ATLANTIC LEAF PROPERTIES LIMITED - Abridged unaudited financial statements for the 3 and 6 months ended 31 Aug 2018 and declaration of dividend

2018-10-11 17:01:00

ALP 201810110065A
Abridged unaudited financial statements for the 3 and 6 months ended 31 Aug 2018 and declaration of dividend

Atlantic Leaf Properties Limited
(Incorporated in the Republic of Mauritius)
(Registration number: 119492 C1/GBL)
SEM share code: ALPL.N0000
JSE share code: ALP
ISIN: MU0422N00009
www.atlanticleaf.mu
('Atlantic Leaf' or 'the Company') 

ABRIDGED UNAUDITED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED 31 AUGUST 2018 
AND DECLARATION OF 4.65 GBP PENCE DIVIDEND PER SHARE 

DIRECTORS' COMMENTARY

Atlantic Leaf presents its results for the three and six months ended 31 August 2018.

Results

Atlantic Leaf produced adjusted headline earnings per share of 4.76 GBP pence for the first six months of the financial year, 
an increase of 5.5% over the comparable period 2017/18.

The property market in the UK has had mixed results in the past year. The industrial sector, to which Atlantic Leaf has a 70% exposure,
continues to strengthen with yields contracting further. Conversely, the retail sector has shown some weakness with yields continuing
to soften and the sector being impacted by insolvencies and company voluntary arrangements. Atlantic Leaf has been affected by
retail weakness in respect of our Haydock asset, formerly let to Palmer & Harvey, and more recently our Brecon asset, let to Homebase.
Haydock remains vacant despite a concerted marketing effort and this loss of income continues to have a negative impact on our earnings.
In August 2018 the creditors of Homebase approved a company voluntary arrangement that resulted in a 45% reduction in rent at our
Brecon property, which will have a further adverse impact on income. We have explored alternative tenants to replace Homebase at
the Brecon property and have made good progress in this regard. We believe that we will attract a new long-term tenant in the next
few months.

In March 2018 Atlantic Leaf acquired a GBP15 million asset in Knowsley and this asset has performed well since acquisition.

Total assets as at 31 August 2018 now stand at GBP374 million, at an average forward yield of 7.1%. As at 31 August 2018 the Company's
loan-to-value ratio was 43.0% (47.0% when including our proportional look through to the joint venture investment).

Impact on valuations

Whilst Haydock is vacant and Brecon has a reduced rental, the board of directors of the Company (the 'Board') has revalued these
properties down to a value near vacant possession based on the methodology used by external valuers. In the prior financial year the
Board valued the Haydock property at GBP7.5 million (from GBP11.2 million) and at 31 August 2018 has valued the Brecon property at
GBP4.1 million (from GBP5.81 million). We believe these are conservative valuations, and that as soon as new leases are negotiated the
valuations of these properties will return to normalised levels and will have a positive effect on net asset value ('NAV').

Refinancing of long-term debt

The Company has agreed terms to refinance approximately GBP115 million of debt with HSBC to mature in October 2022 and October
2023. Terms have also been agreed with Santander to refinance the Company's long-term debt they currently provide, and we expect
the new debt terms to be implemented during November 2018. These will result in the current portion of long-term liabilities reverting to
non-current liabilities.

The benefit of this refinance is that we will now have an average debt maturity of approximately four years which is in line with the
Company's overall debt strategy. In addition, the refinance removes the risk of possible disruption in the finance market that could be 
caused by Brexit in 2019 and 2020. Both debt facilities release additional cash which will be used to acquire further assets as part of our
strategy of acquiring more modern, newer assets.

The expected impact of significantly extending the debt profile is an increase in the average cost of debt from 3.3% to 3.55%.

Conversion to UK REIT

As previously announced in April 2018, Atlantic Leaf intends to convert to a UK REIT and redomicile to Jersey. These plans are well on track 
and we are in the process of obtaining final regulatory approvals and consents. 

We believe that becoming a REIT will have a positive impact on future distributions and the competitiveness of the Company.

Strategy for second half of FY 2019

Atlantic Leaf is considering the sale of certain smaller assets in the portfolio where management believes it can realise good value in the
current market. Proceeds from these sales are expected to be deployed into newer assets where greater long-term growth is achievable.
This strategy will in the short to medium-term improve the overall quality of the portfolio and assist in rebalancing the asset spread from a
tenant concentration risk perspective. We are currently in final negotiations to acquire an asset that would fit with this strategy.

The first asset to be sold was our Upton asset sold in June 2018 at auction for GBP1.2 million, reflecting a 6% net initial yield and a realised
profit of GBP250 000. Overall, Atlantic Leaf earned a return of 21% over the period the asset was held.

Dividend

The Board is pleased to announce an interim dividend of 4.65 GBP pence per share (2017/18: 4.50 GBP pence per share), an increase of
3.3% over the prior corresponding period. This maintains the trend of increasing dividends to our shareholders at a rate above UK inflation.

Further information regarding the interim dividend, including salient dates and exchange rates, will be announced separately.

Outlook

The second half of the financial year will be challenging for the Company. Revenue is under pressure as a result of the vacant Haydock
property and the reduced rental paid by Homebase at Brecon. In addition, we are forecasting higher finance costs as a result of refinancing
the Company's debt and extending our debt maturity profile.

We will be able to offset some of these events through asset management activities. Taking the above into account the Company is likely
to achieve full year growth in distributions of 2%-3% which is in line with UK inflation. This revised forecast does not consider the impact 
of converting to a REIT. When factoring in the effect of converting to a REIT from November, a full year distribution of 9.5 GBP pence would be 
forecast, representing growth of approximately 5% which is in line with previous forecasts. This forecast statement and the forecasts underlying 
such statement are the responsibility of the Board and have not been reviewed or reported on by the Company's auditors.

By order of the Board

Intercontinental Trust Limited
Company Secretary

11 October 2018

STATEMENT OF FINANCIAL POSITION
                                                                                            Group           Group            Group
                                                                                        Unaudited       Unaudited          Audited
                                                                                            as at           as at            as at
                                                                                        31 August       31 August      28 February
                                                                                             2018            2017             2018
                                                                                              GBP             GBP              GBP
ASSETS
Non-current assets                                                                    362 058 171     303 928 809      352 475 304
Investment properties                                                                 333 375 021     303 068 000      319 404 723
Listed investments                                                                      4 058 956         710 686        7 154 208
Investment in joint venture                                                            24 460 533               -       25 766 250
Other receivables                                                                         163 661         150 123          150 123
Current assets                                                                         12 186 532       9 458 970       10 378 826
Trade and other receivables                                                             3 753 225       2 253 918        3 760 371
Cash and cash equivalents                                                               8 433 307       7 205 052        6 618 455
Total assets                                                                          374 244 703     313 387 779      362 854 130
Equity and liabilities
Equity                                                                                203 521 607     155 412 980      204 205 734
Share capital                                                                         198 498 451     152 772 761      198 467 699
Cash flow hedge reserve                                                                 (324 016)     (1 558 640)        (495 679)
Retained earnings                                                                       5 347 172       4 198 859        6 233 714
Liabilities
Non-current liabilities                                                               102 450 411     146 462 782      131 829 657
Interest-bearing borrowings                                                           102 450 411     146 462 782      131 829 657
Current liabilities                                                                    68 272 685      11 512 017       26 818 739
Trade and other payables                                                                5 060 764       3 633 747        4 173 237
Current portion of interest-bearing borrowings                                         61 769 032       4 820 306       21 213 518
Derivative financial instrument                                                           394 791       1 369 271          589 520
Tax payable                                                                             1 048 098       1 688 693          842 464
Total equity and liabilities                                                          374 244 703     313 387 779      362 854 130
Number of shares in issue                                                             188 976 628     142 671 209      188 976 628
Net asset value per share (GBP)                                                              1.08            1.09             1.08
Net asset value per share excluding cash flow hedge reserve                                  1.08            1.10             1.08

STATEMENT OF COMPREHENSIVE INCOME

                                                                Group           Group           Group         Group
                                                            Unaudited       Unaudited       Unaudited     Unaudited          Group
                                                         Three months      Six months    Three months    Six months        Audited
                                                                ended           ended           ended         ended     Year ended
                                                            31 August       31 August       31 August     31 August    28 February
                                                                 2018            2018            2017          2017           2018
                                                                  GBP             GBP             GBP           GBP            GBP
Rental income                                               6 239 156      11 847 970       5 699 569    11 400 073     21 201 662
Tenant recoveries                                             297 872         570 680               -             -              -
Straight-line lease income                                    305 868       1 028 618         323 377       646 754      2 892 734
Revenue                                                     6 842 896      13 447 268       6 022 946    12 046 827     24 094 396
Property operating expenses                                 (584 412)     (1 111 178)       (210 216)     (432 093)      (856 597)
Net property income                                         6 285 484      12 336 090       5 812 730    11 614 734     23 237 799
Other operating expenditure                                 (808 450)     (1 687 557)       (648 333)   (1 205 900)    (2 615 124)
Operating income                                            5 450 034      10 648 533       5 164 397    10 408 834     20 622 675
Other income                                                   38 957          39 416           5 000        14 172          5 243
Investment income                                              74 135         295 129          16 505        47 107        158 350
Profit on disposal of investments 
properties and listed investments                             249 724         378 068               -             -        134 985
Profit/(loss) on foreign exchange                            (35 863)           3 354             879        40 525         67 316
Fair value adjustments                                    (1 505 536)     (1 889 129)       (324 989)     (638 261)        585 784
Finance costs                                             (1 367 244)     (2 710 223)     (1 232 505)   (2 477 440)    (4 860 164)
Equity accounted profit                                       651 065       1 868 844               -             -      1 805 566
Profit before taxation                                      3 555 272       8 633 992       3 629 287     7 394 937     18 519 755
Taxation                                                    (248 248)       (827 609)       (500 050)     (965 672)    (1 551 687)
Profit for the period                                       3 307 024       7 806 383       3 129 237     6 429 265     16 968 068
Other comprehensive income
Items that will be reclassified subsequently
to profit or loss
Fair value movement on interest rate swaps                    357 815         171 663         266 717       322 309      1 385 270
Total comprehensive income for the period                   3 664 839       7 978 046       3 395 954     6 751 574     18 353 338

STATEMENT OF CHANGES IN EQUITY

                                                                                                          Cash flow
                                                                             Stated         Retained          hedge
                                                                            Capital         Earnings        reserve          Total
                                                                                GBP              GBP            GBP            GBP
Balance at 1 March 2017                                                 152 772 761        3 904 456    (1 880 949)    154 796 268   
Profit for the year                                                               -       16 968 068              -     16 968 068   
Dividends                                                                         -     (14 638 810)              -   (14 638 810)   
Issue of shares (net of transaction costs)                               45 694 938                -              -     45 694 938   
Other comprehensive income                                                        -                -      1 385 270      1 385 270   
Balance at 28 February 2018                                             198 467 699        6 233 714      (495 679)    204 205 734   
Profit for the period                                                             -        7 806 383              -      7 806 383   
Dividends                                                                         -      (8 692 925)              -    (8 692 925)   
Issue of shares (net of transaction costs)                                   30 752                -              -         30 752   
Other comprehensive income                                                        -                -        171 663        171 663   
Balance at 31 August 2018                                               198 498 451        5 347 172      (324 016)    203 521 607   

STATEMENT OF CASH FLOWS

                                                                                             Group          Group
                                                                                         Unaudited      Unaudited            Group
                                                                                        Six months     Six months          Audited
                                                                                             ended          ended       Year ended
                                                                                         31 August      31 August      28 February
                                                                                              2018           2017             2018
                                                                                               GBP            GBP              GBP
Cash generated from operations                                                          10 522 409      8 805 384       15 770 848
Interest received                                                                           25 095         26 574           76 121
Finance costs                                                                          (2 316 299)    (2 161 494)      (4 291 899)
Tax paid                                                                                 (621 974)      (483 490)      (1 596 311)
Net cash generated from operating activities                                             7 609 231      6 186 974        9 958 759
Cash flows from investing activities
Acquisition of investment properties                                                  (15 885 297)              -     (12 313 853)
Investment in joint venture                                                                      -              -     (24 794 876)
Sale of investment property                                                              1 182 724
Acquisition of listed investments                                                                -              -      (7 787 184)
Sale of listed investments                                                               3 345 085          9 063          925 802
Dividends received                                                                       3 388 469         18 274          941 544
Net cash (utilised in)/generated from investing activities                             (7 969 019)         27 337     (43 028 567)
Cash flow from financing activities
Proceeds from issue of shares                                                                    -              -       45 694 938
Proceeds from borrowings                                                                14 521 815              -        2 790 691
Repayment of borrowings                                                                (3 650 896)    (5 611 000)      (6 921 950)
Dividends paid                                                                         (8 692 925)    (6 134 862)     (14 638 810)
Net cash generated from/(utilised in) financing activities                               2 177 994   (11 745 862)       26 924 869
Increase/(decrease) in cash and cash equivalents                                         1 818 206    (5 531 551)      (6 144 939)
Cash and cash equivalents at beginning of the year                                       6 618 455     12 696 078       12 696 078
Effects of exchange difference on cash and cash equivalents                                (3 354)         40 525           67 316
Cash and cash equivalents at end of period                                               8 433 307      7 205 052        6 618 455

SEGMENTAL REPORTING - SIX MONTHS ENDED 31 AUGUST 2018
                                                                                              Retail
                                                             Industrial        Office      Warehouse    Unallocated          Total
                                                                    GBP           GBP            GBP            GBP            GBP
Operating income                                              8 455 769     2 860 887        104 434      (772 557)     10 648 533
Other income                                                          -             -              -        337 899        337 899
Profit on disposal of investments                               249 724             -              -        128 344        378 068
Fair value adjustments                                        (619 762)       319 144    (1 710 000)        121 489    (1 889 129)
Interest expense                                            (2 029 253)     (623 176)       (49 041)        (8 753)    (2 710 223)
Equity accounted profit (net of tax)                            579 411             -      1 289 433              -      1 868 844
Tax expense                                                   (405 403)     (212 300)      (162 878)       (47 028)      (827 609)
Profit/(loss) for the period                                  6 230 486     2 344 555      (528 052)      (240 606)      7 806 383
Adjustments
Fair value adjustments (including associate)                    419 423     (319 144)      1 795 538      (121 489)      1 774 328
Straight line lease income                                    (572 460)      (20 846)              -              -      (593 306)
Adjusted headline earnings                                    6 077 449     2 004 565      1 267 486      (362 095)      8 987 405
Statement of financial position
Total assets                                                257 477 802    78 097 985     22 972 335     15 696 581    374 244 703
Total borrowings                                            119 238 360    41 554 384      2 122 552      1 304 147    164 219 443

SEGMENTAL REPORTING - SIX MONTHS ENDED 31 AUGUST 2017
                                                                                              Retail
                                                             Industrial        Office      Warehouse     Unallocated         Total
                                                                    GBP           GBP            GBP             GBP           GBP
Operating income                                              7 989 527     2 676 621        193 552       (450 866)    10 408 834
Other income                                                          -             -              -         101,804       101,804
Profit/(loss) on disposal of investments                              -             -              -               -             -
Fair value adjustments                                        (592 449)      (54 306)              -           8 494     (638 261)
Interest expense                                            (1 839 142)     (587 833)       (50 465)               -   (2 477 440)
Equity accounted profit (net of tax)                                  -             -              -               -             -
Tax expense                                                   (634 310)     (186 548)       (21 582)       (123 232)     (965 672)
Profit/(loss) for the period                                  4 923 626     1 847 934        121 505       (463 800)     6 429 265
Adjustments
Fair value adjustments                                          592 449        54 306              -         (8 494)       638 261
Straight line lease income                                    (592 449)      (54 306)              -           8 494     (638 261)
Adjusted headline earnings                                    4 923 626     1 847 934        121 505       (463 800)     6 429 265
Statement of financial position
Total assets                                                221 566 573    76 992 780      5 810 000      9 018 426    313 387 779
Total borrowings                                            108 325 643    40 775 729      2 181 716              -    151 283 088

RECONCILIATION OF BASIC EARNINGS TO DISTRIBUTABLE EARNINGS
                                                                Group          Group           Group          Group
                                                            Unaudited      Unaudited       Unaudited      Unaudited          Group
                                                         Three months     Six months    Three months     Six months        Audited
                                                                ended          ended           ended          ended     Year ended
                                                            31 August      31 August       31 August      31 August    28 February
                                                                 2018           2018            2017           2017           2018
                                                                  GBP            GBP             GBP            GBP            GBP
Basic earnings                                              3 307 024      7 806 383       3 129 237      6 429 265     16 968 068
Less:
Fair value adjustments to investment properties             1 287 868      2 010 618         323 377        646 754    (1 130 136)
Net profit on disposal of investment properties in
joint venture                                                       -              -               -              -      (303 703)
Fair value adjustments to properties in joint venture               -      (114 801)               -              -      (291 390)
Net profit on disposal of investment properties             (249 724)      (249 724)               -              -              -
Headline earnings                                           4 345 168      9 452 476       3 452 614      7 076 019     15 242 839
Add back:
Straight-line lease income adjustments*                     (296 653)      (593 306)       (323 377)      (646 754)    (1 243 529)
Net profit on disposal of investment properties               249 724        249 724               -              -        303 703
Fair value adjustments to listed investments                  217 669      (121 489)               -              -        544 352
Adjusted headline earnings/Distributable earnings           4 515 908      8 987 405       3 129 237      6 429 265     14 847 365
Weighted average number of shares in issue                188 976 628    188 976 628     142 671 209    142 671 209    163 223 203
Basic and diluted earnings per share (GBP pence)                 1.75           4.13            2.19           4.51          10.40
Basic and diluted headline earnings per share (GBP
pence)                                                           2.30           5.00            2.42           4.96           9.34
Adjusted headline earnings per share (GBP pence)                 2.39           4.76            2.19           4.51           9.10
Interim dividend                                            8 787 413      8 787 413       8 503 948      8 503 948      8 503 948
Final dividend                                                                                     -              -      8 692 925
Total dividend                                              8 787 413      8 787 413       8 503 948      8 503 948     17 196 873
Interim dividend per share (GBP pence)                           4.65           4.65            4.50           4.50           4.50
Final dividend per share (GBP pence)                                -              -               -              -           4.60
Total dividend per share (GBP pence)                             4.65           4.65            4.50           4.50           9.10

* The exclusion of straight-line lease income relates specifically to the contractual rental escalations but does not exclude straight-line lease
  income on lease incentives such as the rent-free periods.

RELATED PARTY TRANSACTIONS

Per the Property Services Agreement, fees for the quarter ended 31 August 2018 paid to Martial Eagle Limited amounted to GBP 463 359
(2017: GBP 363 387).

NOTES

The Company is required to publish financial results for the three and six months ended 31 August 2018 in terms of Listing Rule 12.19 of
the Stock Exchange of Mauritius ('SEM'). The abridged unaudited financial statements for the three and six months ended 31 August
2018 ('financial statements') have been prepared in accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards ('IFRS') as issued by the International Accounting Standards Board ('IASB'),
interpretations issued by the IFRS Interpretation Committee ('IFRS IC'), the requirements of the SAICA Financial Reporting Guides and
the Pronouncements as issued by the Financial Reporting Standards Council, the Mauritian Companies Act 2001, the Mauritian Financial
Reporting Act 2004, the Mauritian Securities Act 2005, the SEM Listing Rules and the JSE Listings Requirements and contains the
information required by IAS 34: Interim Financial Reporting.

The accounting policies and methods of computation adopted in the preparation of these financial statements are in terms of IFRS and
consistent with those applied in the preparation of the audited financial statements for the year ended 28 February 2018.

These financial statements were approved by the Board on 11 October 2018. The financial statements have not been reviewed or reported
on by the Company's external auditors.

Copies of the financial statements and the Statement of direct and indirect interests of each officer of the Company, pursuant to Rule 8(2)(m) 
of the Securities (Disclosure Obligations of Reporting Issuers) Rules 2007 of Mauritius, are available free of charge, upon request at the 
Registered Office of the Company at c/o Intercontinental Trust Limited, Level 3, Alexander House, 35 Cybercity, Ebene 72201, Mauritius. 
Contact person: Mrs. Smitha Algoo-Bissonauth.

This communique is issued pursuant to SEM Listing Rules 11.3 and 12.20 and section 88 of the Mauritian Securities Act 2005. The Board accepts 
full responsibility for the accuracy of the information contained in these financial statements and this announcement. The Directors have 
disclosed all matters or circumstances arising subsequent to the period ended 31 August 2018 that require any additional disclosure or 
adjustment to the financial statements.

Atlantic Leaf has primary listings both on the Official Market of the SEM and on the Main Board of the JSE Limited.

JSE sponsor
Java Capital                                                            +27 11 722 3050

Company secretary
Intercontinental Trust Limited                                          +230 403 0800

SEM authorised representative and sponsor
Perigeum Capital Ltd                                                    +230 402 0890



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