1st Nov 2007 07:01
Speymill Deutsche Immobilien Co PLC01 November 2007 Speymill Deutsche Immobilien Company plc ("SDIC" or "the Company") Preliminary Results for the Year Ended 30 June 2007 Speymill Deutsche Immobilien Company plc (AIM: SDIC; SDCC), the pan-Germanresidential property investment company listed on AIM, is pleased to announceits preliminary results for the year ended 30 June 2007. Highlights: Overall: - After tax profit of EUR27.3 million (£18.6 million), with net financing income of EUR29.0 million (£19.7 million) and profit before tax of EUR29.4 million (£20.0 million) - Financing income includes a gain from the revaluation of swaps of EUR39.6 million (£27.0 million) Ordinary Shares: - Ordinary Share NAV per share of EUR1.49 (100.5 pence) or EUR1.48 (99.7 pence) after adjustment for deferred tax as per IFRS) - Final dividend for the period of 0.7 Euro cents per share to existing holders of Ordinary Shares - Net profit before tax totalled EUR21.2 million (£14.4 million), with profit after tax of EUR19.0 million (£13.0 million) after a deferred tax provision of EUR2.0 million (£1.4 million) C Shares: - Issue of C Shares in May 2007, raising EUR250 million - C Share NAV per share of 99.7 Euro cents (67.1 pence) as per IFRS - Financing facility for up to EUR500 million for further property purchases agreed, with an estimated maximum overall cost of borrowing of 5% Raymond Apsey, Chairman of SDIC, stated: "The past year was one of delivery on our initial objectives and of significantexpansion. Investment of the proceeds of our first fundraising is now completeand, following the raising of a further EUR250 million from the issue of CShares in May 2007, investment of the new monies is well under way. The Managerand Investment Advisor continue to believe that the German residential propertymarket will deliver attractive returns for investors going forward and that theCompany is well positioned to capture that return." 1 November 2007 For further information, please contact: Azhic Basirov / Siobhan SergeantSmith & Williamson Corporate Finance Limited 020 7131 4000 Paul Richards / James KingFairfax I.S. PLC 020 7598 5368 Ian Dungate / Suzanne JonesGalileo Fund Services Limited 01624 692600 Notes to editors: - Speymill Deutsche Immobilien Company plc is a pan-German residential property investment company which listed on AIM in March 2006, raising £170 million on admission. - In May 2007, the Company raised a further EUR250 million through a placing of C Shares which were admitted to trading on AIM on 10 May 2007. - 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 results of the Company for the year to 30 June 2007with an NAV per share of EUR1.49 (100.5 pence) for the Ordinary Shares. Adjustedfor deferred taxes as per IFRS, the NAV per share is EUR1.48 (99.7 pence). Thepast year was one of delivery on our initial objectives and of significantexpansion. Investment of the proceeds of our first fundraising is now completeand, following the raising of a further EUR250 million from the issue of CShares in May 2007, investment of the new monies is well under way. The Company remains committed to assembling a large pan-German residentialproperty portfolio positioned to generate income and with the potential toachieve significant price appreciation. Subject to approval at the AGM, theBoard has declared the payment of a final dividend for the period of 0.7 Eurocents per share to existing holders of Ordinary Shares and the Company expectsto pay a higher dividend on both the Ordinary Shares and the C Shares in theperiods following full investment. For the Ordinary Shares, residential properties notarised (committed to bepurchased) as of 30 June 2007 amounted to a consideration value of EUR925.5million ('the Ordinary Share Portfolio'). This concluded notarisations for theOrdinary Share Portfolio and, by the end of June, approximately EUR841.2 millionof payments (excluding acquisition costs) to sellers had been made. The last ofthe Ordinary Share Portfolio properties have now completed and the plannedrefurbishment programme is now under way. The annualised expected initial net rental income at notarisation in respect ofthe 16,960 units in properties in the Ordinary Share Portfolio notarised wasEUR67.3 million. The blended net initial property yield at notarisationincluding estimated refurbishment costs at that time was 7.1%, anticipated torise to 7.5% within 12 months of full investment. There were, at notarisation,1,278 vacant units (c.7.5% vacancy including units to be refurbished orredecorated prior to letting). Purchasing activities in respect of the funds raised from the issue of C Shares('the C Share Portfolio') were just beginning as of 30 June 2007, with thecumulative cash consideration of properties notarised standing at EUR50.9million. No property transactions had completed by this date but propertypayments, including deposits or part payments and excluding acquisitions costs,amounted to EUR3.9 million. As at 19 October 2007, EUR200.1 million ofpredominantly residential property purchases in various German cities had beennotarised, equating to 3,954 units. The Manager's report highlights in more detail how, during the investment phaseof the Ordinary Shares, after tax profit across all classes of share reachedEUR27.3 million (£18.6 million). With the change in fair value andadministrative expenses at the expected level, the Company achieved netfinancing income of EUR29.0 million (£19.7 million) giving a profit before taxof EUR29.4 million (£20.0 million). The level of profit for this year is mainlydriven by the financing income which includes a gain from the revaluation ofswaps across both share classes of EUR39.6 million (£27.0 million) reduced byinterest expenses of EUR10.7 million (£7.3 million). However, this revaluationamount is not realised and, therefore, will not increase the free cash flow ofthe Company. Financing Given the level of leverage employed by the Company, financing is a key part ofthe business and it is believed that the Company is well positioned for thecurrent more challenging credit market environment. EUR811.6 million of financing has been arranged to date for the Ordinary SharePortfolio of which EUR705.9 million (£474.7 million) had been drawn down by 30June 2007 and the remainder was drawn down by 12 October 2007. These OrdinaryShare borrowings have been fully hedged against interest rate risk, giving anestimated maximum overall fixed cost of borrowing of 4.6%. For the C Share Portfolio, a financing facility for up to EUR500 million offurther property purchases has been agreed, with an estimated maximum overallcost of borrowing of 5%. The contractual arrangements for the facility wereconcluded on 1 October 2007. It is anticipated that an additional EUR300 millionof borrowings will be put in place over time. The expected floating rate debt (3 month Euribor) for the C Share existing andfuture property acquisitions (anticipated to eventually total around EUR800million) has also been fully hedged against interest rate risk. Looking Forward We currently expect that property investment for both share classes will becompleted within the timeframes anticipated in the respective AdmissionDocuments. Accordingly, it is believed that the Company is well placed to fulfilits stated objectives. Given the level of leverage employed in the business, theNAV could prove relatively volatile but the operating business and cash flowsshould be relatively stable going forward as property takeover processes arecompleted. At an average valuation of EUR880 per square metre, the currentvaluation of the Company's Ordinary Share Portfolio remains very reasonablecompared to other portfolios of this scale leaving room for further priceappreciation. Importantly, the Manager and Investment Advisor continue tobelieve that the German residential property market will deliver attractivereturns for investors going forward and that the Company is well positioned tocapture that return. The Board warmly commends and thanks the Manager and Investment Advisor and allof their staff for their excellent achievements over the last year. Raymond ApseyChairman Report of the Manager and Investment Advisor During the period, the Company continued to make good progress towards itsobjective of building a pan-German portfolio of properties positioned togenerate income and with the potential to achieve significant capitalappreciation. We are pleased to report an NAV per share for the Ordinary Shares of EUR1.49(100.5 pence). Adjusted for deferred tax as per IFRS, the NAV per share for theOrdinary Shares is EUR1.48 (99.7 pence). Given the significant one-offacquisition costs incurred in the period, we believe this is a very satisfactoryresult. In respect of the C Shares, notarisation activities were just commencing as at30 June 2007 and the IFRS NAV per share for the C Shares was 99.7 Euro cents(67.1 pence). Summary Results Highlights for the Period Ordinary Shares • Annualised contracted net rent as at notarisation for the entire portfolio was EUR67.3 million. • Contracted revenues began to accrue from the various points of completion as properties were gradually acquired throughout the year. The total of these accruals for contracted net rent was EUR28.2 million. The total revenue rises to EUR36.4 million (£24.8 million) with the inclusion of related service charge income. • Recurring direct operating costs were EUR15.6 million comprised mainly of operating expenses such as service charges, maintenance, and rental administration fees. Service charges for apartments let are recharged to tenants and this portion of recurring direct costs was EUR8.2 million (£5.6 million) (these costs were invoiced to tenants and are therefore included in gross revenues). • Administrative expenses were EUR10.5 million (£7.1 million) comprised of Manager's fees and professional, audit and other expenses. • Recurring EBITDA for the period was EUR10.4 million (£7.1 million). • Net interest expense for the period was EUR11.7 million (£8.0 million). • Recurring funds from operations (FFO) for the period was negative EUR1.3 million. • Non-recurring direct costs comprised EUR6.0 million of expenses relating to one-off lending costs, bringing total direct costs for the period to EUR21.6 million (£14.7 million). • There was a gain through revaluation of swaps of EUR30.5 million (£20.8 million). • One off acquisition costs to 30 June 2007 were EUR55.8 million (i.e. intermediaries' fees, stamp duty, notarial fees). • Acquisition costs were substantially offset by the gain to 30 June 2007 of EUR53.9 million in the annual fair market valuation carried out by DTZ Zadelhoff Tie Leung GmbH ("DTZ") • Net profit before tax totalled EUR21.2 million (£14.4 million) for the period. Profit after tax was EUR19.0 million (£13.0 million), after a deferred tax provision of EUR2.0 million (£1.4 million) Ordinary Shares NAV per share EUR1.49 (100.5 pence)Adjusted NAV per share (including deferred tax EUR1.48 (99.7 pence)provision as per IFRS)Purchase Value of Completed Acquisitions EUR841.2 millionas of 30 June 2007Valuation of Completed Acquisitions EUR893.1 millionas of 30 June 2007 (DTZ)Purchase Value of Notarised Acquisitions EUR925.5 millionas of 30 June 2007*Valuation of Notarised Acquisitions EUR979.7 millionas of 30 June 2007 (DTZ)*Drawn Debt (as of 30 June 2007) EUR705.9 millionTotal Debt (Fully Drawn) EUR811.6 millionLoan to Value (Total Debt to Valuation of Notarised 82.9%Acquisitions)Annualised Net Rents (as at notarisation) EUR67.3 million \* There were no further notarisations for the Ordinary Shares after 30 June 2007 C Shares • Acquisition activities were just commencing as at 30 June 2007, with the cumulative cash consideration of properties notarised at EUR50.9 million. • The IFRS NAV at 30 June 2007 was 99.7 Euro cents (67.1 pence). This figure includes a gain from the revaluation of C Share swaps of EUR9.2 million. Acquisition Environment We are pleased to report that the acquisition process to date has progressedwell. We take a local, research-based approach and try to target smaller portfoliosand assets typically in off-market transactions. We believe this minimises theextent of competition and allows us to achieve more favourable pricing. We tryto acquire assets where there is a gap between wholesale purchase prices andretail prices and continue to believe that, across the portfolio, there isattractive upside potential in values versus today's price levels. The Company's strategy is to buy well-tenanted pan-German residentialproperties, the majority of which are at a significant discount to replacementcost. Through economies of scale, we will seek to increase occupancy, rentallevels and operating efficiencies to grow funds from operations and to deliverdividends. The Company will seek to pay significantly all of its distributablecash flow to its shareholders. Over time, there is the potential to postsignificant NAV growth if German residential values converge with replacementcost. Overall, we believe the market remains very attractive from an acquisitionperspective. •SDIC paid on average EUR829 per square metre to purchase its Ordinary Share Portfolio, a significant discount to estimated replacement cost. •For the Ordinary Shares, acquisitions were largely focused on smaller investments with an average transaction size of EUR6 million and it is believed that this has created value for the Company versus participating in larger and more competitive acquisition processes. •Over 40% of the Ordinary Share properties by value are located in and around major German cities including Berlin, Munich, Dusseldorf, Hamburg, Frankfurt, Leipzig, and Hannover. We believe these cities are likely to perform well in a rising market. • We believe that very large residential portfolios continue to receive premium pricing. • Recently, a new class of large local German investors appears to be targeting the potential of their home residential market and making significant investments. • The recent credit market turmoil may curtail the demand from some highly leveraged investors, allowing SDIC to potentially purchase some mid-sized residential portfolios at attractive prices. • We continue to believe that there is potential for German residential prices to move towards the estimate of replacement cost over the next 5 to 7 years as the German economy resumes its upward trajectory. • Certain non-core owners including corporations and local municipalities, as well as early opportunity fund investors, are liquidating their holdings creating significant acquisition opportunities. Ordinary Share Portfolio Acquisition Update SDIC has notarised a total of EUR925.5 million worth of properties with ablended net initial yield at notarisation of 7.1%, including expectedrefurbishment costs, projected to rise to 7.5% after 12 months of fullinvestment post completion of refurbishments. The profile of the Ordinary SharePortfolio is diversified across Germany with the notarised properties ingeographic clusters. SDIC has notarised properties containing 16,960 units at an overall averageprice of approximately EUR829 per square metre. Total rentable space is1,115,549 square metres. In terms of purchase price of properties notarised forthe Ordinary Share Portfolio, approximately 63% falls in the former WestGermany, 12% in Berlin and 25% in the former East Germany. The contractual net rental income at notarisation was approximately EUR67.3million per annum and the vacancy level was approximately 7.5%. We expect thisvacancy to rise to approximately 10% during the handover period. This increasein vacancy is largely a function of the fact that previous owners have littleincentive to keep tenants following notarisation while we are legally preventedfrom contacting our prospective tenants until completion of the acquisition. The Company is still taking over these properties, reconciling funds with formerowners and booking them into the tenant accounting systems. This is an ongoingprocess that takes an average of 5 months from completion. Approximately 55% ofthe properties had been reconciled and booked as of 1 September 2007 with theremainder expected to be substantially reconciled and booked by the end of thefirst quarter of 2008. Approximately EUR26.4 million was planned to be allocated for refurbishment ofthe Ordinary Share Portfolio and this expenditure is expected to be yield andvalue enhancing. Engineering studies have been carried out, identifyingpotential refurbishment expenditure of a further EUR5.5 million. The majority ofthis additional cost represents newly identified work to enhance the value ofthe buildings and individual apartments although, additionally, it is ourexperience that there has been a minor rise in construction costs in Germany. C Share Portfolio Acquisition Update As at 30 June 2007, SDIC had notarised properties for the C Share Portfolio fora cumulative cash consideration of EUR50.9 million. No purchases had beencompleted by this date, but property payments, including deposits or partpayments and excluding acquisitions costs, amounted to EUR3.9 million. As at 19 October 2007, EUR200.1 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 expected to beapproximately EUR13.6 million per annum. The blended net initial yield atnotarisation, including estimated refurbishment costs, was 6.6%; with theinclusion of rental guarantees received from the outset, this equates toapproximately 7.3%. The normalised rent (at 95% of maximum contracted income) isalso projected to rise to 7.3% in the second year (i.e. after full investmentand after completion of refurbishments.) The Company has notarised apartment blocks for the C Share Portfolio containing3,954 units at an overall average price of EUR766 per square metre. There were,at notarisation, approximately 592 vacant units (c. 15% vacancy including unitsto be refurbished or redecorated prior to letting). Some of the buildings haveinitial rental guarantees in place (most at 95% of maximum rental income as atnotarisation) during the period of refurbishment and until one year followingthe completion of those refurbishments. Effectively 417 units are covered by theinitial rental guarantees, thus the adjusted vacancy in terms of rental incomeis approximately 4.4%. Refurbishment costs of approximately EUR12.3 million are to be borne by theselling entities for approximately EUR78.5 million of the current notarisedproperties. Refurbishment related costs of over EUR6.3 million are to be borneby the fund entities in addition to any costs covered by sellers for all theproperties notarised as at 19 October 2007. This expenditure is expected to beyield and value enhancing. It is envisaged that the properties purchased for the C Share Portfolio will belocated in geographic clusters right across Germany as with the Ordinary Shareportfolio. Rental Income The contracted net rents for the Ordinary Share Portfolio (i.e. the net rentalamount entitled to be received - excluding the service charge element) for theperiod to 30 June 2007 was EUR28.2 million of which EUR21.0 million was receivedin the period. Some properties will have certain contractual rental guaranteesthat also have to be reconciled after a year. Rental guarantees outstanding fromprevious owners were EUR0.35 million. The relatively high level of arrears is in-line with our expectations as it istypical that a number of tenants will continue to pay the previous owner or sendthe money to the wrong account in the months that follow completion, though theCompany is entitled to receive that money in due course. Once the acquisitionprocess is completed, the Company contacts tenants to organise correct paymentarrangements. Taxation There is a current tax charge of EUR0.13 million (£0.09 million) and a deferredtax provision of EUR2.0 million (£1.4 million). This tax provision is includedin the adjusted NAV calculation. The deferred tax provision, relating toproperty revaluation gains, is required under International Financial ReportingStandards as German capital gains tax would be payable if the actual propertieswere sold. No capital gains tax liability should arise if the Company disposedof its shareholdings in the Company's SPVs. Borrowings As of 30 June 2007, the borrowings at the SPV level for the Ordinary SharePortfolio totalled EUR705.9 million, all of which were secured on theproperties. After taking into account the cash position, the net debt at the SPV level forthe Ordinary Share Portfolio as of 30 June 2007 was EUR691.6 million. Financing As at 30 September 2007, EUR811.6 million of financing had been arranged inrespect of the Ordinary Share Portfolio, of which EUR705.9 million had beendrawn down by 30 June 2007, and the remainder was drawn down by 12 October 2007.These borrowings have been fully hedged against interest rate risk, giving amaximum overall fixed borrowing cost of approximately 4.6%. For the C Share Portfolio, a financing facility of up to EUR500 million has beenput in place with NIBC, HSH Nordbank, and Nord LB. In conjunction with theinterest rate hedging, it is anticipated that overall borrowing costs on theseborrowings will not exceed 5%. It is anticipated that an additional EUR300million of borrowings will be put in place for the C Share Portfolio over time.The entire expected floating rate debt (3 month Euribor) of EUR800 million forthe C Share Portfolio existing and future property acquisitions have also beenfully hedged against interest rate risk. Resources The Manager and Investment Advisor continue to have significant resources attheir disposal. There are over 150 employees in Berlin (acquisitions, finance,property management and operations) and a small satellite office in Munich(acquisitions only). An acquisitions team of approximately 25 people isdedicated to sourcing, analysis, due diligence, negotiation and purchasing. Finance and accounting is handled by a team of experienced finance specialistsand accountants and all valuations for financing to date have been conducted byDTZ. 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 employed for the pan-German coverage which includes the use ofspecialist sub-contractor regional firms for satellite operations. Alistair Curry Florian LanzFor the Manager For the Investment AdvisorSpeymill Property Managers Ltd Goal Service GmbH Consolidated Income Statement For the year For the period ended 30 June from 1 March 2007 2006 (date of incorporation) to 30 June 2006 £'000 £'000Rent andrelated income 24,817 -Direct costs (14,716) - ---------- ------------Gross profit 10,101 - ---------- ------------Change in fair value ofinvestment property (2,647) - ---------- ------------ Manager's fees (3,810) (103)Professional fees (2,455) -Audit fees (143) (7)Other expenses (734) (137) ---------- ------------Administrative expenses (7,142) (247) ---------- ------------Net operating profit/(loss)before net financing income 312 (247) ----------- ------------Financial income 28,849 1,296Financial expenses (9,116) (1) ----------- ------------Net financing income 19,733 1,295 ----------- ------------Profit before taxation 20,045 1,048 Income tax expense:Current (86) -Deferred (1,355) - ----------- -------------Retained profit for the year 18,604 1,048 ----------- ------------- Basic earnings per Ordinary Share (pence) 7.04 0.62Diluted earnings per Ordinary Share (pence) 7.03 0.62Basic earnings per C Share (pence) 2.66 -Diluted earnings per C Share (pence) 2.66 - ----------- ------------- The Directors consider that all results derive from continuing activities Consolidated Balance Sheet At 30 June 2007 At 30 June 2006 £'000 £'000 Investment property 600,549 - ----------- -----------Total non-current assets 600,549 - ----------- -----------Derivative financial instruments 42,885 -Trade and other receivables 23,302 22,108Cash and cash equivalents 170,198 139,895 ----------- ------------Total current assets 236,385 162,003 ----------- ------------Total assets 836,934 162,003 ----------- ------------Issued share capital 142,000 17,000Share premium 37,803 -Retained earnings 163,437 145,548Foreign currency translation reserve (6,867) (701)Other reserves 715 - ------------ ------------Total equity 337,088 161,847 ------------ ------------Trade and other payables 23,778 156Interest bearing loans 1,759 -Income tax payable 80 - ------------ ------------Total current liabilities 25,617 156 ------------ ------------Interest bearing loans 472,893 -Deferred tax liability 1,336 - ------------ ------------Total non-current liabilities 474,229 - ------------ ------------Total liabilities 499,846 156 ------------ ------------Total equity & liabilities 836,934 162,003 ------------ ------------ IFRS net asset value per Ordinary Share (pence) 99.67 95.20IFRS net asset value per C Share (pence) 67.06 - Company Balance Sheet At 30 June 2007 At 30 June 2006 £'000 £'000 Investment in subsidiaries 42,070 - ---------- ------------Total non-current assets 42,070 - ---------- ------------Derivative financial instruments 29,023 -Inter company loans 100,409 -Trade and other receivables 5,583 22,108Cash and cash equivalents 160,588 139,895 ---------- ------------Total current assets 295,603 162,003 ---------- ------------Total assets 337,673 162,003 ---------- ------------Issued share capital 142,000 17,000Share premium 37,803 -Retained earnings 162,288 145,548Foreign currency translation reserve (6,789) (701)Other reserves 715 - ---------- ------------Total equity 336,017 161,847 ---------- ------------Trade and other payables 1,656 156 ---------- ------------Total current liabilities 1,656 156 ---------- ------------Total equity & liabilities 337,673 162,003 ---------- ------------ The profit earned by the Company for the year ended 30 June 2007 was £17,455,525(2006: £1,047,941). Consolidated Statement of Changes in Equity Share Share Retained Other 30 June 30 June capital premium earnings reserves 2007 2006 (note 17) £'000 £'000 £000 £'000 £'000 £'000Balance at 1July 2006 17,000 - 145,548 (701) 161,847 - Shares issuedin the year 125,000 44,942 - - 169,942 17,000 Share issue expenses (7,139) (715) 715 (7,139) -Foreign exchangetranslationdifferences - - - (6,166) (6,166) (701)Retained profit for the year - - 18,604 - 18,604 145,548 ------- --------- --------- -------- -------- --------Balance at 30June 2007 142,000 37,803 163,437 (6,152) 337,088 161,847 ------- --------- --------- -------- -------- -------- Analysis by shareOrdinary Shares 17,000 - 156,795 (4,363) 169,432 161,847C Shares 125,000 37,803 6,642 (1,789) 167,656 - ------- --------- --------- -------- -------- --------Balance at 30June 2007 142,000 37,803 163,437 (6,152) 337,088 161,847 ------- --------- --------- -------- -------- -------- Consolidated Cash Flow Statement For the year For the period ended 30 June from 1 March 2007 2006 (date of incorporation) to 30 June 2006 £'000 £'000 Operating activitiesGroup profit for the period 20,045 1,048Adjustments for:Financial income (28,849) (1,296)Financial expenses 9,116 1Change in fairvalue of investment property 2,647 - -------- ---------Operating profit/(loss)before changes in workingcapital and provisions 2,959 (247) Increase in trade and otherreceivables (9,971) (620)Increase in trade andother payables 21,343 156 --------- ---------Cash flow from operations 14,331 (711)Interest paid (9,116) (1)Interest received 2,228 1,296Income tax paid - - --------- ----------Cash flow from operatingactivities 7,443 584 --------- ---------- Investing activitiesAcquisition of investment property (579,429) -Deposits relating to propertyacquisitions (12,711) (21,488)Acquisitions of investments (16,264) - --------- -----------Cash flow from investing activities (608,404) (21,488) --------- ----------- Financing activitiesProceeds from the issue ofOrdinary Share capital 169,942 170,000Share issue expenses (7,139) (8,500)New interest bearing loans 474,652 - --------- ----------Cash flow from financing activities 637,455 161,500 --------- ----------Net increase in cash andcash equivalents 36,494 140,596Effect of exchange ratefluctuations on cash held (6,191) (701)Cash and cash equivalents atbeginning of period 139,895 - ---------- ------------Cash and cashequivalents at end of period 170,198 139,895 ---------- ------------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 an admission document dated 13 March 2006 there was a placing of upto 170 million Ordinary Shares. The Shares of the Company were admitted totrading on AIM, a market of the London Stock Exchange, following the close ofthe placing on 17 March 2006. In total, 170 million Ordinary Shares were issued. Pursuant to an admission document dated 17 April 2007 there was a placing of upto 250 million C Shares. The Shares of the Company were admitted to trading onAIM, a market of the London Stock Exchange, following the close of the placingon 10 May 2007. In total, 250 million C 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. 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 or funds from operations in relation to theCurrent Portfolio and C Share Portfolio to the Ordinary Shareholders and the CShareholders respectively. The Board intends to pay a nominal dividend to existing Ordinary Shareholders inthe short-term and, in line with the stated dividend policy on InitialAdmission, intends to be able to pay a dividend equivalent to an annualisedamount of 6 per cent. of the Initial Placing Price within the first 12 months ofthe Company becoming substantially fully invested (completed). It is the intention of the Directors that in the first 12 months aftersubstantially all of the net proceeds of the C Share Placing have been invested,the net distributable income generated by the Company from the investment of thenet proceeds of the Placing should be equivalent to an annualised netdistributable income return of 5 per cent. of the Placing Price. The Managerbelieves that substantially all of the net proceeds of the Placing will benotarised by 30 June 2008. 2 The Subsidiaries During the year the Company established 65 Isle of Man companies to hold GermanInvestment property. The percentage of shares held in all these subsidiaries is100%. At the end of the year the Company owns 100% of the shares in 80 Isle ofMan incorporated property owning companies and 1 Cayman incorporatedintermediate holding company. 3 Basis of presentation These consolidated financial statements have been prepared in accordance withInternational Financial Reporting Standards ("IFRS"). They are prepared on thehistorical cost basis except for derivative financial instruments and investmentproperties, which are stated at fair value. The preparation of financial statements requires management to make judgements,estimates and assumptions that affect the application of accounting policies andthe reported amounts of assets, liabilities, income and expenses. Actual resultsmay differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisionsto accounting estimates are recognised in the period in which the estimate isrevised and in any future periods affected. The most significant area requiring estimation and judgement by the Directors isthe valuation of investment property. 4 Segment reporting The Group has one segment focusing on achieving income with the potential forcapital growth investing in the residential property market in Germany. Noadditional disclosure is included in relation to segment reporting, as theGroup's activities are limited to one business and geographic segment. 5 Net financing income For the year For the period ended ended 30 June 2007 30 June 2006 £'000 £'000 Interest income 2,228 1,296Unrealised gain on derivativefinancial instruments 26,621 - --------- ----------Financial income 28,849 1,296 -------- ----------Interest charges (9,111) -Bank charges (5) (1) --------- ----------Financial expenses (9,116) (1) --------- ----------Net financing income 19,733 1,295 --------- ---------- 6 Investment property 30 June 2007 30 June 2006 £'000 £'000 Brought forward - -Additions 603,196 -Net revaluation deficit (2,647) - --------- ---------Value of investment property at end of year 600,549 - --------- ----------The fair value of the Group's investment property at 30 June 2007 has beenarrived at on the basis of a valuation carried out at that date by DTZ ZadelhoffTie Leung GmbH, independent valuers that are not related to the Group. DTZZadelhoff Tie Leung GmbH have appropriate qualifications and recent experiencein the valuation of properties in the relevant locations. The valuation, whichconforms to International Valuation Standards, was arrived at by primarilyassessing the current rental income as well as an estimate of the futurepotential net income generated by use of the properties supported by comparablerecent portfolio transactions on arm's length terms. Security At 30 June 2007, there was a first rank mortgage on the above propertiessecuring the bank loan of £474,651,641. 7 Derivative financial instrumentsGroup 30 June 2007 30 June 2006 £'000 £'000 Fair value of interest rate swap contracts 42,885 - ---------- --------- The fair value of the interest rate swap contracts comprises 31 contracts asfollows:- Notional amount Premium Maturity Fixed rate Variable rate Fair value at 30 June 2007 £'000 £'000 £'000 400,000 4,377 02.04.2014 3.745% Euribor 14,159 800,000 8,624 31.12.2014 4.1963% Euribor 14,864 191,650 1,496 30.09.2013 3.7% Euribor 6,635 215,134 2,115 30.09.2013 3.7325% Euribor 7,227 ------- -------- ---------- -------- -------- ---------- 42,885 ----------Company 30 June 2007 30 June 2006 £'000 £'000 Fair value of interest rate swap contracts 29,023 - -------- ---------- The fair value of the interest rate swap contracts comprises 4 contracts asfollows:- Notional amount Premium Maturity Fixed rate Variable rate Fair value at 30 June 2007 £'000 £'000 £'000 400,000 4,377 02.04.2014 3.745% Euribor 14,159 800,000 8,624 31.12.2014 4.1963% Euribor 14,864 ------- -------- ---------- -------- --------- ------- 29,023 -------8 Interest-bearing loans Group 30 June 2007 30 June 2006 £'000 £'000The interest bearing loans are repayable asfollows:On demand or within one year 1,759 -In the second year 4,551 -In the third to fifth years inclusive 24,998 -After five years 443,344 - -------- ---------- 474,652 - -------- -----------Less: amount due for settlement within 12months 1,759 -(shown under current liabilities) --------- ---------- Amount due for settlement over the remainingperiod of the loans 472,893 - ---------- -----------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. The average effective rate is 4.6%. 9 IFRS adjusted Net Asset Value per Share (adjusted for Deferred Tax) Ordinary SharesNet assets attributable to Ordinary Shareholders 169,432 161,847(£'000)Ordinary Shares in issue at 30 June 2007 170,000 170,000(thousands) --------- --------- IFRS net asset value per Ordinary Share (in 99.67p 95.20ppence) ---------- --------- C SharesNet assets attributable to C Shareholders 167,656 -(£'000)C Shares in issue at 30 June 2007 (thousand) 250,000 - -------- -----------IFRS net asset value per Ordinary Share (in 67.06p -pence) -------- ----------- The net proceeds received from the Company's Ordinary Share issue and C Shareissue are accounted for as two separate pools of funds. The C Shares willconvert into Ordinary Shares on such date as the Directors may decide on thebasis of the conversion ratio set out in the C Share admission document, whichwill reflect the proportion of the Group's net asset value attributable to eachC Share compared with the fully diluted net asset value attributable to eachOrdinary Share at the calculation date. The Directors intend to triggerconversion of the C Shares once 85 per cent. of the funds raised from the CShare issue have been fully invested (completed). 10 Basic and Diluted Earnings per Share Basic and diluted earnings per Ordinary Share and C Share are calculated bydividing the profit attributable to the Ordinary Shareholders and the profitattributable to the C Shareholders by the number of Ordinary Shares and thenumber of C Shares respectively in issue during the year. Basic Earnings per Share 2007 2006Ordinary SharesProfit attributable to Ordinary Shareholders 11,962 1,048(£'000)Ordinary Shares in issue at 30 June 2007 170,000 170,000(thousands) -------- -------- Basic earnings per Ordinary Share (pence per 7.04p 0.62pshare) -------- -------- C SharesProfit attributable to C Shareholders (£'000)for the period from 10 May 2007 (date of issue) to 30 June 2007 6,642 - C Shares in issue at 30 June 2007 (thousands) 250,000 - --------- -----------Basic and fully diluted earnings per C Share(pence per share) 2.66p - --------- ----------- The difference between basic and diluted Ordinary Shares in issue arises fromthe assumption that dilutive share options were exercised. The conversion of C Shares in to Ordinary Shares is not considered to bedilutive. Diluted earnings per share 2007 2006Ordinary SharesProfit attributable to Ordinary Shareholders 11,962 1,048(£)Ordinary Shares in issue at 30 June 2007 170,000 170,000(thousands) --------- ---------Adjustment for share options 227 51 --------- ---------Ordinary Shares in issue for diluted earnings 170,227 170,051per share --------- ---------- Fully diluted earnings per Ordinary Share(pence per share 7.03p 0.62p -------- --------- 11 Post balance sheet events On 9 October 2007 the Company was granted an order from the High Court ofJustice approval for the Company to cancel its share premium account arising onthe issue of the C Shares. The Company was granted a further Order from the HighCourt of Justice of the Isle of Man on 9 October 2007 confirming that it maycancel its entire share capital by extinguishing and cancelling all of theissued and unissued Ordinary Shares of 10 pence each and C Shares of 50 penceeach in the Company for the purposes of redominating the shares of the Companyfrom Sterling into Euros. Following the granting of this Order, with effect from16 October 2007 the Company issued new paid up Euro Ordinary Shares with anominal value of 5 Euro cents each and new paid up Euro C Shares with a nominalvalue of 25 Euro cents each. 12 Copies of the Annual Report The full audited accounts for the year ended 30 June 2007 will be sent toshareholders shortly and will be available from the Company's registered officeat Jubilee Buildings, Victoria Street, Douglas, Isle of Man IM1 2SH. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Sdic Power.