TIDMPSDL
RNS Number : 3156X
Phoenix Spree Deutschland Limited
29 April 2019
Phoenix Spree Deutschland Limited
("Phoenix Spree", or the "Company")
FINANCIAL RESULTS FOR YEARED 31 DECEMBER 2018
STRONG PORTFOLIO PERFORMANCE AND FURTHER GROWTH IN BERLIN
Phoenix Spree Deutschland (LSE: PSDL.LN), the UK listed real
estate company specialising in Berlin residential property, today
announces its full year results for the year ended 31 December
2018.
Robert Hingley, Chairman of Phoenix Spree, commented:
"I am delighted to report that, following an exceptionally
strong year in 2017, we have continued this momentum, delivering
further increases in rental growth and portfolio value. This
performance reflects the active management of our portfolio as well
as the continued positive dynamics that characterise the Berlin
residential market, where we are now fully focused following the
disposal of our Northern German portfolio. Although Berlin
residential yield compression has moderated, following a long
period of declining property yields, we see significant opportunity
to grow the portfolio value through a combination of investment
into our existing properties and the acquisition of assets that
meet our strict acquisition criteria. We are confident that we will
continue to deliver value to shareholders through further rental
growth, condominium sales and densification within the existing
portfolio."
Financial highlights: increases in rental growth, property
values and EPRA NAV
-- IFRS NAV per share up 2.3% to EUR4.05 (GBP3.64) (31 December 2017: EUR3.96 (GBP3.52).
-- EPRA NAV per share up 11.4% to EUR4.58 (GBP4.11) (31 December 2017: EUR4.11 (GBP3.65).
-- Strong like-for-like rental income growth per sqm of 9.0% during the year.
o Contracted net rental income of EUR17.5 million, (31 December
2017 EUR18.1 million), reflecting the sale of the Northern German
portfolio in April 2018.
o Gross rental income including service charges of EUR22.7
million (EUR23.7 million in 2017).
-- EPRA total return per share of 13.2% (year to 31 December 2017: 53.0%).
-- Profit before tax EUR56.4 million (year to 31 December 2017:
EUR138.5 million); year-on-year change reflects lower revaluation
increase in 2018 after exceptionally strong gains in 2017.
-- Earnings per share EUR0.46 (31 December 2017: EUR1.21).
-- Net loan to value of 26.1% as at 31 December 2018 (31 December 2017: 32.0%).
-- New debt of EUR28.8 million signed during 2018. Average debt
maturity of 7.7 years, average interest rate reduced to 2.0%.
-- Final dividend per share of EUR5.15 cents (GBP:4.62p), giving
a total dividend per share of EUR7.50 cents (GBP:6.73p) for year to
31 December 2018 (2017: EUR7.3 cents (GBP: 6.4p)).
Operational highlights: Strong portfolio performance
-- Like-for-like Portfolio valuation increase of 14.0% in year to 31 December 2018.
o Total Portfolio valued at EUR645.7 million, an increase of
6.0% in absolute terms over the twelve-month period (31 December
2017: EUR609.3 million), reflecting the impact of non-Berlin
disposals during year.
o Berlin portfolio valued at EUR641.8 million, an increase of
21.4% year-on-year (31 December 2017: EUR528.5 million).
o Portfolio valuation represents an average value per square
metre of EUR3,527 (31 December 2017: EUR2,853).
-- EPRA Vacancy remains low at 2.8% (31 December 2017 2.9%).
-- Condominium sale completion proceeds up 4.4%, to EUR9.9
million, achieving an average value per sqm of EUR4,566.
-- Continued active management of the Berlin portfolio with
record investment of EUR7.9 million in renovations and
modernisations during 2018.
-- New leases on average signed at a 39.7% premium to passing
rents and condominium sales completed at a 27.8% premium to the
average valuation of Berlin rental properties as at 31 December
2018.
Berlin transition complete: further progress on Berlin
acquisitions
-- Contracts to acquire 222 units notarised during 2018,
representing an aggregate purchase price of EUR36.3 million and an
average value per sqm of EUR2,390.
-- As at 23 April 2019, contracts to acquire a further 14 units
in Berlin have been notarised since the December 2018 year end for
a purchase price of EUR2.4 million, representing a price per sqm of
EUR2,956.
-- Disposal of Central and Northern Germany portfolio completed
in April 2018 for EUR73.0 million, a 26% premium to the Jones Lang
LaSalle valuation pre-notarisation.
-- Since 31 December 2018, all residual non-Berlin assets have
been sold, creating a fully-focussed Berlin fund with potential for
greater economies of scale.
Positive outlook: Significant embedded value remains within
rental Portfolio
-- Berlin residential property prices continue to benefit from
lack of supply and favourable demographics, driven by strong job
creation and population growth.
-- Significant reversionary potential underpins future rental growth.
-- Potential for further valuation creation through condominium projects and sales.
-- Further Berlin acquisitions expected in current financial
year. Acquisition prices remain below construction values.
-- Substantive review of financing structure in progress.
Expected to create further capacity for Portfolio development.
-- Active consideration of densification projects, including
attic conversions and new building construction on land surrounding
buildings already owned by the Company.
For further information, please contact:
Phoenix Spree Deutschland Limited
Stuart Young +44 (0)20 3937 8760
Numis Securities Limited (Corporate Broker)
David Benda +44 (0)20 3100 2222
Tulchan Communications (Financial PR)
Elizabeth Snow
Amber Ahluwalia +44 (0)20 7353 4200
CHAIRMAN'S STATEMENT
I am delighted that the Company has continued its growth over
the last twelve months, delivering further increases in rental
revenues, property values and EPRA NAV after an exceptionally
strong set of results in 2017. This performance is underpinned by
the continued favourable Berlin residential rental market dynamics.
After a long period of rapid property price inflation, yield
compression has moderated, although the strong underlying
demographic trends remain in place. The Berlin residential market
is still characterised by a significant undersupply of available
rental property, as well as positive demographic and employment
trends.
Berlin transition complete: geographically focussed
portfolio
When Phoenix Spree listed on the main market of the London Stock
Exchange in June 2015, 53.5% of the properties in the Portfolio
were located outside of Berlin. Notwithstanding the solid financial
performance of these assets, the Board considered that the Berlin
residential market offered superior medium-term scope for further
growth in rental and property values. The Company therefore
successfully repositioned its geographic focus by divesting
properties outside Berlin through a disciplined disposal process,
all at a premium to trailing book value.
All remaining non-Berlin assets have been successfully divested
following the sale of the Company's remaining Northern Germany
assets in the second quarter of 2018 and one residual asset in
Baden-Wurttemberg in early 2019. We have simultaneously enlarged
our Berlin presence through our strategy of further acquisitions of
attractive assets in central Berlin, enhancing the scope for
further asset management efficiencies and economies of scale.
Acquiring for growth
Phoenix Spree has continued to add to the Portfolio in 2018 and
has completed a further EUR41.6 million of acquisitions in central
Berlin. The Company has a proven record of creating value for
shareholders through property acquisitions, having acquired
buildings with a combined initial value of EUR204.1 million from
2015 up to 31 December 2018, while maintaining its disciplined
approach.
We are well placed to continue to grow the portfolio and we
continue to research attractive acquisition opportunities.
Improving our tenanted accommodation
Some properties acquired can be in a poor state of repair,
depending on the level of historical underinvestment by previous
owners. The Company takes its responsibilities to its tenants
extremely seriously and we have continued to invest in improvements
to our properties.
Through a carefully targeted process of investment, we have
raised the overall standard of accommodation for our tenants and
the environment in areas where our buildings are located. During
2018, the Company invested the highest value yet on improvement
programmes, and it is anticipated that this process will continue
into 2019.
This improvement in the overall quality of our living
accommodation has created significant future embedded value within
the Berlin Portfolio, as evidenced by new leases signed at a
premium to in-place rents and condominium sales completed at a
premium to average rental property valuations.
Partnering with our Property Advisor
Since our introduction to the Stock Exchange in 2015, the
Company has benefitted significantly from the expertise of its
property advisor, PMM Partners (UK) Limited. It has actively
managed and developed the Portfolio, whilst simultaneously sourcing
value-enhancing acquisitions, and achieving disposals at a premium
to book value. PMM Partners has also overseen the capital structure
of the Company as well as its day-to-day interaction with investors
and other key stakeholders in our business. These activities have
been fundamental to the strong financial performance of Phoenix
Spree and its ability to access capital markets.
I am therefore delighted that, following overwhelming
shareholder approval at an Extraordinary General Meeting in
December 2018, the Company entered into a new property advisory and
investor relations agreement with PMM Residential Limited (PMM), a
new company within the PMM Group, which will secure its continued
expertise as property advisor until at least the end of 2022.
The new agreement will provide greater certainty and stability
for shareholders and allow PMM to invest in infrastructure, IT
systems and key personnel dedicated to servicing the Company's
growing requirements. It will also reduce future management and
performance fees paid by the Company and will, therefore, result in
significant cost savings compared with the terms of the old
property advisor agreement. The Board looks forward to building on
our valued relationship with PMM over the coming years to continue
our record of strong performance.
In February 2019, the Company announced it had been informed
that PMM Partners (UK) Limited and its principals had sold a total
of 2,239,361 shares in the Company. The sale of these shares was
principally made to satisfy the tax liabilities arising from the
December 2017 performance fee which was settled in Phoenix Spree
Deutschland (PSD) shares issued to PMM Partners (UK) Limited in May
2018.
Share price and dividend
The 2018 financial year proved difficult for global equity
markets in general, as concerns about global growth, the increasing
trend towards trade protectionism and Brexit weighed heavily.
Against this backdrop, 2018 was a year of consolidation for the
Phoenix Spree share price. Notwithstanding this, the shares
outperformed the FTSE All-Share index by 5% and the FTSE 350 Real
Estate Investment Services sector by 12%.
The Board is pleased to recommend a final dividend of EUR5.15
cents per share (GBP 4.62 pence per share), taking the full year
dividend to EUR7.50 cents per share (GBP 6.73 pence per share),
representing a 3% increase on the 2017 full year Euro-denominated
dividend.
Our Better Futures" Corporate Responsibility Plan
The Board recognises the importance of operating with integrity,
transparency and clear accountability towards its shareholders,
tenants and other key stakeholders. We understand that being a
responsible Company, balancing the different interests of our
stakeholders and addressing our environmental and social impacts is
intrinsically linked to the success and sustainability of our
business.
During the past year, the Board and PMM have reviewed how
sustainability is managed within our business and considered
carefully the views of our stakeholders and business priorities to
create our 'Better Futures' Corporate Responsibility ('CR') Plan.
This Plan provides a framework to monitor existing activities
better, while adding new initiatives to improve our overall
sustainability.
Our Corporate Responsibility Plan has four key pillars that have
been integrated throughout our business operations: Protecting our
Environment; Respecting People; Valuing our Customers and Investing
in our Communities. We have established a CR Committee to oversee
the implementation of the Better Futures Plan, reporting to the
Board and advising on any CR related material issues. Our CR
initiatives will be reported in more detail in our 2018 Annual
Report and are available on the Company website.
The Board remains fully committed to high standards of corporate
governance. It has considered the Main Principles and Provisions of
the UK Corporate Governance Code (July 2018) and is pleased to
confirm that the Company has complied with the provisions of the
Code throughout the year, except in certain instances which are set
out in the Corporate Governance Statement within this
announcement.
Outlook
In recent years, Berlin property values have benefited from
significant yield compression. Although this has moderated, the
outlook for the Berlin residential market remains positive.
Residential prices remain on average below the cost of construction
and demand for property continues to grow, due to the continuing
process of urbanisation and population growth. Berlin average
monthly rents per square metre remain among the lowest of all major
European cities.
The Board believes there is scope for further market rental
growth as well as the opportunity to improve rental incomes through
our Property Advisor's active asset management strategies,
particularly on recently acquired buildings. The reversionary
potential that our substantial investment in the Portfolio to date
has created should provide a cushion in the event of any market
slowdown.
The Board remains confident that the Company will continue to
generate growth in rental income and property values during 2019
supported by selected additions to the portfolio and further
condominium projects. This, in turn, should deliver further capital
growth and dividend income to investors in the current financial
year.
REPORT OF THE PROPERTY ADVISOR
Portfolio Regional Overview as at 31 December 2018
Berlin Baden-Wurttemberg Total
(incl. Greater
Area)
% of fund by value 99.4 0.6 100
---------------- ------------------ ------
Number of buildings 95 1 96
---------------- ------------------ ------
Number of residential
units 2,374 18 2,392
---------------- ------------------ ------
Number of commercial
units 142 11 153
---------------- ------------------ ------
Total units 2,516 29 2,545
---------------- ------------------ ------
Total sqm ('000) 179.4 3.7 183.1
---------------- ------------------ ------
Annualised Net Rent (EURm) 17.6 0.4 18.0
---------------- ------------------ ------
Valuation (EURm) 641.8 3.9 645.7
---------------- ------------------ ------
Value per sqm (EUR) 3,576 1,084 3,527
---------------- ------------------ ------
Fully occupied gross
yield % 2.9 12.1 3.0
---------------- ------------------ ------
Vacancy % 4.7 7.7 4.8
---------------- ------------------ ------
EPRA Vacancy % 2.9 0.0 2.8
---------------- ------------------ ------
Like-for-like Portfolio value rises by 14%
On a like-for-like basis, excluding the net impact of
acquisitions and disposals, the Portfolio valuation increased by
14.0% during the year ended 31 December 2018 as it continued to
benefit from the strong market fundamentals in Berlin.
The total Portfolio was valued at EUR645.7 million by Jones Lang
LaSalle GmbH, the Company's external valuers, an absolute increase
of 6.0% over the twelve-month period (31 December 2017: EUR609.3
million), reflecting the impact of non-Berlin disposals during
year. The Portfolio valuation represents an increased average value
per square metre of EUR3,527 (31 December 2017: EUR2,853) and a
gross fully occupied rental yield of 3.0% (31 December 2017:
3.4%).
The Berlin portfolio was valued at EUR641.8 million, an increase
of 21.4% year-on-year (31 December 2017: EUR528.5 million). This
represents an increased average value per square metre of EUR3,576
(31 December 2017: EUR3,220).
The principal drivers behind the like-for-like growth in the
Portfolio value were:
-- a further contraction in market yields, driven by the low interest rate environment;
-- strong growth in like-for-like rental income within the Portfolio;
-- the positive impact of the Property Advisor's active asset management strategy;
-- continued high levels of investor interest in the Berlin property market; and
-- further development of the condominium market, with single
apartment prices in Berlin experiencing another year of
double-digit growth.
Rental income - growth trend continues
Contracted net rental income (excluding service charge revenue)
declined by 3.2% to EUR17.5m (31 December 2017 EUR18.1m),
reflecting the impact of disposal of remaining non-Berlin assets
during the financial year. On a like-for-like basis, excluding the
effect of acquisitions and disposals, rental income across the
Portfolio grew by 9% compared with the prior year. Headline average
in-place rent per sqm was EUR8.6 as at 31 December 2018, compared
with EUR8.1 as at 31 December 2017.
Berlin saw a like-for-like increase in rent per sqm of 6.9%.
Average rent per sqm was EUR8.5, a year-on-year increase of 5.1%
compared with 2017, reflecting strong underlying rental growth in
the existing portfolio, partially offset by the impact of recent
acquisitions, which typically have lower rental values upon
takeover.
As at 31 December 2018 the Company's net contracted annualised
rental income was EUR18.0 million.
Recent letting prices achieve new highs for the Company
The Company enjoyed another strong letting performance in 2018.
A total of 284 new leases were signed, representing 12.0% of the
average units owned during the period. In the Berlin portfolio,
average new letting prices were 5.3% to EUR11.9 per sqm (2017:
EUR11.3 per sqm).
Portfolio reversionary rental potential remains high
Notwithstanding the growth in rental prices, the Portfolio
continues to demonstrate significant reversionary potential, as
shown by the premiums achieved on new letting prices when compared
to in-place rents. New leases signed during the period in Berlin
were agreed, on average, at a 40.4% premium to passing rents.
The Property Advisor believes this reversionary gap should
underpin rental growth in the medium term, providing a buffer
against any potential slow-down in the rental market.
EPRA vacancy remains low
Reported vacancy as at 31 December 2018 was 4.4%, down from 6.8%
as at 31 December 2017. On an EPRA basis, which adjusts for units
undergoing redevelopment or reserved for resale, vacancy was 2.8%
as at 31 December 2018, compared with 2.9% as at 31 December
2017.
The Berlin EPRA vacancy rate also remained low at 2.9% (31
December 2017: 2.7%), with the modest increase reflecting a higher
vacancy rate on buildings acquired during the year. The higher
vacancy rate allows the Company to redevelop and re-let recently
acquired apartments.
Portfolio investment reaches new high
The Company remains committed to improving living standards for
its tenants and fulfilling its environmental obligations in areas
where its properties are located. Depending on the level of
historical underinvestment by previous owners, apartment
improvements can involve redecoration, heating system and heating
plant renewal, new insulation, double glazing, plumbing and
flooring, as well as kitchen and bathroom renewal. Communal areas,
both indoor and outdoor, are also reviewed for potential
improvement where investment has previously been lacking. During
2018, the Company invested EUR7.9m, its highest sum to date, to
further improve the overall quality of its accommodation and
surroundings (year to 31 December 2017: EUR6.7 million).
In the Berlin rental portfolio, EUR4.5 million was invested in
the refurbishment of 189 units representing an average outlay of
EUR354.6 per sqm. The average premium achieved on re-letting these
vacant Berlin units was 68.9%. A further EUR1.9 million was
invested in the infrastructure of properties within the Portfolio
for items such as heating system upgrades and improvements to
indoor and outdoor communal areas. An additional EUR1.5 million was
invested on the development of condominium projects. All these
items are recorded in the accounts as capital expenditure.
A further EUR1.7 million was spent on repairs and maintenance
and expensed through the profit and loss account, compared to
EUR1.4 million in 2017. This results in a total renovation and
repair investment of EUR9.6 million.
Financial Results
EUR million (unless otherwise stated) 31 Dec 2018 31 Dec 2017
Gross rental income (including
service charges) 22.7 23.7
------------ ------------
Like-for-Like annualised rental
income 16.6 15.2
------------ ------------
Net contracted rental income 17.5 18.1
------------ ------------
Profit before tax (PBT) 56.4 138.5
------------ ------------
Reported EPS (EUR) 0.46 1.21
------------ ------------
Investment property value 645.7 609.3
------------ ------------
Net debt 168.4 195.1
------------ ------------
Net LTV 26.1% 32.0%
------------ ------------
EPRA NAV per share (EUR) 4.58 4.11
------------ ------------
EPRA NAV per share (GBP) 4.11 3.65
------------ ------------
Dividend per share (EUR cents) 7.5 7.3
------------ ------------
Dividend per share (GBP pence) 6.7 6.4
------------ ------------
EPRA NAV per share total return
for period (EUR) 13.2% 53.0%
------------ ------------
EPRA NAV per share total return
for period (GBP) 11.4% 57.7%
------------ ------------
Net contracted rental income for the year was 3.2% lower at
EUR17.5 million (year to 31 December 2017: EUR18.1 million). This
decrease reflects the sale of the Northern German Portfolio in
April 2018, effectively offset by strong like-for-like rent per sqm
growth of 7.4%.
The Company has reported a profit before tax for the period to
31 December 2018 of EUR56.4 million (2017: EUR138.5 million) which
was positively affected by a revaluation gain of EUR66.1 million
(2017: EUR157.4 million). The revaluation gain was lower than that
experienced in 2017 and is primarily due to a moderation in the
rate of market yield compression versus the prior year. Reported
earnings per share for the period were EUR0.46 cents (2017: EUR1.21
cents).
EPRA NAV increases by 11.4%
Reported EPRA NAV per share rose by 11.4% in the period to
EUR4.58 (GBP4.11) as at 31 December 2018 (31 December 2017: EUR4.11
(GBP3.65)). After taking into account the dividends paid in 2018 of
EUR7.35 cents (GBP: 6.5p), which were paid in June and October
2018, the Euro EPRA NAV total return in the period was 13.2% (2017:
53.0%).
IFRS NAV per share rose by 2.3% in the period to EUR4.05
(GBP3.54) (31 December 2017: EUR3.96 (GBP3.52).
Dividend
The Company is pleased to have declared a final dividend of
EUR5.15 cents per share (GBP 4.62 pence per share), (2017: EUR5.0
cents; (GBP 4.4 pence per share)), which is expected to be paid on
or around 27 June 2019 to shareholders on the register at close of
business on 7 June 2019, with an ex-dividend date of 6 June 2019.
Taking into account the interim dividend paid in October 2018, the
dividend for the year to 31 December 2018 is EUR7.5 cents per share
(GBP 6.73 pence per share), (2017: EUR7.3 cents per share; (GBP 6.4
pence per share)).
Since listing on the London Stock Market in June 2015, and
including the final dividend for 2018, EUR24.9 million has been
returned to Shareholders. The dividend is paid from operating cash
flows, including the disposal proceeds from condominium projects
and the Company will seek to continue to provide its shareholders
with a secure and progressive dividend over the medium term,
subject to the distribution requirements for Non-Mainstream Pooled
Investments.
Financing
As at 31 December 2018, the Company had gross borrowings of
EUR195.3 million (31 December 2017: EUR222.3 million) and cash
balances of EUR26.9 million (31 December 2017: EUR27.2 million)
equating to a net debt of EUR168.4 million (31 December 2017:
EUR195.1 million) and a net loan to value for the Portfolio of
26.1% (31 December 2017: 32.0%).
Nearly all loans are fixed using an interest rate hedge and, as
at 31 December 2018, the blended interest rate of all loans across
the Portfolio was 2.0%. The average remaining duration of the loan
book at 31 December 2018 was 7.7 years (31 December 2017: 8.4
years). By 31 December 2018, all the Company's debt had been
refinanced within the previous 24 months.
During the course of 2018, the following ten-year loan
facilities were entered into in order to finance newly acquired
properties:
-- April 2018, EUR12.0 million facility;
-- July 2018, EUR1.6 million facility, of which EUR0.3 million remains to be drawn; and
-- December 2018, EUR7.5 million facility of which EUR0.9
million remained to be drawn at 31 December 2018 and was
subsequently drawn in February 2019.
In March 2018, the Company successfully refinanced existing debt
within PSPF Ltd. & Co.KG, against the properties based in
Berlin. An equity release of EUR7.8 million, before costs, was
obtained on the existing property portfolio, all of which was drawn
by 31 December 2018.
Following the disposal of the non-core Central and Northern
Germany assets, EUR40.5 million of the total proceeds of EUR73
million was used to repay debt, with the remainder being reinvested
into the portfolio. Further single property disposals amounting to
EUR4.1 million were also completed during the year with related
debt of EUR3.1 million being repaid.
In November 2018, the Company notarised for disposal the final
non-Berlin property for EUR3.9 million. The transaction completed
in January 2019.There was no debt secured against the asset.
The Company is currently undertaking a substantive review of its
financing requirements to support its future strategy and will
update investors following the conclusion of this exercise.
Acquisitions and disposals
The Company has continued to grow in Berlin with a number of
carefully targeted acquisitions in central locations which fulfil
its strict acquisition criteria. In total, 222 units (210
residential and 12 commercial) were notarised during 2018 for an
aggregate purchase price of EUR36.3 million, at an average price
per sqm of EUR2,390, and annual fully occupied rent of EUR1.3
million.
The Company intends to continue with its strategy of acquiring
in Berlin and, as at 23 April 2019, a further 14 units in Berlin
had been notarised since the December 2018 year end for a purchase
price of EUR2.4 million, representing a value per sqm of EUR2,956.
Acquisitions have been financed using a combination of debt and
cash reserves.
In April 2018 the Company completed the sale of its remaining
Northern Germany assets for a cash consideration of EUR73.0
million, representing a 26% premium to the Jones Lang LaSalle
pre-notarisation valuation. This portfolio, initially acquired in
2006/2007 for an aggregate purchase price of EUR38.7 million,
consisted of 34 properties located in Bremen, Hannover, Hildesheim,
Verden, Delmenhorst, Kiel, Oldenburg, Lüneburg and Lübeck.
Densification projects
Following the significant increase in rental values in recent
years, the Property Advisor is in the process of conducting an
exercise to examine the financial viability of new construction
within the footprint of the existing portfolio. This could involve
both attic conversions and new building construction on land
surrounding buildings that are already owned by the Company.
So far, 26 buildings have been identified for attic conversion
and permission has been granted for 39 new apartments, with a
further 35 in planning. Permission is also being sought for the
first new build project in the courtyard of a building already
owned by the Company with potential to create 23 new units.
Preliminary estimates of the gross development cost for all these
projects are in the region of EUR30 million - EUR35 million. The
Board is committed to ensuring that any decision to proceed with
new construction or investment in existing assets will be based on
the project meeting or exceeding the Company's financial return
targets.
Condominium sales
The Company has continued with its strategy of crystallising the
latent value within the portfolio through selectively reselling
apartment blocks as individual units.
Across the Company's condominium projects, a total of 23 units
were notarised for sale in 2018, with an aggregate sales value of
EUR9.0 million, consistent with the strong sales figures in 2017 of
EUR9.1 million. This represents an average value per sqm of
EUR4,490, or EUR4,466 excluding commercial units and parking.
Condominium sales proceeds during 2018 represented a 24.2%
premium to book value and the average price achieved per sqm for
notarised condominiums was a 25.7% premium to the average valuation
per sqm for properties in the Berlin portfolio as at 31 December
2018, confirming the potential for valuation creation through
apartment privatisation.
These sales constitute a combination of vacant and occupied
units and the Property Advisor expects to identify and prepare
additional condominium projects for sale, either to tenants, or new
buyers during 2019 in order to maintain similar proceeds to
previous years.
Market outlook
The trend towards trade protectionism, slowing global growth and
an uncertain Brexit outcome have impacted negatively on German GDP
forecasts. After averaging 2.1% over the period 2014-2017,
Germany's GDP growth slowed to 1.5% in 2018, and the European
Commission forecasts this will cool further to 1.1% in 2019, before
recovering to 1.7% in 2020. Although headwinds to German economic
growth remain, the inherent strength of the German labour market
continues, with unemployment levels expected to reduce further
(from 5.2% during 2018 to 4.9% in 2019) and employment levels
expected to rise.
Berlin's economic growth prospects remain relatively
uncorrelated given its comparative under-reliance on manufacturing
and skew towards the services sector as a source of job creation.
This positive labour market development has been a key driver of
Berlin's population growth. Between 2011 and 2017, its population
increased by nearly 290,000 and the number of households by almost
200,000. The population is expected to continue to grow. According
to the Senate administration, Berlin will require an additional
194,000 apartments by 2030.
Against a backdrop of strong population growth, medium-term
demand for residential property will continue to outstrip supply,
driven by a combination of high new-build construction costs, lack
of available land and a shortage of new build permits. The net
effect of this supply-demand imbalance should underpin the rental
market and, in turn, create significant future reversionary
potential within the Portfolio. This offers potential to improve
rental incomes in the event that market rental values
stabilise.
With an active market vacancy currently just over 1%, Berlin's
regional government has reacted to supply shortage by implementing
a growing number of regulatory measures such as:
-- the exercise of pre-emptive purchase rights;
-- additional designation of protected residential areas to
restrict the partitioning and resale of rental blocks as
condominiums.
There has recently been a well-documented grass-roots proposal
in Berlin for a referendum which proposes to expropriate properties
of large Berlin landlords with over 3,000 units under management.
The Property Advisor continues to monitor developments in relation
to the proposed referendum, but feels that since the Company owns
2,516 units, the outcome of the referendum is unlikely to affect
the Portfolio.
The Company's strategy will continue to develop to ensure that
it acts in a responsible manner, adhering at all times to relevant
regulatory requirements and property laws.
Notwithstanding the fact that yield compression has moderated,
the Property Advisor remains confident that the favourable Berlin
demographics outlined above offer opportunity to further improve
rental incomes and property values. This, combined with carefully
selected Portfolio acquisitions and a continuation of selective
condominium sales, leaves the Company well placed for the year
ahead.
OUR BUSINESS MODEL
Actively Managing the Portfolio
Underpinning our strategy is a business model that involves our
Property Advisor's active management of the portfolio of assets.
The key stages of this process are; Acquire, Renovate, Optimise,
and Reinvest.
ACQUIRE
The Company focuses on apartment buildings that are sometimes
poorly maintained. Through significant reinvestment, the apartments
are modernised to improve both the standard of accommodation for
tenants and the look of the local neighbourhood. We focus on
carefully selected central Berlin micro-locations which offer the
potential for medium-term value creation through modernisation and
renovation. The Company has historically focussed its acquisitions
on properties built before 1914 (Altbau). Single properties,
packages and portfolios are considered. Since listing on the London
Stock Exchange in June 2015 the Company has notarised on properties
with an aggregate valuation on acquisition of EUR206.3 million.
Acquisitions notarised since 2015 stock market listing
Year Region Purchase Units Sqm Purchase price Fully occupied
price (EUR) Per sqm (EUR) yield
2015 Berlin 35,760,000 227 18,197 1,965 4.3%
------- ------------ ----- ------ -------------- --------------
2016 Berlin 78,305,000 634 41,406 1,891 4.3%
------- ------------ ----- ------ -------------- --------------
2017 Berlin 55,890,000 336 25,135 2,224 3.6%
------- ------------ ----- ------ -------------- --------------
2018 Berlin 36,320,000 222 15,195 2,390 3.5%
------- ------------ ----- ------ -------------- --------------
Total 206,275,000 1,419 99,933 2,064 4.0%
------------ ----- ------ -------------- --------------
RENOVATE
Buildings acquired may require reinvestment to bring them up to
modern standards. It can take several years for the Property
Advisor's disciplined active asset management strategies to be
fully reflected in the valuation of each acquired building.
The scope for value creation is clearly evidenced in buildings
acquired during 2016. Acquisitions that had completed by 31
December 2016 were revalued by Jones Lang LaSalle ("JLL") as at 31
December 2018 at an average 97.2% premium to purchase prices. This
compares with growth in the properties acquired before 2016 over
the same period of 52.4%. This clearly demonstrates the scope for
significant value creation that the Property Advisor can achieve
through the selective acquisition and repositioning of Berlin
properties.
Acquisitions 2016 Value
Number of properties acquired 15
---------
Purchase Price EUR78.3m
---------
Value Growth of 2016 acquisitions (2016 - 31
December 2018) 97.2%
---------
Legacy portfolio valuation growth (2016 - 31
December 2018) 52.4%
---------
Rent per square metre growth of 2016 acquisitions
(2016 - 31 December 2018) 86.5%
---------
Legacy portfolio rent per square metre growth
(2016 - 31 December 2018) 79.0%
---------
Average fully occupied purchase yield of 2016
acquisitions 4.3%
---------
Average fully occupied yield of portfolio in
December 2018 3.0%
---------
We place our tenants' interests at the forefront of everything
we do. Many of the buildings that we acquire are in poor condition,
with a substantial backlog of underinvestment. We therefore seek to
improve the standard of accommodation available to tenants through
modernisation and renovation of apartments and, where appropriate,
their communal areas.
Renovations are carried out sensitively, and we carefully assess
each programme of building improvements to ensure that they are
justified, avoiding excessive investment which might lead to
unaffordable rent increases. Improvements are conducted on a
rolling basis across the Portfolio and vary according to the
condition of each building and its apartments. Refurbishment of
occupied units is only carried out with full agreement from
tenants.
Vacant units in poor condition are considered for full
renovation and vacant attic space is reviewed for conversion to
residential space. Depending on the level of historical
under-investment, apartment improvements can involve heating system
and boiler upgrades, new insulation, double glazing, new plumbing,
kitchen and bathroom renewal, new flooring, and redecoration.
Communal areas, both indoor and outdoor, are also reviewed for
potential improvement. A single apartment generally costs between
EUR20,000 and EUR30,000 to renovate, while an entire building
renovation might cost up to EUR2 million.
OPTIMISE
After acquisition, the Property Advisor looks to realign these
properties to maximise their potential within the Portfolio.
Realigning rents
For properties considered to be core rental buildings, vacant
units are re-let after refurbishment at levels that at all times
comply with relevant regulations. Tenant lists are reviewed
carefully and, only where appropriate, rent increases are applied
for, either where tenants are paying less than the statutory rent
level (Mietspiegel), where modernisation has been undertaken (and
these costs are allowed to be recouped), or where the lease
contains provisions for indexation (Staffel).
Buildings that are re-let typically command a rental premium to
in-place rental values. This "reversionary gap" reflects the
significant investment in these buildings and their surroundings to
bring them up to modern standards.
Berlin reletting premium
Year Berlin portfolio Berlin average new leases
average rent (EUR signed by quarter (EUR
per sqm) per sqm)
2011 6.2 6.7
------------------- --------------------------
2012 6.6 7.9
------------------- --------------------------
2013 7.0 9.1
------------------- --------------------------
2014 7.4 9.8
------------------- --------------------------
2015 8.0 11.2
------------------- --------------------------
2016 7.7 10.6
------------------- --------------------------
2017 8.1 11.9
------------------- --------------------------
2018 8.5 12.0
------------------- --------------------------
Realigning through the creation of new living space
As well as acquiring buildings, the Company is now exploring
ways to realign existing buildings within the existing portfolio by
identifying opportunities to create new residential space. The
substantial increase in rental and property values has created
potential densification opportunities which could involve both
attic conversions and new building construction on land surrounding
buildings already owned by the Company.
REINVEST
The properties within the Portfolio are revalued each year with
historical investment being reflected in revised property values.
To the extent that additional borrowing can be secured on higher
property values, a substantial portion are reinvested by way of
acquisitions and improvements in the existing portfolio of
buildings. For the year ended 2018, 50% of the rental income has
been reinvested into the portfolio.
Buildings that no longer fit the strategic objectives of the
Portfolio are considered for sale, either as blocks, or via the
condominium strategy. Since listing on the Main Market of the
London Stock Exchange in June 2015, the Company has been
progressively selling its non-Berlin assets. In aggregate these
assets have been sold at an average 23.8% premium to trailing book
value and the majority of the proceeds have been reinvested into
further improvements in the Berlin portfolio and Berlin
acquisitions.
Disposals notarised since 2015 stock market listing
Region 2015 2016 2017 2018 Premium to prior
FY book value
(EUR) (EUR) (EUR) (EUR)
Nuremberg & Furth 870,000 77.0%
------- --------- ----------- --------- ----------------
Berlin (including
Greater Area) 3,800,000 19.1%
------- --------- ----------- --------- ----------------
Baden-Wuerttemberg 6,100,000 3,920,000 6.3%
------- --------- ----------- --------- ----------------
Nuremberg & Furth 35,170,000 10.7%
------- --------- ----------- --------- ----------------
Central & North Germany 84,050,000 32.9%
------- --------- ----------- --------- ----------------
Total 870,000 3,800,000 125,320,000 3,920,000 23.8%
------- --------- ----------- --------- ----------------
Creation of condominiums
In addition to its core rental business, the Company also
selectively identifies a small number of condominium projects. The
Company is committed to operating within the relevant regulatory
and planning frameworks at all times during the condominium
realignment process.
This strategy is considered where a significant differential
exists between the market value of a rental unit within an
apartment block and the resale value of a unit as a private
apartment, or where there is limited opportunity to generate
further value as a rental building. The process involves legally
splitting the freeholds in a small number of selected
buildings.
The sales comprise a combination of vacant and occupied units
and can augment returns to reinvest in the Portfolio on further
acquisitions. As at 31 December 2018, 90 units representing
proceeds of EUR26.9 million had completed since condominium sales
commenced in mid-2015.
Year Condominium sales Berlin rental Sales Value Premium to
value EUR/sqm portfolio value (EURm) trailing book
EUR/sqm value (%)
2015 3,899 1,982 4.7 19.4
------------------ ----------------- ------------ ---------------
2016 4,427 2,150 5.5 33.3
------------------ ----------------- ------------ ---------------
2017 4,352 3,220 9.1 23.8
------------------ ----------------- ------------ ---------------
2018 4,566 3,576 9.9 24.2
------------------ ----------------- ------------ ---------------
THE CHANGING FACE OF BERLIN
During the past decade, Berlin has developed into one of
Europe's most vibrant and dynamic cities. Economic and population
growth have substantially outstripped nearly all other European
cities. Today, services account for 85% of Berlin's economic output
and growth in knowledge-based and future-oriented sectors offer a
bright future for Berlin's economy and labour market compared with
other European cities which have relied more heavily on
manufacturing and exports.
Since 2009, employment has increased by more than 30% in
aggregate and this development serves as a solid basis for
residential market demand in Phoenix Spree's core Berlin
residential market.
Whilst manufacturing accounts for one out of four jobs across
Germany as a whole, it plays a subordinated role in Berlin, with
only one out of eight employees employed in this sector. Berlin has
clearly positioned itself as an innovation hub. As its "new world"
economy continues to grow and flourish, the city's inward migration
trends increasingly reflect the new skills demanded by the labour
market. Employment growth has mainly taken place in services, where
more than 200,000 jobs were newly created between 2013 and 2018.
Almost half of these new jobs were in three services sectors only.
First, professional, scientific and technical services; second,
other business services; and third, the information and
communications sector.
The changing population and employment demographics are
reflected in Phoenix Spree's own tenant structure. Analysis of new
tenancies signed during 2018 shows that new tenants attracted to
Phoenix Spree's rental proposition are almost exclusively from the
services sector, over 39% of new leases signed are by tenants that
have relocated either from another German city or from another
country and only 18% are native Berliners.
New leases signed in 2018 by tenant occupation
Employment sector Percentage of tenants
Customer service 23%
----------------------
Other services 20%
----------------------
Students 16%
----------------------
Education service 12%
----------------------
Information Technology 11%
----------------------
Health services 9%
----------------------
Technical services 9%
----------------------
New leases signed in 2018 by place of birth
Nationality Percentage of tenants
Native Berliners 18%
----------------------
Other German locations 42%
----------------------
Other European Union countries 20%
----------------------
Non-European Union but in Europe 6%
----------------------
Other countries 14%
----------------------
Despite the significant rental increases seen in Berlin in
recent years, rental values remain relatively low by European
standards and rent affordability remains high. For Phoenix Spree,
analysis of all new leases signed during 2018 shows that the
average tenant net income after tax is EUR43,200 and that the
percentage of total rent to income stands at only 26%.
Average monthly rents remain among lowest of all major European
cities with the average monthly rent per square metre of EUR9.8
significantly cheaper than other major European cities.
Monthly rents by European City
European City 2018 Monthly Rent (EUR per
sqm)
London 28.2
---------------------------
Edinburgh 19.5
---------------------------
Dublin 19.2
---------------------------
Paris 18.0
---------------------------
Barcelona 17.9
---------------------------
Birmingham 16.2
---------------------------
Amsterdam 16.0
---------------------------
Madrid 15.1
---------------------------
Rome 14.0
---------------------------
Frankfurt 13.3
---------------------------
Milan 12.0
---------------------------
Lisbon 10.6
---------------------------
Berlin 9.8
---------------------------
Vienna 9.4
---------------------------
Source: Knight Frank
Not only are rents comparatively low, but available household
incomes are predicted to rise faster in Berlin than in any other
European city over the next 10 years.
Average household income growth (% change 2018-2028)
European City 10 years Income Growth (%)
Berlin 35.9%
---------------------------
Birmingham 35.1%
---------------------------
Edinburgh 35.2%
---------------------------
Amsterdam 34.0%
---------------------------
London 33.1%
---------------------------
Barcelona 32.7%
---------------------------
Dublin 32.3%
---------------------------
Frankfurt 30.9%
---------------------------
Madrid 30.9%
---------------------------
Milan 29.3%
---------------------------
Lisbon 26.5%
---------------------------
Rome 25.9%
---------------------------
Paris 25.6%
---------------------------
Vienna 21.2%
---------------------------
Source: Knight Frank
CORPORATE RESPONSIBILITY
Phoenix Spree is committed to acting responsibly by balancing
the different interests of all our key stakeholders and capturing
this within our Company Values and business model.
Our Approach to Corporate Responsibility
We strive to strike a meaningful balance between proving a
return to our investors and addressing our social and environmental
impacts. We engage with our stakeholders to ensure we understand
differing viewpoints and take this into consideration when making
business decisions. We believe that this is not only the right way
to approach business, but it will help us maintain a commercial
advantage and enable us to be a sustainable company that delivers
long term success.
Our business focusses on providing homes for people that are
both comfortable and affordable. We often acquire properties that
are in relatively poor condition and, through significant
reinvestment, we modernise the apartments to improve the standard
of accommodation for our tenants and improve the look of the local
neighbourhood. Providing good customer service to our tenants and
improving the sustainability of housing stock through renovation
lies at the core of our business.
In 2018, we reviewed how sustainability is managed within our
business and aligned these with the views of our stakeholders and
business priorities to create our Company Values and our 'Better
Futures' Corporate Responsibility (CR) Plan.
Whilst we are pleased with the progress we are making with the
dedication of our partners; we look forward to further
communication regarding our CR programme in the coming period.
Corporate Responsibility Governance
To ensure the successful delivery of our 'Better Futures' CR
Plan within our business, relevant Policies have been created for
each of the pillars, a measurement framework established to monitor
progress and a structure put in place to ensure robust
oversight.
We share the relevant policies with PMM, who in turn have
created their own policies that are aligned with ours. We request
that PMM periodically verifies that it has acted in accordance with
the policies. Where PMM outsources any key functions to other
business partners, it has likewise shared the policies with them
and requested that they periodically verify that they have acted
within the spirit of the relevant policies.
Structurally, PMM has established a CR Task Force that oversees
the implementation of the plan across the business. This Task Force
reports the progress on the CR Plan, at minimum twice a year, to
Phoenix Spree's CR Sub-Committee, who in turn reports into the
Company's Board.
For further information, please visit the company's website at
www.phoenixspree.com.
PRINCIPAL RISKS AND UNCERTAINTIES
The Board recognises that effective risk evaluation and
management needs to be foremost in the strategic planning and the
decision-making process. In conjunction with the Property Advisor,
key risks and risk mitigation measures are reviewed by the Board on
a regular basis and discussed formally during Board meetings.
RISK IMPACT MITIGATION MOVEMENT
Decline in property Economic, political, The Property Unchanged
valuation fiscal and legal Advisor believes
issues can have German housing
a negative effect affordability
on property valuations. metrics remain
A decline in favourable relative
Group property to other European
valuations could countries and
negatively affect that German residential
the valuation supply-demand
of the Portfolio dynamics are
and the ability supportive, with
of the Group limited supply
to sell properties of rental stock
within the portfolio in urban locations
at valuations putting upward
which satisfy pressure on rents.
the Group's investment
objective.
---------------------------- ---------------------------- -----------
Adverse interest Future interest The Property Unchanged
rate movements rate rises could Advisor has a
increase the record of securing
borrowing cost financing across
to the Group the Portfolio.
which, in turn, The Group mitigates
could negatively its exposure
affect the Group's to adverse interest
financial performance. rate movements
through the use
of interest rate
swaps or by fixing
its interest
rates. All new
debt drawn in
the year was
fixed using interest
rates swaps.
The average blended
interest rate
of the Group's
debt profile
is now 2.0% with
a blended maturity
of 7.7 years.
During the past
24 months, 100%
of the Group's
debt has been
refinanced.
---------------------------- ---------------------------- -----------
Inability to Inability to The Company currently Unchanged
sell condominiums sell condominiums has split over
in the Berlin half the properties
market due to in the German
changing political land registry,
or economic conditions the final step
could affect to allowing the
the Company's sale of properties
cashflows in as individual
the short term, condominiums.
which may affect The Property
the ability of Advisor reviews
the company to the condominium
fund its capital profile of the
expenditure programme Company on a
or fund its annual monthly basis
dividend. and the Company
can onboard new
condominium properties
quickly for sale
if required.
---------------------------- ---------------------------- -----------
Breach of covenant Should any fall The Group has Decreasing
requirements in revenues result no loan to value
in the Group covenants on
breaching financial debt held. The
covenants given group does have
to any lender, debt service
the Group may coverage covenants
be required to on its finance
repay such borrowings with DZ Hyp bank
in whole or in which are assessed
part, together annually in January.
with any related DZ Hyp loan covenant
costs. requirements
have always been
met with significant
headroom, and
were most recently
met in January
2019, again with
significant headroom.
The Property
Advisor regularly
monitors all
debt service
coverage covenants
and would seek
to take remedial
measures in advance
of any covenant
being breached.
---------------------------- ---------------------------- -----------
Insufficient Lack of capital At year end the Increasing
capital to support may restrict Group had cash
expansion the ability of reserves of EUR26.9m
the Group to and has signed
pursue future debt in 2018
investment opportunities of EUR28.9m,
consistent with EUR27.6 of which
the overall investment was drawn. The
objectives. Group always
maintains very
conservative
long-term forecasts
regarding its
cash balances
to ensure a three
year viability
projection. Taking
this into account,
and current and
future spending
commitment on
improving the
portfolio and
returns to shareholders,
without further
debt the Group
has limited capacity
for acquisitions.
It continues
to look for methods
to achieve further
capital on an
ongoing basis.
---------------------------- ---------------------------- -----------
Insufficient Availability The Property Unchanged
investment opportunity of potential Advisor has been
investments which active in the
meet the Group's German residential
investment objective property market
can be negatively since 2006. It
affected by supply has specialised
and demand dynamics acquisition personnel
within the market and an extensive
for German residential network of industry
property and contacts including
the state of property agents,
the German economy industry consultants
and financial and the principals
markets more of other investment
generally. funds. It is
expected that
future acquisitions
will be sourced
from these channels.
---------------------------- ---------------------------- -----------
Changes to property Property laws The Property Increasing
and tenant law remain under Advisor regularly
constant review monitors the
by the new "Red-Red-Green" impact that existing
coalition government and proposed
in Germany and regulation could
future changes have on future
to property regulation rental values
and rent controls and property
for new tenancies planning applications.
could negatively This includes
affect rental the potential
values and property referendum in
valuations. Berlin which
is discussed
on page 11 of
this annual report.
In order to reduce
the dependency
upon statutory
rent increases,
the majority
of the new leases
signed within
the Portfolio
include annual
indexation (or
'Staffel') increases.
---------------------------- ---------------------------- -----------
Occupancy and Unexpected vacancy The Property Decreasing
tenant risk and tenant default Advisor implements
trends across strict vetting
the Portfolio and screening
could lead to processes to
a rental income improve tenant
shortfall which, quality across
in turn, may the Portfolio.
adversely impact Where appropriate,
Group profitability apartments becoming
and investment vacant are renovated
returns. and modernised
and then re-let
at rents which
are at a significant
premium to that
paid by outgoing
tenants.
---------------------------- ---------------------------- -----------
Reliance on the The Group's future Since Listing Unchanged
Property Advisor performance depends on the London
and its key personnel on the success Stock Exchange,
of the Property the Property
Advisor's strategy, Advisor has expanded
skill, judgement headcount through
and reputation. the recruitment
The departure of several additional
of one or more experienced London
key employees and Berlin-based
may have an adverse personnel. Additionally,
effect on the senior Property
performance of Advisor personnel
the Group and and their families
any diminution retain a stake
in the Property in the Group,
Advisor's reputation aligning their
may have an adverse interests with
effect on the other key stakeholders.
Group's performance. In November 2018
the Group announced
that it had signed
a new Property
Advisor agreement
with PMM, committing
the Property
Advisor to the
Fund for the
foreseeable future.
---------------------------- ---------------------------- -----------
Reputational Adverse publicity The Group has Unchanged
risk and inaccurate retained an external
media reporting public relations
could reflect consultancy and
negatively on press releases
stakeholders' are approved
perception of by the Board
the Group, its prior to release.
strategy and The Group maintains
its key personnel. regular communication
with key shareholders
and conducts
presentations
and roadshows
to provide investors
with relevant
information on
the Group, its
strategy and
key personnel.
The Group also
has a dedicated
CSR committee
of the Board
which ensures
the company ethos
is in line with
societal expectations.
---------------------------- ---------------------------- -----------
Macro economic A deterioration Although the Increasing
environment in economic growth Board and Property
and a recessionary Advisor cannot
environment could control external
adversely affect macroeconomic
tenant demand risks, economic
and vacancy, indicators are
leading to a constantly monitored
reduction in by both the Board
rental and property and Property
values. Advisor and Group
strategy is tailored
accordingly.
The Fund is a
Jersey & Guernsey
based entity
operating in
Germany, and
therefore Brexit
should not affect
the fund as it
currently operates
outside the UK.
However, the
uncertainty surrounding
Brexit continues
to affect the
macroeconomic
environment around
Europe and the
situation continues
to be monitored
by both the Board
and Property
Advisor
---------------------------- ---------------------------- -----------
Non- compliance Failure to identify The Group employs Unchanged
with new regulatory and respond to internal compliance
accounting and the introduction and corporate
taxation legislation of new financial governance advisors
regulation in to provide updates
a timely manner. and boardroom
Risk of reputational briefings on
damage, penalties regulatory changes
or fines. likely to impact
the Group. The
Group works closely
with external
accountants and
tax advisors
to keep up to
date with changes
to financial
regulation in
the UK, Channel
Islands and Germany.
---------------------------- ---------------------------- -----------
Loss of data Illegal access Review of IT Increasing
due to cyber of commercially systems and infrastructure
security attack sensitive information in place to ensure
on IT systems and potential these are as
to impact investor, robust as possible.
supplier and Service Providers
tenant confidentiality. are required
to report to
the board on
request on their
financial controls
and procedures.
Service providers
are also required
to hold detailed
risk and controls
registers regarding
their IT systems.
The board is
currently reviewing
its IT procedures
and controls
for the 2019
financial year.
---------------------------- ---------------------------- -----------
Directors' report
The Directors are pleased to present their Annual Report and the
audited consolidated financial statements for the year ended 31
December 2018.
General information
The Company is a public limited company and incorporated in
Jersey, Channel Islands under the Companies (Jersey) Law 1991. The
Company was admitted to the premium segment of the Main Market of
the London Stock Exchange on 15 June 2015.
The Group's objective is to generate an attractive return for
shareholders through the acquisition and active management of
high-quality pre-let properties in Germany. The Group is primarily
invested in the residential market, supplemented with selective
investments in commercial property. The majority of commercial
property within the portfolio is located within residential and
mixed-use properties.
Dividends
The Directors recommend a final dividend of EUR5.15 cents (2017:
EUR5.0 cents) per Ordinary Share to be paid on or around 27 June
2019 to ordinary shareholders on the register on 7 June 2019.
The Directors declared a dividend of EUR5.0 cents per share on
26 April 2018, paid on 29 June 2018 to ordinary shareholders on the
register on 8 June 2018 and a further dividend of EUR2.35 cents per
share on 26 September 2018, paid on 19 October 2018 to ordinary
shareholders on the register on 5 October 2018.
Directors
The Directors who served during 2018 and to date are as
follows:
Name of Director
R Hingley Independent Non-executive director,
Chairman
------------------------------------
R Prosser (resigned 17 April Non-executive director
2018)
------------------------------------
M Northover (resigned 24 January Non-executive director
2018)
------------------------------------
Q Spicer Independent Non-executive director
(Not independent from 7 March
2019)
------------------------------------
A Weaver (resigned 17 April 2018) Non-executive director
------------------------------------
C Valeur (appointed 24 January Independent Non-executive director
2018)
------------------------------------
J Thompson (appointed 24 January Independent Non-executive director
2018)
------------------------------------
M O'Keefe (appointed 17 April Independent Non-executive director
2018)
------------------------------------
Directors' indemnities
The Company has made third party indemnity provisions for the
benefit of its Directors which were in place throughout the year
and remain in force at the date of this report.
Substantial shareholdings
As at 9 April 2019, the Company has received the following
notifications under chapter 5 of the Disclosure and Transparency
Rules of shareholdings of more than 5% of the Company's share
capital:
Name of holder Percentage of voting No. of Ordinary Shares
rights
Bracebridge Capital,
LLC 12.2% 12,288,503
--------------------- -----------------------
Thames River Capital 8.0% 8,088,096
--------------------- -----------------------
Invesco 6.8% 6,872,314
--------------------- -----------------------
Requirements of the Listing Rules
The following table provides references to where the information
required by the Listing Rule 9.8.4R is disclosed.
Listing Rule requirement
A statement of the amount of interest capitalised by the group Not applicable
during the period under review
with an indication of the amount and treatment of any related tax
relief.
-----------------------------------------------
Any information required by LR 9.2.18 R (Publication of unaudited Not applicable
financial information).
-----------------------------------------------
Details of any long-term incentive schemes as required by LR 9.4.3 Not applicable
R.
-----------------------------------------------
Details of any arrangements under which a director of the company No such waivers
has waived or agreed to
waive any emoluments from the company or any subsidiary undertaking.
Where a director has
agreed to waive future emoluments, details of such waiver together
with those relating to
emoluments which were waived during the period under review.
-----------------------------------------------
Details required in the case of any allotment for cash of equity No such share allotments
securities made during the
period under review otherwise than to the holders of the company's
equity shares in proportion
to their holdings of such equity shares and which has not been
specifically authorised by
the company's shareholders. This information must also be given for
any major unlisted subsidiary.
-----------------------------------------------
Where a listed company has listed shares in issue and is a Not applicable
subsidiary undertaking of another
company, details of the participation by the parent undertaking in
any placing made during
the period under review.
-----------------------------------------------
Details of any contract of significance subsisting during the period a) Notes 27,33 to the accounts
under review: b) No controlling shareholder, not applicable
(a) to which the listed company, or one of its subsidiary
undertakings, is a party and in
which a director of the listed company is or was materially
interested; and
(b) between the listed company, or one of its subsidiary
undertakings, and a controlling
shareholder.
-----------------------------------------------
Details of contracts for the provision of services to the listed No controlling shareholder, not applicable
company or any of its subsidiary
undertakings by the controlling shareholder.
-----------------------------------------------
Details of any arrangement under which a shareholder has waived or No such agreements
agreed to waive any dividends,
where a shareholder has agreed to waive future dividends, details of
such waiver together
with those relating to dividends which are payable during the period
under review.
-----------------------------------------------
Board statement in respect of relationship agreement with the No controlling shareholder, not applicable
controlling shareholder.
-----------------------------------------------
Corporate Governance
The Directors have prepared a statement on how the UK Corporate
Governance Code has been applied, which is set out on pages 35 to
44.
Financial instruments
Details of the financial risk management objectives and policies
followed by the Directors can be found in note 3 to the
consolidated financial statements.
Events after the reporting date
-- In April 2019, the Company exchanged contracts for the
acquisition of one individual property in Berlin for the purchase
price of EUR2.4 million. The property is still awaiting
completion.
-- The Company had exchanged contracts for the acquisition of
one property in Berlin with a purchase price of EUR2.2 million
prior to the balance sheet date, which as at balance sheet date had
not yet completed. The purchase completed in January 2019.
-- In Q1 2019, the Company exchanged contracts for the sale of
one commercial unit and one residential unit in BoxhagenerStraße
with an aggregated purchase price of EUR1.9 million. The sale of
these units subsequently completed in April 2019.
-- The Company had exchanged contracts for the sale of three
condominiums in Berlin with aggregated consideration of EUR1.1
million prior to the reporting date. The sale of these units
subsequently completed in Q1 2019.
-- The Company exchanged contracts for the disposal of the last
non-Berlin property for the sale price of EUR3.9 million prior to
the reporting date, the sale of this property subsequently
completed in January 2019.
-- In February 2019, the Company drew down the final EUR0.9
million portion of the EUR7.5 million loan with Berliner Sparkasse.
EUR6.6 million of the debt was drawn down in December 2018.
Auditor
Each of the Directors at the date of approval of this Annual
Report has taken all the steps that he or she ought to have taken
as a Director in order to make him or herself aware of any relevant
audit information and to establish that the Group's auditor is
aware of that information. The Directors are not aware of any
relevant audit information which has not been disclosed to the
auditor.
RSM UK Audit LLP has expressed its willingness to continue in
office as auditor and a resolution to reappoint them will be
proposed at the forthcoming Annual General Meeting.
Viability Statement
The Directors have assessed the viability of the Group over a
three-year period. The Directors have chosen three years because
that is the period over which the Group has sufficiently robust
forecasts as part of its business plan. The Viability Statement is
based on a robust assessment of those risks that would threaten the
business model, future performance, solvency or liquidity of the
Group. For the purposes of the Viability Statement the Directors
have considered, in particular, the impact of the following factors
affecting the projections of cash flows for the three-year period
ending 31 December 2021:
a) the potential operating cash flow requirement of the
Group;
b) seasonal fluctuations in working capital requirements;
c) property vacancy rates;
d) rent arrears and bad debts;
e) capital and administration expenditure (excluding potential
acquisitions as set out below) during the period; and
f) condominium sales proceeds.
The Directors recognise that the projections of cash flows do
not include the impact of further potential property acquisitions
over the three-year period, as these acquisitions are ad hoc and
discretionary in nature. In this respect, the Directors complete a
formal review of the working capital headroom of the Group for each
potential acquisition.
On the basis of the above, and assuming the principal risks are
managed or mitigated as expected, the Directors have a reasonable
expectation that the Group will be able to continue in operation
and meet its liabilities as they fall due over the three-year
period of their assessment.
Registered office
13-14 Esplanade
St Helier
Jersey
JE1 1EE
Channel Islands
Corporate Governance Statement
This Corporate Governance Statement comprises pages 35 to 44 and
forms part of the Directors' Report.
To comply with the UK Listing Regime, the Company must comply
with Listing Rule 9.8.6(5) R which requires the Company to apply
the main principles of the UK Corporate Governance Code ('the
Code') most recently published in July 2018 and report to
shareholders how the Company has applied these principles or
explain any departures therefrom.
On 16 July 2018, the Financial Reporting Council ('FRC')
published the 2018 Code of Corporate Governance. The Code is
available for download from the Financial Reporting Council's
('FRC') website www.frc.org.uk.
The Board intends to adopt The AIC Code of Corporate Governance
(the AIC Code) for the accounting period beginning 1 January 2019.
The Board deems the AIC Code more relevant with respect to the
governance of investment companies.
The Board has considered the principles and recommendations of
the Code. During the year, the Company has complied with all of the
provisions of the Code except as set out below;
-- the role of the Chief Executive and Executives of the Board;
-- Executive Directors' remuneration;
-- the internal audit function;
-- the composition of the Audit Committee and Risk Committee (rectified during 2018).
The Board considers that the provisions relating to the chief
executive and executive directors' role and remuneration are not
relevant to the Company, as the running of PSD's business is
outsourced to third parties and there are no executive directors.
The objective of the Code to separate the roles of the chairman who
manages and provides leadership to the Board, and the running of
PSDL, is achieved because the Chairman is independent from the
third-party providers.
PSDL does not currently have an internal audit function as the
Board believe that it can ensure that PSDL's risk management,
governance and internal control processes are operating effectively
without this. This is because PSDL's business is conducted by
relatively few individuals (through the outsourced service
providers) who report to the Board, and its operations are not
complex. However, if PSDL increases in size, the appointment of an
appropriately qualified and resourced internal audit department
will be, and is currently being, considered. Ultimately this role
will be widened to encompass reviews of the efficiency of
operations and to make recommendations on rationalisation of the
business. If established, such internal audit department would
report directly to the Audit Committee.
The members of the Audit and Risk Committees have been selected
for their experience and expertise in relation to the risks,
financial reporting and internal controls relating to PSDL. The
members bring specific experience in relation to the property
investment sector and externally managed structures which have been
found to be invaluable to each Committee in identifying risks and
assessing the mitigating controls which have been established.
Board Leadership and Company Purpose
In accordance with the Code's Principles A, B, C, D & E
following the changes to its composition in 2018, the Board was
considered wholly independent for the year 2018 with no
representation of external service providers on the Board. From 7
March 2019 Quentin Spicer was no longer considered to be an
Independent Non-executive director due to his length of service
exceeding 10 years. The Board, however, consider his detailed
knowledge of the company a significant asset and are happy for him
to continue as a non-executive director for the coming period. The
board assesses the basis on which the Company generates and
preserves value over the long-term. Additionally, the board
considers and addresses the opportunities and risks to the future
success of the Company, along with the sustainability of the
Company's business model and how its governance contributes to the
delivery of its strategy.
This is achieved by considering the following matters:
-- the overall objectives of the Company as described under the
sections headed "Our Strategy" & "Business Model" in the
Strategic Report, and the strategy for fulfilling those objectives
within an appropriate risk framework in light of market conditions
prevailing from time to time;
-- the appointment of the Property Advisor, administrator and
other appropriately skilled service providers and to monitor their
effectiveness through regular reports and meetings; and
-- the key elements of the Group's performance including NAV and
EPRA NAV growth and the payment of dividends.
Further to the above the Board has adopted a Diversity Policy
which sets out the Board's approach to diversity in board
composition confirming that the Board would make any new
appointments on merit taking into consideration gender
diversity.
The Company has no direct employees therefore is not required to
monitor culture in this respect, however the Board recognises its
wider responsibility to demonstrate to shareholders that it is
operating responsibly, managing its social and environmental
impacts for the benefit of all stakeholders. Following a thorough
review of how sustainability is managed within the Company, a
"Better Futures" Corporate Responsibility Plan has been developed.
This will provide a framework to measure existing activities better
while adding new initiatives to improve overall sustainability.
Additionally, the Board is mindful of culture within each of its
service providers and stakeholders and where it is not satisfied
that policy, practices or behaviours are aligned with the Company's
purpose, values and strategy, the Board will seek assurance that
management have taken corrective action.
The Board has overall responsibility for maximising the Group's
success by directing and supervising the affairs of the business
and meeting the appropriate interests of shareholders and relevant
stakeholders, while enhancing the value of the Group and also
ensuring protection of investors.
Within the Annual Report and Financial Statements, the Directors
have set out the Group's investment objective and policy and have
reported how the Board and its delegated Committees operate and how
the Directors review the risk environment within which the Group
operates and set appropriate risk controls. Furthermore, the Board
has sought to provide further information to enable shareholders to
understand the Group's business and financial performance better.
The Board also maintains a formal schedule of matters specifically
reserved solely for their decision.
The Chairman shall also be responsible for the promotion of a
culture of openness and debate, for ensuring that the Directors
receive accurate, timely and clear information and for ensuring
that there is adequate time available for the discussion of agenda
items at each Board meeting.
The Board believes that the maintenance of good relations with
both institutional and retail shareholders is important for the
long-term prospects of the Group. The Board receives feedback on
the views of shareholders from its corporate broker. Through this
process the Board seeks to monitor the views of shareholders and to
ensure an effective communication programme. The Board shall seek
to utilise stakeholder communication to inform them of the
decisions that the Company and Board takes, whether about the
products or services it provides, or about its strategic direction,
its long-term health, and the society in which it operates. The
Board agrees that stakeholder engagement will strengthen the
business and promote its long-term success to the benefit of
stakeholders and shareholders alike.
The Chair is open to discussions on governance and strategy with
major Shareholders and the other Directors shall also be provided
the opportunity to attend these meetings
The Board believes that the Annual General Meeting provides an
appropriate forum for investors to communicate with the Board and
encourages participation.
The Group regularly reviews its shareholder profile.
Shareholders may contact the Company directly through the Investor
section of the Company's website www.phoenixspree.com.
The Board identifies and manages conflicts of interest,
including those resulting from significant shareholdings, and also
ensures that the influence of third parties does not compromise or
override independent judgement.
If a Board recommendation for a resolution receives 20% or more
of votes cast against it, the Company will explain, when announcing
voting results, any actions it intends to take to consult
shareholders in order to understand the reasons behind the result.
No later than six months after the shareholder meeting, the Company
will publish an update on the views received from shareholders and
any actions taken. The Board will then provide a final summary in
the Annual Report and Financial Statements and, if applicable, in
the explanatory notes to resolutions at the next shareholder
meeting, on the impact the feedback has had on the decisions the
Board has taken and any actions or resolutions that are to be
proposed.
Where Directors have concerns about the operation of the Board
or the management of the Company that cannot be resolved, their
concerns are recorded in the Board minutes. On resignation, a
non-executive director will also provide a written statement to the
Chair, for circulation to the board, if they have any such concerns
in connection with resignation.
Division of Responsibilities
In adherence with the Codes Principles F, G, H & I,
following the appointment of two new independent Directors in
January 2018 and a further appointment in April 2018, the Board
comprised five non-executive Directors, one of whom also acts as
Chairman of the Company. The Chairman is Robert Hingley, who is
considered to be independent for the purposes of Listing Rule 15
and Provision 9 of the Code as he has neither current nor
historical employment with the Property Advisor nor any current
directorships in any other investment funds managed by the Property
Advisor. Listing Rule 15 requires there to be a majority of
independent directors on the board as a whole which was not in
place until the new appointments. The Chair ensures the Directors
receive accurate, timely and clear information.
On 24 January 2018, the Company announced the appointments of
two further independent non-executive Directors, Charlotte Valeur
and Jonathan Thompson. At the same time, Matthew Northover, a
non-independent Director, stepped down from the board to focus on
the business of the Property Advisor. Furthermore, on 17 April
2018, Monique O'Keefe was appointed as an independent non-executive
Director and chair of the Corporate Responsibility Committee, and
both Richard Prosser and Andrew Weaver stepped down from the
board.
Charlotte Valeur is the senior independent Non-executive
Director. The Board has evaluated her independence and considers
Charlotte to remain independent.
The Board considers its current Non-executive Directors to be of
sufficient calibre and number for their views to be of sufficient
weight and that no individual or small group can dominate the
Board's decision-making process. Their qualifications and
experience are relevant to their directorships and in their
appointments to the Committees where applicable.
Due to his 10-year tenure of service on the Board, Quentin
Spicer was deemed to be no longer independent. The Board however
considers his detailed knowledge of the company a significant asset
and is happy for him to continue as a non-executive director for
the coming period.
The Non-executive Directors' terms and conditions of appointment
are available for inspection at the
Company's registered office on request and will be available at
the forthcoming AGM.
The Directors believe that the Board has an appropriate balance
of skills, experience and independence to discharge its duties and
provide effective strategic leadership and proper governance of the
Company. The Board shall ensure that it conducts its business at
all times with only the interests of the Shareholders in mind and
independently of any other associations.
Independence of Non-executive Directors
The Code states that the Board should identify in the annual
report each non-executive director it considers to be independent
and should consider whether there are any relationships or
circumstances that are likely to affect a Director's independence.
On 7 March 2019 Quentin Spicer was no longer considered as an
Independent Non-executive director by the board due to his length
of service exceeding 10 years.
The senior independent director is to provide a sounding board
for the chair and serve as an intermediary for the other directors
and shareholders. Led by the senior independent director, the
non-executive directors will meet without the chair present at
least annually to appraise the chair's performance, and on other
occasions as necessary.
Non-executive Directors' shareholdings
The Board has assessed that the holdings of the Directors are
not significant and believes such levels of investment should not
raise questions regarding their independence. The Board considers
that Directors owning shares in the Company directly aligns them
with the interests of the shareholders.
The responsibilities of the chair, senior independent director,
board and committees are clear and set out in writing, after they
are agreed by the board. They can be found on the Company's
website, www.phoenixspree.com.
When considering any new appointments, the board takes into
account any other demands on directors' time. Prior to appointment,
any significant commitments are disclosed along with an indication
of the time involved. Additionally, any external appointments are
not undertaken without prior approval of the board. Any reasons for
permitting significant appointments will be explained further in
this report as and when the time arises.
All directors have access to the advice of the Company
Secretary, who is responsible for advising the Board on all
governance matters. Both the appointment and removal of the Company
Secretary would be a matter for the whole Board.
Composition, succession and evaluation
In adherence with the Codes Principles J, K & L, the Board
has established a Nomination and Remuneration Committee which is
chaired by Quentin Spicer with Robert Hingley, Charlotte Valeur,
Jonathan Thompson and Monique O'Keefe as members.
The Nomination and Remuneration Committee met twice during the
year.
As at the year-end there were five Directors, 3 of whom are male
and 2 are female. The Directors have agreed that appointments to
the Board should be made on the basis of the Group's specific needs
based on merit, without reference to age, gender or religious
belief. Charlotte Valeur and Jonathan Thompson were appointed to
the Board on 24 January 2018 (with Matthew Northover stepping down)
and Monique O'Keefe was appointed on 17 April 2018 (with Richard
Prosser and Andrew Weaver stepping down).
Re-election
All newly appointed Directors shall stand for election by the
shareholders at the next Annual General Meeting following their
appointment. There are provisions in the Company's Articles of
Association which require Directors to seek re-election on a
periodic basis, however, in accordance with the Code all other
Directors shall also offer themselves for annual re-election. There
is no limit on length of service, nor is there any upper age
restriction on Directors. The names of all Directors standing for
appointment or reappointment shall be accompanied by sufficient
biographical details and the specific reasons why their
contribution is, and continues to be, important to the company's
long-term sustainable success in order to enable shareholders to
make an informed decision.
The Board considers that there is significant benefit to the
Group arising from continuity and experience among Directors, and
accordingly does not intend to introduce restrictions based on age
or tenure. It does, however, believe that shareholders should be
given the opportunity to review membership of the Board on a
regular basis.
After the most recent appointments, the Board is satisfied that
all the Board members standing for re-election should be re-elected
as they have the right skills and experience to continue to manage
the Group. The Board maintains its right to appoint further members
if deemed necessary and considers succession on a regular
basis.
The Board has implemented a process of formal evaluation for
individual Directors, the Committees and the processes utilised by
the Board itself. This is undertaken by the Chair and the Audit
Committee.
The Board areas of evaluation include:
-- Board composition and quality;
-- Overall strategy, performance and risk;
-- Shareholder value;
-- Governance;
-- Board meetings;
-- Support and relations with suppliers;
-- Personal evaluation;
-- Chair's evaluation.
The process of performance evaluation is designed to consider
all elements of performance including any perceived shortcomings,
training or development needs and unforeseen tasks and
responsibilities that have arisen during the year.
The Chairman shall act on the results of the evaluation by
recognising the strengths and addressing any weaknesses of the
Board. Each Director shall engage with the process and take
appropriate action where development needs have been
identified.
The Chairman and the Board have agreed to regular externally
facilitated board evaluations being undertaken, which shall occur
as necessary under the requirements of the Code. Jones Lang LaSalle
is the appointed external property valuer, it has no connection
either to the Company, or to any of the Directors of the
Company.
While no KPIs are set for individual Non-executive Directors,
the time, effort and application to the performance of their duties
for the Board and Committees is taken into account.
The Board, the Committees and the management process -
performance evaluation
In line with the requirements of the Code, the Company has
implemented annual performance evaluations of the Board, the
Committees and the processes utilised by each forum. The aim of the
evaluation is to recognise the strengths and address any weaknesses
and consider improvements to the management process. The evaluation
is designed to ensure that the Board meets its objectives and
effectiveness is maximised.
The evaluations focus on the following issues:
-- the frequency of meetings and the business transacted;
-- the workload of each forum;
-- diversity and how effectively members work together to achieve objectives;
-- the timing, level of detail and appropriateness of information put before meetings;
-- the reporting process from Committees to the Board and delegation process itself;
-- the levels of expertise available within the membership of
the Committees and the need for, selection of and the use of
external consultants; and
-- the effectiveness of internal controls following the review
and report of the Audit Committee.
Following the changes to the Board, and if any potential future
changes are made, due consideration to the evaluation process will
be made.
Audit, risk and internal control
Audit and Risk Committee
Neither Matthew Northover nor Richard Prosser, up to the dates
of their resignations, were considered to be independent Members of
the Board as a consequence of their relationship with the Property
Advisor or the Administrator respectively. However, during the
financial year, Jonathan Thompson, an independent Non-executive
Director, has been appointed to chair the Audit Committee, and
Charlotte Valeur the Risk Committee, meaning that the Company will
comply with the Code principles and recommendations on the
composition of the Committee in future periods.
On 17 April 2018, Monique O'Keefe joined both the Audit and Risk
Committee and the committees split to become a separate Audit
Committee and Risk Committee.
Audit Committee
The Audit Committee is chaired by Jonathan Thompson with Quentin
Spicer, Charlotte Valeur and Monique O'Keefe as members. The Audit
Committee meets no less than three times a year and, if required,
meetings can also be attended by the Property Advisor and the
external auditor. The Board considers that Jonathan's recent and
relevant experience, both in the sector, and in financial
reporting, make him suitably qualified to chair the Audit
Committee.
In adherence with the Code's Principles M & N, the Audit
Committee is responsible for ensuring that the accounting policies
of the Company are appropriate and being followed, disclosures
provided are clear and for reviewing the half-year and annual
financial statements before their submission to the Board. In
addition, the Audit Committee is specifically charged under its
terms of reference to advise the Board on the terms and scope of
the appointment of the auditors, including their remuneration,
independence and objectivity and reviewing with the auditors the
results and effectiveness of the audit. The Committee reviews and
provides advice on whether the content of the annual report and
accounts is fair, balanced and understandable and provides the
information necessary for Shareholders to assess the Company's
performance, business model and strategy.
The Group does not currently have an internal audit function, as
the Board believes that it can ensure that the Group's risk
management, governance and internal control processes are operating
effectively without this. This is because the Group's business is
conducted by relatively few individuals (through the outsourced
service providers) who report to the Board, and its operations are
not complex at present. However, if the Group increases in size or
complexity, the appointment of an appropriately qualified and
resourced internal audit department will be, and is being,
considered. Ultimately this role will be widened to encompass
reviews of the efficiency of operations and to make recommendations
on rationalisation of the business. Once established, such internal
audit department would report directly to the Audit Committee.
The Board is satisfied that the Annual Report and Financial
Statements, taken as a whole, are fair, balanced and understandable
and provide the information necessary for shareholders to assess
the Group's position and performance, business model and
strategy.
Risk Committee
The Risk Committee is chaired by Charlotte Valeur with Quentin
Spicer, Jonathan Thompson and Monique O'Keefe as members. The Risk
Committee meets no less than three times a year and, if required,
meetings can also be attended by the Property Advisor.
In adherence with the Code's Principle O, The Risk Committee is
responsible for advising the Board on the Company's overall risk
appetite, tolerance and strategy. The Risk Committee will also
oversee and advise the Board on the current risk assessment
processes, ensuring that both qualitative and quantitative metrics
are used. Where requested by the Board, the Committee shall review
and provide advice on whether the content of the risk management
and internal control report, as contained in the annual report, is
fair, balanced and understandable and provides the information
necessary for Shareholders to assess the Company's performance,
business model and strategy.
The Members of both the Audit and Risk Committees have been
selected for their experience and expertise in relation to the
risks, financial reporting and internal controls relating to the
Group. The Members bring specific experience in relation to the
property investment sector and externally managed structures which
has been found to be invaluable to the Committee in identifying
risks and assessing the mitigating controls which have been
established.
Remuneration
In adherence with the Code's Principles P Q & R the Board
considers that the provisions relating to the Chief Executive and
Executive Directors' roles and remuneration are not relevant to the
Group, as the running of the Group's business is outsourced to
third parties and there are no executive directors. The objective
of the Code, to separate the roles of the Chairman who runs the
Board, and the running of the Group, is achieved because the
Chairman is independent from the third-party providers. The
remuneration of the directors and the third-party providers is
disclosed and explained in the notes to the financial
statements.
Effectiveness
The Company holds a minimum of four Board meetings per year to
discuss general management, structure, finance, corporate
governance, marketing, risk management, compliance, asset
allocation and gearing, contracts and performance. The reports
provided by the outsourced providers are the principal source of
regular information for the Board enabling it to determine policy
and to monitor performance, compliance and controls, which are
supplemented by communication and discussions throughout the year.
The Board carries out internal evaluations of its effectiveness
which are described on page 39 of the annual report. Furthermore,
the Board has contracted BoardAlpha to carry out an external review
of the Board's effectiveness. The scope of this external
effectiveness evaluation is in line with the scope set out on page
39.
Committees of the Board
The terms of reference for the Board Committees are available on
the Company website at www.phoenixspree.com.
Property Valuation Committee
The Company has established a Property Valuation Committee. The
Property Valuation Committee is responsible for reviewing the
property valuations prepared by the valuer and any further matters
relating to the valuation of the Portfolio.
During 2018, the Property Valuation Committee's composition
changed, following the appointment of the Board's new independent
directors. It continued to be chaired by Quentin Spicer, with
Charlotte Valeur and Jonathan Thompson joining as members on 24
January 2018. Richard Prosser ceased to be a member of the Property
Valuation Committee following his resignation from the Board on 17
April 2018 and Monique O'Keefe and Robert Hingley were both
appointed.
The Property Valuation Committee met four times during the year
and reported to the Board on its duties, which are to:
-- review significant adjustments from the previous property valuation report;
-- review the individual valuations of each property;
-- receive any commentary from the Property Advisor and/or
Directors following the review meeting held with the external
valuer;
-- register and discuss with the Property Advisor any asset
specific issues highlighted by the valuer;
-- review material, unexplained movements in the Group's Net
Asset Value and to recommend the release of the Net Asset Value
announcement following that review;
-- review compliance with applicable standards and guidelines
including those issued by the Royal Institution of Chartered
Surveyors and the UKLA Listing Rules;
-- review the findings and any recommendations or statements made by the valuer;
-- review at least annually, consider and make recommendations
to the Board, in relation to the appointment, remuneration,
re-appointment and removal of the Group's valuer. The Committee
shall oversee the selection process for a new valuer and if a
valuer resigns the Committee shall investigate the issues leading
to this and decide whether any action is required;
-- consider any further matters relating to the valuation of the properties.
The Committee reported to the Board its findings on the property
valuation and the Committee was satisfied with the independent
valuation report and values associated with all properties of the
Group.
Corporate Social Responsibility Committee
On 17 April 2018, the Company formed a Corporate Social
Responsibility Committee. The Corporate Social Responsibility
Committee is chaired by Monique O'Keefe with Jonathan Thompson,
Charlotte Valeur, Robert Hingley and Quentin Spicer as members. The
Corporate Social Responsibility Committee meets no less than three
times a year.
The Corporate Social Responsibility Committee is responsible for
approving a strategy for discharging the Company's corporate and
social responsibilities, overseeing the creation of appropriate
policies and supporting measures along with ensuring that the
policies are regularly reviewed and updated in line with national
and international regulations. Where requested by the Board, the
Committee shall review and provide advice on whether the content of
the CR report, as contained in the Company's annual report, is
fair, balanced and understandable and provides the information
necessary for Shareholders to assess the Company's performance,
business model and strategy.
Management Engagement Committee
In accordance with the Code, the Management Engagement Committee
was established to review the performance of the Property Advisor
on an annual basis. It was previously chaired by Robert Hingley,
with Richard Prosser and Quentin Spicer as members. On 24 January
2018, the Management Engagement Committee's composition has changed
with Robert Hingley remaining as Chair but with Charlotte Valeur
and Jonathan Thompson joining as members. Richard Prosser ceased to
be a member of the Management Engagement Committee following his
resignation from the Board on 17 April 2018 and Monique O'Keefe was
appointed.
The Management Engagement Committee met three times during the
year and reported to the Board on its duties, which are to:
-- monitor and evaluate the Property Advisor's performance and
compliance with the terms of the Property Advisory Agreement and,
if necessary, provide appropriate guidance, which may include
considering the merit of obtaining an independent appraisal of the
Property Advisor's services on an annual basis;
-- review the terms of the Property Advisory Agreement from time
to time to ensure that the terms thereof conform with market and
industry practice and remain in the best interests of shareholders
and make recommendations to the Board on any variation to the terms
of the Property Advisory Agreement which it considers necessary or
desirable;
-- review and make appropriate recommendations to the Board as
to whether the continuing appointment of the Property Advisor is in
the best interests of the Group and Shareholders, and the reasons
for this recommendation;
-- review the level and method of remuneration, the basis on
which the performance fees (if any) are calculated and the notice
period of the Property Advisor, giving due consideration to the
competitive position of the Group against its peer group;
-- consider whether the asset and estate management fee should
be based on gross assets, net assets or market capitalisation;
-- ensure that the basis of any performance fee or performance
related element does not encourage excessive risk and that it
rewards demonstrably superior performance by the Property Advisor
in managing the portfolio against the Group's stated objectives
when compared to a suitable benchmark or peer group;
-- ensure that a sound system of risk management and internal
control is maintained and reviewed annually in order to safeguard
shareholders' investment and the Group's assets;
-- review, consider and recommend any amendments to the terms of
the appointment and remuneration of providers of other services to
the Group; and
-- consider any points of conflict which may arise between the
providers of services to the Group.
The Committee keeps under review the performance of the Property
Advisor and the level and terms of the management fee. On 27
November 2018 the Group announced that it had signed a new contract
with the Property Advisor, effective from 1 January 2019. Further
information on this contract can be seen in note 33 to the
Financial Statements, and on http://www.phoenixspree.com. In the
opinion of the Directors, the continuing appointment of the
Property Advisor on the terms agreed is in the interests of
shareholders as a whole. The Performance Period as set out in the
previous Property Advisory agreement ended on 30 June 2018.
According to the new agreement, the Performance Period starts on
the 1 July 2018, ending on 31 December 2020. The Performance Period
commences benchmarked from the EPRA Net Asset Value of the Company
as at 30 June 2018.
Board and Committee meetings
The table below sets out the number of Board, Audit Committee,
Risk Committee, Property Valuation Committee, Management Engagement
Committee and Nomination and Remuneration Committee meetings held
during the year ended 31 December 2018 and, where appropriate, the
number of such meetings attended by each Director.
Scheduled Audit Risk
Board
-------------- -------------- --------------
Held Attend Held Attend Held Attend
------------ ----- ------- ----- ------- ----- -------
R Hingley 4 4 - - 1 1
R Prosser 1 1 - - - -
Q Spicer 4 4 4 4 1 1
J Thompson 4 4 4 4 1 1
------------ ----- ------- ----- ------- ----- -------
C Valeur 4 3 4 2 1 1
------------ ----- ------- ----- ------- ----- -------
M O'Keefe 4 4 4 4 1 1
------------ ----- ------- ----- ------- ----- -------
A Weaver 1 1 - - - -
------------ ----- ------- ----- ------- ----- -------
Property Management Nomination
Valuation Engagement & Remuneration
------------ -------------- -------------- ------------------
Held Attend Held Attend Held Attend
------------ ----- ------- ----- ------- ------- ---------
R Hingley 4 4 3 3 2 2
R Prosser 4 1 3 - - -
Q Spicer 4 4 3 2 2 2
J Thompson 4 4 3 2 2 2
------------ ----- ------- ----- ------- ------- ---------
C Valeur 4 3 3 3 2 2
------------ ----- ------- ----- ------- ------- ---------
M O'Keefe 4 2 3 3 2 2
------------ ----- ------- ----- ------- ------- ---------
A Weaver - - - - - -
------------ ----- ------- ----- ------- ------- ---------
During the year, there have been several additional ad-hoc
meetings which the directors were required to attend. These
meetings consisted of material matters relating to the running of
the Group.
Information and support for Directors
New Directors receive a full, formal and tailored induction on
joining the Board in order to further inform them of the Group's
activities and structure.
Upon appointment new Directors are briefed about their
responsibilities and duties, together with relevant background
information on the Company and assistance and information from
representatives of the Investment Advisors and the
Administrators.
New Directors are also provided with an opportunity to observe
the Board before their appointment and meet representatives of the
Property Advisors and Administrators to the Company.
All the Directors comply with mandatory continued professional
development requirement and are encouraged to attend industry and
other seminars covering issues and developments relevant to
investment companies, and Board meetings regularly include agenda
items on recent developments in governance and industry issues.
The Chair regularly reviews and agrees with each Director their
training and development needs.
All Directors are able to take independent professional advice
at the Group's expense in the furtherance of their duties, if
necessary.
The Group purchases appropriate insurance in respect of legal
action against its Directors and Officers.
Company Secretary
The Company Secretary is responsible for ensuring that Board
procedures are followed. Under the guidance of the Chairman, the
Secretary ensures that appropriate and timely information flows
between the Board, the Committees and to/from the Directors. It
facilitates inductions to new Directors and the provision of
additional information where required and appropriate.
The Secretary is responsible for advising the Board on
governance matters and is available to all Directors for advice and
support as required. The Board is presently considering the merit
of adopting the AIC code and certain other relevant elements of the
UK code of corporate governance.
The Board intends to adopt the AIC Code of Corporate Governance
(the AIC Code) for the accounting period beginning 1 January 2019.
The Board deems the AIC Code more relevant with respect to the
governance of investment companies.
Audit Committee Report
This report provides details of the role of the Committee and
the duties it has undertaken during the year under review.
Summary of the role of the Audit Committee
The Audit Committee is responsible for reviewing the half-year
and annual financial statements and recommends them to the Board
for approval. The role of the Audit Committee includes:
-- Monitoring the integrity of the Annual Report and Financial
Statements of the Group, covering:
-- formal announcements relating to the Group's financial
performance;
-- significant financial reporting issues and judgements;
-- matters raised by the external auditors; and
-- the appropriateness of accounting policies and practices.
-- Reviewing and considering the Code and FRC Guidance on Audit Committees.
-- Monitoring the quality and effectiveness of the independent
external auditors, which includes:
-- meeting regularly to discuss the audit plan and the
subsequent audit report;
-- considering the level of fees for both audit and non-audit
work;
-- reviewing independence, objectivity, expertise, resources and
qualification; and
-- making recommendations to the Board on the appointment,
reappointment, replacement and remuneration of the external
auditors.
-- Reviewing the Group's procedures for prevention, detection
and reporting of fraud, bribery and corruption.
-- Monitoring and reviewing the internal control and risk
management systems of the service providers together with the need
for an Internal Audit function.
The Audit Committee's full terms of reference can be obtained
from the Company's website www.phoenixspree.com.
Financial reporting
The Audit Committee is responsible for reviewing the half-year
and annual financial statements before their submission to the
Board. In addition, the Audit Committee is specifically charged
under its terms of reference with advising the Board on the terms
and scope of the appointment of the auditors, including their
remuneration, independence, objectivity and reviewing with the
auditors the results and effectiveness of the audit.
Composition of the Audit Committee
The Audit Committee is chaired by Jonathan Thompson with Quentin
Spicer, Charlotte Valeur and Monique O'Keefe as members. The
qualifications and experience of the members of the Audit and Risk
Committee during the financial year are set out in their
biographical details on pages 23 and 24.
Meetings
The Audit Committee is scheduled to meet no less than three
times a year and, if required, meetings can also be attended by the
Property Advisor, the administrator and the external auditor.
Significant issues related to the financial statements
Valuation of investment property Mitigation
A significant focus for the The Group has appointed Jones
Audit Committee is the valuation Lang LaSalle ("JLL") to act
of the Group's property portfolio as the Independent Property
carried out at half year in Valuer. The Audit Committee
June and at the financial year is satisfied that the valuer
end in December each year, as is independent and that it conducted
this is a key determinant of its work in accordance with
the Group's NAV, its profit the Royal Institution of Chartered
or loss and the Property Advisor's Surveyors Valuation Standards
remuneration. (RICS).
The Property Valuation Committee
reviews the valuer's report,
the methodology followed and
the assumptions incorporated
to assess the adequacy of the
valuation. They also meet the
independent valuers JLL as part
of the valuation review.
External audit
Assessing the effectiveness of the external audit process
The Committee satisfied itself as to the effectiveness of the
external audit process as follows:
The audit partner
As a new audit firm was appointed in 2014, no additional
rotation considerations were required for the current year. This is
however the final year cycle for the current audit partner who is
subject to mandatory rotation at the end of the 2018 Financial
Statement audit process. Following completion of the audit the
Committee assessed the partner's performance against expectations
and found this to be satisfactory.
The audit team
Continuity of personnel was reviewed and found to be
satisfactory. To supplement the Committee's necessarily limited
exposure to junior members of the audit team, feedback was sought
on the performance of the external audit team, in particular as
regards their understanding of the business, technical competence
and attitude.
The audit plan
The scope of the audit was reviewed and debated by the Committee
with the auditors prior to work being commenced. This was done in
the light of both the auditors' and the Committee's assessment of
the key risks. The auditors explained materiality thresholds used
in determining their audit scope and the Committee confirmed that
these were in accordance with normal audit practice.
The generality of the audit plan document was assessed and found
to be satisfactory. Arrangements to identify, report and manage
conflicts of interest were satisfactory.
The Committee also considered whether it wished to commission
further audit work to be conducted beyond which the auditor
considered necessary for the expression of their opinions on the
Group accounts and concluded that it did not.
Matters arising from the audit
These were promptly and effectively communicated and addressed
as appropriate. The robustness and perceptiveness of the auditors
in their handling of the key accounting and audit judgements were
seen as appropriate. The detailed report received from the auditors
following completion of their work gave comfort as to the diligence
of execution of that work.
Added value
In appraising the overall performance of the auditors, the
Committee considered whether they had provided useful feedback
arising from their work additional to their statutory
responsibilities and concluded that they had.
Independence
In addition to receiving the auditors' formal confirmation of
their independence, the Committee considered whether this was
demonstrated through their general approach and attitude and were
satisfied that this was the case.
Audit fees
The level of audit fees was reviewed to ensure that it was
sufficient for the work necessary but not excessive. In particular,
changes in fees from the previous year were considered in relation
to changes in the Group and in risk assessments.
Audit tendering
The Committee considered whether the audit appointment should be
put out to tender. In doing so, it considered both the performance
of the current auditors and the likely costs and potential benefits
of change.
Following the above, the Audit Committee has recommended to the
Board that RSM UK Audit LLP is reappointed.
Going forward, the Committee will continue to keep the audit
appointment under review, having regard for the new EU requirements
for audit tendering.
Group policy on the provision of non-audit services by the
auditor
The Committee has an established policy for the commission of
non-audit work from the Group's auditor.
The external auditor is excluded from providing non-audit
services to the Group where the objectives of such assignments are
inconsistent with the objectives of the audit. Additionally, no
work is awarded to the auditor which would result in an element of
self-review, either during the work or via the audit itself.
The Committee will continue to approve all non-audit fees prior
to the work commencing and review the non-audit fees in aggregate
for the year.
Risk management and internal control
The Committee reviews the adequacy and effectiveness of the
Group's (and its service providers') internal financial controls
and internal control and risk management systems and review and
approves the statements to be included in the Annual Report
concerning internal controls and risk management.
The Committee is also responsible for oversight and advice to
the Board on the current risk exposures and future risk strategy of
the Group.
The Directors have carried out a robust assessment of the
principal risks facing the Group, including those that would
threaten its business model, future performance, solvency or
liquidity. The result of this review, the potential impact of each
type of risk identified and the mitigation reasons put in place are
set out in the 'Principal Risks and Uncertainties' section of the
Annual Report on pages 25 to 30. The Directors do not consider that
there are any significant problems facing the business in the
coming year.
Internal audit
The Group does not currently have an internal audit function, as
the Board believes that it can ensure that the Group's risk
management, governance and internal control processes are operating
effectively without this. This is because the Group's business is
conducted by relatively few individuals (through the outsourced
service providers) who report to the Board, and its operations are
not complex at present. However, if the Group increases in size,
the appointment of an appropriately qualified and resourced
internal audit department will be considered.
Directors' Remuneration Report
Introduction
This report is on the activities of the Nomination and
Remuneration Committee. The information provided in this part of
the Directors' Report is not subject to audit, except where
stated.
Remuneration policy
During 2018, the Nomination and Remuneration Committee comprised
four non-executive directors and the Chairman and is chaired by
Quentin Spicer, with Robert Hingley, Monique O'Keefe, Charlotte
Valeur and Jonathan Thompson as members. Andrew Weaver ceased to be
a member of the Nomination and Remuneration Committee following his
resignation from the Board on 17 April 2018.
The Group's policy is that the remuneration of the Directors
should reflect the experience of the Board as a whole, the time
commitment required, and be fair and comparable with that of other
similar companies. Furthermore, the level of remuneration should be
sufficient to attract and retain the Directors needed to oversee
the Group properly and to reflect its specific circumstances. There
were no changes to the policy during the year and it is intended
that this policy will continue to apply for the year ending 31
December 2019.
Duties
The Committee was responsible for setting the Directors'
remuneration levels, in conjunction with the Chairman and with
consideration of the following:
-- levels of Directors' remuneration should reflect the time
commitment and responsibilities of the role;
-- non-executive Directors' remuneration should not include
share options or other performance-related elements;
-- careful consideration should be given to what compensation
commitments entail in the event of early termination of a
Director's appointment;
-- notice of contract periods should be set at one year or less;
-- no Director should be involved in deciding his or her own remuneration;
-- independent judgement and discretion should be exercised when
authorising remuneration outcomes, taking account of company and
individual performance and wider circumstances.
The Committee is also responsible for judging where to position
the Group relative to other companies in relation to the level of
Directors' remuneration, but using such comparisons with caution in
view of the risk of increased remuneration with no corresponding
improvement in performance; and considering and making the
appropriate recommendations to the Board with regard to the need to
appoint external remuneration consultants.
The terms of reference of the Nomination and Remuneration
Committee can be obtained from the Company's website
www.phoenixspree.com.
For the years ended 31 December 2018 and 31 December 2017
Directors' fees were as follows:
Audited 2018 2017
Annual Special Annual Special
Fee Projects Total* Fee Projects Total
-------- ---------- --------- -------- ---------- --------
GBP GBP GBP GBP GBP GBP
-------- ---------- --------- -------- ---------- --------
R Hingley 50,000 25,275 75,275 45,000 Nil 45,000
-------- ---------- --------- -------- ---------- --------
R Prosser Nil Nil Nil 25,000 Nil 25,000
-------- ---------- --------- -------- ---------- --------
M Northover Nil Nil Nil Nil Nil Nil
-------- ---------- --------- -------- ---------- --------
M O'Keefe 40,000 4,916 44,916 Nil Nil Nil
-------- ---------- --------- -------- ---------- --------
Q Spicer 40,000 5,069 45,069 35,000 Nil 35,000
-------- ---------- --------- -------- ---------- --------
A Weaver Nil Nil Nil 25,000 Nil 25,000
-------- ---------- --------- -------- ---------- --------
C Valeur 40,000 5,008 45,008 Nil Nil Nil
-------- ---------- --------- -------- ---------- --------
J Thompson 45,000 12,423 57,423 Nil Nil Nil
-------- ---------- --------- -------- ---------- --------
Total 215,000 52,691 267,691 130,000 Nil 130,000
-------- ---------- --------- -------- ---------- --------
*Total director fees for 2018 in the table above reconciles to
the directors' fees in note 8 when converted from EUR to GBP at an
average rate of EUR/GBP 1.119
During 2018, additional attention was required from the
Directors over and above their normal duties with respect to a
significant transaction that was considered but not pursued. It was
agreed by the committee that additional remuneration, of an amount
up to or equal to the annual salary of each Director, could be
expensed to the Group. Details of the additional remuneration
payable to the Directors are disclosed above and within note 12 to
the consolidated financial statements.
During 2018, Richard Prosser was a Director of Estera Fund
Administrators (Jersey) Limited, the Group's Administrator. The
remuneration of Estera is disclosed in Note 33.
During 2018, Andrew Weaver was a Partner in Appleby's, the
Group's Jersey Legal Advisor. The remuneration of Appleby's is
disclosed in Note 33.
During 2018, Matthew Northover was a Partner in PMM Partners
Ltd., the Group's Property Advisor. The remuneration of PMM
Partners Ltd. is disclosed in Note 33.
Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and the consolidated financial statements in accordance with
applicable law and regulations.
Jersey company law requires the Directors to prepare financial
statements for each financial year, in accordance with generally
accepted accounting principles. The Directors are required under
the Listing Rules of the Financial Conduct Authority to prepare the
financial statements in accordance with International Financial
Reporting Standards ('IFRS'), as adopted by the European Union
('EU').
The financial statements are required by law and IFRS as adopted
by EU to present fairly the financial position of the Group.
Under Jersey company law the Directors must not approve the
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and of the
profit or loss of the Group for that period.
In preparing the financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with IFRS as adopted by the EU;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business.
The Directors are responsible for keeping proper accounting
records, which disclose with reasonable accuracy at any time the
financial position of the Group and to enable them to ensure that
the financial statements comply with the Companies (Jersey) Law
1991. They are also responsible for safeguarding the assets of the
Group and the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors confirm that these financial statements comply
with these requirements.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in Jersey governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors' Responsibility Statement
The Directors confirm that to the best of their knowledge:
-- the consolidated financial statements, prepared in accordance
with the applicable set of accounting standards (as detailed above)
and Company Law, give a true and fair view of the assets,
liabilities, financial position and profit and loss of the issuer
and the undertakings included in the consolidation taken as a
whole;
-- the management report includes a fair review of the
development and performance of the business and the position of the
issuer and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties they face, as well as the business model and strategy
of the Group; and
-- the Annual Report and consolidated financial statements, as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's position, performance, business model and strategy.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2018
Year ended Year ended
31 December 31 December
2018 2017
Notes (restated
- see
note
2.2)
EUR'000 EUR'000
Continuing operations
Revenue 6 22,681 23,667
Property expenses 7 (15,763) (12,587)
Gross profit 6,918 11,080
Administrative expenses 8 (3,194) (2,967)
Gain on disposal of investment property
(including investment property held
for sale) 10 1,026 5,319
Investment property fair value gain 11 66,146 157,374
Performance fee due to property advisor 27 (4,010) (26,339)
Separately disclosed items 12 (966) -
Operating profit 65,920 144,467
Net finance charge 13 (9,491) (5,995)
Profit before taxation 56,429 138,472
Income tax expense 14 (11,071) (26,150)
Profit after taxation 45,358 112,322
Other comprehensive income - -
Total comprehensive income for the year 45,358 112,322
===================== ========================
Total comprehensive income attributable to:
Owners of the parent 45,094 111,538
Non-controlling interests 264 784
45,358 112,322
===================== ========================
Earnings per share attributable to the owners of the parent:
From continuing operations
Basic (EUR) 30 0.46 1.21
Diluted (EUR) 30 0.46 1.11
===================== ========================
Consolidated Statement of Financial Position
At 31 December 2018
As at As at
31 December 31 December
2018 2017
Notes (restated
- see
note
2.2)
EUR'000 EUR'000
ASSETS
Non-current assets
Investment properties 17 632,933 502,360
Property, plant and equipment 19 88 92
Deferred tax asset 14 948 527
Other financial assets at amortised
cost 20 2,406 2,323
636,375 505,302
Current Assets
Investment properties - held for sale 18 12,747 106,897
Trade and other receivables 21 7,531 14,404
Cash and cash equivalents 22 26,868 27,182
47,146 148,483
Total assets 683,521 653,785
===================== ========================
EQUITY AND LIABILITIES
Current liabilities
Borrowings 23 3,642 2,646
Trade and other payables 24 10,429 6,522
Derivative financial instruments 25 1,354 -
Current tax 14 1,387 2,914
16,812 12,082
Non-current liabilities
Borrowings 23 191,632 219,648
Derivative financial instruments 25 4,637 3,333
Other financial liabilities 26 7,135 5,663
Deferred tax liability 14 53,458 45,117
256,862 273,761
Total liabilities 273,674 285,843
===================== ========================
Equity
Stated capital 28 196,578 162,630
Share based payment reserve 27 4,010 33,953
Retained earnings 207,270 169,634
Equity attributable to owners of the parent 407,858 366,217
Non-controlling interest 29 1,989 1,725
Total equity 409,847 367,942
--------------------- ------------------------
Total equity and liabilities 683,521 653,785
===================== ========================
Consolidated Statement of Changes in Equity
For the year ended 31 December 2018
Attributable to the owners of the parent
Share
based
Stated payment Retained Non-controlling Total
capital reserve earnings Total interest equity
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Balance at 1 January
2017 162,630 7,614 64,074 234,318 941 235,259
Comprehensive income:
Profit for the year - - 111,538 111,538 784 112,322
Other comprehensive - - - - - -
income
Total comprehensive
income for the year - - 111,538 111,538 784 112,322
Transactions with owners -
recognised directly in equity:
Dividends paid - - (5,978) (5,978) - (5,978)
Performance fee - 26,339 - 26,339 - 26,339
Balance at 31
December
2017 162,630 33,953 169,634 366,217 1,725 367,942
Comprehensive income:
Profit for the year - - 45,094 45,094 264 45,358
Other comprehensive - - - - - -
income
Total comprehensive
income for the year - - 45,094 45,094 264 45,358
Transactions with owners -
recognised directly in equity:
Issue of shares 33,948 (33,948) - - - -
Dividends paid - - (7,458) (7,458) - (7,458)
Performance fee - 4,010 - 4,010 - 4,010
Adjustment to
perfomance
fee - (5) - (5) - (5)
Balance at 31
December
2018 196,578 4,010 207,270 407,858 1,989 409,847
======== ======== ========== ================ ===================== ========================
The share based payment reserve was established in relation to the issue
of shares for the payment of the performance fee of the property advisor.
Retained earnings are the undistributed reserves to be either reinvested
within the Group or distributed to shareholders as dividends.
Consolidated Statement of Cash Flows
For the year ended 31 December 2018
Year ended Year ended
31 December 31 December
2018 2017
EUR'000 EUR'000
Profit before taxation 56,429 138,472
Adjustments for:
Net finance charge 9,491 5,995
Gain on disposal of investment property (1,026) (5,319)
Investment property revaluation gain (66,146) (157,374)
Depreciation 16 23
Performance fee charge 4,010 26,339
Operating cash flows before movements in working capital 2,774 8,136
Decrease / (increase) in receivables 6,492 (3,048)
Increase in payables 3,908 788
Cash generated from operating activities 13,174 5,876
Income tax paid (4,678) (50)
Net cash generated from operating activities 8,496 5,826
Cash flow from investing activities
Proceeds on disposal of investment property 86,021 60,436
Interest received 54 103
Capital expenditure on investment property (7,943) (6,715)
Property additions (47,329) (76,486)
Additions to property, plant and equipment (12) (75)
Net cash used in investing activities 30,791 (22,737)
Cash flow from financing activities
Interest paid on bank loans (5,118) (5,080)
Repayment of bank loans (54,680) (117,712)
Drawdown on bank loan facilities 27,660 154,414
Dividends paid (7,458) (5,978)
Net cash generated from financing activities (39,596) 25,644
Net increase in cash and cash equivalents (309) 8,733
Cash and cash equivalents at beginning of year 27,182 18,450
Exchange gains on cash and cash equivalents (5) (1)
Cash and cash equivalents at end of year 26,868 27,182
===================== ========================
Reconciliation of Net Cash Flow to Movement in Debt
For the year ended 31 December 2018
Year ended Year ended
31 December 31 December
2018 2017
EUR'000 EUR'000
Cashflow from increase in debt financing (27,020) 36,702
Change in net debt resulting from cash flows (27,020) 36,702
--------------------- ------------------------
Movement in debt in the year (27,020) 36,702
Debt at the start of the year 222,294 185,592
Debt at the end of the year 195,274 222,294
===================== ========================
Notes to the Financial Statements
For the year ended 31 December 2018
1 - General information
The Group consists of a Parent Company, Phoenix Spree Deutschland Limited
('the Company'), incorporated in Jersey, Channel Islands and all its
subsidiaries ('the Group') which are incorporated and domiciled in and
operate out of Jersey, Guernsey and Germany. Phoenix Spree Deutschland
Limited is listed on the premium segment of the Main Market of the London
Stock Exchange.
The Group invests in residential and commercial property in Germany.
The registered office is at 13-14 Esplanade, St Helier, Jersey, JE1
1EE, Channel Islands.
2 - Summary of significant accounting policies
The principal accounting policies adopted are set out below.
2.1 Basis of preparation
The consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards, International Accounting
Standards and interpretations (collectively, 'IFRS'), International
and Financial Reporting Interpretation Committee ('IFRIC') interpretations,
as adopted by the European Union ('IFRS as adopted by the EU').
In accordance with Section 105 of The Companies (Jersey) Law 1991, the
Group confirms that the financial information for the year ended 31
December 2018 are derived from the Group's audited financial statements
and that these are not statutory accounts and, as such, do not contain
all information required to be disclosed in the financial statements
prepared in accordance with International Financial Reporting Standards
("IFRS").
The statutory accounts for the year ended 31 December 2018 have been
audited and approved, but have not yet been filed.
The Group's audited financial statements for the period ended 31 December
2018 received an unqualified audit opinion and the auditor's report
contained no statement under section 113B (3) and (6) of The Companies
(Jersey) Law 1991.
The financial information contained within this preliminary statement
was approved and authorised for issue by the Board on 26 April 2019.
2.2 Change of accounting policy
The Group has carried out a review of IFRS 15, Revenue from Contracts
with Customers, which is effective from 1 January 2018. The main outcome
of the review is to recognise service charges to tenants as revenue,
and service costs recharged to tenants as property costs, whereas in
prior years, service charges incurred on the properties were offset
against service charge income. In accordance with the transition provisions
of IFRS 15, the Group has adopted the new rules retrospectively and
has restated comparatives for the 2017 financial year. For the 2018
financial year the effect has been to recognise service charge revenue
of EUR5.173 million, and property expenses of EUR5.173 million, and
to increase trade and other receivables by EUR4.766 million, and service
charges payable by EUR4.028 million. For the year 2017, this has resulted
in an increase in revenue of EUR5.587 million with a corresponding increase
in other property expenses along with an increase in trade and other
receivables of EUR4.403 million and a corresponding increase in service
charges payable. The change of policy has no effect on reported profit
or net assets.
2.3 Going concern
The Directors have prepared projections for the period to 31 December
2021. These projections have been prepared using assumptions which the
Directors consider to be appropriate to the current financial position
of the Group as regards to current expected revenues and its cost base
and the Group's investments, borrowing and debt repayment plans and
show that the Group should be able to operate within the level of its
current resources and expects to comply with all covenants for the foreseeable
future. The Group's business activities together with the factors likely
to affect its future development and the Group's objectives, policies
and processes from managing its capital and its risks are set out in
the Strategic Report. After making enquiries the Directors have a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future. The Group therefore continues
to adopt the going concern basis in preparing its consolidated financial
statements.
2.4 Basis of consolidation
The consolidated financial statements incorporate the financial statements
of the Company and entities controlled by the Company (its subsidiaries).
The Company controls an entity when the Group is exposed to, or has
rights to, variable returns through its power over the entity. Subsidiaries
are fully consolidated from the date on which control is transferred
to the Group. They are deconsolidated from the date that control ceases.
Profit or loss and each component of other comprehensive income are
attributable to the owners of the Company and to the non-controlling
interests. Total comprehensive income of the subsidiaries is attributable
to the owners of the Company and to the non-controlling interests even
if this results in the non-controlling interests having a deficit balance.
Accounting policies of subsidiaries which differ from Group accounting
policies are adjusted on consolidation. All intra-group transactions,
balances, income and expenses are eliminated on consolidation.
Non-controlling interests in subsidiaries are identified separately
from the Group's equity therein. Those interests of non-controlling
shareholders that present ownership interests entitling their holders
to a proportionate share of net assets upon liquidation may initially
be measured at fair value or at the non-controlling interests' proportionate
share of the fair value of the acquiree's identifiable net assets. The
choice of measurement is made on an acquisition-by-acquisition basis.
Other non-controlling interests are initially measured at fair value.
Subsequent to acquisition, the carrying amount of non-controlling interests
is the amount of those interests at initial recognition plus the non-controlling
interests' share of subsequent changes in equity.
Changes in the Group's interests in subsidiaries that do not result
in a loss of control are accounted for as equity transactions. The carrying
amount of the Group's interests and the non-controlling interests are
adjusted to reflect the changes in their relative interests in the subsidiaries.
Any difference between the amount by which the non-controlling interests
are adjusted and the fair value of the consideration paid or received
is recognised directly in equity and attributed to the owners of the
Company.
2.5 Revenue recognition
Revenue includes rental income and service charges and other amounts
directly recoverable from tenants. Rental income and service charges
from operating leases are recognised as income on a straight-line basis
over the lease term. When the Group provides incentives to its tenants,
the cost of incentives are recognised over the lease term, on a straight-line
basis, as a reduction of rental income.
2.6 Foreign currencies
(a) Functional and presentation currency
The currency of the primary economic environment in which the Company
operates ('the functional currency') is the Euro (EUR). The presentational
currency of the consolidated financial statements is also the Euro (EUR).
(b) Transactions and balances.
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions.
At each reporting date, monetary assets and liabilities that are denominated
in foreign currencies are retranslated at the rates prevailing at that
date. Foreign exchange gains and losses resulting from such transactions
are recognised in the consolidated statement of comprehensive income.
Non-monetary items carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date when the
fair value was determined. Non-monetary items that are measured in terms
of historical cost in a foreign currency are not retranslated.
2.7 Segment reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief
operating decision-maker, who is responsible for allocating resources
and assessing performance of the operating segments, has been identified
as the Board of Directors.
2.8 Operating profit
Operating profit is stated before the Group's gain or loss on its financial
assets and after the revaluation gains or losses for the year in respect
of investment properties and after gains or losses on the disposal of
investment properties.
2.9 Administrative and property expenses
All expenses are accounted for on an accruals basis and are charged
to the consolidated statement of comprehensive income in the period
in which they are incurred. Service charge costs, to the extent that
they are not recoverable from tenants, are accounted for on an accruals
basis and included in property expenses.
2.10 Separately disclosed items
Certain items are disclosed separately in the consolidated financial
statements where this provides further understanding of the financial
performance of the Group, due to their significance in terms of nature
or amount.
2.11 Property Advisor fees
The element of Property Advisor fees for management services provided
are accounted for on an accruals basis and are charged to the consolidated
statement of comprehensive income. These fees are detailed in note 7
and classified under 'Property advisors' fees and expenses'. The settlement
of the Property Advisor performance fees is detailed in note 27. Due
to the nature of the settlement of the performance fee, any movement
in the amount payable at the year end is reflected within the share
based payment reserve on the consolidated statement of financial position.
2.12 Investment property
Property that is held for long-term rental yields or for capital appreciation,
or both, and that is not occupied by the Group, is classified as investment
property.
Investment property is measured initially at cost, including related
transaction costs. After initial recognition, investment property is
carried at fair value, based on market value.
The change in fair values is recognised in the consolidated statement
of comprehensive income for the year.
A valuation exercise is undertaken by the Group's independent valuer,
Jones Lang LaSalle GmbH ('JLL'), at each reporting date in accordance
with the methodology described in note 17 on a building-by-building
basis. Such estimates are inherently subjective and actual values can
only be determined in a sales transaction. The valuations have been
prepared by JLL on a consistent basis at each reporting date.
Subsequent expenditure is added to the asset's carrying amount only
when it is probable that future economic benefits associated with the
item will flow to the Group and the cost of the item can be measured
reliably. Repairs and maintenance costs are charged to the consolidated
statement of comprehensive income during the financial period in which
they are incurred. Changes in fair values are recorded in the consolidated
statement of comprehensive income for the year.
Purchases and sales of investment properties are recognised on legal
completion.
An investment property is derecognised upon disposal or when the investment
property is permanently withdrawn from use and no future economic benefits
are expected from the disposal. Any gain or loss arising on derecognition
of the property (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset, where the carrying amount
is the higher of cost or fair value) is included in the consolidated
statement of comprehensive income in the period in which the property
is derecognised.
2.13 Current assets held for sale - investment property
Current assets (and disposal groups) classified as held for sale are
measured at the most recent valuation.
Current assets (and disposal groups) are classified as held for sale
if their carrying amount will be recovered through a sale transaction
rather than through continuing use. This condition is regarded as met
only when the sale is highly probable and the asset (or disposal group)
is available for immediate sale in its present condition. Management
must be committed to the sale which should be expected to qualify for
recognition as a completed sale within one year from the date of classification.
The Group will recognise an asset in this category once the Board has
committed the sale of an asset and marketing has commenced.
When the Group is committed to a sale plan involving loss of control
of a subsidiary, all of the assets and liabilities of that subsidiary
are classified as held for sale when the criteria described above are
met, regardless of whether the Group will retain a non-controlling interest
in its former subsidiary after the sale.
If an asset held for sale is unsold within one year of being classified
as such, it will continue to be classified as held for sale if:
(a) at the date the Company commits itself to a plan to sell a non-current
asset (or disposal group) it reasonably expects that others (not a buyer)
will impose conditions on the transfer of the asset that will extend
the period required to complete the sale, and actions necessary to respond
to those conditions cannot be initiated until after a firm purchase
commitment is obtained, and a firm purchase commitment is highly probable
within one year;
(b) the Company obtains a firm purchase commitment and, as a result,
a buyer or others unexpectedly impose conditions on the transfer of
a non-current asset (or disposal group) previously classified as held
for sale that will extend the period required to complete the sale,
and timely actions necessary to respond to the conditions have been
taken, and a favourable resolution of the delaying factors is expected;
(c) during the initial one-year period, circumstances arise that were
previously considered unlikely and, as a result, a non-current asset
previously classified as held for sale is not sold by the end of that
period, and during the initial one-year period the Company took action
necessary to respond to the change in circumstances, and the non-current
asset is being actively marketed at a price that is reasonable, given
the change in circumstances, and the criteria above are met;
(d) otherwise it will be transferred back to investment property.
2.14 Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation.
Cost includes the original purchase price of the asset and the costs
attributable to bringing the asset to its working condition for its
intended use. Depreciation is charged so as to write off the costs of
assets to their residual values over their estimated useful lives, on
the following basis:
Equipment, fixtures and vehicles - 4.50% - 25% per annum, straight line.
The gain or loss arising on the disposal of an asset is determined as
the difference between the sales proceeds and the carrying amount of
the asset and is recognised in the consolidated statement of comprehensive
income.
2.15 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction
or production of qualifying assets, which are assets that necessarily
take a substantial period of time to get ready for their intended use
or sale, are added to the cost of those assets, until such time as the
assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in the consolidated statement
of comprehensive income in the period in which they are incurred.
2.16 Tenants deposits
Tenants deposits are held off the consolidated statement of financial
position in a separate bank account in accordance with German legal
requirements, and the funds are not accessible to the Group. Accordingly,
neither an asset nor a liability is recognised.
2.17 Financial Instruments under IFRS 9
The Company has applied IFRS 9 from 1 January 2018 but as explained
in note 2.19 has not restated comparatives on initial application. The
classification and measurement policies adopted by the Company are explained
in note 2.19, but the detailed policies for each class of instrument
is as follows:
Trade and other receivables
Trade receivables are amounts due from tenants for rents and service
charges and are initially recognised at the amount of the consideration
that is unconditional and subsequently carried at amortised cost as
the Group's business model is to collect the contractual cash flows
due from tenants. Provision is made based on the expected credit loss
model which reflects on the Company's historical credit loss experience
over the past three years but also reflects the lifetime expected credit
loss.
Cash and cash equivalents
Cash and cash equivalents are defined as cash and short term deposits,
including any bank overdrafts, with an original maturity of three months
or less, measured at amortised cost.
Trade and other payables
Trade payables are recognised and carried at their invoiced value inclusive
of any VAT that may be applicable, and subsequently at amortised cost
using the effective interest model.
Borrowings
All loans and borrowings are initially measured at fair value less directly
attributable transaction costs. After initial recognition, all interest-bearing
loans and borrowings are subsequently measured at amortised cost, using
the effective interest method.
The interest due within the next twelve months is accrued at the end
of the year and presented as a current liability within trade and other
payables.
The Company has applied IFRS 9 retrospectively, but has elected not
to restate comparative information. As a result the comparative information
continues to be accounted for in accordance with the Company's previous
accounting policies as set out below.
Financial instruments - accounting policies applied until 31 December
2017
Financial assets and financial liabilities are recognised in the Group's
consolidated statement of financial position when the Group becomes
party to the contractual provisions of the instrument. Financial assets
are derecognised when the contractual rights to the cash flows from
the financial asset expire or when the contractual rights to those assets
are transferred. Financial liabilities are derecognised when the obligation
specified in the contract is discharged, cancelled or expired.
The Group classifies its financial assets as held at fair value through
profit or loss, or measured at amortised cost. The classification depends
on the purpose for which the financial assets were acquired, and is
determined at initial recognition.
(a) Financial assets at fair value through profit or loss ('FVTPL')
Financial assets are classified as FVTPL when the financial asset is
designated as FVTPL. A financial asset may be designated as FVTPL upon
initial recognition if:
-- such designation eliminates or significantly reduces a measurement
or recognition inconsistency that would otherwise arise; or
-- the financial asset forms part of a group of financial assets or
financial liabilities, or both, which is managed and its performance
is evaluated on a fair value basis, in accordance with the Group's documented
risk management strategy, and information about the grouping is provided
internally on that basis.
Financial assets at FVTPL are stated at fair value, with any gains or
losses arising on re-measurement recognised in the consolidated statement
of comprehensive income. Fair value is determined in the manner described
in note 32.
(b) Financial assets measured at amortised cost
The Group's financial assets measured at amortised cost comprise trade
and other receivables and cash and cash equivalents. Loans and receivables
are recognised initially at fair value and subsequently at amortised
cost using the effective interest method.
(i) Trade and other receivables
Trade and other receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective interest
method less provision for impairment. Appropriate provisions for estimated
irrecoverable amounts are recognised in the consolidated statement of
comprehensive income when there is objective evidence that the assets
are impaired. Interest income is recognised by applying the effective
interest rate, except for short-term trade and other receivables when
the recognition of interest would be immaterial.
Service charges receivable and payable from tenants are presented gross
as assets and liabilities separately.
Impairment provisions are recognised when there is objective evidence
(such as significant financial difficulties on the part of the counterparty
or default or significant delay in payment) that the Group will be unable
to collect all of the amounts due. For trade and other receivables,
which are reported net, such provisions are recorded in a separate allowance
account with the loss being recognised within property expenses in the
consolidated statement of comprehensive income. On confirmation that
the trade and other receivables will not be collectable, the gross carrying
value of the asset is written off against the associated provision.
(ii) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, cash at agents, demand
deposits, and other short-term highly liquid investments that have maturities
of three months or less from inception, are readily convertible to a
known amount of cash and are subject to an insignificant risk of changes
in value.
(c) Equity instruments
An equity instrument is any contract that evidences a residual interest
in the assets of an entity after deducting all of its liabilities. Equity
instruments issued by the Group are recorded at the proceeds received,
net of direct issue costs.
(d) Trade and other payables
Trade payables are initially measured at their fair value and are subsequently
measured at their amortised cost using the effective interest method;
this method allocates interest expense over the relevant period by applying
the 'effective interest rate' to the carrying amount of the liability.
(e) Borrowings
Borrowings are recognised initially at fair value, net of transaction
costs incurred. Borrowings are subsequently stated at amortised cost;
any difference between the proceeds (net of transaction costs) and the
redemption value is recognised in the consolidated statement of comprehensive
income over the period of the borrowings using the effective interest
method.
2.18 Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax
is recognised in the consolidated statement of comprehensive income,
except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In that case, the tax is also recognised
in other comprehensive income or directly in equity, respectively.
(a) Current tax
The current tax charge is based on taxable profit for the year. Taxable
profit differs from net profit reported in the consolidated statement
of comprehensive income because it excludes items of income or expense
that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Group's liability for
current tax is calculated using tax rates that have been enacted or
substantively enacted by the accounting date.
(b) Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of
taxable profit. Deferred tax assets are recognised to the extent that
it is probable that taxable profits will be available against which
deductible temporary differences can be utilised.
Deferred tax is charged or credited in the consolidated statement of
comprehensive income except when it relates to items credited or charged
directly in equity, in which case the deferred tax is also dealt with
in equity.
Deferred tax is calculated at the tax rates and laws that are expected
to apply to the period when the asset is realised or the liability is
settled based upon tax rates that have been enacted or substantively
enacted by the accounting date.
The carrying amount of deferred tax assets is reviewed at each accounting
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset
to be recovered.
2.19 New standards and interpretations
The following relevant new standards, amendments to standards and interpretations
have been issued, and are effective for the financial year beginning
on 1 January 2018, as adopted by the European Union:
Title As issued by the IASB, mandatory for
accounting periods starting on or
after
IFRS 9 - Financial Instruments Accounting periods beginning on or
after 1 January 2018
IFRS 15 - Revenue from Contracts Accounting periods beginning on or
with Customers after 1 January 2018
IFRIC 22 - Foreign currency transactions Accounting periods beginning on or
and advance consideration after 1 January 2018
IFRS 9 -The Company has applied IFRS 9 from 1 January 2018 but will
not restate comparatives on initial application.
The Company has reviewed its financial assets and liabilities and the
impact from the adoption of the new standard is as follows:
(i) Classification and measurement
IFRS 9 contains three principal classification categories for financial
assets: measured at amortised cost, fair value through profit and loss
and fair value through other comprehensive income. The Company's financial
assets at 31 December 2018 consist primarily of trade receivables, including
service charges, and other financial assets which will continue to be
reflected at amortised cost. Trade receivables are classified as at
amortised cost as they meet the test of Solely Payments of Principal
and Interest ("SPPI test") as the Group's model is to collect the contracted
cash flows due from tenants. There was no impact in respect of classification
and measurement of financial liabilities under IFRS 9.
(ii) Impairment
The new impairment model requires the recognition of impairment provisions
based on expected credit losses rather than only on incurred losses
as was the case under lAS 39. It is therefore no longer necessary for
a credit event to have occurred before credit losses are recognised.
IFRS 9 requires a simplified approach for measuring the loss allowance
at an amount equal to lifetime expected credit losses ("ECLs") for trade
receivables without a significant financing component.
The main area of focus to the Company is considered to be impairment
provisioning of trade receivables. Other financial assets are also subject
to the expected credit loss model.
Gross trade receivables held at 31 December 2018 were EUR1.0 million
(2017: EUR0.3 million) with an impairment provision recognised of EUR0.2
million (2017: EUR0.3 million). The credit risk associated with unpaid
rent is deemed low.
We have performed an assessment of the impact of impairment losses recognised
for trade receivables under IFRS 9 at 31 December 2018 through estimating
the expected credit loss based on actual credit loss experienced over
the past three years and taking into consideration future expected losses.
Based on this assessment, there was no material impact of impairment
losses recognised under IFRS 9.
The impact of non-substantial debt modifications has been reviewed and
there is no material impact on the financial statements at transition.
IFRS 15 - The Company has contracts which include both an operating
lease and a service, i.e. rental of space and service charges. The contracts
do not separate the operating lease component as the accounting for
operating lease income and a service/supply arrangement is similar.
Under IFRS 16, lessors are required to account for the lease and non-lease
components of a contract separately. In the case of non-lease components
such as service charges, this must be accounted for under IFRS 15. The
Company recognises the rental income over the duration of the life of
the contract and recognising the service charge component as incurred.
The following relevant new standards, amendments to standards and interpretations
have been issued, but are not effective for the financial year beginning
on 1 January 2018, as adopted by the European Union, and have not been
early adopted:
Title As issued by the IASB, mandatory for
accounting periods starting on or
after
IFRS 16 Leases Accounting periods beginning on or
after 1 January 2019
The Directors have considered that the adoption of this standard in
future periods will have no material impact on the consolidated financial
statements of the Group. The impact of IFRS 16 removes the differentiation
between financial and operational leases with regard to the Lessee party.
As the Group is the lessor in their contractual arrangements IFRS 16's
approach is substantially unchanged from its predecessor, IAS 17.
The following standards have been issued by the IASB but have not yet
been adopted by the EU:
Title As issued by the IASB, mandatory for
accounting periods starting on or
after
IFRIC 23 - Uncertainty over Income Accounting periods beginning on or
Tax Treatments after 1 January 2019
Prepayment Features with Negative Accounting periods beginning on or
Compensation (Amendments to IFRS after 1 January 2019
9)
Long Term Interests in Associates Accounting periods beginning on or
and Joint Ventures (Amendments to after 1 January 2019
IAS 28)
Annual Improvements to IFRS Standards Accounting periods beginning on or
2015-2017 Cycle after 1 January 2019
Plan Amendment, Curtailment or Settlement Accounting periods beginning on or
(Amendments to IAS 19) after 1 January 2019
Amendments to References to the Accounting periods beginning on or
Conceptual Framework in IFRS Standards after 1 January 2020
IFRS 17 - Insurance Contracts Accounting periods beginning on or
after 1 January 2021
While the above standards have not yet been adopted by the EU, the Group
is currently assessing their impact.
3. Financial risk management
3.1 Financial risk factors
The Group's activities expose it to a variety of financial risks: market
risk, credit risk and liquidity risk. The Group's overall risk management
programme focuses on the unpredictability of financial markets and seeks
to minimise potential adverse effects on the Group's financial performance.
Risk management is carried out by the Risk Committee (previously the
Audit and Risk Committee up to 17 April 2018) under policies approved
by the Board of Directors. The Board provides principles for overall
risk management, as well as policies covering specific areas, such as
interest rate risk, credit risk and investment of excess liquidity.
3.2 Market risk
Market risk is the risk of loss that may arise from changes in market
factors such as foreign exchange rates, interest rates and general property
market risk.
(a) Foreign exchange risk
The Group operates in Germany and is exposed to foreign exchange risk
arising from currency exposures, primarily with respect to Sterling
against the Euro arising from the costs which are incurred in Sterling.
Foreign exchange risk arises from future commercial transactions, and
recognised monetary assets and liabilities denominated in currencies
other than the Euro.
The Group's policy is not to enter into any currency hedging transactions.
(b) Interest rate risk
The Group has exposure to interest rate risk. It has external borrowings
at a number of different variable interest rates. The Group is also
exposed to interest rate risk on some of its financial assets, being
its cash at bank balances. Details of actual interest rates paid or
accrued during each period can be found in note 23 to the consolidated
financial statements.
The Group's policy is to manage its interest rate risk by entering into
a suitable hedging arrangement, either caps or swaps, in order to limit
exposure to borrowings at variable rates.
(c) General property market risk
Through its investment in property, the Group is subject to other risks
which can affect the value of property. The Group seeks to minimise
the impact of these risks by review of economic trends and property
markets in order to anticipate major changes affecting property values.
3.3 Credit risk
The risk of financial loss due to counterparty's failure to honour their
obligations arises principally in connection with property leases and
the investment of surplus cash.
The Group has policies in place to ensure that rental contracts are
made with customers with an appropriate credit history. Tenant rent
payments are monitored regularly and appropriate action taken to recover
monies owed, or if necessary, to terminate the lease.
Cash transactions are limited to financial institutions with a high
credit rating.
3.4 Liquidity risk
The Group's objective is to maintain a balance between continuity of
funding and flexibility through the use of bank loans secured on the
Group's properties. The terms of the borrowings entitle the lender to
require early repayment should the Group be in default with significant
payments for more than one month.
3.5 Capital management
The prime objective of the Group's capital management is to ensure that
it maintains the financial flexibility needed to allow for value-creating
investments as well as healthy balance sheet ratios.
The capital structure of the Group consists of net debt (borrowings
disclosed in note 23 after deducting cash and cash equivalents) and
equity of the Group (comprising stated capital, reserves and retained
earnings).
When reviewing the capital structure the Group considers the cost of
capital and the risks associated with each class of capital. The Group
reviews the gearing ratio which is determined as the proportion of net
debt to equity. In comparison with comparable companies operating within
the property sector the Board considers the gearing ratios to be reasonable.
The gearing ratios for the reporting periods are as follows:
As at As at
31 December 31 December
2018 2017
EUR'000 EUR'000
Borrowings (195,274) (222,294)
Cash and cash equivalents 26,868 27,182
Net debt (168,406) (195,112)
===================== ========================
Equity 409,847 367,942
Net debt to equity ratio 41% 53%
===================== ========================
4. Critical accounting estimates and judgements
The preparation of consolidated financial statements in conformity with
IFRS requires the Group to make certain critical accounting estimates
and judgements. In the process of applying the Group's accounting policies,
management has decided the following estimates and assumptions have
a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the financial year;
i) Estimate of fair value of investment properties
The best evidence of fair value is current prices in an active market
of investment properties with similar leases and other contracts. In
the absence of such information, the Group determines the amount within
a range of reasonable fair value estimates. In making its judgement,
the Group considers information from a variety of sources, including:
a) Discounted cash flow projections based on reliable estimates of future
cash flows, derived from the terms of any existing lease and other contracts,
and (where possible) from external evidence such as current market rents
for similar properties in the same location and condition, and using
discount rates that reflect current market assessments of the uncertainty
in the amount and timing of the cash flows.
b) Current prices in an active market, and its third party independent
experts, for properties of different nature, condition or location (or
subject to different lease or other contracts), adjusted to reflect
those differences.
c) Recent prices of similar properties in less active markets, with
adjustments to reflect any changes in economic conditions since the
date of the transactions that occurred at those prices.
The Directors remain ultimately responsible for ensuring that the valuers
are adequately qualified, competent and base their results on reasonable
and realistic assumptions. The Directors have appointed JLL as the real
estate valuation experts who determine the fair value of investment
properties using recognised valuation techniques and the principles
of IFRS 13. Further information on the valuation process can be found
in note 17.
ii) Judgment in relation to the recognition of assets held for sale
Management has assumed the likelihood of investment properties - held
for sale, being sold within 12 months, in accordance with the requirement
of IFRS 5. Management considers that based on historical and current
experience that the properties can be reasonably expected to sell within
12 months.
iii) Judgment in recognition of the property advisor performance fee
The new property advisor performance fee agreement is effective only
from 1 January 2019 and the fee arising under the prior agreement for
the year ended 31 December 2018 was waived.
The performance fee is based on performance since 1 July 2018 and the
directors judge it to be appropriate to recognise a charge in the year
to reflect the services provided.
5. Segmental information
Information reported to the Board of Directors, which is the chief operating
decision maker, for the purposes of resource allocation and assessment
of segment performance is focussed on the different revenue streams
that exist within the Group. The Group's principal reportable segments
under IFRS 8 are therefore as follows:
- Residential
- Commercial
All revenues are earned in Germany with property and administrative
expenses incurred in Jersey, Germany and Guernsey.
31 December 2017
Residential Commercial Unallocated Total
EUR'000 EUR'000 EUR'000 EUR'000
Investment property 444,488 57,872 - 502,360
Loans and receivables - - 2,323 2,323
Investment properties - held for sale 94,582 12,315 - 106,897
Other assets 33,366 4,344 92 37,802
Liabilities (265,020) (7,843) (8,577) (281,440)
Net assets 307,416 66,688 (6,162) 367,942
========== ================ ===================== ========================
Revenue (restated - see note 2.2) 20,941 2,726 - 23,667
Property expenses (restated - see
note 2.2) (11,137) (1,450) - (12,587)
Administrative expenses - - (2,967) (2,967)
Gain on disposal of investment property 5,319 - - 5,319
Investment property fair value gain 139,245 18,129 - 157,374
Performance fee - - (26,339) (26,339)
Operating profit 154,368 19,405 (29,306) 144,467
---------- ---------------- --------------------- ------------------------
Net finance charge (5,995)
Income tax expense (26,150)
Profit for the year 112,322
========================
31 December 2018
Residential Commercial Unallocated Total
EUR'000 EUR'000 EUR'000 EUR'000
Investment properties 560,019 72,914 - 632,933
Other financial assets at amortised
cost - - 2,406 2,406
Investment properties - held for sale 11,279 1,468 - 12,747
Other assets 31,275 4,072 88 35,435
Liabilities (253,998) (11,154) (8,522) (273,674)
Net assets 348,575 67,300 (6,028) 409,847
========== ================ ===================== ========================
Revenue 20,068 2,613 - 22,681
Property expenses (13,947) (1,816) - (15,763)
Administrative expenses - - (3,194) (3,194)
Gain on disposal of investment property 1,026 - - 1,026
Investment property fair value gain 58,526 7,620 - 66,146
Performance fee - - (4,010) (4,010)
Separately disclosed items - - (966) (966)
Operating profit 65,673 8,417 (8,170) 65,920
---------- ---------------- --------------------- ------------------------
Net finance charge (9,491)
Income tax expense (11,071)
Profit for the year 45,358
========================
6. Revenue
31 December 31 December
2018 2017
(restated
- see
note
2.2)
EUR'000 EUR'000
Rental income 17,508 18,080
Service charge income 5,173 5,587
22,681 23,667
===================== ========================
The total future aggregated minimum rentals receivable under non-cancellable
operating leases are as follows:
31 December 31 December
2018 2017
EUR'000 EUR'000
Not later than one year 435 904
Later than one year but not later than five years 2,468 3,364
Later than five years 2,701 1,398
5,604 5,666
===================== ========================
Revenue comprises rental income earned from residential and commercial
property in Germany. There are no individual tenants that account for
greater than 10% of revenue during any of the reporting periods.
The leasing arrangements for residential property are with individual
tenants, with one month notice for cancellation of the lease in most
cases.
The commercial leases are non-cancellable, with an average lease period
of 3 years.
7. Property expenses
31 December 31 December
2018 2017
(restated
- see
note
2.2)
EUR'000 EUR'000
Property management expenses 1,024 1,079
Repairs and maintenance 1,710 1,433
Impairment charge - trade receivables 29 41
Other property expenses 7,053 5,825
Property advisors' fees and expenses 5,947 4,209
15,763 12,587
===================== ========================
8. Administrative expenses
31 December 31 December
2018 2017
EUR'000 EUR'000
Secretarial & administration fees 880 901
Legal & professional fees 1,160 1,045
Directors' fees 300 148
Audit and accountancy fees 840 894
Bank charges 54 56
Loss on foreign exchange 133 20
Depreciation 16 23
Other income (189) (120)
3,194 2,967
===================== ========================
Key management compensation - the functions of management are undertaken
by external providers of professional services, as set out in note 33.
Further details of the Directors' fees are set out in the Directors'
Remuneration Report on page 49 and in note 12 below.
9. Auditor's remuneration
An analysis of the fees charged by the auditor and its associates is
as follows:
31 December 31 December
2018 2017
EUR'000 EUR'000
Fees payable to the Group's auditor and its associates
for the audit of the consolidated financial statements: 188 176
Fees payable to the Group's auditor and its associates for other services:
- Corporate finance - 26
- Audit-related assurance services 27 24
- Other 8 -
223 226
===================== ========================
10. Gain on disposal of investment property (including investment property
held for sale)
31 December 31 December
2018 2017
EUR'000 EUR'000
Net proceeds 86,959 61,652
Book value of disposals (84,995) (55,117)
Disposal costs (938) (1,216)
1,026 5,319
===================== ========================
Where there has been a partial disposal of a property, the net book
value of the asset sold is calculated on a per square metre rate, based
on the prior period or interim valuation.
11. Investment property fair value gain
31 December 31 December
2018 2017
EUR'000 EUR'000
Investment property fair value gain 66,146 157,374
===================== ========================
Further information on investment properties is shown in note 17.
12. Separately disclosed items
These relate to legal and professional fees incurred during a significant
transaction which was considered by the Board but not pursued totalling
EUR966,000 (December 2017: EURnil).
As part of this transaction, significant demands were made on the Directors'
time. It was agreed that these requirements were far in excess of the
Directors' contracted obligations and that a sum up to or equal to their
annual salary could be billed for their time and effort. Directors fees
relating to the above totalled GBP52,691. These additional fees have
been included within the total Directors' fees expense as detailed in
note 8.
13. Net finance charge
31 December 31 December
2018 2017
EUR'000 EUR'000
Interest income (54) (116)
Interest from partners' loans (83) (57)
Loss / (gain) on interest rate swap 2,658 (1,535)
Interest payable on bank borrowings 5,118 5,080
Finance arrangement fee amortisation 381 550
Finance charge on redemption liability 1,471 2,073
9,491 5,995
===================== ========================
14. Income tax expense
31 December 31 December
2018 2017
The tax charge for the period is as follows: EUR'000 EUR'000
Current tax charge 3,151 2,940
Adjustment in respect of prior year - -
Deferred tax charge - origination and reversal of temporary
differences 7,920 23,210
11,071 26,150
===================== ========================
The tax charge for the year can be reconciled to the theoretical tax
charge on the profit in the income statement as follows:
31 December 31 December
2018 2017
EUR'000 EUR'000
Profit before tax on continuing operations 56,429 138,472
Tax at German income tax rate of 15.8% (2017: 15.8%) 8,916 21,879
Income not taxable (162) (840)
Losses carried forward not recognised 2,317 5,111
Total tax charge for the year 11,071 26,150
===================== ========================
Reconciliation of current tax liabilities
31 December 31 December
2018 2017
EUR'000 EUR'000
Balance at beginning of year 2,914 24
Tax paid during the year (4,678) (50)
Current tax charge 3,151 2,940
Balance at end of year 1,387 2,914
===================== ========================
Reconciliation of deferred tax
Capital Interest
gains on rate swaps
properties Total
EUR'000 EUR'000 EUR'000
(Liabilities) Asset (Net liabilities)
Balance at 1 January 2017 (22,150) 770 (21,380)
Charged to the statement of comprehensive
income (22,967) (243) (23,210)
Deferred tax (liability) / asset at 31 December
2017 (45,117) 527 (44,590)
Charged to the statement of comprehensive
income (8,341) 421 (7,920)
Deferred tax (liability) / asset at 31 December
2018 (53,458) 948 (52,510)
================ ===================== ========================
Jersey income tax
The Group is liable to Jersey income tax at 0%.
Guernsey income tax
The Group is liable to Guernsey income tax at 0%.
German tax
As a result of the Group's operations in Germany, the Group is subject
to German Corporate Income Tax ('CIT') - the effective rate for Phoenix
Spree Deutschland Limited for 2018 was 15.8% (2017: 15.8%).
Factors affecting future tax charges
The Group has accumulated tax losses of approximately EUR17.6 million
(2017: EUR18.1 million) in Germany, which will be available to set against
suitable future profits should they arise, subject to the criteria for
relief. No deferred tax asset is recognised in respect of losses of
EUR2.8 million (2017: EUR2.9 million) as there is insufficient certainty
the losses can be utilised by Group entities.
15. Dividends
31 December 31 December
2018 2017
EUR'000 EUR'000
Amounts recognised as distributions to equity holders in the period:
Interim dividend for the year ended 31 December 2018
of EUR2.35 cents (2.1p) (2017: EUR1.9 cents (1.6p))
per share 2,420 2,079
Proposed final dividend for the year ended 31 December
2018 of EUR5.15 cents (4.62p) (2017: EUR5.0 cents (4.4p))
per share 5,189 5,038
===================== ========================
The proposed final dividend is subject to approval by shareholders at
the Annual General Meeting and has not been included as a liability
in these consolidated financial statements. The proposed dividend is
payable to all shareholders on the Register of Members on 7 June 2019.
The total estimated dividend to be paid is 4.62p per share. The payment
of this dividend will not have any tax consequences for the Group.
16. Subsidiaries
The Group consists of a Parent Company, Phoenix Spree Deutschland Limited,
incorporated in Jersey, Channel Islands and a number of subsidiaries
held directly by Phoenix Spree Deutschland Limited, which are incorporated
in and operated out of Jersey, Guernsey and Germany.
Further details are given below:
Country of incorporation Nature
% holding of business
Investment
Phoenix Spree Deutschland I Limited Jersey 100 100 property
Investment
Phoenix Spree Deutschland II Limited Jersey 100 100 property
Investment
Phoenix Spree Deutschland III Limited Jersey 100 100 property
Investment
Phoenix Spree Deutschland IV Limited Jersey 100 100 property
Investment
Phoenix Spree Deutschland V Limited Jersey 100 100 property
Investment
Phoenix Spree Deutschland VII Limited Jersey 100 100 property
Investment
Phoenix Spree Deutschland IX Limited Jersey 100 100 property
Finance
Phoenix Spree Deutschland X Limited Jersey 100 100 vehicle
Investment
Phoenix Spree Deutschland XI Limited Jersey 100 100 property
Investment
Phoenix Spree Deutschland XII Limited Jersey 100 100 property
Holding
Phoenix Property Holding GmbH & Co.KG Germany 100 100 Company
Phoenix Spree Mueller GmbH (formerly Investment
Laxpan Mueller GmbH) Germany 94.9 94.9 property
Phoenix Spree Gottlieb GmbH (formerly Investment
Invador Grundbesitz GmbH) Germany 94.9 94.9 property
Holding
PSPF Holdings GmbH Germany 100 100 Company
Management
PSPF General Manager GmbH (in liquidation) Germany 100 100 of PSPF
PSPF Acquisition Vehicle GmbH (in Acquisition
liquidation) Germany 99.64 99.64 vehicle
Investment
PSPF Property GmbH & Co. KG (in liquidation) Germany 94 94 property
Phoenix Spree Property Fund Ltd & Investment
Co. KG Germany 94.8 94.8 property
Management
PSPF General Partner (Guernsey) Limited Guernsey 100 100 of PSPF
The investments in PSPF General Manager GmbH and PSPF Acquisition Vehicle
GmbH & Co. KG are all held via the investment is PSPF Holdings GmbH,
which was acquired on 7 September 2007. The other subsidiaries are held
directly.
17. Investment properties
2018 2017
Fair Value EUR'000 EUR'000
At 1 January 609,257 423,799
Capital expenditure 7,943 6,715
Property additions 47,329 76,486
Disposals (84,995) (55,117)
Fair value gain 66,146 157,374
--------------------- ------------------------
Investment properties at fair value - as set out in
the report by JLL 645,680 609,257
Assets considered as "Held for Sale" (Note 18) (12,747) (106,897)
At 31 December 632,933 502,360
===================== ========================
The property portfolio was valued at 31 December 2018 by the Group's
independent valuers, Jones Lang LaSalle GmbH ('JLL'), in accordance
with the methodology described below. The valuations were performed
in accordance with the current Appraisal and Valuation Standards, 8th
edition (the 'Red Book') published by the Royal Institution of Chartered
Surveyors (RICS).
The valuation is performed on a building-by-building basis and the source
information on the properties including current rent levels, void rates
and non-recoverable costs was provided to JLL by the Property Advisors
PMM Partners (UK) Limited. Assumptions with respect to rental growth,
adjustments to non-recoverable costs and the future valuation of these
are those of JLL. Such estimates are inherently subjective and actual
values can only be determined in a sales transaction.
Having reviewed the JLL report, the Directors are of the opinion that
this represents a fair and reasonable valuation of the properties and
have consequently adopted this valuation in the preparation of the consolidated
financial statements.
The valuations have been prepared by JLL on a consistent basis at each
reporting date and the methodology is consistent and in accordance with
IFRS which requires that the 'highest and best use' value is taken into
account where that use is physically possible, legally permissible and
financially feasible for the property concerned, and irrespective of
the current or intended use.
All properties are valued as Level 3 measurements under the fair value
hierarchy (see note 32) as the inputs to the discounted cash flow methodology
which have a significant effect on the recorded fair value are not observable.
Additionally, JLL perform reference checks back to comparable market
transactions to confirm the valuation model.
The unrealised fair value gain in respect of investment property is
disclosed in the consolidated statement of comprehensive income as 'Investment
property fair value gain'.
Valuations are undertaken using the discounted cash flow valuation technique
as described below and with the inputs set out below.
Discounted cash flow methodology (DCF)
The fair value of investment properties is determined using discounted
cash flows.
Under the DCF method, a property's fair value is estimated using explicit
assumptions regarding the benefits and liabilities of ownership over
the asset's life including an exit or terminal value. As an accepted
method within the income approach to valuation the DCF method involves
the projection of a series of cash flows on a real property interest.
To this projected cash flow series, an appropriate, market-derived discount
rate is applied to establish the present value of the income stream
associated with the real property.
The duration of the cash flow and the specific timing of inflows and
outflows are determined by events such as rent reviews, lease renewal
and related lease up periods, re-letting, redevelopment, or refurbishment.
The appropriate duration is typically driven by market behaviour that
is a characteristic of the class of real property.
Periodic cash flow is typically estimated as gross income less vacancy,
non-recoverable expenses, collection losses, lease incentives, maintenance
cost, agent and commission costs and other operating and management
expenses. The series of periodic net operating incomes, along with an
estimate of the terminal value anticipated at the end of the projection
period, is then discounted.
The principal inputs to the valuation are as follows:
Year ended Year ended
31 December 31 December
2018 2017
Range Range
Residential Properties
Market Rent
Rental Value (EUR per sq. p.m.) 7 - 14 5- 13
Stabilised residency vacancy (% per year) 2 2
Tenancy vacancy fluctuation (% per year) 8-10 8 - 10
------------------------------------------------------------------------------ ------------------------
Commercial Properties
Market Rent
Rental Value (EUR per sq. p.m.) 4 - 31 2 - 28
Stabilised commercial vacancy (% per year) 0 - 25 0 - 26
Tenancy vacancy fluctuation (% per year) 8-10 10
------------------------------------------------------------------------------ --------------------- ------------------------
Estimated Rental Value (ERV)
ERV per year per
property
(EUR'000) 60 - 1,201 48 - 1,200
ERV (EUR per sq.) 8 - 14 5 - 14
--------------------- ------------------------
Financial Rates - blended average
Discount rate (%) 4 4.7
Portfolio yield (%) 3.0 3.5
--------------------- ------------------------
Sensitivity
Changes in the key assumptions and inputs to the valuation models used
would impact the valuations as follows:
Vacancy: A change in vacancy by 1% would not materially affect the investment
property fair value assessment.
Rental value: All other factors remaining equal an increase in rental
income would increase valuations. Correspondingly, a decrease in rental
values would decrease valuations.
Discount rate: An increase of 0.5% in the discount rate would reduce
the investment property fair value by EUR85.9m, and a decrease in the
discount rate would increase the investment property fair value by EUR129.9m.
There are, however, inter-relationships between unobservable inputs
as they are determined by market conditions. The existence of an increase
of more than one unobservable input could amplify the impact on the
valuation. Conversely, changes on unobservable inputs moving in opposite
directions could cancel each other out, or lessen the overall effect.
The Group categorises all investment properties in the following three
ways;
Rental Scenario
Where properties have been valued under the "Discounted Cashflow Methodology"
and are intended to be held by the Group for the foreseeable future,
they are considered valued under the "Rental Scenario" This will equal
the "Investment Properties" line in the Non-Current Assets section of
the consolidated statement of financial position.
Condominium scenario
Where properties have the potential or the benefit of all relevant permissions
required to sell apartments individually (condominiums) then we refer
to this as a 'condominium scenario'. Expected sales in the coming year
from these assets are considered held for sale under IFRS 5 and can
be seen in note 18. The additional value is reflected by using a lower
discount rate under the DCF Methodology. Properties which do not have
the benefit of all relevant permissions are described as valued using
a standard 'rental scenario'. Included in properties valued under the
condominium scenario are properties not yet released to held for sale
as only a portion of the properties are forecast to be sold in the coming
12 months.
Disposal Scenario
Where properties have been notarised for sale prior to the consolidated
statement of financial position date, but have not completed; they are
held at their notarised disposal value. These assets are considered
held for sale under IFRS 5 and can be seen in note 18.
The table below sets out the assets valued using these 3 scenarios:
31 December 31 December
2018 2017
EUR'000 EUR'000
Rental scenario 619,430 502,360
Condominium scenario 22,330 29,847
Disposal scenario 3,920 77,050
Total 645,680 609,257
===================== ========================
The movement in the fair value of investment properties is included
in the consolidated statement of comprehensive income as 'gain on disposal
of investment property' and comprises:
31 December 31 December
2018 2017
EUR'000 EUR'000
Investment properties 65,717 155,787
Properties held for sale (see note 18) 429 1,587
66,146 157,374
===================== ========================
18. Investment properties - held for sale
2018 2017
EUR'000 EUR'000
Fair value - held for sale investment properties
At 1 January 106,897 27,970
Transferred from investment properties 5,850 88,990
Transferred (to) investment properties (15,434) -
Properties sold (84,995) (11,650)
Valuation gain on apartments held for sale 429 1,587
At 31 December 12,747 106,897
===================== ========================
Investment properties are re-classified as current assets and described
as 'held for sale' in three different situations: Properties notarised
for sale at the reporting date, Properties where at the reporting date
the group has obtained and implemented all relevant permissions required
to sell individual apartment units, and efforts are being made to dispose
of the assets (condominium); and Properties which are being marketed
for sale but have currently not been notarised.
Properties which no longer satisfy the criteria for recognition as held
for sale are transferred back to investment properties at fair value.
Properties notarised for sale by the reporting date are valued at their
disposal price (disposal scenario), and other properties are valued
using the condominium or rental scenarios (see note 17) as appropriate.
The table below sets out the respective categories:
2018 2017
EUR'000 EUR'000
Rental scenario 1,931 -
Condominium scenario 6,896 29,847
Disposal scenario 3,920 77,050
12,747 106,897
===================== ========================
Investment properties held for sale are all expected to be sold within
12 months of the reporting date based on Management knowledge of current
and historic market conditions. While whole properties have been valued
under a condominium scenario in note 17, only the expected sales have
been transferred to assets held for sale.
There were liabilities secured on the investment properties held for
sale of EUR5.2m (2017: EUR56.9m).
19. Property, plant and equipment
Equipment
EUR'000
Cost or valuation
As at 1 January 2017 58
Additions 75
------------------------
As at 31 December 2017 133
Additions 12
As at 31 December 2018 145
========================
Accumulated depreciation and impairment
As at 1 January 2017 18
Charge for the year 23
------------------------
As at 31 December 2017 41
Charge for the year 16
As at 31 December 2018 57
========================
Carrying amount
As at 31 December 2017 92
As at 31 December 2018 88
------------------------
20. Other financial assets at amortised cost (2017: Loans and receivables)
31 December 31 December
2018 2017
EUR'000 EUR'000
At 1 January 2,323 2,253
Accrued interest 83 70
---------------------
At 31 December 2,406 2,323
===================== ========================
The above loans have been reclassified to 'Other financial assets at
amortised cost' on adoption of IFRS 9, 'financial instruments'.
The Group entered into loan agreements with Mike Hilton and Paul Ruddle
in connection with the acquisition of PSPF. The loans bear interest
at 4% per annum, and have a maturity of less than five years.
The Group also entered into a loan agreement with the minority interest
of Accentero Real Estate AG (formerly Blitz B16 - 210 GmbH) in relation
to the acquisition of the assets as share deals. This loan bears interest
at 3% per annum.
These assets are considered to have low credit risk and any loss allowance
would be immaterial.
None of the loans and receivables were either past due or impaired in
the prior year.
21. Trade and other receivables
31 December 31 December
2018 2017
(restated
- see
note
2.2)
EUR'000 EUR'000
Current
Trade receivables 1,045 691
Less: impairment provision (313) (342)
--------------------- ------------------------
Net receivables 732 349
Prepayments and accrued income 549 6,521
Investment property disposal proceeds receivable 1,167 2,232
Service charges receivable 4,766 5,302
Sundry receivables 317 -
7,531 14,404
===================== ========================
Aging analysis of trade receivables
31 December 31 December
2018 2017
EUR'000 EUR'000
Up to 12 months 731 344
Between 1 year and 2 years 1 5
Over 3 years - -
732 349
===================== ========================
Impairment of trade and service charge receivables
The Company calculates lifetime expected credit losses for trade and
service charge receivables using a portfolio approach. Receivables are
grouped based on the credit terms offered and the type of lease. The
probability of default is determined at the year-end based on the aging
of the receivables, and historical data about default rates. That data
is adjusted if the Company determines that historical data is not reflective
of expected future conditions due changes in the nature of its tenants
and how they are affected by external factors such as economic and market
conditions.
On this basis, the loss allowance as at 31 December 2018, and on 1 January
2018 (the date of adoption of IFRS 9) was determined as set out below.
There was no material difference between the loss allowance determined
on this basis at 1 January 2018 and on the basis previously used, and
therefore there was no re-statement of opening retained earnings required.
The Company applies the following loss rates to trade and service charge
receivables:
As noted below, a loss allowance of 50% (2017: 50%) has been recognised
for trade receivables that are more than 60 days past due. Any receivables
where the tenant is no longer resident in the property are provided
for in full.
0-60 Over 60 Non-current
Trade receivables: Aging days days tenant Total 2018
Expected loss rate (%) 0% 50% 100%
Gross carrying amount (EUR'000) 582 300 163 1,045
Loss allowance provision (EUR'000) - (150) (163) (313)
0-60 Over 60 Non-current Total
Trade receivables: Aging days days tenant 2017
Expected loss rate (%) 0% 50% 100%
Gross carrying amount (EUR'000) 173 352 166 691
Loss allowance provision (EUR'000) - (176) (166) (342)
Movements in the impairment provision against trade receivables are
as follows:
31 December 31 December
2018 2017
EUR'000 EUR'000
Balance at the beginning of the year 342 383
Impairment losses recognised 360 180
Amounts written off as uncollectable (389) (221)
Balance at the end of the year 313 342
===================== ========================
All impairment losses relate to the receivables arising from tenants.
22. Cash and cash equivalents
31 December 31 December
2018 2017
EUR'000 EUR'000
Cash at bank 25,626 25,518
Cash at agents 1,242 1,664
Cash and cash equivalents 26,868 27,182
===================== ========================
23. Borrowings
31 December 31 December
2018 2017
EUR'000 EUR'000
Current liabilities
Bank loans - Deutsche Genossenschafts-Hypothekenbank
AG 2,596 2,020
Bank loans - Berliner Sparkasse 1,046 626
3,642 2,646
Non-current liabilities
Bank loans - Deutsche Genossenschafts-Hypothekenbank
AG 122,054 167,656
Bank loans - Berliner Sparkasse 69,578 51,992
191,632 219,648
195,274 222,294
===================== ========================
All borrowings are secured against the investment properties of the
Group. As at 31 December 2018, the Company had EUR1.2m of undrawn debt
facilities (2017: EUR0.6 million). A summary of the loans as at the
year end is as follows:
Amount Interest
rate
Bank EUR'000 % Maturity
Berliner Sparkasse 9,333 1.72 31/12/2026
7,696 1.74 31/12/2026
12,658 1.89 28/02/2027
5,024 1.93 31/08/2027
3,519 1.05 31/08/2027
10,563 1.95 30/11/2027
3,396 1.09 30/11/2027
11,910 2.30 30/04/2028
6,525 2.00 31/12/2028
Deutsche Genossenschafts-Hypothekenbank AG 26,988 2.30 31/07/2027
26,988 2.30 31/07/2027
1,217 2.30 31/07/2028
38,352 2.09 28/02/2025
23,357 2.09 28/02/2025
7,748 2.30 28/02/2025
195,274
================
24. Trade and other payables
31 December 31 December
2018 2017
(restated
- see
note
2.2)
EUR'000 EUR'000
Trade payables 1,808 1,489
Accrued liabilities 4,592 622
Service charges payable 4,028 3,849
Sundry payables - 554
Deferred income 1 8
10,429 6,522
===================== ========================
25. Derivative financial instruments
31 December 31 December
2018 2017
EUR'000 EUR'000
Interest rate swaps - carried at fair value through profit or loss
Balance at 1 January 3,333 4,869
Loss / (gain) in movement in fair value through profit
or loss. 2,658 (1,536)
Balance at 31 December 5,991 3,333
===================== ========================
The notional principal amounts of the outstanding interest rate swap
contracts at 31 December 2018 were EUR206,690,000 (2017: EUR188,165,000).
At 31 December 2018 the fixed interest rates vary from 0.625% to 1.01%
(2017: 0.402% to 0.775%) above the main factoring Euribor rate.
Maturity analysis of interest rate swaps
31 December 31 December
2018 2017
EUR'000 EUR'000
Less than 1 year 1,354 -
Between 1 and 2 years - -
Between 2 and 5 years - -
More than 5 years 4,637 3,333
5,991 3,333
===================== ========================
During the year the Company had Interest Rate Swaps which were in excess
of the debt being hedged, these have been disclosed as having a maturity
of less than 12 months.
26. Other financial liabilities
31 December 31 December
2018 2017
EUR'000 EUR'000
Redemption Liability
Balance at 1 January 5,663 3,590
Profit share attributable to NCI in PSPF 1,472 2,073
Balance at 31 December 7,135 5,663
===================== ========================
The redemption liability relates to the put option held by the minority
shareholders of PSPF for the purchase of the minority interest in PSPF.
The option period starts on 6 June 2020. The amount of the purchase
price will be based on the EPRA NAV on the consolidated statement of
financial position date as well as the movement in the EPRA NAV during
the year and the proportion of EPRA NAV attributable to the non-controlling
interest in PSPF.
A portion of the liability (EUR1,124k, 2017: (EUR795k)) is recognised
to cover the tax charge of the minority in PSPF on the proceeds received
if they choose to exercise their put option.
The recognition of the redemption liability has been accounted for as
a reduction in the Non-Controlling Interest with the remainder of the
recognition against the Group's retained earnings. Also see the consolidated
statement of changes in equity for the recognition accounting.
27. Share based payment reserve
Performance
fee
EUR'000
Balance at 1 January 2017 7,614
Fee charge for the period 26,339
------------------------
Balance at 31 December 2017 33,953
Transfer to stated capital - settled by issue of shares (33,948)
Adjustment to performance fee (5)
Fee charge for the period 4,010
Balance at 31 December 2018 4,010
========================
The Property Advisor is entitled to an asset and estate management performance
fee, measured over consecutive three year periods, equal to 15% of the
excess (or in the case of the initial period or any performance period
ending prior to 31 December 2020, 16%) by which the annual EPRA NAV
total return of the Group exceeds 8% per annum, compounding (the 'Performance
Fee'). The Performance Fee is subject to a high watermark, being the
higher of:
(i) EPRA NAV per share at 1 July 2018; and
(ii) the EPRA NAV per share at the end of a Performance Period in relation
to which a performance fee was earned in accordance of the provisions
contained with the Property Advisor and Investor Relations Agreement.
The Company's EPRA NAV performance for the three year's ending 31 December
2017 had resulted in a performance fee liability under the Property
Advisory Agreement to the Property Advisor of EUR33.948 million. The
parties agreed that this performance fee (but not any further performance
fees that may become due) be settled through the issuance by the Company
to the Property Advisor of 8,260,065 new shares in the Company at EPRA
NAV per share. 50% of the shares issued in settlement of this fee are
subject to a 12-month restriction on disposal. The shares were admitted
to trading on the premium segment of the Official List and to trading
on the Main Market of the London Stock Exchange on 4 May 2018.
Under the Property Advisory Agreement for providing property advisory
services, the Property Advisor is also entitled to a Portfolio and Asset
Management Fee for the 2018 period as follows:
(i) 1.50% of the EPRA NAV of the Group where the EPRA NAV of the Group
is equal to or less than EUR250 million; and
(ii) 1.25% of the EPRA NAV of the Group between EUR250 million and EUR500
million.
(iii) 1% of the EPRA NAV of the Group greater than EUR500 million.
The performance fee is reduced by the aggregate amount of any transaction
fees and finance fees payable to the Property Advisor in respect of
that calendar year.
The Property Advisor is entitled to a capex monitoring fee equal to
7% of any capital expenditure incurred by any Subsidiary which the Property
Advisor is responsible for managing (the 'Capex Monitoring Fee').
The Property Advisor is entitled to receive a finance fee equal to:
(i) 0.1% of the value of any borrowing arrangement which the Property
Advisor has negotiated and/or supervised; and
(ii) a fixed fee of GBP1,000 in respect of any borrowing arrangement
which the Property Advisor has renegotiated or varied.
The Property Advisor is entitled to receive a transaction fee fixed
at GBP1,000 in respect of any acquisition or disposal of property by
any Subsidiary.
The Property Advisor is entitled to a letting fee equal to 3 month's
net cold rent (being gross rents receivable less service costs and taxes)
for each new tenancy signed by the Company where the Property Advisor
has sourced the relevant tenant.
Property Advisor Fees (from 1 January 2019)
Under the new Property Advisory Agreement for providing property advisory
services, the Property Advisor wil be entitled to a Portfolio and Asset
Management Fee as follows:
(i) 1.20% of the EPRA NAV of the Group where the EPRA NAV of the Group
is equal to or less than EUR500 million; and
(ii) 1% of the EPRA NAV of the Group greater than EUR500 million.
The management fee will be reduced by the aggregate amount of any transaction
fees and finance fees payable to the Property Advisor in respect of
that calendar year.
The Property Advisor is entitled to a capex monitoring fee equal to
7% of any capital expenditure incurred by any Subsidiary which the Property
Advisor is responsible for managing.
The Property Advisor is entitled to receive a finance fee equal to:
(i) 0.1% of the value of any borrowing arrangement which the Property
Advisor has negotiated and/or supervised; and
(ii) a fixed fee of GBP1,000 in respect of any borrowing arrangement
which the Property Advisor has renegotiated or varied.
The Property Advisor is entitled to receive a transaction fee fixed
at GBP1,000 in respect of any acquisition or disposal of property by
any Subsidiary.
The Property Advisor is entitled to a letting fee equal to between 1
and 3 month's net cold rent (being gross rents receivable less service
costs and taxes) for each new tenancy signed by the Company where the
Property Advisor has sourced the relevant tenant.
The Property Advisor shall be entitled to a fee for Investor Relations
Services at the annual rate of GBP75,000 payable quarterly in arrears.
Details of the fees paid to the Property Advisor are set out in note
33.
28. Stated capital
31 December 31 December
2018 2017
EUR'000 EUR'000
Issued and fully paid:
At 1 January 162,630 162,630
Issued during the year at EUR4.11 per share 33,948 -
At 31 December 196,578 162,630
===================== ========================
The number of shares in issue at 31 December 2018 was 100,751,409 (31
December 2017: 92,491,344).
29. Non-controlling interests
Non-controlling 31 December 31 December
interest 2018 2017
%
EUR'000 EUR'000
Phoenix Spree Mueller GmbH (formerly Laxpan
Mueller GmbH) 5.1% 1,026 915
Phoenix Spree Gottlieb GmbH (formerly Invador
Grundbesitz GmbH) 5.1% 963 810
1,989 1,725
===================== ========================
The non-controlling interest relates to the subsidiaries Invador Grundbesitz
GmbH and Laxpan Mueller GmbH.
30. Earnings per share
31 December 31 December
2018 2017
Earnings for the purposes of basic earnings per share
being net profit attributable to owners of the parent
(EUR'000) 45,094 111,538
Weighted average number of ordinary shares for the
purposes of basic earnings per share (Number) 97,945,250 92,491,344
Effect of dilutive potential ordinary shares (Number) 1,014,078 7,677,250
---------------------- -------------------------
Weighted average number of ordinary shares for the
purposes of diluted earnings per share (Number) 98,959,328 100,168,594
====================== =========================
Earnings per share (EUR) 0.46 1.21
Diluted earnings per share (EUR) 0.46 1.11
===================== ========================
31. Net asset value per share and EPRA net asset value
31 December 31 December
2018 2017
Net assets (EUR'000) 407,858 366,217
Number of participating ordinary shares 100,751,409 92,491,344
Net asset value per share (EUR) 4.05 3.96
===================== ========================
EPRA net asset value 31 December 31 December
2018 2017
Net assets (EUR'000) 407,858 366,217
Add back deferred tax assets and liabilities, derivative
financial instruments, goodwill and share based payment
reserves (EUR'000) 53,137 13,970
EPRA net asset value (EUR'000) 460,995 380,187
===================== ========================
EPRA net asset value per share (EUR) 4.58 4.11
The derivative financial liability relating to swap contracts in respect
of borrowings repaid has not been added back as they no longer have
a hedging objective (EUR1.354 million (2017: nil)).
32. Financial instruments
The Group is exposed to the risks that arise from its use of financial
instruments. This note describes the objectives, policies and processes
of the Group for managing those risks and the methods used to measure
them. Further quantitative information in respect of these risks is
presented throughout the financial statements.
Principal financial instruments
The principal financial instruments used by the Group, from which financial
instrument risk arises, are as follows:
-- Financial assets
-- Cash and cash equivalents
-- Trade and other receivables
-- Trade and other payables
-- Borrowings
-- Derivative financial instruments
The Group held the following financial assets at each reporting date:
31 December 31 December
2018 2017
(restated
- see
note
2.2)
EUR'000 EUR'000
Loans and receivables
Trade and other receivables - current 6,982 7,883
Cash and cash equivalents 26,868 27,182
Other financial assets at amortised cost (2017: Loans
and receivables) 2,406 2,323
36,256 37,388
--------------------- ------------------------
The Group held the following financial liabilities at each reporting
date:
31 December 31 December
2018 2017
EUR'000 EUR'000
Held at amortised cost
Borrowings payable: current 3,642 2,646
Borrowings payable: non-current 191,632 219,648
Other financial liabilities 7,135 5,663
Trade and other payables 10,429 6,522
212,838 234,479
--------------------- ------------------------
Fair value through profit or loss
Derivative financial (asset)/ liability - interest
rate swaps 4,637 3,333
Excess hedge due to property disposal 1,354 -
5,991 3,333
--------------------- ------------------------
218,829 237,812
===================== ========================
Fair value of financial instruments
With the exception of the variable rate borrowings, the fair values
of the financial assets and liabilities are not materially different
to their carrying values due to the short term nature of the current
assets and liabilities or due to the commercial variable rates applied
to the long term liabilities.
The interest rate swap was valued externally by the respective counterparty
banks by comparison with the market price for the relevant date.
The interest rate swaps are expected to mature between February 2025
and March 2028.
The Group uses the following hierarchy for determining and disclosing
the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical
assets or liabilities;
Level 2: other techniques for which all inputs which have a significant
effect on the recorded fair value are observable, either directly or
indirectly; and
Level 3: techniques which use inputs which have a significant effect
on the recorded fair value that are not based on observable market data.
During each of the reporting periods, there were no transfers between
valuation levels.
Group Fair Values
31 December 31 December
2018 2017
EUR'000 EUR'000
Financial assets/ (liabilities)
Interest rate swaps - Level 2 - current (1,354) (3,333)
Interest rate swaps - Level 2 - non-current (4,637) -
(5,991) (3,333)
===================== ========================
The valuation basis for the investment properties is disclosed in note
17.
Financial risk management
The Group is exposed through its operations to the following financial
risks:
-- Interest rate
risk
-- Foreign exchange risk
-- Credit risk
-- Liquidity risk
The Group's policies for financial risk management are outlined below.
Interest rate risk
The Group's interest rate risk arises from certain of its borrowings.
Borrowings issued at variable rates expose the Group to cash flow interest
rate risk. Borrowings issued at fixed rates expose the Group to fair
value interest rate risk. The Group is also exposed to interest rate
risk on cash and cash equivalents.
Under interest rate swap contracts, the Group agrees to exchange the
difference between fixed and floating rate interest amounts calculated
on agreed notional principal amounts. Such contracts enable the Group
to mitigate the risk of changing interest rates on the cash flow exposures
on the issued variable rate debt held.
Sensitivity analysis has not been performed as all variable rate borrowings
have been swapped to fixed interest rates, and potential movements on
cash at bank balances are immaterial.
The Group gives careful consideration to interest rates when considering
its borrowing requirements and where to hold its excess cash. The Directors
believe that the interest rate risk is at an acceptable level.
Foreign exchange risk
The Group is exposed to foreign exchange risk on sales, purchases, and
translation of assets and liabilities that are in a currency other than
the functional currency (Euros).
The Group does not enter into any currency hedging transactions and
the Directors believe that the foreign exchange rate risk is at an acceptable
level.
The carrying amount of the Group's foreign currency (non Euro) denominated
monetary assets and liabilities are shown below, all the amounts are
for Sterling balance only:
31 December 31 December
2018 2017
EUR'000 EUR'000
Financial assets
Cash and cash equivalents 1,142 598
Financial
liabilities
Trade and other payables (350) (216)
Net position 792 382
===================== ========================
At each reporting date, if the Euro had strengthened or weakened by
10% against GBP with all other variables held constant, post-tax loss
for the year would have increased/(decreased) by:
Strengthened by
Weakened by 10% 10% Increase/(decrease)
Increase/(decrease) in post-tax loss
in post-tax loss and impact on
and impact on equity equity
EUR'000 EUR'000
31 December 2018 79 (79)
31 December 2017 38 (38)
Credit risk management
Credit risk refers to the risk that the counterparty will default on
its contractual obligations resulting in financial loss to the Group.
Credit risk arises principally from the Group's trade and other receivables
and its cash balances. The Group gives careful consideration to which
organisations it uses for its banking services in order to minimise
credit risk. The Group has an established credit policy under which
each new tenant is analysed for creditworthiness and each tenant is
required to pay a two month deposit.
At each reporting date the Group had no tenants with outstanding balances
over 10% of the total trade receivables balance.
The Group uses the following banks: Barclays Private Clients International
Jersey Ltd, Barclays Bank Plc Frankfurt and Deutsche Bank. The split
of cash held at each of the banks respectively at 31 December 2018 was
57%/33%/10% (31 December 2017: 61%/30%/9%) Barclays and Deutsche Bank
have credit ratings of A and A- respectively.
The Group holds no collateral as security against any financial asset.
The carrying amount of financial assets recorded in the financial information,
net of any allowances for losses, represents the Group's maximum exposure
to credit risk.
Details of receivables from tenants in arrears at each reporting date
can be found in note 21 as can details of the receivables that were
impaired during each period.
An allowance for impairment is made where there is an identified loss
event which, based on previous experience, is evidence of a reduction
in the recoverability of the cash flows. Management considers the above
measures to be sufficient to control the credit risk exposure.
The credit risk on liquid funds and derivative financial instruments
is limited because the counterparties are banks with high credit-ratings
assigned by international credit-rating agencies.
The carrying amount of financial assets recorded in the financial statements,
which is net of impairment losses, represents the Group's maximum exposure
to credit risk as no collateral or other credit enhancements are held.
Liquidity risk management
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due. The Group's approach to managing
liquidity risk is to ensure that it will always have sufficient liquidity
to meet its liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or damage to the Group's reputation.
The Directors manage liquidity risk by regularly reviewing cash requirements
by reference to short term cash flow forecasts and medium term working
capital projections prepared by management.
The Group maintains good relationships with its banks, which have high
credit ratings.
The following table details the Group's remaining contractual maturity
for its non-derivative financial liabilities with agreed maturity periods.
The table has been drawn up based on the undiscounted cash flows of
the financial liabilities based on the earliest date on which the Group
can be required to pay. The tables include both interest payable and
principal cash flows.
Maturity analysis for financial liabilities
Less Between Between
than 1 - 2 2 - 5 More than
1 year years years 5 years Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
At 31 December 2018
Borrowings payable: current 3,642 - - - 3,642
Borrowings payable: non-current - - - 191,632 191,632
Other financial liabilities - - 7,135 - 7,135
Trade and other payables 10,429 - - - 10,429
--------- ---------- ---------------- --------------------- ------------------------
14,071 - 7,135 191,632 212,838
--------- ---------- ---------------- --------------------- ------------------------
Less Between Between
than 1 - 2 2 - 5 More than
1 year years years 5 years Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
At 31 December 2017
Borrowings payable: current 2,646 - - - 2,646
Borrowings payable: non-current - - - 219,648 219,648
Other financial liabilities - - 5,663 - 5,663
Trade and other payables 6,522 - - - 6,522
9,168 - 5,663 219,648 234,479
--------- ---------- ---------------- --------------------- ------------------------
The analysis of the market risk review and sensitivity analysis is detailed
in note 21.
33. Related party transactions
Related party transactions not disclosed elsewhere are as follows:
R Prosser, who was a director of the Company until 17 April 2018, is
a director of Estera Fund Administrators (Jersey) Limited and Estera
Trust (Guernsey) Limited, both of which provide administration services
to the Group.
A Weaver, who was a director of the Company until 17 April 2018, is
a partner of the Jersey law firm, Appleby which provides legal services
to the Group and a member of Appleby group.
During the year ended 31 December 2018, an amount of EUR973,424 (2017:
EUR690,165) was payable to Estera Fund Administrators (Jersey) Limited
and Estera Trust (Guernsey) Limited for accounting, administration and
secretarial services. At 31 December 2018, EUR134,400 (2017: EUR215,625)
Estera Fund Administrators (Jersey) Limited only) was outstanding.
During the year ended 31 December 2018, an amount of EUR43,010 (2017:
EUR40,044) was payable to Appleby, law firm for legal and professional
services. At 31 December 2018 EURnil (2017: EURnil) was outstanding.
M Northover was a Director during 2018 and shareholder of PMM Partners
(UK) Limited, the Group's appointed Property Advisor (Since changed
to PMM Residential on signing of the new property advisor agreement
in November 2018). During the year ended 31 December 2018, an amount
of EUR5,947,282 (EUR5,858,791 Management Fees and EUR88,491 Other expenses
and fees) (2017: EUR4,209,000 (EUR4,110,000 Management fees and EUR99,000
Other expenses and fees)) was payable to PMM Partners (UK) Limited.
At 31 December 2018 EUR7,450 (2017: EURNil) was outstanding.
On 1 January 2019, PMM Partners (UK) Limited was replaced as Property
Advisor by PMM Residential Limited. A Property Advisor and Investors
Relations agreement was entered in to between the Group and PMM Residential
Limited also with an effective date of 1 January 2019. Further details
of the fees payable to PMM Residential Limited can be found in note
27.
The Property Advisor is also entitled to an asset and estate management
performance fee. The charge for the period in respect of the performance
fee was EUR3,995,000 (2017: EUR26,339,000). Please refer to note 27
for more details.
The Property Advisor has a controlling stake in IWA Real Estate Gmbh
& Co. KG who are contracted to dispose of condominiums in Berlin on
behalf of the Company. IWA does not receive a fee from the Company in
providing this service.
In March 2015 the Group also entered into an option agreement to acquire
the remaining 5.2% interest in Phoenix Spree Property Fund GmbH & Co.KG
(PSPF) from the remaining partners being M Hilton and P Ruddle both
Directors of PMM Partners (UK) Limited. The options are to be exercised
on the fifth anniversary of the majority interest acquisition for a
period of three months thereafter at the fair value of the remaining
interest. For their role as the limited partner in Phoenix Spree Property
Fund GmbH & Co.KG they were also paid EUR120,000 (2017: EUR120,000)
each.
The Group entered into an unsecured loan agreement with M Hilton and
P Ruddle in connection with the acquisition of PSPF. At the period end
an amount of EUR768,195 (2017: EUR747,120) each was owed to the Group.
The loans bear interest of 4% per annum.
Dividends paid to directors in their capacity as a shareholder amounted
to EUR1,740 (2017: EUR1,527).
34. Events after the reporting date
In April 2019, the Company exchanged contracts for the acquisition of
one individual property in Berlin for the purchase price of EUR2.4 million.
The property is still awaiting completion.
The Company had exchanged contracts for the acquisition of one property
in Berlin with a purchase price of EUR2.2 million prior to the reporting
date, which as at balance sheet date had not yet completed. The purchase
completed in January 2019.
In Q1 2019, the Company exchanged contracts for the sale of one commercial
unit and one residential unit in BoxhagenerStraße with an aggregated
purchase price of EUR1.9 million. The sale of these units subsequently
completed in April 2019.
The Company had exchanged contracts for the sale of three condominiums
in Berlin with aggregated consideration of EUR1.1 million prior to the
reporting date. The sale of these units subsequently completed in Q1
2019.
The Company exchanged contracts for the disposal of the last non-Berlin
property for the sale price of EUR3.9 million prior to the reporting
date, the sale of this property subsequently completed in January 2019.
In February 2019, the Company drew down the final EUR0.9 million portion
of the EUR7.5 million loan with Berliner Sparkasse. EUR6.6 million of
the debt was drawn down in December 2018.
Professional Advisors
Property Advisor from 1 January 2019
PMM Residential Limited
54-56 Jermyn Street
London SW1Y 6LX
to 31 December 2018
PMM Partners (UK) Limited
54-56 Jermyn Street
London SW1Y 6LX
Administrator Estera Fund Administrators (Jersey) Limited
Company Secretary Estera Secretaries (Jersey) Limited
and Registered Office 13-14 Esplanade
St. Helier
Jersey JE1 1EE
Registrar Link Asset Services (Jersey) Limited
12 Castle Street
St. Helier
Jersey JE2 3RT
Principal Banker Barclays Private Clients International
Limited
13 Library Place
St. Helier
Jersey JE4 8NE
UK Legal Advisor Stephenson Harwood LLP
1 Finsbury Circus
London EC2M 7SH
Jersey Legal Advisor Appleby Global Group Services Limited
13-14 Esplanade
St. Helier
Jersey JE1 1EE
German Legal Advisor Mittelstein Rechtsanwälte
as to property law Alsterarkaden 20
20354 Hamburg
Germany
German Legal Advisor as Taylor Wessing Partnerschaftsgesellschaft
mbB
to German partnership law Thurn-und-Taxis-Platz 6
60313 Frankfurt a.M.
Germany
Sponsor and Broker Liberum Capital Limited
(Broker until 17 September Ropemaker Place
2018)
25 Ropemaker Street
London EC2Y 9LY
Broker (from 17 September 2018) Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT
Independent Property Valuer Jones Lang LaSalle GmbH
Rahel-Hirsch-Strasse 10
10557 Berlin
Germany
Auditor RSM UK Audit LLP
25 Farringdon Street
London EC4A 4AB
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR PGUQGCUPBGRQ
(END) Dow Jones Newswires
April 29, 2019 02:01 ET (06:01 GMT)
Phoenix Spree Deutschland (LSE:PSDL)
Gráfica de Acción Histórica
De Mar 2024 a Abr 2024
Phoenix Spree Deutschland (LSE:PSDL)
Gráfica de Acción Histórica
De Abr 2023 a Abr 2024
