Stenprop Limited Releases Q2 2015 Results (Excerpt)

HAMILTON, Bermuda – 11 December, 2014 – In a filing with the Bermuda Stock Exchange, Stenprop Limited (the “Company” or “Stenprop”; Ticker: STP.BH) filed the Company’s unaudited interim financial results for the period ended 30 September, 2014. The filing read in part:

“UNAUDITED INTERIM RESULTS

for the six months ended 30 September 2014, including major subsequent events

Stenprop Limited, a Bermuda company (previously called GoGlobal Properties Limited) which holds a primary listing on the Bermuda Stock Exchange and a secondary listing on the Alternative Exchange of the Johannesburg Stock Exchange ("JSE"), today announces its results for the six months ended 30 September 2014 ("the reporting date"), and details of events which occurred subsequent to that date.

HIGHLIGHTS

·         Profit after tax of GBP1,793,732 for the six months to 30 September 2014 compared with a loss for the same period last year of GBP13,872, delivering Adjusted EPRA earnings per share(1) of 9.30 pence. These earnings only include the results for the eight properties acquired by Stenprop on 25 March 2014 ("the existing properties") and are expressed in pounds sterling since the presentation and functional currency only changed to Euros (EUR or EUR) after the reporting date.

·         Completion on 1 October 2014 of the acquisition of various property companies which collectively have an interest in 45 buildings in Germany, Switzerland and the United Kingdom ("the acquired properties") with a gross value on the date of completion of EUR683.5 million(2), in return for 218,794,917 Stenprop shares issued at EUR1.37 per share.

·         Completion on 2 October 2014 of the acquisition of the management company of the acquired properties, as well as the management company of the existing properties, in return for 14,121,892 Stenprop shares issued at EUR1.37 per share, resulting in full internalisation of management.

·         EUR pro forma diluted Adjusted EPRA EPS ("pro forma" means calculated as if the purchase of the property companies had completed at the start of the period under review) of 9.80 cents, equating to a 7.1% earnings yield on the issue price of EUR1.37 per share.

·         Pro forma EPRA net asset value on 2 October 2014 of EUR1.46 per share after accounting for the net gain on acquisition arising from the internalisation of management and the uplift in value of the various property companies acquired.

·         Board and management team strengthened with the appointment of Paul Arenson as CEO, Patsy Watson as CFO and Neil Marais as executive director following completion of the acquisitions.

   (1)'EPS' means earnings per share.

   (2)Includes Stenprop's share of properties owned by associate and joint venture investments.

Commentary

General information

Stenprop was incorporated in Bermuda on 26 October 2012. It was listed on the Bermuda Stock Exchange on 15 March 2013 and, following approval from the South African Reserve Bank, it concluded an inward listing on the Alternative Exchange of the Johannesburg Stock Exchange on 29 April 2013. Formerly known as GoGlobal Properties Limited, it changed its name to Stenprop Limited on 9 October 2014. The functional and presentation currency of Stenprop and its subsidiaries ("the Group") has been redenominated from GBP to Euro (EUR) from 2 October 2014.

Investment strategy

Stenprop currently focuses on property investment in the United Kingdom, Germany and Switzerland. It does not intend to pursue development exposure other than value add asset management and related development of existing assets to protect and improve capital values. It intends to distribute most of its earnings which are available for distribution on a bi-annual basis.

Performance

The earnings for the period to 30 September 2014 only include the results for the eight properties acquired by Stenprop on 25 March 2014. Profit after tax was GBP1,793,732 compared with a loss of GBP13,872 for the same six-month period last year, as a result of the acquisition of the eight properties.

Acquisitions subsequent to 30 September 2014

Shareholders are referred to the announcements released on 7 August 2014 and 2 October 2014 setting out the details of the following acquisitions:

-       various property companies which collectively have an interest in 45 properties in Germany, Switzerland and the

-       United Kingdom (the 'property companies');

-       the Stenham Property management business;

-       various cash holding entities; and

-       the external investment manager, Apex Hi (UK) Limited.

The total purchase consideration for the acquisition of the property companies was calculated with reference to the net asset value of the property companies as at 31 March 2014 and amounted to EUR281.0 million. The purchase consideration for the Stenham Property management business was EUR15.6 million and the purchase consideration for Apex Hi (UK) Limited was EUR3.8 million. The purchase consideration for the cash holding subsidiaries was EUR18.4 million.

The purchase consideration for the acquisitions was funded by the issue of 232,916,809 new Stenprop ordinary shares to the value of EUR318,791,449 on the Bermuda Stock Exchange at an issue price of EUR1.37 per share, which was the Euro equivalent of the net asset value per share of Stenprop as at 31 March 2014.

Deferred consideration in relation to the acquisition of the Stenham Property management business is estimated to be EUR1,444,969 and relates to the vendor's right to receive a share of pre-existing exit and performance fees on certain assets managed by the acquired business on behalf of third parties.

The acquisition of the management companies was contingent on the completion of the purchase of the property companies and was therefore considered a linked transaction in terms of IFRS 3: Business combinations. From a Group perspective, the fair value of the combined identifiable net assets on acquisition date exceeded the summation of the consideration and no goodwill has been recognised.

Following the completion of the acquisition of the property companies on 1 October 2014, Stenprop has an interest in 53 properties valued at EUR720 million3 with 39% in the United Kingdom, 41% in Germany and 20% in Switzerland (by value).

The portfolio, which has a gross lettable area of approximately 230,000(3) m(2) and net annual rent of EUR41 million(3), is predominantly in the office and retail sectors which account for 47% and 37% of rental income respectively.

Financial review

Earnings

The earnings for the period to 30 September 2014 only include the results for the eight properties acquired by Stenprop on 25 March 2014. They are expressed in GBP. Basic earnings attributable to shareholders was GBP1,793,732 (Headline earnings: GBP743,732) compared with a basic and Headline loss of GBP13,872 for the same six-month period last year, delivering a basic EPS of 22.40 pence and Headline EPS of 9.30 pence (30 September 2013: basic and Headline loss per share of 10.02 pence).

Whilst the completion date of the acquisition by Stenprop of the various property companies was 1 October 2014, which is when all material conditions were met, the transaction was effective from 1 April 2014, which is the date at which the price of the property companies was determined. All trading results for the six months from 1 April 2014 in the property companies, and any changes in values, were therefore for the benefit of Stenprop. As a result, the fair value of the net assets acquired was greater than the consideration paid and hence this has been recorded as a Gain on Acquisition in the pro forma consolidated statement of comprehensive income on the acquisition date. In order to provide more transparency on the performance of the acquired properties and to provide a more comprehensive view of the composition of the Gain on Acquisition, a pro forma condensed consolidated statement of comprehensive income in EUR for the six-month period to 2 October 2014, being the date on which the acquisition of the various property companies and the management companies completed, has been presented.

Earnings per share is calculated on the weighted average number of shares in issue and the profit/(loss) attributable to shareholders.

The EUR pro forma basic earnings attributable to ordinary shareholders for the six-month period to 2 October 2014 are EUR9,189,237, after accounting for the net gain on acquisition arising from the internalisation of management and the uplift in value of the various property companies acquired. This equates to a basic EPS of 7.38 cents.

The earnings for the two days between the reporting date (30 September 2014) and 2 October 2014 have not been included as they are considered immaterial. The EUR pro forma Headline earnings are EUR11,165,017 equating to a Headline diluted EPS of 8.96 cents.

In accordance with reporting standards widely adopted across the real estate industry in Europe, the board of directors feels it appropriate and useful, in addition to providing the IFRS disclosed earnings, to also disclose EPRA earnings(4).

Pro forma adjusted EPRA earnings attributable to shareholders are EUR12,210.651, equating to a pro forma Adjusted EPRA diluted EPS of 9.80 cents. This represents a 7.1% yield on the issue price of EUR1.37.

Stenprop's policy is to distribute the majority of its earnings available for distribution in the form of bi-annual dividends. It intends to declare its first dividend in the second quarter of 2015, relating to the six months to 31 March 2015, being the first period of trading following the acquisitions.

Net assets

The net asset value ("NAV") at 30 September 2014 only includes the eight properties acquired by Stenprop on 25 March 2014, expressed in GBP. The property portfolio owned by Stenprop prior to the acquisition was valued by Jones Lang La Salle ("JLL") at time of acquisition and again at the reporting date. As at 30 September 2014, JLL valued the properties at GBP28.5 million (March 2014: GBP27.5million). IFRS (basic and diluted) NAV per share (in GBP) at 30 September 2014 is GBP1.20 (30 September 2013: GBP0.85 per share).

The pro forma (basic and diluted) IFRS NAV per share after completion of the acquisitions at 2 October 2014 was EUR1.41.

As is the case with regard to the disclosure of EPRA earnings the board of directors feels that it is appropriate and useful, in addition to IFRS NAV, to also disclose EPRA NAV5. The diluted EPRA NAV per share (in GBP) at 30 September 2014 is GBP1.21 (30 September 2013: GBP0.85 per share).

The pro forma diluted EPRA NAV per share (in EUR) at 2 October 2014 after completion of the acquisitions is EUR1.46, which includes the net gain on acquisition arising from the internalisation of management and uplift in value of the various property companies acquired. This compares with the issue price of EUR1.37 per share at which the consideration shares were issued, representing a 6.6% uplift in value.

(4)The European Public Real Estate Association (EPRA) issued Best Practices Policy Recommendations in August 2011, which provide guidelines for performance measures relevant to real estate companies. Their recommended reporting standards are widely applied across this market, aiming to bring consistency and transparency to the sector. The EPRA earnings measure is intended to show the level of recurring earnings from core operational activities with the purpose of highlighting a Group's underlying operating results from its property rental business and an indication of the extent to which current dividend payments are supported by earnings. The measure excludes unrealised changes in the value of investment properties, gains or losses on the disposal of properties and other items that do not provide an accurate picture of the Group's underlying operational performance.

The measure is considered to accurately capture the long term strategy of the Group, and is an indication of the sustainability of dividend payments.

(5)The objective of the EPRA NAV measure is to highlight the fair value of net assets on an ongoing, long-term basis. EPRA NAV is used as a reporting measure to better reflect underlying net asset value attributable to shareholders. Assets and liabilities that are not expected to crystallise in normal circumstances such as the fair value of financial derivatives and deferred taxes on property valuation surpluses are therefore excluded. The EPRA measure thus takes into account the fair value of assets and liabilities as at the balance sheet date, other than fair value adjustments to financial instruments, deferred tax and goodwill. As the group has adopted fair value accounting for investment property per IAS40, adjustments to reflect the EPRA NAV include only those relating

to the revaluation of financial instruments and deferred tax.

Net debt

Stenprop's loan to value ratio ("LTV") on 30 September 2014 before the acquisitions was 36% (31 March 2014: 37.8%). Following completion of the acquisitions on 2 October, the LTV was 54.6%. This has declined from the estimated LTV of 56.7%6 at the effective date of the acquisitions as a result of amortisation of loans and an increase in values. Stenprop is targeting an LTV of no more than 50%.

The net debt to value ratio, being net liabilities over total property value at 2 October 2014 is 47.8%.

The all-in contracted weighted average cost of debt is 3.06%. After taking into account the amortisation of the swap contract liabilities acquired by Stenprop as part of the acquisition of the various property companies, the effective weighted average cost of debt is 2.3%.

Stenprop does not take speculative positions on interest rate contracts and generally takes interest rate hedges on all of its debt.

The weighted average duration to expiry of the current debt packages is 2.18 years from 30 September 2014, and includes amortisation payments of EUR9.8 million per annum. Stenprop is currently in discussions with the lenders on the Swiss properties to reduce gearing, remove amortisation and extend the debt from maturity in 2017 for up to a further four years to 2021. It is intended that all new debt will be taken on a non-amortising basis.

Prospects

Should current economic conditions prevail, net operating income for the next six months is expected to be broadly similar to that reflected in the pro forma income statement for the first six months to 2 October 2014. This general forecast has not been reported on by the external auditors.

Changes to the board

Upon completion of the acquisition of the property companies and management companies on 1 and 2 October 2014 respectively, Paul  Arenson was appointed CEO of Stenprop, Patsy Watson was appointed CFO and Neil Marais was appointed executive director. All were key members of the management team of Stenham Property, the management company acquired by Stenprop, and have strong track records in the real estate environment. Michael Fienberg and Stephen Ball were appointed as independent non-executive directors on 2 October 2014, both of whom previously served on the boards of the various entities which owned the acquired properties.

Gerald Leissner remains as non-executive Chairman of the board, and James Keyes and David Brown remain as non-executive directors.

Sean Melnick, David Smith, Hennie Esterhuizen and Cobus Josling all resigned from the board on 2 October 2014.

On 10 December 2014 Mandy Yachad was appointed to the board as a non-executive director.

Independent review report to Stenprop Limited

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six  months ended 30 September 2014 which comprises the consolidated income statement, the consolidated balance sheet, the consolidated statement of financial position, statement of changes in equity, the cash flow statement and related notes 1 to 13. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting,".

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2014 is not prepared, in all material respects, in accordance with International Accounting Standard 34.

Deloitte LLP

Chartered Accountants and Statutory Auditor

St Peter Port, Guernsey

10 December 2014”

-ends-

The full text of the release along with the financial results can be found at stenprop.com  or Contact the BSX Listing Sponsor:

Global Custody and Clearing Limited. Bermuda