International Real Estate Plc
29 February 2008
International Real Estate Plc / Epic: IRE / Index: AIM / Sector: Property
29 February 2008
International Real Estate Plc ('IRE' or 'the Group')
Final Results
International Real Estate Plc, the AIM traded European property investment and
development company, announces its results for the year ended 31 December 2007.
Overview
• Profit after tax of approximately €9.4 million (2006 - approximately
€11.0 million)
• Total group net assets increased to approximately €42.8 million
(2006 - approximately €34.5 million)
• Total group assets increased to approximately €226.3 million (2006 -
approximately €129.1 million)
• Final dividend proposed of 5 pence per share making a total of 10
pence for the year (2006 - 9 pence)
• Ongoing refurbishment programmes aimed at improving lettings, rental
levels and technical standards of properties to add value
• A €32 million two-tranche bond issue, finalised in May 2007
IRE CEO, Daniel Akselson, said, 'The quality of our portfolio in Germany and
Belgium, coupled with active management has resulted in encouraging investment
returns for the year. Whilst we naturally remain cautious following the credit
crunch and subsequent difficulties being experienced in the property market, we
are optimistic about the potential of our carefully chosen projects.'
For further information please visit www.IREplc.com or contact:
Rolf L Nordstrom International Real Estate Plc Tel: +44 (0) 7776 137 400
Daniel Akselson International Real Estate Plc Tel: +31 (0) 653 304 590
David Anderson KBC Peel Hunt Ltd Tel: +44 (0) 20 7418 8900
Oliver Stratton KBC Peel Hunt Ltd Tel: +44 (0) 20 7418 8900
Hugo de Salis St Brides Media & Finance Ltd Tel: +44 (0) 20 7236 1177
Chairman's Statement
I am pleased to report that IRE has had another successful year, despite the
challenging conditions faced by the property market in general. Our main focus
remains on the German property market, where our Berlin office has been further
strengthened to meet the demands created from our growing portfolio.
Importantly, we have completed planned refurbishments in the residential and
commercial market and we are due to complete the ongoing projects during this
and next year. Consequently, IRE is reporting satisfactory financial results
and an 11% increase in the dividend for the year.
I am also pleased to report that IRE's efforts have been recognised through the
winning of a number of industry awards and various positive press articles. Our
latest development, Silver Tower, was featured on rbb, a Berlin TV channel, in
favourable news coverage of the Berlin residential market.
Property Portfolio - Germany
IRE has an extensive low risk property portfolio in Germany, amounting to circa
200,000 sq m divided over circa 2,100 apartments and some 50,000 sq m of office
and commercial space. Whilst this market has showed signs of a slowdown with
decreasing transaction volumes, the Board still sees Germany as central to its
strategy, primarily focussing on the development and investment in residential
properties.
During the year we have acquired a number of new properties in our target areas
and have seen a steady improvement of rental levels for our residential
portfolio as well as decreasing vacancy levels within the refurbished portfolio.
Magdeburg continues to be a key focus for us, and in line with this our
investments in the city centre have continued during the year. We now have a
very well concentrated portfolio occupying some of the city's most sought after
addresses, with a lettable area approaching 75,000 sq m. The mix is
predominately residential units and offices with commercial units on the ground
floor level.
During the period we have, amongst other properties, acquired a circa 5,900 sq m
mixed property on Hegelstrasse/Einsteinstrasse/Leibnitzstrasse, a top location
in central Magdeburg. The property will now undergo an updating and upgrading
programme which will be completed in 2009/2010.
The existing projects in Liebigstrasse and the Sudstadthofe project were delayed
due to some redesign work in order to comply with local conservation
requirements. We are now ready to proceed with the necessary works and
anticipate that they will be concluded during 2009.
Property Portfolio - Belgium
We have been active in the Belgium property market for over 20 years, and have
built a focussed property portfolio in Belgium, which we believe has excellent
potential. This includes the Rue du Gouvernement Provisoire project, where
building work is progressing well and the marketing of units is expected to
commence during 2008.
Notably, we successfully completed works at the landmark IT Tower in central
Brussels according to plan and therefore received an additional payment of circa
€2.2 million in accordance with the transfer agreement from August 2004.
During the year we also entered into an agreement with Shell Research SA to
acquire its circa 88,000 sq m leasehold site close to Brussels where Monnet
Centre International Laboratory, a building with circa 17,425 sq m of lettable
space, was erected in 1988. Completion of the acquisition is anticipated to
occur in May 2008.
The Monnet Centre International Laboratory is located with direct access to the
motorway in Louvain la Neuve, close to the University Campus in Wallonie, which
is approximately 20 minutes from Brussels. It was previously used by Shell
Research RA as a research centre and includes high-class laboratories, offices
and ancillary premises. Following completion of the acquisition, we will have
the possibility to further develop the property and revitalise an old planning
permission to extend the property with circa 50,000 sq m of laboratories,
offices and storage. With its infrastructure and access, we believe that this
development has the potential to add significant value to the Group.
Strategy
The Group's primary strategy is to purchase properties in need of refurbishment,
which are subsequently refurbished and re-let at a higher rate as well as
purchase vacant properties with a view to reorganize and extending them.
This strategy naturally leads to a relatively low initial cash-flow requirement.
However, a healthy increase in cash-flow and enhancement of the underlying
property values from the various projects are later achieved as the schemes are
finalised and re-let. Once the cycle has been completed, we evaluate the future
retention policy for each individual property.
An example of this strategy in action was our investment in a portfolio of
properties in Duren, purchased in 2005 for circa €1.8 million. We carried out a
careful refurbishment programme whereby we reinvested the existing cash-flow
generated by the properties together with some additional funds. The total
purchase and investment programme came to circa €2.2 million. Following this,
we sold the properties for €5.6 million to a German investor. However, the
majority of the results from this investment have been released to the income
statement in previous periods as a consequence of the Group's IFRS accounting
policies.
Results
Results for the year ended 31 December 2007 show revenue of €8.9 million (2006 -
€5.4 million), pre-tax profit of €7.5 million (2006 - €16.8 million) and profit
after taxation of €9.4 million (2006 - €11.0 million). Included within operating
profit are unrealised property revaluation gains, release of provisions
totalling €7.8 million (2006 - €1.1 million) and the additional payment to IRE
of €2.2 million in connection with the finalisation of the IT Tower project. The
Group's cash position as at 31 December 2007 was €21.6 million (2006 - €12.2
million). Total net borrowings after taking into account cash balances amounted
to €128.6 million (2006 - €60.0 million). Total net assets amounted to €42.8
million (2006 - €34.5 million). Whilst gearing has increased, we anticipate a
robust cash-flow from the Group's property portfolio in Germany. The Group
accounts show a tax credit €1.9 million, which was mainly in relation to a
reduction in the deferred tax provision following the lower tax rates from 2008
in Germany.
In May 2007 IRE German Property Holding BV, a Dutch subsidiary company, issued
bonds in the amount of €32 million in a private placement. The bonds were
subsequently listed on the OMX Nordic Exchange Stockholm and the OMX Nordic
Exchange Copenhagen. The bonds were issued with the purpose of refinancing
shareholder loans from IRE plc and a bridging loan from a bank.
Dividend
The Board is proposing a final dividend of 5 pence per share (€0.07 eurocents)
payable on 14 April 2008 to shareholders on the register on 14 March 2008. An
Interim dividend of 5 pence (€0.07 eurocents) was paid on 19 October 2007,
making a total dividend for the year of 10 pence (€0.14 eurocents), up 11% from
9 pence (€0.13 eurocents) on the previous year.
Outlook
Naturally, the turbulence in the world-wide financial markets will affect the
Group's business to a degree. However, the Board remains confident that we will
be able to progress the development of the Group. Our property portfolio in
Germany has a low risk profile and is generating an increasing cash-flow
following completion of the various projects, whilst our new project in Belgium
offers significant potential.
I would like to take this opportunity to thank my fellow directors, the staff,
consultants and all the other people who have worked so hard and diligently
during the year. I look forward to reporting on our progress throughout the
year.
Rolf L. Nordstrom, Chairman 29 February 2008
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2007
Note 2007 2006
€'000 €'000
Revenue 8,884 5,365
Cost of Sales (a) 3,947 (4,793)
Gross Profit 12,831 572
Other operating income 6,128 20,695
Administration expenses (4,544) (3,052)
Other operating expenses (34) (1,932)
Operating Profit 14,381 16,283
Finance income 484 292
Profit on sale of subsidiary - 2,656
Finance costs (7,367) (2,445)
Profit Before Tax 7,498 16,786
Tax (credit)/charge (b) 1,854 (5,785)
Profit for the Year 9,352 11,001
Attributable to:
Equity holders of the Parent
9,330 10,500
Minority Interest
22 501
9,352 11,501
Basic and diluted earnings per share (c) €1.35 €1.59
CONSOLIDATED BALANCE SHEET
As at 31 December 2007
Note 2007 2006
€'000 €'000
Non-Current Assets
Investment properties 193,011 112,036
Available for sale investments - 2
193,011 112,038
Current Assets
Inventories 2,938 1,962
Trade and other receivables 8,796 2,884
Cash and cash equivalents 21,566 12,168
33,300 17,014
Total Assets 226,311 129,052
Current Liabilities
Trade and other payables (27,829) (6,692)
Current tax liabilities (65) (37)
Bank loans (e) (18,050) (8,474)
Provisions (1,250) (9,011)
Finance leases - (37)
(47,194) (24,251)
Non-Current Liabilities
Bank loans (e) (101,179) (63,688)
Bond (e) (30,941) -
Deferred tax liabilities (4,158) (6,056)
Finance leases
- (561)
(136,278) (70,305)
Total Liabilities (183,472) (94,556)
Net Assets 42,839 34,496
Equity
Share capital 4,408 4,408
Share premium account 7,957 7,957
Capital redemption reserve 566 566
Retained earnings 29,385 21,064
Equity Attributable to Equity Holders of the Parent 42,316 33,995
Minority interest 523 501
Total Equity 42,839 34,496
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2007
2007 2007 2006 2006
€'000 €'000 €'000 €'000
Net Cash Inflow/(Outflow) from Operating Activities 15,190 (3,075)
Investing Activities
Interest received 351 273
Acquisition of investment properties (84,838) (39,627)
Disposal of investment properties 9,437 -
Sale of subsidiary undertaking - 4,687
Purchase of subsidiary undertaking - (2,031)
Net Cash Used in Investing Activities (75,050) (36,698)
Financing Activities
Dividends paid (1,009) (805)
Interest paid (7,143) (2,374)
Repayment of borrowings (1,352) (21)
Proceeds of bank borrowings 48,468 38,026
Proceeds of bond issue (net of issue costs) 30,892 -
Finance lease payments (598) -
Net Cash Generated by Financing Activities 69,258 34,826
Net Increase/(Decrease) in Cash and Cash Equivalents 9,398 (4,947)
Cash and Cash Equivalents at Beginning of Year 12,168 17,115
Cash and Cash Equivalents at End of Year 21,566 12,168
NOTES TO THE PRELIMINARY ANNOUNCEMENT
for the year ended 31 December 2007
(a) Cost of sales
Included in costs of sales is a provision release of €7.8m (2006 - €1.1m)
representing the utilisation and release of provisions charged to cost of sales
in previous periods in connection with property disposals.
(b) Tax on profit on ordinary activities
2007 2006
€'000 €'000
The tax credit/(charge) on the profit on ordinary activities for the year was as
follows:
Current tax charge (44) (56)
Deferred taxation credit/(charge) 1,898 (5,729)
1,854 (5,785)
(c) Earnings and net assets per share
2007 2006
Earnings for the purpose of basic and diluted earnings per share being net profit
attributable to equity holders €9,351,955 €11,000,746
Weighted average number of Ordinary Shares for the purpose of basic and diluted
earnings per share
6,927,446 6,927,446
Basic and diluted earnings per share €1.35 €1.59
Net asset value per share €6.18 €4.98
(d) Dividends
2007 2006
€'000 €'000
Amounts recognised as distributions to equity holders in the period
Final dividend for the year ended 31 December 2006 of €0.07 (5.0p) (2005 - €0.06
(4.0p)) per share
505 403
Interim dividend for the year ended 31 December 2007 of €0.07 (5.0p) (2006 - €0.06
(4.0p)) per share
504 402
1,009 805
Proposed final dividend for the year ended 31 December 2007 of €0.07 (5.0p) per share
(2006 - €0.07 (5.0p)) 504 485
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 financial
statements.
NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)
for the year ended 31 December 2007
(e) Bank Overdrafts, Loans and Listed Bonds - Group
31 December 31 December
2007 2006
€'000 €'000
Bank loans 119,229 72,162
The borrowings are repayable as follows:
On demand or within one year 18,050 8,474
In the second year 3,250 3,453
In the third to fifth years inclusive 8,976 5,376
After five years 88,953 54,859
119,229 72,162
Less: Amount due for settlement within 12 months
18,050 8,474
Amount due for settlement after 12 months 101,179 63,688
All borrowings, in both financial periods, are denominated in Euros
During the period IRE German Property Holding BV, a subsidiary company, in a
private placement issued bonds, in the amount of €32 million with the purpose of
refinancing shareholder loans from IRE plc and a bridging loan from a bank. The
bonds are secured on the related properties and the bondholders do not have
legal recourse against IRE plc.
On 23 May 2007 the bonds were dual listed on the OMX Nordic Exchange Stockholm
and on the OMX Nordic Exchange Copenhagen.
The senior bond carries a fixed interest rate of 7.7326% and the junior bond
carries a fixed interest rate of 8.5%. Interest on both tranches is payable
annually in arrears.
The bonds are scheduled to be repaid in full at maturity on 1 March 2015,
subject to the Company not exercising its right to early repayment.
(f) Accounting Policies
The financial information set out in this announcement has been prepared in
accordance with the International Financial Reporting Standards (IFRS's),
adopted for use in the European Union and therefore comply with Article 4 of the
EU IAS Regulation.
(g) Financial information
The financial information set out in this announcement does not constitute the
company's statutory accounts for the years ended 31 December 2007 or 2006, but
is derived from those accounts. Statutory accounts for the year ended 31
December 2006, prepared under IFRS's, have been delivered to the Registrar of
Companies and those for the year ended 31 December 2007 will be delivered
following the company's annual general meeting. The auditors reported on these
accounts; their reports were unqualified and did not contain a statement under
s237(2) or (3) of the Companies Act 1985.
(h) AGM
The Company will hold its AGM at 12.00pm on 8 April 2008 at the Stafford Hotel,
16-18 St. James's Place, London SW1A 1NJ.
This information is provided by RNS
The company news service from the London Stock Exchange