8th Apr 2008 07:01
Dawnay, Day Treveria PLC08 April 2008 Dawnay, Day Treveria PLC Preliminary Results For the year ended 31 December 2007 Highlights • Adjusted profits after tax of €36.4 million (2006 : €21.1 million) • Adjusted EPS* for the period of 5.3c (2006 : 5.2c), rising to 6.1c if surrender premiums and related tax are included • Proposed final dividend of 2.55c per share (2006 : 2.50c) giving a total of 5.10c for the year (2006: 4.50c), an increase of 13% • Adjusted NAV* per share increased to 112.9c from 111.9c as at 31 December 2006 • Basic NAV per share increased to 108.7c from 107.6c as at 31 December 2006 • Property assets of €2,333 million, after revaluation, as at 31 December 2007 (2006: €1,715 million) *Adjusted NAV excludes deferred tax; adjusted EPS exclude revaluation surplus,deferred tax, surrender premiums and derivative fair value movements Ian Henderson, Chairman of Dawnay, Day Treveria PLC, said: "The German economyremains robust and we have created a high quality, diversified retail propertyportfolio with both secure and growing rental income and numerous assetmanagement opportunities. We are pleased that our Asset Manager has strengthenedits team to take advantage of these opportunities, and having largely completedthe investment phase of our strategy, we are now moving to the next phase oflooking to recycle capital by disposing of assets where maximum value has beenadded. We remain confident of our ability to generate value for shareholders." The Company will host a call for investors at 3.00pm BST on Tuesday 8 April2008, the details for which are: Number: +44 (0)20 8609 1154PIN: 976017# A copy of the presentation to investors will be available on the Company'swebsite at www.dawnaydaytreveria.com. Enquiries: Dawnay, Day Treveria Real Robert Goldsmith 020 7834 8060Estate Asset Management Limited www.dawnaydaytreveria.comCardew Group Tim Robertson 020 7930 0777 Shan Shan Willenbrock Catherine Maitland Chairman's statement I am pleased to announce the Group's results for the year ended 31 December2007. The German economy performed strongly during 2007 and we experiencedhealthy tenant demand for our portfolio of retail properties located throughoutGermany. Nevertheless, the property market was not immune from the turmoil inthe global credit markets which began in the summer of 2007 and shows no sign ofabating. There has been a reduction in transaction volumes and, in certainsectors and geographical locations, a softening of yields. During 2007 we found it increasingly difficult to acquire assets that met ourinvestment criteria due both to the rise in the 5 year Euro swap rate togetherwith a general rise in asset prices, in part due to the presence of highlyleveraged buyers. Although these buyers have now largely exited the marketfollowing the credit crunch, we have continued to be cautious in our use ofcapital. We have delivered on the first phase of our stated strategy to build adiversified portfolio of retail properties in sustainable locations, especiallytown centres, let to strong covenants. This portfolio is actively managed by ourAsset Manager, which has invested significantly in building its German presenceand which now consists of 112 people in Germany across 3 offices and an enlargedteam of people in London. We believe that this combination of a strong portfolioand a highly dedicated team on the ground will continue to deliver shareholdervalue. During the year we acquired €597 million of properties, excluding costs, at anaverage net initial yield of 6.4%, as compared with our marginal cost ofborrowing of 5.5%, bringing our total acquisitions (before revaluation andcosts) to €2,190 million, with an annualised net rent roll of €145.2 million,after deducting ground rents and non-recoverable costs. Results Gross rental revenue for the year was €130.0 million (2006: €70.8 million).Operating profit for the year, which includes unrealised gains in the value ofinvestment properties, was €100.0 million (2006: €120.9 million) and theadjusted operating profit, which excludes any revaluation movement and surrenderpremiums, was €103.6 million (2006: €55.7 million). Profit before tax for the year was €33.6 million (2006: €87.7 million) and theadjusted profit before tax, which excludes revaluation movement, surrenderpremiums and fair value adjustments on interest rate hedging taken through theincome statement, was €38.5 million (2006: €22.5 million). Surrender premiums of€7.1 million were received during the year from a number of properties. Two ofthese properties have already been relet and we expect that the remainder shouldbe relet in the near future. Administrative and other expenses increased from€4.2 million to €6.2 million due to the larger number of entities within thegroup and the increased size of the portfolio. We believe that retaining liquidity gives us flexibility during these uncertaintimes. As a result of our maintaining significant free cash within the Group,net finance costs reflect interest receivable of €8.0 million (2006: €6.1million). Basic and adjusted EPS were 5.1c and 5.3c respectively (2006: 13.5c and 5.2c).Adjusted EPS exclude revaluation movement, surrender premiums, fair valueadjustments on interest rate hedging and deferred tax. Adding back surrenderpremiums and the related tax, the adjusted EPS would be 6.1c (2006: 5.2c). Revaluation and Net Asset Value The portfolio has been valued by DTZ Debenham Tie Leung Limited as at 31December 2007 at €2,333 million, giving a net deficit of €10.7 million, ascompared with either the 31 December 2006 valuation or the purchase price(including costs) if acquired during the year. Excluding acquisition costsincurred in the year, the corresponding surplus was €20.7 million. The adjustednet asset value of the Group has risen to 112.9c from 111.9c as at 31 December2006. The adjusted net asset value per share has fallen by 2.7% since June 2007.The decrease is primarily due to a slight softening of yields in the second halfas the effects of the credit crunch are reflected in the valuer's assumptions. The average net yield of the portfolio as at 31 December 2007 was 6.2% rising to6.6% once fully let. The gross initial yield of the portfolio was 6.9%. Finance As at 31 December 2007, the Group's borrowings totalled €1,789 million, up from€1,235 million last year, all of which were secured on the properties. The loansmature between 2011 and 2012. The majority of the loans are on a fixed interestrate basis with a current average weighted rate of 4.9%, a small increase on the2006 figure of 4.7%. The Group's cash balances at the year end were €177 millionof which €25 million was in blocked accounts. The corresponding cash balanceslast year were €333 million and €25 million respectively. Share buyback The Group commenced its share buyback programme in July 2007 and had purchased83.4 million of its own shares for cancellation at a weighted average price of€0.99 by the year end. With the price of the shares trading at an increasingdiscount to NAV over the year, we felt that it was a better use of capital tobuy back our own shares rather than purchasing properties in competitivesituations. In line with many other property companies, the Group's shares currently tradeat a significant discount to adjusted NAV (approximately 40% discount at thecurrent price of 67.25c) and we believe that buybacks at these levels, which areboth NAV and EPS accretive, will deliver shareholder value, and therefore intendto continue to buy back shares opportunistically. The Company will seek to renew its share buyback authority at the forthcomingAGM. Dividend The Group's target dividend payout ratio is approximately 90% of its recurringnet income, to be distributed over the course of each financial year. I am pleased to announce that the Board has proposed a final dividend of 2.55cper share representing a total dividend for the year of 5.1c, an increase of 13%over the 2006 total dividend of 4.5c. The record date for the dividend is 25April 2008 and it will be paid, if approved by shareholders at the forthcomingannual general meeting, on 30 May 2008. The total dividend represents 96% of ouradjusted EPS or 84% of our adjusted EPS after adding back surrender premiums andrelated tax. Asset Management Dawnay, Day Treveria Real Estate Asset Management Limited (the "Asset Manager")has continued to expand its operations both in the UK and Germany. As theinvestment phase of the Group is now largely completed, the Asset Manager isfocussed on the active management of the portfolio and has identified andcapitalised on a number of interesting asset management opportunities. Activeasset management is a significant differentiator for the Group and is discussedin greater detail in the Asset Manager's report below. Outlook & Strategy In only two years, the Group has successfully established itself in the marketas a significant investor in German retail real estate and we have built aresilient and diversified portfolio that has both growth potential throughactive asset management, and a steady, growing income from a wide range ofstrong covenants. The credit crunch brings both opportunities and threats to allproperty businesses and the board is confident that the Group's strong marketposition will enable it to weather the global financial crisis and emerge in aposition of strength. In addition, the German economy remains robust and theGerman consumers are less leveraged than their counterparts in many otherwestern countries. As the investment phase of the Group is now largely completed, we move on to thenext phase of the strategy, which is to recycle capital by disposing ofproperties where our active asset management efforts have extracted maximumvalue. This, coupled with our current cash position, gives us flexibility inmanaging our balance sheet effectively during current market conditions. I would like to thank my fellow board members for their contributions during theyear and also to welcome Manfred Maus to the board. Manfred was the founder ofthe OBI chain of DIY stores in Germany and is a valuable addition to the board.The Asset Manager has helped the Group to successfully assemble a largeportfolio of quality retail properties in a relatively short period of time andI would like to congratulate its team on their achievements to date, and lookforward to reporting to shareholders again on further progress during thesechallenging times. Asset Manager's Report German Economy and Retail Market The fundamentals of the Germany economy remained solid during 2007 and theoutlook for 2008 is robust yet necessarily cautious in light of uncertainties inthe general economic environment. Germany remained the largest exporter in theworld by value for the fifth consecutive year, with 6.5% growth in 2007.Unemployment fell to 7.8% in March 2008, the lowest level since 1992. GDP isforecast to grow by 1.5% in 2008, ahead of the Euroland average of 1.3%, andreal disposable income is expected to grow by 1.6%. The retail property market in Germany was relatively buoyant in 2007 with thetotal volume of transactions reaching €13.7 billion, compared to €19.7 billionin 2006 (or €15.2 billion excluding the €4.5 billion KarstadtQuelle deal).Domestic purchasers made up 18.9% of total transaction volume, up from 12% in2006, whilst international investors' share of total transaction volumedeclined. We expect this trend to continue in 2008. Acquisitions and Disposals During the year, the Group acquired €597 million of properties, excludingacquisition costs. The properties acquired constituted 29 portfolios purchasedfrom 28 vendors, and totalled 135 individual properties in 105 towns and citiesacross Germany. The average net initial yield on the portfolios purchased was6.4%. The average lot size acquired in 2007 was €4.5 million. We have identified a number of assets which are planned for disposal. We willupdate shareholders as disposals are made. Portfolio Analysis The following analysis takes into account all properties owned as at 31 December2007. By value, 81.4% of the properties are located in the former West Germany,7.3% in Berlin and 11.3% in the former East Germany. The weighted average leaselength of the portfolio is 5.4 years (2006: 5.9 years). The portfolio retains adiverse exposure to tenants with the top ten tenants constituting 33.5% of thetotal rent roll. Our largest tenant is C&A, which makes up 7.4% of the totalrent roll, followed by Metro Group. The following table shows the breakdown ofour assets by type: ValueHigh Street 42.8%Retail Warehouse 24.5%Shopping Centres 26.9%Mixed Commercial 5.8% Finance As at 31 December 2007, the Group's total borrowings amounted to €1,789 million,all of which were secured on the properties. The corresponding figure for theprevious year was €1,235 million. The loans, provided by Citigroup, DeutscheBank, ABN Amro, Eurohypo and JPMorgan, mature between 2011 and 2012, and are allnon-recourse with no cross-collateralisation. The current average blendedinterest rate is 4.9% inclusive of margin against 4.7% last year. Finance costsfor the period amounted to €73.1 million which include €2.6 million of amortisedbank fees and other financing charges. In the prior period the finance costswere €39.3 million of which €1.6 million related to amortisation. Financeincome, relating mainly to cash balances held in the Isle of Man and Germany,amounted to €8.0 million in 2007, an increase from €6.1 million in 2006. Cashbalances as at the year end were €177 million of which €25 million was inblocked accounts. The corresponding figures in 2006 were €333 million and €25million respectively. The gross LTV (gross debt against property assets) was76.7% and the net LTV (net debt against property assets) was 69.1%. Due to the credit crunch, it has become more difficult to source bank financing.Debt is still available, as evidenced by our drawdowns between December 2007 andFebruary 2008, but the terms have generally tightened. We are pleased to be in aposition where the majority of our borrowings are fixed for substantial periods. Taxation In accordance with IFRS, deferred tax liabilities of €25.4 million have beenrecognised at the year end. This relates to the potential tax on gains that mayarise on property disposals. Widespread revisions to the German taxation regime have been introduced inrecent months, including a reduction in the rate of corporate income tax from26.375 per cent to 15.825 per cent which took effect in January 2008. We havetherefore recognised a one-off reduction in the deferred tax provision duringthe year of €12.2 million with a corresponding credit to the tax charge. Furtherreforms became effective in January 2007 and a restriction on the deductibilityof interest expenses to 30 per cent of EBITDA was introduced in January 2008where the total interest expense exceeds €1 million per annum per entity. Weestimate that this will affect properties with a purchase cost exceeding c.€17million. Our corporate structure is advantageous in this case as most propertiesare held in separate vehicles; had they been held in one fiscal unity, theimpact would have been much greater. Asset Management Since last year's report, our asset management team has grown to about 125people including 13 in London and 112 in Germany, across our three offices inDusseldorf, Hamburg and Augsburg. We have also made two senior appointments tothe team: Damian Wisniewski as Chief Operating Officer/Chief Financial Officerin London, and Ellen Lackner as Chief Operating Officer of our Germanoperations. Damian spent 13 years at Chelsfield plc where he headed the financedepartment, being appointed Finance Director in 2003. Ellen was previously Headof Asset Management at Metro Group Asset Management GmbH. Both bring a wealth ofexperience in large portfolio management and are valuable additions to themanagement team. We believe that the team that we have built in Germany gives usa significant competitive advantage and allows us to build strongerrelationships with our existing and prospective tenants. The portfolio now comprises 3,579 leases across 441 properties in 245 towns,with an average lot size of €5.3 million. During the year, we completed 228lease extensions and new leases generating annual income of €6.2 million. Weachieved a rental uplift of 1.6% due to indexation on our leases in 2007. Vacantspace across the portfolio represents 5.5% of rent, and we had 93 lettings ofvacant space during 2007, generating annual income of €2.3 million. Consolidated income statementFor the year ended 31 December 2007 (Unaudited) Notes 1 January 20 October 2007 to 31 2005 to 31 December December 2007 2006 €000 €000 Gross rental income 2 129,951 70,758Direct costs 3 (20,094) (10,882) -------------------------------------Net rental income 109,857 59,876 (Deficit)/surplus on revaluation of investment properties 9 (10,748) 65,253Other income 2 7,100 -Administrative expenses 3 (4,426) (3,208)Other expenses 3 (1,804) (1,009) -------------------------------------Operating profit 99,979 120,912 Finance revenue 5 7,985 6,061Finance expense 5 (73,073) (39,264)Change in fair value of derivative financial instruments (1,314) - -------------------------------------Profit before tax 33,577 87,709 Income tax credit/(expense) 6 722 (31,538) -------------------------------------Profit for the year/period 34,299 56,171 ===================================== Attributable to:Equity holders of the parent 34,700 55,297Minority interests (401) 874 -------------------------------------Profit for the year/period 34,299 56,171 ===================================== Earnings per shareBasic, for profit for the year/period attributable to ordinary equity holders of the parent 7 5.06c 13.47cDiluted, for profit for the year/period attributable to ordinaryequity holders of the parent 7 5.05c 13.45c Dividends of €34,561,000 (2006: €8,888,000) were paid during the year. Consolidated balance sheet as at 31 December 2007 Group Notes (Unaudited) 2007 2006 €000 €000Non-current assets Investment properties 9 2,383,027 1,726,959 --------------------------Total non-current assets 2,383,027 1,726,959 Current assets Trade and other receivables 10 20,308 11,857 Prepayments 10,366 5,955 Cash and short-term deposits 11 177,015 333,337 --------------------------Total current assets 207,689 351,149 --------------------------Total assets 2,590,716 2,078,108 -------------------------- Current liabilities Trade and other payables 12 48,419 37,238 Interest-bearing loans and borrowings 13 1,457 961 Current tax liabilities 271 400 Derivative financial instruments 1,314 - --------------------------Total current liabilities 51,461 38,599 Non-current liabilities Interest-bearing loans and borrowings 13 1,773,586 1,224,126 Finance lease obligations 50,377 11,803 Deferred tax liabilities 6 25,433 30,560 --------------------------Total non-current liabilities 1,849,396 1,266,489 --------------------------Total liabilities 1,900,857 1,305,088 -------------------------- --------------------------Net assets 689,859 773,020 ========================== Equity Issued capital 14 6,288 7,123 Share premium - 624,663 Capital redemption reserve 15 835 - Other distributable reserve 15 629,755 87,991 Retained earnings 46,548 46,409 --------------------------Total equity attributable to the equity holders of the parent 683,426 766,186 Minority interests 6,433 6,834 --------------------------Total equity 689,859 773,020 ========================== Consolidated statement of changes in equity (Unaudited)For the year ended 31 December 2007 Total equity attributable Capital Other to the equity Issued Share redemption distributable Retained holders of the Minority Total Notes capital premium reserve reserve earnings parent interests Equity €000 €000 €000 €000 €000 €000 €000 €000As at 20 October 2005 - - - - - - - - Profit for the period - - - - 55,297 55,297 874 56,171Issue of sharecapital 14 7,123 737,278 - - - 744,401 - 744,401Transaction costs of share issue - (24,624) - - - (24,624) - (24,624)Court approved capital reduction 15 - (87,991) - 87,991 - - - Minority interests in companies acquired - - - - - - 5,960 5,960Equity dividends - - - - (8,888) (8,888) - (8,888) --------------------------------------------------------------------------------------------- As at 31 December 2006 7,123 624,663 - 87,991 46,409 766,186 6,834 773,020 Profit/(loss) for the year - - - - 34,700 34,700 (401) 34,299Own shares acquired 15 (835) - 835 (82,821) - (82,821) - (82,821)Transaction costs of share issue - (78) - - - (78) - (78)Court approved capital reduction - (624,585) - 624,585 - - - -Equity dividends - - - - (34,561) (34,561) - (34,561) --------------------------------------------------------------------------------------------- As at 31 December 2007 6,288 - 835 629,755 46,548 683,426 6,433 689,859 ============================================================================================= Consolidated cash flow statement for the year ended 31 December 2007 (Unaudited) 2007 2006 Notes €000 €000Operating activities Profit before tax 33,577 87,709 Deficit/(surplus) on revaluation of investment properties 9 10,748 (65,253) Finance revenue (7,985) (6,061) Finance expense 73,073 39,264 Change in fair value of derivative financial instruments 1,314 - --------------------------------Cash flows from operations before changes in working capital 110,727 55,659 Changes in working capital Increase in trade and other receivables (10,530) (16,840) Increase in trade and other payables 10,227 11,335 Finance costs paid (65,470) (26,500) Finance income received 8,093 5,953 Income tax paid (1,539) (578) --------------------------------Cash flows from operating activities 51,508 29,029 -------------------------------- Investing activities Purchase of investment properties (638,920) (1,632,066) --------------------------------Cash flows used in investing activities (638,920) (1,632,066) -------------------------------- Financing activities Dividends paid to equity holders of the parent company (34,561) (8,888) Proceeds from issue of share capital - 744,401 Transactions costs of share issues (1,896) (22,644) Purchase of own share capital (79,796) - Proceeds from loans 556,870 1,235,838 Repayment of loans (2,914) (1,141) Finance charges paid (6,613) (11,192) --------------------------------Cash flows from financing activities 431,090 1,936,374 -------------------------------- (Decrease)/increase in cash and short-term deposits 11 (156,322) 333,337Cash and short-term deposits as at 1 January2007/20 October 2005 333,337 - --------------------------------Cash and short-term deposits at 31 December 177,015 333,337 -------------------------------- 1. BASIS OF PREPARATION The financial information which is unaudited, is abridged and does notconstitute the Group's full Financial Statements for the year ended 31stDecember 2007. The financial information has been prepared under InternationalFinancial Reporting Standards ("IFRS"). The prior period from 20 October 2005 to 31 December 2006 was the first periodof the Group's operation and as such the comparative figures are presented forthis period, as published in the 2006 annual report. 2. REVENUE (Unaudited) 1 January 20 October 2007 to 31 2005 to 31 December December 2007 2006 €000 €000 Rental income from investment properties 129,951 70,758Other income - surrender premiums 7,100 -Finance revenue (see note 5) 7,985 6,061 -------------------------------- 145,036 76,819 ================================ 3. OPERATING PROFIT The following items have been charged or (credited) in arriving at operating profit Direct costs (Unaudited) 1 January 20 October 2007 to 31 2005 to 31 December December 2007 2006 €000 €000Direct operating expenses arising on rental-earning investmentproperties 1,188 641Service charge expenditure 26,003 11,083Service charge income (22,155) (8,634)Property management fee 3,550 2,988Asset management fee 8,394 4,334Ground rent/lease charges 3,114 470 ------------------------------ 20,094 10,882 ============================== Administrative expenses (Unaudited) 1 January 20 October 2007 to 31 2005 to 31 December December 2007 2006 €000 €000 Audit fee 788 752Transactions costs relating to AIM admission - 801Consultants' fees and expenses - subsidiary companies 150 163Legal and professional fees and other administration costs 3,488 1,492 ------------------------------ 4,426 3,208 ============================== Included in administrative expenses is €389,000 (2006: €1,142,000) of feesreceivable by the auditors and their associates in respect of other non-auditservices. Other expenses (Unaudited) 1 January 20 October 2007 to 31 2005 to 31 December December 2007 2006 €000 €000 Directors' fees 332 311Directors' expenses 4 15Net foreign exchange loss 10 44Bank fees 325 149Corporate expenses, insurance and other expenses 1,133 490 ------------------------------ 1,804 1,009 ============================== 4. EMPLOYEE COSTS The Group had one employee during the year (2006: one). The salary of thisemployee was €63,329 (2006: €55,000) and no other benefit was payable. 5. FINANCE REVENUE AND EXPENSE (Unaudited) 1 January 20 October 2007 to 31 2005 to 31 December December 2007 2006 €000 €000Bank interest receivable 7,985 6,061 ----------------------------Finance revenue 7,985 6,061 Bank loan interest payable (70,460) (37,682)Amortisation of capitalised finance charges (2,613) (1,582) ----------------------------Finance expense (73,073) (39,264) ----------------------------Net finance expense (65,088) (33,203) ============================ 6. INCOME TAX (Unaudited) Consolidated income statement 1 January 20 October 2007 to 31 2005 to 31 December December 2007 2006 €000 €000Current income taxCurrent income tax charge 2,533 978Tax charge relating to surrender premiums 1,872 - ----------------------------- 4,405 978Deferred taxEffect of change of tax rate (12,224) -Relating to origination and reversal of temporary differences 7,097 30,560 ----------------------------- (5,127) 30,560 -----------------------------Income tax (credit)/expense reported in the income statement (722) 31,538 ============================= The income tax rate applicable to the Company in the Isle of Man is nil. Thecurrent income tax charge of €4,405,000 (2006: €978,000) represents tax chargeson profit arising in Germany, that is subject to corporate income tax of26.375%. The effective income tax rate for the year is lower than the standardrate of corporation tax in Germany; the differences are explained below: (Unaudited) 1 January 20 October 2007 to 31 2005 to 31 December December 2007 2006 €000 €000Profit before tax 33,577 87,709 -----------------------------Profit before tax multiplied by rate of corporation tax in 8,856 23,133Germany of 26.375%Effects of: Income exempt from tax (576) (681) Expenses deductible for tax purposes (8,316) (4,196) Utilisation of tax losses carried forward (593) (835) Tax losses carried forward 2,239 1,267 Non-taxable items including revaluation movement 3,181 (17,210) Other (386) (500) -----------------------------Total income tax expense in the income statement (as above) 4,405 978 ============================= DEFERRED INCOME TAX LIABILITY (Unaudited) 2007 2006 €000 €000 As at 1 January 2007 / 20 October 2005 30,560 -Effect of change of tax rate (12,224) -Revaluation of investment properties to fair value 7,097 30,560 --------------------------Balance as at 31 December 25,433 30,560 ========================== The Group has tax losses of €88,271,123 (2006: €80,790,025) that are availableindefinitely for offset against future taxable profits of the companies in whichthe losses arose. Deferred tax assets have not been recognised in respect ofthese losses as they may not be used to offset taxable profits elsewhere in theGroup and they have arisen in subsidiaries that have been loss-making for sometime. The Group has an unprovided deferred tax liability of €20 million as at 31December 2007 (2006: €29 million) in respect of the difference between the taxbase and the carrying value of investment properties that arose upon theacquisition of subsidiaries. This liability is unprovided as the directorsconsider that, as the acquisitions are treated as asset purchases rather thanbusiness combinations, the initial recognition exemption in paragraph 24 of IAS12 is available for this temporary difference. To the extent that any taxationis payable in respect of this temporary difference it will be recognised ascurrent tax in the period it becomes payable. There are no income tax consequences for the Company attaching to the payment ofdividends in 2007 by the Company to its shareholders. As at 31 December 2006 a deferred tax provision was made based on the prevailingtax rate in Germany at the time of 26.375%. During 2007, the German corporatetax reform act 2008 was passed, and has been in force since 1 January 2008. Thedeferred tax provision has been recalculated based on the new tax rate of15.825%. This results in a credit to the income statement of €12,224,000. 7. EARNINGS PER SHARE The calculation of the basic, diluted and adjusted earnings per share is basedon the following data: (Unaudited) 2007 2006 €000 €000EarningsEarnings for the purpose of basic and dilutedearnings per share (profit for the year/periodattributable to the equity holders of the parent) 34,700 55,297Revaluation (deficits)/surpluses, surrender premiums and fair value of derivative financial instruments, net of related tax (attributable to equity holders) 1,688 (34,136)Adjusted earnings 36,388 21,161Number of sharesWeighted average number of ordinary shares for thepurpose of basic earnings per share 685,934,483 410,536,493Weighted average effect of dilutive share options 862,500 753,947Weighted average number of ordinary shares for thepurpose of diluted earnings per share 686,796,983 411,290,440Basic earnings per share 5.06c 13.47cDiluted earnings per share 5.05c 13.45cAdjusted earnings per share 5.30c 5.15cAdjusted earnings per share including surrender premiums and related tax (attributable to equityholders) 6.06c 5.15c The Directors have chosen to disclose adjusted earnings per share in order toprovide a better indication of the Group's underlying business performance;accordingly it excludes the effect of revaluation surpluses, surrender premiums,movements on the fair value of derivative financial instruments and related tax.Adjusted earnings per share have also been shown including surrender premiumsand related tax. Since the year end the Group has purchased a further 23,425,252 shares as partof the Group's buy back programme (see note 17). 8. NET ASSETS PER SHARE (Unaudited) 2007 2006 €000 €000Net assetsNet assets for the purpose of assets per share (assets attributable to the equity holders of the parent) 683,426 766,186Deferred tax arising on revaluation surpluses 25,433 30,560Derivative financial instruments 1,314 -Adjusted net assets attributable to equity holders of the parent 710,173 796,746 Number of sharesNumber of ordinary shares for the purpose of net assets per share 628,844,061 712,257,423Net assets per share 108.68c 107.57cAdjusted net assets per share 112.93c 111.86c The effect of share options has no material impact on the net assets per shareof the Group. 9. INVESTMENT PROPERTIES (Unaudited) 2007 2006 €000 €000As at 1 January 2007/20 October 2005 1,726,959 -Additions and subsequent expenditure 666,816 1,661,706(Deficit)/surplus on revaluation (10,748) 65,253 -------------------------------Balance as at 31 December 2,383,027 1,726,959 =============================== All properties were valued as at 31 December 2007 by qualified professionalvaluers working for the company of DTZ Debenham Tie Leung, Chartered Surveyors,acting in the capacity of External Valuers. All properties were valued on the basis of Market Value. DTZ Debenham TieLeung's opinion of the Market Value of the properties was primarily derivedusing comparable market transactions on arm's length terms. All valuations werecarried out in accordance with the RICS Appraisal and Valuation Standards. DTZDebenham Tie Leung's valuation report is dated 27 March 2008 (the "ValuationReport"). Paul Wolfenden has been the signatory of valuation reports provided toDawnay, Day Treveria PLC for the same purpose as the Valuation Report for acontinuous period since September 2005 and DTZ Debenham Tie Leung has beencarrying out valuations for Dawnay, Day Treveria PLC for the same purpose as theValuation Report for the same period. In addition to the matters referred to above, DTZ Debenham Tie Leung providesDawnay, Day Treveria PLC with ad hoc investment advice and valuations foracquisition and other purposes including secured lending. DTZ Debenham Tie Leung is a wholly owned subsidiary of DTZ Holdings plc. In DTZHoldings plc's financial year to 30 April 2007, the proportion of total feespayable by Dawnay, Day Treveria PLC to the total fee income of DTZ Holdings plcwas less than 5%. A reconciliation of the valuation carried out by the external valuer to thecarrying values shown in the balance sheet is as follows: (Unaudited) 2007 2006 €000 €000Investment properties at market value 2,336,143 1,715,156Onerous lease (3,493) -Total investment properties at market value per valuers report 2,332,650 1,715,156Adjustment in respect of minimum payments under head leases separately included as a liability in the balance sheet 50,377 11,803 ---------------------------- 2,383,027 1,726,959 ============================ The carrying value of long leasehold properties which are treated as financeleases and included in investment properties above, amounted to €51,922,059(2006: €39,504,787). 10. TRADE AND OTHER RECEIVABLES Group (Unaudited) 2007 2006 €000 €000Trade receivables 16,552 10,601Other receivables 3,756 1,256 ---------------------------------- 20,308 11,857 ================================== As at 31 December 2007, trade receivables at nominal value of €4,398,000 (2006:€1,385,000) were impaired and fully provided for. 11. CASH AND SHORT-TERM DEPOSITS Group (Unaudited) 2007 2006 €000 €000Cash at banks and in hand 177,015 89,193Short-term deposits - 244,144 ---------------------------------- 177,015 333,337 ================================== Cash at banks earns interest at floating rates based on daily bank depositrates. The fair value of cash and short-term deposits is €177,015,000 (2006:€333,337,000). As at 31 December 2007, €24,640,210 (2006: €24,600,000) of cash is held inblocked accounts. These balances are under the control of lenders who have madeloans to the Group. The cash is specifically segregated so as to be able to payfinancing costs including interest. 12. TRADE AND OTHER PAYABLES Group (Unaudited) 2007 2006 €000 €000Trade payables 12,304 6,505Accrued operating expenses 11,219 8,941Accrued interest 16,172 11,182Other payables 4,765 3,922Capital payables 873 3,367Related party payables 3,086 3,321 ---------------------------------- 48,419 37,238 ================================== Capital payables represent amounts due under contracts to purchase properties,which were unconditionally exchanged at the period end.Terms and conditions of the above financial liabilities: • Trade payables are non-interest bearing and it is the Group's policy to pay within the stated terms which vary from 14 - 60 days. • Other payables are non-interest bearing and as above are paid within stated terms. 13. INTEREST-BEARING LOANS AND BORROWINGS Effective Maturity (Unaudited) interest 2007 rate % €000CurrentDeutsche Bank and Citigroup Loan - second facility 4.79 20 July 2011 3,493ABN Amro Loan 4.76 15 July 2011 987ABN Amro Loan Floating 15 July 2011 110Capitalised financecharges on all loans (3,133) -------------- 1,457 --------------Non-currentDeutsche Bank and Citigroup Loan - second facility 4.79 20 July 2011 225,320Deutsche Bank and Citigroup Loan - firstfacility 4.58 20 January 2011 577,810ABN Amro Loan 4.76 15 July 2011 394,020ABN Amro Loan Floating 15 July 2011 43,780Eurohypo Loan Floating 25 July 2012 448,034JPMorgan Chase Loan Floating 19 November 2012 95,100Capitalised finance charges on all loans (10,478) -------------- 1,773,586 -------------- Total 1,775,043 ============== The borrowings are repayable as follows:On demand or within one year 1,457In the second year 5,075In the third to fifth years inclusive 1,768,511 --------------Total 1,775,043 ============== Comparative figures for the prior period are as follows: Effective Maturity 2006 interest €000 rate % CurrentDeutsche Bank and Citigroup Loan - second facility 4.79 20 July 2011 2,883Capitalised finance charges on all loans (1,922) -------------- 961 --------------Non-currentDeutsche Bank and Citigroup Loan - second 4.79 20 July 2011 228,843facilityDeutsche Bank and Citigroup Loan - first 4.58 20 January 2011 577,810facilityABN Amro Loan 4.75 15 July 2011 382,645ABN Amro Loan Floating 15 July 2011 42,516Capitalised finance charges on all loans (7,688) -------------- 1,224,126 -------------- --------------Total 1,225,087 ============== The borrowings are repayable as follows:On demand or within one year 961In the second year 1,757In the third to fifth years inclusive 1,222,369 --------------Total 1,225,087 ============== The Group has pledged investment properties to secure related interest bearingdebt facilities granted to the Group for the purchase of such investmentproperties. Deutsche Bank AG and Citigroup Global Markets LimitedThe first facility had €577,810,000 drawn down at the year end (2006:€577,810,000). The interest rate on this loan is fixed at 4.58% per annum.Interest is payable quarterly in arrears. The loan is not amortising and isrepayable on the repayment date of 20 January 2011. This loan is secured overassets and undertakings including over real property, various contracts,insurance policies and bank accounts. The terms of the facility include variouscovenants with which the Group has complied. The second facility had €232,867,000 drawn down, of which €4,054,000 had beenamortised, resulting in a net liability of €228,813,000 at the year end (2006:€231,726,000). The interest rate on this loan is fixed at 4.79% per annum. Theterms of the facility are as the first facility with a final repayment date of20 July 2011 and include various covenants with which the Group has complied. ABN Amro N.V.This facility had €438,897,000 drawn down at the year end (2006: €425,161,000).The interest on 90% of the loan is fixed at a weighted average interest rate of4.76% per annum, with the interest on the remaining 10% floating at a rate basedon EURIBOR, but capped at 5.35% per annum by means of an interest rate cap. Thefinal repayment date is 15 July 2011. This loan is secured over assets andundertakings and is subject to various covenants with which the Group hascomplied. Eurohypo AGThis facility is for up to €500,000,000 of which €448,034,000 had been drawndown at the year end. The interest on 80% of the loan is fixed at a weightedaverage interest rate of 5.463% per annum by means of interest rate swaps, withthe interest on the remaining 20% floating at a rate based on EURIBOR, butcapped at a weighted average interest rate of 5.905% per annum by means ofinterest rate caps. Following a renegotiation of the Eurohypo loan the maturity dates and marginwere amended. The final repayment date is now 25 July 2012 as opposed to 25 July2014, as originally agreed with the bank and disclosed in the June 2007 interimaccounts. This loan is secured over assets and undertakings and is subject to variouscovenants with which the Group has complied. JPMorgan Chase Bank N.A.This facility is for up to €105,000,000, of which €95,100,000 had been drawndown at the year end. The interest on 100% of the loan is fixed at 5.328% perannum by means of an interest rate swap. The final repayment date is 19 November2012. This loan is secured over assets and undertakings and is subject tovarious covenants with which the Group has complied. 14. ISSUED CAPITAL Authorised: Number of Shares Share Capital •Founder shares of €1 eachFounder shares 10,000 10,000 ===================================== Ordinary shares of €0.01 each Conversion of founder shares 1,000,000 10,000Increase in authorised share capital 1,499,000,000 14,990,000 -------------------------------------As at 31 December 2006/2007 1,500,000,000 15,000,000 ===================================== Issued and fully paid: Number of Share Shares Capital •Founder shares of €1 eachFounder shares 2 2 =====================================Ordinary shares of €0.01 each Conversion of founder shares 200 2Issue of ordinary shares 712,257,223 7,122,572 -------------------------------------As at 31 December 2006 712,257,423 7,122,574 ------------------------------------- Purchase of own shares (83,413,362) (834,134) -------------------------------------As at 31 December 2007 628,844,061 6,288,440 ===================================== Holders of the ordinary shares are entitled to receive dividends and otherdistributions and to attend and vote at any general meeting. Founder shareswhich were converted to ordinary shares had exactly the same rights as ordinaryshares. On 2 November 2007, the Company passed a resolution, which was approved by theHigh Court of Justice of the Isle of Man on 26 November 2007, to cancel theremainder of the Company's share premium account. Purchase of own shares:On 10 July 2007, the Group commenced a share buy back programme. During the yearthe Company has bought back 83,413,362 ordinary shares with a total nominalvalue of €834,134, at a weighted average price of €0.99 per share. These shareswere then cancelled and the nominal value transferred to the capital redemptionreserve (see note 15). 15. RETAINED EARNINGS AND OTHER RESERVES Capital redemption reserveThe Capital redemption reserve reflects the nominal value of shares purchased bythe Group for cancellation and is €834,134 (2006: nil) in total. Other distributable reserveThe other distributable reserve is a distributable reserve that was created forthe payment of dividends and for the buyback of shares and is €629,755,000(2006:€87,991,000) in total. 16. CONTINGENCIES Carried interestArba Investment S.a.r.l. has a right to a carried interest. In any year ArbaInvestment S.a.r.l. is not entitled to any carried interest unless the Group'sproperty assets in aggregate show a cash on equity return of at least 8 % perannum cumulative. If the hurdle is achieved then Arba Investment S.a.r.l. will be entitled to 25%of the cumulative return in excess of 8% per annum achieved on assets sold (or,in certain circumstances, refinanced) by the Group during that financial period.The carried interest will also be payable on the occurrence of certain otherevents, such as a take-over or liquidation of the Group. No amount had been provided as at 31 December 2007 (2006:nil) as the minimumhurdle rate required has not been achieved. 17. EVENTS AFTER THE BALANCE SHEET DATE Since the year end the Company has bought back a further 23,425,252 ordinaryshares, at a weighted average price of €0.76 per share, for cancellation.Following the cancellation of these shares the Company will have 605,418,809shares in issue. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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