Final Results

RNS Number : 8811H

Sirius Real Estate Limited

06 June 2011

 



Sirius Real Estate Limited

Final Results

For the year ended 31 March 2011

Sirius Real Estate Limited (the "Group", the "Company" or "Sirius"), the real estate company with a portfolio of 38 large mixed-use commercial sites in Germany, which have been significantly upgraded into modern, flexible workspaces, today reports its final results for the year ended 31 March 2011.

Highlights

Financial highlights

·      Property portfolio revalued at €505.5m (31 March 2010: €500.0m)

·      Total income of €45.6m (2010: €44.0m)

·      Current annualised rent roll of €43.6m (2010: €41.9m)

·      PBT from recurring revenues¹ excluding prior period write-offs was €2.0m (2010: €0.8m)

·      EBITDA from recurring revenues excluding prior period write-offs was €20.7m (2010: €18.0m)

·      Occupancy increased to 76% (31 March 2010: 71%)

·      New lettings in the period 159,292 sqm (31 March 2010: 106,647 sqm)

·      Conferencing and catering business contribution increased by more than 160% to €776,384 (31 March 2010: €296,594)

·      Service charge irrecoverable costs and company overheads reduced by €1.8m in the period

·      Operating within banking covenants

·      LTV across the portfolio as at 31 March 2011 of 60.2% (31 March 2010: 62.2%)

·      Adjusted NAV per share 72.85c (31 March 2010: 73.63c)

·      Cash balance of €23.6m (31 March 2010: €33.4m)

¹ Excluding property revaluation, change in fair value derivative instruments, costs relating to the requisitioned Extraordinary General Meeting ("EGM") and write-downs relating to prior periods service charge collections and tenant debtors.

Operating highlights

·      Focused on increasing occupancy, revenues and efficiency across the portfolio

·      Cost reduction and recovery programme generated savings of €1.8m in the period and a further €1.0m expected next period through:

o  Further reductions in property running costs and overheads

o  Better allocation and transparency of property running costs

·      Exposure to service charge recovery write-offs has been significantly reduced going forward by:

o  Increase in service charge prepayments received from tenants

o  Reduced costs mentioned above

o  Improved allocation of facility management and utilities costs to tenants

o  Improved lease terms on all new tenants

·      Strong demand for our Smartspace initiative

·      Average monthly sales enquiries increased from 521 to 966  

·      Market conditions remain positive

Dick Kingston, Chairman of Sirius Real Estate Limited, said:"This has been an important year for the business, as we have made significant progress towards our objectives of increasing occupancy and efficiency across the portfolio. At 76%, we are achieving further significant increases in occupancy. Through the actions we commenced 18 months ago, the Group has reduced its irrecoverable cost base by some €1.8m, which has led to the Company's improved performance.

"The market environment is encouraging with consistent demand from the SME market. Lettings for the period demonstrate the Company's ability to capture market share and the changes made last year to the sales and marketing teams have had a very positive effect as shown by the increase in monthly sales enquiries rising from 521 to 966."

Enquiries:

Principle Capital Sirius Real Estate Asset Management Limited                                

Kevin Oppenheim, CEO                                                                          020 7004 7150

Alistair Marks, CFO

Peel Hunt LLP

Capel Irwin                                                                                            020 7418 8900

Alex Vaughan

Cardew Group                                    

Tim Robertson                                                                                       020 7930 0777 

Georgina Hall                            

Chairman's statement

Introduction

I am pleased to announce the Group's full year results for the year to 31 March 2011. The Group has made solid progress, having now streamlined the business and established a strong platform from which to increase profitability.

Sirius has established itself as the leading operator of branded business parks providing flexible workspace to the German SME market. Today, some 1,521 tenants currently occupy 878,334 sqm of the 1.15m sqm of space available within the portfolio. Most of the tenant base is drawn from the German SME sector for which the Company has sought to extend its range of services to meet their requirements. In the year under review, the Company has successfully promoted these services, such as the increasingly popular Smartspace range, flexible storage solutions plus conferencing and catering facilities that have added to the appeal of the business parks and supported renewals. Demand for Sirius' flexible multipurpose space is continuing to increase and the Company is well positioned to take advantage of this.

Financial

Total income for the year was €45.6m (2010: €44.0m). As at 31 March 2011, the annualised gross rent roll was €43.6m (2010: €41.9m), over a total lettable area of 1.15m sqm. Rent roll in the period increased through the 159,292 sqm of new lettings signed in the period; however, this was offset by 123,768 sqm of move-outs.  The large number of move-outs over the last couple of years were significantly influenced by the difficult economic conditions..  With an improving market environment as well as internal procedures in place, the Company hopes that future move-outs will be reduced.  

As at 31 March 2011 occupancy was 76% (31 March 2010: 71%). This reflects an impressive recovery from 1 January 2010, when occupancy stood at 68%.

The Company's recurring EBITDA excluding write-offs from prior periods has significantly moved forward in the period to €20.7m (2010: €18.1m).  This has been achieved mainly through the €1.8m reduction in irrecoverable costs and overheads in the period.  Additionally a greater focus on the conferencing and catering business saw an increase of more than 160% in contribution to €776,384 (2010: €296,594).  Altogether with the positive new lettings achievements mentioned above, the performance of the portfolio is gathering momentum.

The recurring adjusted PBT excluding write-offs from prior periods was €2.0m (2010: €0.8m) reflecting the benefits mentioned above.  Bank interest was higher in the period due to the most recent bank facility being in place for the full year.  The adjusted EPS excluding property revaluation, change in fair value of derivative financial instruments, exceptional costs and non-controlling interests was (0.61)c (2010: 0.54c).  The adjusted EPS calculation includes the write-offs relating to prior periods which are discussed in more detail in the Asset Manager's report.

The Company's cash reserves at the period end were €23.6m (2010: €33.4m) and all bank facilities were operating within covenants.  As at 31 March 2011 Sirius's borrowings excluding capitalised loan costs totalled €304.3m (2010: €311.0m).  The outstanding consideration on the Royal Bank of Scotland ("RBS") facility was €93.4m and the Landesbank Berlin AG and Berlin-Hannoversche Hypothekenbank AG ("LBB") facility was €211.0m, representing an overall loan to value ratio ("LTV") of 60.2% (2010: 62.2%). The RBS facility matures in October 2012 and the Company has been active in determining the best re-financing solution.  The Board remains confident that it has the flexibility to manage Sirius's financial position. 

NAV

As at 31 March 2010, the portfolio was valued independently by DTZ Zadelhoff Tie Leung GmbH at €505.5m (31 March 2010: €500.0m).

The portfolio, including vacant space, is valued on an average net initial yield of 7.0% (2010: 7.0%) and an average capital value per sqm of €438 (2010: €434).

The adjusted net asset value per share, which excludes the provisions for deferred tax and derivative financial instruments, was 72.85c as at 31 March 2011 (31 March 2010: 73.63c).

Dividend

At this stage, the focus is on increasing rental income and reducing the cost base of the business so that the Company can return to paying dividends in due course. We will continue to review this policy and expect to reinstate a progressive dividend once it is prudent to do so.

Asset management

The Asset Manager has made good progress in terms of its key targets of increasing occupancy, improving revenue streams and reducing the overall irrecoverable cost base, the benefits of which have started to come through in the period. The market environment, new products and further asset management activities to support the existing tenant base and attract new tenants are all covered in the Asset Manager's report.

On 3 May 2011, the Company announced that it was in discussion with the Asset Manager with the objective of agreeing new management arrangements, following termination of the existing agreement as part of a review to ensure shareholders receive the best value and quality of service.  Discussions are ongoing with the Asset Manager and the Board hopes that new management arrangements can be in place as soon as possible.  The Board can also confirm that shareholders will be consulted and any new management arrangement will be made with the agreement of shareholders holding a majority of shares.

Whilst the Board hopes to come to a new agreement with the existing Asset Manager within a short time frame, there are several other options available should this not be possible.  If a new agreement, that is satisfactory to shareholders, cannot be reached the Board would look at other options including internalising management, preferably with the existing team or a new team or appointing another external Asset Manager.

Prospects and outlook

Trading conditions in Germany are improving with demand from the SME sector for the flexible, affordable workspace offered by Sirius remaining positive. The German economy is forecasting a strong export-led recovery and this will improve confidence amongst our core customer base. Importantly, Sirius now has in place a structure to take advantage of a recovering German economy, with the costs of the business firmly under control. During the period, occupancy in 30 of the 38 sites either increased or remained 100% and the Company remains focused on achieving further significant increases in occupancy.

Asset Manager's report

Asset management

We are pleased to report that we have made good progress in this period under review. The business is now considerably leaner and well set up to win market share and capitalise on the significant investments made to date. Over the last 18 months the German based team has been re-organised to reflect the move from completing the development phase to focusing on increasing occupancy and maximising revenue streams and cost recoveries. As a result, the lettings performance has improved markedly and profitability of the business is increasing.

The programme to improve the recoverability of service charge costs and reduce the Company's overheads is progressing well and has made a significant contribution to the recurring operating profit improvements seen this year. 

The appetite from the SME sector for our flexible offering remains positive; we are introducing new products to increase our appeal whilst carefully managing the existing tenant base.

Marketing

A key barometer of market demand is monthly sales enquiries which now average at approximately 966 per month, compared to 521 in the same period last year. The sales force, which doubled in size to become a 40 strong team in late 2010, has adopted a systematic approach to generating and managing new leads. Our online strategy continues to be the key driver of the increased interest, with website traffic now increasing exponentially.

While Sirius is still a relatively young brand in Germany, it is becoming well known within the SME market and as importantly so are the expanding range of services the Company now provides. Sirius has introduced a range of innovative solutions to letting space, such as the highly successful Smartspace initiative. Across the portfolio 32,199 sqm have now been converted into Smartspace which is let at an average of €9.01 psm. In addition, a new low cost storage solution called Flexilager (flexistorage) which utilises previously unlettable space has proved very popular with existing tenants wishing to have storage facilities nearby and has brought in many new tenants to our sites.  Alongside this, the conferencing and catering businesses have seen significant growth in demand in the period.  We have been able to secure a number of large nationwide contracts for use of meeting rooms and catering facilities with large corporate clients which has contributed to the net income generated from these products increasing by more than 160% in the period.  This product has significant potential to grow and we look forward to reporting further progress at the half year stage.

New lettings                              

During the year under review we achieved new lettings of 159,292 sqm and we had 123,768 sqm of space vacated. The move-outs were skewed following two large tenants leaving last summer which together represented 26,824 sqm.

The monthly average rental value achieved on new lettings in this time was €4.41 psm, compared to the average rate across the portfolio of €4.13 psm. The rate decreased in the period because of a number of large tenant move-outs who were paying high rental rates including Siemens who account for 40% of the reduction.  The number of new customers acquired has increased from an average of 40 per month in the period to March 2010 to an average of 87 per month for the period to March 2011; this is due to both an increase in enquiries and an improvement in overall sales conversion from 7.6% last year to 9.0% in the period. Our ability to provide flexible, mixed-use space is proving very attractive to the SME market, with office and storage, and office and light industrial solutions proving popular combinations.  

Post the year end, during April and May, we achieved new lettings of more than 16,500 sqm with an average rate psm in excess of €5.50.

Portfolio analysis                      

The average monthly rental rate achieved across the portfolio now stands at €4.13 per sqm. Our tenant base now consists of 1,521 tenants with an average lease length to the first break option of 3.1 years (excluding smartspace tenants). Given the flexible nature of our offering and leases, 872 tenants occupying 262,576 sqm with an annual rent of €11,841,874 are due for renewal over the twelve months to March 2012. Every tenant due for renewal has been assigned an appropriate manager with renewal discussions commencing well in advance of contract end dates. In the previous year, we made good progress in agreeing longer-term leases with the top 50 tenants and we are continuing to maintain proactive relationships with this core group. We are now looking to extend this level of engagement to the mid and smaller-tier tenants. We are aware of four tenants who will leave in the summer and who together represent 2.6% of occupancy. Nevertheless, we remain confident of offsetting this and achieving further significant increases in occupancy.

Cost improvements and service charge recoveries

Due to our successful reduction of service charge costs, metering of utilities, better allocation of facility management costs, an increase in the service charge prepayments received from tenants and reduced overheads, the Company's non-recovered costs were €1.8m lower than last year and further improvements are expected next year. As mentioned in the interim statement we had to deal with a large number of one-off write-downs relating to prior year service charge balancing receivables and tenant debtors.  We were in the difficult situation of being required to recover service charge balancing charges for the 2009 and 2010 years totalling in excess of €8m.  We have gained much greater insight into this area in the period, hence the level of write-offs, and the issue going forward is significantly reduced as the combination of higher service charge prepayments and lower service charge costs reduces the burden significantly of chasing large balancing charges post year end.  At the same time, we continue to streamline our cost efficiencies and drive occupancy through our online marketing efforts and initiatives which spread the service charge cost allocation over more tenants.

Consolidated statement of comprehensive income
for the year ended 31 March 2011

		Year ended	Year ended
		31 March	31 March
		2011	2010
	Notes	€000	€000
Gross rental income	3	45,568	44,002
Direct costs	4	(22,922)	(20,162)
Net rental income		22,646	23,840
Deficit on revaluation of investment properties	9	(367)	(29,969)
Administrative expenses	4	(4,141)	(5,147)
Other expenses	4	(2,175)	(2,143)
Operating profit/(loss)		15,963	(13,419)
Finance income	5	126	93
Finance expense	5	(17,832)	(17,460)
Change in fair value of derivative financial instruments		5,184	(940)
Profit/(Loss) before taxation		3,441	(31,726)
Taxation	6	(711)	1,712
Profit/(Loss) for the year		2,730	(30,014)
Profit/(Loss) attributable to:
Owners of the Company		2,519	(29,889)
Non-controlling interests		211	(125)
Profit/(Loss) for the year		2,730	(30,014)
Earnings per share
Basic and diluted, for profit/(loss) for the year attributable to ordinary equity holders of the Parent Company	7	0.83c	(9.89)c

     Consolidated statement of financial position
       for the year ended 31 March 2011

	Notes	2011 €000	2010 €000
Non-current assets
Investment properties	9	505,500	500,010
Investment property under construction	10	-	-
Plant and equipment		4,679	4,754
Total non-current assets		510,179	504,764
Current assets
Trade and other receivables	11	7,272	12,110
Prepayments		233	133
Derivative financial instruments		165	-
Cash and cash equivalents	12	23,583	33,401
Total current assets		31,253	45,644
Total assets		541,432	550,408
Current liabilities
Trade and other payables	13	(17,162)	(18,445)
Interest bearing loans and borrowings	14	(7,669)	(6,860)
Current tax liabilities		(707)	(381)
Derivative financial instruments		(9,444)	(14,463)
Total current liabilities		(34,982)	(40,149)
Non-current liabilities
Trade payables		-	(450)
Interest bearing loans and borrowings	14	(294,546)	(300,930)
Deferred tax liabilities	6	(1,924)	(1,629)
Total non-current liabilities		(296,470)	(303,009)
Total liabilities		(331,452)	(343,158)
Net assets		209,980	207,250
Equity
Issued share capital	15	-	-
Other distributable reserve		300,111	300,111
Retained earnings		(91,150)	(93,669)
Total equity attributable to the equity holders of the Parent Company		208,961	206,442
Non-controlling interests		1,019	808
Total equity		209,980	207,250

Consolidated statement of changes in equity
for the year ended 31 March 2011

					Total equity
		Issued	Other		attributable to
		share	distributable	Retained	holders of the	Non controlling
		capital	reserve	earnings	Parent Company	interests	Total equity
		€000	€000	€000	€000	€000	€000
As at 31 March 2009		-	300,111	(63,780)	236,331	933	237,264
Loss for the year		-	-	(29,889)	(29,889)	(125)	(30,014)
As at 31 March 2010		-	300,111	(93,669)	206,442	808	207,250
Profit for the year		-	-	2,519	2,519	211	2,730
As at 31 March 2011		-	300,111	(91,150)	208,961	1,019	209,980

 Consolidated cash flow statement
for the year ended 31 March 2011

		Year	Year
		ended	ended
		31 March	31 March
		2011	2010
	Notes	€000	€000
Operating activities
Profit/(Loss) before tax		3,441	(31,726)
Deficit on revaluation of investment properties	9	367	29,969
Change in fair value of derivative financial instruments		(5,184)	940
Depreciation	4	881	610
Finance income	5	(126)	(93)
Finance expense	5	17,832	17,460
Cash flows from operations before changes in working capital		17,211	17,160
Changes in working capital
Decrease/(increase) in trade and other receivables		4,665	(4,450)
Increase/(decrease) in trade and other payables		3,080	(1,008)
Taxation paid		(121)	(290)
Cash flows from operating activities		24,835	11,412
Investing activities
Purchase of investment properties		-	(1,442)
Development expenditure		(9,303)	(25,672)
Purchase of plant and equipment		(901)	(1,356)
Proceeds on disposal of plant and equipment		56	-
Interest received		126	93
Cash flows used in investing activities		(10,022)	(28,377)
Financing activities
Proceeds from loans		2,490	44,725
Repayment of loans		(9,121)	(8,222)
Finance charges paid		(18,000)	(15,789)
Cash flows from financing activities		(24,631)	20,714
(Decrease)/increase in cash and cash equivalents		(9,818)	3,749
Cash and cash equivalents at the beginning of the year		33,401	29,652
Cash and cash equivalents at the end of the year	12	23,583	33,401

.

Notes to the consolidated financial statements

for the year ended 31 March 2011

1. Basis of preparation

The financial information is abridged and does not constitute the Group's full Financial Statements for the year ended 31 March 2011, but has been prepared under International Financial Reporting Standards ("IFRSs") as adopted for use in the EU.

The Directors note the following in their deliberations on whether the going concern basis is appropriate for the financial statements:

Asset management agreement

On 3 May 2011, the Company announced that it was in discussion with the Asset Manager with the objective of agreeing new management arrangements, following termination of the existing agreement as part of a review to ensure shareholders receive the best value and quality of service.  Discussions are ongoing with the Asset Manager and the Board hopes that new management arrangements can be in place as soon as possible.  The Board can also confirm that shareholders will be consulted and any new management arrangement will be made with the agreement of shareholders holding a majority of shares.

Whilst the Board hopes to come to a new agreement with the existing Asset Manager within a short time frame, there are several other options available should this not be possible.  If a new agreement, that is satisfactory to shareholders, cannot be reached the Board would look at other options including internalizing management, preferably with the existing team or a new team or appointing another external asset manager.

Loan facility

The Group's property portfolio is funded by external debt facilities. One of these facilities is provided by RBS with an outstanding balance of €93m expires on 15 October 2012 and in anticipation of this the Group's Directors and Asset Manager will begin negotiations with them in due course and has not, at this stage, sought any written commitment that the facility will be renewed.

In view of this and after making enquiries, the Directors have a reasonable expectation that the Group has adequate financial resources to manage its business risks and to continue in operational existence for the foreseeable future. Accordingly these consolidated financial statements have been prepared on a going concern basis as it is the view of the Directors that this is the most appropriate basis of preparation.

2. Operating segments

Segment information is presented in respect of the Group's operating segments. The operating segments are based on the Group's management and internal reporting structure. Segment results and assets include items directly attributable to a segment as well as those that can be allocated to a segment on a reasonable basis.

Management considers that there is only one geographical segment which is Germany and one reporting segment which is investment in commercial property.

3. Revenue

	Year	Year
	ended	ended
	31 March	31 March
	2011	2010
	€000	€000
Rental income from investment properties	45,568	44,002

4. Operating profit/(loss)

The following items have been charged or credited in arriving at operating profit/(loss):

Direct costs

		Year	Year
		ended	ended
		31 March	31 March
		2011	2010
		€000	€000
Service charge income		(24,995)	(26,570)
Service charge expenditure and other property costs		43,292	41,726
Irrecoverable property costs		18,297	15,156
Property management fee		1,559	1,748
Asset management fee		2,974	2,998
Development fee		92	260
		22,922	20,162

Administrative expenses

	Year	Year
	ended	ended
	31 March	31 March
	2011	2010
	€000	€000
Audit fee	252	251
Legal and professional fees	2,598	2,743
Other administration costs	909	904
Non-recurring costs	382	1,249
	4,141	5,147

During the year fees of €92,641 (2010: €436,623) were incurred with the auditors and their associates in respect of other non-audit services.

Other expenses

	Year	Year
	ended	ended
	31 March	31 March
	2011	2010
	€000	€000
Directors' fees	220	178
Depreciation	881	610
Bank fees	174	467
Marketing and other expenses	900	888
	2,175	2,143

5. Finance income and expense

	Year	Year
	ended	ended
	31 March	31 March
	2011	2010
	€000	€000
Bank interest income	126	93
Finance income	126	93
Bank interest expense	(16,760)	(16,355)
Amortisation of capitalised finance costs	(1,072)	(1,105)
Finance expense	(17,832)	(17,460)
Net finance expense	(17,706)	(17,367)

6. Taxation

Consolidated statement of comprehensive income

	Year	Year
	ended	ended
	31 March	31 March
	2011	2010
	€000	€000
Current income tax
Current income tax charge	(583)	(438)
Adjustment in respect of prior periods	167	1,297
	(416)	859
Deferred tax
Relating to origination and reversal of temporary differences	(295)	853
	(295)	853
Income tax (expense)/credit reported in the statement of comprehensive income	(711)	1,712

The income tax rate applicable to the Company in Guernsey is nil. The current income tax charge of €583,000 represents tax charges on profit arising in Germany that is subject to corporate income tax of 15.83%. The effective income tax rate for the period differs from the standard rate of corporation tax in Germany. The differences are explained below:

	Year	Year
	ended	ended
	31 March	31 March
	2011	2010
	€000	€000
Profit/(Loss) before tax	3,441	(31,726)
Profit/(Loss) before tax multiplied by rate of corporation tax in Germany of 15.83% (2010: 15.83%)	545	(5,022)
Effects of:
Income exempt from tax	(3,911)	(3,048)
Tax allowable depreciation	(1,653)	(1,634)
Non taxable items including revaluation movements	995	6,156
Tax losses utilised	(55)	(188)
Tax losses not utilised	4,755	4,085
Relating to origination and reversal of temporary differences	295	(853)
Adjustments in respect of prior periods	(167)	(1,297)
Other	(93)	89
Total income tax expense/(credit) in the statement of comprehensive income (as above)	711	(1,712)

Deferred tax liability

	2011	2010
	€000	€000
Opening balance	1,629	2,482
Revaluation of investment properties and derivative financial instruments to fair value	295	(853)
Closing balance	1,924	1,629

The Group has tax losses of €75,344,507 (2010: € 53,995,477) that are available for offset against future profits of its subsidiaries in which the losses arose. Deferred tax assets have not been recognised in respect of the revaluation losses on investment properties and interest rate swaps as they may not be used to offset taxable profits elsewhere in the Group and realisation is not assured.

7. Earnings per share

The calculation of the basic, diluted and adjusted earnings per share is based on the following data:

	Year	Year
	ended	ended
	31 March	31 March
	2011	2010
	€000	€000
Earnings
Profit/(Loss) for the year attributable to the equity holders of the parent	2,519	(29,889)
Earnings	2,519	(29,889)
Add back revaluation deficits	438	29,093
Add back change in fair value of derivative instruments	(5,184)	940
Add back non-recurring costs	382	1,499
Adjusted earnings	(1,845)	1,643
Number of shares
Weighted average number of ordinary shares for the purpose of basic earnings per share	302,223,176	302,223,176
Weighted average of ordinary shares for the purpose of adjusted earnings per share	302,223,176	302,223,176
Basic and diluted earnings per share	0.83c	(9.89)c
Adjusted earnings per share	(0.61)c	0.54c

The number of shares has been reduced by 25,576,824 shares that are held by the Company as Treasury Shares at 31 March 2011, for the calculation of basic and adjusted earning per share.

The Directors have chosen to disclose adjusted earnings per share in order to provide a better indication of the Group's underlying business performance; accordingly it excludes the effect of non-recurring costs, deferred tax and the revaluation deficits on the investment properties and derivative instruments.

As there are no share options in issue, the diluted earnings per share is identical to the basic earnings per share.

8. Net assets per share

	2011	2010
	€000	€000
Net assets
Net assets for the purpose of assets per share (assets attributable to the equity holders of the parent)	208,961	206,442
Deferred tax relating to investment properties	1,921	1,629
Derivative financial instruments	9,279	14,463
Adjusted net assets attributable to equity holders of the parent	220,161	222,534
Number of shares
Number of ordinary shares for the purpose of net assets per share	302,223,176	302,223,176
Net assets per share	69.14c	68.31c
Adjusted net assets per share	72.85c	73.63c

The number of shares has been reduced by 25,576,824 shares that are held by the Company as Treasury Shares at 31 March 2011, for the calculation of basic and adjusted earning per share.

As there are no share options, the diluted net assets per share is identical to net assets per share.

9. Investment properties

	2011	2010
	€000	€000
Opening balance	500,010	500,400
Additions	5,857	29,579
Deficit on revaluation	(367)	(29,969)
Closing balance	505,500	500,010

The fair value of the Group's investment properties at 31 March 2011 has been arrived at on the basis of a valuation carried out by DTZ Zadelhoff Tie Leung GmbH, an independent valuer.

The value of each of the properties has been assessed in accordance with the RICS Valuation Standards on the basis of market value. Market value was primarily derived using a ten year discounted cash flow model supported by comparable evidence. The discounted cash flow calculation is a valuation of rental income considering non recoverable costs and applying a discount rate for the current income risk over a ten year period. After ten years a determining residual value (exit scenario) is calculated. A cap rate is applied to the more uncertain future income, discounted to a present value.

The weighted average lease duration was 3.1 years.

As a result of the level of judgement used in arriving at the market valuations, the amounts which may ultimately be realised in respect of any given property may differ from the valuations shown in the statement of financial position.

10. Investment property under construction

	2011	2010
	€000	€000
Opening balance	-	2,222
Additions	-	-
Transfers	-	(2,222)
Closing balance	-	-

11. Trade and other receivables

	2011	2010
	€000	€000
Trade receivables	5,577	6,112
Other receivables	1,695	5,998
	7,272	12,110

12. Cash and cash equivalents

	2011	2010
	€000	€000
Cash at banks and in hand	23,583	33,401

Cash at banks earns interest at floating rates based on daily bank deposit rates. The fair value of cash is €23,583,498 (2010: €33,401,072).

As at 31 March 2011 €6,717,701 of cash is held in blocked accounts. Of these €1,370,898 is under the control of lenders who have made loans to the Group to be used for capital expenditure on the properties. Balances relating to deposits received from tenants total €1,941,435. In addition an amount of €15,546 relates to funds held on an escrow account for a supplier and an amount of €3,389,822  relates to amounts reserved for future interest payments.

As at the previous year end additional cash was trapped as part of the bank covenant of the ABN Amro Bank N.V. loan being below the required interest coverage ratio of 1.30. On 15 October 2010 the Group made an early repayment of €1,111,606 which resulted in the interest coverage ratio going above 1.30 and resolving the cash trap. Consequently all amounts were released and therefore as at 31 March 2011 there are no remaining trapped amounts.

13. Trade and other payables

	2011	2010
	€000	€000
Trade payables	5,665	8,394
Accrued expenses	3,991	3,585
Accrued interest	1,107	2,401
Other payables	6,283	3,430
Related party payables	116	635
	17,162	18,445

Terms and conditions of the above financial liabilities are as follows:

•    Trade payables are non interest bearing and it is the Group's policy to pay within the stated terms which vary from 14 to 60 days. The exceptions are certain development suppliers where payment plans have been agreed to extend the payment days to a longer period; and

•    Other payables are non interest-bearing and as above are paid within stated terms;

14. Interest bearing loans and borrowings

	Effective
	interest
	rate		2011	2010
	%	Maturity	€000	€000
Current
ABN Amro loan - fixed rate facility	5.85	15 October 2012	2,156	1,808
Berlin Hannoversche Hypothekenbank AG loan - fixed rate facility	5.46	31 March 2013	1,290	1,161
Berlin Hannoversche Hypothekenbank AG loan - hedged floating rate facility	Hedged floating*	31 March 2013-30 June 2013	4,012	3,778
Berlin Hannoversche Hypothekenbank AG loan - capped floating rate facility	Capped floating**	31 December 2013	1,286	1,216
Capitalised finance charges on all loans			(1,075)	(1,103)
			7,669	6,860
Non-current
ABN Amro loan - fixed rate facility	5.85	15 October 2012	91,217	94,484
Berlin Hannoversche Hypothekenbank AG loan - fixed rate facility	5.46	31 March 2013	49,661	48,498
Berlin Hannoversche Hypothekenbank AG loan - hedged floating rate facility	Hedged floating*	31 March 2013-30 June 2013	113,108	117,120
Berlin Hannoversche Hypothekenbank AG loan- capped floating rate facility	Capped floating**	31 December 2013	41,605	42,891
Capitalised finance charges on all loans			(1,045)	(2,063)
			294,546	300,930
Total			302,215	307,790
The borrowings are repayable as follows:
On demand or within one year			8,744	7,963
In the second year			190,174	8,679
In the third to fifth years inclusive			105,417	294,314
Total			304,335	310,956

*     The average fixed rate of the swap contracts is 4.74%, plus an average margin of 1.12% bringing the total cost to 5.86%.

**    This floating rate facility is capped at 5.98%. Due to the current low market interest rates, the interest at year end for this loan is 3.09%.

The Group has pledged 34 (2010: 33) properties to secure the interest bearing debt facilities granted to the Group. The 34 properties had a combined valuation of €465,310,000 as at 31 March 2011 (2010: €453,970,000).

ABN Amro Bank N.V.

This facility had €100,951,940 drawn down, of which €7,579,062 (2010: €4,659,884) has been amortised, resulting in a net liability of €93,372,878 (2010: €96,292,056) at year end. The interest is fixed at a weighted average interest rate of 5.85% per annum. The final repayment date is 15 October 2012. This loan is secured over 16 property assets and is subject to various covenants with which the Group has complied.

Berlin Hannoversche Hypothekenbank AG

During the year the Group received an additional facility to Portfolio I of €2,500,000 which was fully drawn down. In total facilities of €226,500,000 have been granted by Berlin-Hannoversche Hypothekenbank AG which are all fully drawn down. To date €15,538,184 has been amortised, resulting in a liability of €210,961,816 at 31 March 2011.

The facility is split into three portfolios: Portfolio I is split with either an interest rate of 1.18 margin over three months EURIBOR fixed by a SWAP at 4.42%, or a fixed rate of 5.46%. The new facility has a fixed rate of 2.81%. Portfolio II has an interest rate of 1.08 margin over three months EURIBOR fixed by a SWAP at 4.95% and, Portfolio III is at a floating rate capped at 5.98%. This facility is secured over 18 property assets and is subject to various covenants with which the Group has complied.

A summary of the Group's debt covenants are set out below:

	Total	Value of					Interest cover
	loan	secured	Loan-to-	Loan to			/debt service
	outstanding	properties	value	value	Interest	Debt service	cover ratio
	at 31 March	at 31 March	ratio	covenant	cover ratio	cover ratio	covenant
	2011	2011	at 31 March	at 31 March	at 31 March	at 31 March	at 31 March
	€000	€000	2011	2011	2011	2011	2011
ABN Amro loan	93,373	132,710	70.4%	85.0%	1.34	n/a	1.25
Berlin Hannoversche
Hypothekenbank AG loan
- Portfolio I, II and III	210,962	332,600	63.4%	77.0%	n/a	1.48	1.10
Unencumbered properties	-	40,190	n/a
Total	304,335	505,500	60.2%

15. Issued share capital

		Share
	Number	capital
Authorised	of shares	€
Ordinary shares of no par value	Unlimited	-
As at 31 March 2011	Unlimited	-

		Share
	Number	capital
Issued and fully paid	of shares	€
Ordinary shares of no par value
Issued ordinary shares	327,800,000	-
Shares bought back and held in treasury	(25,576,824)	-
As at 31 March 2011	302,223,176	-

Holders of the ordinary shares are entitled to receive dividends and other distributions and to attend and vote at any general meeting.

The Company holds 25,576,824 of its own shares which continue to be held as treasury. No share buy backs were made in the year.

16. Dividends

In order to sustain investment in the Group's portfolio whilst also ensuring cash resources are preserved, the Board has proposed to not pay a dividend in the year ended 31 March 2011.

17. Subsequent event

Under the existing asset management agreement between the Company, Sirius Cooperatief U.A. and Principle Capital Sirius Real Estate Asset Management Limited ("PCSREAM") dated 30th April 2007 as amended on 8th August 2008 (the "AMA") the Company is entitled to terminate the AMA by giving 12 months' notice if the Company fails to achieve a specified net asset value total return (as calculated in accordance with the AMA) at 31 March 2011. This is the only right the Company has to terminate the AMA absent material default or insolvency prior to 2016. The Board of Directors considers that it is entitled to terminate and has decided to do so to maximise its flexibility.

The Board of Directors gave notice on the 3 May 2011 to PCSREAM Ltd to terminate the Asset Manager Agreement with effect on 4 May 2012. The Board of Directors will be entering into discussions with PCSREAM Ltd and the existing real estate asset management team with the objective of agreeing new management arrangements to be in place as soon as possible but in any event by 4^th May 2012

 

END

 

 

FR UOABRARANRAR