RNS Number : 5060E
Dawnay, Day Treveria PLC
29 September 2008
Dawnay, Day Treveria PLC
Interim Results
Dawnay, Day Treveria PLC ("Treveria" or the "Company") (AIM: DTR) today announces interim results for the six month period ended 30 June
2008.
Highlights
* Property assets of EUR2,221 million, after revaluation, as at 30 June 2008 (31 December 2007: EUR2,333 million) reflecting a
decline in valuation of 6%
* EUR79.2 million of property disposals notarised since 30 June 2008 at a 10% premium to the 31 December 2007 valuation
* Gross rental income for the period rose 34% to EUR79.8 million (2007: EUR59.3 million)
* Adjusted profits after tax* of EUR17.4 million (2007: EUR20.3 million)
* Adjusted EPS* for the period of 2.85c (2007: 2.86c)
* Adjusted NAV* per share of 91.2c, a decrease of 19.2% from 112.9c as at 31 December 2007
* Total cash position of EUR152 million as at 30 June 2008
* Strategic review now focused on strengthening the Company's balance sheet and new management arrangements progressing
* Proposed name change.
*Adjusted NAV excludes deferred tax and derivative financial instruments; adjusted profits after tax and EPS exclude revaluation
surplus, deferred tax, surrender premiums and derivative fair value movements
Ian Henderson, Chairman of Dawnay, Day Treveria PLC, said: "We retain a substantial and diversified portfolio of retail assets in
Europe's leading economy. With a cautious approach to the use of our cash, stabilisation of the capital base, a co-operative relationship
with our lenders and a targeted sales programme, we are positioning the Company in a way which should enable it to weather the current
economic storms and to benefit as market conditions improve."
Enquiries:
Dawnay, Day Treveria PLC Ian Henderson
Treveria Asset Management Ltd David Hunter
Damian Wisniewski
Chris Kingham
www.treveria.com
Financial Dynamics Stephanie Highett 020 7831 3113
Richard
Sunderland
Laurence Jones
Chairman's statement
The Company's interim results for the six month period ended 30 June 2008 reflect what has been the most challenging period in the
property industry for many years and for the Company specifically since its inception in late 2005.
Firstly, the global credit crisis, which began in August last year, has continued to worsen. The resulting lack of liquidity in the
banking markets curtailed property transactions not only in Germany, but on a global basis. Coupled with rising inflation fuelled by higher
energy, food and commodity prices, this has suppressed consumer demand especially for 'big ticket' purchases. Further, concerns over the
level of Treveria's gearing and property valuation expectations combined to reduce the Company's share price to a level representing a very
substantial discount to its published net asset value per share. Those events prompted the Board to announce a strategic review on 9 June
2008 to seek ways to maximise returns to shareholders. JPMorgan Cazenove was appointed to carry out the review with a remit to consider all
options available ranging from returning funds to shareholders following asset disposals to a sale of the whole Company.
Strategic Review
Since the announcement of the review, the global credit environment and market sentiment have deteriorated and, in addition, parts of
our external managers' wider group have been placed into administration. Despite this, Treveria has received significant interest from a
number of parties for various proposals.
Following extensive consultation, the Board has concluded that, in current market conditions, a sale of the entire Company is unlikely
to produce the best outcome for shareholders and has therefore focused the review on other options. In particular, the Board has identified
the need for Treveria to strengthen its capital structure and, latterly, to stabilise its asset management operations.
A thorough review of debt facilities has been conducted as part of the strategic review, not least in light of increased susceptibility
to valuation swings due to the relatively high levels of gearing.
Treveria and its subsidiaries (together, the "Group") have a diversified portfolio of retail properties which offers significant
interest cover on all its facilities. However, the Board acknowledges that, in current market conditions, further falls in the value of
Treveria's portfolio may be possible; the Group is therefore exploring ways that it can strengthen its balance sheet.
The Board has decided to pursue a strategy of targeted disposals combined with a possible injection of new equity into the business. We
are currently working with one preferred party to underwrite this possible injection of equity and discussions are continuing on the details
of this proposal, which will include negotiating amendments to certain loan terms. There are a number of issues to be addressed and there
can be no certainty at this time that acceptable terms can be agreed.
Until the conclusion of the strategic review process and implementation of its findings, it has been decided that the Company should
preserve its cash resources and temporarily suspend dividend payments. Accordingly, no interim dividend will be paid.
Management
Following the financial difficulties at the Dawnay, Day group, the Board and its advisers have been monitoring the financial situation
of its external asset manager, Dawnay, Day Treveria Real Estate Asset Management Limited ("DDTREAM"), and property manager, Dawnay, Day
Property Investment GmbH ("DDPI"), both of which are currently still trading. Having not been able to secure sufficient reassurance about
their current financial stability and ability to manage the portfolio over the foreseeable future, the Board has sought a stable management
solution.
The Board has been negotiating with Dawnay, Day entities to secure certain asset and property management capabilities. Despite
protracted negotiations, the Board has been unable to date to reach an agreement with Dawnay, Day on this matter.
Certain Dawnay, Day entities that provide services to DDTREAM have also gone into administration which has had an impact on DDTREAM's
ability to perform its duties independently. Unless an agreement can be reached quickly with Dawnay, Day, the Board is prepared to take
unilateral action to sever its links with Dawnay, Day, terminate the portfolio management agreement with DDTREAM and put in place
alternative arrangements. In anticipation of this, Treveria has set up a subsidiary, Treveria Asset Management Ltd ("TAM") under the
leadership of David Hunter, Chairman of the Investment Committee since the Company's IPO, to provide an alternative solution for the
management of the Group's assets. TAM has already taken on a number of key employees who were made redundant from their previous positions
within Dawnay, Day and has established a subsidiary in Germany, Treveria Asset Management GmbH.
In addition, in the absence of reaching an agreement with Dawnay, Day, the Group is likely to terminate DDPI's property management
agreements which can be terminated on three months' notice. The Company is in discussions with various parties about alternative external
arrangements for property management. Some of these discussions are at an advanced stage.
Proposed change of name
The Company intends to change its name to clarify its position as an independent entity, and a general meeting will be convened in due
course to seek shareholders' approval for the proposed change.
German Economy and Retail Market
The fundamentals of the Germany economy remained resilient into the first half of 2008. German GDP grew 1.2% in the first half of 2008
compared with the previous six months despite a marked decline in the second quarter. The main drags on GDP were private consumption, where
actual and perceived price inflation dampened households' real disposable income, and capital investment. GDP is forecast to grow by 1.7% in
2008 and 0.8% in 2009 which is significantly ahead of the Eurozone averages of 1.2% and 0.1%, respectively. Unemployment fell to 7.6% in
August 2008, the lowest level since 1992.
However, the insolvency of two well known High Street names, Hertie and Sinn Leffers, was announced in July/August 2008 and this is
discussed further below.
Given the state of the global economy, it is perhaps not surprising that transaction volumes in the retail property market in Germany
were lower in the first half of 2008 with the total reaching EUR4.5 billion, compared to EUR5.3 billion in the first half of 2007. Of the
transactions in 2008, EUR2.2 billion came from a single transaction which was the sale of a 50% stake in the Karstadt portfolio.
Results for the Six Month Period ended 30 June 2008
Gross rental income for the half year period was EUR79.8 million (2007: EUR59.3 million). The difference from the 2007 figure primarily
reflects the fact that the portfolio was still being assembled in the first half of 2007. The larger proportion of ground rents payable in
2008, arising from properties acquired in 2007 and an increase in repairs and maintenance expenditure on the portfolio, gave rise to an
increase in direct costs, which have been deducted from gross rental income. Ground rents payable in the first half of 2008 totalled EUR3.2
million against EUR0.8 million for the first six months of 2007. Operating loss for the period, which includes unrealised revaluation
deficits in the value of investment properties, was EUR80.7 million (2007: profit of EUR76.8 million) and the adjusted operating profit,
which excludes any revaluation movement and surrender premiums, was EUR61.9 million (2007: profit of EUR48.3 million). There have been no
surrender premiums in the first half of 2008 (2007: EUR4.2 million).
Loss before tax for the period was EUR111.3 million (2007: profit of EUR49.5 million) and the adjusted profit after tax, which excludes
revaluation movement, surrender premiums and fair value adjustments on interest rate hedging taken through the income statement, was EUR17.4
million (2007: EUR20.3 million). Administrative and other expenses increased from EUR2.1 million to EUR3.1 million due mainly to the number
of entities being managed in the Group and the increasing demands of compliance procedures.
Basic and adjusted EPS were a loss of 17.43c and a profit of 2.85c, respectively (2007: profit of 7.23c and 2.86c). Adjusted EPS exclude
revaluation movement, surrender premiums, fair value adjustments on interest rate hedging and deferred tax.
Revaluation and Net Asset Value
The portfolio has been valued by DTZ Debenham Tie Leung Limited as at 30 June 2008 at EUR2,221 million, giving a net deficit of EUR143
million, as compared to the 31 December 2007 valuation (as adjusted for sales and purchases during the period). This represents an overall
downward valuation movement of about 6% in the period. The adjusted net asset value per share of the Group has reduced to 91.2c from 112.9c
as at 31 December 2007, a fall of 19.2%.
The average net yield of the portfolio as at 30 June 2008 was 6.66% (31 December 2007: 6.22%) which would rise to 7.04% (31 December
2007: 6.60%) if fully let. The gross initial yield of the portfolio was 7.29% (31 December 2007: 6.86%).
Property Acquisitions and Disposals
During the period, the Group initiated a programme of property disposals. Although no sales were completed in the first half,
subsequent to 30 June 2008 the Group has notarised EUR79.2 million of property sales. The sale price represents a premium of EUR7.6 million
to the December 2007 valuation and EUR11.2 million to the June 2008 valuation.
Further property disposals are being progressed in an orderly fashion and we continue to see selective interest for many types of
property though the market for such transactions remains subdued by comparison with recent years.
There have been no significant new acquisitions contracted during the first half of 2008 though EUR26.1 million of properties, for which
contracts were previously agreed, completed during the first half. The average net initial yield on the properties purchased was 6.56%.
In June 2007, the Group contracted to acquire a shopping centre in Cottbus for EUR75.5 million plus acquisition costs. This amount was
shown as a capital commitment in the 2007 annual report. In order to conserve cash and in recognition of the changing economic environment,
we have recently signed a new agreement that allows Treveria to terminate this contract for a single payment of EUR750,000 plus costs. The
total cost is expected to be less than EUR1.1 million.
Finance and Banking
As at 30 June 2008, the Group's total borrowings amounted to EUR1,820 million, all of which are secured on its properties, compared to
EUR1,789 million as at 31 December 2007. The increase is due to additional net drawings as property acquisitions completed. The bank
loans, provided by Citi, Deutsche Bank, ABN Amro, Eurohypo and JPMorgan, mature between January 2011 and November 2012. The current average
blended interest rate in the first half of 2008 remained 4.9% inclusive of margin, approximately the same as at 31 December 2007. Finance
costs for the period amounted to EUR46.7 million which include EUR2.1 million of amortised bank fees and other financing charges. In the
first half of 2007 where the portfolio was significantly smaller, the finance costs were EUR31.6 million of which EUR1.1 million related to
amortisation.
The value of the Group's fixed rates and hedging contracts was estimated at EUR60.0 million as at 30 June 2008 against EUR27.1 million
at 31 December 2007. Neither amount is included in the calculation of adjusted net asset value per share.
Finance income, relating mainly to cash balances held in the Isle of Man and Germany, amounted to EUR2.6 million, a decrease from EUR4.2
million in 2007. Cash balances as at 30 June 2008 were EUR152 million of which EUR30 million was held in blocked accounts for the payment of
bank interest. The corresponding figures as at 31 December 2007 were EUR177 million and EUR25 million respectively. The gross LTV (gross
debt against property assets) was 82.0% and the net LTV (net debt against property assets) was 75.1%. The corresponding figures as at 31
December 2007 were 76.7% and 69.1%, respectively.
The financial covenants within the Group's five bank facilities fall into two main categories: loan to value ("LTV") covenants and
interest cover ("ICR") covenants on a projected 12 month basis. Breach of these causes an event of default under the facility. Each facility
typically also has a lower threshold which, if exceeded, either traps the free cash flow within that facility 'silo' ("cash trap") or
requires debt repayment or deposits to remedy the position.
All facilities are non-recourse with no cross-collateralisation between them.
Interest cover remains substantial; the overall ratio of net rental income over interest costs, ignoring amortisation of finance
charges, was 145% in the first half of 2008 against 156% for the whole of 2007 and 149% for the second half of 2007. The Group's ICR cash
trap thresholds are between 125% and 145% and 'hard breach' covenants are between 115% and 125%.
In a relatively highly geared portfolio, downward pressure on valuations will inevitably put pressure on LTV covenants. The cash trap
LTV ratios are set at between 78% and 85% and the hard breach covenants are set at between 78% and 95%. The recent decline in valuation has
meant that the Eurohypo facility is now in cash trap. We have agreed a 15 month hard breach LTV covenant waiver with Eurohypo in
consideration for a loan repayment of EUR20 million and an adjustment in the margin payable to 125 basis points. Of the loan repayment,
EUR2.25 million will be taken from the rent account and EUR7.5 million was already due to be repaid by 31 December 2008. In addition, it is
likely that the first Deutsche Bank/Citi facility will also be in cash trap once the latest valuation is adopted.
The Group currently has about EUR125 million of cash, EUR75 million of which is held at the PLC level. The Board has flexibility to use
this cash to give extra headroom on these facilities should it consider it appropriate to do so.
Share buybacks
The Company commenced its share buyback programme in July 2007 and, in the first half of 2008, purchased 25.4 million of its own shares
for cancellation during the period at a weighted average price of EUR0.76. The last purchase occurred on 18 April 2008. The cumulative total
purchased to 30 June 2008 was 108.8 million shares at a weighted average price of EUR0.94. The Board has no intention of resuming share
buybacks in the near future.
Asset Management
The Asset Management team is focused on the active management of the portfolio and has identified and capitalised on a number of
interesting asset management opportunities during the period.
During the first half of 2008, 203 lease extensions and new leases generating annual income of EUR3.4 million were completed. Rental
uplift was 0.5% due to indexation on leases during the period. As at 30 June 2008 vacant space across the portfolio represented 5.5% of
rent (December 2007: 5.5%) and 8.8% by area (December 2007: 7.1%), and 58 lettings of vacant space were agreed during the period generating
annual income of EUR0.23 million.
On 31 July, the Company announced that Hertie GmbH, a tenant at five property locations, had entered into insolvency proceedings. The
Group's rental income exposure to Hertie was EUR3.6 million per annum representing 2.2% of annualised rent roll. Subsequently, it was
announced that Sinn Leffers, a tenant at three locations, had also appointed administrators. The exposure to Sinn Leffers represented
EUR3.2 million per annum or 1.9% of the Company's annualised rent roll. Other than at one of the Hertie stores, rent continues to be
received in relation to these properties and we are working with the administrators to clarify their future plans. The asset manager is
also investigating other options for these stores.
As noted below, the balance of the portfolio is well diversified in a broad spectrum of retail locations.
Portfolio Analysis
The following analysis takes into account all properties owned as at 30 June 2008. By value, 81.4% of the properties are located in the
former West Germany, 7.5% in Berlin and 11.1% in the former East Germany. The weighted average lease length of the portfolio is 5.3 years
(December 2007: 5.4 years). The portfolio retains a diverse exposure to tenants with the top ten tenants constituting 35.8% (December 2007:
33.5%) of the total rent roll. Our largest tenant is C&A, which makes up 7.8% of the total rent roll, followed by Metro Group. The following
table shows the breakdown of our assets by type:
Value
High Street 43.1%
Retail Warehouse 27.5%
Shopping Centres 23.8%
Mixed Commercial 5.6%
Board and People
I would like to take this opportunity to thank my fellow board members for their contributions during this difficult period. I would
also like to express my thanks to all the staff and advisers involved in managing the Group and its portfolio for their stalwart support
throughout this very difficult transition.
Peter Klimt resigned as a non-executive director in July 2008.
Outlook and Strategy
We retain a substantial and diversified portfolio of retail assets in Europe's leading economy. With a cautious approach to the use of
our cash, stabilisation of the capital base, a co-operative relationship with our lenders and a targeted sales programme, we are positioning
the Company in a way which we hope will enable it to weather the current economic storms and to benefit as market conditions improve.
Ian Henderson
Chairman
29 September 2008
Consolidated income statement
For the six months ended 30 June 2008
Notes (Unaudited)Six (Unaudited)Six (Audited)Year
monthsended30 June monthsended30 June ended31
2008EUR000 2007EUR000 December2007EUR000
Gross rental income 4 79,788 59,319 129,951
Direct costs 5 (14,797) (8,846) (20,094)
Net rental income 64,991 50,473 109,857
(Deficit)/surplus on 10 (142,563) 24,296 (10,748)
revaluation of investment
properties
Other income 4 - 4,214 7,100
Administrative expenses 5 (2,435) (1,536) (4,426)
Other expenses 5 (688) (599) (1,804)
Operating (loss)/profit (80,695) 76,848 99,979
Finance revenue 4,6 2,645 4,234 7,985
Finance expense 6 (46,744) (31,615) (73,073)
Change in fair value of 13 13,532 - (1,314)
derivative financial
instruments
(Loss)/profit before tax (111,262) 49,467 33,577
Income tax credit 7 3,791 2,474 722
(Loss)/profit for the period (107,471) 51,941 34,299
Attributable to:
Equity holders of the parent (106,237) 51,523 34,700
company
Minority interests (1,234) 418 (401)
(Loss)/profit for the period (107,471) 51,941 34,299
Earnings per share
Basic, for (loss)/profit for 8 (17.43c) 7.23c 5.06c
the period attributable to
ordinary equity holders of the
parent *
Diluted, for (loss)/profit for 8 (17.43c) 7.23c 5.05c
the period attributable to
ordinary equity holders of the
parent *
* Adjusted earnings per share is given in note 8.
Consolidated balance sheet as at 30 June 2008
Notes (Unaudited)30 (Unaudited)30 (Audited)
June2008EUR000 June2007EUR000 31December2007EUR000
Non-current assets
Investment properties 10 2,271,365 2,130,758 2,383,027
Total non-current assets 2,271,365 2,130,758 2,383,027
Current assets
Trade and other receivables 20,223 20,542 20,308
Prepayments 9,388 14,085 10,366
Cash and short-term deposits 11 152,315 163,729 177,015
Derivative financial 13 12,275 - -
instruments
Total current assets 194,201 198,356 207,689
Total assets 2,465,566 2,329,114 2,590,716
Current liabilities
Trade and other payables 40,201 48,989 48,419
Interest-bearing loans and 12 3,439 1,668 1,457
borrowings
Current tax liabilities 898 1,730 271
Derivative financial 13 - - 1,314
instruments
Total current liabilities 44,538 52,387 51,461
Non-current liabilities
Interest-bearing loans and 12 1,802,772 1,402,058 1,773,586
borrowings
Finance lease obligations 10 50,376 40,959 50,377
Deferred tax liabilities 7 20,041 26,633 25,433
Total non-current liabilities 1,873,189 1,469,650 1,849,396
Total liabilities 1,917,727 1,522,037 1,900,857
Net assets 547,839 807,077 689,859
Equity
Issued capital 14 6,035 7,123 6,288
Share premium - 624,585 -
Capital redemption reserve 1,088 - 835
Other distributable reserve 610,594 87,991 629,755
Retained earnings and other (75,077) 80,126 46,548
reserves
Total equity attributable to 542,640 799,825 683,426
the equity holders of the
parent
Minority interests 5,199 7,252 6,433
Total equity 547,839 807,077 689,859
Unaudited consolidated statement of changes in equity
For the six months ended 30 June 2008
Notes Issuedcapital Sharepremium Capitalredemptionres OtherDistributablere Retainedearnings
Total Minorityinterests Totalequity
erve serve
equityAttributableto
theequityholders
ofthe parent
EUR000 EUR000 EUR000 EUR000 EUR000
EUR000 EUR000 EUR000
As at 31 December 2006 7,123 624,663 - 87,991 46,409
766,186 6,834 773,020
Profit for the period - - - - 51,523
51,523 418 51,941
Equity dividends 15 - - - - (17,806)
(17,806) - (17,806)
Transaction costs of share - (78) - - -
(78) - (78)
issue
As at 30 June 2007 7,123 624,585 - 87,991 80,126
799,825 7,252 807,077
Loss for the period - - - - (16,823)
(16,823) (819) (17,642)
Own shares acquired (835) - 835 (82,821) -
(82,821) - (82,821)
Court approved capital - (624,585) - 624,585 -
- - -
reduction
Equity dividends 15 - - - - (16,755)
(16,755) - (16,755)
As at 31 December 2007 6,288 - 835 629,755 46,548
683,426 6,433 689,859
Loss for the period - - - - (106,237)
(106,237) (1,234) (107,471)
Own shares acquired (253) - 253 (19,161) -
(19,161) - (19,161)
Equity dividends 15 - - - - (15,388)
(15,388) - (15,388)
As at 30 June 2008 6,035 - 1,088 610,594 (75,077)
542,640 5,199 547,839
Consolidated cash flow statement for the six months ended 30 June 2008
Notes (Unaudited)Six (Unaudited)Six (Audited)Year
monthsended30 monthsended30 ended31December2007E
June2008EUR000 June2007EUR000 UR000
Operating activities
(Loss)/profit before tax (111,262) 49,467 33,577
Deficit/(surplus) on 10 142,563 (24,296) 10,748
revaluation of investment
properties
Finance revenue 6 (2,645) (4,234) (7,985)
Finance expense 6 46,744 31,615 73,073
Change in fair value of 13 (13,532) - 1,314
derivative financial
instruments
Cash flows from operations 61,868 52,552 110,727
before changes in working
capital
Changes in working capital
Increase in trade and other (1,201) (9,835) (10,530)
receivables
(Decrease)/increase in trade (6,058) 13,087 10,227
and other payables
Finance costs paid (43,704) (29,001) (65,470)
Finance income received 2,753 4,234 8,093
Income tax paid (974) (123) (1,539)
Cash flows from operating 12,684 30,914 51,508
activities
Investing activities
Purchase of investment (29,055) (358,350) (638,920)
properties
Cash flows used in investing (29,055) (358,350) (638,920)
activities
Financing activities
Dividends paid to equity 15 (15,388) (17,806) (34,561)
holders of the parent company
Transactions costs of share - (1,896) (1,896)
issues
Purchase of own share capital (22,186) - (79,796)
Proceeds from loans 41,859 179,592 556,870
Repayment of loans (10,260) (1,167) (2,914)
Derivative financial 128 - -
instruments
Finance charges paid (2,482) (895) (6,613)
Cash flows from financing (8,329) 157,828 431,090
activities
Decrease in cash and (24,700) (169,608) (156,322)
short-term deposits
Cash and short-term deposits 177,015 333,337 333,337
as at 1 January
Cash and short-term deposits 11 152,315 163,729 177,015
at 30 June/31 December
Dawnay, Day Treveria PLC
Notes to the consolidated financial statements
For the six months ended 30 June 2008
1. GENERAL INFORMATION
Dawnay, Day Treveria PLC (the *Company*) is a company incorporated and domiciled in the Isle of Man whose shares are publicly traded on
AIM.
The consolidated financial statements of Dawnay, Day Treveria PLC comprise the Company and its subsidiaries (together referred to as the
*Group*).
The principal activities of the Group are described in note 3.
The Company acts as the investment holding company of the Group.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of preparation
These condensed consolidated interim financial statements are unaudited, have not been reviewed and do not constitute statutory accounts.
The statutory accounts for 2007, which received an unqualified report from the auditors, are available on the Company*s website
www.treveria.com.
The condensed financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial
Reporting.
(b) Basis of consolidation
The condensed financial statements have been prepared under the historical cost convention, except for investment properties and derivative
financial instruments that have been measured at fair value. The condensed financial statements are presented in Euro and all values are
rounded to the nearest thousand (EUR*000) except when otherwise indicated.
The accounting policies adopted are consistent with those followed in the preparation of the Group*s annual financial statements for the
year ended 31 December 2007.
3. SEGMENTAL REPORTING
No segmental reporting is included in the accounts as the Group only holds investment properties in Germany and as such only has one
geographical segment which is Germany and one business segment which is predominantly investment in retail property.
4. REVENUE
(Unaudited)Six (Unaudited)Six (Audited)Year
monthsended30 monthsended30 ended31December2007E
June2008EUR000 June2007EUR000 UR000
Rental income from investment 79,788 59,319 129,951
properties
Other income * surrender - 4,214 7,100
premiums
Finance revenue 2,645 4,234 7,985
82,433 67,767 145,036
Surrender premiums received in the period are included in other income.
5. OPERATING PROFIT
The following items have been charged or (credited) in arriving at operating profit
Direct costs
(Unaudited)Six (Unaudited)Six (Audited)Yearended
monthsended30 monthsended30 31December2007EUR000
June2008EUR000 June2007EUR000
Service charge expenditure 15,146 12,727 26,003
Service charge income (11,696) (10,689) (22,155)
Irrecoverable service charges 3,450 2,038 3,848
Property management fee 2,004 1,614 3,550
Asset management fee 4,596 3,531 8,394
Ground rent/lease charges 3,243 810 3,114
Other property costs 1,504 853 1,188
14,797 8,846 20,094
Administrative expenses
(Unaudited)Six (Unaudited)Six (Audited)Yearended
monthsended30 monthsended30 31December2007EUR000
June2008EUR000 June2007EUR000
Audit fee 448 431 788
Consultants* fees and expenses 105 105 150
* subsidiary companies
Legal and professional fees 1,882 1,000 3,488
and other administration costs
2,435 1,536 4,426
Other expenses
(Unaudited)Six (Unaudited)Six (Audited)Yearended
monthsended30 monthsended30 31December2007EUR000
June2008EUR000 June2007EUR000
Directors* fees 186 145 332
Directors* expenses 6 4 4
Net foreign exchange loss 29 6 10
Bank fees 121 73 325
Marketing, insurance and other 346 371 1,133
expenses
688 599 1,804
As at 30 June 2008, the Group had one full-time employee.
6. FINANCE REVENUE AND EXPENSE
(Unaudited)Six (Unaudited)Six (Audited)Yearended
monthsended30 monthsended30 31December2007EUR000
June2008EUR000 June2007EUR000
Bank interest receivable 2,645 4,234 7,985
Finance revenue 2,645 4,234 7,985
Bank loan interest payable (44,862) (30,498) (70,460)
Amortisation of capitalised (2,051) (1,117) (2,613)
finance charges
Profit on termination of swap 169 - -
arrangements
Finance expense (46,744) (31,615) (73,073)
Net finance expense (44,099) (27,381) (65,088)
7. INCOME TAX
CONSOLIDATED INCOME STATEMENT
(Unaudited)Six (Unaudited)Six (Audited)Yearended
monthended30 monthsended30 31December2007EUR000
June2008EUR000 June2007EUR000
Current income tax
Current income tax charge 1,601 453 2,533
Tax charge relating to - 1,000 1,872
surrender premiums
1,601 1,453 4,405
Deferred tax
Effect of change of tax rate - (12,224) (12,224)
Relating to origination and (5,392) 8,297 7,097
reversal of temporary
differences
(5,392) (3,927) (5,127)
Income tax credit reported in (3,791) (2,474) (722)
the income statement
DEFERRED INCOME TAX LIABILITY
(Unaudited)30 (Unaudited)30 (Audited)
June2008EUR000 June2007EUR000 31December2007EUR000
As at 31 December 25,433 30,560 30,560
Effect of change of tax rate - (12,224) (12,224)
Revaluation of investment (7,334) 8,297 7,097
properties to fair value
Revaluation of derivative 1,942 - -
financial instruments to fair
value
Balance as at 30 June/ 31 20,041 26,633 25,433
December
The Group has tax losses of EUR87 million (31 December 2007: EUR88 million) that are available indefinitely for offset against future
taxable profits of the companies in which the losses arose. Deferred tax assets have not been recognised in respect of these losses as they
may not be used to offset taxable profits elsewhere in the Group and they have arisen in subsidiaries that have been loss-making for some
time.
The Group has an unprovided deferred tax liability of EUR20 million as at 30 June 2008 (31 December 2007: EUR20 million) in respect of the
difference between the tax base and the carrying value of investment properties that arose upon the acquisition of subsidiaries. This
liability is unprovided as the Directors consider that, as the acquisitions are treated as asset purchases rather than business
combinations, the initial recognition exemption in paragraph 24 of IAS 12 is available for this temporary difference. To the extent that any
taxation is payable in respect of this temporary difference it will be recognised as current tax in the period it becomes payable.
There are no income tax consequences for the Company attaching to the payment of dividends in 2008 by the Company to its shareholders.
8. EARNINGS PER SHARE
The calculation of the basic, diluted and adjusted earnings per share is based on the following data:
(Unaudited)30 (Unaudited)30 (Audited)
June2008EUR000 June2007EUR000 31December2007EUR000
Earnings
Earnings for the purpose of (106,237) 51,523 34,700
basic and diluted earnings per
share ((loss)/profit for the
period attributable to the
equity holders of the parent)
Revaluation 123,626 (31,179) 1,688
surpluses/(deficits) and
surrender premiums net of
related tax (attributable to
equity holders)
Adjusted earnings 17,389 20,344 36,388
Number of shares
Weighted average number of 609,596,651 712,257,423 685,934,483
ordinary shares for the
purpose of basic earnings per
share
Weighted average effect of - 862,500 862,500
dilutive share options *
Weighted average number of 609,596,651 713,119,923 686,796,983
ordinary shares for the
purpose of diluted earnings
per share
Basic earnings per share (17.43c) 7.23c 5.06c
Diluted earnings per share (17.43c) 7.23c 5.05c
Adjusted earnings per share 2.85c 2.86c 5.30c
Adjusted earnings per share 2.85c 3.30c 6.06c
including surrender premiums
and related tax (attributable
to equity holders)
* The share options in issue have not been included in the calculation of the diluted earnings per share for the six months ended 30 June
2008 as they are antidilutive and would decrease the loss per share.
9. NET ASSETS PER SHARE
(Unaudited)30 (Unaudited)30 (Audited)
June2008EUR000 June2007EUR000 31December2007EUR000
Net assets
Net assets for the purpose of 542,640 799,825 683,426
assets per share (assets
attributable to the equity
holders of the parent)
Deferred tax arising on 20,041 26,633 25,433
revaluation surpluses
Derivative financial (12,275) - 1,314
instruments
Adjusted net assets 550,406 826,458 710,173
attributable to equity holders
of the parent
Number of shares
Number of ordinary shares for 603,468,809 712,257,423 628,844,061
the purpose of net assets per
share
Net assets per share 89.92c 112.29c 108.68c
Adjusted net assets per share 91.21c 116.03c 112.93c
10. INVESTMENT PROPERTIES
(Unaudited)30 (Unaudited)30 June2007EUR000 (Audited)31December2007EUR000
June2008EUR000
As at 31 December 2,383,027 1,726,959 1,726,959
Additions 30,901 379,503 666,816
(Deficit)/surplus on (142,563) 24,296 (10,748)
revaluation
Balance as at 30 June/31 2,271,365 2,130,758 2,383,027
December
The fair value of the Group*s investment properties at 30 June 2008 has been arrived at on the basis of a valuation carried out at that date
by DTZ Debenham Tie Leung Limited, an independent valuer.
A reconciliation of the valuation carried out by the external valuer to the carrying values shown in the balance sheet is as follows:
(Unaudited)30 (Unaudited)30 (Audited)
June2008EUR000 June2007EUR000 31December2007EUR000
Investment properties at 2,224,489 2,089,799 2,336,143
market value
Onerous lease (3,500) - (3,493)
Investment properties at 2,220,989 2,089,799 2,332,650
market value as determined by
valuers
Adjustment in respect of 50,376 40,959 50,377
minimum payments under head
leases separately included as
a liability in the balance
sheet
Balance as at 30 June/ 31 2,271,365 2,130,758 2,383,027
December
11. CASH AND SHORT-TERM DEPOSITS
(Unaudited)30 (Unaudited)30 (Audited)31December2007EUR000
June2008EUR000 June2007EUR000
Cash at banks and in hand 152,315 163,729 177,015
152,315 163,729 177,015
As at 30 June 2008, EUR30,235,187 (31 December 2007: EUR24,640,210) of cash was held in blocked accounts. These balances are under the
control of lenders who have made loans to the Group. The cash is specifically segregated so as to be able to pay financing costs including
interest.
12. INTEREST-BEARING LOANS AND BORROWINGS
EffectiveInterestrat Maturity (Unaudited)30 (Unaudited)30 (Audited)
e % June2008EUR000 June2007EUR000 31December2007EUR000
Current
Deutsche Bank and Citigroup 4.79 20 July 2011 3,493 3,493 3,493
Loan * second facility
ABN Amro Loan 4.76 15 July 2011 1,976 - 987
ABN Amro Loan Floating 15 July 2011 219 - 110
Eurohypo Loan Floating 25 July 2012 912 - -
Capitalised finance charges on (3,161) (1,825) (3,133)
all loans
3,439 1,668 1,457
Non-current
Deutsche Bank and Citigroup 4.79 20 July 2011 223,574 227,067 225,320
Loan * second facility
Deutsche Bank and Citigroup 4.58 20 January 2011 569,296 577,810 577,810
Loan * first facility
ABN Amro Loan 4.76 15 July 2011 393,032 395,007 394,020
ABN Amro Loan Floating 15 July 2011 43,670 43,890 43,780
Eurohypo Loan Floating 25 July 2012 485,590 165,856 448,034
JPMorgan Chase Loan Floating 19 November 2012 98,491 - 95,100
Capitalised finance charges on (10,881) (7,572) (10,478)
all loans
1,802,772 1,402,058 1,773,586
Total 1,806,211 1,403,726 1,775,043
The Group has pledged investment properties to secure related interest bearing debt facilities granted to the Group for the purchase of such
investment properties.
Deutsche Bank AG and Citigroup Global Markets Limited.
The first facility has EUR577,810,000 drawn down, of which EUR8,514,000 has been repaid by way of a voluntary prepayment, resulting in a net
liability of EUR569,296,000 at the period end (31 December 2007: EUR577,810,000). The interest rate on this loan is fixed at 4.58% per
annum. Interest is payable quarterly in arrears. The loan is not amortising and is repayable on the repayment date of 20 January 2011. This
loan is secured over assets and undertakings including over real property, various contracts, insurance policies and bank accounts.
The second facility has EUR232,867,000 drawn down, of which EUR5,800,000 has been amortised, resulting in a net liability of EUR227,067,000
at the period end (31 December 2007: EUR228,813,000). The interest rate on this loan is fixed at 4.79% per annum. The terms of the facility
are as the first facility with a final repayment date of 20 July 2011.
ABN Amro N.V.
This facility has EUR438,897,000 drawn down at the period end (31 December 2007: EUR438,897,000). The interest on 90% of the loan is fixed
at a weighted average of 4.76% per annum, with the interest on the remaining 10% floating at a rate based on EURIBOR, but capped at 5.35%
per annum by means of an interest rate cap. The final repayment date is 15 July 2011. This loan is secured over assets and undertakings.
Eurohypo AG
This facility has a total amount of EUR500,000,000 of which EUR486,502,000 had been drawn down at the period end (31 December 2007:
EUR448,034,000). The interest on 80% of the loan is fixed at a weighted average interest rate of 5.422% per annum by means of interest
rate swaps, with the interest on the remaining 20% floating at a rate based on EURIBOR, but capped at 5.922% per annum by means of interest
rate caps. The final repayment date is 25 July 2012. This loan is secured over assets and undertakings.
JPMorgan Chase Bank NA
This facility is for up to EUR105,000,000, of which EUR98,491,000 had been drawn down at the period end (31 December 2007: EUR95,100,000).
Of this balance EUR36,190,000 has been syndicated to SNS Property Finance, EUR21,284,286 has been syndicated to Hypo Investmentbank AG and
EUR28,530,000 has been syndicated to Bank of Ireland. The interest on 100% of the loan is fixed at a weighted average interest rate of
5.456% per annum by means of interest rate swaps. The final repayment date is 19 November 2012. This loan is secured over assets and
undertakings.
13. FINANCIAL INSTRUMENTS
Fair values
Set out below is a comparison by category of carrying amounts and fair values of all the Group*s financial instruments that are carried in
the financial statements.
(Unaudited)30 June 2008EUR000 (Unaudited)30 June 2007EUR000 (Audited)31 December
2007EUR000
CarryingAmountEUR000 Fairvalue EUR000 CarryingAmountEUR000 Fairvalue EUR000 CarryingAmountEUR000
Fairvalue EUR000
Financial assets
Cash 152,315 152,315 163,729 163,729 177,015
177,015
Derivative 12,275 12,275 - - -
-
financialinstruments
Financial liabilities
Interest-bearing loans and
borrowings:
Floating rate borrowings 628,882 628,882 209,746 209,746 587,024
587,024
Fixed rate borrowings 1,191,371 1,143,688 1,208,327 1,166,570 1,201,629
1,173,237
Derivative - - - - 1,314
1,314
financialinstruments
Movement in derivative (Unaudited)30 (Unaudited)30 (Audited)31December2007EUR000
financial instruments: June2008EUR000 June2007EUR000
As at 31 December (1,314) - -
Acquisitions 118 - -
Disposals (61) - -
Change in fair value of 13,532 - (1,314)
derivative financial
instruments
12,275 - (1,314)
14. ISSUED CAPITAL
Authorised: Number ofShares ShareCapitalEUR
Ordinary shares of EUR0.01 each
As at 30 June 2008 1,500,000,000 15,000,000
Issued and fully paid: Number ofShares ShareCapitalEUR
Ordinary shares of EUR0.01 each
As at 30 June 2007/31 December 2006 712,257,423 7,122,574
Purchase of own shares (83,413,362) (834,134)
As at 31 December 2007 628,844,061 6,288,440
Purchase of own shares (25,375,252) (253,752)
As at 30 June 2008 603,468,809 6,034,688
15. DIVIDENDS
(Unaudited)30 (Unaudited)30 (Audited)
June2008EUR000 June2007EUR000 31December2007EUR000
Final dividend for the period - 17,806 17,806
ended 31 December 2006 (2.5c
per share)
Interim dividend for the year - - 16,755
ended 31 December 2007 (2.55c
per share)
Final dividend for the year 15,388 - -
ended 31 December 2007 (2.55c
per share)
15,388 17,806 34,561
The Board approved on 27 September 2008 that there would be no interim dividend (interim dividend for the year ended 31 December 2007:
2.55c) per ordinary share, which will result in no further distribution (2007: EUR16,755,000).
16. CAPITAL COMMITMENTS
As at 30 June 2008 the Group had notarised transactions of EUR29,299,970 (31 December 2007: EUR133,323,319) (exclusive of related
acquisition costs) for completion after the period end for the acquisition of investment properties.
17. CONTINGENCIES
Carried interest
Arba Investment Sarl, has a right to a carried interest. In any year Arba Investment Sarl is not entitled to any carried interest unless the
Group*s property assets in aggregate show a cash on equity return of at least 8 % per annum cumulative.
If the hurdle is achieved then Arba Investments Sarl will be entitled to 25% of the cumulative return in excess of 8% per annum achieved on
assets sold (or, in certain circumstances, refinanced) by the Group during that financial period. The carried interest will also be payable
on the occurrence of certain other events, such as a take-over or liquidation of the Group.
No amount has been provided as at 30 June 2008 (31 December 2007: EURnil) as the minimum hurdle rate required has not been achieved.
18. EVENTS AFTER THE BALANCE SHEET DATE
On 26 September 2008, an agreement was signed which removed the Group*s obligation to purchase a shopping centre at Cottbus for EUR75.5
million plus costs. The consideration for the release from the contractual obligation was EUR750,000 plus costs. The total cost is expected
to be less that EUR1.1 million.
Since 30 June 2008, property sales of EUR79.2 million have been notarised and are due to complete in the next few months. The valuation of
these properties was EUR71.6 million at 31 December 2007 and EUR68.0 million as at 30 June 2008.
On 28 September 2008, the Group agreed a variation to the terms of one of its bank facilities. This provides for a 15 month waiver of the
hard breach loan to value ratio covenant. The other principal terms include a loan repayment of EUR20 million and an adjustment in the
margin payable to 125 basis points.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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