REG - Sirius Real Estate - Final Results <Origin Href="QuoteRef">SRET.L</Origin> - Part 2
26/06/2017 07:05
- Part 2: For the preceding part double click ID:nRSZ0774Ja
5 68,793 55,790
Direct costs 6 (8,267) (6,212)
Net operating income 60,526 49,578
Surplus on revaluation of investment properties 13 49,782 44,168
Gain on disposal of properties 6 79 -
Administrative expenses 6 (23,883) (17,310)
Operating profit 86,504 76,436
Finance income 9 23 45
Finance expense 9 (10,224) (18,930)
Change in fair value of derivative financial instruments 133 (476)
Net finance costs (10,068) (19,361)
Profit before tax 76,436 57,076
Taxation 10 (9,500) (2,388)
Profit for the year 66,936 54,688
Profit attributable to:
Owners of the Company 66,911 54,671
Non-controlling interest 25 17
Total comprehensive income for the year 66,936 54,688
Earnings per share
Basic earnings per share 11 8.13c 7.51c
Diluted earnings per share 11 7.90c 7.13c
Basic EPRA earnings per share 11 3.18c 1.88c
The notes on pages 73 to 97 form an integral part of these financial
statements.
Consolidated statement of financial position
as at 31 March 2017
Notes 31 March2017E 000 31 March2016E 000
Non-current assets
Investment properties 13 727,295 687,453
Plant and equipment 15 2,564 1,943
Goodwill 16 3,738 3,738
Deferred tax assets 10 240 183
Total non-current assets 733,837 693,317
Current assets
Trade and other receivables 17 14,290 11,936
Derivative financial instruments - 19
Cash and cash equivalents 18 48,695 19,874
Investment property held for sale 14 96,000 -
Total current assets 158,985 31,829
Total assets 892,822 725,146
Current liabilities
Trade and other payables 19 (33,963) (29,541)
Interest-bearing loans and borrowings 20 (7,068) (5,642)
Current tax liabilities (465) (170)
Derivative financial instruments (7) (715)
Total current liabilities (41,503) (36,068)
Non-current liabilities
Interest-bearing loans and borrowings 20 (334,724) (288,348)
Derivative financial instruments (334) (1,875)
Deferred tax liabilities 10 (20,993) (11,747)
Total non-current liabilities (356,051) (301,970)
Total liabilities (397,554) (338,038)
Net assets 495,268 387,108
Equity
Issued share capital 23 - -
Other distributable reserve 24 470,318 429,094
Retained earnings 24,869 (42,042)
Total equity attributable to the equity holders of the Company 495,187 387,052
Non-controlling interests 81 56
Total equity 495,268 387,108
EPRA net asset value per share 12 57.84c 52.72c
The notes on pages 73 to 97 form an integral part of these financial
statements.
The financial statements on pages 69 to 72 were approved by the Board of
Directors on 23 June 2017 and were signed on its behalf by:
James Peggie
Senior Independent Director
Consolidated statement of changes in equity
for the year ended 31 March 2017
IssuedsharecapitalE000 OtherdistributablereserveE000 RetainedearningsE000 Total equityattributable tothe equityholders of theCompanyE000 Non-controllinginterestsE000 TotalequityE000
As at 31 March 2015 - 384,937 (96,713) 288,224 39 288,263
Shares issued, net of costs - 48,375 - 48,375 - 48,375
Share-based payment transactions - 3,127 - 3,127 - 3,127
Dividends paid - (7,345) - (7,345) - (7,345)
Total comprehensive income for the year - - 54,671 54,671 17 54,688
As at 31 March 2016 - 429,094 (42,042) 387,052 56 387,108
Shares issued, net of costs - 43,620 - 43,620 - 43,620
Share-based payment transactions - 4,289 - 4,289 - 4,289
Conversion of shareholder loan - 5,000 - 5,000 - 5,000
Dividends paid - (11,685) - (11,685) - (11,685)
Total comprehensive income for the year - - 66,911 66,911 25 66,936
As at 31 March 2017 - 470,318 24,869 495,187 81 495,268
The notes on pages 73 to 97 form an integral part of these financial
statements.
Consolidated statement of cash flows
for the year ended 31 March 2017
Notes Year ended31 March2017E000 Year ended31 March2016E000
Operating activities
Profit after tax 66,911 54,671
Taxation 9,500 2,388
Non-controlling interests 25 17
Gain on sale of properties (79) -
Share-based payments 4,290 1,538
Surplus on revaluation of investment properties 12 (49,782) (44,168)
Change in fair value of derivative financial instruments (133) 476
Depreciation 6 868 634
Finance income 9 (23) (45)
Finance expense 9 9,795 12,888
Exit fees/prepayment penalties 9 428 5,929
Cash flows from operations before changes in working capital 41,800 34,328
Changes in working capital
Decrease/(increase) in trade and other receivables 4,984 (356)
Increase in trade and other payables 3,168 3,707
Taxation (paid)/received (17) 168
Cash flows from operating activities 49,935 37,847
Investing activities
Purchase of investment properties (76,265) (82,716)
Prepayments relating to new acquisitions (6,547) (2,147)
Capital expenditure (16,540) (14,391)
Purchase of plant and equipment (1,523) (821)
Net proceeds on disposal of properties 7,201 -
Interest received 23 45
Cash flows used in investing activities (93,651) (100,030)
Financing activities
Issue of shares 43,620 48,873
Dividends paid (11,685) (7,345)
Proceeds from loans 211,500 99,088
Repayment of loans (159,077) (60,383)
Exit fees/prepayment penalties (428) (5,929)
Finance charges paid (11,393) (12,384)
Cash flows from financing activities 72,537 61,920
Increase/(decrease) in cash and cash equivalents 28,821 (263)
Cash and cash equivalents at the beginning of the period 19,874 20,137
Cash and cash equivalents at the end of the period 18 48,695 19,874
The notes on pages 73 to 97 form an integral part of these financial
statements.
Notes to the financial statements
for the year ended 31 March 2017
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") (secondary listing).
The consolidated financial information of the Company comprises that of the
Company and its subsidiaries (together referred to as the "Group") for the
year ended 31 March 2017.
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 consolidated financial information 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 consolidated financial information is presented in euros and all values
are rounded to the nearest thousand (E000) except where otherwise indicated.
As at the reporting date, the Company has elected to present consolidated
financial statements in a manner which makes them more comparable with similar
businesses. As a result, the consolidated statement of comprehensive income
for the year ended 31 March 2016 has been re-presented. The impact on total
comprehensive income for the comparative period is Enil as shown in the table
below:
Previously reportedyear ended31 March 2016E 000 Re-presentedyear ended31 March 2016E 000
Rental income 55,790 55,790
Direct costs (15,832) (6,212)
Net rental income/net operating income 39,958 49,578
Surplus on revaluation of investment properties 44,168 44,168
Gain on disposal of properties - -
Administrative expenses (5,603) (17,310)
Other operating expenses (2,199) -
Operating profit 76,324 76,436
Finance income 45 45
Finance expense (18,817) (18,930)
Change in fair value of derivative financial instruments (476) (476)
Net finance costs (19,248) (19,361)
Profit before tax 57,076 57,076
Taxation (2,388) (2,388)
Profit for the year 54,688 54,688
Profit attributable to:
Owners of the Company 54,671 54,671
Non-controlling interest 17 17
Total comprehensive income for the year 54,688 54,688
(b) Statement of compliance
The consolidated financial information has been prepared in accordance with
the requirements of the Listing Rules of the UK Listing Authority, and in
accordance with IFRS adopted for use in the EU ("Adopted IFRS") and the
Companies (Guernsey) Law, 2008. The consolidated financial statements give a
true and fair view and are in compliance with the Companies (Guernsey) Law,
2008.
(c) 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 the foreseeable future. Accordingly, the
Board continued to adopt the going concern basis in preparing the historical
financial information.
(d) Basis of consolidation
The consolidated financial information comprises the financial information of
the Group as at 31 March 2017. The financial information of the subsidiaries
is prepared for the same reporting period as the Company, using consistent
accounting policies.
All intra-group balances and transactions and any unrealised income and
expenses arising from intra-group transactions are eliminated in preparing the
consolidated financial statements.
Subsidiaries are fully consolidated from the date of acquisition, being the
date on which the Group obtains control, and continue to be consolidated until
the date that such control ceases.
Non-controlling interests represent the portion of profit or loss and net
assets not held by the Group and are presented separately in the consolidated
statement of comprehensive income and within equity in the consolidated
statement of financial position, separately from the Company's shareholders'
equity.
(e) Acquisitions
Property acquisitions that are not accounted for as business combinations
under IFRS 3 are dealt with as acquisitions of property assets.
(f) Foreign currency translation
The consolidated financial information is presented in euros, which is the
functional and presentational currency of all members of the Group.
Transactions in foreign currencies are initially recorded in the functional
currency at the exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are retranslated into
the functional currency at the exchange rate ruling at the statement of
financial position date. All differences are taken to the statement of
comprehensive income.
(g) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group and the revenue can be reliably measured. In
particular:
Rental income
Rental income from operating leases is recognised on a straight-line basis
over the term of the relevant lease unless another systematic basis is more
representative of the time pattern in which the benefit derived from the
leased asset is diminished.
Fixed or determinable rental increases, which can take the form of actual
amounts or agreed percentages, are recognised on a straight-line basis over
the term of material leases only. If the increases are related to a price
index to cover inflationary cost increases then the policy is not to spread
the amount but to recognise them when the increase takes place.
The value of rent free periods and all similar lease incentives is spread on a
straight-line basis over the term of material leases only. Where there is a
reasonable expectation that the tenant will exercise break options, the value
of rent free periods and all similar lease incentives is booked up to the
break date.
Interest income
Interest income is recognised as it accrues (using the effective interest
method, which is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial instrument).
Service charges
Service charge income receivable is not treated as revenue; rather, it is set
off against the direct costs to which such income relates.
(h) Leases
Group as lessor
Leases where the Group does not transfer substantially all the risks and
benefits of ownership of the asset are classified as operating leases.
(i) Income tax
Current income tax
Current income tax assets and liabilities are measured at the reporting date
at the amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted by the reporting date.
Certain subsidiaries may be subject to foreign taxes in respect of foreign
sources of income. Sirius Real Estate Limited is UK resident for tax
purposes.
Deferred income tax
Deferred income tax is recognised on all temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the
consolidated financial statements, with the following exceptions:
• where the temporary difference arises from the initial recognition of
goodwill or of an asset or liability in a transaction that is not a business
combination that at the time of the transaction affects neither accounting nor
taxable profit or loss;
• in respect of taxable temporary differences associated with investments
in subsidiaries, where the timing of the reversal of the temporary differences
can be controlled and it is probable that the temporary differences will not
reverse in the foreseeable future; and
• deferred tax assets are only recognised to the extent that it is
foreseeable that taxable profit will be available against which the deductible
temporary differences, carried forward tax credits or tax losses can be
utilised.
Deferred income tax assets and liabilities are measured on an undiscounted
basis at the tax rates that are expected to apply in the year when the related
asset is realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the reporting date.
(j) Sales tax
Revenues, expenses and assets are recognised net of the amount of sales tax
except:
• where the sales tax incurred on a purchase of assets or services is not
recoverable from the taxation authority, in which case the sales tax is
recognised as part of the cost of acquisition of the asset or as part of the
expense item as applicable; and
• receivables and payables that are stated with the amount of
sales tax included.
The net amount of sales tax recoverable from, or payable to, the taxation
authority is included as part of receivables or payables in the statement of
financial position.
(k) Investment properties
Investment properties are properties owned by the Group which are held either
for long-term rental income or for capital appreciation or both.
Investment properties are initially recognised at cost, including transaction
costs when ownership of the property is transferred. Where recognition
criteria are met the carrying amount includes subsequent costs to add to or
replace part of an investment property. Subsequent to initial recognition,
investment properties are stated at fair value, which reflects market
conditions at the reporting date.
Investment properties are derecognised when the risks and rewards of ownership
of the asset are transferred to a third party.
Gains or losses arising from changes in the fair values of investment
properties are included in profit or loss of the statement of comprehensive
income in the period in which they arise.
The fair value of the Group's investment properties at 31 March 2017 has been
arrived at on the basis of a valuation carried out at that date by Cushman &
Wakefield LLP (2016: Cushman & Wakefield LLP), an independent valuer. The
valuations are in accordance with standards complying with the Royal Institute
of Chartered Surveyors ("RICs") approval and the conceptual framework that has
been settled by the International Valuation Standards Committee.
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 ten year discounted cash flow model 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 a ten year period. After ten years, a determining residual
value (exit scenario) is calculated. A capitalisation rate is applied to the
more uncertain future income, discounted to present value.
Directors can make discretionary impairments of non-core assets when strong
evidence exists to support an adjustment. In such circumstances the Audit
Committee performs a review and satisfies itself the impairment can be fully
substantiated and appropriately supported before a write down is recognised in
the Company's books and records.
(l) Disposals of investment property
Investment property disposals are recognised in the financial information on
the date of completion. Profit or loss arising on disposal of investment
properties is calculated by reference to the most recent carrying value of the
asset adjusted for subsequent capital expenditure.
(m) Investment properties held for sale
Investment properties held for sale are separately disclosed at the asset's
fair value as determined by the notarised sales price. Expected selling costs
are accrued within administrative expenses. In order for an investment
property held for sale to be recognised, the following conditions must be
met:
• the asset must be available for immediate sale in its present
condition and location;
• the asset is being actively marketed;
• the asset's sale is expected to be completed within twelve
months of classification as held for sale;
• there must be no expectation that the plan for selling the
asset will be withdrawn or changed significantly; and
• the successful sale of the asset must be highly probable.
(n) Plant and equipment
Recognition and measurement
Items of plant and equipment are stated at cost less accumulated depreciation
and impairment losses.
Depreciation
Where parts of an item of plant and equipment have different useful lives,
they are accounted for as separate items of plant and equipment.
Depreciation is charged in the statement of comprehensive income on a
straight-line basis over the estimated useful lives of each part of an item of
the fixed assets. The estimated useful lives are as follows:
Plant and equipment four to ten years
Fixtures and fittings four years
Depreciation methods, useful lives and residual values are reviewed at each
reporting date.
(o) Goodwill
Goodwill arising on consolidation represents the excess of the cost of the
purchase consideration over the Group's interest in the fair value of the
identifiable assets and liabilities of a subsidiary at the date of
acquisition.
Goodwill is initially recognised at cost and is subsequently measured at cost
less any accumulated impairment losses. Goodwill is not amortised but is
tested annually for impairment, or more frequently when there is an indication
that the business to which the goodwill applies may be impaired.
(p) Trade receivables
Trade receivables are recognised initially at fair value and are subsequently
measured at amortised cost using the effective interest method, less an
allowance for impairment.
(q) Treasury Shares
Own equity instruments which are reacquired ("Treasury Shares") are deducted
from equity. No gain or loss is recognised in the statement of comprehensive
income on the purchase, sale, issue or cancellation of the Group's equity
instruments.
(r) Share-based payments
The grant date fair value of share-based payment awards granted to employees
is recognised as an employee expense, with a corresponding increase in equity,
over the period that the employees unconditionally become entitled to the
awards.
The amount recognised as an expense is adjusted to reflect the number of
awards for which the related service and non-market vesting conditions are
expected to be met, such that the amount ultimately recognised as an expense
is based on the number of awards that meet the related service and non-market
performance conditions at the vesting date.
(s) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand, demand deposits
and other short-term, highly liquid investments with original maturities of
three months or less that are readily convertible to a known amount of cash
and are subject to an insignificant risk of change in value.
(t) Bank borrowings
Interest-bearing bank loans and borrowings are initially recorded at fair
value, net of direct issue costs.
After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the effective interest method.
(u) Trade payables
Trade payables are initially measured at fair value and are subsequently
measured at amortised cost, using the effective interest rate method.
(v) Equity instruments
Equity instruments issued by the Company are recorded at the proceeds
received, net of direct issue costs.
(w) Dividends
Dividend distributions to the Company's shareholders are recognised as a
liability in the consolidated financial information in the period in which the
dividends are approved by the Company's Board. The final dividend relating to
the year ended 31 March 2017 will be approved and recognised in the financial
year ended 31 March 2018.
(x) Impairment excluding investment properties
(i) Financial assets
A financial asset (excluding financial assets at fair value through profit and
loss) is assessed at each reporting date to determine whether there is any
objective evidence that it is impaired. A financial asset is considered to be
impaired if objective evidence indicates that one or more events have had a
negative effect on the estimated future cash flows of that asset. Objective
evidence of impairment includes observable data that comes to the attention of
the Group about one or more of the following loss events:
• significant financial difficulty of the debtor;
• excessive or persistent debtor ageing;
• a breach of contract, such as a default or delinquency in
interest or principal payments; or
• it becomes probable that the debtor will enter bankruptcy or
other financial reorganisation.
An impairment loss in respect of a financial asset measured at amortised cost
is calculated as the difference between its carrying amount and the present
value of the estimated future cash flows discounted at the original effective
interest rate.
Individually significant financial assets are tested for impairment on an
individual basis. The remaining financial assets are assessed collectively in
groups that share similar credit risk characteristics.
All impairment losses are recognised in profit or loss of the statement of
comprehensive income.
An impairment loss is reversed if the reversal can be related objectively to
an event occurring after the impairment loss was recognised. For financial
assets measured at amortised cost, the reversal is recognised in profit or
loss of the statement of comprehensive income.
(ii) Non-financial assets
The carrying amounts of the Group's non-financial assets, other than
investment property and deferred tax assets, are reviewed at each reporting
date to determine whether there is any indication of impairment. If any such
indication exists, then the asset's recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit is the greater of
its value in use and its fair value less costs to sell. In assessing value in
use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. For the purpose of
impairment testing, assets are grouped together into the smallest group of
assets that generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or groups of assets (the
"cash-generating unit").
An impairment loss is recognised if the carrying amount of an asset or
cash-generating unit exceeds its estimated recoverable amount. Impairment
losses are recognised in profit or loss of the statement of comprehensive
income. Impairment losses recognised in respect of cash-generating units are
allocated first to reduce the carrying amount of any goodwill allocated to the
units and then to reduce the carrying amount of the other assets in the unit
(or group of units) on a pro rata basis.
(y) Compound financial instruments
Compound financial instruments issued by the Group comprise convertible notes
denominated in euros that can be converted to share capital at the option of
the holder, when the number of shares to be issued is fixed.
The liability component of a compound financial instrument is recognised
initially at the fair value of a similar liability that does not have an
equity conversion option. The equity component is recognised initially at the
difference between the fair value of the compound financial instrument as a
whole and the fair value of the liability component. Any directly attributable
transaction costs are allocated to the liability and equity components in
proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound
financial instrument is measured at amortised cost using the effective
interest method. The equity component of a compound financial instrument is
not remeasured subsequent to initial recognition.
Interest related to the financial liability is recognised in profit or loss.
On conversion, the financial liability is reclassified to equity and no gain
or loss is recognised.
(z) Standards effective in the period
The accounting policies adopted are consistent with those of the previous
financial year, except that the following new standard has been adopted in the
current period:
• Annual Improvements to IFRSs 2012-2014 Cycle.
The adoption of this has not had any significant impact on the amounts
reported in the Group financial information.
(aa) Standards and interpretations in issue and not yet effective
IFRS 9 'Financial Instruments' - In November 2009 and October 2010, the IASB
issued IFRS 9 'Financial Instruments', which represents part of a project to
replace IAS 39 'Financial Instruments: Recognition and Measurement'. It
replaces the parts of IAS 39 that relate to the classification and measurement
of financial instruments. IFRS 9 requires financial assets to be classified
into two measurement categories: those measured at fair value and those
measured at amortised cost. The determination is made at initial recognition.
The classification depends on the entity's business model for managing its
financial instruments and the contractual cash flow characteristics of the
instrument. For financial liabilities, the standard retains most of the IAS 39
requirements. The main change is that, in cases where the fair value option is
taken for financial liabilities, the part of a fair value change due to an
entity's own credit risk is recorded in other comprehensive income rather than
the income statement, unless this creates an accounting mismatch. The IASB
currently has an active project to make limited amendments to the
classification and measurement requirements of IFRS 9 and to add new
requirements to address the impairment of financial assets and hedge
accounting. A final standard in relation to hedge accounting is now in issue.
The IASB has tentatively set the effective date of IFRS 9 as periods beginning
on or after 1 January 2018; it has not yet had EU endorsement. The Group has
yet to assess IFRS 9's full impact and will also consider the impact of the
remaining phases of IFRS 9 when completed by the IASB.
IFRS 15 'Revenue from Contracts with Customers' - In 2016, the IASB amended
the standard to clarify application issues identified by stakeholders. The
clarifications relate principally to identifying performance obligations,
accounting for licences of intellectual property and agent vs principal
considerations. A five step model will be applied to determine when to
recognise revenue, and at what amount. Depending on whether certain criteria
are met, revenue is recognised either over time, in a manner that best
reflects the Group's performance, or at a point in time when control of the
goods or services is transferred to the customer. The new standard requires
both qualitative and quantitative disclosures detailing: contracts with
customers, significant judgements and assets recognised from the costs to
obtain or fulfil a contract with a customer. IFRS 15 will not be effective
before 1 January 2018; however, early adoption is permitted. The Group may
choose to adopt the new standard either retrospectively or through a
cumulative effect adjustment as of the start of the first period for which it
applies the new standard. The Group has yet to assess IFRS 15's full impact,
and a full analysis will be included in the March 2018 accounts.
IFRS 16 'Leases' - In 2016, the IASB introduced a new leases standard, with
the accounting treatment of leases by lessees fundamentally changing. IFRS 16
eliminates the current dual accounting model for lessees, which distinguishes
between on-balance sheet finance leases and off-balance sheet operating
leases. Instead, there is a single, on-balance sheet accounting model that is
similar to current finance lease accounting. As a result of the amendments,
lessees will appear to become more asset rich but also more heavily indebted.
Impacts are not limited to the balance sheet. There are also changes in
accounting over the life of the lease. In particular, companies will now
recognise a front-loaded pattern of expense for most leases, even when they
pay annual rents. Lessor accounting will remain similar to current practice,
with lessors classifying leases as finance and operating leases. IFRS 16 will
not be effective before 1 January 2019. The Group has yet to assess IFRS 16's
full impact, and a full analysis will be included in the March 2018 accounts.
3. Significant accounting judgements, estimates and assumptions
Judgements
In the process of applying the Group's accounting policies, which are
described in note 2, the Directors have made the following judgements that
have the most significant effect on the amounts recognised in the financial
information:
Operating lease commitments - Group as lessor
The Group has entered into commercial property leases on its investment
property portfolio. The Group has determined that it retains all the
significant risks and rewards of ownership of these properties and therefore
accounts for them as operating leases.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below.
Valuation of investment properties
The fair value of the Group's investment properties, excluding those held for
sale of E735.3 million (31 March 2016: E695.2 million), was determined by
Cushman & Wakefield LLP (2016: Cushman & Wakefield LLP), an independent
valuer. After adjusting investment properties for lease incentive accounting
and Directors' discretionary impairments of non-core assets described below,
the book value of investment properties is shown as E727.3 million (31 March
2016: E687.5 million).
The Cushman and Wakefield LLP valuation is based upon assumptions including
future rental income, anticipated maintenance costs and an appropriate
discount rate. The properties are valued on the basis of a ten year discounted
cash flow model 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 a ten year
period. After ten years, a determining residual value (exit scenario) is
calculated. A capitalisation rate is applied to the more uncertain future
income, discounted to a present value.
The Directors also perform a review of the Cushman and Wakefield LLP valuation
taking into consideration factors or information which may or may not have
been factored into the Cushman and Wakefield LLP valuation. As a result of
this review Directors have included an investment property write down
amounting to E4,968,000 relating to non-core assets in the year under review.
See note 13 for further details.
As a result of the level of judgement 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 on the statement of
financial position.
Service charge
Service charge expenses are based on actual costs incurred and invoiced
together with an estimate of costs which have been incurred at 31 March but
are yet to be invoiced. The estimates are based on expected consumption rates
and historical trends and take into account market conditions at the time of
recording.
Service charge income is based on service charge expense and takes into
account recovery rates which are largely derived from estimated occupancy
levels.
Deferred tax
Deferred tax is measured at rates prevailing at the balance sheet date. Such
rates are subject to governmental changes that are outside the control of the
entity.
Additionally, management has to assess the recoverability of deferred tax
assets and certain assets are not recognised due to uncertainties over the
timing and nature of future events that will lead to their realisation.
Accordingly, these unrecognised assets may have an impact on future corporate
tax changes in certain circumstances.
Impairment of goodwill
The Group is required to test on an annual basis whether goodwill has suffered
any impairment. The assessment and quantification of any such impairment
charges are determined by key management judgements in terms of:
• detailed short-term budgeting on which the recoverable amounts calculated
are based;
• determining the medium and long-term growth rates that are used in
extrapolating these budgets over the goodwill's indefinite useful economic
life; and
• the discount rate applied to these extrapolated forecasts to calculate the
present value of the cash flows.
Long-Term Incentive Plan ("LTIP")
A new LTIP scheme for the benefit of the Executive Directors and the Senior
Management Team was approved in October 2015. The fair value of the LTIP as
determined at the grant date is expensed on a straight-line basis over the
vesting and holding period, based on the Company's estimate of the shares that
will eventually vest and adjusted for the effect of non-market-based vesting
conditions.
Assumptions considered in the valuation of the LTIP include: expected
volatility of the Company's share price, as determined by calculating the
historical volatility of the Company's share price over the historical 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; expected life of the
awards; risk-free rates; and correlation between comparators.
4. 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 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 Board of Directors, which is provided
with consolidated IFRS information on a quarterly basis.
5. Revenue
Year ended31 March 2017E000 Year ended31 March 2016E000
Rental and other income from investment properties 68,793 55,790
Other income relates primarily to income associated with conferencing and
catering.
6. Operating profit
The following items have been (credited)/charged in arriving at operating
profit:
Direct costs
Year ended31 March 2017E 000 Re-presentedyear ended31 March 2016E 000
Service charge income (40,976) (36,730)
Property costs 47,563 41,848
Non-recoverable maintenance 1,680 1,094
Irrecoverable costs 8,267 6,212
Gain on disposal of properties
Included within gain on disposal of E79,000 (2016: nil) are total proceeds of
E7,370,000 (2016: nil) and costs of E7,291,000 (2016: nil). The gross gain on
properties sold amounted to E651,000 (2016: nil) and gross loss on properties
sold amounted to E572,000 (2016: nil).
Administrative expenses
Year ended31 March 2017E 000 Re-presentedyear ended31 March 2016E 000
Audit fee 293 535
Legal and professional fees 2,128 1,661
Other administration costs 2,368 2,545
LTIP 4,136 1,452
Staff costs 9,305 8,567
Director fees 241 170
Depreciation 868 634
Marketing 1,584 1,281
Selling costs relating to assets held for sale 551 -
Non-recurring items 2,409 465
Administrative expenses 23,883 17,310
During the year fees of E500,000 (2016: E20,000) were paid to auditors and
their associates in respect of other non-audit services including those
relating to the listing on the main markets of the London and Johannesburg
stock exchanges referred to below.
Non-recurring items relate primarily to costs associated with the listing on
the main markets of both the London and Johannesburg stock exchanges including
sponsor, valuation, corporate finance, legal and other professional fees.
Staff costs as stated above relate to costs which are not recovered through
service charge.
7. Employee costs and numbers
Year ended31 March 2017E000 Year ended31 March 2016E000
Wages and salaries 13,970 11,301
Social security costs 2,544 2,057
Pension 174 213
Other employment costs 215 58
16,903 13,629
The costs for the year ended 31 March 2017 include those relating to Executive
Directors and an expense of E4,136,000 (31 March 2016: E1,452,000) relating to
the granting or award of shares under LTIPs (see note 8).
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 and Sirius Corporate
Services B.V. The average number of people employed by the Group during the
year was 204 (31 March 2016: 182), expressed in full-time equivalents. In
addition, the Board of Directors consists of five Non-executive Directors (31
March 2016: three) and two Executive Directors (31 March 2016: two) as at 31
March 2017.
8. Equity-settled share-based payments
A new 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 is expensed on a straight-line basis over the vesting and holding
period, based on the Company's estimate of the shares that will eventually
vest and adjusted for the effect of non-market-based vesting conditions. Under
the LTIP, the awards are granted in the form of whole shares at no cost to the
participants. Shares vest after the three year performance period followed by
a holding period of twelve months. The performance conditions used to
determine the vesting of the award are 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 and an expense of E1,452,000 was recognised
in the consolidated statement of comprehensive income to 31 March 2016.
A total of 1,300,000 shares were forfeited in the year to 31 March 2017. An
expense of E4,136,000 was recognised in the statement of comprehensive income
to 31 March 2017.
Movements in the number of shares outstanding and their weighted average
exercise prices are as follows:
Year ended Year ended
31 March 2017 31 March 2016
Number ofshares Weightedaverageexerciseprice E000 Number ofshares Weightedaverageexerciseprice E000
Balance outstanding as at the beginning of the period (nil exercisable) 25,150,000 - - -
Maximum granted during the period - - 25,150,000 -
Forfeited during the period (1,300,000) - - -
Exercised during the period - - - -
Balance outstanding as at the end of the period (nil exercisable) 23,850,000 - 25,150,000 -
The fair value per share was determined using the Monte Carlo model, with the
following assumptions used in the calculation as at grant date:
Weighted average share price - E 0.52
Weighted average exercise price - E -
Expected volatility - % 20
Expected life - years 2.48
Risk free rate based on European treasury bonds' rate of return - % (0.11)
Expected dividend yield - % 3.41
Assumptions considered in the 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 historical 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; expected life of the awards; risk free rates; and
correlation between comparators.
Employee benefit scheme
The original LTIP for the benefit of the Executive Directors and the Senior
Management Team expired at the end of March 2015. As a result, a total of
3,471,200 ordinary shares were issued during the financial year to 31 March
2016.
During the period 313,608 shares were issued to the Company's management
through its MSP programme (31 March 2016: 134,918).
A reconciliation of share-based payments and their impact on the consolidated
statement of changes in equity is as follows:
Year ended31 March 2017E000 Year ended31 March 2016E000
Charge relating to original LTIP - 1,625
Charge relating to share matching 153 50
Charge relating to new LTIP 4,136 1,452
Share-based payment transactions as per consolidated statement of changes in equity 4,289 3,127
9. Finance income and expense
Year ended31 March 2017E000 Year ended31 March 2016E000
Bank interest income 23 45
Finance income 23 45
Loan interest expense (7,151) (9,945)
Bank charges (139) (113)
Amortisation of capitalised finance costs (1,172) (1,277)
Refinancing costs (1,762) (7,595)
Finance expense (10,224) (18,930)
Net finance expense (10,201) (18,885)
The refinancing costs on derecognition of loans for the year ended 31 March
2017 relate to the costs associated with the refinancing of the Berlin Hyp
AG/Deutsche Pfandbriefbank AG facility with a new E137 million loan facility
and the refinancing of the Berlin Hyp AG facility with a new E70 million loan
facility. The refinancing costs on derecognition of loans in the year ended 31
March 2016 relate to the costs associated with the refinancing of the
Macquarie loan facilities with the E59 million SEB AG loan facility.
10. Taxation
Consolidated statement of comprehensive income
Year ended31 March 2017E000 Year ended31 March 2016E000
Current income tax
Current income tax
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