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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Summit Germany | LSE:SMTG | London | Ordinary Share | GG00BJ4FZW09 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.185 | 1.18 | 1.19 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMSMTG
RNS Number : 8947R
Summit Germany Limited
27 September 2017
Summit Germany Limited
2017 Half Year Results
We are pleased to present the interim results for the six months ended 30 June 2017 ("the Reporting Period") for Summit Germany Limited and its subsidiaries ("the Group").
HY 2017 Highlights:
Financial Results
Profits
-- Net profit up 57.3% to EUR12.9 million (HY 2016: EUR8.2 million, FY 2016: EUR55.6 million)
-- Profit Before Tax (PBT) increased by 46.9% to EUR14.1 million (HY 2016: EUR9.6 million, FY 2016: EUR63.9 million)
-- Earnings Per Share (EPS) of 2.6 cents (HY 2016: 1.6 cents, FY 2016: 10.5 cents)
NAV
-- EPRA NAV of EUR474.4 million (FY 2016: EUR466.3 million) -- EPRA NAV per share of EUR1.02 (FY 2016: EUR1.00) -- Group's NAV increased 2.0% to EUR446.8 million (FY 2016: EUR437.9 million)
Rent
-- Rental income of EUR28.4 million (HY 2016: EUR28.9, FY 2016: EUR57.2 million)
-- Funds from Operations (FFO) of EUR17.5 million (HY 2016: EUR18.2 million, FY 2016: EUR34.9 million)
Substantial portfolio expansion
-- EUR100 million new acquisition of a property portfolio located in Wolfsburg; 80,000 sqm of fully let properties with net rent of approximately EUR7.9 million p.a.; the contribution of this acquisition will benefit the results going forward
-- Following recent acquisition, the portfolio increased to EUR896.5 million with 103 properties; 933,000 sqm of net lettable space (FY 2016: 100 properties at EUR797.8 million)
-- Stable performance notwithstanding recent disposal of properties in comparison to 2016: -- EUR67 million net rent p.a., equivalent to 7.5% rental yield -- 92% occupancy over the portfolio's majority (88% including properties for re-development)
-- Further disposals of non-strategic assets enhance average portfolio quality: EUR2.5 million during the Reporting Period and additional EUR15.1 million post Reporting Period
-- New joint venture projects for development of 95 residential units in Berlin
Financing activities to enhance cash flows
-- 48% LTV with duration of 6 years. Intention to refinance some of the Group's debt
-- EUR19.5 million of debt acquisition after the end of the Reporting Period financed by shareholder's loan and expected to generate cash flow savings of EUR1.3 million p.a.
-- Shareholder's loan will be repaid upon refinancing of the acquired debt
Dividend
-- Total dividend distributions of EUR4.75 million were paid in February 2017, reflecting 1.02 cents per share
-- Additional EUR4.65 million paid in August 2017, reflecting 1.00 cents per share
Harry Hyman, Chairman commented: "In addition to the very reliable performance of the Group portfolio during the first half of the year, the acquisition and financing activity towards and shortly post the period end have further secured basis for a strong full year. We believe these very positive transactions will immediately contribute to the Group's profit and earnings and provide the potential for further growth."
Zohar Levy, Managing Director commented: "We keep improving the portfolio by disposal of non-strategic assets and acquisition of well-located assets with strong cash flow and high occupancy. We believe there's a substantial upside potential at the portfolio valuation and cash flow, at improving our financing and at accretive acquisitions and we are constantly working to achieve this".
For further information please contact:
Hot Features
Premium
Summit Germany Limited Tel: +44 (0) 1481 700 300
Zohar Levy - Managing Director
Itay Barlev (Braun) - Finance
Director
Non-Executive Chairman Tel: +44 (0) 20 7451 7050
Harry Hyman
Carey Group, Company Secretary Tel: +44 (0) 1481 700 300
Sara Bourne
Liberum Capital Limited, Nominated Tel: +44 (0) 20 3100 2222
Adviser and Joint Broker
Chris Clarke / Jill Li
Cenkos Securities, Joint Broker Tel: +44 (0) 20 7397 8900
Ivonne Cantu
Russell Kerr / Selwyn Jones
(Broking)
Inside Information
This announcement contains inside information
which is disclosed in accordance with the Market
Abuse Regulation.
Chairman's and Managing Director's Report
We are pleased to present the interim results of Summit Germany Limited and its subsidiaries ("the Group") for the six months ended 30 June 2017.
This has been another positive period, during which we secured a material increase in the overall scale and quality of our commercial property portfolio and enhanced the tenant and geographical spread.
The key transaction was a EUR100 million acquisition of a commercial property portfolio in Wolfsburg ("the Wolfsburg Portfolio"), supplemented by disposal of non-strategic assets and a EUR19.5 million debt acquisition. These three transactions, which should immediately benefit cash flow and net reported earnings, were completed just prior and shortly post the Reporting Period and hence are not fully reflected in the interim results.
In addition to the above mentioned transactions, we have seen progress on other meaningful measures of portfolio performance. Ongoing asset management initiatives have underpinned occupancy and improved overall tenant quality to support income certainty and stability.
The portfolio's geographical and sector spread has continued to strengthen and we believe that a greater portfolio scale should enhance net returns and will enable us to leverage our existing asset management platform. It is our intention to continue to actively manage the portfolio to unlock steady, incremental improvements in asset performance.
Financial Review
EPRA NAV increased by 1.7% to EUR474.4 million as at 30 June 2017 (FY 2016: EUR466.3 million). This is mainly due to a EUR17.5 million FFO(1) contribution, which was partly offset by EUR3.8 million revaluation expense (due to capex) and EUR4.7 million dividends distributed during the period. EPRA NAV per share was correspondingly approximately 2% higher at EUR1.02 (FY 2016: EUR1.00). The Group's IFRS NAV increased 2.0% to EUR446.8 million (FY 2016: EUR437.9 million).
(1) As presented on page 4
As at 30 June 2017 the portfolio consisted of 103 assets, with a Net Market Value ( "NMV") of EUR896.5 million (FY 2016: 100 properties at EUR797.8 million), including EUR15.1 million in respect of properties held for sale (FY 2016: one property at EUR2.2 million). The increase in NMV mainly reflects the recent EUR100 million portfolio acquisition described in detail below. See Note 5.
Strong and stable performance
During the Reporting Period, we continued our active asset management approach to secure lettings and maintain the rental income and high occupancy rate of the portfolio.
The acquisition of the Wolfsburg Portfolio was completed at period end, therefore not impacting on the Reporting Period's rental income and the respective profit and loss measures. It was due to our excellent landlord and tenant relationships, which have enabled us to keep rental income level stable, despite the disposal of properties in recent periods.
As a result, rental income amounted to EUR28.4 million (HY 2016 EUR28.9 million, FY 2016: EUR57.2 million), reflecting only a minor decrease, mainly due to the disposal of a property in Hamburg in the final quarter of last year.
That minor change in the rental income affected the Gross Profit which amounted to EUR26.2 million as of period end (HY 2016: EUR26.7 million, FY 2016: EUR52.7 million). FFO was correspondingly 3.8% lower at EUR17.5 million (HY 2016: EUR18.2 million, FY 2016: EUR34.9 million), as set out in the table below:
FFO (EUR'mm) 30.6.2017 30.6.2016 31.12.2016 ----------------------- ------------------ --------------------- -------------------- Gross profit 26.2 26.7 52.7 G&A expenses -3.5 -3.5 -7.4 Interest expenses, net -5.2 -5.0 -10.4 ----------------------- ------------------ --------------------- -------------------- FFO 17.5 18.2 34.9 Weighted ave. amount of shares (million) 465 465 465 FFO per share (cents) 3.8 3.9 7.5
PBT was 47% ahead of the comparable figure for the first half of last year and amounted to EUR14.1 million as of the end of the Reporting Period (HY 2016: EUR9.6 million, FY 2016: EUR63.9 million). Whereas most of the expenses remain broadly in line, the increase in PBT was attributable to revaluation expense, which was approximately 60% lower compared to prior period. This revaluation expense is a result of capital expenditure and tenant improvements, which are not reflected in the portfolio's NMV as of period end but improved the properties and are expected to increase the respective properties' value by year end valuation.
PBT (EUR'mm) 30.6.2017 30.6.2016 31.12.2016 --------------------------- ------------------ --------------------- -------------------- Gross profit 26.2 26.7 52.7 G&A expenses -3.5 -3.5 -7.4 Fair value adjustments of investment properties -3.8 -8.8 28.2 Financial expenses (net) -5.2 -5.1 -10.0 Other 0.5 0.3 0.5 --------------------------- ------------------ --------------------- --------------------
Profit Before Taxes 14.1 9.6 63.9
The increase in PBT contributed to the Net Profit which was 57% higher at EUR12.9 million (HY 2016: EUR8.2 million, FY 2016: EUR55.6 million), resulting in EPS of 2.6 cents (HY 2016: 1.6 cents, FY 2016: 10.5 cents).
EPS (EUR'mm) 30.6.2017 30.6.2016 31.12.2016 --------------------------- ------------------ --------------------- ------------------- Profit attributable to ordinary shareholders 12.0 7.7 49.0 No. of shares 465 465 465 --------------------------- ------------------ --------------------- ------------------- Earnings Per Share (cents) 2.6 1.6 10.5
Financing activities underpin stable cash flows
Our ongoing intensive financing activities are well reflected in the Group's success in locking interest rates and stabilising essential cash flows over the long term. We took an active approach towards financing and succeeded in optimising capital structure by keeping leverage level low at 48% (FY 2016: 46%) while maintaining the weighted average term of the Group's aggregated debt at almost 6 years.
The table below sets out the main details of the Group debt facilities as of 30 June 2017, which include among others the EUR70 million credit facility of the Wolfsburg Portfolio, which was recently acquired by way of a share purchase. Further detail on the Group's credit facilities are provided in Note 7 of the Group's financial statements.
Financing Loan to DSCR
Date Value Ratio
---------- ------------------- --------- --------- ------- --------- -------------- --------------
Loan Market
Credit Amount Value
Facility Start Maturity (EURmn) Interest Amort' (EURmn) Cov' Actual Cov' Actual
---------- -------- --------- --------- --------- ------- --------- ----- ------- ----- -------
1 12.2014 12.2021 61 3.14% 3.42% 160.7 70% 38% NR NR
2 12.2014 12.2021 143 3.14% 3.42% 296.3 75% 48% NR NR
3 03.2015 3.2022 31 2.00% 3.00% 66.1 65% 47% 125% 272%
4 11.2013 11.2018 22 2.66% 2.00% 38.0 75% 57% 145% 157%
5 10.2012 12.2021 5 e+1.75% 3.00% 11.8 NR NR 125% 292%
6 10.2012 2.2019 10 e+1.75% 2.65% 17.8 NR NR 125% 234%
7 6.2014 5.2024 70 5.00% 3.12% 101.2 NR NR NR NR
8 1.2016 1.2026 10 1.80% 3.00% 16.7 NR NR NR NR
9 3.2016 3.2026 18 2.26% 2.50% 27.5 NR NR NR NR
10 4.2016 3.2026 38 2.25% 4.15% 59.7 NR NR NR NR
11 9.2016 8.2026 4 2.10% 3.50% NR NR NR NR
12 12.2016 12.2026 16 1.76% 3.00% 21.4 NR NR NR NR
Other 1 0.0 NR NR NR NR
Unpledged Properties 79.2
-------------------------------
429 896.5 48%
---------- -------- --------- --------- --------- ------- --------- ----- ------- ----- -------
Shortly after the Reporting Period, we succeeded in further enhancing cash flows when we entered into an agreement with one of our lenders to acquire, for EUR19.5 million, a debt secured over existing Group assets. The acquired debt has a remaining term of approximately five years, with annual debt service costs of EUR2.9 million, which is payable to the Group following the transaction.
This transaction was funded via a new loan agreement between the Group and its majority shareholder, Summit Real Estate Holdings Ltd (SREH). SREH provided the Group with a matching EUR19.5 million unsecured bridge loan at 8% per annum, with no amortisation, resulting in a net annual benefit of approximately EUR1.3 million to the Group's future cash flow savings. Further details are set out on Note 7.
The Group intends to refinance the properties upon which the acquired debt is secured and to use the funds to repay the shareholder loan within three to sixteen months.
Accretive acquisitions
Notwithstanding the attractive additions to the Group's portfolio, we constantly examine and evaluate potential additions to our portfolio, while strictly maintaining our acquisitions criteria. Focusing on high quality assets with strong income characteristics and strong tenants, we completed the acquisition of the Wolfsburg Portfolio before the Reporting Period end.
The total purchase price of approximately EUR100 million including acquisition costs, and net of liabilities of EUR70 million, was financed out of the Group's existing cash of EUR30 million.
The portfolio is well-located in four different sites in the city of Wolfsburg, the location of Volkswagen headquarters and the world's biggest car plant. It generates EUR7.9 million contracted annual net rent from strong tenants, which is equivalent to a 7.9% p.a. net initial rental yield.
It comprises 80,000 sqm of lettable space constructed between 1999 and 2014, on sites which cover, in aggregate, over 130,000 sqm. It is fully let, with approximately 60% to the Volkswagen group via 15 different leases, and the balance to other leading automotive industry companies.
The above mentioned quality characteristics of the acquired portfolio and the potential to apply our asset management skills to unlock further latent value made it an excellent strategic addition to the Group's portfolio. Apart from increasing the Company's NMV to EUR896.5 million, the acquisition also increased the Group's contracted net rent roll from EUR58 million to EUR67 million. The effect of the later, however, will be reflected in future reporting periods.
Property portfolio overview
At the end of June 2017, the Group's aggregate portfolio comprised 103 assets, ca. 933,000 sqm of net lettable space, located on approximately 1,520,000 sqm of land.
The net annualised contracted income of the portfolio at Reporting Period end was EUR67 million. That is equivalent to a 7.5% p.a. net yield, receivable from ca. 650 tenants. Rent uplifts are either linked to CPI, or subject to agreed fixed annual increases.
No. Land Net Capital
of Size Lettable Vacant Rent Rent/sqm Value
Type Assets (sqm'000) (sqm'000) (sqm'000) (EURmn) /month (EUR/sqm) Yield
-------------- -------- ----------- ----------- ----------- --------- --------- ----------- ------
Office 52 728 558 60 49 8.1 1,195 7.3%
Retail 32 206 85 16 7 8.0 948 8.2%
Logistic 19 587 290 32 12 3.8 512 8.0%
All segments 103 1,520 933 108 67 6.8 961 7.5%
============== ======== =========== =========== =========== ========= ========= =========== ======
80% of the Portfolio's income is derived from strong tenants. It is multi-let with no dependency on key tenants and is also well diversified from sector and geographical perspectives, as illustrated overleaf.
Over 50% of group rent is generated from assets located in Germany's five main cities, Berlin (18%), Frankfurt (13%), Stuttgart (9%), Hamburg (8%) and Dusseldorf (3%). Another 36% is derived from Cologne, Munich and other major cities combined resulting with more than 88% in Germany's major cities. The largest ten properties account for 40% of portfolio income, and 83% of the lettable area is in the former West Germany.
The average rent/sqm per month for the year-end portfolio is set out in the table below, with comparison between distinct commercial sectors.
Offices Logistic Retail
------------------------ ---------------------- ------------------------
6.2017 12.2016 6.2017 12.2016 6.2017 12.2016
----------- ----------- ---------- ---------- ----------- -----------
EUR/sqm/month 8.1 7.9 3.8 3.6 8.0 8.0
Range in
EUR (4.8-20.7) (4.7-20.5) (2.3-7.0) (2.3-5.9) (3.0-25.7) (4.0-25.7)
----------- ----------- ---------- ---------- ----------- -----------
Aggregate portfolio occupancy is currently approximately 88%. The vacancy rate reflects, among others, assets held for future redevelopment. Assuming the portfolio was fully occupied, annualised net rent would be approximately EUR74.1m p.a., equivalent to an 8.3% p.a. yield on current book value.
Portfolio occupancy and income, adjusted for acquisitions and disposals, have both been stable over the last years. Net of disposals during the Reporting Period, lettings were steady and occupancy was maintained at around 92% for the majority of the portfolio.
This stability reflects the Group's strong landlord and tenant relationships, as well as the success of our experienced asset management team and direct approaches made by our marketing unit. During the Reporting Period, we signed new leases for approximately 26,000 sqm, and renewed existing lease agreements for another 68,000 sqm. This is worth a total of approximately EUR5.8 million p.a.
Offices are the largest component of the portfolio as at 30 June 2017 and comprised 74.4% of the NMV and 73.1% of Net Rent (FY 2016: 73.2% and 70.7% respectively). This is fully in line with our long-term strategy to focus on this segment, as it is where we see interesting and attractive prospects. It is an area in which we can capitalise upon management depth of experience and one where we have a proven competitive advantage.
Total
Offices Logistic Retail NMV
-------- --------- ------- ------
667.1 148.6 80.8 896.5
-------- --------- ------- ------
74.4% 16.6% 9.0% 100%
======== ========= ======= ======
We remain confident regarding the prospects for German commercial property, which we believe are characterised by steady demand and positive economic outlook.
New residential development in Berlin
The Group has been engaged through joint ventures in residential development projects to benefit from the ongoing demand for such property in Berlin. The projects are at different stages of progress and are all located in high demand residential neighbourhoods.
During the Reporting Period, the Group has been engaged in two new projects for development of 95 residential units in Berlin. More detail on this is set out in Note 6.
Disposal of non-strategic assets
As part of our strategy to improve the overall quality of the Group's portfolio by focusing on substantial properties in strong locations, we disposed of a portfolio of 18 smaller non-strategic properties shortly after the end of the Reporting Period.
The sale price was in line with the assets' 2016 year-end NMV of approximately EUR15 Million and was settled by EUR9.1 million in cash, and the balance left outstanding on a five-year loan. The loan bears an average annual interest rate of 3% and is secured over the assets and the shares of the companies in which they are held.
The Group used most of the cash proceeds to repay part of its existing debt facilities, which further improves the underlying strength of the Group portfolio.
Dividend
During the Reporting Period the Group announced a 1.00 cent per share in relation to the fourth dividend of 2016. The total amount of EUR4.65 million was paid to shareholders post Reporting Period, in August 2017.
The Group intends to continue and pay quarterly dividends to its shareholders.
Outlook
The portfolio performed steadily in the Reporting Period, underpinned by the benefits of ongoing asset management on net rent and FFO, offsetting to the impact of asset sales in 2016. We expect further progress in this respect in the second half of the year, as transactions completed just prior to the period end will further enhance portfolio returns.
The successful acquisition of the Wolfsburg portfolio again demonstrates our ability to continue to source and conclude deals on attractive, cash flow and earnings enhancing terms. We believe it improves the spread and diversity of the Group portfolio, adding strong tenants in a vibrant commercial location.
Our core strategic focus is intensive management of existing assets and improvements to the terms of supporting finance. We actively manage tenant relationships, and continue to allocate resources where we see opportunities to enhance net rent and revenue certainty. This includes capital expenditure and tenant improvements, renegotiation of leases and tenancy agreements.
We remain committed to building portfolio scale via acquisitions and also plan to continue to dispose of assets with inferior growth prospects in order to strengthen the portfolio by using the net proceeds to fulfill strategic plans.
We will continue to review potential acquisitions under our strict criteria, and pursue those which are well located and let to strong tenants. We expect this to remain a driver of portfolio growth over the next periods and to be funded principally from proceeds of asset sales, and new debt which still available at attractive rates.
Germany's attractions as a relatively stable investment market remain intact. It has a growing economy and a real estate market underpinned by a shortage of quality lettable space, declining vacancy rates and strong investment flows. We strongly believe that this environment will further complements our core objectives and enable us to focus on earnings enhancing initiatives to continue to deliver attractive income and capital returns for our shareholders.
Harry Hyman Zohar Levy
Chairman Managing Director
26 September 2017
INDEPENT REVIEW REPORT TO SUMMIT GERMANY LIMITED
We have been engaged by the Company to review the condensed consolidated set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 which comprises the condensed consolidated statement of financial position, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flow and related notes 1 to 13. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange.
As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules of the London Stock Exchange.
Deloitte LLP
Guernsey, Channel Islands
26 September 2017
condensed CONSOLIDATED STATEMENTs OF FINANCIAL POSITION
30 June 31 December
----------------- -----------
2017 2016 2016
-------- ------- -----------
(Unaudited) (Audited)
----------------- -----------
Note Euro (in thousands)
---- ------------------------------
ASSETS
NON-CURRENT ASSETS:
Investment properties 5 881,457 770,960 795,579
Other long-term assets 6 20,272 7,266 12,093
Deferred tax asset 553 875 655
-------- ------- -----------
Total non-current assets 902,282 779,101 808,327
-------- ------- -----------
CURRENT ASSETS:
Cash and cash equivalents 24,614 40,461 54,158
Trade receivables, net 1,316 1,562 1,297
Prepaid expenses and other current
assets 18,034 19,524 16,133
Receivables from related parties 8 165 80 169
Investment property held for
sale 5 15,060 1,338 2,242
-------- ------- -----------
Total current assets 59,189 62,965 73,999
-------- ------- -----------
Total assets 961,471 842,066 882,326
======== ======= ===========
The accompanying notes are an integral part of the condensed consolidated financial statements.
condensed CONSOLIDATED STATEMENTs OF FINANCIAL POSITION
30 June 31 December
------------------ -----------
2017 2016 2016
-------- -------- -----------
(Unaudited) (Audited)
------------------ -----------
Note Euro (in thousands)
----- -------------------------------
EQUITY AND LIABILITIES
EQUITY:
Share capital 12 (*) - (*) - (*) -
Other reserve 374,242 389,430 377,378
Retained gain 72,512 19,142 60,514
-------- -------- -----------
Equity attributable to the owners
of the Company 446,754 408,572 437,892
Non-controlling interests 23,841 15,410 21,787
-------- -------- -----------
Total equity 470,595 423,982 459,679
-------- -------- -----------
NON-CURRENT LIABILITIES:
Interest-bearing loans and borrowings 7 409,707 353,107 349,526
Other long-term financial liabilities 6 3,893 1,942 1,972
Derivative financial liabilities 9 4,088 9,031 6,248
Deferred tax liability 22,467 14,109 21,127
-------- -------- -----------
Total non-current liabilities 440,155 378,189 378,873
-------- -------- -----------
CURRENT LIABILITIES:
Interest-bearing loans and borrowings 7 15,508 10,050 11,804
Derivative financial liabilities 9 1,648 1,735 1,675
Payables to related parties 8 5,835 2,657 5,507
Current tax liabilities 73 65 65
Trade and other payables 27,657 25,388 24,723
-------- -------- -----------
Total current liabilities 50,721 39,895 43,774
-------- -------- -----------
Total liabilities 490,876 418,084 422,647
-------- -------- -----------
Total equity and liabilities 961,471 842,066 882,326
======== ======== ===========
NAV/Share (cent) 12(d) 95.99 87.79 94.09
======== ======== ===========
EPRA NAV/Share (cent) 12(d) 101.93 92.95 100.19
======== ======== ===========
(*) No par value.
The accompanying notes are an integral part of the consolidated financial statements.
26 September 2017
--------------------- ------------------ -----------------
Date of approval Zohar Levy Itay Barlev
of the
financial statements Managing Director Finance Director
CONDENSED CONSOLIDATED STATEMENTs OF COMPREHENSIVE INCOME
Six months ended Year ended
30 June 31 December
-------------------- ------------
2017 2016 2016
--------- --------- ------------
(Unaudited) (Audited)
-------------------- ------------
Note Euro (in thousands)
---- ----------------------------------
Rental income 28,402 28,909 57,168
Operating expenses (2,211) (2,226) (4,485)
--------- --------- ------------
Gross profit 26,191 26,683 52,683
General and administrative expenses (3,541) (3,479) (7,436)
Fair value adjustments of investment
properties 5 (3,786) (8,816) 28,203
Other income 473 330 486
--------- --------- ------------
Operating profit 19,337 14,718 73,936
--------- --------- ------------
Financial income 10 935 612 1,779
Financial expenses 10 (6,161) (5,736) (11,815)
--------- --------- ------------
Total financial expenses (5,226) (5,124) (10,036)
--------- --------- ------------
Profit before taxes on income 14,111 9,594 63,900
Taxation (1,212) (1,425) (8,353)
--------- --------- ------------
Profit for the period/year 12,899 8,169 55,547
--------- --------- ------------
Other comprehensive income and
expenses:
Items that may be reclassified
subsequently to profit or loss:
Net gain arising on revaluation
of available-for-sale
financial assets - - 123
Net gain (loss) on hedging instruments
entered into for
cash flow hedges 1,789 (4,816) (2,472)
--------- --------- ------------
Other comprehensive (loss) income
for the period/year, net of
tax 1,789 (4,816) (2,349)
--------- --------- ------------
Total comprehensive income for
the period/year 14,688 3,353 53,198
========= ========= ============
Profit for the period/year attributable
to:
Owners of the Company 11,998 7,665 49,037
Non-controlling interests 901 504 6,510
--------- --------- ------------
12,899 8,169 55,547
========= ========= ============
Total comprehensive income attributable
to:
Owners of the Company 13,516 3,511 46,973
Non-controlling interests 1,172 (158) 6,225
--------- --------- ------------
14,688 3,353 53,198
========= ========= ============
Earnings per share:
Basic (Euro per share) 11 0.026 0.016 0.105
========= ========= ============
Diluted (Euro per share) 0.026 0.016 0.105
========= ========= ============
The accompanying notes are an integral part of the consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Equity attributable to owners of the Company
---------------------------------------------------
Total equity
attributable
to owners
of the
Issued Other Reserve Retained parent Non-Controlling Total
capital (Note 12) Earnings Company interests equity
---------- ------------- --------- ------------- --------------- ---------
Euro in thousands
-------------------------------------------------------------------------------
Balance at 1 January 2017 (*) - 377,378 60,514 437,892 21,787 459,679
Profit for the period - - 11,998 11,998 901 12,899
Other comprehensive profit for the
period, net of income
tax - 1,518 - 1,518 271 1,789
---------- ------------- --------- ------------- --------------- ---------
Total comprehensive profit - 1,518 11,998 13,516 1,172 14,688
---------- ------------- --------- ------------- --------------- ---------
Dividend distribution (Note 12c) - (4,654) - (4,654) - (4,654)
Additional non-controlling interest
on acquisition of
subsidiary - - - - 882 882
---------- ------------- --------- ------------- --------------- ---------
Balance at 30 June 2017 (*) - 374,242 72,512 446,754 23,841 470,595
========== ============= ========= ============= =============== =========
(*) No par value.
The accompanying notes are an integral part of the consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Equity attributable to owners of the Company
---------------------------------------------------
Total equity
attributable
to owners
of the
Issued Other Reserve Retained parent Non-Controlling Total
capital (Note 12) Earnings Company interests equity
---------- ------------- --------- ------------- --------------- ---------
Euro in thousands
-------------------------------------------------------------------------------
Balance at 1 January 2016 (*) - 398,007 11,477 409,484 15,218 424,702
Profit for the period - - 7,665 7,665 504 8,169
Other comprehensive loss for the
period, net of income
tax - (4,154) - (4,154) (662) (4,816)
---------- ------------- --------- ------------- --------------- ---------
Total comprehensive profit (loss) - (4,154) 7,665 3,511 (158) 3,353
---------- ------------- --------- ------------- --------------- ---------
Dividend distribution - (4,423) - (4,423) - (4,423)
Additional non-controlling interest
on acquisition of
subsidiary - - - - 350 350
---------- ------------- --------- ------------- --------------- ---------
Balance at 30 June 2016 (*) - 389,430 19,142 408,572 15,410 423,982
========== ============= ========= ============= =============== =========
(*) No par value.
The accompanying notes are an integral part of the consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Equity attributable to owners
of the Company
-------------------------------------------------- --------------- ----------
Total equity
attributable
to owners
of the
Issued Other Reserve Retained parent Non-Controlling Total
capital (Note 12) Earnings Company interests equity
--------- ------------- --------- ------------- --------------- ----------
Euro in thousands
------------------------------------------------------------------- ----------
Balance at 1 January 2016 (*) - 398,007 11,477 409,484 15,218 424,702
Profit for the year - - 49,037 49,037 6,510 55,547
Other comprehensive loss for the
year,
net of income tax - (2,064) - (2,064) (285) (2,349)
--------- ------------- --------- ------------- --------------- ----------
Total comprehensive profit (loss) - (2,064) 49,037 46,973 6,225 53,198
--------- ------------- --------- ------------- --------------- ----------
Dividend distribution - (18,565) - (18,565) - (18,565)
Additional non-controlling interest
on acquisition of subsidiary - - - - 344 344
--------- ------------- --------- ------------- --------------- ----------
Balance at 31 December 2016 (*) - 377,378 60,514 437,892 21,787 459,679
========= ============= ========= ============= =============== ==========
(*) No par value.
The accompanying notes are an integral part of the consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended Year ended
30 June 31 December
-------------------- -------------
2017 2016 2016
--------- --------- -------------
(Unaudited) (Audited)
-------------------- -------------
Euro (in thousands)
-----------------------------------
Cash flows from operating activities:
Profit for the period/year 12,899 8,169 55,547
--------- --------- -------------
Adjustments for:
Deferred taxes 1,149 1,306 8,155
Financial expenses, net 5,226 5,124 10,036
Fair value adjustment of investment
properties 3,786 8,816 (28,203)
Depreciation of property, plant
and equipment 13 16 44
Amortization and impairment of
intangible assets (133) (573) 54
--------- --------- -------------
10,041 14,689 (9,914)
--------- --------- -------------
Changes in operating assets and
liabilities:
Decrease in trade receivables 45 82 348
Decrease in trade and other payables (1,165) (4,447) (3,225)
Increase in payables to related
parties and shareholders 252 470 858
Decrease (Increase) in prepaid
expenses and other current assets 529 (51) 727
(Decrease) Increase in other non-current
liabilities (37) 1,523 20
--------- --------- -------------
(376) (2,423) (1,272)
--------- --------- -------------
Net cash flows from operating activities 22,564 20,435 44,361
Cash flows from investing activities:
Payments of property, plant and
equipment (270) (5) (31)
Net cash outflow on acquisition
of asset companies (25,961) (38,499) (38,506)
Change in deposits 1,057 (3,242) (1,591)
Increase in loan to third party (6,353) (542) (5,009)
Payments for acquisitions of investment
properties (6,631) (4,217) (10,917)
Proceeds from sale of investment
property 2,500 3,297 18,597
Interest income received 972 - 1,528
--------- --------- -------------
Net cash flows from investing activities (34,686) (43,208) (35,929)
--------- --------- -------------
Cash flows from financing activities:
Proceeds from borrowings from banks - 69,000 90,652
Repayment of borrowings (7,264) (29,426) (54,101)
Interest expense paid (5,430) (5,500) (10,590)
Dividend distribution (4,728) (4,423) (13,818)
--------- --------- -------------
Net cash flows from financing activities (17,422) 29,651 12,143
--------- --------- -------------
(Decrease) increase in cash and
cash equivalents (29,544) 6,878 20,575
Cash and cash equivalents at the
beginning of period/year 54,158 33,583 33,583
--------- --------- -------------
Cash and cash equivalents at the
end of period/year 24,614 40,461 54,158
========= ========= =============
The accompanying notes are an integral part of the consolidated financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: GENERAL
Summit Germany Limited (the "Company") and its subsidiaries (together: the "Group") is a German property specialist company. The Company was incorporated and registered in Guernsey on 19 April 2006. The parent company of the Group is Summit Real Estate Holdings Ltd (hereinafter: "SHL"), a company registered in Israel.
The Group owns, enhances and operates commercial real estate assets in Germany including office buildings, logistic centers and others, which are leased to numerous commercial and industrial tenants. The Group invests primarily in such properties that provide substantial income flows and potential for value increase through asset management. The Group does not acquire properties for speculative purposes.
NOTE 2: ACCOUNTING POLICIES
Basis of preparation:
The annual financial statements of Summit Germany Limited are prepared in accordance with IFRSs as adopted by the European Union. The same accounting policies and methods of computation have been applied to the Unaudited Condensed Interim Financial Statements as in the Annual Financial Report at 31 December 2016. The presentation of the Unaudited Condensed Interim Financial Statements is consistent with the Annual Financial Report.
The condensed set of financial statements included in this half yearly financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union.
The same accounting policies and methods of computation have been applied to the Unaudited Condensed Interim Financial Statements as in the Annual Financial Report at 31 December 2016. The presentation of the Unaudited Condensed Interim Financial Statements is consistent with the Annual Financial Report.
Going concern
The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.
Application of new and revised international Financial Reporting Standards (IFRSs)
In the current financial year, the Group has adopted the following Amendments to IFRSs:
-- IAS 34 "Interim Financial Reporting" (Disclosure of Information Elsewhere in the Financial Reporting):
The Amendment clarifies that information appearing in the interim financial reporting, but not within the financial statements themselves, must be included by a reference from the interim financial statements to the other location in the interim financial reporting, available to the users of the reports, under the same terms and time as in the financial statements. The Amendment is implemented retrospectively for annual period commencing on 1 January 2016.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of Group's accounting policies which are described in Note 2 to the annual accounts, management is required to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities that are not readily apparent from other sources. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
Key sources of estimation uncertainty:
The key assumptions concerning the future and other key sources of estimation uncertainty at the consolidated statement of financial position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed in the annual accounts.
Revaluation of investment properties:
The Group carries its investment properties at fair value, with changes in fair values being recognised in profit or loss. The Group engages independent valuation specialists to determine fair value of investment properties on an annual basis. The valuation technique used to determine fair value of investment properties is based on a discounted cash flow model as well as comparable market data.
The determined fair value of the investment properties is sensitive to the estimated yield as well as the long term vacancy rate. See note 5 for further information.
Taxation:
Uncertainties might exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income. Given the Group's international business relationships and the nature of contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded.
Deferred taxes
Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits (See also note 17 to the annual accounts).
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Cont.)
Acquisition of assets:
In regard to the transactions detailed in note 5, the Group management and the Directors have reviewed the characteristics of the transaction and the properties over which control was acquired by the Group, in accordance with the requirements of IFRS 3. Although control over corporate entities was gained as a result of the transaction, these entities were special purpose vehicles for holding properties rather than separate business entities - this judgment was made mainly due to the absence of business processes inherent in these entities. Consequently, the Directors consider that the transaction meets the criteria of acquisition of assets and liabilities rather than business combination, and accounted for the transaction as such.
NOTE 4: ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS A) Amendments to standards affecting the current period and / or previous reporting periods: * Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses
The amendments clarify the following:
1. Decreases below cost in the carrying amount of a fixed-rate debt instrument measured at fair value for which the tax base remains at cost give-rise to a deductible temporary difference, irrespective of whether the debt instrument's holder expects to recover the carrying amount of the debt instrument by sale or by use, or whether it is probable that the issuer will pay all the contractual cash flows;
2. When an entity assesses whether taxable profits will be available against which it can utilise a deductible temporary difference, and the tax law restricts the utilisation of losses to deduction against income of a specific type (e.g. capital losses can only be set off against capital gains), an entity assesses a deductible temporary difference in combination with other deductible temporary differences of that type, but separately from other types of deductible temporary differences;
3. The estimate of probable future taxable profit may include the recovery of some of an entity's assets for more than their carrying amount if there is sufficient evidence that it is probable that the entity will achieve this; and
4. In evaluating whether sufficient future taxable profits are available, an entity should compare the deductible temporary differences with future taxable profits excluding tax deductions resulting from the reversal of those deductible temporary differences.
The amendments apply retrospectively for annual periods beginning on or after 1 January 2017 with earlier application permitted.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4: ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS (Cont.) B) New and revised IFRSs in issue but not yet effective * IFRS 15 Revenue from Contracts with Customers
In May 2014, IFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS 18 Revenue, IAS 11
Construction Contracts and the related interpretations when it becomes effective.
The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces a 5-step approach to revenue recognition.
-- Step 1: Identify the contracts(s) with a customer. -- Step 2: Identify the performance obligations in the contract. -- Step 3: Determine the transaction price. -- Step 4: Allocate the transaction price to the performance obligations in the contract. -- Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.
Under IFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when 'control' of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in IFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by IFRS 15.
The directors of the Company anticipate that the application of IFRS 15 in the future may have an impact on the amounts reported and disclosures made in the Group's consolidated financial statements. However, it is not practicable to provide a reasonable estimate of the effect of IFRS 15 until the Group performs a detailed review. The standard is effective for annual reporting periods beginning on or after 1 January 2018.
IFRS 16 Leases
In January 2016, the IASB published IFRS 16 Leases. The new Standard supersedes IAS 17 Leases and its associated interpretative guidance.
IFRS 16 applies a control model to the identification of leases, distinguishing between leases and service contracts on the basis of whether there is an identified asset controlled by the customer.
IFRS 16 introduces significant changes to lessee accounting it removes the distinction between operating and finance leases under IAS 17 and requires a lessee to recognise a right-of-use asset and a lease liability at lease commencement for all leases, except for short-term leases and leases of low value assets.
IFRS 16 is effective for reporting periods beginning on or after 1 January 2019 with early application permitted for entities that apply IFRS 15 at or before the date of initial application of IFRS 16.
The Group does not expect that this standard will have a significant effect on its financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5: INVESTMENT PROPERTIES
Euro
in thousands
----------------
Balance at 1 January 2016 731,748
Additions during the year 52,885
Disposals during the year (15,015)
Reclassification to property held for
sale (a)(1) (2,242)
Fair value adjustments during the year 28,203
----------------
Balance at 31 December 2016 795,579
================
Additions during the period (b) 104,982
Disposals (a)(1) (258)
Reclassification to property held for
sale (a)(2) (15,060)
Fair value adjustments during the period (3,786)
----------------
Balance at 30 June 2017 881,457
================
The investment properties are stated at fair value. The fair value represents the amount at which the assets could be exchanged between a willing buyer and willing seller in an arm's length transaction at the date of valuation, after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. Valuations are prepared by external valuators at least once a year and more frequently when significant changes to properties' value are identified.
The valuations are performed using the income capitalisation method, which is a valuation based model on the present value of expected Net Operating Income per property. Real estate valuations are based on the net annual cash flows after capitalisation by discounted rates that reflect the specific risks inherent in property activity.
For the reporting period, no independent external valuation was performed. The Company obtained an opinion letter from its external valuer indicating no major change in overall portfolio value.
a. Disposal
(1) As of 31 December 2016, property valued at approximately EUR2.2 million was classified as held for sale. During the reporting period, the property was sold for a consideration similar to their carrying amount.
(2) As of 30 June 2017, 18 properties valued at approximately EUR15.1 million were classified as held for sale. After the reporting period, these properties were sold for a consideration of EUR15 million, similar to their book value.
EUR9.1 million of the purchase price was paid in cash and was mostly used to part repay one of the Company's debt facilities. The remaining balance will be paid through a five-year loan bearing an average annual interest rate of 3% and secured by a first rank mortgage over the sold properties and the shares of the companies in which they are held.
b. Additions
In June 2017, the Group completed an acquisition of a portfolio of commercial properties located in four different sites in the city of Wolfsburg, Germany, at a total purchase price of approximately EUR100 million including acquisition costs.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5: INVESTMENT PROPERTIES (Cont.) b. Additions (Cont.)
The acquired portfolio has a lettable area of 80,000 sqm and is fully let, mainly to Volkswagen Group (approximately 60% of the lettable space through 15 different leases), as well as to other leading Companies in the automotive industry. The properties generate annual net rent of approximately EUR7.9 million.
The acquisition was carried out as a share deal transaction and the purchase price, net of liabilities of EUR70 million, was financed by the Company's existing cash of EUR30 million.
NOTE 6: OTHER LONG TERM ASSETS AND LIABILITIES
Long-term loans receivable
30 June 31 December
--------------- -----------
2017 2016 2016
-------- ----- -----------
Euro in thousands
----------------------------
Other long-term financial assets:
Available-for-sale investment
- unquoted equity shares 2,373 2,250 2,373
Long-term loans receivable
(*) 17,085 4,399 9,135
Other financial assets 728 522 496
-------- ----- -----------
Total long term financial assets 20,186 7,171 12,004
======== ===== ===========
Other long-term non-financial
assets 86 95 89
======== ===== ===========
Other long-term financial liabilities:
Other Financial liabilities 3,893 1,942 1,972
======== ===== ===========
(*) Long-term loans receivable
a. The Group has an agreement to provide funding for three residential projects in Berlin, see note 6 of the Group Consolidated Financial Statements as of 31 December 2016.
As of 30 June 2017:
-- Loans that relate to two out of the three projects, amounting EUR3.8 million, which include accrued interest of EUR2.4 million, were classified to prepaid and other current assets due to their expected repayment date within the next 12 months.
-- The repayment date of the remaining loan and its accrued interest was extended to the second half of 2018 and as such it is included under long term loans receivable.
-- The projects are at different development stages: first and second projects are 100% sold and the third project is approximately 83 % sold.
b. In May 2016 the Group engaged in a JV project for the development of 60 residential units in Berlin and provided approximately EUR4 million as loan by the Group, in terms similar to the previous projects.
The loan and the accrued interest are repayable from the revenues of the project, expected in the second half of 2019.
c. During the first quarter of 2017, the Group engaged in two additional projects for development of 95 residential units in Berlin and committed to provide funds of approximately EUR7 million as loan, in terms similar to the previous projects.
The loan and the accrued interest are repayable from the revenues of the project, expected in the second half of 2020.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7: INTEREST-BEARING LOANS AND BORROWING
The Company is engaged in financing agreements with several credit providers. To the date of this report the borrowing entities comply with all the covenants set in their financing agreements.
After the end of the reporting period, in July 2017, the Group acquired from a current lender a debt secured over Group's properties (the "Acquired Debt") for a consideration of EUR19.5 million. The remaining term of the Acquired Debt is approximately 5 years and the annual debt service costs (i.e. principal and interest) are EUR2.9 million, which will be payable to the Company following the transaction.
In order to fund the transaction, the Company has entered into a loan agreement with its majority shareholder, Summit Real Estate Holding Ltd. ("SREH"). SREH granted an unsecured shareholders loan of EUR19.5 million to the Company at an annual interest rate of 8%, with no amortisation. The Company can repay the shareholders loan within 3 to 16 months of drawdown.
NOTE 8: BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Amounts owed by Amounts owed to
related parties related parties
-------------------------- ----------------------------
30 June 31 December 30 June 31 December
------------ ------------ -------------- ------------
2017 2016 2016 2017 2016 2016
----- ----- ------------ ------ ------ ------------
Euro in thousands
--------------------------------------------------------
Related parties 165 80 169 5,835 2,657 5,507
===== ===== ============ ====== ====== ============
At the date of this report Summit Real Estate Holdings Ltd ("SHL") holds approximately 50.01% of the Ordinary shares in the Company. SHL is under the control of Mr. Zohar Levy, the Managing Director of the Group. Summit Management CO S.A. ("SMC"), a company controlled by Zohar Levy, was appointed as an Asset Manager on 19 May 2006. The terms of this appointment were revised in March 2017. For the terms and conditions of the management agreement, please refer to Note 13b to the Group annual financial statements for the year 2016.
The amounts owed to related parties as of 30 June 2017 include the provision for management fees to SMC (including a provision for a performance-based compensation in the amount of EUR375 thousand).
After the end of the reporting period, the Company has entered into a loan agreement with its majority shareholder, Summit Real Estate Holding Ltd. ("SREH") in order to fund a debt acquisition, as described in Note 7.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9: FAIR VALUE
Fair value of financial instruments carried at amortised cost:
The directors consider that the carrying amounts of financial assets and financial liabilities recognised at amortised cost in the financial statements approximate their fair values.
Fair value measurements recognised in the statement of financial position:
The fair value measurements are grouped into Levels 1, 2 and 3 based on the degree to which the fair value is observable.
-- Level 1 fair value measurements marketable securities are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
-- Level 2 fair value measurements (swaps transactions) are derived from inputs other than quoted prices that are observable for those instruments directly (i.e. as prices).
-- Level 3 fair value measurements (available-for-sale investment - unquoted equity share) are derived from valuation techniques that include inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Refer to Note 5 for valuation approach adopted on investment property.
30 June 2017
---------------------------------
Level Level Level
1 2 3 Total
----- -------- ------- -------
Euro in thousands
---------------------------------
Non-financial assets
Investment properties
(see note 5) - - 896,517 896,517
Available-for-sale financial
assets
Unquoted equity shares
(a) - - 2,373 2,373
----- -------- ------- -------
Total - - 898,890 898,890
===== ======== ======= =======
Financial liabilities
Derivative instruments
- swaps (b) - (5,736) - (5,736)
===== ======== ======= =======
(a) No change in unquoted equity shares from 31 December 2016.
(b) The change in derivative instruments from 31 December 2016 to 30 June 2017 was due to revaluations.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9: FAIR VALUE (Cont.)
Fair value measurements recognised in the statement of financial position (Cont.):
31 December 2016
----------------------------------
Level Level Level
1 2 3 Total
----- -------- -------- -------
Euro in thousands
----------------------------------
Non-financial assets
Investment properties - - 797,821 797,821
Available-for-sale financial
assets
Unquoted equity shares - - 2,373 2,373
----- -------- -------- -------
Total - - 800,194 800,194
===== ======== ======== =======
Financial liabilities
Derivative instruments
- swaps - (7,923) - (7,923)
===== ======== ======== =======
30 June 2016
-----------------------------------
Level Level Level
1 2 3 Total
----- --------- ------- --------
Euro in thousands
-----------------------------------
Non-financial assets
Investment properties - - 772,298 772,298
Available-for-sale financial
assets
Unquoted equity shares - - 2,250 2,250
----- --------- ------- --------
Total - - 774,548 774,548
===== ========= ======= ========
Financial liabilities
Derivative instruments
- swaps - (10,766) - (10,766)
===== ========= ======= ========
NOTE 10: FINANCIAL EXPENSES (INCOME)
Six months Year ended
ended 30 June 31 December
---------------- ------------
2017 2016 2016
------- ------- ------------
Euro in thousands
------------------------------
Financial expenses:
Interest on bank borrowings 5,177 5,044 10,393
Amortization of cost of raising
loans 531 412 842
Expenses on currency exchange 10 - -
Other 443 280 580
------- ------- ------------
Total financial expenses 6,161 5,736 11,815
======= ======= ============
Financial income:
Interest income on short-term
deposits - 12 15
Income on currency exchange - 99 132
Other 935 501 1,632
------- ------- ------------
Total financial income 935 612 1,779
======= ======= ============
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11: EARNINGS PER-SHARE
The calculation of the basic and diluted earnings per share is based on the following data:
Six months Year ended
ended 30 June 31 December
---------------- ------------
2017 2016 2016
-------- ------ ------------
Euro in thousands
------------------------------
Earnings
Earnings for the purposes of
basic earnings per share being
net profit attributable to
owners of the Company 11,998 7,665 49,037
======== ====== ============
Six months Year ended
ended 30 June 31 December
---------------- ------------
2017 2016 2016
------- ------- ------------
in thousands
------------------------------
Number of shares
Weighted average number of
ordinary shares for the purposes
of the basic earnings per share 465,400 465,400 465,400
======= ======= ============
Six months Year ended
ended 30 June 31 December
---------------- ------------
2017 2016 2016
------- ------- ------------
(Unaudited) (Audited)
---------------- ------------
Earnings per share:
Basic (Euro per share) 0.026 0.016 0.105
======= ======= ============
Diluted (Euro per share) 0.026 0.016 0.105
======= ======= ============
There is no difference between basic and diluted earnings per share over the periods.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12: SHARE CAPITAL
a. The authorized share capital of the Group is represented by an unlimited number of Ordinary shares with no par value.
Issued and
outstanding
-------------
Number of
shares
-------------
At 1 January 2016 465,399,862
Change in the period -
-------------
At 30 June 2016 465,399,862
Change in the period -
-------------
At 31 December 2016 465,399,862
Change in the period -
-------------
At 30 June 2017 465,399,862
=============
b. Distributable reserve:
The directors have elected to transfer the premium arising from the issue of ordinary shares by the Company to a distributable reserve, which balance of EUR375 million as of 30 June 2017 (as of 31 December 2016: EUR379.4 million) is included in other reserve. The change during the year was due to dividends distributed in the half year report that ended in 30 June 2017.
In accordance with the Companies (Guernsey) law, 2008, any distribution is subject to a solvency test to determine whether the Company is able to distribute funds to shareholders.
c. Distribution of Dividends
Following the Company's Admission to AIM, the Company has adopted a quarterly dividend policy.
In December 2016, the Company declared a dividend of 1.02 cent per share. The total amount of EUR4,747 thousand was paid to the shareholders in February 2017.
In June 2017, the Company declared a dividend of 1.00 cent per share. The total amount of EUR4,654 thousand was paid to the shareholders after the end of the reporting period in August 2017.
d. NAV and EPRA NAV:
As of 30 June As of 30 June As of 31 December
2017 2016 2016
-------------------------- ---------------------------- ------------------------
EUR, thousands EUR, per EUR, thousands EUR, EUR, EUR,
share per share thousands per share
--------------- --------- --------------- ----------- ----------- -----------
NAV (*) 446,754 0.96 408,572 0.88 437,892 0.94
Financial
derivative
instruments 5,736 10,766 7,923
Deferred
Tax, net 21,914 13,234 20,472
--------------- --------------- -----------
EPRA NAV
(**) 474,404 1.02 432,572 0.93 466,287 1.00
(*) Net Asset Value
(**) EPRA NAV is calculated based on the NAV excluding the effect of deferred taxes and the fair value of hedging instruments.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13: SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD
a. In July 2017, the Company sold 18 small properties for a consideration of EUR15 million, similar to their book value. These properties were classified as held for sell as of 30 June 2017. See note 5.a.(2) for further information.
b. In July 2017, the Group acquired from a current lender a debt secured over Group's properties for a consideration of EUR19.5 million, as further described in Note 7. The Group has entered into a loan agreement with its majority shareholder, Summit Real Estate Holding Ltd. ("SREH") in order to fund the debt acquisition, as further described in Note 8.
c. In August 2017, Group's Finance Director and a director of a subsidiary of the Group purchased a total of 125,000 ordinary shares of the Company. The consideration for these share purchases was satisfied by the Company pursuant to the settlement of a bonus and a share award respectively.
This information is provided by RNS
The company news service from the London Stock Exchange
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