Wrap Text
Final Results for the year ended 31 March 2015
SIRIUS REAL ESTATE LIMITED
(Incorporated in Guernsey)
Company Number: 46442
Share Code: SRE
ISIN Code: ISIN GG00B1W3VF54
Sirius Real Estate Limited
("Sirius", "the Group" or "the Company")
Final Results for the year ended 31 March 2015
"This has been another excellent year for the business. The successful capital raise which facilitated the acquisition of four
business parks in excellent locations in Germany, was accompanied by a successful secondary listing on the Johannesburg
Stock Exchange, further diversifying our shareholder base. In addition, the capex investment programme that we introduced
in 2014 continues to show a high return on investment. This programme, the acquisitions and other asset management
initiatives have contributed to a significant improvement in our annualised rental income, earnings and adjusted net asset
value per share." Robert Sinclair, Chairman of Sirius.
Trading Highlights
- Demand for Sirius’s workspace continues to be high, with gross annualised rent roll from the pre-acquisitions portfolio
at €43.6 million as at 31 Mar 2015 (31 Mar 2014: €41.3 million) representing a like-for-like 5.6% increase. Including
acquisitions, the rent roll has increased to a gross annualised €50.0 million.
- Recurring profit before tax on a like-for-like basis on the pre-acquisitions portfolio increased y 26% from €9.4 million*
to €11.8 million. Including acquisitions completed before the year-end, the recurring profit before tax as €12.6m.
Funds From Operations (“FFO”)** for the year was €14.3 million (2014: €11.2 million).
- Average rental rate across the pre-acquisitions portfolio increased to €4.58 per sqm (31 Mar 2014: €4.46 per sqm)
and occupancy increased to 78% (31 March 2014: 76%). Including acquisitions, the average rental rate was €4.75 per
sqm and occupancy 79%.
- Achieved new lettings in the period of 119,992 sqm at an average rate of €5.02 per sqm, 13% above the average rate of
€4.46 per sqm being achieved on the pre-acquisitions portfolio at the start of the period.
- Valuation of the pre-acquisitions portfolio increased by 6.4% from €445.5 million^ to €473.8 million in the period,
mainly due to net operating income growth. Including acquisitions the portfolio was valued at €550.0 million.
- Adjusted Net Asset Value (“NAV”)*** per share increased by 10.5% to 47.51c (31 March 2014: 43.0c) after adjusting for
the net asset value dilution resulting from the capital raise in December 2014. Total NAV return, including dividends
paid, in the period was 13.0%.
- Loan to value (”LTV”) ratio reduced to 46.8% (31 March 2014: 50.9%) showing continued progress towards the 40% LTV
target.
- The Group re-introduced dividend payments with the objective of paying out 65% of FFO. The Company paid an
interim dividend of 0.3c per share in August 2014 (relating to the prior year) and 0.77c per share in December 2014 and
is declaring a final dividend for the year of 0.84c per share to be paid on 10 July 2015.
* Excluding surrender premium and disposals
** Recurring earnings after tax and before property revaluation, change in fair value of derivative financial instruments, depreciation, amortisation of
debt arrangement fees, non-recurring costs, and other non-cash items
*** Excluding provisions for deferred tax and financial derivatives
^ Adjusted for disposals
^^ Adjusted for equity raise
Capex Investment Programme
- The Company has continued to implement its intensive capex investment programme commenced in January 2014 to
transform approximately 100,000 sqm of previously unlettable or under-rented space. As at 31 March 2015 €3.1
million of the forecasted €8.9 million has been invested, transforming 37,860 sqm of space which is already generating
€1.96 million of rental income on an occupancy of 74%.
Secondary Listing
- On 5 December 2014, the Company completed a dual listing on the Alternative Exchange (“AltX”) of the Johannesburg
Stock Exchange (“JSE”) and was the first ever Company to do so under the newly introduced fast track listing process.
Acquisitions
- At the time of the dual listing, the Company raised €40 million to support the expansion of the property portfolio and
has since announced the acquisition of four business parks for a total consideration of €70.9 million, with an EPRA net
initial yield of 8.1%. A new €36 million debt facility from BerlinHyp as been fully drawn down against three of the four
business parks with an interest rate of 2.85% fixed for five years. This portfolio has an initial cash on cash yield of 12.9%.
Robert Sinclair, Chairman of Sirius, said, “This was a good year for Sirius, which saw us deliver on our ambition to increase the
scale and future returns generated from the business. The focus now is on maintaining this positive momentum. There are
immediate opportunities to achieve this; by growing the rent roll and occupancy through the capex investment programme
focused on 50% of the current vacant space; benefiting from the strong market demand for the Company’s range of flexible
workspace solutions; and by taking advantage of the Company’s ability to borrow at significantly lower interest rates.”
Images of the Sirius property portfolio are available from https://www.flickr.com/photos/128710739@N05/
Enquiries:
Sirius Real Estate
Andrew Coombs, CEO +49 (0)30 285010110
Alistair Marks, CFO
Peel Hunt
Capel Irwin +44 (0)20 7418 8900
Hugh Preston
PSG Capital
David Tosi +27 (0)21 887 9602
Willie Honeyball
Finncap
Stuart Andrews +44 (0)20 7220 0500
Paul Harrington
Novella
Tim Robertson +44 (0)20 3151 7008
Ben Heath
www.sirius-real-estate.com
Chairman's statement
Introduction
The Group is pleased to announce the full year results for the year ended 31 March 2015. We have again seen significant
improvement to the Group’s pre-tax profitability, adjusted net asset value per share and market capitalisation this year, leading
to Sirius not only being included in the FTSE AIM 100 Index for the first time but, at the time of this report, ranking 38th in that
table.
On 5 December 2014, Sirius completed its secondary listing on the Johannesburg Stock Exchange and, at the same time,
successfully raised €40 million to support the expansion of its portfolio through the acquisition of four business parks for €70.9
million. These assets were purchased with an EPRA net initial yield of 8.1% and three of them have been financed with a five
year €36 million bank facility with a 2.85% fixed interest rate. With an initial yield spread of greater than 5.2% and plenty of
value-added opportunities within the sites, these acquisitions are expected to be very accretive to earnings going forward,
initially delivering a cash-on-cash yield of 12.9%. The JSE listing also further diversifies the Company's shareholder base,
providing existing and new South African investors with an opportunity to participate in the Company's income and value
generation potential. This increased liquidity and tradeability of the Company's shares will further help Sirius grow in the future.
The intensive capex investment programme aimed at delivering organic growth has seen some encouraging results in the
period. The programme commenced in January 2014 and is focused on around 100,000 sqm of previously unlettable or
under-rented space that was either vacant or significantly under-rented at the time the initiative commenced. The space
targeted represented approximately 50% of the vacant space of the core portfolio. As at 31 March 2015, we have fully
transformed 37,860 sqm of this space, of which 74% is let and is already contributing €1.96 million of rental income to the
Group.
The value of our property portfolio has grown to €550.0 mi ion as a 31 Mar 2015 (31 Mar 2014: €445.5 million*), with
€76.2 million of the increase attributable to the acquisitions (cost plus revaluation) and €28.3 million coming from revaluation
uplift on the pre-acquisitions portfolio. The uplift on the latter is largely due to rental growth and improvement in service charge
irrecoverability and we have as yet only seen a small amount of yield compression. We report a €5.3 million revaluation uplift on
the recently acquired properties, which is a direct result of our ability to find properties to acquire at a discount to valuation. We
are confident that there is potential for further uplifts on the total portfolio in the coming years from our asset management
initiatives, especially as a result of our ongoing capex investment programme.
* Adjusted for disposals
Financial Results
The Company has seen further improvement in profitability in the period where recurring profit before tax* including
acquisitions was €12.6 million, and excluding the impact of acquisitions was €11.8 million (2014: €9.4 million ^). As the
acquisitions completed near the end of the financial year, the contribution to these results are limited, but they will materially
increase earnings in the coming financial year. The improvement from the pre-acquisitions portfolio has largely come from
increased rental income from our organic growth initiatives, as well as some further improvement from our recovery of service
charge costs. Total income on the entire portfolio as €45.4 million of which €43.9 million as derived from the pre-acquisitions
portfolio (2014: €42.8 million ^) and profit before tax for the period as €32.7 million (2014: €31.0 million), which includes the
property revaluations. Annualised gross rent roll of the 33 business parks increased by 21% o €50.0 million (31 March 2014:
€41.3 million) in the twelve month period, of which €6.4 million (15.4%) as come from the addition of the four acquisitions and
€2.3 million (5.6%) as come from organic growth of the pre-acquisitions portfolio.
Funds From Operations** (“FFO”) in reased o €14.3 million (2014: €11.2 million) and FFO per share was 2.6c*** (2014: 2.8c).
Adjusted EPS* was 2.10c as at 31 March 2015 (31 March 2014: 2.26c^), whilst EPS was 4.84c (31 March 2014: 6.83c^).
* Excludes property revaluation, related deferred tax, non-controlling interests, profits on disposals, change in fair value of derivative financial instruments and
non-recurring items.
** See note 23 of the Notes to the Financial Statements for explanation.
^ Adjusted for surrender premium and disposals to get a like-for-like comparison
*** Based on average number of shares in issue throughout the period. This is lower than the prior year owing to more shares in issue through equity raises and
acquisitions only completing towards the end of the year. DPS is calculated on actual shares in issue and not average shares in issue.
Portfolio Valuation and Net Asset Value
The pre-acquisitions portfolio was independently valued a €473.8 million by Cushman & Wakefield LLP (31 Mar 2014: €445.8
million*) whilst the total portfolio including acquisitions was valued at €550.0 million. This translates to a book value of €545.6
million as follows:
* Adjusted for disposals
2015 2014
€ million € million
Investment properties at market value 550.0 448.7
Adjustment in respect of lease incentives (2.0) (2.0)
Specific value impairments (2.4) (3.0)
Reclassified as investment properties held for sale 0.0 (2.6)
Book value as at year end 545.6 441.1
The Adjusted Net Asset Value (‘Adjusted NAV’) per share, which excludes the provisions for deferred tax and derivative financial
instruments, was 47.5c as at 31 March 2015. This reflects an increase of 10.5% over the 44.32 Adjusted NAV per share on 31
March 2014 excluding the dilutive impact of the December 2014 capital raising. The total NAV return, including dividends paid in
the period, was 13.0%. The movement in Adjusted NAV this year can be seen in the following table:
2015 2015 2014 2014
€ 000 per share € 000 per share
Adjusted NAV, beginning of period * 229,976 44.32 153,845 48.44
Share issues – Dec 14 capital raising 38,324 (1.33) 45,438 (9.76)
Share issues – scrip dividends - (0.32) - -
Share issues – management incentives 506 (0.02) 903 (0.10)
Cash dividends (3,871) (0.62) - -
Recurring profit before tax 12,545 1.99 11,349 2.19
Surplus on revaluation 25,425 4.03 22,735 4.38
Other non-recurring items ** (3,412) (0.54) (4,294) (0.83)
Adjusted NAV, end of period * 299,493 47.51 229,976 44.32
* Adjusted for deferred taxes and change in value of derivative financial instruments
** Including shares to be issued as part of the LTIP and costs associated with the tax migration of Sirius
Real Estate from Guernsey to the UK.
^^ Adjusted for equity raise
The revaluation uplift on the pre-acquisitions portfolio as at 31 Mar 2015 as €28 million representing a 6.4% increase in the
twelve month period. The revaluation uplift on the acquisition portfolio of €5.3 mi ion (€9.5 million offset with €4.2 million of
acquisition costs) represents a 7.5% increase on what was paid for the assets. This is now the fourth valuation in succession
where values have increased and, once again, most of the increases are due to rental income improvements rather than yield
compression. The €33.6 million total valuation uplift translates to a €25.4 million gain in our books as shown in the table below
and is driven largely from the returns experienced from the deployment of €3.1 million of our capex investment programme, our
ability to purchase assets at discounted prices, as well as achieving further improvements in rent roll and service charge
recovery during the period through properties and other asset management initiatives.
€ million
Valuation increase as at 31 March 2015 33.6
Less capex (8.6)
Changes to valuation impairments 0.5
Lease incentives (0.1)
Revaluation profit at 31 March 2015 25.4
The core portfolio, which now comprises 29 of the 33 assets is valued at €515.1 million representing in an average gross yield of
8.9% (31 March 2014: 9.2%) and a net yield of 8.2% (2014: 8.3%). The average capital value per sqm is €547.1 (31 Mar 2014:
€479.1) i remains si nifi an y below replacement cost.
Dividend
In September 2014, the Board resolved to increase the dividend payable to shareholders, due to stronger cash generation from
operations as a result of the capex investment programme and growth in rental income. The dividend policy was enhanced to
65% of FFO, rather than the previously announced policy that referred to recurring profit after tax.
I am therefore pleased to confirm the Board is declaring a final dividend of 0.84c per share making a total dividend for the year
of 1.61c per share. The ex-dividend date will be 8 June 2015 for shareholders on the JSE register and 11 June 2015 for
shareholders on the LSE register. The record date will be 12 June 2015 and the dividend will be paid on 10 July 2015.
Sirius continues to offer shareholders the ability to receive dividends in scrip rather than as a cash alternative, for which there
was a 29% scrip take-up on the dividend paid on 31 December 2014. Details of the scrip offer for the final dividend will be
mailed to shareholders shortly. The latest date the scrip election form can be accepted is expected to be 26 June 2015.
Funding
Sirius has completed the refinancing of all banking facilities and the Group has now secured borrowings of €255.3 million with
four different lenders, representing an LTV ratio of 46.8% based on book value. As previously announced it is the Board’s
intention to reduce the LTV ratio to 40% in the near term through a combination of debt amortisation as well as further
improved valuations driven by our capex investment programme and other asset management initiatives. The bank debt expiry
dates on the four outstanding facilities range between January 2017 and July 2023 with an average unexpired term of 4.4 years.
The first facilities due for renewal are the two Macquarie facilities, repayable in January 2017. These two facilities, with €56
million outstanding, bear interest at a blended rate of approximately 7% and are subject to a full cash sweep. Refinancing these
two facilities at the currently available rates would result in a significant improvement to the Group's profitability and cashflow
and the Board is currently in discussions with a number of financial institutions on this.
German SME Market
Market conditions in the German economy continue to improve and we believe that the SME sector in particular is in a strong
position when compared to the previous twelve months. Gross domestic product, capital investment and exports have all
increased in the three months from December 2014. The weaker euro exchange rate continues to lift German exports and with
the oil price declining, energy costs have fallen sharply. This has provided a significant boost to the German SME sector, which is
a key market from which Sirius attracts its tenant base, particularly for our higher end Smartspace products.
The European Central Bank recently launched an outright quantitative easing programme to stave off deflation, keep interest
rates low and to weaken the euro. As a consequence long term Eurozone government bond yields, a proxy for the cost of
capital, haves declined significantly. Small-to-medium sized German businesses now have more access to cheaper capital and so
are more inclined to invest in expanding their businesses; Sirius’s offering of good quality, good value flexible workspace is
proving to be very attractive.
Outlook
The Company continues to trade in line with expectations, and with the SME market in Germany continuing to improve, we are
confident that demand for conventional and flexible workspace will remain strong across our core sites.
The capex investment programme, targeting 50% of our vacant space, is now nearing 40% completion and we are already seeing
excellent rental returns from the previously unlettable or under-rented areas that have now been transformed. This, together
with the recently acquired earnings enhancing sites should impact positively on rental income, earnings and dividends going
forward.
Chief Executive's Report
Introduction
In a successful period of new acquisitions, capital raising and organic growth, Sirius is pleased to report a strong twelve months
of trading. The Group continues to measure its success in asset management through total returns generated by both increased
income returns and improvement in capital returns. In this financial year, Sirius saw its recurring profit before tax increase by
26% on a like-for-like basis of the pre-acquisitions portfolio, driven largely by increased rental income across the board. Adjusted
NAV per share has also seen a like-for-like increase of 10.5% during the year, after adjusting for the December 2014 equity raise
and is now 47.5c as at 31 March 2015. Total NAV return, including dividends paid, was 13.0%. Whilst this is a positive
movement, we believe there remains further scope to improve the value of the Group’s portfolio of assets through the Group’s
investment and asset management initiatives. This has been a significant contributor to the Group trading at a stronger share
price, but the shares also appear to be benefiting from greater liquidity through the dual listing in Johannesburg as well as it now
being one of the largest companies on AIM. During the twelve months, Sirius has increased the portfolio from 30 business parks
to 33 (29 of which are deemed to be core assets). The four acquisitions in the period have all been earnings enhancing and the
intensive capex investment programme, aimed at transforming previously unlettable or under-rented space, is showing a
positive return. The Sirius business model remains very much focused on organic growth and we will continue to leverage our
operating platform and the experience of our management team as we scale up our portfolio. Ultimately, by having a relatively
fixed overhead cost base spread over a larger estate, we are well positioned to harvest the economic benefits that a larger scale
brings to the business.
Whilst we have increased our flexible products such as Smartspace (Office, Storage and Workbox) and Flexilager which offer
higher yields than conventional lets, our core anchor tenant base remains strong, with our top 50 tenants generating 54% of the
rent roll.
^^Adjusted for equity raise
Operations
Strong market conditions mean that demand for our flexible and conventional workspace from the German SME market
continues to be high. In particular, Smartspace is progressing well with high demand for our Smartspace Office and Smartspace
Storage products in our core locations. Whilst the returns from offering flexibility in the Smartspace product range are
particularly good at the moment, the Group continues to recognise the benefit of having a stable base with strong covenanted
blue-chip anchor tenants, as well as mid-term conventional SME tenants. This asset management focus is as much directed
towards strengthening the quality and security of this core income stream as it is on the higher yielding flexible income stream.
The diversity of our tenant base ensures that we can maximise the yield whilst preserving the covenant quality within each park,
so that our assets will always remain attractive from both an investment and a financing perspective. The table below
illustrates the current tenant mix across the entire portfolio including the new acquisitions:
No. of Occupied Monthly Rate Per Sq
Tenants Sq Mt Rent Annual Rent Percentage Mt
Top 50 Tenants 50 479,273 2,270,439 27,245,273 54% 4.74
SmartSpace Tenants 1,199 41,194 252,297 3,027,567 7% 6.12
Other Tenants 1,730 356,641 1,644,008 19,728,100 39% 4.61
Total 2,979 877,108 4,166,744 50,000,940 100% 4.75
Our Smartspace product range across the entire portfolio currently represents 75,663 sqm or 6.8% of the total lettable space of
the portfolio and we would expect our capex investment programme to increase that to around 8% or more in the next twelve
months. With rental rates of more an €10 per sqm being achieved on the latest Smartspace office and storage products in our
key locations we are encouraged that this product range will continue to grow, especially given the locations of our recent
acquisitions. The capex investment programme is also directed at converting our cheaper, lower-quality Flexilager product into
both the higher-quality Smartspace storage product or, in some instances, back to higher-quality conventional space. The
demand and level of rental rates being achieved on these products continues to improve and the price point that we are
achieving for newly created Smartspace is now up to three times that achieved by the pre-conversion usage. This is being
achieved despite our products often being priced at half that of our main competitors.
Total SQM Occupied SQM Occupancy (%) Annual Rent (ex % Total Annual Rate (ex S/Charge)
S/Charge) Rent
SMSP Office 21,188 16,123 76% 1,468,219 48% 7.59
SMSP Workbox 4,828 4,047 84% 272,706 9% 5.57
SMSP Storage 16,760 10,186 61% 634,882 21% 5.19
Flexilager 32,887 10,838 33% 651,761 22% 5.01
SMSP TOTAL 75,663 41,194 54% 3,027,568 100% 6.12
Capex Investment Programme
The capex investment programme continues to be a strong driver of rental income growth, aimed at transforming
approximately 100,000 sqm of previously unlettable or under-rented space over a three year period through both a major
projects and a light investment programme. As of 31 Mar 2015 15 months after the commencement of the initiative, €3.1
million of the total €8.9 million budget has been invested, transforming 37,860 sqm of space which is already generating €1.96
million of rental income on an occupancy of 74%. Sirius has also successfully transformed this space under budget with the
investment on this space coming in lower than expected. The progress of the major projects element of this initiative can be
seen in the table below:
Status Area Investment Rental Increase
€ € Occupancy Rate
Sqm Budget Actual Budget Achieved to Budget Achieved Budget Achieved
Date to Date to Date
Completed
37,860 3,754,000 3,120,764 2,096,785 1,962,116 80% 74% 5.77 5.82
In Progress
10,870 1,895,500 537,969 575,611 0 80% 0 5.52 0
Not Yet
Commenced 22,067 2,387,549 0 1,072,274 0 80% 0 5.06 0
Total
70,797 8,037,049 3,658,733 3,744,670 1,962,116 80% 40% 5.51 5.82
Once the full capex investment programme is completed, the Group expects that space with an Estimated Rental Value of €5.5
million will have been created and with an occupancy rate of 80% should contribute close to €4.0 million towards the Group’s
total rental income. Considering the recurring profit level of the Group at the time this commenced, this initiative represents a
material improvement in the Group’s profitability over the programme’s life. As the programme is focused on converting
previously unusable or under-rented space, which has limited value attributed to it in the property valuations, this investment is
also expected to have a positive impact on the value of the portfolio.
Disposals
Our objective is to fund our capex investment programme, as far as possible, with the disposal of non-income producing land as
well as cashflow from operations. In the twelve month period, the Group disposed of 34,800 sqm of non-income producing
land across sites in Bremen, Bonn and Berlin, generating proceeds of €4.55 mi ion. Going forward we have identified four
non-core (two of which are unencumbered) low-income producing business parks and a further 105,000 sqm of surplus land as
potentially available for disposal. As these assets generate little profit, have low or no occupancy, and are conservatively valued
on our balance sheet, recycling the capital from these disposals would both streamline the portfolio whilst providing funds that
can be invested with much higher rates of return.
Acquisitions
During the period, Sirius completed the acquisition of four multi-let business parks for a total consideration of €70.9 million.
Located in and around Berlin, our Mahlsdorf and Potsdam assets, with a total lettable area of 65,444 sqm were the first two
sites acquired in December 2014, adding further presence in a core market for Sirius where demand for both conventional and
flexible workspace solutions is high. Acquired for a total consideration of €49.1 million, these sites will initially contribute €4.1
million to the business in annualised rental income on an occupancy of 85% and €3.8 million in net operating income.
In February 2015, the Group acquired two further sites in Aachen and Bonn with a total lettable area of 35,153 sqm for a total
consideration of €21.8 million. These sites provide an initial annualised rental income of €2.3 million on an occupancy of 76%
and €2.0 million of net operating income.
The four acquisitions were funded by the net proceeds from the Company’s €40 million Private Placement in December along
with a drawdown from the new €36 million five-year debt facility with BerlinHyp. This facility is secured over three of the four
assets and bears interest at a fixed rate of 2.85% per annum. These assets were acquired on an EPRA Net Initial Yield of 8.1%,
with opportunities to drive further returns from the vacant space. With demand for available space seen so far being
encouraging, these acquisitions provided immediate improvement in profitability, a sustainable and growing income stream and
ample opportunity to generate high long term total returns.
New Lettings and Moveouts
In the twelve month period, there were new lettings of 119,992 sqm a an avera e ra e of €5.02 per sqm and move-outs of
93,087 sqm at an average rate of €4.18 per sqm. For the year ended 31 March 2014 we reported new lettings of 113,784 sqm at
an average rate of €5.16 per sqm and move-outs of 112,956 sqm at an average rate of €4.42 per sqm. This further occupational
improvement has contributed to the pre-acquisitions portfolio occupancy increasing to 78% (2014: 76%) and rate per sqm to
€4.58 (2014: €4.46). We are continuing to see new lettings at a higher rate per sqm than the portfolio average and the rate of
existing tenants. This can be partly attributed to having more Smartspace available through the capex investment programme
but it is also indicative of the strength of the market we operate in. Given the breadth of our tenant base we will always have
move-outs in the portfolio but we are confident that the strength of our sales and marketing platform will once again result in
move-ins exceeding move-outs in the next financial year.
Operational efficiencies
Our level of service charge recovery continues to be above industry standards and we have made further progress this financial
year. Most aspects of the service charge recovery area are controlled by our employees and the systems that we have
developed which is why we are able to contract and allocate service charge costs in a more detailed and sophisticated way than
our competitors. This combined with using our consolidated purchasing power means we are able to provide a cost efficient and
transparent service to our tenants which they are beginning to really appreciate. What this has meant to Sirius is an
unprecedented level of cost recovery which has been one of the main profit drivers for the Group over the last few years.
Portfolio analysis
The table below shows the key details of the core portfolio of 29 assets and the four assets that are for sale. The core portfolio
is currently valued on a gross yield of 8.9% and a capital value of €547.1 per sqm.
Net operating
Book Value Rent roll income Total sqm Occ Rate per sqm
Core assets €513.2m €45.7m €42.1m 0.9m 84.5% €5.00
Non-core assets for disposal* €32.4m €4.3m €2.4m 0.2m 54.1 % €3.10
Other (€1.8m)
TOTAL €545.6m €50.0m €42.7m 1.1m 78.6 % €4.75
* Included in investment properties on the balance sheet, as the aasets do not yet meet the accounting criteria for the classification as “held for sale”
Outlook and the years ahead
We would like to thank the management team and all the staff for their tremendous work this year. We have secured four
excellent new sites to add to our portfolio and we are confident that the management team has the experience to fully
capitalise on the opportunities available. We will continue to explore further opportunities to increase the value of the existing
estate, recycle non-core and mature assets as well as improve the Group’s financing terms and expand our sources of lending.
The capex investment programme continues to generate strong returns on investment, largely due to the effectiveness of our
asset management activities, and we are hopeful to see further increases in our rent roll, occupancy and capital value of the
portfolio over the years to come.
Consolidated statement of comprehensive income
For the year ended 31 March 2015
Year ended Year ended
31 March 2015 31 March 2014
Notes €000 €000
Gross rental income 5 45,394 45,065
Direct costs 6 (15,082) (16,519)
Net rental income 30,312 28,546
Surplus on revaluation of investment properties 13 25,425 22,735
Profit/(loss) on disposal of properties 1,270 (1,687)
Administrative expenses 6 (6,526) (4,043)
Other expenses 6 (2,413) (2,298)
Operating profit 48,068 43,253
Finance income 9 42 64
Finance expense 9 (12,704) (12,155)
Change in fair value of derivative financial instruments (2,753) (128)
Profit before tax 32,653 31,034
Taxation 10 (5,651) (2,102)
Profit for the year 27,002 28,932
Profit attributable to:
Owners of the Company 26,985 28,927
Non-controlling interests 17 5
Profit for the year 27,002 28,932
Earnings per share
Basic earnings for the year attributable to ordinary equity holders of the Parent Company 11 4.84c 7.31c
Diluted earnings for the year attributable to ordinary equity holders of the Parent Company 11 4.71c 7.01c
Consolidated statement of financial position
As at 31 March 2015
2015 2014
Notes €000 €000
Non-current assets
Investment properties 13 545,626 441,087
Plant and equipment 15 1,678 1,834
Goodwill 16 3,738 3,738
Total non-current assets 551,042 446,659
Current assets
Trade and other receivables 17 9,123 11,378
Prepayments 325 1,570
Derivative financial instruments 73 678
Cash and cash equivalents 18 20,137 13,747
Investment property held for sale 14 — 2,633
Total current assets 29,658 30,006
Total assets 580,700 476,665
Current liabilities
Trade and other payables 19 (25,862) (20,980)
Interest-bearing loans and borrowings 20 (3,302) (2,813)
Current tax liabilities (451) (125)
Derivative financial instruments (538) (4)
Total current liabilities (30,153) (23,922)
Non-current liabilities
Interest-bearing loans and borrowings 20 (251,480) (222,071)
Deferred tax liabilities 10 (9,020) (4,200)
Derivative financial instruments (1,784) (170)
Total non-current liabilities (262,284) (226,441)
Total liabilities (292,437) (250,363)
Net assets 288,263 226,302
2015 2014
Notes €000 €000
Equity
Issued share capital 23 — —
Other distributable reserve 24 384,937 349,978
Retained earnings (96,713) (123,698)
Total equity attributable to the equity holders of the Parent Company 288,224 226,280
Non-controlling interests 39 22
Total equity 288,263 226,302
Consolidated statement of changes in equity
For the year ended 31 March 2015
Total equity
attributable to
the equity
Issued Other holders of
share distributable Retained the Parent Non-controlling Total
capital reserve earnings Company interests equity
Group €000 €000 €000 €000 €000 €000
As at 31 March 2013 — 303,637 (152,625) 151,012 17 151,029
Shares issued, net of costs — 45,438 — 45,438 — 45,438
Share-based payment transactions — 903 — 903 — 903
Profit for the year — — 28,927 28,927 5 28,932
As at 31 March 2014 — 349,978 (123,698) 226,280 22 226,302
Shares issued, net of costs — 38,324 — 38,324 — 38,324
Share-based payment transactions — 506 — 506 — 506
Dividends paid — (3,871) — (3,871) — (3,871)
Profit for the year — — 26,985 26,985 17 27,002
As at 31 March 2015 — 384,937 (96,713) 288,224 39 288,263
Consolidated cash flow statement
For the year ended 31 March 2015
Year ended Year ended
31 March 2015 31 March 2014
Notes €000 €000
Operating activities
Profit before tax 32,653 31,034
(Gain)/loss on sale of properties (1,270) 1,687
Share-based payments 506 903
(Surplus) on revaluation of investment properties 13 (25,425) (22,735)
Change in fair value of derivative financial instruments 2,753 128
Depreciation 6 893 995
Finance income 9 (42) (64)
Finance expense 9 12,704 12,155
Cash flows from operations before changes in working capital 22,772 24,103
Changes in working capital
Decrease/(increase) in trade and other receivables 1,592 (3,924)
Increase/(decrease) in trade and other payables 5,601 (1,464)
Taxation paid (552) (191)
Cash flows from operating activities 29,413 18,524
Investing activities
Purchase of investment properties (70,975) —
Development expenditure (8,433) (4,260)
Purchase of plant and equipment (736) (391)
Proceeds on disposal of properties 4,403 14,811
Interest received 42 64
Cash flows used in investing activities (75,699) 10,224
Financing activities
Issue of shares 38,324 45,438
Dividends paid (3,871) —
Proceeds from loans 36,000 193,560
Repayment of loans (6,717) (259,838)
Finance charges paid (11,060) (10,879)
Cash flows from financing activities 52,676 (31,719)
Increase/(decrease) in cash and cash equivalents 6,390 (2,971)
Cash and cash equivalents at the beginning of the year 13,747 16,718
Cash and cash equivalents at the end of the year 18 20,137 13,747
Notes to the financial statements
For the year ended 31 March 2015
1. General information
Sirius Real Estate Limited (the “Company”) is a company incorporated and domiciled in Guernsey whose shares are publicly traded
on the AIM market of the London Stock Exchange (primary listing) and the Alternative Exchange (AltX) of the Johannesburg Stock
Exchange (secondary listing).
The consolidated financial statements of Sirius Real Estate Limited comprise the Company and its subsidiaries (together referred to
as the “Group”). The Group financial statements have been prepared for the year ended 31 March 2015.
The principal activity of the Group is the investment in and development of commercial property to provide conventional and flexible
workspace in Germany, primarily focused on the SME sector.
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 have been prepared in accordance with IFRSs adopted for use in the EU (“Adopted IFRSs”)
and the Companies (Guernsey) Law, 2008. The consolidated financial statements give a true and fair view and are in compliance
with the Companies (Guernsey) Law, 2008.
The consolidated financial statements were authorised for issue by the Board of Directors on 21 May 2015.
Going concern
Having reviewed the Group’s current trading and forecasts, together with sensitivities and mitigating factors and the available
facilities, the Board has reasonable expectations that the Group has adequate resources to continue in operational existence for the
foreseeable future. Accordingly, the Board continues to adopt the going concern basis in preparing these 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 ended Year ended
31 March 2015 31 March 2014
€000 €000
Rental income from investment properties 45,394 45,065
4. Operating profit
The following items have been charged or credited in arriving at operating loss:
Direct costs
Year ended Year ended
31 March 2015 31 March 2014
€000 €000
Service charge income (33,995) (33,965)
Service charge expenditure and other costs 49,077 50,391
Irrecoverable property costs and overheads 15,082 16,426
Property management fee — 93
15,082 16,519
Administrative expenses
Year ended Year ended
31 March 2015 31 March 2014
€000 €000
Audit fee 409 352
Legal and professional fees 1,379 1,270
Other administration costs 907 1,186
Non-recurring items 3,831 1,235
6,526 4,043
During the year fees of €93,000 (2014: €112,000) were incurred with the auditors and their associates in respect of other non-audit
services.
Non-recurring costs relate primarily to an accrual of €3,276,000 for the granting of 6,200,000 shares under the long-term incentive
scheme for the benefit of the Executive Directors and Senior Management Team (see note 8), costs associated with the provision of
scrip dividends, costs associated with the migration of tax domicile of the Parent Company, Sirius Real Estate Limited, from
Guernsey to the UK, and interest income from prior periods.
Other expenses
Year ended Year ended
31 March 2015 31 March 2014
€000 €000
Directors’ fees 171 142
Depreciation 893 995
Bank fees 88 84
Marketing, insurance and other expenses 1,261 1,077
2,413 2,298
5. Employee costs and numbers
Year ended Year ended
31 March 2015 31 March 2014
€000 €000
Wages and salaries 11,450 8,080
Social security costs 2,159 1,752
Other employment costs 49 25
13,658 9,857
The costs for the year ended 31 March 2015 include an accrual of €3,276,000 for the granting of shares under the LTIP (see note 8).
The average number of persons employed by the Group during the year was 169 (2014: 151), expressed in full-time equivalents. In
addition the Board of Directors consists of four (2014: five) Non-Executive Directors, and since 1 May 2014, two Executive Directors.
On 1 May 2014, one Non-Executive Director stepped down.
6. Equity-settled share-based payments
The Group has a long-term incentive scheme for the benefit of the Executive Directors and Senior Management Team as described
in the Remuneration Report. As a result, 666,668 shares were granted in the scheme in August 2014 and an expense of €261,000
was recognised in the consolidated statement of comprehensive income to 31 March 2015. In addition, an expense of €3,276,000
was recorded in anticipation of the granting of 6,200,000 shares under the scheme to the participants, contingent upon achieving the
performance conditions and the completion of the audit of the Company’s 31 March 2015 Statutory Accounts.
During the year, a further 870,279 shares were issued to the Company’s management through its Share Matching Scheme and
shares taken in lieu of bonus. For the issued shares that were not expensed in prior years, an expense of €109,000 was recognised
in the consolidated statement of comprehensive income.
7. Finance income and expense
Year ended Year ended
31 March 2015 31 March 2014
€000 €000
Bank interest income 42 64
Finance income 42 64
Bank interest expense (11,060) (10,879)
Amortisation of capitalised finance costs (1,644) (1,276)
Finance expense (12,704) (12,155)
8. Taxation
Year ended Year ended
31 March 2015 31 March 2014
€000 €000
Current income tax
Current income tax charge (564) (538)
Adjustment in respect of prior periods (267) —
(831) (538)
Deferred tax
Relating to origination and reversal of temporary differences (4,820) (1,564)
Income tax charge reported in the statement of comprehensive income (5,651) (2,102)
The income tax rate applicable to the Company in Guernsey is nil. The current income tax charge of €831,000 (2014: €538,000)
represents tax charges on profit arising in Germany that is subject to corporate income tax of 15.825% (2014: 15.825%). The
effective income tax rate for the period differs from the standard rate of corporation tax in Germany. The differences are explained
below:
Year ended Year ended
31 March 2015 31 March 2014
€000 €000
Profit before tax 32,653 31,034
Profit before tax multiplied by rate of corporation tax in Germany of 15.825% (2014: 15.825%) 5,167 4,911
Effects of:
Income exempt from tax (3,140) (3,181)
Expenses deductible for tax purposes (1,649) (1,626)
Non-taxable items including revaluation movements (3,742) (3,686)
Tax losses utilised (400) (903)
Tax losses not utilised 4,328 4,937
Relating to origination and reversal of temporary differences 4,820 1,564
Adjustments in respect of prior periods 267 —
Other — 86
Total income tax expense in the statement of comprehensive income 5,651 2,102
Deferred tax liability
Year ended Year ended
31 March 2015 31 March 2014
€000 €000
Opening balance 4,200 2,636
Revaluation of investment properties and derivative financial instruments to fair value 4,820 1,564
Balance as at year end 9,020 4,200
The Group has tax losses of €181,815,000 (2014: €166,412,000) 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.
On 1 May 2014, the Company relocated its tax residence from Guernsey to the United Kingdom. Although the Company continues to
be a limited company registered in Guernsey, the migration in tax residence to the UK enables the Company to take advantage of
recent reforms of the UK tax regime and allow future Board appointments to be made irrespective of their residence. Migration also
allows the Company to hold Board and Shareholder meetings in the UK.
9. Adjusted Earnings per share
The calculation of the basic, diluted, headline and adjusted earnings per share is based on the following data:
Year ended Year ended
31 March 2015 31 March 2014
€000 €000
Earnings
Basic earnings 26,985 28,927
Diluted earnings 27,235 29,184
Headline earnings 5,110 9,443
Diluted headline earnings 5,360 9,693
Adjusted
Basic earnings after tax 26,985 28,927
Deduct valuation surplus (net of related tax) (20,605) (21,171)
(Deduct gain)/Add back loss on sale of properties (1,270) 1,687
Headline earnings after tax 5,110 9,443
Add back change in fair value of derivative instruments 2,753 128
Add back non-recurring expenses 3,831 1,235
Adjusted earnings after tax 11,694 10,806
Number of shares
Weighted average number of ordinary shares for the purpose of basic earnings per share 557,221,586 395,758,526
Weighted average number of ordinary shares for the purpose of diluted earnings per share 578,054,919 416,591,859
Weighted average number of ordinary shares for the purpose of headline earnings per share 557,221,586 395,758,526
Weighted average number of ordinary shares for the purpose of diluted headline earnings per share 578,054,919 416,591,859
Weighted average number of ordinary shares for the purpose of adjusted earnings per share 557,221,586 395,758,526
Basic earnings per share 4.84c 7.31c
Diluted earnings per share 4.71c 7.01c
Headline earnings per share 0.92c 2.39c
Diluted headline earnings per share 0.93c 2.33c
Adjusted earnings per share 2.10c 2.73c
The number of shares has been reduced by 4,981,784 shares (2014: 6,518,731 shares) that are held by the Company as Treasury
Shares at 31 March 2015, 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.
10. Adjusted Net assets per share
Year ended Year ended
31 March 2015 31 March 2014
€000 €000
Net assets
Net assets for the purpose of assets per share (assets attributable to the equity holders of the parent) 288,224 226,280
Deferred tax arising on revaluation of properties 9,020 4,200
Derivative financial instruments 2,249 (504)
Adjusted net assets attributable to equity holders of the parent 299,493 229,976
Number of shares
Number of ordinary shares for the purpose of net assets per share 630,338,749 518,900,307
Net assets per share 45.73c 43.61c
Adjusted net assets per share* 47.51c 44.32c
* Adjusted for deferred taxes and change in value of derivative financial instruments
The number of shares has been reduced by 4,981,784 shares (2014: 6,518,731 shares) that are held by the Company as Treasury
Shares at 31 March 2015, for the calculation of adjusted net assets per share.
11. Investment properties
Some of the Group’s properties are pledged as security for loans obtained by the Group. See note 20 for details.
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:
2015 2014
€000 €000
Investment properties at market value 550,030 448,653
Adjustment in respect of lease incentives (2,004) (1,902)
*
Additional write-downs (2,400) (3,031)
Reclassified as investment properties held for sale — (2,633)
Balance as at year end 545,626 441,087
* This relates to three (2014: two) non-core assets that management hopes to sell in the year but which currently do not meet the criteria for assets held for sale. These
are non-core assets with high vacancy and the write down adjusts the value to the expected sales price required to achieve a quick sale.
The fair value of the Group’s investment properties at 31 March 2015 has been arrived at on the basis of a valuation carried out by
Cushman & Wakefield LLP (prior year: Cushman & Wakefield LLP), 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 across all the properties held by the Group at 31 March 2015 was 2.4 years.
The movement on the valuation of the investment properties of market value per the valuers’ report is as follows:
2015 2014
As at 31 March 2015 €000 €000
Total investment properties at market per valuers’ report as at 1 April 448,653 440,020
Additions and subsequent expenditure 79,566 4,325
Adjustment in respect of lease incentives 102 (230)
Disposals (3,132) (18,197)
Surplus on revaluation 25,425 22,735
Reclassified as other fixed assets (111) —
Write-backs recorded in surplus on revaluation (473) —
Total investment properties at market per valuers’ report as at 31 March 550,030 448,653
Other than the capital commitments disclosed in note 27, the Group is under no contractual obligation to purchase, construct or
develop any investment property. The Group is responsible for routine maintenance to the investment properties.
All investment properties are categorised as Level 3 fair values as they use significant unobservable inputs. There have not been
any transfers between levels during the year. Investment properties have been classed according to their real estate sector.
Information on these significant unobservable inputs per class of investment property is disclosed below:
Sector Market value (€) Technique Significant assumption Range
Business park 530,530,000 Discounted cash flow Current rental income €150k–€5,201k
Market rental income €399k–€6,039k
Gross initial yield 3.5%–11.9%
Discount factor 6.0%–12.0%
Void period (months) 12–24
Estimated capital value per sqm €61–€900
Other 19,500,000 Discounted cash flow Current rental income €381k–€780k
Market rental income €470k–€884k
Gross initial yield 7.8%–10.3%
Discount factor 7.1%–7.9%
Void period (months) 12–24
Estimated capital value per sqm €518–€778
As at 31 March 2014
Sector Market value (€) Technique Significant assumption Range
Business park 426,970,000 Discounted cash flow Current rental income €91k–€5,059k
Market rental income €372k–€6,041k
Gross initial yield 2.2%–10.9%
Discount factor 6.5%–11.8%
Void period (months) 12–24
Estimated capital value per sqm €83–€815
Other 21,683,000 Discounted cash flow Current rental income €38k–€800k
Market rental income €56k–€928k
Gross initial yield 6.2%–8.8%
Discount factor 7.3%–11.0%
Void period (months) 12–24
Estimated capital value per sqm €287–€840
The valuation is performed on a lease-by-lease basis due to the mixed use nature of the sites. This gives rise to large ranges in the
inputs.
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.
For example, an increase in market rental values of 5% would lead to an increase in the fair value of the investment properties of
€28,830,000 and a decrease in market rental values of 5% would lead to a decrease in the fair value of the investment properties of
€28,750,000. Similarly, an increase in the discount rates of 0.25% would lead to a decrease in the fair value of the investment
properties of €10,770,000 and a decrease in the discount rates of 0.25% would lead to an increase in the fair value of the investment
properties of €10,990,000.
The highest and best use of properties do not differ from their current use.
12. Investment properties held for sale
2015 2014
€000 €000
Bremen Doetlingerstr. partial site — 2,150
Bonn Siemensstr. land — 186
Cottbus site — 297
Balance as at year end — 2,633
13. Plant and equipment
Plant and Fixtures
equipment and fittings Total
€000 €000 €000
Cost
As at 31 March 2014 4,193 1,622 5,815
Additions in year 332 416 748
Disposals in year (24) (17) (41)
As at 31 March 2015 4,501 2,021 6,522
Depreciation
As at 31 March 2014 (2,862) (1,119) (3,981)
Charge for the year (667) (226) (893)
Disposals in year 24 6 30
As at 31 March 2015 (3,505) (1,339) (4,844)
Net book value as at 31 March 2015 996 682 1,678
Cost
As at 31 March 2013 4,129 1,709 5,838
Additions in year 129 317 446
Disposals in year (65) (404) (469)
As at 31 March 2014 4,193 1,622 5,815
Depreciation
As at 31 March 2013 (2,248) (1,052) (3,300)
Charge for the year (656) (339) (995)
Disposals in year 42 272 314
As at 31 March 2014 (2,862) (1,119) (3,981)
Net book value as at 31 March 2014 1,331 503 1,834
14. Goodwill
2015 2014
€000 €000
Opening balance 3,738 3,738
Additions — —
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 4.4%.
15. Trade and other receivables
2015 2014
€000 €000
Trade receivables 3,591 4,545
Other receivables 5,532 6,652
Related-party receivable (see note 26) — 181
9,123 11,378
16. Cash and cash equivalents
2015 2014
€000 €000
Cash at banks and in hand 20,137 13,747
Cash at banks earns interest at floating rates based on daily bank deposit rates. The fair value of cash is €20,137,487 (2014:
€13,747,138).
As at 31 March 2015 €10,073,021 (2014: €6,734,622) of cash is held in blocked accounts. Of this, balances relating to deposits
received from tenants total €3,880,386 (2014: €3,032,188). An amount of €15,561 (2014: €15,546) relates to funds held on an
escrow account for a supplier and €116,307 (2014: €116,144) is held in a restricted account for an office rent deposit. An amount of
€6,060,767 (2014: €2,070,744) relates to amounts reserved for future bank loan interest and amortisation payments on the bank
loan facilities. An amount of €nil (2014: €1,500,000) relates to funds held on an escrow account for a possible acquisition of further
assets.
17. Trade and other payables
2015 2014
€000 €000
Trade payables 5,001 5,318
Accrued expenses 9,712 6,983
Accrued interest 692 707
Other payables 10,457 7,972
25,862 20,980
18. Interest-bearing loans and borrowings
Effective
interest
rate 2015 2014
% Maturity €000 €000
Current
Berlin-Hannoversche Hypothekenbank AG/
Deutsche Pfandbriefbank AG
– capped floating rate facility Capped floating* 31 March 2019 1,150 1,150
– hedged floating rate facility Hedged floating* 31 March 2019 1,150 1,150
Berlin-Hannoversche Hypothekenbank AG
– fixed rate facility 2.85 31 December 2019 720 —
Macquarie Bank loan
– hedged floating rate facility Hedged floating** 17 January 2017 555 529
– floating rate facility Floating** 17 January 2017 158 183
– floating rate facility Floating*** 17 January 2017 325 325
K-Bonds I
– fixed rate facility 6.00 31 July 2020 1,000 1,000
Capitalised finance charges on all loans (1,756) (1,524)
3,302 2,813
Non-current
Berlin-Hannoversche Hypothekenbank AG/Deutsche
Pfandbriefbank AG
– capped floating rate facility Capped floating* 31 March 2019 55,200 56,350
– hedged floating rate facility Hedged floating* 31 March 2019 55,200 56,350
Berlin-Hannoversche Hypothekenbank AG
– fixed rate facility 2.85 31 December 2019 35,100 —
Macquarie Bank loan
– hedged floating rate facility Hedged floating** 17 January 2017 19,445 19,471
– floating rate facility Floating** 17 January 2017 5,538 6,728
– floating rate facility Floating*** 17 January 2017 29,793 31,815
K-Bonds I
– fixed rate facility 4.00 31 July 2023 45,000 45,000
– fixed rate facility 6.00 31 July 2020 5,000 6,000
Convertible fixed rate facility 5.00 21 March 2018 5,000 5,000
Capitalised finance charges on all loans (3,796) (4,643)
251,480 222,071
Total 254,782 224,884
* This floating rate facility is charged interest at 300 bps plus EURIBOR. Half of this facility is capped at 4.50%; the other half is hedged at a rate of 4.065%;
** €20.0 million of this facility is charged interest 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.
*** This facility is charged interest at 6.0% plus EURIBOR.
The borrowings are repayable as follows:
2015 2014
€000 €000
Or demand or within one year 5,058 4,337
In the second year 59,407 4,337
In the third to tenth years inclusive 195,869 222,378
Total 260,334 231,052
The Group has pledged 29 (2014: 26) properties to secure the interest-bearing debt facilities granted to the Group. The 29
properties had a combined valuation of €527,075,000 as at 31 March 2015 (2014: €430,267,500).
Berlin-Hannoversche Hypothekenbank AG/Deutsche Pfandbriefbank AG
On 31 March 2014, the Group agreed to a facility agreement with Berlin-Hannoversche Hypothekenbank AG and Deutsche
Pfandbriefbank AG for €115 million. The loan terminates on 31 March 2019. Amortisation is 2% p.a. for the first two years, 2.5% for
the third year and 3% thereafter, with the remainder due in the fifth year. Half of the facility is charged interest at 3% plus three
months’ EURIBOR and is capped at 4.5%, and the other half has been hedged at a rate of 4.065% until 31 March 2019. This facility
is secured over nine property assets and is subject to various covenants with which the Group has complied.
Berlin-Hannoversche Hypothekenbank AG
On 15 December 2014, the Group agreed to a facility agreement with Berlin-Hannoversche Hypothekenbank AG for €36 million. The
loan terminates on 31 December 2019. Amortisation is 2% p.a. for the first two years, 2.4% for the third year and 2.8% thereafter,
with the remainder due in the fifth year. The facility is charged a fixed interest rate of 2.85%. This facility is secured over three
property assets and is subject to various covenants with which the Group has complied.
Macquarie Bank
On 17 January 2013, the Group agreed to a facility agreement with Macquarie Bank Limited for €28.5 million. 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. The facility is subject to
a cash sweep each quarter whereby Macquarie sweeps the Group’s rent collection accounts of the facilities’ borrowers, applying any
excess towards the loan balance with immediate effect and without penalty. €20 million 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.
On 13 December 2013, the Group agreed to a second facility agreement with Macquarie Bank Limited for €32.5 million. The loan
terminates on 17 January 2017. Amortisation is 1% p.a. for the first three years, subject to meeting an agreed business plan, with the
remainder due in the fourth year. This is tested quarterly in arrears and if the business plan numbers are not achieved, Macquarie
has the option to sweep the facilities’ borrowers’ rent collection accounts applying any excess towards the loan balance with
immediate effect and without penalty. The facility is charged interest at 6% plus three months’ EURIBOR. This facility is secured over
nine property assets and is subject to various covenants with which the Group has complied.
K-Bonds
On 1 August 2013, the Group agreed to a facility agreement with K-Bonds for €52 million. The loan consists of a senior tranche of
€45 million and a junior tranche of €7 million. The senior tranche has a fixed interest rate of 4% p.a. and is due in one sum on 31 July
2023. The junior tranche has a fixed interest rate of 6% and terminates on 31 July 2020. The junior tranche is amortised at €1 million
p.a. over a seven year period. This facility is secured over three properties and is subject to various covenants with which the Group
has complied.
Convertible shareholder loan
On 22 March 2013, the Company issued €5.0 million convertible loan notes due in 2018 (the “Loan Notes”). The entire issue of €5.0
million has been taken up by the Karoo Investment Fund S.C.A. SICAVSIF and Karoo Investment Fund II S.C.A. SICAVSIF, 20.4%
shareholders in Sirius. The Loan Notes were issued at par and carry a coupon rate of 5% p.a. 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 were used to reduce debt levels.
A summary of the Group’s debt covenants are set out below:
Property
Outstanding at values at Loan-to-value Loan-to-value Interest cover Debt service Cover ratio
31 March 2015 31 March 2015 ratio at covenant at ratio at cover ratio at covenant at
€000 €000 31 March 2015 31 March 2015 31 March 2015 31 March 2015 31 March 2015
Berlin-Hannoversche Hypothekenbank
AG/Deutsche Pfandbriefbank AG 112,700 241,945 46.6% 60.0% n/a 1.96 1.40
Berlin-Hannoversche Hypothekenbank AG 35,820 69,800 51.3% 60.0% n/a 2.45 1.40
Macquarie Bank – Facility 1 25,696 52,506 48.9% 63.3% 2.05 1.75
1.14 1.05
Macquarie Bank – Facility 2 30,118 81,432 37.0% 61.6% 2.75 1.90
2.06 1.05
K-Bonds 51,000 81,392 62.7% n/a 3.51 n/a 2.50
Unencumbered properties — 18,551 n/a
Total 255,334 545,626 46.8
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, market risk and interest rate risk.
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. The credit risk on liquid funds is limited because the counterparties are banks with
high credit ratings assigned by international credit rating agencies. The risk management policies employed by the Group to manage
these risks are discussed below. 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 to ensure 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:
2015 2014
€000 €000
Trade receivables 3,591 4,545
Other debtors 5,532 6,833
Prepayments 325 1,570
Derivative financial instruments 73 678
Cash and cash equivalents 20,137 13,747
29,658 27,373
The ageing of trade receivables at the statement of financial position date was:
Gross Impairment Gross Impairment
2015 2015 2014 2014
Group €000 €000 €000 €000
Past due 0–30 days 3,684 (1,214) 4,466 (1,057)
Past due 31–120 days 1,736 (892) 1,268 (658)
More than 120 days 1,914 (1,637) 2,571 (2,045)
7,334 (3,743) 8,305 (3,760)
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
2015 2014
€000 €000
Balance at 31 March (3,760) (4,032)
Impairment loss released 17 272
Balance at 31 March (3,743) (3,760)
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 €3,591,000 (2014:
€4,545,000) that 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. Similarly, accounts receivable are due either in advance (e.g., rents, recharges) or within ten
days (e.g., service charge reconciliations), further bolstering the Group’s liquidity level.
The table below summarises the maturity profile of the Group’s financial liabilities as at 31 March 2015 based on contractual
undiscounted payments:
Bank and Derivative
shareholder financial Trade and other
loans instruments payables Total
Year ended 31 March 2015 €000 €000 €000 €000
Undiscounted amounts payable in:
Six months or less (8,652) (361) (25,862) (34,875)
Six months to one year (7,590) (358) — (7,948)
One to two years (69,646) (641) — (70,287)
Two to five years (166,035) (1,108) — (167,143)
Five to ten years (52,020) — — (52,020)
(303,943) (2,468) (25,862) (332,273)
Interest 43,609 2,468 — 46,077
(260,334) — (25,862) (286,196)
Derivative
Bank financial Trade and other
loans instruments payables Total
Year ended 31 March 2014 €000 €000 €000 €000
Undiscounted amounts payable in:
Six months or less (8,094) (260) (25,862) (34,216)
Six months to one year (7,011) (256) — (7,267)
One to two years (14,905) (508) — (15,413)
Two to five years (196,958) (1,267) — (198,225)
Five to ten years (54,900) — — (54,900)
(281,868) (2,291) (25,862) (310,021)
Interest 50,816 2,291 — 53,107
(231,052) — (25,862) (256,914)
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 80% of its total borrowing is at fixed or capped interest rates by taking
out fixed rate loans or derivative financial instruments to hedge interest rate exposure, or interest rate caps.
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 rate would result in a decreased post tax
profit in the consolidated statement of comprehensive income of €0.3 million (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 €0.3 million (excluding the movement on derivative financial instruments).
Market risk
The Group’s activities are within the real estate market, exposing it to very specific industry risks.
The yields available from investments in real estate depend primarily on the amount of revenue earned and capital appreciation
generated by the relevant properties as well as expenses incurred. If properties do not generate sufficient revenues to meet
operating expenses, including debt service and capital expenditure, the Group’s revenue will be adversely affected.
Revenues from properties may be adversely affected by the general economic climate, local conditions such as oversupply of
properties or a reduction of demand for properties in the market in which the Group operates, the attractiveness of the properties to
the tenants, the quality of the management, competition from other available properties and increased operating costs.
In addition, the Group’s revenue would be adversely affected if a significant number of tenants were unable to pay rent or its
properties could not be rented on favourable terms. Certain significant expenditure associated with each equity investment in real
estate (such as external financing costs, real estate taxes and maintenance costs)generally are not reduced when circumstances
cause a reduction in revenue from properties. By diversifying in product, risk categories and tenants, the Group expects to lower the
risk profile of the portfolio.
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 those that occurred with the internalisation of the Asset Management Agreement.
The Company holds 4,981,784 of its own shares which continue to be held as Treasury Shares. During the year 1,536,947 shares
were issued from treasury and no shares were bought back.
The Group monitors capital using a gross debt to property assets ratio, which was 46.8% as at 31 March 2015 (2014: 50.9%).
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:
2015 2014
Carrying Fair Carrying Fair
amount value amount value
€000 €000 €000 €000
Financial assets
Cash 20,137 20,137 13,747 13,747
Trade receivables 3,591 3,591 4,545 4,545
Derivative financial instruments 73 73 678 678
Financial liabilities
Trade payables 5,001 5,001 5,318 5,318
Derivative financial instruments 2,322 2,322 174 174
Interest-bearing loans and borrowings:
Floating rate borrowings 35,814 35,814 39,051 39,051
Floating rate borrowings – hedged 76,350 76,350 77,500 77,500
Floating rate borrowings – capped 56,350 56,350 57,500 57,500
Fixed rate borrowings 91,820 91,094 57,000 56,312
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
2015
Derivative financial instruments — (2,249) — (2,249)
Fixed rate borrowings — (91,904) — (91,904)
2014
Derivative financial instruments — 504 — 504
Fixed rate borrowings — (56,312) — (56,312)
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 year 1–2 years 2–3 years 3–4 years 4–5 years Total
2015 €000 €000 €000 €000 €000 €000
Berlin-Hannoversche Hypothekenbank AG/
Deutsche Pfandbriefbank AG (1,150) (1,437) (1,725) (52,038) — (56,350)
Macquarie Bank loans (483) (35,331) — — — (35,814)
Cash assets 20,137 — — — — 20,137
Within 1 year 1–2 years 2–3 years 3–4 years 4–5 years Total
2014 €000 €000 €000 €000 €000 €000
Berlin-Hannoversche Hypothekenbank AG/
Deutsche Pfandbriefbank AG (1,150) (1,150) (1,437) (1,725) (52,038) (57,500)
Macquarie Bank loans (508) (508) (38,035) — — (39,051)
Cash assets 13,747 — — — — 13,747
The other financial instruments of the Group that are not included in the above tables are non-interest bearing or have fixed interest
rates and are therefore not subject to interest rate risk.
21. Issued share capital
Share
Number capital
Authorised of shares €
Ordinary shares of no par value Unlimited —
As at 31 March 2015 Unlimited —
Share
Number capital
Issued and fully paid of shares €
Ordinary shares of no par value
Issued ordinary shares 525,419,038 —
Shares bought back and held in treasury (25,576,824) —
Issued Treasury Shares 19,058,093 —
As at 31 March 2014 518,900,307 —
Issued ordinary shares 109,901,495 —
Issued Treasury Shares 1,536,947 —
As at 31 March 2015 630,338,749 —
Holders of the ordinary shares are entitled to receive dividends and other distributions and to attend and vote at any general meeting.
On 5 December 2014, the Company conducted an equity raising through the issue of 105,263,158 ordinary shares of no par value,
representing 20% the Company’s issued share capital (excluding treasury shares) at that time. These shares were issued at a price
of 38c per share, representing a nil premium to the prevailing share price to new and existing shareholders and ranking pari passu in
all respects with existing issued shares of the Company including the right to receive all dividends and other distributions declared
after admission of the shares to trading.
On 29 August 2014, the Company paid out a dividend of €0.30c per share, giving shareholders the option of cash or scrip dividend.
Of the 520,437,254 participating shares, 180,938,053 shares (34.8%) chose scrip. The reference price for the scrip was €34.45c per
share, resulting in the issue of 1,575,641 new shares.
On 31 December 2014, the Company paid out a dividend of €0.77c per share, giving shareholders the option of cash or scrip
dividend. Of the 522,012,895 participating shares, 151,544,140 shares (29.0%) chose scrip. The reference price for the scrip was
€38.10c per share, resulting in the issue of 3,062,696 new shares.
The Company holds 4,981,784 of its own shares which are held as treasury. During the year 1,536,947 shares were issued from
treasury.
No shares were bought back in the year.
22. Other reserves
Other distributable reserve
The other distributable reserve was created for the payment of dividends and for the buyback of shares and is €384,937,000 in total
at 31 March 2015 (2014: €349,978,000).
23. Dividends
The Group’s profit attributable to the equity holders of the Parent Company for the year was €27.0 million (2014: profit €28.9 million).
The Group recommenced the payment of a regular dividend, paying an initial dividend of 0.30c per share in August 2014 in
connection with the year ended 31 March 2014 and a dividend of 0.77c per share on 31 December 2014 in relation to the first year
ended 31 March 2015. The Board has declared a final dividend of 0.84c per share for the remainder of the year ended 31 March
2015. The final dividend will be paid on 10 July 2015 with the ex-dividend dates being 8 June 2015 for shareholders on the JSE
register and 11 June 2015 for shareholders on the LSE register. As has been reported previously both the interim and final dividends
represent 65% of the Funds From Operations* for the first and second half of the year ended 31 March 2015 respectively. It is
intended that dividends will continue to be paid on a semi-annual basis and offered to shareholders in cash or scrip form.
* Recurring earnings after tax and before property revaluation, change in fair value of derivative financial instruments, depreciation, amortisation of debt arrangement
fees, non-recurring costs, and other non-cash items.
In line with this policy, the Board has declared a final dividend for the year ended 31 March 2015 of 0.84c per share, again providing
the option of receiving scrip in lieu of the dividend. The dividend per share was calculated as follows:
31 March 2015 31 March 2014
€million €million
Reported PBT 32.7 31.0
Adjustments for:
Gain on revaluation (25.4) (22.7)
(Profit)/loss of disposals (1.3) 1.7
Non-recurring costs* 3.8 1.2
Change in fair value of derivatives 2.8 0.1
Recurring PBT 12.6 11.3**
Adjustments for:
Depreciation 0.9 1.0
Amortisation of financing fees 1.6 1.3
Impact of disposed assets - (0.2)
Surrender premium - (1.7)
Current taxes incurred (0.8) (0.5)
Funds From Operations, year ended 31 March 14.3 11.2
Funds From Operations, six months ended 30
(6.2) (5.9)
September
Funds From Operations, six months ended 31
8.1 5.3
March
Dividend Pool 5.3***
DPS 0.84 c
* Include the net effect of management LTIP rewards, costs for UK migration and gain resulting from ABN loan settlement.
** Recurring PBT €9.4m when adjusted for the surrender premium of €1.7 million received last year and for disposals
*** Calculated as 65% of Funds From Operations
22 May 2015
Sponsor: PSG Capital
Date: 22/05/2015 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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