TIDMREOP
RNS Number : 0761Y
REO Securities Limited
27 August 2009
REO SECURITIES LIMITED
INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2009
REO Securities is a wholly owned subsidiary of Real Estate Opportunities plc.
Shareholders attention is drawn to Real Estate Opportunities plc interim results
which are also published today (27 August 2009).
CHAIRMAN'S STATEMENT
Company Background
On 14 February 2008 the Royal Court of Jersey granted approval for a Scheme of
Arrangement (described in a circular to the shareholders of Real Estate
Opportunities plc ('REO' or 'the Group') dated 18 December 2007). The Scheme
involved the Zero Dividend Preference Shares ("ZDP Shares"), part of the share
capital of REO being cancelled and, in exchange, New ZDP Shares were issued on a
one for one basis by REO Securities Limited ('the Company'), a newly
incorporated subsidiary of REO. Implementation of the Scheme will allow the new
ZDP Shares to be repaid by way of winding up of REO Securities Limited on 31 May
2011 rather than the winding up or reconstruction of REO itself.
Admission of the 57,755,782 New ZDP Shares of REO Securities Limited to the
Official List of the UK Listing Authority took place on 18 February 2008, with
dealings therein on the London Stock Exchange commencing on the same day.
Activities
The Company is a wholly owned subsidiary of REO, and forms part of the Real
Estate Opportunities plc Group (the "Group"). REO is a property company
investing mainly in the Irish and UK property markets but also overseas.
The Company was incorporated as part of a Scheme of Capital Restructuring of the
REO Group so as to remove the requirement that REO be wound up in 2011. On the
18 January 2008 shareholders of REO passed all resolutions proposed at the Class
Meeting of the zero dividend preference shareholders relating to the Scheme of
Capital Restructuring.
On 14 February 2008 the Court approved a scheme for REO to cancel the share
premium account and to cancel the existing zero dividend preference shares and
to issue in exchange zero dividend preference shares ("ZDPs") in the Company.
On the 18 February 2008, the entire issued zero dividend preference shares of
REO were suspended from trading prior to cancellation. On the same day zero
dividend preference shares in the Company issued to the former zero dividend
preference shareholders of REO, commenced trading.
Status
The Company was incorporated on 27 April 2007 and as a wholly owned subsidiary
of REO, forms part of a closed ended collective investment fund, as defined in
the Collective Investment Funds (Jersey) Law 1988, as amended, and the
subordinate legislation made thereunder.
The Company has applied for international service entity status under the Goods
and Services Tax (International Service Entities) (Jersey) Regulations 2008 in
respect of the year ended 31 December 2008 and 31 December 2009. Goods and
Service Tax was introduced with effect from 6 May 2008.
The Company has been granted exempt status under Article 123A of the Income Tax
(Jersey) Law 1961 in respect of the year ended 31 December 2008. With effect
from 1 January 2009 the Company moved to a 0% rate of income tax following the
abolition of exempt company status.
The Company is registered in Jersey under number 97292.
Capital Structure
The Company has a capital structure comprising Ordinary and Zero Dividend
Preference Shares ("ZDP's"). The ordinary shares are unlisted and are
beneficially held by Real Estate Opportunities plc ("REO"). Accordingly, REO
Securities Limited is a wholly owned subsidiary of REO. The ZDP's are listed on
the London Stock Exchange.
Going Concern
The Company's major asset is a receivable from its parent, REO a company
incorporated in Jersey. REO Securities' ability to continue in business and
satisfy its future obligations to the holders of the ZDP's is dependent on REO.
To that end, REO and REO Securities Limited have entered into an arrangement
pursuant to an Undertaking Agreement whereby the net assets of REO will
effectively be made available to meet the repayment entitlement of the ZDP
Shares on the Repayment Date, 31 May 2011.
At 30 June 2009 REO had total borrowings of GBP1,621 million. At that date, REO
had cash, cash equivalents and restricted cash of GBP61 million and a deficit on
consolidated shareholders equity of GBP88 million. REO has an investment and
development property portfolio valued by its Directors at GBP1,622 million.
REO's future operating performance will be affected by general economic,
financial and business conditions, many of which are beyond REO's control. REO's
bank borrowings are mainly provided by financial institutions operating in
Ireland and the United Kingdom. These financial institutions currently face
financial difficulty and in many cases are being supported by Government.
Significant deterioration in the economic environment in Ireland and the United
Kingdom could have a material adverse impact on the value of REO's property
portfolio and shareholders equity and as a consequence on REO's ability to
obtain longer term debt or equity financing required to meet its longer term
financing and liquidity requirements beyond 2010.
REO's Board, together with REO's Investment Adviser, have focused on cash
conservation. A series of cost cutting measures have been implemented across REO
and a full review of REO's detailed financial plan for the next 15 months has
been carried out. A number of key assumptions have been made in preparing this
plan, including: bank facilities that are due in 2009 and 2010 amounting to
GBP556 million and GBP201 million respectively will be rolled over and renewed
on broadly similar terms; if there are further declines in values which may
result in breaches of loan facility covenants, it is assumed that the existing
facilities will remain in place and be renewed, as is consistent with REO's
recent experience; and REO will realise GBP35 million to GBP40 million in cash
following the completion of one of a number of corporate transactions that are
currently being explored. Based on these assumptions, REO's Board believes that
there is adequate cash and cash equivalents to meet its working capital
requirements until November 2010.
The Directors of the Company have concluded that the above factors represent
material uncertainties. Failure by REO to deliver on the forecast assumptions
may cast significant doubt on the ability of the Company to continue as a going
concern and it may therefore be unable to realise its assets and discharge its
liabilities in the normal course of business. Nevertheless, having discussed the
basis of preparation and the assumptions underlying REO's cashflow projections
together with assessing the current status of negotiations with REO's current
lenders, and assuming the rollover and renewal of expiring facilities and
required further waivers are put in place within the required timescales, the
Directors of the Company have a reasonable expectation that the Company will be
able to meet its liabilities as they fall due for the foreseeable future. It is
on this basis that the Directors consider it appropriate to prepare the
financial statements on a going concern basis. These unaudited interim financial
statements do not include any adjustment that would result from the going
concern basis of preparation being inappropriate.
Valuation of investment and development properties
REO's principal assets comprise investment properties and investment properties
under development properties, located in Ireland and the UK, which are being
carried in the financial statements at market value.
The Directors of REO appointed the Investment Adviser to conduct the valuations
using assumptions, and exercising certain judgements, based on market conditions
as at 30 June 2009. Shareholder attention is drawn to the Investment Advisers
Report in REO plc's interim results for further details. These results are also
published today, 27 August 2009.
Real Estate Opportunities plc
Shareholders' attention is drawn to the publication of the preliminary results
for Real Estate Opportunities plc issued on the 27 August 2009 for reference.
Ray Horney
Chairman
26 August 2009
+------------------------------------+------------------------------------+
| Contact | |
| | |
| Sarah Moriarty | |
| REO Investor Relations | |
| Tel: +353 1 6189455 | |
| | |
+------------------------------------+------------------------------------+
| Matrix Corporate Capital LLP | Goodbody Stockbrokers |
| Paul Fincham, Jonathan Becher, | Linda Hickey |
| Robert Naylor | Tel: + 353 1 641 6017 |
| Tel: + 44 (0)20 3206 7000 | |
| | |
+------------------------------------+------------------------------------+
| Bankside Consultants | Murray Consultants |
| Tel: + 44 (0)20 7367 8888 | Tel: + 353 1 498 0300 |
| Simon Rothschild, Oliver Winters | Ed Micheau |
| | |
+------------------------------------+------------------------------------+
Principal Risks and Uncertainties for the remaining six months of the financial
year
The most significant risks to REO Securities Limited relates to its arrangements
with REO.
In order for REO Securities Limited to have sufficient assets to repay the ZDP
Shares, REO and REO Securities Limited have entered into an arrangement pursuant
to an Undertaking Agreement whereby the net assets of REO will effectively be
made available to meet the repayment entitlement of the ZDP Shares on the
Repayment Date, 31 May 2011, after payment of all other creditors of the
Company.
Pursuant to the Undertaking Agreement, REO agrees to contribute to the Company
(by way of gift, capital contribution or otherwise) such an amount as will
result in REO Securities Limited having sufficient assets to satisfy the then
current or, as the case may be, final capital entitlement of the ZDP Shares on
the Repayment Date or any earlier winding up of the Company.
Responsibility Statement
Each of the directors confirms that, to the best of each person's knowledge and
belief:
(a) the condensed interim financial statements comprising the condensed
income statement, statement of comprehensive income, the condensed statement of
financial position, the condensed statement of changes in equity, the condensed
statement of cash flows and related notes 1 to 11 have been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by the EU.
(b) the interim management report includes a fair review of the information
required by:
(i) Regulation 8(2) of the Transparency (Directive 2004/109/EC) Regulations
2007, 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; and
(ii) Regulation 8(3) of the Transparency (Directive 2004/109/EC) Regulations
2007, 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 that period; and any
changes in the related party transactions described in the last annual report
that could do so.
By order of the Board
Ray Horney
Chairman
26 August 2009
REO SECURITIES LIMITED
Condensed statement of financial position
As at
+------------------------------------------+------+-----------+----------+
| | | 30 June | 31 |
| | | | December |
+------------------------------------------+------+-----------+----------+
| | Note | 2009 | 2008 |
| | |Unaudited | Audited |
+------------------------------------------+------+-----------+----------+
| In thousands of pounds sterling | | | |
+------------------------------------------+------+-----------+----------+
| Assets | | | |
+------------------------------------------+------+-----------+----------+
| Trade and other receivables | 2 | 115,315 | 110,495 |
+------------------------------------------+------+-----------+----------+
| Total non current assets | | 115,315 | 110,495 |
+------------------------------------------+------+-----------+----------+
| Total assets | | 115,315 | 110,495 |
+------------------------------------------+------+-----------+----------+
| | | | |
+------------------------------------------+------+-----------+----------+
| Equity | | | |
+------------------------------------------+------+-----------+----------+
| Issued capital | 3 | - | - |
+------------------------------------------+------+-----------+----------+
| Retained earnings | 4 | - | - |
+------------------------------------------+------+-----------+----------+
| Total shareholders' equity | | - | - |
+------------------------------------------+------+-----------+----------+
| | | | |
+------------------------------------------+------+-----------+----------+
| Liabilities | | | |
+------------------------------------------+------+-----------+----------+
| Zero Dividend Preference Shares | 5 | 115,315 | 110,495 |
+------------------------------------------+------+-----------+----------+
| Total non-current liabilities | | 115,315 | 110,495 |
+------------------------------------------+------+-----------+----------+
| Total liabilities | | 115,315 | 110,495 |
+------------------------------------------+------+-----------+----------+
| | | | |
+------------------------------------------+------+-----------+----------+
| Total shareholders' equity and | | 115,315 | 110,495 |
| liabilities | | | |
+------------------------------------------+------+-----------+----------+
| | | | |
+------------------------------------------+------+-----------+----------+
The accompanying notes form an integral part of these interim financial
statements.
Condensed interim income statement
For the six months ended 30 June
+-----------------------------------------+------+-----------+-----------+
| |Note | 2009 | 2008 |
| | |Unaudited |Unaudited |
+-----------------------------------------+------+-----------+-----------+
| | | | Restated |
+-----------------------------------------+------+-----------+-----------+
| In thousands of pounds sterling | | | |
+-----------------------------------------+------+-----------+-----------+
| | | | |
+-----------------------------------------+------+-----------+-----------+
| Finance income | 6 | 4,820 | 3,389 |
+-----------------------------------------+------+-----------+-----------+
| Financial expense | 6 | (4,820) | (3,389) |
+-----------------------------------------+------+-----------+-----------+
| Net financing expense | | - | - |
+-----------------------------------------+------+-----------+-----------+
| | | | |
+-----------------------------------------+------+-----------+-----------+
| Loss before tax | | - | - |
+-----------------------------------------+------+-----------+-----------+
| | | | |
+-----------------------------------------+------+-----------+-----------+
| Income tax expense | 7 | - | - |
+-----------------------------------------+------+-----------+-----------+
| Loss for the year/ period | | - | - |
| | | | |
+-----------------------------------------+------+-----------+-----------+
| | | | |
+-----------------------------------------+------+-----------+-----------+
| Earnings per Share | | | |
+-----------------------------------------+------+-----------+-----------+
| Basic loss per Ordinary Share | 8 | - | - |
+-----------------------------------------+------+-----------+-----------+
Condensed interim statement of comprehensive income
For the six months ended 30 June
+-------------------------------------------+-----+-----------+-----------+
| | | 2009 | 2008 |
| | |Unaudited | Unaudited |
+-------------------------------------------+-----+-----------+-----------+
| | | | Restated |
+-------------------------------------------+-----+-----------+-----------+
| In thousands of pounds sterling | | | |
+-------------------------------------------+-----+-----------+-----------+
| | | | |
+-------------------------------------------+-----+-----------+-----------+
| Loss for the period | | - | - |
+-------------------------------------------+-----+-----------+-----------+
| | | | |
+-------------------------------------------+-----+-----------+-----------+
| Total recognised income and expense for | | - | - |
| the period | | | |
+-------------------------------------------+-----+-----------+-----------+
| | | | |
+-------------------------------------------+-----+-----------+-----------+
Condensed statement of changes in equity
For the six months ended 30 June
No condensed Statement of Change in Equity is presented as there were no changes
in equity in the current or prior period.
Condensed interim statement of cashflows
For the six months ended 30 June
+------------------------------------------------+------+-----------+-----------+
| | | 2009 | 2008 |
| | |Unaudited |Unaudited |
+------------------------------------------------+------+-----------+-----------+
| | | | Restated |
+------------------------------------------------+------+-----------+-----------+
| In thousands of pounds sterling | | | |
+------------------------------------------------+------+-----------+-----------+
| Cash flows from operating activities | | | |
+------------------------------------------------+------+-----------+-----------+
| | | | |
+------------------------------------------------+------+-----------+-----------+
| Loss for the year | | - | - |
+------------------------------------------------+------+-----------+-----------+
| Adjustments for: | | | |
+------------------------------------------------+------+-----------+-----------+
| Net financial expense | | - | - |
+------------------------------------------------+------+-----------+-----------+
| Increase in non current liabilities | | 4,820 | 105,828 |
+------------------------------------------------+------+-----------+-----------+
| Increase in trade and other receivables | | (4,820) | (105,828) |
+------------------------------------------------+------+-----------+-----------+
| Net cash from operating activities | | - | - |
+------------------------------------------------+------+-----------+-----------+
| | | | |
+------------------------------------------------+------+-----------+-----------+
| | | | |
+------------------------------------------------+------+-----------+-----------+
| Net movement in cash and cash equivalents | | - | - |
+------------------------------------------------+------+-----------+-----------+
| Cash and cash equivalents at 1 January 2009 | | - | - |
+------------------------------------------------+------+-----------+-----------+
| Cash and cash equivalents at 30 June 2009 | | - | - |
+------------------------------------------------+------+-----------+-----------+
REO SECURITIES LIMITED
Notes to the annual financial statements
1a. Basis of preparation
The unaudited condensed interim financial statements of the Company are for the
six months ended 30 June 2009. They are in pounds sterling, rounded to the
nearest thousand.
The preparation of interim 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 could differ materially from these estimates. In preparing these interim
financial statements, the significant judgements made by management in applying
the Company's accounting policies and the key sources of estimation uncertainly
were the same as those that applied to the Financial Statements as at and for
the year ended 31 December 2008.
The financial information included in the interim financial statements is
unaudited and does not constitute statutory accounts as defined in Companies
(Jersey) Law 1991, (as amended).
1b. Statement of Compliance
These condensed interim financial statements have been prepared in accordance
with IAS 34 Interim Financial Reporting. They do not include all of the
information required for full annual financial statements, and should be read in
conjunction with the financial statements of the Company as at and for the year
ended 31 December 2008.
The condensed interim financial statements were approved by the Board of
Directors on 26 August 2009.
Significant accounting policies
Except as described below, the accounting policies applied by the Company in
these condensed interim financial statements are the same as those applied by
the Company in its audited financial statements as at and for the year ended 31
December 2008.
The following new standard and amendment to standards are mandatory for the
first time for the financial year beginning 1 January 2009.
Presentation of financial statements
The Company applies revised IAS 1 Presentation of Financial Statements (2007),
which became effective as of 1 January 2009. As a result the Company presents in
the statement of changes in equity all owner changes in equity whereas all non
owner changes in equity are presented in the statement of comprehensive income.
This presentation has been applied in the condensed interim financial statements
as of and for the six months period ended on 30 June 2009.
Comparative information has been re-presented so that it is in conformity with
the revised standard. Since the change in accounting policy only impacts
presentation aspects, there is no impact on earnings per share.
1c. Going concern
The Company's major asset is a receivable from its parent, REO a company
incorporated in Jersey. REO Securities' ability to continue in business and
satisfy its future obligations to the holders of the ZDP's is dependent on REO.
To that end, REO and REO Securities Limited have entered into an arrangement
pursuant to an Undertaking Agreement whereby the net assets of REO will
effectively be made available to meet the repayment entitlement of the ZDP
Shares on the Repayment Date, 31 May 2011.
At 30 June 2009 REO had total borrowings of GBP1.6 billion. At that date, REO
also had cash, cash equivalents and restricted cash of GBP61 million and a
deficit on consolidated shareholders equity of GBP88 million. REO has an
investment and development property portfolio valued by its Directors at GBP1.6
billion at 30 June 2009.
REO's future operating performance will be affected by general economic,
financial and business conditions, many of which are beyond REO's control. REO's
bank borrowings are mainly provided by financial institutions operating in
Ireland and the United Kingdom. These financial institutions currently face
financial difficulty and in many cases are being supported by Government.
Significant deterioration in the economic environment in Ireland and the United
Kingdom could have a material adverse impact on the value of REO's property
portfolio and shareholders equity and as a consequence on REO's ability to
obtain longer term debt or equity financing required to meet our longer term
financing and liquidity requirements beyond 2010.
REO has prepared a financial plan for the period to 31 December 2010. A number
of key assumptions have been made in preparing this plan, including: bank
facilities that are due in 2009 and 2010 amounting to GBP556 million and GBP201
million respectively will be rolled over and renewed on broadly similar terms;
if there are further declines in values which may result in breaches of loan
facility covenants, it is assumed that the existing facilities will remain in
place and be renewed, as is consistent with REO's recent experience; and REO
will realise GBP35 million to GBP40 million in cash following the completion of
one of a number of corporate transactions that are currently being explored.
Based on these assumptions, REO's Board believes that there is adequate cash and
cash equivalents to meet its working capital requirements until November 2010.
Included in REO's consolidated balance sheet at 30 June 2009 are loans due in
2009 of GBP226 million, with original maturity dates between 2010 and 2011.
These are shown as repayable in 2009 as a result of a breach of covenant by REO
at 30 June 2009. Discussions are ongoing with REO's bankers and REO's directors
are not aware of any issues which would prevent the required waiver being
granted.
The Directors of the Company have concluded that the above factors represent
material uncertainties. Failure of REO to deliver on the forecast assumptions
may cast significant doubt on the ability of the Company to continue as a going
concern and it may therefore be unable to realise its assets and discharge its
liabilities in the normal course of business. Nevertheless, having discussed the
basis of preparation and the assumptions underlying REO's cashflow projections
together with assessing the current status of negotiations with REO's current
lenders, and assuming the rollover and renewal of expiring facilities and
required further waivers are put in place within the required timescales, the
Directors of the Company have a reasonable expectation that the Company will be
able to meet its liabilities as they fall due for the foreseeable future. It is
on this basis that the Directors consider it appropriate to prepare the
financial statements on a going concern basis. These unaudited interim financial
statements do not include any adjustment that would result from the going
concern basis of preparation being inappropriate.
1d. Valuation of investment properties and investment properties under
development
REO's principal assets comprise investment properties and investment properties
under development, located in Ireland and the UK, which are being carried at
financial statements fair value.
These valuations have been carried out solely by the Directors of REO using
assumptions, and exercising certain judgements, based on market conditions at 30
June 2009. Further details of the assumptions used in the valuations are set out
in the Investment Advisers report contained in REO's interim results also
published today, 27 August 2009, which details the valuation further. REO's
portfolio will be valued by external valuers as at 31 December 2009.
2. Trade and other receivables - non current
+-----------------------------------------------+------------+------------+
| In thousands of pounds sterling | | |
+-----------------------------------------------+------------+------------+
| | 30 June | 31 |
| | 2009 | December |
| | | 2008 |
+-----------------------------------------------+------------+------------+
| | | |
+-----------------------------------------------+------------+------------+
| Amounts due by parent undertaking | 115,315 | 110,495 |
+-----------------------------------------------+------------+------------+
| | 115,315 | 110,495 |
+-----------------------------------------------+------------+------------+
The amount due from parent undertaking is repayable in 2011.
3. Called -Up Share Capital
+-----------------------------------------------+------------+------------+
| | 30 June | 31 |
| | 2009 | December |
| | | 2008 |
+-----------------------------------------------+------------+------------+
| | GBP | GBP |
+-----------------------------------------------+------------+------------+
| Authorised | | |
+-----------------------------------------------+------------+------------+
| 1,000 ordinary shares of GBP1 | 1,000 | 1,000 |
+-----------------------------------------------+------------+------------+
| 60,000, 000 Zero Dividend Preference (ZDP) | 600 | 600 |
| Shares of GBP0.00001 | | |
+-----------------------------------------------+------------+------------+
| | 1,600 | 1,600 |
+-----------------------------------------------+------------+------------+
| Allotted, called up and paid in full | | |
+-----------------------------------------------+------------+------------+
| 2 ordinary shares of GBP1 | 2 | 2 |
+-----------------------------------------------+------------+------------+
| 57,755,782 Zero Dividend Preference (ZDP) | 578 | 578 |
| Shares of GBP0.00001 | | |
+-----------------------------------------------+------------+------------+
| | 580 | 580 |
+-----------------------------------------------+------------+------------+
| Presented as debt | | |
+-----------------------------------------------+------------+------------+
| 57,755,782 Zero Dividend Preference (ZDP) | 578 | 578 |
| Shares of GBP0.00001 | | |
+-----------------------------------------------+------------+------------+
| Presented as Equity | | |
+-----------------------------------------------+------------+------------+
| 2 ordinary shares of GBP1 | 2 | 2 |
+-----------------------------------------------+------------+------------+
| | 580 | 580 |
+-----------------------------------------------+------------+------------+
On 18 February 2008 the Company was listed on the London Stock Exchange and
57,755,782 New ZDP shares were issued at 0.001p per New ZDP share. These new ZDP
shares were issued on a one for one basis in exchange for the cancelled ZDP
shares in REO, the holding company of REO Securities Limited.
Rights attaching to the ZDP Shares and the Ordinary shares:
(a) As to dividends:
* the Ordinary shares carry the right to receive the profits of the Company
(including accumulated revenue reserves) available for distribution and
determined to be distributed by way of interim and/or final dividend.
* the ZDP shares carry no right to receive dividends out of the revenue or any
other profits of the Company.
(b) As to winding-up, after the payment of the Company's liabilities in full:
* the holders of the Ordinary Shares are entitled to the surplus assets of the
company available for distribution.
* the holders of the ZDP shares are entitled to an amount equal to 100p per ZDP
share as increased each day from 22 June 2001 up to and including 31 May 2011 at
the daily compound rate, which results in a fixed entitlement of 235.51p on 31
May 2011.
(c) As to voting:
* the ordinary shareholders have the right to vote at general meetings of the
Company and each shareholder present shall have 1 vote in respect of each share
held.
* the ZDP Shareholders shall not have the right to attend or vote at any general
meeting of the Company unless the business of the meeting includes any
resolution to vary, modify or abrogate any of the special rights attached to the
ZDP shares, or any resolution to wind up the Company. At any meeting when such
business is to be conducted, such holders shall be entitled to vote in relation
to that business only. When entitled to vote, each holder present, in person or
proxy, shall have 1 vote in respect of each share held.
4. Retained Earnings
+-----------------------------------------------+------------+------------+
| In thousands of pounds sterling | | |
+-----------------------------------------------+------------+------------+
| | 30 June | 31 |
| | 2009 | December |
| | | 2008 |
+-----------------------------------------------+------------+------------+
| | | |
+-----------------------------------------------+------------+------------+
| At 1 January 2008 | - | - |
+-----------------------------------------------+------------+------------+
| Result for the year | - | - |
+-----------------------------------------------+------------+------------+
| Balance at the 31 December 2008 | - | - |
+-----------------------------------------------+------------+------------+
5. Non current Liabilities
+-----------------------------------------------+------------+------------+
| In thousands of pounds sterling | | |
+-----------------------------------------------+------------+------------+
| | 30 June | 31 |
| | 2009 | December |
| | | 2008 |
+-----------------------------------------------+------------+------------+
| | | |
+-----------------------------------------------+------------+------------+
| Zero Dividend Preference Shares | 115,315 | 110,495 |
+-----------------------------------------------+------------+------------+
| | 115,315 | 110,495 |
+-----------------------------------------------+------------+------------+
The Zero Dividend Preference Shares are due to be repaid on the 31 May 2011 or
earlier on winding up
of the Company.
6. Financial Income/ (expense)
+-----------------------------------------------+------------+------------+
| In thousands of pounds sterling | | |
| | | |
+-----------------------------------------------+------------+------------+
| | Period | Period |
| | ended 30 | ended 30 |
| | June 2009 | June 2008 |
+-----------------------------------------------+------------+------------+
| | | |
+-----------------------------------------------+------------+------------+
| Income on REO intercompany advance | 4,820 | 3,389 |
+-----------------------------------------------+------------+------------+
| Interest in respect of zero dividend | (4,820) | (3,389) |
| preference shares | | |
+-----------------------------------------------+------------+------------+
| Net finance expense recognised in income | - | - |
| statement | | |
+-----------------------------------------------+------------+------------+
| | | |
+-----------------------------------------------+------------+------------+
7. Taxation
In accordance with the Income Tax (Jersey) Law 1961 the income tax rate for
companies in Jersey was reduced from 20% to 0% with effect from 3 June 2008.
Exempt company status for all new companies was abolished. The Company's 2008
exempt company status remained in place until 31 December 2008. On 1 January
2009 the Company moved to a 0% rate of income tax and accordingly income, other
than Jersey source income (excluding bank deposit interest), is taxed at 0%.
With effect from 6 May 2008, a 3% Goods and Services Tax ("GST") was introduced
under the Goods and Services Tax (Jersey) Law 2007. The Company may apply for an
exemption under the Goods and Services Tax (International Service Entities)
(Jersey) Regulations 2008 on payment of an annual fee of GBP100. The Company has
been granted international service entity status for the year 2009.
8. Earnings per share
+-----------------------------------------------+------------+------------+
| In thousands of pounds sterling, except | | |
| shares | | |
+-----------------------------------------------+------------+------------+
| | Period | Period |
| | ended 30 | ended 30 |
| | June 2009 | June 2008 |
+-----------------------------------------------+------------+------------+
| | | |
+-----------------------------------------------+------------+------------+
| Basic Earnings per Share | | |
+-----------------------------------------------+------------+------------+
| Loss attributable to equity holders | - | - |
+-----------------------------------------------+------------+------------+
| | - | - |
+-----------------------------------------------+------------+------------+
| | | |
+-----------------------------------------------+------------+------------+
| Weighted average number of Ordinary Shares | 2 | 2 |
+-----------------------------------------------+------------+------------+
| | | |
+-----------------------------------------------+------------+------------+
| Basic loss per Ordinary Share (GBP'000) | - | - |
+-----------------------------------------------+------------+------------+
9. Group Membership
The Company is a wholly owned subsidiary of Real Estate Opportunities Limited, a
company incorporated in Jersey. The consolidated financial statements of Real
Estate Opportunities may be obtained from Whiteley Chambers, Don Street, St
Helier, Jersey JE49WG, Channel Islands.
10. Related party disclosures
REO Securities Limited was incorporated for the purpose of facilitating a scheme
of arrangement to cancel the Zero Dividend Preference (ZDP) shares in REO and to
issue the New ZDP shares in REO Securities Limited on a one for one basis to the
existing shareholders of REO.
This transaction completed in February 2008. Although the New ZDP shares are
entitled to a pre-determined capital repayment on the ZDP Repayment Date, being
the 31 May 2011, this is not guaranteed. The rights of the New ZDP share are
substantially similar to the rights of the ZDP shares in REO which were
cancelled as part of the scheme of arrangement.
In order for REO Securities Limited to have sufficient assets to repay the ZDP
Shares, REO and REO Securities Limited have entered into an arrangement pursuant
to an Undertaking Agreement whereby the net assets of REO will effectively be
made available to meet the repayment entitlement of the ZDP Shares on the
Repayment Date, 31 May 2011.
Pursuant to the Undertaking Agreement, REO agrees to contribute to the Company
(by way of gift, capital contribution or otherwise) such an amount as will
result in REO Securities Limited having sufficient assets to satisfy the then
current or, as the case may be, final capital entitlement of the ZDP Shares on
the Repayment Date or any earlier winding up of the Company.
The related party transaction referred to above was made on an arms length
basis.
11. Restatement
The income statement for the period ended 30 June 2008 has been restated to
reflect the company's income on the amount due from REO. The impact of this
restatement is to reduce the loss for the period to the 30 June 2008 by
GBP3,389,000.
Independent Review Report to REO Securities Limited
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30 June
2009 which comprises the condensed income statement, condensed statement of
comprehensive income, condensed statement of financial position, condensed
statement of cashflows, condensed statement of changes in equity and the related
explanatory notes. We have read the other information contained in the
half-yearly 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 the terms of our
engagement to assist the company in meeting the requirements of the Transparency
(Directive 2004/109/EC) Regulations 2007 ("the TD Regulations") and the
Disclosure and Transparency Rules of the UK's Financial 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 half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the TD Regulations and the Disclosure and
Transparency Rules of the UK FSA.
As disclosed in note 1, the annual financial statements of the company are
prepared in accordance with IFRSs as adopted by the EU. The directors are
responsible for ensuring that the condensed set of financial statements included
in this half-yearly financial report has been prepared in accordance with IAS 34
Interim Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial 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 set of financial statements in the half-yearly report for the
six months ended 30 June 2009 is not prepared, in all material respects, in
accordance with IAS 34 as adopted by the EU, the TD Regulations the Disclosure
and Transparency Rules of the UK FSA.
Emphasis of matter - going concern and valuation of investment properties and
investment properties under development
The Company's major asset is a receivable from its parent, REO a company
incorporated in Jersey. REO Securities' ability to continue in business and
satisfy its future obligations to the holders of the ZDP's is dependent on REO.
To that end, REO and REO Securities Limited have entered into an arrangement
pursuant to an Undertaking Agreement whereby the net assets of REO will
effectively be made available to meet the repayment entitlement of the ZDP
Shares on the Repayment Date, 31 May 2011.
In forming our conclusion, which is not qualified, we have considered the
adequacy of the disclosures made in note 1 to the condensed financial statements
concerning:
(i) the impact of current market conditions on REO's ability to continue as a
going concern and
(ii) the method of valuation of REO's investment properties and investment
properties under development.
As set out in that note there are a number of material uncertainties which may
cast doubt on the ability of REO to continue as a going concern. These matters
include the ability of REO to successfully negotiate the roll over and renewal
of bank loans of GBP556 million which fall due in 2009 and GBP201 million which
fall due in 2010, realise GBP35 - GBP40 million in cash from the completion of a
corporate transaction and to secure the continuing support from REO's bankers in
the event of future breaches of covenants on other loans in a climate of
deteriorating property values.
While the ultimate outcome of these matters cannot be assessed with certainty at
this time, the Directors are of the opinion that based on the current stage of
negotiations with the REO bankers that it is appropriate to prepare the
financial statements on the going concern basis.
The condensed financial statements do not include the adjustments that would
result if the Company was unable to continue as a going concern.
REO's principal assets comprise investment properties and investment properties
under development properties, located in Ireland and the UK, which are being
carried in its financial statements at market value.
Given the materiality of these amounts and the inherent subjectivity in such
valuations, we draw your attention to note 1 to the financial statements, which
highlights that these valuations have been carried out by the Directors of REO
using assumptions, and exercising certain judgements, based on market conditions
as at 30 June 2009.
KPMG
Chartered Accountants
1 Stokes Place
St. Stephen's Green
Dublin 2
Ireland
26 August 2009
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SESFWMSUSEFA
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