Final Results

RNS Number : 6470J

Sirius Real Estate Limited

16 June 2014

 

Sirius Real Estate Limited

("Sirius" or "the Company")

Final Results

For the year ended 31 March 2014

Sirius Real Estate Limited (the "Group", the "Company" or "Sirius"), the real estate company with a portfolio of 30 business parks across Germany, providing a combination of conventional and modern, flexible workspace, today reports its final results for the year ended, 31 March 2014.

Robert Sinclair, Chairman of Sirius Real Estate Limited, said: "These results confirm the completion of our turnaround plan and a return to the dividend list with a commitment to pay out 65% of future recurring profits."

Trading Highlights

·      30% increase in recurring profit before tax to €11.3 million (2013: €8.7 million)

-  total income of €45.1 million (2013: €46.1 million) despite disposal programme of non-core properties¹

-  reduction in non-recoverable costs and overheads of €0.6 million compared to prior financial year

-  new lettings of 113,784 sqm at an average rental rate of €5.16 per sqm, 15% higher than the average portfolio rate of €4.48 per sqm

-  occupancy remained stable at 76% (as at 31 March 2013: 76%*)

·      Profit after tax of €28.9m (2013: loss of €30.3m) driven by a strong valuation result

·      Earnings Per Share of 7.31c (2013: -9.52c) and Adjusted Earnings Per Share of 2.73c (2013: 2.66c) showing a slight increase despite impact of disposals and dilution due to capital raisings undertaken during the year

·      Adjusted Net Asset Value per share² of 44.32c (31 March 2013: 48.44c), an increase of 15.7% excluding the effect of the capital raisings undertaken during the year

·      Dividends recommenced with a final dividend of 0.30c per share declared and establishment of a dividend policy to pay 65% of future recurring profits after tax as dividends with semi-annual payments

*   Adjusted for disposals

Strong balance sheet

·      Two successful equity placements, raising €6.5 million in August 2013 and €40 million in December 2013

·      Completed the refinancing of all the Group's borrowings during the period with three new debt facilities totalling €200 million at favourable interest rates

____________
¹ Total income includes a surrender premium of €1.7 million received for the reduction of an existing lease term (surrender premium in 2013: €1.0 million)

² Excluding provisions for deferred tax and derivative financial instruments

·      Land and non-core property disposals in the period totalled €21.2 million with a further three land and non-core properties notarised for sale for €2.6 million

·      Portfolio valued at €448.7 million as at 31 March 2014 on a gross yield of 9.3%, representing a 6.4% like-for-like increase in the year

·      Group loan to value ("LTV") has been reduced to 50.9% (2013: 65.4%) due to the capital raisings, amortisation and improvement in valuations.

·      Average debt expiries extended to 5.3 years

Growth strategy

·      Significant organic growth potential through an enhanced capex programme investing in highly accretive refurbishment opportunities within the core portfolio

·      Earnings accretive acquisition opportunities identified with two business parks in advanced stages of negotiation for €19m

Robert Sinclair, Chairman of Sirius Real Estate Limited, continued: 

"The continued increase in profitability of the Group is reflective of the renewed strength and operational improvement across the business and our return to the dividend list is indicative of the Board's confidence in the future.

With the strengthening of the balance sheet and refinancing of all debt, the Group's restructuring has been completed and Sirius is now in a position to pursue growth opportunities. We are now seeing the benefits of the management team's efforts of the last few years coming through in our trading performance and we look forward to further improvement in profitability and returns to shareholders.

We are operating a slightly smaller estate, but with a robust capital structure and we can now realise the significant income enhancing potential that lies within it.  There remains further scope to improve income and capital returns by maximising occupancy and passing rents, improving cost recovery and making earnings enhancing improvements with our targeted capex programme.  We also have the platform to benefit immediately from additions we make to the portfolio and have already identified several attractive opportunities.  As a result, we believe the Company is well positioned for the future."

Enquiries:

Sirius                          

Andrew Coombs, Chief Executive Officer                                                                           [phone]

Alistair Marks, Chief Financial Officer

Peel Hunt

Capel Irwin                                                                                                                    [phone]

Hugh Preston

Novella                                   

Tim Robertson                                                                                                               [phone]

Ben Heath        

Chairman's statement

Introduction

I am pleased to be able to present these results which not only show further profit improvements, despite the disposal of a number of assets, but more importantly represent a successful conclusion to the restructuring of the Company which has created a solid financial base from which it can now grow. For the year ended 31 March 2014, the Group is able to report a recurring profit** before tax of €11.3 million (2013: €8.7 million), a 30% increase on the prior year, and a net profit after tax of €28.9 million (2013: net loss of €30.3 million).

Owing to the strength of the operating platform that we have developed to manage our asset class over the last few years, we have been able to access financing sources that have not only fulfilled the requirements for our existing portfolio, but opened up options for future investment. During the period this process included successfully raising €6.5 million and €40.0 million in two separate equity placements and entering into three new debt facilities totalling €200 million. A strengthened capital structure, with LTV falling from 65% to 51% (excluding cash reserves), allowed the Company to secure some very competitive financing rates, whilst increasing our debt expiries to between January 2017 and July 2023, with an average expiry of 5.3 years.

Following the second capital raising in December we have commenced a €9.0 million programme of earnings-enhancing capex improvements to the existing portfolio.  In addition, we have progressed the non-core asset disposal programme.  We have sold €21.2 million of land and non-core properties during the period and have two land and one non-core property sales notarised for €2.6 million.  We have also two further non-core properties for sale and have identified further properties approximately 100,000 sqm of surplus non-income producing land which can either be sold or developed depending on the level of returns.  Funds raised from asset sales going forward will provide resources for our acquisition programme. We have already identified a good pipeline of potential acquisitions and are in advanced stages of negotiation over two business parks for €19 million.

Alongside this, the Company has continued to operate successfully in an improving market. Rental income continues to increase, service charge cost recoveries have improved and overheads have again been reduced.  Combined with the impact of favourable bank interest rates secured during the period, recurring profits increased by 30%. Consequently, the Board is pleased to recommence the payment of a regular dividend, starting with the payment of a final dividend of 0.30c per share for the period. Whilst only a modest payment at this stage, the 0.30c dividend declared today represents 65% of the recurring profits** after tax for the March 2014 quarter, following the capital raising completed in December 2013. We are pleased to report that it is the Board's intention to pay a dividend equal to 65% of the recurring profits** after tax in respect of each financial year of the Group going forward. It is intended that dividends will be paid on a semi-annual basis and offered to shareholders in cash or scrip form.

**Recurring profits are profits before property revaluation, change in fair value of derivative financial instruments and non-recurring costs

Financial Results

Total income for the year was €45.1 million (2013: €46.1 million) which includes €1.7 million received by way of a surrender premium (2013: €1.0 million) paid to the Company for the reduction of an existing lease term at one of our Munich sites. The demand for our space in Munich is strong so we are confident of replacing this tenant shortly after it moves out in 2016, rather than 2018 as under the original agreement. As at 31 March 2014, the annualised gross rent roll of the entire portfolio increased to €41.5 million (2013: €41.4 million*), a good performance considering we experienced the last of the planned Siemens move outs in July, along with three other notable significant move outs.  Despite the tough economic backdrop and the scheduled Siemens vacations, whereby they have given back 83,879 sqm over four years, we have been able to grow our rental income every year over this period, confirming the demand for our workspace and our ability to re-let space. Siemens, the only notable tenant with a known scheduled space reduction programme, remains a large tenant but now represents only 3.5% of our rent roll in March 2014 compared to 15.5% in March 2010.

*   Adjusted for disposals

Earnings Per Share amounted to 7.31c (2013: -9.52c) while Adjusted Earnings Per Share excluding property revaluation, change in fair value of derivative financial instruments and non-recurring costs amounted to 2.73c (2013: 2.66c).  This slight increase in Adjusted Earnings Per Share was achieved despite the number of ordinary shares in issue increasing to 518,900,307 (2013: 317,578,176) following the equity placings in 2013 and the disposal of three business parks in the period. 

Portfolio Valuation

The existing portfolio was independently valued at €448.7 million by Cushman & Wakefield LLP at the year end (31 March 2013: €421.7 million*).  The valuation represents a 6.4%* increase on the prior year and a 4.4%* increase on the valuation from September 2013. This is the second valuation in succession where values have increased.

The core portfolio comprises 27 of the 30 assets, valued at €436.2 million with an average gross yield of 9.2% (2013: 9.9%). The average capital value per sqm is €445.6 (2013: €417.4*) even though these assets operate with an occupancy of only 80% (2013: 81%).  An intensive capex programme that focuses on approximately 50% of the vacant space of these assets, currently either unlettable or significantly under-rented, has commenced during the period.  This capital expenditure is expected to produce a high return on investment, both in terms of income and value accretion. 

*Adjusted for disposals

Funding

During the period the Company completed the long-term refinancing of its assets. The Group has, since our first facility expired in October 2012, completed four new debt facilities totalling €228 million, with debt expiries ranging between January 2017 and July 2023 and an average unexpired term of 5.3 years. The key points of the financing are described in the table below

	October 2012	March 2014
Number of Assets	37	30
Value of Assets	€474m	€448m
Bank Loans Outstanding	€(286)m	€(226)m
LTV (excluding cash reserves)	60%	51%
Annual Interest	€14.10m	€10.88m
Weighted Average Interest Rate	5.3%	4.7%
Weighted Average Debt Expiry	0.5 years	5.3 years

With the refinancing successfully completed, a sustainable capital structure established and new lending sources created, the Company has a number of options for its future financing requirements and a number of lenders have expressed interest in financing future acquisitions. There is a high yield differential between the properties we own or look to acquire and the rates at which we can finance them in the current environment, giving us confidence that we can grow our income through accretive acquisitions.

Net Asset Value

The adjusted net asset value (NAV) per share, which excludes the provisions for deferred tax and derivative financial instruments, was 44.3c as at 31 March 2014 (31 March 2013: 48.4c). The movement in adjusted NAV per share in the period can be reconciled as follows:

Opening adjusted net asset value per share	48.4c
Impact of equity capital raisings and issues during the year	(10.1)c
Impact of valuations/disposals	3.8c
Impact of retained profits	2.2c
Closing adjusted net asset value per share	44.3c

Accordingly, excluding the impact of the equity capital raisings, the NAV per share has increased by 15.7% in the period.

Dividend

The Board is pleased to recommence the payment of a regular dividend, starting with a final dividend of 0.30c per share for the period. The final dividend will be paid on 22 August 2014 to shareholders on the register as at 25 July 2014. The ex-dividend date will be 23 July 2014.  Whilst only a modest payment at this stage, the 0.30c dividend represents 65% of the recurring profits** after tax for the March 2014 quarter, following the capital raising completed in December. The Board has set a policy to pay a dividend equal to 65% of the recurring profits** after tax in respect of each financial year of the Group going forward. It is intended that dividends will be paid on a semi-annual basis and offered to shareholders in cash or scrip form.

**Recurring profits are profits after tax and before property revaluation, change in fair value of derivative financial instruments and non-recurring costs

Capital structure

We have significantly de-risked the capital structure of the business, with all debt refinanced for a weighted average term to expiry of 5.3 years and a reduction in the loan to value to 50.9%, excluding cash reserves. We have already seen a reduction in our cost of debt as a result of this improvement but we believe there is scope to reduce both our interest cost and amortisation requirements further over time. We believe the business should be managed with a capital structure robust enough to sustain all market conditions, thereby reducing the risk for our shareholders. To this end we believe it is appropriate to continue strengthening the balance sheet and the Board has set a target loan to value of 40% to be achieved over the next two years. This target will be achieved through improvements in the value of our estate due to income growth, asset management initiatives and capital expenditure, as well as contractual debt amortisation and acquisitions on a lower loan to value. Our objective is not to maximise income through high leverage but to find the appropriate balance of risk and return. We believe these actions will result in a significantly reduced cost of capital for the business in future years, while reducing the risk for our shareholders and leaving the Company in a stronger position to exploit opportunities throughout different economic and property cycles.

EGM and Board Changes

Following the passing of the resolutions at the EGM held on 1 May 2014, the Company has relocated its tax residence from Guernsey to the United Kingdom. Although the Company will continue to be a limited company registered in Guernsey, the migration in tax residence to the UK enables the Company to take advantage of recent reforms of the UK tax regime and allow future Board appointments to be made irrespective of their residence. Migration will also allow the Company to hold Board and shareholder meetings in the UK.

The Board also announced on 1 May 2014, the appointment of Andrew Coombs as Chief Executive Officer and Alistair Marks as Chief Financial Officer to the Board of the Company with immediate effect. Andrew and Alistair have for the past 4 and 7 years respectively been Chief Executive Officer and Chief Financial Officer of the Company's property management subsidiary Sirius Facilities GmbH.  I am delighted to welcome them to the Board. 

At the same time, Ian Clarke stepped down from the Board, as a Guernsey based non-executive director of the Company but will take up a position as a director of a new Guernsey subsidiary of Sirius being formed as part of the migration.  I would like to thank Ian for his significant contribution to the Company over the last 3 years.  He was a valued member of the Sirius Board and I look forward to our new relationship with him as director of our new subsidiary.  The Board has commenced a search for a replacement non-executive director.

Outlook

Demand for Sirius' products across our offerings, both for conventional space and the flexible products, is strong and the German economy remains robust. We are confident that the business will continue to move forward and that the initiatives we have in place will support further increases in income and profitability which in turn will underpin our ability to increase returns to shareholders.

In addition to the organic growth opportunities, we have identified a number of attractive core acquisitions with the potential to generate excellent income and capital returns for the Group. The experience and knowledge gained over the last seven years, coupled with the Company's market leading position as operators of multi-tenanted business parks across Germany, make it well placed to pursue these opportunities.

Chief Executive's Report

Introduction

The ultimate measure of successful asset management lies in the total returns generated by the Company through both increased income returns and improvement in capital values. During the financial year, we saw a 30% increase in recurring pre-tax earnings building upon the significant progress made the year before. Capital returns also turned positive this year resulting in a 15.7% improvement in net asset value per share, excluding the impact of the capital raisings in the period.  Behind this continued improvement in returns have been the benefits of the asset and property management initiatives developed over the last five years. Throughout this time we have reduced the portfolio from 38 business parks to 30, in so doing reducing total income returns, but improving profitability and the quality of income, while providing a much stronger base from which to grow.  Within the core portfolio there remains significant scope for organic improvement and it is the intention of the Company to realise this potential, as well as to make attractive selective acquisitions that fit within the Sirius business model and which we will be able to exploit through our existing management platform. The business will benefit from scale advantages of a larger portfolio, as our fixed overhead cost base can be spread over a larger estate.

We continue to use the long-term stable income we receive from our core, conventional anchor tenants as a platform to generate higher yielding income from the short-term flexible space and it is the balance between the two that we seek to optimise.  Today, our core anchor tenant base comprises 64 tenants generating 62% of the rent roll. Conversely only 60,639 sqm (7% of total space) has been converted to our high-yielding flexible products such as Smartspace and Flexilager.  We believe that there is demand to create more of this high-yielding space from areas which are currently unlettable within the core portfolio and much of the capex investment programme outlined below focuses on this element of the estate.  The smaller tenants that occupy these products and some of our more conventional offerings are drawn from Germany's large SME sector, from which we continue to experience robust demand for space.

To this end, the Company continues to evolve its product offering which is one of the factors that allows us to push rental rates constantly higher and differentiates Sirius from its competitors.  The Smartspace ranges of Smartspace Büro, Smartspace Lager and Smartspace Workbox continue to be highly popular with our SME customers, where at the more mature sites occupancy consistently exceeds 90% at rental rates of more than €7 per sqm, significantly higher than the average across our estate.  We have now converted 30,073 sqm to Smartspace and are looking to expand this materially over the next 12 to 18 months.  Flexilager is the cheaper storage offering which is created within dead space for a very low investment and is currently achieving in excess of €4 per sqm. Flexilager is now in operation on 30,567 sqm and offers a low cost solution for businesses and individuals already on site and coming from outside.  Conferencing is proving to be a very valuable product.  Not only do we achieve on average €8 per sqm on the 5,013 sqm that have been converted so far, but having these facilities available on site is proving to be a great selling point for the other products as well as providing very useful footfall onto our business parks.

We believe that as asset managers of multi-tenant, mixed-use, workspace across Germany we have created a substantial operating platform that has enabled us to increase profitability and open up the debt markets, during an economic period which has been very challenging for anyone dealing with non-prime assets.  This competitive advantage has allowed us to turn around the performance and stabilise the business and will be the catalyst for future growth.

Capex Investment Programme

This is the largest opportunity and our most important initiative for organic growth.  Our core portfolio of 27 assets has a net lettable area of 930,765 sqm of which currently 188,111 sqm is vacant.  The amount of space that is able to be let without investment is approximately 72,000 sqm (7.7% of total space) and has an ERV of around €3.7m. We have identified around 100,000 sqm of space which cannot be let to its full potential without investment of which around 30% requires light investment and 70% full refurbishment.  The capex required to convert this space, as part of our latest development initiative, is around €9.0 million and is expected to create high-quality lettable space with an ERV of around €5.0 million.  Bearing in mind that this space in its current condition has a very low and in most cases a zero ERV, the returns from both an income and valuation perspective are compelling.  We use our extensive sales and marketing databases and experiences to analyse the demand fully for any space before we convert, so that investments are made in a calculated and measured way rather than speculatively.  We plan on funding this capex from operational cash flow and the remaining proceeds of the equity raises in 2013 and have already commenced a significant amount of the expenditure. We expect to have the capex invested within two years and the full impact of the returns coming through soon thereafter.

Non-core Disposals

During the period under review, the Company sold further land and non-core properties totalling €21.2m and we have identified other non-core business parks for disposal. Since the disposal programme began, the Company has disposed of €38.6m of non-core property and land that was contributing €3.2m of net operating income.  One non-core property and two land sales have been notarised for sale for €2.6m and a further two non-core properties are currently being marketed for sale.  We would expect the non-core disposals to be completed over the next 18 months.  In addition, we have identified 100,000 sqm of non-income producing surplus land which can be either sold or developed and any proceeds can be used for reinvestment into the acquisition programme.  Land disposals would obviously only be done where the returns and demand for the other investment opportunities outweigh those for developing the surplus land.

Acquisitions

The growth strategy of the Company includes the acquisition of core assets to replace the non-core assets that have been disposed of over the last few years. There are significant benefits to be had from adding good income producing properties which we can finance at currently attractive rates and which will not require any increase in our overhead costs to manage, given our well established management platform. A number of suitable properties have been identified which can be purchased at attractive yields thereby being accretive to cash flow and earnings. We are also focusing our efforts on enhancing the geographical mix of the portfolio to allow us to benefit from the synergies of having multiple locations close together whilst also focusing on the strongest markets for our product.  Two business parks which can be purchased for around €19m are at advanced stages of negotiation and we have also identified a number of other potential acquisition opportunities.

Lettings & Marketing

The strength of the Sirius operating platform removes many of the risks typically associated with our asset class, with the internal marketing and lettings systems at the forefront of this.  Our online presence is key to our ability to manage the national portfolio of circa 320 buildings, as 80% of new tenants contact us through our website or internet portals. Our approach to maintaining our online presence is sophisticated, aimed at ensuring the Sirius brand and products are visible to potential customers across a large number of websites used by our customers. Having achieved an average enquiry rate of over 1000 enquires per month for some time now, our focus is not as much on increasing enquires but rather increasing the quality of the enquiries and therefore the conversion rate.

Conversion is a constant focus for the lettings teams across each business park. The sales process we use and introduction in our marketing suites that each new prospective tenant is given, is consistent throughout our business and we strive to provide a very different experience to that of any of our competitors.  This is certainly reflected in our high conversion rate of customers once they have visited a site. Part of our success is our ability to tailor solutions to meet the needs of nearly every customer given the wide variety of space and flexibility of formats we can offer. In the period, average enquiries were 1,046 per month, viewings 524 per month and sales 115 per month, an increase of 1%, 10% and 7% respectively on the prior year and demonstrating a strong sales to enquiries conversion rate of 11%.

New Lettings and Moveouts                            

As at 31 March 2014 the Company's total portfolio had an occupancy rate of 76% (31 March 2013: 76%*), while the average in-place rent per sqm was €4.48 per sqm (2013: €4.42*). 

During the period under review, Sirius generated new lettings of 113,784 sqm at €5.16 per sqm (2013: 107,348* sqm at €5.29* per sqm) and we saw moveouts of 112,982 sqm at €4.42 per sqm in the period compared to 100,956* sqm at €4.28* per sqm in the previous year.  The moveouts include the scheduled 21,674 sqm vacation of Siemens at our Hanover and Nuremburg sites as well as 10,736 sqm of unexpected moveouts due to insolvency.  As has been the case consistently over the last few years, regardless of the level of move outs, we have been able to increase rental income each year. Given that there are no more scheduled Siemens moveouts, Siemens being the only notable tenant with a known space reduction programme, and that the economic outlook for Germany remains positive, we are hopeful that the level of moveouts going forward will be reduced.  We now have most of our tenants on modern, high quality leases, with more appropriate rental rates and improved recovery clauses and we expect the number of terminations initiated by us to reduce accordingly. 

Combined with the greater lettings opportunities being created by our investment programme, we are looking forward to further improvements in both occupancy and passing rents over the next few years.  Product mix will play a significant part in the improvement as our focus is to create more of the high-yielding premium Smartspace products which is where we are experiencing encouraging demand and not enough product, as well as filling otherwise dead space with our low cost Flexilager storage offering.

*   Adjusted for disposals

Operational efficiencies

The reduction of Group overheads and the improved recovery of service charge costs has been the single biggest driver of the increased profitability of the Group over the last four years and there remains further scope for improvement going forward. In the year under review we saw further improvements in this area of approximately €0.6 million.  We are forecasting a recovery of approximately 81% of the service charge costs on an average occupancy during the year of 75%.  Considering that our service charge costs are close to €40 million and most companies that operate multi-tenant, mixed-use parks like ours rarely achieve recovery percentages at the occupancy level, this part of the business is a big asset for the Company.

Portfolio analysis                           

The table below shows the key details of the core portfolio of 27 assets and the three assets that are for sale.  The core portfolio is currently valued on a gross yield of 9.2% and a capital value of €445.6 per sqm.  

Book Value Rent roll Total sqm Occ Rate per sqm Core Assets €434.3m    €40.3m      0.93m^   79.8%    €4.52 Non-Core Assets for disposal €9.4m*       €1.2m      0.09m^   33.4%    €3.41 TOTAL €443.7m     €41.5m      1.02m   75.7%    €4.48

* One Non-Core Asset which is valued as a development site has been written down to offers received.  All other assets have book value equal to valuation.

^ Excludes technical space

The year ahead

We shall continue to improve at the operational level during the year and I would like to thank the management team and all the staff for their tremendous efforts this year.  I am very optimistic that we can meet our targets for the new financial year and the management team is focused on ensuring that the Group benefits from our ongoing asset management initiatives, as well as those of the capital expenditure programme and the attractive acquisitions we are expecting to secure.

Consolidated statement of comprehensive income

for the year ended 31 March 2014

	Notes	Year ended 31 March 2014 €000	Year ended 31 March 2013 €000
Gross rental income	3	45,065	46,115
Direct costs	4	(16,519)	(16,889)
Net rental income		28,546	29,226
Surplus/Deficit on revaluation of investment properties	11	22,735	(35,776)
(Loss) on disposal of properties		(1,687)	(1,201)
Administrative expenses	4	(4,043)	(4,684)
Other expenses	4	(2,298)	(2,411)
Operating Profit (loss)		43,253	(14,846)
Finance income	7	64	25
Finance expense	7	(12,155)	(14,998)
Change in fair value of derivative financial instruments		(128)	350
Profit/(Loss) before tax		31,034	(29,469)
Taxation	8	(2,102)	(783)
Profit/(Loss) for the year		28,932	(30,252)
Profit/(Loss) attributable to:
Owners of the Company		28,927	(30,227)
Non-controlling interests		5	(25)
Profit/(Loss) for the year		28,932	(30,252)
Earnings per share
Basic earnings for the year attributable to ordinary equity holders of the Parent Company	9	7.31c	(9.52)c
Diluted earnings for the year attributable to ordinary equity holders of the Parent Company	9	7.01c	(9.52)c

Consolidated statement of financial position

as at 31 March 2014

	Notes	2014 €000	2013 €000
Non-current assets
Investment properties	11	441,087	410,489
Plant and equipment	13	1,834	2,538
Goodwill	14	3,738	3,738
Total non-current assets		446,659	416,765
Current assets
Trade and other receivables	15	11,378	9,442
Prepayments		1,570	494
Derivative financial instruments		678	-
Cash and cash equivalents	16	13,747	16,718
Investment property held for sale	12	2,633	27,657
Total current assets		30,006	54,311
Total assets		476,665	471,076
Current liabilities
Trade and other payables	17	(20,980)	(27,824)
Interest-bearing loans and borrowings	18	(2,813)	(258,151)
Current tax liabilities		(125)	-
Derivative financial instruments		(4)	(197)
Total current liabilities		(23,922)	(286,172)
Non-current liabilities
Interest-bearing loans and borrowings	18	(222,071)	(31,239)
Deferred tax liabilities	8	(4,200)	(2,636)
Derivative financial instruments		(170)	-
Total non-current liabilities		(226,441)	(33,875)
Total liabilities		(250,363)	(320,047)
Net assets		226,302	151,029
Equity
Issued share capital	21	-	-
Other distributable reserve	22	349,978	303,637
Retained earnings		(123,698)	(152,625)
Total equity attributable to the equity holders of the Parent Company		226,280	151,012
Non-controlling interests		22	17
Total equity		226,302	151,029

Consolidated statement of changes in equity

for the year ended 31 March 2014

Group	Issued share capital €000	Other distributable reserve €000	Retained earnings €000	Total equity attributable to the equity holders of the Parent Company €000	Non-controlling interests €000	Total equity €000
As at 31 March 2012	-	303,625	(122,398)	181,227	42	181,269
Share-based payment transactions	-	12	-	12	-	12
Loss for the year	-	-	(30,227)	(30,227)	(25)	(30,252)
As at 31 March 2013	-	303,637	(152,625)	151,012	17	151,029
Shares issued, net of costs	-	45,438	-	45,438	-	45,438
Share-based payment transactions	-	903	-	903	-	903
Profit  for the year	-	-	28,927	28,927	5	28,932
As at 31 March 2014	-	349,978	(123,698)	226,280	22	226,302

Consolidated cash flow statement

for the year ended 31 March 2014

	Notes	Year  ended 31 March 2014 €000	Year ended 31 March 2013 €000
Operating activities
Profit/(Loss) before tax		31,034	(29,469)
Loss on sale of properties		1,687	1,201
Share-based payments		904	12
(Surplus)/Deficit on revaluation of investment properties	11	(22,735)	35,776
Change in fair value of derivative financial instruments		128	(350)
Depreciation	4	995	1,032
Finance income	7	(64)	(25)
Finance expense	7	12,155	14,998
Cash flows from operations before changes in working capital		24,104	23,175
Changes in working capital
(Increase)/decrease in trade and other receivables		(3,925)	111
(Decrease) in trade and other payables		(1,464)	(329)
Taxation paid		(191)	(590)
Cash flows from operating activities		18,524	22,367
Investing activities
Development expenditure		(4,260)	(3,531)
Purchase of plant and equipment		(391)	(132)
Proceeds on disposal of properties		14,811	20,450
Interest received		64	25
Cash flows used in investing activities		10,224	16,812
Financing activities
Issue of shares		45,438	-
Proceeds from loans		193,560	33,500
Repayment of loans		(259,838)	(51,010)
Finance charges paid		(10,879)	(14,096)
Cash flows from financing activities		(31,719)	(31,606)
(Decrease)/increase  in cash and cash equivalents		(2,971)	7,573
Cash and cash equivalents at the beginning of the year		16,718	9,145
Cash and cash equivalents at the end of the year	16	13,747	16,718

Notes to the consolidated financial statements

for the year ended 31 March 2014

1. Basis of Preparation

The consolidated financial statements have been prepared on a historical cost basis, except for: investment properties, investment properties held for sale and derivative financial instruments which have been measured at fair value. The consolidated financial statements are presented in euros and all values are rounded to the nearest thousand (€000) except where otherwise indicated.

The consolidated financial statements of the Group for the year ended 31 March 2014 have been prepared in accordance with IFRSs adopted for use in the EU ("Adopted IFRSs") and the Companies (Guernsey) Law 2008.  Having reviewed the Group's current trading and forecasts, together with sensitivities and mitigating factors and the available facilities, the Board has reasonable expectations that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Board continues to adopt the going concern basis in preparing these Financial Statements.

The consolidated financial statements have been prepared in accordance with IFRSs adopted for use in the EU ("Adopted IFRSs") and the Companies (Guernsey) Law, 2008. The consolidated financial statements give a true and fair view and are in compliance with the Companies (Guernsey) Law, 2008.

The consolidated financial statements were authorised for issue by the Board of Directors on 13 June 2014.

Going Concern

Having reviewed the Group's current trading and forecasts, together with sensitivities and mitigating factors and the available facilities, the Board has reasonable expectations that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Board continues to adopt the going concern basis in preparing these Financial Statements.

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 ended 31 March 2014 €000	Year ended 31 March 2013 €000
Rental income from investment properties	45,065	46,115

4. Operating profit/(loss)

The following items have been charged or credited in arriving at operating loss:

Direct costs

	Year ended 31 March 2014 €000	Year ended 31 March 2013 €000
Service charge income	(33,965)	(31,306)
Service charge expenditure and other costs	50,391	48,075
Irrecoverable property costs	16,426	16,769
Property management fee	93	120
	16,519	16,889

Administrative expenses

	Year ended 31 March 2014 €000	Year ended 31 March 2013 €000
Audit fee	352	319
Legal and professional fees	1,270	2,056
Other administration costs	1,186	772
Non-recurring costs	1,235	1,537
	4,043	4,684

During the year fees of €111,803 (2013: €118,069) were incurred with the auditors and their associates in respect of other non‑audit services.

Non‑recurring costs relate primarily to loan extension fees associated with the debt facility with ABN Amro Bank N.V. and early payment penalties associated with the refinancing of the debt facility with Berlin Hannoversche Hypothekenbank AG.

Other expenses

	Year ended 31 March 2014 €000	Year ended 31 March 2013 €000
Directors' fees	142	201
Depreciation	995	1,032
Bank fees	84	128
Marketing, insurance and other expenses	1,077	1,050
	2,298	2,411

5. Employee costs and numbers

	Year ended 31 March 2014 €000	Year ended 31 March 2013 €000
Wages and salaries	8,080	7,193
Social security costs	1,752	1,607
Other employment costs	25	14
	9,857	8,814

Since the internalisation of the Asset Management Agreement on 30 January 2012, all employees are now employed directly by the Group. The average number of persons employed by the Group during the year was 151 (2013: 145), expressed in full‑time equivalents. In addition the Board of Directors consists of five Non‑Executive Directors, and since 1 May 2014, two Executive Directors with one Non-executive Director stepping down.

6. Equity‑settled share‑based payments

The Group has a long‑term incentive scheme for the benefit of certain key management personnel. As a result, 1,000,000 shares were granted in the scheme as of 31 March 2014. An expense of €240,000 was recognised in the consolidated statement of comprehensive income to 31 March 2014.

During the year, a further 2,703,093 shares were issued to the Company's management through its share matching scheme and shares taken in lieu of bonus. An expense of €663,000 was recognised in the consolidated statement of comprehensive income.

7. Finance income and expense

	Year ended 31 March 2014 €000	Year ended 31 March 2013 €000
Bank interest income	64	25
Finance income	64	25
Bank interest expense	(10,879)	(14,096)
Amortisation of capitalised finance costs	(1,276)	(902)
Finance expense	(12,155)	(14,998)

8. Taxation

	Year ended 31 March 2014 €000	Year ended 31 March 2013 €000
Current income tax
Current income tax charge	(538)	(327)
Adjustment in respect of prior periods	-	65
	(538)	(262)
Deferred tax
Relating to origination and reversal of temporary differences	(1,564)	(521)
Income tax charge reported in the statement of comprehensive income	(2,102)	(783)

The income tax rate applicable to the Company in Guernsey is nil. The current income tax charge of €538,074 represents tax charges on profit arising in Germany that is subject to corporate income tax of 15.825%. The effective income tax rate for the period differs from the standard rate of corporation tax in Germany. The differences are explained below:

	Year ended 31 March 2014 €000	Year ended 31 March 2013 €000
Profit/(Loss) before tax	31,034	(29,469)
Profit/(Loss) before tax multiplied by rate of corporation tax in Germany of 15.825% (2013: 15.825%)	4,911	(4,663)
Effects of:
Income exempt from tax	(3,181)	(3,699)
Expenses deductible for tax purposes	(1,626)	(3,793)
Non-taxable items including revaluation movements	(3,686)	6,066
Tax losses utilised	(903)	(225)
Tax losses not utilised	4,937	6,584
Relating to origination and reversal of temporary differences	1,564	521
Adjustments in respect of prior periods	-	(65)
Other	86	57
Total income tax expense in the statement of comprehensive income	2,102	783

Deferred tax liability

	Year ended 31 March 2014 €000	Year ended 31 March 2013 €000
Opening balance	2,636	2,115
Release due to disposals	-	(43)
Revaluation of investment properties and derivative financial instruments to fair value	1,564	564
Balance as at year end	4,200	2,636

The Group has tax losses of €166,412,032 (2013: €144,592,914) 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 as realisation is not assured.

9. Earnings per share

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

	Year ended 31 March 2014 €000	Year ended 31 March 2013 €000
Earnings
Basic earnings	28,927	(30,227)
Diluted earnings	29,184	(30,227)
Adjusted
Basic earnings	28,927	(30,227)
Deduct valuation surplus/Add back revaluation deficits (net of related tax)	(21,171)	36,296
Add back change in fair value of derivative instruments	128	(350)
Add back non-recurring expenses	1,235	1,537
Add back loss on sale of properties	1,687	1,201
Adjusted earnings	10,806	8,457
Number of shares
Weighted average number of ordinary shares for the purpose of basic earnings per share	395,758,526	317,559,843
Weighted average number of ordinary shares for the purpose of diluted earnings per share	416,591,859	317,559,843
Weighted average number of ordinary shares for the purpose of adjusted earnings per share	395,758,526	317,559,843
Basic earnings per share	7.31c	(9.52)c
Diluted earnings per share	7.01c	(9.52)c
Adjusted earnings per share	2.73c	2.66c

The number of shares has been reduced by 6,518,731 shares that are held by the Company as Treasury Shares at 31 March 2014, for the calculation of basic and adjusted earnings 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, gains/losses on sale of properties, deferred tax and the revaluation deficits/surpluses on the investment properties and derivative instruments.

10. Net assets per share

	2014 €000	2013 €000
Net assets
Net assets for the purpose of assets per share (assets attributable to the equity holders of the parent)	226,280	151,012
Deferred tax arising on revaluation of properties	4,200	2,636
Derivative financial instruments	(504)	197
Adjusted net assets attributable to equity holders of the parent	229,976	153,845
Number of shares
Number of ordinary shares for the purpose of net assets per share	518,900,307	317,578,176
Net assets per share	43.61c	47.55c
Adjusted net assets per share	44.32c	48.44c

The number of shares has been reduced by 6,518,731 shares that are held by the Company as Treasury Shares at 31 March 2014, for the calculation of adjusted net assets per share.

11. Investment properties

A reconciliation of the valuation carried out by the external valuer to the carrying values shown in the statement of financial position is as follows:

	2014 €000	2013 €000
Investment properties at market value	448,653	440,020
Adjustment in respect of lease incentives	(1,902)	(2,132)
Additional write-downs*	(3,031)	(1,795)
Reclassified as investment properties held for sale	(2,633)	(25,604)
Balance as at year end	441,087	410,489

The fair value of the Group's investment properties at 31 March 2014 has been arrived at on the basis of a valuation carried out by Cushman & Wakefield LLP (prior year: 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 2.6 years.

*This relates to two non-core assets which management hopes to sell in the year but which currently do not meet the criteria for assets held for sale. The write down adjusts the value to the expected sales price.

The movement on the valuation of the investment properties of market value per the valuers' report is as follows:

	2014 €000	2013 €000
Total investment properties at market per valuers' report as at 1 April	440,020	485,740
Additions and subsequent expenditure	4,325	4,145
Adjustment in respect of lease incentives	(230)	232
Disposals	(18,197)	(15,500)
Reclassified as investment properties held for sale not included in valuation	-	(5,380)
Surplus/(Deficit) on revaluation	22,735	(35,776)
Write-downs to selling price recorded in deficit on revaluation	-	6,559
Total investment properties at market per valuers' report as at 31 March	448,653	440,020

Other than the capital commitments of €4,066,797, the Group is under no contractual obligation to purchase, construct or develop any investment property. The Group is responsible for routine maintenance to the investment properties.

All investment properties are categorised as Level 3 fair values as they use significant unobservable inputs.  There have not been any transfers between Levels during the year.  Investment properties have been classed according to their real estate sector.  Information on these significant unobservable inputs per class of investment property is disclosed below:

Sector		Market Value (€)		Technique		Significant Assumption		Range
Business Park		426,970,000		Discounted		Current Rental Income		€91k - €5,059k
				Cash Flow		Market Rental Income		€372k - €6,041k
						Gross Initial Yield		2.2% - 10.9%
						Discount Factor		6.5% - 11.8%
						Void Period (months)		12 - 24
						Estimated Capital Value per sqm		€83 - €815
Other		21,683,000		Discounted		Current Rental Income		€38k - €800k
				Cash Flow		Market Rental Income		€56k - €928k
						Gross Initial Yield		6.2% - 8.8%
						Discount Factor		7.3% - 11.0%
						Void Period (months)		12 - 24
						Estimated Capital Value per sqm		€287 - €840

The valuation is done on a lease by lease basis due to the mixed use nature of the sites. This gives rise to large ranges in the inputs.

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.

For example, an increase in market rental values of 5% would lead to an increase in the fair value of the investment properties of €23,011,000 and a decrease in market rental values of 5% would lead to a decrease in the fair value of the investment properties of €23,120,000.  Similarly, an increase in the discount rates of 0.25% would lead to an increase in the fair value of the investment properties of €8,565,000 and a decrease in the discount rates of 0.25% would lead to a decrease in the fair value of the investment properties of €8,306,000.

The highest and best use of properties do not differ from their current use. 

12. Investment properties held for sale

	2014 €000	2013 €000
Bremen-Brinkmann land	-	187
Bremen Doetlingerstr. partial (prior year: full) site	2,150	8,653
Berlin Gartenfeldstr. land	-	1,975
Merseburg McDonalds building	-	1,029
Bonn Siemensstr. land	186	186
Cottbus site	297	297
Regensburg site	-	6,287
Rostock Goethestr. site	-	965
Bremen Rigaerstr. site	-	3,000
Investment properties held for sale included in year end valuation	2,633	22,579
Leinfelden-Echterdingen site not included in year end valuation	-	5,078
Balance as at year end	2,633	27,657

In December 2012, the Company reached an agreement to dispose of the property at the Bremen Doetlingerstr. site for €8,750,000. The non‑core site consists of four buildings used for office and retail with net lettable area of 10,618 sqm. The agreement was withdrawn in October 2013.  On 5 December 2013, the Company notarised the sale of a partial plot on this site consisting of 4,736 sqm.  This plot of land currently has a completely vacant building on it which is to be demolished in order that the purchaser can build a new Aldi supermarket.

At 30 October 2012, the Company reached an agreement to dispose of 2,743 sqm of land at the Bonn Siemensstr. site for €186,725. The disposal has been notarised and, subject to being included on the land register, it will be completed in the next period.

On 22 March 2013, the Company sold the property at the Cottbus site for €300,000. The site, which is a mixed‑use site with office and storage space, is 76% occupied with current annual rent of €43,440 and net lettable area of 1,057 sqm. The transaction has been notarised and will close in the next period.

13. Plant and equipment

	Plant and equipment €000	Fixtures and fittings €000	Total €000
Cost
As at 31 March 2013	4,129	1,709	5,838
Additions in year	129	276	446
Disposals in year	(65)	(363)	(469)
As at 31 March 2014	4,193	1,622	5,815
Depreciation
As at 31 March 2013	(2,248)	(1,052)	(3,300)
Charge for the year	(656)	(328)	(995)
Disposals in year	42	261	314
As at 31 March 2014	(2,862)	(1,119)	(3,981)
Net book value as at 31 March 2014	1,331	503	1,834
Cost
As at 31 March 2012	4,156	1,644	5,800
Additions in year	45	153	198
Disposals in year	(72)	(88)	(160)
As at 31 March 2013	4,129	1,709	5,838
Depreciation
As at 31 March 2012	(1,680)	(682)	(2,362)
Charge for the year	(613)	(419)	(1,032)
Disposals in year	45	49	94
As at 31 March 2013	(2,248)	(1,052)	(3,300)
Net book value as at 31 March 2013	1,881	657	2,538

14. Goodwill

	2014 €000	2013 €000
Opening balance	3,738	3,738
Additions	-	-
Total	3,738	3,738

On 30 January 2012 a transaction was completed to internalise the Asset Management Agreement and as a result of the consideration given exceeding the net assets acquired, goodwill of €3,738,000 was recognised. Current business plans indicate that the balance is unimpaired.

Goodwill is tested at least annually for impairment and whenever there are indications that goodwill might be impaired. The recoverable amount of a cash‑generating unit is based on its value in use. Value in use is the present value of the projected cash flows of the cash-generating unit. The key assumptions regarding the value in use calculations were budgeted growth in profit margins and the discount rate applied. Budgeted profit margins were estimated based on actual performance over the past two financial years and expected market changes. The discount rate used is a pre‑tax rate and reflects the risks specific to the real estate industry. The Group prepares cash flow forecasts based on the most recent financial budget approved by management, which covers a one year period. Cash flows beyond this period are extrapolated to a period of five years using a growth rate of 2%, which is consistent with the long‑term average growth rate for the real estate sector. The discount rate applied was 6.5%.

15. Trade and other receivables

	2014 €000	2013 €000
Trade receivables	4,545	3,790
Other receivables	6,652	5,642
Related party receivable	181	10
	11,378	9,442

16. Cash and cash equivalents

	2014 €000	2013 €000
Cash at banks and in hand	13,747	16,718

Cash at banks earns interest at floating rates based on daily bank deposit rates. The fair value of cash is €13,747,138 (2013: €16,718,288).

As at 31 March 2014 €6,734,622 (2013: €8,995,249) of cash is held in blocked accounts. Of this, balances relating to deposits received from tenants total €3,032,188 (2013: €2,651,345). An amount of €15,546 (2013: €15,522) relates to funds held on an escrow account for a supplier and €116,144 (2013: €115,503) is held in a restricted account for office rent deposit. An amount of €2,070,744 (2013: €6,212,879) relates to amounts reserved for future bank loan interest and amortisation payments on the bank loan facilities. An amount of €1,500,000 (2013: €0) relates to funds held on an escrow account for a possible acquisition of further assets.

17. Trade and other payables

	2014 €000	2013 €000
Trade payables	5,318	6,658
Accrued expenses	6,983	7,512
Accrued interest	707	596
Other payables	7,972	13,058
	20,980	27,824

18. Interest‑bearing loans and borrowings

	Effective interest rate %	Maturity	2014 €000	2013 €000
Current
ABN Amro loan
- floating rate facility	Floating	17 December 2013	-	49,201
Berlin Hannoversche Hypothekenbank AG
- floating rate facility	Floating	31 March 2014	-	208,688
Berlin Hannoversche Hypothekenbank AG / Deutsche Pfandbriefbank AG
- capped floating rate facility	Capped floating*	31 March 2019	1,150	-
- hedged floating rate facility	Hedged floating*	31 March 2019	1,150	-
Macquarie Bank loan
- hedged floating rate facility	Hedged floating**	17 January 2017	529	529
- floating rate facility	Floating**	17 January 2017	183	183
- floating rate facility	Floating***	17 January 2017	325	-
K-Bonds I
- fixed rate facility	6.00	31 July 2020	1,000	-
Capitalised finance charges on all loans			(1,524)	(450)
			2,813	258,151
Non‑current
Berlin Hannoversche Hypothekenbank AG / Deutsche Pfandbriefbank AG
- capped floating rate facility	Capped floating*	31 March 2019	56,350	-
- hedged floating rate facility	Hedged floating*	31 March 2019	56,350	-
Macquarie Bank loan
- hedged floating rate facility	Hedged floating**	17 January 2017	19,471	20,652
- floating rate facility	Floating**	17 January 2017	6,728	7,136
- floating rate facility	Floating***	17 January 2017	31,815	-
K-Bonds I
- fixed rate facility	4.00	31 July 2023	45,000	-
- fixed rate facility	6.00	31 July 2020	6,000	-
Convertible fixed rate facility	5.00	21 March 2018	5,000	5,000
Capitalised finance charges on all loans			(4,643)	(1,549)
			222,071	31,239
Total			224,884	289,390

*  This floating rate facility is charged interest at 300 bps plus EURIBOR.  Half of this facility is capped at 4.50%, the other half is hedged at a rate of 4.065%.

**        €20.0m of this facility is charged interest at 600 bps plus 0.629% until 23 July 2016 by means of an interest rate swap. The remainder of the facility is charged interest at 6.0% plus EURIBOR.

***This facility is charged interest at 6.0% plus EURIBOR.

The borrowings are repayable as follows:

	2014 €000	2013 €000
Or demand or within one year	4,337	258,601
In the second year	4,337	712
In the third to tenth years inclusive	222,378	32,076
Total	231,052	291,389

The Group has pledged 26 (2013: 33) properties to secure the interest‑bearing debt facilities granted to the Group. The 26 properties had a combined valuation of €430,267,458 as at 31 March 2014 (2013: €429,015,328).

ABN Amro Bank N.V.

This facility had €100,951,940 drawn down, and was paid back in full on 17 December 2013.

Berlin Hannoversche Hypothekenbank AG

To 31 March 2013, facilities of €208,688,000 had been granted by Berlin‑Hannoversche Hypothekenbank AG. The facility was paid back in full by 31 March 2014.

Berlin Hannoversche Hypothekenbank AG / Deutsche Pfandbriefbank AG

On 31 March 2014, the Company agreed to a facility agreement with Berlin‑Hannoversche Hypothekenbank AG and Deutsche  Pfandbriefbank AG for €115,000,000. The loan terminates on 31 March 2019. Amortisation is 2% p.a. for the first two years, 2.5% for the third year, and 3% thereafter, with the remainder due in the fifth year. Half of the facility is charged interest at 3% plus three months' EURIBOR, and is capped at 4.5% and the other half has been hedged at a rate of 4.065% until 31 March 2019. This facility is secured over nine property assets and is subject to various covenants with which the Group has complied.

Macquarie Bank

On 17 January 2013, the Company agreed to a facility agreement with Macquarie Bank Limited for €28,500,000. The loan terminates on 17 January 2017. Amortisation is 2.5% p.a. for the first three years, with the remainder due in the fourth year. The facility is subject to a cash sweep each quarter whereby Macquarie sweep the Company's rent collection accounts of the facilities' borrowers applying any excess towards the loan balance with immediate effect and without penalty.  €20.0m of the facility has been hedged at a rate of 6.629% until 23 July 2016 by way of an interest rate swap. The remainder of the facility is charged interest at 6% plus three months' EURIBOR. This facility is secured over five property assets and is subject to various covenants with which the Group has complied.

On 13 December 2013, the Company agreed to a second facility agreement with Macquarie Bank Limited for €32,500,000. The loan terminates on 17 January 2017. Amortisation is 1% p.a. for the first three years, subject to meeting an agreed business plan, with the remainder due in the fourth year. This is tested quarterly in arrears and if the business plan numbers are not achieved, Macquarie have the option to sweep the facilities' borrowers' rent collection accounts applying any excess towards the loan balance with immediate effect and without penalty. The facility is charged interest at 6% plus three months' EURIBOR. This facility is secured over nine property assets and is subject to various covenants with which the Group has complied.

K-Bonds

On 1 August 2013, the Company agreed to a facility agreement with K-Bonds for €52,000,000. The loan consists of a senior tranche of €45,000,000 and a junior tranche of €7,000,000. The senior tranche has a fixed interest rate of 4% p.a. and is due in one sum on 31 July 2023. The junior tranche has a fixed interest rate of 6% and terminates on 31 July 2020. The junior tranche is amortised at €1,000,000 p.a. over a seven year period. This facility is secured over three properties and is subject to various covenants with which the Group has complied.

Convertible shareholder loan

On 22 March 2013, the Company issued €5.0 million convertible loan notes due in 2018 (the "Loan Notes"). The entire issue of €5.0 million has been taken up by the Karoo Investment Fund S.C.A. SICAV‑SIF and Karoo Investment Fund II S.C.A. SICAV‑SIF, 24.57% shareholders in Sirius. The Loan Notes were issued at par and carry a coupon rate of 5% per annum. The Loan Notes are convertible into ordinary shares of Sirius at the conversion price of €0.24 from 21 March 2014. The majority of the proceeds from the issue of the Loan Notes were used to reduce debt levels.

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

	Outstanding at 31 March 2014  €000			Properties at 31 March 2014 €000	Loan-to-value ratio at 31 March 2014	Loan-to-value covenant at 31 March 2014	Interest cover ratio at 31 March 2014	Debt service cover ratio at 31 March 2014	Cover ratio covenant at 31 March 2014
Berlin Hannoversche Hypothekenbank AG/ Deutsche Pfandbriefbank AG			115,000	220,886	52.1%	60.0%	1.94	n/a	1.40
Macquarie Bank - Facility 1		26,911		53,469	50.3%	66.6%	2.07		1.75
								1.17	1.05
Macquarie Bank - Facility 2		32,140		81,182	39.6%	65.0%	2.20		1.90
								1.64	1.05
K-Bonds		52,000		74,730	69.6%	n/a	3.30	n/a	2.50
Unencumbered properties			-	13,453	n/a
Total		226,051		443,720	50.9%

19. Financial risk management objectives and policies

The Group's principal financial liabilities comprise bank loans, derivative financial instruments and trade payables. The main purpose of these financial instruments is to raise finance for the Group's operations. The Group has various financial assets such as trade receivables and cash, which arise directly from its operations.

The main risks arising from the Group's financial instruments are credit risk, liquidity risk and interest rate risk. The risk management policies employed by the Group to manage these risks are discussed below.

Credit risk

Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the reporting date. In the event of a default by an occupational tenant, the Group will suffer a rental shortfall and incur additional costs, including expenses incurred to try and recover the defaulted amounts and legal expenses in maintaining, insuring and marketing the property until it is re‑let. During the year the Group monitored the tenants in order to anticipate and minimise the impact of defaults by occupational tenants, as well as ensuring that the Group has a diversified tenant base.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

	2014 €000	2013 €000
Trade receivables	4,545	3,790
Other debtors	6,833	5,652
Prepayments	1,570	494
Derivative financial instruments	678	-
Cash and cash equivalents	13,747	16,718
	27,373	26,654

The ageing of trade receivables at the statement of financial position date was:

Group	Gross 2014 €000	Impairment 2014 €000	Gross 2013 €000	Impairment 2013 €000
Past due 0-30 days	4,466	(1,057)	1,673	(289)
Past due 31-120 days	1,268	(658)	3,644	(1,797)
More than 120 days	2,571	(2,045)	2,505	(1,946)
	8,305	(3,760)	7,822	(4,032)

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

	2014 €000	2013 €000
Balance at 31 March	(4,032)	(3,175)
Impairment loss released/(recognised)	272	(857)
Balance at 31 March	(3,760)	(4,032)

The allowance account for trade receivables is used to record impairment losses unless the Group believes that no recovery of the amount owing is possible; at that point the amounts considered irrecoverable are written off against the trade receivables directly.

Most trade receivables are generally due one month in advance. The exception is service charge balancing billing which is due ten days after it has been invoiced. Included in the Group's trade receivables are debtors with carrying amounts of €4,545,168 (2013: €3,789,940) which are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable.

Liquidity risk

Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability but can also increase the risk of losses. The Group has procedures with the objective of minimising such losses, such as maintaining sufficient cash and other highly liquid current assets and having available an adequate amount of committed credit facilities. The Group prepares cash flow forecasts and continually monitors its ongoing commitments compared to available cash. Cash and cash equivalents are placed with financial institutions on a short‑term basis which allows immediate access. This reflects the Group's desire to maintain a high level of liquidity in order to meet any unexpected liabilities that may arise due to the current financial position.

The table below summarises the maturity profile of the Group's financial liabilities as at 31 March 2014 based on contractual undiscounted payments:

Year ended 31 March 2014	Bank and shareholder loans €000	Derivative  financial instruments €000	Trade and other payables €000	Total €000
Undiscounted amounts payable in:
Six months or less	(8,094)	(260)	(20,980)	(29,334)
Six months to one year	(7,011)	(256)	-	(7,267)
One to two years	(14,905)	(508)	-	(15,413)
Two to five years	(196,958)	(1,267)	-	(198,225)
Five to ten years	(54,900)	-	-	(54,900)
	(281,868)	(2,291)	(20,980)	(305,139)
Interest	50,816	2,291	-	53,107
	(231,052)	-	(20,980)	(252,032)

Year ended 31 March 2013	Bank loans €000	Derivative  financial instruments €000	Trade and other payables €000	Total €000
Undiscounted amounts payable in:
Six months or less	(58,074)	(42)	(27,824)	(85,940)
Six months to one year	(209,341)	(41)	-	(209,382)
One to two years	(3,046)	(80)	-	(3,126)
Two to five years	(36,473)	(101)	-	(36,574)
	(306,934)	(264)	(27,824)	(335,022)
Interest	15,545	264	-	15,809
	(291,389)	-	(27,824)	(319,213)

Currency risk

There is no significant foreign currency risk as most of the assets and liabilities of the Group are maintained in euros. Small amounts of UK sterling are held to ensure payments made in UK sterling can be achieved at an effective rate.

Interest rate risk

The Group's exposure to interest rate risk relates primarily to the Group's long‑term floating rate debt obligations. The Group's policy is to mitigate interest rate risk by ensuring that a minimum of 83% of its total borrowing is at fixed interest rates by taking out fixed rate loans or derivative financial instruments to hedge interest rate exposure.

A change in interest will only have an impact on the floating loans capped due to the fact that the other loans have a general fixed interest or they are effectively fixed by a swap. An increase in 100 basis points in interest yield would result in a decreased post tax profit in the consolidated statement of comprehensive income of €1.0m (excluding the movement on derivative financial instruments) and a decrease in 100 basis points in interest yield would result in an increased post tax profit in the consolidated statement of comprehensive income of €1.0m (excluding the movement on derivative financial instruments).

Capital management

The Group seeks to enhance shareholder value both by investing in the business so as to improve the return on investment and by managing the capital structure.

The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, issue shares or undertake transactions such as occurred with the internalisation of the Asset Management Agreement.

The Company holds 6,518,731 of its own shares which continue to be held as Treasury Shares. During the year 3,703,093 shares were issued from treasury and no share buybacks were made.

The Group monitors capital using a gross debt to property assets ratio, which was 50.9% as at 31 March 2014 (2013: 65.4%).

The Group is not subject to externally imposed capital requirements other than those related to the covenants of the bank loan facilities.

20. Financial instruments

Fair values

Set out below is a comparison by category of carrying amounts and fair values of all of the Group's financial instruments that are carried in the financial statements:

	2014			2013
	Carrying amount €000	Fair value €000		Carrying amount €000	Fair value €000
Financial assets
Cash	13,747	13,747		16,718	16,718
Trade receivables	4,545	4,545		3,790	3,790
Derivative financial instruments	678	678		-	-
Financial liabilities
Trade payables	5,318	5,318		6,658	6,658
Derivative financial instruments	174	174		197	197
Interest-bearing loans and borrowings:
Floating rate borrowings	39,051	39,051		257,889	257,889
Floating rate borrowings - hedged	20,000	20,000		28,500	28,500
Floating rate borrowings - capped	115,000	115,000		-	-
Fixed rate borrowings	57,000	56,312		5,000	5,000

Fair value hierarchy

The table below analyses financial instruments measured at fair value into a fair value hierarchy based on the valuation technique used to determine fair value:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

	Level 1 €000	Level 2 €000	Level 3 €000	Total €000
2014
Derivative financial instruments	-	504	-	504
2013
Derivative financial instruments	-	(197)	-	(197)

 Interest rate risk

The following table sets out the carrying amount, by maturity, of the Group's financial instruments that are exposed to interest rate risk:

2014	Within 1 year €000	1-2 years €000	2-3 years €000	3-4 years €000	4-5 years €000	Total €000
Berlin Hannoversche Hypothekenbank AG / Deutsche Pfandbriefbank AG	(1,150)	(1,150)	(1,437)	(1,725)	(52,038)	(57,500)
Macquarie Bank loans	(1,037)	(1,037)	(36,977)	-	-	(39,051)
Cash assets	13,747	-	-	-	-	13,747

2013	Within 1 year €000	1-2 years €000	2-3 years €000	3-4 years €000	4-5 years €000	Total €000
ABN Amro loan	(49,201)	-	-	-	-	(49,201)
Berlin Hannoversche Hypothekenbank AG loan	(208,688)	-	-	-	-	(208,688)
Macquarie Bank loan	(712)	(712)	(712)	(26,364)	-	(28,500)
Cash assets	16,718	-	-	-	-	16,718

The other financial instruments of the Group that are not included in the above tables are non‑interest‑bearing and are therefore not subject to interest rate risk.

21. Issued share capital

Authorised	Number of shares	Share capital €
Ordinary shares of no par value	Unlimited	-
As at 31 March 2014	Unlimited	-

Issued and fully paid	Number of shares	Share capital €
Ordinary shares of no par value
Issued ordinary shares	327,800,000	-
Shares bought back and held in treasury	(25,576,824)	-
Issued Treasury Shares	15,355,000	-
As at 31 March 2013	317,578,176	-
Issued ordinary shares	197,619,038	-
Issued Treasury Shares	3,703,093	-
As at 31 March 2014	518,900,307	-

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

On 6 August 2013, the Company conducted an equity raising through the issue of 30,952,371 ordinary shares of no par value representing 9.4% of the Company's issued share capital at that time. These shares were issued at a price of 21 cents per share, representing a discount of 6.67% to the prevailing share price, to new and existing shareholders and rank pari passu in all respects with the then existing issued shares of the Company including the right to receive all dividends and other distributions declared after Admission.

On 4 December 2013, the Company conducted an equity raising through the issue of 166,666,667 ordinary shares of no par value representing 47.5% the Company's issued share capital (excluding treasury shares) at that time. These shares were issued at a price of 24 cents per share, representing a discount of 4.00% to the prevailing share price, to new and existing shareholders and rank pari passu in all respects with existing issued shares of the Company including the right to receive all dividends and other distributions declared after Admission.

The Company holds 6,518,731 of its own shares which are held as treasury. During the year 3,703,093 shares were issued from treasury.

No share buybacks were made in the year.

22. Other reserves

Other distributable reserve

The other distributable reserve is a distributable reserve that was created for the payment of dividends and for the buyback of shares and is €349,978,105 in total at 31 March 2014 (2013: €303,636,655).

23. Dividends

The Group intends to recommence the payment of a regular dividend, starting with a final dividend of 0.30c per share for the period. The final dividend will be paid on 22 August 2014 to shareholders on the register as at 25 July 2014. The ex-dividend date will be 23 July 2014.  Whilst only a modest payment at this stage, the 0.30c dividend represents 65% of the recurring profits** after tax for the March 2014 quarter, following the capital raising completed in December. The Board has set a policy to pay a dividend equal to 65% of the recurring profits** after tax in respect of each financial year of the Group.  It is intended that dividends will be paid on a semi-annual basis and offered to shareholders in cash or scrip form.

**Recurring profits are profits after tax and before property revaluation, change in fair value of derivative financial instruments and non-recurring costs

 

END

 

 

FR USSURSUANAAR