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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Phoenix Spree Deutschland Limited | LSE:PSDL | London | Ordinary Share | JE00B248KJ21 | SHS NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 1.50 | 1.02% | 148.50 | 150.00 | 155.50 | 152.00 | 148.00 | 150.50 | 29,112 | 16:35:12 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Investment Trust | 26.29M | -15.44M | -0.1681 | -8.92 | 137.74M |
From Apr 2019 to Apr 2024
TIDMPSDL
RNS Number : 3153M
Phoenix Spree Deutschland Limited
27 April 2018
Phoenix Spree Deutschland Limited
(The "Group")
FINANCIAL RESULTS FOR YEARED 31 DECEMBER 2017
ANOTHER YEAR OF STRONG PERFORMANCE - OUTLOOK REMAINS POSITIVE
Phoenix Spree Deutschland (LSE: PSDL.LN), the UK listed investment company specialising in Berlin residential real estate, today announces its full year results for the year ended 31 December 2017.
Financial Highlights
-- EPRA NAV per share grew by 50.5% to EUR4.11 (GBP3.65) at 31 December 2017 (31 December 2016: EUR2.73 (GBP2.33)).
-- EPRA total return per share of 53.0% for the year (2016: 22.5%).
-- IFRS NAV per share grew by 56.5% to EUR3.96 (GBP3.52) at 31 December 2017 (31 December 2016: EUR2.53 (GBP2.16)).
-- Gross rental income up 13.5% year-on-year to EUR18.1 million (2016: EUR15.9m). -- Profit before tax up 183.3% to EUR138.5 million (2016: EUR48.9 million).
-- Net loan to value of 32.0% at 31 December 2017 (31 December 2016: 39.4%). All of the Group's debt has been refinanced within previous 18 months.
-- New debt of EUR57.8 million signed during 2017. Average debt maturity now exceeds eight years. Average interest rate 2.1%.
-- Final dividend per share of EUR5.0 cents (GBP: 4.4p), giving a total dividend per share of EUR7.3 cents (GBP: 6.4p) for 2017 (2016: EUR6.3 cents (GBP: 5.3p)).
Operational Highlights
-- Portfolio value increased by 43.8% to EUR609.3 million (31 December 2016: EUR423.8 million), 40.1% on a like-for-like basis.
-- Berlin posted largest like-for-like valuation increase at 41.8%.
-- Rent per sqm increased by 4.2% to EUR8.0 (31 December 2016: EUR7.6), 6.9% on a like-for-like basis.
-- Berlin like-for-like rent per sqm increased by 8.4% to EUR8.4 (31 December 2016: EUR7.7). -- Rent on new lettings of EUR10.3 per sqm, a 7.9% increase over 2016.
-- EUR6.7 million invested in renovations and modernisations across the entire Portfolio during 2017, representing over one third of rental income.
-- EPRA Vacancy remains low at 2.9% (31 December 2016 2.6%).
-- Condominium sale completion proceeds up 191.8% to EUR9.5m with an average value per sqm of EUR3,868, a 20.1% premium to Berlin Portfolio average value per sqm as at 31 December 2017.
Portfolio now purely focussed on the attractive Berlin market
-- Targeted acquisition and disposal strategy during 2017 has created a pure-play Berlin portfolio with potential for greater economies of scale and strategic benefits.
-- Disposal of Central and Northern Germany portfolio notarised in December 2017 for EUR73.0 million, a 26% premium to the Jones Lang LaSalle valuation as at 30 June 2017.
-- Sale of other non-Berlin assets during 2017, for combined proceeds of EUR48.3 million. All disposals at a significant premium to last reported book value.
-- Contracts to acquire 366 units notarised during 2017, representing an aggregate purchase price of EUR55.9 million and an average price per sqm of EUR2,224.
-- As at 20 April 2018, contracts to acquire a further 160 units in Berlin have been notarised since 31 December 2017 year end for an aggregate value of EUR24.8 million, representing an average price per sqm of EUR2,348.
Outlook
-- Berlin residential demographics remain favourable, driven by strong population growth, job creation and the ongoing process of urbanisation.
-- Berlin residential property prices should continue to benefit from a lack of supply and growing demand from both owner-occupiers and investors.
-- High embedded value within portfolio: Berlin new leases signed at 40.1% premium to in-place rents during 2017, and 45.7% in the fourth quarter of 2017.
-- Strong balance sheet, locking in long-term fixed rate debt at low interest rates, creates scope for further selective acquisitions.
-- Due to careful selection, acquisition prices remain below value of in-place housing stock within the Portfolio and cost of new build construction.
-- Further new condominium projects and sales are planned for the year ahead.
Robert Hingley, Chairman of Phoenix Spree Deutschland commented:
"I am delighted with the Company's performance and continued growth, our strongest year yet. Since listing in 2015, we have successfully delivered against our strategy of investing in and growing the portfolio, and realising the value from within it, resulting in a total return to shareholders of 106%. This year, we have made significant progress in focusing and growing the portfolio in Berlin, where we have an attractive pipeline of opportunities and where the market outlook remains positive, given the ongoing undersupply of rental property. With the portfolio now purely Berlin focused, I am confident that our strategy of managing the portfolio for growth, investing in the quality of our properties and selective acquisitions will continue to deliver further returns for our shareholders."
For further information please contact:
Phoenix Spree Deutschland Stuart Young +44 (0)20 3937 8760 Liberum Capital Limited (Corporate Broker) Richard Crawley Christopher Britton +44 (0)20 3100 2222 Tulchan Communications (Financial PR) Tom Murray Elizabeth Snow +44 (0)20 7353 4200
CHAIRMAN'S STATEMENT
2017 was another year of strong performance for the Company. Market conditions in the Berlin residential property sector have remained favourable and I am delighted to report that the Portfolio has recorded its best period of growth since Phoenix Spree was founded in 2007. Our financial results for the year provide further confirmation of our strategy of creating and actively managing a high-quality portfolio of Berlin assets.
A more focused portfolio
We have made significant progress in our strategy to focus the portfolio on Berlin, having disposed of a series of non-Berlin assets at a premium to book value. The proceeds from these disposals have been used to invest in the current portfolio and to fund further acquisitions in Berlin. Completion of the EUR73.0 million disposal of the Central and Northern Germany portfolio at a 26% premium to book value is expected in April 2018 whereupon Phoenix Spree will effectively become a pure-play Berlin fund, creating greater economies of scale.
The Board is of the view that the Berlin market remains attractive with scope to continue the strategy of investing in the existing portfolio and to grow it further through the selective acquisition of residential assets. Although the competition for assets is intense, the expertise and strong local relationships of our property advisor have enabled the Company to identify a pipeline of attractive acquisition opportunities. We are pleased to have completed or notarised a further EUR75.8 million of acquisitions during 2017, all of which met our acquisition criteria.
Enhancing the portfolio
The Company has continued to invest in its programme of renovations and modernisations throughout the year, as well as making a further outlay on the overall infrastructure of its properties. Many of the buildings acquired by the Company were over 100 years old and, at the time, were in a poor state of repair. The Board is committed to improving the quality of its accommodation, working in partnership with its tenants to make a positive contribution both to living standards and the environment in areas where our properties are located. Substantial investment has been made in projects encompassing outdated heating systems, plumbing, electrics, double glazing, hallways, building facades and outdoor communal areas. During 2017, the Company re-invested over a third of its rental income on improvement programmes, the highest level to date, and it is anticipated that this process will continue into 2018 as we maintain our focus on improving the overall standard of our tenanted buildings.
Strong financial performance
The Portfolio valuation has continued to benefit from strong market fundamentals in Berlin, with the ongoing undersupply of available rental property resulting in further yield compression. Portfolio and rental growth have also been driven by our active asset management strategy, including the modernisation and renovation of apartments.
On a like-for-like basis, excluding the impact of acquisitions and disposals, the Portfolio value increased by 40.1% and Berlin rental income grew by 9.1%. Our EPRA Net Asset Value per share rose by 50.5% to EUR4.11 and the EPRA vacancy rate remains low, ending the year below 3%. The period closed with a strong balance sheet, with a net loan to value of 32% and cash balances of EUR27.2 million.
The investment in the Portfolio continues to provide strong reversionary potential, with new leases in Berlin signed at an average 40.1% premium to in-place rents during the year. Rent levels for new tenants in fully refurbished apartments are set with reference to prevailing market levels and increases for existing tenants comply with the relevant regulations and local rent tables.
The Property Advisor has also continued to identify opportunities to divide and resell a small number of carefully selected apartment blocks as condominiums, the proceeds of which part fund the dividend with the balance reinvested in further acquisitions and Portfolio improvements. The average price per square metre achieved for condominiums sold or notarised represented a 26.9% premium to the average valuation per square metre for the Berlin Portfolio.
Share price and dividend
The year to 31 December 2017 provided the strongest period of share price performance since the Company's stock market listing in 2015. Between 1 January 2017 and the end of the year, the share price rose from 232 pence to 393 pence, representing an increase of 69.4%. I am delighted that Phoenix Spree ended the year as not only the best-performing listed German residential fund, but also the best-performing UK listed real estate investment company in 2017.
The Board is pleased to recommend a final dividend of EUR5.0 cents per share (GBP 4.4 pence per share), taking the full year dividend to EUR7.3 cents per share (GBP 6.4 pence per share), representing a 16% increase on the 2016 full year Euro-denominated dividend. This dividend growth is reflective of the increase in the Portfolio value during the year and is paid from operating cashflows including the disposal proceeds from condominium projects. The Company has historically aimed to provide its shareholders with a secure and progressive dividend over the medium term, and subject to the distribution requirements for Non-Mainstream Pooled Investments. Following the disposal of the non-core portfolio in Northern Germany, the Company's portfolio is almost entirely focused on Berlin, where the Board continues to see significant potential for further acquisitions and capital growth, but where rental yields have historically been lower than in other parts of Germany. These factors may affect future dividend growth.
The total dividend in respect of the 2017 financial year amounts to EUR7.1 million, covered from operating cashflows of EUR5.8 million and condominium disposal proceeds of EUR9.1 million (Total: EUR14.9 million). Since listing on the London Stock Market in June 2015, and including the final dividend for 2017, EUR17.3 million been returned to shareholders.
Property Advisor
The Group has continued to benefit from the expertise of its property advisor, PMM Partners ("PMM"), which combines day-to-day asset management activities, capital structure management and a busy acquisition and disposal pipeline. During 2017, PMM has continued actively to manage the Portfolio, whilst simultaneously leveraging their local network and relationships to source and acquire an attractive pipeline of new Berlin properties, as well as completing the divestment of the remainder of the Company's non-core buildings, at a premium to book value.
On the basis of the Company's strong performance over the three year's ending 31 December 2017, and the impressive growth achieved in EPRA NAV over that period, resulting in a total shareholder return for the three-year period, after all fees, of 106.4%, a performance fee under the Property Advisory Agreement to the Property Advisor of circa EUR34.0 million has become due. The parties have agreed to settle the performance fee (but not any further performance fees that may become due) through the issuance by the Company to the Property Advisor of 8,260,065 new shares in the Company at EPRA NAV per share. 50% of the shares issued in settlement of this fee are subject to a 12-month restriction on disposal. Application will be made for the new shares, once issued, to be admitted to trading on the premium segment of the Official List and to trading on the Main Market of the London Stock Exchange with such admission expected to occur on or around 4 May 2018. The Board would like to thank all at PMM for their valued contribution, which is a key component of our ongoing success.
Corporate governance
The Board remains fully committed to high standards of corporate governance and behaving as a responsible business, addressing its environmental and social impacts as encapsulated in developing the Company's Corporate Responsibility Strategy. It takes very seriously its duties to operate with integrity, transparency and clear accountability towards its shareholders, tenants and other key stakeholders.
Following the year end, the Company announced the appointments of Charlotte Valeur, Jonathan Thompson and Monique O'Keefe as Independent Non-Executive Directors, and that Matthew Northover, Richard Prosser and Andrew Weaver were stepping down as a Non-Executive Directors. As well as strengthening the Board's independence, Charlotte, Jonathan and Monique bring with them a wealth of experience and insight across the real estate and advisory worlds which will be of great value to the Company as it continues to grow in years to come. Jonathan Thompson will also chair the Audit Committee.
On behalf of the Board, I thank Matthew, Richard and Andrew for their invaluable contribution to the Company during a period of considerable growth and its transition to a listed company on the Main Market of the London Stock Exchange in 2015. The Company will continue to benefit from Matthew's expertise through his ongoing involvement with PMM.
The Board has considered the principles and recommendations of the UK Corporate Governance Code and is pleased to confirm that the company complies with the provisions of the Code, where applicable.
Market Outlook
The German economy continues to benefit from record high employment levels and historically low interest rates. Economic growth reached a six-year high in 2017 and Government forecasts suggest this rate of growth will be sustained in 2018.
Berlin's economic growth continues to outstrip the broader economy, with strong growth in the business services, media and technology sectors likely to lead to job creation and net inward migration trends remaining strong.
Against this backdrop, the fundamentals of the Berlin residential market remain attractive: strong demand combined with limited supply, and high levels of transaction activity likely to be sustained by demand from both investors and owner-occupiers. With our business now fully focussed on Berlin, and underpinned by the Property Advisor's active asset management strategy, the Board looks forward to the year ahead with confidence.
OPERATING & FINANCIAL REVIEW
Financial highlights
Hot Features
Premium
EUR million (unless otherwise 31 Dec 2017 31 Dec 2016
stated)
Gross rental income 18.1 15.9
------------ ------------
Profit before tax (PBT) 138.5 48.9
------------ ------------
Reported EPS (EUR) 1.21 0.42
------------ ------------
Investment property value 609.3 423.8
------------ ------------
Net debt 195.1 167.1
------------ ------------
Net LTV 32.0% 39.4%
------------ ------------
IFRS NAV per share (EUR) 3.96 2.53
------------ ------------
IFRS NAV per share (GBP) 3.52 2.16
------------ ------------
EPRA NAV per share (EUR) 4.11 2.73
------------ ------------
EPRA NAV per share (GBP) 3.65 2.33
------------ ------------
Dividend per share (EUR cents) 7.3 6.3
------------ ------------
Dividend per share (GBP pence) 6.4 5.3
------------ ------------
EPRA NAV per share total return
for period (EUR) 53.0% 22.5%
------------ ------------
EPRA NAV per share total return
for period (GBP) 57.7% 41.7%
------------ ------------
Financial results
Reported revenue for the period was 13.5% higher at EUR18.1 million (2016: EUR15.9 million). PBT grew to EUR138.5 million (2016: EUR48.9 million). The results include a significant net valuation gain of EUR157.4 million (2016: EUR55.2 million) and a performance fee due to the Property Advisor of EUR26.3 million. As previously mentioned, the cumulative fee due under the terms of the Property Advisory Agreement for the 3-year measurement period from January 2015 to December 2017 amounts to EUR34.0 million, to be satisfied in new shares issued at EPRA Net Asset Value. Reported earnings per share for the period were EUR1.21c (2016: EUR0.42c).
Positive pricing trends
The year to December 2017 showed a continuation of the positive pricing trends in Berlin residential property, driven by an overall improvement in German economic growth, as well as the positive demographic trends in Berlin, creating an ongoing supply-demand imbalance of available rental properties within the city. The Portfolio has also benefitted from PMM's active asset management strategy and, following a targeted programme of non-core disposals and further Berlin acquisitions, the Company is now a pure-play Berlin investment, well positioned to benefit from these positive macro and demographic factors.
Portfolio value rises by 40.1%
The Portfolio value grew by 43.8% from EUR423.8 million to EUR609.3 million during the year. Excluding the impact of acquisitions and disposals, the like-for-like increase was 40.1% (2016: 19.4%), representing the highest rate of growth in the fund's 10-year history. At the year end, the Portfolio was valued at EUR2,853 per sqm (31 December 2016: EUR1,965) which represents a gross fully-occupied yield of 3.4% (31 December 2016: 4.8%) and a net yield, using EPRA methodology, of 2.8% (31 December 2016: 4.2%).
All geographic markets registered valuation gains during the period, with Berlin seeing the largest like-for-like increase at 41.8%, followed by Central and North Germany 35.2%.
EPRA NAV increases by 50.5%
EPRA NAV per share increased by 50.5% in the period to EUR4.11 (GBP3.65) compared to EUR2.73 31 December 2016 (GBP2.33). Taking into account the dividends paid during 2017, EPRA total return per share was 53.0%, compared with 22.5% in 2016.
EPRA Vacancy remains historically low
Reported vacancy as at 31 December 2017 was 6.8%, down from 9.1% as at 31 December 2016. On an EPRA basis, which adjusts for units undergoing redevelopment or reserved for resale, vacancy was 2.9% as at 31 December 2017, compared to 2.6% as at 31 December 2016. This reflects the ongoing strength in the rental market as well as steps undertaken by the Property Advisor to reduce the time associated with re-letting.
Rental income - Growth trend continues
Gross rental income increased 13.5% to EUR18.1 million, compared with EUR15.9 million in 2016. On a like-for-like basis, rental income grew by 7.2% compared with 2016. Headline average in-place rent per sqm was EUR8.0 as at 31 December 2017, compared with EUR7.6 as at 31 December 2016. On a like-for-like basis, rent per sqm grew by 6.9% compared to 2016. Berlin saw a like-for-like increase in rent per sqm of 8.4%, and Central and North Germany 3.8%. Following the publication in May of the new Mietspiegel, or rent table, rent adjustment notifications were issued to the relevant Berlin tenants in the second half of the year. The majority of new leases signed with the Portfolio include annual indexation (or "Staffel") increases.
As at 31 December 2017, the Company annualised contracted rental income was EUR19.1 million.
Recent letting prices achieve new highs for the Group
The Group enjoyed another strong letting performance in 2017. A total of 382 new leases were signed, representing 13.4% of the average units owned during the period. In Berlin, average new letting prices grew by 9.4% to EUR11.3 per sqm (2016: EUR10.6 per sqm). The non-Berlin portfolio also witnessed growth, with new letting prices rising by 2.3% to EUR8.0 per sqm.
Significant reversionary rental potential remains
The premiums achieved on new letting prices when compared to in place rents demonstrate the significant reversionary potential within the Berlin portfolio.
During the final quarter of 2017, new lettings were signed at an average premium of 36.2% to passing rents and a record 45.7% in Berlin. The Group believes this reversionary gap should underpin rental growth in the medium term, providing a buffer against any potential slow-down in the rental market.
Further investment in the portfolio
The Group continued with its programme of renovations and modernisations, investing EUR6.7 million across the entire Portfolio during 2017. In the Berlin rental portfolio, EUR3.7 million was invested across 117 vacant units, representing an average outlay of EUR301 per sqm. The average premium achieved on re-letting these vacant Berlin units was 60%.
An additional EUR1.0 million was invested in the development of condominium projects with the remaining EUR2.0 million invested in the infrastructure of properties within the Portfolio for items such as heating system upgrades and improvements to indoor and outdoor communal areas. All of these are recorded in the accounts as capital expenditure. A further EUR1.4 million spent on repairs and maintenance was expensed through the profit and loss account, compared to EUR1.1 million in 2016.
Repositioning the Portfolio
When Phoenix Spree listed on the main market of the London Stock Exchange in June 2015, 63% of the assets by value were located in Berlin. Since then, the Company has been transitioning the geographic focus of assets to create a larger, more focussed Berlin portfolio offering greater economies of scale. This has involved a process of carefully selected Berlin acquisitions, combined with the disposal of non-Berlin assets. Since 2015, the Company has acquired EUR194.8 million of Berlin residential property, while disposing or notarising for sale assets outside of Berlin with an aggregate value of EUR130 million. The geographic transition was essentially completed at the end of 2017 with the notarisation of the Company's remaining Northern Germany portfolio, the sale of which is expected to complete in the second quarter of 2018. At 31 December 2017, Berlin assets were valued at EUR528.5 million.
Following completion of all acquisitions and disposals notarised to date, Berlin is expected to represent over 99% of the Company's portfolio value on a pro-forma basis. The Company will effectively be a pure play on Berlin's positive demographics and attractive growth prospects.
Targeted acquisitions
The Group has continued to grow in Berlin with a number of targeted acquisitions. In total, 366 units (354 residential and 12 commercial) were notarised during 2017 for an aggregate purchase price of EUR55.9 million, at an average price per sqm of EUR2,224, and annual fully occupied rent of EUR2.0 million. As at 31 December, 2017 EUR48.4 million of the notarised acquisitions had completed, with the remainder completing in the first quarter of 2018. Acquisitions have been financed using a combination of debt and equity, with a target net loan-to-value ratio of approximately 50%.
In the period from listing in June 2015 to 31 December 2017, the properties acquired by the Group were valued at EUR240.6 million at 31 December 2017. Properties that had completed by December 2017 were revalued by Jones Lang LaSalle ("JLL") as at December 2017 at an average 48.1% premium to purchase prices.
The Group intends to continue with its strategy of growing the Portfolio through selective Berlin acquisitions and, as at 20 April 2018, a further 160 units in Berlin had been notarised since the December 2017 year end for an aggregate value of EUR24.8 million, representing an average price per sqm of EUR2,348.
Acquisitions notarised since 2015 stock market listing
Year Region Purchase Units Sqm Purchase Fully occupied
price price per yield
sqm
2015 Berlin 35,760,000 227 18,197 1,963 4.3%
-------- ------------ ------ ------- ----------- ---------------
2016 Berlin 78,305,000 634 41,406 1,891 4.4%
-------- ------------ ------ ------- ----------- ---------------
2017 Berlin 55,890,000 366 25,135 2,224 3.6%
-------- ------------ ------ ------- ----------- ---------------
2018
YTD Berlin 24,845,000 160 10,583 2,348 3.8%
-------- ------------ ------ ------- ----------- ---------------
Total 194,800,000 1,387 95,321 2,044 4.0%
------------ ------ ------- ----------- ---------------
Profitable non-core disposals
The Group has also sold or notarised for sale a number of properties located outside Berlin, which had been classified as non-core. These disposals generated a profitable exit and release of capital which is expected to be re-deployed into further Berlin acquisitions and further investment in the Berlin portfolio.
In April 2017, the Group completed the sale of a mixed-use property, with a high commercial component, located in Teltow, Brandenburg. The sale proceeds of EUR3.8 million represented a 19% premium to June 2016 book value.
In July 2017, the Group completed the sale of a portfolio of 17 properties, located in Nuremberg and Fürth, for an aggregate consideration of EUR35.2 million. These properties were acquired in 2007 and 2008 for an aggregate purchase price of EUR13.9 million and the sale proceeds represented an 11% premium to the 31 December 2016 book value.
In December 2017, the Group exchanged contracts to sell a portfolio of 34 properties located in Bremen, Hannover, Hildesheim, Verden, Delmenhorst, Kiel, Oldenburg, Lüneburg and Lübeck for an aggregate cash consideration of EUR73.0 million. These buildings were acquired in 2006/2007 for an aggregate purchase price of EUR 38.7 million and the sale price represented a 26% premium to the Jones Lang LaSalle valuation as at 30 June 2017.
Additionally, since 30 June 2017, a further four properties located in Central & North Germany were notarised for sale for a combined consideration of EUR6.7 million, 11% above the Jones Lang LaSalle valuation as at 30 June 2017.
Disposals notarised since June 2015 stock market listing
Region 2015 2016 2017 Premium to
prior FY book
value
(EUR) (EUR) (EUR)
Nuremberg & Furth 870,000 77%
-------- ---------- ------------ ---------------
Berlin (including Greater
Area) 3,800,000 19%
-------- ---------- ------------ ---------------
Baden-Wuerttemberg 6,100,000 7%
-------- ---------- ------------ ---------------
Central & North Germany 84,050,000 33%
-------- ---------- ------------ ---------------
Nuremberg & Furth 35,170,000 11%
-------- ---------- ------------ ---------------
Total 870,000 3,800,000 125,320,000 26%
-------- ---------- ------------ ---------------
Portfolio regional overview 31 December 2017
Market % Buildings Resi Comm Total Total Annualised Valuation Value Fully Vacancy EPRA
of units units units sqm Gross (EURm) per occupied % Vacancy
fund ('000) rent sqm gross %
by (EURm) (EUR) yield
value %
Berlin
(incl.
Greater
Area)* 86.7 85 2,140 134 2,274 164.1 14.9 528.5 3,220.3 3.1 7.1 2.7
------ ---------- ------ ------ ------ ------- ----------- ---------- -------- --------- -------- --------
Central
& North
Germany 12.7 36 758 34 792 45.8 3.8 77.1 1,682.8 5.3 5.7 4.3
------ ---------- ------ ------ ------ ------- ----------- ---------- -------- --------- -------- --------
Baden-Wurttemberg 0.6 1 18 11 29 3.6 0.3 3.7 1,026.1 10.0 6.0 0
------ ---------- ------ ------ ------ ------- ----------- ---------- -------- --------- -------- --------
Total 100% 122 2,916 179 3,095 213.5 19 609.3 2,853.4 3.4 6.8 2.9
------ ---------- ------ ------ ------ ------- ----------- ---------- -------- --------- -------- --------
*Excludes 8 properties (180 units) notarised between September 2017 and March 2018 which had not yet completed at December 31(st) 2017
The Berlin portfolio delivered its strongest performance since the fund's inception, with a like-for-like uplift in value of 41.8% (31 December 2016: 19.4%). The Board continues to believe that Berlin offers excellent potential for further growth in property and rental values.
The Group's Berlin portfolio is valued at EUR3,220 per sqm on average. Reported average rent per sqm stood at EUR8.1, a year-on-year increase of 4.7% compared with 2016, reflecting strong underlying like-for-like rental growth, partially offset by the impact of recent purchases, which typically exhibit lower rental values upon acquisition. On a like-for-like basis (excluding the impact of acquisitions and disposals), the increase in rent per sqm was 8.4%. The Berlin EPRA vacancy rate remained low at 2.7% (31 December 2016: 2.6%). New leases were signed at an average rent of EUR11.3 per sqm during the year, a record high and a premium of 40.7% to the average in-place rent during 2017.
The Northern Germany portfolio, which was notarised for sale in its entirety in December 2017, and consisted of properties in the cities and surrounding areas of Bremen, Hanover and Kiel, reported a like-for-like valuation increase 35.2% (31 December 2016: 10.4%). Average like-for-like rent per sqm rose by 3.8% and EPRA vacancy stood at 4.3%.
Condominiums
The Group has continued with its strategy of crystallising latent value through selectively reselling apartment blocks as individual units at significant premiums to book values. This strategy is designed to take advantage of the differential that exists between the market value of a rental unit within an apartment block and the resale value of a unit as a private apartment. The process involves legally splitting the freeholds in a small number of carefully selected buildings and the sales comprise a combination of vacant and occupied units. As at 31 December 2017, 29% of properties (41% of Berlin portfolio) had been legally split to allow the Company the flexibility to decide on condominium projects, should the circumstances be advantageous.
Across the Group's three condominium projects, a total of 31 units were notarised for sale in 2017, with an aggregate sales value of EUR9.1 million, a 58.9% increase on 2016 notarisations. This represents an average price per sqm of EUR4,027, or EUR4,107 excluding commercial units and parking.
Condominium sales proceeds during 2017 represented a 20.1% premium to 31 December 2017 book value and the average price achieved per sqm for notarised condominiums represents a 73.6% premium to the average valuation per sqm for properties in the Berlin portfolio as at 31 December 2016, confirming the potential for valuation creation that can be achieved through apartment privatisation.
As at 31 December 2017, 65 units, representing aggregate proceeds of EUR17.0 million, had completed since condominium sales commenced in mid-2015. The Company expects to identify and prepare additional condominium projects for sale, either to tenants or new buyers, during 2018.
Dividend
The Board is pleased to have declared a final dividend of EUR5.0 cents per share (GBP 4.4 pence per share), (2016 EUR4.3 cents) (GBP 3.7 pence per share), which is expected to be paid on or around 29 June 2018 to shareholders on the register at close of business on 8 June 2018, with an ex-dividend date of 7 June 2018. Taking into account the interim dividend paid in October 2017, the declared dividend for 2017 is EUR7.3 cents per share (GBP 6.4 pence per share), (2016: EUR6.3 cents per share) (GBP 5.3 pence per share).
Financing
As at 31 December 2017, the Group had gross borrowings of EUR222.3 million (31 December 2016: EUR185.6 million) and cash balances of EUR27.2 million (31 December 2016: EUR18.5 million) equating to a net debt of EUR195.1 million (31 December 2016: EUR167.1 million) and a net loan to value on the Portfolio of 32.0% (31 December 2016: 39.4%). Nearly all loans have fixed interest rates and, at 31 December 2017, the blended interest rate of all loans across the Portfolio was 2.1%. The average remaining duration of the loan book at 31 December 2017 was 8.4 years (31 December 2016: 6.3 years). By 31 December 2017, all the Group's debt had been refinanced within the previous 18 months.
During the course of 2017, the following ten-year loan facilities were entered into in order to finance newly acquired properties: March 2017, EUR13.0 million facility; September 2017, EUR8.7 million facility; November 2017, EUR14.2 million facility. All the funds available from these facilities had been drawn as at 31 December 2017.
In February 2017, the Group successfully refinanced existing debt within Laxpan Mueller GmbH and Invador Grundbesitz GmbH, two companies acquired in 2016, which owned portfolios of Berlin properties. Existing debt of EUR11.2 million was repaid and a new 10 year loan of EUR17.5 million was arranged, resulting in an equity release to the Group of EUR6.2 million before costs, all of which was drawn by 31 December 2017.
In July 2017, the Group successfully refinanced EUR79.6 million of existing debt, while securing a further equity release of EUR15.7 million before costs on the same pool of properties by way of a new 10-year loan facility. With the exception of EUR0.6 million, all of these funds had been drawn by 31 December 2017.
In April 2017, the Group announced the disposal of a non-core portfolio of 17 properties in Nuremberg and Furth for EUR35.2 million. EUR18.3 million of the sale proceeds was used to repay debt. Further single property disposals amounting to EUR16.9 million were also completed during the year with related debt of EUR9.3 million being repaid.
In December 2017, the Group announced that it had exchanged contracts to sell a portfolio of 34 properties located in Central and North Germany for a cash consideration EUR73.0 million. The transaction is due to complete in the first half of 2018 and it is expected that EUR41.2 million of the proceeds will be used to repay debt.
Funds made available to the Group by way of equity releases or through disposals are used to invest in the existing portfolio and to fund new acquisitions. While currently well funded, the Group continues to assess its funding options for growth, including further debt, equity and joint ventures.
Market outlook
With the Portfolio now almost entirely focussed in Berlin, it is now effectively a pure-play on the positive demographics and economic trends driving the performance of the Berlin residential market.
The outlook for Germany's economy has become increasingly favourable, with positive momentum underpinned by unprecedented European Central Bank stimuli. Thanks to record-low interest rates the Bundesbank calculates that the fiscal surplus in 2017 was the highest since the country's reunification. The Ifo Institute for Economic Research estimates that the German economy will expand by 2.6% in 2018, pointing to a broad upswing that is generating record-high employment and buoyant tax revenues. Business sentiment surveys and industrial data also point towards a vibrant German performance for 2018.
Focussing specifically on Berlin, the favourable supply-demand demographics look set to remain for the foreseeable future. JLL estimate that the Berlin population grew by 18,500 in the first half of 2017, with a similar trend expected in the second half. Whilst population growth continues to fuel strong demand for Berlin residential property, scarcity of available development land, a shortage in new-build permits and high costs of construction continue to restrict supply. All-in new-build construction costs per sqm in Berlin are still estimated to be substantially higher than equivalent value per sqm of existing housing stock and the economic viability of new build projects by state-owned companies is constrained by the requirement to have at least 50% of new builds as social housing, with rents capped at EUR10 / sqm for at least the next 5 years.
The Berlin residential rental sector remains well regulated, offering tenants higher levels of protection. Whilst many key elements of potential new rent and planning regulations still need to be clarified following the creation of a new Grand Coalition, the direction of travel is likely to be the same, focussing on a combination of conservation areas which limit the ability to split properties into condominiums, subsidies to stimulate new supply and further rent controls. Phoenix Spree remains fully committed to operating within the regulatory framework and the Company's strategy will continue to evolve to ensure this is maintained.
The reversionary potential within the Portfolio both for rental apartments and condominiums should continue to drive performance positively in the event of any slowdown in the broader market. The Company's balance sheet remains strong, with scope for further refinancing following record appreciation in the value of our properties in 2017. We anticipate that the proceeds will be deployed into further enhancements to the existing Portfolio and, subject to the availability of properties which meet the Fund's acquisition criteria, additional Berlin acquisitions.
KEY PERFORMANCE INDICATORS
The Company has chosen a number of Key Performance Indicators, which the Board believes are relevant to help all stakeholders understand the performance of the Company and the underlying property portfolio. Our key performance metrics are stated below.
In 2017, the value of the property portfolio grew by 40.1% on a like-for-like basis (2016: 19.4%). This increase was assisted by an increase in like-for-like average rent per let sqm of 6.9% (2016: 5.3%). The EPRA vacancy rate of 2.9% has remained relatively unchanged compared with prior year (2016: 2.6%), and in line with expectations.
The Group continued with its targeted condominium programme, agreeing sales of EUR9.1 million during the financial year (2016: EUR5.7 million). EPRA NAV per share increased by 50.5% to EUR4.11 (2016: EUR2.73), and the total dividend for the year was EUR7.3 cents per share (GBP 6.4 pence per share) an increase of 16% (2016: EUR6.3 cents per share, GBP EUR5.3 pence per share).
Net loan to value has reduced from 39.4% at 31 December 2016 to 32% at 31 December 2017.
CORPORATE RESPONSIBILITY
Being a responsible company, balancing the different interests of our key stakeholders and addressing our environmental and social impacts is intrinsically linked to our Company Values and our business strategy and ultimately the success and sustainability of our business.
As a Board, we recognise the increasing expectation from stakeholders for companies to demonstrate that they are operating responsibly and striking a meaningful balance between pursuing economic interests whilst managing their social and environmental impacts for the benefit of all stakeholders.
Sustainability lies at the core of our business model. We often acquire properties that are in relatively poor condition and, through significant reinvestment, we modernise the apartments to improve the standard of accommodation for our customers and improve the look of the local neighbourhood.
The Board and our property advisor, PMM, have reviewed how sustainability is managed within our business and aligned these with the views of our stakeholders and business priorities to create our "Better Futures" Corporate Responsibility (CR) Plan. This Plan provides a framework to measure existing activities better while adding new initiatives to improve our overall sustainability.
Our CR Plan has four key pillars that are integrated throughout our business operations: Respecting our Environment, Investing in People, Valuing our Customers and Building our Communities.
The day-to-day running of the Company's operations is undertaken by our property advisor, PMM, who represent the majority of the operational headcount of the business, based out of offices in London and Berlin. We focus on PMM's employees within our Investing in People pillar and their offices when reviewing our direct environmental impact.
From a governance perspective, a CR Committee has been established to oversee the implementation of the Better Futures Plan, reporting on the progress to the Board and advising on any CR related material issues. We look forward to communicating our CR plans and progress to stakeholders, in due course.
POST BALANCE SHEET EVENTS
-- In January 2018, the Company exchanged contracts for the acquisition of one individual property and a portfolio of four properties in Berlin with an aggregate consideration of EUR17.7 million. The Company also exchanged contracts to acquire two individual properties, one in February and the other in April, with an aggregate consideration of EUR7.1 million. These properties are still awaiting completion.
-- The Company had exchanged contracts for the acquisition of two properties in Berlin with an aggregate purchase price of EUR7.5 million prior to the balance sheet date, which as at the balance sheet date had not yet completed. Both properties completed in Q1 2018.
-- The Company exchanged contracts for the sale of 9 condominiums in Berlin with an aggregate consideration of EUR3.5 million. Three of these condominium sales have subsequently completed at a value of EUR1.1 million. The remainder are expected to complete in Q2 2018.
-- The Company had exchanged contracts for the sale of five condominiums in Berlin with an aggregate sales price of EUR1.8 million prior to the balance sheet date, which as at the balance sheet date had not yet completed. These condominium sales have subsequently completed.
-- In March 2018, The Company refinanced the debt held against a portfolio of buildings in Berlin. The new facility released equity of EUR7.8 million which was drawn in March 2018.
-- The company has signed for a EUR12 million loan secured against seven properties notarised for acquisition in Q4 2017 and Q1 2018.
-- The Company and the Property Advisor reached an agreement to settle the Performance fee through the issuance of 8,260,065 new shares in the Company at EPRA NAV. The settlement is expected to take place in May 2018.
EXTRACTS FROM DIRECTORS REPORT
The Directors are pleased to present their Annual Report and the audited consolidated financial statements for the year ended 31 December 2017.
General information
The Company is a public limited company and incorporated in Jersey, Channel Islands under the Companies (Jersey) Law 1991. The Company was admitted to the premium segment of the Main Market of the London Stock Exchange on 15 June 2015.
The Group's objective is to generate an attractive return for shareholders through the acquisition and active management of high quality pre-let properties in Germany. The Group is primarily invested in the residential market, supplemented with selective investments in commercial property. The majority of commercial property within the portfolio is located within residential and mixed-use properties.
Dividends
The Directors recommend a final dividend of EUR5.3 cents (2016: EUR4.3 cents) per Ordinary Share to be paid on or around 29 June 2018 to ordinary shareholders on the register on 8 June 2018.
The Directors declared a dividend of EUR4.3 cents per share on 26 April 2017, paid on 30 June 2017 to ordinary shareholders on the register on 9 June 2017 and a further dividend of EUR2.28 cents per share on 26 September 2017, paid on 20 October 2017 to ordinary shareholders on the register on 6 October 2017 (2016: EUR1.9 cents).
Auditor
Each of the Directors at the date of approval of this Annual Report has taken all the steps that he or she ought to have taken as a Director in order to make him or herself aware of any relevant audit information and to establish that the Group's auditor is aware of that information. The Directors are not aware of any relevant audit information which has not been disclosed to the auditor.
RSM UK Audit LLP has expressed their willingness to continue in office as auditor and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting.
Viability Statement
The Directors have assessed the viability of the Group over a three-year period, which is significantly longer than the 12-month period from the date of approval of the financial statements that was previously considered for going concern purposes. The Directors have chosen three years because that is the period over which the Group has sufficiently robust forecasts as part of its business plan. The Viability Statement is based on a robust assessment of those risks that would threaten the business model, future performance, solvency or liquidity of the Group. For the purposes of the Viability Statement the Directors have considered, in particular, the impact of the following factors affecting the projections of cash flows for the three-year period ending 31 December 2020:
a) the potential operating cash flow requirement of the Group;
b) seasonal fluctuations in working capital requirements;
c) property vacancy rates;
d) rent arrears and bad debts;
e) capital and administration expenditure (excluding potential acquisitions as set out below) during the period; and
f) condominium sales proceeds.
The Directors recognise that the projections of cash flows do not include the impact of further potential property acquisitions over the three-year period, as these acquisitions are ad hoc and discretionary in nature. In this respect, the Directors complete a formal review of the working capital headroom of the Group for each potential acquisition.
On the basis of the above, and assuming the principal risks are managed or mitigated as expected, the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period of their assessment.
Registered office
13-14 Esplanade
St Helier
Jersey
JE1 1EE
Channel Islands
STATEMENT OF DIRECTORS RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the consolidated financial statements in accordance with applicable law and regulations.
Jersey company law requires the Directors to prepare financial statements for each financial year, in accordance with generally accepted accounting principles. The Directors are required under the Listing Rules of the Financial Conduct Authority to prepare the financial statements in accordance with International Financial Reporting Standards ('IFRS'), as adopted by the European Union ('EU').
The financial statements are required by law and IFRS as adopted by EU to present fairly the financial position of the Group.
Under Jersey company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that period.
In preparing the financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently; -- make judgements and estimates that are reasonable and prudent; -- state whether they have been prepared in accordance with IFRS as adopted by the EU;
-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business.
The Directors are responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Group and to enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors confirm that these financial statements comply with these requirements.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Directors' Responsibility Statement
The Directors confirm that to the best of their knowledge:
-- the consolidated financial statements, prepared in accordance with the applicable set of accounting standards (as detailed above) and Company Law, give a true and fair view of the assets, liabilities, financial position and profit and loss of the issuer and the undertakings included in the consolidation taken as a whole;
-- the management report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face, as well as the business model and strategy of the Group; and
-- the Annual Report and consolidated financial statements, as a whole, are fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position, performance, business model and strategy.
Consolidated Statement
of Comprehensive Income
For the year ended 31
December 2017
Year Year ended
ended
Notes 31 December 31 December
2017 2016
(restated
- note
2.2)
EUR'000 EUR'000
Continuing
operations
Revenue 6 18,080 15,934
Property
expenses 7 (7,000) (7,001)
Gross profit 11,080 8,933
Administrative
expenses 8 (2,967) (2,977)
Gain on disposal of investment
property (including investment
property held for sale) 10 5,319 799
Investment property
fair value gain 11 157,374 55,226
Performance fee due to
property advisor 26 (26,339) (6,350)
Operating profit 144,467 55,631
Net finance
charge 12 (5,995) (6,756)
Profit before
taxation 138,472 48,875
Income tax
expense 13 (26,150) (10,913)
Profit after
taxation 112,322 37,962
Other comprehensive - -
income
Total comprehensive
income for the year 112,322 37,962
================== ====================
Total comprehensive income
attributable to:
Owners of the
parent 111,538 36,998
Non-controlling
interests 784 964
112,322 37,962
================== ====================
Earnings per share attributable
to the owners of the parent:
From continuing
operations
Basic (EUR) 29 1.21 0.42
Diluted (EUR) 29 1.11 0.40
================== ====================
Consolidated Statement
of Financial Position
At 31 December
2017
As at As at
Notes 31 December 31 December
2017 2016
EUR'000 EUR'000
ASSETS
Non-current
assets
Investment
properties 16 502,360 395,829
Property, plant
and equipment 18 92 40
Deferred tax
asset 13 527 770
Loans and
receivables 19 2,323 2,253
505,302 398,892
Current Assets
Investment properties
- held for sale 17 106,897 27,970
Trade and other
receivables 20 10,001 7,503
Cash and cash
equivalents 21 27,182 18,450
144,080 53,923
Total assets 649,382 452,815
================== ====================
EQUITY AND
LIABILITIES
Current
liabilities
Borrowings 22 2,646 9,169
Trade and other
payables 23 2,119 1,331
Derivative financial
instruments 24 - 392
Current tax 13 2,914 24
7,679 10,916
Non-current
liabilities
Borrowings 22 219,648 176,423
Derivative financial
instruments 24 3,333 4,477
Other financial
liabilities 25 5,663 3,590
Deferred tax
liability 13 45,117 22,150
273,761 206,640
Total
liabilities 281,440 217,556
================== ====================
Equity
Stated capital 27 162,630 162,630
Share based payment
reserve 26 33,953 7,614
Retained
earnings 169,634 64,074
Equity attributable
to owners of the
parent 366,217 234,318
Non-controlling
interest 28 1,725 941
Total equity 367,942 235,259
------------------ --------------------
Total equity
and liabilities 649,382 452,815
================== ====================
Consolidated Statement
of Changes in Equity
For the year ended 31
December 2017
Attributable to
the owners of the
parent
Stated Share Retained Total Non-controlling Total
capital based earnings interest equity
payment
reserve
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Balance at
1 January 2016 115,150 1,264 32,125 148,539 2,626 151,165
Comprehensive
income:
Profit for
the year - - 36,998 36,998 964 37,962
Other
comprehensive
income - - - - - -
Total
comprehensive
income for
the year - - 36,998 36,998 964 37,962
Transactions
with owners
-
recognised
directly in
equity:
Issue of share
capital 49,080 - - 49,080 - 49,080
Dividends paid - - (5,049) (5,049) - (5,049)
Performance
fee - 6,350 - 6,350 - 6,350
Recognition
of redemption
liability - - - - (3,590) (3,590)
Acquisition
of subsidiaries - - - - 941 941
Cost related
to share
placing (1,600) - - (1,600) - (1,600)
Balance at
31 December
2016 162,630 7,614 64,074 234,318 941 235,259
Comprehensive
income:
Profit for
the year - - 111,538 111,538 784 112,322
Other
comprehensive
income - - - - - -
Total
comprehensive
income for
the year - - 111,538 111,538 784 112,322
Transactions
with owners
-
recognised
directly in
equity:
Dividends paid - - (5,978) (5,978) - (5,978)
Performance
fee - 26,339 - 26,339 - 26,339
Balance at
31 December
2017 162,630 33,953 169,634 366,217 1,725 367,942
========== ================= ============== ================ ================== ====================
The share based payment reserve has been established
in relation to the issue of shares for the payment
of the performance fee of the property advisor.
Settlement to be made in May 18.
Retained earnings are the undistributed reserves
to be either reinvested within the Group or distributed
to shareholders as dividends
Consolidated Statement
of Cash Flows
For the year ended 31
December 2017
Year Year
ended ended
31 December 31 December
2017 2016
EUR'000 EUR'000
Profit before
taxation 138,472 48,875
Adjustments
for:
Net finance
charge 5,995 6,756
Gain on disposal
of investment property (5,319) (799)
Investment property
revaluation gain (157,374) (55,226)
Depreciation 23 12
Performance
fee charge 26,339 6,350
Operating cash flows before
movements in working capital 8,136 5,968
Increase in
receivables (3,048) (3,808)
Increase / (decrease)
in payables 788 (1,353)
Cash generated from
operating activities 5,876 807
Income tax (50) -
(paid)
Net cash generated from
operating activities 5,826 807
Cash flow from investing
activities
Proceeds on disposal of
investment property 60,436 4,250
Interest
received 103 168
Capital expenditure on
investment property (6,715) (4,189)
Property
additions (76,486) (72,808)
Additions to property,
plant and equipment (75) (22)
Loans issued to
minority shareholders - (806)
Net cash used in
investing activities (22,737) (73,407)
Cash flow from financing
activities
Interest paid
on bank loans (5,080) (3,173)
Repayment of
bank loans (117,712) (6,040)
Drawdown on bank
loan facilities 154,414 45,394
Share issue - 47,480
Dividends paid (5,978) (5,049)
Net cash generated from
financing activities 25,644 78,612
Net increase in cash and
cash equivalents 8,733 6,012
Cash and cash equivalents
at beginning of year 18,450 12,757
Exchange gains / (losses) on
cash and cash equivalents (1) (319)
Cash and cash equivalents
at end of year 27,182 18,450
================== ====================
Reconciliation of Net Cash Flow
to Movement in Debt
For the year ended 31
December 2017
Year Year
ended ended
31 December 31 December
2017 2016
EUR'000 EUR'000
Cashflow from increase
in debt financing 36,702 39,354
Change in net debt resulting
from cash flows 36,702 39,354
------------------ --------------------
Movement in debt
in the year 36,702 39,354
Debt at the
start of the
year 185,592 146,238
Debt at the
end of the
year 222,294 185,592
================== ====================
Notes to the Financial
Statements
For the year ended 31
December 2017
1 - General
information
The Group consists of a Parent Company, Phoenix
Spree Deutschland Limited ('the Company'), incorporated
in Jersey, Channel Islands and all its subsidiaries
('the Group') which are incorporated and domiciled
in and operate out of Jersey, Guernsey and Germany.
Phoenix Spree Deutschland Limited is listed on
the premium segment of the Main Market of the London
Stock Exchange.
The Group invests in residential and
commercial property in Germany.
The registered office is at 13-14 Esplanade,
St Helier, Jersey, JE1 1EE, Channel Islands.
2 - Summary of significant
accounting policies
The principal accounting policies
adopted are set out below.
2.1 Basis of
preparation
The consolidated financial statements have been
prepared in accordance with International Financial
Reporting Standards, International Accounting Standards
and interpretations (collectively, 'IFRS'), International
Financial Reporting Interpretation Committee ('IFRIC')
interpretations, as adopted by the European Union
('IFRS as adopted by the EU').
In accordance with Section 105 of The Companies
(Jersey) Law 1991, the Group confirms that the
financial information for the year ended 31 December
2017 are derived from the Group's audited financial
statements and that these are not statutory accounts
and, as such, do not contain all information required
to be disclosed in the financial statements prepared
in accordance with International Financial Reporting
Standards ("IFRS").
The statutory accounts for the year ended 31 December
2017 have been audited and approved, but have not
yet been filed.
The Group's audited financial statements for the
period ended 31 December 2017 received an unqualified
audit opinion and the auditor's report contained
no statement under section 113B (3) and (6) of
The Companies (Jersey) Law 1991.
The financial information contained within this
preliminary statement was approved and authorised
for issue by the Board on 26 April 2018.
2.2 Change of accounting
policy
The performance fee payable to the property manager
had previously been disclosed in property expenses.
Due to this fee being linked to the fair value
increase, it is now presented separately in the
consolidated statement of comprehensive income
with a restatement of the prior year figures. This
has resulted in a reduction of Property Expenses
in 2016 by EUR6.35 million. The change of policy
has no effect on reported profit.
2.3 Going
concern
The Directors have prepared projections for the
period to 31 December 2020. These projections have
been prepared using assumptions which the Directors
consider to be appropriate to the current financial
position of the Group as regards to current expected
revenues and its cost base and the Group's investments,
borrowing and debt repayment plans and show that
the Group should be able to operate within the
level of its current resources and expects to comply
with all covenants for the foreseeable future.
The Group's business activities together with the
factors likely to affect its future development
and the Group's objectives, policies and processes
from managing its capital and its risks are set
out in the Annual Accounts.. After making enquiries
the Directors have a reasonable expectation that
the Group has adequate resources to continue in
operational existence for the foreseeable future.
The Group therefore continues to adopt the going
concern basis in preparing its consolidated financial
statements.
2.4 Basis of
consolidation
The consolidated financial statements incorporate
the financial statements of the Company and entities
controlled by the Company (its subsidiaries). The
Company controls an entity when the Group is exposed
to, or has rights to, variable returns through
its power over the entity. Subsidiaries are fully
consolidated from the date on which control is
transferred to the Group. They are deconsolidated
from the date that control ceases.
Profit or loss and each component of other comprehensive
income are attributable to the owners of the Company
and to the non-controlling interests. Total comprehensive
income of the subsidiaries is attributable to the
owners of the Company and to the non-controlling
interests even if this results in the non-controlling
interests having a deficit balance.
Accounting policies of subsidiaries which differ
from Group accounting policies are adjusted on
consolidation. All intra-group transactions, balances,
income and expenses are eliminated on consolidation.
Non-controlling interests in subsidiaries are identified
separately from the Group's equity therein. Those
interests of non-controlling shareholders that
present ownership interests entitling their holders
to a proportionate share of net assets upon liquidation
may initially be measured at fair value or at the
non-controlling interests' proportionate share
of the fair value of the acquiree's identifiable
net assets. The choice of measurement is made on
an acquisition-by-acquisition basis. Other non-controlling
interests are initially measured at fair value.
Subsequent to acquisition, the carrying amount
of non-controlling interests is the amount of those
interests at initial recognition plus the non-controlling
interests' share of subsequent changes in equity.
Changes in the Group's interests in subsidiaries
that do not result in a loss of control are accounted
for as equity transactions. The carrying amount
of the Group's interests and the non-controlling
interests are adjusted to reflect the changes in
their relative interests in the subsidiaries. Any
difference between the amount by which the non-controlling
interests are adjusted and the fair value of the
consideration paid or received is recognised directly
in equity and attributed to the owners of the Company.
2.5 Business combinations
The Group applies the acquisition method to account
for business combinations. The consideration transferred
for the acquisition of a subsidiary is the fair
value of the assets transferred to the Group, the
liabilities incurred by the Group to the former
owners of the acquiree and the equity interests
issued by the Group in exchange for control of
the acquiree. The consideration transferred includes
the fair value of any asset or liability resulting
from a contingent consideration arrangement. Identifiable
assets acquired and liabilities and contingent
liabilities assumed in a business combination are
measured initially at their fair values at the
acquisition date.
The Group recognises any non-controlling interest
in the acquiree on an acquisition-by-acquisition
basis, either at fair value or at the non-controlling
interest's proportionate share of the recognised
amounts of the acquiree's identifiable net assets.
Acquisition-related costs are expensed
in the profit or loss as incurred.
If the business combination is achieved in stages,
the acquisition date carrying value of the acquirer's
previously held equity interest in the acquiree
is remeasured to fair value at the acquisition
date; any gains or losses arising from such remeasurement
are recognised in profit or loss.
Goodwill is measured as the excess of the consideration
transferred, the amount of any non-controlling
interest in the acquiree and the acquisition-date
fair value of any previous equity interest in the
acquiree over the fair value of the identifiable
net assets acquired. If the total of consideration
transferred, non-controlling interest recognised
and previously held interest measured is less than
the fair value of the net assets of the subsidiary
acquired, the difference is recognised directly
in profit or loss as a bargain purchase gain.
2.6 Asset
acquisition
The Group applies the acquisition method to account
for asset acquisitions. The consideration transferred
for the acquisition of a subsidiary is the fair
value of the assets transferred to the Group, the
liabilities incurred by the Group to the former
owners of the acquiree and the equity interests
issued by the Group in exchange for control of
the acquiree. The consideration transferred includes
the fair value of any asset or liability resulting
from a contingent consideration arrangement. Identifiable
assets acquired and liabilities and contingent
liabilities assumed in an asset acquisition are
measured initially at their fair values at the
acquisition date.
The Group recognises any non-controlling interest
in the acquiree on an acquisition-by-acquisition
basis, either at fair value or at the non-controlling
interest's proportionate share of the recognised
amounts of the acquiree's identifiable net assets.
Acquisition-related costs are
expensed in profit or loss as
incurred.
No goodwill is recognised on asset acquisitions
where the nature of the acquisition on the subsidiary
is to acquire the property held in the entity.
The consideration for the asset acquisition is
attributed to the property as fair value at the
acquisition date.
2.7 Revenue
recognition
Revenue includes rental income and excludes service
charges and other amounts directly recoverable
from tenants. Rental income from operating leases
is recognised in income on a straight-line basis
over the lease term. When the Group provides incentives
to its tenants, the cost of incentives are recognised
over the lease term, on a straight-line basis,
as a reduction of rental income.
2.8 Foreign
currencies
(a) Functional and presentation
currency
The currency of the primary economic environment
in which the Company operates ('the functional
currency') is the Euro (EUR). The presentational
currency of the consolidated financial statements
is also the Euro (EUR).
(b) Transactions
and balances.
Foreign currency transactions are translated into
the functional currency using the exchange rates
prevailing at the dates of the transactions. At
each reporting date, monetary assets and liabilities
that are denominated in foreign currencies are
retranslated at the rates prevailing at that date.
Foreign exchange gains and losses resulting from
such transactions are recognised in the consolidated
statement of comprehensive income.
Non-monetary items carried at fair value that are
denominated in foreign currencies are translated
at the rates prevailing at the date when the fair
value was determined. Non-monetary items that are
measured in terms of historical cost in a foreign
currency are not retranslated.
2.9 Segment
reporting
Operating segments are reported in a manner consistent
with the internal reporting provided to the chief
operating decision-maker. The chief operating decision-maker,
who is responsible for allocating resources and
assessing performance of the operating segments,
has been identified as the Board of Directors.
2.10 Operating
profit
Operating profit is stated before the Group's gain
or loss on its financial assets and after the revaluation
gains or losses for the year in respect of investment
properties and after gains or losses on the disposal
of investment properties.
2.11 Administrative and
property expenses
All expenses are accounted for on an accruals basis
and are charged to the consolidated statement of
comprehensive income in the period in which they
are incurred. Service charge costs, to the extent
that they are not recoverable from tenants, are
accounted for on an accruals basis and included
in property expenses.
2.12 Exceptional
items
Exceptional items are disclosed separately in the
consolidated financial statements where this provides
further understanding of the financial performance
of the Group, due to their significance in terms
of nature or amount.
2.13 Property Advisor
fees
The element of Property Advisor fees for management
services provided are accounted for on an accruals
basis and are charged to the consolidated statement
of comprehensive income within property expenses
in the period in which they are incurred. These
fees are detailed in note 7 and classified under
'Property advisors' fees and expenses'. The settlement
of the Property Advisor performance fees is detailed
in note 26. The performance fee is presented on
the face of the consolidated statement of comprehensive
income as a separate line item following restatement
from 2016 as detailed in note 2.2. Due to the nature
of the settlement of the performance fee, any movement
in the amount payable at the year end is reflected
within the share based payment reserve on the consolidated
statement of financial position.
2.14 Investment
property
Property that is held for long-term rental yields
or for capital appreciation, or both, and that
is not occupied by the Group, is classified as
investment property.
Investment property is measured initially at cost,
including related transaction costs. After initial
recognition, investment property is carried at
fair value, based on market value.
The change in fair values is
recognised in profit or loss
for the year.
A valuation exercise is undertaken by the Group's
independent valuer, Jones Lang LaSalle GmbH ('JLL'),
at each reporting date in accordance with the methodology
described in note 16 on a building-by-building
basis. Such estimates are inherently subjective
and actual values can only be determined in a sales
transaction. The valuations have been prepared
by JLL on a consistent basis at each reporting
date.
Subsequent expenditure is added to the asset's
carrying amount only when it is probable that future
economic benefits associated with the item will
flow to the Group and the cost of the item can
be measured reliably. Repairs and maintenance costs
are charged to the consolidated statement of comprehensive
income during the financial period in which they
are incurred. Changes in fair values are recorded
in profit or loss for the year.
Purchases and sales of investment properties
are recognised on legal completion.
An investment property is derecognised upon disposal
or when the investment property is permanently
withdrawn from use and no future economic benefits
are expected from the disposal. Any gain or loss
arising on derecognition of the property (calculated
as the difference between the net disposal proceeds
and the carrying amount of the asset, where the
carrying amount is the higher of cost or fair value)
is included in profit or loss in the period in
which the property is derecognised.
2.15 Current assets held
for sale - investment property
Non-current assets (and disposal groups) classified
as held for sale are measured at the most recent
valuation.
Non-current assets and disposal groups are classified
as held for sale if their carrying amount will
be recovered through a sale transaction rather
than through continuing use. This condition is
regarded as met only when the sale is highly probable
and the asset (or disposal group) is available
for immediate sale in its present condition. Management
must be committed to the sale which should be expected
to qualify for recognition as a completed sale
within one year from the date of classification.
The Group will recognise an asset in this category
once the Board has committed the sale of an asset
and marketing has commenced.
When the Group is committed to a sale plan involving
loss of control of a subsidiary, all of the assets
and liabilities of that subsidiary are classified
as held for sale when the criteria described above
are met, regardless of whether the Group will retain
a non-controlling interest in its former subsidiary
after the sale.
2.16 Property, plant
and equipment
Property, plant and equipment is stated
at cost less accumulated depreciation.
Cost includes the original purchase price of the
asset and the costs attributable to bringing the
asset to its working condition for its intended
use. Depreciation is charged so as to write off
the costs of assets to their residual values over
their estimated useful lives, on the following
basis:
Equipment, fixtures and vehicles -
4.50% - 25% per annum, straight line.
The gain or loss arising on the disposal of an
asset is determined as the difference between the
sales proceeds and the carrying amount of the asset
and is recognised in profit or loss.
2.17 Borrowing
costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets,
which are assets that necessarily take a substantial
period of time to get ready for their intended
use or sale, are added to the cost of those assets,
until such time as the assets are substantially
ready for their intended use or sale.
All other borrowing costs are recognised in
profit or loss in the period in which they
are incurred.
2.18 Tenants
deposits
Tenants deposits are held off balance sheet in
a separate bank account in accordance with German
legal requirements, and the funds are not accessible
to the Group. Accordingly, neither an asset nor
a liability is recognised.
2.19 Financial instruments
Financial assets and financial liabilities are
recognised in the Group's consolidated statement
of financial position when the Group becomes party
to the contractual provisions of the instrument.
Financial assets are derecognised when the contractual
rights to the cash flows from the financial asset
expire or when the contractual rights to those
assets are transferred. Financial liabilities are
derecognised when the obligation specified in the
contract is discharged, cancelled or expired.
The Group classifies its financial assets as held
at fair value through profit or loss, or loans
and receivables. The classification depends on
the purpose for which the financial assets were
acquired, and is determined at initial recognition.
(a) Financial assets at fair
value through profit or loss
('FVTPL')
Financial assets are classified as FVTPL when the
financial asset is designated as FVTPL. A financial
asset may be designated as FVTPL upon initial recognition
if:
-- such designation eliminates or significantly
reduces a measurement or recognition inconsistency
that would otherwise arise; or
-- the financial asset forms part of a group of
financial assets or financial liabilities, or both,
which is managed and its performance is evaluated
on a fair value basis, in accordance with the Group's
documented risk management strategy, and information
about the grouping is provided internally on that
basis.
Financial assets at FVTPL are stated at fair value,
with any gains or losses arising on re-measurement
recognised in profit or loss. Fair value is determined
in the manner described in note 31.
(b) Loans and
receivables
The Group's loans and receivables comprise trade
and other receivables and cash and cash equivalents.
Loans and receivables are recognised initially
at fair value and subsequently at amortised cost
using the effective interest method.
(i) Trade and other
receivables
Trade and other receivables are recognised initially
at fair value and subsequently measured at amortised
cost using the effective interest method less provision
for impairment. Appropriate provisions for estimated
irrecoverable amounts are recognised in the consolidated
statement of comprehensive income when there is
objective evidence that the assets are impaired.
Interest income is recognised by applying the effective
interest rate, except for short-term trade and
other receivables when the recognition of interest
would be immaterial.
Service charges receivable from tenants are presented
net of amounts paid on account by tenants.
Impairment provisions are recognised when there
is objective evidence (such as significant financial
difficulties on the part of the counterparty or
default or significant delay in payment) that the
Group will be unable to collect all of the amounts
due. For trade and other receivables, which are
reported net, such provisions are recorded in a
separate allowance account with the loss being
recognised within property expenses in the consolidated
statement of comprehensive income. On confirmation
that the trade and other receivables will not be
collectable, the gross carrying value of the asset
is written off against the associated provision.
(ii) Cash and cash
equivalents
Cash and cash equivalents comprise cash in hand,
cash at agents, demand deposits, and other short-term
highly liquid investments that have maturities
of three months or less from inception, are readily
convertible to a known amount of cash and are subject
to an insignificant risk of changes in value.
(c) Equity
instruments
An equity instrument is any contract that evidences
a residual interest in the assets of an entity
after deducting all of its liabilities. Equity
instruments issued by the Group are recorded at
the proceeds received, net of direct issue costs.
(d) Trade and other
payables
Trade payables are initially measured at their
fair value and are subsequently measured at their
amortised cost using the effective interest method;
this method allocates interest expense over the
relevant period by applying the 'effective interest
rate' to the carrying amount of the liability.
(e) Borrowings
Borrowings are recognised initially at fair value,
net of transaction costs incurred. Borrowings are
subsequently stated at amortised cost; any difference
between the proceeds (net of transaction costs)
and the redemption value is recognised in the consolidated
statement of comprehensive income over the period
of the borrowings using the effective interest
method.
(f) Leases
Rental income from operating leases is recognised
on a straight-line basis over the term of the relevant
lease.
2.20 Current and
deferred income
tax
The tax expense for the period comprises current
and deferred tax. Tax is recognised in the consolidated
statement of comprehensive income, except to the
extent that it relates to items recognised in other
comprehensive income or directly in equity. In
that case, the tax is also recognised in other
comprehensive income or directly in equity, respectively.
(a) Current
tax
The current tax charge is based on taxable profit
for the year. Taxable profit differs from net profit
reported in the consolidated statement of comprehensive
income because it excludes items of income or expense
that are taxable or deductible in other years and
it further excludes items that are never taxable
or deductible. The Group's liability for current
tax is calculated using tax rates that have been
enacted or substantively enacted by the accounting
date.
(b) Deferred
tax
Deferred tax is the tax expected to be payable
or recoverable on differences between the carrying
amounts of assets and liabilities in the financial
statements and the corresponding tax bases used
in the computation of taxable profit. Deferred
tax assets are recognised to the extent that it
is probable that taxable profits will be available
against which deductible temporary differences
can be utilised.
Deferred tax is charged or credited in the consolidated
statement of comprehensive income except when it
relates to items credited or charged directly in
equity, in which case the deferred tax is also
dealt with in equity.
Deferred tax is calculated at the tax rates and
laws that are expected to apply to the period when
the asset is realised or the liability is settled
based upon tax rates that have been enacted or
substantively enacted by the accounting date.
The carrying amount of deferred tax assets is reviewed
at each accounting date and reduced to the extent
that it is no longer probable that sufficient taxable
profits will be available to allow all or part
of the asset to be recovered.
2.21 New standards and
interpretations
No new standards, amendments or interpretations
effective for annual periods beginning on or after
1 January 2017 had an impact on the Group.
The following relevant new standards, amendments
to standards and interpretations have been issued,
but are not effective for the financial year beginning
on 1 January 2017, as adopted by the European Union,
and have not been early adopted:
Title As issued by the IASB, mandatory
for accounting periods starting
on or after
IFRS 9 - Financial Accounting periods beginning
Instruments on or after 1 January 2018
IFRS 15 Revenue from Contracts Accounting periods beginning
with Customers on or after 1 January 2018
IFRS 16 Leases Accounting periods beginning
on or after 1 January 2019
IFRIC 22 - Foreign currency Accounting periods beginning
transactions and advance on or after 1 January 2018
consideration
The Directors have considered that the adoption
of these standards and interpretations in future
periods will have no material impact on the financial
statements of the Group. The Group has no income
that is covered under IFRS 15 because its income
deriving from rentals is covered under IAS 17.
Furthermore, the impact of IFRS 16 removes the
differentiation between financial and operational
leases with regard to the Lessee party. As the
Group is the lessor in their contractual arrangements
IFRS 16's approach is substantially unchanged from
its predecessor, IAS 17.
The following standards have been issued
by the IASB but have not yet been adopted
by the EU:
Title As issued by the IASB, mandatory
for accounting periods starting
on or after
Classification and Measurement Accounting periods beginning
of Share-based Payment on or after 1 January 2018
Transactions (Amendments
to IFRS 2)
Transfer of Investment Accounting periods beginning
Property (Amendments to on or after 1 January 2018
IAS 40)
IFRIC 23 - Uncertainty Accounting periods beginning
over Income Tax Treatments on or after 1 January 2019
While the above standards have not yet been adopted
by the EU, the Group is currently assessing their
impact.
3. Financial risk
management
3.1 Financial
risk factors
The Group's activities expose it to a variety of
financial risks: market risk, credit risk and liquidity
risk. The Group's overall risk management programme
focuses on the unpredictability of financial markets
and seeks to minimise potential adverse effects
on the Group's financial performance.
Risk management is carried out by the Risk Committee
(previously the Audit and Risk Committee up to
17 April 2018) under policies approved by the Board
of Directors. The Board provides principles for
overall risk management, as well as policies covering
specific areas, such as interest rate risk, credit
risk and investment of excess liquidity.
3.2 Market
risk
Market risk is the risk of loss that may arise
from changes in market factors such as foreign
exchange rates, interest rates and general property
market risk.
(a) Foreign
exchange risk
The Group operates in Germany and is exposed to
foreign exchange risk arising from currency exposures,
primarily with respect to Sterling against the
Euro arising from the costs which are incurred
in Sterling. Foreign exchange risk arises from
future commercial transactions, and recognised
monetary assets and liabilities denominated in
currencies other than the Euro.
The Group's policy is not to enter
into any currency hedging transactions.
(b) Interest
rate risk
The Group has exposure to interest rate risk. It
has external borrowings at a number of different
variable interest rates. The Group is also exposed
to interest rate risk on some of its financial
assets, being its cash at bank balances. Details
of actual interest rates paid or accrued during
each period can be found in note 24 to the consolidated
financial statements.
The Group's policy is to manage its interest rate
risk by entering into interest rate swaps in order
to limit exposure to borrowings at variable rates.
(c) General property
market risk
Through its investment in property, the Group is
subject to other risks which can affect the value
of property. The Group seeks to minimise the impact
of these risks by review of economic trends and
property markets in order to anticipate major changes
affecting property values.
3.3 Credit
risk
The risk of financial loss due to counterparty's
failure to honour their obligations arises principally
in connection with property leases and the investment
of surplus cash.
The Group has policies in place to ensure that
rental contracts are made with customers with an
appropriate credit history. Tenant rent payments
are monitored regularly and appropriate action
taken to recover monies owed, or if necessary,
to terminate the lease.
Cash transactions are limited to financial
institutions with a high credit rating.
3.4 Liquidity
risk
The Group's objective is to maintain a balance
between continuity of funding and flexibility through
the use of bank loans secured on the Group's properties.
The terms of the borrowings entitle the lender
to require early repayment should the Group be
in default with significant payments for more than
one month.
3.5 Capital
management
The prime objective of the Group's capital management
is to ensure that it maintains the financial flexibility
needed to allow for value-creating investments
as well as healthy balance sheet ratios.
The capital structure of the Group consists of
net debt (borrowings disclosed in note 22 after
deducting cash and cash equivalents) and equity
of the Group (comprising stated capital, reserves
and retained earnings).
When reviewing the capital structure the Group
considers the cost of capital and the risks associated
with each class of capital. The Group reviews the
gearing ratio which is determined as the proportion
of net debt to equity. In comparison with comparable
companies operating within the property sector
the Board considers the gearing ratios to be reasonable.
The gearing ratios for the reporting
periods are as follows:
As at As at
31 December 31 December
2017 2016
EUR'000 EUR'000
Borrowings (222,294) (185,592)
Cash and cash
equivalents 27,182 18,450
Net debt (195,112) (167,142)
================== ====================
Equity 367,942 235,259
Net debt to
equity ratio 53% 71%
================== ====================
4. Critical accounting
estimates and judgements
The preparation of consolidated financial statements
in conformity with IFRS requires the Group to make
certain critical accounting estimates and judgements.
In the process of applying the Group's accounting
policies, management has decided the following
estimates and assumptions have a significant risk
of causing a material adjustment to the carrying
amounts of assets and liabilities within the financial
year;
i) Estimate of fair value
of investment properties
The best evidence of fair value is current prices
in an active market of investment properties with
similar leases and other contracts. In the absence
of such information, the Group determines the amount
within a range of reasonable fair value estimates.
In making its judgement, the Group considers information
from a variety of sources, including:
a) Current prices in an active market, and its
third party independent experts, for properties
of different nature, condition or location (or
subject to different lease or other contracts),
adjusted to reflect those differences.
b) Recent prices of similar properties in less
active markets, with adjustments to reflect any
changes in economic conditions since the date of
the transactions that occurred at those prices.
c) Discounted cash flow projections based on reliable
estimates of future cash flows, derived from the
terms of any existing lease and other contracts,
and (where possible) from external evidence such
as current market rents for similar properties
in the same location and condition, and using discount
rates that reflect current market assessments of
the uncertainty in the amount and timing of the
cash flows.
The Directors remain ultimately responsible for
ensuring that the valuers are adequately qualified,
competent and base their results on reasonable
and realistic assumptions. The Directors have appointed
JLL as the real estate valuation experts who determine
the fair value of investment properties using recognised
valuation techniques and the principles of IFRS
13. Further information on the valuation process
can be found in note 16.
ii) Judgment in relation to
the recognition of assets held
for sale
Management has assumed the likelihood of investment
properties - held for sale, being sold within 12
months, in accordance with the requirement of IFRS
5. Management considers that based on historical
and current experience that the properties can
be reasonably expected to sell within 12 months.
5. Segmental information
Information reported to the Board of Directors,
which is the chief operating decision maker, for
the purposes of resource allocation and assessment
of segment performance is focussed on the different
revenue streams that exist within the Group. The
Group's principal reportable segments under IFRS
8 are therefore as follows:
- Residential
- Commercial
All revenues are earned in Germany with property
and administrative expenses incurred in Jersey
and Germany.
31 December
2016
Residential Commercial Unallocated Total
EUR'000 EUR'000 EUR'000 EUR'000
Investment
property 332,496 63,333 - 395,829
Loans and
receivables - - 2,253 2,253
Investment properties
- held for sale 23,495 4,475 - 27,970
Other assets 22,447 4,276 40 26,763
Liabilities (179,711) (34,231) (3,614) (217,556)
Net assets 198,727 37,853 (1,321) 235,259
============== ================ ================== ====================
Residential Commercial Unallocated Total
EUR'000 EUR'000 EUR'000 EUR'000
Revenue 13,385 2,549 - 15,934
Property expenses (restated
- see note 2.2) (11,215) (2,136) - (7,001)
Administrative
expenses - - (2,977) (2,977)
Gain on disposal
of investment property 799 - - 799
Investment property
fair value gain 46,390 8,836 - 55,226
Performance
fee - - (6,350) (6,350)
Operating profit 49,359 9,249 (9,327) 55,631
-------------- ---------------- ------------------ --------------------
Net finance
charge (6,756)
Income tax
expense (10,913)
Profit for
the year 37,962
====================
31 December
2017
Residential Commercial Unallocated Total
EUR'000 EUR'000 EUR'000 EUR'000
Investment
properties 444,488 57,872 - 502,360
Loans and
receivables - - 2,323 2,323
Investment properties
- held for sale 94,582 12,315 - 106,897
Other assets 33,366 4,344 92 37,802
Liabilities (265,020) (7,843) (8,577) (281,440)
Net assets 307,416 66,688 (6,162) 367,942
============== ================ ================== ====================
Residential Commercial Unallocated Total
EUR'000 EUR'000 EUR'000 EUR'000
Revenue 15,997 2,083 - 18,080
Property
expenses (6,194) (806) - (7,000)
Administrative
expenses - - (2,967) (2,967)
Gain on disposal
of investment property 5,319 - - 5,319
Investment property
fair value gain 139,245 18,129 - 157,374
Performance
fee - - (26,339) (26,339)
Operating profit 154,367 19,406 (29,306) 144,467
-------------- ---------------- ------------------ --------------------
Net finance
charge (5,995)
Income tax
expense (26,150)
Profit for
the year 112,322
====================
6. Revenue
31 December 31 December
2017 2016
EUR'000 EUR'000
Rental income 18,080 15,934
================== ====================
The total future aggregated minimum rentals receivable
under non-cancellable operating leases are as follows:
31 December 31 December
2017 2016
EUR'000 EUR'000
Not later than
one year 904 309
Later than one year but
not later than five years 3,364 3,171
Later than
five years 1,398 2,605
5,666 6,085
================== ====================
Revenue comprises rental income earned from residential
and commercial property in Germany. There are no
individual tenants that account for greater than
10% of revenue during any of the reporting periods.
The leasing arrangements for residential property
are with individual tenants, with one month notice
for cancellation of the lease in most cases.
The commercial leases are non-cancellable,
with an average lease period of 3 years.
7. Property
expenses
31 December 31 December
2017 2016
EUR'000 EUR'000
Property management
expenses 1,079 1,100
Repairs and
maintenance 1,433 1,102
Impairment charge
- trade receivables 41 88
Other property
expenses 238 1,324
Property advisors'
fees and expenses 4,209 3,387
7,000 7,001
================== ====================
8. Administrative expenses
31 December 31 December
2017 2016
EUR'000 EUR'000
Secretarial & administration
fees 901 658
Legal &
professional
fees 1,045 1,494
Directors'
fees 148 150
Audit and
accountancy
fees 894 586
Bank charges 56 32
Loss on foreign
exchange 20 319
Depreciation 23 12
Other income (120) (274)
2,967 2,977
================== ====================
Key management compensation - the functions of
management are undertaken by external providers
of professional services, as set out in note 32.
Further details of the Directors' fees are
set out in the Directors' Remuneration Report
on page 38.
9. Auditor's remuneration
An analysis of the fees charged by
the auditor and its associates is
as follows:
31 December 31 December
2017 2016
EUR'000 EUR'000
Fees payable to the Group's auditor
and its associates for the audit of
the consolidated financial statements: 176 141
Fees payable to the Group's auditor
and its associates for other services:
- Corporate
finance 26 150
- Audit-related
assurance services 24 25
226 316
================== ====================
10. Gains on disposal of investment property
(including investment property held for
sale)
31 December 31 December
2017 2016
EUR'000 EUR'000
Net proceeds 61,652 4,250
Book value
of disposals (55,117) (3,405)
Disposal costs (1,216) (46)
5,319 799
================== ====================
Where there has been a partial disposal of a property,
the net book value of the asset sold is calculated
on a per square metre rate, based on the prior
period or interim valuation.
11. Investment property
fair value gain
31 December 31 December
2017 2016
EUR'000 EUR'000
Investment property
fair value gain 157,374 55,226
================== ====================
Further information on investment
properties is shown in note
16.
12. Net finance
charge
31 December 31 December
2017 2016
EUR'000 EUR'000
Interest income (116) (113)
Interest from
partners' loans (57) (55)
(Gain) / loss on
interest rate swap (1,535) 3,000
Interest payable
on bank borrowings 5,080 2,753
Finance arrangement
fee amortisation 550 217
Finance charge on
redemption liability 2,073 954
5,995 6,756
================== ====================
13. Income
tax expense
31 December 31 December
2017 2016
The tax charge for the
period is as follows: EUR'000 EUR'000
Current tax
charge 2,940 24
Adjustment in respect
of prior year - (1)
Deferred tax charge - origination
and reversal of temporary differences 23,210 10,890
26,150 10,913
================== ====================
The tax charge for the year can be reconciled to
the theoretical tax charge on the profit in the
income statement as follows:
31 December 31 December
2017 2016
EUR'000 EUR'000
Profit before tax on continuing
operations 138,472 48,875
Tax at German income tax
rate of 15.8% (2016: 15.8%) 21,879 7,722
Income not
taxable (840) (126)
Recognition of timing
differences on acquisition - 1,686
Tax effect of expenses that are not
deductible in determining taxable
profit 5,111 1,631
Total tax charge
for the year 26,150 10,913
================== ====================
Reconciliation of current
tax liabilities
31 December 31 December
2017 2016
EUR'000 EUR'000
Balance at 24 -
beginning of
year
Tax paid during (50) -
the year
Current tax
charge 2,940 24
Balance at
end of year 2,914 24
================== ====================
Reconciliation of
deferred tax
Capital Interest
gains rate
on properties swaps Total
EUR'000 EUR'000 EUR'000
(Liabilities) Asset (Net liabilities)
Balance at
1 January 2016 (10,786) 296 (10,490)
Charged to the statement
of comprehensive income (11,364) 474 (10,890)
Deferred tax (liability)
/ asset at 31 December
2016 (22,150) 770 (21,380)
Charged to the statement
of comprehensive income (22,967) (243) (23,210)
Deferred tax (liability)
/ asset at 31 December
2017 (45,117) 527 (44,590)
================ ================== ====================
Jersey income
tax
The Group is liable to
Jersey income tax at 0%.
Guernsey income
tax
The Group is liable to
Guernsey income tax at
0%.
German tax
As a result of the Group's operations in Germany,
the Group is subject to German Corporate Income
Tax ('CIT') - the effective rate for Phoenix Spree
Deutschland Limited for 2017 was 15.8% (2016: 15.8%).
Factors affecting
future tax charges
The Group has accumulated tax losses of approximately
EUR18.1 million (2016: EUR23.6 million) in Germany,
which will be available to set against suitable
future profits should they arise, subject to the
criteria for relief. No deferred tax asset is recognised
in respect of losses of EUR0.3 million (2016: EUR2.2
million) as there is insufficient certainty the
losses can be utilised by Group entities.
14. Dividends
31 December 31 December
2017 2016
EUR'000 EUR'000
Amounts recognised as distributions
to equity holders in the period:
Interim dividend for the year ended
31 December 2017 of EUR1.9 cents (1.6p)
(2016: EUR1.9 cents (1.6p)) per share 2,079 1,635
Proposed final dividend for the year
ended 31 December 2017 of EUR5.0 cents
(4.4p) (2016: EUR4.3 cents (3.7p))
per share 5,038 3,977
================== ====================
The proposed final dividend is subject to approval
by shareholders at the Annual General Meeting and
has not been included as a liability in these consolidated
financial statements. The proposed dividend is
payable to all shareholders on the Register of
Members on 8 June 2018. The total estimated dividend
to be paid is 4.4p per share. The payment of this
dividend will not have any tax consequences for
the Group.
15. Subsidiaries
The Group consists of a Parent Company, Phoenix
Spree Deutschland Limited, incorporated in Jersey,
Channel Islands and a number of subsidiaries held
directly by Phoenix Spree Deutschland Limited,
which are incorporated in and operated out of Jersey,
Guernsey and Germany.
Further details
are given below:
Country % holding
of
incorporation Nature of business
Phoenix Spree Deutschland Jersey 100 Investment
I Limited property
Phoenix Spree Deutschland Jersey 100 Investment
II Limited property
Phoenix Spree Deutschland Jersey 100 Investment
III Limited property
Phoenix Spree Deutschland Jersey 100 Investment
IV Limited property
Phoenix Spree Deutschland Jersey 100 Investment
V Limited property
Phoenix Spree Deutschland Jersey 100 Investment
VII Limited property
Phoenix Spree Deutschland Jersey 100 Investment
IX Limited property
Phoenix Spree Deutschland Jersey 100 Finance vehicle
X Limited
Phoenix Spree Deutschland Jersey 100 Investment
XI Limited property
Phoenix Spree Deutschland Jersey 100 Investment
XII Limited property
Phoenix Property Germany 100 Holding Company
Holding GmbH & Co.KG
Laxpan Mueller Germany 94.9 Investment
GmbH property
Invador Germany 94.9 Investment
Grundbesitz property
GmbH
PSPF Holdings Germany 100 Holding Company
GmbH
PSPF General Manager GmbH Germany 100 Management
(in liquidation) of PSPF
PSPF Acquisition Vehicle Germany 99.64 Acquisition
GmbH (in liquidation) vehicle
PSPF Property GmbH & Co. Germany 94 Investment
KG (in liquidation) property
Phoenix Spree Property Germany 94.8 Investment
Fund Ltd & Co. KG property
PSPF General Partner Guernsey 100 Management
(Guernsey) Limited of PSPF
The investments in PSPF General Manager GmbH and
PSPF Acquisition Vehicle GmbH & Co. KG are all
held via the investment is PSPF Holdings GmbH,
which was acquired on 7 September 2007. The other
subsidiaries are held directly.
16. Investment properties
2017 2016
Fair Value EUR'000 EUR'000
At 1 January 423,799 283,554
Capital
expenditure 6,715 4,189
Property
additions 76,486 84,235
Disposals (55,117) (3,405)
Fair value
gain 157,374 55,226
------------------ --------------------
Investment properties at fair value
- as set out in the report by JLL 609,257 423,799
Assets considered as "Held
for Sale" (Note 17) (106,897) (27,970)
At 31 December 502,360 395,829
================== ====================
The property portfolio was valued at 31 December
2017 by the Group's independent valuers, Jones
Lang LaSalle GmbH ('JLL'), in accordance with the
methodology described below. The valuations were
performed in accordance with the current Appraisal
and Valuation Standards, 8th edition (the 'Red
Book') published by the Royal Institution of Chartered
Surveyors (RICS).
The valuation is performed on a building-by-building
basis and the source information on the properties
including current rent levels, void rates and non-recoverable
costs was provided to JLL by the Property Advisors
PMM Partners (UK) Limited. Assumptions with respect
to rental growth, adjustments to non-recoverable
costs and the future valuation of these are those
of JLL. Such estimates are inherently subjective
and actual values can only be determined in a sales
transaction.
Having reviewed the JLL report, the Directors are
of the opinion that this represents a fair and
reasonable valuation of the properties and have
consequently adopted this valuation in the preparation
of the consolidated financial statements.
The valuations have been prepared by JLL on a consistent
basis at each reporting date and the methodology
is consistent and in accordance with IFRS which
requires that the 'highest and best use' value
is taken into account where that use is physically
possible, legally permissible and financially feasible
for the property concerned, and irrespective of
the current or intended use.
All properties are valued as Level 3 measurements
under the fair value hierarchy (see note 31) as
the inputs to the discounted cash flow methodology
which have a significant effect on the recorded
fair value are not observable.
The unrealised fair value gain in respect of investment
property is disclosed in the Consolidated Statement
of Comprehensive Income as 'Investment property
fair value gain'.
Valuations are undertaken using the discounted
cash flow valuation technique as described below
and with the inputs set out below.
Discounted cash flow methodology
(DCF)
The fair value of investment properties
is determined using discounted cash
flows.
Under the DCF method, a property's fair value is
estimated using explicit assumptions regarding
the benefits and liabilities of ownership over
the asset's life including an exit or terminal
value. As an accepted method within the income
approach to valuation the DCF method involves the
projection of a series of cash flows on a real
property interest. To this projected cash flow
series, an appropriate, market-derived discount
rate is applied to establish the present value
of the income stream associated with the real property.
The duration of the cash flow and the specific
timing of inflows and outflows are determined by
events such as rent reviews, lease renewal and
related lease up periods, re-letting, redevelopment,
or refurbishment. The appropriate duration is typically
driven by market behaviour that is a characteristic
of the class of real property.
Periodic cash flow is typically estimated as gross
income less vacancy, non-recoverable expenses,
collection losses, lease incentives, maintenance
cost, agent and commission costs and other operating
and management expenses. The series of periodic
net operating incomes, along with an estimate of
the terminal value anticipated at the end of the
projection period, is then discounted.
The principal inputs to Year Year
the valuation are as follows: ended ended
31 December 31 December
2017 2016
Range Range
Residential
Properties
Market Rent
Rental Value
(EUR per sq. 5 -
p.m.) 13 5- 13
Stabilised residency vacancy
(% per year) 2 2
Tenancy vacancy fluctuation 8 -
(% per year) 10 10
------------------------------------------------ -------------- ---------------- --------------------
Commercial
Properties
Market Rent
Rental Value (EUR per 2 - 1 -
sq. p.m.) 28 29
Stabilised commercial 0 - 0 -
vacancy (% per year) 26 4
Tenancy vacancy fluctuation
(% per year) 10 10
------------------------------------------------ -------------- ---------------- ------------------ --------------------
Estimated Rental
Value (ERV)
ERV per year 48 - 25 -
(EUR'000) 1,200 1,014
ERV (EUR per 5 - 5 -
sq.) 14 13
------------------ --------------------
Financial Rates
Discount rate 3 - 4 -
(%) 9 8
Portfolio yield 2 - 3 -
(%) 8 8
------------------ --------------------
Sensitivity
Changes in the key assumptions and inputs to the
valuation models used would impact the valuations
as follows:
Vacancy: A change in vacancy by 1% would not materially
affect the investment property fair value assessment.
Rental value: All other factors remaining equal
an increase in rental income would increase valuations.
Correspondingly, a decrease in rental values would
decrease valuations.
Discount rate: An increase of 0.5% in the discount
rate would reduce the investment property fair
value by EUR85.9m, and a decrease in the discount
rate would increase the investment property fair
value by EUR129.9m.
There are, however, inter-relationships between
unobservable inputs as they are determined by market
conditions. The existence of an increase of more
than one unobservable input could amplify the impact
on the valuation. Conversely, changes on unobservable
inputs moving in opposite directions could cancel
each other out, or lessen the overall effect.
The Group categorises all investment
properties in the following three
ways;
Rental Scenario
Where properties have been valued under the "Discounted
Cashflow Methodology" and are intended to be held
by the Group for the foreseeable future, they are
considered valued under the "Rental Scenario" This
will equal the "Investment Properties" line in
the Non-Current Assets section of the Consolidated
Statement of Financial Position.
Condominium
scenario
Where properties have the potential or the benefit
of all relevant permissions required to sell apartments
individually (condominiums) then we refer to this
as a 'condominium scenario'. These assets are considered
held for sale under IFRS 5 and can be seen in note
17. The additional value is reflected by using
a lower discount rate under the DCF Methodology.
Properties which do not have the benefit of all
relevant permissions are described as valued using
a standard 'rental scenario'.
Disposal
Scenario
Where properties have been notarised for sale prior
to the balance sheet date, but have not completed;
they are held at their notarised disposals value.
These assets are considered held for sale under
IFRS 5 and can be seen in note 17.
The table below sets out the
assets valued using these 3 scenarios:
31 December 31 December
2017 2016
EUR'000 EUR'000
Rental scenario 502,360 388,509
Condominium
scenario 29,847 35,290
Disposal 77,050 -
scenario
Total 609,257 423,799
================== ====================
The 2016 condominium scenario does not equal the
2016 assets held for sale due to an asset being
valued under a condominium scenario methodology
but did not meet the requirement of IFRS 5 to be
treated as an asset held for sale.
The movement in the fair value of investment properties
is included in the Consolidated Statement of Comprehensive
Income as 'gain on disposal of investment property'
and comprises:
31 December 31 December
2017 2016
EUR'000 EUR'000
Investment
properties 155,787 55,226
Properties held 1,587 -
for sale (see note
17)
157,374 55,226
================== ====================
17. Investment properties
- held for sale
2017 2016
EUR'000 EUR'000
Fair value - held for
sale investment properties
At 1 January 27,970 -
Transferred from
investment properties 88,990 27,970
Apartments (11,650) -
sold
Valuation gain on apartments 1,587 -
held for sale
At 31 December 106,897 27,970
================== ====================
Investment properties are re-classified as current
assets and described as 'held for sale' in three
different situations: Properties notarised for
sale at the reporting date, Properties where at
the reporting date the group has obtained and implemented
all relevant permissions required to sell individual
apartment units, and efforts are being made to
dispose of the assets (condominium); and Properties
which are being marketed for sale but have currently
not been notarised.
Properties notarised for sale by the reporting
date are valued at their disposal price (disposal
scenario), and other properties are valued using
the condominium or rental scenarios (see note 16)
as appropriate. The table below sets out the respective
categories:
2017 2016
EUR'000 EUR'000
Condominium 29,847 -
scenario
Disposal 77,050 -
scenario
106,897 27,970
================== ====================
Investment properties held for sale are all expected
to be sold within 12 months of the reporting date
based on Management knowledge of current and historic
market conditions.
There were liabilities secured on the investment
properties held for sale of EUR56.9m (2016: EUR11.7m)
18. Property, plant
and equipment
Equipment
EUR'000
Cost or
valuation
As at 1 January
2016 36
Additions 22
--------------------
As at 31
December
2016 58
Additions 75
As at 31
December
2017 133
====================
Accumulated depreciation
and impairment
As at 1 January
2016 6
Charge for
the year 12
--------------------
As at 31
December
2016 18
Charge for
the year 23
As at 31
December
2017 41
====================
Carrying amount
As at 31
December
2016 40
As at 31
December
2017 92
--------------------
19. Loans and receivables
31 December 31 December
2017 2016
EUR'000 EUR'000
At 1 January 2,253 1,382
Loans issued to minority interest
- initial recognition at fair
value - 806
Accrued interest 70 65
------------------
At 31 December 2,323 2,253
================== ====================
The Group entered into loan agreements with Mike
Hilton and Paul Ruddle in connection with the acquisition
of PSPF. The loans bear interest at 4% per annum,
and have a maturity of less than five years.
The Group also entered into a loan agreement with
the minority interest of Accentero Real Estate
AG (formerly Blitz B16 - 210 GmbH) in relation
to the acquisition of the assets as share deals.
This loan bears interest at 3% per annum.
20. Trade and other
receivables
31 December 31 December
2017 2016
EUR'000 EUR'000
Current
Trade
receivables 691 1,344
Less: impairment
provision (342) (383)
------------------ --------------------
Net receivables 369 961
Prepayments and
accrued income 6,521 6,050
Investment property disposal
proceeds receivable 2,232 21
Sundry
receivables 899 471
10,001 7,503
================== ====================
Aging analysis of
trade receivables
31 December 31 December
2017 2016
EUR'000 EUR'000
Up to 12 months 2,576 902
Between 1 year
and 2 years 5 40
Over 3 years - 19
2,581 961
================== ====================
Movements in the impairment provision
against trade receivables are as follows:
31 December 31 December
2017 2016
EUR'000 EUR'000
Balance at the beginning
of the year 383 295
Impairment losses
recognised 180 319
Amounts written
off as uncollectable (221) (231)
------------------ --------------------
Balance at the end
of the year 342 383
================== ====================
21. Cash and cash
equivalents
31 December 31 December
2017 2016
EUR'000 EUR'000
Cash at bank 25,518 17,107
Cash at agents 1,664 1,343
Cash and cash
equivalents 27,182 18,450
================== ====================
22. Borrowings
31 December 31 December
2017 2016
EUR'000 EUR'000
Current
liabilities
Bank loans - Kreissparkasse
Boblingen District Savings Bank - 2,869
Bank loans - Deutsche Genossenschafts-Hypothekenbank 2,020 -
AG
Bank loans - Berliner 626 -
Sparkasse
Bank loans - Sparkasse
Langenfeld - 6,300
--------------------
2,646 9,169
Non-current
liabilities
Bank loans - Deutsche Genossenschafts-Hypothekenbank
AG 167,656 171,418
Bank loans - Berliner 51,992 -
Sparkasse
Bank loans - HypoVereinsbank - 5,005
--------------------
219,648 176,423
222,294 185,592
================== ====================
All borrowings are secured against the investment
properties of the Group. As at 31 December 2017,
the Company had EUR0.6m of undrawn debt facilities
(2016: EUR13.6 million was available to be drawn
down, from three separate loan facilities. EUR2.0
million from a EUR81.5 million facility with interest
rate 1.4%, EUR1 million from a EUR9.3 million facility
with interest rate 1.34%, and EUR10.6 million undrawn,
from a EUR10.6 million facility with interest rate
1.75%).
23. Trade and other
payables
31 December 31 December
2017 2016
EUR'000 EUR'000
Trade payables 1,489 791
Accrued
liabilities 622 533
Deferred income 8 7
2,119 1,331
================== ====================
24. Derivative financial
instruments
31 December 31 December
2017 2016
EUR'000 EUR'000
Interest rate swaps - carried
at fair value through profit
or loss
Balance at
1 January 4,869 1,869
Additions on
acquisition - 392
(Gain) / loss in movement in
fair value through profit or
loss. (1,536) 2,608
Balance at
31 December 3,333 4,869
================== ====================
The notional principal amounts of the outstanding
interest rate swap contracts at 31 December 2017
were EUR188,165,000 (2016: EUR175,932,000). At
31 December 2017 the fixed interest rates vary
from 0.402% to 0.775% (2016: 0.040% to 0.705%)
above the main factoring Euribor rate.
Maturity analysis of interest
rate swaps
31 December 31 December
2017 2016
EUR'000 EUR'000
Less than 1
year - 392
Between 1 and - -
2 years
Between 2 and - -
5 years
More than 5
years 3,333 4,477
3,333 4,869
================== ====================
25. Other financial liabilities
31 December 31 December
2017 2016
EUR'000 EUR'000
Balance at 3,590 -
1 January
Recognition of redemption
liability - 2,626
Profit share attributable
to NCI in PSPF 2,073 964
Balance at
31 December 5,663 3,590
================== ====================
The redemption liability relates to the put option
held by the minority shareholders of PSPF for the
purchase of the minority interest in PSPF. The
option period starts on 6 June 2020. The amount
of the purchase price will be based on the EPRA
NAV on the balance sheet date as well as the movement
in the EPRA NAV during the year and the proportion
of EPRA NAV attributable to the non-controlling
interest in PSPF.
A portion of the liability (EUR795k, 2016: (EUR378k))
is recognised to cover the tax charge of the minority
in PSPF on the proceeds received if they choose
to exercise their put option.
The recognition of the redemption liability has
been accounted for as a reduction in the Non-Controlling
Interest with the remainder of the recognition
against the Group's retained earnings. Also see
the Consolidated Statement of Changes in Equity
for the recognition accounting.
26. Share based
payment reserve
Performance
fee
EUR'000
Balance at
1 January 2016 1,264
Fee charge
for the period 6,350
--------------------
Balance at 31 December
2016 7,614
Fee charge
for the period 26,339
Balance at 31 December
2017 33,953
====================
Property Advisor
Fees
The Property Advisor is entitled to an asset and
estate management performance fee, measured over
consecutive three year periods, equal to 20% of
the excess by which the annual EPRA NAV total return
of the Group exceeds 8% per annum, compounding
(the 'Performance Fee'). The Performance Fee is
subject to a high watermark, being the higher of:
(i) the most recently published
EPRA NAV on 4 March 2015; and
(ii) the highest previously recorded EPRA
NAV total return at the end of a performance
period
The Company's EPRA NAV performance for the three
year's ending 31 December 2017 has resulted in
a performance fee liability under the Property
Advisory Agreement to the Property Advisor of circa
EUR34 million. The parties have agreed that this
performance fee (but not any further performance
fees that may become due) shall be settled through
the issuance by the Company to the Property Advisor
of 8,260,065 new shares in the Company at EPRA
NAV per share. 50% of the shares issued in settlement
of this fee are subject to a 12-month restriction
on disposal. Application will be made for the new
shares, once issued, to be admitted to trading
on the premium segment of the Official List and
to trading on the Main Market of the London Stock
Exchange.
Under the Property Advisory Agreement for providing
property advisory services, the Property Advisor
is also entitled to a Portfolio and Asset Management
Fee as follows:
(i) 1.50% of the EPRA NAV of the Group where the
EPRA NAV of the Group is equal to or less than
EUR250 million; and
(ii) 1.25% of the EPRA NAV of the Group
between EUR250 million and EUR500 million;
and
(iii) 1% of the EPRA NAV of
the Group greater than EUR500
million.
The Property Advisor is entitled to a capex monitoring
fee equal to 7% of any capital expenditure incurred
by any Subsidiary which the Property Advisor is
responsible for managing (the 'Capex Monitoring
Fee').
The Property Advisor is entitled
to receive a finance fee equal
to:
(i) 0.1% of the value of any borrowing arrangement
which the Property Advisor has negotiated and/or
supervised; and
(ii) a fixed fee of GBP1,000 in respect of any
borrowing arrangement which the Property Advisor
has renegotiated or varied.
The Property Advisor is entitled to receive a transaction
fee fixed at GBP1,000 in respect of any acquisition
or disposal of property by any Subsidiary.
Details of the fees paid to the
Property Advisor are set out
in note 32.
27. Stated
capital
31 December 31 December
2017 2016
EUR'000 EUR'000
Issued and
fully paid:
40,522,364 participating shares of
no par value, issued at a consideration
of GBP1 each 60,027 60,027
5,896,369 participating shares of no
par value, issued at a consideration
of GBP1.11 each 7,681 7,681
19,237,484 participating shares of
no par value, issued at a consideration
of GBP1.46 each 39,052 39,052
4,216,080 participating shares of no
par value, issued at a consideration
of GBP1.44 each 8,390 8,390
22,619,047 participating shares of
no par value, issued at a consideration
of GBP1.68 each on 4 March 2016, less
costs of EUR1.6 million associated
with placing. 47,480 47,480
162,630 162,630
================== ====================
The number of shares in issue at 31 December 2017
was 92,491,344 (31 December 2016: 92,491,344).
28. Non-controlling
interests
Non-controlling
interest 31 December 31 December
% 2017 2016
EUR'000 EUR'000
Invador
Grundbesitz
GmbH 5.1 915 467
Laxpan Mueller
GmbH 5.1 810 474
1,725 941
================== ====================
The non-controlling interest relates to the subsidiaries
Invador Grundbesitz GmbH and Laxpan Mueller GmbH.
29. Earnings
per share
31 December 31 December
2017 2016
Earnings for the purposes of basic
earnings per share being net profit
attributable to owners of the parent
(EUR'000) 111,538 36,998
Weighted average number of ordinary
shares for the purposes of basic earnings
per share (Number) 92,491,344 88,587,235
Effect of dilutive potential
ordinary shares (Number) 7,677,250 2,829,885
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share (Number) 100,168,594 91,417,120
================== ====================
Earnings per
share (EUR) 1.21 0.42
Diluted earnings
per share (EUR) 1.11 0.40
================== ====================
30. Net asset value per share
and EPRA net asset value
31 December 31 December
2017 2016
Net assets
(EUR'000) 366,217 234,318
Number of participating
ordinary shares 92,491,344 92,491,344
Net asset value
per share (EUR) 3.96 2.53
================== ====================
EPRA net asset
value
31 December 31 December
2017 2016
Net assets
(EUR'000) 366,217 234,318
Add back deferred tax assets and liabilities,
derivative financial instruments, goodwill
and share based payment reserves (EUR'000) 13,970 18,635
EPRA net asset value
(EUR'000) 380,187 252,953
EPRA net asset value
per share (EUR) 4.11 2.73
31. Financial
instruments
The Group is exposed to the risks that arise from
its use of financial instruments. This note describes
the objectives, policies and processes of the Group
for managing those risks and the methods used to
measure them. Further quantitative information
in respect of these risks is presented throughout
the financial statements.
Principal financial
instruments
The principal financial instruments used by the
Group, from which financial instrument risk arises,
are as follows:
-- Financial
assets
-- Cash and cash
equivalents
-- Trade and other
receivables
-- Trade and
other payables
-- Borrowings
-- Derivative financial
instruments
The Group held the following financial
assets at each reporting date:
31 December 31 December
2017 2016
EUR'000 EUR'000
Loans and
receivables
Trade and other
receivables - current 3,480 1,453
Cash and cash
equivalents 27,182 18,450
Loans and
receivables 2,323 2,253
32,985 22,156
------------------ --------------------
The Group held the following financial
liabilities at each reporting date:
31 December 31 December
2017 2016
EUR'000 EUR'000
Held at
amortised
cost
Borrowings payable:
current 2,646 9,169
Borrowings payable:
non-current 219,648 176,423
Other financial
liabilities 5,663 3,590
Trade and other
payables 2,119 1,331
230,076 190,513
------------------ --------------------
Fair value through
profit or loss
Derivative financial liability
- interest rate swaps 3,333 4,869
3,333 4,869
------------------ --------------------
233,409 195,382
================== ====================
Fair value of financial
instruments
With the exception of the variable rate borrowings,
the fair values of the financial assets and liabilities
are not materially different to their carrying
values due to the short term nature of the current
assets and liabilities or due to the commercial
variable rates applied to the long term liabilities.
The interest rate swap was valued externally by
the respective counterparty banks by comparison
with the market price for the relevant date.
The interest rate swaps are expected to
mature between January 2022 and February
2027.
The Group uses the following hierarchy for determining
and disclosing the fair value of financial instruments
by valuation technique:
Level 1: quoted (unadjusted) prices in active
markets for identical assets or liabilities;
Level 2: other techniques for which all inputs
which have a significant effect on the recorded
fair value are observable, either directly or indirectly;
and
Level 3: techniques which use inputs which have
a significant effect on the recorded fair value
that are not based on observable market data.
During each of the reporting periods, there
were no transfers between valuation levels.
Group Fair
Values
31 December 31 December
2017 2016
EUR'000 EUR'000
Financial
liabilities
Interest rate swaps
- Level 2 (3,333) (4,869)
------------------ --------------------
The valuation basis for the investment
properties is disclosed in note 16.
Financial risk management
The Group is exposed through its operations
to the following financial risks:
-- Interest
rate risk
-- Foreign
exchange risk
-- Credit risk
-- Liquidity
risk
The Group's policies for financial
risk management are outlined below.
Interest rate
risk
The Group's interest rate risk arises from certain
of its borrowings. Borrowings issued at variable
rates expose the Group to cash flow interest rate
risk. Borrowings issued at fixed rates expose the
Group to fair value interest rate risk. The Group
is also exposed to interest rate risk on cash and
cash equivalents.
Under interest rate swap contracts, the Group agrees
to exchange the difference between fixed and floating
rate interest amounts calculated on agreed notional
principal amounts. Such contracts enable the Group
to mitigate the risk of changing interest rates
on the cash flow exposures on the issued variable
rate debt held.
Sensitivity analysis has not been performed as
all variable rate borrowings have been swapped
to fixed interest rates, and potential movements
on cash at bank balances are immaterial.
The Group gives careful consideration to interest
rates when considering its borrowing requirements
and where to hold its excess cash. The Directors
believe that the interest rate risk is at an acceptable
level.
Foreign exchange
risk
The Group is exposed to foreign exchange risk on
sales, purchases, and translation of assets and
liabilities that are in a currency other than the
functional currency (Euros).
The Group does not enter into any currency hedging
transactions and the Directors believe that the
foreign exchange rate risk is at an acceptable
level.
The carrying amount of the Group's foreign currency
(non Euro) denominated monetary assets and liabilities
are shown below, all the amounts are for Sterling
balance only:
31 December 31 December
2017 2016
EUR'000 EUR'000
Financial assets
Cash and cash
equivalents 598 553
Financial
liabilities
Trade and other
payables (216) (204)
Net position 382 349
================== ====================
At each reporting date, if the Euro had strengthened
or weakened by 10% against GBP with all other variables
held constant, post-tax loss for the year would
have increased/(decreased) by:
Weakened by Strengthened
10% Increase/(decrease) by 10% Increase/(decrease)
in post-tax in post-tax
loss and impact loss and impact
on equity on equity
EUR'000 EUR'000
31 December
2017 38 (38)
31 December
2016 35 (35)
Credit risk
management
Credit risk refers to the risk that the counterparty
will default on its contractual obligations resulting
in financial loss to the Group. Credit risk arises
principally from the Group's trade and other receivables
and its cash balances. The Group gives careful
consideration to which organisations it uses for
its banking services in order to minimise credit
risk. The Group has an established credit policy
under which each new tenant is analysed for creditworthiness
and each tenant is required to pay a two month
deposit.
At each reporting date the Group had no tenants
with outstanding balances over 10% of the total
trade receivables balance.
The Group uses the following banks: Barclays Private
Clients International Jersey Ltd, Barclays Bank
Plc Frankfurt and Deutsche Bank. The split of cash
held at each of the banks respectively at 31 December
2017 was 61%/30%/9% (31 December 2016: 19%/63%/16%)
Barclays and Deutsche Bank have credit ratings
of A and A- respectively.
The Group holds no collateral as security against
any financial asset. The carrying amount of financial
assets recorded in the financial information, net
of any allowances for losses, represents the Group's
maximum exposure to credit risk.
Details of receivables from tenants in arrears
at each reporting date can be found in note 20
as can details of the receivables that were impaired
during each period.
An allowance for impairment is made where there
is an identified loss event which, based on previous
experience, is evidence of a reduction in the recoverability
of the cash flows. Management considers the above
measures to be sufficient to control the credit
risk exposure.
The credit risk on liquid funds and derivative
financial instruments is limited because the counterparties
are banks with high credit-ratings assigned by
international credit-rating agencies.
The carrying amount of financial assets recorded
in the financial statements, which is net of impairment
losses, represents the Group's maximum exposure
to credit risk as no collateral or other credit
enhancements are held.
Liquidity risk management
Liquidity risk is the risk that the Group will
not be able to meet its financial obligations as
they fall due. The Group's approach to managing
liquidity risk is to ensure that it will always
have sufficient liquidity to meet its liabilities
when due, under both normal and stressed conditions,
without incurring unacceptable losses or damage
to the Group's reputation.
The Directors manage liquidity risk by regularly
reviewing cash requirements by reference to short
term cash flow forecasts and medium term working
capital projections prepared by management.
The Group maintains good relationships with
its banks, which have high credit ratings.
The following table details the Group's remaining
contractual maturity for its non-derivative financial
liabilities with agreed maturity periods. The table
has been drawn based on the undiscounted cash flows
of the financial liabilities based on the earliest
date on which the Group can be required to pay.
The tables include both interest payable and principal
cash flows.
Maturity analysis for
financial liabilities
Less Between Between More Total
than 1 - 2 2 - 5 than
1 year years years 5 years
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
At 31 December
2017
Borrowings payable:
current 2,646 - - - 2,646
Borrowings payable:
non-current - - - 219,648 219,648
Other financial
liabilities - - 5,663 - 5,663
Trade and other
payables 2,119 - - - 2,119
4,765 - 5,663 219,648 230,076
----------------- -------------- ---------------- ------------------ --------------------
Less Between Between More Total
than 1 - 2 2 - 5 than
1 year years years 5 years
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
At 31 December
2016
Borrowings payable:
current 9,169 - - - 9,169
Borrowings payable:
non-current - - - 176,423 176,423
Other financial
liabilities - - 3,590 - 3,590
Trade and other
payables 1,331 - - - 1,331
10,500 - 3,590 176,423 190,513
----------------- -------------- ---------------- ------------------ --------------------
The analysis of the market risk review and
sensitivity analysis is detailed in note
16.
32. Related party
transactions
Related party transactions not
disclosed elsewhere are as follows:
R Prosser is a director of Estera Fund Administrators
(Jersey) Limited and Estera Trust (Guernsey) Limited,
both of which provide administration services to
the Group.
A Weaver is a partner of the Jersey law firm, Appleby
which provides legal services to the Group and
a member of Appleby group.
During the year ended 31 December 2017, an amount
of EUR690,165 (2016: EUR657,751) was payable to
Estera Fund Administrators (Jersey) Limited and
Estera Trust (Guernsey) Limited for accounting,
administration and secretarial services. At 31
December 2017, EUR215,625 (2016: EUR187,515 Estera
Fund Administrators (Jersey) Limited only) was
outstanding.
During the year ended 31 December 2017, an amount
of EUR40,044 (2016: EUR60,337) was payable to Appleby,
law firm for legal and professional services. At
31 December 2017 EURnil (2016: EUR9,495) was outstanding.
M Northover was a Director during 2017 and shareholder
of PMM Partners (UK) Limited, the Group's appointed
Property Advisor. During the year ended 31 December
2017, an amount of EUR4,209,000 (EUR4,110,000 Management
Fees and EUR99,000 Other expenses and fees) (2016:
EUR3,387,000 (EUR3,331,000 Management fees and
EUR56,000 Other expenses and fees)) was payable
to PMM Partners (UK) Limited. At 31 December 2017
EURnil (2016: EURNil) was outstanding.
The Property Advisor is also entitled to an asset
and estate management performance fee. The charge
for the period in respect of the performance fee
was EUR26,339,000 (2016: EUR6,350,000). Please
refer to note 26 for more details.
The Property Advisor has a controlling stake in
IWA Real Estate Gmbh & Co. KG who are contracted
to dispose of condominuims in Berlin on behalf
of the Company . IWA does not receive a fee from
the Company in providing this service.
In March 2015 the Group also entered into an option
agreement to acquire the remaining 5.2% interest
in Phoenix Spree Property Fund GmbH & Co.KG from
the remaining partners being M Hilton and P Ruddle
both Directors of PMM Partners (UK) Limited. The
options are to be exercised on the fifth anniversary
of the majority interest acquisition for a period
of three months thereafter at the fair value of
the remaining interest.
The Group entered into an unsecured loan agreement
with M Hilton and P Ruddle in connection with the
acquisition of PSPF. At the period end an amount
of EUR747,120 (2016: EUR704,500) each was owed
to the Group. The loans bear interest of 4% per
annum.
Dividends paid to Quentin Spicer in his capacity
as a shareholder amounted to EUR1,527.
33. Events after
the reporting date
In January 2018, the Company exchanged contracts
for the acquisition of one individual property
and a portfolio of four properties in Berlin with
an aggregate consideration of EUR17.7 million.
The Company also exchanged contracts to acquire
two individual properties, one in February and
the other in April, with an aggregate consideration
of EUR7.1 million. These properties are still awaiting
completion.
The Company had exchanged contracts for the acquisition
of two properties in Berlin with an aggregate purchase
price of EUR7.5 million prior to the balance sheet
date, which as at the balance sheet date had not
yet completed. Both properties completed in Q1
2018.
The Company exchanged contracts for the sale of
9 condominiums in Berlin with an aggregate consideration
of EUR3.5 million. Three of these condominium sales
have subsequently completed at a value of EUR1.1
million. The remainder are expected to complete
in Q2 2018.
The Company had exchanged contracts for the sale
of five condominiums in Berlin with an aggregate
sales price of EUR1.8 million prior to the balance
sheet date, which as at the balance sheet date
had not yet completed. These condominium sales
have subsequently completed.
In March 2018, The Company refinanced the debt
held against a portfolio of buildings in Berlin.
The new facility released equity of EUR7.8 million
which was drawn in March 2018.
The company has signed for a EUR12 million loan
secured against seven properties notarised for
acquisition in Q4 2017 and Q1 2018.
The Company and the Property Advisor agreed to
settle the Performance fee through the issuance
of 8,260,065 new shares in the Company at EPRA
NAV. The settlement is expected to take place in
May 2018.
Professional
Advisors
Property Advisor PMM Partners (UK)
Limited
54-56 Jermyn
Street
London SW1Y
6LX
Administrator Estera Fund Administrators
(Jersey) Limited
Company Estera Secretaries
Secretary (Jersey) Limited
and Registered 13-14 Esplanade
Office
St.
Helier
Jersey JE1
1EE
Registrar Link Asset Services
(Jersey) Limited
12 Castle
Street
St.
Helier
Jersey JE2
3RT
Principal Banker Barclays Private Clients
International Limited
13 Library
Place
St.
Helier
Jersey JE4
8NE
English Legal Stephenson
Advisor Harwood LLP
1 Finsbury
Circus
London EC2M
7SH
Jersey Legal Appleby
Advisor
13-14 Esplanade
St.
Helier
Jersey JE1
1BD
German Legal Mittelstein
Advisor Rechtsanwälte
as to property Alsterarkaden
law 20
Hamburg 20354
Germany
German Legal Taylor Wessing Partnerschaftsgesellschaft
Advisor as mbB
to German Thurn-und-Taxis-Platz
partnership 6
law
60313 Frankfurt
a.M.
Germany
Sponsor and Liberum Capital
Broker Limited
Ropemaker
Place
25 Ropemaker
Street
London EC2Y
9LY
Independent Property Jones Lang
Valuer LaSalle
Rahel-Hirsch-Strasse
10
10557
Berlin
Germany
Auditor RSM UK Audit
LLP
25 Farringdon
Street
London EC4A
4AB
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SEEFAMFASELL
(END) Dow Jones Newswires
April 27, 2018 02:00 ET (06:00 GMT)
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