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Sirius Real Estate (SRE)

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Friday 28 June, 2013

Sirius Real Estate

Final Results

RNS Number : 0744I
Sirius Real Estate Limited
28 June 2013
 



 

Sirius Real Estate Limited

("Sirius" or "the Company")

Final Results

For the year ended 31 March 2013

"A strong financial performance delivering a significant uplift in recurring profitability, ahead of market expectations." Robert Sinclair, Chairman of Sirius.

Sirius Real Estate Limited (the "Group", the "Company" or "Sirius"), the real estate company with a portfolio of 33 business parks across Germany, providing modern, flexible workspace, today reports its final results for the year ended 31 March 2013.

 

Financial overview

·      Substantial increase in recurring profit before tax to €8.7m (2012: €2.9m) due mainly to:

-     Total income increasing to €46.1m (2012: €45.7m) despite disposal programme of non-core properties

-     Total income includes a surrender premium of €1.0m received for early termination of lease contract

-     Non-recoverable costs and overheads reducing by €3.1m compared to prior financial year

-     Interest costs reducing by €2.5m; mainly from debt reduction through disposals 

·      New lettings of 117,982 sqm at a higher average rental rate of €5.13 per sqm (2012: 118,579 sqm at €5.08 per sqm)

·      Occupancy remained stable at 77% (2012: 77%)

·      Average rent per sqm increased by 4% to €4.44 (2012: €4.28)

·      Adjusted earnings per share up to 2.66c (2012: 0.91c) *

* Excludes property revaluation net of related tax, change in fair value of derivative instruments, non-recurring expenses and loss on the sale of properties

Optimised portfolio

·      Disposed of a further 31,795 sqm of non-core assets for €16.3m in the period 

·      Additional non-core assets identified for sale valued at €41.9m (as at 31 March 2013) 

·      Core portfolio valued at €396.2m (as at 31 March 2013) representing a gross yield of 9.9% 

·      Annualised rent roll of core portfolio as at 31 March 2013 of €39.4m (2012: €38.1m)

Financing

·     Successfully reduced borrowing facility with ABN Amro Bank from €91.2m to €49.2m (as at 31 March 2013)

·      Agreed in principal an extension of the outstanding ABN Loan until 30 September 2013. The terms of this extension are similar to the terms of the previous extension to 28 June 2013 and the agreement is subject to internal approval from ABN 

·     Total bank borrowings reduced by €23.1m to €286.4m (March 2012: €309.5m**) through a combination of non-core asset disposals and debt amortisation

-     BerlinHyp debt facility due for repayment in March, June and December 2013 consolidated and extended to 31 March 2014

-     In advanced stages of negotiating a long-term refinancing of a material portion of the BerlinHyp debt with a new lender, while in discussions with a syndicate of banks, including BerlinHyp,  to refinance the remaining BerlinHyp debt

**  includes derivative financial instruments of €13.9m

Outlook

Leveraging the well-established sales and operating platform should allow the company to grow rents and reduce costs further, off a smaller number of higher margin core assets. Tenant demand and sales conversion rates continue to be encouraging and are driving rental growth. Completing the refinancing of the Company's debt is the immediate priority and once complete this should allow the business to focus on enhancing cashflow and pursuing growth opportunities.        

Robert Sinclair, Chairman of Sirius Real Estate Limited, said: 

"These results clearly show the benefit of the actions taken over the last three years. The Company has restructured itself to be able to improve profitability and strengthen its financial base.  With recurring profits at record levels and progress towards refinancing the bank facilities, the business is well positioned to generate attractive shareholder returns going forward."

 

Enquiries:

Sirius                          

Andrew Coombs, CEO                                                                             +49 (0)30 285010110

Alistair Marks, CFO

Peel Hunt

Capel Irwin                                                                                            +44 (0)20 7418 8900

Alex Vaughan

Novella Communications                                    

Tim Robertson                                                                                       +44 (0)20 3151 7008

Ben Heath        



 

Chairman's statement

 

Introduction

As we have consistently reported over the last few years, the Group has been focused on improving profitability and strengthening its financial base.  I am therefore pleased to be able to announce the Group's full year results for the year to 31 March 2013 showing recurring profit before tax increasing to €8.7m (2012: €2.9m).

Alongside the significant improvement in profitability the Company has made good progress with its disposal programme of non-core properties, the proceeds from which are being used to repay loans and re-focus the business on a core portfolio of higher margin assets. In the period, the Company disposed of €16.3m of non-core assets (with DTZ value of €17.5m) which contributed to a €23.1m reduction of the Company's debt facilities.  In addition, at 31 March 2013, the Company had a further €15.7m (with DTZ value of €15.6m) of non-core asset sales notarised which have since completed or are expected to complete in the near future.  Since the year end, a further €7.3m (with DTZ value of €7.6m) of non-core asset disposals have been notarised. In total, since the disposal process began, the company has sold or notarised €40.4m of assets (with DTZ value of €41.1m)

Once the remaining non-core assets have been sold and the re-financing has been concluded, the Group will seek to add new income streams using its knowledge and expertise of providing flexible workspace for the German SME market.

Financial Results

Total income for the year was €46.1m (2012: €45.7m) including €1.0m received by way of a surrender premium. As at 31 March 2013, the annualised gross rent roll was €43.5m (2012: €42.3m*), over a total lettable area of 1.1m sqm.

As at 31 March 2013 occupancy was unchanged from the start of the financial year at 77% (31 March 2012: 77%*), while the average in-place rent per sqm has increased by 4% to €4.44 per sqm (2012: €4.28*).  This has been achieved through higher rates on new lettings and uplifts on renewals. 

*   Adjusted for disposals

The Group's recurring profit before tax increased to €8.7m (2012: €2.9m).   The main reasons for the improvement from last year are as follows:

·      A €2.0m reduction in overheads from the internalisation of Sirius Facilities GmbH, the Company's property manager, which completed in January 2012;

·      A €1.0m surrender premium received from an early termination of leased space which was re-let at a higher rate during the year;

·      A further €1.1m reduction in the Company's non-recoverable costs and overheads;

·      An increase of €218k in overall rental income despite the loss of €1.6m (annualised) rental income from disposals; and

·      A €2.5m reduction in interest mainly from repaying bank debt through disposals.

As a result, the adjusted EPS excluding property revaluation, change in fair value of derivative financial instruments and non-recurring costs was 2.66c (2012: 0.91c).   

Net Asset Value

As at 31 March 2013, the portfolio was valued at €438.1m (independently valued by DTZ Zadelhoff Tie Leung GmbH at €440.0m, 31 March 2012: €486.1m, DTZ value €485.7m excluding €2.3m assets held for sale).  Of the €438.1m, €27.6m is reflected as assets held for sale.   The reduction in portfolio value is due mainly to disposals and revaluation losses:



€ millions


% change






Carrying value, 31 March 2012


486.1



Disposals


-18.9


3.9%

Revaluation


-23.7


4.9%

Impairments


-5.2


1.1%

Lease incentives


-0.2


0.0%






Carrying value, 31 March 2013


438.1


9.9%

The core portfolio is valued on an average gross yield of 9.9% (2012: 9.3%) and an average capital value per sqm of €415.6 (2012: €438.3). The €23.7m revaluation loss (4.9% of carrying value) reflects DTZ's assessment of the change in realisable value of the assets and has been impacted by a widening in yields, reflecting the yields achieved in the investment market for secondary assets in Germany. The change in value has come about despite a 3% increase in gross rental income during the period. The Directors made additional impairments of €5.1 mln against the carrying value of the remaining non-core assets held for sale, to ensure that the impaired values reflect the anticipated realisable value of these assets.

The adjusted net asset value per share, which excludes the provisions for deferred tax and derivative financial instruments, was 48.4c as at 31 March 2013 (31 March 2012: 62.1c). The reduction in adjusted net asset value per share reflects, amongst others, primarily the reduction in valuation of the assets as well as the capitalisation of the derivative financial instrument liability following its termination. The Board believe that the carrying value of the assets has been adjusted to a realistic base given the current property investment market in Germany.

Bank Financing & Cash

The Company's cash reserves at the year-end were €16.7m (2012: €9.1m) of which €5.2m relates to the early receipt of an asset disposal which was committed to repay ABN on 15 April 2013.  As at 31 March 2013, the Company's bank borrowings, excluding capitalised loan costs, totalled €286.4m (2012: €309.5m**), representing a LTV of 65.4% at 31 March 2013 (2012: 63.7%.**).

The three loan facilities with Berlin Hannoversche Hypothekenbank AG (BerlinHyp) which were due to expire in March 2013, June 2013 and December 2013 have all now been successfully consolidated and extended in one new facility of €208.7m which expires on 31 March 2014.  In addition, all interest rate derivatives attached to these loans were terminated and the associated liabilities of €13.3m added to the loan. Following termination of the interest rate derivatives the facility bears interest at three-month EURIBOR plus 2.5%, representing a significant interest saving for the Company.  The terms of this extension are indicative of the strong working relationship Sirius has with BerlinHyp and provide time to implement a longer term arrangement for this facility.  The Company is in advanced negotiations to complete a refinancing of a material portion of this BerlinHyp debt with another lender, while discussions are progressing with a syndicate of banks, including BerlinHyp, to refinance the remaining BerlinHyp facility.

 

**  includes derivative financial instruments of €13.9m 

 

outstanding, secured on assets that have been valued at €59.4m, representing a LTV of 73.0%.  In addition as at 17 June 2013, a further €17.7 million of ABN related disposals have been notarised which, when completed, will reduce the loan balance to €25.6m. 

Finally, as part of the initial ABN repayment, the Group entered into a new debt facility with Macquarie Bank of €28.5m in January 2013. This loan is secured on assets that have been valued by DTZ at €50.2m representing an LTV of 56.8%. 

Dividend

The Company is not proposing to pay a dividend for the full year. The dividend policy will be reconsidered once the BerlinHyp debt has been fully refinanced.

Asset management

This has been a good year for the business and one where we have seen the benefits of the asset and property management initiatives introduced over the last few years come through, demonstrated by the significant uplift in profitability achieved. As importantly, the intangible benefits of streamlined systems, lower tenant disputes, further improved internet and marketing systems are the foundations of the Company's success.  The profit improvements this year have come from a combination of maintaining tenant demand, letting at higher rates, higher levels of tenant retention with uplifts in rent and the further improved management of costs and service charge.

Rental streams have been broadened with the successful flexible products that have now been in place for more than two years.  In particular, the Smartspace, Flexilager and Conferencing and Catering products have all helped to meet our customers' needs and increase income.

Our strategy remains to use the long-term stable income we receive from our core larger tenants as a platform to generate higher yielding income from the short-term flexible space.  We have built real expertise in providing flexible space for the German SME market, a specialist but growing market and one in which the Sirius brand is now well known and highly regarded. This expertise has enabled us to manage the multi-tenant, mixed-use, flexible workspace better than our competitors.  We are currently seeking asset and property management agreements with external landlords to manage mixed-use and multi-tenanted properties in order to fully utilise and maximise the advantage we gain from the knowledge and systems we have in place.  During the period under review, we secured three external operating and management contracts where Sirius Facilities manage non Sirius owned properties. These contracts are intended to raise additional revenues to offset the costs of the operating platform whilst at the same time either gaining presence in new geographical markets such as Essen or increasing critical mass and efficiency in existing geographies such as Munich. The projected gross annual fee revenue associated with operating and management contracts is circa €1 million.

Sales & Marketing

Our ability to let conventional and difficult space is one of Sirius's key competitive advantages and allows the Company to improve its income irrespective of market rental growth. With 34 business parks spread out across Germany comprising, at present, over 700 buildings; most of which are multi-let and mixed-use, we are able to service most prospective tenant needs. Alongside our knowledge of the market, we have established processes and systems that help to quickly match new enquiries with suitable space thereby underpinning our conversion rates.

New business generation and conversion is a core part of our business model. Generation of new enquiries continues to be above 1,000 per month of which more than 80% come from prospective tenants looking for space through our website and internet portals.  Sirius continues to differentiate itself through its flexibility which is the key to generating the income increases that we have seen over the last few years.  This includes our ability to meet the needs of small and large tenants alike.

Over the past three years, the Company has been able to grow its gross annual rental income in the core portfolio by 8.5% from €36.3m to €39.4m. This highlights the Company's ability to deliver rental and income growth across its core portfolio, despite the lack of general market rental growth. Combined with cost reductions achieved, this has resulted in the significant improvement in the Company's financial performance.

New lettings                              

As at 31 March 2013 (including all the notarised disposals), occupancy was unchanged at 77% (31 March 2012: 77%).

During the period under review, Sirius generated new lettings of 117,982 sqm at €5.13 per sqm (2012: 118,579 sqm at €5.08 per sqm).  We saw moveouts of 107,402 sqm at €4.18 per sqm in the period compared to 93,205 sqm (€4.16 per sqm) in the previous year.  We are letting space at higher rates than in the past which is indicative of our ability to yield manage once we reach a certain occupancy level. 

The majority of the yield improvement can be attributed to our successful product range including Smartspace, Flexilager and Conferencing, which provide attractive workspace solutions generally for young businesses, flexible and convenient storage solutions, and high quality conferencing facilities.  These products only represent a small part of the portfolio at present, but the rates achieved are significantly higher than conventional lettings and we intend to grow these products as opportunities allow.

Operational efficiencies

Since March 2010, the Group's overhead costs have been reduced by €4.0m and we have improved the recovery of service charge costs by some €3.8m. These savings have been one of the key elements of the improved profitability that was achieved in the year under review.

The Company is now seeing the benefits of actions undertaken in the past to improve service charge recoverability coming through, nevertheless we feel that there remains scope for further improvement from these initiatives to come in future years.  The systems and techniques that we have developed to manage the service charge not only improve profitability but through the higher transparency created, the level of disputes and difficulty in getting tenants to pay their service charges has improved significantly.  Subsequently the area of property and service charge management is now very much one of the Company's strengths and also provides Sirius with a significant advantage over our competitors. 

As with lettings, we are able to offer property, facility and service charge management to external landlords with multi-let, mixed-use space.  This allows Sirius to maximise the benefits to shareholders from the platform that has been developed to manage this complex business. 

Portfolio analysis                           

We have been successful in disposing of a number of the Company's non-core assets while improving profitability of the core sites.  To date the portfolio has been reduced from 38 business parks to 34 and at the completion of the programme we expect the portfolio to consist of 25 core business parks.  This fully optimised position has not been fully reflected in the Company's balance sheet as we have not notarised all of the assets we have identified for sale.  If we were to fully reflect this the key statistics of the portfolio would be as follows:


Valuation

Rental Income

Total SqM

Occ

Rate per SqM







Core Assets

€ 396.2m

   € 39.4m

     0.91m

  80.4 %

   € 4.49

Non-Core Assets for disposal*

€41.9m

      €4.2m

     0.16m

  54.7 %

   € 3.98

TOTAL

€ 438.1m

    € 43.6m

     1.07m

  76.5 %

   € 4.44

*includes €27.7m classified as assets held for sale and €14.2m classified within investment properties

Focusing on the core portfolio, the average monthly rental rate achieved stands at €4.49 per sqm per month (2012: €4.32 per sqm). The tenant base of this portfolio (including Smartspace tenants) consists of 1,617 tenants occupying 730,903 sqm with an average lease length to the first break option of 2.9 years.  There is a broad mix of tenants within this portfolio but the core base of secure long-term income from our larger tenants remains.  The top 10 tenants occupy 30% of the total space and produce 37% of total rental income and have a weighted average unexpired lease length of 4.0 years.  There remains significant potential for further improvement of this portfolio, and once refinanced as we expect in the near future, will provide a strong base from which we will take the business forward. 

Outlook

These results represent a significant improvement in the financial performance of the business and reflect the success of the management's actions over the last few years. Going forward there are a number of key objectives: Firstly, to dispose of the remaining non-core assets and complete the Company's refinancing, as set out earlier in this statement.  This will deliver long term financial security and enable us to focus on delivering returns for shareholders including, we hope, to a recommencement of a dividend programme; secondly, to continue the focus on the asset management activities that underpin the high demand for our products and are the key for further profit improvements; thirdly, to pursue options to grow the business on the back of the expertise we have developed in this specialist area of providing and managing flexible workspace to the German SME market. 

The achievements of the last few years, as demonstrated by these results, mean the Company is well positioned and I look forward to reporting on further progress in the near future.



 

Consolidated statement of comprehensive income
for the year ended 31 March 2013



Year

Year




ended

ended




31 March

31 March




2013

2012



Notes

€000

€000


Gross rental income

3

46,115

45,745


Direct costs

4

(16,889)

(20,153)


Net rental income


29,226

25,592


Deficit on revaluation of investment properties

11

(35,776)

(27,349)


(Loss)/gain on disposal of properties


(1,201)

645


Administrative expenses

4

(4,684)

(5,650)


Other expenses

4

(2,411)

(2,247)


Operating loss


(14,846)

(9,009)


Finance income

7

25

135


Finance expense

7

(14,998)

(17,665)


Change in fair value of derivative financial instruments


350

(4,575)


Loss before tax


(29,469)

(31,114)


Taxation

8

(783)

(611)


Loss for the year


(30,252)

(31,725)


Loss attributable to:





Owners of the Company


(30,227)

(31,248)


Non-controlling interests


(25)

(477)


Loss for the year


(30,252)

(31,725)


Earnings per share





Basic and diluted loss for the year attributable to ordinary equity holders of the Parent Company

9

(9.52)c

(10.25)c


      
Consolidated statement of financial position
as at 31 March 2013

 



2013

2012


Notes

€000

€000

Non-current assets




Investment properties

11

410,489

476,780

Plant and equipment

13

2,538

3,438

Goodwill

14

3,738

3,738

Total non-current assets


416,765

483,956

Current assets




Trade and other receivables

15

9,442

9,704

Prepayments


494

339

Derivative financial instruments


-

4

Cash and cash equivalents

16

16,718

9,145

Investment property held for sale

12

27,657

9,340

Total current assets


54,311

28,532

Total assets


471,076

512,488

Current liabilities




Trade and other payables

17

(27,824)

(20,634)

Interest-bearing loans and borrowings

18

(258,151)

(189,333)

Current tax liabilities


-

(65)

Derivative financial instruments


(197)

(13,858)

Total current liabilities


(286,172)

(223,890)

Non-current liabilities




Interest-bearing loans and borrowings

18

(31,239)

(105,214)

Deferred tax liabilities

8

(2,636)

(2,115)

Total non-current liabilities


(33,875)

(107,329)

Total liabilities


(320,047)

(331,219)

Net assets


151,029

181,269

Equity




Issued share capital

21

-

-

Other distributable reserve


303,637

303,625

Retained earnings


(152,625)

(122,398)

Total equity attributable to the equity holders of the Parent Company


151,012

181,227

Non-controlling interests


17

42

Total equity


151,029

181,269

 

 

            Consolidated statement of changes in equity
             for the year ended 31 March 2013













Total equity







attributable to







the equity




Issued

Other


holders of




share

distributable

Retained

the Parent

Non-controlling

Total


capital

reserve

earnings

Company

interests

equity


€000

€000

€000

€000

€000

€000

As at 31 March 2011

-

300,111

(91,150)

208,961

1,019

209,980








Total comprehensive income for the year







Loss for the year

-

-

(31,248)

(31,248)

(477)

(31,725)

Transactions with owners of the Company, recognised directly in equity







Treasury Shares issued

-

3,187

-

3,187

-

3,187

Acquisition of non-controlling interest

-

263

-

263

(500)

(237)

Share-based payment transactions

-

64

-

64

-

64








As at 31 March 2012

-

303,625

(122,398)

181,227

42

181,269








Total comprehensive income for the year







Loss for the year

-

-

(30,227)

(30,227)

(25)

(30,252)








Transactions with owners of the Company,







recognised directly in equity







Share-based payment transactions

-

12

-

12

-

12








As at 31 March 2013

-

303,637

(152,625)

151,012

17

151,029

 

             Consolidated cash flow statement
             for the year ended 31 March 2013




Year

Year



 ended

ended



31 March

31 March



2013

2012


Notes

€000

€000

Operating activities




Loss before tax


(29,469)

(31,114)

Loss/(gain) on sale of properties


1,201

(645)

Share-based payments


12

64

Deficit on revaluation of investment properties

11

35,776

27,349

Change in fair value of derivative financial instruments


(350)

4,575

Depreciation

4

1,032

853

Finance income

7

(25)

(135)

Finance expense

7

14,998

17,665

Cash flows from operations before changes in working capital


23,175

18,612

Changes in working capital




Decrease/(increase) in trade and other receivables


111

(1,971)

(Decrease)/increase in trade and other payables


(329)

2,556

Taxation paid


(590)

(833)

Cash flows from operating activities


22,367

18,364

Investing activities




Costs of internalisation of the Asset Management Agreement


-

(1,337)

Cash acquired in companies internalised


-

409

Development expenditure


(3,531)

(7,390)

Purchase of plant and equipment


(132)

(364)

Proceeds on disposal of properties


20,450

1,074

Interest received


25

135

Cash flows used in investing activities


16,812

(7,473)

Financing activities




Proceeds from loans


33,500

-

Repayment of loans


(51,010)

(8,743)

Finance charges paid


(14,096)

(16,586)

Cash flows from financing activities


(31,606)

(25,329)

Increase/(decrease) in cash and cash equivalents


7,573

(14,438)

Cash and cash equivalents at the beginning of the year


9,145

23,583

Cash and cash equivalents at the end of the year

16

16,718

9,145

             Notes to the consolidated financial statements 
             for the year ended 31 March 2013

1. Basis of preparation

The consolidated financial statements have been prepared on a historical cost basis, except for: investment properties, investment properties held for sale and derivative financial instruments which have been measured at fair value. The 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 2013 have been prepared in accordance with IFRSs adopted for use in the EU ("Adopted IFRSs") and The Companies (Guernsey) Law, 2008.

Going concern

The Group's business activities, financial position, including borrowing facilities, and factors likely to affect its future development are described in the Chairman's statement.  In addition, note 19 to the financial statements includes the Group's objectives and policies for managing its capital, credit risk, currency risk, liquidity risk and interest rate risk. 

Despite having significantly improved its operational performance in the period, the Group reported a loss before tax for the year of €29.5m, mainly due to a revaluation loss in the year of €35.8m.  At 31 March 2013, the Group reported net current liabilities of €231.9m.  The Group's property portfolios are mainly funded by external debt facilities. 

The Group's loan facility with ABN Amro Bank N.V. ("ABN") expired in October 2012.  Subsequently, it has been reduced from €85.3m to €43.3m and extended to 30 June 2013.  The Group's facilities with Berlin Hannoversche Hypothekenbank AG (BerlinHyp) of €209m which originally matured in stages between March 2013 and December 2013 have been consolidated and extended to 31 March 2014.  The Directors consider that the outlook presents some challenges in terms of refinancing the Group's existing loan facilities and realising cash by further disposing of non-core and mature assets and will therefore be regularly reviewing the strategy in place to achieve this.  Whilst the Directors have instituted measures to preserve cash and secure additional finance, these circumstances create uncertainties over future cash flows.

The Directors note the following in their deliberations on whether the going concern basis is appropriate for the financial statements:

 

Loan facility with ABN

The facility provided by ABN with an outstanding balance of €43.3m expired on 15 October 2012.  Subsequently it has been extended until 28 June 2013.  The loan is secured over 10 properties which are ring-fenced from the other assets and liabilities within the Group.  Should the Group be unable to repay the outstanding balance by 30 June 2013, the bank may enforce its security over those assets but this would have no impact on the remainder of the Group.

The Group's management are in negotiations to refinance part of the ABN facility and repay the remainder through disposals of ABN financed assets.  At the date of this report, €17.7m of disposals of ABN financed assets have been notarised.  The Directors are in negotiation with other lenders to secure financing for the remaining ABN financed assets.  The Group has obtained an agreement in principle to an extension of this facility until the end of September 2013 subject to internal approval from ABN.

Loan facility with Berlin Hannoversche Hypothekenbank AG

The loan facility with BerlinHyp with an outstanding balance of €209m is secured against most of the Group's core assets and originally matured in stages between March 2013 and December 2013.  During the year, the facility has been combined and extended to 31 March 2014.  The extension of this facility has given the Group more time to secure a long-term solution.  However, until such a solution has been completed, uncertainty remains.  Without refinancing the loan before 31 March 2014, the Group will not be able to meet the capital repayments as they fall due. Discussions are progressing well on a long-term replacement for the BerlinHyp facility with BerlinHyp as well as some other lenders.

 

Cash reserves

The Group's cash balance at 31 March 2013 was €16.7m, however €5.8m of this was committed to repay the ABN loan on 15 April 2013.  Based on its cash reserves and the increased profit now being generated by the business, the Directors anticipate that the Group will be able to generate sufficient cash flows over the next 18 months to service its debts including amortisation assuming that the refinancing and disposal of properties occurs in the expected timeframe.

 

The Directors have concluded that despite the good progress that has been made, the combination of the circumstances detailed above represent a material uncertainty that casts significant doubt upon the Group's ability to continue as a going concern and that, therefore, the Group may be unable to realise its assets and discharge its liabilities in the normal course of business.  Nevertheless, after making enquiries and considering the uncertainties described above, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.  For these reasons, they continue to adopt the going concern basis of accounting in preparing the annual financial statements.  

2. 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 reporting segment which is investment in commercial property.

 

3. Revenue


Year

Year


ended

 ended


31 March

31 March


2013

2012


€000

€000

Rental income from investment properties

46,115

45,745

 

4. Operating loss

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

Direct costs


Year

Year


ended

ended


31 March

31 March


2013

2012


€000

€000

Service charge income

(31,306)

(30,611)

Service charge expenditure and other property costs

48,075

46,854

Irrecoverable property costs

16,769

16,243

Property management fee*

120

1,595

Asset management fee*

-

2,249

Development fee*

-

66


16,889

20,153

* With the exception of a new property management fee at Bremen Holzhafen these costs are no longer incurred as a result of internalisation of the Asset Management Agreement.

Administrative expenses


Year

Year


ended

ended


31 March

31 March


2013

2012


€000

€000

Audit fee

319

247

Legal and professional fees

2,056

1,827

Other administration costs

772

835

Non-recurring costs

1,537

2,741


4,684

5,650

 

During the year fees of €118,069 (2012: €414,906) were incurred with the auditors and their associates in respect of other non-audit services.

Non-recurring costs relate primarily to loan extension fees associated with the debt facility with ABN Amro Bank N.V. In the prior year, the non-recurring costs related primarily to professional fees incurred in the process of internalisation of the Asset Management Agreement.

 

4. Operating loss continued

 

Other expenses


Year

Year


ended

ended


31 March

31 March


2013

2012


€000

€000

Directors' fees

201

267

Depreciation

1,032

853

Bank fees

128

98

Marketing, insurance and other expenses

1,050

1,029


2,411

2,247

 

5. Employee costs and numbers


Year

Year


ended

ended


31 March

31 March


2013

2012


€000

€000

Wages and salaries

7,193

958

Social security costs

1,607

173

Other employment costs

14

87


8,814

1,218

Since the internalisation of the Asset Management Agreement on 30 January 2012, all employees are now employed directly by the Group. The average number of persons employed by the Group during the year was 145 (2012: 159), expressed in full-time equivalents. In addition the Board of Directors consists of 5 Non-executive Directors.

6. Equity-settled share-based payments

In the prior year the Group established a Sirius long-term incentive scheme for the benefit of certain key management personnel. As a result, 300,000 shares were granted but not allotted to the personnel involved in the scheme as of 31 March 2012. An expense of €63,750 was recognised in the consolidated statement of comprehensive income to 31 March 2012.

During the year, these 300,000 shares were allotted to the management personnel in the scheme.  In addition, a further 55,000 were granted and allotted to personnel involved in the scheme for which an expense of €12,000 was recognised in the consolidated statement of comprehensive income.

7. Finance income and expense

                            


Year

Year


ended

ended


31 March

31 March


2013

2012


€000

€000

Bank interest income

25

135

Finance income

25

135

Bank interest expense

(14,096)

(16,590)

Amortisation of capitalised finance costs

(902)

(1,075)

Finance expense

(14,998)

(17,665)



 

8. Taxation

 


Year

Year


ended

ended


31 March

31 March


2013

2012


€000

€000

Current income tax



Current income tax charge

(327)

(85)

Adjustment in respect of prior periods

65

(334)


(262)

(419)

Deferred tax



Relating to origination and reversal of temporary differences

(521)

(192)

Income tax charge reported in the statement of comprehensive income

(783)

(611)

 

The income tax rate applicable to the Company in Guernsey is nil. The current income tax charge of €262,360 represents tax charges on profit arising in Germany that is subject to corporate income tax of 15.83%. The effective income tax rate for the period differs from the standard rate of corporation tax in Germany. The differences are explained below:            


Year

Year


Year

Year


ended

ended


31 March

31 March


2013

2012


€000

€000

Loss before tax

(29,469)

(31,114)

Loss before tax multiplied by rate of corporation tax in Germany
of 15.825% (2012: 15.825%)

(4,663)

(4,924)

Effects of:



Income exempt from tax

(3,699)

(2,546)

Expenses deductible for tax purposes

(3,793)

(1,695)

Non-taxable items including revaluation movements

6,066

5,560

Tax losses utilised

(225)

(207)

Tax losses not utilised

6,584

4,004

Relating to origination and reversal of temporary differences

521

192

Adjustments in respect of prior periods

(65)

334

Other

57

(107)

Total income tax expense in the statement of comprehensive income

783

611





Year

Year

Deferred tax liability

ended

ended

31 March

31 March


2013

2012


€000

€000

Opening balance

2,115

1,923

Release due to disposals

(43)

-

Revaluation of investment properties and derivative financial instruments to fair value

564

192

Balance as at year end

2,636

2,115

The Group has tax losses of €144,592,914 (2012: €97,139,696) that are available for offset against future profits of its subsidiaries in which the losses arose. Deferred tax assets have not been recognised in respect of the revaluation losses on investment properties and interest rate swaps as they may not be used to offset taxable profits elsewhere in the Group as realisation is not assured.

9. Earnings per share

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


Year

Year


ended

ended


31 March

31 March


2013

2012


€000

€000

Earnings



Loss for the period attributable to the equity holders of the parent

(30,227)

(31,248)

Basic and diluted earnings

(30,227)

(31,248)

Add back revaluation deficits (net of related tax)

36,296

27,349

Add back change in fair value of derivative instruments

(350)

4,575

Add back non-recurring expenses

1,537

2,741

Loss/(gain) on sale of properties

1,201

(645)

Adjusted earnings

8,457

2,772

Number of shares



Weighted average number of ordinary shares for the purpose of basic earnings per share

317,559,843

304,773,176

Weighted average number of ordinary shares for the purpose of adjusted earnings per share

317,559,843

304,773,176

Basic and diluted loss per share

(9.52)c

(10.25)c

Adjusted earnings per share

2.66c

0.91c

 

The number of shares has been reduced by 10,221,824 shares that are held by the Company as Treasury Shares at 31 March 2013, for the calculation of basic and adjusted earnings per share.

The Directors have chosen to disclose adjusted earnings per share in order to provide a better indication of the Group's underlying business performance; accordingly it excludes the effect of non-recurring costs, gains/losses on sale of properties, deferred tax and the revaluation deficits/surpluses on the investment properties and derivative instruments.

As the Company incurred a net loss in the reporting period, the diluted loss per share is the same as the basic loss per share.

 

10. Net assets per share


2013

2012


€000

€000

Net assets



Net assets for the purpose of assets per share (assets attributable to the equity

holders of the parent)

151,012

181,227

Deferred tax arising on revaluation of properties

2,636

2,115

Derivative financial instruments

197

13,854

Adjusted net assets attributable to equity holders of the parent

153,845

197,196

Number of shares



Number of ordinary shares for the purpose of net assets per share

317,578,176

317,523,176

Net assets per share

47.55c

57.08c

Adjusted net assets per share

48.44c

62.1c

 

The number of shares has been reduced by 10,221,824 shares that are held by the Company as Treasury Shares at 31 March 2013, for the calculation of adjusted net assets per share.


11. Investment properties

A reconciliation of the valuation carried out by the external valuer to the carrying values shown in the statement of financial position is as follows:


2013

2012


€000

€000

Investment properties at market value

440,020

485,740

Adjustment in respect of lease incentives

(2,132)

(1,900)

Additional write-downs

(1,795)

-

Reclassified as investment properties held for sale

(25,604)

(7,060)

Balance as at year end

410,489

476,780

 

The fair value of the Group's investment properties at 31 March 2013 has been arrived at on the basis of a valuation carried out 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. Market value was primarily derived using a ten year discounted cash flow model supported by comparable evidence. The discounted cash flow calculation is a valuation of rental income considering non-recoverable costs and applying a discount rate for the current income risk over a ten year period. After ten years a determining residual value (exit scenario) is calculated. A cap rate is applied to the more uncertain future income, discounted to a present value.

The weighted average lease duration was three years.

As a result of the level of judgement used in arriving at the market valuations, the amounts which may ultimately be realised in respect of any given property may differ from the valuations shown in the statement of financial position.

The movement on the valuation of the investment properties of market value per the valuers' report is as follows:


2013

2012


€000

€000

Total investment properties at market per valuers' report as at 1 April

485,740

505,500

Additions and subsequent expenditure

4,145

7,969

Adjustment in respect of lease incentives

232

1,900

Disposals

(15,500)

-

Reclassified as investment properties held for sale not included in valuation

(5,380)

(2,280)

Deficit on revaluation

(35,776)

(27,349)

Write-downs to selling price recorded in deficit on revaluation

6,559

-

Total investment properties at market per valuers' report as at 31 March

440,020

485,740


 

12. Investment properties held for sale

 


2013

2012


€000

€000

Königswinter partial site

-

2,280

Bremen - Brinkmann land

187

-

Bremen Doetlingerstr. site

8,653

-

Berlin Gartenfeldstr. land

1,975

-

Merseburg McDonalds building

1,029

-

Bonn Siemensstr. land

186

-

Cottbus site

297

-

Regensburg site

6,287

-

Rostock Goethestr. site

965

-

Bremen Rigaerstr. site

3,000

-

Investment properties held for sale included in year end valuation

22,579

2,280

Munich Hofmanstr. site not included in year end valuation

-

7,060

Leinfelden-Echterdingen site not included in year end valuation

5,078

-

Balance as at year end

27,657

9,340

 

At 14 August 2012, the Company reached an agreement to dispose of a section of land at the Bremen Brinkmann site for  €187,000. The disposal has been notarised and subject to being included on the land register, it will be completed in the next period.

In December 2012, the Company reached an agreement to dispose of the property at the Bremen Doetlingerstr site for €8,750,000.  The non-core site consists of four buildings used for office and retail with net lettable area of 10,618 sqm. The site is 75% occupied with the main tenant EWE Immobilien GmbH.  The transaction has been notarised and expected to complete in the next period.

In December 2012, the Company sold one building and 27,321 sqm of land at the Berlin Gartenfeld site for €1,980,773. The transaction is expected to be notarised and completed in the next period.

In December 2012, the Company sold a 667 sqm stand-alone building on the Merseburg site for €1,050,000.  The transaction was notarised in January 2013 and will be completed in the next period.  The tenant in the building is McDonalds.

At 30 October 2012, the Company reached an agreement to dispose of a further 2,743 sqm of land at the Bonn Siemensstr. site for  €186,725. The disposal has been notarised and subject to being included on the land register, it will be completed in the next period.

On 22 March 2013, the Company sold the property at the Cottbus site for €300,000.  The site, which is a mixed-use site with office and storage space, is 78% occupied with current annual rent of €43,440 and net lettable area of 1,057 sqm.  The transaction has been notarised and will close in the next period.

On 12 April 2013, the Company reached an agreement to dispose of the property at the Regensburg site for €6,350,000.  The site, which is 88% occupied, consists of four buildings for office, industrial and logistic usage with current annual rent of €707,592 and net lettable area of 24,043 sqm. The transaction was notarised in April 2013 and will complete in the next period.

On 28 May 2013, the Company sold the property at the Rostock Goethestr. site for €975,000.  The site is a single office building that is 100% occupied with current annual rent of €101,256 and net lettable area of 1,240 sqm.  The transaction was notarised in May 2013 and will complete in the next period.

The Company sold the Leinfelden-Echterdingen site on 1 April 2013 for €5,250,000.  This site consists of one building for mainly office use with some industrial and storage use with its net lettable area of 10,239 sqm. The site is was 84% occupied when sold.   

13. Plant and equipment

 


Plant and

Fixtures



equipment

and fittings

Total

€000

€000

€000

Cost




4,156

1,644

5,800

45

153

198

(72)

(88)

(160)

As at 31 March 2013

4,129

1,709

5,838




(1,680)

(682)

(2,362)

(613)

(419)

(1,032)

45

49

94

As at 31 March 2013

(2,248)

(1,052)

(3,300)

Net book value as at 31 March 2013

1,881

657

2,538

Cost




5,237

1,311

6,548

97

165

262

(1,414)

2

(1,412)

236

166

402

As at 31 March 2012

4,156

1,644

5,800




(1,494)

(375)

(1,869)

(546)

(307)

(853)

360

-

360

As at 31 March 2012

(1,680)

(682)

(2,362)

Net book value as at 31 March 2012

2,476

962

3,438





 

14. Goodwill


2013

2012


€000

€000

Opening balance

3,738

-

Additions

-

3,738

Total

3,738

3,738

 

On 30 January 2012 a transaction was completed to internalise the Asset Management Agreement and as a result of the consideration given exceeding the net assets acquired, goodwill of €3,738,000 was recognised. Current business plans indicate that the balance is unimpaired.

Goodwill is tested at least annually for impairment and whenever there are indications that goodwill might be impaired. The recoverable amount of a cash-generating unit is based on its value in use. Value in use is the present value of the projected cash flows of the cash generating unit. The key assumptions regarding the value in use calculations were budgeted growth in profit margins and the discount rate applied. Budgeted profit margins were estimated based on actual performance over the past two financial years and expected market changes. The discount rate used is a pre-tax rate and reflects the risks specific to the real estate industry. The Group prepares cash flow forecasts based on the most recent financial budget approved by management, which covers a one year period. Cash flows beyond this period are extrapolated to a period of five years using a growth rate of 2%, which is consistent with the long-term average growth rate for the real estate sector. The discount rate applied was 6.5%

 

15. Trade and other receivables

 


2013

2012


€000

€000

Trade receivables

3,790

4,771

Other receivables

5,642

4,923

Related party receivable (see note 26)

10

10


9,442

9,704

 

 

16. Cash and cash equivalents

 


2013

2012


€000

€000

Cash at banks and in hand

16,718

9,145

 

Cash at banks earns interest at floating rates based on daily bank deposit rates. The fair value of cash is €16,718,288 (2012: €9,144,770).

As at 31 March 2013 €8,995,249 (2012: €5,572,909) of cash is held in blocked accounts. Of this, balances relating to deposits received from tenants total €2,651,345 (2012: €2,332,317). An amount of €15,522 (2012: €15,625) relates to funds held on an escrow account for a supplier and €115,503 (2012: €153,596) is held in a restricted account for office rent deposit. An amount of €6,212,879 (2012: €3,071,371) relates to amounts reserved for future bank loan interest and amortisation payments on the bank loan facilities.

  

17. Trade and other payables


2013

2012


€000

€000

Trade payables

6,658

6,080

Accrued expenses

7,512

6,840

Accrued interest

596

1,111

Other payables

13,058

6,603


27,824

20,634

 

The other payables include the purchase price for the sale of the Leinfelden-Echterdingen site of €5,250,000, which was received in advance of the effective date of the sale 1 April 2013.

 

18. Interest-bearing loans and borrowings


Effective

interest

rate

%

Maturity

2013

€000

2012

€000

Current





ABN Amro loan
- floating rate facility

Floating

30 June 2013

49,201

-

ABN Amro loan
- fixed rate facility

5.85

15 October 2012

-

91,217

Berlin Hannoversche Hypothekenbank AG

- floating rate facility

Floating

31 March 2014

208,688

-

Berlin Hannoversche Hypothekenbank AG

- fixed rate facility

5.46

31 March 2013

-

49,661

Berlin Hannoversche Hypothekenbank AG

- hedged floating rate facility

Hedged floating*

31 March 2013-30 June 2013

-

47,937

Berlin Hannoversche Hypothekenbank AG

- capped floating rate facility

Capped floating**

31 December 2013

-

1,360

Macquarie Bank loan

- hedged floating rate facility

Hedged floating***

17 January 2017

712

-

Capitalised finance charges on all loans



(450)

(842)




258,151

189,333

Non-current





Berlin Hannoversche Hypothekenbank AG

- hedged floating rate facility

Hedged floating*

31 March 2013-30 June 2013

-

65,172

Berlin Hannoversche Hypothekenbank AG

- capped floating rate facility

Capped floating**

31 December 2013

-

40,245

Macquarie Bank loan

- hedged floating rate facility

Hedged floating***

17 January 2017

27,788

-

Convertible  fixed rate facility

5.00

21 March 2018

5,000

-

Capitalised finance charges on all loans



(1,549)

(203)




31,239

105,214

Total



289,390

294,547

 

  

18. Interest-bearing loans and borrowings continued

The borrowings are repayable as follows:


2013

2012


€000

€000

On demand or within one year

258,601

190,175

In the second year

712

105,417

In the third to fifth years inclusive

32,076

-

Total

291,389

295,592

 

*   The average fixed rate of the swap contracts was 4.74%, plus an average margin of 1.12% bringing the total cost to 5.86%. The swap contracts had various maturity dates with the latest being June 2018. The swap contracts were terminated in January and March 2013, with the settlement amounts being added to the new floating rate loan.

**  This floating rate facility was capped at 5.98%.

*** €20.0m of this facility is charged interests at 600 bps plus 0.629% until 23 July 2016 by means of an interest rate swap.  The remainder of the facility is charged interest at 6.0% plus EURIBOR.

 

The Group has pledged 33 (2012: 34) properties to secure the interest-bearing debt facilities granted to the Group. The 33 properties had a combined valuation of €429,015,328 as at 31 March 2013 (2012: €450,660,000).

ABN Amro Bank N.V.

This facility had €100,951,940 drawn down, of which €51,751,093 (2012: €9,734,821) has been amortised, resulting in a net liability of €49,200,847 (2012: €91,217,119) at year end. Until 15 October 2012, the interest was fixed at a weighted average interest rate of 5.85% per annum. The final repayment date was 15 October 2012.

The Company agreed on 6 December 2012 an extension to the ABN Amro ("ABN") facility to 28 June 2013. The extended loan was changed to a floating rate facility at 4.0% plus EURIBOR. This extension was subject to the facility balance being reduced to certain hurdles on 15 January 2013 and 15 April 2013. The hurdles were met for 15 January 2013, but as the hurdles for 15 April 2013 were not met due to delays in the disposal of non-core assets, a further extension was negotiated. As the Company has in the meantime reduced the loan balance down to €43.3 million, and with a further €16.8 million of ABN related disposals under notarisation which will take the loan balance down to €26.5m, ABN granted on 3 May 2013 the further extension to 28 June 2013.

The loan is secured over ten (2012: 16) property assets and is subject to various covenants with which the Group has complied.

 

Berlin Hannoversche Hypothekenbank AG

Through 28 March 2013, facilities of €226,500,000 had been granted by Berlin-Hannoversche Hypothekenbank AG. To 28 March 2013 €31,119,000 (2012: €22,125,645) had been amortised, resulting in a liability of €195,381,000. On that date, the three loan facilities which were to expire on 31 March 2013, 30 June 2013 and 31 December 2013 were all extended in one new facility to 31 March 2014.  In addition, the interest rate derivatives attached to these loans valuing €13,307,000 were terminated and the associated liabilities added to the loan.  As a result, the loan liability at 31 March 2013 is €208,688,000 (2012: €204,374,355).

The new facility has an interest rate of 2.50% margin over three months EURIBOR plus a minimal liquidity surcharge. This facility is secured over 18 property assets and is subject to various covenants with which the Group has complied.

Macquarie Bank

On 17 January 2013, the Company agreed to a facility agreement with Macquarie Bank Limited for €28,500,000. The loan terminates on 17 January 2017. Amortisation is 2.5% p.a. for the first three years, with the remainder due in the fourth year. €20.0m of the facility has been hedged at a rate of 6.629% until 23 July 2016 by way of an interest rate swap.  The remainder of the facility is charged interest at 6% plus three months EURIBOR. This facility is secured over five property assets and is subject to various covenants with which the Group has complied.

Convertible shareholder loan

On 22 March 2013, the Company issued €5 million convertible loan notes due 2018 (the "Loan Notes").  The entire issue of €5 million has been taken up by the Karoo Investment Fund S.C.A. SICAV-SIF and Karoo Investment Fund II S.C.A. SICAV-SIF,  24.96% shareholders in Sirius  The Loan Notes were issued at par and carry a coupon rate of 5% per annum.  The Loan Notes are convertible into ordinary shares of Sirius at the conversion price of €0.24 from 21 March 2014.  The majority of the proceeds from the issue of the Loan Notes will be used to reduce debt levels and form part of the on-going discussion with existing banks to refinance debt facilities. 

18. Interest-bearing loans and borrowings continued 

A summary of the Group's debt covenants are set out below:


Total

Value of





Interst cover/


Loan

secured





debt service


outstanding

properties

Loan-to-value

Loan-to-value

Interest

Debt service

cover ratio


at 31 March

at 31 March

ratio

covenant

cover ratio

cover ratio

convenant


2013

2013

at 31 March

at 31 March

at 31 March

at 31 March

at 31 March


€000

€000

2013

2013

2013

2013

2013

ABN Amro loan

49,201

64,451

76.3%

80%

2.25

n/a

1.30

Berlin Hannoversche

208,688

312,614

66.8%

69%

n/a

2.01

1.30

Hypothekenbank AG loan
Macquarie Bank

28,500

50,154

56.8%

70%

2.06


1.75







1.27

1.05

Unencumbered properties

-

10,927

n/a





Total

286,389

438,146

65.4%





 

19. Financial risk management objectives and policies

The Group's principal financial liabilities comprise bank loans, derivative financial instruments and trade payables. The main purpose of these financial instruments is to raise finance for the Group's operations. The Group has various financial assets such as trade receivables and cash, which arise directly from its operations.

The main risks arising from the Group's financial instruments are credit risk, liquidity risk and interest rate risk. The risk management policies employed by the Group to manage these risks are discussed below.

Credit risk

Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the reporting date. In the event of a default by an occupational tenant, the Group will suffer a rental shortfall and incur additional costs, including expenses incurred to try and recover the defaulted amounts and legal expenses in maintaining, insuring and marketing the property until it is re-let. During the year the Group monitored the tenants in order to anticipate and minimise the impact of defaults by occupational tenants, as well as ensuring that the Group has a diversified tenant base.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:


2013

2012


€000

€000

Trade receivables

3,790

4,771

Other debtors

5,651

4,934

Prepayments

494

339

Derivative financial instruments

-

4

Cash and cash equivalents

16,718

9,145


26,653

19,193

 

The ageing of trade receivables at the statement of financial position date was:


Gross

Impairment

Gross

Impairment


2013

2013

2012

2012

Group

€000

€000

€000

€000

Past due 0-30 days

1,673

(289)

4,176

(792)

Past due 31-120 days

3,644

(1,797)

587

(229)

More than 120 days

2,505

(1,946)

3,183

(2,154)


7,822

(4,032)

7,946

(3,175)


 

19. Financial risk management objectives and policies continued

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:


2013

2012


€000

€000

Balance at 31 March

(3,175)

(2,897)

Impairment loss recognised

(857)

(278)

Balance at 31 March

(4,032)

(3,175)

 

The allowance account for trade receivables is used to record impairment losses unless the Group believes that no recovery of the amount owing is possible; at that point the amounts considered irrecoverable are written off against the trade receivables directly.

Most trade receivables are generally due one month in advance. The exception is service charge balancing billing which is due ten days after it has been invoiced. Included in the Group's trade receivables are debtors with carrying amounts of €3,789,940 (2012: €4,770,682) which are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable.

Liquidity risk

Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability but can also increase the risk of losses. The Group has procedures with the objective of minimising such losses, such as maintaining sufficient cash and other highly liquid current assets and having available an adequate amount of committed credit facilities. The Group prepares cash flow forecasts and continually monitors its ongoing commitments compared to available cash. Cash and cash equivalents are placed with financial institutions on a short-term basis which allows immediate access. This reflects the Group's desire to maintain a high level of liquidity in order to meet any unexpected liabilities that may arise due to the current financial position.

The table below summarises the maturity profile of the Group's financial liabilities as at 31 March 2013 based on contractual undiscounted payments:



Derivative




Bank and shareholder

 financial

Trade and other



loans

instruments

payables

Total

Year ended 31 March 2013

€000

€000

€000

€000

Undiscounted amounts payable in:





Six months or less

(58,074)

(42)

(27,824)

(85,940)

Six months to one year

(209,341)

(41)

-

(209,382)

One to two years

(3,046)

(80)

-

(3,126)

Two to five years

(36,473)

(101)

-

(36,574)


(306,934)

(264)

(27,824)

(335,022)

Interest

15,545

264

-

15,809


(291,389)

-

(27,824)

(319,213)

 



Derivative




Bank

 financial

Trade and other



loans

instruments

payables

Total

Year ended 31 March 2012

€000

€000

€000

€000

Undiscounted amounts payable in:





Six months or less

(10,285)

(2,361)

(20,634)

(33,280)

Six months to one year

(189,932)

(2,317)

-

(192,249)

One to two years

(106,475)

(990)

-

(107,465)

Two to five years

-

-

-

-


(306,692)

(5,668)

(20,634)

(332,994)

Interest

11,100

5,668

-

16,768


(295,592)

-

(20,634)

(316,226)

19. Financial risk management objectives and policies continued

Currency risk

There is no significant foreign currency risk as most of the assets and liabilities of the Group are maintained in euros. Small amounts of UK sterling are held to ensure payments made in UK sterling can be achieved at an effective rate.

Interest rate risk

The Group's exposure to interest rate risk relates primarily to the Group's long-term floating rate debt obligations. The Group's policy is to mitigate interest rate risk by ensuring that a minimum of 85% of its total borrowing is at fixed interest rates by taking out fixed rate loans or derivative financial instruments to hedge interest rate exposure.

A change in interest will only have an impact on the floating loans capped due to the fact that the other loans have a general fixed interest or they are effectively fixed by a swap. An increase in 100 basis points in interest yield would result in a decreased post tax profit in the consolidated statement of comprehensive income of €2.2m (excluding the movement on derivative financial instruments) and a decrease in 100 basis points in interest yield would result in an increased post tax profit in the consolidated statement of comprehensive income of €2.2m (excluding the movement on derivative financial instruments).

Capital management

The Group seeks to enhance shareholder value both by investing in the business so as to improve the return on investment and by managing the capital structure.

The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, issue shares or undertake transactions such as occurred with the internalisation of the Asset Management Agreement.

The Company holds 10,221,824 of its own shares which continue to be held as Treasury Shares. During the year 55,000 shares were issued from treasury and no share buybacks were made. This is explained further in note 21.

The Group monitors capital using a gross debt to property assets ratio, which was 65.4% as at 31 March 2013 (2012: 61.1%).

The Group is not subject to externally imposed capital requirements other than those related to the covenants of the bank loan facilities.

  

20. Financial instruments

Fair values

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


2013



2012



Carrying

Fair


Carrying

Fair


amount

value


amount

value


€000

€000


€000

€000

Financial assets






Cash

16,718

16,718


9,145

9,145

Trade receivables

3,790

3,790


4,771

4,771

Derivative financial instruments

-

-


4

4

Financial liabilities






Trade payables

6,658

6,658


6,080

6,080

Derivative financial instruments

197

197


13,858

13,858

Interest-bearing loans and borrowings:






Floating rate borrowings

257,889

257,889


-

-

Floating rate borrowings - hedged

28,500

28,500


113,108

113,108

Floating rate borrowings - capped

-

-


41,606

41,606

Fixed rate borrowings

5,000

5,000


140,878

144,295

 

Fair value hierarchy

The table below analyses financial instruments measured at fair value into a fair value hierarchy based on the valuation technique used to determine fair value:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).


Level 1

Level 2

Level 3

Total


€000

€000

€000

€000

2013





Derivative financial instruments

-

197

-

197

2012





Derivative financial instruments

-

13,854

-

13,854

 

Interest rate risk

The following table sets out the carrying amount, by maturity, of the Group's financial instruments that are exposed to interest rate risk:


Within

1 - 2

2 - 3

3 - 4

4 - 5



1 year

years

years

years

years

Total

2013

€000

€000

€000

€000

€000

€000

ABN Amro loan

(49,201)

-

-

-

-

(49,201)

Berlin Hannoversche Hypothekenbank AG loan

(208,688)

-

-

-

-

(208,688)

Macquarie Bank loan

(712)

(712)

(712)

(26,364)

-

(28,500)

Cash assets

16,718

-

-

-

-

16,718

 

 

20. Financial instruments continued

The other financial instruments of the Group that are not included in the above tables are non-interest-bearing and are therefore not subject to interest rate risk.


Within

1 - 2

2 - 3

3 - 4

4 - 5



1 year

years

years

years

years

Total

2012

€000

€000

€000

€000

€000

€000

ABN Amro loan

(91,217)

-

-

-

-

(91,217)

Berlin Hannoversche Hypothekenbank AG loan:





-

Fixed and floating rate hedged

(97,597)

(65,172)

-

-

-

(162,769)

Floating rate capped

(1,360)

(40,245)

-

-

-

(41,605)

Cash assets

9,145

-

-

-

-

9,145

 

21. Issued share capital

 


Number

Share


of shares

capital

Authorised


Ordinary shares of no par value

Unlimited

-

As at 31 March 2013

Unlimited

-

 

 



Share


Number

capital

Issued and fully paid:

of shares

Ordinary shares of no par value



Issued ordinary shares

327,800,000

-

Shares bought back and held in treasury

(25,576,824)

-

Issued Treasury Shares

15,300,000

-

As at 31 March 2012

317,523,176

-

Issued Treasury Shares

55,000

-

As at 31 March 2013

317,578,176

-

 

Holders of the ordinary shares are entitled to receive dividends and other distributions and to attend and vote at any general meeting.

The Company holds 10,221,824 of its own shares which are held as treasury. During the year 55,000 shares were issued.

No share buybacks were made in the year.

 

22. Other reserves

Other distributable reserve

The other distributable reserve is a distributable reserve that was created for the payment of dividends and for the buyback of shares and is €303,636,655 in total at 31 March 2013 (2012: €303,625,000).

 

23. Dividends

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 year ended 31 March 2013 (2012: €nil).

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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