Sirius Real Estate Regulatory News (SRE)

This announcement is not, does not constitute or form part of, and should not be construed as, any offer or invitation to sell or issue, or any solicitation or any offer to purchase or subscribe for or otherwise acquire, any securities of the Company nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contractual commitment or investment decision in relation thereto. This announcement does not constitute a recommendation regarding any securities.

This announcement is not an offer of securities for sale into the United States. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933 (the "Securities Act"), or with any securities regulatory authority of any state or other jurisdiction of the United States. The securities may not be offered or sold in the United States, except pursuant to an applicable exemption from or in a transaction not subject to the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. No public offering of the securities referred to herein is being made in the United States.

8 November 2021

Sirius Real Estate Limited

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

Condensed consolidated financial results for the six months ended 30 September 2021

Strong H1 organic growth, inaugural bond issuance and progress on acquisitions

Sirius Real Estate, the leading operator of branded business parks providing conventional space and flexible workspace in Germany, today announces its half year results for the six months ended 30 September 2021.

Organic and acquisitive growth continuing to drive rental income, FFO and dividend

• 25.7% increase in profit before tax to €78.2 million (30 September 2020: €62.2 million)

• 13.4% growth in funds from operations ("FFO") to €33.0 million (30 September 2020: €29.1 million)

• 12.1%1 increase in dividend per share to 2.04c (30 September 2020: 1.82c)

• 2.5% increase in like-for-like annualised rent roll to €98.9 million (31 March 2021 €96.5 million2) driven by a 2.6% increase in like-for-like rate per sqm to €6.33 (31 March 2021: €6.17) with further improvement expected in the second half of the year as assets notarised in the period complete and contribute to earnings.

Sirius platform continues to deliver against improving market

• High percentage of German population have now been vaccinated

• German economy forecast to grow at c.4% in 2022

• Like-for-like occupancy remained broadly flat at 86%, whilst total occupancy reduced to 85% (31 March 2021: 87%) primarily as a result of the acquisition of 23,000 sqm of vacant space within acquisition assets that completed within the period

• Consistently high cash collection rate of 97.4% for the six-month period to 30 September 2021 (30 September 2020: 97.3%) and a 12 month trailing rate of 98.2%, reflecting Sirius' tenant diversification and resilience of its portfolio

• Maintained ratings across MSCI, improved ratings on Sustainalytics and GRESB Public Disclosure with a fuller ESG update to be provided at the year-end.

Strong balance sheet and valuation growth

• NAV per share grew 4.9% to 92.62c (31 March 2021: 88.31c) with adjusted NAV per share increasing by 5.3% to 98.80c (31 March 2021: 93.79c)

• Increase in valuation of like-for-like owned investment property by €62.1 million to €1,409.3.5 million (31 March 2021: €1,347.2 million)resulting in 4.6% like-for-like3 valuation growth

• Total cash balance of €187.6 million (31 March 2021: €65.7 million), of which €172.7 million is unrestricted (31 March 2021: €49.3 million), providing capacity for further acquisitions and investment.

Transformation of balance sheet with inaugural bond issuance

• Completion of €400.0 million oversubscribed corporate bond issuance in June 2021 attracting a coupon of 1.125% until maturity in June 2026

• Repayment of €170.7 million of secured debt and increase in book value of unencumbered properties to €944.1 million (31 March 2021: 245.5 million)

• Weighed average cost of debt reduced to 1.2% (31 March 2021: 1.5%) and weighted average term of debt extended to 3.7 years (31 March 2021: 2.7 years)

• Net LTV of 36.8% (31 March 2021: 31.4%)

Progress on acquisitions

• €153.4 million deployed or committed to eight on balance sheet acquisitions

• Two acquisition assets completed in the period amounting to €19.7 million, comprising business parks in Essen and Öhringen

• Six acquisitions notarised in the period and expected to complete in the second half, amounting to €133.6 million, including business parks in Heiligenhaus, Oberhausen, Frankfurt, Essen, Erfurt and Neckartenzlingen.

• Completion of the €79.9 million acquisition of the Sigma Technopark in Augsburg through the Titanium venture with AXA IM Alts 

• The Company also completed the purchase of a land parcel adjacent to its existing business park in Neuruppin, for €0.5 million.

Board appointment

• Appointment of independent non-executive director Joanne Kenrick, whose 30 years of commercial marketing experience and ESG strategy development brings an invaluable contribution to the business.

Outlook

· Trading in line with expectations for the full year

Post period transaction

• Sirius is separately announcing today an acquisition which will be in part funded by a placing of the Company's new ordinary shares.

Andrew Coombs, Chief Executive Officer of Sirius Real Estate, said: "The improving economy and renewed market confidence has been reflected in a positive set of results for Sirius for the first half of the financial year. The business has grown both organically and acquisitively during the period which has resulted in our FFO increasing by 13.4% and enabled us to increase our dividend per share by over 12%. Additionally, the success of our oversubscribed inaugural corporate bond issuance has allowed us to reduce our cost of debt further and provide us with significant resources for future investment whilst also highlighting the conviction investors have in our strategy.

"As the vaccination roll-out continues across Germany and trading conditions improve further, Sirius is well-positioned to capitalise on the wider macro trends being felt in the market, with increased nearshoring and the localisation of supply chains driving demand for space within our asset class. We have made strong progress throughout the first half and, with the contribution from recently notarised properties that have not yet completed to come, we remain well placed to continue to perform in the second half of the financial year and beyond."

1 Interim dividend representing 65% of FFO (30 September 2020: 65% of FFO)

2 Excludes €0.7m of annualised rent roll relating to the expected Daimler moveout in the Fellbach 2 asset that was acquired in March 2021

3 Like for like comparison assesses assets that were in the portfolio previously and excludes acquisitions and disposals

CONFERENCE CALL

Webcast Conference 

There will be an audio webcast presentation for analysts at 08.30am BST / 10.30am SAST today, hosted by Andrew Coombs, Chief Executive Officer of Sirius Real Estate.

If you would like to join the webcast please use the registration link below:

https://brrmedia.co.uk/sirius-real-estate-hy22/

For further information:

Sirius Real Estate

Andrew Coombs, CEO / Alistair Marks, CFO

+49 (0) 30 285 010 110

FTI Consulting (Financial PR)

Richard Sunderland / Claire Turvey / James McEwan / Talia Jessener

+44 (0) 20 3727 1000

SiriusRealEstate@fticonsulting.com 

NOTES TO EDITORS

About Sirius Real Estate

Sirius is a property company listed on the main market and premium segment of the London Stock Exchange and the main board of the Johannesburg Stock Exchange. It is a leading operator of branded business parks providing conventional space and flexible workspace in Germany. The Company's purpose is to create and manage optimal workspaces that empower small and medium-sized businesses to grow, evolve and thrive. Sirius seeks to unlock the potential of its people, its properties, and the communities in which it operates, so that together we can create sustainable impact, and long-term financial and social value.

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.

Sirius also has a venture with clients represented by AXA IM Alts. Titanium was formed through the acquisition by AXA IM Alts, on behalf of its clients, from Sirius, of a 65% stake in five business parks across Germany. Sirius retained the remaining 35%. The venture seeks to grow primarily through the acquisition of larger stabilised business park assets and portfolios of assets with strong tenant profiles and occupancy. As well as its equity interest, Sirius acts as operator of the assets in the venture, on a fee basis. Sirius will continue to grow its wholly owned portfolio through acquisitions of more opportunistic assets, where it can capitalise on its asset management expertise to maximise utilisation of the space, grow occupancy and improve quality of the tenants. The strategies have been clearly defined so that the venture does not conflict with Sirius's existing business.

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

Follow us on LinkedIn at https://www.linkedin.com/company/siriusrealestate/

Follow us on Twitter at @SiriusRE

JSE Sponsor

PSG Capital

€78.2m

↑ 25.7%

Profit before tax

2021 78.2

2020 62.2

€88.4m

↑ 11.5%

Total revenue

2021 88.4

2020 79.3

€33.0m

↑ 13.4%

Funds from operations1

2021 33.0

2020 29.1

€99.7m

↑ 11.8%

Total annualised rent roll

2021 99.7

2020 89.2

2.04c per share

↑ 12.1%2

Interim dividend

2021 2.04

2020 1.82

6.44c per share

↑ 18.2%

Basic earnings per share

2021 6.44

2020 5.45

1 See note 24 of the Interim Report 2021

2 Interim dividend representing 65% of FFO (30 September 2020: 65% of FFO).

3 See note 11 of the Interim Report 2021

Business update

Strong organic and acquisitive growth

In summary:

• Positive trading momentum in first half of the financial year

• Profit before tax of €78.2 million (30 September 2020: €62.2 million)

• 13.4% increase in funds from operations ("FFO") to €33.0 million (30 September 2020: €29.1 million)

• Dividend of 2.04c per share declared, 1.5 times covered by FFO (30 September 2020: 1.82c)

• Completion of €400.0 million inaugural unsecured bond issuance

• €153.9 million of acquisitions completed or notarised in the period

Overview

Sirius has had a positive six-month trading period with strong organic growth and revenue increasing 11.5% to €88.4 million (30 September 2020: €79.3 million) resulting in a 2.5% increase in like-for-like annualised rent roll, 13.4% increase in FFO to €33.0 million (30 September 2020: €29.1 million) and a 4.6% like-for-like uplift in the valuation of its investment property.

The period under review saw the successful completion of the Company's inaugural bond issuance with a €400.0 million placing transforming the Company's balance sheet and increasing the amount of unencumbered assets to €944.1 million. The issuance also resulted in a reduction in the average cost of debt to 1.2% (31 March 2021: 1.5%) and increase in average debt maturity to 3.7 years (31 March 2021: 2.7 years). The Company made good progress in the deployment of funds generated from the issuance with the acquisition of two assets and one land parcel completing within the period for €20.2 million and the acquisition of six assets notarised for completion after the period end amounting to €133.6 million.

The Company has declared a dividend in respect of six months ended 30 September 2021 of 2.04c per share representing 65% of FFO. This is a 12.1% increase on the 1.82c declared in relation to the same period in the prior year.

Looking forward, the Company is confident it can continue to grow FFO organically through its intensive asset management initiatives and through acquisitions, as assets that were recently acquired or notarised for completion are integrated into the operating platform in the second half of the financial year.

Financial performance

The Company reported a profit before tax for the six-month period of €78.2 million (30 September 2020: €62.2 million) including €51.4 million of gains (30 September 2020: €33.5 million) from owned property revaluations (net of capex and adjustments in relation to lease incentives and broker fees). Total revenue, which comprises rent, fee income from Titanium, other income from investment properties and service charge income, increased by 11.5% to €88.4 million (30 September 2020: €79.3 million).

FFO for the six months grew to €33.0 million (3.14c per share) compared to €29.1 million (2.80c per share) for the same period in the prior year, an increase of 12.1% on a per share basis, which feeds through to the increase in dividend pay-out. Basic earnings of €67.7 million and 6.44c per share increased by 18.2% on a per share basis from 5.45c reflecting the increases in valuations, organic growth and the impact of acquisitions compared to the same period in the prior year. Similarly, adjusted EPS, which excludes valuation movements as well as exceptional items, increased 7.3% to 2.93c per share from 2.73c reflecting the positive year on year operational development. The following table sets out the key earnings per share metrics:

Table 1: Earnings per share

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). Refer to note 2(c) for further information.

As the investment market continued to open up, the Company was able to deploy or commit a total of €153.9 million on acquisitions. Due to the timing of completions the impact from acquisitions in the six-month period to 30 September 2021 was not material, however based on estimated completion dates of notarised assets the contribution for the second half of the financial year is expected to be more significant.

Net asset value per share ("NAV") grew by 4.9% to 92.62c (31 March 2021: 88.31c) in the period whilst adjusted net asset value per share ("adjusted NAV") increased by 5.3% to 98.80c (31 March 2021: 93.79c). EPRA net tangible assets ("EPRA NTA") per share increased by 5.1% to 97.02c (31 March 2021: 92.29c) with the main driver of these increases attributable to valuation uplift more than offsetting the dividend paid to shareholders in the period. The valuation metrics are described in more detail below and the movement in net asset value per share in the period can be seen in the following table:

Table 2: Net assets per share

*See note 11 of the Interim Report 2021.

Lettings and rent roll development 

Like-for-like annualised rent roll increased by 2.5% to €98.9 million (31 March 2021: €96.5* million) driven by a 2.6% increase in like-for-like average rental rate to €6.33 per sqm from €6.17 per sqm highlighting strong occupier demand and realisation of some potential within the portfolio whilst total annualised rent roll increased by 3.3% to €99.7 million (31 March 2021: €96.5* million). Like-for-like occupancy remained broadly flat at 86%, whilst total occupancy reduced to 85% (March 2021: 87%) primarily as a result of the acquisition of 21,000 sqm of vacant space within the Essen and Ohringen assets that completed within the period. The movement in annualised rent roll is described in more detail below:

*Excludes €0.7 million of annualised rent roll relating to the expected Daimler moveout in the Fellbach 2 asset that was acquired in March 2021.

Sirius generated a total of 8,036 enquiries** during the period compared to 8,284 for the same period in the prior year. Analysis of the enquiries showed an increase in demand for commercial and self-storage spaces as onshoring of production and the related impact on supply chains continues to gain momentum. The monthly development of like-for-like enquiries compared to the same period in the prior year is detailed in the table below:

**Includes enquiries relating to assets under operating and management contracts and Titanium

Table 4: Enquiries

Whilst the six months to September 2021 saw a similar number of leasing deals to the same period in the prior year the volume of sqms let in the period increased to 83,757 from 74,095 whilst the average deal size increased to 82 sqm from 67 sqm. Conversion rates remained stable at 13.1% compared to 13.4% for the same period in the prior year. Details of monthly letting numbers and square metre volumes compared to the same period in the previous year are set out in the table below:

Table 5: Lettings

Tenant retention in the period was encouraging with 71% of square metres up for renewal in the period being successfully extended (30 September 2020: 68%), especially given the changeable economic environment during the period. The consistency in renewals, enquiry levels and sales conversion levels demonstrate the capability of the Company's internal operating platform to create value in a variety of market conditions. Furthermore, with a number of new acquisition assets expected to complete in the second half of the financial year, the Company is well placed to take advantage of the opportunity those assets present to increase occupancy and operating income.

Cash collection

The Company benefits from an experienced in-house team of cash collection professionals who maintain close relationships with tenants. During the period under review Sirius worked with its tenants as they continued to adapt to new ways of working and related space requirements whilst actively managing their debt. The Group's cash collection performance in the six-month period to 30 September 2021 relating to rent and service charge prepayments (excluding VAT) is detailed in the following table:

Table 6: Cash collection to 30 September 2021

In the six-month period to 30 September 2021 the Company billed a total of €76.7 million (excluding VAT) to tenants of which €74.7 million or 97.4% was collected. The Company expects to collect the majority of the €2.0 million outstanding debt from the period through its regular collection activities over the coming months. Write offs with a value of less than €50,000 relating to the period under review were recorded. The rolling twelve month cash collection rate was 98.2% in line with the 98.2% reported for the twelve-month period to 31 March 2021. This consistency in cash collection demonstrates the benefits of a well-diversified portfolio and tenant base that represents a wide range of industries combined with the asset management expertise of the Company's internal operating platform. Further, the Group continued to collect cash from rent and service charge invoices that were outstanding as at 31 March 2021.

Portfolio valuation

Demand from investors for industrial and office business parks in Germany has increased as vaccination rates accelerate and markets return to growth. Domestic and foreign sources of capital are again active in the market and competing for assets that provide well-diversified, attractive cashflows and growth potential. Whilst yield movement has been a strong feature of valuation development in recent periods, the upgrading and repositioning of assets through the Company's capex investment programmes and the resulting organic rental growth continue to be a major driver of value for the Company.

The portfolio of owned investment properties, which excludes leased investment properties and the assets within Titanium, comprised 62 assets as at 30 September 2021 and was independently valued by Cushman & Wakefield LLP at €1,432.0 million (31 March 2021: €1,350.8 million), converting to a book value of €1,428.5 million (31 March 2021: €1,347.2 million) after allowing for the provision for lease incentives.

The movement in book value for the period relating to owned investment properties can be reconciled as follows:

Table 7: Reconciliation of market value to book value

Taking into account investment property relating to leased assets the total investment property book value as at 30 September 2021 was €1,444.8 million (31 March 2021: €1,362.2 million). The movement in book value in the period is set out in the table below:

Table 8: Movement in book value in the period

The positive movement in owned investment property of €81.3 million was made up of €20.2 million of acquisitions, a net €51.0 million valuation uplift, after taking into account €9.6m of capital expenditure and a €0.1 million adjustment in respect of lease incentives. In accordance with IFRS 16, the Group recognises lease liabilities of €14.7 million relating to leases on assets meeting the definition of investment property. Accordingly, an expense of €3.1 million representing the fair value adjustment in the year was recorded in the statement of comprehensive income. During the period under review the Group entered into a ground lease agreement meeting the definition of investment property as a result of acquisition activity. Accordingly, an addition to leased investment property was recorded amounting to €4.4 million.

Whilst the valuation uplift for the period relating to owned investment properties was €61.0 million, the net valuation gain after taking into account €9.6 million of capital expenditure and adjustments for broker fees was €51.5 million. The gain on revaluation on investment properties recorded in the consolidated statement of comprehensive income, which also adjusts for lease incentives and deficit on revaluation relating to leased assets, was €48.4 million.

The book value of the like-for-like assets increased by €62.1 million or 4.6% from €1,347.2 million to €1,409.3 million. The assets that were acquired in the period were revalued at €0.3 million above the property purchase prices paid but €1.1 million less than the total acquisition costs paid for them.

Table 9: Book value valuation metrics

The 30 September 2021 book value of owned properties of €1,428.5 million represents an average gross yield of 7.0% (31 March 2021: 7.2%) which translates to a net yield of 6.2% (31 March 2021: 6.5%). The valuation increase compared to 31 March 2021 was primarily driven by organic increases in annualised rent roll of €2.4 million reflecting the ability of the operating platform to consistently grow income. Gross yield compression was approximately 20 bps.

Importantly, just over 60% of the total portfolio relates to assets with value-add potential which can be unlocked by utilising the Company's platform to undertake intensive asset management and selective capex investment. With average occupancy of 80.3% and valuations at a gross yield of 7.3%, significant income and capital value growth within the value-add assets can be achieved in future periods. Whilst the average occupancy of the mature assets has now increased to 95.3%, they are valued at a yield that is around 80 bps lower than the value-add assets highlighting the scope for growth in the value-add assets.

The average capital value per sqm of the portfolio of €895 per sqm remains well below replacement cost and illustrates the potential for further growth from transformative investment within the Group's capex investment programmes.

Capex investment programmes

The Group's capex investment programmes have historically been focused on the transformation of underutilised vacant space that is typically acquired at low cost due to it being considered as structurally void by former owners, and is subjected to ongoing capex investment programmes. The take up of this space has resulted in significant improvements in service charge cost recovery and therefore increased operating income and consistently makes a strong contribution to the valuation increases the Company has been recording now for many years. The completed original capex programme included an investment of €25.7 million into 204,182 sqm which, at 30 September 2021, was generating €12.8 million in annualised rent roll representing a return on cost of 49.8%.

The new acquisition programme which began in 2017 now extends to 185,180 sqm of space that is subject to a budgeted investment of €40.3 million from which the Company expects to generate €13.2 million in annualised rent roll. As at 30 September 2021 a total of 154,905 sqm had been transformed with an investment of €30.8 million which, at 72% occupancy, was generating annualised rent roll of €10.0 million. In addition to the space that has been completed and let or is currently being marketed, a total of approximately 30,275 sqm of space is either in progress of being transformed or is awaiting approval to commence transformation. A further €4.9 million is expected to be invested into this space on top of the €0.8 million already spent, and, based on achieving budgeted occupancy, incremental annualised rent roll in the region of €1.9 million is expected to be generated. Further information on the new acquisition capex programme is detailed below: 

Table 10: New acquisition capex investment programme

Whilst the income returns expected to be achieved on the more recent projects are less than those of the original programme, the extent of transformative work involved suggests the impact on valuations may be more pronounced. The capex investment programmes have been one of the key income and valuation growth drivers over the last few years and, as a result, the Company continues to seek to acquire assets with sub-optimal vacancy in order to refuel them.

In addition to the capex investment programmes Sirius also looks for opportunities to upgrade recently vacated space that is returned each year as a result of move-outs. Within the existing vacancy at 30 September 2021, the Company has identified approximately 34,273 sqm of recently vacated space that has potential to be upgraded. This space can be upgraded with an investment of €7.2 million and generate €2.8 million in annualised rent roll when re-let. This selective investment into vacated space allows the Company to capture reversionary potential whilst significantly enhancing the desirability and value of lower quality space.

The Company's headline 85% occupancy rate means that in total 228,556 sqm of space is vacant as at 30 September 2021. When excluding the vacancy, which is subject to investment (4% of total space), and the structural vacancy, which is not economically viable to develop (3% of total space), the Company's occupancy rate based on space that is readily lettable is approximately 92%.

The analysis below details the underutilised space and vacancy at 30 September 2021 and highlights the opportunity from developing this space.

Table 11: Vacancy

The opportunity within the vacant space as at 30 September 2021 can be summarised as follows:

• 63,094 sqm of sub-optimal and recently vacated space, which requires €12.1 million of capex and will have an ERV of €4.7 million when completed; and

• 125,372 sqm of lettable space, which requires €0.9 million of capex and has an ERV of €8.9 million.

Whilst the capex investment programmes are a key part of Sirius' strategy, they represent one of several ways in which the Company can organically grow income and capital values. A wide range of asset management capabilities including the capturing of contractual rent increases, uplifts on renewals and the re-letting of space at higher rates are expected to continue to make a strong contribution to the Company's annualised rent roll growth.

Excellent progress with acquisitions

Building on the momentum achieved when the investment markets in Germany gathered momentum at the end of last year, the Company made good progress in terms of capital deployment in the period. A total of €153.4 million was committed to eight business park acquisitions, with two assets completing in the period and the remaining six notarised for completion post period end. In addition, the Company completed the purchase of a land parcel adjacent to an existing business park asset for €0.5 million.

The Company also completed the previously announced acquisition of a business park in Augsburg for €79.9 million through its Titanium venture with AXA IM Alts, which comprises seven assets with a combined value of €333.3 million for the period ended 30 September 2021 (31 March 2021: €244.2 million).

A summary of acquisitions is set out in the table below:

Table 12:Acquisitions

The acquisition assets are located in markets underpinned by strong demand dynamics that in some cases are complementary to the Company's existing business parks. With total annualised net operating income of €7.5 million, the acquisition assets provide attractive and well-diversified cashflows that, once fully integrated, will make a significant contribution to the Company's FFO growth. Additionally, with approximately 82,000 sqm of vacant space these acquisition assets provide opportunity for the Company to make selective investments that upgrade the space and drive income growth. Further information on the acquisitions assets is detailed below:

· The Essen I asset completed in May 2021, was acquired for total acquisition costs of €10.7 million and provides a mix of production, storage and office space located in the heart of Germany's industrial Rhein-Ruhr region. Whilst the acquisition represents the Company's first of two investments in Essen during the period, the Company knows the location well through its long standing management of an asset located in the city.

· The Öhringen asset was completed in August 2021 for total acquisition costs of €9.0 million. Located in the town of Öhringen in Baden-Württemberg, the asset provides approximately 18,000 sqm of lettable space including 15,800 sqm of warehouse space. The site includes a land parcel that may be considered for future light industrial development amounting to 11,600 sqm. The asset, having been acquired wholly vacant has already benefited from integration into the Sirius operating platform with occupancy increasing to approximately 50% as at 30 September 2021.

· The Oberhausen business park notarised for €39.8 million, and once completed will be one of the Company's physically larger assets and is located in a well-developed commercial area of the city of Oberhausen, in the northwest of Germany's Rhein-Ruhr region. The asset offers a wide mix of uses with approximately 77,600 sqm of lettable space, comprising around 47,400 sqm of offices, 19,200 sqm of warehouse space, 4,600 sqm of storage and 6,400 sqm of other space. The asset is 63% occupied and provides strong day one cash flows with the opportunity to grow income through the letting of vacant space and reduction of service charge costs supported by targeted investment and refurbishment.

· The multi-tenanted business park at Heiligenhaus, Nord Rhein-Westfalen, was notarised in the period under review for total acquisition costs amounting to €14.2 million. The asset provides approximately 45,000 sqm of lettable space consisting of around 23,200 sqm of office space, 11,400 sqm of warehouse space, 7,800 sqm of production space and 2,600 sqm of other space. The town of Heiligenhaus is located between the cities of Essen, Duisburg, Düsseldorf and Wuppertal and benefits from good autobahn and public transport links. The property currently generates annualised net operating income of €1.1 million per annum at 77% occupancy and, with an undemanding average rent of €2.44 per sqm (excluding parking and other income), provides the opportunity to capture reversionary income growth.

· The Company notarised the acquisition of its third asset in Frankfurt, a multi-tenanted office tower comprising total lettable area of approximately 10,000 sqm for total acquisition costs of €21.2 million. The property generates annualised net operating income of €598,000 per annum at 54% occupancy at an average rent of €11.02 per sqm (excluding parking and other income) and has a remaining WALE of 2.9 years. The property benefits from its location close to two this major city's main autobahns and aligns to the Company's strategy of providing a range of flexible out of town office products that it expects to appeal to the local market.

· Following on from the completion of the Company's first investment in Essen in May 2021 the Company was able to build scale in the local market through the notarisation of the Essen II property for total acquisition costs of €12.2 million in August 2021. The Essen II asset comprises 11,709 sqm of office and production space and, at 81% occupancy, generates annualised net operating income of €851,000.

· The notarisation of the multi-tenanted business park in Erfurt represents the Company's first investment into this key logistics location. With total acquisition costs of €11.7 million the asset consists of 14,000 sqm of industrial space, 7,400 sqm of office space and 760 sqm of other space. The site generates €623,000 of annualised net operating income at 81% occupancy providing opportunity to grow income through the letting of vacant space and potential investment into an 18,000 sqm development land parcel that formed part of the acquisition.

· The Company notarised the acquisition of the high quality Neckartenzlingen property, located to the south of Stuttgart, for total acquisition costs of €34.5 million shortly before the period end. The asset comprises 54,515 sqm of predominantly production and warehouse space with net operating income of €1.9 million and WALE of 8.1 years providing stable, long term cashflows with the opportunity to grow income coming from the let up of vacant space which amounts to more than 10,000 sqm at the date of notarisation.

· The Company completed the acquisition of Augsburg within the Titanium venture with AXA IM Alts (of which Sirius owns 35%) which it had notarised in the prior year for total acquisition costs of €79.9 million. The business park is located in one of the most well-known industrial areas in Bavaria and benefits from strong public transportation connections to the city centre. The asset provides stable day one cash flows through its 90% occupancy rate whilst providing opportunity for Sirius to add value through redevelopment and active asset management. The site generates annualised rent roll of €5.4 million and has total lettable space of 112,784 sqm of which 11,300 sqm is vacant, and produces an average rate per sqm of €4.46.

In addition, the Company has also completed the acquisition of an approximately 16,000 sqm land parcel adjacent to its asset in Neuruppin for €0.5 million (total acquisition cost), to assist in its plans to expand and develop the existing property.

Inaugural bond issuance

As previously communicated to shareholders the Company had been assessing opportunities to optimise its funding structure to support its future growth ambitions. The Company's inaugural bond issuance was significantly oversubscribed and successfully completed in June 2021 following the award of a BBB stable investment grade credit rating from Fitch in May 2021. Bonds totalling €400.0 million, listed on the Luxembourg stock exchange, were issued attracting a coupon of 1.125% with a maturity date of June 2026.

The bond issuance coupled with the repayment of €170.7 million of existing secured debt provides the Group with a number of benefits including:

· strong financial capacity to fund acquisitions and other investment opportunities;

· reduction in the Group's weighted average cost of debt to 1.2% (31 March 2021: 1.5%) and increase in weighted average term of debt to 3.7 years (31 March 2021: 2.7 years); and

· increase in the number of unencumbered assets to 48, with a book value of approximately €944.1 million.

Following the bond issuance and related secured debt repayments, the Group holds total debt amounting to €698.2 million of which €450.0 million or 65% is unsecured (31 March 2021: 11%). The transformation of the Group's financing arrangements is expected to provide positive support to Sirius' operations notably will and make asset recycling much easier and less expensive. Net LTV, which excludes restricted cash balances, was 36.8% (31 March 2021: 31.4%) whilst interest cover at EBITDA level was 9.8x as at 30 September 2021 (31 March 2021: 9.9x). All covenants were complied with in full during the period. A summary of the movement in the Group's debt is set out below:

*Excludes loan issue costs

Well-diversified income and tenant base

Against the backdrop of the pandemic the combination of having a well-diversified tenant base and wide range of products underpinned by an established operating platform has been proven. Sirius' portfolio includes production, storage and out of town office space that cater to multiple usages and a range of size and types of tenants. The Company's tenant base is well-diversified providing stability through its large long-term anchor tenants and opportunity through the flexible SME and private customers.

The Group's large anchor tenants are typically multinational corporations occupying production, storage and related office space. The balance comprises primarily SME tenants and private customers who occupy space on both conventional and flexible basis including space marketed under the Company's popular Smartspace brand which provides tenants with a fixed cost and maximum flexibility. The Company's largest single tenant contributes 2.5% of total annualised rent roll whilst 7.9% of its annualised rent roll comes from government tenants.

The wide range of tenants that the Sirius marketing and sales team is able to attract is a key competitive advantage for the Company and results in a significantly de-risked business model when compared to other owners of multi tenanted light industrial and business park assets.

The table below illustrates the diverse nature of tenant mix within the Sirius portfolio at the end of the reporting period:

Table 14: Tenant breakdown

1 Mainly large national/international private and public tenants.

2 Mainly small and medium-sized private and public tenants.

3 Mainly small and medium-sized private and retail tenants.

* See glossary section of the Interim Report 2021.

Smartspace

A key differentiator for Sirius continues to be the ability to provide a variety of flexible products that meet local market demand. The Company's Smartspace products are specifically designed to provide tenants with a range of options in terms of type and size of space, price, lease length and the provision of services, As the pandemic has necessitated businesses to adapt to new and still evolving ways of working the Company's Smartspace products have proven popular with occupancy increasing to 72% from 69% and rate increasing by 4.1% to €8.69 psm within the six-month period to 30 September 2021. The range of products and ability of the Sirius operating platform to increase occupancy and rate within this segment positions the Company well as working patterns continue to shift. Smartpace now contributes total annualised rent roll of €7.1 million, an increase of 9.3% from the beginning of the period. A summary of Smartspace products and their contribution to the Group is set out below: 

Table 15: Smartspace

In addition, having identified at an early stage an increase in demand for storage products, the Group has grown its storage container investment and is generating annualised rent roll of €230,000 as at 30 September 2021 (€168,000 as at 31 March 2021) on its otherwise non income producing land.

Environmental, Social, Governance ("ESG")

During the period under review the Company continued to develop its ESG programme and to integrate it into its strategy and business processes. Operating sustainably, recognising the importance of environmental responsibility, and creating long-term social and financial value are essential elements of the Company's purpose. The business is built on the recycling of working spaces and refurbishing and revitalising older buildings. Sirius is committed to developing a carbon reduction strategy that will be based on solid analysis and delivered within a timeframe that is financially and sustainably viable. People also remain at the heart of the business, both our own employees and those of our tenants, and the Company has continued to enhance its engagement with these key stakeholders during the first half of the financial year. The Company looks forward to providing further information and more detailed reporting as part of its Annual Report and Accounts 2022.

Outlook

Sirius is pleased with the trading momentum achieved in the first six months of the financial year which came predominantly as a result of organic growth and resulted in a 12.1% increase in dividend to 2.04c per share compared to the same period in the prior year. The inaugural €400.0 million bond issuance that completed in June 2021 has resulted in an improvement in the Company's financial position and balance sheet strength whilst also providing significant firepower for acquisitive growth. The Company has made good progress in deploying or committing funds raised through the bond issuance and looks forward to continuing to integrate acquisition assets into its platform in the second half of the financial year. The Company remains committed to delivering attractive risk adjusted returns to shareholders and continues to assess a wide range of future growth opportunities, including planned acquisitions and continues to trade in line with expectations for the full year

Statement of Directors' responsibilities

Each of the Directors, whose names and functions appear below, confirm to the best of their knowledge that the unaudited 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 Guidance 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 2021 that have materially affected, and any changes in the related party transactions described in the 2021 Annual Report that could materially affect, the financial position or performance of Sirius Real Estate Limited during the period.

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

• Daniel Kitchen, Chairman*

• James Peggie, Senior Independent Director*

• Andrew Coombs, Chief Executive Officer

• Alistair Marks, Chief Financial Officer

• Caroline Britton*^

• Mark Cherry*

• Kelly Cleveland*^

• Joanne Kenrick *°

* Non-Executive Directors.

^ Appointed 1 June 2020.

° Appointed 1 September 2021.

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 Guernsey governing the preparation and dissemination of financial information differs from legislation in other jurisdictions.

By order of the Board

Andrew Coombs

Chief Executive Officer

Alistair Marks

Chief Financial Officer

5 November 2021

Independent review report

to Sirius Real Estate Limited

Conclusion

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2021 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 27. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2021 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 South African Institute of Chartered Accountants (SAICA) Financial Reporting Guides, as issued by the South African Accounting Practices Committee and the Financial Pronouncements as issued by the Financial Reporting Standards Council of South Africa.

Basis for Conclusion

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 UK Auditing Practices Board. 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.

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

Responsibilities of the Directors

The directors are responsible for preparing the half-yearly financial report in accordance with:

- the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority; 

- the South African Institute of Chartered Accountants (SAICA) Financial Reporting Guides, as issued by the Accounting Practices Committee;

- the Financial Pronouncements as issued by the Financial Reporting Standards Council of South Africa.

Auditor's Responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report. Our conclusion is based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

Use of our report

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 UK 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.

Ernst & Young LLP

London

5 November 2021

Consolidated statement of comprehensive income

for the six months ended 30 September 2021

All operations of the Group have been classified as continuing.

Consolidated statement of financial position

as at 30 September 2021

The financial statements on pages 13 to 39 were approved by the Board of Directors on 5 November 2021 and were signed on its behalf by:

Daniel Kitchen

Chairman

Company number: 46442

Consolidated statement of changes in equity

for the six months ended 30 September 2021

Consolidated statement of cash flow

for the six months ended 30 September 2021 

Notes forming part of the financial statements

for the six months ended 30 September 2021

1. General information

Sirius Real Estate Limited (the "Company") is a company incorporated in Guernsey and resident in the United Kingdom for tax purposes, whose shares are publicly traded on the Main Market of the London Stock Exchange ("LSE") (primary listing) and the Main Board of 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 2021.

The principal activity of the Group is the investment in, and development of, commercial and industrial 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 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 Company has chosen to prepare its interim condensed set of consolidated financial statements in accordance with International Financial Reporting Standards as issued by the IASB ("IFRS") as a result of the primary listing on the JSE. See also note 2(d) for statement of compliance.

The financial information in these unaudited interim condensed set of consolidated financial statements does not comprise statutory accounts. This unaudited interim condensed set of consolidated financial statements has been reviewed, not audited, by the Group's auditor, Ernst & Young LLP, which issued an unmodified review opinion. The financial information presented for the year ended 31 March 2021 is derived from the statutory accounts for that year. Statutory accounts for the year ended 31 March 2021 were approved by the Board on 4 June 2021. 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.

As at 30 September 2021 the Group's consolidated interim condensed financial statements reflect consistent accounting policies and methods of computation as used in the previous financial year, except for the changes in the application of accounting policies as described in note 2(b).

(b) Changes in accounting policies

The new standards and interpretations to be applied as at 1 April 2021 do not have an impact on the interim financial statements of the Group.

(c) 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 gain net of related tax, gain/loss on sale of properties net of related tax, gain/loss on loss of control of subsidiaries net of related tax, NCI relating to revaluation and revaluation gain/loss on investment property relating to associates 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 certain adjusting items stated within administrative expenses in note 5 and certain finance costs in note 8.

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 24 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.

(d) Statement of compliance

The unaudited 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 JSE Limited, IAS 34 "Interim Financial Reporting" and Companies (Guernsey) Law 2008. 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 2021. The unaudited 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 2021 except for the changes in accounting policies as shown in note 2(b). The financial statements for the year ended 31 March 2021 have been prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the IASB.

(e) Going concern

The Group has prepared its going concern assessment for the period to the end of January 2023 (the 'going concern period'), a period chosen in order to consider the repayment of €15m of the Schuldschein facility in December 2022 and January 2023. The Group's going concern assessment is based on the same financial model that supported the Group's going concern and viability statement detailed within its Annual Report and Accounts 2021, updated on the basis of the assumptions set out below. It considers the Group's Principal Risks and Uncertainties set out in note 2 (f) and is dependent on a number of factors including financial performance, continued access to lending facilities (see note 20) and the ability to continue to operate the Group's secured and unsecured debt structure within its financial covenants.

In considering going concern, the Directors reviewed a detailed base case scenario and a severe but plausible downside scenario provided by Management. The severe but plausible downside scenario takes into account a potential downturn in the Group's performance, including the potential impact of Covid-19 on the Group's financial position and future prospects. The cashflow projections incorporate assumptions on future trading performance, and potential valuation movements in order to estimate the level of headroom on facilities and covenants for loan to value, debt service cover and occupancy ratios set out within the respective loan agreements.

The impact of Covid-19 on the business within the six-month period to 30 September 2021 indicated no deterioration in the Group's income streams or asset values, both of which increased in the period. The assumptions on which the base case and severe but plausible downside scenario relating to the going concern period are based included:

Base case and severe but plausible downside scenario

• continuation of forecast capex investment;

• continuation of forecast dividend payments;

• payment of loan interest and loan repayment amounts, including €15m of the Schuldschein facility in December 2022 and January 2023;

• no acquisitions over and above those contractually committed to; and

• sale of assets notarised for sale.

Severe but plausible downside scenario

• reduction in occupancy of 5% per annum;

• reduction in service charge recovery of 5% per annum; and

• reduction in property valuations of 5% per annum.

In the severe but plausible downside scenario, the Group is expected to comply with its loan covenants with no breaches forecast, continue to operate within the terms of its facilities and have sufficient cash reserves, with a lowest cash position forecast in the going concern period of approximately €110 million in January 2023. As disclosed in note 27, subsequent to year-end a €75 million revolving credit facility was entered into, comprising a €25 million tranche with a two-year term which may be extended for two additional one-year terms, and €50 million tranche with a six-month term. This facility is available in addition to the forecast cash position of €110 million under the severe but plausible scenario.

The Directors also considered the impact of the planned acquisition of all shares of Helix Investments Limited held by BizSpace Group Limited (hereinafter referred to as "Bizspace") on the cash flow forecasts prepared for the base case scenario and severe but plausible downside scenario and its impact on the going concern assumption. The acquisition is conditional upon a successful equity raise of approximately €150 million.

Bizspace had external debt facilities of approximately €173 million which mature in July 2022. Consent from the existing lenders relating to the change of control of Bizspace is a condition precedent of the transaction. The Directors have also considered the likelihood of being able to access refinancing options for the Bizspace external debt facility and the €50 million tranche of the revolving credit facility with a six-month term ahead of their maturity dates, including accessing the corporate bond market and refinancing with Bizspace's existing lender, who have provided the Directors with a non-binding term-sheet to refinance the loan facility prior to its expiration.

The assessment of the probability of completing the refinancing of Bizspace's €173 million external debt facility, should the planned acquisition complete, and the refinancing of the €50 million tranche of the revolving credit facility in May 2022 is a significant judgement made by the Directors in assessing going concern. This judgement has been made by the Directors by assessing the refinancing options available to the Group, its history of refinancing debt facilities including accessing the corporate bond market, discussions with its advisors and its evaluation of the availability of debt financing from lenders and investors and ability to complete the refinancing in the approximately six months available subsequent to the approval of these financial statements.

Having considered these factors the Directors have concluded that should the Bizspace acquisition proceed, following a successful equity raise, the Group has sufficient available cash and facilities to complete the transaction and there is a remote likelihood of not being able to arrange the required refinancing of the loan facilities in the timeframe required within the going concern period. As such, the Directors have not identified any material uncertainties which would cast significant doubt on the Group's ability to continue as a going concern for the duration of the going concern period. In each of the scenarios considered for going concern, including the impact of the planned acquisition of Bizspace, the Company is not dependent on any mitigating actions which would be available to the Group and include restricting dividends, reducing capital expenditure or the disposal of unencumbered assets that have a book value of €944.1 million as at 30 September 2021.

After due consideration, the Board believes it is appropriate to adopt the going concern basis in preparing the financial statements.

(f) 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 38 to 47 of the Group's Annual Report and Accounts 2021 (except for the principal risks and uncertainties related to the planned acquisition referred to in note 2(e)) and have been assessed in line with the requirements of the 2018 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 revenue is derived from operations in Germany. The majority of the Group's investment properties are multi-tenanted and mixed use and accordingly cannot be evaluated according to separate segments. 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

Other income relates primarily to income associated with conferencing and catering of €1,265,000 (30 September 2020: €972,000) and fee income from managed properties of €1,782,000 (30 September 2020: €1,044,000).

5. Operating profit

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

Direct costs

Administrative expenses

The expected credit loss provision has decreased during the period mainly due to the successful cash collection of outstanding trade receivables that were previously provided for. Exceptional items relate to a legal claim accrual adjustment (30 September 2020: costs directly attributable to Covid-19 which were mainly cost for signage and hygiene products). Employee costs as stated above relate to costs which are not recovered through service charge.

6. Employee costs and numbers

Included in the costs related to wages and salaries for the period are expenses of €1,403,000 (30 September 2020: €1,448,000) relating to the granting or award of shares under LTIPs and SIPs (see note 7). 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 (Cyprus) Limited and Sirius Corporate Services B.V. The average number of people employed by the Group during the period was 270 (30 September 2020: 251) expressed in full-time equivalents. In addition, as at 30 September 2021, the Board of Directors consists of six Non-executive Directors (30 September 2020: five) and two Executive Directors (30 September 2020: two).

7. Employee schemes

Equity-settled share-based payments

2018 LTIP

The LTIP for the benefit of the Executive Directors and the Senior Management Team was approved in 2018 with three separate grant dates. Awards granted under the LTIP are made in the form of nil-cost options which vest after the three year performance period with vested awards being subject to a further holding period of two years. Awards are split between ordinary and outperformance awards. Ordinary awards carry both adjusted net asset value per share ("TNR") (two-thirds of award) and relative total shareholder return ("TSR") (one-third of award) performance conditions and outperformance awards carry a sole TNR performance condition. The employees' tax obligation will be determined upon the vesting date of the share issue.

June 2020 grant

3,600,000 ordinary share awards were granted under the scheme on 15 June 2020 with a total charge for the award of €2,265,552. Charges for the awards are based on fair values calculated at the grant date and expensed on a straight-line basis over the period that individuals are providing service to the Company in respect of the awards. For the 15 June 2020 LTIP grant an expense of €405,000 is recognised in the half year consolidated statement of comprehensive income to 30 September 2021.

The following assumptions were used in calculating the fair value per share for the TNR and TSR elements of the award that were granted on 15 June 2020:

The weighted average fair value of share options granted on 15 June 2020 is €0.68.

Assumptions considered in this model include: expected volatility of the Company's share price, as determined by calculating the historical volatility of the Company's share price over the period immediately prior to the date of grant and commensurate with the expected life of the awards; dividend yield based on the actual dividend yield as a percentage of the share price at the date of grant; performance projection period; risk-free rate; and correlation between comparators.

June 2019 grant

3,760,000 ordinary share awards and 690,000 outperformance share awards were granted under the scheme on 16 June 2019 with a total charge for the awards of €2,145,511 over three years. Charges for the awards are based on fair values calculated at the grant date and expensed on a straight-line basis over the period that individuals are providing service to the Company in respect of the awards. For the 16 June 2019 LTIP grant an expense of €383,000 was recognised in the half year consolidated statement of comprehensive income to 30 September 2021.

The fair value per share for the TNR and TSR elements of the award was determined using Black-Scholes and Monte-Carlo models respectively with the following assumptions used in the calculation:

The weighted average fair value of share options granted on 16 June 2019 is €0.54.

Assumptions considered in this model include: expected volatility of the Company's share price, as determined by calculating the historical volatility of the Company's share price over the period immediately prior to the date of grant and commensurate with the expected life of the awards; dividend yield based on the actual dividend yield as a percentage of the share price at the date of grant; performance projection period; risk-free rate; and correlation between comparators.

January 2019 grant

In addition, as disclosed in the 2019 Annual Report, 4,000,000 ordinary share awards and 700,000 outperformance share awards were previously granted under the scheme on 15 January 2019.

The January 2019 grant vested on 21 May 2021. Vesting was at maximum level for all participants resulting in the exercise of 3,266,210 shares with a weighted average share price of €1.20 at the date of exercise. 1,433,790 shares have been surrendered in relation to the partial settlement of certain participants' tax liabilities arising in respect of the vesting.

2021 LTIP

The LTIP for the benefit of the Executive Directors and the Senior Management Team was approved in 2021. Awards granted under the LTIP are made in the form of nil-cost options which vest after the three year performance period with vested awards being subject to a further restricted period of two years when shares acquired on exercise cannot be sold. Awards are subject to adjusted net asset value per share ("TNR") (two-thirds of award) and relative total shareholder return ("TSR") (one-third of award) performance conditions. The employees' tax obligation will be determined upon the vesting date of the share issue.

August 2021 grant

4,154,119 ordinary share awards were granted under the scheme on 2 August 2021 with a total charge for the award of €4,705,196. Charges for the awards are based on fair values calculated at the grant date and expensed on a straight-line basis over the period that individuals are providing service to the Company in respect of the awards. For the 2 August 2021 LTIP grant an expense of €261,000 is recognised in the half year consolidated statement of comprehensive income to 30 September 2021.

The following assumptions were used in calculating the fair value per share for the TNR and TSR elements of the award that were granted on 2 August 2021:

* In accordance with IFRS 2, TNR is classed as a non-market performance condition. As such, the fair value has been calculated using a Black-Scholes model and does not take the expected outcome of the performance condition into account. The Company currently estimates the expected vesting outcome for the TNR award to be 100%.

* In accordance with IFRS 2, relative TSR is classed as a market-based performance condition. As such, projected performance and the likelihood of achieving the condition have been taken into account when calculating the fair value using a Monte-Carlo model. The model also uses assumptions for the expected volatility of comparator companies, the pairwise correlation between comparator companies and TSR performance between the start of the performance period and the date of grant.

The weighted average fair value of share options granted on 2 August 2021 is €1.13.

Expected volatility of the Company's share price was determined by calculating the historical volatility of the Company's share price over the period immediately prior to the date of grant, commensurate with the term to the end of the performance period.

2019 SIP

A SIP for the benefit of senior employees of the Company was approved in August 2019. The fair value was based on the Company's estimate of the shares that will eventually vest. Under the SIP, the awards were granted in the form of whole shares at no cost to the participants. Shares will vest after a three year performance period followed by a holding period of twelve months. The performance conditions used to determine the vesting of the award were based on the adjusted net asset value including dividends paid. As a result, under the scheme in August 2019 2,784,750 shares were granted (with an additional 70,000 allocated in the 2021 financial year), subject to performance criteria, and an expense including related costs of €284,000 was recognised in the half year consolidated statement of comprehensive income to 30 September 2021.

During the period 180,000 shares were forfeited due to employees in the scheme leaving the employment of the Company.

2020 SIP

Another SIP for the benefit of senior employees of the Company was approved in July 2020. The July 2020 grant vested on 21 May 2021. Vesting was at maximum level for all participants resulting in the exercise of 95,537 shares with a weighted average share price of €1.26 at the date of exercise. 24,463 shares have been surrendered in relation to the partial settlement of certain participants' tax liabilities arising in respect of the vesting.

2021 SIP

Another SIP for the benefit of senior employees of the Company was approved in 2021. Awards granted under the SIP are made in the form of a conditional right to receive a specified number of shares for nil cost which vest after the three year performance period with vested awards being subject to a further restricted period of one year when shares cannot be sold. Awards are subject to adjusted net asset value per share ("TNR") (two-thirds of award) and relative total shareholder return ("TSR") (one-third of award) performance conditions. The employees' tax obligation will be determined upon the vesting date of the share issue.

September 2021 grant

3,174,500 ordinary share awards were granted under the scheme on 7 September 2021 with a total charge for the award of €3,857,195. Charges for the awards are based on fair values calculated at the grant date and expensed on a straight-line basis over the period that individuals are providing service to the Company in respect of the awards. For the 7 September 2021 SIP grant an expense of €70,000 is recognised in the half year consolidated statement of comprehensive income to 30 September 2021.

The following assumptions were used in calculating the fair value per share for the TNR and TSR elements of the award that were granted on 7 September 2021:

* In accordance with IFRS 2, TNR is classed as a non-market performance condition. As such, the fair value has been calculated using a Black-Scholes model and does not take the expected outcome of the performance condition into account. The Company currently estimates the expected vesting outcome for the TNR award to be 100%.

* In accordance with IFRS 2, relative TSR is classed as a market-based performance condition. As such, projected performance and the likelihood of achieving the condition have been taken into account when calculating the fair value using a Monte-Carlo model. The model also uses assumptions for the expected volatility of comparator companies and the pairwise correlation between comparator companies and TSR performance between the start of the performance period and the date of grant.

The weighted average fair value of share options granted on 7 September 2021 is €1.21.

Expected volatility of the Company's share price was determined by calculating the historical volatility of the Company's share price over the period immediately prior to the date of grant, commensurate with the term to the end of the performance period.

Movements in the number of awards outstanding are as follows:

Employee benefit schemes

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

8. Finance income, finance expense and change in fair value of derivative financial instruments

Included within refinancing costs in the six month period ended 30 September 2021 were exit fees and early prepayment penalties of €5,579,000 that directly related to the early repayment of loans.

The change in fair value of derivative financial instruments of €160,000 (30 September 2020: (€132,000)) reflects the change in the market valuation of these financial instruments.

9. Taxation

Consolidated statement of comprehensive income

Deferred income tax liability

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% (31 March 2021: 15.825%). It has tax losses of €338,289,000 (31 March 2021: €325,257,000) that are for an indefinite period of time 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, the valuation of the Company LTIP and SIP, interest rate swaps and IFRS 16 "Leases" as they may not be used to offset taxable profits elsewhere in the Group as realisation is not assured. However, the available losses have been considered in the calculation of the deferred tax liability in relation to the revaluation of investment properties.

10. Earnings per share

The calculation of the basic, diluted, EPRA, 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.

The following table shows the reconciliation of basic to headline earnings, separately disclosing the impact before tax (gross column) and after tax (net column):

EPRA earnings

For more information on EPRA earnings refer to Annex 1.

For the calculation of basic, headline, adjusted, EPRA and diluted earnings per share the number of shares has been reduced by 3,295,750 own shares held (30 September 2020: 3,684,608), which are held by an Employee Benefit Trust on behalf of the Group.

The weighted average number of shares for the purpose of diluted, diluted EPRA, diluted headline 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 the revaluation of investment properties, changes in fair value of derivative financial instruments, gains and losses on disposals of properties (net of related tax), the gain on loss of control of subsidiaries (net of related tax), refinancing costs, exit fees and prepayment penalties (collectively the "EPRA earnings adjustments"), deferred tax in respect of the EPRA earnings adjustments, NCI relating to gain on revaluation and gain on sale of properties net of related tax, revaluation gain on investment property relating to associates and the related tax thereon.

11. Net asset value per share