TIDMDDE
RNS Number : 6991W
Develica Deutschland Ltd
24 November 2010
Develica Deutschland Limited
Unaudited Interim Report
Company Highlights
Balance Sheet benefits from improved swap position
-- Decrease in interest rate swap liability at 30 September
2010 of EUR11.3 million to EUR51.6 million (31 March 2010:
EUR62.9 million)
-- Property assets of EUR793.1 million after revaluation as at
30 September 2010 (31 March 2010: EUR803.9 million), a
decrease of 1.4% during the period
-- NAV of negative EUR58.6 million, improvement of EUR5.7
million during the last 6 months
-- Gross LTV ratio (gross debt against property assets) at
104.6% (31 March 2010: 103.7%)
Financial performance
-- Increase in ring--fenced cash in the period by 34% to
EUR9.0 million (31 March 2010: EUR6.7 million)
-- IFRS profit improves to EUR5.7 million (30 September 2009:
loss of EUR42.0 million)
-- Gross rental income for the period of EUR33.9 million (30
September 2009: EUR34.5 million)
-- Secured new leases covering in excess of 9,000m2 providing
additional rental income of EUR0.6 million
Chairman's Statement
Introduction and market commentary
I am pleased to present the Interim Report and Accounts for Develica
Deutschland Limited ("the Company") for the six months ended 30 September
2010.
With the benefits of rising global demand and investment, GDP in Germany
has risen in the second quarter by 2.2% on the first three months of
the year. Strong growth in global trade and investment suggests that
the upturn will continue into the second half of the year, however,
more muted performance is forecast in 2011 as the economy normalises.
The recent debt crisis in Portugal, Ireland, Italy, Greece and Spain
brings to light the major adjustments still required in a number of
European countries. Relative to Germany, key weaknesses in the economies
of these countries increased significantly during the past decade.
Looking forward, I believe that there is increased optimism that the
worst of the global economic crisis has now passed although some concerns
remain concerning a double dip. With gradual normalisation of global
credit markets and modest economic recovery, it is anticipated that
Germany can perform well compared to its peers over the short term
with the prospect of outperformance over the medium term returning
to pre--crisis levels.
Valuation and portfolio
An analysis of the CB Richard Ellis ("CBRE") valuation reveals at 30
September that for the second consecutive valuation the key important
drivers, rental values and yields, did not change significantly.
CBRE has independently valued the portfolio at 30 September 2010 at
EUR793.1m. This compares to a value of EUR803.9m as at 31 March 2010
and represents a fall of EUR10.8m or 1.4% over the period under review.
The annualised rental income was EUR67.1m at 30 September 2010 (31
March 2010: EUR68.4m) with rental value estimated by CBRE at EUR64.9m
(31 March 2010: EUR65.1m).
The overall decline in valuation relates to a number of properties'
specific characteristics, rather than general falling rental values or an
upward yield movement and therefore adheres to the general consensus that
the German real estate market has bottomed out.
Major valuation declines are represented by properties at Cologne Pesch
(EUR5.4m), Loehne (EUR1.0m), Fulda (EUR1.2m) and Oberursel (EUR0.9m),
where the challenge to secure alternative occupiers remains difficult.
Further, the uncertainty over a number of tenants' continuing occupancy
intentions has been detrimental to the valuation of a number of industrial
properties within our portfolio.
As we enter a period of recovery, 2010 has shown signs of increased
liquidity in the market for European commercial property and this has
been illustrated by an increase in investment transaction activity
during the year to date compared to 2009. From January 2010 to September
2010, the transaction volume has reached over EUR12 billion, an increase
of over 50% compared to the previous year.
This increased demand has begun to have a positive impact on the valuation
of some of our prime properties. Looking ahead, we think that the outlook
for German property is relatively good.
Asset management
There was a fall in annualised rental income over the six months to 30
September 2010, principally due to the lease expiries by BCC, Loxxess and
Outotec. Develica's proactive property and asset management continues to
target new tenants and leases and over the period has successfully secured
a number of new leases, covering in excess of 9,000 sq m of portfolio
property and delivering almost EUR0.6m of additional annualised rental
income. Further new leases are under negotiation with an anticipated
rental value of upwards of EUR0.8m to be signed before the year end. The
largest lease renewal in 2010 so far was the new 5--year lease to tenant
Arvato (a wholly owned subsidiary of Bertelsmann) covering 49,765 sq m and
delivering EUR2.0m annual rental income. Rent collection continues to be
vigorous and proactive, with in excess of 97% of rental income
successfully collected.
The last six months also saw Develica's asset management strategy
re--focusing, with a fresh look at the balance between required capital
commitments, management costs and the long term effect on net asset value.
One of the results of this re--focusing was the decision to sell four
properties and these are currently being marketed for sale. However, to
preserve market confidentiality, it is not considered to be in the
Company's interest to disclose the individual property values at this
time.
Another aspect of the shift in strategy involves approaching tenants
before lease expiry in order to proactively explore earlier lease
renewals. While in previous years these initiatives generally started from
twelve months before the lease break date, they now start 24 months
beforehand and, in some instances, even earlier. Most initiatives follow
active 'value--add' strategies based on 'tenant engineering', building
transformations from single to multi--let, building extension and
strategic land acquisition of neighbouring sites. Most initiatives require
capital expenditure and the appointment of external consultants and
architects. There are currently eight schemes of this nature which we
anticipate will add value to the assets.
Results
International Financial Reporting Standards ("IFRS")
The operating profit before tax for the six month period ended 30
September 2010 of EUR5.67m (30 September 2009: loss of EUR42.02m) was
positively affected by a net valuation gain of EUR0.5m comprising the
positive fair value adjustment on the interest rate swaps less the
negative fair value adjustment on the investment properties. Including the
negative effect of the swaps, the Group's net asset value ("NAV") per
share was negative 23.44 cents compared to negative 25.71 cents as at 31
March 2010.
European Public Real Estate Association ("EPRA")
EPRA defines NAV differently from IFRS as can be seen in the Financial
Statements. Movements in derivatives and deferred tax provisions are
excluded from EPRA NAV calculations and the Board believes that the
EPRA basis more accurately reflects the true underlying value of the
property portfolio.
EPRA NAV per share at 30 September 2010 was negative 2.73 cents compared
to a negative 0.45 cents at 31 March 2010. EPRA profit per share for
the six month period ended 30 September 2010 was 2.06 cents compared
to 2.36 cents at 30 September 2009.
Banking facilities and Group cash position
Banking facilities
The Group's property valuation as at the period end date continues
to indicate that the loan to value ("LTV") ratio would, in most cases,
exceed LTV covenants. Some of these covenants continue to remain untested
by the debt providers as set out in the facility agreements.
Through its subsidiary companies, the Group has eleven ring--fenced
loan facilities totalling EUR827.0m as at 30 September 2010, and through
amortisation, it reduced its debt position by EUR4.1m during the six
month period under review. Each of these facilities has LTV and interest
cover or debt servicing covenants which have to be met.
We have previously reported that the Group has one of its smaller loan
facilities with both LTV and Interest Cover Ratio ("ICR") breaches.
The Group has made the decision to commence the disposal of these assets
and has entered into a standstill agreement with the lender until the
earlier of the disposal date or 30 June 2011. Marketing for the disposal
of these assets has already commenced.
There is one remaining facility that has been notified of an LTV breach
and this has triggered a cash trap. The loan facility remains in negative
equity with no expectation of shareholder value in the medium term
and as a result we have agreed with the lender that we should work
to achieve a sale of the property. This is disclosed further in the
Unaudited Consolidated Statement of Financial Position (as property
held for sale) and in note 8 to the Financial Statements. The successful
sale of this property will improve the Group NAV and leave the Company
able to concentrate its resources on the other portfolios.
No further notifications of LTV breaches have been served by other
lenders and, despite a small decrease in rental income, all other ICR
covenants continue to be met.
Excluding the five loan facilities with our largest lender Citibank
International PLC, that have amended LTV covenants and the two loan
facilities previously notified of LTV breach, the remaining four
facilities would trigger a LTV breach if the lenders were to request an
external valuation. The gross LTV (gross debt against property assets) was
104.6% (31 March 2010: 103.7%).
As I have previously mentioned, we continue in negotiations with each
of our lenders concerning the restructuring and refinancing of our
loan facilities and will announce the outcomes as soon as they are
known.
Interest rate swaps
The Company's interest rate payments have been swapped and fixed in
order to de risk a significant variable element of our leveraged property
portfolio. As previously reported, due to the current low level of
interest rates, the value of interest rate swaps held by the Group
at 30 September 2010 gave rise to a liability of EUR51.6m, which is
a reduction of EUR11.3m or 18.0% on the liability at 31 March 2010.
The balance sheet liability arising from the swaps will only crystallise
on disposal of a property or if a swap is cancelled before its expiry
date otherwise the liability will be reduced to zero over the life
of the loan. Each swap arrangement is held in the individual special
purpose vehicle to which each facility loan relates and is subject
to the cross guarantee and indemnity arrangements applicable to the
relevant lender.
Group cash position
Cash and cash equivalents at 30 September 2010 amounted to EUR23.8m
(31 March 2010: EUR23.9m) with EUR14.4m cash subject to borrowings
related restrictions (31 March 2010: EUR17.0m). Excluded from the cash
balances is a lender controlled escrow account balance of EUR9.2m (31
March 2010: EUR6.8m) which can be utilised for the servicing of its
loans. Parent Company cash amounted to EUR9.0m (31 March 2010: EUR6.7m)
and this cash is held in non lender controlled accounts.
Dividend
In the present circumstances the Board remains focused on the preservation
of cash balances within the Group and has again concluded that it would
not be in the Group's best interest to pay a dividend at this time.
Strategy and outlook
Our strategy is to restore shareholder value in three ways.
Firstly, the Company will contemplate asset disposal on a case by case
basis; however, in general, it is not planned to sell properties at the
bottom of the market. Debt reduction as a result of these sales should
improve the Company's overall financial strength and NAV accordingly.
Secondly we are seeking to improve the capital structure of the Company by
actively pursuing the restructuring of its loan facilities. In all cases
where an actual or potential breach of any loan has/could arise, the
Directors are hopeful that, through maintaining close links and dialogue,
that it will be able to work together with the debt providers in reaching
a satisfactory conclusion for all parties. As previously reported, the
Group reached a successful agreement on amending five facilities through
Citi. However, these amended facilities expire on 31 March 2011 and
negotiations with Citi on future terms are in progress including one loan
facility of EUR39.5m which is due to expire in October 2011. All
facilities are due to expire by January 2013. Whilst negotiations continue
with lenders, the Directors cannot predict with any degree of certainty
what the eventual outcomes may be. Such outcomes are likely to be
influenced by future events in the credit markets and the particular
circumstances of each lender. In the event that a breach occurs resulting
in an event of default, and the Group is unable to reach a resolution with
the relevant debt provider, then the only recourse available to the debt
provider are the assets secured against the given loan at the loan
facility agreement level and not the whole Group's assets. Should such
recourse be taken by lenders, there is a possibility that this could have
an adverse impact on the cash flows of the Parent Company.
Thirdly we are adopting the aggressively active 'value added' asset
management approach referred to earlier in order to drive value within
the portfolio.
We continue to investigate all available options to meet these objectives
in what remains a challenging financial environment for the Company,
albeit with a more positive outlook in the economy generally.
I am grateful for the continued support of our shareholders through
what has been a difficult period and for the unstinting commitment
of the Board and the Manager. I thank them for that and believe that
will enable us to withstand the challenges that lie ahead as the German
real estate market moves towards recovery.
Derek Butler
Chairman
23 November 2010
Unaudited consolidated statement of comprehensive income
For the six months ended 30 September 2010
Six months ended
30 September
2010 2009
Notes EUR EUR
Rental income 33,880,500 34,462,363
Service charge income 3,874,804 4,457,460
Less: property expenses (5,881,841) (6,054,026)
Net rental income 31,873,463 32,865,797
Administration and other expenses 3 (3,444,719) (4,131,347)
Fair value adjustment on investment
properties 7 (10,850,000) (47,713,930)
Net operating profit/(loss) before
finance costs 17,578,744 (18,979,480)
Finance expenses (23,305,822) (23,270,562)
Finance income 33,476 31,617
Fair value adjustment on interest rate
swaps 11,351,408 614,774
Net profit/(loss) before tax 5,657,806 (41,603,651)
Taxation 4 10,156 (419,382)
Total profit/(loss) attributable to
equity holders of the Company for the
period, net of tax 5,667,962 (42,023,033)
Total comprehensive income/(loss) 5,667,962 (42,023,033)
Basic and diluted profit/(loss) per
share in cents 2.27 (16.81)
The notes are an integral part of these unaudited financial
statements
Unaudited consolidated statement of changes in equity
For the six months ended 30 September 2010
Distributable Retained
Issued capital reserves earnings Total
EUR EUR EUR EUR
Balance at 01
April 2009 2,500,000 236,009,041 (270,157,348) (31,648,307)
Comprehensive
income
Total
comprehensive
loss
attributable
to equity
holders of
the Company - - (42,023,033) (42,023,033)
Balance at 30
September
2009 2,500,000 236,009,041 (312,180,381) (73,671,340)
Issued Distributable Retained
capital reserves earnings Total
EUR EUR EUR EUR
Balance at 01
April 2010 2,500,000 236,009,041 (302,787,497) (64,278,456)
Comprehensive
income
Total
comprehensive
income
attributable
to equity
holders of the
company - - 5,667,962 5,667,962
Balance at 30
September
2010 2,500,000 236,009,041 (297,119,535) (58,610,494)
The notes are an integral part of these unaudited financial
statements
Unaudited consolidated statement of financial position
As at 30 September 2010
30 September 31 March 30 September
2010 2010 2009
audited restated
Notes EUR EUR EUR
ASSETS
Non--current
assets
Investment
properties 7 742,500,000 803,925,000 807,180,000
Deferred tax
assets 5 420,008 232,207 548,160
742,920,008 804,157,207 807,728,160
Assets of
disposal group
classified as
held for sale 8 50,575,000 - -
Current assets
Current tax
receivables 1,151,221 1,466,567 -
Trade and other
receivables 8,338,589 7,044,887 6,302,762
Cash and cash
equivalents 10 23,803,604 23,870,472 23,233,411
Other assets 9 9,954,315 7,626,922 6,371,749
43,247,729 40,008,848 35,907,922
Total assets 836,742,737 844,166,055 843,636,082
EQUITY
Capital and
reserves
attributable to
the Company's
equity holders
Issued capital 2,500,000 2,500,000 2,500,000
Distributable
reserves 236,009,041 236,009,041 236,009,041
Retained
earnings (297,119,535) (302,787,497) (312,180,381)
Total equity (58,610,494) (64,278,456) (73,671,340)
LIABILITIES
Non--current
liabilities
Borrowings - - 424,808,587
Derivative
financial
instruments - - 30,987,588
Deferred tax
liabilities 5 72,032 - 653,866
72,032 - 456,450,041
Current
liabilities
Borrowings 12 827,000,098 830,352,583 408,481,389
Derivative
financial
instruments 51,568,356 62,919,764 33,814,415
Current tax
liabilities 357,688 90,190 1,542,851
Trade and other
payables 16,355,057 15,081,974 17,018,726
895,281,199 908,444,511 460,857,381
Total
liabilities 895,353,231 908,444,511 917,307,422
Total equity and
liabilities 836,742,737 844,166,055 843,636,082
Net asset value
per ordinary
share in cents 6 (23.44) (25.71) (29.47)
Approved by the board of directors of the Develica Deutschland Limited
on 23 November 2010 and signed on its behalf by:
Derek Butler John Hallam
Chairman Director
Unaudited Consolidated Statement of Cash flows
For the six months ended 30 September 2010
Six months ended
30 September
2010 2009
Notes EUR EUR
Cash generated from operations 11 28,407,972 23,206,981
Income taxes paid 477,231 1,152,076
Net cash inflow from operating
activities 28,885,203 24,359,057
Interest received 33,476 31,617
Net cash inflow from investing
activities 33,476 31,617
Cash flows from financing activities
Bank loan repayment (4,091,813) (3,415,328)
Bank loan interest paid on borrowings (7,957,968) (10,430,244)
Swap loan interest paid on borrowings (14,608,526) (12,086,890)
Other finance costs - (14,100)
Transfer to other assets (2,327,240) (5,579,069)
Net cash outflow from financing
activities (28,985,547) (31,525,631)
Net decrease in cash and cash
equivalents (66,868) (7,134,957)
Cash and cash equivalents at the
beginning of the period 23,870,472 30,368,368
Cash and cash equivalents at end of the
period 23,803,604 23,233,411
The notes are an integral part of these unaudited financial
statements
Notes to the Unaudited Consolidated Financial Statements
For the six months ended 30 September 2010
1 Corporate information
Develica Deutschland Limited ("the Company") and its subsidiaries
(together "the Group") carry on the business of property investment
through a portfolio of freehold investment properties located in Germany.
These unaudited consolidated financial statements have been approved for
issue by the Board of Directors on 23 November 2010.
2 Basis of preparation
The condensed financial statements of the Group have been prepared
in accordance with International Accounting Standard 34 -- Interim
Financial Reporting, on the historical cost basis, except for investment
property and derivative financial instruments that have been measured
at fair value. The consolidated financial statements are presented
in euros. The functional currency of the Group is euros.
(a) Basis of consolidation
The consolidated financial statements comprise the Financial Statements
of the Company and its wholly owned subsidiary undertakings which are
entities with limited liability incorporated and domiciled in Guernsey,
Channel Islands.
Subsidiaries are fully consolidated from the date on which control
is transferred to the Company and continue to be consolidated until
the date that control ceases.
Inter--entity transactions, balances and unrealised gains on transactions
between entities are eliminated on consolidation.
(b) Changes in accounting policy
The accounting policies adopted in the preparation of the interim
condensed consolidated Financial Statements are consistent with those
followed in the preparation of the Group's annual Financial Statements for
the year ended 31 March 2010 except for the adoption of the following
standard noted below:
IFRS 5 Non--Current Assets Held for Sale and Discontinued Operations
Investment property is transferred to non--current assets held for
sale when it is expected that the carrying amount will be recovered
principally through sale rather than from continuing use. For this
to be the case, the property must be available for immediate sale in
its present condition subject only to terms that are usual and customary
for sales of such property and its sale must be highly probable.
For the sale to be highly probable:
-- the Board must be committed to a plan to sell the property,
and an active programme to locate a buyer and complete the
plan must have been initiated;
-- the property must be actively marketed for sale at a price
that is reasonable in relation to its current fair value; and
-- the sale should be expected to qualify for recognition as a
completed sale within one year from the date of
classification
On re--classification, investment property that is measured at fair
value continues to be so measured.
(c) Fundamental accounting concept
An analysis of the CB Richard Ellis ("CBRE") valuation reveals at 30
September 2010 that for the second consecutive valuation the key important
drivers, rental values and yields, did not change significantly.
The Group's property valuation as at the period end date continues
to indicate that the loan to value ("LTV") ratio would, in all cases,
except for the Citi facilities referred to below, exceed LTV covenants.
Some of these covenants continue to remain untested by the debt providers
as set out in the facility agreements.
Through its subsidiary companies, the Group has eleven ring--fenced
loan facilities totalling EUR827.0m as at 30 September 2010 and through
amortisation, it reduced its debt position by EUR4.1m during the six
month period under review. Each of these facilities has LTV and interest
cover or debt servicing covenants which have to be met.
We have previously reported that the Group has one of its smaller loan
facilities with both LTV and Interest Cover Ratio ("ICR") breaches.
The Group has made the decision to commence the disposal of these assets
and has entered into a standstill agreement with the lender until the
earlier of the disposal date or 30 June 2011. Marketing for the disposal
of these assets has already commenced.
There is one remaining facility that has been notified of an LTV breach
and this has triggered a cash trap. The loan facility remains in negative
equity with no expectation of shareholder value in the medium term and as
a result we have agreed with the lender that we should work to achieve a
sale of the property. This is disclosed further in the Unaudited
Consolidated Statement of Financial Position (as assets of disposal group
classified as held for sale) and in note 8 to the Financial Statements.
The successful sale of this property will improve the Group NAV and leave
the Company able to concentrate its resources on the other portfolios.
No further notifications of LTV breaches have been served by other
lenders and, despite a small decrease in rental income, all other ICR
covenants continue to be met. The Group's borrowing arrangements include
covenants that require maintenance of LTV ratios ranging between 85
per cent and 95 per cent with a weighted average of 91 per cent.
Excluding the five loan facilities with our largest lender Citibank
International PLC, that have amended LTV covenants and the two loan
facilities previously notified of LTV breach, the remaining four
facilities would trigger a LTV breach if the lenders were to request an
external valuation. The gross LTV (gross debt against property assets) was
104.6% (31 March 2010: 103.7%).
The strong cash flow generated from a diverse range of quality tenants
enables the Group to service these financing obligations. The Group
has entered into hedging instruments across the entire portfolio which
fix the ongoing interest obligations and also reduce the ongoing debt
exposure.
In all cases where an actual or potential breach of any loan has/could
arise, the Directors are hopeful that, through maintaining close links and
dialogue, that it will be able to work together with the debt providers in
reaching a satisfactory conclusion for all parties. As previously
reported, the Group reached a successful agreement on amending five
facilities through Citi. However, these amended facilities expire on 31
March 2011 and negotiations with Citi on future terms are in progress
including one loan facility of EUR39.5m which is due to expire in October
2011. All facilities are due to expire by January 2013. Whilst
negotiations continue with lenders, the Directors cannot predict with any
degree of certainty what the eventual outcomes may be. Such outcomes are
likely to be influenced by future events in the credit markets and the
particular circumstances of each lender. In the event that a breach occurs
resulting in an event of default, and the Group is unable to reach a
resolution with the relevant debt provider, then the only recourse
available to the debt provider are the assets secured against the given
loan at the loan facility agreement level and not the whole Group's
assets. Should such recourse be taken by lenders, there is a possibility
that this could have an adverse impact on the cash flows of the Parent
Company.
After due considerations of the above factors and, in particular the
ring--fenced nature of the borrowing agreements, the Directors have
considered that there is no material uncertainty about the Group to
continue to trade as a going concern. Accordingly the consolidated
financial statements have been prepared on a going concern basis.
3 Administration and other expenses
Six months ended
30 September
2010 2009
EUR EUR
Management fees 1,591,749 1,724,136
Accountancy fees 425,000 541,554
Legal and professional fees 360,779 484,069
Other expenses 290,947 331,754
VAT declaration fees 155,000 155,933
Tax advisory fees 152,313 176,472
Audit fees 151,934 171,519
Administration fees 140,277 166,426
Directors' fees 87,500 99,647
Valuation fees 89,220 91,204
Consultancy fees - 188,633
3,444,719 4,131,347
4 Income tax expense
Six months ended
30 September
2010 2009
EUR EUR
Guernsey tax - -
German tax 105,613 536,418
Current income tax charge 105,613 536,418
Deferred tax
Origination and reversal of temporary
differences (115,769) (117,036)
Tax (credit)/charge in the statement of
comprehensive income (10,156) 419,382
5 Deferred tax
30 September 31 March 30 September
2010 2010 2009
audited
EUR EUR EUR
Deferred tax assets (420,008) (232,207) (548,160)
Deferred tax liabilities 72,032 - 653,866
(347,976) (232,207) 105,706
At 1 April (232,207) 222,740 -
Accelerated allowance on loan
set--up costs 232,207 548,160 653,866
Reversal of deferred tax
liability - (770,900) (548,160)
Deferred tax asset on tax loss
carry forward (347,976) (232,207) -
(347,976) (232,207) 105,706
The Group has additional tax losses and deductions that are available
indefinitely to 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 trading
profits elsewhere in the Group and they have arisen in subsidiaries
that have been loss making for some time.
6 Net asset value per ordinary share
The net asset value per ordinary share is based on the net liabilities
attributable to ordinary shareholders of EUR58,610,494 (31 March 2010:
EUR64,278,456) and on 250,000,000 (31 March 2010: 250,000,000) ordinary
shares in issue at the year end date. There is no difference between
diluted and basic earnings per share.
7 Investment properties
30 September 31 March 30 September
2010 2010 2009
audited
EUR EUR EUR
Fair value at beginning of the
period 803,925,000 854,841,000 854,841,000
Acquisitions and capital
expenses - 104,623 52,930
Net loss from fair value
adjustments on investment
property (10,850,000) (51,020,623) (47,713,930)
Transfer to held for sale (note
8) (50,575,000) - -
Fair value at end of the period 742,500,000 803,925,000 807,180,000
It is Group policy to carry investment property in accordance with IAS 40
Investment Property. Investment property was valued as at 30 September
2010 by CBRE, external valuers to the Group. CB Richard Ellis Limited have
consented to the use of their names in these Financial Statements. These
valuations have been incorporated into the Financial Statements and have
been carried out in accordance with the Royal Institution of Chartered
Surveyors Valuation Standards, Sixth Edition.
The valuations have been prepared on the basis of market value which
is defined as:
"The estimated amount for which a property should exchange on the date of
valuation between a willing buyer and a willing seller in an arm's--length
transaction after proper marketing wherein the parties had each acted
knowledgeably, prudently and without compulsion."
CB Richard Ellis Limited has valued the properties individually and no
account has been taken of any discount or premium that may be negotiated
in the market if all or part of the portfolio was to be marketed
simultaneously, either in lots or as a whole.
Market values have been primarily derived using comparable recent market
transactions on arm's--length terms.
Various assumptions have been made as to tenure, letting, town planning
and the condition and repair of buildings and sites, including ground
and groundwater contamination.
CB Richard Ellis Limited have carried out their work based upon
information supplied to them by the Company which they have assumed to be
correct and comprehensive.
The fair value adjustments of the investment properties result in the
temporary difference between the carrying value of the properties and
their tax basis. Deferred taxes on the above differences have not been
recorded in respect of those properties.
8 Held for Sale
The assets and liabilities related to the Group companies DDE27 Limited,
DDE28 Limited, DDE31 Limited and DDE44 Limited are presented as held for
sale at 30 September 2010. The Group has agreed with the lenders a
consensual sale of the properties and marketing has begun. The completion
date for the transactions is expected by June 2011.
Investment properties classified as held for sale
30 September 31 March 30 September
2010 2010 2009
audited
EUR EUR EUR
Investment Property 50,575,000 - -
9 Other assets
30 September 31 March 30 September
2010 2010 2009
audited restated
EUR EUR EUR
Funds on escrow --
borrowings 9,161,261 6,834,023 5,579,069
Funds on escrow --
contingency 793,054 792,899 792,680
9,954,315 7,626,922 6,371,749
Funds on escrow consists of:
-- collateral held in respect of external debt; and
-- contingency against legal proceedings and matters arising post acquisition
10 Cash and cash equivalents
30 September 31 March 30 September
2010 2010 2009
audited restated
EUR EUR EUR
Parent company 8,991,740 6,727,038 6,549,293
Wholly owned subsidiaries 14,811,864 17,143,434 16,684,118
Total cash at bank 23,803,604 23,870,472 23,233,411
As at 30 September 2010, EUR14,456,337 (31 March 2010: EUR15,673,585)
of cash is held in restricted accounts out of which EUR1,041,552 (31
March 2010: EUR1,285,201) is in cash trap. These balances are under
the control of the lenders who have made loans to the Group. The cash
is specifically segregated so as to be able to pay financing costs
including interest and principal.
11 Reconciliation of profit/(loss) before tax to cash generated from
operations
Six months ended
30 September
2010 2009
EUR EUR
Net profit/(loss) before tax 5,657,806 (41,603,651)
Fair value adjustment on investment
properties 10,850,000 47,661,000
Fair value adjustment on interest rate swaps (11,351,408) (614,774)
Loan set--up costs -- amortisation 739,328 (739,432)
Movement in deferred tax provision - 117,034
5,895,726 4,820,177
Operating cash flows before changes to
working capital and other cash movements
Net financing costs 23,125,915 22,499,617
Movement in trade and other receivables (330,073) (3,569,686)
Movement in trade and other payables (283,596) (543,127)
22,512,246 18,386,804
Cash generated from operations 28,407,972 23,206,981
12 Borrowings
Principal Finance
amounts costs Total
EUR EUR EUR
At 31 March 2010 833,743,798 (3,391,215) 830,352,583
Capital repayments (4,091,813) - (4,091,813)
Unamortised issue costs - 739,328 739,328
At 30 September 2010 829,651,985 (2,651,887) 827,000,098
Under the terms of the Group's borrowing arrangements, lenders are
generally entitled to request updated valuation information.
Total capital repayments of EUR4,091,813 have been made in the six
months ended 30 September 2010 (30 September 2009: EUR3,415,327).
13 Commitments and contingencies
Proceedings were initiated in the Royal Court of Guernsey against the
Company on 6 June 2008 seeking to recover an amount of EUR600,412 as
monies owing by way of premium under the Develica Deutschland Limited Sale
Agreement and Brokerage Agreement. The proceedings are being vigorously
resisted and the Company has made a substantial counterclaim against Mitco
Realty Limited. Although a trial date has not yet been set it is
anticipated that it will occur in mid to late 2011 and therefore it is not
practicable to state the timing of the payment if any.
The Group has been advised by its legal counsel that it is only possible,
not probable, that the action will succeed and accordingly, no provision
for any liability has been recorded in these Financial Statements.
14 Investment in subsidiaries
The 74 subsidiaries of the Group (Develica Atrium Bonn Limited and
DDE 20 Limited -- DDE 92 Limited) are wholly owned property investment
vehicles incorporated in Guernsey.
15 Related party transactions
The Group was charged investment management fees of EUR1,591,749 (30
September 2009: EUR1,724,136) by the Investment Manager of which nil
was outstanding at the period end (2009: EURnil). Grant Tromans, who
is a Director of the Company, is also a Director of the Investment
Manager.
16 Ultimate controlling party
In the opinion of the Board there is no ultimate controlling party.
Investor Information
Directors Derek
Butler John
Hallam
Peter Le
Cheminant
Grant
Tromans
Quentin
Spicer
Company Secretary, Elysium Registrar Capita Registrars
Administrator and Fund (Guernsey)
registered office Management Longue Hougue House
(Incoming 1 August Limited PO St Sampson
2010) Box 650 2nd Guernsey GY2 4JN
Floor No.1
Le Truchot
St Peter
Port
Guernsey
GY1 3JX
Company Secretary, State German Tax PricewaterhouseCoopers Aktiengesellschaft
Administrator and Street Adviser WirtschaftsprufungsgesellschaftFuhrberger
registered office (Guernsey) Strasse 5 30625 Hannover
(Outgoing 1 August Limited
2010) (formerly
Mourant
Guernsey
Limited)
1st Floor,
Dorey Court
Admiral
Park St
Peter Port
Guernsey
GY1 6HJ
Investment Manager Develica German AQuAM Deutschland
Deutschland Property GmbH
Management Management Fernroder Strasse
Limited PO 9
Box 650 2nd 30161 Hannover
Floor No. 1
Le Truchot
St Peter
Port
Guernsey
GY1 3JX
Brokers Fairfax Guernsey Mourant Ozannes
I.S. PLC 46 legal 1 Le Marchant Street
Berkeley advisers St Peter Port
Square Guernsey GY1 4HP
London W1J
5AT
Nominated Adviser Grant English Stephenson Harwood
Thornton legal One St Paul's
Corporate advisers Churchyard London
Finance 30 EC4M 8SH
Finsbury
Square
London EC2P
2YU
Independent Ernst & German K&L Gates LLP
Auditors Young LLP legal Markgrafenstra(Beta)e
Royal advisers 42
Chambers St 10117 Berlin
Julian's
Avenue St
Peter Port
Guernsey
GY1 4AF
Property Valuers CB Richard
Ellis St
Martin's
Court 10
Paternoster
Row London
EC4M 7HP
The Company is an authorised closed--ended investment company, registered
in Guernsey.
Registration number 44810.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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