Half Yearly Report

RNS Number : 6425D

Sirius Real Estate Limited

07 December 2009

 



Sirius Real Estate Limited

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

Half-Yearly Results for the six months ended 30 September 2009

Results Highlights

• Adjusted NAV per share 78.6c1 (31 March 2009: 83.5c)  

• Property assets were revalued at €500 million (flat vs. 31 March 2009)  

• Adjusted profit before tax attributable to equity holders of €1.0 million2

• Adjusted EPS of 0.63c2 per share (30 September 2009)

• Gross LTV across the portfolio at 63% (30 September 2009), following a full drawdown of the new BerlinHyp facility

Operational Highlights

• Returns from investment into the portfolio being evidenced by increased rental values

• • New lettings in period of 45,283 sqm compared to 55,900 sqm for the full year ended 31 March 2009

  • Average new lease rate achieved of €5.20 per sqm up from €4.50 per sqm in the previous year

• Positive market data from German SME sector

• Introduced new Smartspace scheme to take advantage of demand for highly flexible short lets 

• Approval on debt restructuring post period end, ensuring good financial flexibility 

1 Excluding related deferred tax and change in fair value on derivative financial instruments.

2 Excluding property revaluation, related deferred tax and non-controlling interest and change in fair value on derivative financial instruments.

Dick Kingston, Chairman of Sirius Real Estate, said: 

"During the first six months of the financial year, we continued to focus on developing the portfolio, the benefits of which are demonstrated by our continued ability to drive rental growth above market rates. A number of move outs in our largest site created an opportunity to increase rental returns and helped us achieve a highly encouraging level of new lettings during the period, almost reaching the number achieved during the full year to 31 March 2009. Tenant demand is improving as confidence returns to the SME sector and this is certainly borne out by the increase in enquiry levels."

Enquiries:

Principle Capital Sirius Real Estate Asset Management Limited            

Kevin Oppenheim, CEO                                                             020 7632 4130

Alistair Marks, CFO

Mark Whitfeld, Investor Relations                                               020 7240 3222

JPMorgan Cazenove                

Robert Fowlds                                                                          020 7588 2828

Bronson Albery            

Cardew Group                

Tim Robertson                                                                          020 7930 0777  

Shan Shan Willenbrock                        

Catherine Maitland                         

A copy of the presentation to investors will be available on the Group's website at www.sirius-real-estate.com. 

A presentation to analysts will be held on the day at J.P. Morgan Cazenove (20 Moorgate, London EC2R 6DA) at 9.30am.

Chairman's statement

Introduction

I am pleased to announce the Group's Interim Results for the six months ended 30 September 2009. We have continued to focus on asset management of the existing portfolio, transforming the individual properties into modern business parks offering flexible, affordable, high quality workspace. Demand for such space has been strong from local markets; we have maintained occupancy, grown revenue and achieved impressive rental growth during a period of extremely challenging economic conditions, thus demonstrating the resilience of the Sirius business model.

Results 

During the period under review, approximately €17.4 million has been invested in our portfolio; tenant demand has remained strong evidenced by the fact that we let 81% of the total space let in the last financial year in the first six months, at an average rate of circa 16% higher than last year's average. Consequently the average rent psm achieved on the portfolio has increased from €4.15 to €4.26, an increase of 2.7% since 31 March 2009.

New tenant enquiry levels are averaging 120 per week and have been rising consistently throughout the period. We therefore believe the portfolio is well positioned to continue to benefit from the increase in confidence across the German SME sector. Added to this is our new Smartspace scheme, where we offer small refurbished modular premises of sub 100 sqm on highly flexible terms. In response to strong demand for this product we have now converted approximately 13,000 sqm of previously vacant premises into the Smartspace product, on which we are able to achieve premium rents.

We are also implementing a number of efficiency measures to reduce the inherited irrecoverable running costs of the portfolio. Under an internal initiative, the Asset Manager is looking at various areas of portfolio management in order to reduce the cost base through supplier consolidation and economies of scale, as well as other initiatives to significantly improve the recoverability of the remaining costs. These measures have reduced profitability in the current year, however, they are expected to have a material financial benefit over the following years.

Gross rental income for the period was €22.0 million. Excluding property revaluations, related deferred tax and non-controlling interest and fair value adjustments for financial derivatives, profit before tax for the period was €1.0 million. This reflected the Company's additional investment in efficiency initiatives and the net cost of borrowing significantly increasing as we fully drew down the new €45 million BerlinHyp facility, together with interest income earned on deposits dropping significantly with the falls in base rate.  As at 30 September 2009, the portfolio of 38 properties had an annualised gross rent roll of €42.3 million and total lettable area of circa 1.2m sqm.  

Occupancy was 73.1%, which is broadly level with the beginning of the financial year, as anticipated occupancy was held back due to two large move outs. However, we were able to let a substantial amount of space at improved rates in the six month period. 45,283 sqm of new leases were signed at an average rent of €5.20 psm, compared to 55,900 sqm signed at an average of €4.50 psm for the full year ended 31 March 2009. 52,807 sqm of vacated space in the period was let at an average rate of €3.26 psm. Recent letting activity has been encouraging, demonstrated by our ability to attract tenants at advantageous rates, and significantly higher than the rates of vacating tenants.  

The adjusted EPS, which excludes property revaluation, related deferred tax and non-controlling interest and change in fair value on derivative financial instruments,  was 0.63c as at 30 September 2009 (2008: 1.19c).  

Further to the announcement dated 6 November 2009 noting press speculation with regard to the potential acquisition by the Company of a German property portfolio, the Company announced on 3 December 2009 that it is no longer in discussions concerning this potential acquisition.  The decision by the Company not to pursue the acquisition at this time was made at the latter stages of negotiations with the vendor. The Company expects that professional advisory fees of approximately €1 million (which are the subject of ongoing negotiations) were incurred in connection with the potential transaction.

Net Asset Value (NAV)

The portfolio has been independently valued by DTZ Zadelhoff Tie Leung GmbH ("DTZ") as at 30 September 2009 at €500 million, which has resulted in a revaluation deficit of €17.4m. The valuation deficit arises because of the capex invested into the portfolio in the period, effectively being written off, through the revaluation adjustment.

The portfolio including vacant space is now valued on an average net initial yield of 7.0% off an average passing rent of €4.26 psm. The average capital value psm is €436 and the valuation takes no account of the surplus land. 

The financial turmoil has led to valuers taking a very cautious approach. Having said that, we believe that we will continue to let new space as it becomes available following the transformation process, and the higher rates being achieved from new lettings are keeping the values stable.

The adjusted NAV per share, which excludes deferred tax and change in fair value adjustment on financial derivative instruments, was 78.6c at 30 September 2009 (31 March 2009: 83.5c).

Capital Expenditure

During the six months ended 30 September 2009, the Company invested approximately €17.4 million in its ongoing programme of upgrading the portfolio, the benefits of which are being evidenced by higher rental rates and improved tenant retention. 

Dividend

As reported previously, in order to sustain investment in the Group's portfolio whilst also keeping the LTV ratio at modest levels and ensuring cash resources are preserved, the Board decided to keep dividend payments suspended. We will continue to review this policy.

Finance

As at 30 September 2009 Sirius's borrowings, excluding capitalised loan costs, totalled €315.7 million representing an LTV of 63%.

As announced post the period end, the Company has received approval following negotiations to consolidate its two portfolios financed with ABN Amro Bank N.V. ("ABN") for a one-off fee of €250,000 plus legal costs and an increase in the cost of borrowing of 40 basis points. In addition the loan must be paid down by circa €1 million plus a €66,000 repayment penalty. While one of the two portfolios has significant headroom, the other was believed to be in breach of its LTV covenant based on the Company's valuations. Following the consolidation of these portfolios, the new LTV covenant is 85%, creating the headroom to accommodate a 14% drop in property values, as valued by DTZ.  

In addition a cure provision has been added so that should a financial covenant be breached again it can be cured by paying down an appropriate portion of the loan. Consequently all of the Company's banking facilities are now within their respective covenants and the Company has sufficient cash to fund its planned capital expenditure programme for the foreseeable future.

Asset Management 

The fundamentals of the Sirius business model remain positive, and tenant demand during and post the period has been encouraging. According to the German Ifo survey, German business confidence rose for an eighth consecutive month in November. The Ifo business climate index rose to 93.9 points in November from 92 points in October.

While the Sirius model enables higher rents to be achieved on transformed space, importantly the space remains good value and we continue to receive a high level of enquiries from potential tenants. The occupancy rate across the portfolio of 38 properties is 73.1%. 

In April 2009, the Smartspace campaign was launched, offering very small ready-made units for office, light industrial and storage purposes. This product targets start-up companies and small businesses and is proving successful having achieved lettings of 2,788 sqm at an average of €8.40 psm which represents a significant premium above conventional letting rates. The Smartspace product is now available at ten sites across the portfolio with the intention of converting 20,000 sqm by January 2010. The Sirius team continues to monitor and adapt to local market trends, and our flexibility combined with the high quality and affordable space we offer remains a key advantage in the current market.

Developing on surplus land on a pre-let basis continues to be an important component of the Group's strategy, and three new deals have been signed and construction started since 31 March 2009: with Burger King at Pfungstadt, ZK Glasbau in Maintal and OPC in Düsseldorf. A total of nine pre-let development deals have now been signed since IPO, creating an additional 5,877 sqm of pre-let space at a net initial yield on cost of 12.4%.

Outlook

We believe there has been an improvement in market conditions over the last six months. Tenant demand is improving as confidence returns to the German SME market. Enquiry levels continue to increase and during the period we have let more than 80% of the space that we did in the previous financial year and, critically, new lettings are achieving significant rental increases. We will continue to focus on increasing rents where we have the opportunity to do so, and investing in transforming the portfolio under the proven Sirius model. We therefore look forward to further developing the business and delivering value to shareholders. 

Dick Kingston

Chairman

Unaudited consolidated statement of comprehensive income for the six months ended 30 September 2009		(Unaudited)	(Unaudited)	(Audited)
		six months ended	six months ended	twelve months ended
		30 September	30 September	31 March
		2009	2008	2009
	Notes	€000	€000	€000
Gross rental income	4	22,008	19,081	43,742
Direct costs	5	(9,854)	(7,033)	(19,271)
Net rental income		12,154	12,048	24,471
Deficit on revaluation of investment properties		(17,336)	(10,280)	(42,721)
Administrative expenses	5	(2,138)	(2,810)	(5,159)
Other operating expenses	5	(833)	(400)	(947)
Operating loss		(8,153)	(1,442)	(24,356)
Finance income	6	24	1,154	1,714
Finance expense	6	(8,534)	(6,667)	(15,219)
Change in fair value of derivative financial instruments		172	(2,151)	(13,523)
Loss before tax		(16,491)	(9,106)	(51,384)
Taxation	7	1,281	(1,615)	(1,283)
Loss for the period		(15,210)	(10,721)	(52,667)
Other comprehensive income		-	-	-
Total comprehensive income for the period		(15,210)	(10,721)	(52,667)
Loss attributable to:
Owners of the Company		(14,277)	(10,345)	(51,989)
Non-controlling interest		(933)	(376)	(678)
Loss for the period		(15,210)	(10,721)	(52,667)
Earnings per share
Basic and diluted, for comprehensive income for the period attributable to ordinary equity holders of the parent company	8	(4.72)c	(3.37)c	(17.05)c

The notes below form an integral part of these financial statements.

Unaudited consolidated statement of financial position as at 30 September 2009		(Unaudited)	(Unaudited)	(Audited)
		30 September	30 September	31 March
		2009	2008	2009
	Notes	€000	€000	€000
Non-current assets
Investment properties	10	500,020	519,100	500,400
Assets under construction	11	3,338	2,637	2,222
Plant and equipment		4,627	3,069	3,452
Total non-current assets		507,985	524,806	506,074
Current assets
Trade and other receivables		11,213	5,493	7,586
Prepayments		901	815	136
Cash and cash equivalents	12	46,708	41,279	29,652
Total current assets		58,822	47,587	37,374
Total assets		566,807	572,393	543,448
Current liabilities
Trade and other payables	13	(16,964)	(12,921)	(18,248)
Interest-bearing loans and borrowings	14	(101,671)	(4,421)	(102,447)
Current tax liabilities		(343)	(1,095)	(1,663)
Derivative financial instruments	15	(13,351)	(43)	(13,523)
Total current liabilities		(132,329)	(18,480)	(135,881)
Non-current liabilities
Interest-bearing loans and borrowings	14	(210,250)	(269,184)	(167,821)
Derivative financial instruments	15	-	(2,108)	-
Deferred tax liabilities	7	(2,174)	(3,411)	(2,482)
Total non-current liabilities		(212,424)	(274,703)	(170,303)
Total liabilities		(344,753)	(293,183)	(306,184)
Net assets		222,054	279,210	237,264
Equity
Issued share capital	16	-	-	-
Other distributable reserve		300,111	300,111	300,111
Retained earnings		(78,057)	(22,136)	(63,780)
Total equity attributable to the equity holders of the parent company		222,054	277,975	236,331
Non-controlling interests		-	1,235	933
Total equity		222,054	279,210	237,264

The notes below form an integral part of these financial statements.

Unaudited consolidated statement of changes in equity for the six months ended 30 September 2009					Total equity
					attributable
		Issued	Other		to the equity
		share	distributable	Retained	holders of	Non-controlling
		capital	reserve	earnings	the company	interests	Total equity
		€000	€000	€000	€000	€000	€000
As at 31 March 2008		-	311,625	(7,258)	304,367	1,611	305,978
Loss for the period		-	-	(10,345)	(10,345)	(376)	(10,721)
Own shares acquired		-	(11,514)	-	(11,514)	-	(11,514)
Equity dividends		-	-	(4,533)	(4,533)	-	(4,533)
As at 30 September 2008		-	300,111	(22,136)	277,975	1,235	279,210
Loss for the period		-	-	(41,644)	(41,644)	(302)	(41,946)
As at 31 March 2009		-	300,111	(63,780)	236,331	933	237,264
Loss for the period		-	-	(14,277)	(14,277)	(933)	(15,210)
As at 30 September 2009		-	300,111	(78,057)	222,054	-	222,054

The notes below form an integral part of these financial statements.

Unaudited consolidated statement of cash flow for the six months ended 30 September 2009	(Unaudited)	(Unaudited)	(Audited)
	six months ended	six months ended	twelve months ended
	30 September	30 September	31 March
	2009	2008	2009
	€000	€000	€000
Operating activities
Loss before tax	(16,491)	(9,106)	(51,384)
Adjustments for:
Deficit on revaluation of investment properties	17,336	10,280	42,721
(Surplus)/deficit on revaluation of derivative financial instruments	(172)	2,151	13,523
Depreciation	208	161	416
Finance income	(24)	(1,154)	(1,714)
Finance costs	8,534	6,667	15,219
Cash flows from operations before changes in working capital	9,391	8,999	18,781
Changes in working capital
(Increase)/decrease in trade and other receivables	(4,541)	(813)	(2,228)
(Decrease)/increase in trade and other payables	(1,328)	37	3,791
Taxation paid	(346)	-	-
Cash flows from operating activities	3,176	8,223	20,344
Investing activities
Purchase of investment properties	(1,347)	(138,112)	(138,187)
Development expenditure	(17,794)	(8,303)	(22,137)
Purchase of plant and equipment	(874)	(17)	(722)
Proceeds on disposal of plant and equipment	-	-	89
Interest received	24	1,154	1,703
Cash flows used in investing activities	(19,991)	(145,278)	(159,254)
Financing activities
Dividends paid to equity holders of the Parent Company	-	(4,533)	(4,533)
Purchase of own share capital	-	(11,514)	(11,514)
Proceeds from loans	44,706	178,110	178,110
Repayment of loans	(3,468)	(26,457)	(29,309)
Finance charges paid	(7,367)	(6,795)	(13,715)
Cash flows from financing activities	33,871	128,811	119,039
Increase/(decrease) in cash and cash equivalents	17,056	(8,244)	(19,871)
Cash and cash equivalents at the beginning of the period	29,652	49,523	49,523
Cash and cash equivalents at the end of the period	46,708	41,279	29,652

The notes below form an integral part of these financial statements.

Notes forming part of the financial statements

for the six months ended 30 September 2009

1.    General information

Sirius Real Estate Limited (the "Company") is a Company incorporated and domiciled in Guernsey whose shares are publicly traded on AIM.

The consolidated financial statements of Sirius Real Estate Limited comprise the Company and its subsidiaries (together referred to as the "Group"). 

The principal activity of the Group is investment in and development of commercial property to provide flexible workspace in Germany.

The consolidated financial statements of the Group as at and for the year ended 31 March 2009 are available upon request from the Company's registered office at PO Box 119, Martello Court, Admiral Park, St. Peter Port, Guernsey GY1 3HB, Channel Islands or at www.sirius-real-estate.com.

The Company acts as the investment holding company of the Group.

2.    Significant accounting policies

(a)    Basis of preparation

The consolidated financial statements have been prepared on a historical cost basis, except for investment properties, assets under construction and derivative financial instruments which have been measured at fair value. The consolidated financial statements are presented in euros and all values are rounded to the nearest thousand (€000) except where otherwise indicated.

The consolidated financial statements of the Group for the year ended 31 March 2009 have been prepared in accordance with IFRSs adopted for use in the EU ("Adopted IFRSs") and The Companies (Guernsey) Law, 2008. The interim set of financial statements included in this interim report has been prepared in accordance with the recognition and measurement requirements of Adopted IFRSs. The interim set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 March 2009 except for IAS 1 Presentation of Financial Statements (Revised), IFRS 8 Operating Segments and improvements to IFRSs (2008) amends IAS 40 'Investment Property' which have been adopted for the first time. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 March 2009.

These financial statements have been prepared on a going concern basis as it is the view of the Directors that this is the most appropriate basis of preparation to adopt having considered the issue identified below.

The Group's property portfolios are partly funded by external debt facilities. Under the terms of the debt agreements each debt obligation is "ring-fenced" within a sub-group of companies. Sirius Real Estate Limited, the ultimate parent company, itself is not a party to any of the finance documents (in any capacity including as borrower, guarantor or security provider). The finance providers would therefore not have any recourse to the ultimate parent under the finance arrangements.

Due to falling property values in the current economic climate ABN AMRO instructed a valuation to test the LTV covenants of the two facilities they have in place with the company. This proved one of the facilities to be in breach for which a resolution was agreed subsequent to the period end. The total amount outstanding for the two facilities was €98 million, of which the second has significant headroom on the LTV covenant.  The Company has received approval following negotiations with the finance provider to consolidate the two portfolios for covenant testing purposes for a one off fee of €250,000 plus legal costs and an increase in the cost of borrowing of 40 basis points. In addition the loan will be paid down by €975,000 plus a €66,000 repayment penalty. Following the consolidation of the two portfolios, the new LTV covenant will be 85%, creating headroom to accommodate a 14% drop in property values.

Under the terms of the breached facility the lender has no recourse against any other assets outside the ABN AMRO financed portfolios. The Group has €46.7 million of cash reserves which means the Group has significant liquid assets at its disposal. The group also has €48.7 million worth of unencumbered assets.

(b)    Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 30 September 2009. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

All intraߛgroup balances, transactions, income and expenses and profits and losses resulting from intraߛgroup transactions that are recognised in assets, are eliminated in full.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

Non-controlling interests represent the portion of profit or loss and net assets not held by the Group and are presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from parent shareholders' equity.

(c)    Significant accounting policies

Except as described below, the accounting policies applied by the Group in these consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 March 2009.

Changes in accounting policies

IAS 1 Presentation of Financial Statements (Revised) introduces the possibility of either a single statement of comprehensive income (combining the income statement and a statement of comprehensive income) or to retain the income statement with a supplementary statement of comprehensive income. The first option has been adopted by the Group. As this standard is concerned with presentation only it does not have any impact on the results or the net assets of the Group.

IFRS 8 Operating Segments requires the disclosure of segment information based on the internal reports regularly reviewed by the Group's Chief Operating Decision Maker ('CODM') in order to assess each segment's performance and to allocate resources to them. The ultimate decision making of the Group is the board of directors of the Company. The directors of subsidiaries make decisions relating to specific assets. The Directors have appointed the Asset Manager through the Asset Management Agreement. The Asset Manager has power of attorney for decisions up to €50,000. Collectively they are all referred to as "management".

"Improvements to IFRSs (2008)" amends IAS 40 "Investment property". According to the amendment, investment property which is under construction will be carried at fair value at the earlier of when the fair value first becomes reliably measurable and the date of completion of the property. Any gain or loss will be recognised in statement of comprehensive income, consistent with the policy adopted for all other investment properties carried at fair value. This amendment resulted in changes in the Group's accounting policies regarding the accounting treatment for properties under development. Previously, such properties were carried at cost. The changes in accounting policy are applied when the fair value of the properties under development first becomes reliably measurable, which is from the first period they are presented in the financial statements. The impact on the financial statements for the six month period to 30 September 2009 is not material.

3.    Operating segments

Segment information is presented in respect of the Group's operating segments. The operating segments are based on the Group's management and internal reporting structure. Segment results and assets include items directly attributable to a segment as well as those that can be allocated to a segment on a reasonable basis. 

Management considers that there is only one geographical segment which is Germany and one business segment which is investment in commercial property.

4.    Revenue

	(Unaudited)	(Unaudited)	(Audited)
	six months ended	six months ended	twelve months ended
	30 September	30 September	31 March
	2009	2008	2009
	€000	€000	€000
Rental income from investment properties	22,008	19,081	43,742

5.    Operating loss

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

Direct costs

	(Unaudited)	(Unaudited)	(Audited)
	six months ended	six months ended	twelve months ended
	30 September	30 September	31 March
	2009	2008	2009
	€000	€000	€000
Service charge income	(10,849)	(8,639)	(18,965)
Property costs	18,126	13,770	33,633
Irrecoverable property costs	7,277	5,131	14,668
Property management fee	921	704	1,496
Asset management fee	1,486	1,198	2,834
Development fee	170	-	273
Direct costs	9,854	7,033	19,271
Administrative expenses
	(Unaudited)	(Unaudited)	(Audited)
	six months ended	six months ended	twelve months ended
	30 September	30 September	31 March
	2009	2008	2009
	€000	€000	€000
Audit fee	100	200	253
Legal and professional fees	1,019	1,365	2,763
Other administration costs	1,019	1,245	2,143
Administrative expenses	2,138	2,810	5,159
Other operating expenses
	(Unaudited)	(Unaudited)	(Audited)
	six months ended	six months ended	twelve months ended
	30 September	30 September	31 March
	2009	2008	2009
	€000	€000	€000
Directors' fees	85	121	214
Bank fees	79	77	120
Depreciation	208	161	416
Marketing and other expenses	461	41	197
Other operating expenses	833	400	947

The Group has no full-time employees. 

  6.    Finance income and expense

	(Unaudited)	(Unaudited)	(Audited)
	six months ended	six months ended	twelve months ended
	30 September	30 September	31 March
	2009	2008	2009
	€000	€000	€000
Bank interest receivable	24	1,154	1,714
Finance income	24	1,154	1,714
Bank loan interest payable	(7,971)	(6,182)	(14,232)
Amortisation of capitalised finance charges	(563)	(485)	(987)
Finance expense	(8,534)	(6,667)	(15,219)
Net finance expense	(8,510)	(5,513)	(13,505)

7.    Taxation

Consolidated statement of comprehensive income

	(Unaudited)	(Unaudited)	(Audited)
	six months ended	six months ended	twelve months ended
	30 September	30 September	31 March
	2009	2008	2009
	€000	€000	€000
Current income tax
Current income tax charge	(300)	(53)	(650)
Adjustments in respect of prior period*	1,273	-	-
	973	(53)	(650)
Deferred tax
Relating to origination and reversal of temporary differences	308	(1,562)	(633)
Income tax credit/(charge) reported in the statement of comprehensive income	1,281	(1,615)	(1,283)
Deferred income tax liability
	(Unaudited)	(Unaudited)	(Audited)
	six months ended	six months ended	twelve months ended
	30 September	30 September	31 March
	2009	2008	2009
	€000	€000	€000
Opening balance	2,482	1,849	1,849
Revaluation of investment properties to fair value	(308)	1,562	633
Balance as at period end	2,174	3,411	2,482

* During the period under report the German government made tax changes in light of an economic growth programme. The most important change for the Group is the increase of the interest threshold from €1 million to €3 million with retroactive effect as of the tax assessment from 1 January 2008 and is guaranteed until 31 December 2009. 

Management does not recognise deferred tax assets in respect of revaluation losses as they may not be used to offset taxable profits elsewhere in the group.

 8.    Earnings per share

The calculation of the basic, diluted and adjusted earnings per share ('EPS') is based on the following data:

	(Unaudited)	(Unaudited)	(Audited)
	six months ended	six months ended	twelve months ended
	30 September	30 September	31 March
	2009	2008	2009
	€000	€000	€000
Earnings
Loss for the period attributable to the equity holders of the parent	(14,277)	(10,345)	(51,989)
Basic and diluted earnings	(14,277)	(10,345)	(51,989)
Add back revaluation deficits (net of related tax)	16,362	11,842	43,354
Add back change in fair value of derivative financial instruments	(172)	2,151	13,523
Adjusted earnings	1,913	3,648	4,888
Number of shares
Weighted average number of ordinary shares for the purpose of basic and diluted EPS	302,223,176	307,038,914	304,840,217
Weighted average number of ordinary shares for the purpose of adjusted EPS	302,223,176	307,038,914	304,840,217
Basic and diluted earnings per share	(4.72)c	(3.37)c	(17.05)c
Adjusted earnings per share	0.63c	1.19c	1.60c

The number of shares has been adjusted for the 25,576,824 shares held by the Group as Treasury Shares as at both 30 September 2009 and 31 March 2009.

The Directors have chosen to disclose adjusted EPS in order to provide a better indication of the Group's underlying business performance. Accordingly it excludes the effect of deferred tax and the revaluation deficits on the investment properties and derivative instruments adjusted for non-controlling interests.

As there are no share options in issue, the diluted EPS is identical to the basic EPS.

9.    Net assets per share

	(Unaudited)	(Unaudited)	(Audited)
	six months ended	six months ended	twelve months ended
	30 September	30 September	31 March
	2009	2008	2009
	€000	€000	€000
Net assets
Net assets for the purpose of assets per share (assets attributable to the equity holders of the parent)	222,054	277,975	236,331
Deferred tax arising on revaluation of properties	2,174	3,411	2,482
Derivative financial instruments	13,351	2,151	13,523
Adjusted net assets attributable to equity holders of the parent	237,579	283,537	252,336
Number of shares
Number of ordinary shares for the purpose of net assets per share	302,223,176	302,223,176	302,223,176
Net assets per share	73.47c	91.98c	78.20c
Adjusted net assets per share	78.61c	93.82c	83.49c

The number of shares has been adjusted for the 25,576,824 shares held by the Group as Treasury Shares as at both 30 September 2009 and 31 March 2009.

  10.    Investment properties

	(Unaudited)	(Unaudited)	(Audited)
	30 September	30 September	31 March
	2009	2008	2009
	€000	€000	€000
Opening balance	500,400	375,950	375,950
Additions	16,956	153,430	167,171
Revaluation of investment properties to fair value	(17,336)	(10,280)	(42,721)
Balance as at period end	500,020	519,100	500,400

The fair value of the Group's investment properties at 30 September 2009 has been arrived at on the basis of a valuation carried out at that date by DTZ Zadelhoff Tie Leung GmbH, an independent valuer.

The value of each of the properties has been assessed in accordance with the RICS Valuation Standards on the basis of market value.

11.    Assets under construction

	(Unaudited)	(Unaudited)	(Audited)
	30 September	30 September	31 March
	2009	2008	2009
	€000	€000	€000
Opening balance	2,222	-	-
Additions	1,116	2,637	2,222
Balance as at period end	3,338	2,637	2,222

12.    Cash and cash equivalents

	(Unaudited)	(Unaudited)	(Audited)
	30 September	30 September	31 March
	2009	2008	2009
	€000	€000	€000
Cash at banks and in hand	46,708	35,858	29,652
Short-term deposits	-	5,421	-
Balance as at period end	46,708	41,279	29,652

As at 30 September 2009, €3,886,740 of cash is held in blocked accounts. Of this €3,090,178 is under control of lenders who release this to the Group upon request to be used for capital expenditure on properties. The remainder relates to deposits received from tenants totalling €796,562. Most tenant deposits are taken by way of bank guarantee.

13. Trade and other payables

	(Unaudited)	(Unaudited)	(Audited)
	30 September	30 September	31 March
	2009	2008	2009
	€000	€000	€000
Trade payables	4,770	2,306	3,970
Accrued expenses	6,652	5,315	4,405
Accrued interest	2,282	1,193	1,675
Other payables	2,231	2,828	3,698
Related party payables	1,029	1,279	4,500
Balance as at period end	16,964	12,921	18,248

14.    Interest-bearing loans and borrowings

			(Unaudited)	(Unaudited)	(Audited)
	Effective		30 September	30 September	31 March
	interest rate		2009	2008	2009
	%	Maturity	€000	€000	€000
Current
ABN AMRO Loan	5.48	15 October 2012	98,115	1,332	98,963
Berlin-Hannoversche Hypothekenbank AG - fixed rate facility	5.46	30 March 2013	997	1,426	1,010
Berlin-Hannoversche Hypothekenbank AG - hedged floating rate facility	Hedged floating	31 March 2013 -  31 December 2013	4,866	2,100	3,519
Capitalised finance charges on all loans			(2,307)	(437)	(1,045)
			101,671	4,421	102,447
Non-current
ABN AMRO Loan	5.48	15 October 2012	-	98,477	-
Berlin-Hannoversche Hypothekenbank AG - fixed rate facility	5.46	30 March 2013	49,219	49,768	49,748
Berlin-Hannoversche Hypothekenbank AG - hedged floating rate facility	Hedged floating	31 March 2013 -  31 December 2013	162,512	124,048	120,936
Capitalised finance charges on all loans			(1,481)	(3,109)	(2,863)
			210,250	269,184	167,821
Total			311,921	273,605	270,268

The Group has pledged 33 investment properties to secure related interest-bearing debt facilities granted to the Group. The 33 properties had a combined valuation of €451,360,000.

ABN AMRO Bank N.V.

This facility had €100,951,940 drawn down, of which €2,836,595 has been amortised to date, resulting in a net liability of €98,115,345 as at 30 September 2009. The facility is split into two portfolios. The interest is fixed at a weighted average interest rate of 5.48% per annum. The final repayment date of the latest drawdown is 15 October 2012. This loan is secured over 16 property assets. With the exception of one LTV covenant (see note 2a) the Group complied with all the loan covenants.

Berlin-Hannoversche Hypothekenbank AG

Facilities of €224,000,000 have been granted by Berlin-Hannoversche Hypothekenbank AG, which have now been fully drawn down. To date €6,406,185 has been amortised, resulting in a net liability of €217,593,815 at September 2009. The facility is split into three portfolios: Portfolio I is split with either an interest rate of 1.18 margin over three months EURIBOR fixed by a SWAP at 4.42% or a fixed rate of 5.46%, Portfolio II has an interest rate of 1.08 margin over three months EURIBOR fixed by a SWAP at 4.95% and Portfolio III is at a floating rate caped at 5.99%. This loan is secured over 17 property assets.

Due to the single breach detailed in note 2a, the entire ABN facility has been shown as current. The consolidation of the loan covenants is conditional upon signing the revised loan agreement. Until this has been signed the loan is shown entirely as current.

15.    Financial instruments

Fair values

Set out below is a comparison by category of carrying amounts and fair values of all the Group's financial instruments that are carried in the financial statements:

		(Unaudited)			(Unaudited)			(Audited)
		30 September 2009			30 September 2008			31 March 2009
	Carrying		Fair	Carrying		Fair	Carrying		Fair
	amount		value	amount		value	amount		value
	€000		€000	€000		€000	€000		€000
Financial assets
Cash	46,708		46,708	41,279		41,279	29,652		29,652
Trade receivables	3,088		3,088	1,986		1,986	2,343		2,343
Financial liabilities
Trade payables	4,770		4,770	2,306		2,306	3,970		3,970
Derivative financial instruments	13,351		13,351	2,151		2,151	13,523		13,523
Interest-bearing loans and borrowings:
Floating rate borrowings	167,378		167,378	126,148		126,148	124,455		124,455
Fixed rate borrowings	148,332		157,586	151,003		151,003	149,721		155,848

The Group holds interest rate swap contracts designed to manage the interest rate and liquidity risk of expected cash flows under €122,695,800 of borrowing for the Group's variable rate facility with Berlin-Hannoversche Hypothekenbank AG. The swap contracts mature at the same time as the loans between March and December 2013. 

16.    Issued share capital

	Number	Share capital
Authorised
Ordinary shares of no par value	Unlimited	-
As at 30 September 2009	Unlimited	-
Issued and fully paid
Ordinary shares of no par value	327,800,000	-
Share brought back and held in treasury	(25,576,824)	-
As at 30 September 2009	302,223,176	-

As at 30 September 2009 the Company has bought back 25,576,824 ordinary shares with a total nominal value of €nil, at a weighted average price of €0.71 per share. These shares are being held by the Company as Treasury Shares

 17.    Dividends

	(Unaudited)	(Unaudited)	(Audited)
	30 September	30 September	31 March
	2009	2008	2009
	€000	€000	€000
Final dividend of 1.5c for the period ended 31 March 2008	-	4,533	4,533
	-	4,533	4,533

In order to sustain investment in the Group's portfolio whilst also ensuring cash resources are preserved the Board has proposed to not pay a dividend in the period ended 30 September 2009.

18.    Capital commitments

As at 30 September 2009 the Group had contracted capital expenditure on existing properties of €8,139,113. These were committed but not yet provided for.

19.    Carried interest

Marba Holland B.V. is a joint venture between a subsidiary of Principle Capital Holdings S.A., Frank and Kevin Oppenheim and certain other individuals. Marba Holland B.V. has a right to a carried interest. In any year Marba Holland B.V. is not entitled to any carried interest unless the Group's NAV total return per ordinary share has increased by an amount equal to the performance hurdle applicable to that financial period. For the period ended September 2009 the performance hurdle applicable is the average of the initial NAV per ordinary share and 10% above the NAV per ordinary share at the end of the financial period ended 31 March 2008. 

If the hurdle is achieved then Marba Holland B.V. will be entitled to 20% of the amount by which the performance hurdle is exceeded by the Group in respect of that financial period. The carried interest will also be payable on the occurrence of certain other events, such as a take over or liquidation of the Group.

No amount has been provided as at 30 September 2009 as the minimum hurdle rate required has not been achieved.

20. Subsequent events

The Company has received approval following negotiations to consolidate its two portfolios financed with ABN AMRO Bank N.V. for a one off fee of €250,000 plus legal costs and an increase in the cost of borrowing of 40 basis points. In addition the loan will be paid down by €975,000 plus a €66,000 repayment penalty. This will correct the breach of the facility detailed in note 2a. 

Further to the announcement dated 6 November 2009 noting press speculation with regard to the potential acquisition by the Company of a German property portfolio, the Company announced on 3 December 2009 that it is no longer in discussions concerning this potential acquisition. The decision by the Company not to pursue the acquisition at this time was made at the latter stages of negotiations with the vendor. The Company expects that professional advisory fees of approximately €1 million, which are subject of ongoing negotiations, were incurred in connection with the potential transaction. 

 

END

 

 

IR BLBDDSUGGGCS