Last checked at 
26 Sep 2017 07:00
Phoenix Spree Deutschland Limited(The "Company" or "PSDL")
Interim Results for the half year to 30 June 2017
STRONG OPERATING PERFORMANCE DRIVING PORTFOLIO VALUATION GAINS
Phoenix Spree Deutschland (LSE: PSDL.LN), the UK listed investment company specialising in German residential real estate, announces its Interim Results for the six months ended 30 June 2017.
Financial highlights
- Gross rental income up 25% year-on-year to €9.5m, (H1 2016 €7.6m)
- Profit before tax up 303% year-on-year to €63.1m, (H1 2016 €15.7m)
- EPRA NAV per share up 22.3% in H1 2017 to €3.34 per share (31 December 2016: €2.73) EPRA NAV per share total return in H1 2017 of 23.7% (six months to 30 June 2016: 7.8%)
- Net loan to value of 31.6% at 30 June 2017 (31 December 2016: 39.4%)
- Increased first half dividend to €2.28cents (GBP 2.0p), up 25% year-on-year (H1 2016: €1.92cents (1.6p))
Operational highlights
- Portfolio value increased by 22.6% in H1 2017 to €519.7 million. (31 December 2016: €423.8 million), and by 15.6% on a like-for-like basis.
- Berlin posted largest like-for-like increase at 18.2%
- Strong annual like-for-like rent per sqm growth of 5.0% (30 June 2016 5.7%)
- Significant embedded value within the portfolio: Berlin new leases signed at a 44% premium to passing rents
- First half condominium sales achieve an average value per sqm of €3,687, a 59.8% premium to portfolio average value per sqm at 30 June 2017
- Five property acquisitions in Berlin completed for €27.7m in H1 2017, with a further two notarised in H1 and due to complete in H2 2017 with a value of €11.6m
- Nuremberg and Fürth portfolio disposed for €35.2m on 1 July 2017, an 11% premium to its book value as at 31 December 2016
- Berlin represented 78.2% of PSDL portfolio by value as at 30 June 2017, and 84.2%* on a pro-forma basis
*following completion of Nuremberg and Fürth disposal, and the completion of Berlin assets notorised in the first half of 2017, but not completed at30 June 2017
Outlook
- Berlin property market outlook remains favourable, underpinned by strong demand for apartments, lack of supply and low interest rates
- Significant further potential to create value through reversionary letting and condominium sales
- Scope for further growth in property values, particularly in central Berlin
- Strong balance sheet locking in long-term fixed rate debt at low interest rates
- The Company is on track to deliver a strong financial performance for the full year 2017
Robert Hingley, Chairman of Phoenix Spree Deutschland, commented:
"I am delighted to announce another strong set of results following an active start to the year in which the Company has delivered strong rental growth and enhanced its portfolio in Berlin where the outlook remains particularly positive. The Portfolio has seen another significant valuation uplift, driven by the positive market backdrop and our active asset management strategy, resulting in an EPRA NAV per share total return of 23.7% for the six months. Nothwithstanding the significant rises in property values to date, and corresponding rental yield compression, Management continues to see significant embedded value within the Portfolio, with further reversionary rental potential and opportunities to create value through the sale of apartment blocks as condominiums. The Company has also strengthened its balance sheet, bolstered by non-core disposals, leaving it well placed to continue to grow the Portfolio."
For further information please contact:
Phoenix Spree Deutschland Limited +44 (0)20 3937 8777
Stuart Young
Liberum Capital Limited (Corporate Broker) +44 (0)20 3100 2222
Christopher Britton
Tulchan Communications (Financial PR) +44 (0)20 7353 4200
Tom Murray
Chairman's Statement
I am pleased to be able to report another strong set of interim results. Our active asset management strategy has continued to deliver rental growth at a premium to listed peers; we have made value enhancing acquisitions while successfully disposing of non-core assets; and have secured additional debt financing on highly competitive terms.
Market dynamics are favourable with a continuation of positive growth trends in both rental and property values. During the first six months of 2017, the value of the Portfolio has increased by €95.9m, with like-for-like growth of 15.6%, while EPRA NAV per share grew by 22.3%. Notwithstanding these growth rates, the Board believes significant embedded value remains within the Portfolio, evidenced by first half new leases signed at an average 44% premium to in-place rents in Berlin, and condominium sales at a substantial premium to average Portfolio property valuations.
The market outlook remains positive, particularly in Berlin where, on a pro-forma basis, 84.2% of the Portfolio is located. Demographic trends are supportive as demand for housing stock from owner occupiers and investors continues to significantly outstrip supply. The funding environment is also positive, with rising property values and low interest rates combining to allow the Company to refinance maturing debt facilities on attractive terms.
The Board is confident that the Company is well positioned to take advantage of the favourable outlook to deliver future capital growth and income to its investors. The Board is pleased to declare a dividend of €2.28cents (2.0p) per share for the first half, which is expected to be paid on or around 13 October 2017.
Operational and Financial Review
Financial Highlights
Financial Summary |
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€ million unless otherwise stated | 30-Jun-17 | 30-Jun-16 | 31-Dec-16 |
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Gross rental income | 9.5 | 7.6 | 15.9 |
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Profit Before Tax | 63.1 | 15.7 | 48.9 |
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Pre-Exceptional Profit Before Tax | 63.1 | 17.2 | 48.9 |
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Reported EPS (€) | 0.55 | 0.14 | 0.42 |
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Investment Property Value | 519.7 | 329.8 | 423.8 |
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Gross Debt | 197.2 | 143.6 | 185.6 |
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Gross Cash | 32.9 | 42.0 | 18.5 |
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Net LTV 1 | 31.6% | 30.8% | 39.4% |
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EPRA NAV per share (€) | 3.34 | 2.42 | 2.73 |
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EPRA NAV per share (£) 2 | 2.94 | 2.02 | 2.33 |
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Dividend per share (€ cents) | 2.3 | 1.9 | 6.3 |
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Dividend per share (£ pence) 2 | 2.0 | 1.6 | 5.3 |
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EPRA NAV per share total return for period (€%) | 23.7% | 7.8% | 22.5% |
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EPRA NAV per share total return for period (£%) | 26.9% | 22.7% | 41.7% |
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1 Debt less cash as a proportion of value of investment property |
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2 Exchange rate of 1.14 at 30 June 2017, 1.20 at 30 June 2016, 1.17 at 31 December 2016 |
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Like-for-like portfolio value increase of 15.6%
As at 30 June 2017, the portfolio was valued at €519.7 million (31 December 2016: €423.8 million) by Jones Lang LaSalle GmbH, the Company's external property valuer. This represents an increase of 22.6% over the six-month period, equating to an average value per square metre of €2,308 (31 December 2016: €1,965) and a gross fully occupied yield of 4.1% (31 December 2016: 4.8%). Included within the portfolio are condominium properties with an aggregate value of €25.5m (31 December 2016: €24.2m). This increase in valuation reflects a combination of yield compression and growth in Portfolio rents.
On a like-for-like basis, after adjusting for the impact of acquisitions and disposals, the Portfolio valuation rose by 15.6% per cent in the six months ended 30 June 2017. This compares to an increase of 9.8% for the half year to 30 June 2016 and an increase of 19.4% for the full financial year ended 31 December 2016. The appreciation in the Portfolio valuation reflects a combination of market growth, improved rents and the impact of rising condominium values on multi-family home pricing.
By geographic segment, Berlin posted the largest like-for-like increase at 18.2%. As at 30 June 2017, Berlin represented 78.2% of the portfolio by value, up from 75.2% as at 31 December 2016. On a pro-forma basis, including the impact of the sale of the Company's Nuremberg and Fürth portfolio and assets notarised, but not completed, in H1 2017, Berlin represents 84.2% of the portfolio by value.
EPRA NAV increase of 22.3% in H1 2017
EPRA NAV per share rose by 22.3% in the first half of 2017 to €3.34 (£2.94) (31 December 2016: €2.73 (£2.33)). After taking into account the 2016 final dividend of €4.3cents (GBP: 3.7p), which was paid in June 2017, the EPRA NAV total return in the first half of 2017 was 23.7% (H1 2016: 7.8%).
Accelerating rental growth
Against a backdrop characterised by undersupply of available rental property and population growth in Berlin, the Company's active asset management strategy has continued to deliver strong rental growth. Annualised rental income for the period to 30 June 2017 was €19.2m (30 June 2016: €15.1m). Adjusting for acquisitions and disposals, this represents a like-for-like increase of 8.5% compared with 30 June 2016 (30 June 2016: 3.3%).
Average in place rent was €7.7 per sqm as at 30 June 2017, an increase of 1.1% compared with 30 June 2016. On a like-for-like basis, the increase was 5.0% (year to 30 June 2016: 5.7%).
Reported vacancy at 30 June 2017 was 8.2% (30 June 2016: 11.1%). On an EPRA basis, which adjusts for units undergoing development and made available for sale, the vacancy rate was 3.7% (30 June 2016 3.2%).
Further increase in new lettings premium
During the period, 234 new leases were signed, representing an annualised letting rate of 14.4% of units. The average rent achieved on new lettings was €10.0 per sqm, a 6.4% increase on the same period in 2016.
Notwithstanding growth in rental prices, the Company continues to re-let units at a substantial premium to in-place rents. During the first six months of 2016, new leases were signed at an average premium of 30.6% to passing rents. In Berlin, new leases were signed at an average rate of €11.2 per sqm, a 43.6% (30 June 2016: 37.4%) premium to passing rents.
The Company believes this reversionary uplift illustrates the significant embedded opportunity for continued future rental growth within the Portfolio, as lower paying tenants move out and prices on re-letting converge with current market levels.
Active portfolio management
The Company continues to source and acquire attractive assets in central Berlin. The Board considers this location offers the best medium-term potential for future rental and capital growth. In the six months to 30 June 2017, the Company completed on five Berlin property packages, consisting of 146 residential and 11 commercial units, for an aggregate purchase price of €27.7 million and representing an average price per square metre of €2,050. Two of these five properties were notarised in H1 2017, the others being notarised in the prior year. At 30 June 2017, Berlin represented 78.2% of the Portfolio by value.
Since 30 June 2017, the acquisitions of two further properties have been completed, comprising 75 residential and 3 commercial units, for an aggregate purchase price of €11.6 million and representing an average price per square metre of €2,045.
Overall, during the current year to September 2017, the Company has notarised a total of six new property packages, comprising 310 residential and 5 commercial units for an aggregate purchase price of €48.4 million, excluding purchase costs. Of this, €19.4 million of property was notarised in H1 2017.
In April 2017, the Company announced that it had exchanged contracts to sell a portfolio of 17 non-core properties in Nuremberg and Fürth for an aggregate cash consideration of €35.2m. These properties had been acquired in 2007 and 2008 for an aggregate purchase price of €13.9m and the sale proceeds represent an 11% premium to the 31 December 2016 Jones Lang LaSalle valuation. This disposal was completed on the 1 July 2017.
The disposal represents a complete exit from the Nuremberg & Fürth region, the proceeds of which will be used to reduce debt, fund further acquisitions in Berlin and invest in the existing Portfolio. Including the impact of this disposal on the 30 June 2017 figures, as well as Berlin acquisitons notarised in H1 but not yet completed, the Berlin proportion of the Portfolio increased to 84.2% by value on a pro-forma basis.
The Company has also notarised for disposal five other non-Berlin assets during the first half of 2017, with a total consideration of €10.5 million. A further non-Berlin asset was notarised for sale in August 2017 with a value of €2.1 million. Of these properties notarised for sale, €9.5 million has completed.
The Company continues to invest in its Portfolio through a carefully planned process of modernisation and renovation of apartments, upgrades to communal areas such as building facades and staircases, as well as investment in more efficient heating systems. The Company invested €3.0 million during the first half of 2017, the majority of which related to vacant apartments, which are refurbished and subsequently re-let at higher rents. This process of targeted investment enables the Company to access the reversionary rental potential that exists within the Portfolio and it is expected that investment will continue at a similar rate during the second half of the year.
Condominium sales
The Company's condominium strategy is to divide and resell a small number of carefully selected apartment blocks as condominiums, in order to monetise the value difference that exists between the value of an apartment block and the value of the same property sold as single apartments.
During the first half of 2017, sixteen apartments were notarised for sale, with an aggregate value of €3.9 million. The average sales' value per sqm achieved was €3,687, a 59.8% premium to the Fund's 30 June 2017 average Portfolio valuation.
Since June, a further two apartments have been notarised for sale. As at 31 August 2017, all but one of the available units at the two Berlin Kreuzberg apartment blocks had been sold and over 20% of Boxhagenerstrasse units have been sold.
Portfolio regional overview as at 30 June 2017
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Berlin has continued its strong performance in the first half, with significant underlying growth in rents and property values. Reported average rent per sqm stood at €7.9 an increase of 0.4% compared with 30 June 2016, reflecting strong underlying like-for-like rental growth partially offset by the impact of recent acquisitons which typically exhibit lower rental values upon takeover. On a like-for-like basis, (excluding the impact of acquisitions and disposals), the increase in rent per sqm was 6.1%. The Berlin EPRA vacancy rate stood at 4.0% in the first half of 2017 (H1 2016: 2.7%).
Nuremberg & Fürth, which was notarised for sale in the first half of 2017, reported rent per sqm of €7.5, a like-for-like increase of 4.9% (30 June 2016 2016 9.5%). First half 2017 EPRA vacancy stood at 5.9% (H1 2016: 1.4%).
Central & Northern Germany delivered a like-for-like increase in rent per sqm of 2.9% and an improved EPRA vacancy of 2.1% (H1 2016: 5.5%).
Rent and vacancy by region
Market | Average Rent per sqm(€) | Average Rent per sqm(€) | Average rent growth(%) | LFL Growth(%) | LFL Growth(%) | Reported Vacancy(%) | Reported Vacancy(%) | EPRA Vacancy(%) | EPRA Vacancy(%) |
H1 2017 | H1 2016 | H1 2017 | H1 2017 | H1 2016 | H1 2017 | H1 2016 | H1 2017 | H1 2016 | |
Berlin (inc.Greater Area) | 7.9 | 7.8 | 0.4 | 6.1 | 6.5 | 8.2 | 12.6 | 4.0 | 2.7 |
Central & North Germany | 7.2 | 7.0 | 2.9 | 2.9 | (6.0) | 5.8 | 7.6 | 2.1 | 5.5 |
Nuremberg & Fürth | 7.5 | 7.2 | 4.9 | 4.9 | 0.8 | 16.1 | 14.4 | 5.9 | 1.4 |
Baden-Wuerttemberg | 8.6 | 8.5 | 0.4 | 0.4 | (1.0) | 4.4 | 4.4 | 2.0 | 0.9 |
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Total | 7.7 | 7.6 | 1.1 | 5.0 | 5.7 | 8.2 | 11.1 | 3.7 | 3.2 |
Financial results
Reported revenue for the six-month period was € 9.5 million (30 June 2016: €7.6 million). This increase represents a combination of organic growth in rental income and the net impact of acquisitions and disposals.
The Company has reported a profit before taxation for the period to 30 June 2017 of €63.1 million (30 June 2016 : €15.7 million). This is after charging/crediting the following non-cash items totalling net €8.2 million, consisting of:
- An accrual of €10.7million relating to the Property Advisor performance fee (30 June 2016: 2.8 million). The accrual reflects the potential fee payable to the Property Advisor at the year end, based on the increase in EPRA NAV, under the terms of the Property Advisor Agreement; and
- mark-to-market interest rate swap gains of €2.5 million (30 June 2016: loss of €2.9m)
The results were positively impacted by a revaluation gain of €70.1 million (30 June 2016: €21.7 million). Excluding the revaluation gain, the performance fee accrual and the gain on the Swaps, the Company reported a profit before tax of €1.2 million (30 June 2016: loss before tax of €0.3 million).
Reported earnings per share for the period were €55 cents (June 2016: €14 cents).
The Board is pleased to declare an interim dividend €2.28 cents per share (GBP 2.0 pence per share), (30 June 2016: €1.92cents, GBP 1.6 pence) for the first half of the year. The dividend is expected to be paid on or around 13 October 2017 to shareholders on the register at close of business on 29 September 2017, with an ex-dividend date of 28 September 2017.
Debt and gearing
As at 30 June 2017, the Company had gross borrowings of €197.2 million (31 December 2016: €185.6m) and cash balances of €32.9 million (31 December 2016: €18.5 million), resulting in net debt of €164.3 million (31 Dec 2016 : €167.1m) and a net loan to value of 31.6% (31 Dec 2016: 39.4%). The increases in gross debt in the period reflects: i) the drawdown from new and existing loan facilities in an aggregate amount of €43.3 million, €11.3m of which was used to refinance existing Group debt and ii) the repayment of €18.3 million of debt in relation to the sale of the Nuremburg & Fürth portfolio. The increase in cash balances, and resulting fall in net loan to value, reflects the cash received in advance of the period end from the disposal of the Nurnberg & Fürth portfolio.
At 30 June 2017, the blended interest rate of the Company's loan book was 1.9% (30 June 2016: 2.0%). The average remaining duration of the loan book at 30 June 2017 was 6.3 years (30 June 2016: 4.7 years).
Since 30 June 2017, the Group has successfully refinanced €79.6 million of existing debt, while securing a further equity release of €14.8 million on the same pool of properties. The equity release will be used to fund new property acquisitions and also to invest in the existing portfolio. Including the impact of this new financing, the average remaining duration of the loan book would be just under 9 years, providing the Group with stable, long term, low cost funding for many years to come.
Although currently well funded, the Group will continue to assess its funding options for growth, including further debt, equity and joint ventures.
Outlook
Market dynamics are favourable, particularly in Berlin, where demand for rental property is significantly outstripping supply. The demand for rental apartments is driven by inward migration, high job creation levels, and falling unemployment. By contrast, supply of housing stock is limited, constrained by lack of available land for development and new-build construction costs that exceed the value of existing housing stock in most locations.
The net effect of this supply-demand imbalance is upward pressure on new letting prices which, in turn, has created a significant reversionary rental opportunity for the future. The fact that new leases in our Berlin portfolio have been signed at an average 44% premium to in-place rents during the first half of this year suggests that significant potential remains to improve rental incomes even in the event that market rental values were to stabilise.
The rising trend within the Berlin market for private individuals buying apartments is also creating a reversionary opportunity within the Portfolio through selling individual units as condominiums at significant premiums to book carrying values. This potential was clearly demonstrated in our results during the first six months of 2017 and additional properties are in the process of being evaluated as future condominium projects.
Following the disposal of the Company's Nuremberg and Fürth portfolio, and a series of carefully targeted property acquisitions, the Board believes that the Portfolio, with its focus on Central Berlin, is well positioned to take advantage of these trends. Positive market tailwinds, combined with the Company's active asset management strategy, have the potential to generate further growth in rental incomes and property values during the second half of the year.
Identification of business risks
The Group's principal risks and uncertainties are consistent with those set out in the Annual Report for the year ended 31 December 2016 being compliance with financial covenants on bank borrowing, tenant default, liquidity, interest rate hedging instruments, insufficient investment opportunities and interest rate movements on bank borrowings. The Directors consider that the significant areas of judgement made by management that have significant effect on the Group's performance and estimates with a significant risk of material adjustment in the second half of the year are unchanged from those identified in the Annual Report for the year ended 31 December 2016.
Key Performance Indicators
The Company has chosen a number of Key Performance Indicators (KPI's), which the Board believes may help investors understand the performance of the Company and the underlying property portfolio.
In the six months to 30 June 2017:
· the value of the property portfolio grew by 15.6% on a like-for-like for basis. This increase was driven by yield compression and an increase in like-for-like average rent per let sqm of 5.0% (H1 2016: 5.7%)
· the EPRA vacancy of the Portfolio at 30 June 2017 stood at 3.7% (30 June 2016: 3.2%)
· the Group continued with its targeted condominium programme, agreeing sales of €3.9 million in the half year to 30 June 2017 (H1 2016: €1.2 million)
· EPRA NAV per share increased by 38% to €3.34 as at 30 June (30 June 2016 €2.42),
· the declared dividend for the half year 2017 was €2.28 cents (2.0p) per share, an increase of 15% in Euro terms (H1 2016 €1.92 cents (1.60p) per share).
Forward looking statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The interim management report contains certain forward looking statements in respect of Phoenix Spree Deutschland Limited and the operation of its subsidiaries. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon 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. Nothing in this announcement should be construed as a profit forecast. |
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Responsibility statement | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
We confirm that to the best of our knowledge; |
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(a) the condensed set of financial statements gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, included in the consolidation as a whole as required by DTR 4.2.4R; |
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(b) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting'; |
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(c) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and their impact on the condensed set of financial statements and description of principal risks and uncertainties for the remaining six months of the year); and |
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(d) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein). |
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By order of the Board of Directors | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Robert Hingley | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-executive Director and Chairman | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
25 September 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Consolidated Statement of Comprehensive Income | |||||
For the six months ended 30 June 2017 | |||||
| Notes | Six months ended | Six months ended | Year ended | |
30 June2017 | 30 June2016 | 31 December 2016 | |||
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| (unaudited) | (unaudited) | (audited) | |
Continuing Operations |
| €'000 | €'000 | €'000 | |
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Revenue | 5 | 9,489 | 7,624 | 15,934 | |
Property expenses | 6 | (14,439) | (6,324) | (13,351) | |
Gross (loss)/profit |
| (4,950) | 1,300 | 2,583 | |
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Other operating income |
| - | 57 | - | |
Administrative expenses | 7 | (1,397) | (1,406) | (2,977) | |
Gain on disposal of investment property | 8 | 767 | 422 | 799 | |
Investment property fair value gain | 13 | 70,084 | 21,662 | 55,226 | |
Operating profit before exceptional costs |
| 64,504 | 22,035 | 55,631 | |
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Exceptional items - transaction costs | 9 | - | (1,592) | - | |
Operating profit |
| 64,504 | 20,443 | 55,631 | |
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Net finance charge | 10 | (1,406) | (4,788) | (6,756) | |
Profit before taxation |
| 63,098 | 15,655 | 48,875 | |
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Income tax expense | 11 | (11,833) | (3,269) | (10,913) | |
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Profit after taxation |
| 51,265 | 12,386 | 37,962 | |
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Other comprehensive income |
| - | - | - | |
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Total comprehensive income for the period |
| 51,265 | 12,386 | 37,962 | |
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Total comprehensive income attributable to: |
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Owners of the parent |
| 50,998 | 12,144 | 36,998 | |
Non-controlling interests |
| 267 | 242 | 964 | |
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| 51,265 | 12,386 | 37,962 | |
Earnings per share attributable to the owners of the parent: |
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From continuing operations |
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Basic (€) | 23 | 0.55 | 0.14 | 0.42 | |
Diluted (€) | 23 | 0.52 | 0.14 | 0.40 | |
Condensed Consolidated Statement of Financial Position | ||||
As at 30 June 2017 | ||||
| Notes | As at | As at | As at |
30 June2017 | 30 June2016 | 31 December 2016 | ||
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| (unaudited) | (unaudited) | (audited) |
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| €'000 | €'000 | €'000 |
ASSETS |
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Non-current assets |
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Investment properties | 13 | 436,226 | 329,493 | 395,829 |
Property, plant and equipment |
| 55 | 31 | 40 |
Deferred tax asset | 11 | 370 | 749 | 770 |
Loans and receivables | 16 | 2,282 | 1,409 | 2,253 |
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| 438,933 | 331,682 | 398,892 |
Current assets |
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Investment properties - held for sale | 14 | 83,504 | 354 | 27,970 |
Trade and other receivables | 15 | 12,893 | 2,037 | 7,503 |
Cash and cash equivalents |
| 32,876 | 42,039 | 18,450 |
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| 129,273 | 44,430 | 53,923 |
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Total assets |
| 568,206 | 376,112 | 452,815 |
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EQUITY AND LIABILITIES |
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Current liabilities |
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Borrowings | 17 | 2,793 | 8,418 | 9,169 |
Trade and other payables | 18 | 37,108 | 935 | 1,331 |
Derivative financial instruments | 19 | - | - | 392 |
Current tax |
| 19 | 9 | 24 |
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| 39,920 | 9,362 | 10,916 |
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Non-current liabilities |
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Borrowings | 17 | 194,404 | 135,218 | 176,423 |
Derivative financial instruments | 19 | 2,336 | 4,734 | 4,477 |
Other financial liabilities | 20 | 4,696 | 3,113 | 3,590 |
Deferred tax liability |
| 33,572 | 14,500 | 22,150 |
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| 235,008 | 157,565 | 206,640 |
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Total liabilities |
| 274,928 | 166,927 | 217,556 |
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Equity |
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|
Stated capital | 22 | 162,630 | 164,230 | 162,630 |
Share based payment reserve | 21 | 18,267 | 4,101 | 7,614 |
Retained earnings |
| 111,173 | 40,854 | 64,074 |
Equity attributable to owners of the parent |
| 292,070 | 209,185 | 234,318 |
|
|
|
|
|
Non-controlling interest |
| 1,208 | - | 941 |
|
|
|
|
|
Total equity |
| 293,278 | 209,185 | 235,259 |
|
|
|
|
|
Total equity and liabilities |
| 568,206 | 376,112 | 452,815 |
Condensed Consolidated Statement of Changes in Equity | ||||||||||||||
For the six months ended 30 June 2017 |
| |||||||||||||
| ||||||||||||||
Attributable to the owners of the parent |
| |||||||||||||
Stated capital | Share based payment reserve | Retained earnings | Total | Non-controlling interest | Total equity |
| ||||||||
€'000 | €'000 | €'000 | €'000 | €'000 | €'000 |
| ||||||||
| ||||||||||||||
Balance at 1 January 2016 | 115,150 | 1,264 | 32,125 | 148,539 | 2,626 | 151,165 |
| |||||||
Comprehensive income: |
| |||||||||||||
Profit for the period | - | - | 12,144 | 12,144 | 242 | 12,386 |
| |||||||
Other comprehensive income | - | - | - | - | - | - |
| |||||||
Total comprehensive income for the period | - | - | 12,144 | 12,144 | 242 | 12,386 |
| |||||||
| ||||||||||||||
Transactions with owners - recognised directly in equity: |
| |||||||||||||
Issue of share capital | 49,080 | - | - | 49,080 | - | 49,080 |
| |||||||
Dividends paid | - | - | (3,414) | (3,414) | - | (3,414) |
| |||||||
Performance fee | - | 2,837 | - | 2,837 | - | 2,837 |
| |||||||
Recognition of redemption liability | - | - | (1) | (1) | (2,868) | (2,869) |
| |||||||
Balance at 30 June 2016 | 164,230 | 4,101 | 40,854 | 209,185 | - | 209,185 |
| |||||||
| ||||||||||||||
Comprehensive income: |
| |||||||||||||
Profit for the period | - | - | 24,854 | 24,854 | 722 | 25,576 |
| |||||||
Other comprehensive income | - | - | - | - | - | - |
| |||||||
Total comprehensive income for the period | - | - | 24,854 | 24,854 | 722 | 25,576 |
| |||||||
| ||||||||||||||
Transactions with owners - recognised directly in equity: |
| |||||||||||||
Dividends paid | - | - | (1,634) | (1,634) | - | (1,634) |
| |||||||
Performance fee | - | 3,513 | - | 3,513 | - | 3,513 |
| |||||||
Recognition of redemption liability | - | - | - | - | (722) | (722) |
| |||||||
Acquisition of subsidiaries | - | - | - | - | 941 | 941 |
| |||||||
Cost related to share placing | (1,600) | - | - | (1,600) | - | (1,600) |
| |||||||
Balance at 31 December 2016 | 162,630 | 7,614 | 64,074 | 234,318 | 941 | 235,259 |
| |||||||
| ||||||||||||||
Comprehensive income: |
| |||||||||||||
Profit for the period | - | - | 50,998 | 50,998 | 267 | 51,265 |
| |||||||
Other comprehensive income | - | - | - | - | - | - |
| |||||||
Total comprehensive income for the period | - | - | 50,998 | 50,998 | 267 | 51,265 |
| |||||||
| ||||||||||||||
Transactions with owners - recognised directly in equity: |
| |||||||||||||
Dividends paid | - | - | (3,899) | (3,899) | - | (3,899) |
| |||||||
Performance fee | - | 10,653 | - | 10,653 | - | 10,653 |
| |||||||
Balance at 30 June 2017 | 162,630 | 18,267 | 111,173 | 292,070 | 1,208 | 293,278 |
| |||||||
Condensed Consolidated Statement of Cash Flows | |||
For the six months ended 30 June 2017 | |||
Six months ended | Six months ended | Year ended | |
30 June2017 | 30 June2016 | 31 December 2016 | |
(unaudited) | (unaudited) | (audited) | |
€'000 | €'000 | €'000 | |
|
|
| |
Profit before tax | 63,098 | 15,655 | 48,875 |
Adjustments for: | |||
Net finance charge | 1,406 | 4,788 | 6,756 |
Gain on disposal of investment property | (767) | (422) | (799) |
Investment property revaluation gain | (70,084) | (21,662) | (55,226) |
Depreciation | 11 | 5 | 12 |
Performance fee charge | 10,653 | 2,837 | 6,350 |
Operating cash flows before movements in working capital | 4,317 | 1,201 | 5,968 |
(Increase)/decrease in receivables | (5,362) | 481 | (3,808) |
Increase/(decrease) in payables | 607 | (1,749) | (1,353) |
Cash (used in)/generated from operating activities | (438) | (67) | 807 |
Income tax (paid)/received | - | - | - |
Net cash (used in)/generated from operating activities | (438) | (67) | 807 |
Cash flow from investing activities | |||
Proceeds on disposal received in advance | 35,170 | - | - |
Proceeds on disposal of investment property | 9,063 | 2,277 | 4,250 |
Bank interest received | 106 | 102 | 168 |
Capital expenditure on investment property | (2,950) | (1,303) | (4,189) |
Property additions | (31,037) | (25,183) | (72,808) |
Additions to property, plant and equipment | (26) | (6) | (22) |
Loans issued to minority shareholders | - | - | (806) |
Net cash used in investing activities | 10,326 | (24,113) | (73,407) |
Cash flow from financing activities | |||
Interest paid on bank loans | (3,161) | (1,756) | (3,173) |
Repayment of bank loans | (31,771) | (6,815) | (6,040) |
Drawdown on bank loan facilities | 43,365 | 16,650 | 45,394 |
Share issue | - | 49,080 | 47,480 |
Dividends paid | (3,899) | (3,414) | (5,049) |
Net cash generated from financing activities | 4,534 | 53,745 | 78,612 |
Net increase in cash and cash equivalents | 14,422 | 29,565 | 6,012 |
Cash and cash equivalents at beginning of period | 18,450 | 12,757 | 12,757 |
Exchange gains/(losses) on cash and cash equivalents | 4 | (283) | (319) |
Cash and cash equivalents at end of period | 32,876 | 42,039 | 18,450 |
Notes to the Condensed Consolidated Financial Statements | |||||
For the six months ended 30 June 2017 | |||||
1. General information | |||||
Phoenix Spree Deutschland Limited is a public limited company which is listed on the premium segment of the main market of the London Stock Exchange and is incorporated and domiciled in Jersey, and operates out of Jersey and Germany. The Group's principal activity is the holding of investment properties located in Germany. The Company's ordinary shares were admitted to trading on the London Stock Exchange on 15 June 2015. | |||||
The registered office of the Company is 13-14 Esplanade, St. Helier, Jersey JE1 1EE. | |||||
2. Basis of preparation | |||||
The interim set of condensed consolidated financial statements has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34 Interim Financial Reporting as adopted by the European Union. | |||||
The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2016. | |||||
As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, the financial statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 December 2016. | |||||
The comparative figures for the financial year ended 31 December 2016 are extracted from but do not comprise, the Group's annual financial statements for that financial year. | |||||
The interim condensed consolidated financial statements were authorised and approved for issue on 25 September 2017. | |||||
The interim condensed consolidated financial statements are neither reviewed nor audited, and do not constitute statutory accounts within the meaning of Section 105 of the Companies (Jersey) Law 1991. | |||||
Going concern | |||||
The interim condensed consolidated financial statements have been prepared on a going concern basis which assumes the Group will be able to meet its liabilities as they fall due for the foreseeable future. The Directors have prepared cash flow forecasts which show that the cash generated from operating activities will provide sufficient cash headroom for the foreseeable future. | |||||
3. Critical accounting judgements and estimates | |||||
The preparation of the interim condensed consolidated financial statements in conformity with IFRS requires the Group to make certain critical accounting estimates and judgements. In the process of applying the Group's accounting policies, management has decided the following estimates and assumptions have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities recognised in the condensed consolidated financial statements.
| |||||
Estimate of fair value of investment properties | |||||
The best evidence of fair value is current prices in an active market for similar properties and other contracts. In the absence of such information, the Group determines the amount within a range of reasonable fair value estimates. In making its judgement, the Group considers information from a variety of sources including: | |||||
a) Current prices in an active market, and the opinion of its third party independent experts, for properties of different nature, condition or location (or subject to different lease or other contracts), adjusted to reflect those differences. | |||||
b) Recent prices of similar properties in less active markets, with adjustments to reflect any changes in economic conditions since the date of the transactions that occurred at those prices. | |||||
c) Discounted cash flow projections based on reliable estimates of future cash flows, derived from the terms of any existing lease and other contracts, and (where possible) from external evidence such as current market rents for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows.
For further information with regards to the movement in the fair value of the Group's investment properties, refer to the management report on pages 3 to 4.
| |||||
4. Segmental Information | |||||
Information reported to the Board of Directors, which is the chief operating decision maker, for the purposes of resource allocation and assessment of segment performance is focussed on the different revenue streams that exist within the Group. The Group's principal reportable segments under IFRS 8 are therefore as follows: | |||||
· | Residential | ||||
· | Commercial | ||||
All revenues are earned in Germany with property and administrative expenses incurred in Jersey and Germany. | |||||
4. Segmental Information (continued) | ||||
31 December 2016 (audited) | ||||
Residential | Commercial | Unallocated | Total | |
€'000 | €'000 | €'000 | €'000 | |
Investment property | 332,496 | 63,333 | - | 395,829 |
Loans and receivables | - | - | 2,253 | 2,253 |
Assets held for sale | 23,495 | 4,475 | - | 27,970 |
Other assets | 22,447 | 4,276 | 40 | 26,763 |
Liabilities | (179,711) | (34,231) | (3,614) | (217,556) |
Net assets | 198,727 | 37,853 | (1,321) | 235,259 |
Residential | Commercial | Unallocated | Total | |
€'000 | €'000 | €'000 | €'000 | |
Revenue | 13,385 | 2,549 | - | 15,934 |
Property expenses | (11,215) | (2,136) | - | (13,351) |
Administrative expenses | - | - | (2,977) | (2,977) |
Gain on disposal of investment property | 799 | - | - | 799 |
Investment property fair value gain | 46,390 | 8,836 | - | 55,226 |
Operating profit | 49,359 | 9,249 | (2,977) | 55,631 |
Net finance charge | (6,756) | |||
Income tax expense | (10,913) | |||
Profit for the year | 37,962 | |||
30 June 2016 (unaudited) | ||||
Residential | Commercial | Unallocated | Total | |
€'000 | €'000 | €'000 | €'000 | |
Investment property | 273,479 | 56,014 | - | 329,493 |
Loans and receivables | - | - | 1,409 | 1,409 |
Other assets | 37,559 | 7,620 | 31 | 45,210 |
Liabilities | (135,958) | (27,847) | (3,122) | (166,927) |
Net assets | 175,080 | 35,787 | (1,682) | 209,185 |
Residential | Commercial | Unallocated | Total | |
€'000 | €'000 | €'000 | €'000 | |
Revenue | 6,328 | 1,296 | - | 7,624 |
Property expenses | (5,249) | (1,075) | - | (6,324) |
Other operating income | - | - | 57 | 57 |
Administrative expenses | - | - | (1,406) | (1,406) |
Gain on disposal of investment property | 422 | - | - | 422 |
Investment property fair value gain | 17,979 | 3,683 | - | 21,662 |
Operating profit | 19,480 | 3,904 | (1,349) | 22,035 |
Exceptional costs | (1,592) | |||
Net finance charge | (4,788) | |||
Income tax expense | (3,269) | |||
Profit for the period | 12,386 | |||
4. Segmental Information (continued) | ||||
30 June 2017 (unaudited) | ||||
Residential | Commercial | Unallocated | Total | |
€'000 | €'000 | €'000 | €'000 | |
Investment property | 368,306 | 67,920 | - | 436,226 |
Loans and receivables | - | - | 2,282 | 2,282 |
Assets held for sale | 70,502 | 13,002 | - | 83,504 |
Other assets | 38,955 | 7,184 | 55 | 46,194 |
Liabilities | (228,141) | (42,072) | (4,715) | (274,928) |
Net assets | 249,622 | 46,034 | (2,378) | 293,278 |
Residential | Commercial | Unallocated | Total | |
€'000 | €'000 | €'000 | €'000 | |
Revenue | 8,012 | 1,477 | - | 9,489 |
Property expenses | (12,191) | (2,248) | - | (14,439) |
Administrative expenses | - | - | (1,397) | (1,397) |
Gain on disposal of investment property | 767 | - | - | 767 |
Investment property fair value gain | 59,172 | 10,912 | - | 70,084 |
Operating profit | 55,760 | 10,141 | (1,397) | 64,504 |
Net finance charge | (1,406) | |||
Income tax expense | (11,833) | |||
Profit for the period | 51,265 | |||
5. Revenue | ||||
30 June2017 | 30 June2016 | 31 December 2016 | ||
(unaudited) | (unaudited) | (audited) | ||
€'000 | €'000 | €'000 | ||
Rental income | 9,489 | 7,624 | 15,934 |
6. Property expenses | ||||
30 June2017 | 30 June2016 | 31 December 2016 | ||
(unaudited) | (unaudited) | (audited) | ||
€'000 | €'000 | €'000 | ||
Property management expenses | 572 | 529 | 1,100 | |
Repairs and maintenance | 599 | 543 | 1,102 | |
Doubtful debt expense | 182 | 130 | 88 | |
Other property expenses | 406 | 742 | 1,324 | |
Property advisors' fees and expenses | 2,027 | 1,543 | 3,387 | |
Property advisors' performance fee accrual | 10,653 | 2,837 | 6,350 | |
14,439 | 6,324 | 13,351 | ||
7. Administrative expenses | ||||
30 June2017 | 30 June2016 | 31 December 2016 | ||
(unaudited) | (unaudited) | (audited) | ||
€'000 | €'000 | €'000 | ||
Secretarial & administration fees | 330 | 304 | 658 | |
Legal & professional fees | 754 | 587 | 1,494 | |
Directors' fees | 76 | 44 | 150 | |
Accountancy fees | 167 | 121 | 445 | |
Audit fees | 79 | 51 | 141 | |
Bank charges | 11 | 11 | 32 | |
(Profit)/loss on foreign exchange | (4) | 283 | 319 | |
Depreciation | 11 | 5 | 12 | |
Other income relating to cost recovery | (27) | - | (274) | |
1,397 | 1,406 | 2,977 |
8. Gain on disposal of investment property | ||||
30 June2017 | 30 June2016 | 31 December 2016 | ||
(unaudited) | (unaudited) | (audited) | ||
€'000 | €'000 | €'000 | ||
Proceeds | 9,063 | 2,277 | 4,250 | |
Book value of disposals | (8,140) | (1,855) | (3,405) | |
Disposal costs | (156) | - | (46) | |
767 | 422 | 799 | ||
Disposals consist of one rental property sold in February 2017 at its book value of €3,800,000, resulting in no gain; and condominium sales, accounting for the remainder of the disposal proceeds and net book value.
| ||||
9. Exceptional costs | ||||
30 June2017 | 30 June2016 | 31 December 2016 | ||
(unaudited) | (unaudited) | (audited) | ||
€'000 | €'000 | €'000 | ||
Professional fees associated with share placing | - | 1,592 | - | |
- | 1,592 | - | ||
Exceptional costs comprise of costs directly attributable to the share placing on the London Stock Exchange. The fees were reallocated against equity in the financial statements for the year ended 31 December 2016 in accordance with IAS 32 | ||||
10. Net finance charge | ||||
Six months ended | Six months ended | Year ended | ||
30 June2017 | 30 June2016 | 31 December 2016 | ||
(unaudited) | (unaudited) | (audited) | ||
€'000 | €'000 | €'000 | ||
Interest income | (77) | (102) | (113) | |
Interest accrued from partner loans | (29) | - | (55) | |
(Gain)/loss on interest rate swaps | (2,533) | 2,865 | 3,000 | |
Interest payable on bank borrowings | 2,403 | 1,640 | 3,924 | |
Fees associated with early termination of debt finance | 536 | 141 | - | |
Finance cost of redemption liability | 1,106 | 244 | - | |
1,406 | 4,788 | 6,756 |
11. Taxation | ||||
Six months ended | Six months ended | Year ended | ||
30 June2017 | 30 June2016 | 31 December 2016 | ||
(unaudited) | (unaudited) | (audited) | ||
The tax charge for the period is as follows: | €'000 | €'000 | €'000 | |
Current tax charge | 11 | 8 | 24 | |
Adjustment in respect of prior year | - | - | (1) | |
Deferred tax charge | 11,822 | 3,261 | 10,890 | |
Current tax charge for the period | 11,833 | 3,269 | 10,913 | |
Capital gains on properties | Interest rate swaps | Total | ||
The movement in respect of deferred taxation is as follows: | €'000(Liability) | €'000Asset | €'000(Net liability) | |
Balance at 1 January 2016 | (10,786) | 296 | (10,490) | |
Movement for the period | (3,714) | 453 | (3,261) | |
Deferred tax at 30 June 2016 | (14,500) | 749 | (13,751) | |
Movement for the period | (7,650) | 21 | (7,629) | |
Deferred tax at 31 December 2016 | (22,150) | 770 | (21,380) | |
Movement for the period | (11,422) | (400) | (11,822) | |
Deferred tax at 30 June 2017 | (33,572) | 370 | (33,202) |
12. Dividends | ||||||
As at | As at | As at | ||||
30 June2017 | 30 June2016 | 31 December 2016 | ||||
(unaudited) | (unaudited) | (audited) | ||||
€'000 | €'000 | €'000 | ||||
Dividends on participating shares proposed for approval (not recognised as a liability at 30 June 2017) | ||||||
Proposed interim dividend for the year ended 31 December 2017 of €2.28c (2.00p) (2016: 1.60p (€1.92c)) per share | 2,108 | 1,771 | - | |||
Proposed final dividend for the year ended 31 December 2016 of €4.30c (3.70p) (2015: €3.90c (2.90p)) per share | - | - | 3,977 | |||
Amounts recognised as distributions to equity holders in the period: | ||||||
Interim dividend for the year ended 31 December 2016 of €1.92c (1.60p) (2015: €1.80c (1.30p)) per share | - | - | 1,634 | |||
Final dividend for the year ended 31 December 2016 of €4.30c (3.70p) (2015: €3.90c (2.90p)) per share | 3,899 | 3,414 | - | |||
13. Investment properties | ||||
€'000 | ||||
Fair Value | ||||
At 1 January 2016 | 283,554 | |||
Capital expenditure | 1,303 | |||
Disposals | (1,855) | |||
Reclassified as investment properties held for sale | (354) | |||
Property additions | 25,183 | |||
Revaluation gain | 21,662 | |||
At 30 June 2016 | 329,493 | |||
Capital expenditure | 2,886 | |||
Disposals | (1,550) | |||
Reclassified as investment properties held for sale | (27,616) | |||
Property additions | 59,052 | |||
Revaluation gain | 33,564 | |||
At 31 December 2016 | 395,829 | |||
Capital expenditure | 2,950 | |||
Reclassified as investment properties - held for sale | (63,674) | |||
Property additions | 31,037 | |||
Revaluation gain | 70,084 | |||
At 30 June 2017 | 436,226 | |||
The property portfolio was valued at 30 June 2017 by the Group's independent valuers, Jones Lang LaSalle GmbH ("JLL"), in accordance with the following described methodology. | ||||
The valuation is performed on a building-by-building basis and the source information on the properties including current rent levels, void rates and non-recoverable costs was provided to JLL by the Property Advisors PMM Partners (UK) Limited. Assumptions with respect to rental growth, adjustments to non-recoverable costs and the future valuation of these are those of JLL. Such estimates are inherently subjective and actual values can only be determined in a sales transaction. | ||||||||||||
Having reviewed the JLL report, the Directors are of the opinion that this represents a fair and reasonable valuation of the properties and have consequently adopted this valuation in the preparation of this financial information. | ||||||||||||
The valuations have been prepared by JLL on a consistent basis at each reporting date and the methodology is consistent and in accordance with IFRS, which requires that the 'highest and best use' value is taken into account where that use is physically possible, legally permissible and financially feasible for the property concerned, and irrespective of the current or intended use.
All Properties are valued as level 3 measurements under the fair value hierarchy (see note 25) as the inputs which have significant effect on the recorded fair value are not observable for the discounted cash flow method. The unrealised fair value gain in respect of investment property is disclosed in the Statement of Comprehensive Income as "Investment property fair value gain". | ||||||||||||
Discounted cash flow method (DCF) | ||||||||||||
Under the DCF method, a property's fair value is estimated using explicit assumptions regarding the benefits and liabilities of ownership over the asset's life including an exit or terminal value. As an accepted method within the income approach to valuation the DCF method involves the projection of a series of cash flows on a real property interest. To this projected cash flow series, an appropriate, market-derived discount rate is applied to establish the present value of the income stream associated with the real property. | ||||||||||||
The duration of the cash flow and the specific timing of inflows and outflows are determined by events such as rent reviews, lease renewal and related lease up periods, re-letting, redevelopment, or refurbishment. The appropriate duration is typically driven by market behaviour that is a characteristic of the class of real property. Periodic cash flow is typically estimated as gross income less vacancy, non-recoverable expenses, collection losses, lease incentives, maintenance cost, agent and commission costs and other operating and management expenses. The series of periodic net operating incomes, along with an estimate of the terminal value anticipated at the end of the projection period, is then discounted. | ||||||||||||
The frequency of inflows and outflows (monthly, quarterly, annually) is contract and market-derived. | ||||||||||||
An appropriate discount rate is then applied to the cash flow. If the frequency of the time points selected for the cash flow is, for example, quarterly, the discount rate must be the effective quarterly rate and not a nominal rate. The DCF method assumes that cash outflows occur in the same period that expenses are recorded. The exit yield is normally separately determined and differs from the discount rate.
The discount rate reflects the opportunity and risk aspects of the market yield demanded by investors, and consist of an interest rate for a risk-free investment, as well as a premium, to account for specific investment risks associated with real estate investments.
The exit yield (capitalisation rate) is used to capitalise the stabilised net operating income at year 10 in to perpetuity, as it is assumed that properties are kept in stock after the detailed 10 year planning period. The exit yield is based on each property's individual discount rate.
| ||||||||||||
Comparable Valuation Method | ||||||||||||
The properties held for sale are also valued with the DCF method, but with a privatisation scenario (sale of all units within a defined period of time) based on comparable sales prices for condominiums. The properties with the sales potential are valued using the same DCF method as with a rental scenario, however, the sales potential is reflected by using lower discount rate. The total of properties under a privatisation scenario will not equal Investment property - held for sale as there are other properties notarised for sale or being marketed for sale.
| ||||||||||||
Notarised disposal price
Where the group has notarised properties for sale, and which have not completed at the reporting date, the properties have been valued at their disposal price. These have also been included for reference in the following table. (Disposal Scenario). | ||||||||||||
The table below sets out the assets valued using the discounted cash flow method (Rental scenario), comparable valuation (Privatisation scenario), and the assets notarised for disposal (Disposal scenario). |
| |||||||||||
As at | As at | As at |
| |||||||||
30 June2017 | 30 June2016 | 31 December 2016 |
| |||||||||
€'000 | €'000 | €'000 |
| |||||||||
Rental Scenario | 448,622 | 325,197 | 388,509 |
| ||||||||
Privatisation Scenario | 25,463 | 4,650 | 35,290 |
| ||||||||
Disposal scenario | 45,645 | - | - |
| ||||||||
Total | 519,730 | 329,847 | 423,799 |
| ||||||||
14. Investment properties - held for sale | ||||
Fair Value | €'000 | |||
At 1 January 2016 | - | |||
Reclassified from investment properties | 354 | |||
At 30 June 2016 | 354 | |||
Reclassified from investment properties | 27,616 | |||
At 1 January 2017 | 27,970 | |||
Disposals | (8,140) | |||
Reclassified from investment properties | 63,674 | |||
At 30 June 2017 | 83,504 | |||
Under IFRS 5, Investment properties are re-classified as current assets, and described as 'held for sale' when at the reporting date, the Group has obtained and implemented all relevant permissions required to sell individual the assets; and efforts are being made to dispose of the assets. The assets held for sale are disclosed in the Segmental Information note 4.
Held for sale includes three different types of property: Properties notarised for sale, properties being privatised under the condominium strategy, and properties which are being marketed for sale but currently have not been notarised.
Investment properties - held for sale are all expected to be sold within 12 months of the reporting date. | ||||
15. Trade and other receivables | ||||
As at | As at | As at | ||
30 June2017 | 30 June2016 | 31 December2016 | ||
(unaudited) | (unaudited) | (audited) | ||
€'000 | €'000 | €'000 | ||
Trade receivables | 1,135 | 995 | 1,344 | |
Less: Impairment provision | (565) | (318) | (383) | |
Net receivables | 570 | 677 | 961 | |
Prepayments and accrued income | 7,203 | 1,051 | 6,050 | |
Investment property disposal proceeds receivable | 3,490 | - | 21 | |
Sundry receivables | 1,630 | 309 | 471 | |
12,893 | 2,037 | 7,503 |
Prepayments and accrued income contains a €5.1 million payment, including acquisition costs, for property Mittelbruchzeile 112; as well as a €0.7 million deposit for the Investix Portfolio. Mittelbruchzeile 112 completed in July 2017, and the Investix portfolio is expected to complete in September 2017.
Investment Property Disposal Proceeds Receivable consists of cash held on the notary account from sales of condominiums in Boxhagener Str. which is expected to be transferred across to the fund in October 2017
16. Loans and receivables | |||||||||
As at | As at | As at | |||||||
30 June2017 | 30 June2016 | 31 December 2016 | |||||||
(unaudited) | (unaudited) | (audited) | |||||||
€'000 | €'000 | €'000 | |||||||
Loans issued - Balance at start of period | 2,253 | 1,338 | 1,382 | ||||||
Loans issued to minority interest - initial recognition | - | - | 806 | ||||||
Accrued interest | 41 | 71 | 65 | ||||||
Loan repayments made in period | (12) | - | - | ||||||
2,282 | 1,409 | 2,253 | |||||||
In 2015 the Group entered into loan agreements with Mike Hilton and Paul Ruddle in connection with the acquisition of Phoenix Spree Property Fund Ltd. & Co KG ('PSPF'). The loans bear interest at 4% per annum, and have a maturity of less than five years.
The group also entered into a loan agreement with the minority interest (Accentro Real Estate KG) in relation to the acquisition of Laxpan Mueller GmbH and Invador Grundbesitz GmbH in 2016. This loan bears interest at 3% per annum. | |||||||||
17. Borrowings |
| ||||||||
As at | As at | As at |
| ||||||
30 June2017 | 30 June2016 | 31 December 2016 |
| ||||||
(unaudited) | (unaudited) | (audited) |
| ||||||
€'000 | €'000 | €'000 |
| ||||||
| |||||||||
Current liabilities |
| ||||||||
Bank loans - Kreissparkasse Boblingen |
| ||||||||
District Savings Bank | 2,793 | - | 2,869 |
| |||||
Bank loans - Sparkasse Langenfeld | - | - | 6,300 |
| |||||
Bank loans - Deutsche Hypothekenbank AG | - | 8,418 | - |
| |||||
2,793 | 8,418 | 9,169 |
| ||||||
Non-current liabilities |
| ||||||||
Bank loans - Deutsche Genossenschafts |
|
| |||||||
-Hypothekenbank AG | 164,023 | 132,275 | 171,418 |
| |||||
Bank loans - HypoVereinsbank | - | - | 5,005 |
| |||||
Bank loans - Berliner Sparkasse | 30,381 | - | - |
| |||||
Bank loans - Kreissparkasse Boblingen |
| ||||||||
District Savings Bank | - | 2,943 | - |
| |||||
194,404 | 135,218 | 176,423 |
| ||||||
| |||||||||
197,197 | 143,636 | 185,592 |
| ||||||
For further information on borrowings, refer to the management report on page 7.
| |||||
18. Trade and other payables |
| ||||
As at | As at | As at |
| ||
30 June2017 | 30 June2016 | 31 December2016 |
| ||
(unaudited) | (unaudited) | (audited) |
| ||
€'000 | €'000 | €'000 |
| ||
Trade payables | 978 | 641 | 791 |
| |
Other payables | 596 | - | - |
| |
Consideration received in advance on sale of Nurnberg Furth Portfolio | 35,170 | - | - |
| |
Other provisions and accrued liabilities | 363 | 294 | 533 |
| |
Tenant deposits | 1 | - | 7 |
| |
VAT | - | - | - |
| |
37,108 | 935 | 1,331 |
| ||
19. Derivative financial instruments | ||||
As at | As at | As at | ||
30 June2017 | 30 June2016 | 31 December 2016 | ||
(unaudited) | (unaudited) | (audited) | ||
€'000 | €'000 | €'000 | ||
Interest rate swaps - carried at fair value through profit or loss | ||||
Balance at start of period | 4,869 | 1,869 | 1,869 | |
Additions on acquisition | - | - | 392 | |
(Gain)/loss in movement in fair value through profit or loss | (2,533) | 2,865 | 2,608 | |
Balance at end of period | 2,336 | 4,734 | 4,869 | |
The notional principal amounts of the outstanding interest rate swap contracts at 30 June 2017 were €182,948,000 (31 December 2016: €175,932,000, 30 June 2016: €133,436,000). At 30 June 2017, the fixed interest rates varied from 0.27% to 1.85% above the main factoring Euribor rate.
Maturity analysis of interest rate swaps
|
|
| As at | As at | As at |
|
|
| 30 June2017 | 30 June2016 | 31 December 2016 |
|
|
|
|
|
|
Less than 1 year | - | - | 392 | ||
Between 1 and 2 years | - | 1,250 | - | ||
Between 2 and 5 years | 1,161 | 3,484 | - | ||
More than 5 years | 1,175 | - | 4,477 | ||
|
|
| 2,336 | 4,734 | 4,869 |
20. Other financial liabilities | ||||
As at | As at | As at | ||
30 June2017 | 30 June2016 | 31 December 2016 | ||
(unaudited) | (unaudited) | (audited) | ||
€'000 | €'000 | €'000 | ||
Balance at start of period | 3,590 | - | - | |
Recognition of redemption liability | - | 2,869 | 2,626 | |
Finance cost on redemption liability | 1,106 | 244 | - | |
Increase in profit attributable to NCI | - | - | 964 | |
Balance at end of period | 4,696 | 3,113 | 3,590 | |
The redemption liability relates to the put option held by the minority shareholders of PSPF for the purchase of the minority interest in PSPF. The option period starts on 6 June 2020. The valuation of the purchase price will be based on the last published financial results as at the date the option is put to the parent. | ||||
The recognition of the redemption liability has been accounted for as a financial obligation to the fund; and any movement in this liability is recognised as a charge to the Condensed Consolidated Statement of Comprehensive Income under net finance charge. Also see the Condensed Consolidated Statement of Changes in Equity for the recognition accounting. | ||||
21. Share based payment reserves | ||
Performance fee | ||
€'000 | ||
Balance at 1 January 2016 | 1,264 | |
Fee accrued for the period | 2,837 | |
Balance at 30 June 2016 (unaudited) | 4,101 | |
Fee accrued for the period | 3,513 | |
Balance at 31 December 2016 (audited) | 7,614 | |
Fee accrued for the period | 10,653 | |
Balance at 30 June 2017 (unaudited) | 18,267 | |
22. Stated capital | ||||
As at | As at | As at | ||
30 June2017 | 30 June2016 | 31 December 2016 | ||
(unaudited) | (unaudited) | (audited) | ||
€'000 | €'000 | €'000 | ||
Issued and fully paid: | ||||
40,522,364 participating shares of no par value, issued at a consideration of GBP1 each | 60,027 | 60,027 | 60,027 | |
5,896,369 participating shares of no par value, issued at a consideration of GBP1.11 each | 7,681 | 7,681 | 7,681 | |
19,237,484 participating shares of no par value, issued at a consideration of GBP1.46 each | 39,052 | 39,052 | 39,052 | |
4,216,080 participating shares of no par value, issued at a consideration of GBP1.44 each | 8,390 | 8,390 | 8,390 | |
22,619,047 participating shares of no par value, issued at a consideration of GBP1.68 each on 4 March 2016 | 47,480 | 49,080 | 47,480 | |
162,630 | 164,230 | 162,630 | ||
During the period ended 30 June 2016, placing costs of €1,592,000 were shown as an exceptional item in the financial statements. The total amount of €1,600,000 was reallocated against equity in the financial statements for the year ended 31 December 2016 in accordance with IAS 32. The total number of shares in issue at 31 December 2016 was 92,491,344.
| ||||
23. Earnings per share | ||||
Six months ended | Six months ended | Year ended | ||
30 June2017 | 30 June2016 | 31 December 2016 | ||
(unaudited) | (unaudited) | (audited) | ||
Earnings for the purposes of basic earnings per share being net profit attributable to owners of the parent (€'000) | 50,998 | 12,144 | 36,998 | |
Weighted average number of ordinary shares for the purposes of basic earnings per share (Number) | 92,491,344 | 84,661,574 | 88,587,235 | |
Effect of dilutive potential ordinary shares (Number) | 5,471,487 | 2,075,930 | 2,829,885 | |
Weighted average number of ordinary shares for the purposes of diluted earnings per share (Number) | 97,962,831 | 86,737,504 | 91,471,120 | |
Earnings per share (€) | 0.55 | 0.14 | 0.42 | |
Diluted earnings per share (€) | 0.52 | 0.14 | 0.40 | |
24. Net asset value per share and EPRA net asset value | ||||||||
30 June2017 | 30 June2016 | 31 December 2016 | ||||||
(unaudited) | (unaudited) | (audited) | ||||||
|
|
| ||||||
Net assets (€'000) | 292,070 | 209,185 | 234,318 | |||||
Number of participating ordinary shares | 92,491,344 | 92,491,344 | 92,491,344 | |||||
Net asset value per share (€) | 3.16 | 2.26 | 2.53 | |||||
EPRA net asset value | 30 June2017 | 30 June2016 | 31 December 2016 | |||||
(unaudited) | (unaudited) | (audited) | ||||||
|
|
| ||||||
Net assets (€'000) | 292,070 | 209,185 | 234,318 | |||||
Add back deferred tax assets and liabilities, derivative financial instruments, goodwill and adjusting for the dilutive effect of shares to be issued in respect of the performance fee | 17,271 | 14,384 | 18,635 | |||||
EPRA net asset value (€'000) | 309,341 | 223,569 | 252,953 | |||||
EPRA net asset value per share (€) | 3.34 | 2.42 | 2.73 | |||||
25. Financial instruments
|
| |||||||
The Group is exposed to the risks that arise from its use of financial instruments. This note describes the objectives, policies and processes of the Group for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout this financial information.
|
| |||||||
Principal financial instruments |
| |||||||
|
| |||||||
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
· Financial assets · Cash and cash equivalents · Trade and other receivables · Trade and other payable · Borrowings · Derivative financial instruments
|
| |||||||
The Group held the following financial assets at each reporting date:
| |||||
|
| 30-Jun-17 | 30-Jun-16 | 31-Dec-16 | |
|
| €'000 | €'000 | €'000 | |
|
|
|
|
| |
Loans and receivables: |
|
|
|
| |
Trade and other receivables: current | 5,690 | 986 | 1,453 | ||
Cash and cash equivalents |
| 32,876 | 42,039 | 18,450 | |
Loans and receivables |
| 2,282 | 1,409 | 2,253 | |
|
| 40,848 | 44,434 | 22,156 | |
|
|
|
|
| |
The Group held the following financial liabilities at each reporting date:
| |||||
|
| 30-Jun-17 | 30-Jun-16 | 31-Dec-16 | |
|
| €'000 | €'000 | €'000 | |
|
|
|
|
| |
Held at amortised cost: |
|
|
|
| |
Borrowings payable: current |
| 2,793 | 8,418 | 9,169 | |
Borrowings payable: non-current |
| 194,404 | 135,218 | 176,423 | |
Other financial liabilities |
| 4,696 | 3,113 | 3,590 | |
Trade and other payables |
| 37,108 | 935 | 1,331 | |
|
| 239,001 | 147,684 | 190,513 | |
|
|
|
|
| |
Fair value through profit or loss: |
|
|
| |||
Derivative financial liability - interest rate swaps | 2,336 | 4,734 | 4,869 | |||
|
| 2,336 | 4,734 | 4,869 | ||
|
| 241,337 | 152,418 | 195,382 | ||
With the exception of the variable rate borrowings, the fair values of the financial assets and liabilities are not materially different to their carrying values due to the short-term nature of the current assets and liabilities or due to the commercial variable rates applied to the long term liabilities. |
Interest rate swaps are initially recognised at fair value at the date of inception and are subsequently remeasured at their fair value at the reporting date. |
The interest rate swaps are expected to mature between November 2017 and February 2027. |
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: |
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities; |
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and |
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. |
During each of the reporting periods, there were no transfers between valuation levels.
Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on the cash flow exposures on the issued variable rate debt held.
Sensitivity analysis has not been performed as all variable rate borrowings have been swapped to fixed interest rates and potential movements on cash at bank balances are immaterial. |
26. Related party transactions | |||||||||
Related party transactions not disclosed elsewhere are as follows: | |||||||||
R Prosser is a director of Estera Fund Administrators (Jersey) Limited which provides administration services to the Company. | |||||||||
A Weaver is a partner of the Jersey law firm, Appleby, which provides legal services to the Company and a member of Appleby group. | |||||||||
During the six month period ended 30 June 2017, an amount of €328,952 (June 2016: €378,664 and December 2016: €657,751) was payable to Estera Fund Administrators (Jersey) Limited for accounting, administration and secretarial services. At June 2017, €182,222 (June 2016: €330,229 and December 2016: €187,515) was outstanding. | |||||||||
During the six month period ended 30 June 2017, an amount of €24,570 (June 2016: €39,523 and December 2016: €60,337) was payable to Appleby, law firm for legal and professional services. At June 2017 €2,568 (June 2016: €30,354 and December 2016: €9,495) was outstanding. | |||||||||
M Northover is a Director of, and shareholder of PMM Partners (UK) Limited, the Company's appointed Property Advisor. During the six month period ended 30 June 2017, an amount of €2,027,000 (June 2016: €1,543,000 and December 2016: €3,387,000) was payable to PMM Partners (UK) Limited. At June 2017 €Nil (June 2016: €Nil and December 2016: €Nil) was outstanding. | |||||||||
The Property Advisor is also entitled to an asset and estate management performance fee. The charge for the period in respect of the performance fee was €10,653,000 (June 2016: €2,837,000 and December 2016 €6,350,000). | |||||||||
The Group entered into unsecured loan agreements with M Hilton and P Ruddle (both Directors of and shareholders in PMM Partners (UK) Limited) in connection with the acquisition of PSPF. The nominal value of the loan was €669,000 at first issue in 2015, and as at the June 2017 €727,900 each was owed to the Group. The loans bear interest of 4% per annum.
The Group exchanged contracts in September 2017 for the acquisition of a portfolio of seven properties in Berlin for consideration of €22.0 million. This transaction is expected to complete in November 2017.
The Group also exchanged contracts in September 2017 for a property in Berlin for consideration of €7.0 million. This portfolio is expected to complete in December 2017.
The Group had exchanged contracts for the acquisition of a portfolio and a single property in Berlin with an aggregate purchase price of €11.6 million prior to the balance sheet date, which had not yet completed at the balance sheet date. The single property with value of €4.5 million completed in Q3 2017, and the Investix Portfolio with a purchase price €7.1 million is expected to complete in September 2017.
The Group has notarised for sale all the properties held by a subsidiary fund, which are located in the Nurnberg and Furth area, for a gross consideration of €35.2 million. The transaction completed in July 2017.
The Group had notarised for sale six properties in non-Berlin regions prior to the balance sheet date for €12.6 million which had yet to complete at the balance sheet date. Of these notarised assets €9.5 million have since completed, leaving €3.1 million remaining to complete.
One of these disposals was the sole property securing against a €2.8 million loan from Kreissparkasse Boblingen District Savings Bank. This loan was subsequently repaid on disposal of the property in August 2017.
The Group had exchanged contracts for the sale of four condominiums in Berlin with an aggregate sales price of €1.2 million prior to the balance sheet date, which as at the 30 June 2017 had not completed. One of these condominium sales has subsequently completed in Q3 2017 at a value of €0.3 million. The remaining three are due to complete in Q3 2017.
In July 2017, the Group refinanced the majority of its existing loans with Deutsche Genossenschafts-Hypothekenbank Aktiengesellschaft with a €98.0 million facility, obtaining an equity release of €14.8 million. The debt was secured against the value of current properties.
The group signed a new loan of €8.7 million secured against new property acquisitions, which is yet to disperse.
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