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:

Further reductions in property running costs and overheads

Better allocation and transparency of property running costs

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

Increase in service charge prepayments received from tenants

Reduced costs mentioned above

Improved allocation of facility management and utilities costs to tenants

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 4th May 2012

 

 


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