Sdic Power. Regulatory News (SDIC)

29 Mar 2007 07:03

Speymill Deutsche Immobilien Co PLC29 March 2007 Speymill Deutsche Immobilien Company plc ("SDIC" or "the Company")Interim results for the six months to 31 December 2006 Speymill Deutsche Immobilien Company plc (AIM: SDIC), the pan-German residentialproperty investment company listed on AIM, is pleased to announce its interimresults for the six months to 31 December 2006. Highlights: - As at 31 December 2006: o residential properties notarised (i.e. committed to be purchased) for a cumulative cash consideration of EUR746.3 million; o EUR478 million (including acquisition costs) of purchases completed - As at 15 March 2007: o residential properties notarised for a cumulative cash consideration of EUR902.4 million; o EUR576.5 million in actual property payments (including deposits or part payments, excluding acquisition costs) - Blended net initial property yield at notarisation of 7.1%, anticipated to rise to 7.6% within 12 months of full investment - Pre-tax profit of GBP 901,000 for the six months to 31 December 2006 Raymond Apsey, Chairman of SDIC, stated: "I believe that significant progress has been achieved by the Company inbuilding a strong and balanced portfolio of investments in the pan-Germanresidential property market and that the Company is well placed to fulfil theobjectives stated at launch. The Manager and Investment Adviser have continuedconfidence in the prospects for the German residential property market." 29 March 2007 Notes to editors: - Speymill Deutsche Immobilien Company plc is a pan-German residential property investment company which listed on AIM on 17 March 2006. - The Company raised £170 million in a placing on its admission. - The Company was established to invest in the German property market and, predominantly, in the residential sector. It is anticipated that once fully invested, the Company will have a balanced portfolio of properties throughout Germany. - The Company's objective is to provide Shareholders with an attractive level of income together with the prospect for long-term capital growth. - The Manager is Speymill Property Managers Limited and the Investment Adviser is GOAL Service GmbH. The Manager and Investment Adviser are responsible for identifying new investment opportunities. - The Manager is a subsidiary of Speymill Group plc (AIM: SYG) while the Investment Adviser is a joint venture partner of Speymill Group plc (which owns 51% of the venture). Chairman's Statement I am pleased to present the interim results of the Company for the six monthperiod to 31 December 2006 and to update shareholders on the significantprogress achieved in building a strong and balanced portfolio of investments inthe pan-German residential property market. As at 31 December 2006 residential properties notarised (committed to bepurchased) amounted to a cumulative cash consideration of EUR746.3 million ofwhich EUR478 million (including acquisition costs) of purchases had beencompleted. By 15 March 2007 the cumulative cash consideration of propertiesnotarised had increased to EUR902.4 million. Actual property payments, includingdeposits or part payments, excluding acquisition costs, as at 15 March 2007amounted to EUR576.5 million. Approximately EUR26.9 million is planned to beallocated for refurbishment of those properties currently notarised and thisexpenditure is expected to be yield and value enhancing. The remainder of those properties notarised to 15 March 2007, are expected tocomplete within a two to three month timeframe. Approximately EUR25 million offurther properties are expected to be notarised shortly. The annualised expected initial net rental income in respect of the 16,637 unitsin properties notarised to date is EUR65.8 million. The blended net initialproperty yield at notarisation was 7.1%, anticipated to rise to 7.6% within 12months of full investment. There were at notarisation 1,263 vacant units (c.7.6%vacancy including units to be refurbished or redecorated prior to letting). EUR3.5 million of net rental income was actually received in the period, withapproximately EUR1.8 million due to be received subsequently afterreconciliation with former owners. It is normal for there to be a time lag ofthree or four months after taking over a building for reconciliations of fundswith previous owners and existing tenants in relation to rental income, servicecharges and deposits. (See also Manager's Report for additional background.) Financing The Company's borrowings are more particularly described in The Manager andInvestment Adviser's Report. Approximately EUR406 million of finance has been arranged to date of whichEUR403 million has been drawn down. Agreement in principle has been reached on terms for a facility for thefinancing of up to EUR410 million of further property purchases. The Companyexpects this facility to be concluded by the end of March 2007. The property acquisitions have also been fully hedged against interest raterisk, allowing the Company to assume a maximum overall fixed cost of borrowingof 4.6%. Result for the period Pre-tax profit was at GBP901,000 (EUR1.3 million) or 21% in relation to revenue. Looking Forward It is felt that the property investment targets indicated in the AdmissionDocument will have been achieved within the anticipated timeframe. Accordinglyit is believed that the Company is well placed to fulfil the objectives statedat launch. The Board warmly commends and thanks the Manager and Investment Adviser and allof their staff for their excellent achievements in this regard. We announced on 16 March 2007 that consideration is being given to an issue of Cshares via a placing with institutional investors. This is a reflection of theconfidence the Manager and Investment Adviser have in the prospects for theGerman residential property market. Raymond ApseyChairman Report of the Investment Manager and Investment Adviser Acquisition Summary We can report that the acquisition process to date has proceeded well. We take alocal, research-based and focused approach and try to select smaller portfoliosand assets typically in off market transactions to avoid competing with thelarger opportunity investors. Also, we try to acquire assets where there is agap between our "wholesale" purchase price and retail prices. We believe thatin certain parts of our portfolio there is attractive upside potential in valuesbased on today's price levels. Main highlights as at 31 December 2006 - Residential properties in various German cities notarised (i.e. committed to be purchased) for a cumulative cash consideration of EUR746.3 million - Expected initial net rental income of approximately EUR54.6 million per annum - Blended net initial property yield at notarisation of 7.1%, projected to rise to 7.6% within 12 months of full investment The Company notarised apartment blocks containing 13,696 units at an overallaverage price of EUR817 per square metre. There were approximately 1,056 vacantunits (circa 7.7% vacancy including units to be refurbished or redecorated priorto letting). The Company expects the occupancy level to rise over time once it has had anopportunity to manage the properties. The Manager intends to raise occupancythrough active management with proactive leasing and refurbishment whereappropriate. Approximately EUR20.2 million is planned to be allocated for refurbishment ofthose properties as notarised at 31 December 2006 and this expenditure isexpected to be yield and value enhancing. As at 31 December 2006 EUR478 million (including acquisition costs) of purchaseswere completed. Rental income The majority of completions occurred in the latter part of the year and thecontracted net rental income for the period (i.e. the rental amount entitled tobe received) was GBP3.6 million (EUR5.3 million). EUR3.5 million of net rental income was received in the period, withapproximately EUR1.8 million due to be received subsequently afterreconciliation with former owners. It is normal for there to be a time lag ofthree or four months after taking over a building for reconciliations of fundswith previous owners and existing tenants in relation to rental income, servicecharges and deposits. By way of explanation, it is usually the case that a seller will only allowtenants to be informed of the new owners and the new bank account details forrental income after completion. Therefore for at least one or two months manytenants will continue to pay the former owners' rental income (including servicecharge prepayments), though the new owner is entitled to receive that money indue course. The master data relating to the new buildings and tenants also has to bemanually entered into a property management system, and there then needs to be aprocess of reconciliation of funds. In addition there are obligations on the newowners to take over or put in place property management services such ascleaning, general maintenance, new technical service agreements (e.g. forheating systems, utilities, lifts) and all this takes some time. Other Commentary Pre-tax profit was at GBP901,000 (EUR1.3 million) or 21% in relation to revenue.This result includes capitalised service charges (work in progress) of GBP695,000 (EUR1.0 million). These are charges received from subcontractors andsuppliers of utilities that will be passed on to tenants in due course. There was also a favourable impact of GBP982,000 (EUR1.4 million) fromrevaluation gains on interest swaps. Income after tax shows a profit of GBP757,000 (EUR1.12 million). There is anincome tax burden of GBP144,000 (EUR211,000). This income tax of GBP144,000 (EUR211,000) can be split into current tax expenseof GBP58,000 (EUR85,000) and deferred taxes of GBP86,000 (EUR126,000). Borrowings As of 31 December 2006, the Company's borrowings totaled GBP221 million (EUR328million), all of which were secured on the properties. After taking into account the Company's cash position, the net debt of theCompany as at 31 December 2006 was GBP186 million (EUR271 million). Further Notarisations to 15 March 2007 As at 15 March 2007, EUR902.4 million of predominantly residential propertypurchases in various German cities had been notarised (committed to bepurchased).* The expected initial net rental income of these properties was approximatelyEUR65.8 million per annum. The blended net initial property yield was 7.1%,anticipated to rise to 7.6 % within 12 months of full investment. The Company has notarised apartment blocks containing 16,637 units at an overallaverage price of EUR820 per square metre. There were at notarisationapproximately 1,263 vacant units (circa 7.6% vacancy including units to berefurbished or redecorated prior to letting). Approximately EUR26.9 million is planned to be allocated for refurbishment ofthose properties notarised as at 15 March 2007 and this expenditure is expectedto be yield and value enhancing. The notarised properties are in geographic clusters right across Germany. Interms of purchase price of properties notarised to date, approximately 64 percent. falls in the former West Germany, 12 per cent. in Berlin and 24 per cent.in the former East Germany. Financing To date, approximately EUR406 million of finance has been arranged, of whichEUR403 million has been drawn down. Agreement in principle has been reached on terms for a debt facility of up toEUR410 million for the financing of further property purchases. Subject tocontract, the Company expects this facility to be available by the end of March2007. This will mean the Company will have received approximately EUR815 million ofdebt financing with the interest rate fixed at or below 4.6% and this debt willrepresent at least 85% of original purchase price of properties, includingrefurbishments. The property acquisitions have been fully hedged against interest rate risk,allowing the Company to assume a maximum overall fixed cost of borrowing of4.6%. * EUR576.5 million property payments (including deposits or part-payments,excluding acquisition costs) were made as at 15 March 2007 and the remainder ofthose properties notarised so far are expected to complete within a two to threemonth timeframe. It is important to remember that when one takes over aproperty, although the rental income since completion is entitled to be receivedeventually, there is a lot of work in reconciling both the rental and servicecharge figures with previous owners. In addition there is also the task ofgetting tenants to pay to new accounts as many of them continue to pay theprevious owner or send the money to the wrong account. Others simply requirechasing at the outset to pay the new owners. It is not unusual, for thistransitional process to take three months or more and before the rental figuresreflect anticipated contractual income. Some properties will have certaincontractual rental guarantees that also have to be reconciled after a year.Contractual rent levels can fluctuate over the course of a year, i.e. whentenants leave or new tenants arrive. Details of Interest Rate Hedging 1. A Forward Rate Swap for a notional amount of EUR191,650,000 at 3.7 per cent. was exercised at 1 December 2006, expiry December 2013 2. Two swaptions each with a notional amount of EUR150,000,000 at 3.7 per cent. were exercised at 29 December 2006, expiry October 2013 3. Two swaptions each with a notional amount of EUR200,000,000 at 3.7 per cent., exercise date 30 March 2007, expiry October 2013 Bank Valuations For the purposes of bank valuations, property purchases of almost EUR814 millionthus far have been submitted for valuation to DTZ Zadelhoff Tie Leung GmbH, andthese have been valued at a weighted average premium of approximately 4.9 percent. to purchase price (excluding acquisition costs and refurbishments). A portfolio of properties is currently being finalised for valuation andfinancing. Strong pipeline with potential for further investment A further property acquisition pipeline of over EUR300 million has beenidentified and the Company is considering and exploring a further capitalraising. This was the subject of a separate announcement to the market on 16March 2007. Resource Deployed The Manager and Investment Adviser have deployed significant resources. Thereare over 120 employees with an office in Berlin (acquisitions, finance, propertymanagement and operations) and a satellite office in Munich (acquisitions). A team of approximately 25 is dedicated to sourcing, analysis, due diligence,negotiation and purchasing. The regions and major towns in Germany are coveredby specialist "Acquisition Team Managers". The execution team of negotiators hasan average experience of 15 years in German real estate. Finance and accounting is handled by a team of experienced finance specialistsand accountants and all valuations for financing to date have been conducted byDTZ Zadelhoff Tie Leung GmbH. On the property management side, there is a team of over 60 property managersand book-keepers/accountants. The management team of any newly acquired propertyportfolio is retained when appropriate and a "cluster" property managementstrategy is to be employed for the pan-German coverage which includes the use ofspecialist sub-contractor regional firms for satellite operations. The widelyused GES Property Management system has been implemented. Alistair Curry Florian LanzFor the Manager For the Investment AdviserSpeymill Property Managers Ltd Goal Service GmbH Consolidated Income Statement Note Unaudited Audited For the period For the period 1 July 2006 to from 1 March 31 December 2006 (date of 2006 incorporation) to 30 June 2006 £'000 £'000 Net rent and related income 4,306 -Direct costs (3,317) - ------- ------Gross profit 989 - ------- ------Manager's fees (1,061) (103)Audit and professional fees (7) (7)Other expenses (281) (137) ------- ------Administrative expenses (1,349) (247) -------- ------Net operating loss beforenet financing income (360) (247) -------- ------Financial income 3 2,465 1,296Financial expenses (1,204) (1) -------- ------ Net financing income 1,261 1,295 -------- ------Profit before tax 901 1,048 Income tax expenseCurrent (58) -Deferred (86) - -------- -------Retained profit for the period 757 1,048 -------- ------- Basic and dilutedearnings per share (pence) 8 0.45 0.62 --------- ------- Consolidated Balance Sheet Note Unaudited Audited At 31 December At 30 June 2006 2006 £'000 £'000 Investment property 5 321,892 -Investments 9,562 - ------- -------Total non-current assets 331,454 - -------- -------Trade and other receivables 6 31,031 22,108Cash and cash equivalents 34,991 139,895 -------- -------Total current assets 66,022 162,003 -------- -------Total assets 397,476 162,003 -------- --------Issued share capital 17,000 17,000Retained earnings 146,305 145,548Foreign currency translation reserve (4,793) (701)Swap revaluation reserve 982 - -------- --------Total equity 159,494 161,847 -------- -------- Trade and other payables 7 16,819 156Interest bearing loans 10 522 -Income tax payable 56 - -------- --------Total current liabilities 17,397 156 -------- --------Interest bearing loans 10 220,500 -Deferred tax liability 9 85 - -------- --------Total non-current liabilities 220,585 - -------- --------Total liabilities 237,982 156 -------- --------Total equity & liabilities 397,476 162,003 -------- -------- Consolidated Statement of Changes in Equity Share Retained Hedging Foreign Unaudited Audited capital earnings reserve currency at 31 at 30 June translation December 2006 reserve 2006 £'000 £'000 £'000 £'000 £'000 £'000 Balance atbeginning of period 17,000 145,548 - (701) 161,847 - Shares issued - - - - - 17,000in the period Foreign exchangetranslationdifferences - - - (4,092) (4,092) (701) Revaluationof swaps - - 982 - 982 - Retainedprofit forthe period - 757 - - 757 145,548 ------ ------- ---- ------ ------- -------Balance at end 17,000 146,305 982 (4,793) 159,494 161,847 ------ ------- ---- ------ ------- ------- Consolidated Cash Flow Statement Note Unaudited Audited For the period For the period 1 July 2006 to from 7 June 31 December 2005 (date of 2006 incorporation) to 30 June 2006 £'000 £'000 Operating activitiesGroup profit for the period 901 1,048Adjustments for:Financial income 3 (2,465) (1,296)Financial expenses 1,204 1 ------- ------ Operating profit before changes inworking capital and provisions (360) (247) Increase in trade and otherreceivables (2,004) (620)Increase in trade and other payables 8,716 156 ------ ------Cash used in operations 6,352 (711)Interest paid (1,204) (1)Interest received 1,031 1,296Income tax paid (3) - ------ ------Cash flows from operatingactivities 6,176 584 ------ ------ Investing activitiesAcquisition of investment property (293,016) -Deposits relating to propertyacquisitions (28,407) (21,488)Acquisitions of investments (7,146) --------- --------Cash flows from investingactivities (328,569) (21,488) --------- -------- Financing activitiesProceeds from the issue ofordinary share capital - 170,000Share issue expenses - (8,500)New interest bearing loans 221,022 ------- -------- Cash flows generated fromfinancing activities 221,022 161,500 ------- -------Net (decrease)/increase in cash and cashequivalents (101,371) 140,596Effect of exchange rate fluctuationson cash held (3,533) (701)Cash and cash equivalents atbeginning of period 139,895 - -------- -------- Cash and cash equivalents atend of period 34,991 139,895 ------- -------- Notes to the Consolidated Financial Statements 1 The Company Speymill Deutsche Immobilien Company plc (the "Company") was incorporated andregistered in the Isle of Man under the Isle of Man Companies Act 1931-2004 on 1March 2006 as a public company with registered number 115746C. 2 Significant Accounting Policies The interim consolidated financial statements of the Company for the periodended 31 December 2006 comprises the Company and its subsidiaries (togetherreferred to as the "Group"). The interim consolidated financial statements areunaudited. 2.1 Basis of presentation These financial statements have been prepared in accordance with InternationalFinancial Reporting Standards ("IFRS") and have been prepared using the sameaccounting policies as the preceding annual financial statements. 2.2 Investment property Investment properties are those which are held either to earn rental income orfor capital appreciation or both. Investment properties are stated at costincluding costs of acquisition. Depreciation will commence in the first fullaccounting period after acquisition. 2.3 Basis of consolidation Subsidiaries Subsidiaries are those enterprises controlled by the Company. Control existswhere the Company has the power, directly or indirectly, to govern the financialand operating policies of an enterprise so as to obtain benefits from itsactivities. The financial statements of subsidiaries are included in theconsolidated financial statements from the date that control effectivelycommences until the date that control effectively ceases. Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised gains arising fromintra-group transactions, are eliminated in preparing the consolidated financialstatements. 2.4 Dividends Dividends are recognised as a liability in the period in which they are declaredand approved. There was no dividend declared as at 31 December 2006. 3 Net financing income 31 December 2006 30 June 2006 £'000 £'000 Interest income 1,031 1,296Revaluation of swap 1,434 - ------ -----Financial income 2,465 1,296 ------ ----- 4 Segment reporting The Company has one segment focusing on achieving income together with long termcapital growth through investing in the residential property market in Germany.No additional disclosure is included in relation to segment reporting, as theCompany's activities are limited to one business and geographic segment. 5 Investment properties 31 December 2006 30 June 2006 £'000 £'000 Brought forward - -Additions 321,892 - ------- -------Cost of investment properties at end ofperiod 321,892 - ------- ------- 6 Trade and Other Receivables Trade and other receivables includes a total of £28,406,642 (€42,189,545)representing deposits with notaries for properties that had not completed as at31 December 2006 (30 June 2006: £21,488,289 (€31,100,000)). 7 Trade and Other Payables Trade and other payables includes a total of £7,947,382 (€11,803,452)representing amounts payable for property purchases as at 31 December 2006 (30June 2006: £0 (€0)). 8 Basic and Diluted Earnings per Share Basic and diluted earnings per share are calculated by dividing the profitattributable to equity holders of the Company by the number of ordinary sharesin issue during the period 31 December 2006 30 June 2006 £'000 £'000 Profit attributable to equity holders of theCompany (£'000) 757 1,048Number of ordinary shares in issue(thousands) 170,000 170,000 -------- ------- Basic earnings per share (pence per share) 0.45 0.62 -------- ------- 9 Deferred Tax 31 December 2006 30 June 2006 £'000 £'000 At beginning of period - -Deferred tax arising on timing differences 85 - ---- ----At end of period 85 - ---- ---- 10 Interest-bearing loans 31 December 2006 30 June 2006 £'000 £'000The interest bearing loans are repayable asfollows:On demand or within one year 522 -In the second year 2,777 -In the third to fifth years inclusive 12,118 -After five years 205,605 - -------- ------ 221,022 - -------- ------Less: amount due for settlement within 12months (shown under current liabilities) 522 - -------- ------Amount due for settlement over the remainingperiod of the loans 220,500 - -------- ------ The Group has pledged properties and the rental income of the properties tosecure related interest bearing facilities granted to the Group for the purchaseof such properties. At the date of borrowing the loan to value ratio was 82.8%.Interest rates have been fixed at approximately 4.6% by forward rate contractsand swaptions. 11 Commitments As at 31 December 2006, notarisation commitments outstanding were €296.8 (30June 2006: €103.3) 12 Copies of the Interim Results The interim results for the six months ended 31 December 2006 will be sent toshareholders and will be available from the Company's registered office atJubilee Buildings, Victoria Street, Douglas, Isle of Man IM1 2SH. This information is provided by RNS The company news service from the London Stock Exchange