TIDMDDE
RNS Number : 8010P
Develica Deutschland Ltd
23 July 2010
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| FOR IMMEDIATE RELEASE |
| 23 July 2010 |
| DEVELICA DEUTSCHLAND LIMITED: |
| RESULTS FOR 12 MONTHS TO 31ST MARCH 2010 |
| HIGHLIGHTS |
| |
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| |
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| Balance Sheet benefits from stabilised valuation |
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| · Portfolio valuation down 6% since March 2009 but down only |
| 0.4% during last 6 months |
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| · IFRS Net Assets of negative EUR64.3 million, improvement of |
| EUR9.4 million during the last 6 months |
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| · European Public Real Estate Association ("EPRA") profit |
| before tax of EUR14.4 million (2009: loss of EUR4.4 million) impacted by |
| strong rental income and reduction in operating costs |
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| · Gross LTV ratio (gross debt against property assets) at |
| 103.7% (2009: 98.4%) but static movement since September 2009 |
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| Good financial performance |
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| · Results since interim affected by stabilising of property |
| valuations |
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| · IFRS loss before tax improves to EUR34.5 million (2009: loss |
| of EUR199.8 million) |
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| · Nil dividends in order to preserve Group cash |
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| Rental income |
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| · Rental income stable despite 2 major lease terminations |
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| · Additional rental income of EUR1.04 million as a result of |
| 39 new lettings |
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| · Occupancy rate remains in excess of 95% on ERV basis |
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| · Net rental income up 8% due to active asset management and |
| control of property costs |
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| CONTACT: | | |
| | | |
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| Derek Butler, | Develica | Tel: 020 7016 1860 |
| Chairman | Deutschland Ltd. | |
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| Baron Phillips | Baron Phillips | Tel: 020 7920 3161 |
| | Associates | |
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| | Develica Deutschland Limited |
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| | Annual Report and Consolidated Accounts 2010 |
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| | |
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| Chairman's Statement |
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| Introduction and Market Commentary |
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| I am pleased to present the Annual Report and Accounts for Develica |
| Deutschland Limited ("the Company") for the year ended 31 March 2010. The |
| period under review saw the turbulence in global financial markets slowly |
| begin to stabilise and towards the end of the year there were the |
| beginnings of increased activity in the German commercial real estate |
| market. I believe that this improvement will continue in the current year |
| and that Germany, with its more risk averse investment culture, will see |
| a slower but more sustainable recovery than in other European economies. |
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| I believe that as transactions in the market increase it will also become |
| easier to assess the true inherent value of our properties and that |
| values will start to increase accordingly. The Company is focused on |
| delivering shareholder value and I am confident that the measures taken |
| over the last two years, which are continuing, to secure our funding |
| streams will stand the Company in good stead as markets begin to |
| strengthen. |
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| Valuation and Portfolio |
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| Our portfolio was independently valued by CB Richard Ellis ("CBRE") as at |
| 31 March 2010 at EUR803.9m, almost unchanged from our last valuation six |
| months earlier. The value of the portfolio at 30 September 2009 was |
| EUR807.2m, only EUR3.3m higher, or 0.4%, than the latest valuation. This |
| reflects the more stable market conditions in the German real estate |
| investment market, particularly since the start of 2010. In contrast, |
| the year on year decline is approximately 6% as the value of the |
| portfolio at 31 March 2009 was EUR854.8m. |
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| For the first time in eight consecutive quarters the CBRE valuation |
| indicated there was little change in the underlying valuation drivers - |
| rental values and yields. The Group's rental values held up well over |
| the period although, as I reported at the time of our half year |
| statement, we have suffered two major lease terminations. But in spite |
| of this our annualised gross rental income for the twelve months was |
| EUR68.4m against EUR70.9m a year earlier with the portfolio's estimated |
| rental value standing at EUR65.1m against EUR65.7m in March 2009. |
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| Interest Rate Arrangements |
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| As previously reported in accordance with prudence and best practice, the |
| Group's interest rate payments have been swapped and fixed in order to |
| de-risk a significant variable element of our leveraged property |
| portfolio. |
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| Under International Financial Reporting Standards ("IFRS") the swaps must |
| be re-valued at each reporting date to reflect the present value of |
| future interest payments. The Group has decided not to apply hedge |
| accounting so valuation changes are taken to the Consolidated Statement |
| of Comprehensive Income. Due to the current low level of interest rates |
| the value of interest rate swaps held by the Group at 31 March 2010 gave |
| rise to a liability of EUR62.9m (2009: EUR65.4m). |
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| However the year end liability arising from the swaps will only |
| crystallise on disposal of a property or if a swap is cancelled before |
| its expiry date otherwise the liability will be reduced to zero over the |
| life of the loan. Each swap arrangement is held in the individual special |
| purpose vehicle to which each facility loan relates. |
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| Results |
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| International Financial Reporting Standards ("IFRS") |
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| The operating loss before tax for the year ended 31 March 2010, after |
| taking into account the significant fair value write downs on the |
| portfolio and interest rate swaps, was EUR34.51m (2009: EUR199.85m). |
| Including the negative effect of the swaps, the Company's net asset value |
| per share was negative 25.71 cents compared to negative 12.66 cents as at |
| 31 March 2009. |
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| European Public Real Estate Association ("EPRA") |
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| EPRA defines NAV differently from IFRS as can be seen in the financial |
| statements. Movements in derivatives and deferred tax provisions are |
| excluded from EPRA NAV calculations and the Board believes that the EPRA |
| basis more accurately reflects the true underlying value of the property |
| portfolio. |
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| EPRA NAV per share was negative 0.45 cents compared to a positive 14.04 |
| cents at 31 March 2009. EPRA profit per share for the year to 31 March |
| 2010 was 5.76 cents compared to a negative 1.75 cents at 31 March 2009. |
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| Banking Facilities and Group Cash Position |
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| As I previously outlined in the year's Interim Report, the Group's |
| property valuation at that time indicated that the loan to value ("LTV") |
| ratio would, in certain cases, exceed LTV covenants and, based on the |
| valuation at 31 March 2010, that remains the same. However, at the year |
| end date, some of these covenants as set out in the facility agreements |
| remained untested by the debt providers. |
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| Through its subsidiary companies, the Company had eleven ring-fenced loan |
| facilities totalling EUR830.4m as at 31 March 2010 (net of unamortised loan |
| arrangement fees) and through capital repayments, we reduced our debt |
| position by EUR8.0m during the year. Each of these facilities has LTV and |
| interest cover or debt servicing covenants which have to be met. |
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| As reported last year, the Group has been notified of two LTV breaches |
| relating to the Group's loan facilities now standing at EUR113.7m. In each |
| case, the lender has requested a valuation under the terms of the |
| facility agreements and the Group continues to have positive discussions |
| with the lenders to seek to remedy these breaches. No further |
| notifications of LTV breaches have been served on the Group by its other |
| lenders although we continue in discussion with all our lenders with |
| regards to the loan facilities. |
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| The two facilities that have been notified of their respective LTV |
| breaches have triggered cash traps. Excluding the five loan facilities |
| with our largest lender Citibank International PLC that have currently |
| amended LTV covenants, the remaining four facilities would trigger LTV |
| breaches if the lenders were to request an external valuation. The gross |
| LTV (gross debt against property assets) was 103.7% (2009: 98.4%). |
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| Loan interest and amortisation continues to be well serviced through |
| rental income with only one exception. As I reported at the interim |
| date, one of the smaller loan facilities has an Interest Cover Ratio |
| ("ICR") covenant which is not being met. The Company continues in |
| discussions with the relevant bank to remedy the breach. All other ICR |
| covenants are currently being met. |
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| I mentioned at the interim date that we were hopeful to be able to |
| announce further restructuring of some of our loan facilities with the |
| intention of stabilising our Group's debt. We are still in negotiations |
| with our lenders concerning the restructuring and will announce the |
| outcome as soon as we can. |
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| Cash and cash equivalents at 31 March 2010 amounted to EUR23.9m (2009: |
| EUR30.4m) with EUR17m under the control of the lenders (2009: EUR18.9m). None |
| of the EUR6.7m cash held at Parent level was held in controlled accounts. |
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| Dividend |
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| In the present circumstances the Board remains focused on the |
| preservation of cash balances within the Company and has again concluded |
| that it would not be in the Group's best interest to pay a dividend at |
| this time. |
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| Board and management |
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| Alan Gravett, who had been a Director of the Company since inception, |
| stood down during the year in order to concentrate on his other business |
| activities and I thank him for his contribution during his time in office |
| and wish him well for the future. |
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| As was announced on 1 February 2010, the Board welcomes the appointment |
| of Lars Lücking as Managing Director of the Investment Manager, Develica |
| Deutschland Management Limited, and looks forward to the benefits his |
| extensive experience in asset management and debt restructuring in |
| European real estate will bring. |
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| He has a strong skill set to lead the Investment Manager and ensure that |
| the Company is in a position to take full advantage of the anticipated |
| upturn in the German economy and the consequent revival in the German |
| real estate market. |
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| Company secretary and Administrator |
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| The Secretary of the Company at 31 March 2010 was State Street (Guernsey) |
| Limited ("State Street") (formerly Mourant Guernsey Limited). As part of |
| our ongoing commitment to continually review and contain costs, a number |
| of selected providers were invited to participate in a tendering process |
| to undertake the role of Company Secretary and Administrator to the |
| Company. Following a successful fee quote and interview process it has |
| been decided to change from State Street to Elysium Fund Management |
| Limited ("Elysium") with effect from 1 August 2010. |
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| The Guernsey Financial Services Commission has been notified of this |
| change. We thank State Street for their services over the last two years |
| and look forward to working with Elysium in the future. |
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| Strategy and Outlook |
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| Strategy |
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| We are increasing our focus in the coming year on the stabilisation of |
| the Company's financial position by pursuing all possible avenues to |
| improve the capital structure of the Company. This combined with ongoing |
| asset management initiatives and the anticipated upswing of the German |
| real estate market, should, we hope, lead to an improved financial |
| situation for the Company in 2010/11. |
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| Despite a more positive outlook in terms of the investment climate, the |
| Company's strategy in terms of asset disposal has not materially changed. |
| It is not planned to sell properties at the bottom of the market. |
| However, individual asset sales in co-operation with a significant debt |
| reduction could improve the Company's overall financial strength and as |
| such would be considered on a case by case basis. |
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| During the past 18 months, the Company has adopted a pro-active |
| restructuring approach to ensure the ongoing and future ability to |
| refinance loan facilities and to return shareholder value. This process |
| is ongoing and remains, together with the active asset management, the |
| main focus of the Company. The restructuring instruments to improve the |
| Group's capital structure vary from proposed debt/equity swaps, waiver |
| (covenants), loan extensions, raise new debt and equity or a combination |
| of those instruments. |
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| Outlook |
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| We are encouraged that German commercial real estate values appear to |
| have stabilised and that we are now beginning to see the initial signs of |
| growth coming back to the market. The unprecedented turmoil in the |
| markets over the last two years has clearly been damaging to the Company |
| but we continue to investigate all available options to address that |
| situation and restore shareholder value over the medium to long term. |
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| As I announced on 4 January 2010, the recent purchase of shares by the |
| Directors and Manager demonstrates their support of the Company and their |
| belief that the current share price underestimates both the current value |
| of the Company and its potential for future growth on a recovery in the |
| German economy. |
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| I am grateful for the continued support of our shareholders through what |
| has been a difficult period and for the wise counsel and unstinting |
| commitment of the Board and the Manager. I thank them for that and |
| believe that we are well placed to withstand the challenges that lie |
| ahead as the German real estate market moves towards recovery. |
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| Derek Butler |
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| Chairman |
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| 22 July 2010 |
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+--+-------------------------------------------------------------------------+
| | Develica Deutschland Limited |
+--+-------------------------------------------------------------------------+
| | Annual Report and Consolidated Accounts 2010 |
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| | |
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| Investment Manager's Review |
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| German Economic Outlook and Investment market |
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| 2009 was a historical year for Germany with a decline in GDP that was |
| unprecedented in recent history. However, the economic stimulus |
| activities adopted by the German government, such as the extension of |
| compensation for short-time work, have had a positive impact on the |
| German economy. The unemployment rate has remained at a comparatively |
| moderate rate (7.3% in Germany versus 10.0% for the entire Euro area; |
| source: Eurostat). |
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| After more than two years of decreasing capital values, the German |
| commercial property market seems to have bottomed out. The structure of |
| the investors has changed significantly since the start of the credit |
| squeeze; current buyers are rather domestic and equity driven (i.e. |
| German open-ended funds) compared to a high percentage of |
| highly-leveraged foreign buyers in the pre-credit crunch period. |
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| The investment turnover in 2009 was again lower than in the previous |
| year; however, the turnover in the second six months of 2009 was 30% |
| higher than in the first half of 2009. This trend is likely to continue |
| in 2010 with a predicted increase of 10% to 20% by the various |
| international real estate agents. Nonetheless, the high correlation |
| between the commercial investment market (turnover) and the financing |
| market remains a barrier for the market to take-off quicker than, for |
| example, the UK. On the other hand the German market has been |
| traditionally a more robust and less volatile market; one of the reasons |
| why most market researchers do not expect a double dip. |
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| The financing market remains the key to the success of the real estate |
| market. The government support (i.e. bail-out of Hypo Real Estate) was |
| considered to be an important signal to the market to strengthen the |
| Pfandbrief market which is now the main source of refinancing for German |
| lenders. Whilst debt liquidity is still constrained, a clear improvement |
| in lending conditions was observed during the last twelve months. The |
| amount of banks that are back in the market has increased by c. 20-25%, |
| predominantly being the German Pfandbrief lenders. As a consequence of |
| the stabilisation of the banking system, LTV ratios have increased to a |
| maximum of c. 75% compared to c. 45%-55% in late 2007/early 2008, albeit |
| leverages of over 70% do comprise often of an expensive mezzanine tranche |
| element and are only available to prime properties. |
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| Impact on Valuations |
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| As far as capital values are concerned the Group's real estate portfolio |
| remains under pressure. However, the degree of decline in values has |
| significantly diminished and reflects the trend of the German market that |
| is clearly bottoming out. The 31 March 2010 revaluation by CBRE is |
| EUR803,9m, a 0.4% fall in value compared to the 30 September 2009 |
| valuation. The decrease in value looks more encouraging and supports the |
| general view that the market has stabilised. As outlined before there are |
| still lower than average transaction volumes recorded and, in |
| consequence, valuations are still to a degree based on sentiment as well |
| as on transaction evidence. |
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| The analysis of the CBRE valuation reveals that the main important |
| drivers, rental values and yields, did not change significantly for the |
| first time in eight consecutive quarters if the underlying property |
| fundamentals had not changed. Rental values in the Group's portfolio |
| have, in general, held up well. Nevertheless, as previously reported the |
| property portfolio suffered from two major lease terminations (logistic |
| property in Loehne, let to Stratos, vacated in September 2009; annual |
| rent of EUR1.549m; retail property in Cologne let to Fegro, to be vacated |
| at the end of 2010; rental income of EUR1.802m). |
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| Property acquisitions and disposals |
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| In line with the strategy to restructure the Group's capital structure |
| and improve the asset management to protect the current rental stream, |
| there were no asset disposals or acquisitions undertaken in the financial |
| year 2009/10. Any future disposals will be on an opportunistic basis to |
| ensure that the strategic goals are met. |
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| Subsequently, the sector and geographic weightings remain unchanged, with |
| 55% in offices, 21% in retail and 24% in industrial/logistics. The |
| geographic exposure remains balanced between North, West, South and |
| Central Germany with minimal exposure in the East. |
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| Asset Management |
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| Despite the two major lease terminations, the rental portfolio has held |
| up fairly well, with an annualised gross rental income of EUR68.4m as at 31 |
| March 2010, compared to EUR70.9m at 31 March 2009. The rental value |
| estimated by CBRE is EUR65.1m and has decreased by EUR0.6m, mainly due to the |
| reconsideration of the Loehne property and its re-letting prospects. |
| Overall the rental income remains robust benefiting from its diversity, |
| and high level of tenant retention. Asset management remains the |
| critical area to focus on to support the sustainability of cash flow as |
| well as the ability to enhance value in the short to mid term. |
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| Despite an ongoing difficult economic environment and a consolidation of |
| the German retail market with major players such as Karstadt or Hertie in |
| insolvency proceedings, the investment portfolio has hardly suffered from |
| the underlying occupational tenant's business. CBRE confirmed the view |
| that 91% of the income derives from "medium" or "strong" tenant |
| covenants. This assessment is supported by the low level of tenant |
| defaults. |
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| A complete review of the third party property management service was |
| undertaken during 2009 which resulted in a phased transfer of management |
| from DTZ to AQuAM Deutschland GmbH, a niche management provider based in |
| Hannover, which was completed in January 2010. |
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| The Investment Manager has also identified and strengthened its asset |
| management team with the appointment of Jochen Kauschmann, whose wide |
| range of asset management experience in the German market will assist us |
| in identifying and implementing future asset management initiatives. |
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| Portfolio performance |
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| In the period to 31 March 2010 the Company achieved the following |
| positive asset management results: |
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| · the vacancy rate remained at a comparatively low level |
| with c. 6% by floor area and 5% by ERV as of 31March 2010; |
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| · 39 new lettings were achieved producing an additional |
| EUR1.04m annualised rental income; |
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| · the Investment Manager's ongoing leasing management led to |
| 91 tenants renewing their lease arrangements representing a very high |
| renewal rate (>90%); |
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| · as far as rental arrears are concerned the Company |
| progresses successfully to collect a very high percentage of rents. Over |
| 97% of all rents due were collected and steps have been taken to collect |
| the outstanding arrears accordingly; |
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| · the property expenses were monitored rigorously to ensure |
| an appropriate maintenance and cost level. Where property expense budgets |
| were agreed with the lenders (i.e. in cash sweep events) a monthly review |
| was undertaken to ensure that the SPV's were ring-fenced and |
| self-financing; and |
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| · the Weighted Average Unexpired Lease Length of the |
| portfolio is 4.90 years, compared to 5.83 years as of March 2009. |
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| Financing |
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| In line with the market for highly leveraged real estate funds, the |
| Company increased the focus in 2009/10 on the restructuring of its debt |
| facilities. The Company adopted a pro-active restructuring approach to |
| ensure it has the ability to refinance several loan facilities and to |
| return shareholder value respectively. This process is ongoing and |
| remains together with the active asset management the main task of the |
| Investment Manager. The restructuring instruments to improve the Group's |
| capital structure vary from proposed debt/equity swaps, waiver |
| (covenants), loan extensions, raise new debt and equity or a combination |
| of those instruments. |
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| Despite a more positive outlook in terms of the investment climate, the |
| Company's strategy in terms of asset disposal has not materially changed. |
| It is not planned to sell properties at the bottom of the market which |
| would destroy "option value". However, individual asset sales in |
| co-operation with a significant debt reduction could improve the |
| Company's overall financial situation and as such would be considered on |
| a case by case basis in liaison with the lenders. |
+---------------------------------------------------------------------------+
| We are increasing our focus in the coming year on the stabilisation of |
| the Company's financial position by pursuing all possible avenues to |
| improve the capital structure of the Company. This, combined with ongoing |
| asset management initiatives and an anticipated upswing of the German |
| property market, should lead to an improved financial situation in |
| 2010/11. |
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| Lars Lücking |
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| Develica Deutschland Management Limited |
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| Investment Manager |
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| 22 July 2010 |
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+--+-------------------------------------------------------------------------+
| | Develica Deutschland Limited |
+--+-------------------------------------------------------------------------+
| | Annual Report and Consolidated Accounts 2010 |
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| | |
+--+-------------------------------------------------------------------------+
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| Consolidated Statement of Comprehensive Income |
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| For the year ended 31 March 2010 |
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+--------------------------------------------------+----+--------------+---------------+
| | | 2010 | 2009 |
+--------------------------------------------------+----+--------------+---------------+
| | | EUR | EUR |
+--------------------------------------------------+----+--------------+---------------+
| Rental income | | 68,361,168 | 68,717,942 |
+--------------------------------------------------+----+--------------+---------------+
| Service charge income | | 8,306,748 | 9,532,488 |
+--------------------------------------------------+----+--------------+---------------+
| Less: property expenses | | (8,354,830) | (14,747,185) |
+--------------------------------------------------+----+--------------+---------------+
| Net rental income | | 68,313,086 | 63,503,245 |
+--------------------------------------------------+----+--------------+---------------+
| | | | |
+--------------------------------------------------+----+--------------+---------------+
| Expenditure | | | |
+--------------------------------------------------+----+--------------+---------------+
| Administration and other expenses | | (7,726,764) | (14,368,376) |
+--------------------------------------------------+----+--------------+---------------+
| Fair value adjustment on investment property | | (51,020,623) | (152,852,014) |
+--------------------------------------------------+----+--------------+---------------+
| Realised loss on disposal of investment property | | - | (141,297) |
+--------------------------------------------------+----+--------------+---------------+
| | | | |
+--------------------------------------------------+----+--------------+---------------+
| Net operating gain/(loss) before finance costs | | 9,565,699 | (103,858,442) |
+--------------------------------------------------+----+--------------+---------------+
| Finance expenses | | (46,705,324) | (50,664,174) |
+--------------------------------------------------+----+--------------+---------------+
| Finance income | | 133,527 | 5,035,440 |
+--------------------------------------------------+----+--------------+---------------+
| Fair value adjustment on interest rate swaps | | 2,497,012 | (50,359,690) |
+--------------------------------------------------+----+--------------+---------------+
| | | (44,074,785) | (95,988,424) |
+--------------------------------------------------+----+--------------+---------------+
| Net loss before tax | | (34,509,086) | (199,846,866) |
+--------------------------------------------------+----+--------------+---------------+
| Taxation | | 1,878,937 | (402,125) |
+--------------------------------------------------+----+--------------+---------------+
| Total comprehensive loss for the year | | (32,630,149) | (200,248,991) |
| attributable to equity holders of the Company | | | |
+--------------------------------------------------+----+--------------+---------------+
| Basic and diluted loss per ordinary share in | | 13.05 | 80.10 |
| cents | | | |
+--------------------------------------------------+----+--------------+---------------+
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| |
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| All revenue in the above statement is derived from continuing operations. |
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| The Group has no component of other comprehensive income for the current |
| year. |
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+--+-------------------------------------------------------------------------+
| | Develica Deutschland Limited |
+--+-------------------------------------------------------------------------+
| | Annual Report and Consolidated Accounts 2010 |
+--+-------------------------------------------------------------------------+
| | |
+--+-------------------------------------------------------------------------+
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| Consolidated Statement of Changes in Equity |
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| For the year ended 31 March 2010 |
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+------------------------+----+-----------+---------------+-------------+---------------+---------------+
| | | Issued | Distributable | Treasury | Retained | Total |
| | | capital | reserve | Shares | earnings | |
+------------------------+----+-----------+---------------+-------------+---------------+---------------+
| | | EUR | EUR | EUR | EUR | EUR |
+------------------------+----+-----------+---------------+-------------+---------------+---------------+
| Balance at 01 April | | 2,500,000 | 236,646,430 | - | (69,908,357) | 169,238,073 |
| 2008 | | | | | | |
+------------------------+----+-----------+---------------+-------------+---------------+---------------+
| Comprehensive income | | | | | | |
+------------------------+----+-----------+---------------+-------------+---------------+---------------+
| Total comprehensive | | - | - | - | (200,248,991) | (200,248,991) |
| loss for the year | | | | | | |
| attributable to equity | | | | | | |
| holders of the Company | | | | | | |
+------------------------+----+-----------+---------------+-------------+---------------+---------------+
| Other comprehensive | | | | | | |
| income | | | | | | |
+------------------------+----+-----------+---------------+-------------+---------------+---------------+
| Acquisition of | | - | - | (3,074,889) | - | (3,074,889) |
| treasury shares | | | | | | |
+------------------------+----+-----------+---------------+-------------+---------------+---------------+
| Share-based payment | | - | (637,389) | 3,074,889 | - | 2,437,500 |
+------------------------+----+-----------+---------------+-------------+---------------+---------------+
| Balance at 31 March | | 2,500,000 | 236,009,041 | - | (270,157,348) | (31,648,307) |
| 2009 | | | | | | |
+------------------------+----+-----------+---------------+-------------+---------------+---------------+
+------------------------+----+-----------+---------------+----------+---------------+--------------+
| | | Issued | Distributable | Treasury | Retained | Total |
| | | capital | reserve | Shares | earnings | |
+------------------------+----+-----------+---------------+----------+---------------+--------------+
| | | EUR | EUR | EUR | EUR | EUR |
+------------------------+----+-----------+---------------+----------+---------------+--------------+
| Balance at 01 April | | 2,500,000 | 236,009,041 | - | (270,157,348) | (31,648,307) |
| 2009 | | | | | | |
+------------------------+----+-----------+---------------+----------+---------------+--------------+
| Comprehensive income | | | | | | |
+------------------------+----+-----------+---------------+----------+---------------+--------------+
| Total comprehensive | | - | - | - | (32,630,149) | (32,630,149) |
| loss for the year | | | | | | |
| ended 31 March 2010 | | | | | | |
+------------------------+----+-----------+---------------+----------+---------------+--------------+
| Balance at 31 March | | 2,500,000 | 236,009,041 | - | (302,787,497) | (64,278,456) |
| 2010 | | | | | | |
+------------------------+----+-----------+---------------+----------+---------------+--------------+
+--+-------------------------------------------------------------------------+
| | Develica Deutschland Limited |
+--+-------------------------------------------------------------------------+
| | Annual Report and Consolidated Accounts 2010 |
+--+-------------------------------------------------------------------------+
| | |
+--+-------------------------------------------------------------------------+
+---------------------------------------------------------------------------+
| Consolidated Statement of Financial Position |
+---------------------------------------------------------------------------+
| As at 31 March 2010 |
+---------------------------------------------------------------------------+
+------------------------------+----+----------+------+----+---------------+---------------+
| | | 2010 | 2009 |
+-----------------------------------------------------+----+---------------+---------------+
| | | EUR | EUR |
+-----------------------------------------------------+----+---------------+---------------+
| ASSETS | | | |
+-----------------------------------------------------+----+---------------+---------------+
| Non-current assets | | | |
+-----------------------------------------------------+----+---------------+---------------+
| Investment properties | | 803,925,000 | 854,841,000 |
+-----------------------------------------------------+----+---------------+---------------+
| Deferred tax assets | | 232,207 | 548,160 |
+-----------------------------------------------------+----+---------------+---------------+
| | | 804,157,207 | 855,389,160 |
+-----------------------------------------------------+----+---------------+---------------+
| Current assets | | | |
+-----------------------------------------------------+----+---------------+---------------+
| Current tax receivables | | 1,466,567 | - |
+-----------------------------------------------------+----+---------------+---------------+
| Trade and other receivables | | 7,044,887 | 4,300,982 |
+-----------------------------------------------------+----+---------------+---------------+
| Cash and cash equivalents | | 23,870,472 | 30,368,368 |
+-----------------------------------------------------+----+---------------+---------------+
| Other assets | | 7,626,922 | 792,114 |
+-----------------------------------------------------+----+---------------+---------------+
| | | 40,008,848 | 35,461,464 |
+-----------------------------------------------------+----+---------------+---------------+
| Total assets | | 844,166,055 | 890,850,624 |
+-----------------------------------------------------+----+---------------+---------------+
| EQUITY | | | |
+-----------------------------------------------------+----+---------------+---------------+
| Capital and reserves attributable to the Company's | | | |
| equity holders | | | |
+-----------------------------------------------------+----+---------------+---------------+
| Issued capital | | 2,500,000 | 2,500,000 |
+-----------------------------------------------------+----+---------------+---------------+
| Distributable reserves | | 236,009,041 | 236,009,041 |
+-----------------------------------------------------+----+---------------+---------------+
| Retained earnings | | (302,787,497) | (270,157,348) |
+-----------------------------------------------------+----+---------------+---------------+
| Total equity | | (64,278,456) | (31,648,307) |
+-----------------------------------------------------+----+---------------+---------------+
| LIABILITIES | | | | | |
+------------------------------+----+----------+-----------+---------------+---------------+
| Non-current liabilities | | | |
+-----------------------------------------------------+----+---------------+---------------+
| Deferred tax liabilities | | - | 770,900 |
+-----------------------------------------------------+----+---------------+---------------+
| | | - | 770,900 |
+-----------------------------------------------------+----+---------------+---------------+
| Current liabilities | | | |
+-----------------------------------------------------+----+---------------+---------------+
| Borrowings | | 830,352,583 | 836,705,303 |
+-----------------------------------------------------+----+---------------+---------------+
| Derivative financial instruments | | 62,919,764 | 65,416,776 |
+-----------------------------------------------------+----+---------------+---------------+
| Current tax liabilities | | 90,190 | 2,275,545 |
+-----------------------------------------------------+----+---------------+---------------+
| Trade and other payables | | 15,081,974 | 17,330,407 |
+-----------------------------------------------------+----+---------------+---------------+
| | | 908,444,511 | 921,728,031 |
+-----------------------------------------------------+----+---------------+---------------+
| Total liabilities | | 908,444,511 | 922,498,931 |
+-----------------------------------------------------+----+---------------+---------------+
| Total equity and liabilities | | 844,166,055 | 890,850,624 |
+-----------------------------------------------------+----+---------------+---------------+
| Net asset value per ordinary share in cents | | (25.71) | (12.66) |
+-----------------------------------------------------+----+---------------+---------------+
| | | | | | | |
+------------------------------+----+----------+------+----+---------------+---------------+
+---------------------------------+---------------------------------+--------+
| Approved by the Board of Directors of Develica Deutschland Limited on 22 |
| July 2010 and signed on its behalf by: |
+----------------------------------------------------------------------------+
| | | |
| | | |
+---------------------------------+---------------------------------+--------+
| Derek Butler | Quentin Spicer | |
+---------------------------------+---------------------------------+--------+
| Chairman | Director | |
+---------------------------------+---------------------------------+--------+
+--+-------------------------------------------------------------------------+
| | Develica Deutschland Limited |
+--+-------------------------------------------------------------------------+
| | Annual Report and Consolidated Accounts 2010 |
+--+-------------------------------------------------------------------------+
| | |
+--+-------------------------------------------------------------------------+
+--------------------------------------------------+----+--------------+--------------+
| Consolidated Statement of Cash Flows |
+-------------------------------------------------------------------------------------+
| For the year ended 31 March 2010 |
+-------------------------------------------------------------------------------------+
| | | 2010 | 2009 |
+--------------------------------------------------+----+--------------+--------------+
| | | EUR | EUR |
+--------------------------------------------------+----+--------------+--------------+
| Cash generated from operations | | 56,384,465 | 51,138,215 |
+--------------------------------------------------+----+--------------+--------------+
| Income taxes paid | | (1,772,986) | 463,121 |
+--------------------------------------------------+----+--------------+--------------+
| Net cash inflow from operating activities | | 54,611,479 | 51,601,336 |
+--------------------------------------------------+----+--------------+--------------+
| Cash flows from investing activities | | | |
+--------------------------------------------------+----+--------------+--------------+
| Purchase of investment property | | (104,623) | (462,011) |
+--------------------------------------------------+----+--------------+--------------+
| Proceeds from sale of investment property | | - | 320,000 |
+--------------------------------------------------+----+--------------+--------------+
| Interest received | | 133,527 | 2,078,090 |
+--------------------------------------------------+----+--------------+--------------+
| Net cash inflow from investing activities | | 28,904 | 1,936,079 |
+--------------------------------------------------+----+--------------+--------------+
| Cash flows from financing activities | | | |
+--------------------------------------------------+----+--------------+--------------+
| Bank loan repayment | | (7,959,655) | (14,703,191) |
+--------------------------------------------------+----+--------------+--------------+
| Bank loan interest paid on borrowings | | (18,593,332) | (46,077,411) |
+--------------------------------------------------+----+--------------+--------------+
| Swap loan interest paid on borrowings | | (26,490,955) | (2,957,350) |
+--------------------------------------------------+----+--------------+--------------+
| Swap loan interest received on borrowings | | - | 2,772,201 |
+--------------------------------------------------+----+--------------+--------------+
| Other finance costs | | (1,260,314) | (1,629,412) |
+--------------------------------------------------+----+--------------+--------------+
| Transfer to escrow accounts | | (6,834,023) | - |
+--------------------------------------------------+----+--------------+--------------+
| Repurchase of shares | | - | (3,074,889) |
+--------------------------------------------------+----+--------------+--------------+
| Net cash outflow from financing activities | | (61,138,279) | (65,670,052) |
+--------------------------------------------------+----+--------------+--------------+
| Net decrease in cash and cash equivalents | | (6,497,896) | (12,132,637) |
+--------------------------------------------------+----+--------------+--------------+
| Cash and cash equivalents at the beginning of | | 30,368,368 | 42,501,005 |
| the year | | | |
+--------------------------------------------------+----+--------------+--------------+
| Cash and cash equivalents at end of year | | 23,870,472 | 30,368,368 |
+--------------------------------------------------+----+--------------+--------------+
+--+-------------------------------------------------------------------------+
| | Develica Deutschland Limited |
+--+-------------------------------------------------------------------------+
| | Annual Report and Consolidated Accounts 2010 |
+--+-------------------------------------------------------------------------+
| | |
+--+-------------------------------------------------------------------------+
+---------------------------------------------------------------------------+
| Notes to the Consolidated Financial Statements |
| For the year ended 31 March 2010 |
+---------------------------------------------------------------------------+
| 1 Corporate Information |
+---------------------------------------------------------------------------+
| Develica Deutschland Limited ("the Company") and its subsidiaries, |
| (together "the Group") carry on the business of property investment |
| through a portfolio of freehold investment properties located in Germany. |
| These audited consolidated financial statements have been approved for |
| issue by the Board of Directors on 22 July 2010. |
+---------------------------------------------------------------------------+
| 2 Basis of Preparation and statement of compliance |
+---------------------------------------------------------------------------+
| The consolidated financial statements of the Group have been prepared in |
| accordance with International Financial Reporting Standards ("IFRS") as |
| adopted by the European Union, and all applicable requirements of The |
| Companies (Guernsey) Law, 2008 as amended, on a historical cost basis, |
| except for investment property and financial instruments that have been |
| measured at fair value. The consolidated financial statements are |
| prepared in euros. |
+---------------------------------------------------------------------------+
| (a) Basis of Consolidation |
+---------------------------------------------------------------------------+
| The consolidated financial statements comprise the financial statements |
| of the Company and its wholly owned subsidiary undertakings which are |
| entities with limited liability incorporated and domiciled in Guernsey, |
| Channel Islands. |
+---------------------------------------------------------------------------+
| Subsidiaries are fully consolidated from the date on which control is |
| transferred to the Company, and continue to be consolidated until the |
| date that control ceases. |
+---------------------------------------------------------------------------+
| Inter-entity transactions, balances and unrealised gains on transactions |
| between entities are eliminated on consolidation. |
+---------------------------------------------------------------------------+
| (b) Fundamental Accounting Concept |
+---------------------------------------------------------------------------+
| The continued falling values of commercial property across Germany during |
| the year has meant that the Group has suffered a property valuation |
| decrease of EUR50.9 million to EUR803.9 million on a like for like basis, |
| although the decline since the interim date of 30 September 2009 was only |
| EUR3.3 million. The degree of decline in values has significantly |
| diminished and reflects our belief that the trend of the German real |
| estate market is bottoming out. |
+---------------------------------------------------------------------------+
| At 31 March 2010 the Company had eleven ring-fenced loan facilities |
| amounting to EUR833.7 million a reduction through capital repayments of |
| EUR8.0 million during the year. The loan facilities continue to be subject |
| to loan to value ("LTV") and interest cover ratio ("ICR") covenants that |
| must be complied with. |
+---------------------------------------------------------------------------+
| The portfolio has a good income stream and loan interest and amortisation |
| continues to be well serviced through rental income with the exception of |
| one of the smaller loan facilities where the ICR covenant is currently |
| not being met due to a tenant default. The Company continues in |
| discussions with the relevant bank to remedy this ICR breach. |
+---------------------------------------------------------------------------+
| Despite the reduction in property values, the Group remains compliant |
| with the amended covenants on the facilities with its main lender |
| Citibank International PLC ("Citi"). However, these amended covenants |
| expire on 31 March 2011 and negotiations with Citi on future terms are in |
| progress. As these negotiations have not been concluded, the loans |
| remain classified as current liabilities. |
+---------------------------------------------------------------------------+
| Excluding the amended Citi facilities, the Group's borrowing arrangements |
| include covenants that require maintenance of LTV ratios ranging between |
| 85% and 95% with a weighted average of 91% (as in the previous year). |
| The continued fall in property values has caused an increase in the |
| average LTV ratio to 103.7% based on the year end values (2009: 98.4%). |
| Notwithstanding this decline, there have been no further breaches |
| notified by lenders beyond those reported at the interim stage, since |
| when property values have stabilised. As those loans are outside their |
| covenant limit they have been reclassified as current liabilities. |
+---------------------------------------------------------------------------+
| The loans with notified breaches amounted to EUR113.7 million at 31 March |
| 2010. In both cases the lender has control of the cash balances which |
| has resulted in a cash trap but the company continues to have positive |
| discussions with the lenders to seek to remedy these breaches. No |
| further notifications of LTV breaches have been served on the Group by |
| it's other lenders. |
+---------------------------------------------------------------------------+
| The Company continues in positive discussion with all its lenders with |
| regards to the loan facilities. However, if negotiations with lenders |
| (including swap counterparties) are unsuccessful and repayment is sought, |
| the only recourse available is to the asset secured against the relevant |
| loan at the subsidiary level and not to any other assets of the Group. |
+---------------------------------------------------------------------------+
+---------------------------------------------------------------------------+
| The Directors have carefully considered: |
+---------------------------------------------------------------------------+
| · the current status of negotiations with lenders and the |
| current position on LTV and ICR covenants as described above; |
+---------------------------------------------------------------------------+
| · the likely trend of commercial property values in Germany; |
| and |
+---------------------------------------------------------------------------+
| · the Group's existing cash resources and continuing |
| positive cashflows |
+---------------------------------------------------------------------------+
| After due consideration of the above factors and, in particular, the |
| ring-fenced nature of the Group's borrowing arrangements, the Directors |
| have concluded that there is no material uncertainty about the Group's |
| ability to continue trading as a going concern and consequently that it |
| is appropriate to prepare the consolidated financial statements on a |
| going concern basis. |
+---------------------------------------------------------------------------+
+-------------------------------------------------------+------------+-------------+
| 3 Net Rental Income |
+----------------------------------------------------------------------------------+
| | 2010 | 2009 |
+-------------------------------------------------------+------------+-------------+
| | EUR | EUR |
+-------------------------------------------------------+------------+-------------+
| Rental Income | 68,860,941 | 69,980,854 |
+-------------------------------------------------------+------------+-------------+
| Less: provision for doubtful debts | (499,773) | (1,262,912) |
+-------------------------------------------------------+------------+-------------+
| Net rental income | 68,361,168 | 68,717,942 |
+-------------------------------------------------------+------------+-------------+
| 4 Administration and other expenses |
+----------------------------------------------------------------------------------+
| | 2010 | 2009 |
+-------------------------------------------------------+------------+-------------+
| | EUR | EUR |
+-------------------------------------------------------+------------+-------------+
| Management fees | 3,387,759 | 6,013,664 |
+-------------------------------------------------------+------------+-------------+
| Legal and professional fees | 987,162 | 2,060,398 |
+-------------------------------------------------------+------------+-------------+
| Accounting fees | 966,554 | 812,500 |
+-------------------------------------------------------+------------+-------------+
| Other expenses | 482,231 | 348,068 |
+-------------------------------------------------------+------------+-------------+
| Audit fees | 363,666 | 254,500 |
+-------------------------------------------------------+------------+-------------+
| Tax advisory fees | 333,921 | 479,418 |
+-------------------------------------------------------+------------+-------------+
| Administration fees | 330,852 | 488,125 |
+-------------------------------------------------------+------------+-------------+
| VAT declaration fees | 310,933 | 487,027 |
+-------------------------------------------------------+------------+-------------+
| Directors' fees and expenses | 199,206 | 229,468 |
+-------------------------------------------------------+------------+-------------+
| Valuation fees | 184,667 | 290,402 |
+-------------------------------------------------------+------------+-------------+
| Consultancy fees | 179,813 | 467,306 |
+-------------------------------------------------------+------------+-------------+
| Share-based payment | - | 2,437,500 |
+-------------------------------------------------------+------------+-------------+
| | 7,726,764 | 14,368,376 |
+-------------------------------------------------------+------------+-------------+
+-------------------------------------------------------+--------------+--------------+
| 5 Finance income and expenses |
+-------------------------------------------------------------------------------------+
| | 2010 | 2009 |
+-------------------------------------------------------+--------------+--------------+
| | EUR | EUR |
+-------------------------------------------------------+--------------+--------------+
| Finance expenses | | |
+-------------------------------------------------------+--------------+--------------+
| Interest expense on bank borrowings | 18,593,334 | 46,077,412 |
+-------------------------------------------------------+--------------+--------------+
| Swap interest | 26,490,955 | 2,957,350 |
+-------------------------------------------------------+--------------+--------------+
| Bank loan amortisation | 1,606,935 | 1,478,656 |
+-------------------------------------------------------+--------------+--------------+
| Default interest paid | 14,100 | 91,235 |
+-------------------------------------------------------+--------------+--------------+
| Bank arrangement fees | - | 59,521 |
+-------------------------------------------------------+--------------+--------------+
| | 46,705,324 | 50,664,174 |
+-------------------------------------------------------+--------------+--------------+
| Finance income | | |
+-------------------------------------------------------+--------------+--------------+
| Interest income on bank deposits | 133,527 | 1,129,283 |
+-------------------------------------------------------+--------------+--------------+
| Swap interest | - | 3,906,157 |
+-------------------------------------------------------+--------------+--------------+
| | 133,527 | 5,035,440 |
+-------------------------------------------------------+--------------+--------------+
| Net finance expenses | (46,571,797) | (45,628,734) |
+-------------------------------------------------------+--------------+--------------+
| 6 Income tax expense |
+-------------------------------------------------------------------------------------+
| | 2010 | 2009 |
+-------------------------------------------------------+--------------+--------------+
| | EUR | EUR |
+-------------------------------------------------------+--------------+--------------+
| Current income tax | | |
+-------------------------------------------------------+--------------+--------------+
| Guernsey tax | - | - |
+-------------------------------------------------------+--------------+--------------+
| German tax | (1,423,989) | 1,542,271 |
+-------------------------------------------------------+--------------+--------------+
| Current income tax charge | (1,423,989) | 1,542,271 |
+-------------------------------------------------------+--------------+--------------+
| Deferred tax | | |
+-------------------------------------------------------+--------------+--------------+
| Origination and reversal of temporary differences | (454,948) | (1,140,146) |
+-------------------------------------------------------+--------------+--------------+
| Tax (credit)/charge in the Statement of Comprehensive | (1,878,937) | 402,125 |
| Income | | |
+-------------------------------------------------------+--------------+--------------+
| | 2010 | 2009 |
+-------------------------------------------------------+--------------+--------------+
| | EUR | EUR |
+-------------------------------------------------------+--------------+--------------+
| Reconciliation of income tax charge | | |
+-------------------------------------------------------+--------------+--------------+
| Loss on ordinary activities multiplied by the average | (5,499,689) | (30,834,478) |
| rate of corporate income tax of 15.83% (2009: 15.38%) | | |
+-------------------------------------------------------+--------------+--------------+
| Revaluation (gains)/losses on interest rate swaps not | (395,152) | 7,745,320 |
| taxable | | |
+-------------------------------------------------------+--------------+--------------+
| Unrealised losses arising on revaluation of | 3,345,472 | 23,508,640 |
| investment property not subject to tax | | |
+-------------------------------------------------------+--------------+--------------+
| Expenses not deductible for tax purposes (property | 800,317 | (2,804,389) |
| depreciation, 2% on 85% of acquisition costs) | | |
+-------------------------------------------------------+--------------+--------------+
| Unutilised tax losses | 3,286,857 | 2,787,032 |
+-------------------------------------------------------+--------------+--------------+
| Effects from Group consolidation | (1,295,389) | - |
+-------------------------------------------------------+--------------+--------------+
| Taxes from different periods | (1,712,562) | - |
+-------------------------------------------------------+--------------+--------------+
| Other taxes | (408,791) | - |
+-------------------------------------------------------+--------------+--------------+
| Current income tax (credit)/expense | (1,878,937) | 402,125 |
+-------------------------------------------------------+--------------+--------------+
| The weighted average income tax rate for the year of 15.83% (2009: 15.38%) |
| is based on the weighted average tax rate applicable across the Group's |
| operations. This has been calculated by dividing (1) Group companies' |
| profits before tax multiplied by the tax rate applicable for each Group |
| company by (2) the Group's profit before tax. |
+-------------------------------------------------------+--------------+--------------+
+-------------------------------------------------------+--------------+---------------+
| The Company and its Guernsey-registered subsidiaries have been granted |
| exemption from Guernsey taxation under The Income Tax (Exempt Bodies) |
| (Guernsey) Ordinance 1989 and are charged an annual exemption fee of GBP600 |
| each. |
+--------------------------------------------------------------------------------------+
| 7 Deferred tax |
+--------------------------------------------------------------------------------------+
| | 2010 | 2009 |
+-------------------------------------------------------+--------------+---------------+
| | EUR | EUR |
+-------------------------------------------------------+--------------+---------------+
| | | |
+-------------------------------------------------------+--------------+---------------+
| Deferred tax assets | (232,207) | (548,160) |
+-------------------------------------------------------+--------------+---------------+
| Deferred tax liabilities | - | 770,900 |
+-------------------------------------------------------+--------------+---------------+
| | (232,207) | 222,740 |
+-------------------------------------------------------+--------------+---------------+
| Movement | | |
+-------------------------------------------------------+--------------+---------------+
| As at 1 April | 222,740 | 1,362,887 |
+-------------------------------------------------------+--------------+---------------+
| Accelerated allowance on loan setup costs | 548,160 | 770,900 |
+-------------------------------------------------------+--------------+---------------+
| Reversal of deferred tax liability | (770,900) | (1,362,887) |
+-------------------------------------------------------+--------------+---------------+
| Deferred tax asset on tax loss carry forward | (232,207) | (548,160) |
+-------------------------------------------------------+--------------+---------------+
| | (232,207) | 222,740 |
+-------------------------------------------------------+--------------+---------------+
| The Group has additional tax losses and deductions that will be available |
| indefinitely for offset against future taxable profits of the Companies in |
| which the losses and deductions arose. The Group has not recognised |
| deferred income tax assets in respect of some of these losses. In addition, |
| the Group has unrecognised deferred tax assets of EUR7,502,077 (2009: |
| EUR1,039,281). The assets have not been recognised due to the degree of |
| uncertainty over both the amount and the timing of utilisation. |
+--------------------------------------------------------------------------------------+
| 8 Dividends |
+--------------------------------------------------------------------------------------+
| No interim dividends were paid in 2010 (2009: EURnil). The Directors do not |
| propose the payment of a final dividend for the year ended 31 March 2010 |
| (2009: EURnil). |
+--------------------------------------------------------------------------------------+
| 9 Loss per ordinary share |
+--------------------------------------------------------------------------------------+
| | 2010 | 2009 |
+-------------------------------------------------------+--------------+---------------+
| | EUR | EUR |
+-------------------------------------------------------+--------------+---------------+
| Loss per ordinary share | | |
+-------------------------------------------------------+--------------+---------------+
| Total comprehensive loss for the year attributable to | (32,630,149) | (200,248,991) |
| equity holders of the Company | | |
+-------------------------------------------------------+--------------+---------------+
| ordinary shares issued | 250,000,000 | 250,000,000 |
+-------------------------------------------------------+--------------+---------------+
| | | |
+-------------------------------------------------------+--------------+---------------+
| | EUR | EUR |
+-------------------------------------------------------+--------------+---------------+
| Loss per ordinary share - basic and diluted | (13.05) | (80.10) |
+-------------------------------------------------------+--------------+---------------+
| | | |
+-------------------------------------------------------+--------------+---------------+
+-------------------------------------------------------+--------------+---------------+
| 10 Net asset value per ordinary share |
+--------------------------------------------------------------------------------------+
| The net asset value per Ordinary Share is based on the net liabilities |
| attributable to Ordinary Shareholders of (EUR64,278,456) and on 250,000,000 |
| Ordinary Shares in issue at the year end date. There is no difference |
| between diluted and basic earnings per share. |
+--------------------------------------------------------------------------------------+
| 11 Investment properties |
+--------------------------------------------------------------------------------------+
| | 2010 | 2009 |
+-------------------------------------------------------+--------------+---------------+
| | EUR | EUR |
+-------------------------------------------------------+--------------+---------------+
| Fair value at beginning of the year | 854,841,000 | 1,007,692,300 |
+-------------------------------------------------------+--------------+---------------+
| Acquisitions and capital expense | 104,623 | 462,011 |
+-------------------------------------------------------+--------------+---------------+
| Fair value adjustment | (51,020,623) | (152,852,014) |
+-------------------------------------------------------+--------------+---------------+
| Disposal of investment property | - | (320,000) |
+-------------------------------------------------------+--------------+---------------+
| Loss on disposal of investment property | - | (141,297) |
+-------------------------------------------------------+--------------+---------------+
| Fair value at end of the year | 803,925,000 | 854,841,000 |
+-------------------------------------------------------+--------------+---------------+
+-------------------------------------------------------+----------+----------+
| It is the Group policy to carry investment property in accordance with IAS |
| 40 'Investment Property'. Investment property was valued at 31 March 2010 |
| by CBRE, external valuer to the Group. CBRE has consented to the use of its |
| name in these financial statements. These valuations have been incorporated |
| into the financial statements and have been carried out in accordance with |
| the Royal Institution of Chartered Surveyors ("RICS") Valuation Standards, |
| Sixth Edition. |
+-----------------------------------------------------------------------------+
| The valuations have been prepared on the basis of market value which is |
| defined as: |
+-----------------------------------------------------------------------------+
| 'The estimated amount for which a property should exchange on the date of |
| valuation between a willing buyer and a willing seller in an arm's length |
| transaction after proper marketing wherein the parties had each acted |
| knowledgeably, prudently and without compulsion'. |
+-----------------------------------------------------------------------------+
| CBRE has valued the properties individually and no account has been taken |
| of any discount or premium that may be negotiated in the market if all or |
| part of the portfolio was to be marketed simultaneously, either in lots or |
| as a whole. |
+-----------------------------------------------------------------------------+
| As a result of the current volatility in the global financial system and |
| the lack of liquidity in the capital markets, transaction volumes have |
| reduced. Consequently, whilst market values have been primarily derived |
| using comparable recent market transactions on arm's length terms, valuers |
| have also increasingly used their knowledge and professional judgement. |
+-----------------------------------------------------------------------------+
| Various assumptions have been made as to tenure, letting, town planning and |
| the condition and repair of buildings and sites, including ground and |
| groundwater contamination. |
+-----------------------------------------------------------------------------+
| The significant assumptions made relating to the valuation are set out |
| below: |
+-----------------------------------------------------------------------------+
| | 2010 | 2009 |
+-------------------------------------------------------+----------+----------+
| | | |
+-------------------------------------------------------+----------+----------+
| Average gross rent per square meter | EUR82.40 | EUR85.73 |
+-------------------------------------------------------+----------+----------+
| Average estimated rental value (market rent) per | EUR78.66 | EUR79.39 |
| square meter | | |
+-------------------------------------------------------+----------+----------+
| Net initial yield | (3)% - | 1% - 11% |
| | 13% | |
+-------------------------------------------------------+----------+----------+
| Reversionary yield | 5% - 10% | 1% - 10% |
+-------------------------------------------------------+----------+----------+
+-----------------------------------+----------+----------+-----+---------+---+-------------+
| The table below presents the sensitivity of the valuation to changes in the most |
| significant assumptions underlying the valuation of the investment property. |
+-------------------------------------------------------------------------------------------+
| | | | 2010 | 2009 |
+-----------------------------------+----------+----------+---------------+-----------------+
| | | | EUR | EUR |
+-----------------------------------+----------+----------+---------------+-----------------+
| | | | | |
+-----------------------------------+----------+----------+---------------+-----------------+
| Increase in yield of 10 basis | | | (11,690,000) | (12,183,700) |
| points | | | | |
+-----------------------------------+----------+----------+---------------+-----------------+
| Decrease in rental rates of 5% | | | (3,407,777) | (3,545,509) |
+-----------------------------------+----------+----------+---------------+-----------------+
| | | | | |
+-----------------------------------+----------+----------+---------------+-----------------+
| 12 Trade and other receivables |
+-------------------------------------------------------------------------------------------+
| | 2010 | 2009 |
+---------------------------------------------------------------+-------------+-------------+
| | EUR | EUR |
+---------------------------------------------------------------+-------------+-------------+
| Trade and rents receivable | 6,256,879 | 4,054,188 |
+---------------------------------------------------------------+-------------+-------------+
| Allowance for doubtful debt | (1,147,520) | (1,262,912) |
+---------------------------------------------------------------+-------------+-------------+
| Net trade receivables | 5,109,359 | 2,791,276 |
+---------------------------------------------------------------+-------------+-------------+
| Sundry receivables and prepayments | 1,935,528 | 1,316,623 |
+---------------------------------------------------------------+-------------+-------------+
| Bank balances with restricted availability | - | 193,083 |
+---------------------------------------------------------------+-------------+-------------+
| | | |
+---------------------------------------------------------------+-------------+-------------+
| | 7,044,887 | 4,300,982 |
+---------------------------------------------------------------+-------------+-------------+
| | | | | | | |
+-----------------------------------+----------+----------+-----+---------+---+-------------+
+-------------------------------------------------------+-----------+-----------+
| Management believes the risk inherent in the 'neither past due nor |
| impaired' balance is not high given the history and the strong tenant base |
| of the Group. |
+-------------------------------------------------------------------------------+
| Trade receivables are non-interest bearing. |
+-------------------------------------------------------------------------------+
| Rent and service charge receivables are non interest bearing and are |
| typically due within 30 days. The analysis of the trade receivables are |
| set out below: |
+-------------------------------------------------------------------------------+
| | 2010 | 2009 |
+-------------------------------------------------------+-----------+-----------+
| | EUR | EUR |
+-------------------------------------------------------+-----------+-----------+
| | | |
+-------------------------------------------------------+-----------+-----------+
| Neither past due nor impaired | 3,407,900 | 1,303,680 |
+-------------------------------------------------------+-----------+-----------+
| Past due but not impaired | | |
+-------------------------------------------------------+-----------+-----------+
| <30 days | 260,524 | 893,537 |
+-------------------------------------------------------+-----------+-----------+
| 30-90 days | 313,296 | - |
+-------------------------------------------------------+-----------+-----------+
| 90-120 days | - | - |
+-------------------------------------------------------+-----------+-----------+
| >120 days | 1,127,639 | 594,059 |
+-------------------------------------------------------+-----------+-----------+
| Impaired | | |
+-------------------------------------------------------+-----------+-----------+
| >120 days | 1,147,520 | 1,262,912 |
+-------------------------------------------------------+-----------+-----------+
| Total | 6,256,879 | 4,054,188 |
+-------------------------------------------------------+-----------+-----------+
| As of 31 March 2010, trade receivables with a nominal value of EUR1,147,520 |
| were impaired and fully provided for. |
+-------------------------------------------------------+-----------+-----------+
+-------------------------------------------------------+-----------+----------+
| 13 Other assets |
+------------------------------------------------------------------------------+
| | | |
+-------------------------------------------------------+-----------+----------+
| | 2010 | 2009 |
+-------------------------------------------------------+-----------+----------+
| | EUR | EUR |
+-------------------------------------------------------+-----------+----------+
| | | |
+-------------------------------------------------------+-----------+----------+
| Funds on escrow - borrowings | 6,834,023 | - |
+-------------------------------------------------------+-----------+----------+
| Funds on escrow - contingency | 792,899 | 792,114 |
+-------------------------------------------------------+-----------+----------+
| | 7,626,922 | 792,114 |
+-------------------------------------------------------+-----------+----------+
+--------------------------------------------------------+------------+------------+
| Funds on escrow consists of: |
+----------------------------------------------------------------------------------+
| · contingency against legal proceedings and matters arising |
| post acquisition. |
+----------------------------------------------------------------------------------+
| · collateral held in respect of external debt |
+----------------------------------------------------------------------------------+
| 14 Trade and other payables |
+----------------------------------------------------------------------------------+
| | 2010 | 2009 |
+--------------------------------------------------------+------------+------------+
| | EUR | EUR |
+--------------------------------------------------------+------------+------------+
| Accrued interest | 8,664,642 | 8,303,919 |
+--------------------------------------------------------+------------+------------+
| Other trade payables | 2,650,320 | 813,200 |
+--------------------------------------------------------+------------+------------+
| VAT payable | 2,401,375 | 2,182,094 |
+--------------------------------------------------------+------------+------------+
| Trade payables | 721,658 | 4,581,802 |
+--------------------------------------------------------+------------+------------+
| Accrued expenses | 643,979 | 1,280,299 |
+--------------------------------------------------------+------------+------------+
| Other payables | - | 169,093 |
+--------------------------------------------------------+------------+------------+
| | 15,081,974 | 17,330,407 |
+--------------------------------------------------------+------------+------------+
| 15 Cash and cash equivalents |
+----------------------------------------------------------------------------------+
| | 2010 | 2009 |
+--------------------------------------------------------+------------+------------+
| | EUR | EUR |
+--------------------------------------------------------+------------+------------+
| Parent Company | 6,727,038 | 9,976,591 |
+--------------------------------------------------------+------------+------------+
| Wholly owned subsidiaries | 17,143,434 | 20,391,777 |
+--------------------------------------------------------+------------+------------+
| Total cash at bank | 23,870,472 | 30,368,368 |
+--------------------------------------------------------+------------+------------+
| As at 31 March 2010, EUR16,958,786 (2009:EUR18,886,744) of cash is held in |
| controlled accounts of which EUR2,445,419 (2009:EUR193,083) is in cash trap. |
| These balances are under the control of the lenders who have made loans to |
| the Group. The cash is specifically segregated so as to be able to pay |
| financing costs including interest and principal. |
+--------------------------------------------------------+------------+------------+
+-------------------------------------------------------+--------------+---------------+
| 16 Reconciliation of loss before tax to cash generated from operations |
+--------------------------------------------------------------------------------------+
| | 2010 | 2009 |
+-------------------------------------------------------+--------------+---------------+
| | EUR | EUR |
+-------------------------------------------------------+--------------+---------------+
| Net loss before tax | (34,509,086) | (199,846,866) |
+-------------------------------------------------------+--------------+---------------+
| Non-cash movements | | |
+-------------------------------------------------------+--------------+---------------+
| Unrealised loss on fair value of investment | 51,020,623 | 152,852,014 |
| properties | | |
+-------------------------------------------------------+--------------+---------------+
| Unrealised (gain)/loss on fair value of derivative | (2,497,012) | 50,359,690 |
| financial instruments | | |
+-------------------------------------------------------+--------------+---------------+
| Allowance for doubtful debts | 499,773 | 1,262,912 |
+-------------------------------------------------------+--------------+---------------+
| Share-based payment | - | 2,437,500 |
+-------------------------------------------------------+--------------+---------------+
| Movement in deferred tax provision | (454,946) | (1,140,146) |
+-------------------------------------------------------+--------------+---------------+
| Loss on sale of investment properties | - | 141,297 |
+-------------------------------------------------------+--------------+---------------+
| Amortisation of loan set-up costs | 1,606,935 | 1,478,656 |
+-------------------------------------------------------+--------------+---------------+
| | 15,666,287 | 7,545,057 |
+-------------------------------------------------------+--------------+---------------+
| Operating cash flows before changes to working | | |
| capital and other cash movements | | |
+-------------------------------------------------------+--------------+---------------+
| Interest payable | 46,361,906 | 46,758,017 |
+-------------------------------------------------------+--------------+---------------+
| Interest receivable | 209,891 | (1,129,284) |
+-------------------------------------------------------+--------------+---------------+
| Net financing costs | 46,571,797 | 45,628,733 |
+-------------------------------------------------------+--------------+---------------+
| Movement in trade and other receivables | (3,244,461) | 3,982,607 |
+-------------------------------------------------------+--------------+---------------+
| Movement in trade and other payables | (2,609,158) | (6,018,182) |
+-------------------------------------------------------+--------------+---------------+
| | 40,718,178 | 43,593,158 |
+-------------------------------------------------------+--------------+---------------+
| Cash generated from operations | 56,384,465 | 51,138,215 |
+-------------------------------------------------------+--------------+---------------+
+-------------------------------------------------------+-----------+-----------+
| 17 Issued capital |
+-------------------------------------------------------------------------------+
| | 2010 | 2009 |
+-------------------------------------------------------+-----------+-----------+
| | EUR | EUR |
+-------------------------------------------------------+-----------+-----------+
| Ordinary Shares | | |
+-------------------------------------------------------+-----------+-----------+
| Authorised | | |
+-------------------------------------------------------+-----------+-----------+
| 500,000,000 ordinary shares of EUR0.01 each | 5,000,000 | 5,000,000 |
+-------------------------------------------------------+-----------+-----------+
| | | |
+-------------------------------------------------------+-----------+-----------+
| Allotted, called up and fully paid | | |
+-------------------------------------------------------+-----------+-----------+
| 250,000,000 ordinary shares of EUR0.01 each | 2,500,000 | 2,500,000 |
+-------------------------------------------------------+-----------+-----------+
| | | |
+-------------------------------------------------------+-----------+-----------+
| Total issued capital | 2,500,000 | 2,500,000 |
+-------------------------------------------------------+-----------+-----------+
+-------------------------------------------------------+----------+----------+----------+-------------+
| | 2010 | 2009 |
+-------------------------------------------------------+---------------------+------------------------+
| | Number of Shares | Number of Shares |
+-------------------------------------------------------+---------------------+------------------------+
| Movement in ordinary shares | | |
+-------------------------------------------------------+---------------------+------------------------+
| Opening balance at 1 April | 250,000,000 | 250,000,000 |
+-------------------------------------------------------+---------------------+------------------------+
| Treasury shares | - | (24,375,000) |
+-------------------------------------------------------+---------------------+------------------------+
| Share-based payments | - | 24,375,000 |
+-------------------------------------------------------+---------------------+------------------------+
| Closing balance at 31 March | 250,000,000 | 250,000,000 |
+-------------------------------------------------------+---------------------+------------------------+
| | | |
+-------------------------------------------------------+---------------------+------------------------+
| | | |
+-------------------------------------------------------+---------------------+------------------------+
| Ordinary shares have the following rights in respect of the assets of the Company: |
+------------------------------------------------------------------------------------------------------+
| · entitlement to receive, and participate in, any dividends or other distributions |
| out of the profits of the Company; |
+------------------------------------------------------------------------------------------------------+
| · entitlement to participate in the distributions of capital on a winding up; and |
+------------------------------------------------------------------------------------------------------+
| · entitlement, on a poll, to one vote per share at all general meetings of the |
| Company. |
+------------------------------------------------------------------------------------------------------+
| Under the terms of an option agreement dated 25 May 2006, the Company has granted an option which |
| entitles the holder to subscribe to 5 million ordinary shares at a price of EUR1 per share during |
| the option period, being the period commencing 25 May 2006 and expiring on the fifth anniversary |
| of Admission. The option had not been exercised as at 31 March 2010. |
+------------------------------------------------------------------------------------------------------+
| 18 Distributable reserve |
+------------------------------------------------------------------------------------------------------+
| | 2010 | 2009 |
+------------------------------------------------------------------+---------------------+-------------+
| | EUR | EUR |
+------------------------------------------------------------------+---------------------+-------------+
| Opening Balance at 1 April | 236,009,041 | 236,646,430 |
+------------------------------------------------------------------+---------------------+-------------+
| Share-based payment | - | (637,389) |
+------------------------------------------------------------------+---------------------+-------------+
| | | |
+------------------------------------------------------------------+---------------------+-------------+
| Closing Balance at 31 March | 236,009,041 | 236,009,041 |
+------------------------------------------------------------------+---------------------+-------------+
| | | | | |
+-------------------------------------------------------+----------+----------+----------+-------------+
+---------------------------------------------------------------------------+
| The distributable reserve can be used for all purposes permitted by The |
| Companies (Guernsey) Law, 2008, including the purchase of the Company's |
| own shares and the payments of dividends. The share-based payment |
| granted to the Investment Manager in prior year vested unconditionally |
| and exercisable with immediate effect therefore, there were no additional |
| charges incurred during the year. |
+---------------------------------------------------------------------------+
+---------------------------------------------+-------------+-------------+-------------+
| 19 Borrowings |
+---------------------------------------------------------------------------------------+
| | Principal | Finance | Total |
| | Amounts | Costs | |
+---------------------------------------------+-------------+-------------+-------------+
| | EUR | EUR | EUR |
+---------------------------------------------+-------------+-------------+-------------+
| | | | |
+---------------------------------------------+-------------+-------------+-------------+
| At 31 March 2009 | 841,703,453 | (4,998,150) | 836,705,303 |
+---------------------------------------------+-------------+-------------+-------------+
| Capital repayments | (7,959,655) | - | (7,959,655) |
+---------------------------------------------+-------------+-------------+-------------+
| Unamortised issue costs | - | 1,606,935 | 1,606,935 |
+---------------------------------------------+-------------+-------------+-------------+
| At 31 March 2010 | 833,743,798 | (3,391,215) | 830,352,583 |
+---------------------------------------------+-------------+-------------+-------------+
+---------------------------------------------------------------------------+
| Under the terms of the Group's borrowing arrangements, lenders are |
| generally entitled to request updated valuation information. |
+---------------------------------------------------------------------------+
| The movement of EUR7,959,655 in total borrowings pertains to capital |
| repayments for the year ended 31 March 2010. |
+---------------------------------------------------------------------------+
| 20 Derivative financial instruments |
+---------------------------------------------------------------------------+
| The Group's subsidiaries have hedged their variable interest rate |
| exposure using fixed rate interest swaps. Interest rate swaps were |
| entered into for the notional amounts with a term of five years and fixed |
| rates and a variable rate of three month Euribor. In accordance with IAS |
| 39 Financial Instruments: Recognition and Measurement, the swaps are |
| recognised in the financial statements at fair value. |
+---------------------------------------------------------------------------+
| Derivative financial instruments at 31 March 2010 were valued at a |
| liability of EUR62,919,764 (2009: EUR65,416,776). |
+---------------------------------------------------------------------------+
| 21 Financial risk management |
+---------------------------------------------------------------------------+
| Financial risk factors |
+---------------------------------------------------------------------------+
| The Group's financial instruments comprise bank loans, receivables, bank |
| and cash, derivatives and trade payables. The main purpose of these |
| financial instruments is to finance the Group's operations. The Group |
| has entered into interest rate swap agreements in accordance with the |
| terms of the loan agreements with its principal providers of finance. |
| The purpose is to manage the interest rate risks arising from the Group's |
| sources of finance. |
+---------------------------------------------------------------------------+
| It is, and has been throughout the year under review, the Group's policy |
| that no trading in financial instruments shall be undertaken. The main |
| risks arising from the Group's financial instruments are interest rate |
| risk, liquidity risk, credit risk and market price risk for derivatives. |
| The Board reviews and agrees policies for managing each of these risks |
| and they are summarised below. |
+---------------------------------------------------------------------------+
| (a) Credit risk |
+---------------------------------------------------------------------------+
| Credit risk is the risk that a counterparty will be unable to meet a |
| commitment that it has entered into with the Group. |
+---------------------------------------------------------------------------+
| The Group has two major counterparties with A-1 ratings at 31 March 2010. |
| A major counterparty is defined as any counterparty that holds cash that |
| in the aggregate, is greater than 10% of total cash. |
+---------------------------------------------------------------------------+
| In the event of default by an occupational tenant, the Group will suffer |
| a rental income shortfall and incur additional related costs. |
+---------------------------------------------------------------------------+
| In respect of other financial assets of the Group, which comprise of cash |
| and cash equivalents, the Group's exposure to credit risk arises through |
| default of counterparties with maximum exposure equal to the carrying |
| value of these instruments. |
+---------------------------------------------------------------------------+
+-----------------------------------+------------+------------+-------------+---------------+
| The Group performs ongoing credit evaluations of its leases and the financial |
| statements include specific allowances for doubtful accounts which, in |
| management's estimation, adequately reflect the underlying loss of debts |
| whose collection is doubtful. At 31 March 2010, we consider there to be |
| doubtful receivables for which a provision has been made of EUR1,147,520. |
+-------------------------------------------------------------------------------------------+
| (b) Liquidity risk |
+-------------------------------------------------------------------------------------------+
| Liquidity risk is the risk that the Group will not be able to meet its |
| financial obligations as they fall due. |
+-------------------------------------------------------------------------------------------+
| The Group monitors its risk to a shortage of funds using detailed cash flow |
| reporting. This considers the maturity of both its financial investments and |
| financial assets (e.g. accounts receivables, other financial assets) and |
| projected cash flows from operations. |
+-------------------------------------------------------------------------------------------+
| The Group's objective is to maintain a balance between continuity of funding |
| and flexibility through the use of bank overdrafts, bank loans and fund |
| raising. |
+-------------------------------------------------------------------------------------------+
| A summary table with maturity of financial assets and liabilities presented |
| below is used by key management personnel to manage liquidity risks: |
+-------------------------------------------------------------------------------------------+
| | Less | Between | Between | Total |
| | than 1 | 1 and 2 | 2 and 5 | |
| | year | years | years | |
+-----------------------------------+------------+------------+-------------+---------------+
| | EUR | EUR | EUR | EUR |
+-----------------------------------+------------+------------+-------------+---------------+
| As at 31 March 2010 | | | | |
+-----------------------------------+------------+------------+-------------+---------------+
| Borrowings | 8,206,111 | 7,765,625 | 817,772,062 | 833,743,798 |
+-----------------------------------+------------+------------+-------------+---------------+
| Interest payable on borrowings | 43,841,656 | 43,412,618 | 19,931,748 | 107,186,022 |
| and derivative financial | | | | |
| instruments | | | | |
+-----------------------------------+------------+------------+-------------+---------------+
| Trade and other payables | 12,680,599 | - | - | 12,680,599 |
+-----------------------------------+------------+------------+-------------+---------------+
| | 64,728,366 | 51,178,243 | 837,703,810 | 953,610,419 |
+-----------------------------------+------------+------------+-------------+---------------+
| As at 31 March 2009 | | | | |
+-----------------------------------+------------+------------+-------------+---------------+
| Borrowings | 7,959,655 | 8,206,111 | 825,537,687 | 841,703,453 |
+-----------------------------------+------------+------------+-------------+---------------+
| Interest payable on borrowings | 45,084,287 | 43,841,656 | 63,344,366 | 152,270,309 |
| and derivative financial | | | | |
| instruments | | | | |
+-----------------------------------+------------+------------+-------------+---------------+
| Trade and other payables | 15,148,317 | - | - | 15,148,317 |
+-----------------------------------+------------+------------+-------------+---------------+
| | 68,192,259 | 52,047,767 | 888,882,053 | 1,009,122,079 |
+-----------------------------------+------------+------------+-------------+---------------+
| As required by IAS 1, as at 31 March 2010, EUR830,352,583 (2009: EUR836,705,303) |
| of debt facilities have been classified as current because the Group will not |
| be entitled to defer settlement if loan covenant breaches are notified by the |
| lenders. However it is not anticipated that settlement of these liabilities |
| is likely to occur within twelve months of the year end date. The total |
| interest payable that will be incurred on the borrowings and derivative |
| financial instruments balances beyond twelve months from the year end date to |
| loan maturity amounts to EUR63,344,366 (2009: EUR107,186,022). |
+-----------------------------------+------------+------------+-------------+---------------+
+-------------------------------------------------------+------------+-----------+----------+
| (c) Market risk | |
+--------------------------------------------------------------------------------+----------+
| The Group's exposure to market risk is comprised of the following risks: | |
+--------------------------------------------------------------------------------+----------+
| (i) Interest rate risk | |
+--------------------------------------------------------------------------------+----------+
| The Group's exposure to the risk of changes in market interest rates | |
| relates primarily to the Group's long-term debt obligations with floating | |
| interest rates. | |
+--------------------------------------------------------------------------------+----------+
| The Group's policy is to fix the interest rate of its bank loans by | |
| entering into variable interest rate loan agreements and by entering into | |
| interest rate swaps, in which the Group agrees to exchange at specified | |
| intervals, the difference between fixed and variable rate interest amounts | |
| calculated by reference to an agreed-upon notional principal amount. As at | |
| 31 March 2010, after taking into account the effect of interest rate swaps, | |
| the vast majority of the Group's borrowings were at a fixed rate of | |
| interest. However, fixing the interest rates of bank loans through the | |
| swap agreements exposes the Group to price risk on changes in fair value of | |
| the swaps. | |
+--------------------------------------------------------------------------------+----------+
| The Group has minimal exposure to interest rate cash flow risk on | |
| borrowings due to the fact that the interest rates on the external loans | |
| are fully mitigated by the interest rate swap arrangements. The swap | |
| arrangements are matched to the terms of the external loan. The Group was | |
| charged external loan interest of EUR18,593,334 and swap interest of | |
| EUR26,490,955. | |
+--------------------------------------------------------------------------------+----------+
| Most of the Group's cash is deposited in interest bearing accounts | |
| receiving interest at a floating rate, however the Group does not consider | |
| that a significant interest rate risk is involved. This is reflected in | |
| the table below: | |
+--------------------------------------------------------------------------------+----------+
| | Increase/ | Effect | |
| | (decrease) | on | |
| | in basis | profit | |
| | points | before | |
| | | tax | |
+-------------------------------------------------------+------------+-----------+----------+
| | | EUR | |
+-------------------------------------------------------+------------+-----------+----------+
| As at 31 March 2010 | | | |
+-------------------------------------------------------+------------+-----------+----------+
| Euro | 25 | 73,860 | |
+-------------------------------------------------------+------------+-----------+----------+
| Euro | (25) | (73,860) | |
+-------------------------------------------------------+------------+-----------+----------+
| As at 31 March 2009 | | | |
+-------------------------------------------------------+------------+-----------+----------+
| Euro | 100 | 298,231 | |
+-------------------------------------------------------+------------+-----------+----------+
| Euro | (100) | (100,440) | |
+-------------------------------------------------------+------------+-----------+----------+
| | |
+--------------------------------------------------------------------------------+----------+
| Swap rates differ from the current European Central Bank rate mainly | |
| because the swap rates factor in Euribor projections over the full life of | |
| the swap. On-market swap rates are set to make the present value of the | |
| swap zero. Therefore they factor in forward Euribor rates over the full | |
| life of the swap. In the current market, forwards exceed today's Euribor. | |
+--------------------------------------------------------------------------------+----------+
| The table below demonstrates the sensitivity to a reasonable possible | |
| change in interest rate swap rates, with all variables held constant, of | |
| the Group's loss before tax (through the impact on floating rate | |
| borrowings). The sensitivity analysis includes the non-derivative floating | |
| rate financial instruments and derivative financial instruments. It shows | |
| the value of the Group's swap portfolio based on parallel shifts of the | |
| swap curve from positive 50 basis points to minus 50 basis points. | |
+--------------------------------------------------------------------------------+----------+
| | Increase/ | Effect on |
| | (decrease) | profit before tax |
| | in basis | |
| | points | |
+-------------------------------------------------------+------------+----------------------+
| | | EUR |
+-------------------------------------------------------+------------+----------------------+
| Swap Portfolio PV | | |
+-------------------------------------------------------+------------+----------------------+
| Euro | 50 | 8,171,295 |
+-------------------------------------------------------+------------+----------------------+
| Euro | (50) | (8,551,355) |
+-------------------------------------------------------+------------+----------------------+
| Capital risk management |
+-------------------------------------------------------------------------------------------+
| The Group manages it capital structure and makes adjustments to it, in light of |
| changes in economic conditions. To maintain or adjust the capital structure, the |
| Company may issue new shares, sell assets to reduce debt or return capital to |
| shareholders. No changes were made in the objectives, policies or processes during |
| the year ended 31 March 2010. |
+-------------------------------------------------------+------------+-----------+----------+
+----------+----------------------------------+----------+------------+--------------+----------+----------+----------+
| The Group is not subject to externally imposed capital requirements. | |
+----------------------------------------------------------------------------------------------------------+----------+
| The Group considers that capital is composed of equity, distributable reserves and retained | |
| earnings. The Group closely monitors the gearing ratio which involves the net debt and equity as | |
| shown below: | |
+----------------------------------------------------------------------------------------------------------+----------+
| | 2010 | 2009 | |
+---------------------------------------------------------------------+--------------+---------------------+----------+
| | EUR | EUR | |
+---------------------------------------------------------------------+--------------+---------------------+----------+
| | | | |
+---------------------------------------------------------------------+--------------+---------------------+----------+
| Total Borrowings | 830,352,583 | 836,705,303 | |
+---------------------------------------------------------------------+--------------+---------------------+----------+
| Cash and cash equivalents | (23,870,472) | (30,562,451) | |
+---------------------------------------------------------------------+--------------+---------------------+----------+
| Net Debt | 806,482,111 | 806,142,852 | |
+---------------------------------------------------------------------+--------------+---------------------+----------+
| Total Equity | (64,278,456) | (31,648,307) | |
+---------------------------------------------------------------------+--------------+---------------------+----------+
| Total | 742,203,655 | 774,494,545 | |
+---------------------------------------------------------------------+--------------+---------------------+----------+
| Gearing Ratio | 109% | 104% | |
+---------------------------------------------------------------------+--------------+---------------------+----------+
| Fair values | |
+----------------------------------------------------------------------------------------------------------+----------+
| The fair values of financial assets and liabilities are not materially different from their | |
| carrying values at the year end date. The fair value of derivatives and borrowings has been | |
| calculated by reference to quoted market prices for similar instruments. | |
+----------------------------------------------------------------------------------------------------------+----------+
| The fair value of loan notes and other financial assets have been calculated using market | |
| interest rates. | |
+----------------------------------------------------------------------------------------------------------+----------+
| · quoted prices (unadjusted) in active markets for identical assets or liabilities | |
| (level 1); | |
+----------------------------------------------------------------------------------------------------------+----------+
| · inputs other than quoted prices included within level 1 that are observable for | |
| the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from | |
| prices) (level 2); and | |
+----------------------------------------------------------------------------------------------------------+----------+
| · inputs for the asset or liability that are not based on observable market data | |
| (that is, unobservable inputs) (level 3). | |
+----------------------------------------------------------------------------------------------------------+----------+
| | The following table shows an analysis of the financial instruments recognised in the Statement of |
| | Financial Position at fair value by the level of the fair value hierarchy as explained above: |
+----------+----------------------------------------------------------------------------------------------------------+
| | | Level 1 | Level 2 | Level 3 | Total |
+----------+----------------------------------+----------+------------+-------------------------+---------------------+
| | As at 31 March 2010 | | | | |
+----------+----------------------------------+----------+------------+-------------------------+---------------------+
| | Derivatives | - | 62,919,764 | - | 62,919,764 |
+----------+----------------------------------+----------+------------+-------------------------+---------------------+
| | As at 31 March 2009 | | | | |
+----------+----------------------------------+----------+------------+-------------------------+---------------------+
| | Derivatives | - | 65,416,776 | - | 65,416,776 |
+----------+----------------------------------+----------+------------+-------------------------+---------------------+
| | | | | | | | |
+----------+----------------------------------+----------+------------+--------------+----------+----------+----------+
+---------------------------------------------------------------------------+
| 22 Property investment risk |
+---------------------------------------------------------------------------+
| The Group's performance can be adversely affected by weakening rental and |
| capital value in the property market. Tenants could default and the |
| Group may suffer rental shortfalls and incur additional re-letting costs |
| for the property. In addition, future property market recession |
| could adversely affect the capital value of the investment properties. |
+---------------------------------------------------------------------------+
| Investment property provides a return to the shareholders by way of |
| rental income and capital growth in its market value. Both forms of |
| income are generally affected by overall conditions in the local economy, |
| examples being employment levels, growth in gross domestic product, |
| interest rate changes and inflation. Rental income and property values |
| may also be affected by other factors in the real estate market including |
| competition from other real estate owners, inability to collect rental |
| income due to bankruptcy or insolvency, renovations and capital |
| expenditure. In addition, the Group must meet the ongoing operating |
| expenses even if the property is vacant. |
+---------------------------------------------------------------------------+
| Investments in property are relatively illiquid and there is a greater |
| difficulty to realise than investments in other sectors such as equities |
| or bonds. |
+---------------------------------------------------------------------------+
| 23 Investment in subsidiaries |
+---------------------------------------------------------------------------+
| The 74 subsidiaries of the Group (Develica Atrium Bonn Limited and DDE 20 |
| Limited - DDE 92 Limited) are wholly owned property investment vehicles |
| incorporated in Guernsey. |
+---------------------------------------------------------------------------+
| 24 Related party disclosures |
+---------------------------------------------------------------------------+
| Investment Manager's fee |
+---------------------------------------------------------------------------+
| The Group was charged investment management fees of EUR3,387,759 (2009: |
| EUR6,013,664), by the Investment Manager of which EURnil was outstanding at |
| the year end (2009: EURnil). Grant Tromans, who is a Director of the |
| Company, is also a Director of the Investment Manager. |
+---------------------------------------------------------------------------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
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