Final Results

Real Estate Investors PLC 04 April 2007 REAL ESTATE INVESTORS PLC ("REI" or "the Company") PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006 Real Estate Investors PLC (AIM:RLE), the West Midlands based property company, today announces its preliminary results for the year ended 31 December 2006. Highlights: * £25 million share placing in December 2006 issued at premium to market price * Gross property assets up 21% to £23.9m (2005: £19.8m) * Rental income increased to £1.4m (2005: £1.2m) * Net assets up to £33.3m (2005: £5.8m), equivalent to 10p per share (excluding increase in value of trading stock) * Year end balance sheet cash £26.9m * Recent acquisition of investment properties for £11.5m in West Midlands For further information please contact: Enquiries: Real Estate Investors plc +44 (0)121 524 2588 Paul Bassi Smith & Williamson Corporate Finance Limited +44 (0)20 7131 4000 Azhic Basirov / Siobhan Sergeant Powerscourt Media Limited +44 (0)20 7236 5615 Victoria Brough/ Claire Melly Notes to Editors 1. REI is an AIM listed property investment and development company specialising in commercial property throughout the Midlands and Central England 2. REI is focused on delivering shareholder value through returns generated from strong yields and capital enhancements. This is achieved by targeting investments in orphaned, distressed, part-let and underperforming commercial property assets 3. REI's Board is led by respected property investor Paul Bassi, who has over 23 years of property experience. Mr Bassi is also co-founder and chairman of Bond Wolfe Auctioneers and deputy chairman of Bigwood Chartered Surveyors - the combined businesses place them in the UK's top 50 property auction houses and estate agents 4. REI was admitted to trading on AIM in June 2004. In December 2006, REI successfully raised £25 million to aggressively grow its property portfolio, at that time, estimated to be worth approximately £28 million. Paul Bassi is the largest shareholder in the Company 5. Further information on REI can be found at www.reiplc.com CHAIRMAN'S STATEMENT It gives me considerable pleasure to be able to report to you on a year of tremendous progress and advancement in REI's activities. In my statement that accompanied the 2006 interim results, I commented that we had created the solid platform necessary to enable further growth and the rapid expansion of the business. Indeed, following the £2.7 million share subscription and the appointment to the board of Paul Bassi and Marcus Daly, we were pleased to announce, on 20 December 2006, the successful completion of a £25 million institutional fundraising, which was oversubscribed. We are greatly encouraged by the level of support from our new investors which will enable us to concentrate on implementing our strategy of building a £150 million portfolio over the next 18 months. The background and reasons for the £25 million placing were well covered in the 20 December announcement and the board, headed by our new Chief Executive and major shareholder Paul Bassi, has moved quickly to take advantage of market opportunities. I am pleased to report that our gross property assets increased over the year by 21% from £19.8 million to £23.9 million. Rental income for 2006 was £1.4 million compared to £1.2 million for 2005 and net assets increased from £5.8 million to £33.3 million. The reported net asset value per share has been diluted to 9.8p per share mainly as a result of the share issues, but this figure excludes a significant increase in the value of our trading stock, which is not revalued in the accounts. Whilst the results for the year show a loss of £513,000, this was mainly as a result of a deficit on property revaluation of £272,000, director's bonus and compensation of £160,000 and a provision in respect of share warrants valued at £121,000. We started the new financial year with £26.9 million of cash balances, two major acquisitions and a market capitalisation of £40 million. Consistent with our strategy of concentrating our business in the Midlands and Central England, we announced at the beginning of February this year our first acquisition since the year end fundraising. We purchased, off market, the freehold interest in 102/106 Colmore Row and 1-6 Bennett's Hill, Birmingham for a cash consideration of £6.3 million. This prime city centre property comprises 30,000 square feet of offices and presently produces £200,000 in annual rental. We shall be refurbishing the vacant space and anticipate a strong demand from quality tenants. On 19 March 2007 we announced our second acquisition - we purchased Avon House, Buntsford Gate, Bromsgrove for a cash consideration of £5.2 million. The property consists of approximately 26,000 square feet of modern high quality offices, close to the Midlands motorway network and within easy access to Birmingham City centre and its international airport. The property is currently part let, with tenant interest already expressed in the void space. Once fully let we anticipate that the property will generate in excess of £400,000 rent per annum. These deals are the first examples of the major opportunities available to us now that the group has significant resources with which it is able to make acquisitions for cash. We made a number of purchases and a disposal in the first six months of 2006, which were the subject of detailed coverage in our June interim statement. These transactions increased the group's portfolio to £28 million and are performing well. In order to focus on our preferred area of operations, we have decided to transfer our headquarters to West Bromwich, where REI's activities will be supported by Bond Wolfe Auctioneers and Bigwood Chartered Surveyors, of which Paul Bassi remains Chairman. Marcus Daly, who joined the board in June 2006, has been appointed full time Finance Director, effective from 1 January 2007. It has been an eventful and exciting year for Real Estate Investors PLC, one in which the group's market capitalisation has advanced to £40 million and the demanding targets set at flotation in June 2004 have been achieved. Our strong, institutional shareholder base and the cash resources now available to the group will enable the board to take forward its stated strategy of creating a substantial Central England focused listed property company and delivering strong returns for shareholders. At this stage the directors are not recommending the payment of a dividend. I recommend that you visit our interactive website www.reiplc.com where financial and corporate information may be viewed. Continuously updated information and news on REI can be accessed and company announcements emailed to you. I am looking forward to writing to you again shortly. Peter H Lewin Chairman GROUP PROFIT AND LOSS ACCOUNT For the year ended 31 December 2006 Note 2006 2005 £000 £000 Turnover - continuing operations 1,324 1,181 - acquisitions 167 - - share of joint venture (66) - ----- ----- Group turnover 1,425 1,181 Administration expenses (875) (441) Other operating income - 35 ----- ----- Operating profit - continuing operations 544 775 - acquisitions 6 - ----- ----- 550 775 Surplus on disposal of fixed asset investment property 45 45 Share of operating profit of joint venture 57 - Deficit on revaluation of investment properties (272) - ----- ----- Profit on ordinary activities before interest 380 820 Net interest payable and similar charges - group (892) (800) - joint venture (48) - ----- ----- (940) (800) ----- ----- (Loss)/profit on ordinary activities before taxation (560) 20 Tax credit/(charge) on (loss)/profit on ordinary activities 47 (6) ----- ----- (Loss)/profit on ordinary activities after taxation (513) 14 ===== ===== Basic (loss)/earnings per share 2 (0.62p) 0.03p ===== ===== Diluted (loss)/earnings per share 2 (0.62p) 0.03p ===== ===== The results of the group for the period related entirely to continuing operations. There is no difference between the profit on ordinary activities and the retained profit for the period stated above and their historical cost equivalents. GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the year ended 31 December 2006 2006 2005 £000 £000 (Loss)/profit on ordinary activities after taxation (513) 14 Unrealised surplus on revaluation of investment properties 130 708 ----- ----- Total recognised (losses) and gains for the year (383) 722 ===== ===== GROUP BALANCE SHEET AT 31 DECEMBER 2006 Note 2006 2005 £000 £000 Fixed assets Intangible assets - goodwill 165 117 - negative goodwill (903) (903) ------ ------ (738) (786) Tangible assets 14,248 10,216 ------ ------ 13,510 9,430 Investment in joint venture Share of gross assets 1,386 - Share of gross liabilities (1,062) - ------- ------- 324 - ------- ------- 13,834 9,430 Current assets Stock 9,703 9,703 Debtors 488 189 Investments 435 1,282 Cash at bank 26,889 1,065 ------ ------ 37,515 12,239 Creditors: amounts falling due within one year 3 (1,162) (1,840) ------ ------ Net current assets 36,353 10,399 ------ ------ Total assets less current liabilities 50,187 19,829 Creditors: amounts falling due after more than one year Convertible debt (325) (325) Other 3 (16,545) (13,695) ------- ------- (16,870) (14,020) ------- ------- Net assets 33,317 5,809 ======= ======= Capital and reserves Called up share capital 4 3,407 523 Share premium account 29,472 4,586 Capital redemption reserve 45 45 Other reserves 121 - Revaluation reserve 838 708 Profit and loss account (566) (53) ------ ----- Shareholders' funds 33,317 5,809 ====== ===== GROUP CASH FLOW STATEMENT For the year ended 31 December 2006 2006 2005 £000 £000 Net cash inflow from operating activities 528 921 ----- ----- Returns on investments and servicing of finance Interest received 90 36 Interest paid (1,030) (658) ----- ----- Net cash outflow from returns on investments and servicing of finance (940) (622) Taxation - (186) Capital expenditure and financial investment Purchase of tangible fixed assets (2,011) (4,596) Sale of investment properties 456 1,170 ------ ------ Net cash outflow from capital expenditure and financial investment (1,555) (3,426) Acquisitions and disposals Purchase of subsidiary undertakings (349) (2,254) Investment in joint venture (224) - Payment of amounts owed by subsidiaries to vendors (247) (66) Net cash from purchase of subsidiaries 30 - ------ ------ Net cash outflow from acquisitions and disposals (790) (2,320) Management of liquid resources Treasury deposits placed (24,750) - ------ ------ (24,750) - Financing Proceeds from issue of shares 27,840 1,061 Expenses of issue of shares (1,071) (37) Receipts from borrowing 1,752 11,207 Repayments of borrowing (784) (6,305) Funds deposited with lenders 847 (1,263) Finance lease taken out - 7 Finance lease repaid (3) - ------ ------ Net cash inflow from financing 28,581 4,670 ------ ------ Increase/(decrease) in cash 1,074 (963) ====== ====== NOTES TO THE PRELIMINARY ANNOUNCEMENT For the year ended 31 December 2006 1. Basis of preparation The preliminary results of the group set out in this preliminary announcement do not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The financial information for the year ended 31 December 2006 has been extracted from the group's statutory financial statements to that date, upon which the auditor's opinion is unqualified and does not include any statement under Section 237 of the Companies Act 1985. The statutory financial statements have not yet been filed with the Registrar of Companies. The financial information has been prepared under the historical cost convention as modified by the revaluation of investment properties and in accordance with applicable United Kingdom accounting standards, and is consistent with the policies set out in the group's statutory accounts for the period ended 31 December 2006. 2. Earnings per share The calculation of earnings per share is based on the profit retained for the year and on the weighted average number of shares in issue during the year. The calculation of diluted earnings per share is based on the basic earnings per share adjusted for the issue of shares on the assumed conversion of the convertible loan notes. Reconciliations of the earnings/(loss) and the weighted average numbers of shares used in the calculations are set out below. 2006 2005 Loss/ Weighted Earnings Earnings Weighted Loss per earnings average per share £000 average share £000 number amount number amount of shares of shares Basic earnings/ (loss) per share (513) 82,085,371 (0.62p) 14 44,477,097 0.03p ------ ---------- ----- --- ---------- ---- Dilutive effect of conversion of convertible loan 2,954,545 notes ---------- Diluted earnings per share 14 47,431,642 0.03p --- ---------- ---- The conversion of convertible loan notes and exercise of share warrants would not be dilutive to the loss per share. 3. Financial instruments Maturity of financial liabilities The group financial liabilities analysis at 31 December 2006 was as follows: Group Group 2006 2005 £000 £000 In less than one year: Bank borrowings 370 1,127 In more than one year but less than two years: Bank borrowings 404 382 In more than two years but less than five years: Bank borrowings 2,924 1,172 In more than five years: Bank borrowings 13,463 12,377 ------ ------ 17,161 15,058 Deferred arrangement costs (246) (236) ------ ------ 16,915 14,822 ====== ====== Borrowing facilities The group has no undrawn committed borrowing facilities at 31 December 2006. 4. Share capital 2006 2005 2006 2005 Number of Number £000 £000 shares of shares Authorised: Ordinary shares of 1p each 1,000,000,000 1,000,000,000 10,000 10,000 ============= ============= ====== ====== Allotted, called up and fully paid Ordinary shares of 1p each 340,714,327 52,316,197 3,407 523 ============= ============= ====== ====== The excess of the total consideration for shares issued of £25,957,000 over the nominal value of £2,884,000 has been credited to the share premium account. On 9 March 2006 1,000,000 ordinary shares were issued for £100,000 as part consideration for the acquisition of a freehold property in West Bromwich. On 26 June 2006 223,130 ordinary shares 1p were issued for £23,130 as part consideration for services. On 29 June 2006 22,250,000 ordinary shares of 1p were issued for £2,175,000 in cash. On 29 June 2006 675,000 ordinary shares of 1p were issued for £67,500 as consideration for commission in connection with the share issue. On 25 July 2006 1,250,000 ordinary shares of 1p were issued for £125,000 in cash. On 25 July 2006 7,000,000 ordinary shares of 1p were issued for £700,000 as part consideration for the acquisition of the share capital of Rightforce Limited. On 2 August 2006 4,000,000 ordinary shares of 1p were issued for £400,000 in cash. On 24 August 2006 2,000,000 ordinary shares of 1p were issued for £200,000 as part consideration for the acquisition of a freehold property in Paisley. On 15 December 2006 250,000,000 ordinary shares of 1p were issued for £25,000,000 in cash. The directors were granted share warrants on 29 June 2006 in respect of 10,637,500 Ordinary shares and on 25 July 2006 in respect of 4,750,000 Ordinary shares. The share warrants are exercisable from two years from the date of the grant of the option and will lapse within seven years if not exercised. The warrants were granted on the basis of 1 for 2 shares held at the date of the grant and are exercisable at 12p. The fair value of these options of £121,000 has been charged to the profit and loss account. 5. Post balance sheet events The company completed the purchase on 26 March 2007 of freehold property at 102/ 106 Colmore Row and 1-6 Bennett's Hill, Birmingham for a consideration of £6.3 million and on Avon House, Bromsgrove for a consideration of £5.2 million satisfied in cash. 6. Copies of announcement Copies of this announcement are available from the Company's business premises at West Plaza, 8th Floor East, West Bromwich, West Midlands, B70 8JJ. 3 April 2007 This information is provided by RNS The company news service from the London Stock Exchange FWDSWSEIL

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