Half Yearly Report

RNS Number : 3023T

Sirius Real Estate Limited

05 December 2011

 



Sirius Real Estate Limited

("Sirius", "the Group" or "the Company")

Half-Yearly Results for the six months ended 30 September 2011

Sirius Real Estate, the real estate company with a portfolio of 38 large mixed-use commercial sites in Germany, which it upgrades into modern, flexible workspaces, today, reports its half year results for the six months ended 30 September 2011.

Results highlights

·      Occupancy rate of 77% (30 September 2010: 73%)

·      Recurring profit before tax (PBT) excluding exceptional costs €0.9m* (2010: €1.2m)

·      Gross annualised rent roll level increased to €44.4m representing a 7% increase year on year (30 September 2010: €41.5m)

·      Average rent per sqm increased to €4.18 (31 March 2011: €4.13)

·      Property portfolio revalued by DTZ at €492.0m (31 March 2011: €505.5m)

·      Adjusted NAV per share of 66.63c (31 March 3011: 72.85c)

·      LTV across the portfolio of 61.0% (31 March 2011: 60.2%)

*Excluding property revaluation, change in fair value derivative instruments and costs incurred for advice relating to the asset management agreement.

Operational highlights

·      On track to deliver €1m of cost savings for the full year

·      10% increase in average monthly sales enquiries for the period to 957 compared to the same period last year (September 2010: 871) with majority of monthly sales enquiries now reaching over 1,000

·      New lettings of 65,153 sqm at €5.18 per sqm representing an improved return on investment

·      Move-outs of 37,275 sqm (September 2010: 73,966 sqm), which shows improved retention rates

·      Good demand for highly flexible smartspace solutions

·      Land disposals worth €2.5m agreed during the period and completed after the period and capacity to make further disposals in a profitable and timely manner

·      Good progress on agreeing new management structure

Robert Sinclair, Chairman of Sirius Real Estate, said:

"Despite the macroeconomic difficulties and continued uncertainty across the eurozone, the Company has recorded a satisfactory trading performance for the first six months of this financial year and the focus on occupancy and reducing central costs has meant that the Group is trading in line with management expectations for the full year.

"Economic concerns have not impacted on demand as yet, with average monthly enquiries increasing by 10% over the last 12 months which has enabled the Company to offset some larger move-outs over the summer and keep occupancy figures increasing. The key point is the much improved rate we are seeing from new lettings which indicates that we are starting to see some real benefit from the investment we have made over the last few years. This, together with a further €1m of cost savings expected over the year, is driving incremental improvement.

"Good progress has been made towards agreeing a new management structure and I am confident long term plans for the management team will be announced in due course. The Company is working on a new strategic plan to refinance the business and build the Company from a profitable base."

Enquiries:

Principle Capital Sirius Real Estate Asset Management Limited                                

Kevin Oppenheim, CEO                                                                          020 7004 7150

Alistair Marks, CFO

Peel Hunt                                            

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 half-yearly results for the six months ended 30 September 2011. In a difficult trading environment, the Company has made good progress. Our rent roll is continuing to increase reflecting demand from the SME market for our unique mix of commercial, office and light engineering space. At the same time, the Company has remained focused on renewing existing leases with key tenants, which is reflected in our improved retention rates.

The programme of cost reduction and better cost recovery from service charges continues and the Company expects to benefit by a further €1m of cost reductions in this financial year. This has been achieved despite the substantial increases in electricity and heating costs experienced throughout Germany.

Good progress has also been made on the future management structure and the Company will in due course make an announcement on long term plans for the management team.

Results 

For the period under review, gross income was €22.1m (2010: €22.0m). The improvement in total income is despite the loss of €345k of surrender premiums which were received in the same period last year. The property portfolio, consisting of 38 properties had an annualised gross rent roll of €44.4m million (30 September 2010: €41.5m) over a total lettable area of 1.15 million sqm. 

Recurring profit before tax for the period was €0.9 million (2010: €1.2m), excluding property revaluation, change in fair value derivative instruments and the one-off impact of the €0.4 million costs incurred for advice relating to the asset management contract. Good progress has been made on reducing the irrecoverable service charge costs through a combination of optimising contracts and improving allocation, therefore bad debts relating to unpaid service charges are expected to be much lower than previous years although there will be an impact from the increased cost of utilities.

Capital expenditure during the six months to 30 September 2011 was €4.8m, which was mainly related to creating new space for letting and dealing with the associated regulatory requirements.  We expect capex investment in the second half to be much lower.

The adjusted EPS, which excludes property revaluation, related deferred tax and non-controlling interest and change in fair value on derivative financial instruments was 0.27c as at 30 September 2011 (2010: (0.11c)). 

Net Asset Value (NAV)

DTZ Zadelhoff Tie Leung GmbH have valued the portfolio at €492.0m (31 March 2011: €505.5m).

The adjusted NAV per share, which excludes deferred tax and change in fair value adjustment on financial derivative instruments, was 66.63c as at 30 September 2011 (31 March 2011: 72.85c).

The reduction in valuation is not reflective of the Company's performance as both income and cost recoveries are moving in a positive direction.  Our valuers have indicated that the reduction is due to their perception of market conditions.

Dividend

The Company's 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.

Finance

As at 30 September 2011 the Company's borrowings, excluding capitalised loan costs, totalled €300.0m (31 March 2011: €304.3m), representing an LTV of 61.0% (31 March 2011: 60.2%). Both banking facilities are operating within covenants and the facility with the Royal Bank of Scotland matures in October 2012. As at 30 September 2011, the Company had cash reserves of €13 million which is down from €24 million at the same point last year. The reduction in cash balances stems primarily from debt amortisation and required capital expenditure. The Board is in the process of finalising a plan to ensure that the Company has sufficient operating cash flow to service its borrowings and cover future capital expenditure requirements. This is likely to include further asset management activities to optimise the portfolio and some strategic asset disposals of carefully selected assets enabling a consolidation of the business and the creation of a new financial and operational base upon which the Company would seek to grow.

Asset management

The Sirius brand is now well established amongst the German business park sector and is widely known amongst the German SME market for providing truly flexible workspace throughout the country. As yet, the political and economic turmoil across Europe has yet to result in a slowdown in demand for our product and the manager has continued to see a high level of enquiries for new space in the Company's portfolio. Sales enquiries are exceeding 1,000 per month in the majority of months and the Company saw a 10% increase in the total number of enquiries for the period compared to 12 months ago.

The Company signed 65,153 sqm of new leases compared with move-outs of 37,275 sqm. This compares to 87,078 sqm of new leases and 73,966 sqm of move-outs in the same period last year. On a sqm basis, net lettings of 27,878 sqm versus 13,112 sqm represents a solid improvement. However, further success has been achieved in the rental rate in the period of €5.18 per sqm compared to €4.16 per sqm last year.  Despite the challenging economic background the Company is starting to see some significantly improved returns from creating the unique "Sirius" product. As a result, occupancy was 77% as at 30 September 2011, compared with 73% as at 30 September 2010 and 76% as at 31 March 2011. It is worth noting that the new lettings signed in the period will underpin the next period. This is because there has been a longer than expected lag between signing and moving in. These will come through in the second half of the financial year but will be offset somewhat by the move-out of Siemens (13,161 sqm) which took place post the half year in October 2011. The improved lettings rate is reflected in the average rental value of the portfolio improving to €4.18 psm (31 March 2011: €4.13 psm).

A key focus for the Asset Management team has been on tenant retention and in particular, retaining the Company's largest tenants.  In July, the Company extended a 34,200 sqm lease with an existing multinational tenant at our Munich Neuaubing site for 10 years at an average rate of €4.46 psm which over the lease will generate €44.7 million of income (inclusive of service charge). Additionally, the move-outs in the period of 37,275 sqm were significantly lower than the 73,966 sqm experienced for the same period last year. This is an encouraging reflection of the emphasis the team has placed on retention.

The programme of cost reduction and cost recovery has continued into the current financial year. This benefit has come despite the well documented increases in electricity and heating costs throughout Germany this year. The main benefits have come from optimising and controlling our facility management and utilities suppliers combined with the use of significantly improved cost allocation tools.  The improved optimisation and transparency to tenants makes the recovery of service charge costs an easier process and we expect this will continue into the future to have a positive effect on the bottom line. Overall, we anticipate making further savings of approximately €1 million in the current financial year.

In September, the Company sold a parcel of land at the Bremen Brinkmann site and sold part of one of the sites in Bonn.  These two disposals will generate close to €2.5m of proceeds and around €600k of profit, which will be reported in the second half of this financial year.  These properties are currently generating €115k of annual income.  Approximately €2m of the proceeds will be used to repay the loans outstanding at these sites.

Asset management contract

As previously announced, the Board is in the process of determining the optimum management structure for the Company going forward.  The Board has been in discussions with various parties including PCSREAM, the current Asset Manager. As a result of these discussions, the Board will in due course be making an announcement confirming the long term management structure of the business.

Board changes

On 15 July 2011, Dick Kingston stood down from the Board. His significant real estate experience was invaluable to the Company and on behalf of the Board I would like to thank him for his contributions. My appointment as Chairman followed once Dick stepped down.

Subsequently, on 26 July 2011 the Company was pleased to announce the appointments of Ian Clarke, Rolf Elgeti, Shelagh Mason, Eitan Milgram, Charles Parkinson and Amanda Spring as Non-executive Directors. On 15 November 2011, Justin Schaefer was also appointed as Non-executive Director, replacing Eitan Milgram.

With the new Directors to the Board, the Company has retained a good balance of independent Directors plus greater representation from key shareholders.  Their wealth of experience is proving extremely useful in this period of transition for Sirius.

Outlook

The Company has delivered a satisfactory trading performance for the first six months of this financial year and is on track to meet management expectations for the full year. Given the wider market environment this reflects well on the business and its ability to adapt to the needs of tenants.

The Board is focused on finalising the future management structure together with a new strategic plan to create a long-term financial and operational platform on which to grow the business in the current market environment. The Board is confident that Sirius can, with time, deliver significant returns to shareholders.

Unaudited consolidated statement of comprehensive income

For the six months ended 30 September 2011

		(Unaudited)	(Unaudited)	(Audited)
		six months ended	six months ended	twelve months ended
		30 September	30 September	31 March
		2011	2010	2011
	Notes	€000	€000	€000
Rental income	4	22,078	22,012	45,568
Direct costs	5	(9,858)	(10,274)	(22,922)
Net rental income		12,220	11,738	22,646
Deficit on revaluation of investment properties	10	(19,387)	(1,710)	(367)
Administrative expenses	5	(1,729)	(1,985)	(4,141)
Other operating expenses	5	(1,099)	(1,026)	(2,175)
Operating (loss)/profit		(9,995)	7,017	15,963
Finance income	6	82	64	126
Finance expense	6	(8,917)	(8,981)	(17,832)
Change in fair value of derivative financial instruments		(4,201)	(1,500)	5,184
(Loss)/profit before tax		(23,031)	(3,400)	3,441
Taxation	7	(177)	(234)	(711)
(Loss)/profit for the period		(23,208)	(3,634)	2,730
(Loss)/profit attributable to:
Owners of the Company		(22,929)	(3,908)	2,519
Non-controlling interest		(279)	274	211
Loss for the period		(23,208)	(3,634)	2,730
Earnings per share
Basic and diluted, for comprehensive income for the period attributable to ordinary equity holders of the Parent Company	8	(7.59)c	(1.29)c	0.83c

Unaudited consolidated statement of financial position As at 30 September 2011		(Unaudited)	(Unaudited)	(Audited)
		30 September	30 September	31 March
		2011	2010	2011
	Notes	€000	€000	€000
Non-current assets
Investment properties	10	491,960	501,180	505,500
Plant and equipment		3,349	4,903	4,679
Total non-current assets		495,309	506,083	510,179
Current assets
Trade and other receivables		6,775	8,292	7,272
Prepayments		483	479	233
Derivative financial instruments	14	25	-	165
Cash and cash equivalents	11	12,613	28,650	23,583
Total current assets		19,896	37,421	31,253
Total assets		515,205	543,504	541,432
Current liabilities
Trade and other payables	12	(14,580)	(15,290)	(17,162)
Interest-bearing loans and borrowings	13	(7,842)	(7,383)	(7,669)
Current tax liabilities		(67)	(564)	(707)
Derivative financial instruments	14	(13,505)	(15,963)	(9,444)
Total current liabilities		(35,994)	(39,200)	(34,982)
Non-current liabilities
Interest-bearing loans and borrowings	13	(290,576)	(299,001)	(294,546)
Deferred tax liabilities	7	(1,863)	(1,687)	(1,924)
Total non-current liabilities		(292,439)	(300,688)	(296,470)
Total liabilities		(328,433)	(339,888)	(331,452)
Net assets		186,772	203,616	209,980
Equity
Issued share capital	15	-	-	-
Other distributable reserve		300,111	300,111	300,111
Retained earnings		(114,079)	(97,577)	(91,150)
Total equity attributable to the equity holders of the Parent Company		186,032	202,534	208,961
Non-controlling interests		740	1,082	1,019
Total equity		186,772	203,616	209,980

Unaudited statement of changes in equity For six months ended 30 September 2011				Total equity attributable
	Issued	Other		to the equity
	share	distributable	Retained	holders of the	Non-controlling	Total
	capital	reserve	earnings	Parent Company	interests	equity
	€000	€000	€000	€000	€000	€000
As at 31 March 2010	-	300,111	(93,669)	206,442	808	207,250
Loss for the period	-	-	(3,908)	(3,908)	274	(3,634)
As at 30 September 2010	-	300,111	(97,577)	202,534	1,082	203,616
Profit for the period	-	-	6,427	6,427	(63)	6,364
As at 31 March 2011	-	300,111	(91,150)	208,961	1,019	209,980
Loss for the period	-	-	(22,929)	(22,929)	(279)	(23,208)
As at 30 September 2011	-	300,111	(114,079)	186,032	740	186,772

Unaudited consolidated cash flow statement For the six months ended 30 September 2011
	(Unaudited) six months ended	(Unaudited) six months ended	(Audited) twelve months ended
	30 September	30 September	31 March
	2011	2010	2011
	€000	€000	€000
Operating activities
(Loss)/profit before tax	(23,031)	(3,400)	3,441
Adjustments for:
Deficit on revaluation of investment properties	19,387	1,710	367
Change in fair value of derivative financial instruments	4,201	1,500	(5,184)
Depreciation	418	414	881
Finance income	(82)	(64)	(126)
Finance expense	8,917	8,981	17,832
Cash flows from operations before changes in working capital	9,810	9,141	17,211
Changes in working capital
Decrease in trade and other receivables	248	3,401	4,665
(Decrease)/increase in trade and other payables	(2,461)	(848)	3,080
Taxation paid	(877)	(33)	(121)
Cash flows from operating activities	6,720	11,661	24,835
Investing activities
Development expenditure	(4,829)	(5,611)	(9,303)
Purchase of plant and equipment	(276)	(563)	(901)
Proceeds on disposal of plant and equipment	-	-	56
Interest received	82	64	126
Cash flows used in investing activities	(5,023)	(6,110)	(10,022)
Financing activities
Proceeds from loans	-	1,990	2,490
Repayment of loans	(4,334)	(3,900)	(9,121)
Finance charges paid	(8,333)	(8,392)	(18,000)
Cash flows from financing activities	(12,667)	(10,302)	(24,631)
Decrease in cash and cash equivalents	(10,970)	(4,751)	(9,818)
Cash and cash equivalents at the beginning of the period	23,583	33,401	33,401
Cash and cash equivalents at the end of the period	12,613	28,650	23,583

1.   General information

Sirius Real Estate Limited (the "Company") is a company incorporated and domiciled in Guernsey whose shares are publicly traded on AIM.

The consolidated financial statements of Sirius Real Estate Limited comprise the Company and its subsidiaries (together referred to as the "Group").

The principal activity of the Group is investment in and development of commercial property to provide flexible workspace in Germany.

The consolidated financial statements of the Group as at and for the year ended 31 March 2011 are available upon request from the Company's registered office at PO Box 119, Martello Court, Admiral Park, St. Peter Port, Guernsey GY1 3HB, Channel Islands or at www.sirius-real-estate.com.

The Company acts as the investment holding company of the Group.

2.   Significant accounting policies

(a) Basis of preparation

The consolidated financial statements have been prepared on a historical cost basis, except for investment properties, investment properties under construction 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 2011 have been prepared in accordance with IFRSs adopted for use in the EU ("Adopted IFRSs"), and The Companies (Guernsey) Law, 2008. The interim set of financial statements included in this Interim Report has been prepared in accordance with the recognition and measurement requirements of Adopted IFRSs. The interim set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 March 2011. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 March 2011.

These 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 to adopt having considered the issues identified below:

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 arrangement as part of a review to ensure shareholders receive the best value and quality of service. The Board has been in discussions with various parties including PCSREAM, the current Asset Manager.

Financial

The Group incurred a net loss of €23,208,000 during the period ended 30 September 2011 (30 September 2010: €3,634,000).  The Directors have prepared cash flow forecasts for a period greater than twelve months from the date of approval of the half yearly results.  These forecasts show that the Group will require additional financing in October 2012.

The Board is in the process of finalising a plan to ensure that the Company has sufficient operating cash flow to service its borrowings and cover future capital expenditure requirements. This is likely to include further asset management activities to optimise the portfolio and some strategic asset disposals of carefully selected assets enabling a consolidation of the business and the creation of a new financial and operational base upon which the Company would seek to grow.

Based on the reasons outlined above, the Directors believe that it remains appropriate to prepare the financial statements on a going concern basis.

(b) Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 30 September 2011. The financial statements of the subsidiaries are prepared for the same reporting period as the Parent Company, using consistent accounting policies.

All intra-group balances and transactions and any unrealised income and expenses and profits and losses arising from intra-group transactions are eliminated in preparing the consolidated financial statements.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

Non-controlling interests represent the portion of profit or loss and net assets not held by the Group and are presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from the Parent Company shareholders' equity.

(c) Significant accounting policies

The accounting policies applied by the Group in these consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 March 2011.

3.   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 business segment which is investment in commercial property.

4.   Revenue

	(Unaudited)	(Unaudited)	(Audited)
	six months ended	six months ended	twelve months ended
	30 September	30 September	31 March
	2011	2010	2011
	€000	€000	€000
Rental income from investment properties	22,078	22,012	45,568

5.   Operating profit/(loss)

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

Direct costs
	(Unaudited)	(Unaudited)	(Audited)
	six months ended	six months ended	twelve months ended
	30 September	30 September	31 March
	2011	2010	2011
	€000	€000	€000
Service charge income	(15,088)	(12,431)	(24,995)
Property costs	22,503	20,432	43,292
Irrecoverable property costs	7,415	8,001	18,297
Property management fee	877	739	1,559
Asset management fee	1,518	1,476	2,974
Development fee	48	58	92
Direct costs	9,858	10,274	22,922
Administrative expenses
	(Unaudited)	(Unaudited)	(Audited)
	six months ended	six months ended	twelve months ended
	30 September	30 September	31 March
	2011	2010	2011
	€000	€000	€000
Audit fee	112	100	252
Legal and professional fees	936	1,251	2,598
Other administration costs	320	285	909
Non-recurring costs	361	349	382
Administrative expenses	1,729	1,985	4,141
Other operating expenses
	(Unaudited)	(Unaudited)	(Audited)
	six months ended	six months ended	twelve months ended
	30 September	30 September	31 March
	2011	2010	2011
	€000	€000	€000
Directors' fees	106	105	220
Bank fees	54	63	174
Depreciation	418	414	881
Marketing and other expenses	521	444	900
Other operating expenses	1,099	1,026	2,175

The Group has no full-time employees and the Board of Directors consists of nine Non-executive Directors. The employees working for the Group are all employed by Principle Capital Sirius Real Estate Asset Management Ltd, the Asset Manager or Sirius Facilities GmbH, the German operating company of the Asset Manager.

6.   Finance income and expense

	(Unaudited)	(Unaudited)	(Audited)
	six months ended	six months ended	twelve months ended
	30 September	30 September	31 March
	2011	2010	2011
	€000	€000	€000
Bank interest income	82	64	126
Finance income	82	64	126
Bank interest expense	(8,380)	(8,447)	(16,760)
Amortisation of capitalised finance costs	(537)	(534)	(1,072)
Finance expense	(8,917)	(8,981)	(17,832)
Net finance expense	(8,835)	(8,917)	(17,706)

7.   Taxation

Consolidated statement of comprehensive income
	(Unaudited)	(Unaudited)	(Audited)
	six months ended	six months ended	twelve months ended
	30 September	30 September	31 March
	2011	2010	2011
	€000	€000	€000
Current income tax
Current income tax charge	(178)	292	(583)
Adjustments in respect of prior period	(60)*	(116)	167
	(238)	176	(416)
Deferred tax
Relating to origination and reversal of temporary differences	61	58	(295)
Income tax (credit)/charge reported in the statement of comprehensive income	(177)	234	(711)
Deferred income tax liability
	(Unaudited)	(Unaudited)	(Audited)
	six months ended	six months ended	twelve months ended
	30 September	30 September	31 March
	2011	2010	2011
	€000	€000	€000
Opening balance	1,924	1,629	1,629
Revaluation of investment properties to fair value	(61)	58	295
Balance as at period end	1,863	1,687	1,924

*     This relates to refunds of prior year tax which have not been included in the March 2011 accrual.

Management does not recognise deferred tax assets in respect of revaluation losses as they may not be used to offset taxable profits elsewhere in the Group.

8.   Earnings per share

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

	(Unaudited)	(Unaudited)	(Audited)
	six months ended	six months ended	twelve months ended
	30 September	30 September	31 March
	2011	2010	2011
	€000	€000	€000
Earnings
(Loss)/profit for the period attributable to the equity holders of the parent	(22,929)	(3,908)	2,519
Basic and diluted earnings	(22,929)	(3,908)	2,519
Add back revaluation deficits (net of related tax)	19,196	1,721	438
Add back change in fair value of derivative financial instruments	4,201	1,500	(5,184)
Add back non-recurring costs	361	349	382
Adjusted earnings	829	(338)	(1,845)
Number of shares
Weighted average number of ordinary shares for the purpose of basic and diluted earnings per share	302,223,176	302,223,176	302,223,176
Weighted average number of ordinary shares for the purpose of adjusted earnings per share	302,223,176	302,223,176	302,223,176
Basic and diluted earnings per share	(7.59)c	(1.29)c	0.83c
Adjusted earnings per share	0.27c	(0.11)c	(0.61)c

The number of shares has been adjusted for the 25,576,824 shares held by the Company as treasury shares.

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.

9.   Net assets per share

	(Unaudited) 30 September	(Unaudited) 30 September	(Audited) 31 March
	2011	2010	2011
	€000	€000	€000
Net assets
Net assets for the purpose of assets per share (assets attributable to the equity holders of the parent)	186,032	202,534	208,961
Deferred tax arising on revaluation of properties	1,863	1,685	1,921
Derivative financial instruments	13,480	15,963	9,279
Adjusted net assets attributable to equity holders of the parent	201,375	220,182	220,161
Number of shares
Number of ordinary shares for the purpose of net assets per share	302,223,176	302,223,176	302,223,176
Net assets per share	61.55c	67.01c	69.14c
Adjusted net assets per share	66.63c	72.85c	72.85c

The number of shares has been adjusted for the 25,576,824 shares held by the Company as treasury shares.

10. Investment properties

	(Unaudited)	(Unaudited)	(Audited)
	30 September	30 September	31 March
	2011	2010	2011
	€000	€000	€000
Opening balance	505,500	500,010	500,010
Additions	5,847	2,880	5,857
Revaluation of investment properties to fair value	(19,387)	(1,710)	(367)
Balance as at period end	491,960	501,180	505,500

The fair value of the Group's investment properties at 30 September 2011 has been arrived at on the basis of a valuation carried out at that date 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.

·      On 14 September 2011 an agreement was made to dispose of some land at the Brinkmann site for €1,073,670. The sale is conditional on the purchaser acquiring an adjacent piece of land from the local authority and this is expected to take place at the latest by 28 March 2012.

·      On 29 September 2011 an agreement was made to dispose of two buildings at the Königswinter site for €1,450,000. Due to the process that needs to be followed, legal title on the deal is expected to transfer on 2 January 2012.

11. Cash and cash equivalents

	(Unaudited)	(Unaudited)	(Audited)
	30 September	30 September	31 March
	2011	2010	2011
	€000	€000	€000
Cash at banks and in hand	12,613	28,650	23,583
Balance as at period end	12,613	28,650	23,583

The fair value of cash is €12,612,510 (31 March 2011: €23,583,498).

As at 30 September 2011 €5,281,934 (31 March 2011: €6,717,701) of cash is held in blocked accounts. Of this €142,077 (31 March 2011: €1,370,898) is under control of lenders who release this to the Group upon request to be used for capital expenditure on properties. €1,958,257 (31 March 2011: €1,941,435) relates to deposits received from tenants and €15,585 (31 March 2011: €15,546) is cash held on escrow as requested by a supplier and an amount of €3,166,015 (31 March 2011: €3,389,822) relates to amounts reserved for future bank loan interest and amortisation payments.

12. Trade and other payables	(Unaudited)	(Unaudited)	(Audited)
	30 September	30 September	31 March
	2011	2010	2011
	€000	€000	€000
Trade payables	3,785	4,559	5,665
Accrued expenses	5,267	3,571	3,991
Accrued interest	1,154	2,416	1,107
Other payables	3,976	3,411	6,283
Related party payables	398	1,333	116
Balance as at period end	14,580	15,290	17,162

13. Interest-bearing loans and borrowings

			(Unaudited)	(Unaudited)	(Audited)
	Effective		30 September	30 September	31 March
	interest rate		2011	2010	2011
	%	Maturity	€000	€000	€000
Current
ABN Amro Loan	5.85	15 October 2012	2,186	2,030	2,156
Berlin-Hannoversche Hypothekenbank AG - fixed rate facility	5.28	30 March 2013	1,325	1,271	1,290
Berlin-Hannoversche Hypothekenbank AG - hedged floating rate facility	Hedged floating	31 March 2013 - 31 December 2013	4,135	3,894	4,012
Berlin-Hannoversche Hypothekenbank AG - capped floating rate facility	Capped floating	31 December 2013	1,323	1,251	1,286
Capitalised finance charges on all loans			(1,127)	(1,063)	(1,075)
			7,842	7,383	7,669
Non-current
ABN Amro Loan	5.85	15 October 2012	90,116	93,414	91,217
Berlin-Hannoversche Hypothekenbank AG - fixed rate facility	5.28	30 March 2013	48,990	49,787	49,661
Berlin-Hannoversche Hypothekenbank AG - hedged floating rate facility	Hedged floating	31 March 2013 - 31 December 2013	111,001	115,136	113,108
Berlin-Hannoversche Hypothekenbank AG - capped floating rate facility	Capped floating	31 December 2013	40,925	42,248	41,605
Capitalised finance charges on all loans			(456)	(1,584)	(1,045)
			290,576	299,001	294,546
Total			298,418	306,384	302,215

The Group has pledged 34 investment properties to secure related interest-bearing debt facilities granted to the Group. The 34 properties had a combined valuation of €453,660,000 as at 30 September 2011 (31 March 2011: €465,310,000).

ABN Amro Bank N.V.

This facility had €100,951,940 drawn down, of which €8,649,346 has been amortised to date, resulting in a liability of €92,302,594 as at 30 September 2011. 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

Facilities of €226,500,000 have been granted by Berlin-Hannoversche Hypothekenbank AG. To date €18,801,981 has been amortised, resulting in a liability of €207,698,019 at September 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 latest drawdown has a fixed rate of 2.81% for the loan facility. 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.

14. Financial instruments

Fair values

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

		(Unaudited)			(Unaudited)			(Audited)
		30 September 2011			30 September 2010			31 March 2011
	Carrying		Fair	Carrying		Fair	Carrying		Fair
	amount		value	amount		value	amount		value
	€000		€000	€000		€000	€000		€000
Financial assets
Cash	12,613		12,613	28,650		28,650	23,583		23,583
Derivative financial instruments	25		25	-		-	165		165
Trade receivables	3,661		3,661	3,464		3,464	5,577		5,577
Financial liabilities
Trade payables	3,785		3,785	4,559		4,559	5,665		5,665
Derivative financial instruments	13,505		13,505	15,963		15,963	9,444		9,444
Interest-bearing loans and borrowings:
Floating rate borrowings - hedged*	115,136		115,136	119,030		119,030	117,120		117,120
Floating rate borrowings - capped**	42,248		42,248	43,499		43,499	42,891		42,891
Fixed rate borrowings	142,616		145,575	146,502		154,276	144,324		149,616

*   The Group holds interest rate swap contracts designed to manage the interest rate and liquidity risk of expected cash flows of borrowing for the Group's variable rate facility with Berlin-Hannoversche Hypothekenbank AG. The swap contracts mature between March 2013  and June 2018.

** The Group holds interest rate caps designed to manage the interest rate and liquidity risk of expected cash flows of borrowing for the Group's variable rate facility with Berlin-Hannoversche Hypothekenbank AG. The cap contracts mature at December 2013, the same time as the loans.

15. Issued share capital

	Number	Share capital
Authorised
Ordinary shares of no par value	Unlimited	-
As at 30 September 2011	Unlimited	-
Issued and fully paid
Ordinary shares of no par value	327,800,000	-
Share brought back and held in treasury	(25,576,824)	-
As at 30 September 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 buybacks were made in the period.

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 period ended 30 September 2011.

17. Capital commitments

As at 30 September 2011 the Group had contracted capital expenditure on existing properties of €1,160,737. These were committed but not yet provided for.

18. Carried interest

Marba Holland B.V. is a joint venture between a subsidiary of Principle Capital Holdings S.A., Frank and Kevin Oppenheim and certain other individuals. Marba Holland B.V. has a right to carried interest. In any year Marba Holland B.V. is not entitled to any carried interest unless the Group's net asset value per ordinary share exceeds the performance hurdle applicable to that financial year.

For the period ended September 2011 the performance hurdle applicable is calculated as 10% of the higher of:

- the average of the net asset values per ordinary share at the end of 31 March 2010 and 31 March 2011; and

- the net asset value per ordinary share at the end of 31 March 2011.

If the hurdle is achieved then Marba Holland B.V. will be entitled to 20% of the amount by which the performance hurdle is exceeded by the Group in respect of that financial period. The carried interest will also be payable on the occurrence of certain other events, such as a takeover or liquidation of the Group.

No amount has been provided as at 30 September 2011 as the minimum hurdle rate required has not been achieved.

 

END

 

 

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