Sirius Real Estate Regulatory News (SRE)

Sirius Real Estate Limited

("Sirius" or "the Company")

Trading Statement 

Sirius Real Estate Limited is pleased to provide the following trading update for the 12 months to 31 March 2012.

In January 2012, the Company completed the internalisation of the core management team, thereby aligning the interests of all stakeholders in the business and bringing the operating platform under the control and ownership of Sirius. As part of the internalisation, the Company acquired Sirius Facilities GmbH, the provider of property and asset management services to the Group for the last five years. The majority of its c.150 strong team led by Andrew Coombs and Alistair Marks have moved to the Company as part of this acquisition. The internalisation is expected to reduce the operating costs of the business by approximately €2m per annum.

During the year under review, the Company has traded well, and is expected to perform in line with management's expectations for the year. Rental income is expected to increase to €45.2m in the year compared to €43.6m last year (after excluding €1.9m of surrender premiums), driven primarily by higher average rate per sqm on new sales. In addition, the Company is expected to see further reductions in non-recovered service charge costs and overhead costs. The benefits from these will be offset by higher than expected write-offs of old service charge balancing amounts and debts that have been in legal hands.

Occupancy has increased to 78% in the year, up from 76% at the start of the financial year. This increase has come from new sales of 128,345 sqm at €5.24 per sqm (2010: 159,292 sqm at €4.41 per sqm) and lower moveouts of 91,933 sqm compared to 123,768 sqm in the previous year.

Increasing occupancy and rental rates continue to be at the heart of the Company's strategic plans and the higher rates achieved on new lettings in the year is a reflection of the Company's focus to achieve increased yields from the portfolio. Another year of more than 125,000 sqm of new sales is also indicative of the Company's successful marketing activities and the continued demand from the German SME sector for flexible lettings solutions. Demand has come from a broad mix of light industrial, logistics, office and storage users. In addition, the Company has continued to benefit from Smartspace, a highly flexible solution for young businesses, Flexilager, a low cost storage solution and the growing demand for conferencing facilities.

The benefits from reducing the service charge costs, metering of utilities, better allocation of facility management costs, increasing the service charge prepayments from tenants and general reduction in overheads is expected to add approximately €1m to the Company's profit in the year. This has been achieved despite substantial increases in heating, cooling and electricity costs. This reduction in the non-recovered cost base is a key part of increasing operating cashflow.

As at 31 March 2012, cash reserves were €9.1 million, (30 September €13m). To preserve cash resources, going forward the Company's main target is to be able to service its borrowings and cover future capital expenditure requirements from operational cashflow. This will be achieved through continued optimization of the property portfolio and selective disposals. As previously announced, the Company sold a parcel of land at the Bremen Brinkmann site and part of one of the sites in Bonn generating close to €2.5m of proceeds and around €700k of profit. The Company is currently in advanced discussions with regard to a further similar disposal plus the disposal of an entire non-core site. 

As at 31 March 2012 the Company's borrowings, excluding capitalised loan costs, totalled €296m (30 September 2011: €300.0m), representing an LTV of 60.1% on DTZ's latest valuation at 30 September 2011 (30 September 2011: 61.0%). Both banking facilities are operating within covenants and the facility with the Royal Bank of Scotland ("RBS") matures in October 2012. Discussions with RBS are ongoing.

The Company looks forward to providing a further update with the announcement of its final results on 13 June 2012.

Enquiries:

Sirius

Andrew Coombs, CEO +49 (0) 30 285010110

Alistair Marks, CFO

Peel Hunt

Capel Irwin 020 7418 8900

Alex Vaughan

Cardew Group

Tim Robertson 020 7930 0777

Georgina Hall