Wrap Text
Interim Results For The Six Months Ended
30 September 2017 And Interim Dividend Declaration
Sirius Real Estate Limited
(Incorporated in Guernsey)
Company number: 46442
Share code: SRE
ISIN: GG00B1W3VF54
("Sirius", "the Group" or "the Company")
Interim Results for the six months ended 30 September 2017
Investing for the next phase of growth, EUR103 million of mature assets sold and EUR167 million being invested into higher
growth opportunities
Asset acquisitions and recycling progressing well
- EUR103.0 million of disposals with average occupancy of 90% completed in the period
- EUR25.0 million equity raise completed in August 2017
- EUR166.7 million of acquisitions with average occupancy of 58% completed, notarised or in exclusivity
- Seven assets for EUR83.7 million completed
- Four assets for EUR43.8 million notarised
- Two assets for EUR39.2 million in exclusivity
Continuing to deliver rental growth
- Despite the impact of disposals, total income increased by 8.3% to EUR35.3 million (2016: EUR32.6 million)
- Like-for-like annualised rental income increased by 2.0% to EUR65.2 million (31 March 2017: EUR64.0 million)
- Total annualised rental income was EUR69.7 million (31 March 2017: EUR71.0 million) due to disposals reducing rental income by
EUR6.9 million
- New lettings of 72,509 sqm signed at an average rental rate of EUR6.39 per sqm, 21.3% above the portfolio average rate of
EUR5.27 per sqm at the start of the period
- Like-for-like average rental rates increased to EUR5.17 from EUR5.11 per sqm in the period
Temporary increase in dividend pay-out ratio to 75% to compensate for loss of income from disposals
- Profit before tax in the period grew 44.5% yoy to EUR54.7 million (2016: EUR37.5 million)
- Funds from Operations grew by 8.2% to EUR18.5 million (2016: EUR17.1 million)
- Temporary increase in pay-out ratio to 75% in order to maintain positive dividend growth and offset the impact on earnings
whilst the proceeds of mature high-income producing assets are reinvested
- Interim dividend of 1.56c per share representing a 12.2% increase in the same period in the prior year (2016: 1.39c)
Significant valuation uplift driven by organic growth and yield compression
- Book value of portfolio including assets held for sale increased to EUR857.4 million (31 March 2017: EUR823.3 million)
- Valuation uplift of EUR53.5 million* recorded in the period, with core portfolio uplift driven one-third by organic rental growth
- Gross yield of portfolio of 8.1% remains high compared to recent transactional evidence
- Adjusted net asset value** per share increased by 7.8% to 63.40c (31 March 2017: 58.82c)
* Compared to the 31 March 2017 book valuation for assets held at the start of the period or total acquisition costs for assets acquired
in the period.
** Excludes the provisions for deferred tax and derivative financial instruments.
Andrew Coombs, Chief Executive Officer of Sirius Real Estate, said:
"The occupational demand for our space offerings continues to be strong and it is very pleasing to see that our management
platform is capitalising on this. We are also encouraged that, despite seeing stronger competition for assets in 2017, our recycling
programme is progressing well and we expect to complete the programme by the financial year end.
Transforming vacant areas into desirable rental spaces is one of our primary drivers for creating long-term value in new assets. As
our original capex investment programme draws to an end, we are very optimistic about the significant opportunities that we have
identified for the sub-optimal space and vacancy that we are acquiring within our new acquisitions.
As indicated, at the year end the Board has decided to temporarily increase the dividend pay-out ratio to 75% of FFO from 65% in
order to maintain positive dividend growth whilst the disposal proceeds of mature high-income producing assets are reinvested."
Enquiries:
Sirius Real Estate +49 (0)30 285010110
Andrew Coombs, CEO
Alistair Marks, CFO
Novella +44 (0)20 3151 7008
Tim Robertson
Toby Andrews
Background to Sirius Real Estate:
Sirius is a property company listed on the Main Market and premium segment of the London Stock Exchange and the Main Board
of the Johannesburg Stock Exchange. It is a leading operator of branded business parks, providing conventional space and flexible
workspace in Germany. The Company's core strategy is the acquisition of industrial and office business parks at attractive yields,
the integration of these business parks into its network of sites under the Company's own name as well as offering a range of
branded products within those sites, and the reconfiguration and upgrade of existing and vacant space to appeal to the local market
through intensive asset management and investment. The Company's strategy aims to deliver attractive returns for shareholders by
increasing rental income and improving cost recoveries and capital values, as well as by enhancing those returns through financing
its assets on favourable terms. Once sites are mature and net income and values have been optimised, the Company may take the
opportunity to refinance the sites to release capital for investment in new sites or consider the disposal of sites in order to recycle
equity into assets which present greater opportunity for the asset management skills of the Company's team.
For more information, please visit: www.sirius-real-estate.com.
Images of the Sirius property portfolio are available from: https://www.flickr.com/photos/sirius_re/.
Sirius Real Estate Limited
Interim Report 2017
Business update
Introduction
The six month period to 30 September 2017 has been another good trading period for the Company, which has seen further
organic rental growth, significant valuation increases, excellent progress on asset recycling and further acquisition activity on the
back of another successful equity raise. The organic improvements seen in the period have mainly come from the Group's asset
management activities, including capex investment programmes, but have also been aided by the strong German industrial,
logistics and office market conditions that currently exist.
Sirius has taken advantage of these market conditions through the disposal of three mature assets and the notarisation for sale of a
non-income producing piece of land in the period. The proceeds from the completed disposals, along with the equity raises which
completed in March 2017 and August 2017, have been applied to date to complete the acquisition of seven assets and the
notarisation for purchase of four further assets since the start of the financial year. The recycling programme has focused on selling
mature assets with limited income and valuation increase potential and replacing them with assets with significantly greater
opportunity. The details of the disposals and acquisitions are presented in the Asset Recycling section of this update.
Over the last few years, the Company has been able to achieve organic rental growth each year despite the low inflationary
environment in Germany. This has continued into the period under review, where an increase in like-for-like annualised rental
income of 2.0% to EUR65.2 million* was achieved despite a large move-out in a non-core site in Bremen. The continued growth of the
portfolio's rental income highlights the benefits of the Company's asset management and investment methods.
During the period, the total portfolio, excluding assets that were sold, increased in book value** by EUR53.5 million to EUR857.4 million as
at 30 September 2017 (31 March 2017: EUR823.3 million**).The valuation uplift is attributable to both increases in income and
occupancy as well as reflecting approximately 40 bps of yield compression on the core portfolio. Considering the potential to
improve income through our intensive asset management initiatives in both existing and new acquisition assets, the Company is
confident of continuing to drive value going forward.
* Excludes assets acquired or sold in the period.
** Compared to the 31 March 2017 valuation for assets held at the start of the period or total acquisition costs for assets acquired in
the period including assets held for sale.
Trading performance
The positive trading for the period under review has been driven by organic growth from the portfolio owned throughout the period,
offsetting in part the loss of income from assets sold in the period totalling EUR103.0 million and a small contribution from the
acquisitions that completed in the period. As indicated in the Annual Report for the year ended 31 March 2017, the net effect of the
asset recycling programme was expected to be an initial reduction in earnings whilst disposal and fundraising proceeds were
being invested.
For the half year under review total rental income was EUR35.3 million (2016: EUR32.6 million) with profit before tax increasing to EUR54.7
million (2016: EUR37.5 million), including EUR41.6 million (2016: EUR25.4 million) of gains from property revaluations. Funds from
Operations*** ("FFO") for the six months were EUR18.5 million (2.07c per share) compared to EUR17.1 million (2.13c per share) for the
same period in the prior year. Basic EPRA earnings**** of EUR14.1 million (1.57c per share) were recorded, compared to EUR12.4 million
(1.54c per share) in the six months to September 2016. We expect FFO per share and earnings per share in the second half of the
financial year to be at similar levels whilst the proceeds of asset disposals and the equity raises continue to be deployed. The
Company has, however, decided to temporarily increase its normal dividend pay-out ratio during this period of reinvestment, the
details of which are set out in the Dividend section of this update.
*** See note 22 of the Interim Report.
**** See note 10 of the Interim Report.
Organic growth was seen mostly through rental improvements, where like-for-like annualised rental income increased by EUR1.2
million to EUR65.2 million in the six month period, representing an increase of 2.0% from the position at March 2017, whilst the
average like-for-like rental rate per sqm increased from EUR5.11 to EUR5.17. Total annualised rental income, including acquisitions, at 30
September 2017 was EUR69.7 million compared to EUR71.0 million at the beginning of the period, despite the loss of EUR6.9 million of
annualised rental income relating to the assets that were sold in the period. Total annualised rental income including those assets
notarised in the period which are expected to complete after the period end amounts to EUR72.7 million.
Lettings and rental growth
As mentioned above, significant organic rental growth has been achieved in the period, despite some large expected move-outs,
with like-for-like rental income increasing by 2.0% in six months. Move-outs, excluding disposals, in the first half of this financial
year of 73,083 sqm were offset by new lettings of 72,509 sqm. Average rental rates for the like-for-like portfolio were driven up from
EUR5.11 to EUR5.17 per sqm. The rate increase was partly driven by new leases being signed at an average rate of EUR6.39 per sqm
compared to move-outs of EUR6.03 per sqm, along with some contracted rental uplifts and increases upon renewal. The high number
of new lettings achieved by the Company in the period reflects not only strong occupier demand from our core German SME
customers but also emphasises the capability of the operating platform which, during the period, delivered an average of 1,208
leads per month and a conversion rate into new deals of 14.4%. Unlike other property companies, Sirius does not depend on
external brokers for attracting new tenants, with the vast majority coming from leads generated in house, allowing us to be more
flexible in the space we offer tenants. Furthermore, by investing into the vacant areas and offering a range of innovative
Smartspace products in the suboptimal space, Sirius can optimise a lot of the space that our competitors would be unable to fill.
Despite the impact of some large move-outs in the period as referenced above, like-for-like occupancy increased in the period.
However, at a total portfolio level the decrease in occupancy from 81% to 79% is reflective of the vacancy within the assets the
Company has acquired as well as the impact of disposing mature, high-occupancy assets.
Portfolio valuations
The strong demand for assets in Germany has seen properties trading across all asset classes at significantly lower yields in 2017
than in the prior year. Additionally, foreign investors are increasingly seeking to build up portfolios in Germany, as evidenced by a
number of large transactions being reported over the last year. This has, to some degree, fed into the valuation of the Group's
portfolio as at the period end; however, the continued organic rental growth has also had a very positive impact.
The portfolio, including acquisitions completed in the period, was independently valued at EUR860.3 million by Cushman & Wakefield
LLP (31 March 2017: EUR829.7 million), which converts to a book value of EUR857.4 million including assets held for sale and after
allowing for the provision for tenant incentives. The uplift for the period including capex totalling EUR11.9 million was EUR53.5 million.
The three assets sold in the period were done so at significant premiums to the most recent valuation however, these were written up to
the expected disposal value in the last period. As such, the impact from disposals recognised in the consolidated statement of
comprehensive income in the period represents additional costs that were associated with these sales.
The portfolio as at 30 September 2017 comprised 48 assets and the book value can be reconciled to the Cushman & Wakefield
LLP valuation as follows:
Table 1: Valuation reconciliation to book value*:
30 Sep 2017 31 Mar 2017
EURm EURm
Investment properties at market value 860.3 829.7
Uplift in respect of assets held for sale 0.3 1.6
Adjustment in respect of lease incentives (3.2) (3.0)
Directors' impairment of non-core asset valuations - (5.0)
Balance as at period end* 857.4 823.3
* Includes assets held for sale.
The valuation increases on the existing core portfolio are derived approximately one-third from organic rental growth and the rest
from yield compression of 40 bps in the period. A significant proportion of the organic growth derives from the Company's capex
investment programme, which involves the transformation and lease-up of space that carries little or no book value. The assets that
were acquired in the period were valued at EUR82.1 million compared to the EUR83.7 million total acquisition costs. The movement of the
portfolio's value in the period is detailed as follows:
Table 2: Movement in book value in the period:
EURm
Book value at 31 March 2017* 823.3
Acquisitions 83.7
Disposals (103.1)
Uplift 53.5
Book value at 30 September 2017* 857.4
* Includes assets held for sale.
In order to analyse the key metrics of the portfolio, we have split the portfolio into core assets that still have value-add potential,
core mature assets which have realised most of the value-add potential and non-core assets as follows:
Table 3: Book value valuation metrics:
Annualised
rental Annualised Capital value Rate per Vacant space
Book value income NOI Gross yield Net yield per sqm Occupancy sqm sqm
EURm EURm EURm % % EUR % EUR 000
Core value-add 499.8 39.8 34.0 8.0 6.8 626 76.5 5.62 181.3
Core mature 338.7 27.2 25.9 8.0 7.6 725 93.9 5.36 27.7
Non-core 18.9 2.7 1.1 14.4 5.7 104 49.3 2.73 85.6
Other - - (1.6) - - - - - -
Total 857.4 69.7 59.4 8.1 6.9 593 78.8 5.30 294.6
There still remains a significant gap between the gross and net yields of these assets which we expect to close when they
approach maturity. Additionally, most of the capex investment programme is focused on the 94,628 sqm of vacant space within the
value-add assets and we should see further rental income growth as this programme continues. In spite of the yield compression
experienced in the period, the average gross yields of 8.0% (core value-add) and 8.0% (core mature) (31 March 2017: 8.8% and
8.5%) remain high compared to the transactional evidence in the market place for the asset class. As such, we expect there may
be more yield compression to come.
Net asset value
The valuation uplift seen this period has contributed towards an increase of 7.0% in EPRA net asset value ("NAV") per share to
61.87c from 57.84c as at 31 March 2017. Adjusted NAV per share increased by 7.8% to 63.40c from 58.82c as at 31 March 2017.
The movement of adjusted NAV per share and reconciliation to EPRA NAV per share in the period can be seen in note 11.
Total shareholder return based on adjusted NAV, including the 1.53c per share final dividend paid in August, was 10.4% for the six
month period (30 September 2016 6.7%).
Asset recycling, acquisitions and disposals
The asset acquisitions and recycling programme is expected to be accretive to shareholder value over time, despite the initial
reduction to earnings in the current year whilst the sales proceeds of three mature high-income producing assets are being
reinvested. The Company's strategy is currently focused on replacing these assets which had limited further valuation and income
improvement potential with assets with substantial value-add potential. The objective of the programme is to create future
shareholder value and the results are generally achieved by acquiring assets at the right price with significant vacancy suited for
development and value-add.
The asset acquisition and recycling plan for the current financial year can be summarised as follows:
- the completion in the first half of the financial year of the sale of three assets, with proceeds totalling EUR103.0 million; and
- the recycling of the equity from these assets and proceeds from the two equity raises that completed in March and August
2017 as well as two new banking facilities into approximately EUR167 million of acquisitions.
Table 4: Asset recycling and acquisitions activity in the period:
Annualised Non-recoverable
Vacant rental service charge Maintenance Annualised EPRA net
Proceeds Total sqm Occupancy sqm income costs costs NOI initial yield
Disposals EUR sqm % sqm EUR EUR EUR EUR %
Munich RMS 85,000,000 58,585 88% 7,027 5,420,000 (98,000) (40,000) 5,282,000 5.9%
Düsseldorf 11,000,000 16,607 96% 657 884,000 (23,000) (10,000) 851,000 7.2%
Kiel 7,000,000 10,063 90% 1,006 594,000 (22,500) (10,000) 561,500 7.4%
Total 103,000,000 85,255 90% 8,690 6,898,000 (143,500) (60,000) 6,694,500 6.2%
Acquisition
non-
Annualised recoverable
Total investment Total acquisition service Acquisition Annualised
(incl. acquisition acquisition Acquisition Acquisition rental charge maintenance acquisition EPRA net
costs) sqm occupancy vacant sqm income costs costs NOI initial yield
Acquisitions EUR sqm % sqm EUR EUR EUR EUR %
Completed
Cologne 22,904,000 20,342 100% 105 2,038,000 (171,000) (18,000) 1,849,000 8.1%
Mahlsdorf II 6,394,000 12,826 62% 4,845 531,000 (136,000) (8,000) 387,000 6.1%
Frankfurt 4,498,000 4,064 28% 2,926 153,000 (107,000) (2,000) 44,000 1.0%
Frankfurt II 6,079,000 5,035 87% 673 499,000 (49,000) (5,000) 445,000 7.3%
Grasbrunn 18,075,000 14,791 4% 14,279 97,000 (319,000) (17,000) (239,000) (1.3)%
Neu-Isenburg 9,635,000 7,996 41% 4,692 472,000 (117,000) (7,000) 348,000 3.6%
Neuss 16,093,000 18,258 38% 11,344 670,000 (296,000) (14,000) 360,000 2.2%
Subtotal 83,678,000 83,312 53% 38,864 4,460,000 (1,195,000) (71,000) 3,194,000 3.8%
Notarised
Krefeld III 9,161,000 10,398 72% 2,875 729,000 (106,000) (9,000) 614,000 6.7%
Frickenhausen 11,149,000 28,594 50% 14,423 801,000 (323,000) (26,000) 452,000 4.1%
Schenefeld 15,059,000 42,220 71% 12,164 1,460,000 (261,000) (19,000) 1,180,000 7.8%
Hamburg 8,412,000 11,223 0% 11,223 - (215,000) (7,000) (222,000) (2.6)%
Subtotal 43,781,000 92,435 56% 40,685 2,990,000 (905,000) (61,000) 2,024,000 4.6%
Exclusivity
Another 30,992,000 47,350 64% 17,198 3,001,000 (506,000) (43,000) 2,452,000 7.9%
Another 8,250,000 8,672 80% 1,704 626,000 (76,000) (10,000) 540,000 6.5%
Subtotal 39,242,000 56,022 66% 18,902 3,627,000 (582,000) (53,000) 2,992,000 7.6%
Total 166,701,000 231,769 58% 98,451 11,077,000 (2,682,000) (185,000) 8,210,000 4.9%
As can be seen from the table above, the net operating income lost from disposals is expected to be replaced when the
acquisitions, including those in exclusivity are completed. The yields of the acquisitions are lower (4.9%) due to the high level of
vacancy (42%) within these assets compared to those being sold. This means that it may take a little longer to realise the full
benefits of the recycling but the Company believes that because the potential of the acquisition assets is far greater than those
realised, it will be accretive for shareholder value over time. The acquisition portfolio was sourced from multiple vendors and
comprises an attractive mix of stable, high-quality income like the Cologne and Frankfurt II assets along with a number of assets
with significant value-add opportunity which will also benefit from operational synergies given their location in markets where Sirius
is already invested. The potential of this acquisition portfolio comes predominantly from the 42% vacancy rate. With capital
investment and extensive asset management, we believe significant gains in income and valuation can be achieved.
Within the period, seven acquisitions completed with total costs of EUR83.7 million. The properties located in Grasbrunn, Neu-Isenburg
and Neuss are financed by SEB AG, with whom a new EUR30.0 million seven year loan facility that includes a EUR7.0 million capex
facility was agreed shortly after the period end. The Frankfurt II asset was successfully incorporated into the existing SEB AG
facility as substitute for the disposed Kiel asset and the Cologne asset is planned to be used as part of the replacement for the
disposed Munich site within the Berlin Hyp and Deutsche Pfandbriefbank ("PBB") facility. In addition to the completed acquisitions,
four assets were notarised in the period totalling EUR43.8 million, with two further assets totalling EUR39.2 million being entered into
exclusivity arrangements after the period end.
In summary, the Group has made good progress in acquiring its target acquisition portfolio of around EUR167 million of new properties
from the combination of the EUR103 million of asset disposal proceeds and the two equity raises totalling around EUR39 million which
completed in March and August 2017. Two new banking facilities as well as an agreement with Berlin Hyp and PBB to reissue the
facility that was secured against the disposed Munich asset will be required to complete this but the transactions are progressing
and we are confident that these will be completed before the end of the financial year.
Capex investment programmes
A significant part of the valuation increases and organic rental growth comes from unlocking income and value through the
transformation of vacant and suboptimal space through the Group's capex investment programme. An innovative range of products
has been developed, which means Sirius is able to develop and realise the full potential of space which other owners would
consider structural vacancy. As such, our capex investment programme continues to fuel the returns that we are achieving
from our assets.
The original capex investment programme relates to around 200,000 sqm of suboptimal space and has been running for almost
four years. Up until the period end, a total of 173,519 sqm has been completely refurbished and is either let or being marketed for
letting. A total of EUR17.1 million has been invested into this space and, at occupancy of 83%, is generating EUR9.8 million of annualised
rental income, representing a return on investment of 57%. This return does not include the additional benefit of improved cost
recovery from this space being occupied or the valuation increase that has been generated by the investment, which we expect to
be substantial considering the space had a low book value prior to investment. There remains further potential to increase rents
and values from this programme, with 30,157 sqm of space still to be converted. It is anticipated that by the end of this financial
year the original capex investment programme will be substantially complete with a further EUR6.6 million of investment expected to
deliver an additional EUR2.1 million of annualised rental income. Details on the progress of the original capex investment programme
can be seen in the table 7 in the Business Analysis section of this document.
In addition to the original capex investment programme, Sirius has been working on the vacant space that has come with the
acquisitions that the Group has made since the March 2016 financial year. The acquisitions that have completed so far this
financial year, like those acquired in the previous financial year, include large amounts of suboptimal space suitable for investment.
Accordingly, a new acquisition capex investment programme was initiated last year, identifying 79,251 sqm of suboptimal space
suitable for investment. The total forecast spend of EUR19.5 million on this space is expected to generate annualised rental income of
EUR6.7 million based on occupancy rates of around 83%. To date, EUR1.4 million has been invested and EUR1.1 million of additional
annualised rental income realised, which leaves a further EUR18.1 million to be invested into this programme targeting a further EUR5.5
million increase in annualised rental income. Further details relating to the new acquisition capex investment programme are set
out in table 8 in the Business Analysis section of this document.
The expected income returns from the new acquisition capex investment programme are slightly lower than from the original capex
investment programme due to the condition of the vacancy of the acquisitions being of a lower standard and more investment being
required. However, the valuation attributed to the vacant space of the new acquisitions is lower and, as such, we would expect the
valuation increases from the new acquisitions capex investment programme to be higher than those we have seen from the original
capex investment programme.
The capex investment programmes are key elements of Sirius' business model and the potential is continually being restored
whenever assets with vacancy are purchased. Between the original and the new acquisition capex investment programmes
detailed above, the valuation potential remaining from a further investment of EUR24.7 million and expected increase in annualised
rental income of EUR7.6 million could be in the region of EUR70 million.
Smartspace
Smartspace products continue to provide a successful conversion option for suboptimal space and remain popular with tenants
seeking flexible and fixed-cost workspaces. The investment returns on Smartspace remain high since it is usually space which
would be considered a structural vacancy that is converted. As such, it continues to play an important role in the capex investment
programme and in the period 2,096 sqm of Smartspace Office, 510 sqm of Smartspace Workbox and 870 sqm of Smartspace
Storage were created from suboptimal space.
Whilst total Smartspace square metres fell in the period as a result of the disposal activity annualised rental income at 30
September 2017 increased to EUR4.5 million on occupancy of 71% compared to the same period in the prior year. Average rates per
sqm rose from EUR6.65 to EUR6.70. The Smartspace range is still only a small part of the total portfolio but is another key
differentiator of Sirius. The total returns that are achieved from assets are significantly enhanced by generating this level of
income from space with little or no inherent value prior to conversion because this space would be typically left vacant or rented
at very low rates by most other operators. Further details on our Smartspace products and how they contribute to the portfolio as a
whole can be seen in table 9 in the Business Analysis of this document.
Acquisitions progress
The capex investment programme is one of the main contributors to high returns that are being achieved from the acquisitions that
the Company has made over the last three years. Of the 23 assets that have been acquired since the current acquisitions
programme commenced in 2015, 13 of these have been owned for more than one year. The returns achieved to date on these
have exceeded expectations and are detailed in Table 10 in the Business Analysis section of this document.
The total acquisition costs for the 13 assets owned for more than twelve months was EUR204.2 million, of which EUR105.3 million was
funded by bank debt and EUR98.9 million of equity was required. In addition to the initial equity approximately EUR6.1 million of capex
has been invested into these assets to date giving a total equity investment of EUR105 million. This investment so far has resulted in
EUR44.9 million of valuation gains and a EUR2.0 million increase in annualised rental income whereby these assets are now contributing
around EUR17.3 million of profit before tax per year, which represents a 17.5% running annual income return on the equity investment
to date. As such, it is expected that these assets will produce more than EUR100 million of profit before tax (including valuation
increases) on the EUR105 million of equity invested in the first three years of ownership.
Loan to value
The Company continues to be focused on a risk-adjusted approach towards its investments and has been committed to achieving a
gross loan-to-value ratio ("LTV") of 40% or below by 31 March 2018. Total debt at 30 September 2017 was reduced to
EUR298.2 million (31 March 2017: EUR348.6 million), resulting in the Group's gross LTV coming down to 34.8% (31 March 2017: 42.3%) whilst
net LTV* reduced to 33.3% (31 March 2017: 38.0%). The extent of this reduction is likely to be only temporary as it is
predominantly due to the disposal of assets in the period resulting in the repayment of debt as well as acquisitions that completed
in the period being initially purchased on an ungeared basis. It is expected that in the second half of this financial year new debt will
be drawn against these acquisitions as well as those that will be completed in the second half, resulting in the Company's LTV
levels returning to closer to the 40% gross LTV mark, but still within the Company's target, by 31 March 2018.
* Net LTV is the ratio of principal value of gross debt less cash, excluding that which is restricted, to the aggregate value of
investment property.
Dividend
Whilst it remains the Company's normal policy to pay dividends based on 65% of the Group's FFO, the Board communicated in the
Annual Report for the year ended 31 March 2017 the possibility of temporarily increasing the dividend pay-out ratio in order to
maintain positive dividend growth whilst the proceeds from the very substantial disposals of high-income producing mature assets
made by the Company at the start of the financial year are reinvested. As shown in the asset recycling tables earlier in the report,
the income lost from disposals is expected to be mostly recovered when the equity is recycled into the acquisitions that have been
identified as replacements. The earnings drag comes from the fact that the disposals occurred at the start of the financial year
whereas the acquisitions are completing more towards the middle and back end of the financial year. Thus, provided the
investments that have been notarised or are under exclusivity progress to plan, we expect the pay-out ratio to return to normal for
the second half of the year.
In accordance with this, the Board has declared an interim dividend of 1.56c per share for the six month period ended 30
September 2017, representing 75% of FFO, and an increase of 12.2% on the 1.39c dividend relating to the same period last year.
The ex-dividend date will be 13 December 2017 for shareholders on the South African register and 14 December 2017 for
shareholders on the UK register. The record date will be 15 December 2017 for shareholders on the South African and UK registers
and the dividend will be paid on 19 January 2018 for shareholders on both registers. A detailed dividend announcement will be
made in due course, including details of a scrip dividend alternative.
Board
Neil Sachdev has informed the Board that he intends to step down at the end of December, to take on other opportunities within his
current work plans. The Board would like to thank Neil for his service with the Company, first as a Non-executive Director and then
as Chairman, most notably for leading the Company onto the Main Market of the London Stock Exchange and the Main Board of
the Johannesburg Stock Exchange. The Board has commenced a search to identify a replacement for Neil as Chairman.
The Company is, however, pleased to announce that Jill May has joined the Board today as an independent Non-executive
Director. Jill has twenty four years' experience in investment banking, thirteen years' experience in M&A with SG Warburg and
eleven years' experience as a Managing Director at UBS, where she was responsible for Cross Business Strategy. She is a non-
executive director of JPMorgan Claverhouse Investment Trust plc and Ruffer Investment Company. She is a panel member of the
Competition and Markets Authority and a non-executive director of the Institute of Chartered Accountants (ICAEW).
At the AGM held on 22 September 2017, Robert Sinclair formally retired from the Board after more than ten years of service
including five years as Chairman. The Board would like to thank Robert for his excellent contributions and stewardship over the
years. On 22 September 2017, Justin Atkinson was appointed to replace Robert as Chairman of the Audit Committee.
Outlook
Sirius' focus continues to be on delivering attractive risk adjusted returns on its portfolio by growing recurring income and capital
values through intensive asset management activity. When this is combined with recycling equity from mature assets into
investments with greater opportunity as well as with acquiring sites with the appropriate mix of stability and opportunity using new
equity and long-term fixed low interest rate bank facilities, then returns to shareholders are expected to continue to grow. Sirius has
made strong progress on all fronts in the period under review.
The market from both an occupier demand perspective as well as a transactional perspective is strong in Germany and, despite the
increased competition and significant yield compression being seen on commercial assets, the Company has been able to source
some excellent acquisitions so far this financial year. These assets have come with typically greater vacancy than those that have
been sold but we believe this presents an excellent opportunity for the Company to extend its highly successful capex
investment programme.
The German economy in the first three-quarters of this year grew at its fastest annualised pace (3.2%) since 2011, thanks to strong
domestic demand and a cyclical upswing across the markets it services such as the US and the rest of the Eurozone. German
industrial production was up by 1.7% in the second quarter and 1.1% in the third, as a consequence of which businesses are
expanding production capacity. We expect this to continue to benefit Sirius' customer base. The low Eurozone interest rate
environment helps both the economy and Sirius, which continues to enjoy excellent terms on its new banking facilities.
Following on from the Main Market listings at the start of 2017, the Company was pleased to announce its entry into the FTSE All-
Share and small-cap indices in September 2017 and that on 16 November 2017, the Company's secondary listing on the Main
Board of the JSE was transferred to a primary listing on the Main Board of the JSE, meaning that Sirius will have primary listings on
both the JSE and LSE. This will allow Sirius to be included in the SAPY index in the future and it is hoped that these and further
indices inclusions, on both the London and Johannesburg exchanges, will benefit the Company and its shareholders going forward.
The Sirius Board is confident that the strong results will continue into the second half of the year.
Conclusion
We have been engaged by Sirius Real Estate Limited (the "Company") to review the condensed set of financial statements in the
half-yearly financial report for the six months ended 30 September 2017 of the Company and its subsidiaries (together the "Group"),
which comprises the unaudited consolidated statement of comprehensive income, unaudited consolidated statement of financial
position, unaudited consolidated statement of changes in equity, unaudited consolidated statement of cash flow and the related
explanatory notes.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in
the half-yearly financial report for the six months ended 30 September 2017 is not prepared, in all material respects, in accordance
with IAS 34 'Interim Financial Reporting' as adopted by the EU and the Disclosure Guidance and Transparency Rules (the "DTR")
of the UK's Financial Conduct Authority (the "UK FCA").
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of
Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in
the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly
financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the
condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified
in an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for
preparing the half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The Directors are responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the
requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our review work, for this report or for the conclusions
we have reached.
Mike Woodward
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square, London E14 5GL
24 November 2017
Unaudited consolidated statement of comprehensive income
for the six months ended 30 September 2017
Represented*
(Unaudited) (unaudited)
six months ended six months ended Year ended
30 September 2017 30 September 2016 31 March 2017
Notes EUR000 EUR000 EUR000
Rental income 4 35,301 32,636 68,793
Direct costs 5 (5,265) (5,308) (8,267)
Net operating income 30,036 27,328 60,526
Surplus on revaluation of investment properties 12 41,580 25,370 49,782
(Loss)/gain on disposal of properties 5 (807) - 79
Administrative expenses 5 (10,591) (9,865) (23,883)
Operating profit 60,218 42,833 86,504
Finance income 8 5 18 23
Finance expense 8 (5,481) (5,217) (10,224)
Change in fair value of derivative financial instruments 7 (126) 133
Net finance costs (5,469) (5,325) (10,068)
Profit before tax 54,749 37,509 76,436
Taxation 9 (3,840) (4,632) (9,500)
Profit for the period 50,909 32,877 66,936
Profit attributable to:
Owners of the Company 50,885 32,862 66,911
Non-controlling interests 24 15 25
Total comprehensive income for the period 50,909 32,877 66,936
Earnings per share
Basic earnings per share 10 5.69c 4.09c 8.13c
Diluted earnings per share 10 5.54c 3.97c 7.90c
Basic EPRA earnings per share 10 1.57c 1.54c 3.18c
* See note 2(a).
Unaudited consolidated statement of financial position
as at 30 September 2017
(Unaudited) (Unaudited)
30 September 2017 30 September 2016 31 March 2017
Notes EUR000 EUR000 EUR000
Non-current assets
Investment properties 12 856,417 764,990 727,295
Plant and equipment 2,814 1,928 2,564
Goodwill 14 3,738 3,738 3,738
Deferred tax assets 9 573 267 240
Total non-current assets 863,542 770,923 733,837
Current assets
Trade and other receivables 15 18,177 8,576 14,290
Cash and cash equivalents 16 33,664 24,747 48,695
Investment properties held for sale 13 950 5,870 96,000
Total current assets 52,791 39,193 158,985
Total assets 916,333 810,116 892,822
Current liabilities
Trade and other payables 17 (33,047) (27,763) (33,963)
Interest-bearing loans and borrowings 18 (6,026) (6,204) (7,068)
Current tax liabilities (2,725) (144) (465)
Derivative financial instruments (7) (12) (7)
Total current liabilities (41,805) (34,123) (41,503)
Non-current liabilities
Interest-bearing loans and borrowings 18 (286,659) (308,017) (334,724)
Derivative financial instruments (327) (587) (334)
Deferred tax liabilities 9 (22,882) (16,485) (20,993)
Total non-current liabilities (309,868) (325,089) (356,051)
Total liabilities (351,673) (359,212) (397,554)
Net assets 564,660 450,904 495,268
Equity
Issued share capital 20 - - -
Other distributable reserve 21 488,801 460,013 470,318
Retained earnings 75,754 (9,180) 24,869
Total equity attributable to the equity holders of the Company 564,555 450,833 495,187
Non-controlling interests 105 71 81
Total equity 564,660 450,904 495,268
Unaudited consolidated statement of changes in equity
for the six months ended 30 September 2017
Total equity
attributable to
Issued Other the equity
share distributable Retained holders of the Non-controlling Total
capital reserve earnings Company interests equity
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
As at 31 March 2016 - 429,094 (42,042) 387,052 56 387,108
Shares issued, net of costs - 29,117 - 29,117 - 29,117
Share-based payment transactions - 2,305 - 2,305 - 2,305
Conversion of shareholder loan - 5,000 - 5,000 - 5,000
Dividends paid - (5,503) - (5,503) - (5,503)
Total comprehensive income for the period - - 32,862 32,862 15 32,877
As at 30 September 2016 - 460,013 (9,180) 450,833 71 450,904
Shares issued, net of costs - 14,503 - 14,503 - 14,503
Share-based payment transactions - 1,984 - 1,984 - 1,984
Dividends paid - (6,182) - (6,182) - (6,182)
Total comprehensive income for the year - - 34,049 34,049 10 34,059
As at 31 March 2017 - 470,318 24,869 495,187 81 495,268
Shares issued, net of costs - 24,386 - 24,386 - 24,386
Share-based payment transactions - 2,475 - 2,475 - 2,475
Dividends paid - (8,378) - (8,378) - (8,378)
Total comprehensive income for the period - - 50,885 50,885 24 50,909
As at 30 September 2017 - 488,801 75,754 564,555 105 564,660
Unaudited consolidated statement of cash flow
for the six months ended 30 September 2017
(Unaudited) (Unaudited)
six months ended six months ended Year ended
30 September 2017 30 September 2016 31 March 2017
Notes EUR000 EUR000 EUR000
Operating activities
Profit after tax 50,885 32,862 66,911
Taxation 3,840 4,632 9,500
Non-controlling interests 24 15 25
Loss/(gain) on sale of properties 807 - (79)
Share-based payments 2,475 2,305 4,290
Surplus on revaluation of investment properties 12 (41,580) (25,370) (49,782)
Change in fair value of derivative financial instruments (7) 126 (133)
Depreciation 5 561 416 868
Finance income 8 (5) (18) (23)
Finance expense 4,950 5,132 9,795
Exit fees/prepayment penalties 530 15 428
Cash flows from operations before changes in working capital 22,480 20,115 41,800
Changes in working capital
Decrease in trade and other receivables 3,547 3,738 4,984
(Decrease)/increase in trade and other payables (3,970) (2,206) 3,168
Taxation (paid)/received (22) 118 (17)
Cash flows from operating activities 22,035 21,765 49,935
Investing activities
Purchase of investment properties (83,656) (50,801) (76,265)
Prepayments relating to new acquisitions (395) (378) (6,547)
Capital expenditure (8,870) (7,955) (16,540)
Purchase of plant and equipment (809) (410) (1,523)
Net proceeds on disposal of properties 95,246 - 7,201
Interest received 5 18 23
Cash flows from/(used in) investing activities 1,521 (59,526) (93,651)
Financing activities
Issue of shares 24,378 29,117 43,620
Dividends paid (8,378) (5,503) (11,685)
Proceeds from loans - 141,500 211,500
Repayment of loans (50,379) (116,426) (159,077)
Exit fees/prepayment penalties (530) (15) (428)
Finance charges paid (3,677) (6,039) (11,393)
Cash flows (used in)/from financing activities (38,586) 42,634 72,537
(Decrease)/increase in cash and cash equivalents (15,031) 4,873 28,821
Cash and cash equivalents at the beginning of the period 48,695 19,874 19,874
Cash and cash equivalents at the end of the period 16 33,664 24,747 48,695
Notes forming part of the financial statements
for the six months ended 30 September 2017
1. General information
Sirius Real Estate Limited (the "Company") is a company incorporated in Guernsey and resident in the United Kingdom, whose
shares are publicly traded on the main markets of the London Stock Exchange ("LSE") and the Johannesburg Stock Exchange
("JSE").
The consolidated financial information of the Company comprises that of the Company and its subsidiaries (together referred to as
the "Group") for the six month period to 30 September 2017.
The principal activity of the Group is the investment in, and development of, commercial property to provide conventional and
flexible workspace in Germany.
2. Significant accounting policies
(a) Basis of preparation
The unaudited interim condensed set of 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 unaudited interim condensed set of consolidated financial statements are presented in euros and all values are rounded
to the nearest thousand (EUR000), except where otherwise indicated.
The comparative figures for the financial year ended 30 September 2016 are not the Company's statutory accounts for that
financial year. Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The
report of the auditor was (i) unqualified (ii) did not include a reference to any matters to which the auditors drew attention by way of
emphasis without qualifying their report and (iii) did not contain a statement under section 263 (2) or (3) of the Companies
(Guernsey) Law, 2008.
As at 31 March 2017, the Company elected to present consolidated financial statements in a manner which makes them more
comparable with similar businesses that operate in the real estate sector who typically include only costs that are considered
directly attributable the underlying property assets within net operating income. As a result, the consolidated statement of
comprehensive income for the six months ended 30 September 2016 has been re-presented with the main impact being the
reallocation of costs that are not considered to be directly attributable to the underlying property assets from direct costs to
administrative expenses. The impact on total comprehensive income for the comparative period is nil as shown in the table below:
Previously reported Re-presented
six months ended six months ended
30 September 2016 30 September 2016 Movement
EUR000 EUR000 EUR000
Rental income 32,636 32,636 -
Direct costs (8,900) (5,308) 3,592
Net rental income/net operating income 23,736 27,328 3,592
Surplus on revaluation of investment properties 25,370 25,370 -
Administrative expenses (5,041) (9,865) (4,824)
Other operating expenses (1,301) - 1,301
Operating profit 42,764 42,833 70
Finance income 18 18 -
Finance expense (5,147) (5,217) (70)
Change in fair value of derivative financial instruments (126) (126) -
Net finance costs (5,255) (5,325) (70)
Profit before tax 37,509 37,509 -
Taxation (4,632) (4,632) -
Profit for the year 32,877 32,877 -
Profit attributable to:
Owners of the Company 32,862 32,862 -
Non-controlling interest 15 15 -
Total comprehensive income for the year 32,877 32,877 -
(b) Non-IFRS measures
The Directors have chosen to disclose EPRA earnings, which are widely used alternate metrics to their IFRS equivalents (further
details on EPRA best practice recommendations can be found at www.epra.com). Note 10 of the Interim Report includes a
reconciliation of basic and diluted earnings to EPRA earnings.
The Directors are required, as part of the JSE Listing Requirements, to disclose headline earnings; accordingly, headline earnings
are calculated using basic earnings adjusted for revaluation surplus net of related tax and gain/loss on sale of properties net of
related tax. Note 10 of the Interim Report includes a reconciliation between IFRS and headline earnings.
The Directors have chosen to disclose adjusted earnings in order to provide an alternative indication of the Group's underlying
business performance; accordingly, it excludes the effect of adjusting items net of related tax. Note 10 of the Interim Report
includes a reconciliation of adjusting items included within adjusted earnings, with those adjusting items stated within administrative
expenses in note 5.
The Directors have chosen to disclose adjusted profit before tax and Funds from Operations in order to provide an alternative
indication of the Group's underlying business performance and to facilitate the calculation of its dividend pool, a reconciliation
between profit before tax and funds from operation is included within note 22. Within adjusted profit before tax are adjusting items
as described above gross of related tax.
Further details on non-IFRS measures can be found in the Business Analysis section of this document.
(c) Statement of compliance
The condensed interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the
United Kingdom Financial Conduct Authority, the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee, Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the listing requirements
of JSE Limited and IAS 34 'Interim Financial Reporting'. They do not include all of the information required for the full annual
financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the
year ended 31 March 2017. The condensed interim financial statements have been prepared on the basis of the accounting
policies set out in the Group's annual financial statements for the year ended 31 March 2017. The financial statements for the year
ended 31 March 2017 have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted for
use in the EU. The Group's annual financial statements refer to new standards and interpretations, none of which had a material
impact on the financial statements.
(d) Going concern
Having reviewed the Group's current trading and cash flow forecasts, together with sensitivities and mitigating factors and the
available facilities, the Board has a reasonable expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future. Accordingly, the Board continued to adopt the going concern basis in preparing these
financial statements.
(e) Basis of consolidation
The unaudited interim condensed set of consolidated financial statements comprises the financial statements of the Group as at 30
September 2017. The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using
consistent accounting policies.
All intra-group balances and transactions and any unrealised income and expenses arising from intra-group transactions are
eliminated in preparing the consolidated financial statements.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to
be consolidated until the date that such control ceases.
Non-controlling interests represent the portion of profit or loss and net assets not held by the Group and are presented separately
in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position,
separately from the Company's shareholders' equity.
(f) Significant accounting policies
The accounting policies applied by the Group in this unaudited interim condensed set of consolidated financial statements are the
same as those applied by the Group in its audited consolidated financial statements as at and for the year ended 31 March 2017.
(g) Principal risks and uncertainties
The key risks that could affect the Group's medium-term performance and the factors which mitigate these risks have not materially
changed from those set out in the Group's Annual Report and Accounts 2017 and have been assessed in line with the
requirements of the 2014 UK Corporate Governance Code. The risks are reproduced below. The Board is satisfied that the
Company continues to operate within its risk profile.
Principal risks summary
Risk category Principle risk(s)
1. Financing - Availability and pricing of debt
- Compliance with facility covenants
2. Valuation - Property inherently difficult to value
- Susceptibility of property market to change in value
3. Market - Reliance on Germany
- Reliance on SME market
4. Acquisitive growth - Failure to acquire suitable properties with desired returns
5. Organic growth - Failure to deliver capex investment programme
- Failure to achieve targeted returns from investment
6. Customer - Decline in demand for space
- Significant tenant move-outs or insolvencies
- Exposure to tenants' inability to meet rental and other lease commitments
7. Regulatory and tax - Non-compliance with tax or regulatory obligations
8. People - Inability to recruit and retain people with the appropriate skillset to deliver the Group strategy
9. Systems and data - System failures and loss of data
- Security breaches
- Data protection
3. Operating segments
The Directors are of the opinion that the Group is engaged in a single segment of business, being property investment, and in one
geographical area, Germany. All rental income is derived from operations in Germany. There is no one tenant that represents more
than 10% of Group revenues. The chief operating decision maker is considered to be the Board of Directors, which is provided with
consolidated IFRS, as adopted by the European Union ("EU"), information on a quarterly basis.
4. Revenue
(Unaudited) (Unaudited)
six months ended six months ended Year ended
30 September 2017 30 September 2016 31 March 2017
EUR000 EUR000 EUR000
Rental and other income from investment properties 35,301 32,636 68,793
5. Operating profit
The following items have been (credited)/charged in arriving at operating profit:
Direct costs
(Unaudited) (Unaudited)
six months ended six months ended Year ended
30 September 2017 30 September 2016 31 March 2017
EUR000 EUR000 EUR000
Service charge income (20,466) (18,184) (40,976)
Property costs 24,715 22,854 47,563
Non-recoverable maintenance 1,016 638 1,680
Irrecoverable property costs 5,265 5,308 8,267
Loss on disposal of properties
Within loss on disposal of properties of EUR807,000 (31 March 2017 EUR79,000 gain) are various costs relating to the disposal of assets
in the period including the derecognition of lease incentives.
Administrative expenses
(Unaudited) (Unaudited)
six months ended six months ended Year ended
30 September 2017 30 September 2016 31 March 2017
EUR000 EUR000 EUR000
Audit fee 174 213 293
Legal and professional fees 1,129 779 2,128
Other administration costs 90 171 2,368
LTIP 2,148 2,152 4,136
Staff costs 5,383 4,515 9,305
Director fees 166 94 241
Depreciation 561 416 868
Marketing 880 721 1,584
Selling costs relating to assets held for sale - - 551
Non-recurring items 60 804 2,409
Administrative expenses 10,591 9,865 23,883
Non-recurring items relate to costs associated with the admission of the Company to the main markets of the London and
Johannesburg stock exchanges that completed on 6 March 2017.
6. Employee costs and numbers
(Unaudited) (Unaudited)
six months ended six months ended Year ended
30 September 2017 30 September 2016 31 March 2017
EUR000 EUR000 EUR000
Wages and salaries 8,027 6,936 13,970
Social security costs 1,381 1,225 2,544
Pension 91 78 174
Other employment costs 44 48 215
9,543 8,287 16,903
The costs for the period ended 30 September 2017 include those relating to Executive Directors and an accrual of EUR2,148,000
relating to the granting or award of shares under LTIPs (see note 7).
All employees are employed directly by one of the following Group subsidiary companies: Sirius Facilities GmbH, Sirius Facilities
(UK) Limited, Curris Facilities & Utilities Management GmbH, SFG NOVA GmbH, Sirius Finance (Guernsey) Limited and Sirius
Corporate Services B.V. The average number of people employed by the Group during the period was 224 (30 September 2016: 201;
31 March 2017: 204) expressed in full-time equivalents. In addition, the Board of Directors consists of four Non-executive
Directors and two Executive Directors as at 30 September 2017.
7. Employee schemes
Equity-settled share-based payments
A new LTIP for the benefit of the Executive Directors and the Senior Management Team was approved in October 2015. The fair
value determined at the grant date is expensed on a straight-line basis over the vesting and holding period, based on the
Company's estimate of the shares that will eventually vest and adjusted for the effect of non-market-based vesting conditions.
Under the LTIP, the awards are granted in the form of whole shares at no cost to the participants. Shares vest after the three year
performance period followed by a holding period of twelve months. The performance conditions used to determine the vesting of
the award are based on net asset value and total shareholder return allowing vesting of 0% to a maximum of 125%. As a result, a
maximum of 25,150,000 shares were granted, subject to performance criteria, under the scheme in December 2015.
No shares were forfeited in the six months to 30 September 2017. An expense of EUR2,148,000 (30 September 2016: EUR2,152,000)
was recognised in the statement of comprehensive income to 30 September 2017.
Movements in the number of shares outstanding and their weighted average exercise prices are as follows:
(Unaudited) six months ended
30 September 2017 Year ended 31 March 2017
Weighted Weighted
average v average
exercise exercise
Number of price Number of price
shares EUR000 shares EUR000
Balance outstanding as at the beginning of the
period (nil exercisable) 23,850,000 - 25,150,000 -
Forfeited during the period - - (1,300,000) -
Balance outstanding as at the end of the period
(nil exercisable) 23,850,000 - 23,850,000 -
The fair value per share was determined using the Monte-Carlo model, with the following assumptions used in the calculation as at
the grant date:
Weighted average share price - EUR 0.52
Weighted average exercise price - EUR -
Expected volatility - % 20
Expected life - years 2.48
Risk free rate based on European treasury bonds' rate of return - % (0.11)
Expected dividend yield - % 3.41
Assumptions considered in the model include: expected volatility of the Company's share price, as determined by calculating the
historical volatility of the Company's share price over the historic period immediately prior to the date of grant and commensurate
with the expected life of the awards; dividend yield based on the actual dividend yield as a percentage of share price at the date of
grant; expected life of the awards; risk free rates; and correlation between comparators.
Employee benefit scheme
During the period, 487,166 shares were issued to the Company's management through its MSP scheme.
A reconciliation of share-based payments and employee benefit schemes and their impact on the consolidated statement of
changes in equity is as follows:
(Unaudited) (Unaudited)
six months ended six months ended Year ended
30 September 2017 30 September 2016 31 March 2017
EUR000 EUR000 EUR000
Charge relating to MSP 327 153 153
Charge relating to new LTIP 2,148 2,152 4,136
Share-based payment transactions as per consolidat
statement of changes in equity 2,475 2,305 4,289
The MSP was terminated in respect of any new awards with effect from 1 April 2017.
8. Finance income and expense
(Unaudited) (Unaudited)
six months ended six months ended Year ended
30 September 2017 30 September 2016 31 March 2017
EUR000 EUR000 EUR000
Bank interest income 5 18 23
Finance income 5 18 23
Bank loan interest expense (3,432) (3,642) (7,151)
Bank charges (65) (70) (139)
Amortisation of capitalised finance costs (594) (583) (1,172)
Refinancing costs (1,390) (922) (1,762)
Finance expense (5,481) (5,217) (10,224)
Net finance expense (5,476) (5,199) (10,201)
9. Taxation
Consolidated statement of comprehensive income
(Unaudited) (Unaudited)
six months ended six months ended Year ended
30 September 2017 30 September 2016 31 March 2017
EUR000 EUR000 EUR000
Current income tax
Current income tax charge (226) (59) (576)
Current income tax charge relating to disposals (2,061) - -
Adjustment in respect of prior periods 4 81 264
Total current income tax (2,283) 22 (312)
Deferred tax
Relating to origination and reversal of temporary differences (1,890) (4,738) (9,245)
Relating to LTIP charge for the period 333 84 57
Total deferred tax (1,557) (4,654) (9,188)
Income tax charge reported in the statement of comprehensive income (3,840) (4,632) (9,500)
Deferred income tax liability
(Unaudited) (Unaudited)
30 September 2017 30 September 2016 31 March 2017
EUR000 EUR000 EUR000
Opening balance (20,993) (11,747) (11,747)
Release due to disposals 4,845 - -
Taxes on the revaluation of investment properties and derivative
financial instruments* (6,734) (4,738) (9,245)
Balance as at period end (22,882) (16,485) (20,993)
* Movement refers to the revaluation of investment properties to fair value, the recognition of derivatives and adjustments for lease
incentives (e.g. rent free periods).
Deferred
(Unaudited) (Unaudited)
30 September 2017 30 September 2016 31 March 2017
EUR000 EUR000 EUR000
Opening balance 240 183 183
Relating to LTIP charge for the year 333 84 57
Balance as at period end 573 267 240
Reductions in the UK corporation tax rate from 20% to 19% (effective from 1 April 2017) and 18% (effective from 1 April 2020) were
substantively enacted on 26 October 2015. A further reduction to the UK corporation tax rate was announced in the 2016 Budget to
further reduce the tax rate to 17% (to be effective from 1 April 2020). This will reduce the Company's future current tax charge
accordingly. The deferred tax asset at the balance sheet date has been calculated based on the rate of 19%, which represents the
expected relevant rate to apply to the period when the asset is realised.
The Group has tax losses of EUR246,521,000 (31 March 2017: EUR 262,525,000) that are available for offset against future profits of its
subsidiaries in which the losses arose under the restrictions of the minimum taxation. 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. Deferred tax assets have been recognised in respect of the
valuation of the Company LTIP.
10. Earnings per share
The calculation of the basic, diluted, headline and adjusted earnings per share is based on the following data:
(Unaudited) (Unaudited)
six months ended six months ended Year ended
30 September 2017 30 September 2016 31 March 2017
EUR000 EUR000 EUR000
Earnings
Basic earnings 50,885 32,862 66,911
Diluted earnings 50,885 32,862 66,911
EPRA earnings* 14,080 12,371 26,188
Headline earnings* 14,085 12,270 26,318
Diluted headline earnings 14,085 12,270 26,318
Adjusted
Basic earnings after tax 50,885 32,862 66,911
Deduct revaluation surplus, net of related tax (39,668) (20,592) (40,514)
Add loss/(deduct gain) on sale of properties, net of related tax 2,868 - (79)
Headline earnings after tax 14,085 12,270 26,318
(Deduct)/add change in fair value of derivative financial instrument,
net of related tax (29) 86 (156)
Add adjusting items*, net of related tax 3,265 3,794 8,801
Adjusted earnings* after tax 17,321 16,150 34,963
Number of shares
Weighted average number of ordinary shares for the purpose of
basic and headline earnings per share 894,104,933 803,512,009 822,957,685
Weighted average number of ordinary shares for the purpose of
diluted earnings and diluted headline earnings per share 917,954,933 827,362,009 846,807,685
Weighted average number of ordinary shares for the purpose of
adjusted earnings per share 894,104,933 803,512,009 822,957,685
Basic earnings per share 5.69c 4.09c 8.13c
Diluted earnings per share 5.54c 3.97c 7.90c
Basic EPRA earnings per share 1.57c 1.54c 3.18c
Diluted EPRA earnings per share 1.53c 1.50c 3.09c
Headline earnings per share 1.58c 1.53c 3.20c
Diluted headline earnings per share 1.53c 1.48c 3.11c
Adjusted earnings per share 1.94c 2.01c 4.25c
Adjusted diluted earnings per share 1.89c 1.95c 4.13c
* See Table 5 in Business Analysis section for further details.
The Directors have chosen to disclose adjusted earnings per share in order to provide an alternative indication of the Group's
underlying business performance; accordingly, it excludes the effect of adjusting items net of related tax, gains/losses on sale of
properties net of related tax, the revaluation deficits/surpluses on the investment properties net of related tax and derivative
financial instruments net of related tax. In addition, the Directors have chosen to disclose EPRA earnings in order to assist in
comparisons with similar businesses. The reconciliation between basic and diluted earnings and EPRA earnings is as follows:
EPRA earnings
Basic and diluted earnings attributable to owners of the Company 50,885 32,862 66,911
Basic and diluted earnings attributable to non-controlling interests 24 15 25
Basic and diluted earnings attributable to owners of the
Company and non-controlling interests 50,909 32,877 66,936
Surplus on revaluation of investment properties (41,580) (25,370) (49,782)
Loss/(gain) on disposal of properties (including tax) 2,868 - (79)
Change in fair value of derivative financial instruments (7) 126 (133)
Deferred tax in respect of EPRA adjustments 1,890 4,738 9,246
EPRA earnings 14,080 12,371 26,188
Non-recurring items as stated within earnings per share can be reconciled with those stated within administrative expenses in note
5 as follows:
(Unaudited) (Unaudited)
six months ended six months ended Year ended
30 September 2017 30 September 2016 31 March 2017
EUR000 EUR000 EUR000
Non-recurring items as per note 5 60 804 2,409
Finance restructuring costs 1,390 922 1,762
Selling costs relating to assets held for sale - - 551
LTIP 2,148 2,152 4,136
Change in deferred tax assets (333) (84) (57)
Adjusting items as per note 10 3,265 3,794 8,801
The number of shares has been reduced by 574,892 shares (30 September 2016: 1,062,058 shares; 31 March 2017: 1,062,058
shares), which are held by the Company as Treasury Shares at 30 September 2017, for the calculation of basic, headline, adjusted
and diluted earnings per share.
The weighted average number of shares for the purpose of diluted and EPRA diluted earnings per share is calculated as follows:
(Unaudited) (Unaudited)
30 September 2017 30 September 2016 31 March 2017
Number of shares Number of shares Number of shares
Weighted average number of ordinary shares for the purpose of
basic, EPRA basic and adjusted earnings per share 894,104,933 803,512,009 822,957,685
Effect of grant of LTIP shares 23,850,000 23,850,000 23,850,000
Weighted average number of ordinary shares for the purpose of
diluted and EPRA diluted earnings per share 917,954,933 827,362,009 846,807,685
The Company has chosen to report EPRA earnings per share ("EPRA EPS"). EPRA EPS is a definition of earnings as set out by
the European Public Real Estate Association. EPRA earnings represents earnings after adjusting for property revaluation, changes
in fair value of derivative financial instruments, profits and losses on disposals and deferred tax in respect of EPRA adjustments.
11. Net assets per share
(Unaudited) ( Unaudited)
30 September 2017 30 September 2016 31 March 2017
EUR000 EUR000 EUR000
Net assets
Net assets for the purpose of assets per share (assets attributable to the equity
holders of the Company) 564,555 450,833 495,187
Deferred tax arising on revaluation of properties and LTIP valuation 22,310 16,218 20,753
Derivative financial instruments 334 599 341
Adjusted net assets attributable to equity holders of the Company 587,199 467,650 516,281
Number of shares
Number of ordinary shares for the purpose of net assets per share 926,153,673 840,769,233 877,786,535
Number of ordinary shares for the purpose of diluted EPRA net assets per share 950,003,673 864,619,233 901,636,535
Net assets per share 60.96c 53.62c 56.41c
Adjusted net assets per share 63.40c 55.62c 58.82c
EPRA net assets per share 61.87c 54.80c 57.84c
Net assets at the end of the year (basic) 564,555 450,833 495,187
Directors' discretionary impairment of non-core assets - 5,910 4,968
Derivative financial instruments at fair value 334 599 341
Deferred tax in respect of EPRA adjustments 22,882 16,485 20,993
EPRA net assets 587,771 473,827 521,489
The Company has chosen to report EPRA net assets per share ("EPRA NAV per share"). EPRA NAV per share is a definition of
net asset value as set out by the European Public Real Estate Association. EPRA NAV represents net assets after adjusting for
derivative financial instruments and deferred tax relating to valuation movement and derivatives. EPRA NAV per share takes into
account the effect of the granting of shares relating to long-term incentive plans.
The number of shares has been reduced by 574,892 shares (31 March 2017: 1,062,058 shares), which are held by the Company
as Treasury Shares at 30 September 2017, for the calculation of net assets and adjusted net assets per share.
12. Investment properties
Most of the Group's properties are pledged as security for loans obtained by the Group. See note 18 for details.
The movement in the book value of investment properties is as follows:
(Unaudited) (Unaudited)
30 September 2017 30 September 2016 31 March 2017
EUR000 EUR000 EUR000
Total investment properties at book value as at the beginning of the period* 727,295 687,453 687,453
Additions 83,656 50,801 76,265
Capital expenditure 11,926 7,236 16,493
Disposals (7,090) - (6,698)
Reclassified as investment properties held for sale not included in valuation (950) (5,870) (96,000)
Surplus on revaluation above capex 36,797 26,363 50,040
Adjustment in respect of lease incentives (185) (393) (600)
Movement in Directors' discretionary impairment of non-core assets 4,968 (600) 342
Total investment properties at book value as at the end of the period 856,417 764,990 727,295
* Excluding items held for sale.
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:
(Unaudited) (Unaudited)
30 September 2017 30 September 2016 31 March 2017
EUR000 EUR000 EUR000
Investment properties at market value per valuer's report* 859,600 773,720 735,290
Adjustment in respect of lease incentives (3,183) (2,820) (3,027)
Directors' discretionary impairment of non-core assets - (5,910) (4,968)
Balance as at period end 856,417 764,990 727,295
* Excluding assets held for sale.
The fair value (market value) of the Group's investment properties at 30 September 2017 has been arrived at on the basis of a
valuation carried out at that date by Cushman & Wakefield LLP (2016: 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
capitalisation rate is applied to the more uncertain future income, discounted to a present value.
As at 30 September 2017, no Directors' discretionary impairments were made against any assets (31 March 2017: EUR4,968,000).
The weighted average lease expiry remaining across the whole portfolio at 30 September 2017 was 2.6 years
(31 March 2017: 2.5 years).
As a result of the level of judgement used in arriving at the market valuations, the amounts that may ultimately be realised in
respect of any given property may differ from the valuations shown in the statement of financial position.
The reconciliation of surplus on revaluation above capex as per the statement of comprehensive income is as follows:
(Unaudited) (Unaudited)
30 September 2017 30 September 2016 31 March 2017
EUR000 EUR000 EUR000
Surplus on revaluation above capex 36,797 26,363 50,040
Adjustment in respect of lease incentives (185) (393) (600)
Movement in Directors' discretionary impairment of non-core assets 4,968 (600) 342
Surplus on revaluation of investment properties reported in the
statement of comprehensive income 41,580 25,370 49,782
Included in the surplus on revaluation of investment properties reported in the statement of comprehensive income are gross gains
of EUR52,527,000 and gross losses of EUR10,947,000.
Other than the capital commitments disclosed in note 23 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:
As at 30 September 2017
Sector Market value (EUR) Technique Significant assumption Range
Business park 841,320,000 Discounted cash flow Current rental income EUR68k-EUR5,257k
Market rental income EUR423k-EUR5,625k
Gross initial yield 0.4%-16.7%
Discount factor 5.00%-8.9%
Void period (months) 12-24
Estimated capital value per sqm EUR255-EUR1,404
Other 18,930,000 Discounted cash flow Current rental income EUR511k-2,375k
Market rental income EUR899k-EUR3,344k
Gross initial yield 9.6%-10.1%
Discount factor 8.5%-12.0%
Void period (months) 12-24
Estimated capital value per sqm EUR65-EUR125
As at 31 March 2017
Sector Market value (EUR) Technique Significant assumption Range
Business park 711,320,000 Discounted cash flow Current rental income EUR288k-EUR5,655k
Market rental income EUR424k-EUR6,035k
Gross initial yield 3.8%-15.6%
Discount factor 4.75%-12.0%
Void period (months) 12-24
Estimated capital value per sqm EUR67-EUR1,261
Other 23,970,000 Discounted cash flow Current rental income EUR398k-1,905k
Market rental income EUR466k-EUR2,119k
Gross initial yield 3.8%-10.1%
Discount factor 6.3%-9.5%
Void period (months) 12-24
Estimated capital value per sqm EUR597-EUR941
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 EUR43,920,000 and a
decrease in market rental values of 5% would lead to a decrease in the fair value of the investment properties of EUR44,490,000.
Similarly, an increase in the discount rates of 0.25% would lead to a decrease in the fair value of the investment properties of
EUR17,480,000 and a decrease in the discount rates of 0.25% would lead to an increase in the fair value of the investment properties
of EUR17,660,000.
The highest and best use of properties do not differ from their current use.
13. Investment properties held for sale
(Unaudited) (Unaudited)
30 September 2017 30 September 2016 31 March 2017
EUR000 EUR000 EUR000
Merseburg - 5,870 -
Berlin Tempelhof land 950 - -
Munich Rupert Mayer Strasse - - 85,000
Düsseldorf - - 11,000
Balance as at period end 950 5,870 96,000
Investment properties held for sale at 30 September 2017 is EUR950,000 (31 March 2017: EUR96.0 million), representing non-income
producing land that was notarised for sale in the period. A gain of EUR300,000 was recognised in the surplus on revaluation of
investment properties within the consolidated statement of comprehensive income in the period.
14. Goodwill
(Unaudited) (Unaudited)
30 September 2017 30 September 2016 31 March 2017
EUR000 EUR000 EUR000
Opening balance 3,738 3,738 3,738
Closing balance 3,738 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 EUR3,738,000 was recognised. Current business plans indicate
that the balance is unimpaired.
15. Trade and other receivables
(Unaudited) (Unaudited)
30 September 2017 30 September 2016 31 March 2017
EUR000 EUR000 EUR000
Trade receivables 2,088 1,808 2,837
Other receivables 14,026 5,265 4,470
Prepayments 2,063 1,503 6,983
Balance as at period end 18,177 8,576 14,290
Other receivables include lease incentives of EUR3,610,000 (31 March 2017: EUR3,269,000).
Prepayments include costs totalling EUR395,000 (31 March 2017: EUR6,547,000) relating to the acquisition of a new site that was
notarised as at 30 September 2017.
16. Cash and cash equivalents
(Unaudited) (Unaudited)
30 September 2017 30 September 2016 31 March 2017
EUR000 EUR000 EUR000
Cash at bank and in hand 33,664 24,747 48,695
Balance as at period end 33,664 24,747 48,695
Cash at bank earns interest at floating rates based on daily bank deposit rates. The fair value of cash as at 30 September 2017 is
EUR33,664,000 (31 March 2017: EUR48,695,000).
As at 30 September 2017, EUR20,710,000 (31 March 2017: EUR12,753,000) of cash is held in blocked accounts. Of this, EUR7,000,000 (31
March 2017: EURnil) represents proceeds from the disposal of investment property retained by the bank to which the asset acted as
security until such time as a replacement asset is substituted into the relevant loan facility. EUR7,089,000 (31 March 2017:
EUR6,933,000) relates to deposits received from tenants. An amount of EUR16,000 (31 March 2017: EUR16,000) is cash held in escrow as
required by a supplier and EUR131,000 (31 March 2017: EUR131,000) is held in restricted accounts for office rent deposits. An amount of
EUR2,859,000 (31 March 2017: EUR2,850,000) relates to amounts reserved for future bank loan interest and amortisation payments,
pursuant to certain of the Group's banking facilities, and an amount of EUR3,615,000 (31 March 2017: EUR2,823,000) relates to amounts
reserved for future capital expenditure.
17. Trade and other payables
(Unaudited) (Unaudited)
30 September 2017 30 September 2016 31 March 2017
EUR000 EUR000 EUR000
Trade payables 6,581 4,483 5,865
Accrued expenses 11,503 9,568 12,206
Accrued interest 2,137 1,564 509
Other payables 12,826 12,148 15,383
Balance as at period end 33,047 27,763 33,963
18. Interest-bearing loans and borrowings
Effective (Unaudited) (Unaudited)
interest rate 30 September 2017 30 September 2016 31 March 2017
% Maturity EUR000 EUR000 EUR000
Current
Deutsche Genossenschafts-
Hypothekenbank AG
- fixed rate facility 1.59 31 March 2021 320 320 320
Bayerische Landesbank
- hedged floating rate facility Hedged(1) 19 October 2020 508 508 508
SEB A
- fixed rate facility 1.84 1 September 2022 1,180 1,180 1,180
Berlin Hyp AG/Deutsche
Pfandbriefbank AG
- floating rate facility Floating(2) 27 April 2023 - 1,063 1,063
- fixed rate facility 1.66 27 April 2023 2,310 2,394 2,413
Berlin Hyp AG
- fixed rate facility 2.85 31 December 2019 - 828 -
- fixed rate facility 1.32 31 December 2019 - 112 -
- fixed rate facility 1.48 29 October 2023 1,773 - 1,773
K-Bonds I
- fixed rate facility 6.00 31 July 2020 1,000 1,000 1,000
Capitalised finance charges
on all loans (1,065) (1,201) (1,189)
6,026 6,204 7,068
Non-current
Deutsche Genossenschafts-
Hypothekenbank AG
- fixed rate facility 1.59 31 March 2021 14,200 14,520 14,360
Bayerische Landesbank
- hedged floating rate facility Hedged(1) 19 October 2020 23,860 24,367 24,113
SEB AG
- fixed rate facility 1.84 1 September 2022 55,755 56,640 56,050
Berlin Hyp AG/Deutsche
Pfandbriefbank AG
- floating rate facility Floating(2) 27 April 2023 - 40,906 40,375
- fixed rate facility 1.66 27 April 2023 83,679 91,138 89,927
Berlin Hyp AG
- fixed rate facility 2.85 31 December 2019 - 33,912 -
- fixed rate facility 1.32 31 December 2019 - 4,341 -
- fixed rate facility 1.48 29 October 2023 66,613 - 67,496
K-Bonds I
- fixed rate facility 4.00 31 July 2023 45,000 45,000 45,000
- fixed rate facility 6.00 31 July 2020 2,000 3,000 3,000
Capitalised finance charges
on all loans (4,448) (5,807) (5,597)
286,659 308,017 334,724
Total 292,685 314,221 341,792
(1) This facility is hedged with a swap charged at a rate of 1.66%.
(2) Tranche 2 of this facility was fully repaid in September 2017.
The Group has pledged 35 (31 March 2017: 38) investment properties to secure several separate interest-bearing debt facilities
granted to the Group. The 35 (31 March 2017: 38) properties had a combined valuation of EUR705,566,000 as at 30 September 2017
(31 March 2017: EUR774,120,000).
Deutsche Genossenschafts-Hypothekenbank AG
On 24 March 2016, the Group agreed to a facility agreement with Deutsche Genossenschafts-Hypothekenbank AG for EUR16.0 million.
As at 31 March 2017, tranche 1 had been drawn down in full totalling EUR15.0 million. The loan terminates on 31 March 2021.
Amortisation is 2% p.a., with the remainder of the loan due in the fifth year. The facility is charged at a fixed interest rate of 1.59%.
The facility is secured over one property asset and is subject to various covenants with which the Group has complied.
Bayerische Landesbank
On 20 October 2015, the Group agreed to a facility agreement with Bayerische Landesbank for EUR25.4 million. The loan terminates
on 19 October 2020. Amortisation is 2% p.a., with the remainder due in the fourth year. The full facility has been hedged at a rate of
1.66% until 19 October 2020 by way of an interest rate swap. The facility is secured over four property assets and is subject to
various covenants with which the Group has complied.
SEB AG
On 2 September 2015, the Group agreed to a facility agreement with SEB AG for EUR59.0 million to refinance the two existing
Macquarie loan facilities. The loan terminates on 1 September 2022. Amortisation is 2% p.a., with the remainder due in the seventh
year. The loan facility is charged at a fixed interest rate of 1.84%. This facility is secured over twelve of the 14 property assets
previously financed through the Macquarie loan facilities; thereby, two non-core assets were unencumbered in the refinancing
process. The facility is subject to various covenants with which the Group has complied.
Berlin Hyp AG/Deutsche Pfandbriefbank AG
On 31 March 2014, the Group agreed to a facility agreement with Berlin Hyp AG and Deutsche Pfandbriefbank AG for EUR115.0 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 3.0%
thereafter, with the remainder due in the fifth year. Half of the facility (EUR55.2 million) is charged interest at 3.0% plus three months'
EURIBOR and is capped at 4.5%, and the other half (EUR55.2 million) has been hedged at a rate of 4.265% until 31 March 2019. This
facility is secured over nine property assets and is subject to various covenants with which the Group has complied. On 28 April
2016, the Group agreed to refinance this facility, which had an outstanding balance of EUR110.4 million at 31 March 2016. The new
facility is split in two tranches totalling EUR137.0 million and terminates on 27 April 2023. Tranche 1, totalling EUR94.5 million, is charged
at a fixed interest rate of 1.66% for the full term of the loan. Tranche 2, totalling EUR42.5 million, is charged with a floating rate of
1.57% over three months' EURIBOR (not less than 0%) for the full term of the loan. Amortisation is set at 2.5% across the full
facility, with the remainder due in one instalment on the final maturity date. The facility is secured over eleven property assets and
is subject to various covenants with which the Group has complied.
On 30 June 2017, the Group made a repayment of EUR5.75 million relating to tranche 1 of the facility as a result of the disposal of an
asset that acted as security over the loan. On 28 September 2017, the Group repaid tranche 2 of the facility in full, which had an
outstanding balance of EUR41.2 million at the time of repayment as a result of the disposal of an asset that acted as security over the
loan. The Group continues to have substitution rights relating to the facility.
Berlin Hyp AG
On 15 December 2014, the Group agreed to a facility agreement with Berlin Hyp AG for EUR36.0 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 at 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. On 28 April 2016, the Group agreed to add an additional tranche
to this facility, which had an outstanding balance of EUR35.1 million at 31 March 2016. The additional tranche of EUR4.5 million brings the
total loan to EUR39.6 million. The maturity of the additional loan tranche is coterminous with the existing loan at 31 December 2019.
Amortisation is 2.5% per annum, with the remainder due at maturity. The additional loan tranche is charged with a fixed interest
rate of 1.32% for the full term of the loan. The original facility agreement was amended to include one previously unencumbered
property asset located in Würselen. The terms of the original loan are unchanged and the loan continues to be subject to various
covenants with which the Group has complied.
On 20 October 2016, the Group concluded an agreement with Berlin Hyp AG to refinance and extend this facility that had an
outstanding balance of EUR39.2 million at 30 September 2016. The new facility totals EUR70.0 million and terminates on 29 October 2023.
Amortisation is 2.5% per annum, with the remainder due at maturity. The facility is charged with an all-in fixed interest rate of
1.48% for the full term of the loan. The facility is secured over six property assets which include the recent acquisitions in Dresden
and Wiesbaden which were added to the security pool in order to increase the facility. The loan 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 EUR52.0 million. The loan consists of a senior tranche of
EUR45.0 million and a junior tranche of EUR7.0 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
EUR1.0 million p.a. over a seven year period. This facility is secured over four properties and is subject to various covenants with
which the Group has complied.
19. 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:
(Unaudited) (Unaudited)
30 September 2017 30 September 2016 31 March 2017
Carrying Fair Carrying Fair Carrying Fair
amount value amount value amount value
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
Financial assets
Cash 33,664 33,664 24,747 24,747 48,695 48,695
Trade receivables 2,088 2,088 1,808 1,808 2,837 2,837
Derivative financial instruments - - - - - -
Financial liabilities
Trade payables 6,581 6,581 4,483 4,483 5,865 5,865
Derivative financial instruments 334 334 599 599 341 341
Interest-bearing loans and
borrowings:
Floating rate borrowings - - 41,969 41,969 41,438 41,438
Floating rate borrowings - hedged* 24,367 24,367 24,875 24,875 24,621 24,621
Fixed rate borrowings 273,831 278,563 254,385 256,458 282,519 288,288
* The Group holds interest rate swap contracts designed to manage the interest rate and liquidity risks of expected cash flows of its
borrowings with the variable rate facility with Bayerische Landesbank. Please refer to note 18 for details of swap and cap contracts.
20. Issued share capital
Share
Number capital
Authorised of shares EUR
Ordinary shares of no par value Unlimited -
As at 30 September 2017 Unlimited -
Share
Number capital
Issued and fully paid of shares EUR
As at 31 March 2016 751,984,887 -
Issued ordinary shares 125,488,040 -
Issued Treasury Shares 313,608 -
As at 31 March 2017 877,786,535 -
Issued ordinary shares 47,879,972 -
Issued Treasury Shares 487,166 -
As at 30 September 2017 926,153,673 -
Holders of the ordinary shares are entitled to receive dividends and other distributions and to attend and vote at any general
meeting. Shares held in treasury are not entitled to receive dividends or to vote at general meetings.
Pursuant to a scrip dividend offering on 13 January 2017, the Company issued 11,027,524 ordinary shares at an issue price of
EUR0.5055, resulting in the Company's overall issued share capital being 852,858,815 ordinary shares, of which 1,062,058 were held
in treasury. The total number of ordinary shares with voting rights in the Company at this date was 851,796,757.
Pursuant to an equity raise of EUR15.0 million on 7 March 2017, the Company issued 25,989,778 ordinary shares at an issue price of
EUR0.5771, resulting in the Company's overall issued share capital being 878,848,593 ordinary shares, of which 1,062,058 were held
in treasury. The total number of ordinary shares with voting rights in the Company at this date was 877,786,535. Costs associated
with the equity raise amounted to EUR446,000.
On 7July 2017, the Company issued 487,166 ordinary shares out of treasury to the Company's two Executive Directors and some
of the Group's Senior Management Team, pursuant to the Company's MSP incentive scheme. This resulted in the Company's
overall issued share capital being 878,848,593 ordinary shares, of which 574,892 were held in treasury. The total number of
ordinary shares with voting rights in the Company at this date was 878,273,701.
Pursuant to an equity raise of EUR25.0 million on 4 August 2017, the Company issued 39,888,185 ordinary shares at an issue price of
GBP0.56, resulting in the Company's overall issued share capital being 918,736,778 ordinary shares, of which 574,892 were held in
treasury. The total number of ordinary shares with voting rights in the Company at this date was 918,161,886. Costs associated
with the equity raise amounted to EUR612,000.
Pursuant to a scrip dividend offering on 18 August 2017, the Company issued 7,991,787 ordinary shares at an issue price of
GBP0.5621, resulting in the Company's overall issued share capital being 926,728,565 ordinary shares, of which 574,892 were held in
treasury. The total number of ordinary shares with voting rights in the Company at this date was 926,153,673.
The Company holds 574,892 of its own shares, which are held in treasury (31 March 2017: 1,062,058). During the period 487,166
shares were issued from treasury.
No shares were bought back in the year.
21. Other reserves
Other distributable reserve
The other distributable reserve was created for the payment of dividends and for the buyback of shares and is EUR488,801,000 in total
at 30 September 2017 (31 March 2017: EUR470,318,000).
22. Dividends
In November 2016, the Company announced a dividend of 1.39c per share, with a record date of 16 December for UK
shareholders and 15 December 2016 for South African shareholders, and payable on 20 January 2017. On the record date,
841,831,291 shares were in issue, of which 1,062,058 were held in treasury and 840,769,233 were entitled to participate in the
dividend. Holders of 401,207,527 shares elected to receive the dividend in ordinary shares under the Scrip Dividend Alternative,
representing a dividend of EUR5,577,000, while holders of 439,561,706 shares opted for a cash dividend with a value of EUR6,182,000.
The total dividend was EUR11,759,000.
On 4 July 2017, the Company announced a dividend of 1.53c per share, with a record date of 14 July 2017 for UK and South
African shareholders and payable on 18 August 2017. On the record date, 878,848,593 shares were in issue, of which 574,892
were held in treasury and 878,273,701 were entitled to participate in the dividend. Holders of 329,660,344 shares elected to receive
the dividend in ordinary shares under the Scrip Dividend Alternative, representing a dividend of EUR5,044,000, while holders of
548,613,357 shares opted for a cash dividend with a value of EUR8,378,000. The total dividend was EUR13,422,000.
The Group's profit attributable to the equity holders of the Company for the six months to 30 September 2017 was EUR50.9 million
(30 September 2016: EUR32.9 million). The Board indicated the possibility, in the Annual Report for the year ended 31 March 2017, of
temporarily increasing the dividend pay-out ratio from its policy of paying 65% of FFO* in order to maintain dividend growth
trajectory whilst the proceeds from high income producing mature assets are reinvested. The Board has declared a final dividend of
1.56c per share for the period ended 30 September 2017, representing a temporary increase in the pay-out ratio of 75% of FFO.
The dividend will be paid on 19 January 2018, with the ex-dividend dates being 13 December 2017 for shareholders on the South
African register and 14 December 2017 for shareholders on the UK register. It is intended that dividends will continue to be paid on
a semi-annual basis and offered to shareholders in cash or scrip form.
The dividend paid per the statement of changes in equity is the value of the cash dividend.
* Adjusted profit before tax adjusted for depreciation, amortisation of financing fees, current tax receivable/incurred and tax
relating to disposals.
The dividend per share was calculated as follows:
(Unaudited) (Unaudited)
30 September 2017 30 September 2016 31 March 2017
EURm EURm EURm
Reported profit before tax 54.7 37.5 76.4
Adjustments for:
Surplus on revaluation (41.6) (25.4) (49.8)
Loss/(gain) on disposals 0.8 - (0.1)
Other adjusting items* 3.6 3.9 8.9
Change in fair value of financial derivatives - 0.1 (0.1)
Adjusted profit before tax 17.5 16.1 35.3
Adjustments for:
Depreciation 0.6 0.4 0.9
Amortisation of financing fees 0.6 0.6 1.2
Current taxes (incurred) (see note 9) (2.3) - (0.3)
Add back current tax relating to disposals 2.1 - -
Funds from Operations, year ended 31 March n/a n/a 37.1
Funds from Operations, six months ended 30 September 18.5 17.1 17.1
Funds from Operations, six months ended 31 March n/a n/a 20.0
Dividend pool, six months ended 30 September** 14.4 11.7 11.7
Dividend pool, six months ended 31 March n/a n/a 13.4
DPS, six months ended 30 September 1.56c 1.39c 1.39c
DPS, six months ended 31 March n/a n/a 1.53c
* Includes expenses relating to the main market move, restructuring costs, the management LTIP gross of related tax
** Calculated as 75% of FFO of 2.07c per share (30 September 2016: 2.13c per share using 65% of FFO; 31 March 2017: 2.38c per share
using 65% of FFO), based on average number of shares outstanding of 894,104,933 (30 September 2016: 803,512,009;
31 March 2017: 846,641,989).
23. Capital and other commitments
As at 30 September 2017, the Group had contracted capital expenditure on existing properties of EUR6,378,000
(31 March 2017: EUR5,951,000) and commitments of EUR2,461,000 (31 March 2017: EUR2,732,000) derived from office rental contracts.
These commitments have not yet been provided for in the financial statements.
24. Post balance sheet events
On 3 November 2017, the Group notarised the acquisition of a property located in Frickenhausen. Total acquisition costs are
expected to be EUR11.2 million. The property is a mixed-use business park and has a net lettable area of 28,594 sqm. The property is
49.6% occupied and let to 19 tenants, producing an annual income of EUR800,839 and having a remaining weighted average lease
term of 2.9 years.
On 30 October 2017, the Group agreed to a facility agreement with SEB AG for EUR30.0 million. The loan terminates on 30 October
2024 and is secured over three property assets. The loan facility comprises a EUR23.0 million acquisition facility and a EUR7.0 million
capex facility. The acquisition and capex facilities will initially have a margin of 1.88% which steps down to 1.78% at the point at
which occupancy of the portfolio exceeds 50% and to 1.68% at the point occupancy of the portfolio exceeds 70%. EUR20.0 million of
the acquisition facility has been drawn down and hedged by way of a swap at an all-in fixed interest rate of 2.58%. There is a
requirement to hedge the remaining EUR3.0 million of the acquisition facility upon draw down. The capex facility is charged at a
floating rate of margin over 6 month EURIBOR. Amortisation is calculated as 2% of the acquisition facility with the first repayment
relating to the quarter ending 31 March 2019 with the remainder due in the seventh year.
Business Analysis
Table 5: Non-IFRS measures
(Unaudited) (Unaudited)
30 September 2017 30 September 2016 31 March 2017
EUR000 EUR000 EUR000
Reported profit for the period 50,909 32,877 66,936
Surplus on revaluation of investment properties (41,580) (25,370) (49,782)
Loss/(gain) on disposal of properties (including tax) 2,868 - (79)
Change in fair value of derivative financial instruments (7) 126 (133)
Deferred tax in respect of EPRA adjustments 1,890 4,738 9,245
EPRA earnings 14,080 12,371 26,188
Deduct non-controlling interest (24) (15) (25)
Add change in deferred tax relating to derivative financial instruments 22 40 23
Add change in fair value of derivative financial instruments 7 (126) 133
Headline earnings after tax 14,085 12,270 26,319
Add/deduct change in fair value of derivative financial instruments (29) 86 (156)
net of related tax
Add adjusting items*, net of related tax 3,265 3,794 8,801
Adjusted earnings after tax 17,321 16,150 34,964
* See Note 10 of the Interim Report.
(Unaudited) (Unaudited)
30 September 2017 30 September 2016 31 March 2017
EUR000 EUR000 EUR000
EPRA earnings 14,080 12,371 26,188
Weighted average number of ordinary shares 894,104,933 803,512,009 822,957,685
EPRA earnings per share 1.57 1.54 3.18
Headline earnings after tax 14,085 12,270 26,319
Weighted average number of ordinary shares 894,104,933 803,512,009 822,957,685
Headline earnings per share 1.58 1.53 3.20
Adjusted earnings after tax 17,321 16,150 34,964
Weighted average number of ordinary shares 894,104,933 803,512,009 822,957,685
Adjusted earnings per share 1.94 2.01 4.25
Table 6: EPRA Net Assets per share at 30 September 17
EUR cents per share
Adjusted NAV per share at 31 March 17 58.82
Equity raise and Share awards 0.07
Recurring profit before tax 1.90
Surplus on revaluation 4.49
Scrip and Cash Dividend Paid (1.41)
Non Recurring Items (0.46)
Adjusted NAV per share at 30 September 17 63.40
EPRA Adjustments (1.53)
EPRA Net Assets per share at 30 September 17 61.87
Table 7: Original capex investment programme
Annualised
rental income
Annualised increase
rental income achieved to
Original capex Investment increase September Occupancy Occupancy Rate per sqm Rate per sqm
investment programme budgeted Actual spend budgeted 2017 budgeted achieved budgeted achieved
progress sqm EUR EUR EUR EUR % % EUR EUR
Completed* 173,519 19,582,000 16,258,000 9,957,000 9,660,000 85% 83% 5.63 5.59
In progress 23,097 5,938,000 844,000 1,652,000 133,000 88% - 6.77 -
To be commenced 7,060 815,000 1,000 304,000 - 67% - 5.36 -
Total 203,676 26,335,000 17,103,000 11,913,000 9,793,000 85% - 5.73 -
* EUR0.7 million of further spending on completed projects is expected.
Table 8: New acquisition capex investment
Annualised
rental income
Annualised increase
New rental income achieved to
acquisition capex Investment Actual increase September Occupancy Occupancy Rate per sqm Rate per sqm
investment programm budgeted spend budgeted 2017 budgeted achieved budgeted achieved
progress sqm EUR EUR EUR EUR % % EUR EUR
Completed 12,153 1,892,000 1,009,000 1,654,000 1,149,000 91% 68% 12.46 11.65
In progress 13,376 5,239,000 365,000 1,010,000 - 84% - 7.49 -
To be
commenced 53,721 12,388,000 1,000 3,994,000 - 81% - 7.65 -
Total 79,250 19,519,000 1,375,000 6,658,000 1,149,000 83% - 8.44 -
Table 9: Smartspace
Annualised
rental income Rate per sqm
(excl. service % of total (excl. service
Total Occupied Occupancy charge) annualised charge)
Smartspace product type sqm sqm % EUR rental income EUR
Smartspace Office 30,268 24,378 81% 2,305,000 51% 7.88
Smartspace Workbox 6,268 4,699 75% 344,000 8% 6.09
Smartspace Storage 29,855 21,411 72% 1,510,000 34% 5.88
Subtotal 66,391 50,488 76% 4,159,000 93% 6.86
Smartspace Flexilager 11,998 5,268 44% 323,000 7% 5.11
Smartspace total 78,389 55,755 71% 4,482,000 100% 6.70
Table 10: Acquisitions progress
Total Annualised Annualised Annualised
acquisition Market value Market value acquisition rental income rental income
Date cost (rounded) increase rental income at September 2017 increase
Site acquired EUR EUR % EUR EUR %
Mahlsdorf Dec-14 19,574,000 25,500,000 30% 1,786,000 2,052,000 15%
Potsdam Dec-14 29,353,000 37,200,000 27% 2,347,000 2,797,000 19%
Bonn II Feb-15 3,316,000 6,850,000 107% 531,000 390,000 (27)%
Aachen I Jan-15 18,693,000 24,400,000 31% 1,751,000 2,220,000 27%
Ludwigsburg Sep-15 7,443,000 11,800,000 59% 969,000 1,305,000 35%
Weilimdorf Sep-15 5,699,000 5,730,000 1% 511,000 511,000 0%
Heidenheim Sep-15 18,320,000 22,700,000 24% 1,846,000 1,956,000 6%
Cölln Parc Oct-15 18,586,000 19,700,000 6% 1,469,000 1,480,000 1%
Aachen II Nov-15 7,340,000 7,370,000 0% 532,000 561,000 5%
Mainz Mar-16 25,074,000 28,400,000 13% 2,219,000 2,490,000 12%
Markgröningen May-16 8,720,000 15,300,000 75% 1,322,000 1,378,000 4%
Krefeld May-16 13,475,000 13,800,000 2% 1,219,000 1,219,000 0%
Dresden Sep-16 28,600,000 30,000,000 5% 2,781,000 2,890,000 4%
Total 204,193,000 248,750,000 22% 19,283,000 21,249,000 10%
Capex since
Acquisition September 2017 Occupancy acquisition to
Date occupancy occupancy increase September 2017
Site acquired % % % EUR
Mahlsdorf Dec-14 85% 91% 6% 1,301,000
Potsdam Dec-14 85% 99% 14% 496,000
Bonn II Feb-15 76% 59% (18)% 202,000
Aachen I Jan-15 75% 91% 16% 1,317,000
Ludwigsburg Sep-15 68% 79% 11% 876,000
Weilimdorf Sep-15 100% 100% 0% 55,000
Heidenheim Sep-15 83% 86% 3% 409,000
Cölln Parc Oct-15 90% 95% 6% 188,000
Aachen II Nov-15 97% 100% 3% 8,000
Mainz Mar-16 83% 92% 9% 517,000
Markgröningen May-16 67% 74% 7% 281,000
Krefeld May-16 94% 89% (4)% 44,000
Dresden Sep-16 66% 68% 2% 429,000
Total 78% 83% 5% 6,123,000
Glossary of terms
Adjusted NAV is the assets attributable to the equity holders of the Company adjusted for deferred tax and derivative financial
instruments
Annualised rental income is the contracted rental income of a property at a specific reporting date expressed in annual terms
Capital value is the market value of a property divided by the total sqm of a property
Funds from operations is reported profit before tax adjusted for property revaluation, gain/loss on disposals, change in the fair
value of derivative financial instruments, adjusting items, depreciation, amortisation of financing fees and current tax
receivable/incurred
Gross loan to value ratio is the ratio of principle value of total debt to the aggregated value of investment property
Gross yield is the annualised rental income generated by a property expressed as a percentage of its value
Like-for-like refers to the manner in which metrics are subject to adjustment in order to make them directly comparable. Like for
like adjustments are typically made in relation to annualised rental income, rate and occupancy and eliminate the effect of asset
acquisitions and disposals that occur in the reporting period
Net loan to value ratio is the ratio of principle value of total debt less cash, excluding that which is restricted, to the aggregate
value of investment property
Net operating income is the income generated by a property less directly attributable costs
Net yield is the net operating income generated by a property expressed as a percentage of its value
Occupancy is the percentage of total lettable space occupied as at reporting date
Rate is rental income per sqm expressed on a monthly basis as at a specific reporting date
Total debt is the aggregate amount of the Company's interest bearing loans and borrowings
Total shareholder return based on adjusted NAV is the return obtained by a shareholder calculated by combining both
movements in adjusted NAV per share plus dividends paid
Total return is the return for a set period of time combining valuation movement and income generated
Corporate directory
Registered office
Trafalgar Court
2nd Floor
East Wing
Admiral Park
St Peter Port
Guernsey GY1 3EL
Channel Islands
Registered number
Incorporated in Guernsey under the Companies (Guernsey) Law, 2008, as amended, under number 46442
Company Secretary
A L Bennett
Sirius Real Estate Limited
Trafalgar Court
2nd Floor
East Wing
Admiral Park
St Peter Port
Guernsey GY1 3EL
UK solicitors
Norton Rose Fulbright LLP
3 More London Riverside
London SE1 2AQ
Financial PR
Novella Communications
1a Garrick House
Carrington Street
London W1J 7AF
Johannesburg Stock Exchange sponsor
PSG Capital Proprietary Limited
1st Floor, Ou Kollege
35 Kerk Street
Stellenbosch
7600
South Africa
Joint broker
Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET
Berenberg
60 Threadneedle Street
London EC2R 8HP
Property valuer
Cushman & Wakefield LLP
Rathenauplatz 1
60313 Frankfurt am Main
Germany
Independent auditors
KPMG LLP
15 Canada Square
London
E14 5GL
Guernsey solicitor
Carey Olsen
Carey House
Les Banques
St Peter Port
Guernsey GY1 4BZ
27 November 2017
Sponsor: PSG Capital Proprietary Limited
Date: 27/11/2017 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
