24 May 2010 07:00
24 May 2010
INVISTA EUROPEAN REAL ESTATE TRUST SICAF
(the "Company')
ANNOUNCEMENT OF HALF YEARLY RESULTS AND UNAUDITED NAV
Report for the six month period ENDed 31 March 2010
Invista European Real Estate Trust SICAF today announces its results for the period ended six months to 31 March 2010, including its unaudited Net Asset Value ("NAV") for the last quarter, calculated using International Financial Reporting Standards and adjusted to add back the change in fair value of the warrants and deferred tax.
Financial Highlights
·; The unaudited NAV per share reduced to 49.6p (30 September 2009: 103p; 31 December 2009: 53.5p) as the property portfolio's positive performance in the quarter was exceeded by the negative impact of certain non cash financial items. In Euros the unaudited NAV was €0.555 per share (30 September 2009: €1.12; 31 December 2009: €0.60).
·; Property portfolio valued at €514.8 million comprising 44 properties, an increase of 0.5% for the quarter ended 31 March 2010 and a marginal decline of 0.4% over the 6 months ended 31 March 2010 (30 September 2009: 46 assets, valued at €532.9 million).
·; Two sales totalling €17.0 million have been achieved during the period at premia to valuations. Post 31 March 2010, the Company sold its interests in an office property in Brussels, Belgium for €7.7 million and an additional €2.75 million of property is currently under offer at a price 27.3% above valuation.
·; Property income security improved; a proactive asset management strategy resulted in the re-negotiation of six leases representing 76,000 sqm, increasing the weighted average lease length to expiry to 6.26 years (September 2009: 6.06 years).
·; Successful capital raise in December 2009 of £58.27 million (gross) to reset the Company's capital structure through the issuance of both new Ordinary Shares and a new class of Preference Shares with Warrants attached.
·; More stable capital structure with access to lower cost debt financing and exit fees reduced by €5.3 million.
·; Debt facilities were reduced to €348.1 million as at 31 March 2010 (30 September 2009: €400.2 million).
·; Balance sheet cash of €52.6 million (excluding tenant deposits of €4.4 million) provides financial resilience and gives the potential to take advantage of more favourable market conditions.
Tony Smedley, Head of Continental European Funds, Invista Real Estate Investment Management, said: "Management of the financial resources of the Company will continue to focus upon maximising rental earnings, increasing free cash flow and generating value growth. The stable balance sheet, fixed credit facility and relaxed banking covenants provide a strong platform for NAV growth in the future.
"The financial strategy is to reduce gearing from the current level of 67.6% to a target 60% LTV. This will be undertaken through a combination of driving portfolio valuation performance using our active management capabilities to contribute to NAV growth and further reducing debt over time. We believe this target gearing level provides the right balance of risk and potential for leveraged returns in a recovering property market.
"Our additional cash resources will enable us to be agile and react quickly to evolving market conditions. We will continue our efforts to maximise both income and capital growth from the portfolio with the objective of closing the gap between share price and NAV over time and strengthening the income position of the Company to allow it to resume the payment of ordinary dividends."
Tom Chandos, Chairman, added:
"The Company has worked hard on the strategic initiatives set out a year ago which were to strengthen the balance sheet, maximise cash flow and re-set the capital structure. The support from the Company's shareholders and new investors in the capital raise has provided a sound basis from which to grow. Cash on the balance sheet will be deployed in corporate or property related initiatives which will provide the best returns to shareholders.
"The operating environment remains challenging and unpredictable with increased uncertainty around the economic stability of the Eurozone's most indebted countries; however the Board and the Investment Manager will continue to actively manage the Company's portfolio with a view to generating positive NAV performance."
For further information:
Tony Smedley / Chris Ludlam
Invista Real Estate Investment Management 020 7153 9345
Dido Laurimore / Rachel Drysdale
Financial Dynamics 020 7831 3113
COMPANY SUMMARY
The Company's investment objective is to provide Shareholder returns through investing in a diversified commercial real estate portfolio in Continental Europe with the potential for income and capital growth. The geographical focus of the Group remains the Western European countries due to the relative stability, transparency and liquidity of these markets.
As at 31 March 2010, Invista European Real Estate Trust SICAF and its subsidiaries (together the "Group") owned a portfolio comprising 44 commercial properties across seven Continental European countries and was committed to acquire one further property. The combined aggregate value of these properties1 was €523.0 million (€514.8 million of which were owned).
Financial Highlights (in Euros)
·; Capital raise of €59.8 million (net of expenses) concluded on 30 December 2009
·; New four year debt facility concluded on 12 January 2010 and reduction of senior debt by €52.1 million
·; NAV3 per share in Euros decreased by 50.4% and in Sterling decreased by 51.9% over the last 6 months. This decrease is mainly due to the dilutive effect of the capital increase
·; Property assets of €514.8 million (30 September 2009: €532.9 million) comprising a portfolio of 44 properties, excluding one committed asset valued at €8.2 million
·; Earnings per share of €0.001
·; Net debt2 Loan to Value ratio of 57.4%
|
| 31 Mar 10 | 30 Sep 09 | Change |
| Direct Property: |
|
|
|
| Independent valuation1 (including sales) | €514.8m | €532.9m | -3.4% |
| Valuation of sales | - | €15.9m | - |
| Like for like direct property | €514.8m | €517.0m | -0.4% |
| Net Asset Value 3 | €144.3m | €128.0m | 12.7% |
| NAV per ordinary share 3 | €0.555 | €1.120 | -50.4% |
| NAV per ordinary share 3, 4 | £0.496 | £1.03 | -51.9% |
| NAV per preference share 5 | €1.14 | - | - |
| NAV per preference share 4, 5 | 102.2p | - | - |
| Ordinary share price | 28.25p | 28.0p | 0.9% |
| Preference share price | 100.25p | - | - |
| Warrant price | 9.33p | - | - |
| Share price discount to NAV per ordinary share | 42.9% | 72.8% | - |
| NAV total return in last 12 months - Euro | -61.2% | -52.2% | - |
| Total Group assets less current liabilities | €556.9m | €554.8m | 0.4% |
| Borrowings as % of total assets less current liabilities | 62.5% | 72.1% | - |
Sources: Invista Real Estate Investment Management; Datastream
1 Direct property valuation includes one asset held for sale at 31 March 2010
2 Net debt represents total senior debt less cash but excluding tenant deposits
3 NAV is calculated using International Financial Reporting Standards and adjusted to add back the change in fair value of the warrants and deferred tax
4 €:£ exchange rate used as at 1.1198 as at 31 March 2010; 1.091 as at 30 September 2009
5 The NAV for preference share is equal to the nominal value plus accrued interest divided by the total number of preference shares.
ANNOUNCEMENT OF UNAUDITED NAV
As at 31 March 2010, the Company's unaudited NAV (calculated using International Financial Reporting Standards and adjusted to add back the change in fair value of the warrants and deferred tax) was €0.555 (49.6p) per share, reflecting a decrease of €0.04 (3.9p) equating to 6.72% over the quarter. The unaudited NAV, calculated under International Financial Reporting Standards, was €0.524 per share. The unit value per preference share was €1.14.
The portfolio valuation rose during the last quarter by 0.5% (€2.8 million or €0.01 per share) however the impact of a change in value of the following non-cash financial items principally caused a reduction in NAV in the quarter:
·; Interest rate swap valuations reduced by €3.4 million (or €0.01 per ordinary share)
·; €4.7 million (€0.02 per ordinary share) of remaining debt arrangement fees paid at the time of the debt refinancing in November 2008 have been fully expensed
The Company's unaudited NAV figure incorporates the external property portfolio valuation as at 31 March 2010. The property portfolio will next be valued by an external valuer as at 30 June 2010 and the next quarterly NAV per share is expected to be published in August 2010.
Figures converted into sterling assume a EUR per STG exchange rate of 1.1198 as at 31 March 2010.
Chairman's Half Yearly Results Statement
The combination of a stronger balance sheet resulting from the successful capital raise on 30 December 2009 and an increase in the property portfolio valuation in Q1 2010 provides a more stable platform for the Company to move forward. The positive valuation change during the last quarter is encouraging, however, we remain firmly focused on maintaining and growing earnings in what remains a challenging period for economic growth.
While the recovery in our markets will be unpredictable we remain optimistic that active management of both the capital structure and the property portfolio will enable the Company to generate attractive total returns for its shareholders.
Property Markets
Against the background of recent announcements by the European Commission, European Central Bank and International Monetary Fund to provide significant support to the European economy, attention has increasingly turned towards the sustainability of debt levels in some countries and the impact of indebtedness on future economic growth in the region.
Encouragingly, Europe's gradual recovery from its deep recession has continued over the past six months, while improving credit markets seem to have given property investors a renewed sense of confidence. Nevertheless, challenges remain in property leasing markets as tenants are still cautious about the risks to future economic growth and the focus of the Investment Manager on preserving revenue and actively managing our investments remains as important as ever.
Property capital values in Europe seem to be well positioned to stabilise during 2010 as long as investment activity continues to grow and the main downside risks to economic growth are kept at bay. Indeed, the investment-led phase of the property market recovery appears to be well underway within the Company's key markets of France and Germany, somewhat ahead of the smaller, less liquid markets on the periphery of the Eurozone. Portfolio rental income in core Eurozone countries is expected to be better supported by stable or improving tenant demand later this year, while positive indexation should drive some earnings growth in our key markets.
Results
Following the capital raise and the issue of new Ordinary Shares, the Company reported a reduction in its unaudited NAV per share (adjusted to add back warrants and deferred taxation) to €0.555 (49.6p), equating a 50.4% reduction in the interim reporting period. This reduction in NAV has arisen primarily from the dilution caused by the issuance of new Ordinary Shares in December 2009. Importantly, however the resulting restructuring of debt has enabled the Company to move onto the front foot and secure more favourable long term debt terms.
The property portfolio increased in value by 0.5% on a like for like basis during the quarter to 31 March 2010.
Dividends
Although market conditions have begun to improve the Board does not yet consider it appropriate to reinstate the ordinary share dividend. The situation is reviewed continually in light of the Company's performance, the outlook for the wider economy and, in particular, its impact on the occupational markets (and therefore earnings) in our key markets.
Borrowings
As at 31 March 2010, the Company had drawn down debt facilities of €348.1 million. This has reduced from €400.2 million at 30 September 2009 as debt was repaid using proceeds from the capital raise completed on 30 December 2009 and from our active sales programme. The reduction of debt enabled the Company to secure new, improved debt terms with the Bank of Scotland including a lower margin, additional two years duration, a reduced exit fee and an increase in LTV covenant from 65% to 85%.
Preference Shares
Further to the capital raise concluded in December 2009, the Board has considered proposals for holders of preference shares to have the ability to convert sterling denominated preference shares to euro denominated preference shares. Such proposals would not enable the Company to fully hedge its currency exposure and accordingly the Board does not intend to put any proposals to shareholders in this regard. The Company will continue to seek ways to mitigate its exposure to FX movements on the principal and interest of the preference shares.
Property Portfolio
The Company owns a diversified portfolio of 44 commercial property investments in seven countries, predominately in France and Germany. As at 31 March 2010, the Company's independent valuer concluded that the portfolio had a value of €514.8 million. This represents a like for like increase of 0.5% since 31 December 2009. Over the six month reporting period the value change was -0.4%.
Active investment management resulted in stable income returns during the period. Lease lengths have also improved from a weighted average of 6.06 years in September 2009 to 6.26 years as at 31 March 2010. This focus on maximising earnings is supported by the Investment Manager's view that total returns from property investments in the near term will be driven by income performance. In their opinion additional growth through yield compression will only be earned through the continuing application of value enhancing initiatives.
Outlook
The Company has worked hard on the strategic initiatives set out a year ago which were to strengthen the balance sheet, maximise cash flow and re-set the capital structure. The support from the Company's shareholders and new investors in the capital raise has provided a sound basis from which to grow. Cash on the balance sheet will be deployed in corporate or property related initiatives which will provide the best returns to shareholders.
The operating environment remains challenging and unpredictable with increased uncertainty around the economic stability of the Eurozone's most indebted countries; however the Board and the Investment Manager will continue to actively manage the Company's portfolio with a view to generating positive NAV performance.
Tom Chandos
Chairman
Invista European Real Estate Trust SICAF
21 May 2010
INVESTMENT MANAGER'S REPORT
Business Review
The successful €59.8 million (net of expenses) capital raise which completed on 30 December 2009 and the subsequent pay down of €40.0 million of senior debt placed the Company on a firmer footing. Additional de-leveraging through asset sales reduced debt by a further €13.0 million during the period. With cash on the balance sheet of €52.6 million (excluding tenant deposits of €4.4 million) as at 31 March 2010 the Company is now in a position to take advantage of more favourable market conditions in which to generate shareholder returns.
The last six months have seen a material improvement in investment demand for commercial property. Attractive income returns and the potential for medium term capital growth have caused yields to fall in some prime markets. We expect this to feed through into all market sectors and the evidence from the last quarter's property valuation is that the portfolio value has now stabilised and is in fact beginning to rise.
We have continued to sell mature property investments where returns have been maximised and the Company has been able to effect sales at prices in excess of valuation, enabling it to retire senior debt and further reduce borrowings.
Property Portfolio
As at 31 March 2010, the Company owned a portfolio of 44 assets valued at €514.8 million (including €8.0 million assets held for sale). The Company is also committed to acquire a logistics property valued at €8.2 million in Girona, Spain. The purchase of this committed property has been delayed due to litigation with respect to a construction defect. The portfolio valuation has been broadly stable showing a small increase of 0.5% between 31 December 2009 and 31 March 2010 but a 0.4% drop in the like-for-like valuation in the six months to 30 September 2009.
The Group's portfolio currently generates a gross income of €43.0 million per annum (€42.1 million net) from 161 individual leases and 152 tenants. As at 31 March 2010 the net income return at property level was 7.57% which would rise to 8.24% should the current vacancy of 8.06% be leased.
Like for like net annual income increased by 1.5% over the six months to 31 March 2010.
Our active management strategy resulted in the re-negotiation of six leases on 76,000 sqm of accommodation, which increased the weighted average lease length to expiry to 6.26 years (4.15 years until first break). As at December 2009, the tenant credit rating was 61/100 which is classified as "normal creditworthiness" (Source: Experian).
Top 10 properties by value*- Table 1
| Address | Sector | % |
| Heusenstamm, Frankfurt, Germany | Office | 12.5 |
| Riesa, Germany | Retail | 8.9 |
| Lutterberg, Germany | Logistics | 5.1 |
| Cergy, Paris, France | Office | 4.9 |
| Madrid, Spain | Logistics | 3.5 |
| Roth, Germany | Retail | 3.1 |
| Grenoble, France | Office | 3.1 |
| Marseille, France | Logistics | 3.0 |
| Monteux, France | Logistics | 2.9 |
| Trappes, France | Logistics | 2.8 |
| Total |
| 49.8% |
*Percentage of aggregate asset value plus cash (including committed asset) as at 31 March 2010
Top 10 Tenants by Income
| Tenant Name | %** |
| Norbert Dentressangle | 15.9% |
| Deutsche Telekom | 13.1% |
| DHL | 8.6% |
| Schenker Logistics | 4.0% |
| Valeo | 3.8% |
| Carrefour | 3.6% |
| AVA Marktkauf | 2.8% |
| Real SB-Warenhaus | 2.6% |
| SDV Logistique International | 2.4% |
| Nature & Découvertes | 2.3% |
| Total | 59.1% |
**Percentage of aggregate gross rent (including committed asset) as at 31 March 2010
Sector Spread
| Sector | %* |
| Logistics | 55.5% |
| Office | 28.4% |
| Retail | 16.1% |
| Total | 100.0% |
*Percentage of aggregate asset value (including committed asset) as at 31 March 2010
Geographic Spread
| Country | % * |
| France | 45.7% |
| Germany | 37.8% |
| Belgium | 4.5% |
| Spain | 5.4% |
| Netherlands | 3.6% |
| Czech Republic | 1.8% |
| Poland | 1.2% |
| Total | 100.0% |
*Percentage of aggregate asset value (including committed asset) as at 31 March 2010
Rent Expiry Profile
| Term | Expiry |
| < 1 year | 7.3% |
| 1 - 3 years | 11.9% |
| 3 - 6 years | 27.7% |
| 6 - 9 years | 36.3% |
| 9 - 15 years | 16.8% |
| 15 + years | 0.0% |
| Total | 100.0% |
*Percentage of aggregate asset value (including committed asset) as at 31 March 2010
Expiry dates of lease contracts
| Financial Year of the Company | % Annual gross income due to expire |
| 2010 | 0.7% |
| 2011 | 11.0% |
| 2012 | 6.8% |
| 2013 | 1.7% |
| 2014 | 5.4% |
| 2015 | 18.9% |
| 2016 | 6.3% |
| 2017 | 7.6% |
| 2018 | 11.4% |
| 2019 | 13.4% |
| 2020+ | 16.8% |
The European Market
The European Commission, European Central Bank and International Monetary Fund recently announced a significant package of measures to support the European economy through bond purchases, guaranteed loans and additional aid. This marks a key moment in Europe's economic growth recovery which, though still nascent, has been maintained over the past six months. Industrial production growth in the core Eurozone countries of France, Germany and Benelux gained momentum, partly due to initial government stimulus packages and the relatively weak Euro. Unemployment stabilised at around 10% and both economic activity and the availability of credit have improved.
Latest forecasts suggest economic growth will slowly recover to trend levels over the medium-term in core Eurozone countries. We expect this will support the longer-term value growth of the Company's property portfolio which is predominantly located in the core Eurozone. However, in peripheral countries - specifically Greece, Italy, Portugal and Spain - economic growth is likely to remain below-trend for the foreseeable future as governments seek to reduce debt levels with increasing urgency.
Property investment activity strengthened further during the first quarter of 2010, which we believe reflects improving investor sentiment, increased liquidity and the attraction of higher income returns from property across Europe. Leasing activity however remains subdued and rents are still generally under pressure in most markets. According to CB Richard Ellis, prime rents, which are often considered a reliable lead indicator for the wider market, stabilised in Q1 2010. This is a positive sign for the market, and suggests that conditions may begin to stabilise across the wider property market in late 2010 and into 2011.
The outlook for European property has therefore improved in recent months, though the pace of the recovery is likely to differ between countries. The combination of yield compression and an acceleration of indexation rates is expected to provide the potential for value growth in some of the larger, more liquid property markets of the core Eurozone. Euro bond yields and other interest rates remain historically low, increasing the attractiveness of stable, income producing property assets.
Transactions and Asset Management
In this environment, investment performance will be generated through actively managing the property portfolio. The discipline of working through asset level business plan initiatives has been a recurring theme in our shareholder reporting since IPO in December 2006 and is as important as ever.
During the first six months of the financial year, the Company sold ownership interests in two logistics assets in France (one being a plot of land) and one office building in Belgium for a total consideration of €17 million which was 6.8% above the then prevailing valuation. Post the period end the Company also divested an office asset in Brussels, Belgium for a total sale consideration of €7.7 million. An additional €2.75 million of property is under offer at 27.3% above valuation.
The Company's approach of pro-actively negotiating new lease terms with existing tenants has been fundamental in improving income security and asset value. During the first six months of the financial year, the Company agreed improved lease terms with tenants representing 10.7% of the portfolio (by income) and at an average weighted lease term to expiry of 8.5 years. This has been accretive to portfolio lease duration, causing the weighted average lease length of the portfolio to increase from 6.06 years in September 2009 to 6.26 years in March 2010. These initiatives also added €2.2 million to the value of those assets which had been the subject of re-negotiated lease terms.
In line with our stated strategy, the portfolio weighting to the largest tenant Norbert Dentressangle (ND) was reduced from 19.99% at 31 December 2009 to 15.89% at 31 March 2010 following active asset management of the key ND leases. The Company's successful strategy to engage in tenant negotiations in advance of lease events ensured no loss of income and has diversified our tenant exposure.
Finance
As at 31 March 2010, the Company had drawn down €348.1 million of senior debt in respect of its €359.3 million facility with the Bank of Scotland and its €12.0 million facility with Credit Foncier. On 30 December 2009, a capital raise of €59.8 million (net of expenses) was successfully completed, enabling the company to reduce senior debt by €40.0 million on 12 January 2010. Property sales also enabled a further €13.0 million reduction in senior debt during the six month period with an additional €6.1 million being repaid in April 2010. As a result, the Company had cash balances of €52.6 million (excluding tenant deposits of €4.4 million) at 31 March 2010 giving a net debt of €295.5 million.
The Company's gross LTV as at 31 March 2010 was 67.6%. The Company's gross LTV under the Finance Documents with the Bank of Scotland was 68.6% (based on a 31 December 2009 valuation) against a LTV covenant of 85% in 2010. The Company's net debt LTV was 57.4% as 31 March 2010.
As a result of the capital raise, disposals and reduction of debt as described above, the Company has terminated a number of interest rate swaps. The associated break costs have been settled in part through cash payments and in part through increasing the rates of remaining swaps so as to conserve existing cash resources. All debt is fully hedged against changes in European interest rates until December 2013, giving a total interest cost of 6.61% per annum (at current LTV levels).
Outlook and Strategy
Management of the financial resources of the Company will continue to focus upon maximising rental earnings, increasing free cash flow and generating value growth. The stable balance sheet, fixed credit facility and relaxed banking covenants provide a strong platform for NAV growth in the future.
The financial strategy is to reduce gearing from the current level of 67.6% to a target 60% LTV. This will be undertaken through a combination of driving portfolio valuation performance using our active management capabilities to contribute to NAV growth and further reducing debt over time. We believe this target gearing level of target gearing provides the right balance of risk and potential for leveraged return in a recovering property market.
Our additional cash resources will enable us to be agile and react quickly to evolving market conditions. We will continue our efforts to maximise both income and capital growth from the portfolio with the objective of closing the gap between share price and NAV over time and strengthening the income position of the Company to allow it to resume the payment of ordinary dividends.
Tony Smedley
Head of Continental European Funds
Invista Real Estate Investment Management
21 May 2010
Cautionary statement regarding forward-looking statements
This Interim Report has been prepared for the members of Invista European Real Estate Trust SICAF ("the Company") and no one else. The Company, its Directors or agents do not accept or assume responsibility to any other person in connection with this document and any such responsibility or liability is expressly disclaimed.
This Interim Report contains certain forward-looking statements with respect to the principal risks and uncertainties facing the Company. By their nature, these statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. The forward-looking statements reflect the knowledge and information available at the date of preparation of this Interim Report and will not be updated during the year. Nothing in this Report should be construed as a profit forecast.
CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited for the period from 1 October 2009 to 31 March 2010
|
|
| Six months to | Six months to | Twelve months to |
|
| 31 Mar 10 | 31 Mar 09 | 30 Sep 09 | |
| Notes | €000 | €000 | €000 | |
| Rental income |
| 21,680 | 23,055 | 44,931 |
| Property operating expenses |
| (1,527) | (1,974) | (3,882) |
| Gross profit |
| 20,153 | 21,081 | 41,049 |
|
|
|
|
|
|
| Other income |
| 939 | 1,841 | 1,308 |
|
|
|
|
|
|
| Investment management fees |
| (1,655) | (2,929) | (4,684) |
| Professional fees |
| (777) | (1,482) | (3,160) |
| Abortive fees Administration fees Directors' fees |
| (5) (1,133) (111) | (16) (1,188) (89) | 116 (3,135) (199) |
| Other expenses |
| (1,527) | (337) | (621) |
| Sales cost |
| (264) | - | - |
| Net expenses |
| (5,472) | (6,041) | (11,683) |
|
|
|
|
|
|
| Investment property disposal proceeds |
| 16,976 | 50,908 | 66,446 |
| Carrying value of investment property |
| (15,885) | (49,497) | (65,598) |
| Profit on disposal of investment property |
| 1,091 | 1,411 | 848 |
|
|
|
|
|
|
| Net gain/(loss) on derivative instruments |
| 7,907 | (35,670) | (34,741) |
| Net change in fair value of investment property |
| (2,693) | (66,976) | (97,265) |
| Net change in fair value of warrants |
| (2,010) | - | - |
| Net gain/(loss) on valuation |
| 3,204 | (102,646) | (132,006) |
|
|
|
|
|
|
| Net operating profit/(loss) |
| 19,915 | (84,354) | (100,484) |
|
|
|
|
|
|
| Finance income |
| 12 | 1,203 | 1,214 |
| Finance expenses |
| (20,294) | (17,216) | (34,556) |
| Net finance costs |
| (20,282) | (16,013) | (33,342) |
|
|
|
|
|
|
| Net loss before tax |
| (367) | (100,367) | (133,826) |
| Deferred taxes |
| 4,037 | 5,688 | 6,681 |
| Capital gains tax |
| (3,167) | - | - |
| Other taxes |
| (183) | 10 | 66 |
| Total taxation |
| 687 | 5,698 | 6,747 |
| Gain/(loss) for the year/period |
| 320 | (94,669) | (127,079) |
|
|
|
|
|
|
| Basic gain/(loss) per share (euro) | 8 | 0.0012 | (0.83) | (1.11) |
| Diluted gain/(loss) per share (euro) | 8 | 0.0011 | (0.83) | (1.11) |
|
|
|
|
|
|
|
|
| Six months to | Six months to | Twelve months to |
|
|
| 31 Mar 10 | 31 Mar 09 | 30 Sep 09 |
|
| Notes | €000 | €000 | €000 |
|
|
|
|
|
|
| OTHER COMPREHENSIVE INCOME |
|
|
|
|
| Profit/(loss) for the period |
| 320 | (94,669) | (127,079) |
| Exchange difference on translating foreign operations |
| (455) | (240) | 68 |
| Effective portion of changes in fair value of cash flow hedged |
| (11,794) | (1,383) | (3,304) |
| Other comprehensive loss for the period |
| (12,249) | (1,623) | (3,236) |
| Total comprehensive loss for the period |
| (11,929) | (96,292) | (130,315) |
All items in the above statement are derived from continuing operations.
The accompanying notes 1 to 11 form an integral part of this consolidated interim report.
CONDENSED INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited as at 31 March 2010
|
| Notes | As at | As at | As at |
| 31 Mar 10 | 31 Mar 09 | 30 Sep 09 | ||
| €000 | €000 | €000 | ||
| Assets |
|
|
|
|
| Investment property | 5 | 506,679 | 554,906 | 517,481 |
| Deferred tax assets |
| - | 57 | - |
| Total non-current assets |
| 506,679 | 554,963 | 517,481 |
|
|
|
|
|
|
| Trade and other receivables |
| 13,234 | 14,787 | 17,048 |
| Cash and cash equivalents |
| 56,813 | 43,016 | 34,347 |
| Non-current assets classified as held for sale |
| 8,160 | - | 16,264 |
| Total current assets |
| 78,207 | 57,803 | 67,659 |
|
|
|
|
|
|
| Total assets |
| 584,886 | 612,766 | 585,140 |
|
|
|
|
|
|
| Equity |
|
|
|
|
| Share capital |
| 25,995 | 142,829 | 142,829 |
| Share premium |
| 165,057 | 149,304 | 149,304 |
| Net capital contributed |
| 191,052 | 292,133 | 292,133 |
| Undistributable reserves |
| 117,807 | - | - |
| Cumulative foreign currency translation adjustment |
| 176 | (926) | 125 |
| Cashflow hedge valuation reserve |
| (6,108) | 7,607 | 5,686 |
| Retained losses |
| (166,677) | (146,934) | (180,086) |
| Total equity attributable to equity holders of the Company |
| 136,250
| 151,880 | 117,858 |
|
|
|
|
|
|
| Liabilities |
|
|
|
|
| Interest-bearing loans and borrowings |
| 337,005 | 394,158 | 372,771 |
| Long-term provision |
| 7,186 | - | 12,495 |
| Derivative financial instruments |
| 30,531 | - | 29,056 |
| Deferred tax liabilities |
| 5,144 | 11,212 | 6,969 |
| Preference shares |
| 31,593 | - | - |
| Warrants |
| 3,043 | - | - |
| Total non-current liabilities |
| 414,502 | 405,370 | 421,291 |
|
|
|
|
|
|
| Derivative financial instruments |
| - | 27,319 | - |
| Trade and other payables |
| 18,795 | 21,263 | 22,366 |
| Current taxation payable |
| 9,145 | 6,934 | 7,339 |
| Liabilities directly associated with non-current assets classified as held for sale |
| 6,194 | - | 16,286 |
| Total current liabilities |
| 34,134 | 55,516 | 45,991 |
|
|
|
|
|
|
| Total liabilities |
| 448,636 | 460,886 | 467,282 |
| Total equity and liabilities |
| 584,886 | 612,766 | 585,140 |
|
|
|
|
|
|
|
| Notes | As at | As at | As at |
|
|
| 31 Mar 10 | 31 Mar 09 | 30 Sep 09 |
|
|
| €000 | €000 | €000 |
| Net Asset Value per ordinary share (Euro) | 7 | 0.52 | 1.33 | 1.03 |
| Net Asset Value per preference share (Euro) | 7 | 1.14 | - | - |
| Diluted Net Asset Value per ordinary share (Euro) | 7 | 0.50 | - | - |
The interim statements were approved by the Board of Directors on 21 May 2010 and signed on its behalf by:
Tom Chandos Robert DeNormandie
Chairman Chair of Audit Committee
The accompanying notes 1 to 11 form an integral part of this consolidated interim report.
CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited for the period from 1 October 2009 to 31 March 2010
|
| Share capital | Share premium | Hedging reserve | Restricted reserve | Currency translation adjustment | Retained earnings | Total equity | |||
|
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | |||
| Balance as at 30 September 2008 | 142,829 | 149,304 | 8,990 | (686) | 743 | (53,007) | 248,173 | |||
| Other comprehensive loss |
|
| (3,304) | 180 | (112) |
| (3,236) | |||
| Loss for the period |
|
|
|
|
| (127,079) | (127,079) | |||
| Distributions for the period |
|
|
|
|
|
|
| |||
| Balance as at 30 September 2009 | 142,829 | 149,304 | 5,686 | (506) | 631 | (180,086) | 117,858 | |||
|
|
|
|
|
|
|
|
| |||
| Balance as at 30 September 2009 | 142,829 | 149,304 | 5,686 | (506) | 631 | (180,086) | 117,858 | |||
| Capital contributed during the period | (116,834) | 17,977 |
| 118,313 |
| 13,089 | 32,545 | |||
| Cost of capital raising |
| (2,224) |
|
|
|
| (2,224) | |||
| Other comprehensive loss |
|
| (11,794) |
| (455) |
| (12,249) | |||
| Profit for the period |
|
|
|
|
| 320 | 320 | |||
| Total recognised profit/(loss) for the period | (116,834) | 15,753 | (11,794) | 118,313 | (455) | 13,409 | 18,392 | |||
| Balance as at 31 March 2010 | 25,995 | 165,057 | (6,108) | 117,807 | 176 | (166,677) | 136,250 | |||
The accompanying notes 1 to 11 form an integral part of this consolidated interim report.
CONDENSED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited for the period from 1 October 2009 to 31 March 2010
|
| Six months to 31 Mar 10 | Six months to 31 Mar 09 | Twelve months to 30 Sep 09 |
|
| €000 | €000 | €000 |
| Operating Activities |
|
|
|
| Loss for the period before taxation | (367) | (101,307) | (133,826) |
| Adjusted for: |
|
|
|
| Net valuation gains on investment | 2,693 | 102,646 | 97,265 |
| Net finance costs | 20,282 | 16,204 | 33,342 |
| Unrealised change in fair value of derivatives | (7,907) | - | 34,741 |
| Unrealised foreign currency exchange | - | (16) | 70 |
| Reversal of gain from sale of property | (1,091) | - | - |
| Unrealised change in value of warrants | 2,010 | - | - |
| Operating profit before changes in working capital and provisions | 15,620 | 17,527 | 31,592 |
|
|
|
|
|
| (Decrease)/increase in trade and other receivables | 4,047 | (690) | (143) |
| Decrease/(increase) in trade and other payables | (1,309) | 11,583 | (3,902) |
| Cash generated from operations | 18,358 | 28,420 | 27,547 |
|
|
|
|
|
| Interest paid | (14,236) | (15,560) | (28,979) |
| Interest received | 28 | 1,979 | 1,987 |
| Tax paid | (1,555) | (1,749) | (1,608) |
| Cash flows from operating activities | 2,595 | 13,090 | (1,053) |
|
|
|
|
|
| Investing activities |
|
|
|
| Acquisition of investment properties | - | 90 | - |
| Disposal of investment properties | 16,976 | 50,908 | 66,446 |
| Capital expenditure | (3,211) | - | (8,679) |
| Cash flows from investing activities | 13,765 | 50,998 | 57,767 |
|
|
|
|
|
| Financing activities |
|
|
|
| Draw down of loan facility | 930 | - | 6,071 |
| Proceeds on issue of shares | 65,172 | - | - |
| Issuing fees | (4,448) | - | - |
| Repayments of existing loans | (53,016) | (44,900) | (51,376) |
| Finance costs paid on arrangement of long term loan | (2,987) | (6,998) | (7,279) |
| Cash flows from/(to) financing activities | 5,651 | (51,898) | (52,584) |
|
|
|
|
|
| Net increase in cash and cash equivalents for the period |
22,011 |
12,190 |
4,130 |
| Opening cash and cash equivalents | 34,956 | 30,826 | 30,826 |
| Closing cash and cash equivalents | 56,967 | 43,016 | 34,956 |
| Cash directly associated with non-current assets held for sale | (154) | - | (609) |
| Closing cash and cash equivalents | 56,813 | - | 34,347 |
The accompanying notes 1 to 11 form an integral part of this consolidated interim report.
NOTES TO THE CONSOLIDATED INTERIM STATEMENTS AS AT 31 MARCH 2010
1. Reporting Entity
Invista European Real Estate Trust SICAF ("the Company") was incorporated as a "société anonyme" under the laws of Luxembourg on 6 June 2005. On 17 November 2006 the Company was converted into an investment company with fixed capital "société d'investissement à capital fixe" ("SICAF"). Through its subsidiaries (together "the Group") its main activity is to evaluate, make and actively manage direct and indirect investments in real estate in Continental European countries. During the period ended 31 March 2010 the Group has disposed of legal interests in two properties in France and one in Belgium.
The Company is a public limited liability company incorporated for an unlimited term. The registered office of the Company is established at 25C, Boulevard Royal, L-2449 Luxembourg.
2. Basis of preparation
Statement of compliance
These consolidated interim statements have been approved for issue by the Board of Directors on 21 May 2010 and have been prepared in accordance with International Financial Reporting Standard (IFRS) and interpretations adopted by the International Accounting Standard Board (IASB), as adopted by the European Union (EU).
Basis of measurement
The consolidated interim statements have been prepared on the historical cost basis except for the following:
·; Derivative financial instruments measured at fair value
·; Investment properties measured at fair value
The methods used to measure fair values are discussed further in note 4.
Basis of preparation
These consolidated interim statements are presented in Euro, which is the Company's functional currency. All financial information presented in Euro has been rounded to the nearest thousand.
The accounting policies have been consistently applied to the results, assets, liabilities and cash flows of the entities included in the interim statements and are consistent with those of the previous year/period.
Use of estimates and judgements
The preparation of interim statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the interim statements is included in the note 4 'Determination of fair values'.
Accounting for borrowing costs
The Group capitalised borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. Since 1 October 2009 the Group capitalises all borrowing cost, this is in accordance with IAS 23 borrowing costs.
Basis of consolidation
The consolidated interim statements comprise the accounts of the Company and all of its subsidiaries drawn up to 31 March each year. Subsidiaries are those entities over which the Company has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are de-consolidated from the date control ceases.
The Group's acquisitions of subsidiaries are primarily accounted for as acquisitions of assets as the subsidiaries are special purpose vehicles established for the sole purpose of holding assets. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.
The assets and liabilities of the subsidiaries and their results are fully reflected in the consolidated interim statements. Intercompany transactions, balances and unrealised gains on transactions between group companies are not included. Unrealised losses are also not included unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Company.
Investment property
Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, used in the production or supply of goods or services or for administrative purposes. Investment property comprises freehold land, freehold buildings and leasehold interest.
Investment property is initially recognised on completion of contracts at cost, including related transaction costs associated with the investment property. After initial recognition, investment properties are measured at fair value, with unrealised gains and losses recognised in the Statement of Comprehensive Income.
This accounting policy is also applied for assets classified as held for sale.
Where unconditional commitments have been entered into prior to the Balance Sheet date property acquisitions are recognised at their contractual value.
Financial instruments
Non-derivative financial instruments
Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through the Statement of Comprehensive Income, any directly attributable transaction costs.
Subsequent to initial recognition non-derivative financial instruments are measured as described below.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts.
Loans and borrowings
Borrowings are recognised initially at fair value of the consideration received, less related transaction costs. Subsequent to initial recognition, interest bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.
Financing costs incurred in obtaining a debt facility are capitalised and amortised over the period of the facility using the effective interest rate method.
Derivative financial instruments
The Group uses derivative financial instruments to hedge its exposure to interest rate risks arising from operational, financing and investment activities.
Derivatives are initially recognised at fair value; attributable transaction costs are recognised in the Statement of Comprehensive Income when incurred. Subsequent to initial recognition, derivative financial instruments are measured and stated at fair value, and changes therein are accounted for as described below:
Cashflow hedges
Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised directly in equity to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are recognised in the Statement of Comprehensive Income.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in equity remains there until the forecast transaction occurs. When the hedged item is a non-financial asset, the amount recognised in equity is transferred to the carrying amount of the asset when it is recognised. In other cases the amount recognised in equity is transferred to the Statement of Comprehensive Income in the same period that the hedged item affects profit or loss.
Before the renegotiation of the debt and the interest rate hedging, the swap hedging was not fully effective, and the changes of the fair value were recognised in the Statement of Comprehensive Income.
Share capital
Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares, other than on a business combination, are shown as a deduction, net of tax, in equity from the proceeds. Share issue costs incurred directly in connection with a business combination are included in the cost of acquisition. Dividends are recognised in the period in which they are paid.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
Preference shares are classified as either a financial liability or an equity instrument according to the substance of the contract, not its legal form. A financial instrument is an equity instrument only if the instrument includes no contractual obligation to deliver cash or another financial asset to another entity and if the instrument will or may be settled in the issuer's own equity instrument. As the preference shares pay a fixed rate of dividend and have a mandatory redemption feature at a future date, the substance is that there is a contractual obligation to deliver cash and, therefore, should be recognised as a liability under International Financial Reporting Standards.
External costs directly attributable to the issue of the preference shares are capitalised and amortised over the life of the share.
The holders of preference shares are entitled to receive a preferential cumulative dividend corresponding to the higher of (a) 50% per annum of their accounting par value of €0.10 and (b) the relevant percentage per annum of the par value, as will, when converted on each payment date at the spot rate of exchange between sterling and Euro and will enable the Company to pay to each preference share holder an amount in sterling equal to 9% per annum of the preference share issue price of £1.00. The preference dividend is payable semi-annually on 31 May and 30 November each year from 2010 to 2016 inclusive.
Impairment
Financial assets
A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in the Statement of Comprehensive Income.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in the Statement of Comprehensive Income.
Non-financial assets
The carrying amounts of the Group's non-financial assets, other than investment property, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to that asset.
For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash-generating unit").
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in the Statement of Comprehensive Income.
Revenue
Rental income
Rental income from investment properties is accounted for on a straight-line basis over the term of the ongoing leases and is shown gross of any income tax. Any material premiums or rent-free periods are spread evenly over the lease term.
Finance income and expenses
Finance income comprises interest income on funds invested and gains on hedging instruments that are recognised in the Statement of Comprehensive Income. Interest income is recognised on an accruals basis.
Finance expenses comprise interest expense on borrowings, and losses on hedging instruments that are recognised in the Statement of Comprehensive Income.
Expenses
Operating expenses
All expenses are accounted for on an accruals basis. The Group's investment management and administration fees and all other expenses are charged through the Statement of Comprehensive Income.
Attributable transaction costs incurred in establishing the Group's credit facilities are deducted from the fair value of borrowings on initial recognition and are amortised over the lifetime of the facilities through the Statement of Comprehensive Income.
Taxation
According to the Luxembourg regulations regarding SICAF companies, the Group is not subject to capital gains taxes in Luxembourg. It is, however, liable to an annual subscription of 0.05% "taxe d'abonnement" of its total net assets, payable quarterly, and assessed on the last day of each quarter.
Real estate revenues, or capital gains derived thereon, may be subject to taxes by assessment, withholding or otherwise in the countries where the real estate is situated.
The subsidiaries of the Group are subject to taxation in the countries in which they operate. Current taxation is provided for at the current applicable rates on the respective taxable profits.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated interim statements.
Deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction presents neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the Balance Sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.
3. New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations have been issued by the International Auditing Standards Board but are not yet effective for the period ended 31 March 2010 and have not been applied in preparing these financial statements. None of these will have an effect on the consolidated financial statements of the Group, except for Eligible Hedged Items - Amendment to IAS 39 Financial Instruments: Recognition and Measurement, which clarifies the existing principles that determine whether specific risks or portions of cash flows are eligible for designation in a hedging relationship. The amendment, which becomes mandatory for the Group's 2011 consolidated financial statements, is not expected to have a significant impact on the consolidated financial statements.
The other standards and interpretations that have been adopted and which have not yet adopted, according to IASB, are not expected to have a significant impact on the Company's financial statements.
4. Determination of fair values
A number of the Group's accounting policies and disclosures require the determination of fair values, for both financial and non financial assets and liabilities. Fair values have been determined for measurement and / or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
Investment property
Fair value is based on the open market valuations of the properties as provided by an independent expert, DTZ Debenham Tie Leung, in accordance with the guidance issued by the Royal Institution of Chartered Surveyors (the "RICS"). Market valuations are carried out on a quarterly basis.
The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of the 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.
In the absence of current prices in an active market, the valuations are prepared by considering the aggregate of the estimated cash flows expected to be received from renting out the property. A yield that reflects the specific risks inherent in the net cash flows is then applied to the net annual cash flows to arrive at the property valuation.
Valuations reflect, when appropriate the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting vacant accommodation, and the market's general perception of their creditworthiness, the allocation of maintenance and insurance responsibilities between the Group and the lessee and the remaining economic life of the property. When rent reviews or lease renewals are pending with anticipated reversionary increases, it is assumed that all notices, and when appropriate counter-notices, have been served validly and within the appropriate time.
Derivatives
The fair value of the Group's derivatives is the estimated amount that the Group would receive or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the current creditworthiness of the swap counterparties.
5. Investment property
|
| 31 Mar 10 €000 | 31 Mar 09 €000 | 30 Sep 09 €000 |
| At beginning of year | 517,481 | 631,568 | 631,569 |
| Fair value of properties disposed during the year | (485) | (12,937) | (12,937) |
| Capital expenditure incurred | 376 | - | 11,514 |
| Net change in fair value of portfolio | (2,693) | (63,725) | (97,265) |
| Investment property classified as held for sale | (8,000) | - | (15,400) |
| At end of year | 506,679 | 554,906 | 517,481 |
At 31 March 2010 all properties of the portfolio were subject to registered mortgages in order to secure bank loans.
The net change in the value of the investment property also includes the valuation of assets sold in the period amounting to €15.9 million.
On 26 October 2009, SCI Prolog sold its warehouse property located in Aix-en-Provence, France for a price of €688,000, which enabled the repayment of €456,348 of bank debt.
On 16 November 2009 Fova Sarl sold a parcel of land for a price of €618,000, which enabled the repayment of €350,576 of bank debt.
On 4 February 2010 the sale of legal interests in the office property Campus Remy located in Remylaan 4B/4C, 3018 Wijgmaal, Leuven, Belgium, was completed for a total price of €15,670,000, which enabled the repayment of €12,210,000 of bank debt.
Investment property comprises a number of commercial properties that are leased to third parties.
6. Issued capital and reserves
Share capital
The Company has an issued share capital of €25,995,895 consisting of 259,948,949 Ordinary shares and 29,137,134 preference shares without indication of nominal value, all of which have been fully paid up. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
All ordinary shares rank equally with regard to the Company's residual assets.
On 29 December 2009 the Company reduced its share capital from an amount of €142,829,093.75 to €11,426,327.50.
On 30 December 2009 the Company issued 145,685,674 new ordinary shares.
Preference shares
On 30 December 2009 the Company issued 29,137,134 redeemable preference shares with one warrant attached per preference share. The preference shares confer the right to a cumulative preference share dividend payable semi-annually.
As the preference shareholders have a right to receive a dividend and are redeemable, they are treated as a liability in the Statement of Financial Position as per IAS 32.
Warrants
On 30 December 2009, the Company issued 29,137,134 warrants. Each warrant holder shall be entitled to exercise their subscription right in cash on any subscription date falling in the years from 2010 to 2013 inclusive. The subscription date in any year shall be the last business day of May and the last business day in November. The subscription price will be £0.29 per ordinary share. As the exercise price for the warrants is set in Sterling as opposed to the functional currency of the company, which is Euro, the warrants have been treated as a liability in the Statement of Financial Position as per IAS 32.
Authorised capital
The Company shall have an authorised capital of €920,980,852.20 represented by 9,209,808,522 ordinary shares without indication of nominal value.
Hedging reserve
The hedging reserve relates to the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred.
Due to the difference in the maturity of the previous loan facility (2011) and the related hedging contracts/derivative financial instruments (2013), the hedge accounting relationship was discontinued with effect from 1 October 2008, since the derivative financial instruments no longer met the hedging criteria.
Movements in the valuations of the derivative financial instruments from 1 October 2008 to 31 December 2009 are included in the income statement. The related reserve of €9.0m, which has been credited to the reserves as at 30 September 2008 is amortised to the statement of comprehensive income during this period.
In January 2010 the Company extended the loan facility to 2013 bringing the maturity date in line with the swap agreement. As a result of this, the swap became an effective cash flow hedge and the outstanding hedging reserve, which has not yet been amortised, has been fully reversed in the Statement of Comprehensive Income.
Restricted reserve
A legal reserve subject to profit of the Subsidiaries and the Company has been allocated in the different jurisdictions where applicable. This reserve is not available for dividend distributions.
Non-distributable reserve
On 29 December 2009 the Company created a non-distributable reserve of €118,313,496.25, which can exclusively be used to absorb losses incurred or to increase the share capital of the Company through the capitalisation of the non-distributable reserve. This reserve was created by a reduction of the share capital.
7. Net asset value per ordinary and preference share
The net asset value per ordinary share is based on the net assets of €144.3 million (30 September 2009: €128.0 million and 31 March 2009: €151.8 million) and 259.9 million (30 September 2009: 114.2 million and 31 March 2009: 114.2 million) ordinary shares in issue at the Balance Sheet date.
The net asset value per preference share is based on the value of the nominal value of €32.6 million plus accrued interest of €0.7 million divided by 29.1 million of preference shares in issue.
|
| As at 31 Mar 10 €000 | As at 31 Mar 09 €000 | As at 30 Sep 09 €000 |
| Net asset value | 136,250 | 151,880 | 117,858 |
| Net change in fair value of the warrants | 2,010 | - | - |
| Deferred tax | 6,021 | 11,212 | 10,162 |
| Adjusted net asset value | 144,281 | 163,092 | 128,020 |
| Assuming exercise of all dilutive potential ordinary shares |
|
|
- |
| Listed warrants1,2 | 9,462 | - |
|
| Fully diluted net asset value | 153,743 | 163,092 | 128,020 |
| Number of ordinary shares | 259,948,949 | 114,263,275 | 114,263,275 |
| Number of warrants | 29,137,134 | - | - |
| Fully diluted ordinary share capital | 289,086,083 | 114,263,275 | 114,263,275 |
| Net asset value per ordinary share | €0.524 | €1.329 | €1.031 |
| Fully diluted net asset value per ordinary share | €0.504 | - | - |
| Adjusted net asset value per ordinary share | €0.555 | €1.427 | €1.120 |
| Adjusted fully diluted net asset value per ordinary share | €0.532 | - | - |
(1) €:£ exchange rate 1.1198 as at 31 March 2010
(2) Exercise price of warrants £0.29
The charge to profit and loss in the accounts with regard to the change in fair value of the warrants is excluded from the calculation of net asset value as in the opinion of the Directors this charge does not reflect a potential cost to the business that would ever be realised.
8. Profit/(loss) per ordinary share
|
| 31 Mar 10 €000 | 31 Mar 09 €000 | 30 Sep 09 €000 |
| Results attributable to ordinary share holders | 320 | (94,669) | (127,079) |
| Number of ordinary shares | 259,948,949 | 114,263,275 | 114,263,275 |
| Number of warrants | 29,137,134 | - | - |
| Total potential ordinary shares | 289,086,083 | 114,263,275 | 114,263,275 |
| Earnings per ordinary share | €0.0012 | (€0.83) | (€1.11) |
| Diluted earnings per ordinary share | €0.0011 | - | - |
9. Segment reporting
Geographical segments
Segment information is presented in respect of the Group's geographical segments, which is based on the Group's management and internal reporting structure. The Group's business is investing in commercial properties. All the existing properties are located in the Continental European region.
Business segments
Business segment reporting has not been prepared because the Group is active in just one business segment which is commercial property investment.
|
| France | Germany | Other Europe | Total |
| Six months to 31 March 2010 | €000 | €000 | €000 | €000 |
| Gross rental income | 10,306 | 7,897 | 3,477 | 21,680 |
| Property operating expenses | (665) | (476) | (386) | (1,527) |
| Segment gross profit | 9,641 | 7,421 | 3,091 | 20,153 |
|
|
|
|
|
|
| Change in value of investment properties | (3,361) | 2,790 | (2,122) | (2,693) |
| Net change in fair value of derivative financial instruments | (7) | - | 5,904 | 5,897 |
| Change in value of investments | (3,368) | 2,790 | 3,782 | 3,204 |
|
|
|
|
|
|
| Finance income | 7 | - | 5 | 12 |
| Finance expenses | (8,149) | (6,281) | (5,864) | (20,294) |
| Unallocated net expense | (1,119) | (1,417) | (906) | (3,442) |
| Profit/(Loss) before tax | (2,988) | 2,513 | 108 | (367) |
| Taxation | 1,071 | (369) | (15) | 687 |
| Profit/(Loss) after tax | (1,917) | 2,144 | 93 | 320 |
|
|
|
|
|
|
| As at 31 March 2010 |
|
|
|
|
| Assets and Liabilities |
|
|
|
|
| Segment assets | 262,775 | 209,584 | 112,527 | 584,886 |
| Segment liabilities (excluding equity components) | (173,239) | (137,029) | (138,368) | (448,636) |
|
| France | Germany | Other Europe | Total |
| Six months to 31 March 2009 | €000 | €000 | €000 | €000 |
| Gross rental income | 10,509 | 8,021 | 4,525 | 23,055 |
| Property operating expenses | (1,106) | (303) | (565) | (1,974) |
| Segment gross profit | 9,403 | 7,718 | 3,960 | 21,081 |
|
|
|
|
|
|
| Change in value of investment properties | (31,634) | (20,627) | (14,715) | (66,976) |
| Net change in fair value of derivative financial instruments | - | - | (35,670) | (35,670) |
| Change in value of investments | (31,634) | (20,627) | (50,385) | (102,646) |
|
|
|
|
|
|
| Finance income | 671 | 428 | 104 | 1,203 |
| Finance expenses | (10,005) | (5,605) | (1,606) | (17,216) |
| Unallocated net expense | (1,613) | (1,130) | (46) | (2,789) |
| Loss before tax | (33,178) | (19,216) | (47,973) | (100,367) |
| Taxation | 1,229 | 1,236 | 3,233 | 5,698 |
| Loss after tax | (31,949) | (17,980) | (44,740) | (94,669) |
|
|
|
|
|
|
| As at 31 March 2009 |
|
|
|
|
| Assets and Liabilities |
|
|
|
|
| Segment assets | 279,260 | 213,265 | 120,241 | 612,766 |
| Segment liabilities (excluding equity components) | (200,130) | (141,531) | (119,787) | (461,448) |
|
|
|
|
|
|
Certain subsidiaries of the Group are involved in litigation resulting from operating activities. These legal disputes and claims for damages are routine resulting from the normal course of business. None of these legal disputes and claims is expected to have a material effect on the balance sheet, profits or liquidity of the Group.
11. Post balance sheet events
On 1 April and on 19 April 2010 KP Image house sold its legal interests in an office property located in Belgium for a price of €7.7 million, which enabled the repayment of €6.1 million of bank debt.
Glossary
Estimated rental value (ERV) is the Group's external valuers' reasonable opinion as to the open market rent which, on the date of valuation, could reasonably be expected to be obtained on a new letting or rent review of a property.
Gross income yield (GIY) is the Gross rent expressed as a percentage of the net valuation of property portfolio.
Gross rental income or gross rent is the annualised rental income receivable in the period, prior to payment of non-recoverable expenditure such as ground rents and property outgoings.
Group is Invista European Real Estate Trust SICAF and its subsidiaries.
Net asset value (NAV) are shareholders' funds, plus the surplus of the open market value over the book value of both development and trading properties, adjusted to add back deferred tax.
Net initial yield (NIY) is the Net rental income expressed as a percentage of the gross valuation of property portfolio.
Net rental income or net rent is the annualised rental income receivable in the period after payment of non-recoverable expenditure items such as ground rents and property outgoings.