Demand for flexible and conventional work space drives earnings growth in H1 2016
Net Rental Income and Recurring Profits* up by 35.3 per cent and 87.2 per cent, Funds from Operations by 72.7 per cent
– Total income increased by 25.9 per cent to EUR32.6 million (2015: EUR25.9 million).
– Like for like annualized rental income increased by 2.4 per cent to EUR64.5 million (31 March 2016 EUR63.0 million).
– Current annualized rental income is EUR69.1 million.
– Recurring profit before tax increased by 87.2 per cent to EUR16.1 million (2015: EUR8.6 million).
– Funds from Operations (“FFO”) increased by 72.7 per cent to EUR17.1 million (2015: EUR9.9 million)
– FFO was 2.13c per share and Adjusted earnings per share (“EPS”) 2.01c per share (2015: 1.41c per share and 1.25c per share respectively).
– Interim dividend declared of 1.39c per share, an increase of 51.1 per cent (2015: 0.92c).
*Reported profit before tax adjusted for property revaluation, change in fair value of derivative financial instruments and non-recurring items including expenses relating to the Long Term Incentive Plan.
**Recurring profit before tax adjusted for depreciation, amortization of financing fees and current tax receivable/incurred.
*** Including the initial annualized rental income of the Markgröningen and Krefeld acquisitions which both completed in May 2016.
**** Including the initial annualized rental income of the Wiesbaden acquisition which completed on 31 October 2016.
EUR30 million equity raise and accretive new acquisitions
– Completed a EUR30.0 million private placement in June 2016 at EUR0.53 per share.
– Three acquisitions completed in the period and one post period end for a total of EUR68.5 million adding EUR7.2 million to annualized rental income and EUR6.0 million of Net Operating Income (“NOI”) representing an EPRA net initial yield of 8.8 per cent.
– Average occupancy of acquisition sites is 69 per cent giving significant scope to drive income and capital growth.
– Valuation uplift from assets acquired in period of EUR4.1 million as at 30 September 2016.
Further long-term, low interest rate financing
– As at period end, average cost of debt down to 2.2 per cent (31 March 2016: 3.0 per cent) and debt maturity at 5.8 years (2015: 5 years).
– Completion of new EUR70 million BerlinHyp financing post period end at 1.48 per cent interest rate and 7 year term:
– reduces average cost of debt to below 2.0 per cent post period end, and
– extends debt maturity to 6.2 years.
– Loan to Value (“LTV”) at 41.7 per cent as at 30 September 2016 increasing to 44.6 per cent after the completion of the Wiesbaden acquisition and the new BerlinHyp financing deal. Board confirms a target of 40.0 per cent by no later than 31 March 2018.
Valuation uplift driven by new income and positive yield shift
– Portfolio valued at EUR770.9 million including asset held for sale (31 March 2016: EUR687.5 million).
– Following completion of the Wiesbaden acquisition post period end, portfolio increased to EUR797.2 million.
– Like for like portfolio valuation increased by EUR29.5 million or 4.2 per cent to EUR724.7 million reflecting annualised rental income increases and 17 bps of yield compression.
– Adjusted net asset value (“NAV”) per share increased by 4.3 per cent to 55.62c (31 March 2016: 53.35c).
Strong demand for conventional and flexible work space
– Like for like occupancy at record high of 81 per cent (31 March 2016: 80 per cent).
– Rate per square metre of the portfolio increased to EUR5.10 with like for like rate per square metre increasing to EUR5.07 (31 March 2016: EUR5.02).
– New lettings of 70,626 square metres in the period at an average rate of EUR5.89 per square metre (2015: 70,201 square metres at EUR5.10 per square metre).
Expanded capex programme continues to deliver above target returns
– Conversion of sub-optimal areas into high-quality conventional and flexible workspace continues to deliver strong returns.
– Transformed a further 30,824 square metres of space and produced an additional EUR1.1 million of annualised rental income in the period.
– A further 67,073 square metres is in progress or has been identified for conversion. The total programme requires a further EUR9.7 million of investment to produce an estimated EUR3.9 million of annualised rental income.
Andrew Coombs, Chief Executive Officer of Sirius Real Estate, said:
“The strength of our trading performance reflects well on our ability to extract value from our existing portfolio and our ability to acquire business parks which are both earnings accretive from acquisition as well as offering additional income and capital growth potential. There remains significant scope for further organic growth within our current portfolio and we continue to see real opportunity within our acquisition pipeline”.
“Over 99 per cent of German enterprises are SMEs and 34 per cent of these are enterprises with fewer than 10 employees. This is the market which is seeking flexible leases to meet ever evolving space requirements and Sirius is well placed to take advantage of these market dynamics with our flexible multi-tenanted work spaces”.
“We are encouraged by the results we are achieving to continue transforming our portfolio of assets under our investment programmes. Now that we have reduced our average cost of debt to below 2.0 per cent and the average debt expiry to more than six years we are well placed to continue to execute our strategy in a sustainable manner over the medium to long term. As part of supporting our ambitions for the business we are making good progress towards moving up to the main markets of both the London and Johannesburg Stock Exchanges.”