RESULTS FOR THE YEAR ENDED 31 AUGUST 2017

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 2017

DISCIPLINED APPROACH DELIVERS SECTOR-LEADING DIVIDEND YIELD

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 full year ended 31 August 2017.

(1) Refer to Glossary for explanation

· Underlying earnings per share of 2.75 pence in line with guidance

· Gross rental income increased 3.7% on a like-for-like basis (2016: 1.0%)

· Dividend fully covered with pay-out ratio of 94.5%

· Portfolio valuation increased 3.0% on a like-for-like basis (2016: 3.4%)

· Cost of debt reduced to 3.1% (2016: 3.4%)

· LTV reduced to 50.0% including post year end transactions (2016: 53.4%)

· EPRA NAV per share increased 3.5% to 41.4 pence (2016: 40.0 pence)

Operational progress

· EPRA occupancy remains high at 97.7% (2016: 97.7%)

· Disposals of £148.2 million at a 12.2% premium to book value

· Leases subject to indexation increased to 38.9% (2016: 34.7%)

· WAULT of 7.4 years to first break (8.5 years to lease expiry)

· 235 lease events completed during the year totalling £17.3 million (up 3.9% on passing rent; up 0.7% on ERV)

· Agreement for lease with TK Maxx at Derby for new 22,000 sqft unit

· Office vacancy reduced to 4.2% following a number of successful lettings (2016: 6.9%)

· Post year end, scheme of arrangement approved to increase the Group's interest in IHL 

Greg Clarke, Chairman, commented:

"Redefine International has delivered another solid performance for its investors. Following the Capital Markets Day earlier this year, the Company outlined clear and measurable medium-term targets and has demonstrated clear conviction in executing these throughout the year. The continued focus on improving the portfolio's quality is well on track, following the completion of a number of successful strategic disposals and income enhancing investments, whilst progress in strengthening the capital structure leaves the business well positioned to offer investors security in an uncertain economic climate."

Mike Watters, Chief Executive, commented:

"At our Capital Markets Day earlier this year, we outlined our strategic priorities to put the Company on track to becoming the UK's leading income focused REIT. I'm pleased to report tangible progress across all areas which enables us to present a higher quality portfolio and stronger balance sheet. In line with guidance, 2017 has seen the dividend re-based to align more closely to operational cash flow. We firmly believe this was the right thing to do and continue to deliver one of the highest yields on NAV in the industry. With a growing global appetite for predictable income returns, we believe our income-led business model, designed to deliver market leading shareholder distributions, remains extremely attractive and we look to the future with confidence."

Results presentation, webcast and conference call

A meeting for analysts and investors will take place on Thursday 26 October 2017 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) 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

2017 has been a year of heightened global and political uncertainty and prospects of continued volatility across markets. In a world where change is happening at an ever-increasing pace, our strategy to be the UK's leading income focused REIT is well placed. I am therefore pleased to report another solid set of results, with underlying earnings per share at 2.75 pence, in line with recent guidance and EPRA NAV per share up 3.5 per cent to 41.4 pence.

Results and dividend

Underlying earnings increased by 7.6 per cent to £49.8 million (2016: £46.3 million). Underlying earnings per share are in line with guidance at 2.75 pence and form the base from which we will grow income in line with our medium-term growth target of 3.0 to 5.0 per cent per annum.

EPRA NAV increased by 3.5 per cent to 41.4 pence per share (2016: 40.0 pence per share) supported by a 3.0 per cent like-for-like increase in the value of the Group's portfolio. 

The Board has declared a second interim dividend of 1.3 pence per share taking dividends declared for the full year to 2.6 pence per share. The full year dividend reflects a pay-out ratio of 94.5 per cent of underlying earnings, delivering on our strategic priority of distributing superior income returns which are fully covered by underlying earnings and aligned with operating cash flow. The total dividend for the year of 2.6 pence per share reflects a 6.3 per cent yield on EPRA NAV, over 50 per cent higher than the UK-REIT average of 4.1 per cent.

Strategic priorities

In February 2017 we held an inaugural Capital Markets Day and set out the Company's strategic priorities which have the goal of delivering superior, sustainable and growing income returns. Following a period of significant growth and transactional activity these priorities underline our ongoing ambition to become the UK's leading income focused REIT. 

Our initial earnings target of 2.7 to 2.8 pence per share has been achieved and in only six months we have made material progress in improving the quality of the portfolio so as to deliver long-term sustainable income returns and enhanced growth prospects.

Scalable business

There are a number of long-term benefits associated with greater scale, including greater access to capital markets and liquidity, a lower cost of capital, overhead efficiencies and operational flexibility. However, these benefits will remain secondary to securing the right income focused investment opportunities for our shareholders.

The acquisition of a further 32.8 per cent stake in International Hotel Properties Limited ("IHL") by way of a scheme of arrangement, as announced in August 2017, will result in the issuance of approximately 45.9 million new Redefine International shares. In addition, the Company will reach agreement later today to acquire a further 5.0 million shares (representing an 8.9 per cent stake) in IHL from Redefine Properties on the same terms as the scheme of arrangement. 12.5 million new Redefine International shares will be issued in consideration (representing 0.7 per cent of the current issued share capital). The completion of these two transactions will result in the Group's overall interest in IHL increasing to 58.9 per cent. IHL will be delisted and the portfolio will be managed as part of the Group's existing hotel portfolio. Last valued at £104.4 million, the assets include the Hampton By Hilton at Gatwick Airport, the Holiday Inn Express, Edinburgh and four Travelodge hotels providing long-dated uncapped CPI-linked income. The acquisition is expected to provide a yield on equity of over 10 per cent which will be earnings enhancing and provide exposure to assets demonstrating strong trading performance. This acquisition clearly demonstrates our ambition to increase scale through investing in the right earnings enhancing opportunities.

Income focused portfolio

Our strategic priority to improve our portfolio's exposure to more resilient property fundamentals supports our target to deliver secure, sustainable and growing income. Our investment philosophy is simple; we look to invest in and extract value from assets which can deliver consistent and growing income returns. Equally, we look to recycle capital from assets providing limited further rental and/or capital growth expectations, where business plans have been successfully executed and value creation maximised.

It has been a productive year in terms of both investment and disposal activity. Over £148 million was generated from asset sales at a premium of 12.2 per cent to book value with a further £11.0 million sold post year end. The disposals completed during the year are testament to our strategy as set out above. These actions, combined with disciplined reinvestment, are continuously improving the quality of the portfolio and its ability to deliver long-term sustainable and growing income returns.

The Company is at advanced stages of negotiation on the sale of a portfolio of German retail assets for approximately €200 million. The sale would include the repayment of associated debt facilities. This opportunistic disposal capitalises on an exceptionally strong investment market and an approximate 17 per cent increase in the value of the Euro relative to Sterling over the investment period.

The Company intends to recycle the disposal proceeds into new investments which are in line with the Company's strategy of enhancing the quality of the portfolio and its growth prospects. A number of investment opportunities have been identified which are at various stages of due diligence. In particular, the Company is currently in exclusive negotiations to acquire a portfolio of high quality assets in the UK which, if acquired, would utilise the majority of the disposal proceeds. The income yield is expected to be commensurate with the yield achieved on the disposal and likely to be accretive to investors over the medium-term. However, there can be no guarantee that such acquisition will proceed to completion, and a further announcement will be made by the Company, as appropriate, in due course.

Our relentless focus on maximising income delivered from the portfolio is evidenced by the continued high level of occupancy achieved at 97.7 per cent (2016: 97.7 per cent). 235 leasing events were completed during the year reflecting a 3.9 per cent (£0.6 million) increase on passing rent and a 0.7 per cent increase on ERV. Excluding temporary leases, gross annualised rental income increased by 5.0 per cent and 4.9 per cent on passing rent and ERV respectively. 

The redevelopment and expansion of existing assets remains an important part of our strategy to enhance the quality of the portfolio and deliver attractive income returns on marginal investment. Capital expenditure during the year totalled £19.6 million with current capital projects anticipated to provide a 7.6 per cent yield on cost.

Efficient capital structure

We are focused on further strengthening the balance sheet by mitigating refinancing risk and efficiently reducing leverage, whilst also limiting the impact on income.

The Group's loan-to-value ratio of 50.0 per cent, reflecting transactions post year end, is at the top end of our medium-term target of 45 to 50 per cent. The acquisition of a further 44.0 per cent interest in the Leopard portfolio during the second half of the year raised leverage temporarily above 50 per cent but this has been largely addressed through successful disposals and the acquisition of the controlling interest in the IHL hotel portfolio post year end.

The Group's weighted average cost of debt stands at 3.1 per cent (2016: 3.4 per cent), below our medium-term target of 3.2 to 3.4 per cent. The reduction in our interest costs has provided enhanced interest cover at a Group level of 3.2 times (2016: 2.7 times).

The long-term debt secured against four of our UK Shopping Centres was successfully restructured in the second half of the year to reduce leverage and interest costs. The aggregate facility of £167.8 million was reduced to £146.1 million, extended to April 2042 and included the termination of the historic profit share arrangement on Grand Arcade, Wigan. The aggregate prepayment and restructuring costs of £27.6 million provided a marginal return of approximately 10 per cent, resulting in an efficient reduction in leverage.

Financial discipline

In February 2017, we aligned underlying earnings to the EPRA measure, adjusted for limited Company specific non-cash adjustments. Utilising this industry standard metric will provide a closer alignment of earnings to operating cash flow. Our dividend for the year was fully covered, with the pay-out ratio of 94.5 per cent within our target of 90 to 95 per cent. Progress against our medium-term financial targets has been positive with key metrics largely on target or moving in the right direction.

 (1) 17.2 per cent when adjusted for non-recurring items.

Growing our business sustainably

On the Corporate & Social Responsibility front, the Group has been proactive in ensuring compliance with forthcoming Energy Performance Certificate ("EPC") regulations. Over 500 EPCs have been reviewed or renewed eliminating compliance risk in advance of the 2018 deadline. On Green initiatives, we have improved our GRESB rating for the second year running, and we have conducted tenant surveys at our UK Shopping Centres to help us develop better experiences for occupiers and customers alike. For certain centres this has resulted in the implementation of electric vehicle charging bays, provided free of charge to customers. 2016 marked ten years since the Group's listing and to celebrate we have been paying it back with community projects called 'Ten 4 Ten'. Each centre has invested ten days during the year towards initiatives designed to support the communities in which we operate.

Outlook

The income return from direct real estate in the UK has contributed approximately 75 per cent of total direct real estate returns over the long-term, and our income focused portfolio is well placed to capitalise on this trend in the future. With growing global appetite for predictable income returns, we believe our income-led strategy to deliver market leading shareholder distributions remains extremely attractive.

The expectation of rising interest rates in the UK in the near term appears increasingly likely. Despite this, interest rates remain exceptionally low by historic standards and the outlook for longer-term rates remains benign, suggesting that the search for yield is likely to endure as a key investment theme. 

Our income focused and diversified portfolio provides limited exposure to any single sector or occupier with the opportunity to allocate capital to assets and sectors where we identify the best opportunities. We are increasingly looking to invest in locations and sectors with long-term structural support driven by occupier demand, infrastructure investment and strong demographics.

Significant progress has been made in strengthening our balance sheet and we will continue to target a lower leverage structure over time. Notwithstanding this objective, the Group's average debt maturity is already in excess of seven years and with material covenant headroom and interest cover over three times, this has resulted in limited refinancing risk and strong cash flow cover. 

All our medium-term targets remain in place. Our growth target of 3.0 to 5.0 per cent per annum in underlying earnings per share reflects the confidence we have that our business will continue to deliver superior, sustainable and growing income. Earnings growth is driven with focus on all aspects of our income statement. The continuous improvement in the quality of our portfolio is supporting rental growth expectations. We are seeing strong occupier demand for our logistics, hotels and retail park assets (47 per cent of the UK portfolio) supported by 38.9 per cent of the overall portfolio being subject to inflation-linked and fixed rental increases. In addition, we have a number of income-led asset management initiatives planned and underway to support our growth targets. Weighted average cost of debt has reduced to 3.1 per cent which, combined with improvements in our EPRA cost ratio is providing positive operating leverage.

We remain committed to becoming the UK's leading income focused REIT and to delivering upper quartile income returns relative to other UK-REITs.

Mike Watters

Chief Executive Officer

26 October 2017

STRATEGIC REPORT

Operating Review

Portfolio overview

2017 has been an active year in terms of capital recycling and asset management activity. Since the start of the year, we have invested £41.9 million and sold £132.1 million of assets, resulting in a material improvement to the quality of the portfolio and the sustainability of its income.

Our portfolio provides strong income characteristics with clear visibility of the medium-term income profile and growth opportunities. Key portfolio characteristics include:

· a weighted average lease length of 7.4 years to the first potential lease break and 8.5 years to expiry;

· 38.9 per cent of gross rental income is subject to inflation-linked or fixed increases;

· rental growth potential with a reversionary yield of 6.6 per cent, 90 bps higher than the current portfolio net initial yield;

· high and stable occupancy demonstrating robust occupier demand; and

· over 600 tenants with no single tenant accounting for more than 7.0 per cent of gross rental income.

Portfolio positioning by business plan

Each asset is viewed in terms of its ability to deliver sustainable income returns and/or growth. Approximately 76 per cent of the current portfolio is classified as either "Core Income" or "Growth Income". Core Income assets typically exhibit long lease lengths, high cash on cash returns and are predominantly multi-let, often with some form of indexation. Growth Income assets constitute approximately 30 per cent of the current portfolio. These assets are typically lower yielding but with higher intrinsic growth prospects. 

20 per cent of the portfolio comprises properties which have shorter term, more intensive asset management plans underway. These opportunities are typically income-led with a significant percentage of pre-let income being secured before development commences. Our ability to create marginal revenue and enhance the quality of assets is fundamental to our overall strategy.

Where we believe we have maximised the potential of individual assets or where the market is prepared to pay a higher price than our view of the assets' intrinsic value, we will look to recycle that capital into new opportunities. At 31 August 2017, approximately 4 per cent of the portfolio was considered mature with a number of those assets being actively considered for sale.

Valuation overview

The portfolio increased in value by £40.7 million or 3.0 per cent on a like-for-like basis. This increase in value was driven by a 2.7 per cent increase in like-for-like annualised net rental income and an inward yield shift of 7 basis points. A more detailed review of the valuation movement is presented in the Financial Review.

Leasing activity

In the last 12 months, 235 lease events were agreed providing a total rent of £17.3 million, a 3.9 per cent (£0.6 million) increase above the passing rent and a 0.7 per cent (£0.1 million) increase on ERV. Portfolio occupancy remained high and stable at 97.7 per cent (2016: 97.7 per cent).

As previously reported, we have experienced little evidence to suggest a material change in occupational demand in the markets in which we operate. Post year end, over 53,702 sqft (4,989 sqm) of vacant space in the UK Shopping Centre portfolio is in solicitor's hands, including the former BHS unit at Grand Arcade, Wigan which has exchanged with Poundland, resulting in the highest occupancy achieved since acquiring the shopping centres.

Rateable values

In January 2016, the UK Valuation Office Agency published an updated rating list for England and Wales which has been adopted from 1 April 2017. The change in rateable values for commercial real estate will have a direct impact on business rates and therefore the total cost of occupation for tenants and the cost of vacant space for landlords. In general, rates are to increase materially in London while many regional centres will see a reduction in rateable values. Across our UK portfolio (excluding UK Hotels) rates will reduce by approximately 6.9 per cent. Our hotels, which are largely London focused, will see a 51 per cent increase in rates. While the impact of the change in rates is to be phased in over a three year period, the change is already reflected in hotel property values.

Acquisitions

Leopard portfolio

The acquisition of the controlling interest in the Leopard portfolio was completed on 26 April 2017. The portfolio consists of 66 German retail properties which were independently valued at the time of acquisition at €175.5 million reflecting a net initial yield of 7.4 per cent. The portfolio generates gross annualised rental income of €13.9 million, of which 99.2 per cent is indexed between 60 and 70 per cent of German CPI, subject to indexation reaching a cumulative hurdle of 10 per cent. Tenants including Edeka, Netto, Real and Rossman account for over 85 per cent of the gross rental income. The portfolio has a WAULT of 7.9 years and is nearly fully occupied at 99.0 per cent by ERV.

The joint venture interest was acquired for an aggregate consideration of €49.0 million (€49.4 million including transaction costs). Following the transaction, the Company holds an effective 94 per cent controlling interest in the portfolio, whilst providing 100 per cent of its non-bank financing requirement by way of shareholder loans.

IHL

In August, the Company made an offer to increase its shareholding in IHL by 32.8 per cent (from 17.2 to 50.0 per cent). Following subsequent shareholder and court approval, the Company will acquire 16,429,687 IHL shares from the minority shareholders by way of a scheme of arrangement and a further 1,913,479 IHL shares from Redefine Properties. The transactions are expected to complete simultaneously in early November 2017. Consideration for the IHL shares will be settled via a share-for-share exchange with 2.5 Redefine International shares to be issued for every 1 IHL share held. A total of 45.9 million new Redefine International shares are expected to be allotted. On implementation of the scheme, the listing of IHL's shares on both the JSE and LuxSE will be terminated. The Company will also later today reach agreement to acquire a further 8.9 per cent interest in IHL from Redefine Properties on the same terms as the scheme of arrangement, by the issue of an additional 12.5 million new Redefine Intentional shares. This transaction constitutes a smaller related party transaction and falls within LR 11.1.10 R of the UK Listing Rules. The Group's interest will initially increase to 26.2 per cent and then to 58.9 per cent once the scheme of arrangement completes.

The IHL portfolio comprises nine high quality UK hotels which were last valued at £104.4 million and will complement the Company's existing hotel portfolio. The four Travelodge hotels, comprising 27.7 per cent of the portfolio, are let on long-term leases with average unexpired lease term of over 20 years. These assets reflect a net initial yield of 5.3 per cent and benefit from five yearly upward only CPI escalations that provide attractive rental growth prospects in a higher inflationary environment.

The remaining five hotels, valued at £75.4 million, will be leased to the Company's associate, RedefineBDL Hotel Group. Four of the hotels are franchised to Holiday Inn Express and one to Hampton by Hilton. The five hotels to be leased by RedefineBDL have a strong trading record. The Hampton by Hilton at Gatwick Airport is integrally linked to the airport terminal building and the Holiday Inn Express, Edinburgh has shown strong growth since acquisition by IHL. The five franchised hotels are expected to deliver a net initial yield of over 7.5 per cent. The portfolio is currently financed at 41.7 per cent loan-to-value, at an all-in cost of debt of 3.3 per cent.

Following the transactions, UK Hotels are expected to comprise approximately 21 per cent of the Company's gross assets, up from 16 per cent at 31 August 2017. It is anticipated that there will be material savings on the integration of the hotel assets into the Company's existing hotel portfolio and REIT status.

Disposals

The success of the disposal programme in the first half of the year continued into the second half with a further £53.2 million of disposals achieved at a premium of 12.0 per cent to the 28 February 2017 book values. Disposals for the full year totalled £148.2 million, reflecting a premium of 12.2 per cent to book value.

Strategic disposals

As part of our strategy to enhance the quality of the portfolio, mature assets and assets in weaker locations will be considered for sale.

VBG office portfolio, Germany

On 18 January 2017, the Company completed on the sale of four German office assets for a gross consideration of €106.0 million. The assets, which were disposed of via a share sale and included related debt facilities, were held in a joint venture with the Menora Mivtachim Group. The disposal of the Company's 49 per cent share reflected an 8.6 per cent premium to the August 2016 market value in Euro terms. The Company's net proceeds of €25.6 million, which included a net Performance Fee of €1.8 million, delivered an IRR of 24 per cent over the investment period.

The properties, situated in Berlin, Dresden, Cologne and Stuttgart, total 485,900 sqft (45,100 sqm), and are let to a German government-backed social insurance body, VBG, on a combined WAULT of just under seven years. The portfolio generated a total annual gross rental income of €8.1 million, of which €4.0 million was attributable to the Company. Significant capital would have been required on expiry of the leases to make market rents achievable.

Other

Other strategic sales included certain regional office assets and a number of smaller retail assets in Germany which had limited rental growth expectations.

Realising value

The ability to enhance income and value through asset management initiatives is a key part of our investment strategy. Where asset values have been maximised through reconfiguration, refurbishment or leasing activity, these assets will be considered for sale.

Delta 900, Swindon

Swindon was successfully sold for £3.6 million, following the completion of a new 15-year lease with Oxford Brookes University for 28,412 sqft (2,640 sqm) on an agreed rent of £0.3 million, 20.8 per cent above ERV. The disposal represents a 28.6 per cent premium on book value.

Carphone Warehouse unit, Priory Retail Park, London

The standalone Carphone Warehouse unit at Priory Retail Park, Merton was sold for £5.5 million relative to an apportioned value of £2.1 million reflecting a 161.9 per cent premium.

Opportunistic disposals

We are consistently looking to generate value through alternative use, income-led asset management or opportunistic sales. Opportunities to recycle capital through the disposal of assets at attractive prices are considered on a risk‑adjusted basis taking into consideration future capital commitments, planning and letting risks.

Exchange House, Watford

The Exchange House completed in October 2016 for £13.3 million, a 12.7 per cent premium to carrying value reflecting a net initial yield of 6.9 per cent and a reversionary yield of 5.8 per cent. The 63,000 sqft (5,900 sqm) office building is occupied by the Department of Work and Pensions until March 2023 with a break option in March 2018.

201 Deansgate, Manchester

On 31 January 2017, the Company completed on the disposal of 201 Deansgate, Manchester for £29.2 million. The property provides 83,700 sqft (7,800 sqm) of office space and delivered an annual net rental income of £1.1 million, with a WAULT of 4.1 years. The office was originally acquired as part of the AUK Portfolio in March 2016 and the sales price represents a net initial yield of 3.6 per cent and a 14.3 per cent premium to book value. The IRR over the investment period was 22 per cent.

Sytner BMW Car Showroom, High Wycombe

The Sytner BMW showroom was sold for £26.1 million to a UK pension fund in August 2017. The sale price reflected a net initial yield of 5.0 per cent and a premium of 5.8 per cent to the 28 February 2017 book value. The property was acquired in March 2016 as part of the AUK transaction. The disposal provided an opportunity to recycle capital out of an asset with limited near-term rental growth prospects at a low initial yield. 

Development and capital expenditure

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

City Arcaden, Ingolstadt

The redevelopment of this prime retail asset is anticipated to be completed in late 2017 and will transform the existing retail pitch. The completed scheme will total approximately 129,000 sqft (12,000 sqm) including two retail units pre-let to Primark and H&M of approximately 100,000 sqft (9,500 sqm). The scheme is anticipated to generate €2.2 million in rental income resulting in a yield on cost of 5.2 per cent.

Holiday Inn Express, Southwark

The 12-room extension and upgrade to the front and rear façade completed in September 2017 and included an upgrade to the bedrooms to align with the latest Holiday Inn Express format. The hotel's operating business delivered consistent underlying revenues despite the disruptions from the extension and refurbishment works.

UK Retail Park expansions

The new PureGym unit at Banbury Cross Retail Park was completed post year end. This unit will provide an additional £0.2 million of rental income reflecting a yield on cost of 15.0 per cent.

A further seven units are in various stages of development, with pre-let agreements for all the units either already completed or in solicitor's hands to strong A3 covenants. We are particularly pleased with The Arches Retail Park, Watford where competitive bidding resulted in indicative rental values of over £90 per sqft. The new units will provide an additional £0.5 million of rental income reflecting a yield on cost of over 10 per cent.

Albion Street, Derby

In May 2017 an agreement for lease was signed with TK Maxx for a new 22,000 sqft (2,044 sqm) store at Albion Street in Derby.

The redevelopment of 9-11 Albion Street has commenced to combine the basement, ground, first and second floors of the three existing units into a single, modern space to accommodate TK Maxx. The new store is scheduled to open by late 2017, once internal fittings have been installed, creating 35 new jobs and improving the retail pitch for the city. The agreed rent of £0.2 million is 50 per cent ahead of the February 2017 ERV. Capital expenditure to reconfigure the space is anticipated to be £2.2 million.

The ten adjoining retail units under our ownership, inclusive of the three being combined for TK Maxx provide a key artery in Derby's main retail centre, linking the city's Intu Shopping Centre to Primark and the historic Old Town. The area is the subject of major redesign and refurbishment plans by Derby City Council, which will transform the area into a family-focused shopping destination.

UK Retail

The retail landscape continues to evolve rapidly resulting in a significant variation in the performance of retail assets in different sub-sectors and locations. Unemployment levels are at an historic low, however, consumer confidence has been impacted by political uncertainty and negative real wage growth.

Unsurprisingly, the investment demand for retail, shopping centres in particular, has been weak which has been reflected in our valuations in the second half of the year. On the positive side, our shopping centre exposure is heavily weighted toward food, discount and convenience shopping which has proved more resilient when compared to retail of a more discretionary nature.

Commercialisation income of £1.1 million was collected during the year, a 9 per cent increase relative to last year. Our in-house commercialisation team, Centre Stage has enhanced the quality and profitability of the speciality retailing and advertising activity within our shopping centres and retail parks, collaborating with international and national brands as well as supporting smaller local businesses and communities. Income from commercialisation activities is targeted to grow by 7 per cent in 2018. Further opportunities to drive ancillary revenues from the Group's wider portfolio have been identified.

Shopping Centres

Despite a tough retail environment, 76 lease events were completed during the year which were marginally down on previous passing rents. Occupancy decreased to 96.7 per cent (2016: 98.1 per cent) as a result of five small units becoming vacant, three of which have successfully exchanged post year end. Annualised gross rental income decreased marginally, however, values declined 6.9 per cent on a like-for-like basis reflecting a weak investment market with very few transactions in the year.

The former 41,315 sqft (3,838 sqm) BHS unit at Grand Arcade, Wigan has been let to Poundland post year end. This is a good result, with the majority of old BHS units in the UK still vacant.

Shopping Centre occupancy will increase to 99.2 per cent following the inclusion of the lettings achieved post year end and will result in a saving of £0.6 million on vacancy costs.

Overall footfall increased by 2.1 per cent over the year. The majority of our shopping centres have benefited from this increase, other than Grand Arcade, Wigan where the former BHS vacancy impacted footfall. The re-letting of the BHS unit to Poundland is anticipated to have a positive impact on footfall in 2018.

Retail Parks and Other Retail

A modest 1.0 per cent decline in like-for-like valuations was impacted by a reduction in the valuation of the House of Fraser department store in Hull. Contracts have been exchanged on the sale of this asset post year end. Excluding this property, valuations increased 1.0 per cent. Annualised gross rental income was down by 2.1 per cent over the last 12 months largely as a result of the development started in Derby and two vacant units totalling 17,238 sqft (1,601 sqm) at Banbury Cross Retail Park. There are various discussions underway to re-let this space including the potential to enhance the tenant mix.

Occupier demand remains healthy, particularly for our larger schemes in London and the South East. Discussions with a number of discount food retailers and drive-through food and beverage operators are providing potential opportunities to realise higher rental values on the parks, as well as to deliver income and value enhancing asset management initiatives. The new 10 year lease with PureGym at Banbury Cross Retail Park will deliver £0.2 million of rental income and a yield on cost of 15.0 per cent for the recently completed 7,500 sqft (697 sqm) extension.

UK Commercial

The regional office market has been resilient, both in terms of occupational demand and investment volumes. With rental growth expected to remain relatively static in a number of key regional cities and some aggressive pricing of core assets, we have taken the opportunity to sell assets where we believe pricing was ahead of their growth prospects.

The London Southbank market has benefited from large scale redevelopment and investment from London Bridge through to Waterloo. Our exposure to 104,622 sqft (9,720 sqm) of London office space in areas undergoing material redevelopment has provided strong rental growth as well as longer-term redevelopment options. According to UK government projections, the expected growth in London's population from 8.9 million people to 9.9 million by 2027, providing opportunities to acquire assets in improving locations with rising rental values. Our London portfolio is well positioned to benefit from areas of structural change and has no exposure to financial services occupiers.

Distribution and industrial development activity remains restrained and general levels of supply are low suggesting the supply/demand dynamics will remain positive in the near term. The continued growth in online retailing from 14.9 per cent of total retail sales in 2016 to an anticipated 18.5 per cent by 2022 (source: GlobalData) should provide ongoing structural support as retailers adapt to an omni-channel sales strategy.

Our focus remains on multi-let industrial estates that benefit from a broad range of occupier demand and suitable to catering for growth in last mile distribution. Our largest exposure at Camino Park, Crawley benefits from the Crawley/Gatwick market which has both strong occupier demand and almost negligible available supply.

Offices

Offices delivered a strong result both in terms of income and valuation growth supported by a combination of factors including letting of vacant space and exposure to areas of structural change and rental growth. Valuations increased 5.9 per cent on a like-for-like basis, supported by London offices (12.8 per cent) and positive letting progress at City Point, Leeds and Omnibus, Reigate. Annualised gross rental income increased 5.1 per cent supported by three positive lease events at Charing Cross generating £0.2 million and reflecting a 19.0 per cent increase on passing rent and the letting of 18,195 sqft (1,690 sqm) of vacant space across the regional office portfolio. During the year one tenant in Newington Causeway, London went into administration. Given demand in the Southbank area we are confident this space will be re-let at attractive rents. Continued progress was also made in reducing vacancies in our regional office portfolio, where vacancies have now decreased to 4.2 per cent (2016: 9.5 per cent).

Distribution and Industrial

The distribution portfolio produced exceptional growth largely as a result of rental uplifts and lower investment yields at Camino Park, Crawley. The portfolio increased in value by 16.3 per cent on a like-for-like basis supported by ERV growth of 7.2 per cent. A rent review was settled at Express Park, Bridgwater resulting in a £0.1 million or 5.5 per cent increase in annual rental income. Looking forward, 64.6 per cent of rental income at Camino Park, Crawley is subject to rent review in late 2017. The current average passing rent of £7.1 per sqft is expected to show strong growth against both passing rent and ERV.

UK Hotels

Despite the squeeze on real incomes in the UK, the weak pound has helped to boost the UK hotel industry, by attracting overseas visitors. The performance of the sector in 2017 has exceeded expectations with PwC expecting occupancy, average daily room rates and RevPars to finish 2017 higher than 2016 and forecast in London to increase 2.4 per cent in 2018.

The investment market was strong in the first half of 2017 with investment in London hotels of approximately £1.1 billion; 55 per cent of the overall UK hotel investment volume. London hotels have seen strong demand from Asian investors originating from Hong Kong, Malaysia and Singapore with interest from India also now appearing, highlighting the strength of London as a world tourist and an investment destination.

The Group's hotel portfolio remains heavily weighted to London which has consistently proven to be a stable and growing market. The hotel portfolio will increase to approximately 21 per cent of the overall portfolio (31 August 2017: 16 per cent) post year end following the increase in the IHL shareholding. The acquisition will provide further exposure to Edinburgh and to Gatwick Airport, the UK's second busiest airport. In addition, the acquisition of a further four Travelodge hotels provides exposure to long-dated inflation linked income.

The portfolio increased in value by 2.9 per cent on a like-for-like basis supported by underlying EBITDAs for the RedefineBDL leased hotels ending the financial year 4.7 per cent higher than last year. The Travelodge, Enfield also increased in value by 13.0 per cent reflecting the improved Travelodge covenant and the general investment demand for long-dated index-linked income.

The rent for the RedefineBDL leased portfolio for the 2018 financial year has been set at £15.4 million, a 7.5 per cent like-for-like increase. 

RedefineBDL

The Company's 30.4 per cent stake in RedefineBDL, the largest independent hotel management company in the UK, contributed £1.1 million to underlying earnings during the year. Post year end, RedefineBDL was awarded the management contract for a further 26 four-star luxury hotels located throughout the UK. Following the transaction, RedefineBDL manage more than 11,000 rooms across 75 hotels in the UK, testament to the in-house specialism in this sector. 

IHL

The Company's 17.2 per cent investment in IHL had a market value of £8.5 million at 31 August 2017 resulting in a fair value loss of £0.3 million for the year. Due to the scheme of arrangement currently in progress no dividend has been declared in respect of the second half of the financial year which has impacted the anticipated earnings. IHL contributed £0.5 million in the previous financial year.

Europe

The investment market in Germany continues to attract significant domestic and foreign capital which, combined with a lack of available investment product, has supported competitive market activity. Of note is the entry of Asian investors into the direct market, accounting for close to 9 per cent of the transaction volume in the first half of the year. Berlin continues to see strong investment demand which bodes well for our portfolio, where 20 per cent is located. Logistics and industrial assets have witnessed a material increase in activity and the trend of increasing investment into alternative assets is rising given the competitive pricing of the traditional sectors.

The European portfolio delivered strong growth supported by a stronger Euro relative to Sterling. The portfolio increased in value by 2.5 per cent in local currency terms and on a like-for-like basis.

Asset management activity at our Berlin Shopping Centre is progressing well. Terms have been agreed to extend the REWE supermarket by 1,840 sqft (171 sqm). The lease will also be extended on a new 10 year term with the additional rent reflecting an 8.3 per cent yield on cost. Similarly, the dm pharmacy has agreed to extend its store by 1,076 sqft (100 sqm). The lease will also be extended on a 10 year term with the additional rent reflecting a 9.4 per cent yield on cost. Both of these initiatives increase the centre's weighting to food and convenience shopping and reduces the number of units on the lower ground floor, improving the supply demand position of the centre. The refurbishment of the foodcourt began during the year and will provide a more modern concept with improved services to customers.

Redevelopment options at Altona, Hamburg are currently being progressed in consultation with the local authority. The wider master plan for this historic and commercially important area will be driven by the planned relocation of the high-speed railway terminal. This relocation is anticipated to take place in 2023 but in the interim, the development of a further 5,000 new homes has already commenced.

STRATEGIC REPORT

Financial Review

Overview

As set out at our Capital Markets Day in February, the year has seen considerable capital recycling and reinvestment, targeting our core objective of delivering market leading income returns for our shareholders. We have re-based our key earnings metric and dividend structure to ensure we retain sufficient operating cash flow within the business to fund asset management initiatives which are designed to grow income-led total returns. Capital profits from disposals have been partly applied towards debt restructuring and prepayments to drive down finance costs and leverage.

Guidance on the Group's re-based earnings measure, set out at the Capital Markets Day, has been delivered on and these full year results demonstrate solid progress against all commitments made. 

Underlying earnings, the Group's earnings measure, were £49.8 million or 2.75 pence per share. Aligning the comparative period, which removes the impact of discontinued Company adjustments, would have resulted in underlying earnings of £46.3 million or 2.8 pence per share. The marginal reduction per share is largely attributable to both non-recurring administrative costs and the timing of reinvestment following a period of extensive capital recycling.

EPRA NAV per share rose by 3.5 per cent to 41.4 pence, driven primarily by both realised and unrealised gains on the Group's property portfolio, and the impact of our European investments which benefited from the relative strength of the Euro.

An aggregate premium to book value of £16.1 million (12.2 per cent) was generated through the disposal of mature assets and the strategic sale of certain high yielding assets, with reinvestment into lower yielding but higher growth assets during the year. The most significant were the disposal of the VBG portfolio and Deansgate, Manchester which achieved a 24 and 22 per cent IRR respectively over the investment periods.

Proceeds from the VBG disposal were used to acquire the joint venture's interest in the German supermarket portfolio for €49.0 million, an investment providing a 10 per cent cash on cash yield. As well as being an efficient reinvestment of capital, the acquisition provides flexibility over the portfolio's asset management initiatives and longer-term investment decisions.

Post year end, a scheme of arrangement was approved by the minority shareholders in IHL which will see the Group's interest increase from 17.2 to 50.0 per cent via a share-for-share exchange. IHL owns nine UK hotels last valued at £104.4 million. The transaction is anticipated to complete in early November 2017 with IHL to be delisted shortly after.

In April an opportunity arose to restructure and refinance the £167.8 million Aviva facility secured over four UK Shopping Centres. In return for a prepayment of £21.7 million, the interest rate on the refinanced principal of £146.1 million reduced by 31 basis points and has resulted in an annual finance cost saving of £1.7 million. The restructuring also removed an historic arrangement whereby Aviva shared in both the annual profits and (subject to certain hurdles) the capital appreciation of the Grand Arcade, Wigan. An aggregate annual saving of £1.5 million is expected to result from the removal of the profit share arrangement.

The Board today declares a second interim dividend of 1.3 pence per share, bringing the total paid and payable in respect of 2017 to 2.6 pence per share, which represents a 94.5 per cent pay-out ratio on underlying earnings, which is in line with guidance.

Presentation of financial information

The Board reviews information and reports presented on a proportionately consolidated basis, which includes the Group's share of interests in joint ventures. To align with how the Group is managed, this Financial Review has been presented on the same basis.

Gross revenue exceeded £100 million for the first time in 2017 following a full year of rental income from the 2016 AUK Portfolio acquisition.

On a like-for-like basis gross rental income increased by 3.7 per cent, or 0.7 per cent on a local currency basis. The strengthening of the Euro contributed an additional £2.1 million.

Asset management initiatives across the Group's retail schemes grew rents by 1.7 per cent. UK Shopping Centres recorded like-for-like income growth of 0.7 per cent in spite of the underlying challenges facing this asset class which demonstrates the resilience of our largely discount and convenience focused portfolio. Strong performers were St. George's Harrow and Banbury Cross, the only Retail Park currently included in like-for-like income, which has delivered well against expectations since acquisition.

Successful rent reviews within the Kwik Fit portfolio and the Government Office portfolio contributed to an overall 2.1 per cent like-for-like increase in the UK Commercial portfolio.

The income from the UK Hotel portfolio fell 1.3 per cent like-for-like, the result of lease incentive payments extended for general improvements to the portfolio, which masked a modest headline rental increase.

European rents were relatively flat in local currency terms, although a stronger Euro relative to Sterling during the year resulted in a 12.3 per cent increase in Sterling terms.

Property operating expenses have increased primarily due to the enlarged portfolio and a repairs and maintenance programme carried out on a number of German schemes, the most significant being the Berlin Shopping Centre.

Other income of £2.7 million includes a Performance Fee earned on the VBG portfolio disposal of £1.6 million. This arose from the asset management services provided to the joint venture and the IRR achieved on exit. 

The Group's administrative cost base increased by £4.2 million to £15.6 million, in part due to significant non-recurring charges incurred during the year. As guided, £1.6 million was paid to terminate the historic AUK asset management contract following the Group's 2016 acquisition and integration of the portfolio, with a further £0.4 million in professional fees incurred through the year which are non-recurring. The residual increase in cost base can be attributed to the enlarged portfolio. The EPRA cost ratio, although above our medium-term target, has been managed downwards during the second half of the year to 17.2 per cent, after adjusting for non-recurring items.

A saving in net finance costs of £4.1 million has been achieved as a result of several refinancing initiatives carried out during the year. The Aviva refinancing in April reduced finance costs by £3.2 million relative to 2016, benefiting from both a lower cost of debt and the extinguishment of the historic profit share arrangement with the lender to Grand Arcade, Wigan.

Other finance expense includes a £4.3 million non-cash charge in relation to the net fair value adjustment on refinancing of the fixed rate Aviva facility. The fair value adjustment on the new facility was lower than that released on the old, due in part to the £21.7 million prepayment made.

The year also saw £10.7 million in realised profits following disposal of 11 properties, with significant premiums received on Deansgate Manchester, Exchange House Watford and a Carphone Warehouse unit at Priory Retail Park in Merton. In addition, the VBG portfolio was disposed of via a share sale at a £3.8 million premium to the Group's proportionate share of its carrying value at 31 August 2016.

(1) Market value of property, including property assets held for sale, adjusted to reflect head leases and tenant lease incentives.

EPRA NAV per share increased by 1.4 pence, or 3.5 per cent to 41.4 pence per share. This was primarily the result of realised and unrealised gains on the property portfolio, a strengthening of the Euro and earnings for the year, offset by dividends paid.

Property portfolio

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

Following a number of asset management initiatives, the portfolio increased in value by 3.0 per cent like-for-like. The overall increase was supported by the Group's European investments which benefited from the relative strength of the Euro, increasing by 11.2 per cent compared to 2.5 per cent in local currency terms.

The UK Retail portfolio decreased by £25.1 million or 4.7 per cent, driven by the UK Shopping Centre portfolio which suffered rising yields and a general lack of transactional evidence.

The UK Commercial portfolio continued its strong performance, with an 8.3 per cent like-for-like increase in values. Underpinning this performance were particularly strong uplifts in offices and distribution warehouses caused by a reduction in vacancies, rising rents and the weight of both overseas and domestic capital fuelling a competitive investment market.

The UK Hotels portfolio increased by 2.9 per cent following a strong trading performance, despite the increase in business rates during the year. The DoubleTree by Hilton hotel in Edinburgh performed particularly well, drawing from Edinburgh's RevPar growth in 2016 of 17 per cent. The London portfolio also continues to benefit from one of the highest occupancy rates in the UK at 82 per cent, with growth in occupancy, average daily rate and RevPar forecast for both 2017 and 2018.

Debt and gearing

(1) Pro forma LTV adjusted for transactions completed post year end as outlined in Note 35 to the consolidated financial statements.

The Group's capital structure continued to improve during the year with an overall reduction in net debt, increased weighted average debt maturity to 7.3 years, a 30 basis point reduction in borrowing costs and enhanced coverage of finance costs by operating income. 

Operating cash flows increased by £8.8 million on the prior year to £51.6 million a result of the increased net rental income from the AUK acquisition and the German supermarket portfolio joint venture buy-out.

Investing cash inflows were generated from disposal proceeds, the most significant being the VBG portfolio and Deansgate, Manchester. Cash outflows applied to investment activities included the acquisition of our joint venture partner's interest in the German supermarket portfolio, £18.9 million applied primarily towards development activity at Ingolstadt in Germany and a 12-bedroom extension to our Southwark Hotel on London's Southbank.

Financing activities included net repayment and prepayment of debt and dividends paid, including withholding tax. Scrip take-up on the two dividend payments made during the year were 27.3 per cent and 28.8 per cent respectively which resulted in a cash saving of £12.3 million.

Cash balances, including the Group's proportionate share of cash held in joint ventures, was £53.4 million at 31 August 2017, with an additional £10.0 million available from committed undrawn facilities.

Dividends

The dividends paid and payable during the year represent an annualised yield of 6.3 per cent on EPRA NAV, and 6.6 per cent based on the Group's share price at 31 August 2017.

The Board intend to offer shareholders a scrip dividend alternative. Full details including the tax components of the dividend and the timetable will be released separately on Friday 27 October 2017. The dividend payment date has been set for Monday 18 December 2017, to shareholders on the register on Friday 1 December 2017.

Going concern

At 31 August 2017, the Group's cash and undrawn facilities were £63.4 million and its capital commitments were £16.8 million. Having considered severe but plausible scenarios, the Directors are satisfied that the security of the Group's income taken together with an average debt maturity profile in excess of seven years, headroom against financial covenants and strong interest cover, continues to provide a reasonable expectation that the Group will have the resources it requires to meet ongoing and future commitments. Accordingly, the 2017 consolidated financial statements have been prepared on a going concern basis.

Donald Grant

Chief Financial Officer

26 October 2017

Statement of Directors' responsibilities

The statement of Directors' responsibilities has been prepared in relation to the Group's Annual Report 2017. 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

26 October 2017

Consolidated Income Statement

for the year ended 31 August 2017

(1) Net gain on sale of joint venture interests relates to the disposal of the property-owning subsidiaries of one of the Group's joint ventures, Wichford VBG Holding S.à.r.l. While the holding structure has been retained, the business of the joint venture has been disposed of and Wichford VBG Holding S.à.r.l. holds only residual cash to settle working capital. The net gain on sale includes £2.2 million of cumulative foreign currency translation that has been transferred to the income statement as part of the disposal.

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

Consolidated Statement of Comprehensive Income

for the year ended 31 August 2017

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

Consolidated BALANCE SHEET

as at 31 August 2017

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

The consolidated financial statements were approved by the Board of Directors on 26 October 2017 and were signed on its behalf by:

Consolidated Statement of Changes In Equity

for the year ended 31 August 2017

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

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

Consolidated Statement of CASH FLOWs

for the year ended 31 August 2017

(1) Net proceeds of £18.7 million received during the year to 31 August 2017 on disposal of joint ventures interest of Wichford VBG Holding S.à.r.l. are comprised of the Group's 49 per cent share of the proceeds received of £38.2 million after the deduction of the Performance Fee of £3.4 million (gross cash proceeds: £41.6 million) and includes the repayment of loans advanced by the Group to the joint venture of £12.5 million. The Performance Fee received has been separately presented under operating activities.

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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 August 2017

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 transferred 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 2017 for the year ended 31 August 2017 will be available on the Company's website (www.redefineinternational.com) in early December 2017. 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

The consolidated financial statements for the year ended 31 August 2017 have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). The relevant new standards, amendments and interpretations that have been adopted during the year are set out in the following table:

The adoption of these improvements and amendments has not had a material impact on the financial statements of the Group. The accounting policies otherwise applied by the Group are the same as those applied in the audited consolidated financial statements as at and for the year ended 31 August 2016.

Disclosed in the table below are the relevant new standards, amendments and interpretations that have been issued by the IASB but are not yet effective or have not been early adopted. The impact of these improvements and amendments on the consolidated financial statements of the Group is being assessed.

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, and 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, all of which are carried at fair value.

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 the financial statements have been prepared on a going concern basis.

Re-presentation of Prior Year Comparatives

Certain presentational changes have been made to the comparative balance sheet to ensure consistency with the current year. This has resulted in the reclassification of tenant lease incentives of £3.8 million and other receivables of £0.9 million from current assets to non-current assets. In line with the requirements of IAS 1, Paragraph 60, these amounts would not have been settled or recovered within twelve months of the balance sheet date as at 31 August 2016. In addition, current tax liabilities of £2.4 million as at 31 August 2016 have been presented separately on the face of the consolidated balance sheet in accordance with IAS 1, Paragraph 54 (n). Current tax liabilities were previously included in trade and other payables.

2.3 Key Judgements and Estimates

The preparation of the consolidated 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:

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 market yields. The valuers also make reference to market evidence of transaction prices for similar properties. Further details are provided in Note 12.

corporate and property acquisitions

When control is obtained over an entity or group of entities, judgement is required in determining whether the transaction constitutes a business combination with reference to the inputs, processes and outputs of the subsidiary or subsidiary group acquired. If it is determined that the transaction is a business combination, the requirements of IFRS 3 'Business Combinations' ("IFRS 3") are applied.

In addition, when a property is acquired directly, the Directors have regard to the substance of the transaction and whether related processes and activities have been assumed which would represent a business. When such an acquisition is considered to be the acquisition of a business, the requirements of IFRS 3 apply as above, otherwise the transaction is treated as an acquisition of a property asset in line with IAS 40.

Classification of UK Hotels as Investment Property

The UK Hotels are held for capital appreciation and to earn rental income. Apart from one of the properties, the hotels have been let to Redefine Hotel Management Limited ("RHML") and Redefine Earls Court Management Limited ("RECML"), on lease terms which are subject to annual review. At each review, the revised rent is set with reference to the forecast EBITDA of the hotels. RHML and RECML run the hotels' operating business and are therefore exposed to fluctuations in the underlying trading performance of each hotel under management. They are responsible for the key decision making of the business operations and the day-to-day upkeep of the properties.

The Group cumulatively holds a 30.4 per cent shareholding in RedefineBDL Hotel Group Limited ("RedefineBDL"), which in turn controls RHML and RECML. Having considered the guidance in IFRS 10, the respective rights of each of the shareholders in RedefineBDL and the relative size of the Group's shareholding, the Directors have determined that the Group has the ability to exercise significant influence over RedefineBDL. The Group does not control RedefineBDL and hence does not control RHML or RECML. The investment in RedefineBDL is therefore classified as an associate.

The Group is not involved with the operation of the hotel management business and there are limited transactions between the two entities. As a result, the hotels are classified as investment property in accordance with IAS 40.

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 group, International Hotel Properties Limited (formerly International Hotel Group Limited), for £3.8 million. On the date of listing, this investment represented 25.4 per cent of the entity's issued share capital and the investment was recognised as an associate of the Group under the equity method. On 20 October 2015, the Group ceased to recognise IHL as an associate when its shareholding was diluted to 13.2 per cent and the investment was reclassified as a financial instrument at fair value through profit or loss. At 31 August 2016, the Group held a 15.5 per cent interest in IHL. During the year ended 31 August 2017, the Group's shareholding increased by 1.7 per cent to 17.2 per cent. Refer to Note 13 for further details on changes in the Group's ownership interests in IHL.

The degree of judgement relating to the classification as a financial instrument at fair value through profit or loss has 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 relative size of the Group's shareholding and the fact 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 investment as a financial asset at fair value through profit or loss continues to be appropriate as at 31 August 2017.

Refer to Note 35 for changes to the Group's interests in IHL subsequent to the balance sheet date.

Fair Value of Restructured Liabilities

New borrowings or existing borrowings which have been substantially modified are recognised at fair value. The determination of fair value involves the application of judgement. The Group determines fair value by discounting the cash flows associated with the liability at a market discount rate. The key judgement surrounds the determination of an appropriate market benchmark. Management determine the discount rate on a loan by loan basis having regard to the term, duration and security arrangements of the new liability and an estimation of the current rates charged in the market for similar instruments issued to companies of similar sizes.

This judgement is made more difficult given the bespoke nature of certain loans obtained by the Group. Any difference between the nominal value of the loan and its fair value equivalent will be recognised immediately in the income statement insofar as the fair value measurement is based on observable inputs. The deemed fair value will subsequently be accreted through profit or loss over the term of the loan using the effective interest rate method.

Aviva Profit Share and Capital Appreciation Rights

As part of the Aviva debt restructure in 2013, Aviva, the lender with security over the Group's shopping centre asset, Grand Arcade, Wigan, had a right under the facility agreement to participate in 50 per cent of the valuation uplifts of the property in excess of the value of the drawn debt ("capital appreciation right"). Once the value of the property exceeded £90 million, Aviva had the additional right to realise tranches of the excess valuation at any time, with corresponding reductions to their right to profit share participation.

Up to and including the year ended 31 August 2016, the Group recognised a financial liability in respect of Aviva's right to participate in the profits of the shopping centre. However, no provision was recognised in respect of Aviva's capital appreciation right as a reliable estimate of the provision could not be made and it was not considered probable that a payment to Aviva would be required. The contractual obligation was disclosed as a contingent liability. During the year ended 31 August 2017, the debt was again restructured and both Aviva's existing capital appreciation and profit participation rights were formally extinguished.

2.4 Accounting Policies

Basis of Consolidation

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.

The Group accounts for business combinations using the acquisition method, under which the consideration transferred is measured at fair value, and acquisition related costs are recognised in the income statement as incurred. Any excess in the purchase price of business combinations over the Group's share of the fair value of the assets, liabilities and contingent liabilities acquired is recognised as goodwill while any discount received is credited immediately to the income statement. If it is determined that an acquisition does not constitute a business combination, the transaction is accounted for as an asset acquisition and the relevant IFRSs are applied in the recognition of a group of assets and liabilities. No goodwill arises on initial recognition but any premium paid or discount received is allocated to the individual identifiable assets and liabilities based on their relative fair values. 

The Group recognises non-controlling interests on the basis of their proportionate share in the subsidiary's identifiable net assets. Non-controlling interests are presented separately from the equity of the owners of the Parent on the balance sheet. Profit or loss and total comprehensive income for the year attributable to non-controlling interests are presented separately in the income statement and the statement of comprehensive income.

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

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

- 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);

- recognises the fair value of any consideration received;

- 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;

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

- recognises any resulting difference of the above items as a gain or loss in the 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, in accordance with IAS 28. For a change in the Group's interest in a subsidiary that does not result in a loss of control, the Group adjusts the carrying amounts of the controlling and non-controlling interest to reflect the changes in their relative interests. Any difference between the value of the non-controlling interest acquired or disposed of and the fair value of the consideration is recognised directly in equity and attributed to the equity holders of the Parent.

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.

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 contractual rights to the assets and obligations for the liabilities. When making this assessment, the Group considers the structure of the arrangements, the legal form of any separate vehicles, the contractual terms 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 other comprehensive income or directly in equity. The Group's share of the post-tax results of the associate or joint venture reflects the Group's proportionate interest in the relevant undertaking.

Goodwill arising on the acquisition of an associate 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.

As goodwill forms part of the carrying amount of the net investment, it is not recognised separately and 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 where there is objective evidence that the investment may be impaired. Reversals of impairment are recorded as an adjustment to the investment balance to the extent that the recoverable amount of the associate or joint venture increases.

Capital contributions result from the non-reciprocal transfer of resources to an associate or joint venture without a corresponding increase in the Group's equity interest. Capital contributions are also accounted for as an increase in the Group's net investment and are subject to impairment.

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

Where the Group obtains significant influence or joint control over an investment that was previously accounted for as a financial instrument under IAS 39, the Group's previously held interest is re-measured to fair value through profit or loss. The deemed cost of the associate or joint venture is the fair value of the existing investment plus the fair value of any consideration given to achieve significant influence or joint control.

When the Group ceases to have significant influence or joint control, it is accounted for as a disposal of the entire interest under the equity method, with a resulting gain or loss being recognised in the income statement. Any retained interest in the investment at the date when significant influence or joint control is lost is recognised at fair value on initial recognition of a financial asset or, when appropriate, treated as the deemed 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 income statement.

Intangible Assets

Intangible assets arising on business combinations are carried at cost less impairment. 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.

Currency Translation

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 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 date that the values are determined.

Foreign Operations

Exchange differences arising from the translation of the net investment in foreign operations are taken to the foreign currency translation reserve. Cumulative exchange differences are subsequently released to the income statement upon disposal. On consolidation, the balance sheets of foreign subsidiaries are translated at the closing rate and the income statement and statement of comprehensive income are translated at the transaction date rates or at an average rate for the year where this is a reasonable approximation.

Revenue Recognition

Rental income, including fixed stepped rent, is recognised in the income statement on a straight-line basis over the lease term. Tenant lease incentives, including rent-free periods granted and cash contributions paid, which are an integral part of securing leases, are amortised as a reduction of rental income over the lease term. Surrender premiums that are paid by the Group to tenants to vacate a property are also treated as lease incentives if the surrender results in an enhanced future rental income stream.

Contingent rents are recognised as they arise. Rent reviews are recognised as income or as a reduction thereof from the date it is probable that the revised terms will be agreed. Surrender premiums paid by the tenant to terminate a lease early are recognised immediately in the income statement.

Management fees receivable from joint ventures are recognised in other income during the year in which the services are rendered. Performance fees are recognised when the conditions are satisfied.

Dividends from listed property investments are recognised on the date the Group's right to receive payment is established.

Interest earned on loans receivable and on cash invested is recognised on an accruals basis using the effective interest rate method.

Service Charges

Where the Group invoices budgeted service charges to tenants, amounts received are not recognised as income as the risks in relation to the subsequent provision of actual goods and services are primarily borne by the tenants during the service charge period. Consequently, amounts received are recognised as a liability on the balance sheet and reduced by the actual service charge expenditure incurred. Any non-recoverable service charge expenses suffered by the Group, as a result of void or capped units, are included within rental expense in the income statement.

Employee Benefits and 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 certain employees and Executive Directors for services rendered. The Group's share-based payments are all equity-settled. The fair value of each award granted is calculated at the grant date, using the Monte Carlo and Black-Scholes valuation methodologies. The fair value is not subsequently re-measured and is recognised in the share based payment reserve in equity on a straight-line basis over the vesting period as adjusted for the Group's estimate of the awards that will eventually vest at each reporting date. The corresponding compensation cost is recognised as an administrative expense over the vesting period.

At the end of the performance period, a reserves transfer occurs with no further charge reflected in the income statement.

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 or loss 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 income statement because it excludes items of income that are not taxable or expenses that are not tax deductible.

Deferred tax is recognised using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their relative tax base. The amount of deferred tax provided is based on the expected manner of realisation or settlement, using tax rates enacted or substantively enacted at the reporting date.

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; and those relating to 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.

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 liabilities are provided only to the extent that there are not sufficient tax losses to shield the charge.

Investment Property

In accordance with IAS 40, Paragraph 14, judgement may be required to determine whether a property qualifies as investment property. The Group has developed criteria so that it can exercise judgement consistently in recognising investment property, namely: property held for long-term capital appreciation; property owned (or held under finance leases) and leased out under one or more operating leases; and property that is being developed for future use as investment property. The recognition and classification of property as investment property principally assumes that the Group:

- does not retain significant exposure to the variation in cash flows arising from the underlying operations of tenants; and

- will recover the carrying value through continuing rental income streams and longer-term capital appreciation.

Investment properties are initially recognised at cost, including directly attributable transaction costs, and subsequently measured at fair value. The portfolios are valued on a bi-annual basis by external, independent and professionally qualified valuers, having recent experience in the location and category of the property being valued. The fair values are based on market values, being the estimated amount for which the property could be exchanged on a highest and best use basis between a willing buyer and seller in an arm's length transaction.

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

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 included in Note 12 to the financial statements.

In determining fair value, the market value of the property as determined by the independent valuers is reduced by the carrying amount of tenant lease incentives and increased by the carrying amount of fixed head leases.

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

Subsequent expenditure is capitalised to investment property when the expenditure incurred enhances the future economic benefits associated with the property, such as enhanced future rental income, capital appreciation or both. Contributions to tenant refurbishments under lease arrangements are treated as tenant lease incentives and amortised against rental income over the term of the lease.

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 unless the fair value cannot be measured reliably and the property is measured at cost. All finance costs directly associated with the acquisition and construction of a qualifying development property are capitalised during the period of active development until practical completion. The rate applied is the actual rate payable on specific borrowings or the weighted average cost of debt of the Group for development spend that is financed out of general funds.

Acquisition and disposals of investment property are recognised when significant risks and rewards attached to the property have transferred to, or from, the Group. This will ordinarily occur on exchange of contracts unless there are significant conditions pending completion. Such transactions are recognised when these conditions are satisfied. The profit or loss on disposal of investment property is recognised separately in the income statement and is the difference between the net sales proceeds and the opening fair value asset plus any capital expenditure during the period to disposal.

A property ceases to be recognised as investment property and is transferred at its fair value to property held for sale when it meets the criteria of IFRS 5.

Property held by the Group under long-term leases are also treated as investment property in line with IAS 40. The Group's leasehold interests are all classified as finance leases as substantially all the risks and rewards of ownership of the property have transferred to the Group. Finance leases are recognised as both an asset and a liability and are measured at the lower of fair value and the present value of any future minimum lease payments. The finance lease obligation to the superior leaseholder is recognised within borrowings on the balance sheet. 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.

Financial Instruments - recognition, classification and measurement

Non-Derivative Financial Instruments

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

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

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 at each reporting date recognised in the 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. 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 income statement as incurred. Derivatives are subsequently re-measured to fair value at each reporting date, and changes therein are accounted for in the income statement and presented under change in fair value of derivative financial instruments. The Group does not apply hedge accounting.

Impairment of financial assets

Financial assets not carried at fair value through profit or loss are assessed at each reporting date to determine whether there is objective evidence of impairment. A financial asset is impaired if objective evidence indicates that a loss event has occurred and factors include: adverse changes in the payment status of a debtor or issuer; default or delinquency by a debtor; restructuring of an amount due on terms that the Group would not consider otherwise; potential bankruptcy of a debtor or issuer; and economic conditions that correlate with defaults or the disappearance of an active market for a security.

An impairment loss is calculated as the difference between the carrying amount of the financial asset and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. When a subsequent event objectively causes the amount of impairment loss to decrease, the decrease in impairment loss is calculated on a basis consistent with the impairment charge but the carrying value after any reversal must not exceed the original carrying value.

Impairment losses and reversals are recognised in the income statement and reflected in an allowance account against loans and receivables. Finance income on impaired interest-bearing assets continues to be recognised.

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 are recognised at fair value and have maturities of less than three months. Restricted cash comprises cash deposits that are restricted until the fulfilment of certain conditions.

Non-Current Assets and Disposal Groups 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 the carrying value will be recovered by the Group principally through sale rather than through continuing use and the sale is highly probable. The asset or disposal group must be available for immediate sale, be actively marketed at a reasonable approximation to fair value and the sale must have the appropriate level of management commitment. The sale may complete beyond a period of one year from classification so long as there is sufficient evidence of a firm commitment from both parties and the circumstances of the delay are beyond the Group's control.

Where there is commitment to a sale plan involving the loss of control of a subsidiary, the loss of joint control of a joint venture or significant influence over a joint venture and the criteria set out above are met, the Group classifies all the assets and liabilities of that subsidiary or the equity accounted investment in the joint venture or associate as held for sale. This classification is appropriate regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale. Where significant influence over an associate will not be lost, only that portion of the investment for which there is a commitment to sell shall be reclassified as held for 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 income statement and subsequently re-measured at each reporting date. 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.

Gains and losses on re-measurement and impairment losses subsequent to classification as held for sale are presented within continuing operations in the income statement, unless they meet the definition of a discontinued operation. Non-current assets held for sale are presented separately under current assets on the balance sheet. Comparatives are not reclassified.

Borrowings

Interest-bearing borrowings are recognised initially at fair value less directly attributable transaction costs. Any difference between the transaction price and the deemed fair value of the borrowing is treated as a gain or loss in the income statement when the determination of fair value is based on observable inputs. Subsequent to initial recognition, interest-bearing borrowings are measured at amortised cost. Any differences between cost and the redemption value as a result of transaction costs incurred or fair value adjustments are recognised in the income statement over the contractual term of the borrowings on an effective interest rate basis.

A financial liability is derecognised when it is extinguished. This 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 income statement. The consideration paid includes non-financial assets transferred and the assumption of liabilities, including the new modified financial liability. The modified borrowing is recognised 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.

Where existing borrowings are exchanged for new or amended borrowings and the terms are not substantially different, the new borrowings are recognised initially at the carrying amount of the existing borrowings. Any costs or fees incurred adjust the carrying amount of the borrowings and are amortised over the remaining term.

Ongoing finance costs and debt servicing payments are recognised in the income statement on an accruals basis, using the effective interest rate method.

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 to present value using an appropriate discount rate that reflects 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 to a third party which has not been provided for at the balance sheet date.

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.

Dividends

Dividends to shareholders are recognised when they become legally payable. In the case of interim dividends, this is when the dividends are declared by the Board.

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 Listing Requirements, the Group also presents headline earnings per share.

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 as disclosed in Note 3.

3. Segmental Reporting

As required by IFRS 8 'Operating Segments' ("IFRS 8"), the information provided to the Board, which is the Chief Operating Decision Maker, has been 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.