14th Dec 2006 14:37
Speymill Deutsche Immobilien Co PLC14 December 2006 Speymill Deutsche Immobilien Company plc ("SDIC" or "the Company") Preliminary Results for the Period Ended 30 June 2006 Speymill Deutsche Immobilien Company plc (AIM: SDIC), the pan-German residentialproperty investment company listed on AIM, is pleased to announce itspreliminary results for the period from incorporation to 30 June 2006. Highlights: - Company admitted to trading on AIM on 17 March 2006 - Funds raised on admission of £170 million - As at 8 December 2006, totals of 10,839 residential units and 311 commercial units have been purchased/committed to be purchased for a cumulative cash consideration of EUR612.2 million Raymond Apsey, Chairman of SDIC, stated: "In the 8 months since our programme of investment in the German property marketcommenced, there has been significant progress towards building a strongportfolio in a competitive market. The Manager continues to be confident ofachieving the stated portfolio yield target and spread of assets set out in theCompany's AIM admission document." 14 December 2006 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 In the 8 months since our programme of investment in the German property marketcommenced, there has been significant progress towards building a strongportfolio as targeted in the AIM admission document. By 8 December 2006, totals of 10,839 residential units and 311 commercial unitshad been purchased/committed to be purchased for a cumulative cash considerationof EUR612.2 million. These are expected to generate net rental income of EUR44.8million per annum. Approximately EUR70 million of further properties have beenapproved by the Board to proceed towards notarisation and we have an identifiedproperty acquisition pipeline of over EUR400 million. We are therefore well ontarget to achieve the objectives stated at the time of launch. As stated in the Manager's Report to follow, attractive financing terms havebeen negotiated for EUR407 million of debt finance (c. 85% of original purchaseprice) with the interest rate fixed at 4.6 % as a result of the hedgingarrangements put in place. Further portfolios of properties for valuation andfinancing are being prepared. The property investment opportunities presented to the Board for considerationfulfill the investment policy and objectives of the fund set out in the AIMadmission document. The Board is satisfied that appropriate investmentopportunities in German properties continue to be identified and sourced by theManager and Investment Advisor. Their acquisition performance to date iscommended. The building of the portfolio is progressing well in this competitive market. Werecognise that, given the increasing competition in Germany, property prices insome higher yielding areas are unlikely to remain at current levels. The Managercontinues to be confident of achieving the stated portfolio yield target andspread of assets set out in the Company's AIM admission document. Raymond P ApseyChairman Report of the Manager and Investment Adviser Executive Summary • SDIC offers leveraged play on recovery of the German residential property market • Company has purchased geographically diversified residential portfolio typically below replacement cost (i.e. what it would cost to replace the assets) • German wholesale residential prices are rising and the Manager believes that these should move towards replacement cost levels in next 5-7 years • Company on track to deliver a dividend equivalent to 6 per cent of the placing price for the 12 month period following full investment • Attractive financing terms negotiated for EUR407 million of debt finance and more properties' details are being lined up for valuation and arrangement of financing • Investment strategy on target with approximately 65% notarised Strategy Summary Objectives • Pan-German residential fund with exposure to selected cities and regions • Investment spread over five broad categories • Geographical allocation up to 40% in former East Germany • 6% annualized dividend yield for the year after full investment • Targeting full investment within one year Assumptions • Blended initial portfolio yield of 7.25% • Target loan to value (LTV) of 85% • Financing rate of approximately 4.6% Acquisition Summary We are pleased with the acquisition process to date in conjunction with theInvestment Adviser. We take a local, research-based and focused approach and tryto select smaller portfolios and assets typically in off market transactions toavoid competing with the larger opportunity investors. Where possible, we tryto cherry pick assets where there is 5-10% upside between existing average rentsper square metre and "Mietspiegel" rents (an average rent range for propertiesset by local authorities for certain areas, that translates literally as"rent-mirror"). Also, we try to acquire assets where there is a gap between our"wholesale" purchase price and retail prices. We estimate in certain parts ofour portfolio, there is attractive upside potential in values at today's pricelevels. As at 30 June 2006, property purchases of EUR 103,320,400 were notarised(committed to be purchased). Payments were made to sellers from notary accounts for four property offerings in July. Since the launch of the fund to 8 December 2006, EUR612,238,168 of property purchases were notarised (committed to be purchased).* The Company notarised apartment blocks containing 11,140 units (residentialunits - 10,839 and commercial units - 311) at an overall average price of EUR812per square metre. The total rentable space is 753,911 square metres. As at notarisation dates there are presently approximately 841 vacant units(circa 7.5% overall vacancy including units to be refurbished or redecoratedprior to 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 EUR17.7million is planned to be allocated onrefurbishment for those properties currently notarised and this expenditure isexpected to be yield and value enhancing. The expected initial net rental income is approximately EUR44.8 million perannum. Overall the blended net initial yield is 7.1% and presently this is projected torise to 7.6% within 12 months of full investment The notarised properties are in geographic clusters right across Germany. Todate 71% of these notarised properties are in the former West Germany, 8% inBerlin and 21% in the former East Germany. * Of these a total of EUR365,615,302 of property purchases have been completedand the remainder of those properties notarised so far are expected to completewithin a two month timeframe. It is important to remember that when one takesover a property, although all the due rental income should 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. Financing Agreement in principle has been reached for the financing of further propertypurchases including EUR215.1 million of debt financing. Subject to contract, theCompany expects this financing transaction to be concluded in early December. This will mean the Company will have received approximately EUR407m of debtfinancing with the interest rate fixed at 4.6% and this debt will represent atleast 85% of original purchase price. So far, EUR189.6 million has been drawndown. The property acquisitions going forward have also been fully hedged againstinterest rate risk, allowing the Company to assume a maximum overall fixed costof borrowing of 4.6%. Details of Interest Rate Hedging 1. A Forward Rate Swap for a notional amount of EUR191,800,000 at 3.7%, exercise date 01/12/06, expiry 02/12/2013 2. Two Swaptions each with a notional amount of EUR150,000,000 at 3.7%, exercise date 29/12/06, expiry 31/10/2013 3. Two swaptions each with a notional amount of EUR200,000,000 at 3.7%, exercise date 30/03/07, expiry 31/10/2013 Bank Valuations For the purposes of bank valuations, the portfolios of assets being financedhave been valued by DTZ at a weighted average of 6.0% increase to purchaseprice. A further portfolio of properties is being prepared for valuation and financing. Pipeline Approximately EUR70 million of properties have been approved by the Board toproceed to notarisation. A further property acquisition pipeline of over EUR400 million has beenidentified. Significant Resource Deployed The Manager and Investment Adviser have deployed significant resource. There areover 100 employees with an office in Berlin (acquisitions, finance, propertymanagement and operations) and a satellite office in Munich (acquisitions). A team of 20 is dedicated to sourcing, analysis, due diligence, negotiation andpurchasing. The regions and major towns in Germany are covered by specialist"Acquisition Team Managers". The execution team of negotiators has an averageexperience of 20 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 Germany. On the property management side, there is a team of 63 property managers andbook-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 may include the useof specialist regional firms for satellite operations. The GES PropertyManagement system has been implemented. Alistair Curry Florian LanzFor the Manager For the Investment AdviserSpeymill Property Managers Ltd Goal Service GmbH Appendix - Overview by Investment Category Category 1 2 3 4 5Description Highest Yield High Middle Lower Lowest Yield Yield Yield Yield Indicative price/m(2) c. EUR585 c. EUR680 c. EUR980 c.EUR1,250 c.EUR940 Indicative net c. 9% c. 8% c. 6.5-7% c. 5-6.5% c. 5%initial yield or more or more Example locations/ Rostock Leipzig Berlin Munich Lorrachareas Neuhardenburg Chemnitz Frankfurt Hamburg Kempten Frankfurt-an-der- Magdeburg Dusseldorf Oder Halle Hannover Nurnberg DresdenPercentagesplit bycategory ofnotarisedproperties todate 4% 48% 35% 11% 2% • Please note that a range of yields exist in different areas depending upon specific locations and property characteristics. It is also worth noting that given the increasing competition in Germany at present some higher yielding areas may not always remain at such levels for all locations and property types within those areas, but that the Manager continues to be confident of achieving the portfolio yield (7.25%) and spread of assets set out in the Admission Document. Consolidated Income Statement For the period from 1 March 2006 (date of incorporation) to 30 June 2006 £'000 Net rent and related income - Manager's fees (103)Audit and professional fees (7)Other expenses (137) -----Administrative expenses (247) ----- Net operating loss before net financing income (247) -----Financial income 1,296Financial expenses (1) ----- Net financing income 1,295 ----- Profit before tax 1,048Income tax expense - -----Profit for the period 1,048 ===== Basic and diluted earnings per share (pence) 0.62 ----- Consolidated and Company Balance Sheet At 30 June 2006 £'000 Investment property - --------Total non-current assets - -------- Trade and other receivables 22,108Cash and cash equivalents 139,895 -------Total current assets 162,003 -------Total assets 162,003 ======= Issued share capital 17,000Retained earnings 145,548Foreign currency translation reserve (701) -------Total equity 161,847 -------Trade and other payables 156 -------Total current liabilities 156 -------Total liabilities 156 -------Total equity & liabilities 162,003 ======= There is no difference between the Consolidated and Company balance sheets. Theprofit earned by the Company for the period ended 30 June 2006 was EUR1,047,941. Consolidated Statement of Changes in Equity For the period from 1 March 2006 (date of incorporation) to 30 June 2006 Share capital Share premium Retained Foreign Total earnings currency translation reserve £'000 £'000 £'000 £'000 £'000 Balance at - - - - -beginning of period Shares issuedin the period 17,000 153,000 - - 170,000 Foreign exchangetranslationdifferences - - - (701) (701) Share issue expenses - (8,500) - - (8,500) Cancellationof share premium - (144,500) 144,500 - - Retained profit for the period - - 1,048 - 1,048 ------ ------- ------- ------- -------Balance at endof period 17,000 - 145,548 (701) 161,847 ------- ------- ------- ------- ------- Consolidated Cash Flow Statement For the period from 1 March 2006 (date of incorporation) to 30 June 2006 £'000 Operating activities Group profit for the period 1,048Adjustments for:Financial income (1,296)Financial expenses 1 ------Operating loss before changes in working capital (247)and provisions (Increase)/Decrease in trade and other receivables (620)Increase/(Decr ease) in trade and other payables (545) ------Cash used in operations (1,412)Interest paid (1)Interest received 1,296 ------Cash flows used in operating activities (117) ------Investing activitiesAcquisition of investment property -Deposits relating to property acquisitions (21,488) ------Cash flows used in investing activities (21,488) ------ Financing activities Proceeds from the issue of ordinary share capital 170,000Share issue expenses (8,500) -------Cash flows generated from financing activities 161,500 ------- Net increase in cash and cash equivalents 139,895Cash and cash equivalents at 1 March 2006 - -------Cash and cash equivalents at 30 June 2006 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. Pursuant to a prospectus dated 13 March 2006 there was a placing of up to 170million Ordinary Shares. The Shares of the Company were admitted to trading onAIM, a market of London Stock Exchange plc, following the close of the placingon 17 March 2006. In total, 170 million Shares were issued. The Company's agents and the Manager perform all significant functions.Accordingly, the Company itself has no employees. Duration The Company currently does not have a fixed life but the Board considers itdesirable that Shareholders should have the opportunity to review the future ofthe Company at appropriate intervals. Accordingly, at the annual general meetingof the Company in 2012 an ordinary resolution will be proposed that the Companyceases to continue as presently constituted. If the resolution is not passed, asimilar resolution will be proposed at every third annual general meetingthereafter. If the resolution is passed, the Directors will be required toformulate proposals to be put to Shareholders to reorganise, unitise orreconstruct the Company or for the Company to be wound up. Dividend Policy Due to the anticipated regular rental income from the property instruments, itis the intention of the Directors that the Company will distribute substantiallyall of its surplus income profits. The Company may also pay dividends out ofrealised capital profits. It is anticipated that once fully invested dividendswill be paid semi-annually. Property Valuation and Reporting Policy The Directors will appoint one or more internationally recognised firms ofsurveyors as property valuers. It is the Directors' intention that the Company'sentire property portfolio will be valued independently in each annual financialperiod. 2 Basis of presentation The full financial statements have been prepared in accordance withInternational Financial Reporting Standards ("IFRS"). The preliminary results of the Company set out in this statement do notconstitute the Company's statutory accounts for the period ended 30 June 2006.The financial information for the period ended 30 June 2006 has been extractedfrom the Group's statutory financial statements to that date, upon which theauditors' opinion is unqualified. 3 Segment reporting The company has one segment focusing on achieving capital growth throughinvesting in the residential property market in Germany. No additionaldisclosure is included in relation to segment reporting, as the Company'sactivities are limited to one business and geographic segment. 4 Net financing income 2006 £'000 Interest income 1,296 -----Financial income 1,296 -----Bank charges (1) -----Financial expenses (1) -----Net financing income 1,295 ----- 5 Net Asset Value per Share The net asset value per share as at 30 June 2006 is £0.9520 per share based on170,000,000 ordinary shares in issue as at that date. 6 Cash and Cash Equivalents 30 June 2006 £'000 Bank balances 139,895Bank overdrafts - -------Cash and cash equivalents 139,895 ------- 7 Capital and Reserves Share capitalOrdinary Shares of £0.10 each Number £'000 In issue at the start of the period - -Issued during the period 170,000,000 17,000 ----------- ------In issue at 30 June 2006 170,000,000 17,000 ----------- ------ At incorporation the authorised share capital of the Company was £30 milliondivided into 300 million Ordinary Shares of £0.10 each. The holders of ordinary shares are entitled to receive dividends as declaredfrom time to time and are entitled to one vote per share at meetings of theCompany. All shares rank equally with regards to the Company's assets. By a special resolution dated 10 March 2006 and with the approval of the HighCourt of Justice of the Isle of Man, it was resolved that the amount standing tothe credit of the share premium account be cancelled and credited as adistributable reserve. 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 2006 Profit attributable to equity holders of the Company 1,048(£000) Number of ordinary shares in issue (thousands) 170,000 -------Basic and diluted earnings per share (pence per share) 0.62 ------- 9 Commitments As at 30 June 2006, property purchases of EUR103,320,400 were notarised(committed to be purchased). 10 Post Balance Sheet Events Since 30 June 2006, the Company has notarised a further EUR208,583,866 ofproperty purchases and completed a total of EUR365,615,302 of propertypurchases. A total of EUR406,934,500 of finance has been negotiated at a fixed rate of4.6%. (EUR215,134,500 of this has been agreed in principle and is subject tocontract. The transaction is expected to be concluded in December 2006). To dateEUR189,660,304 has been drawn down. The Company has entered into the following hedging arrangements: - One forward rate swap for a notional amount of EUR191,800,000 at 3.7% exercise date 01/12/06, expiry 02/12/2013 - Two swaptions each with a notional of EUR150,000,000 at 3.7% exercise date 29/12/06, expiry 31/10/2013 - Two swaptions each with a notional of EUR200,000,000 at 3.7% exercise date 30/03/07, expiry 31/10/2013 The Company has incorporated a further 26 subsidiaries since 30 June 2006. 11 Copies of the Annual Report The full audited accounts for the period ended 30 June 2006 will be sent toshareholders before 31 December 2006 and will be available from the Company'sregistered office at Jubilee Buildings, Victoria Street, Douglas, Isle of ManIM1 2SH. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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