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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Taliesin Pty | LSE:TPF | London | Ordinary Share | JE00B3B3WB31 | 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% | 4,450.00 | 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
TIDMTPF TIDMTPFZ
RNS Number : 9632G
Taliesin Property Fund Limited
11 August 2016
Taliesin Property Fund Limited - Half Yearly Report
TALIESIN PROPERTY FUND LIMITED
Unaudited half yearly report for the 6 months to 30 June 2016
Key financial and operational highlights
-- Adjusted Net Asset Value (NAV)* per share increased by 11.8% to end the first half of 2016 at EUR35.15 (31 December 2015 EUR31.44). On an EPRA basis**, the NAV per share was EUR34.73 as at 30 June 2016 (31 December 2015 EUR31.10)
-- Property portfolio now valued at EUR289.2 million, an increase of 9.5% after adjusting for property sales in the first half of 2016
-- Per square metre (psqm) valuation of EUR2,440 (31 December 2015 EUR2,240) -- Recently completed loan refinancing further reduces interest costs -- Proposed further capital return to shareholders of EUR2 per share (171p per share) * The Adjusted NAV takes the IFRS NAV and excludes gross deferred tax liabilities
** The EPRA NAV takes the IFRS NAV and excludes the cumulative mark-to-market movements in Taliesin's interest rate swap contracts and excludes net deferred tax liabilities
This announcement contains inside information.
For further information, please contact:
Taliesin Property Fund Limited
Mark Smith, Director 01534 700 000
Stockdale Securities Limited
Alastair Moreton/ Rose Ramsden 020 7601 6118
Chairman's Statement
I am delighted to again be able to report on a strong half-year for Taliesin. The Group's Adjusted NAV per share increased by 11.8% in the first half of 2016 to EUR35.15 (31 December 2015 EUR31.44). The value of the Taliesin property portfolio as at 30 June 2016, following a valuation carried out by Jones Lang LaSalle (JLL), now stands at EUR289.2 million, an increase in the period of 9.5% after adjusting for property sales.
The value per square metre of the portfolio now stands at EUR2,440, an increase of 8.9% from 31 December 2015 (EUR2,240 psqm). Taliesin invested a further EUR2.1 million in selective property refurbishment projects during the period and has committed a similar amount for the rest of the year.
The ongoing investment programme continues to drive rental growth. Despite a smaller portfolio as a result of privatisation sales and static vacancy rates, overall rental revenue is growing strongly and in situ rents are growing in the region of 4-5% per annum.
Further commentary on the Berlin residential market is provided in the Investment Advisers' report but, in summary, the trends that have supported the market in recent years remain robust. The Berlin economy continues to prosper supported by healthy demographics as more people move to the city, adding to the problem of a scarcity of supply in the residential rental market. Strong growth in home ownership driven by record low borrowing costs is driving single apartment prices higher and further reducing the stock of residential property available for rent.
The increase in the value of Taliesin's portfolio demonstrates how well placed the Group is to take full advantage of these trends. In particular, the new valuation reflects the potential for further privatisations and better captures the premium prices achievable through apartment sales. Looking at valuations generally, the market is beginning to differentiate pricing much more depending on location, quality of building and potential (for privatisation, redevelopment etc.). This is a big step away from when Taliesin first started acquiring property, as there was very little in the way of price differentiation based on location and potential. As the market continues to mature, I would expect this trend to become stronger and for Taliesin to be an obvious beneficiary given the quality and location of its properties and their potential.
The ongoing collapse in interest rates and the slew of bonds offering negative yields in Germany has clearly been positive for the value of a predictable (and growing) yield portfolio such as ours. As discussed later in this report, we do not see this changing anytime soon. Of immediate benefit to Taliesin and its shareholders is the Group's ability to refinance maturing senior loans at much lower interest rates and higher principal amounts allowing for a further capital distribution of EUR2 per share (171p per share) by way of an issue and redemption of B shares, paid up out of the Company's stated capital account. The distribution will amount to EUR9,680,374 in aggregate and the Sterling equivalent of 171p per share will be paid on 26 August 2016 to those shareholders on the register at the close of business of 19 August 2016. The shares will be marked 'ex' on 18 August 2016.
Investment Advisers' Report
The Berlin residential market continues to benefit from the positive trends mentioned in the Chairman's commentary. The economy remains strong and is outperforming the rest of Germany. For example, in the first quarter of 2016, employment rose by 2.7% (49,700 jobs), more than double the rate in Germany as a whole. Employment in Berlin has been growing faster than in any other state since 2009. Businesses continue to move to the city and the technology sector shows early signs of being a game-changer for Berlin. Championed by Chancellor Merkel, tech activity has ballooned in the city, establishing Berlin as the start-up capital of mainland Europe. The move by various large American/Israeli co-working space operators into the Mitte district recently highlights just how dynamic and space hungry this sector has become, having been virtually non-existent a few years ago. Combined with a strong requirement for space from any number of stand-alone tech companies, this has led to significant increases in commercial rents in central areas. To the extent that Taliesin has commercial space in these areas, this is clearly positive. However, the real benefit for the Group is in the shape of more demand for rental and ownership properties in central areas, particularly in Friedrichshain where a number of media and tech businesses are located and a large part of the Taliesin portfolio is located.
The tech sector is not alone in attracting newcomers to Berlin. As discussed extensively in previous updates, the city continues to attract significant numbers of new inhabitants working in the media, arts, government and education sectors amongst others. Residential building, although picking up, is still lagging population growth. According to the Berlin Statistics Office, Berlin's population rose by 50,000 (1.4%) in 2015, ending the year at 3,520,000, the highest level since the Berlin Wall came down. Meanwhile, in 2015, the housing stock rose by 10,877 units (0.6%) to 1,902,675 units. Not surprisingly, the resulting squeeze has led to a substantial increase in living costs in recent years. However, residential accommodation remains very affordable. At current valuations, a typical newly refurbished, centrally located, 75 square metre (800 square foot) apartment is held on our balance sheet at EUR183,000. This is likely to sell for around EUR300,000 as a private apartment and rent for around EUR900-1000 per month. Leaving aside the issue of availability, this pricing would still seem to continue to offer exceptional value.
In addition to a strong local economy and positive demographic trends, it is also worth reflecting on the broader outlook. The macroeconomic backdrop remains subdued in the Eurozone, suggesting little chance of any tightening of monetary policy near term. Growth was running at 1.6% per annum at mid-year, with annual inflation keeping low at 0.2% and some countries, such as Italy and Spain, still experiencing deflation. Germany recently became the first Eurozone country to issue bonds with a negative yield, although yields in the secondary market for German sovereign debt have been negative for some time. Although estimates of the macroeconomic impact of Brexit vary wildly, not least because the ultimate form of Britain's economic relationship with the EU remains unclear, there is little doubt that Brexit and its attendant uncertainties will dampen the outlook for the EU. In previous crises, the EU has responded by accelerating and deepening the process of EU integration. Moves are currently afoot to harmonise social security systems and insolvency law. However, Brexit has emboldened several countries, notably former Warsaw Pact nations, to call for greater decentralisation, partly because they feel they have borne the brunt of Germany's basically unilateral implementation of an open door policy on immigration. With anti-EU sentiment growing throughout the Eurozone, any significant concessions made to the UK in the process of Brexit talks could encourage potentially irresistible demands for EU referenda in several countries. As Brexit negotiations are taking place ahead of and during the French presidential elections in April/May 2017 and German national elections in September 2017, the political barometer in the Eurozone is bound to rise. This will surely take its toll on investment spending and ensure that the ECB will keep rates lower for longer and semi-institutionalise QE. This bodes well for the outlook for real estate prices in Berlin and Taliesin's ability to continue to refinance maturing senior loans on preferential terms.
In our full year 2015 report, we flagged a re-financing of two senior loans maturing in 2016. The two maturing facilities totalled EUR17 million with an interest rate of 4.5% and we had indicated at the time of the full year report that we hoped to refinance with a new principal amount of EUR30 million and an interest rate of less than 1.5%. Given the improvement seen this year in the financing market, the actual amount of new principal loan is slightly higher at EUR30.5 million and the interest rate slightly lower at less than 1.25%. This refinancing was concluded and drawn-down at the end of July, i.e. post the balance sheet date for the interim results. As of the balance sheet date, the loan-to-value on the Taliesin portfolio declined again to 41%. The recently concluded refinancing will increase this ratio to around 46%. The cover ratio on the Group's ZDP shares also improved to 2.34x as at 30 June 2016 as a result of the portfolio revaluation. It is particularly pleasing for the Company to be able to fund a further capital distribution to shareholders as a result of this most recent refinancing. Looking at the future maturity schedule of senior loans, Taliesin has a significant number of loans maturing over the next two years. If current benign conditions persist, then this should allow the Group to continue to return money to shareholders and further reduce interest costs. Proceeds from further privatisation sales should also help facilitate future distributions.
Looking at the interim financial statements and following on from a change first made at year end 2015, Taliesin now shows an additional balance sheet line 'Assets classified as held for sale' representing those properties that are in the immediate process of privatisation. At year-end 2015 this line consisted entirely of unsold units in Warschauer Strasse, Taliesin's first foray into the privatisation market. A further property, Kavalierstrasse in Pankow, has been reclassified as 'held for sale' at the interim stage reflecting the Group's decision to push ahead with apartment sales in the property. This property is very different to Warschauer Strasse in that a full refurbishment programme was carried out some time ago meaning that very little additional investment is required ahead of apartment sales. Three apartments in this building have been agreed for sale with average sales prices of close to EUR3,900 psqm. These three apartments were all offered for sale as vacant units and further units in the property are being marketed in a similar fashion. Vacant apartments continue to fetch a premium over tenanted units when sold to private ownership. Taliesin's first privatisation project in Warschauer Strasse is now virtually complete with just one commercial unit left to sell. As we have highlighted in the past, virtually all of the Group's property portfolio has permissions in place to privatise or does not require them. Given the prices achieved through single apartment sales, we would hope to see the overall valuation applied to the portfolio continue to capture a greater privatisation premium.
Risks and Uncertainties
As we noted in the full year review, the strengths of the Taliesin business have been discussed extensively. The Group does, however, remain vigilant to threats to the business, particularly due to the geographic concentration of the Taliesin portfolio.
We would reiterate those risks outlined in the full year report. The political environment remains fairly hostile to landlords in light of sizeable rent increases in recent years and an electorate made up predominantly of renters. Additional regulations/restrictions on property owners remain an ever present threat.
An additional area of uncertainty is the general difficulty in finding contractors, architects etc. to carry out projects given how tight the market has become. This also extends to uncertainties around gaining permissions from the authorities to carry out works. Often the infrastructure is not up to the task.
The economic risks have been covered in detail earlier in the report and we believe that the virtuous circle of lower interest rates and higher asset prices can persist in Germany. There can be no guarantee however that this can't change and a reversal in German interest rates could have a strongly negative impact on real estate prices.
Summary
The original premise of Taliesin was to acquire good quality, centrally located Berlin properties at a substantial discount to replacement cost. The vast bulk of the portfolio was acquired for prices around EUR1,000 psqm. Gross yield were also in the region of 7%. The Group had a strong conviction that medium term demographics were supportive of the residential market and that the economic outlook was far better than the consensus suggested. We felt that vacancy rates could decline quite quickly in the face of high net migration to Berlin and regarded the prospect of new supply hitting the market at prevailing price levels as close to zero. The properties that were acquired were also ones that we thought would be attractive to apartment buyers in the future as the assumption of higher future home ownership seemed logical.
The initial strategy was to invest heavily in the portfolio to improve the quality of our stock and allow us to command higher rents. Taliesin never committed to regular dividends due to the high cash requirements of improving the property portfolio and the outsize returns on those investments. It was always the aim of the Group to return capital to shareholders via proceeds of refinancing or asset sales and we are delighted to have reached this point.
The success of the initial strategy could be seen through substantial rental growth and, in turn, higher valuations for the portfolio. More recently, the economic and demographic trends which we hoped would occur have become strongly entrenched. The market has become substantially de-risked compared to when the Group started and new buyers have turned up in the market as a result with very different price expectations.
What we did not foresee when we first entered the market was the confluence of factors that has led to the current ultra-low interest rate environment. This has clearly been an additional support to the market in Berlin and Taliesin's ability to refinance loans and, in turn, return capital to shareholders.
The current valuation of the Group's portfolio of EUR2,440 psqm is a long way from the original purchase price, but a huge amount has changed in the Berlin market. As outlined in this report, these prices still represent good value. Absent a dramatic change in the global environment, we feel confident that the following themes will continue: Firstly, given the ongoing privatisation sales and the heavy maturity schedule of loans over the next two years, the Group can continue to return capital to shareholders. Secondly, given how entrenched the positive demographic and economic trends are, rents will continue to increase and lastly, that low interest rates will continue to drive single apartment prices higher and increase the attractiveness of a portfolio such as ours to any number of potential acquirers.
Directors' statement of responsibilities
The Directors are responsible for preparing the half-yearly financial statements in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:
- the condensed set of financial statements contained within the half-yearly financial report have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union;
- the half-yearly financial report provides a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed half-yearly financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year ending 31 December 2016; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could materially affect the financial position or performance of the entity.
Signed on behalf of the Board of Directors.
_____________________________
Director
Nigel Le Quesne
11 August 2016
Hot Features
Premium
Consolidated Statement of Comprehensive
Income
6 months 6 months
to to Year ended
30 June 30 June 31 Dec
2016 2015 2015
(unaudited) (unaudited) (audited)
Note EUR(000) EUR(000) EUR(000)
Continuing operations
Rental Income 5,240 5,042 10,156
Service charge receipts 1,406 1,363 2,617
--------------------------------------------- ----- ------------ ------------ -----------
Revenue 6,646 6,405 12,773
Income from disposal of investment property
(including investment property held
for sale) 3,960 - 4,349
Carrying amount of investment property
sold (3,921) - (3,110)
--------------------------------------------- ----- ------------ ------------ -----------
Profit on disposal of investment property 39 - 1,239
Other operating income 169 228 399
--------------------------------------------- ----- ------------ ------------ -----------
Total operating revenues 6,854 6,633 14,411
Net change in fair value of investment
properties (including investment property
held for sale) 23,212 13,789 53,138
Total operating expenses 11 (9,684) (7,087) (20,310)
--------------------------------------------- ----- ------------ ------------ -----------
Profit from operating activities 20,382 13,335 47,239
Gain on fair value of financial assets 888 472 1,806
Finance income 2 3 4
Finance expenses (2,252) (2,971) (5,589)
Net foreign exchange differences 9 (166) 30 69
Interest rate swap instruments fair
value adjustment 7 630 632 1,188
--------------------------------------------- ----- ------------ ------------ -----------
Net financing costs (898) (1,834) (2,522)
Profit before income tax 19,484 11,501 44,717
Income tax charge 12 (4,207) (2,657) (9,422)
--------------------------------------------- ----- ------------ ------------ -----------
Total profit for the year 15,277 8,844 35,295
Profit and total comprehensive income
attributable to:
Owners of the parent 14,314 8,326 33,315
Non-controlling interest 963 518 1,980
--------------------------------------------- ----- ------------ ------------ -----------
Total profit and total comprehensive
income for the year 15,277 8,844 35,295
Basic earnings per ordinary share (EUR) 13 3.11 1.90 7.52
Diluted earnings per ordinary share
(EUR) 13 3.11 1.90 7.17
Consolidated Statement of Financial
Position
6 months 6 months
to to Year ended
30 June 30 June 31 Dec
2016 2015 2015
(unaudited) (unaudited) (audited)
Note EUR(000) EUR(000) EUR(000)
ASSETS
Non-current assets
Investment properties 5 280,032 228,184 262,511
Other financial assets 4,940 2,717 4,052
--------------------------------------------- ----- ------------ ------------ -----------
Total non-current assets 284,972 230,901 266,563
Current assets
Cash and cash equivalents 875 2,097 4,078
Other financial assets - 1,761 16
Trade and other receivables and prepayments 8,326 7,483 7,581
Assets classified as held for sale 6 9,140 - 5,220
--------------------------------------------- ----- ------------ ------------ -----------
Total current assets 18,341 11,341 16,895
Total assets 303,313 242,242 283,458
SHAREHOLDERS`EQUITY AND LIABILITIES
Equity
Stated capital account 8 59,061 57,009 48,041
Shares to be issued - - 6,643
Capital reserve 56 56 56
Retained earnings 81,801 42,498 67,487
--------------------------------------------- ----- ------------ ------------ -----------
Equity attributable to equity holders
of parent 13 140,918 99,563 122,227
Non-controlling interests 5,346 2,921 4,383
Total equity 146,264 102,484 126,610
6 months 6 months
to to Year ended
30 June 30 June 31 Dec
2016 2015 2015
(unaudited) (unaudited) (audited)
Note EUR(000) EUR(000) EUR(000)
Non-current liabilities
Interest bearing loans and borrowings 10 87,608 95,431 90,390
Financial liabilities at fair value
through profit or loss 7 952 2,509 1,161
Deferred tax liabilities 12 25,896 15,285 21,906
--------------------------------------- ----- ------------ ------------ -----------
Total non-current liabilities 114,456 113,225 113,457
Current liabilities
Interest bearing loans and borrowings 10 26,386 18,830 30,634
Financial liabilities at fair value
through profit or loss 7 371 - 792
Other liabilities and payables 11,372 7,703 9,969
Liabilities directly associated with
assets classified as held for sale 4,464 - 1,996
--------------------------------------- ----- ------------ ------------ -----------
Total current liabilities 42,593 26,533 43,391
Total equity and liabilities 303,313 242,242 283,458
Net asset value per ordinary share
(EUR) 13 29.11 22.21 27.26
The financial statements were approved by the Board of Directors on 11 August 2016 and signed on its behalf by:
_____________________________
Director
Nigel Le Quesne
Consolidated Statement of
Changes in
Equity
Stated Stated
capital capital Shares
account account to Capital Treasury Retained Equity before Non-controlling Total
ordinary be Non-controlling
shares b-shares issued reserve shares earnings interests interests equity
EUR(000) EUR(000) EUR(000) EUR(000) EUR(000) EUR(000) EUR(000) EUR(000) EUR(000)
Equity at 1
January 2016 48,041 - 6,643 56 - 67,487 122,227 4,383 126,610
Profit for the
year - - - - - 14,314 14,314 963 15,277
--------------- ------------- --------- --------- --------- --------- --------- ---------------- ---------------- ---------
Total
comprehensive
income
for the year - - - - - 14,314 14,314 963 15,277
Transaction
with owners
Issue of
shares 11,020 - (6,643) - - - 4,377 - 4,377
Issue of
b-shares - - - - - - - - -
Redemption of
b-shares - - - - - - - - -
Cancellation
of b-shares - - - - - - - - -
Shares to be
issued for
services
received - - - - - - - - -
--------------- ------------- --------- --------- --------- --------- --------- ---------------- ---------------- ---------
Total
transaction
with owners 11,020 - - - - - 4,377 - 4,377
Equity at 30
June 2016 59,061 - - 56 - 81,801 140,918 5,346 146,264
Equity at 1
January 2015 52,812 - - 56 - 34,172 87,040 2,403 89,443
Profit for the
year - - - - - 33,315 33,315 1,980 35,295
--------------- ------------- --------- --------- --------- --------- --------- ---------------- ---------------- ---------
Total
comprehensive
income
for the year - - - - - 33,315 33,315 1,980 35,295
Transaction
with owners
Issue of
shares 4,197 - - - - - 4,197 - 4,197
Issue of
b-shares (8,968) 8,968 - - - - - - -
Redemption of
b-shares - - - - (8,968) - (8,968) - (8,968)
Cancellation
of b-shares - (8,968) - - 8,968 - - - -
Shares to be
issued for
services
received - - 6,643 - - - 6,643 - 6,643
--------------- ------------- --------- --------- --------- --------- --------- ---------------- ---------------- ---------
Total
transaction
with owners (4,771) - 6,643 - - - 1,872 - 1,872
Equity at 31
December 2015 48,041 - 6,643 56 - 67,487 122,227 4,383 126,610
Consolidated Statement of Cash Flows
6 months 6 months
to to Year ended
30 June 30 June 31 Dec
2016 2015 2015
(unaudited) (unaudited) (audited)
Note EUR(000) EUR(000) EUR(000)
Profit from operating activities 20,381 13,335 47,239
Net change in fair value of investments
properties (23,212) (13,789) (53,138)
Changes in working capital:
Decrease/(Increase) in receivables (105) (1,020) 199
Increase in payables 5,162 1,116 9,395
------------------------------------------- ----- ------------ ------------ -----------
2,226 (358) 3,695
Tax paid (533) (135) (178)
Net cash generated from / (used in)
operating activities 1,693 (493) 3,517
Investing activities
Capital expenditure on properties held 5 (2,150) (2,279) (5,586)
Sale of property 3,593 - 3,376
Interest received 2 3 4
------------------------------------------- ----- ------------ ------------ -----------
Net cash generated from / (used in)
investing activities 1,445 (2,276) (2,206)
Financing activities
Proceeds from borrowings - 3,864 29,243
Loan repayments (3,394) (2,507) (19,665)
Interest paid (1,644) (1,839) (3,772)
Capital return to owners - - (8,967)
Margin deposit (1,300) - -
Realised currency gain - - 581
Costs of ZDP issue - - -
Sale of treasury shares - - -
------------------------------------------- ----- ------------ ------------ -----------
Net cash used in financing activities (6,338) (482) (2,580)
Foreign exchange gains on bank accounts (2) 224 223
Net decrease in cash and cash equivalents (3,200) (3,251) (1,269)
Cash and cash equivalents at start
of year 4,078 5,124 5,124
Cash and cash equivalents at end of
year 876 2,097 4,078
Cash and cash equivalents comprise:
Cash at bank 876 2,097 4,078
1. Reporting entity
Taliesin Property Fund Limited (the "Company") is a company domiciled in Jersey and was incorporated on 17 November 2005. The condensed consolidated interim financial statements of the Company for the 6 months ended 30 June 2016 comprise the Company and its subsidiaries (together referred to as the "Group"). The Group invest in primarily residential property in Berlin and the former German Democratic Republic.
The audited consolidated financial statements of the Group as at and for the year ended 31 December 2015 are available upon request from the Company`s registered office at P.O. Box 1075, Elizabeth House, 9 Castle Street, St Helier, Jersey, JE4 2QP.
2. Statement of compliance
These condensed consolidated interim financial statements have been prepared in accordance with international Accounting Standard (IAS) 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2015.
The condensed consolidated interim financial statements were approved by the Board of Directors on 11 August 2016.
3. Significant accounting policies
The accounting policies applied by the Group in these condensed consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2015. The Group has had a revaluation of its property portfolio at 30 June 2016.
The financial information for the 6 months to 30 June 2016 and 30 June 2015 has been extracted from the accounting records of the Group. The balances as at 31 December 2015 and the results for the year then ended have been extracted from the audited financial statements. The auditor's report on those financial statements was unqualified.
4. Segment Reporting
The Group monitors its business of investing in primarily residential property in Berlin, Potsdam and Dresden in two segments:
First, the procurement and oversight of management of its rent portfolio, which includes the modernisation and maintenance of the Group's investment properties, the management of rent contracts, caring for tenants and the marketing of apartments. The focus of managing the rent units is to optimise rents. Therefore all capital expenditures to the properties are analysed for rent improvement potential. On the other hand service charges are sought to be reduced and to be passed on to tenants.
The second segment is privatisation, the sale of individual apartments. The Group has started in fiscal year 2015 to sell a number of apartments as a means to demonstrate to shareholders the value potential in its property portfolio in privatisation.
Segment by activity
----------------------------
Income statement
sale of
total rental portfolio units
30 June 30 June
2016 30 June 2016 2016
EUR(000) EUR(000) EUR(000)
Rental Income 5,240 5,213 27
Service charge receipts 1,406 1,406 -
----------------------------------------- --------- ----------------- ---------
Revenue 6,646 6,619 27
Sale of investment properties 3,960 - 3,960
Sold properties book value (3,921) - (3,921)
----------------------------------------- --------- ----------------- ---------
Profit on sale of investment properties 39 - 39
Other operating income 169 164 5
----------------------------------------- --------- ----------------- ---------
Total operating revenues 6,854 6,783 71
Net change in fair value of investment
properties 23,212 22,973 239
Total operating expenses (9,684) (9,576) (108)
----------------------------------------- --------- ----------------- ---------
Profit from operating activities 20,382 20,180 202
Net financing costs (898) (841) (57)
----------------------------------------- --------- ----------------- ---------
Profit before income tax 19,484 19,339 145
Income tax charge (4,207) (4,228) 21
----------------------------------------- --------- ----------------- --------- Total profit for the year 15,277 15,111 166
5. Investment properties
6 months 6 months
to to Year ended
30 June 30 June 31 Dec
2016 2015 2015
Group Group Group
(unaudited) (unaudited) (audited)
EUR(000) EUR(000) EUR(000)
Book cost brought forward at 1 January 155,674 150,415 150,415
Fair value adjustments brought forward 113,587 61,701 61,701
------------------------------------------ ------------ ------------ -----------
Valuation brought forward at 1 January 262,511 212,116 212,116
Capital expenditure on properties held 2,150 2,279 5,586
Reclassification to assets held for sale (7,570) - (6,750)
Property sold during the period - - (327)
------------------------------------------ ------------ ------------ -----------
257,091 214,395 210,625
Revaluation (fair value adjustments) 22,941 13,789 51,886
------------------------------------------ ------------ ------------ -----------
Valuation as at 30 June 2016 280,032 228,184 262,511
Properties held for long-term rental yields or for capital appreciation or both are classified as investment properties and the provisions of IAS 40 "Investment Property" apply.
Investment properties comprise undeveloped land, land and rights equivalent to land with buildings, and land with third party hereditary building rights. Investment properties are measured initially at cost including related transaction costs. After initial recognition, investment properties are measured at their fair values, with subsequent changes in fair values recognised in the consolidated statement of comprehensive income.
The property portfolio, which is carried in the balance sheet at fair value, is valued six-monthly by professionally qualified external valuers using recognised valuation techniques and the principles of IFRS 13. The Directors ensure that they are satisfied that the valuation of the Group's properties is appropriate for the accounts. Investment properties are valued by adopting the 'investment method' of valuation. This approach involves applying market-derived capitalisation yields to current and market-derived future income streams with appropriate adjustments for income voids arising from vacancies or rent-free periods. These capitalisation yields and future income streams are derived from comparable property and leasing transactions and are considered to be the key inputs in the valuation. Other factors that are taken into account in the valuations include the tenure of the property, tenancy details and ground and structural conditions.
The fair value of investment properties is based on valuations experts, Jones Lang LaSalle (JLL), using recognised valuation techniques and the principles of IFRS 13. Fair value is the price that would be received to sell a property in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset takes place either in the principal market for the property or in the absence of a principal market, in the most advantageous market at the measurement date.
The fair value of an investment property is measured using the assumptions that market participants would use when pricing the property, assuming to act in their economic best interest. Thus the fair valuation takes into account a market participant's ability to generate economic benefits by using the property in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group operates in large cities in Germany where there is a well-developed and active property market for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Such inputs include current and recent sale prices of similar properties, and rents based on current market rates with which to calculate discounted cash flows based on reliable estimates of future rental income and discount rates that reflect current market assessments of uncertainties in the amount and timing of cash flows. Estimates of the values of investment properties include assumptions regarding vacancy rates, discount rates, rental income and privatization potential of investment properties (ie the value potential in the split and separate sale of freeholds) and the Group has established specific criteria relating to the progress of the privatisation process that must be met for a property`s privatisation value to be considered.
All of the investment properties owned by the Group have been pledged as security for the Group`s financial liabilities. (See note 10). Other than capital expenditure on existing properties held, there have been no property acquisitions in the period to 30 June 2016.
6. Assets held for sale
6 months 6 months
to to Year ended
30 June 30 June 31 Dec
2016 2015 2015
Group Group Group
(unaudited) (unaudited) (audited)
EUR(000) EUR(000) EUR(000)
Valuation brought forward at 1 January - - -
Reclassification from Investment properties 7,570 - 6,750
Apartments sold (3,921) - (2,782)
Valuation gain on apartments held for
sale 5,491 - 1,252
--------------------------------------------- ------------ ------------ -----------
9,140 - 5,220
An investment property is reclassified as an asset held for sale when a number of criteria have been satisfied in order to commence with the privatisation of that property. Warschauer Strasse was reclassified as an asset held for sale in the second half of 2015, with 4 unsold apartments remaining as held for sale as at 30 June 2016. Kavalierstrasse has been reclassified in the first half of 2016 and 22 remaining apartments in that property are held for sale as at 30 June 2016.
7. Financial liabilities at fair value through profit or loss
6 months 6 months
to to Year ended
30 June 30 June 31 Dec
2016 2015 2015
Group Group Group
(unaudited) (unaudited) (audited)
EUR(000) EUR(000) EUR(000)
Liabilities at valuation at start of period
/ year (1,953) (3,141) (3,141)
Fair value adjustment taken to consolidated
statement of comprehensive income 630 632 1,188
---------------------------------------------- ------------ ------------ -----------
Liabilities at valuation at end of period
/ year (1,323) (2,509) (1,953)
Maturity of derivative financial liabilities
Within one year (371) - (792)
After more than one year (952) (2,509) (1,161)
---------------------------------------------- ------------ ------------ -----------
(1,323) (2,509) (1,953)
The above table represents the fair value of interest swap arrangements which the German subsidiaries entered into with their bankers in order to manage their exposure to upward movements in interest rates. These arrangements were entered into along with the loan agreements with the banks detailed in note 10. They require that the Group pays interest on any loans drawn down at the contractual EURIBOR rate plus the contractual margin and to receive (or pay) the difference between this EURIBOR rate and the fixed interest swap rate specified in the swap agreement.
The fair values of these interest swap arrangements represent the price at which one party would assume the rights and obligations of the counterparty. The fair value was determined by discounting the anticipated future cash flows. For this purpose, the market interest rates applicable for the remaining term of the contract are used as a basis.
The following table summarises the swap facilities in existence as at 30 June 2016.
Expiry
date
Amount Fair value of interest
of Swap of Swap swap Fixed
Bank in EUR(000) in EUR(000) agreement rate
31 Oct
Hypothekenbank Frankfurt 8,682 (113) 2016 3.50%
31 Oct
Hypothekenbank Frankfurt 3,453 (45) 2016 3.50%
03 Apr
Hypothekenbank Frankfurt 4,890 (369) 2018 3.92%
30 Dec
DZ BANK 11,412 (213) 2016 3.385%
29 Mar
DZ BANK 8,514 (583) 2018 3.585%
-------------------------- ------------ ------------ ------------ -------
36,951 (1,323)
8. Stated capital account
6 month to 30 June Year ended 31 Dec
Ordinary shares of no par value 2016 2015
(unaudited) (audited)
Number EUR(000) Number EUR(000)
Stated capital account - Issued
and fully paid
At start of period / year 4,483,672 48,041 4,315,103 52,812
Shares issued 356,515 11,020 168,569 4,197
Shares buyback - - - (8,968)
----------------------------------- ---------- --------- ---------- ---------
At end of period / year 4,840,187 59,061 4,483,672 48,041
Shares to be issued
At start of period / year - - - -
Provision for shares to be issued - - - 6,643
----------------------------------- ---------- --------- ---------- ---------
At the end of period / year - - - 6,643
On 29 April 2016, 356,515 Ordinary shares were issued at a price of EUR 30,91 per share to Taliesin Management Limited and JJ Investment Management Limited, the Investment Advisers to the Group, as consideration for part of the performance fee due for the year ended 31 December 2015. The full amount of the performance fee was charged in the consolidated income statement for the year ended 31 December 2015.
9. Net foreign exchange differences
6 months 6 months
to to Year ended
30 June 30 June 31 Dec
2016 2015 2015
Group Group Group
(unaudited) (unaudited) (audited)
EUR(000) EUR(000) EUR(000)
Realised loss/gain on settlement of currency
forward contracts (1,080) - 749
Unrealised loss/gain on fair value of
currency forward contracts (1,388) 1,475 16
Foreign exchange loss/gain on bank accounts (2) 223 223
Foreign exchange gain/loss on ZDP valuation 2,318 (1,811) (995)
Foreign exchange loss/gain on margin collateral (14) 143 76
------------------------------------------------- ------------ ------------ -----------
Net foreign exchange differences (166) 30 69
The principal operating currency of the Group is Euros. The Group has, however, issued Zero Dividend Preference Shares denominated in Pounds Sterling. In order to hedge this future Pound Sterling liability, The Group has entered into forward foreign currency contracts on that portion of the ZDP proceeds that has been converted into Euros. The foreign exchange losses on the ZDPs in the period reflect the appreciation of the Pound Sterling against the Euro. The offsetting items represent the realised and unrealised gains on the forward foreign currency contracts and the translation gains on the Pound Sterling bank balances at the reporting date.
The Group provided an amount of GBP 1,684,780 as margin collateral with the brokerage firm, which is providing forward foreign currency services to the Group.
10. Financial liabilities
6 months 6 months
to to Year ended
30 June 30 June 31 Dec
2016 2015 2015
Group Group Group
(unaudited) (unaudited) (audited)
EUR(000) EUR(000) EUR(000)
Due within one year 26,386 18,830 30,634
Liabilities directly associated with assets
classified as held for sale 4,464 - 1,820
Due after more than one year 88,222 95,431 91,145
--------------------------------------------- ------------ ------------ -----------
119,072 114,261 123,599
Zero Dividend Preference Share Deferred
issue costs (614) (896) (755)
--------------------------------------------- ------------ ------------ -----------
118,458 113,365 122,844
The above financial liabilities represent loans from banks for the purpose of purchasing property for the Group which are secured on all of the properties owned by the Group and a five year 7,5% p.a. Zero Dividend Preference Share (ZDP) of EUR20,667,000 (December 2015: EUR22,488,000) which was issued by Taliesin Property Fund Limited in September 2013.
The total amounts of loans drawn down under all loan facilities, including the ZDP, as at 30 June 2016 was EUR119,072,000 (30 June 2015: EUR114,261,000, December 2015: EUR123,599,000), represented in these accounts at their fair value of EUR119,072,000 (30 June 2015: EUR114,261,000, December 2015: EUR122,844,000).
11. Operating expenses
6 months 6 months
to to Year ended
30 June 30 June 31 Dec
2016 2015 2015
Group Group Group
(unaudited) (unaudited) (audited)
EUR(000) EUR(000) EUR(000)
Service charge expenses 1,458 1,448 3,032
Property maintenance costs 644 565 1,408
Administrative costs 274 234 441
Investment advisory and performance fees 6,407 3,942 13,523
Directors`fees 56 22 49
Legal and professional fees 160 199 479
Other operating expenses 522 532 1,094
Provision for bad debts 77 66 126
Auditor's remuneration 86 79 158
------------------------------------------ ------------ ------------ -----------
Total operating expenses 9,684 7,087 20,310
The Group paid the following fees to its 6 months 6 months
Auditor: to to Year ended
30 June 30 June 31 Dec
2016 2015 2015
Group Group Group
(unaudited) (unaudited) (audited)
EUR(000) EUR(000) EUR(000)
Fees payable to the Group's Auditor for
the audit of the Group's consolidated
annual accounts 57 67 133
Tax compliance services 29 - 25
Corporate finance and advisory - 12 -
------------------------------------------ ------------ ------------ -----------
Total 86 79 158
12. Income tax expense
6 months 6 months
to to Year ended
30 June 30 June 31 Dec
2016 2015 2015
Group Group Group
(unaudited) (unaudited) (audited)
EUR(000) EUR(000) EUR(000)
Current tax on profits (252) (238) (220)
Prior year corporate tax income / expense 35 1 (161)
Deferred tax charge (3,990) (2,420) (9,041)
------------------------------------------- ------------ ------------ -----------
Total income tax expense for the period
/ year (4,207) (2,657) (9,422)
The net tax liability at the end of the
period comprises:
Deferred tax asset 3,463 3,549 3,563
Deferred tax liabiltity (29,359) (18,834) (25,469)
------------------------------------------- ------------ ------------ -----------
(25,896) (15,285) (21,906)
Taxes on profits of the Group arising in Germany are computed using the tax rate of 15,83 % (2015: 15,83%), both for current and deferred tax. Taxable income arising in Cyprus is taxed at 12,5% (2015: 12,5%).
The applicable tax rate in Jersey is 0%.
All taxation charges and credits are recognised in the statement of comprehensive income.
13. Earnings per ordinary share and net asset value per ordinary share
6 months 6 months
to to Year ended
30 June 30 June 31 Dec
2016 2015 2015
Group Group Group
(unaudited) (unaudited) (audited)
EUR(000) EUR(000) EUR(000)
Profit and total comprehensive income
attributable to owners of the parent (EUR000) 14,317 8,326 33,315
Weighted average number of ordinary shares 4,607,081 4,373,776 4,429,176
------------------------------------------------ ------------ ------------ -----------
Basic earnings per share (EUR) 3.11 1.90 7.52
Weighted average number of ordinary shares
including shares to be issued 4,607,081 4,373,776 4,644,090
Diluted earnings per share (EUR) 3.11 1.90 7.17
Net asset value attributable to holders
of ordinary shares (EUR000) 140,918 99,563 122,227
Ordinary shares at reporting date note
8 4,840,187 4,483,672 4,483,672
------------------------------------------------ ------------ ------------ -----------
Net asset value per share (EUR) 29.11 22.21 27.26
Ordinary shares and shares to be issued
at period / year end 4,840,187 4,483,672 4,698,586
Net asset value per share (EUR) 29.11 22.21 26.01
Adjusted Net Asset Value
In addition to the net asset values disclosed above, which are based on the net consolidated assets attributable to Ordinary shareholders as stated in the financial statements ("Accounting NAV"), the Directors monitor the performance of the Group as measured by a Key Performance Indicator ("KPI") known as the Adjusted Net Asset Value ("Adjusted NAV").
This KPI is defined as the Accounting NAV of the Group as adjusted by adding any portfolio premium not already reflected in the accounts, the gross deferred tax liability from which the Accounting NAV is derived and deducting any goodwill shown as an asset in such accounts.
These adjustments and the calculations are as shown below:
6 months 6 months
to to Year ended
30 June 30 June 31 Dec
2016 2015 2015
Group Group Group
(unaudited) (unaudited) (audited)
EUR(000) EUR(000) EUR(000)
Net consolidated assets attributable to
Ordinary shareholders 140,918 99,563 122,227
Gross deferred tax liabiltity 29,359 18,833 25,469
Plus: Capital return to owners - - 8,968
Less: Shares to be issued - - (6,643)
Less: Gross deferred tax liability attributable
to non-controlling interest (152) (48) (106)
------------------------------------------------- ------------ ------------ -----------
Adjusted Net Assets attributable to Ordinary
shareholders 170,125 118,348 149,915
Number of Ordinary shares outstanding
at 30 June 4,840,187 4,483,672 4,483,672
------------------------------------------------- ------------ ------------ -----------
Adjusted Net Assets Value per Ordinary
share (EUR) 35.15 26.40 33.44
Adjusted Net Assets attributable to Ordinary
shareholders deducting
capital return to owners 170,125 118,348 140,947
Adjusted Net Assets Value per Ordinary
share (EUR) 35.15 26.40 31.44
14. Commitments and contingencies
As at 30 June 2016, the Group had authorised capital investments of EUR2,334,000 (December 2015: EUR1,130,000).
15. Related party transactions
Nigel Le Quesne and Philip Burgin are shareholders and directors of JTC Group Limited of which JTC (Jersey) Limited and JTC (Luxembourg) S.A. are wholly owned subsidiaries. Stephen Burnett is a non-executive director of the JTC Group Limited. JTC (Jersey) Limited is the Secretary to the Company and provider of administration services to the Company and its subsidiaries. JTC (Jersey) Limited charged fees totalling EUR89,000 (2015: EUR221,000) to the Group during the half year, of which EUR43,000 (2015: EUR8,000) was outstanding as at 30 June 2016. JTC (Luxembourg) S.A. provides administrative services to the Company's Luxembourg subsidiaries. JTC (Luxembourg) S.A. charged fees totalling EUR75,600 (2015: EUR124,000) to the Group during the half-year of which EURnil (2015: EURnil) was outstanding at 30 June 2016.
Mark Smith is a director and shareholder of TML and JJIM, the Investment Advisers of the Group, which charged investment advisory fees totalling EUR1,549,755 (50% JJIM / 50% TML) (2015: EUR2,452,000) to the Group during the half-year, of which EUR413,417 (2015: EUR625,000) was outstanding as at 30 June 2016. TML and JJIM together made a provision for performance fee of EUR4,978,916 (75% JJIM / 25% TML) (2015: EUR11,071,000) to the Group during the half-year, all of which was outstanding as at 30 June 2016.
As at the balance sheet date Mark Smith, together with his wife, owns 75,62% of TML which holds 615,946 shares in the Group, representing 12.73 per cent of the outstanding shares. These shares were issued in respect of previous performance fees. In addition, Mark Smith holds 403,449 ordinary shares in the Group (including the ordinary shares issued to JJIM, which is wholly owned by Mark Smith), representing 8.34 per cent of the outstanding shares.
There were no other related party transactions with the Company or the Group other than remuneration payable to the Directors, who are the only key management personnel.
There are no employee benefits accrued by directors or key management personnel in the current half-year (2015: EURnil).
16. Events since the balance sheet date
In July, the Group completed the refinancing of two maturing senior loans with a new loan provided by DG Hyp. The new loan is for an aggregate amount of EUR30.5 million, replacing a maturing loan amount of EUR17.4 million. The funds from the new facility were released to the Group in July.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BXGDIRBBBGLB
(END) Dow Jones Newswires
August 11, 2016 09:21 ET (13:21 GMT)
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