Euro1.44 million).
As a consequence of the loan defaults referred to above, amounts totalling
#670,000 (Euro968,000) disclosed as creditors falling due in more than one
year at 30 June 2003 became a current liability with effect from
13 August 2003.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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