Half Yearly Report

RNS Number : 6260U

Sirius Real Estate Limited

04 December 2013

 



Sirius Real Estate Limited

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

Half year results for the six months ended 30 September 2013

 "Trading during the first six months has continued positively, positioning the business to achieve a good result for the year. Today we also announce measures to refinance the Company's short term debt, strengthen the capital structure and position the business for growth." said Andrew Coombs, CEO of Sirius Facilities.

Financial highlights

·               Gross annualised rent roll level increased by 1% to €40.8 million (30 September 2012: €40.3m*)  

·               Recurring profit before tax increased significantly to €6.9 million** (2012: €3.9m)

·               Average rent per sqm increased to €4.44 (31 March 2013: €4.42*)  

·               Adjusted EPS was 2.04c (2012: 0.96c)***

·               Valuations increased by 1.9% and net asset value per share increased to 48.96c (31 March 2013: 48.44c) despite the dilutive effect of 30.9 million shares issued in August 2013

 Strong tenant demand

·               New lettings of 59,674 sqm at an average rate of €5.08 per sqm which compares favourably to the average portfolio rate of €4.44 per sqm 

·               Enquiries for all types of space increased to an average of over 1,100 per month

-               Occupancy reduced from 76%* at 31 March 2013 to 75% mostly due to two large Siemens terminations in Hannover and Nurmberg. Despite the occupancy reduction gross annual rent roll has increased by 1% from September 2012, showing strong demand for available space.

·               Improving economic outlook in Germany

Re-financing, Proposed Equity Raise & Disposals

·               The Company's largest loan facility with Berlin Hannoversche Hypothekenbank AG ("BerlinHyp") stood at €149.4 million at 30 September 2013 reduced from €208.7 million at 31 March 2013 following a successful bond issue.  As at the date of this report, €31.3 million was outstanding with ABN AMRO, part of the Royal Bank of Scotland ("RBS").

·               Non-core asset disposal programme almost complete, with one asset notarised for sale and two assets and one land package still being marketed. In addition the Company completed one non-income producing land sale for €4.2 million on 29 November 2013 and has notarised two other such land sales for €0.4 million.

·               The Company has today announced in a separate announcement made to the London Stock Exchange plans to raise up to €40 million by way of an issue of new ordinary shares to existing and new investors (the "Equity Raising").  Conditional on the success of this Equity Raising it has:

-               agreed heads of terms with Macquarie Bank Limited for a new facility of a minimum of €32.5m, to refinance five of the RBS assets, three BerlinHyp assets and an unencumbered asset.

-               agreed in principle a new five year facility of €115.0 million with a syndicate of two banks led by BerlinHyp and involving another well respected German bank on attractive terms against nine of the remaining eleven assets within the current BerlinHyp facility.

The proceeds of the Equity Raising and the two new facilities will be used to repay the outstanding facilities with RBS and BerlinHyp in full, and associated costs, thereby reducing the loan to value going forward. As a result the two remaining assets and the land package currently in those facilities will become unencumbered. It is the intention to dispose of or refinance the unencumbered assets and one other non-core asset in 2014 and recycle this capital, together with the excess proceeds of the Equity Raising, into new core opportunities and the capital expenditure programme. The Company expects to have approximately €17.5 million available for this purpose.

Following the capital raising, refinancings and the non-core asset disposals mentioned above, the Company will have 27 properties valued at €414.8 million and the Group will have debt facilities of €226.5 million expiring between January 2017 and August 2023. 

*   Adjusted for disposals.

**  Excluding property revaluation and change in fair value of derivative instruments 

*** Excluding property revaluation, related deferred tax and non-controlling interest and change in fair value of derivative financial instruments

"The portfolio continues to generate increasing levels of profitability through the Company's asset management capabilities and with the non-core asset disposal programme nearing completion, we will have a higher quality, streamlined portfolio with organic and acquisition led potential for further growth. Following successful execution of the refinancing, the Company will be well placed to deliver attractive returns to shareholders through both income and capital growth. With a sustainable capital structure in place the Company will be in a position to re-commence dividend payments to shareholders following the Company's year end." said Robert Sinclair, Chairman of Sirius

Enquiries:

Sirius                         

Andrew Coombs                                                                 [phone]

Alistair Marks                                                                       

Peel Hunt

Capel Irwin                                                                            020 7418 8900

Hugh Preston

Novella                                           

Tim Robertson                                                                     020 3151 7008

Ben Heath

www.sirius-real-estate.com 

Chairman's Statement

I am pleased to announce the Group's half-year results for the six months ended 30 September 2013. We are continuing to see significant benefits from our in-house management platform created to manage the mixed-use, multi-tenant asset class within which we operate.  Demand for rental space which we generate through our internal marketing channels from predominantly the SME market in Germany is strong and the trading performance of the portfolio reflects this. In addition, the systems and procedures that we have developed to manage the service charge cost allocation process to the 1,981 tenants that occupy our sites are proving their worth, with further reductions in irrecoverable costs and higher transparency to tenants being achieved (it is noteworthy that 738 of the tenants representing 5% of the rent roll, are on "all-inclusive" leases that do not require a service charge reconciliation). The combination of these initiatives are the main driving force behind the improved profitability with recurring profits before tax (excluding revaluation) increasing by 77% in the period compared to the same period last year. This result was helped by a surrender premium of €1.7 million (2012: €1.0m) received for an early termination of a lease in one of our Munich sites but we regularly seek opportunities of this nature in the portfolio, especially where we can re-let the space very quickly after surrender at a higher rate.

We have finally seen some upward movements in the value of the property portfolio after two years of valuation write-downs.  The total portfolio at 30 September 2013 was valued at €434.3 million compared to €426.2* million at 31 March 2013 (*adjusted for disposals), indicating that we have perhaps touched the bottom of the cycle and are now entering a period of valuation recovery. We believe that much of the value increase has come through the improved rental rates and the reduction in irrecoverable costs that we have achieved through our asset management activity.

Since the start of the disposal programme, the Company has sold eight non-core properties for proceeds of €34.2** million (**including land packages and separate building sales) representing an 8% discount to DTZ valuation.  This includes the three properties that completed in the period. In addition to this we have one property notarised for €0.3 million which is expected to complete early in 2014, one non-income producing land sale which completed on 29 November 2013 for €4.2 million and two other such land sales which have been notarised for €0.4 million and which are expected to complete early in 2014. Two further non-core properties and one land package are being actively marketed for sale.  The value of the non-core properties and land packages which remain for sale and the land package sold on 29 November 2013 is approximately €15 million.  We intend to recycle the proceeds of this and the balance of the proposed equity fund raise (as set out in the Finance section below, the "Equity Raising") not used for paying down debt or associated costs into accretive capital expenditure programmes as well as attractive investment opportunities.  The Company expects to have approximately €17.5 million) for this purpose.

We have seen significant profitability improvements throughout the last three years and we believe that this demonstrates the Company's ability to manage this asset class. However, we believe that the Company's share price has not reflected these improvements, continuing to trade as it has at a significant discount to our NAV. We believe the key factor in the persistent discount has been uncertainty over short term debt maturities which have restricted our ability to deliver regular income to shareholders from our activities. We are therefore pleased to announce today proposals to complete the long term refinancing of both the facilities with ABN Amro, a part of the Royal Bank of Scotland ("RBS") and Berlin Hannoversche Hypothekenbank AG ("BerlinHyp"), subject to the completion of the Equity Raising and finalising documentation.  Details are set out under the Finance section below. This has been a time consuming process in a difficult financing environment, however it has been very much down to our asset management capabilities and strong financial performance that we have been able to differentiate ourselves from our competitors, thereby opening up sources of financing that would otherwise be closed.

Once the refinancings and non-core asset sales are fully executed, the remaining core portfolio will consist of 27 properties with an annual rent roll of €39.6 million and GLA of 0.9 million sqm.  These assets have a value of €414.8 million against which the Group would have three separate secured facilities, one with a syndicate of two banks led by BerlinHyp and involving another well respected German bank, one with Macquarie Bank Limited ("Macquarie") and the other with Baader Bank (the paying agent for the bond facility).  One property will be unencumbered (value at approximately €3.0 million) and there will also be one unencumbered land package valued at approximately €1.8 million. The much reduced LTVs have enabled us to obtain attractive financing packages which substantially offset the net operating income that we have lost from disposals to date.  In addition the Equity Raising and completion of the non-core asset sales should allow us to invest both in the many opportunities available in our existing portfolio as well as selectively to add new assets to the portfolio. The combination of these factors will enable us to continue to enhance cashflow, grow the Group's profits and re-commence dividend payments to shareholders. 

Earnings

For the half year under review, total income was €23.6 million (2012: €23.9m) which included the €1.7 million surrender premium (2012: €1.0m) previously mentioned. We have ended the period with a property portfolio which consists of 30 properties (2012: 37 properties) and an annualised gross rent roll of €40.8 million (30 September 2012: €40.3*m) over a total lettable area of 1.0 million sqm.

Recurring profit before tax for the period was €6.9 million (2012: €3.9m), which includes the above mentioned surrender premium but excludes property revaluation and the fair value adjustment on financial derivative instruments.

Last year saw a step change in the level of profitability of the Company and in H1 2013 we have delivered further improvements. We have seen in the period some large Siemens move-outs at our sites in Nuremberg and Hannover, which we had forecast, as well as another large tenant vacating in Berlin due to insolvency issues. Despite this, we have been able to continue to increase rental income for the portfolio overall which proves our ability to act quickly and replace lost income regardless of its magnitude.  We also continue to make good progress on reducing the irrecoverable service charge costs through the combination of optimising costs, improving recovery provisions in tenant leases and further improving cost allocation which provides tenants with much better transparency and reduces disputes. 

Capital expenditure during the six months to 30 September 2013 was €1.8 million.  There are many opportunities to invest in the existing portfolio to unlock currently unlettable space, generating very attractive returns.  We have completed some new projects successfully in the period with initial income returns significantly in excess of 20%, and we are constantly reviewing new opportunities.  Following the refinancing we are planning on increasing the capex spend to €5 million per year to take advantage of highly attractive investment opportunities in the existing portfolio, as the Company has under-invested in its estate over the last few years due to capital constraints.  Much has been learned over the last six years and our ability to generate attractive returns from intelligent investment improves each year.

The Adjusted EPS, which excludes property revaluation, related deferred tax and non-controlling interest and change in fair value of derivative financial instruments was 2.04c as at 30 September 2013 (2012: 0.96c).  We have benefited from lower interest rates on the BerlinHyp portfolio in the period following termination of the previous interest rate hedge. Borrowing costs will rise following the refinancing as the majority of interest rate exposure will be fixed while amortisation payments are expected to reduce substantially.

* adjusted for disposals

Operations

During the period we achieved new lettings of 59,674 sqm at an average rate of €5.08 per sqm which represents a price which is 14% above the portfolio average rate per sqm of €4.44. In addition, we saw tenants moving out of 72,338 sqm with an average rental rate of €4.46 per sqm which, when combined with higher rate on new lettings, helped move the portfolio average rate up slightly in the period from €4.42* per sqm at March 2013.  For this period, 41% of the move-outs relate to the Siemens and the Berlin move-outs mentioned earlier in this report.  As a result, occupancy, as at 30 September 2013, was 75% (30 September 2012 75%*). Demand, however, is good and through our sales and marketing platform we are confident of quickly replacing these vacating tenants with tenants paying higher rents on better terms.

Conversion of enquiries into viewings and then into lettings remains a key strength of the business and enquiries averaged just over 1,100 per month in the period (up from 1,000 for the same period last year). Against industry comparables Sirius's rate of lead conversion is exceptional, averaging, in the period, at around 9.5%, with some months hitting 10%, of all enquiries. Origination of enquiries continues to come primarily from online sources which is an area where the Company continues to lead the market.

Management of costs, particularly around recovery of service charge, has been crucial in increasing the profitability of the portfolio. We believe that the systems and techniques we use to allocate costs across a multitude of tenants with varying uses of space, is market leading. The results of this are evident in the improved recovery to date and significantly lower levels of tenant disputes being seen. The improvements have come about despite increasing utilities costs (thereby increasing the irrecoverable portion), and we believe there remains opportunity for further progress in the future. In the current year, we are expecting service charge irrecoverables to remain stable with the prior year, mainly because we are being prudent in our estimations due to the increasing utility costs. Once we see some stability in utility prices and we are able to further increase the prepayments we receive from tenants, we will start seeing additional benefits over and above what has been achieved to date.  We do, however, expect to see a further reduction in overheads for the full year to 31 March 2014 of €0.5 million compared to the previous year, as the overhead cost base is optimised further.

Over the last 6 years, the asset management team, through managing over 700 mixed-use multi-tenant buildings with around 2,000 tenants, has gained significant experience in this specific market. This, together with a proven ability to reposition and refurbish vacant space, leaves the Company well placed to provide external advice and management to other landlords with mixed-use multi-tenant properties in Germany.  Currently, the Group has secured 3 external contracts and is seeking to add to this number.

The selective disposal programme of non-core assets is nearing completion. To date, nine properties* (*including land packages and separate building sales) have been sold for €38.4 million, in a very difficult market exacerbated by a lack of financing. This has enabled the Company to reduce its debt levels and has created a new streamlined portfolio, from which the management are confident of further improving returns. Subject to the refinancing being completed (see Finance section below), we will look to replace the profits lost from the disposals through a combination of organic income growth, renewed investment in the optimised portfolio, new management contracts which utilise our asset management platform on assets owned by external landlords and selective asset acquisitions. There is no doubt that the results of the various management initiatives over the last few years have put the Company in a much stronger position to grow and generate attractive shareholder returns well into the future. 

* adjusted for disposals

Finance

As at the date of this report, the Company had two debt facilities which were close to expiry and were required to be refinanced or repaid.  As announced in August 2013, the Company's major bank facility with BerlinHyp of €208 million was reduced when Sirius raised long term financing of €52 million through a bond issue secured against four of the assets from the then BerlinHyp security pool. Sirius also raised €6.5 million through a share placing to pay down the BerlinHyp debt and permit the release of the four assets. As at 30 September 2013, following the bond issue, share placing and scheduled amortisation payments, the BerlinHyp loan stood at €149.4 million.  This facility expires on 31 March 2014 and as set out below, terms have been agreed to refinance this loan.

The Company's RBS loan has been reduced to €31.3 million, down from €49.2 million as at 31 March 2013.  This loan facility expired on 29 November 2013.

In order to effect the refinancing of the BerlinHyp and RBS debt, the Company is planning to raise up to €40 million by way of an issue of new ordinary shares. The proceeds from the Equity Raising will be applied towards completing the following refinancing activities:

-               agreed heads of terms with Macquarie Bank Limited for a new facility of a minimum of €32.5m , to refinance five of the RBS assets, three BerlinHyp assets and an unencumbered asset.

-               a new  €115.0 million five year facility, agreed in principle with a syndicate of two banks led by BerlinHyp and involving another well respected German bank, maturing in December 2018 on attractive terms secured against nine of the remaining eleven assets within the BerlinHyp facility. When completed, the remaining two assets will be released by BerlinHyp and will become unencumbered.

The proceeds of the Equity Raising and the two new facilities will be used to repay the outstanding facilities with RBS and BerlinHyp in full, and associated costs, thereby reducing the loan to value going forward. It is the intention to dispose of the unencumbered assets in due course and recycle this cash raised into new core opportunities. As a result the two remaining assets and the land package currently in those facilities will become unencumbered. It is the intention to dispose of or refinance the unencumbered assets and one other non-core asset in 2014 and recycle this capital, together with the excess proceeds of the Equity Raising, into new core opportunities and the capital expenditure programme. The Company expects to have approximately €17.5 million available for this purpose.

Following completion of the Equity Raising and the refinancing outlined above the estimated overall loan to value on the remaining core portfolio will be 56%. The weighted average unexpired debt term will be 5.4 years and the estimated average interest cost is 4.9%.

Net Asset Value

DTZ Zadelhoff Tie Leung GmbH have valued the portfolio of 30 assets at €434.26 million (31 March 2013: €426.21m*).  This is the first valuation uplift the portfolio has received for some time and reflects the improved quality of the portfolio, increased rental rate, better recovery of costs and a general improvement in the German industrial property market.

The valuation is based on rental income of €40.8 million giving a gross yield of 9.4% (March 2013: 9.7%) and a capital value per square metre of €425 (March 2013: €417). 

The Company issued 30.9 million new shares at 21 cents per share in August 2013 which reduced the Company's NAV per share by 2.33c. Combining this with the positive impact of increased valuations and profits from operations, the adjusted NAV per share, which excludes deferred tax and fair value adjustment on financial derivative instruments, was 48.96c as at 30 September 2013 (31 March 2013: 48.44c).

* adjusted for disposals

Dividend

The Company is not proposing to pay an interim dividend but provided the Equity Raising and the refinancing is successfully completed expects to recommence paying dividends alongside the announcement of the results for the full year to 31 March 2014.  This is likely to be a smaller dividend whilst we complete the final elements of the refinancing, with a view to increasing to a more substantial dividend for the year ended 31 March 2015 by which time the full benefits of the Equity Raising and the refinancing should be felt. The Company intends to outline an ongoing dividend policy in the 31 March 2014 results.

Outlook

The Board is pleased with the position the Company has now achieved. There is no doubt that the value and the quality of the portfolio has been substantially improved as a result of the Group's asset management activities and the optimisation programme to dispose of non-core assets. The last six months has been focused on the upcoming debt maturities and the implementation of a sustainable capital structure. We are encouraged by the reception we have received from the lending market and we are confident that we can finance our optimised portfolio as well as accretive acquisitions on attractive terms going forward. With the support of our current lenders and potential new lenders we look forward to growing the business through investment in the current portfolio, accretive acquisitions and third party management activities. Following the refinancing and the Equity Raising, the Company now has a strong financial base, both in profitability and capital structure and the Board is very positive in its outlook for the business.

Robert Sinclair

Non-executive Chairman

INDEPENDENT REVIEW REPORT TO SIRIUS REAL ESTATE LIMITED

Introduction

We have been engaged by the Sirius Real Estate Limited ("the Company") to review the unaudited interim condensed set of financial statements in the Interim Report for the six months ended 30 September 2013 which comprises unaudited consolidated statement of comprehensive income, unaudited consolidated statement of financial position, unaudited consolidated statement of changes in equity, unaudited consolidated cash flow statement and the related explanatory notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim condensed set of financial statements.

This report is made solely to the Company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The Interim Report is the responsibility of, and has been approved by, the Directors. The directors are responsible for preparing the Interim Report in accordance with the AIM Rules.

As disclosed in note 2(a), the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the EU. The interim condensed set of financial statements included in this Interim Report has been prepared in accordance with the recognition and measurement requirements of IFRS as adopted by the EU.

Our responsibility

Our responsibility is to express to the Company a conclusion on the unaudited interim condensed set of financial statements in the Interim Report based on our review.

Scope of review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the unaudited interim condensed set of financial statements in the Interim Report for the six months ended 30 September 2013 is not prepared, in all material respects, in accordance with the recognition and measurement requirements of IFRS as adopted by the EU and the AIM Rules.

Emphasis of matter - going concern

In forming our conclusion on the interim condensed set of financial statements, which is not modified, we have considered the adequacy of the disclosure made in note 2 to the interim condensed set of financial statements concerning the group's ability to continue as a going concern. In particular, the successful refinancing of the Group's debt is dependent upon the successful raising of €40 million by way of an issue of new ordinary shares. These conditions, along with the other matters explained in note 2 to the interim condensed set of financial statements, indicate the existence of a material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern. The interim condensed set of financial statements do not include the adjustments that would result if the group was unable to continue as a going concern.

KPMG Channel Islands Limited
Chartered Accountants

Guernsey
3 December 2013

Unaudited consolidated statement of comprehensive income

for the six months ended 30 September 2013

	Notes	(Unaudited) six months ended 30 September 2013 €000	(Unaudited) six months ended 30 September 2012 €000	(Audited) twelve months ended 31 March 2013 €000
Rental income	4	23,626	23,886	46,115
Direct costs	5	(8,160)	(8,883)	(16,889)
Net rental income		15,466	15,003	29,226
Surplus/(deficit) on revaluation of investment properties	12	5,215	(7,867)	(35,776)
Loss on disposal of properties		(336)	(719)	(1,201)
Administrative expenses	5	(2,222)	(1,641)	(4,684)
Other operating expenses	5	(1,058)	(1,190)	(2,411)
Operating profit/(loss)		17,065	3,586	(14,846)
Finance income	8	41	15	25
Finance expense	8	(6,182)	(8,480)	(14,998)
Change in fair value of derivative financial instruments		81	(660)	350
Profit/(loss) before tax		11,005	(5,539)	(29,469)
Taxation	9	(716)	(1,550)	(783)
Profit/(loss) for the period		10,289	(7,089)	(30,252)
Profit/(loss) attributable to:
Owners of the Company		10,283	(7,082)	(30,227)
Non-controlling interest		6	(7)	(25)
Profit/(loss) for the period		10,289	(7,089)	(30,252)
Earnings per share
Basic comprehensive income for the period attributable to ordinary equity holders of the Parent Company	10	3.13c	(2.23)c	(9.52)c
Diluted comprehensive income for the period attributable to ordinary equity holders of the Parent Company	10	2.98c	(2.23)c	(9.52)c

The notes on pages 12 to 22 form an integral part of these interim condensed set of financial statements.

Unaudited consolidated statement of financial position

as at 30 September 2013

	Notes	(Unaudited) 30 September 2013 €000	(Unaudited) 30 September 2012 €000	(Audited) 31 March 2013 €000
Non-current assets
Investment properties	12	420,912	446,355	410,489
Plant and equipment		2,043	3,067	2,538
Goodwill	14	3,738	3,738	3,738
Total non-current assets		426,693	453,160	416,765
Current assets
Trade and other receivables		8,649	7,780	9,442
Prepayments		711	702	494
K-Bonds I Junior Debt taken by SRE	15	2,000	-	-
Derivative financial instruments	19	-	1	-
Cash and cash equivalents	16	16,251	7,115	16,718
Investment property held for sale	13	7,720	26,501	27,657
Total current assets		35,331	42,099	54,311
Total assets		462,024	495,259	471,076
Current liabilities
Trade and other payables	17	(18,568)	(17,326)	(27,824)
Interest-bearing loans and borrowings	18	(191,360)	(246,244)	(258,151)
Current tax liabilities		-	(712)	-
Derivative financial instruments	19	(3)	(14,515)	(5)
Total current liabilities		(209,931)	(278,797)	(285,980)
Non-current liabilities
Interest-bearing loans and borrowings	18	(80,849)	(39,489)	(31,239)
Derivative financial instruments	19	(113)	-	(192)
Deferred tax liabilities	9	(3,172)	(2,793)	(2,636)
Total non-current liabilities		(84,134)	(42,282)	(34,067)
Total liabilities		(294,065)	(321,079)	(320,047)
Net assets		167,959	174,180	151,029
Equity
Issued share capital	20	-	-	-
Other distributable reserve		310,278	303,625	303,637
Retained earnings		(142,342)	(129,480)	(152,625)
Total equity attributable to the equity holders of the Parent Company		167,936	174,145	151,012
Non-controlling interests		23	35	17
Total equity		167,959	174,180	151,029

The notes on pages 12 to 22 form an integral part of these interim condensed set of financial statements.

The interim condensed set of financial statements were approved by the Board of Directors on 3 December 2013 and were signed on its behalf by:

Robert Sinclair

Director

Unaudited consolidated statement of changes in equity

for the six months ended 30 September 2013

	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
Loss for the period	-	-	(7,082)	(7,082)	(7)	(7,089)
As at 30 September 2012	-	303,625	(129,480)	174,145	35	174,180
Share-based payment transactions	-	12	-	12	-	12
Loss for the period	-	-	(23,145)	(23,145)	(18)	(23,163)
As at 31 March 2013	-	303,637	(152,625)	151,012	17	151,029
Shares issued, net of costs	-	6,397	-	6,397	-	6,397
Share-based payment transactions	-	244	-	244	-	244
Profit for the period	-	-	10,283	10,283	6	10,289
As at 30 September 2013	-	310,278	(142,342)	167,936	23	167,959

The notes on pages 12 to 22 form an integral part of these interim condensed set of financial statements.

Unaudited consolidated statement of cash flows

for the six months ended 30 September 2013

	(Unaudited) six months ended 30 September 2013 €000	(Unaudited) six months ended 30 September 2012 €000	(Audited) twelve months ended 31 March 2013 €000
Operating activities
Profit (loss) before tax	11,005	(5,539)	(29,469)
Loss on sale of properties	336	719	1,201
Adjustments for:
Share-based payments	244	-	12
Surplus on revaluation of investment properties	(5,215)	7,867	35,776
Change in fair value of derivative financial instruments	(81)	660	(350)
Depreciation	494	501	1,032
Finance income	(41)	(15)	(25)
Finance expense	6,182	8,480	14,998
Cash flows from operations before changes in working capital	12,924	12,673	23,175
Changes in working capital
Decrease/(increase) in trade and other receivables	568	1,561	111
(Decrease)/increase in trade and other payables	(5,071)	(3,387)	(329)
Taxation paid	(226)	(224)	(590)
Cash flows from operating activities	8,195	10,623	22,367
Investing activities
Development expenditure	(1,868)	(1,609)	(3,531)
Purchase of plant and equipment	(99)	(125)	(132)
Net Proceeds on disposal of properties	11,013	6,367	20,450
K-Bonds I Junior Debt taken by SRE	(2,000)	-	-
Interest received	41	15	25
Cash flows used in investing activities	7,087	4,648	16,812
Financing activities
Issue of shares	6,397	-	-
Proceeds from loans	52,000	-	33,500
Repayment of loans	(68,452)	(9,353)	(51,010)
Finance charges paid	(5,694)	(7,948)	(14,096)
Cash flows from financing activities	(15,749)	(17,301)	(31,606)
Decrease in cash and cash equivalents	(467)	(2,030)	7,573
Cash and cash equivalents at the beginning of the period	16,718	9,145	9,145
Cash and cash equivalents at the end of the period	16,251	7,115	16,718

The notes on pages 12 to 22 form an integral part of these interim condensed set of financial statements.

Notes forming part of the financial statements

for the six months ended 30 September 2013

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 interim condensed set of 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 interim condensed set of consolidated financial statements of the Group as at and for the year ended 31 March 2013 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.siriusrealestate.com.

2. Significant accounting policies

(a) Basis of preparation

The interim condensed set of consolidated financial statements have been prepared on a historical cost basis, except for investment properties and derivative financial instruments which have been measured at fair value. The interim condensed set of 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 2013 have been prepared in accordance with IFRSs as adopted by the EU and The Companies (Guernsey) Law, 2008. The interim set of consolidated financial statements included in this Interim Report has been prepared in accordance with the recognition and measurement requirements of IFRSs as adopted by the EU. 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 2013. 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 2013.

Going concern

The Directors note the following in their deliberations on whether the going concern basis is appropriate for the interim condensed set of financial statements.

The Group reported a profit before tax for the period of €11.0 million but net current liabilities of €175 million remain. The Group's property portfolios are mainly funded by external debt facilities. The loan facility with ABN Amro, which at 30 September 2013 stood at €41.0 million, down from €85.3m when it matured in October 2012, was extended to 29 November 2013.  In addition, the loan facility with Berlin-Hannoversche Hypothekenbank AG which stood at €149.4 million as at 30 September 2013, down from €208.7m at 31 March 2013, currently matures on 31 March 2014.

The Company has been in discussion on refinancing and extending the maturity dates of both the ABN Amro and BerlinHyp facilities. However, in order to achieve the refinancing of the loans, these bankers have required changes to the existing loan to value level such that that additional equity will need to be raised by the Company. 

The Group currently plans to raise €40 million by way of an issue of new ordinary shares to existing and new investors. If this equity raising is successful, the Group has received commitments from its existing and additional bankers to issue new loans to replace those facilities which have already expired and those that are expiring in the next six months.

Loan facility with ABN Amro

The loan with ABN Amro expired on 29 November 2013. The loan is secured over six properties which are ring fenced from the other assets and liabilities of the Group. €10 million of the loan was repaid on 1 October 2013.

The Group has agreed in principle a new loan with Macquarie Bank for €32.5 million, this loan is conditional on the Group raising an additional €40 million in equity.

Should the share issue not take place the Group will be unable to repay the outstanding balance with ABN Amro. As a result ABN Amro may enforce its security on those six properties but this would have limited impact on the remainder of the group.

Loan facility with Berlin-Hannoversche Hypothekenbank AG

The loan facility with BerlinHyp currently matures in March 2014. Without refinancing the loan, the Group will not be able to meet the capital repayments as they fall due.

Conditional on raising the €40 million BerlinHyp has agreed with the Company to refinance the current facility with a new loan facility. The €40 million equity to be raised will be used to partly repay the existing €149.4 million loan such that the new facility that will then be entered will be for €115 million and will mature in December 2018.

The raising of the equity is uncertain as there is no certainty that existing and new investors will subscribe for the €40 million that the Group intends to raise.  As a result the refinancing of the loans are also uncertain as they are conditional on the equity funds being raised. All these represent material uncertainties that may cast a significant doubt upon the Group's ability to continue as a going concern.  The Group may, therefore, be unable to realise its assets and discharge its liabilities in the normal course of business but the interim condensed set of consolidated financial statements do not include any adjustments that would result from the going concern basis of preparation being inappropriate. Nevertheless, after making enquiries and considering the uncertainties described above, the Directors believe that they have a reasonable expectation that after the completion of the planned raising of the equity and the refinancing of the loans the Group will be in a position to have adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis of accounting in preparing the condensed set of interim financial statements.

(b) Basis of consolidation

The interim condensed set of consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 30 September 2013. 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 this interim condensed set of 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 2013.

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) six months ended 30 September 2013 €000	(Unaudited) six months ended 30 September 2012 €000	(Audited) twelve months ended 31 March 2013 €000
Rental income from investment properties	23,626	23,886	46,115

5. Operating profit/(loss)

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

Direct costs

	(Unaudited) six months ended 30 September 2013 €000	(Unaudited) six months ended 30 September 2012 €000	(Audited) twelve months ended 31 March 2013 €000
Service charge income	(15,589)	(14,379)	(31,306)
Property costs	23,689	23,202	48,075
Irrecoverable property costs	8,100	8,823	16,769
Property management fee	60	60	120
Direct costs	8,160	8,883	16,889

Administrative expenses

	(Unaudited) six months ended 30 September 2013 €000	(Unaudited) six months ended 30 September 2012 €000	(Audited) twelve months ended 31 March 2013 €000
Audit fee	159	166	319
Legal and professional fees	587	979	2,056
Other administration costs	624	282	772
Non‑recurring costs	852	214	1,537
Administrative expenses	2,222	1,641	4,684

Other operating expenses

	(Unaudited) six months ended 30 September 2013 €000	(Unaudited) six months ended 30 September 2012 €000	(Audited) twelve months ended 31 March 2013 €000
Directors' fees	71	126	201
Bank fees	40	58	128
Depreciation	494	501	1,032
Marketing and other expenses	453	505	1,050
Other operating expenses	1,058	1,190	2,411

The Board of Directors consisted of five members during the entire reporting period.

6. Employee costs and numbers

	(Unaudited) six months ended 30 September 2013 €000	(Unaudited) six months ended 30 September 2012 €000	(Audited) twelve months ended 31 March 2013 €000
Wages and salaries	3,219	3,241	7,193
Social security costs	654	525	1,607
Other employment costs	8	65	14
	3,881	3,831	8,814

Since the internalisation of the Asset Management Agreement on 30 January 2012, all employees are employed directly by Sirius Facilities GmbH and Sirius Facilities (UK) Limited, both Group subsidiary companies. The average number of persons employed by the Group in the reporting period was 154 (30 September 2012: 161), expressed in full-time equivalents.

7. Equity-settled share-based payments

The Group has a long-term incentive plan for the benefit of certain key management personnel. As a result of this plan, 1,220,000 shares were granted and allotted to the personnel involved in the plan during the reporting period. An expense of €244,000 was recognised in the consolidated statement of comprehensive income to 30 September 2013.

8. Finance income and expense

	(Unaudited) six months ended 30 September 2013 €000	(Unaudited) six months ended 30 September 2012 €000	(Audited) twelve months ended 31 March 2013 €000
Bank interest income	41	15	25
Finance income	41	15	25
Bank interest expense	(5,694)	(7,948)	(14,096)
Amortisation of capitalised finance costs	(488)	(532)	(902)
Finance expense	(6,182)	(8,480)	(14,998)
Net finance expense	(6,141)	(8,465)	(14,973)

9. Taxation

Consolidated statement of comprehensive income

	(Unaudited) six months ended 30 September 2013 €000	(Unaudited) six months ended 30 September 2012 €000	(Audited) twelve months ended 31 March 2013 €000
Current income tax
Current income tax charge	(498)	(745)	(327)
Adjustments in respect of prior period	318	(127)	65
	(180)	(872)	(262)
Deferred tax
Relating to origination and reversal of temporary differences	(536)	(678)	(521)
Income tax charge reported in the statement of comprehensive income	(716)	(1,550)	(783)

Deferred income tax liability

	(Unaudited) six months ended 30 September 2013 €000	(Unaudited) six months ended 30 September 2012 €000	(Audited) twelve months ended 31 March 2013 €000
Opening balance	2,636	2,115	2,115
Release due to disposals	-	-	(43)
Revaluation of investment properties and derivative financial instruments **	536	678	564
Balance as at period end	3,172	2,793	2,636

**  Movement refers to the revaluation of investment properties to fair value, the recognition of derivatives and adjustments for lease incentives (e.g. rent free periods).

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.

10. Earnings per share

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

	(Unaudited) six months ended 30 September 2013 €000	(Unaudited) six months ended 30 September 2012 €000	(Audited) twelve months ended 31 March 2013 €000
Earnings
Profit/(loss) for the period attributable to the equity holders of the parent	10,283	(7,082)	(30,227)
Basic and diluted earnings	10,283	(7,082)	(30,227)
Add back revaluation deficit/(surplus), net of related tax	(4,679)	8,545	36,296
Add back change in fair value of derivative financial instruments	(81)	660	(350)
Add back non-recurring costs	852	214	1,537
Loss on sale of properties	336	719	1,201
Adjusted earnings	6,711	3,056	8,457
Number of shares
Weighted average number of ordinary shares for the purpose of basic earnings per share	328,708,966	317,523,176	317,559,843
Weighted average number of ordinary shares for the purpose of diluted earnings per share	349,542,300	317,523,176	317,559,843
Weighted average number of ordinary shares for the purpose of adjusted earnings per share	328,708,966	317,523,176	317,559,843
Basic earnings per share	3.13c	(2.23)c	(9.52)c
Diluted earnings per share	2.98c	(2.23)c	(9.52)c
Adjusted earnings per share	2.04c	0.96c	2.66c

The number of shares has been adjusted for the 9,001,824 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.

For the purpose of calculating diluted earnings per share, interest expense on convertible loans in the amount of €132,277.40 was added back into the profit for the period, resulting in an adjusted profit of €10,415,290.

11. Net assets per share

	(Unaudited) 30 September 2013 €000	(Unaudited) 30 September 2012 €000	(Audited) 31 March 2013 €000
Net assets
Net assets for the purpose of assets per share (assets attributable to the equity holders of the parent)	167,936	174,145	151,012
Deferred tax arising on revaluation of properties	3,172	2,793	2,636
Derivative financial instruments	116	14,514	197
Adjusted net assets attributable to equity holders of the parent	171,224	191,452	153,845
Number of shares
Number of ordinary shares for the purpose of net assets per share	349,750,547	317,523,176	317,578,176
Net assets per share	48.02c	54.84c	47.55c
Adjusted net assets per share	48.96c	60.30c	48.44c

The number of shares has been adjusted for the 9,001,824 shares held by the Company as Treasury Shares.

12. 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:

	(Unaudited) 30 September 2013 €000	(Unaudited) 30 September 2012 €000	(Audited) 31 March 2013 €000
Investment properties at market value	434,260	474,000	440,020
Adjustment in respect of lease incentives	(2,122)	(2,092)	(2,132)
Additional write-downs	(3,506)	-	(1,795)
Reclassified as investment properties held for sale	(7,720)	(25,553)	(25,604)
Balance as at period end	420,912	446,355	410,489

The fair value of the Group's investment properties at 30 September 2013 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.

The weighted average lease duration was three years.

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

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

	(Unaudited) 30 September 2013 €000	(Unaudited) 30 September 2012 €000	(Audited) 31 March 2013 €000
Total investment properties at market value per valuer's report as at 1 April	440,020	485,740	485,740
Additions and subsequent expenditure	1,752	1,664	4,145
Adjustment in respect of lease incentives	(9)	191	232
Disposals	(12,760)	(7,060)	(15,500)
Reclassified as held for sale	-	-	(5,380)
Surplus/(deficit) on revaluation	5,215	(7,867)	(35,776)
Write-downs to selling price recorded in deficit on revaluation	42	1,332	6,559
Total investment properties at market value per valuers' report as at end of period	434,260	474,000	440,020

13. Investment properties held for sale

	(Unaudited) 30 September 2013 €000	(Unaudited) 30 September 2012 €000	(Audited) 31 March 2013 €000
Bonn Königswinter building	-	830	-
Bonn Königswinter buildings and land	-	1,450	-
Berlin Breitenbachstr. site	-	2,344	-
Bremen Brinkmann land	187	187	187
Berlin Gartenfeldstr. land	-	1,975	1,975
Merseburg McDonalds building	-	1,029	1,029
Bremen Doetlingerstr. site	-	8,653	8,653
Leinfelden-Echterdingen site	-	5,188	-
Bonn Königswinter rest of site	-	2,366	-
Troisdorf site	-	1,673	-
Bonn-Siemensstr. land	-	620	-
Bonn-Siemensstr. land	186	186	186
Cottbus site	297	-	297
Regensburg site	-	-	6,287
Rostock Goethestr. site	-	-	965
Düsseldorf Wiesenstraße land	4,050	-	965
Bremen-Fabrikenufer site	3,000	-	3,000
Investment properties held for sale included in year end valuation	7,720	26,501	22,579
Leinfelden-Echterdingen site not included in year end valuation	-	-	5,078
Balance as at period end	7,720	26,501	27,657

On 14 August 2012, the Company reached an agreement to dispose of a section of land at the Bremen Brinkmann site for €187,000. The disposal has been notarised and, subject to being included on the land register, it will be completed in the next period.

On 30 October 2012, the Company reached an agreement to dispose of a further 2,743 sqm of land at the Bonn Siemensstr. site for  €186,000. 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 reached an agreement to sell the property at the Cottbus site for €300,000. The site, which is a mixed-use site with office and storage space, is 78% 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.

The Company is in the final stages of marketing the Bremen-Fabrikenufer site. The transaction is expected to be notarised and completed in the next period.

On 28 October 2013, the Company reached an agreement to dispose of a section of land at the Düsseldorf Wiesenstraße site for €4,200,000. The sale is for 37,900 sqm and has been notarised.  All conditions for the closing of the transaction have been met and the purchase price should be transferred within the next weeks.

14. Goodwill

	(Unaudited) 30 September 2013 €000	(Unaudited) 30 September 2012 €000	(Audited) 31 March 2013 €000
Opening balance	3,738	3,738	3,738
Additions	-	-	-
Impairment	-	-	-
Closing balance	3,738	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.

15. K-Bonds I Junior Debt taken by SRE

Four of the Company's subsidiaries raised €52 million via a secured bond agreement. The Bond is split into a 10 year senior tranche of €45 million with a fixed interest rate of 4%, and no amortisation, as well as a 7 year junior tranche of €7 million which has a fixed interest rate of 6%, and is fully amortised over the term of the facility. The Bond is secured on three assets with a combined DTZ valuation at 30 September 2013 of €76.2m.

SRE subscribed initially for €4 million of the more expensive junior debt itself while retaining the flexibility to sell it on to investors in the future. The Company sold €2m of the investment in September 2013 and the remaining €2m investment was sold on 2 October 2013.

16. Cash and cash equivalents

	(Unaudited) 30 September 2013 €000	(Unaudited) 30 September 2012 €000	(Audited) 31 March 2013 €000
Cash at banks and in hand	16,251	7,115	16,718
Balance as at period end	16,251	7,115	16,718

The fair value of cash is €16,250,531 (31 March 2013: €16,718,288).

As at 30 September 2013 €14,251,138 (31 March 2013: €8,995,249) of cash is held in blocked accounts. Of this €2,787,567 (31 March 2013: €2,651,345) relates to deposits received from tenants. An amount of €15,522 (31 March 2013: €15,522) is cash held on escrow as requested by a supplier and €116,074 (31 March 2013: €115,503) is held in a restricted account for office rent deposit. An amount of €11,331,975 (31 March 2013: €6,212,879) relates to amounts reserved for future bank loan interest and amortisation payments.

17. Trade and other payables

	(Unaudited) 30 September 2013 €000	(Unaudited) 30 September 2012 €000	(Audited) 31 March 2013 €000
Trade payables	3,850	4,541	6,658
Accrued expenses	7,923	6,266	7,512
Accrued interest	738	1,052	596
Other payables	6,057	5,467	13,058
Balance as at period end	18,568	17,326	27,824

18. Interest‑bearing loans and borrowings

	Effective interest rate  per cent		Maturity	(Unaudited) 30 September 2013 €000	(Unaudited) 30 September 2012 €000	(Audited) 31 March 2013 €000
Current
ABN AMRO
- fixed rate facility	5.85		15 October 2012	-	85,323	-
- floating rate facility	floating		29 November 2013	40,986	-	49,201
Berlin-Hannoversche Hypothekenbank AG
- fixed rate facility	5.46		31 March 2013	-	48,990	-
- hedged floating rate facility	floating		30 June 2013	-	111,001	-
- capped floating rate facility	floating		31 December 2013	-	1,383	-
- floating rate facility	floating		31 March 2014	149,391	-	208,688
Macquarie Bank Limited
- hedged floating rate facility	floating		17 January 2017	517	-	517
- floating rate facility	floating		17 January 2017	195	-	195
K-Bonds I
- fixed rate facility	6.00		31 July 2020	1,000	-	-
Capitalised finance charges on all loans				(729)	(453)	(450)
				191,360	246,244	258,151
Non-current
Berlin-Hannoversche Hypothekenbank AG
- capped floating rate facility	floating		31 December 2013	-	39,542	-
Macquarie Bank Limited
- hedged floating rate facility	floating		17 January 2017	19,483	-	20,165
- floating rate facility	floating		17 January 2017	7,365	-	7,623
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				(1,999)	(53)	(1,549)
				80,849	39,489	31,239
Total				272,209	285,733	289,390

The Group has pledged 29 (31 March 2013: 33) investment properties to secure related interest-bearing debt facilities granted to the Group. The 29 (31 March 2013: 33) properties had a combined valuation of €428,632,335 as at 30 September 2013 (31 March 2013: €438,733,976).

ABN AMRO Bank N.V.

This facility had €100,951,940 drawn down, of which €59,965,692 has been amortised to 30 September 2013, resulting in a liability of €40,986,248 as at 30 September 2013. A further €9,672,932 was amortised on 1 October 2013, resulting in a remaining liability of €31,313,316. Until 15 October 2012, the interest was fixed at a weighted average interest rate of 5.85% per annum. The final repayment date was 15 October 2012.

Through a series of agreements, the facility has been extended through to 29 November 2013. The extended loan is a floating rate facility at 6.0% plus EURIBOR.

The loan is secured over six (31 March 2013: 10) 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 €77,109,150 has been amortised, resulting in a liability of €149,390,850 at September 2013.

At 28 March 2013 €31,119,000 (2012: €22,125,645) had been amortised, resulting in a liability of €195,381,000. On that date, the three loan facilities which were to expire on 31 March 2013, 30 June 2013 and 31 December 2013 were all extended in one new facility to 31 March 2014.  In addition, the interest rate derivatives attached to these loans valuing €13,307,000 were terminated and the associated liabilities added to the loan.  As a result, the loan liability at 31 March 2013 was €208,688,000. The new facility has an interest rate of 2.50% margin over three months EURIBOR plus a minimal liquidity surcharge.

Effective 1 August 2013, four properties previously financed with this facility were refinanced with a loan granted by K-Bonds in the amount of €52,000,000. The balance due to BerlinHyp for the four properties was €46,947,450. To release these assets from the facility, the Company paid an additional amount of €9,000,000 which was further applied as amortisation against the facility.

This remaining facility is secured over 14 properties (31 March 2013: 18) and is subject to various covenants with which the Group has complied

Macquarie Bank Limited

On 17 January 2013, the Company agreed to a facility agreement with Macquarie Bank Limited for €28,500,000, of which €939,918 has been amortised to date, resulting in a liability of €27,560,082 as at 30 September 2013. 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. €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

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 million convertible loan notes due 2018 (the "Loan Notes"). The entire issue of €5 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,  24.96% 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, thereby facilitating the ongoing discussion with existing banks to refinance debt facilities.

19. 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) 30 September 2013		(Unaudited) 30 September 2012		(Audited) 31 March 2013
	Carrying amount €000	Fair value €000	Carrying amount €000	Fair value €000	Carrying amount €000	Fair value €000
Financial assets
Cash	16,251	16,251	7,115	7,115	16,718	16,718
K-Bonds I Junior Debt	2,000	2,000	-	-	-	-
Trade receivables	1,609	1,609	2,310	2,310	3,790	3,790
Derivative financial instruments	-	-	1	1	-	-
Financial liabilities
Trade payables	3,850	3,850	4,541	4,541	6,658	6,658
Derivative financial instruments	116	116	14,515	14,515	197	197
Interest‑bearing loans and borrowings:
Floating rate borrowings	197,937	197,937	-	-	257,889	257,889
Floating rate borrowings - hedged[*]	20,000	20,000	111,001	111,001	28,500	28,500
Floating rate borrowings - capped	-	-	40,925	40,925	-	-
Fixed rate borrowings	52,000	51,753	134,313	135,252	5,000	5,000

*   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 Macquarie Bank Limited. The swap contracts mature on 23 July 2016.

20. Issued share capital

	Number of shares	Share capital €
Authorised
Ordinary shares of no par value	Unlimited	-
As at 30 September 2013	Unlimited	-
	Number of shares	Share capital €
Issued and fully paid
Ordinary shares of no par value
Issue of ordinary shares	327,800,000	-
Share brought back and held in treasury	(25,576,824)	-
Issued Treasury Shares during the year	15,300,000	-
As at 31 March 2012	317,523,176	-
Issued Treasury Shares during the year	55,000	-
As at 31 March 2013	317,578,176	-
New shares issued	30,952,371	-
Issued Treasury Shares during the year	1,220,000	-
As at 30 September 2013	349,750,547	-

In August 2013, the Company conducted an equity raising through the issue of 30,952,371 ordinary shares of no par value ("New Shares"). These shares were issued at a price of 21 cents per share, representing a discount of 6.67% to the then prevailing share price, to new and existing shareholders and rank pari passu in all respects with previously existing issued shares of the Company including the right to receive all dividends and other distributions declared after admission.

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 9,001,824 of its own shares, which continue to be held as Treasury. No share buybacks were made in the period.

21. 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 2013.

22. Capital commitments

As at 30 September 2013 the Group had contracted capital expenditure on existing properties of €1,296,829 (31 March 2013: €838,866) and commitments of €549,836 (31 March 2013: €711,553) from office rental contracts. These were committed but not yet provided for.

Shareholder information and corporate details

Directors

Robert Sinclair

(Non-executive Chairman)

Ian Clarke

(Non-executive Director)

Rolf Elgeti

(Non-executive Director)

Wessel Hamman

(Non-executive Director)

James Peggie

(Non-executive Director)

Registered office

PO Box 119
Martello Court
Admiral Park
St. Peter Port
Guernsey GY1 3HB
Channel Islands
www.siriusrealestate.com

Registered number

Incorporated in Guernsey under The Companies (Guernsey) Laws, 2008, as amended, under number 46442

Company secretary and administrator

Intertrust Fund Services (Guernsey) Limited

PO Box 119
Martello Court
Admiral Park
St. Peter Port
Guernsey GY1 3HB
Channel Islands

Nominated adviser and broker

Peel Hunt LLP

Moor House
120 London Wall
London EC2Y 5ET

Property valuers

DTZ Zadelhoff Tie Leung GmbH

Eschersheimer
Landstrasse 6
60322 Frankfurt am Main
Germany

Auditors

KPMG Channel Islands Limited

20 New Street
St. Peter Port
Guernsey GY1 4AN
Channel Islands

Guernsey solicitors

Carey Olsen

PO Box 98
7 New Street
St. Peter Port
Guernsey GY1 4BZ
Channel Islands

UK solicitors

Norton Rose LLP

3 More London Riverside
London SE1 2AQ

 

END

 

 

IR DDBDDGXGBGXX