Sirius Real Estate Regulatory News (SRE)

19 November 2018

Sirius Real Estate Limited

("Sirius Real Estate", "Sirius" or the "Company")

Interim Results for the six months ended 30 September 2018

Sirius Real Estate (LSE: SRE, JSE: SRE), the leading operator of branded business parks providing conventional space and flexible workspace in Germany, announces its interim results for the six months to 30 September 2018.

Highlights

· Strong profit growth and increased dividend

- Profit before tax in the period grew 43.0% y-o-y to €78.2 million (H1 2017: €54.7 million)

- Funds from Operations1 grew by 25.9% to €23.3 million (H1 2017: €18.5 million)

- Interim dividend increased 4.5%2 to 1.63c per share (H1 2017: 1.56c)

· Significant valuation growth

- €56.2 million valuation gain in the period net of capex invested and adjustments for lease incentives.

- Total valuation increase of €69.3 million

- Total portfolio book value of €1,048.8 million (31 March 2018: €931.2 million)

- Increase in NAV per share of 6.7% to 67.29c (31 March 2018: 63.09c) with adjusted NAV3 per share increasing by 7.3% to 70.52c (31 March 2018: 65.71c)

· Continuing to deliver good rental growth

- Increase in rental and other income from investment properties of 16.6% to €40.8 million (H1 2017: €35.0 million) in the period despite the impact of three large expected move outs

- Increase in like for like annualised rent roll4 of 2.6% in the period despite the impact of three large expected move outs

- Original and new acquisition capex investment programmes making a strong contribution to results

- Total annualised rent roll5 increased 17.6% to €82.0 million (30 September 2017: €69.7 million)

· Acquisitions and asset recycling progressing well

- Good progress on investing funds from March 18 equity raise with two assets acquired in the period for a total of €29.8 million5, followed shortly after the period end by the acquisition of an asset for €9.6 million and notarisation of an asset for €25.7 million

- Completed the disposal of all non-core assets for total proceeds of €19.3 million in or just after the period end freeing up further capital to be recycled

- Significant resources to acquire further assets in the second half of the financial year to drive shareholder value

1See note 22 of the Interim Report

2Interim dividend representing 70% of FFO (30 September 2017: 75% of FFO)

3See note 11 of the Interim Report

4See glossary section of the Interim Report.

5Excludes the completion of the Saarbrucken and Dusseldorf assets totalling €36.1 million that completed on 1 April 2018

Andrew Coombs, Chief Executive Officer of Sirius Real Estate, said: "In the first half, we achieved a significant milestone, exceeding the €1 billion mark for assets owned. We saw a 43% year-on-year increase in profit before tax underpinned by a €69.3 million valuation uplift, new lettings of more than 83,000 sqm and €6.6 million of annualised rent roll signed in the period and are able to report a 2.6% like-for-like rental growth despite the impact from three expected large move-outs. This performance reflects the success of our asset management strategy alongside the currently strong German market.

"Our business model and the diverse nature of the Sirius portfolio has always been a key strength. Occupier demand for industrial assets and secondary offices in Germany has never been greater.

"We believe this market will continue for some time and Sirius is very well positioned to take advantage of it. With the portfolio being valued at a defensive 7.8% gross yield and having significant amounts of value-add opportunity within the 19% vacancy, we can see considerable upside to come from income and capital growth over the next few years."

For further information:

Sirius Real Estate

Andrew Coombs, CEO

Alistair Marks, CFO

+49 (0)30 285010110

Tavistock (financial PR)

Jeremy Carey

James Verstringhe

Kirsty Allan

+44 (0)20 7920 3150

siriusrealestate@tavistock.co.uk

NOTES TO EDITORS

About Sirius Real Estate Limited

Sirius Real Estate is a property company listed on the main market and premium segment of the London Stock Exchange and the main board of the JSE Limited. It is a leading operator of branded business parks providing conventional space and flexible workspace in Germany. The Company's core strategy is the acquisition of business parks at attractive yields, the integration of these business parks into its network of sites under the Company's own name as well as offering a range of branded products within those sites, and the reconfiguration and upgrade of existing and vacant space to appeal to the local market, through intensive asset management and investment. The Company's strategy aims to deliver attractive returns for shareholders by increasing rental income and improving cost recoveries and capital values, as well as by enhancing those returns through financing its assets on favourable terms. Once sites are mature and net income and values have been optimised, the Company may take the opportunity to refinance the sites to release capital for investment in new sites or consider the disposal of sites in order to recycle equity into assets which present greater opportunity for the asset management skills of the Company's team.

For more information, please visit: www.sirius-real-estate.com

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Sirius Real Estate Limited

Interim Report 2018 

Business update

Overview

Another strong trading performance in the six month period to 30 September 2018 has both underlined Sirius' position as a leading operator of branded business parks in Germany and demonstrated the key differentiators of our business model in a competitive market. We have continued to buy at attractive valuations, have recycled our capital out of non-core assets and importantly have continued to demonstrate our very strong focus on internal active asset management to drive increased rental growth and returns to shareholders. This leaves the business well positioned to continue growing both organically and through acquisitions over the coming years.

Performance in the period has been underpinned by further organic rental growth, significant valuation increases, the disposal of all non-core assets and good progress on investing the funds from the equity raise that we completed in March 2018. As a result, the Company has increased its rental and other income from investment properties to €40.8 million and annualised rent roll* to more than €82.0 million, grown its investment portfolio to over €1.0 billion and has progressed discussions regarding a further bank facility such that it should have the resources to acquire another €70.0 million of assets in the second half of the financial year, €35.3 million of which was either completed or notarised shortly after the period end.

The Company was able to achieve strong organic rental growth during the period, with an increase in rental and other income from investment properties to €40.8 million and like-for-like annualised rent roll* growth of 2.6% to €79.7 million from €77.7 million in the six month period. This was an excellent result which was achieved despite three large expected move-outs on sites that were recently acquired which drove the loss of €1.2 million of annualised rent roll*. Importantly this highlights the capability and benefits of the Company's internal operating platform and capex investment programmes, and the Company is well positioned for further growth in the second half. The strong organic rental growth was a key contributor to the total portfolio book valuation increase of €69.3 million seen in the period. However, there was also approximately 37 bps of gross yield compression incorporated which meant that around 35% of the increase came from income growth and 65% from yield movement. Including the acquisitions and disposals, the book value of the total portfolio increased by €117.6 million to €1,048.8 million as at 30 September 2018 (31 March 2018: €931.2 million). This is the first time we have seen market movement drive values higher to a greater extent than income growth but the Company remains confident that there is significant scope in income growth going forward, particularly in relation to the recently acquired assets that contain significant vacancy.

Acquisitions and asset recycling continue to be accretive in all aspects and it was very pleasing to sell two non-core assets in Bremen, with Bremen Hag completing after period end, as well as notarising for sale the third and last remaining asset in Bremen, Bremen Dötlinger. Alongside this, the disposal of a piece of non-income producing land in Rostock and a residential block in Markgröningen completed in the period. Combining the proceeds of these disposals with the equity raised in March 2018 and a bank facility which is currently being negotiated, the Company was in a position to deploy nearly €120.0 million in assets as well continue our capex investment programmes. Progress on acquisitions has been good with €29.8 million of acquisitions completing in the period, €9.6 million completing on 1 October 2018 and €25.7 million notarised shortly after the period end.

* See glossary section of the Interim Report.

Financial performance

The results for the six month period to 30 September 2018 were positive despite rental and other income being impacted in the first two months of the period due to three large expected move-outs in respect of some recently acquired assets. The contribution from acquisitions in the period was slightly less than anticipated due to the Company continuing to apply rigorous acquisition criteria to ensure the right assets are bought. Rent and other income from investment properties was €40.8 million (2017: €35.0 million) with profit before tax increasing to €78.2 million (2017: €54.7 million), including €56.2 million (2017: €41.6 million) of gains from property revaluations net of capex invested and lease incentive adjustments. Funds from Operations* ("FFO") for the six months of €23.3 million (2.33c per share) compared to €18.5 million (2.07c per share) for the same period in the prior year representing an increase of 12.6% on a per share basis. Basic earnings per share of €70.4 million (7.04c per share) compared to €50.9 million (5.69c per share) whilst basic EPRA earnings** of €21.5 million (2.15c per share) compared to €14.1 million (1.57c per share) for the six months to 30 September 2017.

Table 1: Earnings per share

* See note 22 of the Interim Report.

** See note 10 of the Interim Report.

The valuation uplift seen this period has been the main contributor towards an increase of 6.7% in net asset value per share ("NAV") to 67.29c from 63.09c at 31 March 2018. EPRA net asset value ("EPRA NAV") per share increased by 9.3% to 70.16c from 64.18c whilst adjusted net asset value ("Adjusted NAV") per share increased by 7.3% to 70.52c from 65.71c. The movement in net asset value in the period can be seen below:

Table 2: Net assets per share 

*See note 11 of the Interim Report.

Total shareholder accounting return ("TSR") based on the movement in adjusted NAV plus the 1.60c per share final dividend paid in August 2018 was 9.8% for the six month period (30 September 2017: 10.4%). The Company is well on track to exceed the 15% TSR level for the full year for the fourth year in a row.

Lettings and rental growth

As mentioned above, the Company has achieved an increase in rental and other income from investment properties of 16.6% to €40.8 million from €35.0 million and a like for like annualised rent roll* increase of 2.6% to €79.7 million from €77.7 million in the period despite the impact of three large expected move outs. Incorporating acquisitions and disposals, total annualised rent roll* reached €82.0 million and positions the Company well for the second half of the financial year with more acquisitions and further organic rental growth expected.

The three expected large move-outs on recently acquired sites totalling 12,633 sqm resulted in a decrease in annualised rent roll* of €1.2 million. These were part of the total 82,631 sqm and €5.8 million of annualised rent roll* lost from move-outs in the first half of this financial year. This loss of income was offset by new lettings of 83,888 sqm with annualised rent roll* of €6.6 million. This reflects an average rental rate of €6.58 per sqm on entering tenants compared to the €5.89 per sqm that exiting tenants were paying. Contracted rental increases and uplifts on renewals added €1.2 million to the annualised rent roll* and along with the €2.4 million that came from acquisitions and €1.8 million lost through disposals, altogether the total annualised rent roll* increased from €79.5 million to €82.0 million.

The like for like annualised rent roll* increase has, accordingly, come from average rental rates increasing by 2.5% to €5.76 from €5.62 whilst occupancy has remained relatively flat at approximately 81.0%. When factoring in acquisitions and disposals, the average rental rate for the total portfolio increased by 5.1% to €5.74 from €5.46 and occupancy from 79.2% to 81.2%.

The high number of new lettings achieved by the Company in the period yet again reflects strong occupier demand from our core German SME customers but also the strong capabilities of our operating platform which, during the period, delivered a Company record new lettings conversion rate of 15% of all enquiries received. Considering the total enquiries received for the six months was 6,800, this was an impressive performance from the marketing and lettings teams. One of the pleasing aspects of the lettings performance was the number of large long-term leases secured in the period. Amongst these were long-term deals with a leading German sports car manufacturer based in Stuttgart for 6,766 sqm, with Landeshauptstadt München in Munich for 4,766 sqm and CARE Deutschland-Luxembourg, a government agency, for 1,947 sqm in Bonn. The Company also agreed a five year extension with Daimler-AG, an existing anchor tenant in the Kirchheim site occupying 39,844 sqm during the period.

The mixture of large long-term and small flexible lettings illustrates the diversity of Sirius' sales and marketing platform and is what provides the business with a high degree of optionality in how space can be configured for the benefit of tenants, and therefore the business. With occupancy for the total portfolio remaining relatively low at 81.2% there remains substantial potential for further rental growth through developing and letting the vacancy. Of the 276,091 sqm of vacant space, 47,683 sqm relates to the Bremen Hag site which was sold in November 2018 and 102,996 sqm is being developed from sub-optimal space into high-quality space through the capex investment programmes. Of the remaining 125,412 sqm of vacancy only 27,154 sqm (2% of the total lettable space) is considered by the management team as structural vacancy, which is indicative of how the Company believes it can extract value and income from much more of the space on its industrial business parks than its competitors. The Smartspace range of products is one of the elements that allows Sirius to generate value and rental income from space that many would leave as structural vacancy.

* See glossary section of the Interim Report.

Portfolio valuation

Strong demand for real estate assets in Germany continues to drive yields lower with the industrial sector experiencing some of the largest yield compression out of all the real estate asset classes. Domestic and foreign investors continue to seek to build up portfolios in Germany, as evidenced by a number of large transactions being reported in 2018. The increasing desire for investors to gain exposure to a high yielding asset class with growth potential has fuelled the positive movements seen in the industrial sector and some of this has been reflected in the Group's portfolio value at the period end. In addition to this, the strong organic rental growth mentioned above in the trading section continues to play a major role in Sirius' valuation increases.

The portfolio, including assets held for sale, was independently valued at €1,052.5 million by Cushman & Wakefield LLP (31 March 2018: €933.7 million), which converts to a book value of €1,048.8 million after allowing for the provision for lease incentives. The uplift for the period was €69.3 million, which after deducting capex investment of €13.0 million resulted in a net valuation gain of €56.3 million. Following adjustments for lease incentives this resulted in a credit of €56.2 million to the statement of comprehensive income.

Table 3: Reconciliation of market value to book value

The portfolio comprised 55 assets as at 30 September 2018 and the movement in book value for the period can be reconciled as follows:

Table 4: Movement in book value in the period

*Including assets held for sale.

The valuation increases in the period were derived around 65% from yield compression of 37 bps and 35% from organic rental growth. The total portfolio book value increase of €69.3 million resulted from a like for like portfolio book value increase of €69.8 million or 7.6% in the period whilst the assets acquired in the period had a book value of €65.1 million compared to the €65.6 million total acquisition costs. Notwithstanding the fact that the portfolio yields have compressed by 37 bps in the September 2018 valuation, the gross yield of the entire portfolio is still 7.8%, which appears high compared to the transactional evidence in the market. Additionally, with so much sub-optimal space and vacancy still to develop and let there remains excellent potential for values and rental levels to continue to grow over the next few years. In order to analyse this potential better, the table below splits the portfolio into the assets that still have value-add potential and the mature assets which have realised most of the value-add potential. Additionally the sold non-core asset in Bremen Hag has been separated and classified as non-core:

Table 5: Book value valuation metrics

In addition to the potential that gross yields could come in further from the 7.8% level that rental income is currently capitalised at, there remains strong potential for the capex investment programmes which are targeting 102,996 sqm of sub-optimal and vacant space within the value-add assets, to drive further value. The space has very little value in the books so its transformation is expected to have a significant impact on both values and rental income.

* See glossary section of the Interim Report.

Asset recycling, acquisitions and disposals 

The Company has made significant progress in deploying the proceeds of the €40.0 million equity raise that completed in March 2018 and the €21.1 million of proceeds from disposal activity including the sale of the two non-core Bremen sites, one of which completed shortly after the period end. Together with a new financing deal which is in advanced discussions, it created the resources to acquire around €120.0 million of new assets. Three acquisitions totalling €39.4 million completed in the period or shortly after the period end. In addition, one asset totalling €25.7 million was notarised post period end. It is expected that the acquisition activity outlined above will complete in the second half of the financial year.

The €39.4 million of assets acquired provide an attractive mix of stable income as well as opportunity and together produce an attractive day-one net initial yield. The assets are located in attractive markets, in most of which the Company has extensive presence already and one is located in a renowned industrial area the Company has been seeking to enter. This new portfolio thereby provides the opportunity for operational synergies as well as strategically broadening the presence of Sirius into core industrial locations. Whilst competition for assets in the market continues to increase, the four assets acquired or in exclusivity will contribute an EPRA net initial yield of 7.7% as well as vacancy of 12%, demonstrating the ability of the Company's operating platform to continue sourcing assets that meet the Company's investment strategy and returns profile. Rental and other income from investment properties from the acquisitions that completed prior to 30 September 2018 was €0.4 million. The key details of these acquisitions can be seen within the table below:

Table 6: Acquisitions 

As communicated at the year end our acquisition focus is now more on our forecast IRRs over a three to five year period rather than net initial yields and whilst the net initial yields are still at reasonable levels compared to others we are seeing in the market, the most important factor in our decision to acquire these new assets has been a combination of under-rents and 14,119 sqm of vacant space which we believe will generate excellent IRRs whatever happens in the market. In line with its strategy to recycle equity out of non-core locations and assets with minimal remaining value-add potential, the Company completed the sale of the non-core Bremen Brinkman asset at book value in the period and the non-core Bremen Hag asset in November 2018 with combined proceeds amounting to €19.3 million. The disposal of these non-core assets is significant as the two assets had in total approximately 96,000 sqm of vacant space which was not economical or desirable for the Company to develop. Reinvesting the equity from these two assets into assets in Sirius' core locations will be a significantly accretive step for the Group. Additionally, after the period end in October 2018, the Company notarised for sale its final remaining asset in Bremen, the Dötlinger site, which, when completed in March 2019, will represent the exit of a market the Company considers unsuitable for its investment strategy and the final non-core asset having been sold.

The Company's strategy is to also dispose of non-income producing land and buildings and in the period one land plot and a residential building were sold generating proceeds of €1.8 million. For further details on disposal activity please see the business analysis section of this report.

* See glossary section of the Interim Report.

Capex investment programmes

The Group's capex investment programmes continue to be a key driver of rental income and valuation growth. The original capex investment programme is substantially complete with an additional 4,543 sqm of space completed in the period resulting in total completed space of 191,164 sqm which, with a total investment of €20.9 million, has generated €11.6 million of annualised rent roll* representing a return on investment of 55.5%. In addition to the high rental income return, this investment has also created significant improvements to service charge cost recovery as well as large valuation increases over the last few years and it is pleasing to report that the cost of the investment programme is expected to complete well within budget. With occupancy of 81% there remains further additional income growth potential to come from the space already completed as well as 13,553 sqm of space that is not yet completed but is either in progress or awaiting permissions for conversion. Further information on the original capex investment programme is set out in the table below:

Table 7: Original capex investment programme

The original capex investment programme focused on all assets acquired prior to April 2016 and a new capex investment programme has commenced on all assets acquired since then. The new capex investment programme includes 21 sites and a total of 119,026 sqm of sub-optimal or vacant space. The budgeted investment on this space of €30.8 million is expected to generate annualised rent roll* of €8.6 million and, in line with the original programme, will have a positive impact on service charge cost recovery and valuations. As at 30 September 2018 a total of 34,698 sqm of space had been fully converted with an investment of €5.7 million generating annualised rent roll* of €2.3 million on occupancy of 62%. Whilst the investment into the space contained within the new capex investment programme is higher than that in the original programme, the rental rates at which the space is expected to be let and the significant expected valuation uplift impact provide an attractive investment return. Of the space completed so far the average rate achieved of €9.07 per sqm is well in excess of the budgeted rate of €7.41 per sqm and indicative of not only the quality and attractiveness of the space being created but the ability of our internalised operating platform to crystallise returns. Further details on the new capex investment programme are set out in the table below:

Table 8: New capex investment programme

* See glossary section of the Interim Report.

** €1.0 million of annualised rent roll* achieved to September 2018 relates to a short-term lease which ends in October 2018.

Smartspace

The Smartspace range of products continues to provide Sirius with an excellent platform to create income and significant value from the difficult space within the portfolio. It also provides tenants with flexible and fixed cost workspaces which has proven to be very desirable when the market is strong as well as during the tougher times. Since the Smartspace areas are usually created through the transformation of sub-optimal space and space that would otherwise remain as structural vacancy, it is substantially value accretive as well.

The total amount of space that has been converted to Smartspace now stands at 77,920 sqm, which is around 5.3% of the total lettable space. The annualised rent roll* that is generated by Smartspace remained flat at around €5.3 million in the period which is reflective of newly created Smartspace product being offset by space lost through the disposal activity. It was pleasing to note that the average rental rate per sqm (excluding service charge cost contributions) increased by 6.7% from €7.19 to €7.67 and occupancy increased from 70% to 74% in the period and with increases recorded across all categories Smartspace is proving to be very popular with tenants. As we communicated at the year end, our second First Choice Business Centre was created on the ground floor of an office building in Wiesbaden providing a mix of office and co-working space. We are delighted to report that, after only eleven months since opening, as at 30 September 2018 occupancy of this space was 82% with an average rental rate excluding service charge of €19.61. This demonstrates the benefits of providing both a five star premium offering as well as the three star Smartspace products, and we intend to introduce further First Choice Business Centres in buildings where we feel the market lends itself to this offering. For further information on our Smartspace products and how they contribute to the portfolio as a whole please see the table below:

Table 9: Smartspace

* See glossary section of the Interim Report.

Loan to value

The Company continues to be committed to maintaining a gross loan-to-value ratio ("LTV") of 40% or below. Total debt at 30 September 2018, before outstanding loan issue costs, was €368.1 million (31 March 2018: €373.1 million), resulting in a Group gross LTV of 35.1% (31 March 2018: 40.8%) whilst net LTV* reduced to 32.7% (31 March 2018: 33.8%). As assets that have been recently acquired on an ungeared basis are expected to be subject to financing in the second half, so the Group's LTV is expected to increase; however, we remain committed to a policy of maintaining gross LTV below 40%.

* Net LTV is the ratio of principal value of gross debt less cash, excluding that which is restricted, to the aggregate value of investment property.

Dividend

The Board increased the dividend payout ratio in the year ended 31 March 2018 to 75% of FFO in order to maintain positive dividend growth whilst the proceeds from disposals of mature assets were reinvested, and the Company expects gradually to revert to its stated policy of a 65% payout ratio. The Board has again considered the payout ratio for the financial year ending 31 March 2019 in light of the time it will take to invest the proceeds from the March 2018 equity raise as well as the proceeds from the disposal of non-core assets that we have discussed earlier in this report.

In accordance with this the Board has declared an interim dividend of 1.63c per share for the six month period ended 30 September 2018, representing a payout ratio of 70% of FFO, and an increase of 4.5% on the 1.56c dividend that represented 75% of FFO relating to the same period last year.

The ex-dividend date will be 12 December 2018 for shareholders on the South African register and 13 December 2018 for shareholders on the UK register. The record date will be 14 December 2018 for shareholders on the South African and UK registers and the dividend will be paid on 18 January 2019 for shareholders on both registers. A detailed dividend announcement will be made in due course, including details of a scrip dividend alternative.

Principle risks and uncertainties

The key risks that affect the Group's medium-term performance and the factors that mitigate these risks have not materially changed from those set out in the Group's Annual Report and Accounts 2018. For further information on principal risks and uncertainties please see Note 2 of the Interim Report.  

Board

During the period the Company welcomed Danny Kitchen to the Board as Non-executive Chairman. Danny has more than 25 years of property and finance experience in both public and private markets and we look forward to working with him as we continue to deliver our future growth ambitions. We thank James Peggie for his strong leadership in his time as Acting Chairman and look forward to continuing working with him in his capacity as Senior Independent Director.

Sadly we will be saying farewell to Wessel Hamman at the end of the year (31 December 2018). For some time Wessel has been keen to leave the Board as he has significant other business commitments, and with the appointment of Danny Kitchen in September, he is now able to leave with the Board in good shape and appropriately constituted. The Board wish to extend their appreciation to Wessel for the exceptional role he has played in helping to guide and support the company since his appointment in 2011.

On 2 November 2018 the Board reorganised its Board Committees, with Wessel Hamman, who is not deemed to be an independent Non-executive Director, stepping off the Nomination, Remuneration and Audit Committees and Danny Kitchen joining the Nomination (as Chairman) and Remuneration Committees. This makes the composition of all the Committees in line with best practice and the corporate governance codes relevant to the Company, and they will remain so once Wessel leaves the Board.

Outlook

As can be seen from the activity in the period, Sirius continues to be focused on both organic growth from existing assets as well as acquisitive growth funded by equity placements and new banking facilities. The Company is also continuing to add to the organic growth opportunity with selective recycling of assets focusing on the disposal of non-core and mature assets and replacing these with assets with considerably more growth potential. The recycling will, over time, prove to be more accretive but the benefits from growing the portfolio through new equity are not being ignored.

In the first half of the current financial year Sirius has achieved some significant milestones including exceeding the €1 billion mark for assets owned, achieving a €69.3 million valuation uplift in a six month reporting period, new lettings of 83,888 sqm, a 43% year on year increase in profit before tax and €6.6 million of annualised rent roll* signed in the period. In addition a 2.6% like-for-like rental growth increase was achieved despite the impact from three expected large move-outs referred to earlier in this report. We believe this performance is reflective of the Company's asset management strategy alongside the currently strong German market.

There remains much political uncertainty in Europe including the ongoing Brexit process, Italian debt issues as well as political change coming in Germany. However the Sirius business model and diverse nature of its portfolio has always been a key strength of the Company. The occupier demand within the market for the asset types that Sirius own remains strong and on the transaction side, the demand for industrial assets and secondary offices has never been greater. 

The outlook seems to be for this to continue for some time and Sirius is very well positioned to take advantage of this if it continues, or create new opportunities if it does not. With the portfolio being valued at a defensive 7.8% gross yield, as well as still having significant amounts of value-add opportunity within the 19% vacancy in the portfolio, approximately half of which is going through the Company's capex investment programmes, we can see considerable upside to come from income and capital growth over the next few years. We will continue refuelling this opportunity with further asset recycling and acquisitions.

* See glossary section of the Interim Report.

Statement of Directors' responsibilities

Each of the Directors, whose names and functions appear below, confirm to the best of their knowledge that the condensed consolidated interim financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting', as issued by the IASB, and the interim management report herein includes a fair review of the information required by the Disclosure and Transparency Rules ("DTR"), namely:

• DTR 4.2.7 (R): an indication of important events that have occurred during the first six months of the financial year, and their impact on the condensed set of consolidated interim financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

• DTR 4.2.8 (R): any related party transactions that have taken place in the six month period ended 30 September 2018 that have materially affected, and any changes in the related party transactions described in the 2018 Annual Report that could materially affect, the financial position or performance of the enterprise during the period.

The Directors of Sirius Real Estate Limited as at the date of this announcement are set out below:

• Danny Kitchen, Chairman*

• James Peggie, Senior Independent Director*

• Andrew Coombs, Chief Executive Officer

• Alistair Marks, Chief Financial Officer

• Wessel Hamman*

• Justin Atkinson*

• Jill May*

*Non-executive Directors.

A list of the current Directors is maintained on the Sirius Real Estate Limited website: www.sirius-real-estate.com.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial information differs from legislation in other jurisdictions.

By order of the Board

Danny Kitchen

Chairman

Independent review report to Sirius Real Estate Limited

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the interim financial report for the six months ended 30 September 2018 which comprises the unaudited consolidated statement of comprehensive income, the unaudited consolidated statement of financial position, the unaudited consolidated statement of changes in equity, the unaudited consolidated statement of cash flow and the related notes 1 to 24. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority, the SAICA Financial Reporting Guides, as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council.

As disclosed in note 2, the annual financial statements are prepared in accordance with IFRS. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting".

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the six months ended 30 September 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34, the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority, the SAICA Financial Reporting Guides, as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council.

Ernst & Young LLP

London

16 November 2018

Consolidated statement of comprehensive income

for the six months ended 30 September 2018

* See note 2(b)

All operations of the Group have been classified as continuing.

Consolidated statement of financial position

as at 30 September 2018

* See note 2(b).

The financial statements on pages 12 to 31 were approved by the Board of Directors on 16 November 2018 and were signed on its behalf by:

Danny Kitchen

Chairman

Consolidated statement of changes in equity

for the six months ended 30 September 2018

Consolidated statement of cash flow

for the six months ended 30 September 2018

Notes forming part of the financial statements

for the six months ended 30 September 2018

1. General information

Sirius Real Estate Limited (the "Company") is a company incorporated in Guernsey and resident in the United Kingdom, whose shares are publicly traded on the Main Markets of the London Stock Exchange ("LSE") (primary listing) and the Johannesburg Stock Exchange ("JSE") (primary listing).

The consolidated financial information of the Company comprises that of the Company and its subsidiaries (together referred to as the "Group") for the six month period to 30 September 2018.

The principal activity of the Group is the investment in, and development of, commercial property to provide conventional and flexible workspace in Germany.

2. Significant accounting policies

(a) Basis of preparation

The unaudited interim condensed set of consolidated financial statements has been prepared on a historical cost basis, except for investment properties, investment properties held for sale and derivative financial instruments, which have been measured at fair value. The unaudited interim condensed set of consolidated financial statements is presented in euros and all values are rounded to the nearest thousand (€000), except where otherwise indicated.

The financial information in these condensed consolidated half year financial statements do not comprise statutory accounts. These condensed consolidated half year financial statements have been reviewed, not audited, by the Group's auditor, Ernst & Young LLP, which issued an unmodified review opinion on the condensed consolidated half year financial statements, which are available for inspection at the Company's offices. The financial information presented for the year ended 31 March 2018 is derived from the statutory accounts for that year. Statutory accounts for the year ended 31 March 2018 were approved by the Board on 1 June 2018 and delivered to the Registrar of Companies. The report of the auditors on those accounts was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under Sections 263 (2) or (3) of the Companies (Guernsey) Law, 2008.

The company has chosen to prepare its next annual consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) as issued by the IASB as a result of primary listing on the JSE. The company previously prepared consolidated financial information in accordance with IFRS as adopted by the EU. Accordingly, the condensed consolidated interim financial information as at 30 September 2018 and the comparative periods have been prepared in accordance with IFRS as issued by the IASB, specifically IAS 34 'Interim Financial Reporting'. There were no noted differences between IFRS as issued by IASB and IFRS as adopted by the EU that are relevant to the company, including between IAS 34 as issued by IASB and IAS 34 as adopted by the EU. Therefore, no changes to previously reported financial information were made as a result of this change in the basis of preparation of financial statements.

As at 30 September 2018 the Group's consolidated interim financial statements reflect changes in the application of accounting policies as described in note 2(b).

(b) Changes in accounting policies and other re-presentations

For the period beginning on 1 April 2018 the Group had to adopt IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers for the first time. The adoption of these new standards and other amendments to existing standards and interpretations effective from 1 January 2018, did not materially impact the condensed set of interim financial statements for the six months ended 30 September 2018 and no retrospective adjustments were made.

IFRS 15 "Revenue from Contracts with Customers"

IFRS 15 replaced the existing regulations for the recognition of revenue in accordance with IAS 18 "Revenue" and IAS 11 "Construction Contracts". Consequently, revenues are recognised, when the customer obtains control over the agreed goods and services and can derive benefits from these. IFRS 15 does not apply to rental income which make up approximately 60% of total revenue of the Group, but does apply to other revenue streams, namely service charge income and also proceeds on disposal of investment property. The first-time application of the standard has not had a material impact on the Condensed Consolidated Statement of Comprehensive Income resulted or required disclosures.

IFRS 9 "Financial Instruments"

IFRS 9 provides a standardised approach for classification, measurement and derecognition of financial assets and liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets. There were no material changes identified from adoption of the standard.

As part of the Group's review of the impact of adopting the amendments to IFRS the Group has taken the opportunity to revisit its accounting policies. As a result the following adjustments were recorded to represent the financial statements:

Revenue and direct costs

The Group had previously a) incorrectly netted service charge income received from tenants against the direct costs to which the income relates and b) incorrectly netted rental and other income from managed properties against costs relating to managed properties. The Group has reassessed these treatments and concluded that it operates as a principal in both cases and that the amounts should be recognised gross. The impact of this re-presentation is to increase revenue and direct costs by €24,840,000 at 30 September 2017 and by €51,511,000 at 31 March 2018.

There is no impact on basic, diluted, headline or adjusted earnings per share.

Investment properties held for sale

The Group had previously presented investment properties held for sale within current assets. In accordance with IFRS 5 and industry practice, this has been represented separately from other assets in the statement of financial position. The impact of this re-presentation is to decrease current assets by €950,000 at 30 September 2017 and by €17,325,000 at 31 March 2018.

There is no impact on basic, diluted, headline or adjusted earnings per share.

Other non-current assets

The Group has reallocated non-current guarantees amounting to €1,750,000 (30 September 2017: €1,750,000, 31 March 2018: €1,750,000) from other receivables to other non-current assets which were previously incorrectly accounted for within current assets.

There is no impact on basic, diluted, headline or adjusted earnings per share.

(c) Standards and interpretations in issue and not yet effective

IFRS 16 "Leases"

IFRS 16 replaces existing leases guidance, including IAS 17 'Leases', IFRIC 4 'Determining Whether an Arrangement Contains a Lease', SIC-15 'Operating Leases - Incentives' and SIC-27 'Evaluating the Substance of Transactions Involving the Legal Form of a Lease'.

The standard is effective for annual periods beginning on or after 1 January 2019. Early adoption is permitted for entities that apply IFRS 15 at or before the date of initial application of IFRS 16.

IFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are recognition exemptions for short-term leases and leases of low-value items. Lessor accounting remains similar to the current standard - i.e. lessors continue to classify leases as finance or operating leases.

The Group has completed an initial assessment of the potential impact on its consolidated financial statements but has not yet completed its detailed assessment. The actual impact of applying IFRS 16 on the financial statements in the period of initial application will depend on future economic conditions, including the Group's borrowing rate at 1 April 2019, the composition of the Group's lease portfolio at that date, the Group's latest assessment of whether it will exercise any lease renewal options and the extent to which the Group chooses to use practical expedients and recognition exemptions.

So far, the most significant impact identified is that the Group will recognise new assets and liabilities for its operating leases of office buildings and leases for space relating to operating management contracts. As at 30 September 2018, the Group's future minimum lease payments under non-cancellable operating leases are disclosed under note 23.

In addition, the nature of expenses related to those leases will now change as IFRS 16 replaces the straight-line operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities.

As a lessee, the Group can either apply the standard using a:

• retrospective approach; or

• modified retrospective approach with optional practical expedients.

The Group plans to apply IFRS 16 initially on 1 April 2019 using the modified retrospective approach and will apply the election consistently to all of its leases.

Therefore, the cumulative effect of adopting IFRS 16 will be recognised as an adjustment to the opening balance of retained earnings at 1 April 2019, with no restatement of comparative information.

When applying the modified retrospective approach to leases previously classified as operating leases under IAS 17, the lessee can elect, on a lease-by-lease basis, whether to apply a number of practical expedients on transition. The Group is assessing the potential impact of using these practical expedients.

(d) Non-IFRS measures

The Directors have chosen to disclose EPRA earnings, which are widely used alternative metrics to their IFRS equivalents (further details on EPRA best practice recommendations can be found at www.epra.com). Note 10 to the interim financial statements includes a reconciliation of basic and diluted earnings to EPRA earnings.

The Directors are required, as part of the JSE Listing Requirements, to disclose headline earnings; accordingly, headline earnings are calculated using basic earnings adjusted for revaluation surplus net of related tax and gain/loss on sale of properties net of related tax. Note 10 to the interim financial statements includes a reconciliation between IFRS and headline earnings.

The Directors have chosen to disclose adjusted earnings in order to provide an alternative indication of the Group's underlying business performance; accordingly, it excludes the effect of adjusting items net of related tax. Note 10 to the interim financial statements includes a reconciliation of adjusting items included within adjusted earnings, with those adjusting items stated within administrative expenses in note 5.

The Directors have chosen to disclose adjusted profit before tax and Funds from Operations in order to provide an alternative indication of the Group's underlying business performance and to facilitate the calculation of its dividend pool; a reconciliation between profit before tax and Funds from Operations is included within note 22 to the interim financial statements. Within adjusted profit before tax are adjusting items as described above gross of related tax.

Further details on non-IFRS measures can be found in the business analysis section of this document.

(e) Statement of compliance

The condensed interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom Financial Conduct Authority, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the listing requirements of the Johannesburg Stock Exchange, JSE Limited, and IAS 34 'Interim Financial Reporting'. They do not include all of the information required for the full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 March 2018. The condensed interim financial statements have been prepared on the basis of the accounting policies set out in the Group's annual financial statements for the year ended 31 March 2018 except for the changes in accounting policies as shown in note 2(b). The financial statements for the year ended 31 March 2018 have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted for use in the EU. The Group's annual financial statements refer to new standards and interpretations, none of which had a material impact on the financial statements.

(f) Going concern

Having reviewed the Group's current trading and cash flow forecasts, together with sensitivities and mitigating factors and the available facilities, the Board has a reasonable expectation that the Group has adequate resources to continue in operational existence for at least twelve months from the date these financial statements are approved. Accordingly, the Board continued to adopt the going concern basis in preparing these financial statements.

(g) Principal risks and uncertainties

The key risks that could affect the Group's medium-term performance and the factors which mitigate these risks have not materially changed from those set out on pages 39 to 46 of the Group's Annual Report and Accounts 2018 and have been assessed in line with the requirements of the 2016 UK Corporate Governance Code. The risks are reproduced below. The Board is satisfied that the Company continues to operate within its risk profile for the remaining six months of the financial year.

Principal risks summary

3. Operating segments

The Directors are of the opinion that the Group is engaged in a single segment of business, being property investment, and in one geographical area, Germany. All rental and other income is derived from operations in Germany. There is no one tenant that represents more than 10% of Group revenues. The chief operating decision maker is considered to be the Senior Management Team, which is provided with consolidated IFRS information on a monthly basis.

4. Revenue

* See note 2(b).

Other income relates primarily to income associated with conferencing and catering.

5. Operating profit

The following items have been charged in arriving at operating profit:

Direct costs

* See note 2(b).

Gain on disposal of properties

The gain on disposal of properties of €99,000 (30 September 2017: €807,000 loss) relates to the disposal of the Bremen Brinkmann site which completed in June 2018.

Administrative expenses

Non-recurring items relate to a legal claim accrual adjustment (30 September 2017: Main Market listing costs).

6. Employee costs and numbers

The costs for the periods ended 30 September 2017 and 31 March 2018 included accruals of €2,148,000 and €3,541,000 relating to the granting or award of shares under LTIPs (see note 7) and nil costs for the six month period ended 30 September 2018 relating to the previous LTIP award. The costs for all periods include those relating to Executive Directors.

All employees are employed directly by one of the following Group subsidiary companies: Sirius Facilities GmbH, Sirius Facilities (UK) Limited, Curris Facilities & Utilities Management GmbH, SFG NOVA GmbH, Sirius Finance (Guernsey) Limited and Sirius Corporate Services B.V. The average number of people employed by the Group during the period was 243 (30 September 2017: 224; 31 March 2018: 232) expressed in full-time equivalents. In addition, the Board of Directors consists of five Non-executive Directors and two Executive Directors as at 30 September 2018.

7. Employee schemes

Equity-settled share-based payments

The 2015 LTIP for the benefit of the Executive Directors and the Senior Management Team was approved in October 2015. The fair value determined at the grant date was expensed on a straight-line basis over the vesting period, based on the Company's estimate of the shares that would eventually vest and adjusted for the effect of non-market-based vesting conditions. Under the LTIP, the awards were granted in the form of whole shares at no cost to the participants. Shares vested after the three year performance period and include a holding period of twelve months. The performance conditions used to determine the vesting of the award were based on net asset value and total shareholder return allowing vesting of 0% to a maximum of 125%. As a result, a maximum of 25,150,000 shares were granted, subject to performance criteria, under the scheme in December 2015.

The 2015 LTIP vested based on performance conditions assessed over the three years to 31 March 2018, and a separate assessment based on total shareholder return assessed up to the 20th business day after the announcement of the results for the year ended 31 March 2018. Vesting was at the maximum level for all participants resulting in the exercising of 14,804,000 shares in the period and the forfeiting of 4,290,000 relating to partial settlement of certain participants' tax liabilities arising in respect of the vesting. In June 2018 participants in the scheme surrendered, for nil cost, 4% of the awards granted to them amounting to 756,000 shares in order to make employees of the Group shareholders. Of the balance outstanding of 4,756,000 at the end of the period, 756,000 relating to surrendered shares are expected to be exercised following the announcement of the results for the year ended 31 March 2019 with the remaining 4,000,000 subject to nil cost options which can be exercised at any time up to 2 July 2019.

As the fair value determined at the grant date was expensed on a straight-basis over the vesting period an expense of €nil (30 September 2017: €2,148,000; 31 March 2018: €2,617,000) was recognised in the statement of comprehensive income to 30 September 2018.

Movements in the number of shares outstanding are as follows:

Employee benefit schemes

During the period a total of 14,804,000 shares were issued to the Company's management team as part of the 2015 LTIP.

A reconciliation of share-based payments and employee benefit schemes and their impact on the consolidated statement of changes in equity is as follows:

The MSP ("Matching Share Plan") was terminated in respect of any new awards with effect from 1 April 2017.

8. Finance income and expense

9. Taxation

Consolidated statement of comprehensive income

Deferred income tax liability

Deferred income tax asset

The Group is mainly subject to taxation in Germany with the income from the Germany-located rental business with a tax rate of 15.825%. It has tax losses of €287,398,000 (31 March 2018: €261,763,000) that are available for offset against future profits of its subsidiaries in which the losses arose under the restrictions of the minimum taxation rule. Deferred tax assets have not been recognised in respect of the revaluation losses on investment properties and interest rate swaps as they may not be used to offset taxable profits elsewhere in the Group as realisation is not assured. Deferred tax assets have been recognised in respect of the valuation of the Company LTIP.

10. Earnings per share

The calculation of the basic, diluted, headline and adjusted earnings per share is based on the following data:

* See reconciliation between adjusting items as stated within earnings per share and those stated within administrative expenses in note 5 below.

The Directors have chosen to disclose adjusted earnings per share in order to provide an alternative indication of the Group's underlying business performance; accordingly, it excludes the effect of adjusting items net of related tax, gains/losses on sale of properties net of related tax, the revaluation deficits/surpluses on the investment properties net of related tax and derivative financial instruments net of related tax.

In addition, the Directors have chosen to disclose EPRA earnings in order to assist in comparisons with similar businesses. The reconciliation between basic and diluted earnings and EPRA earnings is as follows:

EPRA earnings

For the calculation of basic, headline, adjusted and diluted earnings per share the number of shares has been reduced by 574,892 shares (30 September 2017: 574,892 shares; 31 March 2018: 574,892 shares), which are held by the Company as Treasury Shares at 30 September 2018.

The weighted average number of shares for the purpose of diluted, EPRA diluted, headline diluted and adjusted diluted earnings per share is calculated as follows:

The Company has chosen to report EPRA earnings per share ("EPRA EPS"). EPRA EPS is a definition of earnings as set out by the European Public Real Estate Association. EPRA earnings represents earnings after adjusting for property revaluation, changes in fair value of derivative financial instruments, profits and losses on disposals and deferred tax in respect of EPRA adjustments.

11. Net asset value per share

The Company has chosen to report EPRA net asset value per share ("EPRA NAV per share"). EPRA NAV per share is a definition of net asset value as set out by the European Public Real Estate Association. EPRA NAV represents net asset value after adjusting for derivative financial instruments and deferred tax relating to valuation movement and derivatives. EPRA NAV per share takes into account the effect of the granting of shares relating to long-term incentive plans.

The number of shares has been reduced by 574,892 shares (31 March 2018: 574,892 shares), which are held by the Company as Treasury Shares at 30 September 2018 for the calculation of net asset value and adjusted net asset value per share.

12. Investment properties

The movement in the book value of investment properties is as follows:

* Excluding items held for sale.

The reconciliation of the valuation carried out by the external valuer to the carrying values shown in the statement of financial position is as follows:

* Excluding assets held for sale.

The fair value (market value) of the Group's investment properties at 30 September 2018 has been arrived at on the basis of a valuation carried out at that date by Cushman & Wakefield LLP (2017: Cushman & Wakefield LLP), an independent valuer accredited in terms of the RICS.

The value of each of the properties has been assessed in accordance with the RICS valuation standards on the basis of market value.

The valuation is based upon assumptions including future rental income, anticipated non-recoverable and maintenance costs, expected capital expenditure and an appropriate discount rate. The properties are valued on the basis of a discounted cash flow model using a range of 10-14 years supported by comparable evidence. The discounted cash flow calculation is a valuation of rental income considering non-recoverable costs and applying a discount rate for the current income risk over the measurement period. At the end of the period in which the cash flow is modelled, a determining residual value (exit scenario) is calculated. A capitalisation rate is applied to the more uncertain future income, discounted to present value.

The weighted average lease expiry remaining across the whole portfolio at 30 September 2018 was 2.8 years (31 March 2018: 2.6 years).

As a result of the level of judgement and estimations used in arriving at the market valuations, the amounts that may ultimately be realised in respect of any given property may differ from the valuations shown in the statement of financial position.

The reconciliation of surplus on revaluation above capex as per the statement of comprehensive income is as follows:

Included in the surplus on revaluation of investment properties reported in the statement of comprehensive income are gross gains of €59.5 million and gross losses of €3.3 million (31 March 2018: gross gains of €72.9 million and gross losses of €9.4 million).

Every transaction is assessed as either an asset acquisition or a business combination. During the period it was assessed that all investment properties purchased in the period should be accounted for as asset acquisitions due to the fact that Sirius implements its own internal processes and the key elements of the infrastructure of the business were not purchased.

Other than the capital commitments disclosed in note 23 the Group is under no contractual obligation to purchase, construct or develop any investment property. The Group is responsible for routine maintenance to the investment properties.

All investment properties are categorised as Level 3 fair values as they use significant unobservable inputs. There have not been any transfers between levels during the year. Investment properties have been classed according to their real estate sector. Information on these significant unobservable inputs per class of investment property is disclosed below:

As at 30 September 2018

As at 31 March 2018

The valuation is performed on a lease-by-lease basis due to the mixed-use nature of the sites. This gives rise to large ranges in the inputs.

As a result of the level of judgement and estimates used in arriving at the market valuations, the amounts which may ultimately be realised in respect of any given property may differ from the valuations shown in the statement of financial position. For example, an increase in market rental values of 5% would lead to an increase in the fair value of the investment properties of €53,690,000 and a decrease in market rental values of 5% would lead to a decrease in the fair value of the investment properties of €53,690,000. Similarly, an increase in the discount rates of 0.25% would lead to a decrease in the fair value of the investment properties of €22,230,000 and a decrease in the discount rates of 0.25% would lead to an increase in the fair value of the investment properties of €22,590,000.

The highest and best use of properties do not differ from their current use.

13. Investment properties held for sale

Investment properties held for sale at 30 September 2018 is €3,800,000 (31 March 2018: €17,325,000), representing the Bremen HAG asset that was notarised for sale in the period and completed shortly thereafter. A loss of €130,000 was recognised in the surplus on revaluation of investment properties within the consolidated statement of comprehensive income in the period.

14. Goodwill

On 30 January 2012 a transaction was completed to internalise the Asset Management Agreement and, as a result of the consideration given exceeding the net assets acquired, goodwill of €3,738,000 was recognised. Current business plans indicate that the balance is unimpaired.