Results for the Year Ended 31 August 2016

REDEFINE INTERNATIONAL P.L.C.

("Redefine International" or the "Company" or the "Group")

(Registration number 010534V)

LSE share code: RDI

JSE share code: RPL

ISIN: IM00B8BV8G91

RESULTS FOR THE YEAR ENDED 31 AUGUST 2016

STRENGTHENED PORTFOLIO DELIVERS RESILIENT INCOME PERFORMANCE

Redefine International, the FTSE 250 income-focused UK-REIT, which has a primary listing on the London Stock Exchange and a secondary listing on the Johannesburg Stock Exchange, today announces its results for the year ended 31 August 2016.

Financial Highlights

· 17.6% increase in earnings available for distribution to £52.2m (2015: £44.4m)

· Second interim dividend of 1.575p per share, taking the full year dividend to 3.2p per share (2015: 3.25p per share)

· Gross rental income increase of 1.0% on a like-for-like basis

· Portfolio valuation increase of 3.4% on a like-for-like basis

· EPRA NAV per share of 40.0p (2015: 41.0p), a decrease of 2.4%, incorporating a one-off impact of AUK portfolio acquisition costs and a 1.0% increase in UK Stamp Duty Land Tax ("SDLT")

· LTV of 53.4% (2015: 51.8%) Weighted average cost of debt reduced by a further 50 bps to 3.4% (2015: 3.9%)

Operating Highlights

· Completion and integration of the transformational AUK portfolio acquisition, increasing the value of the portfolio to £1.5bn and significantly improving the quality of income

· Successful equity placement in February, raising gross proceeds of £115.0m above the target minimum amount of £100.0m

· Opportunistic disposal of 16 Grosvenor Street prior to completion of the AUK acquisition, realising a profit of £2.8m

· Sale of 10 petrol filling stations for £12.0m, 6.0% above the August 2015 book value and disposal of The Hague, the Company's last legacy asset

· Occupancy improved to 97.7% by ERV (2015: 97.5%)

· 25 leases totalling £2.6m in gross annualised rent completed since the EU referendum, 4.5% ahead of ERV

· Two properties disposed of post year end for £14.9m, an 11.7% premium to 31 August 2016 book values

Greg Clarke, Chairman, commented:

"This year marks the tenth anniversary of the Company's listing and the management team has continued to deliver a solid performance in challenging conditions, to create a much stronger Company, portfolio and earnings performance. Redefine International continues to offer superior distributions relative to its peer group and the resilience of the Company's share price in testing market conditions is reflective of the market's confidence in Redefine International to provide secure income underpinned by a diversified, well-located portfolio of assets with attractive property fundamentals. We are looking forward to building on these achievements as we enter our next decade as a public company."

Mike Watters, Chief Executive, commented:

"We have once again delivered a pleasing set of results against a challenging economic and political backdrop. Our performance was partly underpinned by the successful off-market acquisition of the AUK portfolio in the first half, which positioned us well for the future by significantly improving the quality of our portfolio and income streams. Our strengthened capital structure, lean cost base and a far-reaching asset management programme, puts us in a good position to grow through the next chapter in the property cycle.

While some uncertainty and volatility remains following the EU referendum decision, we are not yet seeing any notable change in the occupier market. Our track record and proven strategy of delivering income-focused total returns offers an increasingly attractive opportunity in this historic low interest rate environment. We are committed to driving Redefine forward to become the UK's leading income-focused diversified REIT."

Results presentation, webcast and conference call

A meeting for analysts and investors will take place today at 9.00a.m. (UK time) at FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. The presentation and a live webcast will be available at 9.00a.m. (UK time), 10.00a.m. (SA time) today which can be accessed via the homepage of the Company's website: www.redefineinternational.com.

Conference call dial-in numbers

United Kingdom Local: 020 3059 8125

South Africa Local: 0318 197 008 or 0800 999 282

All other locations: +44 20 3059 8125

Conference code: Redefine

For further information, please contact:

Disclaimer

This release includes statements that are forward-looking in nature. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Redefine International P.L.C. to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Any information contained in this release on the price at which shares or other securities in Redefine International P.L.C. have been bought or sold in the past, or on the yield on such shares or other securities, should not be relied upon as a guide to future performance.

STRATEGIC REPORT

Chief Executive's Report

This year was the tenth anniversary of the Company's listing on the London Stock Exchange. During this period the Company has achieved many milestones and grown into an established FTSE 250 UK-REIT. Although we are focused on the future, it is important to recognise the recent growth and evolution of the Company which highlights our progress and ability to create value. We extend our sincere thanks to our shareholders, advisers and employees who have supported us throughout the last decade.

The importance of liquidity and transparency in the property sector has recently been highlighted by the volatility caused by the EU referendum outcome which resulted in some open-ended property funds closing to redemptions from investors. Listed real estate, and particularly REITs, are well placed to provide institutional and retail investors with access to commercial real estate returns with the benefit of both liquidity and transparency.

As the REIT market matures in the UK, there is a growing emphasis on income returns and the ability of REITs to efficiently convert underlying property performance into shareholder returns. We aim to be the UK's leading diversified income-focused REIT and believe our strategy of income-focused total returns is well positioned at this point in the property cycle and in the current low interest rate environment.

Results and dividends

The year under review was characterised by the completion and integration of the transformational Aegon UK ("AUK") portfolio acquisition, which increased the value of the portfolio to £1.5 billion amid the significant market volatility and uncertainty surrounding the EU referendum.

Earnings available for distribution increased by 17.6 per cent year on year to £52.2 million (2015: £44.4 million). Distributable earnings per share were in line with the prior year at 3.2 pence per share, reflecting the increased number of shares in issue following the capital raise in February 2016 to part fund the AUK acquisition.

EPRA NAV decreased by 2.4 per cent to 40.0 pence per share incorporating the one-off impact of the AUK portfolio acquisition costs and the one per cent increase in UK SDLT.

The Board has declared a second interim dividend of 1.575 pence per share to be paid on 12 December 2016. Together with the interim dividend of 1.625 pence per share, the total dividend for the year of 3.2 pence per share is 1.5 per cent below last year (2015: 3.25 pence).

EU referendum

The EU referendum result has had a significant impact on the real estate investment market with transaction volumes down materially immediately following the outcome. The uncertainty created by the result is likely to have a negative impact on near term economic growth as investment decisions are postponed. However, the resultant prospect of continued low interest rates and bond yields, as well as demand from foreign capital following the depreciation of Sterling, should offer encouraging support for the investment market. 

Since the EU referendum, we have concluded 25 leases totalling £2.6 million in annualised gross rental income with a number of further leases at various stages of negotiation or currently in solicitors' hands. At present in the markets in which we operate, there appears to be little evidence to suggest a material change in occupational demand has occurred to date.

We remain alert to opportunities that may present themselves in 2017 in the event of increased volatility and disconnects between market pricing and property fundamentals.

Strategic priorities

We have two key strategic priorities:

· Reposition the portfolio through recycling capital into assets with stronger growth potential; and

· Strengthen our balance sheet by reducing our LTV over the medium term to our target range of 40-50 per cent

Repositioning the portfolio for growth

Our strategy remains clearly focused on income-led total returns. To achieve this, we will continue to actively reposition the portfolio towards strong economic locations and assets supported by occupier demand. The recent AUK transaction has enhanced the quality of our portfolio and income growth opportunities significantly, not only improving the overall exposure to locations expected to deliver economic growth but also providing exposure to the distribution and industrial sectors which are currently experiencing strong occupier demand and rental growth.

We have acquired a number of strategically located assets, including an office block on Charing Cross Road, London, which will benefit from largescale redevelopment underway in the area and from the neighbouring Tottenham Court Road Crossrail station opening in 2017. The Company's recently acquired retail parks are showing encouraging letting activity and the overall exposure to UK regional shopping centres has been diluted to 22 per cent of the total portfolio, down from 33 per cent in 2015.

We have a number of asset management opportunities due to be delivered in 2017 as well as various longer term strategic redevelopment options. Extensions to a number of assets are underway including a 12 room extension to the Holiday Inn Express, Southwark, five additional pre-let units across the retail park portfolio and 1,000 sqm of foodstore extensions in Germany.

Capital recycling is expected to be more active in 2017, led by the disposal of mature assets and reinvestment into assets and locations which support sustainable occupier demand. The Hague, the last remaining legacy asset outside our core markets, was sold together with its associated bank debt during the year. Post year end we have also exchanged contracts for the disposal of two assets, namely Duchess Place, Edgbaston and Exchange House, Watford for £14.9 million, at a premium of 11.7 per cent to carrying value.

Strengthening the balance sheet

We have been active in strengthening our capital structure and securing attractive financing terms during a period of low interest rates and competitive lending. Over £160 million of banking facilities were refinanced, extended or repaid during the year, lowering our average cost of debt by 50 basis points to 3.4 per cent. The weighted average debt maturity is 6.9 years (2015: 7.8 years).

We secured a £148.0 million revolving credit facility as part of the AUK transaction which has enhanced our ability to manage cash and liquidity more effectively. This pro-active refinancing activity has secured current low rates and ensured the Company has no material financing facilities maturing until 2020.

The LTV ratio increased to 53.4 per cent primarily due to a decrease in property values after accounting for AUK acquisition costs and the recent SDLT increase. Net debt, including our share of joint venture net debt, increased by £275.4 million during the year following the £489.9 million AUK acquisition which was part funded by £252.0 million of bank debt. Refinancing activity was typically completed at lower leverage with reductions in interest costs delivering attractive marginal returns on equity.

We expect our capital structure to continue evolving into a lower leverage model that supports sustainable income-led total returns. In the medium term, we will continue to incrementally reduce our leverage to within our target LTV range of 40-50 per cent through a combination of capital recycling, refinancing or reinvesting at lower leverage.

Part of our repositioning requires us to reinvest for growth. To enhance the growth profile for future earnings and strengthen the balance sheet, we will base our distributions on an industry standard EPRA based earnings measure which will provide greater flexibility in managing cash flow and reducing leverage.

Growing our business sustainably

We value our relationships with all our stakeholders including customers, communities, partners, employees and shareholders. We drive and foster a culture of high performance through an entrepreneurial approach and are consistently looking to identify, recruit and retain key personnel to support the Company's growth and build a ready pool of talent for future years. The composition of the Group's Corporate Social Responsibility ("CSR") Committee has recently been reviewed. Donald Grant will replace Stephen Oakenfull with effect from 1 December 2016. The Committee thanks Stephen for his guidance and support in establishing the Group's strategic CSR framework.

As local property owners, we understand that our responsibility to our communities extends beyond our employees and investments. We are now GRESB participants and have already made significant progress in delivering our CSR strategy which may improve our current score of 50. The Company was awarded the top prize in the CSR category at both the BCSC Purple Apple Marketing Awards and the ICSC Solal European Marketing Awards. Recognised as demonstrating leadership and innovation in the area of corporate social responsibility, Weston Favell's 'Movie Hub' gave 400 local children from the surrounding area the opportunity to work on the set of the first operational film studio located in a UK shopping centre. Overcoming strong competition in a record year of 238 entries from 21 countries, this award was a fantastic achievement and justifies the importance our team places on CSR initiatives and community engagement across the portfolio.

Outlook

We believe there is a unique opportunity to grow Redefine International into the UK's leading diversified income-focused REIT. With interest rates across Europe at historic lows and an anticipated slowdown in capital value growth, income returns will be an increasingly important component of total returns for the foreseeable future.

Following ten years of building the Company to become an established FTSE 250 REIT, culminating in the transformational AUK acquisition, we are now in the process of reviewing the portfolio and capital structure to ensure it supports the Company's long term commitment to deliver sustainable and growing income-focused total returns.

It is our objective to enhance the growth profile of future earnings and to strengthen our balance sheet to support our aim of becoming the leading diversified income-focused UK-REIT and to retain our position as a top quartile yield payer, relative to our peer group. By ensuring greater flexibility in how we manage our cash flow and reducing leverage, we expect to enhance our income-led operational and investment strategy and drive dividend growth going forward.

We aim to adopt a more active approach to recycling capital, including the disposal of lower growth assets, to reposition the portfolio for stronger income and capital growth over the medium term. Our key strengths include actively managing a diversified portfolio with an efficient cost base, so we are well suited to deliver on this strategy.

The Company will host a capital markets day in early 2017 to provide more detail on our strategic priorities.

Following a period of significant growth in which we have a demonstrable track record in delivering secure and superior dividends to our shareholders, we remain committed to delivering upper quartile income returns as measured against other UK-REITs and have laid the foundations that will support future growth throughout our second decade.

Mike Watters

Chief Executive

27 October 2016

Portfolio Overview

Over the past year, Redefine's portfolio has been enhanced through active capital recycling and investment in high quality assets. This, combined with our strategic flexibility to invest across sectors, underpins the success of our income-focused total return strategy.

The AUK acquisition has significantly enhanced the quality of the portfolio, providing exposure to a number of high quality assets in sectors and locations expected to deliver economic growth. Over 58 per cent of the portfolio is located in Greater London, the "Big 6" UK cities, southern UK and the "Big 5" cities in Germany. The remainder of the portfolio is largely made up of dominant regional shopping centres and assets presenting specific income-led asset management opportunities. In addition, we now have exposure to distribution assets and retail parks, all of which are showing evidence of strong occupier demand.

The market value of the portfolio, including our share of joint ventures, increased by 3.4 per cent on a like-for-like basis which included the effect of a 16.3 per cent increase in the value of the Euro relative to Sterling. UK valuations are down by 1.9 per cent on a like-for-like basis, driven by softer yields in the second half of the year and a one per cent increase in UK SDLT. Encouragingly, valuers supported the income outlook for our portfolio with ERV improving across all subsectors, other than our UK shopping centres, which declined 2.6 per cent over the last six months.

We have changed our occupancy metric to align with EPRA best practice recommendations which now reflects the vacant percentage by ERV instead of lettable space. Under this metric, occupancy increased by 20bps to 97.7 per cent. Our secure income stream is underpinned by a WAULT of 7.8 years (2015: 8.4 years).

Resilient and secure income stream

Our portfolio provides clear visibility on future rental income. Our WAULT of 7.8 years is backed by a diversified portfolio and high quality tenant base, providing a resilient and secure income stream. Just over 20 per cent of gross rental income is subject to break options or expiries in the next five years with no more than 6.8 per cent subject to tenant break options or expiries in any single year. Our occupier mix is not overly exposed to any single tenant or sector. Within retail we have actively targeted non-discretionary food, value fashion and leisure offerings, all of which have proved to be resilient with a positive market outlook.

Income growth opportunities

The repositioning of the portfolio is strategically focused on continued income sustainability and growth opportunities. We aim to be more active in recycling capital from mature assets with low growth prospects into assets with clearly identified asset management initiatives and income upside.

We are making good progress in letting the remaining vacant space, particularly in regional offices. Several extensions, supported by tenant demand and pre-let agreements, are at various stages of completion across the retail portfolio. We continue to drive commercialisation activity across the portfolio to maximise revenues from advertising, promotional space and short term lettings. Additionally, 34.7 per cent of gross rental income is subject to inflationary linked reviews or fixed increases.

Driving cost efficiencies

Our EPRA cost ratio (excluding direct vacancy costs) remains one of the lowest in the UK-REIT sector at 14.9 per cent (2015: 15.3 per cent), a great result given the recent portfolio growth to over £1.5 billion.

The agreement with Kames Capital to support our asset management function across the AUK portfolio for a minimum of 18 months was terminated in September 2016 and takes effect from April 2017. The termination will result in a one-off termination fee of £1.2 million in the next financial year, however considerable savings will materialise following internalisation.

During the course of 2016 we brought the commercialisation function for our retail assets in-house. This includes revenues derived from marketing, promotions, advertising and leasing of mobile retail units. In doing so, we have enhanced both the quality of commercialisation within our centres and driven higher net commercialisation income.

Leasing activity

In the last 12 months, 75 rent reviews were agreed providing a total rent of £22.4 million, 4.9 per cent (£0.9 million) increase above the passing rent. 64 new lettings or renewals were completed providing a total rent of £4.3 million (£1.1 million increase on passing rent), 4.4 per cent ahead of ERV. Portfolio occupancy based on lettable area declined marginally to 97.1 per cent (2015: 98.1 per cent) driven largely by two units totalling 8,818 sqm (94,709 sqft) let to two tenants who went into administration during the last six months.

Since the result of the EU referendum, we have concluded 25 leases totalling £2.6 million in annualised gross rental income 4.5 per cent ahead of ERV, with a number of further leases at various stages of negotiation or in solicitors' hands. Currently within the markets in which we operate, there is little evidence to suggest a material change in occupational demand.

Key leasing activity completed during the year:

· Banbury Cross Retail Park - a new 10 year lease for 464 sqm (4,998 sqft) with Tapi, the carpet and flooring supplier, on an agreed rent of £0.1 million which was in line with ERV. A lease renewal was also agreed with Poundstretcher at a rent of £0.2 million, 2.8 per cent ahead of ERV. Since the EU referendum result, DFS has signed a 10 year renewal on 1,863 sqm (20,056 sqft) of space at £0.3 million which is 4.9 per cent above ERV.

· Charing Cross Road, London - two rent reviews with Superdrug for 460 sqm (4,953 sqft) and 3 Monkey Communications for 700 sqm (7,571 sqft), were agreed totalling £0.8 million, £0.2 million above passing rent.

· Swindon - a new 15 year lease with Oxford Brookes University for 2,640 sqm (28,412 sqft) on an agreed rent of £0.3 million, 20.8 per cent above ERV.

· Omnibus building in Reigate - Deutsche Leasing has signed a 15 year lease, with a 7.5 year break, on 1,023 sqm (11,015 sqft) of vacant space at an annualised rent of £0.3 million, 10.1 per cent ahead of ERV. 40 per cent of the vacant space on acquisition has now been filled, saving £0.1 million in void costs.

· Camino Park, Crawley - Royal Mail has agreed a 10 year reversionary lease on 20,535 sqm (221,037 sqft) with a break option in five years.

· Camino Park, Crawley - post the EU referendum result, DFS has signed a 10 year lease on 2,537 sqm (27,306 sqft) at £10.25 per sqft, a 15.5 per cent uplift to passing rent and 14.6 per cent above ERV.

Acquisitions

This year's activity was dominated by the acquisition of the £489.9 million AUK portfolio and its integration into the business. The acquisition has been transformational, increasing our portfolio by approximately 50 per cent to £1.5 billion and enhancing its overall quality. Nearly 75 per cent of the assets in the AUK portfolio are located in areas expected to deliver future economic growth including London, the South East and the "Big 6" UK cities. In addition, the portfolio brought exposure to the distribution and industrial sector which are currently experiencing strong occupier demand and rental growth.

The AUK acquisition has added a significant and resilient long term rental stream with clear asset management opportunities. Despite market volatility, progress to date on asset management initiatives has exceeded management's initial expectations, with discussions and agreements ahead of the business plan for each property. The initial yield on acquisition of 5.0 per cent increased to 5.1 per cent following the early sale of 16 Grosvenor Street and successful letting activity with a further increase to 5.7 per cent anticipated following expiry of rent free periods.

ERVs across the AUK portfolio have increased by £0.9 million (3.2 per cent). Contracted rent over the same period increased by £0.4 million (1.5 per cent), which was partly offset by the single tenant at Severalls Industrial Estate, Colchester going into administration.

We remain confident in our ability to successfully execute the asset management opportunities we have identified. A further six leases totalling 5,874 sqm (63,226 sqft) in the AUK portfolio are in solicitors' hands, with most expected to be signed with high quality national tenants for terms of at least 10 years. Following the completion of these leases, an additional £0.4 million of annualised gross rental income will be generated, with a further 377 sqm (4,062 sqft) being made available to let at Banbury Cross Retail Park. We now have the welcome challenge of creating additional space in our portfolio to meet occupier demand, which is being addressed by progressing planning permission on five additional pre-let units to be built across the retail park portfolio.

Disposals

As a result of the prevailing low interest rate environment, assets with defensive but low growth income streams are being priced relatively aggressively. We plan to recycle out of mature and low growth investments into assets with stronger real estate fundamentals backed by sustainable occupier demand.

Ten petrol filling stations were sold during the period for £12.0 million at a 6.0 per cent premium to book value. The Group's remaining petrol filling stations are let to BP with an average lease length of 16.1 years and subject to fixed five yearly rental uplifts.

16 Grosvenor Street, which formed part of the second tranche of the AUK portfolio, was sold prior to the transaction's completion for £35.6 million, 22.8 per cent above the purchase price.

The Hague office building, our last remaining asset outside our core markets, was sold together with associated debt of £15.0 million for a nominal consideration. The sale has no material impact on key metrics.

Development and capital expenditure

Development activity is focused on refurbishing existing assets and adding incremental space and income to meet additional occupier demand.

(1) Yield on cost reflects the overall scheme yield.

City Arcaden, Ingolstadt

The scheme, which incorporates a complete redevelopment of the existing shopping centre, is anticipated to complete during the first half of 2017.

The introduction of Primark will significantly strengthen the retail offering in the town and surrounding areas and encourage additional footfall. Once complete, the Primark lease will deliver an additional €1.5 million of rental income per annum. The 2,687 sqm (28,923 sqft) H&M unit has been enhanced and refurbished with the lease being extended until May 2026. H&M has continued trading during the development period.

The overall scheme, once complete, is anticipated to generate €2.1 million in annual rental income. Over 95 per cent of the scheme by rental income is either let or subject to pre-let agreements.

Holiday Inn Express, Southwark

In July 2016 we commenced work at the Holiday Inn Express, Southwark to build 12 new bedrooms, improve 18 under-sized existing bedrooms and refurbish the front and rear façade of the existing hotel. Total capex is expected to be £3.1 million. The extension is planned to complete by the third quarter of 2017.

Albion Street, Derby

Heads of terms have been agreed with an international discount fashion retailer to take up a large floor plate in a newly configured high street retail block. Planning permission has been submitted and we are actively engaging with the local council. The introduction of such a strong international discount fashion retailer will transform the high street in Derby and support letting activity at our neighboring units. This reconfiguration is expected to yield in excess of 10 per cent on cost.

Retail Parks

Planning applications have been submitted to develop three additional units at Banbury Cross Retail Park, one unit at The Arches Retail Park, Watford and one unit in Priory Retail Park, Merton totalling 1,308 sqm (14,075 sqft). The new units are in advanced stages of negotiation with national operators and are expected to generate £0.4 million of additional rental income providing an approximate yield on cost of 12.7 per cent.

With national retail park vacancy at a 14 year low, we have seen positive occupier demand across the majority of our recently acquired retail park portfolio.

Foodstore extensions, Germany

A number of extensions to standalone foodstore units are agreed or at advanced stages of negotiation with Edeka, Lidl and Netto. Extensions totalling in excess of 1,000 sqm (10,764 sqft) are planned which will deliver a return on cost of approximately 8.3 per cent. As part of the negotiations, the existing leases are typically being extended by 12 to 15 years.

UK Retail

The UK Retail landscape continues to undergo significant structural change. Internet retailing is now estimated to capture 14 per cent of total retail sales and is forecast to reach 17 per cent by 2020. At the same time, established retailers and previously pure play internet retailers have recognised the importance of having both a physical and an online retail presence. As a result, larger retailers are targeting fewer stores but which are strategically located.

Our portfolio of shopping centres and retail parks is predominantly focused on value and convenience retailers serving local communities, an element of the market which has proved relatively resilient. However, we are cautious in our outlook for certain shopping centre assets, particularly fashion anchored schemes which do not dominate their catchment areas and/or have a successful leisure element. The UK shopping centre portfolio now represents 22 per cent of the total portfolio compared to 33 per cent at the end of the 2015 financial year.

Occupancy across the retail portfolio increased to 98.7 per cent (2015: 98.3 per cent) with three of the shopping centres and all of the retail parks now fully let. Exposure to the BHS administration was limited to one store at Grand Arcade, Wigan of 3,838 sqm (41,315 sqft) resulting in a net income loss of £0.6 million including void costs. Plans are in place to reconfigure the unit to support re-letting options and early stage discussions are in progress with potential retailers.

The internalised commercialisation function, branded as CentreStage Leasing, has delivered a marked improvement in the quality of commercialisation activity within our retail assets and delivered a 20.4 per cent increase in net commercialisation income to £1.0 million per annum.

In the year ahead we see opportunities for reconfiguration and optimisation of space, further development and expansion activities as well as a drive to increase income from advertising and promotional space.

Shopping Centres

We have seen improved confidence from national operators willing to take additional space or renew leases in the majority of our shopping centres. Occupancy improved to 98.1 per cent (2015: 97.9 per cent). Contracted rental income at year end was higher in four of our shopping centres but offset by the BHS administration at Grand Arcade, Wigan and challenging trading at West Orchards, Coventry. To counteract these challenges, asset management activity is focused on introducing improved food and leisure offerings at both Grand Arcade and West Orchards.

Retail Parks

The retail park portfolio remains fully occupied with positive leasing activity during the year. Over the last 12 months, ERVs have grown by 1.1 per cent across the portfolio, providing evidence and supporting our view that the implied negative reversion of £1.0 million can be closed significantly once higher rents are proven.

Asset management is focused on the creation of new units and additional revenue streams from advertising and ancillary income. Demand from national fast food and coffee operators has been strong with five units planned at Banbury Cross Retail Park, Priory Retail Park, Merton and The Arches Retail Park, Watford. Pre-let agreements have been secured for £0.4 million of additional rental income.

UK Commercial

Our office exposure in London is concentrated around Charing Cross Road and Southbank with both areas currently undergoing regeneration. Charing Cross Road is due to benefit from the planned opening of the Tottenham Court Road Crossrail station in Spring 2017 while London's Southbank is witnessing significant change with many occupiers being priced out of Central London or the West End. Outside London, regional markets have experienced strong rental growth for most of 2016, however this appears to have slowed recently with supply shortages easing in key markets and demand moderating. Overall, we believe our office portfolio is relatively well insulated from short term concerns surrounding the EU referendum and the potential impact on key financial areas in the City of London and Canary Wharf.

The distribution and industrial sectors present opportunities for rental growth potential. Demand from occupiers is being supported by retailers' requirements to create efficient distribution networks with increasingly diverse occupational demand. The sector is also starting to show signs of supply shortages in certain parts of the market. This has been experienced in our own portfolio, in particular Camino Park, Crawley where letting has been competitive and rents are showing clear signs of growth.

Office Portfolio 

Leasing activity and rent reviews, particularly within the AUK portfolio, have been encouraging. Two rent reviews at Charing Cross Road, London, were agreed at more than 29 per cent above passing rents.

The four regional offices acquired as part of the AUK portfolio had over 6,500 sqm (69,966 sqft), 19.9 per cent of vacant space on acquisition in October 2015. Since then, 1,040 sqm (11,195 sqft) have been let at Lochside View, Edinburgh at two per cent above ERV. A further 1,022 sqm (11,001 sqft) was let to Deutsche Leasing at the Omnibus Building in Reigate and we continue to make good progress on the remainder of the vacant regional office space.

A pre-planning application has been submitted for a significant development scheme at Charing Cross Road in London to add an additional seven floors, in line with surrounding schemes. This has the potential to add significant value to the asset in the medium term.

Distribution and Industrial Portfolio

Four lettings have been agreed which have increased the portfolio WAULT by over 30 per cent to 6.0 years. At Camino Park, Crawley, DFS has signed a 10 year lease on 2,537 sqm (27,306 sqft) at £10.25 per sqft, a 15.5 per cent uplift to passing rent and 14.6 per cent above ERV. At Express Park, Bridgwater, Exel has agreed a lease extension until 2019 on 12,407 sqm (133,550 sqft) at £5.70 per sqft, 8.6 per cent above ERV. This reversionary portfolio is continuing to benefit from strong tenant enquiries which are expected to drive future rental growth in the short to medium term.

UK Hotels

London witnessed a strong increase in supply during 2016 with approximately 7,000 rooms forecast to open by the end of the year with more than half of these within the limited service sector. Despite this, aggregate demand has outperformed supply albeit certain locations and segments have come under pressure as they adjust to new room openings.

Underlying trading performance within the RedefineBDL managed portfolio was mixed. A number of the London based hotels experienced a strong start to the financial year which moderated during the second half, possibly as a result of weaker tourism following terrorist attacks in Paris and Brussels and the impact on business travel in the immediate period post the EU referendum result. Conversely, underlying trading performance at the Crowne Plaza, Reading and DoubleTree by Hilton, Edinburgh delivered strong growth. The RedefineBDL managed portfolio delivered EBITDA growth of 2.2 per cent on last year, highlighting the resilience of the portfolio and the London budget hotel market.

There has been a significant depreciation in Sterling which is expected to support tourism. Recent economic indicators also suggest that the UK economy has performed ahead of expectations immediately after the EU referendum which should support improved trading. We believe that the outlook for limited service branded hotels remains supportive of income growth. Average daily rates and revenue per available room ("RevPAR") in London are forecast, by PwC, to increase 2.2 per cent per annum and 2.3 per cent respectively by the end of 2016.

The Enfield Travelodge extension was completed during the first half of the year adding 632 sqm (6,800 sqft) to the existing hotel. The extension increased the annual rent by £0.1 million to £0.7 million for the term of the lease until 2047 and will include RPI escalations. Extension works at the Holiday Inn Express, Southwark commenced in July 2016 and further extensions to other hotels are currently under consideration.

(1) Subject to annual review with reference to forecast EBITDA of the RBDL managed portfolio.

The Company's 25.3% stake in RedefineBDL, the largest independent hotel management company in the UK, produced distributable earnings of £1.7 million during the period, an increase of 183 per cent since last year, following the receipt of a non-recurring termination fee of £1.1 million (our share).

The Company's 15.5% investment in International Hotel Properties Limited ("IHL") had a market value of £7.9 million at year end. Our investment strategy in respect of IHL is to support the establishment of a focused hotel investment company with a wide investment remit that can leverage the RedefineBDL management platform.

Europe

Economic recovery in Germany is expected to continue in 2017, albeit slowly. Growth is forecast to exceed that of the wider Eurozone supported by improving employment figures and rising incomes. This trend is being reflected in improved year-on-year retail sales growth which stood at 2.6 per cent in June 2016. Demand from international retailers remained robust with the food and beverage sector also showing positive demand from operators. Investment market activity has remained strong, supported by a significant amount of investment capital and a relatively limited supply of good quality assets. Similar trends to those witnessed in the UK are becoming apparent including increased investment activity outside of the traditional "Big 5" German cities as well as increased investment into logistics and alternative sectors.

Occupancy, excluding space under development, remains high at 98.5 per cent (2015: 98.9 per cent). Post year end the only vacant unit in the Schloss Strassen Center, Berlin has been let to a national food operator which is strategically aimed at strengthening the food court and footfall through increased commuter traffic. 

The new 5,200 sqm (55,973 sqft) development at Ingolstadt is subject to a €1.5 million pre-let agreement with Primark and is expected to complete in the first half of 2017. Asset management activity is focused on attracting improved footfall to the shopping centres, by improving the tenant mix and optimisation of space. Additionally, a number of smaller foodstore extensions are underway, providing attractive incremental returns with development yields averaging 8.3 per cent. These extensions are often accompanied by extensions to the lease term over the whole store providing enhanced income security.

The potential redevelopment of Bahnhof Center, Altona, Hamburg, remains a significant long term opportunity to drive value and income growth from a strategic location undergoing extensive regeneration. In the area, several significant development schemes are underway to deliver approximately 10,000 new residential units. We are actively engaging with the local authority on redevelopment opportunities in support of the area's regeneration.

Financial review

Overview

The first half of the year was characterised by the transformational Aegon UK ("AUK") portfolio acquisition. The portfolio was acquired in two tranches with the first completing in October 2015. The second tranche completed on 1 March 2016 following a £115.0 million equity raise through the placement of 270.6 million ordinary shares at a placing price of 42.5 pence per share. The Group's property portfolio is now valued in excess of £1.5 billion.

The result of the UK's referendum on membership of the European Union in June was a surprise for many in both the UK and elsewhere. Sterling came under pressure, weakening 14.0 per cent against the Euro across the twelve months to August. It is clear that business confidence has fallen since the referendum, with a noticeable decline in transactional activity across all sectors in which we invest.

A number of debt facilities were refinanced during the second half of the year. Specifically, a €67.5 million facility secured against the Schloss Strassen Center, Berlin, Germany and £31.6 million within the UK Commercial portfolio (including the Enfield Travelodge). In total, £0.2 million was incurred as a cost of terminating existing facilities. In addition, the £38.1 million facility secured on St. George's, Harrow, which was due to mature this year, has been extended to 2021.

In late August, the Group disposed of its final non-core legacy asset, The Justice Centre in The Hague, Netherlands. As the asset was non-recourse, the negative equity position has now been removed from EPRA NAV and it is no longer necessary to report an adjusted measure.

LTV has increased marginally year on year to 53.4 per cent, primarily as a result of deploying cash reserves held at the prior year end. The weighted average cost of debt has fallen to 3.4 per cent following refinancing with further reduction expected as a result of post year-end activity.

The facility supporting the AUK acquisition includes a five year £148.0 million revolving credit facility, a first for the Group, providing the means for more efficient use of cash and greater financial flexibility.

AUK portfolio acquisition

The AUK portfolio comprised 20 properties at an initial market value of £489.9 million.

On 7 September 2015, the Group completed the acquisition of the first of these properties, Banbury Cross Retail Park at a purchase price of £52.5 million and conditionally exchanged contracts for the acquisition of the remaining 19 properties. Banbury Cross Retail Park was funded entirely from existing cash resources and generates gross annual income of £3.8 million.

Due to the nature and size of the transaction, shareholder approval was sought for the acquisition of the remaining properties. Shareholders approved the transaction at an Extraordinary General Meeting on 25 September 2015, at which point the contract became unconditional and the significant risks and rewards of ownership transferred.

As agreed with the vendor, the remaining properties were scheduled to complete in two tranches, the first of which comprised nine properties, completed on 2 October 2015 at a purchase price of £203.5 million. This was funded by both existing cash resources and £155.0 million drawn against a new £303.0 million facility which had been secured from a syndicate of four UK banks at an initial margin of 2.1 per cent. The facility comprises a £155.0 million term facility and a £148.0 million revolving credit facility. The nine properties acquired on this date generate gross annual income of £13.5 million.

On 21 December 2015, the Group announced it had exchanged contracts to sell 16 Grosvenor Street, Mayfair which formed part of the second tranche of the remaining ten properties. The property was sold for £35.6 million realising an immediate profit for the Group of £2.8 million (including costs).

On 1 March 2016 the last nine properties were acquired at a purchase price of £204.7 million. The properties were funded by the proceeds of the February 2016 equity raise and the drawing of £97.0 million from the revolving credit facility referred to above. Following the completion of tranche two, the margin payable on the combined facility reduced to 1.9 per cent.

The AUK portfolio was acquired for £483.4 million and was valued at £456.6 million at 31 August 2016. Acquisition costs of £22.6 million, predominantly SDLT, amounted to 4.9 per cent of the purchase price paid. 

Basis of presentation

Internally the Board focuses on and reviews information and reports prepared on a proportionately consolidated basis, which includes the Group's share of joint ventures. To align with how the Group is managed, this review of performance and position is presented on this basis.

Income statement

In addition to EPRA earnings, the Group presents an underlying calculation of earnings. The Directors consider that this presentation provides useful information as it removes certain exceptional items and fair value adjustments and better reflects the recurring performance of the business.

EPRA earnings decreased by 31.5 per cent to £44.1 million or 2.7 pence per share (2015: 4.7 pence) primarily as a result of the non-recurring gain recorded on extinguishment of debt in the Delta portfolio during the prior year.

Following the AUK acquisition, underlying earnings increased by 11.3 per cent to £49.4 million. The inclusion of a £2.8 million non-recurring profit on disposal of 16 Grosvenor Street, Mayfair contributed to a 17.6 per cent increase in distributable earnings compared to 2015. The inclusion of this opportunistic profit goes some way towards normalising distributable earnings for the year for the impact of the phased completion of the AUK portfolio.

On a per share basis, overall distributable earnings remain unchanged at 3.2 pence per share.

Gross rental income by segment is analysed below to illustrate the change in like-for-like income over the year. This analysis does not include AUK as these properties were not held in 2015. Considering just those that are comparable, like-for-like income increased by one per cent compared to 2015. Removing the impact of Euro denominated income which is benefiting from Sterling's weakness, like-for-like income has remained relatively flat.

Gross income of £30.6 million was generated from acquisitions during the period, of which £21.0 million arises from the AUK portfolio.

The increase in net rental income year-on-year should to be considered alongside the decrease in investment income. This results from recycling capital from the sale of the Australian listed security, Cromwell, into the first tranche of the AUK portfolio. Investment income now represents dividends received from the Group's 15.5% interest in International Hotel Properties Limited (previously International Hotel Group Limited).

Other income includes management and consulting fees and can be expected to be recurring.

Administrative costs have remained in line with the prior year. These are likely to increase marginally as the enlarged portfolio is we fully integrated.

Net finance costs have declined relative to drawn debt as a result of a 50 basis point reduction in the weighted average cost of debt over the year. In absolute terms, finance costs increased following the AUK acquisition.

Other finance costs include £1.5 million due to Aviva under the profit share arrangement in respect of the Grand Arcade, Wigan and £0.4 million incurred on early termination of facility and derivative contracts.

Gains on disposal of investment property of £3.2 million arose following the sale of ten petrol filling stations in February 2016 and an early opportunity to realise value from within the AUK portfolio in December 2015 when 16 Grosvenor Street was sold pre-completion.

Balance sheet

EPRA adjusted, diluted net assets per share ("EPRA NAV") decreased by 2.4 per cent to 40.0 pence (2015: 41.0 pence). Valuation losses of £41.2 million (including £22.6 million of acquisition costs incurred on the AUK transaction) have reduced EPRA NAV by 2.5 pence per share. This is offset by currency translation gains recorded on the Group's net investment in Europe and release of non-recourse debt following the disposal of The Hague. Underlying earnings of 3.2 pence per share have been matched by the two dividend payments during the year.

In February 2016, the Group completed the placing of 270.6 million ordinary shares at a placing price of 42.5 pence per share (a 1.9 per cent premium to the 31 August 2015 net asset value) raising gross proceeds of £115.0 million. Placing costs totalling £5.9 million included £2.5 million paid to Redefine Properties Limited, the Company's largest shareholder, for underwriting £70.0 million of the equity raise. Redefine Properties Limited subscribed for £34.6 million of the gross equity raised, maintaining its 30.07% shareholding.

The capital raise generated net proceeds of £109.1 million and completed on 23 February 2016.

(1) As a result of the non-recourse nature of the debt relating to The Justice Centre in The Hague, Netherlands, a negative equity position of 0.7 pence per share was adjusted for to arrive at an Adjusted NAV measure in 2015. The property was disposed of in August 2016.

Investment property

On a like-for-like basis the Group's property portfolio increased in value by 3.4 per cent in the year to 31 August 2016.

The UK portfolio experienced a decline of 1.9 per cent during the year, primarily in the second half as a result of the one per cent increase in SDLT and the significant uncertainty following the EU referendum.

As has been the case since the start of 2015, the retail investment market continues to underperform other real estate sectors with IPD suggesting a five per cent decline in capital values in the second half of the year alone, four per cent in the three months since the EU referendum.

The Group's commercial portfolio continues to benefit from well-located offices, particularly in London, with a like-for-like increase in excess of 9 per cent recorded for the year.

The November 2015 terrorist atrocities in Paris impacted UK Hotels with a considerable softening in occupancy rates from late November until February. Although occupancy has steadily recovered during the latter part of the year, revenue achieved per room continued to underperform expectations through the final quarter. Looking forward, a weaker Pound is expected to boost UK tourism into the new year.

European valuations showed modest growth in underlying currency terms. Sterling's weakness in 2016 has reversed the losses recorded on the European portfolio in the prior year with the portfolio value increase almost 17 per cent.

(1) Valuation includes the effect of capital expenditure, amortisation of head leases, lease incentives and foreign currency translation where applicable.

Debt and Gearing

The Group has had a particularly active year on the financing front through capital recycling, facility refinancing and extensions while capitalising on the prevailing favourable interest rate environment. Over £160 million has been repaid, prepaid or extended across six different facilities, including the Swiss and Australian facilities repaid early this financial year.

The Group's weighted average cost of debt decreased to 3.4 per cent from 3.9 per cent in the previous year, a significant saving on recurring finance costs. Interest cover stands at 270 per cent, up from 230 per cent in 2015 while the weighted average debt maturity is just below seven years. The next significant refinancing is not now due until 2020.

Group loan-to-value has increased marginally to 53.4 per cent, outside our target range of 40-50 per cent. As we become more active in recycling capital from assets that have met their business plans and do not provide continued opportunity to deliver sustainable income, we expect to see capital reinvestment occurring at lower initial LTVs.

The Group utilises derivative instruments, including interest rate swaps and interest rate caps, to manage its interest rate exposure. At 31 August 2016, the net fair value liability of the Group's share of derivative financial instruments was £12.4 million (2015: £4.5 million).

Our hedging policy requires at least 75 per cent of all interest rate exposures exceeding one year to be on a fixed or capped rate basis. For facilities with interest rate swaps or caps attached, the interest rates are fixed or capped for the duration of the facility. The changes in the fair value of the Group's hedging instruments have been recognised in the income statement.

Key financing statistics

(1) Net rental income divided by net finance cost

Cash flow

Cash flow from operating activities increased £4.0 million to £39.6 million for the year.

Investing activities were characterised by the AUK acquisition (£483.4 million including costs). This was offset by proceeds from the sale of Cromwell, the Swiss portfolio, ten petrol filling stations and 16 Grosvenor Street (£118.8 million).

Financing activities generated £270.8 million, mainly the result of the equity placement (net proceeds of £109.1 million) and borrowings drawn to finance the AUK acquisition of £252.0 million. These inflows were offset by net debt repayments and prepayments totalling £54.2 million and dividends paid of £29.4 million.

Cash at 31 August 2016 was £32.0 million (£34.3 million when including the Group's share of joint ventures), with a further £23.0 million available within undrawn committed facilities.

EPRA performance measures

Going Concern

At 31 August 2016 the Group's cash and undrawn committed facilities were £57.3 million and its capital commitments were £15.8 million. Weighted average debt maturity of 6.9 years and LTV of 53.4 per cent provide sufficient headroom against financial covenants. Attention is also drawn to the viability statement contained within the Group's Principal Risk disclosures.

After considering severe but plausible scenarios, the Directors are satisfied that there continues to be a reasonable expectation that the Group will have the resources it requires to meet on-going and future commitments. Accordingly, the 2016 consolidated financial statements have been prepared on a going concern basis.

Dividends

The Directors have declared a second interim dividend for the year of 1.575 pence per share making the total dividend paid and payable in respect of the year to 3.2 pence per share. This reflects an annualised yield of 8.0 per cent on EPRA NAV, 7.3 per cent based on the Group's share price at 31 August 2016.

The Company is again offering shareholders the option of receiving a cash dividend or a scrip dividend by way of the issue of new Redefine International P.L.C shares. Full details including the tax components of the dividend and the timetable have been announced separately today. The dividend payment date is set for 12 December 2016 to shareholders on the register at 18 November 2016.

In respect of the first interim dividend for the period ended 29 February 2016 which was paid to shareholders in June, the scrip take up was 51.4 per cent resulting in a cash saving of £12.5 million net of withholding taxes paid.

Donald Grant

Chief Financial Officer

27 October 2016

Statement of Directors' responsibilities

The statement of Directors' responsibilities has been prepared in relation to the Group's Annual Report 2016. Certain parts of the Annual Report are not included in this announcement.

We confirm to the best of our knowledge:

· the Group financial statements, which have been prepared in accordance with IFRS, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

· the Strategic Report includes a fair review of the development and performance of the business and the position of the Group.

By order of the Board

Mike Watters Donald Grant

Chief Executive Chief Financial Officer

27 October 2016

Consolidated Income Statement

for the year ended 31 August 2016

The accompanying notes form an integral part of these consolidated financial statements

Consolidated Statement of Comprehensive Income

for the year ended 31 August 2016

The accompanying notes form an integral part of these consolidated financial statements

Consolidated BALANCE SHEET

as at 31 August 2016

The accompanying notes form an integral part of these consolidated financial statements.

The consolidated financial statements were approved by the Board of Directors on 27 October 2016 and were signed on its behalf by:

Mike Watters Donald Grant

Chief Executive Officer Chief Financial Officer

Consolidated Statement of Changes In Equity

for the year ended 31 August 2016

The accompanying notes form an integral part of these consolidated financial statements.

Consolidated Statement of Changes In Equity

for the year ended 31 August 2016

The accompanying notes form an integral part of these consolidated financial statements.

Consolidated Statement of CASH FLOWs

for the year ended 31 August 2016

The accompanying notes form an integral part of these consolidated financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 August 2016

1. General Information

Redefine International P.L.C was incorporated in the Isle of Man on 28 June 2004 (Registered Number: 111198C) and was re-registered under the Isle of Man Companies Act 2006 on 3 December 2013 (Registered Number: 010534V).

On 4 December 2013, the Company converted to a UK-REIT and moved its tax residence from the Isle of Man to the United Kingdom ("UK").

The Company holds a primary listing on the Main Market of the London Stock Exchange ("LSE") and a secondary listing on the Main Board of the Johannesburg Stock Exchange ("JSE").

The financial information presented here does not amount to statutory financial statements. The Annual Report 2016 for the year ended 31 August 2016 will be available on the Company's website (www.redefineinternational.com) in early December 2016. The auditors, KPMG, have reported on the audited financial statements and their report was unmodified. A copy is available upon request from the Company's registered office at 24 North Street, Douglas, Isle of Man, IM1 4LE.

2. Significant Accounting Policies

2.1 Statement of Compliance

These consolidated financial statements, have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

The accounting policies applied by the Group in these consolidated financial statements are the same as those applied by the Group in its audited consolidated financial statements as at and for the year ended 31 August 2015. The following are the relevant new standards, amendments and interpretations that have been issued but are not yet effective or have not been adopted early. None of these will have a material impact on the consolidated financial statements:

IFRS 2 Share Based Payment (amendment) ("IFRS 2")

IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations (amendment) ("IFRS 5")

IFRS 7 Financial Instruments: Disclosures (amendment) ("IFRS 7")

IFRS 9 Financial Instruments (amendment) ("IFRS 9")

IFRS 10 Consolidated Financial Statements (amendment) ("IFRS 10")

IFRS 11 Joint Arrangements (amendment) ("IFRS 11")

IFRS 12 Disclosure of Interests in Other Entities (amendment) ("IFRS 12")

IFRS 15 Revenue from Contracts with Customers ("IFRS 15")

IFRS 16 Leases ("IFRS 16")

IAS 1 Presentation of Financial Statements (amendment) ("IAS 1")

IAS 7 Statement of Cash Flows (amendment) ("IAS 7")

IAS 12 Income Taxes (amendment) ("IAS 12")

IAS 28 Investments in Associates and Joint Ventures (amendment) ("IAS 28")

2.2 Basis of Preparation

The consolidated financial statements are presented in Great British Pounds, which is the functional currency of the Company and the presentational currency of the Group, rounded to the nearest hundred thousand pounds. They are prepared using the historical cost basis except for investment property, certain assets held for sale, derivative financial instruments and financial instruments designated at fair value through profit and loss.

Going Concern

The Directors are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future and for this reason these consolidated financial statements have been prepared on a going concern basis.

Re-presentation of Prior Year Comparatives

The Group has re-presented its interests in joint venture entities. Payments of equity which are permanent and loss absorbing in nature are disclosed as 'Investments in joint ventures', while advances of loans with either contractual maturities or amounts that are callable on demand, are disclosed as 'Loans to joint ventures'. Interest payments made by joint ventures under loan agreements are presented as finance income whereas distributions received from investments reduce the carrying value of the Group's investment in joint ventures.

The impact of this change on the key financial statement line items for the year ended 31 August 2015 was as follows:

As there was no change in either net asset value or profit for the year, there has been no impact on net asset value per share or earnings per share. There has also been no impact to net cash flows.

Certain other presentational changes were made to the prior year figures to ensure consistency with the current year. This has resulted in the order of certain line items changing to allow for new subtotals to be introduced. The Directors consider this presentational style consistent with best practice, more relevant to an understanding of the Group's financial performance and more consistent with comparator reports.

2.3 Key Judgements and Estimates

The preparation of financial statements in conformity with IFRS requires the use of judgements and estimates that affect the reported amounts of assets and liabilities at the reporting date and the reported amounts of revenues and expenses during the year. Although these estimates are based on the Directors' best knowledge of the amount, event or actions, actual results may differ materially from those estimates.

The principal areas where such judgements and estimates have been made are detailed below:

2.3.1 Investment Property Valuation

The Group uses valuations determined by independent valuers in accordance with IFRS 13 Fair Value Measurement ("IFRS 13") as the fair value of its investment property. The valuations are based upon assumptions including estimated rental values, future rental income, anticipated maintenance costs, future development costs and appropriate discount rates. The valuers also make reference to market evidence of transaction prices for similar properties. Further details are provided in Note 12.

2.3.2 Classification of the Group's Investment in International Hotel Properties Limited ("IHL") at Fair Value through Profit or Loss

On 14 October 2015, the Company acquired, by way of private placement, 3.8 million shares in the newly listed International Hotel Properties Limited (formerly International Hotel Group Limited) for £3.8 million. On the date of listing this represented 25.4% of the entity's issued share capital and the investment was classified as an associate on initial recognition. On 20 October 2015, the Group ceased to recognise IHL as an associate when its shareholding was diluted to 13.2% and reclassified the investment as a financial instrument at fair value through profit or loss.

The degree of judgement relating to this classification is increased given that the Company currently has representation on IHL's Board of Directors. In drawing their conclusion, the Directors have considered the criteria for significant influence in paragraphs 5-9 of IAS 28, the size of shareholding at 15.5% and that the Group does not have the right to appoint a director. Having considered all the facts and circumstances the Directors believe that the designation of the Company's residual investment at fair value through profit or loss continues to be appropriate.

2.3.3 Classification of Investment Property for UK Hotels

The UK Hotel properties are held for capital appreciation and to earn rental income. Apart from one of the assets, the hotels have been let to Redefine Hotel Management Limited ("RHML") and Redefine Earls Court Management Limited ("RECML") for rent which is subject to annual review. The annual review takes into account the forecast EBITDA for the hotel portfolio when setting the revised rental level. RHML and RECML operate the hotel business and are exposed to fluctuations in the underlying trading performance. They are responsible for the day-to-day upkeep of the properties and retain the key decision making responsibility for the business operations.

The Group holds a 25.3% shareholding in RedefineBDL Hotel Group Limited ("RedefineBDL"), which in turn owns RHML and RECML. Having considered the guidance in IFRS 10, the respective rights of each of the shareholders in RedefineBDL and the size of the Group's shareholding relative to other shareholders, the Directors have determined that the Group has the ability to exercise significant influence but does not control RedefineBDL and hence does not control RHML or RECML. The investment in RedefineBDL is classified as an associate.

Aside from the payment of rental income to the Group, which resets annually, and the Group's shareholding in RedefineBDL, the Group is not involved with the separate hotel management business and there are limited transactions between the two entities. As a result, the hotels are classified as investment property in line with IAS 40 Investment Property ("IAS 40").

2.3.4 Property Acquisitions

Where properties are acquired through the acquisition of corporate interests, the Directors have regard to the substance of the assets and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business. Where such acquisitions are not judged to be an acquisition of a business the transactions are accounted for as if the Group had acquired the underlying property directly. Accordingly, no goodwill arises on initial recognition of the asset purchase. Corporate acquisitions are otherwise accounted for as business combinations.

2.3.5 Aviva Equity Share

Aviva, the lender with security over the Group's investment property, Grand Arcade Shopping Centre, Wigan has a right under the facility agreement to participate in the equity value of the property in excess of the value of its drawn debt.

Once the value of the property exceeds £90 million Aviva has the right to call tranches of equity at any time with corresponding adjustments to their rights to participate in the property's profit share. While the Group has recognised a financial liability in respect of Aviva's right to participate in the profits of the shopping centres, a provision has not been recognised for Aviva's right to participate in the equity value of the property.

In concluding that no provision was required at the balance sheet date, the Directors considered all factors, including Aviva's knowledge of the property's historic value and their actions taken. Given the property is carried at fair value and subject to bi-annual valuations, a reliable estimate cannot be made nor is it currently considered probable that a payment will be required. The contractual obligation is therefore disclosed as a contingent liability.

2.4 Basis of Consolidation

2.4.1 Investment in Subsidiaries

A subsidiary undertaking is an investee controlled by the Group. The Group controls an investee when it has power over the investee, is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Subsidiaries are consolidated in the Group's financial statements from the date on which control commences until the date that control ceases. The Group reassesses whether it controls a subsidiary when facts and circumstances indicate that there are changes to one or more elements of control.

If the Group loses control of a subsidiary, the Group:

a) derecognises the assets (including any goodwill) and liabilities of the former subsidiary at their carrying amounts at the date control is lost;

b) derecognises the carrying amount of any non-controlling interests in the former subsidiary at the date control is lost (including amounts of other comprehensive income attributed to non-controlling interests);

c) recognises the fair value of any consideration received;

d) reclassifies to profit or loss, or transfers directly to retained earnings, amounts recognised in other comprehensive income in relation to the subsidiary on the same basis as would be required if the parent had directly disposed of the related assets or liabilities;

e) recognises any investment retained in the former subsidiary at its fair value at the date when control is lost; and

f) recognises any resulting difference of the above items as a gain or loss in the consolidated income statement.

The Group subsequently accounts for any investment retained in the former subsidiary in accordance with IAS 39 Financial Instruments ("IAS 39"), or when appropriate, IAS 28. This accounting policy is applied when the Group loses control of a subsidiary through the sale of shares to a party external to the Group and/or when a controlling interest in a subsidiary is transferred to an existing joint venture of the Group.

2.4.2 Business Combinations

The Group accounts for the business combinations using the acquisition method under which the consideration transferred is measured at fair value, calculated as the sum of:

· the acquisition date fair value of assets transferred by the Group;

· liabilities incurred by the Group to the former owners of the acquiree; and

· the equity interests issued by the Group in exchange for control of the acquiree.

Acquisition related costs are recognised in the consolidated income statement as incurred.

Goodwill is measured as the excess of the sum of:

· the fair value of the consideration transferred;

· the amount of any non-controlling interests in the acquiree; and

· the fair value of the acquirer's previously held equity interest in the acquiree, if any; less

· the net of the acquisition date fair value of the identifiable assets acquired and liabilities assumed.

For each business combination, the Group recognises any non-controlling interest in the acquiree at its proportionate share of the acquiree's identifiable net assets.

For changes in the Group's interest in a subsidiary that do not result in a loss of control, the Group adjusts the carrying amounts of the controlling and non-controlling interests to reflect the changes in their relative interests in the subsidiary. The difference between the change in value of the non-controlling interest and the fair value of the consideration paid or received is recognised directly in equity and attributed to the equity holders of the Parent.

2.4.3 Transactions eliminated on Consolidation

Intra-group balances, transactions, any unrealised gains and losses or income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

2.4.4 Investment in Associates and Joint Ventures

Associates are entities over whose financial and operating policies the Group has the ability to exercise significant influence but not control and which are neither subsidiaries nor joint arrangements. The Group classifies its interests in joint arrangements as either joint operations or joint ventures depending on the Group's rights to the assets and obligations for the liabilities of the arrangements. When making this assessment, the Group considers the structure of the arrangements, the legal form of any separate vehicles, the contractual terms of the arrangements and other facts and circumstances specific to each transaction.

Investments in associates and joint ventures are initially recorded at cost and subsequently increased or decreased each year by the Group's share of the post-acquisition net profit or loss and other movements recognised in the other comprehensive income or directly in equity of the investments. The Group's share of the results of associate undertakings or joint ventures after tax reflects the Group's proportionate interest in the relevant undertaking and is based on financial statements drawn up to a date not earlier than three months before the year end reporting date, adjusted to conform with the accounting policies of the Group.

Where the Group obtains significant influence such that an investment which was previously accounted for as an investment under IAS 39 is now to be treated as an associate undertaking, the Group's previously held interest is remeasured to fair value through profit or loss for the year. The deemed cost of the associate is the fair value of the original investment plus the fair value of any additional consideration given to achieve significant influence.

Goodwill arising on the acquisition of an associated undertaking or joint venture is included in the carrying amount of the investment. When the Group's share of losses in an associate or joint venture has reduced the carrying amount to zero, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations to make payments on behalf of the associate or joint venture.

Since goodwill that forms part of the carrying amount of the investment in an associate or joint venture is not recognised separately, it is not tested for impairment separately. Instead, the entire amount of the investment in an associate or joint venture is tested for impairment as a single asset when there is objective evidence that the investment in an associate or joint venture may be impaired.

Reversals of impairments are recorded as an adjustment to the investment balance to the extent that the recoverable amount of the associate or joint venture increases.

Unrealised gains and losses arising from transactions with associates and joint ventures are eliminated to the extent of the Group's interest in the entities.

Capital contributions result from the non-reciprocal transfer of resources without a corresponding increase in the underlying net assets of the associate or joint venture. Capital contributions are accounted for as an increase in the net investment held within the Group's financial statements and are subject to impairment.

When the Group ceases to have significant influence over an associate or joint control over a joint venture, it is accounted for as a disposal of the entire interest in that investee, with a resulting gain or loss being recognised in the consolidated income statement. Any retained interest in that former investee at the date when significant influence or joint control is lost is recognised at fair value and this amount is treated as the fair value on initial recognition of a financial asset or, when appropriate, the cost on initial recognition of an investment in an associate.

Any gain or loss on the dilution of an interest in an equity-accounted investee is calculated as the difference between the carrying amounts of the investment in the equity-accounted investee, immediately before and after the transaction that resulted in the dilution and is recognised in the consolidated income statement.

2.4.5 Goodwill and Intangible Assets

Goodwill and intangible assets are carried at cost less impairment. In respect of equity accounted investments, the carrying amount of goodwill is included in the carrying amount of the investment and an impairment loss on such an investment is not allocated to any underlying asset, including goodwill that forms part of the carrying amount of the investee.

Amortisation of intangible assets is recognised in profit or loss on a straight-line basis over their estimated useful life, from the date that they are available for use.

2.5 Currency Translation Reserve

2.5.1 Foreign Currency Transactions

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the consolidated income statement. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to the functional currency at the foreign exchange rates ruling at the dates that the values are determined.

2.5.2 Foreign Operations

Exchange differences arising from the translation of the net investment in foreign operations are taken to the foreign currency translation reserve ("FCTR"). They are released into the consolidated income statement upon disposal. On consolidation, the balance sheet of foreign subsidiaries are translated at the closing rate and the income statement and statement of comprehensive income are translated at the rates at the dates of the transaction or at an average rate for the year where this is a reasonable approximation.

2.6 Investment Property

Investment properties are those which are held either to earn rental income or for capital appreciation or for both. Investment properties are initially recognised at cost and subsequently measured at fair value. External, independent valuation companies, having professionally qualified valuers and recent experience in the location and category of property being valued, value the portfolios on an annual basis. The fair values are based on market values, being the estimated amount for which property could be exchanged on a highest and best use basis between a willing buyer and a willing seller in an arm's length transaction.

The valuations are determined by considering comparable and timely market transactions for sales and letting and having regard for the current leases in place. In the case of lettings this includes considering the aggregate of the net annual market rents receivable from the properties and where relevant, associated costs. A yield which reflects the risks inherent in the net cash flows is applied to the net annual rents to arrive at the property valuation.

As the fair value model is applied, property under construction or redevelopment for future use as investment property continues to be measured at fair value. However, where the fair value of investment property under redevelopment cannot be measured reliably, the property is measured at cost.

Property held under leases to earn rental income or for capital appreciation is also classified as investment property, accounted for as if held under a finance lease. Such property is initially recognised as the sum of any premium paid on acquisition and the present value of any future minimum lease payments. The corresponding liability to the superior leaseholder is recognised in the consolidated balance sheet as a finance lease obligation.

In determining the fair value of the property, the market value as determined by the independent valuers is:

· reduced by the carrying amount of any accrued income and expense resulting from the spreading of lease incentives to tenants and/or minimum lease payments; and

· increased by the carrying amount of any liability to the superior leaseholder included in the consolidated balance sheet as a finance lease obligation.

The bi-annual valuations of investment property are based upon estimates and subjective judgements that may vary materially from the actual values and sales prices that may be realised by the Group upon ultimate disposal. The critical assumptions made in determining the valuations have been disclosed in Note 12 to the financial statements.

Gains or losses arising from changes in the fair value of investment property are included in the consolidated income statement in the year in which they arise.

Acquisition and disposals of investment property are recognised when significant risks and rewards attached to the property have transferred to, or from, the Group. Profit or loss on disposal of investment property is recognised in the consolidated income statement when significant risks and rewards have transferred from the Group.

2.6.1 Borrowing Costs and Cost of Construction

All costs directly associated with the purchase and construction of a qualifying property are capitalised.

Borrowing costs are capitalised if they are directly attributable to the acquisition, construction or production of a qualifying asset. Capitalisation of borrowing costs commences when the activities to prepare the asset are in progress and expenditure and borrowing costs are being incurred. Capitalisation of borrowing costs may continue until the assets are substantially ready for their intended use. If the resulting carrying amount of the asset exceeds its value, an impairment loss is recognised. The capitalisation rate is arrived at by reference to the actual rate payable on borrowings for development purposes or, with regard to that part of the development cost financed out of general funds, to the weighted average cost of debt.

2.7 Property, Plant and Equipment

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses, if any. Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Group. Depreciation is calculated to write off the cost of items to their estimated residual values using the straight-line method over their estimated useful lives and is generally recognised in the consolidated income statement. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. It is Group policy to depreciate property, plant and equipment over a period of between 2 and 5 years.

2.8 Financial Instruments - recognition, classification and measurement

Non-Derivative Financial Instruments

Non-derivative financial instruments comprise investments in equity securities, trade and other receivables, cash and cash equivalents, loans and borrowings and trade and other payables.

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not designated at fair value through profit or loss, any directly attributable transaction costs, except as described below. Loan receivables and payables are subsequently measured at amortised cost using the effective interest rate method.

A financial instrument is recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group's contractual rights to the cash flows from those assets expire or if the Group transfers the assets to another party without retaining control or substantially all risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e. the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised when the Group's obligations specified in the contract expire.

Investments at Fair Value through Profit or Loss

An instrument is classified at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated as fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value. Upon initial recognition, attributable transaction costs are recognised in profit or loss as incurred. Financial instruments at fair value through profit or loss comprise equity securities and are measured at fair value with changes therein recognised in the consolidated income statement. Fair values are determined by reference to their quoted bid price at the reporting date.

Derivative Financial Instruments

The Group holds derivative financial instruments to manage its interest rate risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.

Derivatives are recognised initially at fair value on the date the Group becomes party to the contract; any attributable transaction costs are recognised in the consolidated income statement as incurred. Subsequent to initial recognition, derivatives are re-measured to fair value at each reporting date, and changes therein are accounted for in the consolidated income statement and presented under change in fair value of derivative financial instruments.

2.9 Finance Leases

Finance leases are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the future minimum lease payments. Lease payments are apportioned between the finance charges and the capital reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability over the lease term. Finance charges are charged through profit or loss as they arise.

2.10 Impairment

Financial assets not carried at fair value through profit or loss are assessed at each reporting date to determine whether there is objective evidence that they are impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition, that the loss event had a negative effect on the estimated future cash flows of that asset and the impact on those cash flows can be estimated reliably.

Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers of or issuers to the Group, economic conditions that correlate with defaults or the disappearance of an active market for a security.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Losses are recognised in the consolidated income statement and reflected in an allowance account against loans and receivables. Interest on the impaired asset continues to be recognised. When a subsequent event (e.g. repayment by a debtor) causes the amount of impairment loss to decrease, the decrease in impairment loss is calculated on a basis consistent with the original charge and reversed through the consolidated income statement.

2.11 Cash and Cash Equivalents

Cash and cash equivalents comprise cash balances on hand, cash deposited with financial institutions and short-term call deposits. Cash and cash equivalents have a maturity of less than three months.

Restricted cash comprises cash deposits which are restricted until the fulfilment of certain conditions.

2.12 Share Capital

Ordinary share capital

Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares, net of tax, are shown as a deduction from any recognised share premium.

2.13 Leasehold Property

Leasehold properties that are leased out to tenants under operating leases are classified as investment properties as appropriate and are included in the consolidated balance sheet at fair value. Land interests held under operating leases are classified and accounted for as investment property on a property by property basis when they are held to earn rentals or for capital appreciation on both the land and the property elements. Any such property interest under an operating lease classified as investment property is carried at fair value.

2.14 Borrowings

Interest-bearing borrowings are recognised initially at fair value less directly attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the consolidated income statement over the contractual term of the borrowings on an effective interest rate basis.

Finance Costs

Finance costs recognised in the consolidated income statement represent interest payable on borrowings calculated using the effective interest rate method.

Restructured Debt

A financial liability is derecognised when it is extinguished (i.e. it is discharged, cancelled or expires) which may happen when full repayment is made to the lender, the borrower is legally released from primary responsibility for the financial liability or where there is an exchange of debt instruments with substantially different terms or a substantial modification to the existing terms of a debt instrument.

In the event of a substantial modification of terms, any difference between the carrying amount of the original liability and the consideration paid is recognised in the consolidated income statement. The consideration paid includes non-financial assets transferred and the assumption of liabilities, including the new modified financial liability. Any new financial liability recognised is measured initially at fair value and subsequently carried at amortised cost under the effective interest rate method. Any costs or fees incurred are recognised as part of the gain or loss on extinguishment and do not adjust the carrying amount of the new liability.

2.15 Dividends

Dividends to shareholders are recognised when they become legally payable. In the case of interim dividends, this is when the dividends are declared and paid by the Directors. In the case of final dividends, this is when approved by the shareholders at a general meeting.

2.16 Rental Income

Rental income from investment property leased out under operating leases is recognised in the consolidated income statement on a straight-line basis over the term of the leases. Lease incentives granted are recognised as an integral part of the total rental income and amortised over the term of the leases.

Contingent rental income is recognised as it arises. Premiums to terminate leases are recognised in the consolidated income statement as they arise.

2.17 Service Charges

Where the Group invoices service charges, these amounts are not recognised as income as the risks in relation to the provision of these goods and services are primarily borne by the Group's tenants and consequently they are recognised as a reduction in rental expense. Any servicing expenses suffered by the Group are included within rental expense in the consolidated income statement.

2.18 Investment and Interest Income

Dividends from listed property investments are recognised on the date the Group's right to receive payment is established. Interest earned on cash invested with financial institutions is recognised on an accruals basis using the effective interest rate method.

2.19 Income Tax

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the consolidated income statement except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case it is recognised in other comprehensive income.

Current tax is based on taxable profit for the year and is calculated using tax rates that have been enacted or substantively enacted by the reporting date. Taxable profit differs from net profit as reported in the consolidated income statement because it excludes items of income or expense that are not taxable (or tax deductible).

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: those arising from goodwill not deductible for tax purposes, those arising from the initial recognition of assets or liabilities that affect neither accounting or taxable profit, nor differences relating to investments in subsidiaries to the extent described below. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised and is reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax is not provided on temporary differences arising on investments in subsidiaries and joint ventures where the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability settled. Deferred tax on the fair value movement on German investment properties has been provided at the capital gains taxation rate based on the manner in which each asset is expected to be realised. Deferred taxation liabilities are provided only to the extent that there are not sufficient tax losses to shield the charge.

2.20 Earnings per Share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is determined by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding adjusted for the effects of all dilutive potential ordinary shares.

In line with the JSE Listings Requirements, the Group also presents headline earnings per share.

2.21 Segmental Reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and in respect of which it may incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components. An operating segment's operating results are reviewed regularly by the Chief Operating Decision Maker to inform decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available. See Note 3 for further details.

2.22 Employee Benefits and Employee Share-Based Payments

Employee benefits, such as salaries and other benefits, are accounted for on an accruals basis over the period during which employees have provided services. Bonuses are recognised to the extent that the Group has a legal or constructive obligation to its employees that can be measured reliably.

Share-based incentives are provided to employees under the Group's Long-Term Performance Share Plan ("PSP") for Executive Directors and the Long-Term Restricted Stock Plan ("RSP") for employees. The Group recognises a compensation cost in respect of these schemes that is based on the fair value of the awards, measured using the Monte Carlo valuation methodology.

For equity-settled schemes, the fair value is determined at the date of grant and is not subsequently remeasured unless the conditions on which the award was granted are modified.

For cash-settled schemes, the fair value is determined at the date of grant and is remeasured at each reporting date until the liability is settled. Generally, the compensation cost is recognised on a straight-line basis over the vesting period. Adjustments are made to reflect expected and actual forfeitures during the vesting period due to the failure to satisfy service conditions or non-market performance conditions.

2.23 Disposal Groups and Non-Current Assets Held for Sale

A non-current asset or a disposal group comprising assets and liabilities is classified as held for sale if it is expected that its carrying amount will be recovered principally through sale rather than through continuing use, it is available for immediate sale and it is highly probable that the sale will occur within one year. For the sale to be highly probable, the appropriate level of management must be committed to a plan to sell the asset or disposal group.

Where the Group is committed to a sale plan involving the loss of control of a subsidiary, it classifies all the assets and liabilities of that subsidiary as held for sale when the criteria set out above and detailed in IFRS 5 are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale.

On initial classification as held for sale, non-current assets and disposal groups are ordinarily measured at the lower of the previous carrying amount and fair value less costs to sell, with any adjustments recognised in the consolidated income statement and re-measured at each reporting date. However, certain assets such as financial assets within the scope of IAS 39 and investment property in the scope of IAS 40 continue to be measured in accordance with those standards.

Impairment losses subsequent to the classification of assets as held for sale are recognised in the consolidated income statement. Increases in fair value less costs to sell of assets that have been classified as held for sale are recognised in the consolidated income statement to the extent that the increase is not in excess of any cumulative impairment loss previously recognised in respect of that asset. Assets classified as held for sale are not depreciated.

Gains and losses on re-measurement and impairment losses subsequent to classification as a disposal group or a non-current asset held for sale are presented within continuing operations in the consolidated income statement, unless they meet the definition of a discontinued operations.

Disposal groups and non-current assets held for sale are presented separately from other assets and liabilities on the balance sheet. Prior periods are not reclassified.

2.24 Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote.

Capital commitments are disclosed when the Group has a contractual future obligation which has not been provided for at the balance sheet date.

2.25 Capital Management

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors both the demographic spread of shareholders, as well as the return on capital, which the Group defines as total shareholders' equity, excluding non-controlling interests, and the dividends paid to ordinary shareholders.

At the 2015 AGM the Company received the necessary authorisation from shareholders to purchase its own shares on the market, subject to such shares being cancelled immediately upon acquisition. The timing of purchases will depend on market conditions and purchase and sale decisions will be made on a transaction by transaction basis by the Board of Directors. No share purchases took place during the year. The Group does not have a defined share buy-back plan.

The level of the Company's borrowings, in terms of its articles of association, shall not at any time, without the previous sanction of an ordinary resolution of the Company exceed ten times the aggregate of:

i. the amount paid up on the issued share capital of the Company; and

ii. the total of capital and revenue reserves.

The Company's dividend policy is to distribute the majority of its earnings available for distribution in the form of dividends to shareholders.

3. Segmental Reporting

As required by IFRS 8 Operating Segments ("IFRS 8"), the information provided to the Board, being the Chief Operating Decision Maker, can be classified into the following segments:

Management information, as presented to the Chief Operating Decision Maker, is prepared on a proportionately consolidated basis. Segmental reporting is therefore reported in line with management information, with the Group's share of joint ventures presented line-by-line. Joint venture adjustments are disclosed to reconcile segmental performance and position to the consolidated financial statements. Comparative information has been aligned to ensure consistent disclosure.