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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Sirius Real Estate Ld | LSE:SRE | London | Ordinary Share | GG00B1W3VF54 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -2.75 | -2.89% | 92.50 | 92.95 | 93.65 | 92.50 | 92.50 | 92.50 | 12,780 | 08:02:03 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Investment Trust | 270.1M | 79.6M | 0.0590 | 16.14 | 1.28B |
From Apr 2019 to Apr 2024
TIDMSRE
RNS Number : 2322Q
Sirius Real Estate Limited
28 November 2016
Sirius Real Estate Limited
("Sirius", the "Group" or the "Company")
Half Year Results for the six months ended 30 September 2016
Demand for flexible and conventional workspace drives earnings growth in H1 2016
Net Rental Income and Recurring Profits* up by 35.3 per cent and 87.2 per cent, Funds from Operations** by 72.7 per cent
Total income increased by 25.9 per cent to EUR32.6 million (2015: EUR25.9 million
Like for like annualised rental income increased by 2.4 per cent to EUR64.5 million (31 March 2016 EUR63.0 million***)
Current annualised rental income is EUR69.1 million****
Recurring profit before tax increased by 87.2 per cent to EUR16.1 million (2015: EUR8.6 million)
Funds from Operations ("FFO") increased by 72.7 per cent to EUR17.1 million (2015: EUR9.9 million)
FFO was 2.13c per share and Adjusted earnings per share ("EPS") 2.01c per share (2015: 1.41c per share and 1.25c per share respectivel
Interim dividend declared of 1.39c per share, an increase of 51.1 per cent (2015: 0.92c)
(*Reported profit before tax adjusted for property revaluation, change in fair value of derivative financial instruments and non-recurring items including expenses relating to the Long Term Incentive Plan.)
(**Recurring profit before tax adjusted for depreciation, amortisation of financing fees and current tax receivable/incurred.)
(*** Including the initial annualised rental income of the Markgröningen and Krefeld acquisitions which both completed in May 2016.)
(**** Including the initial annualised rental income of the Wiesbaden acquisition which completed on 31 October 2016.)
EUR30 million equity raise and accretive new acquisitions
Completed a EUR30.0 million private placement in June 2016 at EUR0.53 per share
Three acquisitions completed in the period and one post period end for a total of EUR68.5 million adding EUR7.2 million to annualised rental income and EUR6.0 million of Net Operating Income ("NOI") representing an EPRA net initial yield of 8.8 per cent
Average occupancy of acquisition sites is 69 per cent giving significant scope to drive income and capital growth
Valuation uplift from assets acquired in period of EUR4.1 million as at 30 September 2016
Further long-term, low interest rate financing
As at period end, average cost of debt down to 2.2 per cent (31 March 2016: 3.0 per cent) and debt maturity at 5.8 years (2015: 5 years)
Completion of new EUR70 million BerlinHyp financing post period end at 1.48 per cent interest rate and 7 year term:
o reduces average cost of debt to below 2.0 per cent post period end, and
o extends debt maturity to 6.2 years
Loan to Value ("LTV") at 41.7 per cent as at 30 September 2016 increasing to 44.6 per cent after the completion of the Wiesbaden acquisition and the new BerlinHyp financing deal. Board confirms a target of 40.0 per cent by no later than 31 March 2018
Valuation uplift driven by new income and positive yield shift
Portfolio valued at EUR770.9 million including asset held for sale (31 March 2016: EUR687.5 million)
o Following completion of the Wiesbaden acquisition post period end, portfolio increased to EUR797.2 million
Like for like portfolio valuation increased by EUR29.5 million or 4.2 per cent to EUR724.7 million reflecting annualised rental income increases and 17 bps of yield compression
Adjusted net asset value ("NAV") per share increased by 4.3 per cent to 55.62c (31 March 2016: 53.35c)
Strong demand for conventional and flexible workspace
Like for like occupancy at record high of 81 per cent (31 March 2016: 80 per cent)
Rate per square metre of the portfolio increased to EUR5.10 with like for like rate per square metre increasing to EUR5.07 (31 March 2016: EUR5.02)
New lettings of 70,626 square metres in the period at an average rate of EUR5.89 per square metre (2015: 70,201 square metres at EUR5.10 per square metre)
Expanded capex programme continues to deliver above target returns
Conversion of sub-optimal areas into high-quality conventional and flexible workspace continues to deliver strong returns
Transformed a further 30,824 square metres of space and produced an additional EUR1.1 million of annualised rental income in the period
A further 67,073 square metres is in progress or has been identified for conversion. The total programme requires a further EUR9.7 million of investment to produce an estimated EUR3.9 million of annualised rental income
Andrew Coombs, Chief Executive Officer of Sirius Real Estate, said:
"The strength of our trading performance reflects well on our ability to extract value from our existing portfolio and our ability to acquire business parks which are both earnings accretive from acquisition as well as offering additional income and capital growth potential. There remains significant scope for further organic growth within our current portfolio and we continue to see real opportunity within our acquisition pipeline.
Over 99 per cent of German enterprises are SMEs and 34 per cent of these are enterprises with fewer than 10 employees. This is the market which is seeking flexible leases to meet ever evolving space requirements and Sirius is well placed to take advantage of these market dynamics with our flexible multi-tenanted workspaces.
We are encouraged by the results we are achieving to continue transforming our portfolio of assets under our investment programmes. Now that we have reduced our average cost of debt to below 2.0 per cent and the average debt expiry to more than six years we are well placed to continue to execute our strategy in a sustainable manner over the medium to long term.
As part of supporting our ambitions for the business we are making good progress towards moving up to the main markets of both the London and Johannesburg Stock Exchanges."
Enquiries:
Sirius Real Estate +49 (0)30 285010110
Andrew Coombs, CEO
Alistair Marks, CFO
Peel Hunt +44 (0)20 7418 8900
Capel Irwin
Edward Fox
Canaccord Genuity Limited +44 (0)20 7523 8000
Bruce Garrow
Chris Connors
JSE Sponsor: PSG Capital +27 (0)21 887 9602
David Tosi
Willie Honeyball
Novella +44 (0)20 3151 7008
Tim Robertson
Toby Andrews
Background to Sirius Real Estate:
Established in February 2007, Sirius Real Estate is a leading operator of branded business parks providing conventional space and flexible workspace in Germany. The Group owns and operates a portfolio of 43 business parks which together include over 400 buildings offering over 1.4 million square metres of gross lettable space comprising mainly offices, production areas and storage facilities. Sirius operates out of its head office in Berlin and employs around 200 people in Germany. In December 2014, Sirius was the first company to gain a secondary listing on the AltX of the Johannesburg Stock Exchange under its fast track process, in addition to its existing primary listing on the AIM market of the London Stock Exchange.
For more information, please visit: www.sirius-real-estate.com
Interview with CEO Andrew Combs with BRR Media, to view: www.sirius-real-estate.com
Images of the Sirius property portfolio are available from: https://www.flickr.com/photos/sirius_re/
Business Update
Introduction
The six month period to 30 September 2016 has been good for Sirius and saw the Group continue to deliver strong trading results with acquisitions and organic growth driving an increase in recurring profit to EUR16.1 million, up 87.2 per cent on the same period last year. Indicative of the organic performance was an increase in the like for like occupancy to 81.0 per cent (31 March 2016: 80.0 per cent), a record for the Group, as well as the increase in the like for like rate per square metre to EUR5.07 (31 March 2016 EUR5.02).
Acquisition activity was underpinned by a successful EUR30.0 million equity raise in June 2016 along with the refinancing of two banking facilities on significantly better terms. Three acquisitions were completed in the period with a further acquisition completing shortly after. All four were immediately earnings enhancing and provide real opportunity for future income and capital growth. The new banking deals that were completed to finance these purchases have again been at attractive long-term fixed interest rates reducing our weighted average cost of debt to below 2.0 per cent and extending our average debt expiry to 6.2 years. This has prolonged the Group's exposure to the current low interest rate environment and the higher returns to shareholders that come from this. Whilst taking advantage of this refinancing opportunity has increased the LTV temporarily, we are on track and committed to lowering LTV to 40 per cent by 31 March 2018.
The Group's NAV per share and Adjusted NAV per share were boosted by further uplifts in the values of our properties. During the period, the like for like portfolio, excluding acquisitions made since the start of the period, increased in value to EUR724.7 million as at 30 September 2016 (31 March 2016: EUR695.2 million) and the acquisitions which completed in the period were valued at EUR54.9 million representing a small uplift from the total acquisition costs of EUR50.8 million. The revaluation uplift is both income driven as well as reflective of approximately 17 bps of yield compression on the core portfolio. The effect of the continuing capex investment programme in refurbishing sub-optimal space was a key factor in the valuation gain for which EUR7.2 million was invested in total capex in the period. Following the completion of the Wiesbaden asset purchase which happened shortly after the reporting period end, the value of the total portfolio increased to EUR797.2 million*.
(* The Wiesbaden asset is included at cost.)
Company strategy
Our focus is on generating carefully managed risk adjusted total returns for shareholders through a mix of organic and acquisition led growth. Organically the portfolio, which now consists of 43 business parks offering more than 1.4 million square metres of gross lettable space, still has substantial scope for further increases in income and capital value primarily through developing sub-optimal space. Central to this is the Group's capex investment programme which is focused on transforming this space into market-ready, flexible and conventional workspace and is currently achieving high returns.
A differentiating factor for Sirius with regards to realising these returns from investment is the strength of our in-house sales and marketing teams, which generate and develop more than 95 per cent of our leads. The Group's marketing platform has produced an average of 1,049 new leads each month over the last six months and the dedicated call centre and on-site sales force has converted approximately 11.3 per cent of these leads into new sales. Unlike many of our peers, we do not outsource this key business requirement and we believe our in-house capability is a major driver of the Group's high customer enquiry conversion and retention rates and the ability to achieve high rental rates per square metre particularly on our flexible solutions.
The expansion of the portfolio has been through the acquisition of new business parks, which have almost all been acquired with EPRA net initial yields of more than 8 per cent. This, when combined with our ability to access long term debt on attractive terms, makes for a compelling proposition and an excellent starting point for our asset management teams to apply their expertise in introducing higher yielding flexible solutions to vacant and under-utilised spaces.
Significant opportunities remain for the Group to acquire new assets with these same characteristics and the Group actively reviews its portfolio to consider whether there are mature assets with limited income or capital growth opportunity that might be better sold and the capital reinvested in new assets with a higher return profile. The Group has also identified certain non-core assets which it is marketing for sale.
The Group always aims to manage risk across the business. Central to this is the progression towards the Group's LTV target of 40.0 per cent. In addition, we have been extending the term of existing banking facilities whilst switching to very low fixed interest rates for the full term of the new facilities. This has had the effect of not only substantially reducing our cost of debt and extending the average debt expiry as mentioned above, but also significantly improving the interest and debt service cover that we generate from our net operating income. When combined with the value-add capex investment programme, we feel that our strategy is well balanced between risk and return, as we continue to review ways in which we might extend and improve our exposure to the current low interest rate cycle.
Trading performance
For the half year under review, total income was EUR32.6 million (2015: EUR25.9 million) with profit before tax of EUR37.5 million (2015: EUR28.3 million), which includes EUR25.4 million of gains from property revaluations (2015: EUR27.0 million). The recurring profit before tax for the period was up 87.2 per cent to EUR16.1 million (2015: EUR8.6 million) with FFO increasing by 72.7 per cent to EUR17.1 million (2015: EUR9.9 million). FFO per share was 2.13c (2015: 1.41c) and adjusted EPS was 2.01c (2015: 1.25c). The significant increase in recurring profit has come predominantly from organic growth, acquisitions and the new lower interest banking deals that the Group has been securing. Organic growth was driven by like for like annualised rental income increasing by EUR1.5 million to EUR64.5 million in the period representing an increase of 2.4 per cent from the position at the previous year end. Annualised rental income, including the Wiesbaden acquisition completed on 31 October 2016, is EUR69.1 million.
Portfolio valuations
The portfolio, including acquisitions completed in the period, was independently valued at EUR779.6 million by Cushman & Wakefield LLP (31 March 2016: EUR695.2 million) which converts to a book value of EUR770.9 million after directors' impairments of non-core asset valuations and the provision for tenant incentives. In accordance with our stated intention to dispose of non-core assets, the sale of a retail asset located in Merseburg was notarised for EUR5.9 million in the period resulting in this asset being categorised as held for sale at 30 September 2016. This is expected to complete by the end of the financial year. The book value of investment property excluding this asset held for sale is EUR765.0 million.
The like for like valuations have increased by EUR29.5 million or 4.2 per cent over the six month period and the valuations of the sites acquired in the period were EUR54.9 million or 8.1 per cent higher than the acquisition costs. This continues to demonstrate the long-term capital return potential of the Sirius portfolio and the fact that we have purchased well in the period. We have seen approximately 17 bps of yield compression in the period on the core portfolio along with rental income improvements. We continue to see returns from both an income and valuation perspective through the investment into our capex investment programme and from purchasing assets at discounted prices.
The portfolio as at 30 September 2016 comprised 42 assets and has a book value of EUR770.9 million which can be reconciled to the Cushman & Wakefield LLP valuation as follows:
Hot Features
Premium
Valuation Reconciliation to Book Value 30 Sep 2016 31 Mar 2016
EURm EURm
---------------------------------------------------- ------------ ------------
Investment properties at market value* 779.6 695.2
Adjustment in respect of lease incentives -2.8 -2.4
Directors' impairment of non-core asset valuations -5.9 -5.3
---------------------------------------------------- ------------ ------------
Balance as at period end 770.9 687.5
---------------------------------------------------- ------------ ------------
(*Includes assets held for sale)
The 30 September 2016 book valuation of the core portfolio that was held at 31 March 2016 is EUR687.2 million (31 March 2016: EUR657.6 million). This represents an average gross yield of 8.5 per cent (31 March 2016: 8.7 per cent) and a net yield of 7.7 per cent (31 March 2016: 7.9 per cent) which highlights the 17 bps of yield compression we have seen in the period. The average capital value per square metre of the core portfolio is EUR620 (31 March 2016: EUR594). The valuation metrics of our portfolio split between the core portfolio and non-core portfolio (including the Merseburg asset notarised for sale) can be seen in the following table:
Book Annualised Annualised Gross Net Capital Occupancy Rate Vacant
Value Rental NOI Yield Yield Value % Per Space
EURm Income EURm % % Per sq. sq. sq.
EURm m EUR m EUR m (000)
------------- ------- ----------- ----------- ------- ------- --------- ---------- ------- ---------
Core 454.1 40.6 35.1 8.8 7.7 572.2 80.1 5.43 154.0
Core Mature 288.0 23.1 22.6 8.3 7.8 645.3 92.6 5.04 30.7
Non-Core 28.8 3.5 2.0 12.3 6.9 148.0 51.1 3.17 89.1
Other -1.4
------------- ------- ----------- ----------- ------- ------- --------- ---------- ------- ---------
Total 770.9 67.2 58.3 8.7 7.6 537.4 80.0 5.10 273.8
------------- ------- ----------- ----------- ------- ------- --------- ---------- ------- ---------
The valuation improvement in the period is reconciled as follows:
30 Sep 2016 31 Mar 2016
EURm EURm
------------------------------------------------ ------------ ------------
Total investment properties at market value
as per valuer's report as at the beginning of
the period 695.2 550.0
Additions 50.8 82.7
Subsequent expenditure 7.2 15.0
Disposals - -
Surplus on revaluation above capex 26.4 47.5
------------------------------------------------ ------------ ------------
Total investment properties at market value
as per valuer's report as at the end of the
period 779.6 695.2
------------------------------------------------ ------------ ------------
The Adjusted NAV per share, which excludes the provisions for deferred tax and derivative financial instruments, was 55.62c as at 30 September 2016, an increase of 4.3 per cent over the 53.35c as at 31 March 2016. Total Shareholder Return (based on Adjusted NAV), including the 1.30c per share final dividend paid in July, was 6.7 per cent for the period (30 September 2015: 7.3 per cent).
Dividend
The Company's dividend policy continues to pay shareholders 65 per cent of FFO, with the dividend paid semi-annually. As in previous periods, the Company is offering shareholders the ability to receive dividends in scrip rather than cash.
In accordance with this policy, the Board has declared an interim dividend of 1.39c per share for the six month period ended 30 September 2016. The ex-dividend date will be 13 December 2016 for shareholders on the South African register and 15 December 2016 for shareholders on the UK register. The record date will be 15 December 2016 for shareholders on the South African register and 16 December for shareholders on the UK register and the dividend will be paid on 20 January 2017 for shareholders on both registers. A detailed dividend announcement will be made in due course.
Acquisitions
Four acquisitions totalling EUR68.5 million have been completed since the last financial year end, namely Krefeld and Markgröningen which completed in May 2016, Dresden which completed in September 2016 and Wiesbaden which completed in October 2016, shortly after the interim period end.
In June 2016, the Company completed a successful equity fundraising via a private placement which was enlarged from EUR20 million to EUR30 million in response to investor demand. This, along with the refinancing of our existing facilities with BerlinHyp and Deutsche Pfandbriefbank provided funds for the Dresden and Wiesbaden acquisitions and a further EUR10 million remains from the equity raise, most of which the Group has already earmarked for three new smaller transactions which have been notarised and should complete by the end of the financial year. These assets have high vacancy and present an opportunity for significant value-add, whilst also lowering LTV as we do not currently intend to finance them with bank debt. The Group is actively seeking smaller ungeared assets such as these which can be injected into existing debt portfolios as and when we need to refinance in the future.
There was no benefit from the Dresden or Wiesbaden acquisitions in the results for the first half of this financial year but they are both expected to have a positive effect in the second half. The pipeline for further accretive acquisitions is strong and we are confident we can deploy the funds remaining from the June private placement as well as those resulting from the sale of the Merseburg asset and a land sale expected to be completed before the end of the financial year.
The acquisitions that have completed so far this financial year have been immediately earnings enhancing providing a good balance of stable, high-quality income and value added opportunity as shown in the following table:
Site Total Investment Cost Per Annualised Annualised NOI Yield Occupancy
EUR sq.m Acquisition Acquisition % %
EUR Rental Income NOI
EUR EUR
-------------------- ----------------- --------- --------------- ------------- ---------- ----------
Krefeld I 13,475,000 1,176 1,218,603 1,138,290 8.4% 94%
Markgröningen 8,720,000 154 1,321,964 904,872 10.4% 67%
Dresden 28,600,275 538 2,781,105 2,376,284 8.3% 65%
Wiesbaden* 17,658,382 901 1,877,793 1,598,203 9.1% 65%
-------------------- ----------------- --------- --------------- ------------- ---------- ----------
Total 68,453,657 486 7,199,465 6,017,649 8.8% 69%
-------------------- ----------------- --------- --------------- ------------- ---------- ----------
(*Completed post period end)
Of the 13 assets that we have acquired since we began the current acquisitions programme in 2015, we have owned seven of these for more than twelve months up to 30 September 2016. We continue to make solid progress on transforming all these acquired assets and the table below shows the progress made so far on these seven assets by comparing the annualised rental income at 30 September 2016 to that at acquisition and the amount of capex we have invested:
Annualised Annualised Annualised
Total Acquisition Market Value Market Acquisition Rental Income Rental Income
Site Cost (rounded) Value Increase Rental Income for Sep 2016 Increase
EUR EUR % EUR EUR %
-------------
Mahsldorf 19,573,781 22,700,000 16% 1,786,063 1,953,766 9%
Potsdam 29,352,527 34,200,000 17% 2,346,622 2,638,213 12%
Bonn II 3,316,230 6,900,000 108% 530,601 924,020 74%
Aachen
I 18,692,656 22,000,000 18% 1,751,112 2,073,241 18%
Ludwigsburg 7,442,986 9,520,000 28% 969,305 1,098,520 13%
Weilimdorf 5,699,271 5,910,000 4% 510,835 510,835 0%
Heidenheim 18,319,585 20,700,000 13% 1,845,715 1,820,450 -1%
------------- ------------------ ------------- ---------------- --------------- --------------- ---------------
Total 102,397,036 121,930,000 19% 9,740,253 11,019,045 13%
Capex Since
Acquisition Sep 2016 Occupancy Acquisition
Site Occupancy Occupancy Increase to Sep 2016
% % % EUR
------------- ------------ ----------- ---------- -------------
Mahsldorf 85% 90% 5% 524,163
Potsdam 85% 96% 11% 235,413
Bonn II 76% 93% 17% 78,510
Aachen I 75% 87% 12% 352,337
Ludwigsburg 68% 74% 6% 331,282
Weilimdorf 100% 100% 0% 0
Heidenheim 83% 85% 2% 60,031
------------- ------------ ----------- ---------- -------------
Total 80% 87% 7% 1,581,736
We believe there is further progress to be made on these acquisitions as well as on others completed more recently.
Organic rental income growth
Demand for both flexible and conventional workspace continues to be strong from the Group's core German SME customers with new lettings of 70,626 square metres at an average rate of EUR5.89 per square metre being achieved during the period (2015: 70,201 square metres at EUR5.10 per square metre). Comparing this with the total move-outs in the period of 64,422 square metre at an average rate of EUR5.38 per square metre (2015: 90,470 square metre at EUR3.78 per square metre) provides an indication of why like for like occupancy increased to 81 per cent (31 March 2016: 80 per cent) and like for like average rate per square metre rose to EUR5.07 (31 March 2016: EUR5.02). Accordingly we saw a 2.4 per cent increase in the like for like annualised rental income in the period up to EUR64.5 million from EUR63.0 million*. Annualised rental income including the Wiesbaden acquisition completed after period end is EUR69.1 million.
(* Including the initial annualised rental income of the Markgröningen and Krefeld acquisitions which both completed in May 2016)
One of the main drivers of the rental income improvements is the Group's capex investment programme which is continuing to see positive results. As at 30 September 2016, almost three years into the programme, we had completed the transformation of 139,900 square metres of the circa 207,000 square metres identified for investment and investing EUR11.7 million into this space has generated EUR7.6 million per annum of additional annualised rental income so far at around 78 per cent occupancy.
More detail on the programme to date is provided in the following table:
Capex Sq. m Investment Actual Annualised Annualised Occupancy Occupancy Rate Per Rate Per
Investment Budgeted Spend Rental Rental Budgeted Achieved sq. m sq. m
Programme Income Income to Sep Budgeted Achieved
Progress Increase Increase 2016 to Sep
Budgeted Achieved 2016
to Sep
2016
EUR EUR EUR EUR % % EUR EUR
------------ -------- ----------- ----------- ----------- ----------- ---------- ---------- --------- ---------
Completed 139,900 14,025,713 10,823,356 8,411,428 7,627,219 86% 78% 5.81 5.82
In Progress 22,765 5,066,699 788,590 1,318,799 - 83% - 5.89 -
To Commence
in Next
Financial
Year 44,308 4,924,176 86,771 1,764,025 - 74% - 4.48 -
------------ -------- ----------- ----------- ----------- ----------- ---------- ---------- --------- ---------
Total 206,974 24,016,588 11,698,717 11,494,252 7,627,219 83% 53% 5.51 5.82
There still remains significant potential to increase rents and values from this programme with around 67,073 square metres of space still to be converted. The total programme requires a further EUR9.7 million of investment to produce an estimated EUR3.9 million of annualised rental income. In addition to this is the 35 per cent vacancy that has come with both the Dresden and Wiesbaden acquisitions as well another circa 13,000 square metres of recently vacated space and low end Flexilager storage space which we are planning on transforming. The results that are achievable from our investments are indicative of the value-add business model that we run and we look forward to further successes with this over the coming years.
Smartspace
One of the most significant elements of our capex investment initiatives is the transformation of sub-optimal space into our Smartspace products. In the period we have created a further 2,025 square metres of Smartspace Office, 2,008 square metres of Smartspace Workbox and 4,363 square metres of Smartspace Storage from this sub-optimal space which includes space that was being used as our lower end Flexilager storage space. We have further increased the occupancy of Smartspace products to 66 per cent (31 March 2016: 62 per cent) and increased the rate per square metre achieved to EUR6.51 (31 March 2016: EUR6.33). The rental rates we achieve on Smartspace Offices and Smartspace Storage remain particularly encouraging. The table below gives more detail on the Smartspace offerings across the whole portfolio:
Annualised Rate Per
Rental Income sq. m (excl
Smartspace Product Total sq. Occupied (excl Service % Total Annualised Service
Type m sq. m Occupancy Charge) Rental Income Charge)
% EUR EUR
------------------------- ---------- --------- ---------- --------------- ------------------- -------------
Smartspace Office 30,544 23,811 78% 2,180,702 52% 7.63
Smartspace Workbox 5,526 3,723 67% 280,786 7% 6.28
Smartspace Storage 23,699 17,083 72% 1,133,028 27% 5.53
------------------------- ---------- --------- ---------- --------------- ------------------- -------------
Subtotal* 59,769 44,618 75% 3,594,515 86% 6.71
Smartspace Flexilager** 20,668 8,563 41% 561,850 14% 5.47
------------------------- ---------- --------- ---------- --------------- ------------------- -------------
Smartspace Total 80,438 53,181 66% 4,156,365 100% 6.51
(* adjusted for common areas)
(** not adjusted for common areas)
Whilst Smartspace contributes around 6 per cent of the annualised rental income of Sirius, the intention is for it to be at around 10 per cent by the end of the capex investment programme.
Portfolio tenant mix
We have continued to maintain the balance of our tenant mix between the high-yielding flexible Smartspace products and the solid core of anchor tenants. The latter provide our banks with the comfort and stability that they require in order for them to offer us the most competitive interest rates and term lengths whereas the flexible tenants contribute significantly to the high returns we can achieve for our shareholders. The table below illustrates the tenant mix across our portfolio at the end of the reporting period:
% of Total
No. of Occupied Annualised Annualised Rate Per
Type of Tenant Tenants sq. m Rental Income Rental Income sq. m
EUR % EUR
------------------------ --------- ---------- --------------- --------------- ---------
Top 50 anchor Tenants 50 539,431 32,283,912 48% 4.99
Smartspace SME Tenants 1,675 53,181 4,156,365 6% 6.51
Other SME Tenants 1,953 504,911 30,782,128 46% 5.08
------------------------ --------- ---------- --------------- --------------- ---------
Total 3,678 1,097,523 67,222,405 100% 5.10
Finance
The Group continues to reduce the average cost of its borrowings and since the last financial year end completed two refinancing deals which were used to replace existing more expensive facilities as well as part fund the completed acquisitions.
In April 2016 the Group concluded a new seven year EUR137.0 million facility with Berlin and Deutsche Pfandbriefbank to refinance an existing loan with the same syndicate which had an outstanding balance of EUR110.4 million and an average interest rate of 3.61 per cent. The new facility was split in two tranches with Tranche 1, totalling EUR94.5 million charged at a fixed interest rate of 1.66 per cent for the full term of the loan and Tranche 2, totalling EUR42.5 million charged with a floating rate of 1.25 per cent over three month EURIBOR (not less than 0 per cent) for the first year of the loan and a requirement to fix the interest rate on this Tranche thereafter.
After the period end in October 2016 a new seven year EUR70.0 million facility was completed with BerlinHyp with an all-in fixed interest rate of 1.48 per cent for the full term of the loan to replace an existing EUR39.2 million facility which was incurring an all-in fixed interest rate of 2.68 per cent.
These new deals have further reduced the Group's weighted average cost of debt to below 2.0 per cent and increased the weighted average debt expiry to 6.2 years, which further reflects the confidence our lenders have in our asset management platform. This is particularly encouraging when considering the large spread between our recent acquisition yields and the interest rates available to us and highlights the opportunity currently available to the Group. We believe further opportunities exist to take advantage of this yield spread whilst being mindful of maintaining a sensible and sustainable LTV.
The Group's overall LTV reduced to 41.7 per cent as at 30 September 2016 (31 March 2016: 42.8 per cent). After the Wiesbaden acquisition and associated BerlinHyp refinancing the Group's LTV temporarily increased to 44.6 per cent but this is expected to reduce again by the financial year end through amortisation payments and the continuing effect of our investment programme. The Group is committed to achieving a target LTV of 40.0 per cent by no later than 31 March 2018.
Main Market listings
As previously announced, the Company has been considering making applications (the "Applications") to transfer the admission of the Ordinary Shares from AIM to the premium segment of the Official List and to trading on the main market of the London Stock Exchange ("LSE") (the "UK Admission") and from trading on AltX to trading on the Johannesburg Stock Exchange's ("JSE") main board for listed securities (the "JSE Transfer"). Following consultations with the Company's major shareholders and advisers, this process is now underway. The Company has already submitted an application to the JSE and hopes to submit an application to the LSE before the end of 2016 with each of UK Admission and JSE Transfer expected to occur in the early part of 2017. Once finalised, an expected timetable will be notified to shareholders through an appropriate announcement. The Board of Directors believe that the transition will facilitate the longer term ambitions of the Company, increase its appeal to a broader range of international investors and potentially allow the Company to benefit from inclusion in certain indices. Total costs of this process are expected to be in the region of EUR1.6 million.
Board
Neil Sachdev was appointed as a non-executive director in July 2016 and was elected by the Board as Chairman in September 2016, replacing Robert Sinclair who had chaired the Board since 2011. Robert remains as a non-executive director. The Board is seeking at least one additional appointment in connection with its proposed move to the main markets of the LSE and JSE.
Outlook
Sirius's focus is on delivering risk adjusted returns by growing recurring income and capital values through asset management activity, acquiring new sites with the appropriate mix of stability and opportunity and leveraging long-term fixed low interest rate facilities, whilst maintaining LTV at sensible and sustainable levels. Our confidence in achieving this stems from having a balanced portfolio of assets and a deep market understanding which we have developed by managing in detail almost every aspect of our properties over the last 10 years. It is this unique insight and connectivity into our marketplace which gives Sirius a competitive advantage and makes a strong contribution to the returns we generate.
Post Brexit, Germany has fast become the market of choice for many property investors as they seek a safe haven outside of more volatile markets and Sirius is set to benefit from the changing sentiment of managing properties, particularly office and storage space, with flexible solutions. In Q3 of 2016 investment volumes across Europe, as reported by JLL, show Berlin, Munich and Frankfurt as three of the top five cities in terms of investment volume in Europe. This bodes well for Sirius which has 53 per cent of its total portfolio value in and around these three major investment hotspots.
Sirius is also pleased to note the changing sentiment towards the flexible office and storage markets. There is no doubt that we must retain our balance in combining the stability of our conventional space alongside our flexible space, however, we expect to be a beneficiary of the technology driven structural changes occurring, as more people choose to work for smaller firms and seek flexible workspace. These trends work well for Sirius and help to underpin our growth strategies.
Going into the second half of this financial year, the Group is well placed to continue to deliver strong returns to shareholders. Underpinning our confidence is the continuation of our capex investment programme, the on-going application of our asset management techniques to existing and future acquisitions and the potential to crystallise profits on disposing of mature and non-core assets in favour of higher yielding opportunities.
We therefore look forward to an exciting and positive second half of the year.
Unaudited consolidated statement of comprehensive income
(Unaudited) (Unaudited)
six months six months
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
Notes EUR000 EUR000 EUR000
--------------------------------------------- ----- ------------- ------------- ----------
Rental income 4 32,636 25,869 55,790
Direct costs 5 (8,900) (8,329) (15,832)
--------------------------------------------- ----- ------------- ------------- ----------
Net rental income 23,736 17,540 39,958
Surplus on revaluation of investment
properties 12 25,370 27,027 44,168
(Loss)/gain on disposal of properties - (68) -
Administrative expenses 5 (5,041) (1,651) (5,603)
Other operating expenses 5 (1,301) (1,008) (2,199)
--------------------------------------------- ----- ------------- ------------- ----------
Operating profit 42,764 41,840 76,324
Finance income 8 18 29 45
Finance expense 8 (5,147) (13,866) (18,817)
Change in fair value of derivative financial
instruments (126) 271 (476)
--------------------------------------------- ----- ------------- ------------- ----------
Profit before tax 37,509 28,274 57,076
Taxation 9 (4,632) (185) (2,388)
--------------------------------------------- ----- ------------- ------------- ----------
Profit for the period 32,877 28,089 54,688
--------------------------------------------- ----- ------------- ------------- ----------
Profit attributable to:
Owners of the Company 32,862 28,079 54,671
Non-controlling interests 15 10 17
--------------------------------------------- ----- ------------- ------------- ----------
Total comprehensive income for the period 32,877 28,089 54,688
--------------------------------------------- ----- ------------- ------------- ----------
Earnings per share
Basic comprehensive income for the period
attributable to ordinary equity holders
of the Company 10 4.09c 3.97c 7.51c
Diluted comprehensive income for the
period attributable to ordinary equity
holders of the Company 10 3.97c 3.87c 7.13c
--------------------------------------------- ----- ------------- ------------- ----------
Unaudited consolidated statement of financial position
(Unaudited) (Unaudited)
30 September 30 September 31 March
2016 2015 2016
Notes EUR000 EUR 000 EUR000
---------------------------------------- ----- ------------- ------------- ---------
Non-current assets
Investment properties 12 764,990 610,120 687,453
Plant and equipment 1,928 1,764 1,943
Goodwill 14 3,738 3,738 3,738
Deferred tax assets 9 267 - 183
---------------------------------------- ----- ------------- ------------- ---------
Total non-current assets 770,923 615,622 693,317
---------------------------------------- ----- ------------- ------------- ---------
Current assets
Trade and other receivables 15 8,576 27,370 11,936
Derivative financial instruments - 66 19
Cash and cash equivalents 16 24,747 14,114 19,874
Investment properties held for sale 13 5,870 - -
---------------------------------------- ----- ------------- ------------- ---------
Total current assets 39,193 41,550 31,829
---------------------------------------- ----- ------------- ------------- ---------
Total assets 810,116 657,172 725,146
---------------------------------------- ----- ------------- ------------- ---------
Current liabilities
Trade and other payables 17 (27,763) (26,584) (29,541)
Interest-bearing loans and borrowings 18 (6,204) (4,347) (5,642)
Current tax liabilities (144) - (170)
Derivative financial instruments (12) (540) (715)
---------------------------------------- ----- ------------- ------------- ---------
Total current liabilities (34,123) (31,471) (36,068)
---------------------------------------- ----- ------------- ------------- ---------
Non-current liabilities
Interest-bearing loans and borrowings 18 (308,017) (251,915) (288,348) Derivative financial instruments (587) (1,350) (1,875) Deferred tax liabilities 9 (16,485) (9,461) (11,747) ---------------------------------------- ----- ------------- ------------- --------- Total non-current liabilities (325,089) (262,726) (301,970) ---------------------------------------- ----- ------------- ------------- --------- Total liabilities (359,212) (294,197) (338,038) ---------------------------------------- ----- ------------- ------------- --------- Net assets 450,904 362,975 387,108 ---------------------------------------- ----- ------------- ------------- --------- Equity Issued share capital 20 - - - Other distributable reserve 460,013 431,560 429,094 Retained earnings (9,180) (68,634) (42,042) ---------------------------------------- ----- ------------- ------------- --------- Total equity attributable to the equity holders of the Company 450,833 362,926 387,052 Non-controlling interests 71 49 56 ---------------------------------------- ----- ------------- ------------- --------- Total equity 450,904 362,975 387,108 ---------------------------------------- ----- ------------- ------------- ---------
Unaudited consolidated statement of changes in equity
Total equity
attributable
to
the equity
Issued Other holders
share distributable Retained of the Non-controlling Total
capital reserve earnings Company interests equity
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
--------------------------------- -------- -------------- --------- ------------- --------------- -------
As at 31 March 2015 - 384,937 (96,713) 288,224 39 288,263
Shares issued, net of costs - 48,423 - 48,423 - 48,423
Share-based payment transactions - 1,625 - 1,625 - 1,625
Dividends paid - (3,425) - (3,425) - (3,425)
Total comprehensive income
for the year - - 28,079 28,079 10 28,089
--------------------------------- -------- -------------- --------- ------------- --------------- -------
As at 30 September 2015 - 431,560 (68,634) 362,926 49 362,975
Shares issued, net of costs - (48) - (48) - (48)
Share-based payment transactions - 1,502 - 1,502 - 1,502
Dividends paid - (3,920) - (3,920) - (3,920)
Total comprehensive income
for the year - - 26,592 26,592 7 26,599
--------------------------------- -------- -------------- --------- ------------- --------------- -------
As at 31 March 2016 - 429,094 (42,042) 387,052 56 387,108
Shares issued, net of costs - 29,117 - 29,117 - 29,117
Share-based payment transactions - 2,305 - 2,305 - 2,305
Conversion of shareholder
loan - 5,000 - 5,000 - 5,000
Dividends paid - (5,503) - (5,503) - (5,503)
Total comprehensive income
for the period - - 32,862 32,862 15 32,877
--------------------------------- -------- -------------- --------- ------------- --------------- -------
As at 30 September 2016 - 460,013 (9,180) 450,833 71 450,904
--------------------------------- -------- -------------- --------- ------------- --------------- -------
Unaudited consolidated statement of cash flow
(Unaudited) (Unaudited)
six months six months
ended 30 ended Year ended
September 30 September 31 March
2016 2015 2016
Notes EUR000 EUR000 EUR000
--------------------------------------------------- ----- ----------- ------------- ----------
Operating activities
Profit after tax 32,862 28,079 54,671
Taxation 4,632 185 2,388
Non-controlling interests 15 10 17
Loss/(gain) on sale of properties - 68 -
Share-based payments 2,305 - 1,538
Surplus on revaluation of investment properties 12 (25,370) (27,027) (44,168)
Change in fair value of derivative financial
instruments 126 (271) 476
Depreciation 5 416 293 634
Finance income 8 (18) (29) (45)
Finance expense 5,132 6,271 12,888
Exit fees/prepayment penalties 15 5,929 5,929
--------------------------------------------------- ----- ----------- ------------- ----------
Cash flows from operations before changes
in working capital 20,115 13,508 34,328
Changes in working capital
Decrease/(increase) in trade and other receivables 3,738 (707) (356)
(Decrease)/increase in trade and other payables (2,206) 721 3,707
Taxation received/(paid) 118 (42) 168
--------------------------------------------------- ----- ----------- ------------- ----------
Cash flows from operating activities 21,765 13,480 37,847
--------------------------------------------------- ----- ----------- ------------- ----------
Investing activities
Purchase of investment properties (50,801) (31,365) (82,716)
Prepayments relating to new acquisitions (378) (18,114) (2,147)
Capital expenditure (7,955) (4,363) (14,391)
Purchase of plant and equipment (410) (380) (821)
Net proceeds on disposal of properties - (68) -
Interest received 18 29 45
--------------------------------------------------- ----- ----------- ------------- ----------
Cash flows used in investing activities (59,526) (54,261) (100,030)
--------------------------------------------------- ----- ----------- ------------- ----------
Financing activities
Issue of shares 29,117 48,899 48,873
Dividends paid (5,503) (3,425) (7,345)
Proceeds from loans 141,500 59,000 99,088
Repayment of loans (116,426) (58,324) (60,383)
Exit fees/prepayment penalties (15) (5,929) (5,929)
Finance charges paid (6,039) (5,463) (12,384)
--------------------------------------------------- ----- ----------- ------------- ----------
Cash flows from financing activities 42,634 34,758 61,920
--------------------------------------------------- ----- ----------- ------------- ----------
Increase/(decrease) in cash and cash equivalents 4,873 (6,023) (263)
Cash and cash equivalents at the beginning
of the period 19,874 20,137 20,137
--------------------------------------------------- ----- ----------- ------------- ----------
Cash and cash equivalents at the end of
the period 16 24,747 14,114 19,874 --------------------------------------------------- ----- ----------- ------------- ----------
Notes forming part of the financial statements
1. General information
The Company is a company incorporated in Guernsey and resident in the United Kingdom, whose shares are publicly traded on AIM of the LSE (primary listing) and the AltX of the JSE (secondary listing).
The unaudited interim condensed set of consolidated financial statements of Sirius Real Estate Limited comprises that of the Company and its subsidiaries (together referred to as the "Group").
The principal activity of the Group is the investment in and operation and development of commercial property to provide conventional and flexible workspace in Germany.
The audited consolidated financial statements of the Group for the year ended 31 March 2016 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.
2. Significant accounting policies
(a) Basis of preparation
The unaudited interim condensed set of consolidated financial statements have been prepared on a historical cost basis, except for investment properties, investment properties held for sale and derivative financial instruments which have been measured at fair value. The unaudited interim condensed set of consolidated financial statements are presented in euros and all values are rounded to the nearest thousand (EUR000) except where otherwise indicated.
(b) Statement of compliance
The audited consolidated financial statements of the Group for the year ended 31 March 2016 have been prepared in accordance with IFRSs adopted for use in the EU ("Adopted IFRSs") and the Companies (Guernsey) Law, 2008. The unaudited interim set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's audited consolidated financial statements for the year ended 31 March 2016. They do not include all of the information required for full annual financial statements and should be read in conjunction with the audited consolidated financial statements of the Group as at and for the year ended 31 March 2016.
(c) Going concern
Having reviewed the Group's current trading and cash flow forecasts, together with sensitivities and mitigating factors and the available facilities, the Board has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Board continued to adopt the going concern basis in preparing these financial statements.
(d) Basis of consolidation
The unaudited interim condensed set of consolidated financial statements comprises the financial statements of the Group as at 30 September 2016. The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies.
All intra-group balances and transactions and any unrealised income and expenses 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 Company's shareholders' equity.
(e) Significant accounting policies
The accounting policies applied by the Group in this unaudited interim condensed set of consolidated financial statements are the same as those applied by the Group in its audited consolidated financial statements as at and for the year ended 31 March 2016.
3. Operating segments
The Directors are of the opinion that the Group is engaged in a single segment of business, being property investment, and in one geographical area, Germany. All rental income is derived from operations in Germany. There is no one tenant that represents more than 10 per cent of Group revenues. The chief operating decision maker is considered to be the Board of Directors, which is provided with consolidated IFRS information on a quarterly basis.
4. Revenue
(Unaudited) (Unaudited)
six months six months
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
EUR000 EUR000 EUR000
--------------------------------------------------- ------------- ------------- ----------
Rental and other income from investment properties 32,636 25,869 55,790
--------------------------------------------------- ------------- ------------- ----------
Other income relates primarily to income associated with conferencing and catering.
5. Operating profit
The following items have been (credited)/charged in arriving at operating profit:
Direct costs
(Unaudited) (Unaudited)
six months six months
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
EUR000 EUR000 EUR000
------------------------------------------- ------------- ------------- ----------
Service charge income (18,184) (15,962) (36,729)
Property and overhead costs 27,084 24,291 52,561
------------------------------------------- ------------- ------------- ----------
Irrecoverable property costs and overheads 8,900 8,329 15,832
Property management fee - - -
------------------------------------------- ------------- ------------- ----------
8,900 8,329 15,832
------------------------------------------- ------------- ------------- ----------
Administrative expenses
(Unaudited) (Unaudited)
six months six months
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
EUR000 EUR000 EUR000
---------------------------- ------------- ------------- ----------
Audit fee 213 288 535
Legal and professional fees 779 740 1,661
Other administration costs 1,093 681 1,491
LTIP 2,152 - 1,452
Non-recurring items 804 (58) 464
---------------------------- ------------- ------------- ----------
Administrative expenses 5,041 1,651 5,603
---------------------------- ------------- ------------- ----------
Non-recurring items relate primarily to costs associated with scrip dividends, aborted acquisitions and other non-recurring events or transactions. In the six months to 30 September 2016 an amount of EUR711,000 was accrued for in respect of services relating to market listing activity. It is expected that total costs relating to market listing activity will be in the region of EUR1,600,000.
Other operating expenses
(Unaudited) (Unaudited)
six months six months
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
EUR000 EUR000 EUR000
----------------------------- ------------- ------------- ----------
Directors' fees 94 85 170
Depreciation 416 293 634
Bank fees 70 62 113
Marketing and other expenses 721 568 1,282
----------------------------- ------------- ------------- ----------
Other operating expenses 1,301 1,008 2,199
----------------------------- ------------- ------------- ----------
6. Employee costs and numbers
(Unaudited) (Unaudited)
six months six months
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
EUR000 EUR000 EUR000
----------------------- ------------- ------------- ----------
Wages and salaries 6,921 4,789 11,301
Social security costs 1,286 943 2,146
Other employment costs 48 29 58
----------------------- ------------- ------------- ----------
8,255 5,761 13,505
----------------------- ------------- ------------- ----------
The costs for the period ended 30 September 2016 include those relating to Executive Directors and an accrual of EUR2,152,000 (31 March 2016: EUR1,452,000) relating to the granting or award of shares under LTIPs (see note 7).
All employees are employed directly by one of the following Group subsidiary companies: Sirius Facilities GmbH, Sirius Facilities (UK) Limited, Curris Facilities & Utilities Management GmbH, SFG NOVA GmbH and Sirius Corporate Services B.V. The average number of people employed by the Group during the period was 201 (30 September 2015: 188; 31 March 2016: 182) expressed in full-time equivalents. In addition, the Board of Directors consists of four Non-executive Directors and two Executive Directors as at 30 September 2016.
7. Employee schemes
Equity settled share based payments
A new LTIP for the benefit of the Executive Directors and the Senior Management Team was approved in October 2015. The fair value determined at the grant date is expensed on a straight-line basis over the vesting and holding period, based on the Company's estimate of the shares that will eventually vest and adjusted for the effect of non-market-based vesting conditions. Under the LTIP, the awards are granted in the form of whole shares at no cost to the participants. Shares vest after the three year performance period followed by a holding period. The performance conditions used to determine the vesting of the award are based on net asset value and total shareholder return allowing vesting of zero per cent to a maximum of 125 per cent. As a result, a maximum of 25,150,000 shares were granted, subject to performance criteria, under the scheme in December 2015 and an expense of EUR1,452,000 was recognised in the consolidated statement of comprehensive income to 31 March 2016.
A total of 1,300,000 shares were forfeited in the six month period to 30 September 2016. An expense of EUR2,152,000 was recognised in the statement of comprehensive income to 30 September 2016.
Movements in the number of shares outstanding and their weighted average exercise prices are as follows:
(Unaudited)
six months ended Year ended
30 September 2016 31 March 2016
----------------------------------------- ---------------------- ---------------------
Weighted Weighted
average average
exercise exercise
Number of price Number of price
shares EUR000 shares EUR000
----------------------------------------- ----------- --------- ---------- ---------
Balance outstanding as at the beginning
of the period (nil exercisable) 25,150,000 - - -
Maximum granted during the period - - 25,150,000 -
Forfeited during the period (1,300,000) - - -
Exercised during the period - - - -
----------------------------------------- ----------- --------- ---------- ---------
Balance outstanding as at the end of the
period (nil exercisable) 23,850,000 - 25,150,000 -
----------------------------------------- ----------- --------- ---------- ---------
The fair value per share was determined using the Monte-Carlo model, with the following assumptions used in the calculation as at grant date:
31 March 2016
------------------------------------------ -------------
Weighted average share price - EUR 0.52
Weighted average exercise price - EUR -
Expected volatility - % 20
Expected life - years 2.48
Risk-free rate based on European treasury
bonds' rate of return - % (0.11)
Expected dividend yield - % 3.41
------------------------------------------ -------------
Assumptions considered in the model include: expected volatility of the Company's share price, as determined by calculating the historical volatility of the Company's share price over the historic period immediately prior to the date of grant and commensurate with the expected life of the awards; dividend yield based on the actual dividend yield as a percentage of share price at the date of grant; expected life of the awards; risk-free rates; and correlation between comparators.
Employee benefit scheme
The original LTIP for the benefit of the Executive Directors and the Senior Management Team expired at the end of March 2015. As a result, a total of 3,471,200 Ordinary Shares were issued during the financial year to 31 March 2016.
During the period 313,608 shares were issued to the Company's management through its MSP and Ordinary Shares taken in lieu of bonus (31 March 2016: 134,918 shares).
A reconciliation of share-based payments and employee benefit schemes and their impact on the consolidated statement of changes in equity is as follows:
(Unaudited) (Unaudited)
six months six months
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
EUR000 EUR000 EUR000
---------------------------------------- ------------- ------------- ----------
Charge relating to original LTIP - 1,625 1,625
Charge relating to MSP 153 - 50
Charge relating to new LTIP 2,152 - 1,452
---------------------------------------- ------------- ------------- ----------
Share-based payment transactions as per
consolidated statement of changes in
equity 2,305 1,625 3,127
---------------------------------------- ------------- ------------- ----------
8. Finance income and expense
(Unaudited) (Unaudited)
six months six months
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
EUR000 EUR000 EUR000
------------------------------------------ ------------- ------------- ----------
Bank interest income 18 29 45
------------------------------------------ ------------- ------------- ----------
Finance income 18 29 45
------------------------------------------ ------------- ------------- ----------
Bank loan interest expense (3,642) (5,462) (9,945)
Amortisation of capitalised finance costs (583) (809) (1,277)
Refinancing costs (922) (7,595) (7,595)
------------------------------------------ ------------- ------------- ----------
Finance expense (5,147) (13,866) (18,817)
------------------------------------------ ------------- ------------- ----------
Net finance expense (5,129) (13,837) (18,772)
------------------------------------------ ------------- ------------- ----------
The refinancing costs on derecognition of the loans for the six months ended 30 September 2016 relate to the costs associated with the refinancing of the Berlin-Hannoversche Hypothekenbank AG/Deutsche Pfandbriefbank AG facility with the new EUR137 million loan facility. The refinancing costs for derecognition of the loans in the year ended 31 March 2016 relate to the costs associated with the refinancing of the Macquarie loan facilities with the new EUR59 million SEB AG loan facility.
9. Taxation
Consolidated statement of comprehensive income
(Unaudited) (Unaudited)
six months six months
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
EUR000 EUR000 EUR000
-------------------------------------------------- ------------- ------------- ----------
Current income tax
Current income tax (charge)/credit (59) 256 156
Adjustment in respect of prior periods 81 - -
-------------------------------------------------- ------------- ------------- ----------
22 256 156
Deferred tax
Relating to origination and reversal of temporary
differences (4,738) (441) (2,727)
Relating to LTIP charge for the period 84 - 183
-------------------------------------------------- ------------- ------------- ----------
Income tax charge reported in the statement of
comprehensive income (4,632) (185) (2,388)
-------------------------------------------------- ------------- ------------- ----------
Deferred income tax liability
(Unaudited) (Unaudited)
30 September 30 September 31 March
2016 2015 2016
EUR000 EUR000 EUR000
-------------------------------------------------- ------------- ------------- --------
Opening balance 11,747 9,020 9,020
Taxes on the revaluation of investment properties
and derivative financial instruments* 4,738 441 2,727
-------------------------------------------------- ------------- ------------- --------
Balance as at period end 16,485 9,461 11,747
-------------------------------------------------- ------------- ------------- --------
* 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).
Deferred income tax asset
(Unaudited) (Unaudited)
30 September 30 September 31 March
2016 2015 2016
EUR000 EUR000 EUR000
------------------------------------- ------------- ------------- --------
Opening balance (183) - -
Relating to LTIP charge for the year (84) - (183)
------------------------------------- ------------- ------------- --------
Balance as at period end (267) - (183)
------------------------------------- ------------- ------------- --------
The Group has tax losses of EUR252,002,000, (31 March 2016: EUR235,682,000) that are available for offset against future profits of its subsidiaries in which the losses arose under the restrictions of the minimum taxation. Deferred tax assets have not been recognised in respect of the revaluation losses on investment properties and interest rate swaps as they may not be used to offset taxable profits elsewhere in the Group as realisation is not assured. Deferred tax assets have been recognised in respect of the valuation of the Company LTIP.
10. Earnings per share
The calculation of the basic, diluted, headline and adjusted earnings per share is based on the following data:
(Unaudited) (Unaudited)
six months six months
ended ended
30 September 30 September Year ended
2016 2015 31 March 2016
EUR000 EUR000 EUR000
------------------------------------------------- ------------- ------------- --------------
Earnings
Basic earnings 32,862 28,079 54,671
Diluted earnings 32,862 28,204 54,921
Headline earnings 12,270 1,785 13,582
Diluted headline earnings 12,270 1,910 13,832
------------------------------------------------- ------------- ------------- --------------
Adjusted
Basic earnings after tax 32,862 28,079 54,671
Deduct revaluation surplus, net of related
tax (20,592) (26,362) (41,089)
Add loss/deduct gain on sale of properties,
net of related tax - 68 -
------------------------------------------------- ------------- ------------- --------------
Headline earnings after tax 12,270 1,785 13,582
Add/deduct change in fair value of derivative
financial instrument, net of related tax 86 (495) 124
Add non-recurring items, net of related tax 3,794 7,537 9,329
------------------------------------------------- ------------- ------------- --------------
Adjusted earnings after tax 16,150 8,827 23,035
------------------------------------------------- ------------- ------------- --------------
Number of shares
Weighted average number of Ordinary Shares
for the purpose of basic and headline earnings
per share 803,512,009 707,075,634 728,152,740
------------------------------------------------- ------------- ------------- --------------
Weighted average number of Ordinary Shares
for the purpose of diluted earnings and diluted
headline earnings per share 827,362,009 727,908,968 770,534,539
------------------------------------------------- ------------- ------------- --------------
Weighted average number of Ordinary Shares
for the purpose of adjusted earnings per
share 803,512,009 707,075,634 728,152,740
------------------------------------------------- ------------- ------------- --------------
Basic earnings per share 4.09c 3.97c 7.51c
------------------------------------------------- ------------- ------------- --------------
Diluted earnings per share 3.97c 3.87c 7.13c
------------------------------------------------- ------------- ------------- --------------
Headline earnings per share 1.53c 0.25c 1.87c
------------------------------------------------- ------------- ------------- --------------
Diluted headline earnings per share 1.48c 0.26c 1.80c
------------------------------------------------- ------------- ------------- --------------
Adjusted earnings per share 2.01c 1.25c 3.16c
------------------------------------------------- ------------- ------------- --------------
Adjusted diluted earnings per share 1.95c 1.21c 2.99c
------------------------------------------------- ------------- ------------- --------------
Non-recurring items as stated within earnings per share can be reconciled with those stated within administrative expenses in note 5 as follows:
(Unaudited) (Unaudited)
six months six months
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
EUR000 EUR000 EUR000
----------------------------------- ------------- ------------- ----------
Non-recurring items as per note 5 804 (58) 464
Finance restructuring costs 922 7,595 7,595
LTIP 2,152 - 1,452
Change in deferred tax assets (84) - (183)
----------------------------------- ------------- ------------- ----------
Non-recurring items as per note 10 3,794 7,537 9,328
----------------------------------- ------------- ------------- ----------
The number of shares has been reduced by 1,062,058 shares (30 September 2015: 1,471,875 shares; 31 March 2016: 1,375,666 shares), that are held by the Company as Treasury Shares at 30 September 2016, for the calculation of basic, headline, adjusted and diluted earnings per share.
The weighted average number of shares for the purpose of adjusted earnings per share is calculated as follows:
(Unaudited) (Unaudited)
30 September 30 September 31 March
2016 2015 2016
Number of Number of Number of
shares shares shares
------------------------------------------------------ ------------- ------------- -----------
Weighted average number of Ordinary Shares for
the purpose of basic and headline earnings per
share 803,512,009 707,075,634 728,152,740
Effect of conversion of convertible shareholder
loan - 20,833,334 22,261,799
Effect of grant of LTIP shares 23,850,000 - 20,120,000
------------------------------------------------------ ------------- ------------- -----------
Weighted average number of Ordinary Shares for
the purpose of diluted earnings and diluted headline
earnings per share 827,362,009 727,908,968 770,534,539
------------------------------------------------------ ------------- ------------- -----------
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 items, gains/losses on sale of properties, deferred tax and the revaluation deficits/surpluses on the investment properties and derivative financial instruments.
11. Net assets per share
(Unaudited) (Unaudited)
30 September 30 September
2016 2015 31 March 2016
EUR000 EUR000 EUR000
------------------------------------------- ------------- ------------- -------------
Net assets
Net assets for the purpose of assets per
share (assets attributable to the equity
holders of the Company) 450,833 362,926 387,052
Deferred tax arising on revaluation of
properties and LTIP valuation 16,218 9,461 11,564
Derivative financial instruments 599 1,824 2,571
------------------------------------------- ------------- ------------- -------------
Adjusted net assets attributable to equity
holders of the Company 467,650 374,211 401,187
------------------------------------------- ------------- ------------- -------------
Number of shares
Number of Ordinary Shares for the purpose
of net assets per share 840,769,233 746,410,666 751,984,887
Net assets per share 53.62c 48.62c 51.47c
Adjusted net assets per share 55.62c 50.13c 53.35c
------------------------------------------- ------------- ------------- -------------
The number of shares has been reduced by 1,062,058 shares (31 March 2016: 1,375,666 shares) that are held by the Company as Treasury Shares at 30 September 2016, for the calculation of net assets and adjusted net assets per share.
12. Investment properties
Most of the Group's properties are pledged as security for loans obtained by the Group. See note 18 for details.
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) (Unaudited)
30 September 30 September
2016 2015 31 March 2016
EUR000 EUR000 EUR000
------------------------------------------- ------------- ------------- -------------
Investment properties at market value 779,590 615,240 695,190
Adjustment in respect of lease incentives (2,820) (2,020) (2,427)
Directors' impairment of non-core assets (5,910) (3,100) (5,310)
Reclassified as investment properties held
for sale (5,870) - -
------------------------------------------- ------------- ------------- -------------
Balance as at period end 764,990 610,120 687,453
------------------------------------------- ------------- ------------- -------------
The fair value (market value) of the Group's investment properties at 30 September 2016 has been arrived at on the basis of a valuation carried out at that date by Cushman & Wakefield LLP (2015: Cushman & Wakefield LLP), an independent valuer. The adjustment in respect of lease incentives excludes those relating to assets that have been written down.
The valuation is based upon assumptions including future rental income, anticipated maintenance costs and an appropriate discount rate. The properties are valued on the basis of 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 capitalisation rate is applied to the more uncertain future income, discounted to a present value.
The Directors also perform a review of the valuation and they have decided to reduce the value of 3 of the 42 properties from the Cushman & Wakefield LLP valuation.
The weighted average lease expiry remaining across the whole portfolio at 30 September 2016 was 2.6 years.
The movement on the valuation of the investment properties at market value as set out in the valuer's report is as follows:
(Unaudited) (Unaudited)
30 September 30 September
2016 2015 31 March 2016
EUR000 EUR000 EUR000
-------------------------------------------- ------------- ------------- -------------
Total investment properties at market value
as per valuer's report as at the beginning
of the period 695,190 550,030 550,030
Additions 50,801 31,365 82,716
Subsequent expenditure 7,236 6,102 14,943
Disposals - - -
Surplus on revaluation above capex 26,363 27,743 47,501
Reclassified as other fixed assets - - -
-------------------------------------------- ------------- ------------- -------------
Total investment properties at market value
as per valuer's report as at the end of
the period 779,590 615,240 695,190
-------------------------------------------- ------------- ------------- -------------
The reconciliation of surplus on revaluation above capex as per the statement of comprehensive income is as follows:
(Unaudited) (Unaudited)
30 September 30 September
2016 2015 31 March 2016
EUR000 EUR000 EUR000
------------------------------------------------ ------------- ------------- -------------
Surplus on revaluation above capex 26,363 27,743 47,501
Adjustment in respect of lease incentives (393) (16) (423)
Changes in Directors' impairment of non-core
asset valuations (600) (700) (2,910)
------------------------------------------------ ------------- ------------- -------------
Surplus on revaluation of investment properties
reported in the statement of comprehensive
income 25,370 27,027 44,168
------------------------------------------------ ------------- ------------- -------------
13. Investment properties held for sale
(Unaudited) (Unaudited)
30 September 30 September
2016 2015 31 March 2016
EUR000 EUR000 EUR000
----------------------------------- ------------- ------------- -------------
Merseburg 5,870 - -
Bremen Doetlingerstr. partial site - - -
Bonn Siemensstr. land - - -
Cottbus site - - -
----------------------------------- ------------- ------------- -------------
Balance as at period end 5,870 - -
----------------------------------- ------------- ------------- -------------
Investment properties held for sale at 30 September 2016 is EUR5.9 million (31 March 2016: EURnil) representing a non-core asset that was notarised for sale in the period. A loss of EUR1.1 million was recognised in the surplus on revaluation of investment properties within the consolidated statement of comprehensive income in the period. See note 24 for details of a disposal of a non-income producing piece of land that was notarised post period end which has not been recognised as an investment property held for sale.
14. Goodwill
(Unaudited) (Unaudited)
30 September 30 September
2016 2015 31 March 2016
EUR000 EUR000 EUR000
---------------- ------------- ------------- -------------
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 which was previously held by a company external to the Group and, as a result of the consideration given exceeding the net assets acquired, goodwill of EUR3,738,000 was recognised. The impairment review methodology for goodwill is unchanged from that described in the 2016 Annual Report and Group Financial Statements. Current business plans indicate that the balance is unimpaired.
15. Trade and other receivables
(Unaudited) (Unaudited)
30 September 30 September
2016 2015 31 March 2016
EUR000 EUR000 EUR000
------------------------- ------------- ------------- -------------
Trade receivables 1,808 1,857 3,069
Other receivables 5,265 6,206 6,368
Prepayments 1,503 19,307 2,499
Related party receivable - - -
Balance as at period end 8,576 27,370 11,936
------------------------- ------------- ------------- -------------
16. Cash and cash equivalents
(Unaudited) (Unaudited)
30 September 30 September
2016 2015 31 March 2016
EUR000 EUR000 EUR000
------------------------- ------------- ------------- -------------
Cash at bank and in hand 24,747 14,114 19,874
------------------------- ------------- ------------- -------------
Balance as at period end 24,747 14,114 19,874
------------------------- ------------- ------------- -------------
Cash at bank earns interest at floating rates based on daily bank deposit rates. The fair value of cash as at 30 September 2016 is EUR24,747,000 (31 March 2016: EUR19,874,000).
As at 30 September 2016 EUR11,462,000 (31 March 2016: EUR10,858,000) of cash is held in blocked accounts. Included in blocked accounts is deposits received from tenants, cash held in escrow as requested by a supplier, restricted accounts for office rent deposits, amounts reserved for future bank loan interest and amortisation payments, pursuant to certain of the Group's banking facilities, and an amount reserved for future capital expenditure.
17. Trade and other payables
(Unaudited) (Unaudited)
30 September 30 September
2016 2015 31 March 2016
EUR000 EUR000 EUR000
------------------------- ------------- ------------- -------------
Trade payables 4,483 7,359 6,960
Accrued expenses 9,568 8,236 9,305
Accrued interest 1,564 1,614 530
Other payables 12,148 9,375 12,746
------------------------- ------------- ------------- -------------
Balance as at period end 27,763 26,584 29,541
------------------------- ------------- ------------- -------------
18. Interest-bearing loans and borrowings
Effective (Unaudited) (Unaudited)
Interest 30 September 30 September 31 March
rate 2016 2015 2016
% Maturity EUR000 EUR000 EUR000
---------------------------------------- ----------- ------------- ------------- ------------- --------
Current
Deutsche Genossenschafts-Hypothekenbank
AG
- fixed rate facility 1.59 31 March 2021 320 - 320
Bayerische Landesbank
19 October
- hedged floating rate facility Hedged(1) 2020 508 - 508
SEB AG
1 September
- fixed rate facility 1.84 2022 1,180 1,180 1,180
Berlin-Hannoversche Hypothekenbank
AG/Deutsche Pfandbriefbank AG
- floating rate facility Floating(2) 27 April 2023 1,063 1,150 1,437
- fixed rate facility 1.66 27 April 2023 2,394 1,150 1,437
Berlin-Hannoversche Hypothekenbank
AG
31 December
- fixed rate facility 2.85 2019 828 720 756
31 December
- fixed rate facility 1.32 2019 112 - -
K-Bonds I
- fixed rate facility 6.00 31 July 2020 1,000 1,000 1,000
Capitalised finance charges
on all loans (1,201) (853) (996)
---------------------------------------- ----------- ------------- ------------- ------------- --------
6,204 4,347 5,642
---------------------------------------- ----------- ------------- ------------- ------------- --------
Non-current
Deutsche Genossenschafts-Hypothekenbank
AG
- fixed rate facility 1.59 31 March 2021 14,520 - 14,680
Bayerische Landesbank
19 October
- hedged floating rate facility Hedged(1) 2020 24,367 - 24,621
SEB AG
1 September
- fixed rate facility 1.84 2022 56,640 57,820 57,230
Berlin-Hannoversche Hypothekenbank
AG/Deutsche Pfandbriefbank AG
- floating rate facility Floating(2) 27 April 2023 40,906 54,625 53,763
- fixed rate facility 1.66 27 April 2023 91,138 54,625 53,763
Berlin-Hannoversche Hypothekenbank
AG
31 December
- fixed rate facility 2.85 2019 33,912 34,740 34,344
31 December
- fixed rate facility 1.32 2019 4,341 - -
K-Bonds I
- fixed rate facility 4.00 31 July 2023 45,000 45,000 45,000
- fixed rate facility 6.00 31 July 2020 3,000 4,000 4,000
Convertible fixed rate facility 5.00 21 March 2018 - 5,000 5,000
Capitalised finance charges
on all loans (5,807) (3,895) (4,053)
---------------------------------------- ----------- ------------- ------------- ------------- --------
308,017 251,915 288,348
---------------------------------------- ----------- ------------- ------------- ------------- --------
Total 314,221 256,262 293,990 ---------------------------------------- ----------- ------------- ------------- ------------- -------- 1 This facility is hedged with a swap charged at a rate of 1.66 per cent.
2 Tranche 2 of this facility is charged with a floating rate of 1.57 per cent over three month EURIBOR (not less than 0 per cent) for the full term of the loan.
The Group has pledged 36 (31 March 2016: 33) investment properties to secure related interest-bearing debt facilities granted to the Group. The 36 (31 March 2016: 33) properties had a combined valuation of EUR696,302,000 as at 30 September 2016 (31 March 2016: EUR635,413,000).
Deutsche Genossenschafts-Hypothekenbank AG
On 24 March 2016, the Group agreed to a facility agreement with Deutsche Genossenschafts-Hypothekenbank AG for EUR16 million. As at 31 March 2016 tranche 1 had been drawn down in full totalling EUR15 million. The loan terminates on 31 March 2021. Amortisation is 2 per cent per annum with the remainder of the loan due in the fifth year. The facility is charged a fixed interest rate of 1.59 per cent. The facility is secured over one property asset and is subject to various covenants with which the Group has complied.
Bayerische Landesbank
On 20 October 2015, the Group agreed to a facility agreement with Bayerische Landesbank for EUR25.4 million. The loan terminates on 19 October 2020. Amortisation is 2 per cent per annum with the remainder due in the fourth year. The full facility has been hedged at a rate of 1.66 per cent until 19 October 2020 by way of an interest rate swap. The facility is secured over four property assets and is subject to various covenants with which the Group has complied.
SEB AG
On 2 September 2015, the Group agreed to a facility agreement with SEB AG for EUR59 million to refinance the two existing Macquarie facilities. The loan terminates on 1 September 2022. Amortisation is 2 per cent per annum with the remainder due in the seventh year. The facility is charged a fixed interest rate of 1.84 per cent. This facility is secured over 12 of the 14 property assets previously financed through the Macquarie facilities, thereby two non-core assets were unencumbered in the refinancing process. The facility is subject to various covenants with which the Group has complied.
Berlin-Hannoversche Hypothekenbank AG/Deutsche Pfandbriefbank AG
On 31 March 2014, the Group agreed to a facility agreement with Berlin-Hannoversche Hypothekenbank AG and Deutsche Pfandbriefbank AG for EUR115 million. The loan terminates on 31 March 2019. Amortisation is 2 per cent per annum for the first two years, 2.5 per cent for the third year and 3 per cent thereafter, with the remainder due in the fifth year. Half of the facility (EUR55.2 million) is charged interest at 3.2 per cent plus three months' EURIBOR and is capped at 4.5 per cent, and the other half (EUR55.2 million) has been hedged at a rate of 4.265 per cent until 31 March 2019. This facility is secured over nine property assets and is subject to various covenants with which the Group has complied.
On 28 April 2016, the Group agreed to a facility agreement with Berlin-Hannoversche Hypothekenbank AG/Deutsche Pfandbriefbank AG to refinance its existing loan that had an outstanding balance of EUR110.4 million at 31 March 2016. The new facility is split in two tranches totalling EUR137 million and terminates on 27 April 2023. Tranche 1, totalling EUR94.5 million is charged at a fixed interest rate of 1.66 per cent for the full term of the loan. Tranche 2, totalling EUR42.5 million is charged with a floating rate of 1.57 per cent over three month EURIBOR (not less than 0 per cent.) for the full term of the loan. Amortisation is set at 2.5 per cent across the full facility with the remainder due in one instalment on the final maturity date. The facility is secured over 11 property assets and is subject to various covenants with which the Group has complied.
Berlin-Hannoversche Hypothekenbank AG
On 15 December 2014, the Group agreed to a facility agreement with Berlin-Hannoversche Hypothekenbank AG for EUR36 million. The loan terminates on 31 December 2019. Amortisation is 2 per cent per annum for the first two years, 2.4 per cent. for the third year and 2.8 per cent thereafter, with the remainder due in the fifth year. The facility is charged a fixed interest rate of 2.85 per cent. This facility is secured over three property assets and is subject to various covenants with which the Group has complied.
On 28 April 2016, the Group agreed to a facility agreement with Berlin-Hannoversche Hypothekenbank AG to add an additional tranche to the existing loan that had an outstanding balance of EUR35.1 million at 31 March 2016. The additional tranche of EUR4.5 million brings the total loan to EUR39.6 million. The maturity of the additional loan tranche is coterminous with the existing loan at 31 December 2019. Amortisation is 2.5 per cent per annum, with the remainder due at maturity. The additional loan tranche is charged with a fixed interest rate of 1.32 per cent for the full term of the loan. The original facility agreement has been amended to include one previously unencumbered property asset located in Würselen. The terms of the original loan are unchanged and the loan continues to be subject to various covenants with which the Group has complied.
K-Bonds
On 1 August 2013, the Group agreed to a facility agreement with K-Bonds for EUR52 million. The loan consists of a senior tranche of EUR45 million and a junior tranche of EUR7 million. The senior tranche has a fixed interest rate of 4 per cent per annum and is due in one sum on 31 July 2023. The junior tranche has a fixed interest rate of 6 per cent and terminates on 31 July 2020. The junior tranche is amortised at EUR1 million per annum over a seven year period. This facility is secured over four properties and is subject to various covenants with which the Group has complied.
Convertible shareholder loan
On 22 March 2013, the Company issued EUR5.0 million convertible loan notes due in 2018 (the "Loan Notes"). The entire issue of EUR5.0 million has been taken up by the Karoo Investment Fund S.C.A. SICAV-SIF and Karoo Investment Fund II S.C.A. SICAV-SIF. The Loan Notes were issued at par and carry a coupon rate of 5 per cent per annum The Loan Notes are convertible into Ordinary Shares of the Company at an original conversion price of 0.24c and can now be converted at any time. The conversion price is subject to dividend protection and, when considering the dividends that the Group has paid to date, the current conversion price is 0.225c as at 31 March 2016. The majority of the proceeds from the issue of the Loan Notes were used to reduce debt levels.
On 23 June 2016, the Company announced that the Karoo Investment Fund S.C.A. SICAV-SIF served notice to convert its EUR5,000,000 convertible loan notes due in 2018 in full into, in aggregate, 22,814,731 new Ordinary Shares at the conversion price of EUR0.22 per Ordinary share. Following the conversion on 23 June 2016 and the subsequent admission of the shares to AIM on 28 June 2016, the overall issued share capital was 832,779,058 Ordinary Shares of which 1,062,058 were held in treasury. The total number of Ordinary Shares with voting rights in the Company at this date was 831,717,000.
19. Financial instruments
Fair values
Set out below is a comparison by category of carrying amounts and fair values of all of the Group's financial instruments that are carried in the financial statements:
(Unaudited) (Unaudited)
30 September 2016 30 September 2015 31 March 2016
------------------------- -------------------- -------------------- -----------------
Carrying Fair Carrying Fair Carrying Fair
amount value amount value amount value
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
------------------------- ---------- -------- ---------- -------- -------- -------
Financial assets
Cash 24,747 24,747 14,114 14,114 19,874 19,874
Trade receivables 1,808 1,808 1,857 1,857 3,069 3,069
Derivative financial
instruments - - 66 66 19 19
------------------------- ---------- -------- ---------- -------- -------- -------
Financial liabilities
Trade payables 4,483 4,483 7,359 7,359 6,960 6,960
Derivative financial
instruments 599 599 1,890 1,890 2,590 2,590
Interest-bearing loans
and borrowings:
Floating rate borrowings 41,969 41,969 - - - -
Floating rate borrowings
- hedged* 24,875 24,875 55,775 55,775 80,329 80,329
Floating rate borrowings
- capped* - - 55,775 55,775 55,200 55,200
Fixed rate borrowings 254,385 256,458 149,460 149,969 163,510 166,570
------------------------- ---------- -------- ---------- -------- -------- -------
* The Group holds interest rate swap contracts designed to manage the interest rate and liquidity risks of expected cash flows of its borrowings with the variable rate facility with Bayerische Landesbank. Please refer to note 18 for details of swap and cap contracts.
20. Issued share capital
Share
Number capital
Authorised of shares EUR
------------------------------- ---------- --------
Ordinary Shares of no par value Unlimited -
------------------------------- ---------- --------
As at 30 September 2016 Unlimited -
------------------------------- ---------- --------
Share
Number capital
Issued and fully paid of shares EUR
-------------------------------- ----------- --------
Ordinary Shares of no par value
As at 31 March 2013 317,578,176 -
Issued Ordinary Shares 197,619,038 -
Issued Treasury Shares 3,703,093 -
-------------------------------- ----------- --------
As at 31 March 2014 518,900,307 -
Issued Ordinary Shares 109,901,495 -
Issued Treasury Shares 1,536,947 -
-------------------------------- ----------- --------
As at 31 March 2015 630,338,749 -
Issued Ordinary Shares 118,040,020 -
Issued Treasury Shares 3,606,118 -
-------------------------------- ----------- --------
As at 31 March 2016 751,984,887 -
Issued Ordinary Shares 88,470,738 -
Issued Treasury Shares 313,608 -
-------------------------------- ----------- --------
As at 30 September 2016 840,769,233 -
-------------------------------- ----------- --------
Holders of the Ordinary Shares are entitled to receive dividends and other distributions and to attend and vote at any general meeting.
The following changes to the issued share capital of the Company have taken place since 30 September 2015:
On 26 November 2015, the Company issued 62,500 Ordinary Shares out of treasury to one of the Company's Executive Directors pursuant to the Company's MSP incentive scheme. This resulted in the Company's overall issued share capital being 747,882,541 Ordinary Shares of which 1,471,875 were held in treasury. The total number of Ordinary Shares with voting rights in the Company at this date was 746,473,166.
Pursuant to an issue of bonus shares on 26 November 2015, the Company issued 33,709 Ordinary Shares out of treasury to one of the Company's Executive Directors and some of the Group's senior management team. This resulted in the Company's overall issued share capital being 747,882,541 Ordinary Shares of which 1,357,666 were held in treasury. The total number of Ordinary Shares with voting rights in the Company at this date was 746,506,875.
Pursuant to a scrip dividend offering on 20 January 2016, the Company issued 5,478,012 Ordinary Shares at an issue price of EUR0.5178, resulting in the Company's overall issued share capital being 753,360,553 Ordinary Shares of which 1,375,666 were held in treasury. The total number of Ordinary Shares with voting rights in the Company at this date was 751,984,887.
On 26 May 2016, the Company issued 313,608 Ordinary Shares out of treasury to the Company's two Executive Directors and some of the Group's senior management team pursuant to the Company's MSP incentive scheme. This resulted in the Company's overall issued share capital being 753,360,553 Ordinary Shares of which 1,062,058 were held in treasury. The total number of Ordinary Shares with voting rights in the Company at this date was 752,298,495.
Pursuant to an equity raise of EUR30 million on 21 June 2016, the Company issued 56,603,774 Ordinary Shares at an issue price of EUR0.53, resulting in the Company's overall issued share capital being 809,964,327 Ordinary Shares of which 1,062,058 were held in treasury. The total number of Ordinary Shares with voting rights in the Company at this date was 808,902,269.
On 23 June 2016, the Company announced that the Karoo Investment Fund S.C.A. SICAV-SIF served notice to convert its EUR5,000,000 convertible loan notes due in 2018 in full into, in aggregate, 22,814,731 new Ordinary Shares at the conversion price of EUR0.22 per ordinary share. Following the conversion on 23 June 2016 and the subsequent admission of the shares to AIM on 28 June 2016, the overall issued share capital was 832,779,058 Ordinary Shares of which 1,062,058 were held in treasury. The total number of Ordinary Shares with voting rights in the Company at this date was 831,717,000.
Pursuant to a scrip dividend offering on 15 July 2016, the Company issued 9,052,233 Ordinary Shares at an issue price of EUR0.4822, resulting in the Company's overall issued share capital being 841,831,291 Ordinary Shares of which 1,062,058 were held in Treasury. The total number of Ordinary Shares with voting rights in the Company at this date was 840,769,233.
The Company holds 1,062,058 of its own shares, which are held in treasury (31 March 2016: 1,375,666). During the period 313,608 shares were issued from treasury.
New shares under the Scrip Dividend Alternative 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 and the right to vote at any general meeting.
No shares were bought back in the period.
21. Dividends
In November 2015, the Company announced a dividend of 0.92c per share with a record date of 18 December 2015 and payable on 20 January 2016. On the record date, 747,882,541 shares were in issue, of which 1,375,666 were held in treasury and 746,506,875 were entitled to participate in the dividend. Holders of 311,075,606 shares elected to receive the dividend in ordinary shares under the Scrip Dividend Alternative, representing a dividend of EUR2,862,000, while holders of 435,431,269 shares opted for a cash dividend with a value of EUR3,920,000. The total dividend was EUR6,782,000.
In May 2016 the Company announced a dividend of 1.30c per share with a record date of 17 June 2016 and payable on 15 July 2016. On the record date, 753,360,553 shares were in issue, of which 1,062,058 were held in treasury and 752,298,495 were entitled to participate in the dividend. Holders of 334,125,185 shares elected to receive the dividend in ordinary shares under the Scrip Dividend Alternative, representing a dividend of EUR4,344,000 while holders of 418,173,310 shares opted for a cash dividend with a value of EUR5,503,000. The total dividend was EUR9,847,000.
The Group's profit attributable to the equity holders of the Company for the period was EUR32.9 million (30 September 2015: EUR28.1 million). The Board has declared an interim dividend of 1.39c per share for the period ended 30 September 2016. The interim dividend will be paid on 20 January 2017 with the ex-dividend dates being 13 December 2016 for shareholders on the South African register and 15 December 2016 for shareholders on the UK register. The interim dividend represents 65 per cent of Funds from Operations* for the period ended 30 September 2016. It is intended that dividends will continue to be paid on a semi-annual basis and offered to shareholders in cash or scrip form.
The dividend paid per the statement of changes in equity is the value of the cash dividend.
* Recurring profit before tax adjusted for depreciation, amortisation of financing fees and current tax receivable/incurred
The dividend per share was calculated as follows:
(Unaudited) (Unaudited)
30 September 30 September 31 March
2016 2015 2016
EUR million EUR million EUR million
----------------------------------------------------- ------------- ------------- ------------
Reported profit before tax 37.5 28.3 57.1
Adjustments for:
Surplus on revaluation (25.4) (27.0) (44.2)
Gain of disposals - - -
Non-recurring items 3.9 7.5 9.5
Change in fair value of financial derivatives 0.1 (0.2) 0.5
----------------------------------------------------- ------------- ------------- ------------
Recurring profit before tax 16.1 8.6 22.9
Adjustments for:
Depreciation 0.4 0.3 0.6
Amortisation of financing fees 0.6 0.8 1.3
Impact of disposal assets - - -
Surrender premium - - -
Current taxes receivable (see note 9) - 0.2 0.2
----------------------------------------------------- ------------- ------------- ------------
Funds from Operations, year ended 31 March n/a n/a 25.0
----------------------------------------------------- ------------- ------------- ------------
Funds from Operations, six months ended 30 September 17.1 9.9 9.9
----------------------------------------------------- ------------- ------------- ------------
Funds from Operations, six months ended 31 March n/a n/a 15.0
----------------------------------------------------- ------------- ------------- ------------
Dividend pool, six months ended 30 September 11.7(1) 6.9(1) 6.9(1) ----------------------------------------------------- ------------- ------------- ------------ Dividend pool, six months ended 31 March n/a n/a 9.8(1) ----------------------------------------------------- ------------- ------------- ------------ DPS, six months ended 30 September 1.39c 0.92c 0.92c ----------------------------------------------------- ------------- ------------- ------------ DPS, six months ended 31 March n/a n/a 1.30c ----------------------------------------------------- ------------- ------------- ------------
1 Calculated as 65 per cent of Funds from Operations of 2.13c per share (30 September 2015: 1.41c per share; 31 March 2016: 2.01c per share) based on average number of shares outstanding of 803,512,009 (30 September 2015: 707,075,634; 31 March 2016: 749,229,846).
22. Capital and other commitments
As at 30 September 2016, the Group had contracted capital expenditure on existing properties of EUR5,504,000 (31 March 2016: EUR4,636,000) and commitments of EUR2,922,000 (31 March 2016: EUR3,162,000) derived from office rental contracts.
These commitments have not yet been provided for in the financial statements.
23. Post balance sheet events
On 19 October 2016 the Group notarised the disposal of a piece of non-income producing land at the CöllnParc site for EUR1.5 million representing an increase on the book value of 41 per cent.
On 20 October 2016, the Group concluded an agreement with Berlin-Hannoversche Hypothekenbank AG to refinance and extend its existing loan, which had an outstanding balance of EUR39.2 million at 30 September 2016. The new facility totals EUR70.0 million and terminates on 29 October 2023. Amortisation is 2.5 per cent per annum with the remainder due at maturity. The facility is charged with an all-in fixed interest rate of 1.48 per cent for the full term of the loan. The facility is secured over five property assets including those located in Dresden and Wiesbaden. Non-recurring costs associated with this refinancing, including early redemption fees and breakage costs on the existing facility are expected to be around EUR1.4 million. Of this amount EUR0.8 million is expected to impact upon net asset value immediately, while the remainder, representing arrangement fees on the new facility, will be amortised over the seven year term.
On 25 October 2016, the Group notarised the purchase of an asset located in Krefeld. The property is a single let business park totalling 6,335 square metres of office and warehouse space. The property is 100 per cent occupied, producing annual income of EUR0.4 million with a weighted average remaining lease term of 0.9 years.
With effect from 31 October 2016, the Group acquired a property located in Wiesbaden for a total acquisition cost of EUR17.7 million using proceeds from the June 2016 equity raise as described in note 20. This property is a multi-let office building totalling 19,602 square metres. The property is 65 per cent occupied and let to three tenants, producing annual income of EUR1.9 million and having a weighted average remaining lease term of 2.7 years.
On 3 November 2016, the Group notarised the purchase of an asset located in Dreieich. The property is a multi-let business park comprising office, warehouse and service space totalling 12,905 square metres. The property is 29.4 per cent occupied, producing annual income of EUR0.29 million with a weighted average remaining lease term of 1.7 years.
Corporate directory
Registered office
PO Box 119
Martello Court
Admiral Park
St. Peter Port
Guernsey GY1 3HB
Channel Islands
Registered number
Incorporated in Guernsey under the Companies (Guernsey) Law, 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
UK solicitors
Norton Rose Fulbright LLP
3 More London Riverside
London SE1 2AQ
Financial PR
Novella Communications
1a Garrick House
Carrington Street
London W1J 7AF
JSE sponsor
PSG Capital Proprietary Limited
1st Floor, Ou Kollege
35 Kerk Street
Stellenbosch
7600
South Africa
Nominated adviser and joint brokers
Peel Hunt LLP
120 London Wall
London EC2Y 5ET
Joint brokers
Canaccord Genuity Limited
88 Wood Street
London EC2V 7QR
Property valuer
Cushman & Wakefield LLP
Rathenauplatz 1
60313 Frankfurt am Main
Germany
Independent auditors
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St. Peter Port
Guernsey GY1 1WR
Channel Islands
Guernsey solicitors
Carey Olsen
PO Box 98
7 New Street
St. Peter Port
Guernsey GY1 4BZ
Channel Islands
This information is provided by RNS
The company news service from the London Stock Exchange
END
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