Final Results

2nd Apr 2009 07:00



Treveria plc

("Treveria" or the "Company")

Preliminary Results

-Appointment of new chairman-

Treveria plc (AIM: TRV), the German retail focused real estate investment company, today announces its preliminary results for the twelve months ended 31 December 2008.

Financial Highlights:

Property assets of €2,017 million, after revaluation, as at 31 December 2008 (31 December 2007: €2,333 million, 30 June 2008 €2,221 million) reflecting a decline in valuation over the twelve months of 12.3%, after allowing for acquisitions and disposals

Gross rental income for the year rose to €155.1 million (2007: €130.0 million) 

Net rental income for the year was €122.8 million (2007: €109.9 million)

Equivalent yield of the portfolio was 6.9% (2007: 6.2%) with a net fully let yield of 7.5% (2007: 6.6%).

Adjusted profit before tax, which excludes revaluation movement, surrender premiums, profits on sales of properties, fair value movements on interest rate hedging and accelerated finance costs on the sale of properties was €23.4 million (2007: €38.5 million)

Basic and adjusted* EPS were a loss of 44.4c and a profit of 3.4c, respectively (2007: earnings of 5.1c and 5.3c, respectively)

Adjusted NAV per share of 68.4c down 39% compared to 31 December 2007 NAV per share of 112.9c (30 June 2008: 91.2c)

Total cash position of €146 million as at 31 December 2008, of which €81 million was held at the parent Company level

Total bank loans in the Company's five non-recourse debt silos reduced to €1.74 billion from €1.79 billion at the 2007 year end and €1.81 billion at 30 June 2008 

The Company remains compliant against 'hard breach' banking covenants:

o each facility benefits from considerable interest cover of between 138% and 176% against 'hard breach' covenants of between 110% and 125%

o As at the year end, the gross loan to value ("LTV") ratio was 86.2% (2007: 76.7%) and the net LTV ratio was 78.9% (2007: 69.1%) against 'cash trap' LTV ratios of between 77% and 85% and 'hard breach' LTV ratios between 77% and 95%. 

Operational Highlights:

€76.2 million of property disposals completed at a 5.6% premium, after disposal costs, to the 31 December 2007 valuation

294 new leases and lease renewals negotiated with a total annual rent of €7.4 million compared to historic rental levels of €6.8 million

Strategic review initiated in June 2008, with a principal focus on stabilisation of the day-to-day management of the business following the collapse of the former Dawnay Day group, which resulted in a number of initiatives with cost savings in excess of €2.5 million expected per annum, and included:

 

o the internalisation of the Company's asset management function through the appointment of Treveria Asset Management Limited as asset manager;

o the appointment of Cushman & Wakefield LLP as exclusive property manager; and

o the change of Company name to Treveria plc, to reflect its independent status.

The Company also announces that, effective today Ian Henderson will step down as chairman of the Company. He will be replaced by fellow Board director Nicholas Cournoyer.

*Adjusted EPS excludes revaluation movement, surrender premiums, profits on sales of properties, fair value movements on interest rate hedging and accelerated finance costs on the sale of properties and deferred tax.

Ian Henderson, outgoing chairman of Treveria plc, said: 

"Twelve months is a long time at the moment and in the current difficult markets, the priorities for a Group such as Treveria have changed to ensure survival. The benefits of a diversified portfolio concentrating on retail centres and 'High Street' shops frequented by everyday shoppers are clear and we will continue to work hard to protect our income streams through the months ahead, whilst bearing in mind that, as ever, protection of the Company's cash is an over-riding priority.

"As a result of the significant changes and achievements over the last twelve months and in recognition that the Group's requirements and ownership have moved on, I am stepping down as chairman with immediate effect. I will leave the Company in the hands of Nicholas Cournoyer who will fill the seat I am vacating. I would like to take this opportunity to thank our very loyal and talented management team and all our staff for their diligent work through a difficult period and to wish them all every success in the future."

Nicholas Cournoyer, the new chairman of Treveria plc, said:

"Under the leadership of Ian Henderson, the Company has undertaken a number of important measures to ensure it can withstand the significant challenges that the current market environment presents. I would like to thank Ian for all his hard work, especially over the last 12 months, which have been challenging for all businesses. He has ensured that the Company is positioned for the current market and I wish him all the best for the future.

"As I take up the position of chairman, the focus for the Company remains the same. We will continue our active asset management programme, ensuring that our properties are working as hard as possible to maximize their income, whilst at the same time focusing on strengthening the Company's balance sheet through prudent debt and cash management."

Enquiries:

Treveria Asset Management Damian Wisniewski / Chris Kingham	+44 (0)20 7960 6525
Financial Dynamics Stephanie Highett / Richard Sunderland / Laurence Jones	+44 (0)20 7831 3113

  Chairman's statement 

As I write this statement for the year ended 31 December 2008, I am acutely aware that this has been an eventful year both for the Treveria plc group ("the Group") and for the world in general. It has also been something of a turning point for the Group as it adapts to new challenges and looks forward to the future.

It is worth reviewing how we have reached our current situation. The Company was launched and joined the AIM market in December 2005 when the initial public offering of shares raised €444 million of gross proceeds. The business model was to acquire commercial retail properties in Germany which met our investment objectives using a combination of the equity raised and the proceeds of debt based on a level of gearing of not more than 80% LTV, to build a portfolio of approximately €2.3 billion over a period of 12 to 18 months. The portfolio was designed to include a large variety of tenants and a wide geographical area to spread risk and then to enhance rental and capital growth through active portfolio management. Given the yields generated at that time from secondary retail assets and the overall cost of debt, the Group was expected to generate significant positive cash flow and our stated target was that about 85 per cent of recurring distributable profits would be paid out in semi-annual dividends.

In the period up to 31 December 2006, the Group acquired almost €1.7 billion of properties in 29 portfolios spread through 191 towns in Germany. In November 2006, the Company completed a secondary placing raising gross proceeds of €300 million but it soon became clear that the prices being asked for suitable properties were overheating and the positive yield gap on new properties was being eroded by increasing interest rates and margins. Between January and June 2007, from which point property valuations started to decline, further property acquisitions of €326 million were completed and, by the end of December 2007, the portfolio size was €2.4 billion, including revaluation surpluses of €55 million. The Group commenced its share buyback programme in July 2007, rather than purchasing more properties. 

The global credit crisis started to gather momentum from August 2007 and liquidity in the banking markets declined rapidly. Concerns over our gearing level combined with expectations that property valuations would fall led to a significant decline in the Company's share price through the first half of 2008 and prompted the Board to announce a strategic review on 9 June 2008 to seek ways to protect shareholder value. As reported in my interim statement, JPMorgan Cazenove was appointed to carry out the review with a remit to consider all options available ranging from returning funds to shareholders following asset disposals to a sale of the whole Company. The other principal advisers to the Company were Norton Rose LLP and Ernst & Young LLP. As this review progressed, sentiment in the financial markets deteriorated further and one of the most significant corporate failures reported within the UK in mid-2008 was that of companies owned by the Dawnay, Day group. Dawnay, Day was a diverse and complex set of companies and, as well as being significant shareholders in, and the original promoters of, Treveria, owned the asset management and property management entities responsible for managing the Group's portfolio. At that time, the Group's asset manager was Dawnay, Day Treveria Real Estate Asset Management Limited ("DDTREAM") and the property manager was Dawnay, Day Property Investment GmbH ("DDPI").

Much of my time and energy, and that of our teams of advisers, through the second half of 2008 was spent looking for a solution to a very complex set of challenges generated by the declining share price and the collapse of Dawnay, Day and the outcome is reported below. I believe that, as a result of the very significant amount of time and effort expended by your Board and senior management, we have reached the best possible outcome in difficult circumstances.

RESULTS

Gross rental income for the year was €155.1 million (2007: €130.0 million). The comparative figure was lower as the portfolio was still being assembled during 2007. Net rental income for the year was €122.8 million (2007: €109.9 million) reflecting an increase in direct property costs to €32.3 million from €20.1 million in 2007. Of this increase, €2.7 million of costs were recognised in 2008 relating to the finalisation of 2007 service charge reconciliations, where irrecoverable costs proved much higher than previously expected. After adjusting for this, irrecoverable service charge expenditure represented 4.8% of gross rents against 5.0% for 2007. Further cost increases occurred because many of the properties acquired in late 2007 were leasehold; the cost of ground rents in 2008 was €5.6 million against €3.1 million in the prior year.

After allowing for property revaluation movements, the operating loss for the year was €167.2 million (2007: profit of €100.0 million). It should also be noted that the prior year benefited from €7.1 million of surrender premiums. The adjusted operating profit for the year, which excludes profits on sales of properties, revaluation movements and surrender premiums as well as the non-recurring costs of the strategic review and the termination of management arrangements with Dawnay, Day was €116.0 million (2007: profit of €103.6 million).

Loss before tax for the year was €283.6 million (2007: profit of €33.6 million). The adjusted profit before tax, which excludes revaluation movement, surrender premiums, profits on sales of properties, fair value movements on interest rate hedging and accelerated finance costs on the sale of properties was €23.4 million (2007: €38.5 million).

Basic and adjusted EPS were a loss of 44.4c and a profit of 3.4c, respectively (2007: earnings of 5.1c and 5.3c, respectively). Adjusted EPS excludes revaluation movement, surrender premiums, profits on sales of properties, fair value movements on interest rate hedging and accelerated finance costs on the sale of properties and deferred tax.

Property sales of €76.2 million completed during 2008 giving rise to a gross profit before taxation of €3.9 million after allowing for sales costs and the costs incurred in avoiding the contracted capital commitments detailed below. The net profit on sale was partly offset by swap breakage costs of €2.0 million and accelerated amortisation of loan arrangement costs of €0.7 million.

REVALUATION AND NET ASSET VALUE

Property values have fallen significantly in Germany in the last year, though declines in value in the UK and some other markets have been more dramatic still. As at 31 December 2008, the portfolio was valued by DTZ Debenham Tie Yeung Limited at €2,017 million reflecting a revaluation deficit of €282.9 million for the year or about 12.3 per cent of the portfolio value after allowing for acquisitions and disposals. The net asset value of the Group attributable to equity holders of Treveria plc has fallen to €379.8 million as at the year end (2007: €683.4 million). As a result, the adjusted net asset value per share has fallen by 39% to 68.4c (2007: 112.9c). Property yields have moved out considerably and the average net yield of the portfolio as at 31 December 2008 was 6.9% (2007: 6.2%); the net fully let yield was 7.5% (2007: 6.6%).

PROPERTY ACQUISITIONS AND DISPOSALS

The Group did not enter in to any new contracts to acquire property during 2008; owing to purchase commitments made in 2007 the Company completed the acquisition of properties totalling €35.2 million including fees and purchase costs. The average net initial yield on the new properties purchased was 6.6%.

The Group has sold properties during the year for total proceeds of €76.2 million; this price reflects a premium, including sale costs, of €5.3 million to the book value as at 31 December 2007. Further to these sales, contracts have been notarised over two additional properties for total sale proceeds of €4.2 million. Whilst the very significant fall in European interest rates is attractive for new purchasers of property, the costs associated with unwinding swap arrangements has created an additional factor when assessing the feasibility of property sales.

During the year the Group negotiated the withdrawal from the €75.5 million planned acquisition of a shopping centre in Cottbus. Subsequent to the period under review, an, agreement was reached in February 2009 to withdraw from the forward commitment to acquire a €25.0 million shopping centre in Bremerhaven. The Group incurred total costs of €1.4 million in withdrawing from these commitments; in the current environment it was considered that incurring these costs to walk away was in the best interests of the Group.

PORTFOLIO PERFORMANCE

Portfolio rental income was affected by the failure of two of our larger tenants, Hertie GmbH and Sinn Leffers AG. Together, they contributed combined rental income of €6.8 million at the start of 2008. At the balance sheet date, the leases all remained in place but as at the date of this statement this contracted rental income had reduced to €2.3 million per annum following termination of leases by the administrators. 

In a challenging market environment, our asset managers negotiated 294 new leases and lease renewals during 2008, with a total annual rent of €7.4 million compared to historic rental levels of €6.8 million. The rent was increased in 415 leases due to indexation and stepped rent uplifts resulted in additional rental income of €1.4 million per annum. The annualised gross rent for the portfolio as at the beginning of 2009 was €152.7 million.

As noted above, the portfolio has experienced an increase in landlord non-recoverable costs during the year. The improvement of service charge lease recovery rates, the letting of vacant space and the implementation of property management initiatives are major objectives of the Group's asset management team for 2009.

STRATEGIC REVIEW AND STABILISATION OF MANAGEMENT

The strategic review was a significant exercise. Many third parties performed detailed due diligence on the Group and a number of indicative offers was made, some of which would have involved the appointment of new asset managers. After careful review with our advisers and consultation with major shareholders, none of these indicative offers was considered by the Board to represent an attractive outcome for shareholders.

Stabilising the day-to-day management of this extensive portfolio was our other main priority. From the end of August 2008, a number of key DDTREAM staff were made redundant by Dawnay, Day and we had to act quickly to preserve an effective management team for our business. This led to us setting up a wholly owned subsidiary company, Treveria Asset Management Limited ("TAML") in the UK and its own subsidiary in Germany, Treveria Asset Management GmbH ("TAMG"), to employ these key staff on a basis that would safeguard the business whilst maximizing our flexibility pending the outcome of the strategic review which, at that time, was still underway. It was also paramount to ensure continuity of the property management function which, under the guidance of the asset manager, involved managing around 2,800 tenancies in about 444 properties. The urgent need to stabilise the management added additional complexity to the strategic review process and the actions we could take to ensure such stability and reorganise the management functions were constrained by being in an offer period and thereby having to comply with the rules of the Takeover Code. It is regrettable, but also inevitable, that the whole process took almost six months and necessitated significant expenditure by the Company in advisory fees and other expenses.

Against this background, on 3 December 2008, I was pleased that we were able to announce the internalisation of the asset management function through the appointment of TAML as asset manager. Cushman & Wakefield LLP was also appointed as exclusive property manager, replacing DDPI. As Dawnay, Day had sold its shareholding in the Company prior to this, the Group's relationship with Dawnay, Day thus ended. To recognise this, it was also announced that the Company would change its name to Treveria plc and, following an EGM on 12 January 2009, this became effective. The relationship between Dawnay, Day and Treveria was confusing for many, not least our tenants and suppliers in Germany, and this separation enables us to demonstrate and explain our independence with clarity.

The cost of extracting the Group from its management relationship with Dawnay, Day was approximately €2.6 million. This included a termination fee to DDTREAM of circa €1 million, equating to about one and a half months' notice, and a fee to DDPI of almost €1 million, equating approximately to the fee DDPI would have received had the contracted three months' notice of termination been given. In addition, the total cost of the advisers' fees in relation to the management solution was about €600,000. Total fees in relation to the strategic review were €1.8 million, including an award by the Board to myself and David Hunter of additional fees for our work in connection with the strategic review and management solution. David Hunter also took on the role of chairman of TAML from September 2008 and, in his capacity as a member of the Investment Committee, has been instrumental in helping to maintain sound investment and divestment decisions through the intervening period. Following the internalization of the asset management function, the overall annual cost of asset and property management within the Group is expected to be between €2.5 million and €3 million less than under Dawnay, Day's management. In addition, the new management structure should enable closer alignment between the interests of managers and shareholders and reduce potential conflicts of interest. Our domestic asset management team in Germany is being strengthened further with the recruitment of several new asset management personnel and additional appointments within the finance function. We recognise clearly that it is essential our asset managers work closely with the local property managers to optimise portfolio performance.

In order for it to be commercially feasible for Cushman & Wakefield to take on the employment contracts and other commitments to deliver a relatively seamless property management solution, it was necessary to agree a minimum contract period of three years with guaranteed fee levels set at €5 million in the first year, €4.5 million in the second year and falling to €4 million in the third. In addition, the Group has guaranteed letting fees to Cushman & Wakefield over these three years, but we expect that these will be within the amounts earned by them from lettings during the period.

As the asset manager is now a Treveria subsidiary, the report of the asset manager, which was previously a separate report, has been incorporated within the chairman's statement.

FINANCE, BANKING AND CASH RESOURCES

I would also like to highlight the importance that the Board and the asset management team attach to the Group's banking arrangements, its debt facilities and its cash in particular. With our advisers, we have looked at ways of strengthening the Group's balance sheet but, given the scale of the Group's borrowings and the weak share price, have concluded for now that a rights issue or similar initiative is not in the best interests of existing shareholders. The Group has been structured in a way that holds properties and debt within separate 'silos'. There are five silos with external funding issued by Citi, Deutsche Bank, ABN Amro, Eurohypo and JPMorgan. There is no cross collateralisation between these silos and no recourse to Treveria plc by the lenders. Moreover, each silo benefits from considerable interest cover; the interest cover ratios ("ICR"), as tested on a forward looking basis in our most recent quarterly reports to the banks, were between about 138% and 176% in the various silos. The Group's ICR 'hard breach' covenants are between 110% and 125% though there are 'cash trap' covenants between 125% and 145%. If a facility is cash trapped, cash is retained within the silo rather than being allowed to flow up to the parent after the payment of interest and other costs and fees. 

Given the falls in property values that have occurred and the gearing inherent in the original business model, there has been some pressure on certain LTV ratio covenants and it is anticipated that further declines may be recorded in 2009. The cash trap LTV ratios are set at between 77% and 85% and the hard breach LTV ratios between 77% and 95%. As at the year end, the gross LTV ratio (gross debt against property assets) was 86.2% (2007: 76.7%) and the net LTV ratio (net debt against property assets) was 78.9% (2007: 69.1%).

Following a valuation that was commissioned by Eurohypo, as at 30 July 2008, and as reported in my interim statement, the LTV ratio covenant in that facility came under pressure in September 2008. As the Group was still within the strategic review period and in order to avoid a potential breach of covenant, a 15 month 'hard breach' LTV covenant waiver was negotiated in consideration for a part-repayment of €20 million and an increase in the margin payable to 125 basis points. Of the loan repayment, €2.25 million was taken from a cash trapped bank account and €7.5 million was already contractually due to be repaid in December 2008. As a result of a property sale and further amortisation since the facility has been cash trapped, the LTV ratio is now back below the level at which the hard breach covenant was set before it was waived though the facility remains cash trapped. 

No other LTV ratio covenants have been breached though it remains a possibility in relation to one or more facilities that this could occur should lenders ask for a new valuation and fail to waive a potential breach. In recognition of that possibility, €89.5 million of bank loans have been reclassified as current liabilities as required under IAS 1 though it is not anticipated that settlement of these liabilities is likely to occur within twelve months of the balance sheet date. It seems that, in current market conditions, lenders are generally focusing on interest cover and are also looking to the quality of management. We are some way along the road back to 'relationship banking', a return to which I very much support. However, let it be clear that the Board is committed to preserving cash within the parent company. Parent cash stood at €81 million, as at 31 December 2008, against €102 million the previous year and €75 million at the time of my interim statement in September 2008. Total cash balances as at 31 December 2008 were €146 million against €177 million the previous year and €152 million on 30 June 2008. 

Recent meetings have been held with our lending banks and the Board has weighed carefully the issues in order to continue to prepare these financial statements on a 'going concern' basis.

Total bank loans have reduced to €1.74 billion as at 31 December 2008 from €1.79 billion at the 2007 year end and €1.81 billion at 30 June 2008. The reduction in debt is due mainly to sales of properties during the year totalling €76.2 million and has been possible despite the drawdown of new facilities totalling €41.8 million secured on properties acquired during the year. There were no sales of properties in 2007. 

The loans fall due for final repayment between January 2011 and November 2012. The Group uses a combination of fixed rate loans and interest rate swaps and caps to hedge interest payments on borrowings. Under International Financial Reporting Standards, the swaps and caps must be revalued at each reporting date with valuation movements shown in the income statement. The value of the swaps is calculated as the present value of the payments over the remaining life of the hedge, based on market assumptions of future interest rates. Where, as was the case at 31 December 2008, the floating rate amounts receivable are expected to be lower than the fixed rate amounts payable, a liability is recognised. However, that liability will only crystallise if the hedge is cancelled before its expiry date and will otherwise be adjusted through the income statement over its remaining life. Included in the results for the year is a mark to market loss of €20.8 million on swaps and caps. In addition, the fair value of the fixed rate loans has worsened by €51.1 million during the year. 

The current average blended interest rate under the facilities inclusive of margin is approximately 4.9% (2007: 4.9%). The margin increase in relation to the Eurohypo facility and the higher interest rates payable on loans drawn in 2008 have been largely offset by the recent reductions in floating rates. At 31 December 2008, about 6.5% of the Group's loans were at floating rates protected by interest rate caps.

Finance costs for the year totalled €100.6 million (2007: €73.1 million). Finance costs include €4.9 million (2007: €2.6 million) amortisation of capitalised finance costs and €2.0 million of losses (2007: €nil) on the closing out of interest rate swaps due to property sales. The interest cost for 2007 is not directly comparable as €557 million of loans were drawn during 2007. Bank interest receivable for the year was €5.0 million (2007: €8.0 million) reflecting lower interest rates and a lower average cash balance.

SHARE BUYBACKS

The Company commenced its share buyback programme in July 2007 and, in the first half of 2008, purchased 25.4 million of its own shares for cancellation at a weighted average price of €0.76. The last purchase occurred on 18 April 2008.

DIVIDEND

The Board has concluded that, given the state of the market and the underlying risks to the business at the present time, it is not appropriate to pay a final dividend. Shareholders will recall that the interim dividend was also suspended to conserve cash resources. The dividend announced in 2007 represented 5.1c per share of which 2.55c per share was the final dividend.

OUTLOOK AND STRATEGY

Twelve months is a long time at the moment and the priorities for a Group such as Treveria have changed to deal with the unique challenges currently facing the industry. The benefits of a diversified portfolio concentrating on retail centres and 'High Street' shops frequented by everyday shoppers are apparent and we will work hard to protect the income stream through the months ahead. Containment of irrecoverable property costs is also important to maximise cash flow and, as noted above, the asset and property management teams are working to this end. We are also in the process of strengthening the asset management and finance teams in Germany with locally recruited individuals. The Group's administration costs should reduce in 2009 following internalisation of the asset management function and efficiencies such as the liquidation of unused subsidiary companies will reduce costs further. Protection of the cash within the parent company has been an over-riding aim.

Selective disposals of properties which are ex-growth will continue once market conditions and liquidity improve though sales remain generally unattractive at the prices currently available and are also discouraged by the swap breakage costs that would result. The advantage of low fixed interest rates is that the positive yield gap that gave rise to the original business plan has returned, albeit linked to lower LTV ratios than were previously available.

As announced previously, Peter Klimt resigned as a director in July 2008 once the difficulties at Dawnay, Day became apparent. Martin Bruehl's resignation was announced to coincide with the appointment of Cushman & Wakefield as property managers in December 2008 and Manfred Maus stepped down in February 2009 on the appointment of three new directors. I would like to thank them for their support through challenging times. The three directors appointed in February 2009 were Nicholas Cournoyer, Rolf Elgeti and Michael Neubuerger. All three are fluent German speakers and I am confident that their understanding of the German markets in which we operate plus their expertise in dealing with debt will help steer the Group forward through the next phase of its development.

As a result of the changes and achievements highlighted in this statement and in recognition that the Group's requirements and ownership have moved on, I am stepping down as chairman with immediate effect; Nicholas Cournoyer will take over as chairman of the Board. I would like to take this opportunity to thank our very loyal and talented management team for their diligent work through a difficult period and to wish them all, and the Group as a whole, every success in the future.

Ian Henderson

Chairman

2 April, 2009

 

  Income statement

For the year ended 31 December 2008

		Group
	Notes	Year ended 31 December 2008 €000	Year ended 31 December 2007 €000
Gross rental income	2	155,079	129,951
Direct costs	3	(32,264)	(20,094)
Net rental income		122,815	109,857
Profit from sale of investment properties		3,906	-
Deficit on revaluation of investment properties	9	(282,934)	(10,748)
Other income	2	-	7,100
Strategic review and management restructuring costs	3	(4,418)	-
Administrative expenses	3	(6,571)	(6,230)
Operating (loss)/profit		(167,202)	99,979
Finance revenue	5	5,043	7,985
Finance expense	5	(100,651)	(73,073)
Change in fair value of derivative financial instruments	14	(20,831)	(1,314)
(Loss)/profit before tax		(283,641)	33,577
Income tax credit	6	11,694	722
(Loss)/profit for the year		(271,947)	34,299
Attributable to:
Equity holders of the parent		(269,077)	34,700
Minority interests		(2,870)	(401)
(Loss)/profit for the year		(271,947)	34,299
Earnings per share
Basic, for (loss)/profit for the year attributable to ordinary equity holders of the parent	7	(44.36)c	5.06c
Diluted, for (loss)/profit for the year attributable to ordinary equity holders of the parent	7	(44.36)c	5.05c

Dividends of €15,388,000 (2007: €34,561,000) were paid during the year.

Balance sheet as at 31 December 2008

		Group
	Notes	2008 €000	2007 €000
Non-current assets
Investment properties	9	2,065,070	2,383,027
Fixed assets		59	-
Total non-current assets		2,065,129	2,383,027
Current assets
Trade and other receivables	10	18,157	20,308
Prepayments		7,019	10,366
Cash and short-term deposits	11	145,922	177,015
Total current assets		171,098	207,689
Total assets		2,236,227	2,590,716
Current liabilities
Trade and other payables	12	42,759	48,419
Interest-bearing loans and borrowings	13	100,279	1,457
Current tax liabilities		1,729	271
Derivative financial instruments	14	22,404	1,314
Total current liabilities		167,171	51,461
Non-current liabilities
Interest-bearing loans and borrowings	13	1,624,777	1,773,586
Finance lease obligations		50,202	50,377
Deferred tax liabilities	6	10,714	25,433
Total non-current liabilities		1,685,693	1,849,396
Total liabilities		1,852,864	1,900,857
Net assets		383,363	689,859
Equity
Issued capital	15	6,035	6,288
Capital redemption reserve	16	1,088	835
Retained earnings and other distributable reserves	16	372,677	676,303
Total equity attributable to the equity holders of the parent		379,800	683,426
Minority interests		3,563	6,433
Total equity		383,363	689,859

Statement of changes in equity

For the year ended 31 December 2008

Group	Notes	Issued capital	Share premium	Capital redemption reserve	Retained earnings and other distributable reserve	Total equity attributable to the equity holders of the parent	Minority interests	Total Equity
		€000	€000	€000	€000	€000	€000	€000
As at 31 December 2006		7,123	624,663	-	134,400	766,186	6,834	773,020
Profit/(loss) for the year		-	-	-	34,700	34,700	(401)	34,299
Own 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	676,303	683,426	6,433	689,859
Loss for the year		-	-	-	(269,077)	(269,077)	(2,870)	(271,947)
Own shares acquired	15	(253)	-	253	(19,161)	(19,161)	-	(19,161)
Equity dividends		-	-	-	(15,388)	(15,388)	-	(15,388)
As at 31 December 2008		6,035	-	1,088	372,677	379,800	3,563	383,363

Cash flow statement for the year ended 31 December 2008

		Group
	Notes	2008  €000	2007  €000
Operating activities
(Loss)/profit before tax		(283,641)	33,577
Deficit on revaluation of investment properties	9	282,934	10,748
Profit on disposal of investment properties		(3,906)	-
Finance revenue	5	(5,043)	(7,985)
Finance expense	5	100,651	73,073
Change in fair value of derivative financial instruments		20,831	1,314
Cash flows from operations before changes in working capital		111,826	110,727
Changes in working capital
Increase in trade and other receivables		4,316	(10,530)
Increase in trade and other payables		(3,914)	10,227
Finance costs paid		(92,804)	(65,470)
Finance income received		5,043	8,093
Income tax paid		(1,568)	(1,539)
Cash flows from operating activities		22,899	51,508
Investing activities
Purchase of investment properties		(33,910)	(638,920)
Proceeds from sale of investment properties		74,096	-
Cash flows used in investing activities		40,186	(638,920)
Financing activities
Dividends paid to equity holders of the parent company		(15,388)	(34,561)
Amounts lent to subsidiary companies		-	-
Transactions costs of share issues		-	(1,896)
Purchase of own share capital		(22,186)	(79,796)
Proceeds from loans		41,859	556,870
Repayment of loans		(93,212)	(2,914)
Settlement of derivative financial instruments		(1,739)	-
Finance charges paid		(3,512)	(6,613)
Cash flows from financing activities		(94,178)	431,090
(Decrease)/increase in cash and short-term deposits		(31,093)	(156,322)
Cash and short-term deposits as at 1 January		177,015	333,337
Cash and short-term deposits at 31 December	11	145,922	177,015

  

1 BASIS OF PREPARATION

The financial information is abridged and does not constitute the Group's full financial statements for the years ended 31 December 2008 and 31 December 2007, and has been prepared under International Financial Reporting Standards ('IFRS').

Full financial statements for the year ended 31 December 2007, which were prepared under IFRS, received an unqualified auditors' report.

Financial statements for the year ended 31 December 2008 will be presented to the Members at the forthcoming Annual General Meeting; the auditors' report on these financial statements is unqualified.

2 REVENUE

	Group
	Year ended  31 December 2008 €000	Year ended 31 December 2007 €000
Rental income from investment properties	155,079	129,951
Other income - surrender premiums	-	7,100
Finance revenue (see note 5)	5,043	7,985
	160,122	145,036

3 OPERATING PROFIT

The following items have been charged or (credited) in arriving at operating profit

Direct costs

	Group
	Year ended  31 December 2008 €000	Year ended 31 December 2007 €000
Service charge expenditure	33,502	26,003
Service charge income	(23,387)	(22,155)
Irrecoverable service charges	10,115	3,848
Property management fee	3,921	3,550
Asset management fee	8,348	8,394
Ground rent/lease charges	5,617	3,114
Other property costs	4,263	1,188
	32,264	20,094

Included within service charge expenditure for 2008 is €2.7m of costs arising from reconciliations of 2007 service charges.

  

Strategic review and management restructuring costs

	Group
	Year ended  31 December 2008 €000	Year ended 31 December 2007 €000
Strategic review costs	1,750	-
Directors' fees related to strategic review and management restructuring	176	-
Management restructuring costs	2,492	-
	4,418	-

Administrative expenses

	Group
	Year ended  31 December 2008 €000	Year ended 31 December 2007 €000
Audit fee	798	788
Directors' fees	355	332
Directors' expenses	32	4
Net foreign exchange loss	20	10
Bank fees	411	325
Staff costs (see detail below)	77	63
Consultants' fees and expenses - subsidiary companies	125	150
Legal and professional fees and other administration costs	4,753	4,558
	6,571	6,230

Included in administrative expenses and strategic review costs is €626,867 (2007: €389,000) of fees receivable by the auditors and their associates in respect of other non-audit services.

The total Directors' fees of €531,153 is made up of €176,500 related to strategic review costs and €354,653 contractual fees included within administrative expenses. 

4 EMPLOYEE COSTS AND NUMBERS

	Year ended 31 December 2008 €000	Year ended 31 December 2007 €000
Wages and salaries	609	63
Social security costs	64	-
Other employment costs	9	-
Recharge of costs to DDTREAM	(605)
	77	63

The average number of persons employed by the Group during the year was four (2007: one). Aside from one employee all other employees have been employed by the Group since the beginning of September 2008.

5 FINANCE REVENUE AND EXPENSE

	Group
	Year ended 31 December 2008 €000	Year ended 31 December 2007 €000
Intercompany interest receivable	-	-
Bank interest receivable	5,043	7,985
Finance revenue	5,043	7,985
Bank loan interest payable	(93,759)	(70,460)
Amortisation of capitalised finance charges	(4,163)	(2,613)
Accelerated amortisation due to disposal of investment properties	(715)	-
Loss on termination of swap arrangements on sale of properties	(2,014)	-
Finance expense	(100,651)	(73,073)
Net finance expense	(95,608)	(65,088)

6 INCOME TAX

Consolidated income statement	Year ended  31 December 2008 €000	Year ended 31 December 2007 €000
Current income tax
Current income tax charge	2,526	2,533
Tax charge relating to disposal of investment properties	499	-
Tax charge relating to surrender premiums	-	1,872
	3,025	4,405
Deferred tax
Effect of change of tax rate	-	(12,224)
Relating to origination and reversal of temporary differences	(14,719)	7,097
	(14,719)	(5,127)
Income tax (credit)/expense reported in the income statement	(11,694)	(722)

  

The corporate income tax rate applicable to the Company in the Isle of Man is 0%. The current income tax charge of €3,025,000 (2007: €4,405,000) represents tax charges on profit arising in Germany, that is subject to corporate income tax of 15.825% (2007: 26.375%). The effective income tax rate for the year is lower than the standard rate of corporation tax in Germany, the differences are explained below:

	Year ended  31 December 2008 €000	Year ended 31 December 2007 €000
(Loss)/profit before tax	(283,641)	33,577
(Loss)/profit before tax multiplied by rate of corporation tax in Germany of 15.825% (2007: 26.375%)	(44,886)	8,856
Effects of:
Income exempt from tax	585	(576)
Expenses deductible for tax purposes	(5,790)	(8,316)
Utilisation of tax losses brought forward	(59)	(593)
Tax losses carried forward	4,243	2,239
Adjustment due to change in tax rates prior year	-	(12,224)
Adjustment due to change in tax rates current year	-	1,272
Deferred tax assets on revaluation deficits not recognised	33,351	9,006
Other	862	(386)
Total income tax credit in the income statement (as above)	(11,694)	(722)

DEFERRED INCOME TAX LIABILITY

	2008 €000	2007 €000
As at 1 January	25,433	30,560
Effect of change of tax rate	-	(12,224)
Released in respect of property disposals	(175)	-
Revaluation of investment properties to fair value	(14,544)	7,097
Balance as at 31 December	10,714	25,433

The Group has tax losses of €112 million (2007: €88 million) that are available indefinitely for offset against future taxable profits of the companies in which the losses arose. Deferred tax assets have not been recognised in respect of these losses as they may not be used to offset taxable profits elsewhere in the Group and they have arisen in subsidiaries that have been loss-making for some time.

The Group has an unprovided deferred liability of €18 million as at 31 December 2008 (2007: €20 million) in respect of the difference between the tax base and the carrying value of investment properties that arose upon the acquisition of subsidiaries. This liability is unprovided as the directors consider that, as the acquisitions are treated as asset purchases rather than business combinations, the initial recognition exemption in IAS 12 is available for this temporary difference. To the extent that any taxation is payable in respect of this temporary difference it will be recognised as current tax in the period it becomes payable.

There are no income tax consequences for the Company attached to the final dividend for 2007 that was paid in 2008 by the Company to its shareholders.

  

7 EARNINGS PER SHARE

The calculation of the basic, diluted and adjusted earnings per share is based on the following data:

	2008 €000	2007 €000
Earnings
Earnings for the purpose of basic and diluted earnings per share ((loss)/profit for the year attributable to the equity holders of the parent)	(269,077)	34,700
Revaluation deficits, surrender premiums, gains on disposals and related costs, strategic review and management restructuring costs and fair value of derivative financial instruments, net of related tax (attributable to equity holders)	289,672	1,688
Adjusted earnings	20,595	36,388
Number of shares
Weighted average number of ordinary shares for the purpose of basic earnings per share	606,515,987	685,934,483
Weighted average effect of dilutive share options*	-	862,500
Weighted average number of ordinary shares for the purpose of diluted earnings per share	606,515,987	686,796,983
Basic earnings per share	(44.36)c	5.06c
Diluted earnings per share	(44.36)c	5.05c
Adjusted earnings per share	3.40c	5.30c
Adjusted earnings per share including surrender premiums and related tax (attributable to equity holders)	3.40c	6.06c

The Directors have chosen to disclose adjusted earnings per share in order to provide a better indication of the Group's underlying business performance; accordingly it excludes the effect of revaluation surpluses, gains on the disposal of investment properties and related costs, strategic review and management reorganisation costs, surrender premiums, movements on the fair value of derivative financial instruments and related tax. Adjusted earnings per share have also been shown including surrender premiums and related tax.

* The share options in issue have not been included in the calculation of the diluted earnings per share for the year ended 31 December 2008 as they are antidilutive and would decrease the loss per share.

8 NET ASSETS PER SHARE

	2008 €000	2007 €000
Net assets
Net assets for the purpose of assets per share (assets attributable to the equity holders of the parent)	379,800	683,426
Deferred tax arising on revaluation surpluses	10,714	25,433
Derivative financial instruments	22,404	1,314
Adjusted net assets attributable to equity holders of the parent	412,918	710,173
Number of shares
Number of ordinary shares for the purpose of net assets per share	603,468,809	628,844,061
Net assets per share	62.94c	108.68c
Adjusted net assets per share	68.42c	112.93c

The effect of share options has no material impact on the net assets per share of the Group. 

9 INVESTMENT PROPERTIES

	2008 €000	2007 €000
As at 1 January	2,383,027	1,726,959
Additions and subsequent expenditure	35,167	666,816
Disposals	(70,190)	-
Deficit on revaluation	(282,934)	(10,748)
Balance as at 31 December	2,065,070	2,383,027

All properties were valued as at 31 December 2008, by qualified professional valuers 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's opinion of the Market Value of the properties was primarily derived using comparable recent market transactions on arm's length terms. The properties were valued individually. The aggregate portfolio value equates to an equivalent yield of 6.9% (2007: 6.2%).

However, due to a reduction in transaction volumes the valuers have increasingly used their market knowledge and professional judgement and not only relied on historic transactional comparables. As a result of the level of judgement used in the valuations, the amounts ultimately realised in respect of any given property may differ from the valuations in the balance sheet.

All valuations were carried out in accordance with the RICS Valuation Standards. DTZ's valuation report is dated 13 March 2009 (the "Valuation Report"). Paul Wolfenden has been the signatory of valuation reports provided to Treveria plc for the same purpose as the Valuation Report for a continuous period since 2006. 

In addition to the matters referred to above, DTZ provides Treveria with valuations for acquisition and other purposes including secured lending. 

DTZ Debenham Tie Leung is a wholly owned subsidiary of DTZ Holdings plc. In the financial year to 30 April 2008, the proportion of total fees payable by Treveria to the total fee income was less than 5%.

A reconciliation of the valuation carried out by the external valuer to the carrying values shown in the balance sheet is as follows:

	2008 €000	2007 €000
Investment properties at market value	2,018,730	2,336,143
Onerous lease	(2,140)	(3,493)
Total investment properties at market value per valuers report	2,016,590	2,332,650
Adjustment in respect of minimum payments under head leases separately included as a liability in the balance sheet	50,202	50,377
Adjustment in respect of rent free periods	(1,722)	-
	2,065,070	2,383,027

The carrying value of long leasehold properties which are treated as finance leases and included in investment properties above, amounted to €62,715,900 (2007: €51,922,059)

  

10 TRADE AND OTHER RECEIVABLES

	Group
	2008 €000	2007 €000
Trade receivables	14,910	16,552
Other receivables	3,247	3,756
	18,157	20,308

As at 31 December 2008, trade receivables at nominal value of €9,350,000 (2007: €4,398,000) were impaired and fully provided for.

11 CASH AND SHORT-TERM DEPOSITS

	Group
	2008 €000	2007 €000
Cash at banks and in hand	115,922	177,015
Short-term deposits	30,000	-
	145,922	177,015

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and two months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. The weighted average effective rate on short-term deposits was 3.88% per annum. The fair value of cash and short-term deposits is €145,922,000 (2007: €177,015,000).

As at 31 December 2008, €33,415,238 (2007: €24,640,210) of cash is held in blocked accounts under the control of lenders who have made loans to the Group.

 

12 TRADE AND OTHER PAYABLES

	Group
	2008   €000	2007  €000
Trade payables	10,053	12,304
Accrued operating expenses	12,393	11,219
Accrued interest	17,127	16,172
Other payables	2,878	4,765
Capital payables	308	873
Related party payables	-	3,086
	42,759	48,419

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:

13 INTEREST-BEARING LOANS AND BORROWINGS

	Effective interest rate %	Maturity	2008 €000	2007 €000
Current
Deutsche Bank and Citigroup Loan - first facility	4.58	20 January 2011	87,156	-
Deutsche Bank and Citigroup Loan - second facility	4.79	20 July 2011	3,493	3,493
ABN Amro Loan	4.76	15 July 2011	9,542	987
ABN Amro Loan	Floating	15 July 2011	1,059	110
Eurohypo Loan	Floating	25 July 2012	2,595	-
Capitalised finance charges on all loans			(3,566)	(3,133)
			100,279	1,457
Non-current
Deutsche Bank and Citigroup Loan - first facility	4.58	20 January 2011	476,840	577,810
Deutsche Bank and Citigroup Loan - second facility	4.79	20 July 2011	221,827	225,320
ABN Amro Loan	4.76	15 July 2011	385,218	394,020
ABN Amro Loan	Floating	15 July 2011	42,803	43,780
Eurohypo Loan	Floating	25 July 2012	458,669	448,034
JPMorgan Chase Loan	Floating	19 November 2012	48,099	95,100
Capitalised finance charges on all loans			(8,679)	(10,478)
			1,624,777	1,773,586
Total			1,725,056	1,775,043
The borrowings are repayable as follows:
On demand or within one year			100,279	1,457
In the second year			9,273	5,075
In the third to fifth years inclusive			1,615,504	1,768,511
Total			1,725,056	1,775,043

As required by IAS 1, €89,533,000 of debt facilities have been reclassified as current liabilities though it is not anticipated that settlement of these liabilities is likely to occur within twelve months of the balance sheet date.

The Group has pledged investment properties to secure related interest bearing debt facilities granted to the Group for the purchase of such investment properties.

Deutsche Bank AG and Citigroup Global Markets Limited

The first facility had €577,810,000 drawn down, of which €13,814,000 has been repaid by way of a voluntary prepayment, resulting in a net liability of €563,996,000 at the year end (2007: €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 is repayable on the repayment date of 20 January 2011. This loan is secured over assets and undertakings including over real property, various contracts, insurance policies and bank accounts.

 

The second facility had €232,867,000 drawn down, of which €7,547,000 has been amortised, resulting in a net liability of €225,320,000 at the year end (2007: €228,813,000). The interest rate on this loan is fixed at 4.79% per annum. The terms of the facility are as the first facility with a final repayment date of 20 July 2011. 

ABN Amro N.V.

This facility had €438,897,000 drawn down at the year end, of which €275,000 has been amortised, resulting in a net liability of €438,622,000 at the year end (2007: €438,897,000). The interest on 90% of the loan is fixed at a weighted average interest rate of 4.76% per annum, with the interest on the remaining 10% floating at a rate based on EURIBOR, but capped at 5.35% per annum by means of an interest rate cap. The final repayment date is 15 July 2011. This loan is secured over assets and undertakings. 

Eurohypo AG

This facility had €486,502,000 drawn down at the year end, of which €25,238,000 has been repaid by way of a voluntary prepayment, resulting in a net liability of €461,264,000 at the year end (2007: €448,034,000). The interest on 85% of the loan is fixed at a weighted average interest rate of 5.75% per annum by means of interest rate swaps, with the interest on the remaining 15% floating at a rate based on EURIBOR, but capped at a weighted average interest rate of 6.25% per annum by means of interest rate caps. The final repayment date is 25 July 2012. This loan is secured over assets and undertakings. 

JPMorgan Chase Bank N.A.

This facility had €98,491,000 drawn down at the year end, of which €50,392,000 has been repaid by way of a voluntary prepayment, resulting in a net liability of €48,099,000 at the year end (2007: €95,100,000). Of this balance €18,323,000 has been syndicated to SNS Property Finance, €10,765,000 has been syndicated to Hypo Investmentbank AG and €14,430,000 has been syndicated to Bank of Ireland. The interest on 100% of the loan is fixed at 5.46% per annum by means of an interest rate swap. The final repayment date is 19 November 2012. This loan is secured over assets and undertakings.

 

  

14 FINANCIAL INSTRUMENTS

Fair values

Set out below is a comparison by category of carrying amounts and fair values of all of the Group's and the Company's financial instruments that are carried in the financial statements.

	Group 2008
	Carrying amount €000	Fair Value €000
Financial assets
Cash	145,922	145,922
Financial liabilities
Interest-bearing loans and borrowings: Floating rate borrowings Fixed rate borrowings	553,225 1,184,076	553,225 1,206,766
Derivative financial instruments	22,404	22,404
Finance Leases	50,202	50,202

	Group 2007
	Carrying amount €000	Fair Value €000
Financial assets
Cash	177,015	177,015
Financial liabilities
Interest-bearing loans and borrowings: Floating rate borrowings Fixed rate borrowings	587,024 1,201,629	587,024 1,173,237
Derivative financial instruments	1,314	1,314
Finance Leases	50,377	50,377

The fair value of borrowings has been calculated by discounting the expected future cash flows at prevailing interest rates.

The fair value of derivative financial instruments has been calculated by JC Rathbone Associates Limited, financial risk consultants, based on market prices, estimated future cashflows and forward rates as appropriate.

Derivative financial instruments

	2008 €000	2007 €000
As at 1 January	(1,314)	-
Acquisitions	118	-
Disposals	(377)	-
Change in fair value of derivative financial instruments	(20,831)	(1,314)
Balance as at 31 December 2008	(22,404)	(1,314)

15 ISSUED CAPITAL

Authorised:	Number of Shares	Share Capital €
Ordinary shares of €0.01 each
As at 31 December 2007/2008	1,500,000,000	15,000,000
Issued and fully paid:	Number of Shares	Share Capital €
Ordinary shares of €0.01 each
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
Purchase of own shares	(25,375,252)	(253,752)
As at 31 December 2008	603,468,809	6,034,688

Holders of the ordinary shares are entitled to receive dividends and other distributions and to attend and vote at any general meeting.

Purchase of own shares:

During the year the Company bought back 25,375,252 (2007: 83,413,362) ordinary shares with a total nominal value of €253,752 (2007: €834,134), at a weighted average price of €0.76 (2007: €0.99) per share. The last purchase occurred on 18 April 2008. These shares were then cancelled and the nominal value transferred to the capital redemption reserve (see note 16).

16 OTHER RESERVES

Capital redemption reserve

The capital redemption reserve reflects the nominal value of shares purchased by the Group for cancellation and is €1,088,000 (2007: €835,000) in total.

Retained earnings and other distributable reserve

The other distributable reserve is a distributable reserve that was created for the payment of dividends and for the buyback of shares. The deficit on retained earnings has been deducted from this reserve. The resulting balance is €372,677,000 (2007: €676,303,000).

17 COMMITMENTS 

As at 31 December 2008 the Group had notarised transactions of €25,050,000 (2007: €133,323,319) (exclusive of related acquisition costs) for completion after the year end for the acquisition of investment properties. Subsequent to the year end this obligation has been extinguished at a further cost to the Group of €0.3 million and these costs have been provided for within disposal of investment properties.

18 EVENTS AFTER THE BALANCE SHEET DATE

Subsequent to the year end an obligation of €25,050,000 relating to the acquisition of a shopping centre in Bremerhaven has been extinguished and the costs have been written off in the income statement.

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ENDFR LFLLBKZBLBBB

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Related Shares:

GWIK.L