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== Summary ==
== Summary ==


* Sirius Real Estate, the FTSE 250 real estate investment company, has made eight material announcements since our last report (on 12th April 2022).
* Sirius Real Estate, the FTSE 250 real estate investment company, has made eight material announcements since our last report on the company (on 12th April 2022).
*For us, the key highlight of the announcements is that the company has performed exceptionally well in the six months ended 30th September 2022, growing funds from operations (FFO) by 47% over the period.
*For us, the key highlight of the announcements is that the company has performed exceptionally well in the six months ended 30th September 2022, growing funds from operations (FFO) by 47% over the period.  
*Accordingly, we have updated our forecasts, and estimate that the expected return of an investment in Sirius Real Estate over the next 12-months is 57%. In other words, an £100,000 investment in the company is expected to return £157,000 in 12-months time.
*Accordingly, we have updated our forecasts, and estimate that the expected return of an investment in Sirius Real Estate over the next 12-months is 57%. In other words, an £100,000 investment in the company is expected to return £157,000 in 12-months time.
*We note that the degree of risk associated with an investment in Sirius is relatively 'low', with the company's shares having an adjusted beta<ref name=":0">Research shows that an investment has two main types of risks: 1) non-systematic and 2) systematic. Systematic risk is the risk related to the overall market, and non-systematic risk is the risk that's specific to an individual investment. Evidence shows that taking on non-systematic risk is inefficient, and it's, therefore, best to eliminate it; and in most cases, elimination is fairy easy to do [by holding a diversified portfolio of investments (i.e. around 15 investments)]. Accordingly, when assessing the riskiness of an investment, it’s best to look at the systematic risk only (i.e. ignore the non-systematic risk). A key measure of systematic risk is beta, and a main way to determine the riskiness of an investment is to compare the beta of the investment with the beta of the market, which is 1. For example, Sirius's adjusted beta (5 years, monthly data) is 1.06, and is, accordingly, 6% above the market beta (of 1); assuming that a 'low' level of riskiness is 10% or less above the market beta, then the riskiness of investing in the company is considered to be relatively 'low' (1.6%<10%). For estimating an asset's beta, in terms of time period, and frequency of observations, the most common choice is five years of monthly data, yielding 60 observations. In terms of the benchmark, we suggest using the iShares MSCI World ETF. One study of U.S. stocks found support for five years of monthly data over alternatives. The beta value in a future period has been found to be on average closer to the mean value of 1.0, the beta of an average-systematic-risk security, than to the value of the raw beta. Because valuation is forward looking, it is logical to adjust the raw beta so it more accurately predicts a future beta.</ref> that is 1.6% above the market (1.016 vs. 1).
*We note that the degree of risk associated with an investment in Sirius is relatively 'low', with the company's shares having an adjusted beta<ref name=":0">Research shows that an investment has two main types of risks: 1) non-systematic and 2) systematic. Systematic risk is the risk related to the overall market, and non-systematic risk is the risk that's specific to an individual investment. Evidence shows that taking on non-systematic risk is inefficient, and it's, therefore, best to eliminate it; and in most cases, elimination is fairy easy to do [by holding a diversified portfolio of investments (i.e. around 15 investments)]. Accordingly, when assessing the riskiness of an investment, it’s best to look at the systematic risk only (i.e. ignore the non-systematic risk). A key measure of systematic risk is beta, and a main way to determine the riskiness of an investment is to compare the beta of the investment with the beta of the market, which is 1. For example, Sirius's adjusted beta (5 years, monthly data) is 1.06, and is, accordingly, 6% above the market beta (of 1); assuming that a 'low' level of riskiness is 10% or less above the market beta, then the riskiness of investing in the company is considered to be relatively 'low' (1.6%<10%). For estimating an asset's beta, in terms of time period, and frequency of observations, the most common choice is five years of monthly data, yielding 60 observations. In terms of the benchmark, we suggest using the iShares MSCI World ETF. One study of U.S. stocks found support for five years of monthly data over alternatives. The beta value in a future period has been found to be on average closer to the mean value of 1.0, the beta of an average-systematic-risk security, than to the value of the raw beta. Because valuation is forward looking, it is logical to adjust the raw beta so it more accurately predicts a future beta.</ref> that is 1.6% above the market (1.016 vs. 1).
Line 50: Line 50:
During the six month period, revenue increased by 47.7% to €130.6 million (H1 FY2022: €88.4 million), mainly driven by higher rental and service charge. In Germany, like-for-like annualised rent roll improved by 2.4% to €115.2 million (H1 FY2022: €112.5 million), and in the United Kingdom, by 4.1% to €46.5 million (H1 FY2022: €44.7 million). Profit before tax decreased by 3% to €75.7 million (H1 FY2022: €78.2 million).
During the six month period, revenue increased by 47.7% to €130.6 million (H1 FY2022: €88.4 million), mainly driven by higher rental and service charge. In Germany, like-for-like annualised rent roll improved by 2.4% to €115.2 million (H1 FY2022: €112.5 million), and in the United Kingdom, by 4.1% to €46.5 million (H1 FY2022: €44.7 million). Profit before tax decreased by 3% to €75.7 million (H1 FY2022: €78.2 million).


Net current assets increased by 22% to €67 million (H2 FY2022: €55 million), net asset value improved by 1.8% to €1,213 million (H2 FY2022: €1,191 million). Cash stood at €162 million (H2 FY2022: €151 million). The value of the company's investment property increased by 0.3% to €2,081.4 million (H2 FY2022: €2,074.9 million).  
Net current assets increased by 22% to €67 million (H2 FY2022: €55 million), net asset value improved by 1.8% to €1,213 million (H2 FY2022: €1,191 million). Cash stood at €162 million (H2 FY2022: €151 million) and debt at €993 million (H2 FY2022: €996 million). The value of the company's investment property increased by 0.3% to €2,081.4 million (H2 FY2022: €2,074.9 million).  


Cash flows from operating activities increased by 37.5% to €48.1 million (H1 FY2022: €35.0 million), and mainly due to the disposal of properties, cash flows from investing activities was negligible (H1 FY2022: negative €107.5 million). The company's German and UK portfolios saw a respective increase of €20.3 million and £6.3 million, representing a 1.8% and 2.1% like-for-like valuation growth. With no new loans taken during the period. cash flows from financing activities swung to negative €36.5 million (H1 FY2022: positive €194 million). The total dividend per share for the period increased by 32.4% to 2.79 cents (H1 FY2022: 2.04 cents).
Cash flows from operating activities increased by 37.5% to €48.1 million (H1 FY2022: €35.0 million), and mainly due to the disposal of properties, cash flows from investing activities was negligible (H1 FY2022: negative €107.5 million). The company's German and UK portfolios saw a respective increase of €20.3 million and £6.3 million, representing a 1.8% and 2.1% like-for-like valuation growth. With no new loans taken during the period. cash flows from financing activities swung to negative €36.5 million (H1 FY2022: positive €194 million). The total dividend per share for the period increased by 32.4% to 2.79 cents (H1 FY2022: 2.04 cents).
Line 59: Line 59:


Given the rising interest rates and the uncertainty that this and the many other factors affecting the German and UK property markets are causing at the moment, the company has prioritised improving its debt ratios and building up its cash reserves. Net LTV, which reduces the loan balance by free cash (excluding restricted cash balances) in its calculation, was 41.0% (FY2022: 41.6%) whilst interest cover at EBITDA level was 8.1x as at 30th September 2022 (FY2022: 7.3x). The group added that it's fully committed to continue reducing its net LTV to be well within 40% or below in the near term.
Given the rising interest rates and the uncertainty that this and the many other factors affecting the German and UK property markets are causing at the moment, the company has prioritised improving its debt ratios and building up its cash reserves. Net LTV, which reduces the loan balance by free cash (excluding restricted cash balances) in its calculation, was 41.0% (FY2022: 41.6%) whilst interest cover at EBITDA level was 8.1x as at 30th September 2022 (FY2022: 7.3x). The group added that it's fully committed to continue reducing its net LTV to be well within 40% or below in the near term.
 
{| class="wikitable"
== Reaffirmed Investment Rating ==
|+Consolidated Income Statement
On the 7th November 2022, Sirius Real Estate announced that the rating agency Fitch Ratings has reaffirmed the company's BBB investment grade rating with 'Stable Outlook' (Long-Term Issuer Default Rating).
!
 
!Year ended 31 March 2022 (€000)
In its rating, Fitch noted that it expects Sirius's income to remain stable, due to an active focus on occupancy and low affordable rents for the company's out-of-town locations. It also highlighted the benefits of the Sirius operating platform and the resilience of its core, high-yielding portfolio. Fitch anticipates that total average portfolio occupancy levels will remain above 80%.
!Year ended 31 March 2021 (€000)
 
!Movement (%)
== Early refinancing of next major debt expiry ==
|-
On 6th October 2022, Sirius Real Estate announced that it has completed the early refinancing of the the company's next major debt expiry, a €170 million facility with Berlin Hyp AG, approximately one year in advance of the facility's due date.  
|'''Rental Income'''
 
|'''79.2'''
The refinancing comprises a new 7-year, €170 million facility at a fixed interest rate of 4.26%, which will replace and redeem the existing facility upon its expiry on 31 October 2023.
|'''49.6'''
 
|'''+60%'''
As of 30 September 2022, the group had a total of €993 million of outstanding debt, €750 million of which is unsecured. The remaining €243 million comprised mortgage-backed debt, of which the most significant tranche is the newly refinanced €170 million Berlin Hyp AG facility referred to above.
|-
 
|Titanium income
This refinancing facility extends the group's total weighted average debt expiry from 3.8 years to 5.0 years. When the new facility commences just over a year from now, the group's weighted average cost of debt will increase from 1.4% to 1.9%.
|3.5
 
|3.4  
The company has €1.6 billion of unencumbered assets and in excess of €138 million of free cash available. Within the next 12 months, Sirius has a total of €35 million of debt expiring, which it is confident of either extending terms with the existing lenders, replacing with new lenders or paying down.
|
 
|-
== Acquisitions and disposals update ==
|Service charge irrecoverable costs
On 4th October 2022, Sirius Real Estate announced that it has completed three acquisitions in Germany, for €44.6 million.
|(3.7)
 
|(1.7)
These acquisitions were all notarised prior to the end of June and have been predominantly funded using capital recycled from three strategic disposals in Germany and the UK for a combined €33.6 million.
|
 
|-
The disposals have been made at a premium to book value.
|Non-recoverable maintenance
 
|(2.5)
The three disposals were of assets that offered limited further growth opportunities due to location and/or condition, and comprised:
|(1.7)
 
|
The notarisation of a €1.0 million 3,200 sqm non-income producing land plot in Heiligenhaus, Germany which had a book value of €250,000 at the time of notarisation. This asset is being sold to a supermarket chain as part of its expansion plans, with the transaction expected to complete in January 2023.
|-
 
|'''Net Operating Income'''
The three new acquisitions totalling €44.6 million currently generate a combined total of €2.3 million of rental income and €1.6 million of net operating profit annually. The three acquired assets have a combined occupancy of just 54% and offer a range of avenues for Sirius to leverage its significant value creation expertise to grow rental income. The acquired assets comprise:
|'''76.5'''
 
|'''49.6'''
# A €39.8 million (including costs) mixed-use property in Düsseldorf, Germany, situated 2.6 km from the city's international airport. The property comprises mainly office and warehouse/light industrial space and is 55% occupied, offering good value add potential.
|'''+54%'''
# A €3.9 million (including costs) primarily warehouse asset located in a well-developed commercial area in Dreieich, Germany, that is strategically adjacent to an existing property owned by Sirius.  We intend to convert the property into a self-storage facility, adding to our existing SmartSpace Self-Storage brand that now exists in 32 locations across Germany.
|-
# A €0.9 million (including costs) small 239 sqm vacant office building in Potsdam. The property is placed strategically at the entrance to one of the Company's existing sites and directly adjacent to the world famous Babelsberg Film Studios.
|Corporate costs and overheads
 
|(20.8)
The company said that it has identified a number of asset management initiatives within the three newly acquired properties which will allow it to grow rental income and occupancy by leasing into markets where it sees continued strong demand for its products.
|(10.4)  
 
|
The company added that it expects to slow its acquisition pipeline, and that it will also continue to seek to dispose of non-core or mature assets as and when it feels the timing is right.
|-
 
|'''Adjusted EBITDA'''
== Change of Chief Financial Officer ==
|'''55.7'''
On the 16th August 2022, Sirius Real Estate announced that for personal reasons, Diarmuid Kelly has decided to step down as the company's Chief Financial Officer.  
|'''39.2'''
 
|'''+42%'''
Alistair Marks, the Chief Investment Officer and former CFO of the company, has stepped in as the interim CFO. The company has begun the search for a new CFO.
|-
 
|Bank interest
== Sale of Bizspace Camberwell ==
|(6.9)
On 16th May 2022, Sirius Real Estate announced the sale of a business park asset for £16 million, representing a 94% premium to the valuation that the asset was initially acquired by the company in November 2021 (i.e. in less than eight months). The proceeds will be used to invest in higher yielding UK opportunities.
|(4.5)
 
|
Key features of the asset include:
|-
 
|Current tax (excluding tax on disposals)  
* It's located in Camberwell, London.
|(0.3)
* It's multi-tenanted.
|(1.7)
* It comprises approx. 34,700 sq. ft. of industrial and office space, and is 91% occupied.
|
* The sale price represents a net initial yield (NIY), which is the current annualised rent, net of costs, expressed as a percentage of capital value, after adding notional purchaser's costs, of around 2.0%.
|-
 
|'''FFO'''
== Board changes ==
|'''48.5'''
On 13th June 2022, the company announced two board changes.
|'''33.0'''
 
|'''+47%'''
Caroline Britton was appointed to succeed James Peggie as the Senior Independent Director. Caroline has been a non-executive Director of Sirius since June 2020 and chairs the Audit Committee and is a member of the Nomination Committee of the Board.
|-
 
|Depreciation & amortisation of financing fees
Joanne Kenrick was appointed to succeed James Peggie as the chair of the Remuneration Committee. Joanne has been a non-executive Director of Sirius since September 2021 and is a member of the Nomination and Sustainability and Ethics Committees of the Board.
|(3.3)
 
|(1.9)
James Peggie will continue as a non-executive Director and a member of the Audit, Nomination and Remuneration Committees of the Board.
|
 
|-
== Final results ==
|Add back current taxes (excluding tax on disposals)
On 13th June 2022, the company announced its full year results for the year ended 31st March 2022.
|0.3
 
|1.7
During the 12-month period, revenue increased by 27% to €210 million (FY2021: €165 million), and the gain on revaluation of investment properties jumped by 41% to €210 million (FY2021: €165 million); however, mainly due to an impairment charge, higher administrative expenses and interest expenses, the net profit remained more-or-less unchanged at €147 million (FY 2021: €147 million).
|
 
|-
In terms of the financial position of the company, the net current assets increased by more than 3x to €55 million (FY 2021: €17 million), and the net asset value (NAV) rose by by 28% to €1.19 billion (FY 2021: €0.93 billion).
|IFRS 16 & foreign exchange effects
 
|(1.9)  
Cash flows from operating activities increased by 15% to €82 million (FY2021: €71 million), and mainly due to the acquisition of a subsidiary and purchase of investment properties, cash flows used in investing activities increased by almost 6x to €430 million (FY2021: €74 million). Cash flows from financing activities swung to €431 million (FY2021: negative €54 million), driven by the proceeds of loans and the issue of share capital. The total dividend per share for the year increased by 16% to 4.41 cents (FY2021: 3.80%).
|(0.5)
 
|
Funds From Operations (FFO) increased by 22.5% to €74.6 million (FY2021: €60.9 million).
|-
{| class="wikitable"
|'''Adjusted Profit Before Tax'''
|+How do the results compare to our forecasts?
|'''43.6'''
!
|'''32.3'''
!Forecast
|'''+35%'''
!Actual
|-
!Difference (%)
|Adjusting items
|(3.0)<ref>Adjusting items include costs relating to share awards, costs relating to the repayment of secured debt and acquisition costs relating to the acquisition of BizSpace.</ref>
|(7.0)
|
|-
|Surplus/Deficit on revaluation of investment properties
|27.7
|51.5
|
|-
|Goodwill impairment
| -
| -
|
|-
|Gain/Loss on disposal of investment properties
|4.8
|(0.3)  
|
|-
|Change in fair value of derivative financial instruments
|1.2
|0.2
|
|-
|Share of profit in associate not included in FFO
|1.4  
|1.5
|
|-
|'''Profit Before Tax'''
|'''75.7'''
|'''78.2'''
|'''(3)%'''
|}
{| class="wikitable"
|+Consolidated Statement of Financial Position
!
!Year ended 31 March 2022 (€000)
!Year ended 31 March 2021 (€000)
!Movement (%)
|-
|Assets
|
|
|
|-
|Investment properties (owned assets)
|2,082.4
|1,428.5
|46%
|-
|Investment properties (leased assets)
|23.6
|16.3
|45%
|-
|-
|Portfolio value (€'billion)
|Investment in associate
|2.00
|71.1
|2.08
|63.9
|4.00%
|11%
|-
|Plant and equipment
|11.3
|9.8<ref>Includes €3.7m Goodwill.</ref>
|15%
|-
|Trade and other receivables
|45.0<ref>Includes €15m Right of use assets.</ref>
|100.6
|55)%
|-
|-
|FFO (€'million)
|Derivative financial instruments
|72.0
|1.6
|74.6
|0
|3.61%
| -
|-
|-
|FFO/share (€'cents)
|Cash and cash equivalents
|6.58
|162.1
|6.78
|187.6
|3.04%
|(14)%
|-
|-
|Dividend/share (€'cents)
|Total Assets
|4.25
|2,397.1
|4.41
|1,806.7
|3.76%
|33%
|-
|-
|Adjusted NAV/share (€'cents)
|Liabilities
|104.4
|
|108.5
|
|3.93%
|
|-
|Trade and other payables
|(77.0)
|(49.2)
|57%
|-
|Interest bearing bank loans
|(980.4)
|(689.2)
|42%
|-
|Lease liabilities
|(38.7)<ref>Includes €16.7m Lease Liability for Right of use assets.</ref>
|(16.4)
|136%
|-
|Current & Deferred tax liabilities
|(86.2)  
|(68.5)
|26%
|-
|Derivative financial instruments
| -
|(0.5)
|(100)%
|-
|Total Liabilities
|(1,182.3)
|(823.8)
|44%
|-
|Net Assets
|1,214.8
|982.9
|24%
|-
|NAV per share
|103.90c
|92.62c
|12%
|-
|Adjusted NAV per share
|110.72c
|98.80c
|12%
|-
|EPRA NTA per share
|109.47c
|97.02c
|13%
|}
|}


== Financials ==
== Reaffirmed Investment Rating ==
On the 7th November 2022, Sirius Real Estate announced that the rating agency Fitch Ratings has reaffirmed the company's BBB investment grade rating with 'Stable Outlook' (Long-Term Issuer Default Rating).
 
In its rating, Fitch noted that it expects Sirius's income to remain stable, due to an active focus on occupancy and low affordable rents for the company's out-of-town locations. It also highlighted the benefits of the Sirius operating platform and the resilience of its core, high-yielding portfolio. Fitch anticipates that total average portfolio occupancy levels will remain above 80%.


{| class="wikitable"
== Early refinancing of next major debt expiry ==
|+How have are forecasts changed?
On 6th October 2022, Sirius Real Estate announced that it has completed the early refinancing of the the company's next major debt expiry, a €170 million facility with Berlin Hyp AG, approximately one year in advance of the facility's due date.
!
 
! colspan="3" |31 March 2023
The refinancing comprises a new 7-year, €170 million facility at a fixed interest rate of 4.26%, which will replace and redeem the existing facility upon its expiry on 31 October 2023.
! colspan="3" |31 March 2024
 
|-
As of 30 September 2022, the group had a total of €993 million of outstanding debt, €750 million of which is unsecured. The remaining €243 million comprised mortgage-backed debt, of which the most significant tranche is the newly refinanced €170 million Berlin Hyp AG facility referred to above.
!
 
!Old
This refinancing facility extends the group's total weighted average debt expiry from 3.8 years to 5.0 years. When the new facility commences just over a year from now, the group's weighted average cost of debt will increase from 1.4% to 1.9%.
!New
 
!Change (%)
The company has €1.6 billion of unencumbered assets and in excess of €138 million of free cash available. Within the next 12 months, Sirius has a total of €35 million of debt expiring, which it is confident of either extending terms with the existing lenders, replacing with new lenders or paying down.
!Old
 
!New
== Acquisitions and disposals update ==
!Change (%)
On 4th October 2022, Sirius Real Estate announced that it has completed three acquisitions in Germany, for €44.6 million.
|-
 
|Portfolio value (€'billion)
These acquisitions were all notarised prior to the end of June and have been predominantly funded using capital recycled from three strategic disposals in Germany and the UK for a combined €33.6 million.
|2.12
 
|2.12
The disposals have been made at a premium to book value.
|0.00%
 
|2.21
The three disposals were of assets that offered limited further growth opportunities due to location and/or condition, and comprised:
|2.15
 
|(2.71%)
The notarisation of a €1.0 million 3,200 sqm non-income producing land plot in Heiligenhaus, Germany which had a book value of €250,000 at the time of notarisation. This asset is being sold to a supermarket chain as part of its expansion plans, with the transaction expected to complete in January 2023.
|-
 
|FFO (€'million)
The three new acquisitions totalling €44.6 million currently generate a combined total of €2.3 million of rental income and €1.6 million of net operating profit annually. The three acquired assets have a combined occupancy of just 54% and offer a range of avenues for Sirius to leverage its significant value creation expertise to grow rental income. The acquired assets comprise:
|90.1
 
|97.0
# A €39.8 million (including costs) mixed-use property in Düsseldorf, Germany, situated 2.6 km from the city's international airport. The property comprises mainly office and warehouse/light industrial space and is 55% occupied, offering good value add potential.
|7.66%
# A €3.9 million (including costs) primarily warehouse asset located in a well-developed commercial area in Dreieich, Germany, that is strategically adjacent to an existing property owned by Sirius.  We intend to convert the property into a self-storage facility, adding to our existing SmartSpace Self-Storage brand that now exists in 32 locations across Germany.
|95.1
# A €0.9 million (including costs) small 239 sqm vacant office building in Potsdam. The property is placed strategically at the entrance to one of the Company's existing sites and directly adjacent to the world famous Babelsberg Film Studios.
|100.0
 
|5.15%
The company said that it has identified a number of asset management initiatives within the three newly acquired properties which will allow it to grow rental income and occupancy by leasing into markets where it sees continued strong demand for its products.
|-
|FFO/share (€'cents)
|7.75
|8.25
|6.45%
|8.16
|8.50
|4.17%
|-
|Dividend/share (€'cents)
|5.0
|5.4
|8.00%
|5.3
|5.6
|5.66%
|-
|Adjusted NAV/share (€'cents)
|110.9
|109.5
|(1.26%)
|118.0
|114.5
|(2.97%)
|}


== Risks ==
The company added that it expects to slow its acquisition pipeline, and that it will also continue to seek to dispose of non-core or mature assets as and when it feels the timing is right.
As with any investment, investing in Sirius carries a level of risk. Overall, based on the company's market beta (i.e. 1.016), the degree of risk associated with an investment in Sirius is relatively 'low'. Here, to estimate the adjusted beta<ref name=":0" />, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice.  


For us, currently, the biggest risk to the valuation of the company relates to macro-economic factors, in particular unexpected and sudden changes in inflation and interest rates movements, ultimately resulting in a reduction in the affordability and, therefore, demand of the company's assets/properties. With that said, the company has a diverse tenant base and no material dependencies on specific industries, and a track record of buying and building high-returning investment opportunities.  
== Change of Chief Financial Officer ==
On the 16th August 2022, Sirius Real Estate announced that for personal reasons, Diarmuid Kelly has decided to step down as the company's Chief Financial Officer.  


== Valuation ==
Alistair Marks, the Chief Investment Officer and former CFO of the company, has stepped in as the interim CFO. The company has begun the search for a new CFO.
Research suggests that in terms of estimating the expected return of an investment over a period of 12-months or less, the approach that is more accurate is the relative valuation approach, so that's the approach that we suggest using to determine the estimated value of the company.
 
== Sale of Bizspace Camberwell ==
On 16th May 2022, Sirius Real Estate announced the sale of a business park asset for £16 million, representing a 94% premium to the valuation that the asset was initially acquired by the company in November 2021 (i.e. in less than eight months). The proceeds will be used to invest in higher yielding UK opportunities.


==== What's the expected return of an investment in Sirius using the relative valuation approach? ====
Key features of the asset include:
Accordingly, we estimate that the expected return of an investment in Sirius Real Estate Limited over the next 12-months is 57%. In other words, an £100,000 investment in the company is expected to return £157,000 within 12-months from now. The assumptions used to estimate the return figure can be found in the table below.


Assuming that a suitable return level in the 12 months is 10% and Sirius Real Estate Limited achieves its expected return level (of 197%), then an investment in the company is considered to be a 'suitable' one.
* It's located in Camberwell, London.
* It's multi-tenanted.
* It comprises approx. 34,700 sq. ft. of industrial and office space, and is 91% occupied.
* The sale price represents a net initial yield (NIY), which is the current annualised rent, net of costs, expressed as a percentage of capital value, after adding notional purchaser's costs, of around 2.0%.


==== What are the assumptions used to estimate the return figure? ====
== Board changes ==
{| class="wikitable"
On 13th June 2022, the company announced two board changes.
|+Key inputs
 
!Description
Caroline Britton was appointed to succeed James Peggie as the Senior Independent Director. Caroline has been a non-executive Director of Sirius since June 2020 and chairs the Audit Committee and is a member of the Nomination Committee of the Board.
!Value
!Commentary
|-
|Which type of multiple do you want to use?
|P/FFO
|The FFO does not account for depreciation in properties but rather adds back the depreciation value back to the net income. Furthmore, FFO deducts any gains or losses from the sale of assets, since including the transaction would result in discrepancies in the revenues reported in each period. Accordingly, we suggest valuing the company using the Price to Funds From Operations (P/FFO) ratio.
|-
|In regards to the P/FFO multiple, for the FFO figure, which year to you want to use?
|Twelve months ahead
|Research suggests that when using the relative valuation approach, it's best to use a time period of 12 months or less. Accordingly, for the FFO figure, we suggest using the twelve months ahead.
|-
|In regards to the P/FFO multiple, what multiple figure do you want to use?
|18x
|According to Bloomberg, Sirius Real Estate Limited closest peers trade on a multiple of 18x.
|-
|Which financial forecasts to use?
|Proactive Investors
|Here, we have used the forecasts of Proactive Investors.
|-
|What's the current value of the company?
|£981.20 million
|As at 22nd November 2022, the current value of Sirius Real Estate Limited is £981.20 million.
|-
|Which time period do you want to use to estimate the expected return?
|Between now and one year time
|Research suggests that when using the relative valuation approach, it's best to estimate the expected return of the company between now and one year time.
|}


=== Sensitive analysis ===
Joanne Kenrick was appointed to succeed James Peggie as the chair of the Remuneration Committee. Joanne has been a non-executive Director of Sirius since September 2021 and is a member of the Nomination and Sustainability and Ethics Committees of the Board.
The two main inputs that result in the greatest change in the expected return of the Sirius Real Estate Limited investment are, in order of importance (from highest to lowest):


# The P/FFO multiple (the default multiple is 18x); and
James Peggie will continue as a non-executive Director and a member of the Audit, Nomination and Remuneration Committees of the Board.
# The twelve months ahead FFO forecast (the default forecast is €98.78 million).


The impact of a 10% change in those main inputs to the expected return of the Sirius Real Estate Limited investment is shown in the table below.
== Final results ==
{| class="wikitable sortable"
On 13th June 2022, the company announced its full year results for the year ended 31st March 2022.
|+Sirius investment expected return sensitive analysis
!Main input
!10% worse
!Unchanged
!10% better
|-
|The P/FFO multiple
|43%
|57%
|73%
|-
|The twelve months ahead FFO forecast
|43%
|57%
|73%
|}


== Appendix ==
During the 12-month period, revenue increased by 27% to €210 million (FY2021: €165 million), and the gain on revaluation of investment properties jumped by 41% to €210 million (FY2021: €165 million); however, mainly due to an impairment charge, higher administrative expenses and interest expenses, the net profit remained more-or-less unchanged at €147 million (FY 2021: €147 million).
 
In terms of the financial position of the company, the net current assets increased by more than 3x to €55 million (FY 2021: €17 million), and the net asset value (NAV) rose by by 28% to €1.19 billion (FY 2021: €0.93 billion).
 
Cash flows from operating activities increased by 15% to €82 million (FY2021: €71 million), and mainly due to the acquisition of a subsidiary and purchase of investment properties, cash flows used in investing activities increased by almost 6x to €430 million (FY2021: €74 million). Cash flows from financing activities swung to €431 million (FY2021: negative €54 million), driven by the proceeds of loans and the issue of share capital. The total dividend per share for the year increased by 16% to 4.41 cents (FY2021: 3.80%).
 
Funds From Operations (FFO) increased by 22.5% to €74.6 million (FY2021: €60.9 million).
{| class="wikitable"
{| class="wikitable"
|+Peers
|+How do the results compare to our forecasts?
!Company name
!
!Bloomberg ticker
!Forecast
!Primary exchange
!Actual
!Classification
!Difference (%)
!Industry
!Market capitalisation (GBP)
!BF P/FFO
!Yield (%)
!Interest cover (x)
!Total debt/total capital
|-
|-
|Sirius Real Estate Ltd
|Portfolio value (€'billion)
|SRE LN
|2.00
|United Kingdom
|2.08
|Multi Asset Class Own & Develop
|4.00%
|Real Estate Owners & Developers
|979,494,700
|11.5111
|4.08%
|5.42
|46.14%
|-
|-
|FastPartner AB
|FFO (€'million)
|FPARA SS
|72.0
|Sweden
|74.6
|Multi Asset Class Own & Develop
|3.61%
|Real Estate Owners & Developers
|1,170,459,785
| --
|2.93%
|4.50
|48.51%
|-
|-
|Cibus Nordic Real Estate AB
|FFO/share (€'cents)
|CIBUS SS
|6.58
|Sweden
|6.78
|Multi Asset Class Own & Develop
|3.04%
|Real Estate Owners & Developers
|-
|57,4491,440
|Dividend/share (€'cents)
| --
|4.25
|6.78%
|4.41
|3.47
|3.76%
|61.04%
|-
|-
|Shaftesbury PLC
|Adjusted NAV/share (€'cents)
|SHB LN
|104.4
|United Kingdom
|108.5
|Multi Asset Class Own & Develop
|3.93%
|Real Estate Owners & Developers
|}
|1,385,308,138
 
|33.7009
== Financials ==
|2.48%
 
|1.99
{| class="wikitable"
|27.95%
|+How have our forecasts changed?
!
! colspan="3" |31 March 2023
! colspan="3" |31 March 2024
|-
|-
|Intershop Holding AG
!
|ISN SW
!Old
|Switzerland
!New
|Multi Asset Class Own & Develop
!Change (%)
|Real Estate Owners & Developers
!Old
|1,011,223,384
!New
| --
!Change (%)
|4.08%
|(10.25)
|34.63%
|-
|-
|WCM Beteiligungs- und Grundbes
|Portfolio value (€'billion)
|WCMK GR
|2.12
|Germany
|2.12
|Multi Asset Class Own & Develop
|0.00%
|Real Estate Owners & Developers
|2.21
|497,815,111
|2.15
| --
|(2.71%)
|2.86%
|6.18
|2.77%
|-
|-
|Metrovacesa SA
|FFO (€'million)
|MVC SM
|90.1
|Spain
|97.0
|Multi Asset Class Own & Develop
|7.66%
|Real Estate Owners & Developers
|95.1
|874,166,035
|100.0
|25.1504
|5.15%
|30.90%
|N/A
|15.84%
|-
|-
|Brack Capital Properties NV
|FFO/share (€'cents)
|BCNV IT
|7.75
|Italy
|8.25
|Multi Asset Class Own & Develop
|6.45%
|Real Estate Owners & Developers
|8.16
|601,880,806
|8.50
| --
|4.17%
| --
|(11.66)
|42.48%
|-
|-
|TLG Immobilien AG
|Dividend/share (€'cents)
|TLG GR
|5.0
|Germany
|5.4
|Multi Asset Class Own & Develop
|8.00%
|Real Estate Owners & Developers
|5.3
|1,949,040,400
|5.6
|23.0976
|5.66%
|4.70%
|4.89
|15.32%
|-
|-
|GAG Immobilien AG
|Adjusted NAV/share (€'cents)
|GWK3 GR
|110.9
|Germany
|109.5
|Multi Asset Class Own & Develop
|(1.26%)
|Real Estate Owners & Developers
|118.0
|1,097,732,888
|114.5
| --
|(2.97%)
|0.65%
|3.87
|71.78%
|-
|Gateway Real Estate AG
|GTY GR
|Germany
|Multi Asset Class Own & Develop
|Real Estate Owners & Developers
|498,775,280
| --
| --
|0.25
|63.50%
|}
|}


== Appendix ==
== Risks ==
As with any investment, investing in Sirius carries a level of risk. Overall, based on the company's market beta (i.e. 1.016), the degree of risk associated with an investment in Sirius is relatively 'low'. Here, to estimate the adjusted beta<ref name=":0" />, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice.
 
For us, currently, the biggest risk to the valuation of the company relates to macro-economic factors, in particular unexpected and sudden changes in inflation and interest rates movements, ultimately resulting in a reduction in the affordability and, therefore, demand of the company's assets/properties. With that said, the company has a diverse tenant base, with its top 50 tenants generating 45% of annual income in Germany, and 26% of annual income generated by the top 100 tenants in the UK. Sirius also has no material dependencies on specific industries, and a track record of buying and building high-returning investment opportunities. 
 
== Valuation ==
Research suggests that in terms of estimating the expected return of an investment over a period of 12-months or less, the approach that is more accurate is the relative valuation approach, so that's the approach that we suggest using to determine the estimated value of the company.
 
==== What's the expected return of an investment in Sirius using the relative valuation approach? ====
Accordingly, we estimate that the expected return of an investment in Sirius Real Estate Limited over the next 12-months is 57%. In other words, an £100,000 investment in the company is expected to return £157,000 within 12-months from now. The assumptions used to estimate the return figure can be found in the table below.
 
Assuming that a suitable return level in the 12 months is 10% and Sirius Real Estate Limited achieves its expected return level (of 197%), then an investment in the company is considered to be a 'suitable' one.
 
==== What are the assumptions used to estimate the return figure? ====
{| class="wikitable"
{| class="wikitable"
|+Condensed consolidated income statement
|+Key inputs
!
!Description
!Six months ended 30 September 2021 (€000)
!Value
!Six months ended 30 September 2022 (€000)
!Commentary
|-
|-
|Revenue
|Which type of multiple do you want to use?
|88,352
|P/FFO
|130,558
|The FFO does not account for depreciation in properties but rather adds back the depreciation value back to the net income. Furthmore, FFO deducts any gains or losses from the sale of assets, since including the transaction would result in discrepancies in the revenues reported in each period. Accordingly, we suggest valuing the company using the Price to Funds From Operations (P/FFO) ratio.
|-
|-
|Direct costs
|In regards to the P/FFO multiple, for the FFO figure, which year to you want to use?
|(38,843)
|Twelve months ahead
|(57,350)
|Research suggests that when using the relative valuation approach, it's best to use a time period of 12 months or less. Accordingly, for the FFO figure, we suggest using the twelve months ahead.
|-
|-
|Net operating income
|In regards to the P/FFO multiple, what multiple figure do you want to use?
|49,509
|18x
|73,208
|According to Bloomberg, Sirius Real Estate Limited closest peers trade on a multiple of 18x.
|-
|-
|Gain on revaluation of investment properties
|Which financial forecasts to use?
|48,414
|Proactive Investors
|26,812
|Here, we have used the forecasts of Proactive Investors.
|-
|-
|Gain/(loss) on disposal of properties
|What's the current value of the company?
|(400)
|£981.20 million
|4,801
|As at 22nd November 2022, the current value of Sirius Real Estate Limited is £981.20 million.
|-
|-
|Recoveries from prior disposals of subsidiaries
|Which time period do you want to use to estimate the expected return?
|94
|Between now and one year time
|<nowiki>-</nowiki>
|Research suggests that when using the relative valuation approach, it's best to estimate the expected return of the company between now and one year time.
|}
 
=== Sensitive analysis ===
The two main inputs that result in the greatest change in the expected return of the Sirius Real Estate Limited investment are, in order of importance (from highest to lowest):
 
# The P/FFO multiple (the default multiple is 18x); and
# The twelve months ahead FFO forecast (the default forecast is €98.78 million).
 
The impact of a 10% change in those main inputs to the expected return of the Sirius Real Estate Limited investment is shown in the table below.
{| class="wikitable sortable"
|+Sirius investment expected return sensitive analysis
!Main input
!10% worse
!Unchanged
!10% better
|-
|-
|Administrative expenses
|The P/FFO multiple
|(12,311)
|43%
|(24,809)
|57%
|73%
|-
|-
|Share of profit of associates
|The twelve months ahead FFO forecast
|2,463
|43%
|2,597
|57%
|73%
|}
 
== Appendix ==
{| class="wikitable"
|+Peers
!Company name
!Bloomberg ticker
!Primary exchange
!Classification
!Industry
!Market capitalisation (GBP)
!BF P/FFO
!Yield (%)
!Interest cover (x)
!Total debt/total capital
|-
|-
|Operating profit
|Sirius Real Estate Ltd
|87,769
|SRE LN
|82,609
|United Kingdom
|Multi Asset Class Own & Develop
|Real Estate Owners & Developers
|979,494,700
|11.5111
|4.08%
|5.42
|46.14%
|-
|-
|Finance income
|FastPartner AB
|1,596
|FPARA SS
|1,129
|Sweden
|Multi Asset Class Own & Develop
|Real Estate Owners & Developers
|1,170,459,785
| --
|2.93%
|4.50
|48.51%
|-
|-
|Finance expense
|Cibus Nordic Real Estate AB
|(11,347)
|CIBUS SS
|(9,249)
|Sweden
|Multi Asset Class Own & Develop
|Real Estate Owners & Developers
|57,4491,440
| --
|6.78%
|3.47
|61.04%
|-
|-
|Change in fair value of derivative financial instruments
|Shaftesbury PLC
|160
|SHB LN
|1,244
|United Kingdom
|Multi Asset Class Own & Develop
|Real Estate Owners & Developers
|1,385,308,138
|33.7009
|2.48%
|1.99
|27.95%
|-
|-
|Net finance costs
|Intershop Holding AG
|(9,591)
|ISN SW
|(6,876)
|Switzerland
|Multi Asset Class Own & Develop
|Real Estate Owners & Developers
|1,011,223,384
| --
|4.08%
|(10.25)
|34.63%
|-
|-
|Profit before tax
|WCM Beteiligungs- und Grundbes
|78,178
|WCMK GR
|75,733
|Germany
|Multi Asset Class Own & Develop
|Real Estate Owners & Developers
|497,815,111
| --
|2.86%
|6.18
|2.77%
|-
|-
|Taxation
|Metrovacesa SA
|(10,386)
|MVC SM
|(5,673)
|Spain
|Multi Asset Class Own & Develop
|Real Estate Owners & Developers
|874,166,035
|25.1504
|30.90%
|N/A
|15.84%
|-
|-
|Profit for the period after tax
|Brack Capital Properties NV
|67,792
|BCNV IT
|70,060
|Italy
|Multi Asset Class Own & Develop
|Real Estate Owners & Developers
|601,880,806
| --
| --
|(11.66)
|42.48%
|-
|-
|Profit attributable to:
|TLG Immobilien AG
|
|TLG GR
|
|Germany
|Multi Asset Class Own & Develop
|Real Estate Owners & Developers
|1,949,040,400
|23.0976
|4.70%
|4.89
|15.32%
|-
|-
|Owners of the Company
|GAG Immobilien AG
|67,738
|GWK3 GR
|70,008
|Germany
|Multi Asset Class Own & Develop
|Real Estate Owners & Developers
|1,097,732,888
| --
|0.65%
|3.87
|71.78%
|-
|-
|Non-controlling interest
|Gateway Real Estate AG
|54
|GTY GR
|52
|Germany
|Multi Asset Class Own & Develop
|Real Estate Owners & Developers
|498,775,280
| --
| --
|0.25
|63.50%
|}
 
{| class="wikitable"
|+Condensed consolidated income statement
!
!Six months ended 30 September 2021 (€000)
!Six months ended 30 September 2022 (€000)
|-
|-
|
|Revenue
|67,792
|88,352
|70,060
|130,558
|-
|-
|Earnings per share
|Direct costs
|
|(38,843)
|
|(57,350)
|-
|-
|Basic earnings per share
|Net operating income
|6.44c
|49,509
|6.00c
|73,208
|-
|-
|Diluted earnings per share
|Gain on revaluation of investment properties
|6.33c
|48,414
|5.92c
|26,812
|}
{| class="wikitable"
|+Condensed consolidated statement of financial position
!
!Six months ended 30 September 2021 (€000)
!Six months ended 30 September 2022 (€000)
|-
|-
|Non-current assets
|Gain/(loss) on disposal of properties
|
|(400)
|
|4,801
|-
|-
|Investment properties
|Recoveries from prior disposals of subsidiaries
|2,100,004
|94
|2,105,046
|<nowiki>-</nowiki>
|-
|-
|Plant and equipment
|Administrative expenses
|5,492
|(12,311)
|7,199
|(24,809)
|-
|-
|Intangible assets
|Share of profit of associates
|4,283
|2,463
|4,129
|2,597
|-
|-
|Right of use assets
|Operating profit
|14,996
|87,769
|15,259
|82,609
|-
|-
|Other non-current financial assets
|Finance income
|48,330
|1,596
|48,409
|1,129
|-
|-
|Investment in associates
|Finance expense
|24,142
|(11,347)
|26,739
|(9,249)
|-
|-
|Total non-current assets
|Change in fair value of derivative financial instruments
|2,197,247
|160
|2,206,781
|1,244
|-
|-
|Current assets
|Net finance costs
|
|(9,591)
|
|(6,876)
|-
|-
|Trade and other receivables
|Profit before tax
|24,571
|78,178
|24,420
|75,733
|-
|-
|Derivative financial instruments
|Taxation
|329
|(10,386)
|1,573
|(5,673)
|-
|-
|Cash and cash equivalents
|Profit for the period after tax
|150,966
|67,792
|162,098
|70,060
|-
|-
|Total current assets
|Profit attributable to:
|175,866
|
|188,091
|
|-
|-
|Assets held for sale
|Owners of the Company
|13,750
|67,738
|1,000
|70,008
|-
|-
|Total assets
|Non-controlling interest
|2,386,863
|54
|2,395,872
|52
|-
|
|67,792
|70,060
|-
|-
|Current liabilities
|Earnings per share
|
|
|
|
|-
|-
|Trade and other payables
|Basic earnings per share
|(89,335)
|6.44c
|(76,993)
|6.00c
|-
|-
|Interest-bearing loans and borrowings
|Diluted earnings per share
|(19,630)
|6.33c
|(37,243)
|5.92c
|-
|}
|Lease liabilities
{| class="wikitable"
|(1,090)
|+Condensed consolidated statement of financial position
|(1,458)
!
!Six months ended 30 September 2021 (€000)
!Six months ended 30 September 2022 (€000)
|-
|-
|Current tax liabilities
|Non-current assets
|(10,423)
|(4,978)
|-
|Total current liabilities
|(120,478)
|(120,672)
|-
|Non-current liabilities
|
|
|
|
|-
|-
|Interest-bearing loans and borrowings
|Investment properties
|(961,863)
|2,100,004
|(943,176)
|2,105,046
|-
|-
|Lease liabilities
|Plant and equipment
|(37,571)
|5,492
|(37,233)
|7,199
|-
|-
|Deferred tax liabilities
|Intangible assets
|(75,893)
|4,283
|(81,220)
|4,129
|-
|-
|Total non-current liabilities
|Right of use assets
|(1,075,327)
|14,996
|(1,061,629)
|15,259
|-
|-
|Total liabilities
|Other non-current financial assets
|(1,195,805)
|48,330
|(1,182,301)
|48,409
|-
|-
|Net assets
|Investment in associates
|1,191,058
|24,142
|1,213,571
|26,739
|-
|Total non-current assets
|2,197,247
|2,206,781
|-
|-
|Equity
|Current assets
|
|
|
|
|-
|-
|Issued share capital
|Trade and other receivables
|<nowiki>-</nowiki>
|24,571
|<nowiki>-</nowiki>
|24,420
|-
|-
|Other distributable reserve
|Derivative financial instruments
|570,369
|329
|544,419
|1,573
|-
|-
|Own shares held
|Cash and cash equivalents
|(6,274)
|150,966
|(8,329)
|162,098
|-
|-
|Foreign currency translation reserve
|Total current assets
|(1,701)
|175,866
|(21,243)
|188,091
|-
|-
|Retained earnings
|Assets held for sale
|628,258
|13,750
|698,266
|1,000
|-
|-
|Total equity attributable to the owners of the Company
|Total assets
|1,190,652
|2,386,863
|1,213,113
|2,395,872
|-
|-
|Non-controlling interest
|Current liabilities
|406
|
|458
|
|-
|-
|Total equity
|Trade and other payables
|1,191,058
|(89,335)
|1,213,571
|(76,993)
|}
{| class="wikitable"
|+Condensed consolidated statement of cash flow
!
!Six months ended 30 September 2021 (€000)
!Six months ended 30 September 2022 (€000)
|-
|-
|'''Operating activities'''
|Interest-bearing loans and borrowings
|
|(19,630)
|
|(37,243)
|-
|-
|Profit for the period after tax
|Lease liabilities
|67,792
|(1,090)
|70,060
|(1,458)
|-
|-
|Taxation
|Current tax liabilities
|10,386
|(10,423)
|5,673
|(4,978)
|-
|-
|Profit for the period before tax
|Total current liabilities
|78,178
|(120,478)
|75,733
|(120,672)
|-
|-
|(Gain)/loss on disposal of properties
|Non-current liabilities
|400
|
|(4,801)
|
|-
|-
|Net exchange differences
|Interest-bearing loans and borrowings
|<nowiki>-</nowiki>
|(961,863)
|(309)
|(943,176)
|-
|-
|Share-based payments
|Lease liabilities
|1,403
|(37,571)
|1,947
|(37,233)
|-
|-
|Gain on revaluation of investment properties
|Deferred tax liabilities
|(48,414)
|(75,893)
|(26,812)
|(81,220)
|-
|-
|Change in fair value of derivative financial instruments
|Total non-current liabilities
|(160)
|(1,075,327)
|(1,244)
|(1,061,629)
|-
|-
|Depreciation of property, plant and equipment
|Total liabilities
|349
|(1,195,805)
|1,027
|(1,182,301)
|-
|-
|Amortisation of intangible assets
|Net assets
|564
|1,191,058
|629
|1,213,571
|-
|-
|Depreciation of right of use assets
|Equity
|260
|
|1,141
|
|-
|-
|Share of profit of associates
|Issued share capital
|(2,463)
|<nowiki>-</nowiki>
|(2,597)
|<nowiki>-</nowiki>
|-
|-
|Finance income
|Other distributable reserve
|(1,596)
|570,369
|(1,129)
|544,419
|-
|-
|Finance expense
|Own shares held
|11,347
|(6,274)
|9,249
|(8,329)
|-
|-
|'''Changes in working capital'''
|Foreign currency translation reserve
|
|(1,701)
|  
|(21,243)
|-
|-
|Decrease/(increase) in trade and other receivables
|Retained earnings
|(2,598)
|628,258
|3,786
|698,266
|-
|-
|Decrease in trade and other payables
|Total equity attributable to the owners of the Company
|(2,053)
|1,190,652
|(5,848)
|1,213,113
|-
|-
|Taxation paid
|Non-controlling interest
|(256)
|406
|(2,717)
|458
|-
|-
|Cash flows from operating activities
|Total equity
|34,961
|1,191,058
|48,055
|1,213,571
|}
{| class="wikitable"
|+Condensed consolidated statement of cash flow
!
!Six months ended 30 September 2021 (€000)
!Six months ended 30 September 2022 (€000)
|-
|-
|Investing activities
|'''Operating activities'''
|
|
|
|
|-
|-
|Purchase of investment properties
|Profit for the period after tax
|(20,221)
|67,792
|(832)
|70,060
|-
|-
|Prepayments relating to new acquisitions
|Taxation
|(75,771)
|10,386
|(3,639)
|5,673
|-
|-
|Capital expenditure on investment properties
|Profit for the period before tax
|(10,494)
|78,178
|(11,904)
|75,733
|-
|-
|Purchase of plant and equipment and intangible assets
|(Gain)/loss on disposal of properties
|(1,461)
|400
|(3,210)
|(4,801)
|-
|-
|Proceeds on disposal of properties (including held for sale)
|Net exchange differences
|<nowiki>-</nowiki>
|<nowiki>-</nowiki>
|18,593
|(309)
|-
|-
|Increase in loan receivable due from associates
|Share-based payments
|(1,124)
|1,403
|(74)
|1,947
|-
|-
|Interest received
|Gain on revaluation of investment properties
|1,596
|(48,414)
|1,129
|(26,812)
|-
|-
|'''Cash flows from/(used in) investing activities'''
|Change in fair value of derivative financial instruments
|'''(107,475)'''
|(160)
|'''63'''
|(1,244)
|-
|-
|'''Financing activities'''
|Depreciation of property, plant and equipment
|
|349
|  
|1,027
|-
|-
|Shares purchased
|Amortisation of intangible assets
|<nowiki>-</nowiki>
|564
|(2,389)
|629
|-
|-
|Payment relating to exercise of share options
|Depreciation of right of use assets
|(2,020)
|260
|(1,686)
|1,141
|-
|-
|Dividends paid to owners of the Company
|Share of profit of associates
|(11,381)
|(2,463)
|(26,211)
|(2,597)
|-
|-
|Dividends paid to non-controlling interest
|Finance income
|(5)
|(1,596)
|<nowiki>-</nowiki>
|(1,129)
|-
|-
|Proceeds from loans
|Finance expense
|400,000
|11,347
|<nowiki>-</nowiki>
|9,249
|-
|-
|Repayment of loans
|'''Changes in working capital'''
|(173,791)
|
|(2,699)
|  
|-
|-
|Payment of principal portion of lease liabilities
|Decrease/(increase) in trade and other receivables
|(2,931)
|(2,598)
|(775)
|3,786
|-
|-
|Exit fees/prepayment of financing penalties
|Decrease in trade and other payables
|(3,697)
|(2,053)
|<nowiki>-</nowiki>
|(5,848)
|-
|-
|Capitalised loan issue cost
|Taxation paid
|(7,559)
|(256)
|<nowiki>-</nowiki>
|(2,717)
|-
|-
|Finance charges paid
|Cash flows from operating activities
|(4,170)
|34,961
|(2,747)
|48,055
|-
|-
|'''Cash flows (used in)/from financing activities'''
|Investing activities
|'''194,446'''
|
|'''(36,507)'''
|
|-
|-
|'''Increase in cash and cash equivalents'''
|Purchase of investment properties
|'''121,932'''
|(20,221)
|'''11,611'''
|(832)
|-
|Prepayments relating to new acquisitions
|(75,771)
|(3,639)
|-
|-
|'''Net exchange difference'''
|Capital expenditure on investment properties
|'''-'''
|(10,494)
|'''(479)'''
|(11,904)
|-
|-
|Cash and cash equivalents as at the beginning of the period
|Purchase of plant and equipment and intangible assets
|65,674
|(1,461)
|150,966
|(3,210)
|-
|-
|'''Cash and cash equivalents as at the period end'''
|Proceeds on disposal of properties (including held for sale)
|'''187,606'''
|<nowiki>-</nowiki>
|'''162,098'''
|18,593
|}
 
 
{| class="wikitable"
|+Consolidated income statement
!
!Year ended 31 March 2021 (€000)
!Year ended 31 March 2022 (€000)
!Year ended 31 March 2023 (€000)
!Year ended 31 March 2024 (€000)
|-
|-
|Revenue
|Increase in loan receivable due from associates
|165,361
|(1,124)
|210,182
|(74)
|154,500
|159,000
|-
|-
|Direct costs
|Interest received
|(71,541)
|1,596
|(87,689)
|1,129
|
|
|-
|-
|'''Net operating income'''
|'''Cash flows from/(used in) investing activities'''
|'''93,820'''
|'''(107,475)'''
|'''122,493'''
|'''63'''
|
|
|-
|-
|Gain on revaluation of investment properties
|'''Financing activities'''
|99,585
|140,884
|
|
|
|
|-
|-
|(Loss)/gain on disposal of properties
|Shares purchased
|54
|<nowiki>-</nowiki>
|(623)
|(2,389)
|
|
|-
|-
|Recoveries from prior disposals of subsidiaries
|Payment relating to exercise of share options
|65
|(2,020)
|94
|(1,686)
|
|
|-
|-
|Administrative expenses
|Dividends paid to owners of the Company
|(27,823)
|(11,381)
|(40,718)
|(26,211)
|
|
|-
|-
|Goodwill impairment
|Dividends paid to non-controlling interest
|(5)
|<nowiki>-</nowiki>
|<nowiki>-</nowiki>
|(40,906)
|
|
|-
|-
|Share of profit of associates
|Proceeds from loans
|4,977
|400,000
|6,940
|<nowiki>-</nowiki>
|
|
|-
|-
|'''Operating profit'''
|Repayment of loans
|'''170,678'''
|(173,791)
|'''188,164'''
|(2,699)
|
|
|-
|-
|Finance income
|Payment of principal portion of lease liabilities
|2,712
|(2,931)
|2,986
|(775)
|
|
|-
|-
|Finance expense
|Exit fees/prepayment of financing penalties
|(9,869)
|(3,697)
|(23,219)
|<nowiki>-</nowiki>
|
|
|-
|-
|Change in fair value of derivative financial instruments
|Capitalised loan issue cost
|136
|(7,559)
|996
|<nowiki>-</nowiki>
|
|
|-
|-
|'''Net finance costs'''
|Finance charges paid
|'''(7,021)'''
|(4,170)
|'''(19,237)'''
|(2,747)
|
|
|-
|-
|'''Profit before tax'''
|'''Cash flows (used in)/from financing activities'''
|'''163,657'''
|'''194,446'''
|'''168,927'''
|'''(36,507)'''
|91,570
|95,770
|-
|-
|Taxation
|'''Increase in cash and cash equivalents'''
|(16,097)
|'''121,932'''
|(20,935)
|'''11,611'''
|
|
|-
|-
|'''Profit for the year after tax'''
|'''Net exchange difference'''
|'''147,560'''
|'''-'''
|'''147,992'''
|'''(479)'''
|95,500
|97,950
|-
|-
|'''Profit attributable to:'''
|Cash and cash equivalents as at the beginning of the period
|
|65,674
|
|150,966
|
|
|-
|-
|Owners of the Company
|'''Cash and cash equivalents as at the period end'''
|147,451
|'''187,606'''
|147,873
|'''162,098'''
|95,500
|}
|97,950
 
 
{| class="wikitable"
|+Consolidated income statement
!
!Year ended 31 March 2021 (€000)
!Year ended 31 March 2022 (€000)
!Year ended 31 March 2023 (€000)
!Year ended 31 March 2024 (€000)
|-
|Revenue
|165,361
|210,182
|154,500
|159,000
|-
|-
|Non-controlling interest
|Direct costs
|109
|(71,541)
|119
|(87,689)
|
|
|
|
|-
|-
|'''Net operating income'''
|'''93,820'''
|'''122,493'''
|
|
|147,560
|
|147,992
|-
|Gain on revaluation of investment properties
|99,585
|140,884
|
|
|
|
|-
|-
|'''Earnings per share'''
|(Loss)/gain on disposal of properties
|54
|(623)
|
|
|
|
|-
|Recoveries from prior disposals of subsidiaries
|65
|94
|
|
|
|
|-
|-
|Basic earnings per share
|Administrative expenses
|14.16c
|(27,823)
|13.48c
|(40,718)
|8.00c
|
|8.00c
|
|-
|-
|Diluted earnings per share
|Goodwill impairment
|13.96c
|<nowiki>-</nowiki>
|13.29c
|(40,906)
|8.00c
|
|8.00c
|
|}
{| class="wikitable"
|+Consolidated statement of financial position
!
!Year ended 31 March 2021 (€000)
!Year ended 31 March 2022 (€000)
|-
|-
|'''Non-current assets'''
|Share of profit of associates
|4,977
|6,940
|
|
|
|
|-
|-
|Investment properties
|'''Operating profit'''
|1,362,192
|'''170,678'''
|2,100,004
|'''188,164'''
|
|
|-
|-
|Plant and equipment
|Finance income
|2,682
|2,712
|5,492
|2,986
|
|
|-
|-
|Intangible assets
|Finance expense
|6,568
|(9,869)
|4,283
|(23,219)
|
|
|-
|-
|Right of use assets
|Change in fair value of derivative financial instruments
|1,919
|136
|14,996
|996
|
|
|-
|-
|Other non-current financial assets
|'''Net finance costs'''
|44,960
|'''(7,021)'''
|48,330
|'''(19,237)'''
|
|
|-
|-
|Investment in associates
|'''Profit before tax'''
|17,202
|'''163,657'''
|24,142
|'''168,927'''
|91,570
|95,770
|-
|-
|'''Total non-current assets'''
|Taxation
|'''1,435,523'''
|(16,097)
|'''2,197,247'''
|(20,935)
|-
|'''Current assets'''
|
|
|
|
|-
|-
|Trade and other receivables
|'''Profit for the year after tax'''
|18,731
|'''147,560'''
|24,571
|'''147,992'''
|95,500
|97,950
|-
|-
|Derivative financial instruments
|'''Profit attributable to:'''
|70
|
|329
|
|
|
|-
|-
|Cash and cash equivalents
|Owners of the Company
|65,674
|147,451
|150,966
|147,873
|95,500
|97,950
|-
|-
|'''Total current assets'''
|Non-controlling interest
|'''84,475'''
|109
|'''175,866'''
|119
|
|
|-
|-
|Assets held for sale
|
|<nowiki>-</nowiki>
|147,560
|13,750
|147,992
|
|
|-
|-
|'''Total assets'''
|'''Earnings per share'''
|'''1,519,998'''
|
|'''2,386,863'''
|
|-
|'''Current liabilities'''
|
|
|
|
|-
|-
|Trade and other payables
|Basic earnings per share
|(50,527)
|14.16c
|(89,335)
|13.48c
|8.00c
|8.00c
|-
|-
|Interest-bearing loans and borrowings
|Diluted earnings per share
|(9,114)
|13.96c
|(19,630)
|13.29c
|8.00c
|8.00c
|}
{| class="wikitable"
|+Consolidated statement of financial position
!
!Year ended 31 March 2021 (€000)
!Year ended 31 March 2022 (€000)
|-
|-
|Lease liabilities
|'''Non-current assets'''
|(5,857)
|
|(1,090)
|
|-
|-
|Current tax liabilities
|Investment properties
|(2,063)
|1,362,192
|(10,423)
|2,100,004
|-
|-
|Derivative financial instruments
|Plant and equipment
|(414)
|2,682
|<nowiki>-</nowiki>
|5,492
|-
|-
|'''Total current liabilities'''
|Intangible assets
|'''(67,975)'''
|6,568
|'''(120,478)'''
|4,283
|-
|-
|'''Non-current liabilities'''
|Right of use assets
|
|1,919
|
|14,996
|-
|-
|Interest-bearing loans and borrowings
|Other non-current financial assets
|(458,940)
|44,960
|(961,863)
|48,330
|-
|-
|Lease liabilities
|Investment in associates
|(9,130)
|17,202
|(37,571)
|24,142
|-
|-
|Derivative financial instruments
|'''Total non-current assets'''
|(797)
|'''1,435,523'''
|<nowiki>-</nowiki>
|'''2,197,247'''
|-
|-
|Deferred tax liabilities
|'''Current assets'''
|(56,331)
|
|(75,893)
|
|-
|-
|'''Total non-current liabilities'''
|Trade and other receivables
|'''(525,198)'''
|18,731
|'''(1,075,327)'''
|24,571
|-
|-
|'''Total liabilities'''
|Derivative financial instruments
|'''(593,173)'''
|70
|'''(1,195,805)'''
|329
|-
|-
|'''Net assets'''
|Cash and cash equivalents
|'''926,825'''
|65,674
|'''1,191,058'''
|150,966
|-
|-
|'''Equity'''
|'''Total current assets'''
|
|'''84,475'''
|
|'''175,866'''
|-
|-
|Issued share capital
|Assets held for sale
|<nowiki>-</nowiki>
|<nowiki>-</nowiki>
|<nowiki>-</nowiki>
|13,750
|-
|-
|Other distributable reserve
|'''Total assets'''
|449,051
|'''1,519,998'''
|570,369
|'''2,386,863'''
|-
|-
|Own shares held
|'''Current liabilities'''
|(2,903)
|
|(6,274)
|
|-
|-
|Foreign currency translation reserve
|Trade and other payables
|<nowiki>-</nowiki>
|(50,527)
|(1,701)
|(89,335)
|-
|-
|Retained earnings
|Interest-bearing loans and borrowings
|480,385
|(9,114)
|628,258
|(19,630)
|-
|-
|'''Total equity attributable to the owners of the Company'''
|Lease liabilities
|'''926,533'''
|(5,857)
|'''1,190,652'''
|(1,090)
|-
|-
|Non-controlling interest
|Current tax liabilities
|292
|(2,063)
|406
|(10,423)
|-
|Derivative financial instruments
|(414)
|<nowiki>-</nowiki>
|-
|-
|'''Total equity'''
|'''Total current liabilities'''
|'''926,825'''
|'''(67,975)'''
|'''1,191,058'''
|'''(120,478)'''
|}
{| class="wikitable"
|+Consolidated statement of cash flows
!
!Year ended 31 March 2021 (€000)
!Year ended 31 March 2022 (€000)
|-
|-
|'''Operating activities'''
|'''Non-current liabilities'''
|
|
|
|
|-
|-
|Profit for the year after tax
|Interest-bearing loans and borrowings
|147,560
|(458,940)
|147,992
|(961,863)
|-
|-
|Taxation
|Lease liabilities
|16,097
|(9,130)
|20,935
|(37,571)
|-
|-
|Profit for the year before tax
|Derivative financial instruments
|163,657
|(797)
|168,927
|<nowiki>-</nowiki>
|-
|-
|Loss/(gain) on disposal of properties
|Deferred tax liabilities
|(54)
|(56,331)
|623
|(75,893)
|-
|-
|Recoveries from prior disposals of subsidiaries
|'''Total non-current liabilities'''
|(65)
|'''(525,198)'''
|(94)
|'''(1,075,327)'''
|-
|-
|Net exchange differences
|'''Total liabilities'''
|<nowiki>-</nowiki>
|'''(593,173)'''
|(1,975)
|'''(1,195,805)'''
|-
|-
|Share-based payments
|'''Net assets'''
|3,148
|'''926,825'''
|4,173
|'''1,191,058'''
|-
|-
|Gain on revaluation of investment properties
|'''Equity'''
|(99,585)
|
|(140,884)
|
|-
|-
|Change in fair value of derivative financial instruments
|Issued share capital
|(136)
|<nowiki>-</nowiki>
|(996)
|<nowiki>-</nowiki>
|-
|-
|Depreciation of property, plant and equipment
|Other distributable reserve
|669
|449,051
|1,167
|570,369
|-
|-
|Amortisation of intangible assets
|Own shares held
|897
|(2,903)
|1,164
|(6,274)
|-
|-
|Depreciation of right of use assets
|Foreign currency translation reserve
|521
|843
|-
|Goodwill impairment
|<nowiki>-</nowiki>
|<nowiki>-</nowiki>
|40,906
|(1,701)
|-
|-
|Share of profit of associates
|Retained earnings
|(4,977)
|480,385
|(6,940)
|628,258
|-
|-
|Finance income
|'''Total equity attributable to the owners of the Company'''
|(2,712)
|'''926,533'''
|(2,986)
|'''1,190,652'''
|-
|Non-controlling interest
|292
|406
|-
|-
|Finance expense
|'''Total equity'''
|9,869
|'''926,825'''
|23,219
|'''1,191,058'''
|}
{| class="wikitable"
|+Consolidated statement of cash flows
!
!Year ended 31 March 2021 (€000)
!Year ended 31 March 2022 (€000)
|-
|-
|'''Changes in working capital'''
|'''Operating activities'''
|
|
|
|
|-
|-
|Increase in trade and other receivables
|Profit for the year after tax
|(2,518)
|147,560
|(5,196)
|147,992
|-
|-
|Increase in trade and other payables
|Taxation
|2,913
|16,097
|3,470
|20,935
|-
|-
|Taxation paid
|Profit for the year before tax
|(632)
|163,657
|(3,671)
|168,927
|-
|-
|'''Cash flows from operating activities'''
|Loss/(gain) on disposal of properties
|'''70,995'''
|(54)
|'''81,750'''
|623
|-
|-
|'''Investing activities'''
|Recoveries from prior disposals of subsidiaries
|
|(65)
|
|(94)
|-
|-
|Purchase of investment properties
|Net exchange differences
|(35,484)
|(162,844)
|-
|Prepayments relating to new acquisitions
|<nowiki>-</nowiki>
|<nowiki>-</nowiki>
|(1,860)
|(1,975)
|-
|-
|Proceeds from loss on control of subsidiaries (net of cash disposed)
|Share-based payments
|65
|3,148
|94
|4,173
|-
|-
|Capital expenditure on investment properties
|Gain on revaluation of investment properties
|(31,104)
|(99,585)
|(23,786)
|(140,884)
|-
|-
|Purchase of plant and equipment and intangible assets
|Change in fair value of derivative financial instruments
|(2,718)
|(136)
|(3,540)
|(996)
|-
|-
|Acquisition of a subsidiary (net of cash acquired)
|Depreciation of property, plant and equipment
|<nowiki>-</nowiki>
|669
|(254,730)
|1,167
|-
|-
|Proceeds on disposal of properties (including held for sale)
|Amortisation of intangible assets
|30
|897
|15,297
|1,164
|-
|-
|Increase in loans receivable due from associates
|Depreciation of right of use assets
|(5,950)
|521
|(1,124)
|843
|-
|-
|Interest received
|Goodwill impairment
|1,627
|<nowiki>-</nowiki>
|2,986
|40,906
|-
|-
|'''Cash flows used in investing activities'''
|Share of profit of associates
|'''(73,534)'''
|(4,977)
|'''(429,507)'''
|(6,940)
|-
|Finance income
|(2,712)
|(2,986)
|-
|Finance expense
|9,869
|23,219
|-
|-
|'''Financing activities'''
|'''Changes in working capital'''
|
|
|
|
|-
|-
|Proceeds from issue of share capital
|Increase in trade and other receivables
|<nowiki>-</nowiki>
|(2,518)
|159,926
|(5,196)
|-
|-
|Transaction costs on issue of shares
|Increase in trade and other payables
|<nowiki>-</nowiki>
|2,913
|(6,219)
|3,470
|-
|-
|Shares purchased
|Taxation paid
|(1,613)
|(632)
|(5,545)
|(3,671)
|-
|-
|Payment relating to exercise of share options
|'''Cash flows from operating activities'''
|<nowiki>-</nowiki>
|'''70,995'''
|(3,519)
|'''81,750'''
|-
|-
|Dividends paid to owners of the Company
|'''Investing activities'''
|(24,248)
|
|(30,815)
|
|-
|-
|Dividends paid to non-controlling interest
|Purchase of investment properties
|(63)
|(35,484)
|(5)
|(162,844)
|-
|-
|Proceeds from loans
|Prepayments relating to new acquisitions
|20,000
|<nowiki>-</nowiki>
|750,000
|(1,860)
|-
|Proceeds from loss on control of subsidiaries (net of cash disposed)
|65
|94
|-
|-
|Repayment of loans
|Capital expenditure on investment properties
|(33,753)
|(31,104)
|(399,431)
|(23,786)
|-
|-
|Payment of principal portion of lease liabilities
|Purchase of plant and equipment and intangible assets
|(5,681)
|(2,718)
|(5,871)
|(3,540)
|-
|-
|Exit fees/prepayment of financing penalties
|Acquisition of a subsidiary (net of cash acquired)
|<nowiki>-</nowiki>
|<nowiki>-</nowiki>
|(5,335)
|(254,730)
|-
|-
|Capitalised loan issue cost
|Proceeds on disposal of properties (including held for sale)
|(134)
|30
|(14,369)
|15,297
|-
|-
|Finance charges paid
|Increase in loans receivable due from associates
|(7,558)
|(5,950)
|(7,067)
|(1,124)
|-
|-
|'''Cash flows from/(used in) financing activities'''
|Interest received
|'''(53,050)'''
|1,627
|'''431,750'''
|2,986
|-
|-
|'''Increase/(decrease) in cash and cash equivalents'''
|'''Cash flows used in investing activities'''
|'''(55,589)'''
|'''(73,534)'''
|'''83,993'''
|'''(429,507)'''
|-
|-
|'''Net exchange difference'''
|'''Financing activities'''
|'''-'''
|
|'''1,299'''
|
|-
|-
|Cash and cash equivalents as at the beginning of the year
|Proceeds from issue of share capital
|121,263
|<nowiki>-</nowiki>
|65,674
|159,926
|-
|-
|'''Cash and cash equivalents as at the year end'''
|Transaction costs on issue of shares
|'''65,674'''
|<nowiki>-</nowiki>
|'''150,966'''
|(6,219)
|}
 
{| class="wikitable"
!Risk area
!Principal risk(s)
|-
|-
| rowspan="4" |Financing
|Shares purchased
|Availability and pricing of debt
|(1,613)
|(5,545)
|-
|-
|Compliance with loan facility covenants
|Payment relating to exercise of share options
|<nowiki>-</nowiki>
|(3,519)
|-
|-
|Availability and pricing of equity capital
|Dividends paid to owners of the Company
|(24,248)
|(30,815)
|-
|-
|Reputational risk
|Dividends paid to non-controlling interest
|-
|(63)
| rowspan="2" |Valuation
|(5)
|Property inherently difficult to value
|-
|-
|Susceptibility of property market to change in value
|Proceeds from loans
|20,000
|750,000
|-
|-
| rowspan="3" |Markets
|Repayment of loans
|Participation within two geographically diverse markets
|(33,753)
|(399,431)
|-
|-
|Reliance on specific industries and the SME market
|Payment of principal portion of lease liabilities
|(5,681)
|(5,871)
|-
|-
|Reduction in occupancy
|Exit fees/prepayment of financing penalties
|<nowiki>-</nowiki>
|(5,335)
|-
|-
| rowspan="2" |Acquisitive growth
|Capitalised loan issue cost
|Decrease in number of acquisition opportunities coming to market
|(134)
|(14,369)
|-
|-
|Failure to acquire suitable properties with desired returns
|Finance charges paid
|(7,558)
|(7,067)
|-
|-
| rowspan="3" |Organic growth
|'''Cash flows from/(used in) financing activities'''
|Failure to deliver capex investment programmes
|'''(53,050)'''
|'''431,750'''
|-
|-
|Failure to refuel capex investment programmes
|'''Increase/(decrease) in cash and cash equivalents'''
|'''(55,589)'''
|'''83,993'''
|-
|-
|Failure to achieve targeted returns from investments
|'''Net exchange difference'''
|'''-'''
|'''1,299'''
|-
|-
| rowspan="4" |Customer
|Cash and cash equivalents as at the beginning of the year
|Decline in demand for space
|121,263
|65,674
|-
|-
|Significant tenant move-outs or insolvencies
|'''Cash and cash equivalents as at the year end'''
|-
|'''65,674'''
|Exposure to tenants' inability to meet rental and other lease commitments
|'''150,966'''
|-
|Tenant affordability
|-
|Regulatory and tax
|Non-compliance with tax or regulatory obligations
|-
|People
|Inability to recruit and retain people with the appropriate skillset to deliver the Group strategy
|-
| rowspan="3" |Systems and data
|System failures and loss of data
|-
|Security breaches
|-
|Data protection
|-
| rowspan="5" |Macro-economic
|Impact of the Covid-19 pandemic
|-
|Inflationary pressure leading to increased costs
|-
|Interest rate movements impacting the commercial real estate market
|-
|Delays in cash collection and tenant insolvencies
|-
|Energy supply shortages caused by a variety of economic and geopolitical factors
|-
| rowspan="4" |ESG
|Unforeseen costs relating to physical and transition risks associated with climate change
|-
|Reputational risk
|-
|Failure to meet shareholder and societal requirements or expectations
|-
|Restricted access to financing market due to higher requirements ("green financing")
|-
|Foreign currency
|Financial impact of uncontrollable foreign currency fluctuation on earnings and net asset value
|}
|}


== References and notes ==
== References and notes ==

Latest revision as of 17:26, 11 December 2022

SummaryEdit

  • Sirius Real Estate, the FTSE 250 real estate investment company, has made eight material announcements since our last report on the company (on 12th April 2022).
  • For us, the key highlight of the announcements is that the company has performed exceptionally well in the six months ended 30th September 2022, growing funds from operations (FFO) by 47% over the period.
  • Accordingly, we have updated our forecasts, and estimate that the expected return of an investment in Sirius Real Estate over the next 12-months is 57%. In other words, an £100,000 investment in the company is expected to return £157,000 in 12-months time.
  • We note that the degree of risk associated with an investment in Sirius is relatively 'low', with the company's shares having an adjusted beta[1] that is 1.6% above the market (1.016 vs. 1).
  • All-in-all, assuming that a suitable return level in the next 12 months is 10% or more, then an investment in the company is considered to be a 'suitable' one.
Summary financials
31 March 2021 (€000) 31 March 2022 (€000) 31 March 2023 (€000) 31 March 2024 (€000)
Portfolio value (€'billion) 1.36 2.08 2.12 2.15
FFO (€'million) 60.9 74.6 97.0 100.0
FFO/share (€'cents) 5.84 6.78 8.25 8.50
Dividend/share (€'cents) 3.8 4.41 5.4 5.6
Adjusted NAV/share (€'cents) 93.8 108.5 109.5 114.5

Half-Year ResultsEdit

On 21st November 2022, the company announced its interim results for the period ended 30th September 2022.

During the six month period, revenue increased by 47.7% to €130.6 million (H1 FY2022: €88.4 million), mainly driven by higher rental and service charge. In Germany, like-for-like annualised rent roll improved by 2.4% to €115.2 million (H1 FY2022: €112.5 million), and in the United Kingdom, by 4.1% to €46.5 million (H1 FY2022: €44.7 million). Profit before tax decreased by 3% to €75.7 million (H1 FY2022: €78.2 million).

Net current assets increased by 22% to €67 million (H2 FY2022: €55 million), net asset value improved by 1.8% to €1,213 million (H2 FY2022: €1,191 million). Cash stood at €162 million (H2 FY2022: €151 million) and debt at €993 million (H2 FY2022: €996 million). The value of the company's investment property increased by 0.3% to €2,081.4 million (H2 FY2022: €2,074.9 million).

Cash flows from operating activities increased by 37.5% to €48.1 million (H1 FY2022: €35.0 million), and mainly due to the disposal of properties, cash flows from investing activities was negligible (H1 FY2022: negative €107.5 million). The company's German and UK portfolios saw a respective increase of €20.3 million and £6.3 million, representing a 1.8% and 2.1% like-for-like valuation growth. With no new loans taken during the period. cash flows from financing activities swung to negative €36.5 million (H1 FY2022: positive €194 million). The total dividend per share for the period increased by 32.4% to 2.79 cents (H1 FY2022: 2.04 cents).

Funds From Operations (FFO) increased by 47.0% to €48.5 million (H2 FY2022: €33.0 million).

The company said it continues to expect to trade in-line with consensus and management expectations for the full year.

Given the rising interest rates and the uncertainty that this and the many other factors affecting the German and UK property markets are causing at the moment, the company has prioritised improving its debt ratios and building up its cash reserves. Net LTV, which reduces the loan balance by free cash (excluding restricted cash balances) in its calculation, was 41.0% (FY2022: 41.6%) whilst interest cover at EBITDA level was 8.1x as at 30th September 2022 (FY2022: 7.3x). The group added that it's fully committed to continue reducing its net LTV to be well within 40% or below in the near term.

Consolidated Income Statement
Year ended 31 March 2022 (€000) Year ended 31 March 2021 (€000) Movement (%)
Rental Income 79.2 49.6 +60%
Titanium income 3.5 3.4
Service charge irrecoverable costs (3.7) (1.7)
Non-recoverable maintenance (2.5) (1.7)
Net Operating Income 76.5 49.6 +54%
Corporate costs and overheads (20.8) (10.4)
Adjusted EBITDA 55.7 39.2 +42%
Bank interest (6.9) (4.5)
Current tax (excluding tax on disposals) (0.3) (1.7)
FFO 48.5 33.0 +47%
Depreciation & amortisation of financing fees (3.3) (1.9)
Add back current taxes (excluding tax on disposals) 0.3 1.7
IFRS 16 & foreign exchange effects (1.9) (0.5)
Adjusted Profit Before Tax 43.6 32.3 +35%
Adjusting items (3.0)[2] (7.0)
Surplus/Deficit on revaluation of investment properties 27.7 51.5
Goodwill impairment - -
Gain/Loss on disposal of investment properties 4.8 (0.3)
Change in fair value of derivative financial instruments 1.2 0.2
Share of profit in associate not included in FFO 1.4 1.5
Profit Before Tax 75.7 78.2 (3)%
Consolidated Statement of Financial Position
Year ended 31 March 2022 (€000) Year ended 31 March 2021 (€000) Movement (%)
Assets
Investment properties (owned assets) 2,082.4 1,428.5 46%
Investment properties (leased assets) 23.6 16.3 45%
Investment in associate 71.1 63.9 11%
Plant and equipment 11.3 9.8[3] 15%
Trade and other receivables 45.0[4] 100.6 55)%
Derivative financial instruments 1.6 0 -
Cash and cash equivalents 162.1 187.6 (14)%
Total Assets 2,397.1 1,806.7 33%
Liabilities
Trade and other payables (77.0) (49.2) 57%
Interest bearing bank loans (980.4) (689.2) 42%
Lease liabilities (38.7)[5] (16.4) 136%
Current & Deferred tax liabilities (86.2) (68.5) 26%
Derivative financial instruments - (0.5) (100)%
Total Liabilities (1,182.3) (823.8) 44%
Net Assets 1,214.8 982.9 24%
NAV per share 103.90c 92.62c 12%
Adjusted NAV per share 110.72c 98.80c 12%
EPRA NTA per share 109.47c 97.02c 13%

Reaffirmed Investment RatingEdit

On the 7th November 2022, Sirius Real Estate announced that the rating agency Fitch Ratings has reaffirmed the company's BBB investment grade rating with 'Stable Outlook' (Long-Term Issuer Default Rating).

In its rating, Fitch noted that it expects Sirius's income to remain stable, due to an active focus on occupancy and low affordable rents for the company's out-of-town locations. It also highlighted the benefits of the Sirius operating platform and the resilience of its core, high-yielding portfolio. Fitch anticipates that total average portfolio occupancy levels will remain above 80%.

Early refinancing of next major debt expiryEdit

On 6th October 2022, Sirius Real Estate announced that it has completed the early refinancing of the the company's next major debt expiry, a €170 million facility with Berlin Hyp AG, approximately one year in advance of the facility's due date.

The refinancing comprises a new 7-year, €170 million facility at a fixed interest rate of 4.26%, which will replace and redeem the existing facility upon its expiry on 31 October 2023.

As of 30 September 2022, the group had a total of €993 million of outstanding debt, €750 million of which is unsecured. The remaining €243 million comprised mortgage-backed debt, of which the most significant tranche is the newly refinanced €170 million Berlin Hyp AG facility referred to above.

This refinancing facility extends the group's total weighted average debt expiry from 3.8 years to 5.0 years. When the new facility commences just over a year from now, the group's weighted average cost of debt will increase from 1.4% to 1.9%.

The company has €1.6 billion of unencumbered assets and in excess of €138 million of free cash available. Within the next 12 months, Sirius has a total of €35 million of debt expiring, which it is confident of either extending terms with the existing lenders, replacing with new lenders or paying down.

Acquisitions and disposals updateEdit

On 4th October 2022, Sirius Real Estate announced that it has completed three acquisitions in Germany, for €44.6 million.

These acquisitions were all notarised prior to the end of June and have been predominantly funded using capital recycled from three strategic disposals in Germany and the UK for a combined €33.6 million.

The disposals have been made at a premium to book value.

The three disposals were of assets that offered limited further growth opportunities due to location and/or condition, and comprised:

The notarisation of a €1.0 million 3,200 sqm non-income producing land plot in Heiligenhaus, Germany which had a book value of €250,000 at the time of notarisation. This asset is being sold to a supermarket chain as part of its expansion plans, with the transaction expected to complete in January 2023.

The three new acquisitions totalling €44.6 million currently generate a combined total of €2.3 million of rental income and €1.6 million of net operating profit annually. The three acquired assets have a combined occupancy of just 54% and offer a range of avenues for Sirius to leverage its significant value creation expertise to grow rental income. The acquired assets comprise:

  1. A €39.8 million (including costs) mixed-use property in Düsseldorf, Germany, situated 2.6 km from the city's international airport. The property comprises mainly office and warehouse/light industrial space and is 55% occupied, offering good value add potential.
  2. A €3.9 million (including costs) primarily warehouse asset located in a well-developed commercial area in Dreieich, Germany, that is strategically adjacent to an existing property owned by Sirius.  We intend to convert the property into a self-storage facility, adding to our existing SmartSpace Self-Storage brand that now exists in 32 locations across Germany.
  3. A €0.9 million (including costs) small 239 sqm vacant office building in Potsdam. The property is placed strategically at the entrance to one of the Company's existing sites and directly adjacent to the world famous Babelsberg Film Studios.

The company said that it has identified a number of asset management initiatives within the three newly acquired properties which will allow it to grow rental income and occupancy by leasing into markets where it sees continued strong demand for its products.

The company added that it expects to slow its acquisition pipeline, and that it will also continue to seek to dispose of non-core or mature assets as and when it feels the timing is right.

Change of Chief Financial OfficerEdit

On the 16th August 2022, Sirius Real Estate announced that for personal reasons, Diarmuid Kelly has decided to step down as the company's Chief Financial Officer.

Alistair Marks, the Chief Investment Officer and former CFO of the company, has stepped in as the interim CFO. The company has begun the search for a new CFO.

Sale of Bizspace CamberwellEdit

On 16th May 2022, Sirius Real Estate announced the sale of a business park asset for £16 million, representing a 94% premium to the valuation that the asset was initially acquired by the company in November 2021 (i.e. in less than eight months). The proceeds will be used to invest in higher yielding UK opportunities.

Key features of the asset include:

  • It's located in Camberwell, London.
  • It's multi-tenanted.
  • It comprises approx. 34,700 sq. ft. of industrial and office space, and is 91% occupied.
  • The sale price represents a net initial yield (NIY), which is the current annualised rent, net of costs, expressed as a percentage of capital value, after adding notional purchaser's costs, of around 2.0%.

Board changesEdit

On 13th June 2022, the company announced two board changes.

Caroline Britton was appointed to succeed James Peggie as the Senior Independent Director. Caroline has been a non-executive Director of Sirius since June 2020 and chairs the Audit Committee and is a member of the Nomination Committee of the Board.

Joanne Kenrick was appointed to succeed James Peggie as the chair of the Remuneration Committee. Joanne has been a non-executive Director of Sirius since September 2021 and is a member of the Nomination and Sustainability and Ethics Committees of the Board.

James Peggie will continue as a non-executive Director and a member of the Audit, Nomination and Remuneration Committees of the Board.

Final resultsEdit

On 13th June 2022, the company announced its full year results for the year ended 31st March 2022.

During the 12-month period, revenue increased by 27% to €210 million (FY2021: €165 million), and the gain on revaluation of investment properties jumped by 41% to €210 million (FY2021: €165 million); however, mainly due to an impairment charge, higher administrative expenses and interest expenses, the net profit remained more-or-less unchanged at €147 million (FY 2021: €147 million).

In terms of the financial position of the company, the net current assets increased by more than 3x to €55 million (FY 2021: €17 million), and the net asset value (NAV) rose by by 28% to €1.19 billion (FY 2021: €0.93 billion).

Cash flows from operating activities increased by 15% to €82 million (FY2021: €71 million), and mainly due to the acquisition of a subsidiary and purchase of investment properties, cash flows used in investing activities increased by almost 6x to €430 million (FY2021: €74 million). Cash flows from financing activities swung to €431 million (FY2021: negative €54 million), driven by the proceeds of loans and the issue of share capital. The total dividend per share for the year increased by 16% to 4.41 cents (FY2021: 3.80%).

Funds From Operations (FFO) increased by 22.5% to €74.6 million (FY2021: €60.9 million).

How do the results compare to our forecasts?
Forecast Actual Difference (%)
Portfolio value (€'billion) 2.00 2.08 4.00%
FFO (€'million) 72.0 74.6 3.61%
FFO/share (€'cents) 6.58 6.78 3.04%
Dividend/share (€'cents) 4.25 4.41 3.76%
Adjusted NAV/share (€'cents) 104.4 108.5 3.93%

FinancialsEdit

How have our forecasts changed?
31 March 2023 31 March 2024
Old New Change (%) Old New Change (%)
Portfolio value (€'billion) 2.12 2.12 0.00% 2.21 2.15 (2.71%)
FFO (€'million) 90.1 97.0 7.66% 95.1 100.0 5.15%
FFO/share (€'cents) 7.75 8.25 6.45% 8.16 8.50 4.17%
Dividend/share (€'cents) 5.0 5.4 8.00% 5.3 5.6 5.66%
Adjusted NAV/share (€'cents) 110.9 109.5 (1.26%) 118.0 114.5 (2.97%)

RisksEdit

As with any investment, investing in Sirius carries a level of risk. Overall, based on the company's market beta (i.e. 1.016), the degree of risk associated with an investment in Sirius is relatively 'low'. Here, to estimate the adjusted beta[1], we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice.

For us, currently, the biggest risk to the valuation of the company relates to macro-economic factors, in particular unexpected and sudden changes in inflation and interest rates movements, ultimately resulting in a reduction in the affordability and, therefore, demand of the company's assets/properties. With that said, the company has a diverse tenant base, with its top 50 tenants generating 45% of annual income in Germany, and 26% of annual income generated by the top 100 tenants in the UK. Sirius also has no material dependencies on specific industries, and a track record of buying and building high-returning investment opportunities.

ValuationEdit

Research suggests that in terms of estimating the expected return of an investment over a period of 12-months or less, the approach that is more accurate is the relative valuation approach, so that's the approach that we suggest using to determine the estimated value of the company.

What's the expected return of an investment in Sirius using the relative valuation approach?Edit

Accordingly, we estimate that the expected return of an investment in Sirius Real Estate Limited over the next 12-months is 57%. In other words, an £100,000 investment in the company is expected to return £157,000 within 12-months from now. The assumptions used to estimate the return figure can be found in the table below.

Assuming that a suitable return level in the 12 months is 10% and Sirius Real Estate Limited achieves its expected return level (of 197%), then an investment in the company is considered to be a 'suitable' one.

What are the assumptions used to estimate the return figure?Edit

Key inputs
Description Value Commentary
Which type of multiple do you want to use? P/FFO The FFO does not account for depreciation in properties but rather adds back the depreciation value back to the net income. Furthmore, FFO deducts any gains or losses from the sale of assets, since including the transaction would result in discrepancies in the revenues reported in each period. Accordingly, we suggest valuing the company using the Price to Funds From Operations (P/FFO) ratio.
In regards to the P/FFO multiple, for the FFO figure, which year to you want to use? Twelve months ahead Research suggests that when using the relative valuation approach, it's best to use a time period of 12 months or less. Accordingly, for the FFO figure, we suggest using the twelve months ahead.
In regards to the P/FFO multiple, what multiple figure do you want to use? 18x According to Bloomberg, Sirius Real Estate Limited closest peers trade on a multiple of 18x.
Which financial forecasts to use? Proactive Investors Here, we have used the forecasts of Proactive Investors.
What's the current value of the company? £981.20 million As at 22nd November 2022, the current value of Sirius Real Estate Limited is £981.20 million.
Which time period do you want to use to estimate the expected return? Between now and one year time Research suggests that when using the relative valuation approach, it's best to estimate the expected return of the company between now and one year time.

Sensitive analysisEdit

The two main inputs that result in the greatest change in the expected return of the Sirius Real Estate Limited investment are, in order of importance (from highest to lowest):

  1. The P/FFO multiple (the default multiple is 18x); and
  2. The twelve months ahead FFO forecast (the default forecast is €98.78 million).

The impact of a 10% change in those main inputs to the expected return of the Sirius Real Estate Limited investment is shown in the table below.

Sirius investment expected return sensitive analysis
Main input 10% worse Unchanged 10% better
The P/FFO multiple 43% 57% 73%
The twelve months ahead FFO forecast 43% 57% 73%

AppendixEdit

Peers
Company name Bloomberg ticker Primary exchange Classification Industry Market capitalisation (GBP) BF P/FFO Yield (%) Interest cover (x) Total debt/total capital
Sirius Real Estate Ltd SRE LN United Kingdom Multi Asset Class Own & Develop Real Estate Owners & Developers 979,494,700 11.5111 4.08% 5.42 46.14%
FastPartner AB FPARA SS Sweden Multi Asset Class Own & Develop Real Estate Owners & Developers 1,170,459,785 -- 2.93% 4.50 48.51%
Cibus Nordic Real Estate AB CIBUS SS Sweden Multi Asset Class Own & Develop Real Estate Owners & Developers 57,4491,440 -- 6.78% 3.47 61.04%
Shaftesbury PLC SHB LN United Kingdom Multi Asset Class Own & Develop Real Estate Owners & Developers 1,385,308,138 33.7009 2.48% 1.99 27.95%
Intershop Holding AG ISN SW Switzerland Multi Asset Class Own & Develop Real Estate Owners & Developers 1,011,223,384 -- 4.08% (10.25) 34.63%
WCM Beteiligungs- und Grundbes WCMK GR Germany Multi Asset Class Own & Develop Real Estate Owners & Developers 497,815,111 -- 2.86% 6.18 2.77%
Metrovacesa SA MVC SM Spain Multi Asset Class Own & Develop Real Estate Owners & Developers 874,166,035 25.1504 30.90% N/A 15.84%
Brack Capital Properties NV BCNV IT Italy Multi Asset Class Own & Develop Real Estate Owners & Developers 601,880,806 -- -- (11.66) 42.48%
TLG Immobilien AG TLG GR Germany Multi Asset Class Own & Develop Real Estate Owners & Developers 1,949,040,400 23.0976 4.70% 4.89 15.32%
GAG Immobilien AG GWK3 GR Germany Multi Asset Class Own & Develop Real Estate Owners & Developers 1,097,732,888 -- 0.65% 3.87 71.78%
Gateway Real Estate AG GTY GR Germany Multi Asset Class Own & Develop Real Estate Owners & Developers 498,775,280 -- -- 0.25 63.50%
Condensed consolidated income statement
Six months ended 30 September 2021 (€000) Six months ended 30 September 2022 (€000)
Revenue 88,352 130,558
Direct costs (38,843) (57,350)
Net operating income 49,509 73,208
Gain on revaluation of investment properties 48,414 26,812
Gain/(loss) on disposal of properties (400) 4,801
Recoveries from prior disposals of subsidiaries 94 -
Administrative expenses (12,311) (24,809)
Share of profit of associates 2,463 2,597
Operating profit 87,769 82,609
Finance income 1,596 1,129
Finance expense (11,347) (9,249)
Change in fair value of derivative financial instruments 160 1,244
Net finance costs (9,591) (6,876)
Profit before tax 78,178 75,733
Taxation (10,386) (5,673)
Profit for the period after tax 67,792 70,060
Profit attributable to:
Owners of the Company 67,738 70,008
Non-controlling interest 54 52
67,792 70,060
Earnings per share
Basic earnings per share 6.44c 6.00c
Diluted earnings per share 6.33c 5.92c
Condensed consolidated statement of financial position
Six months ended 30 September 2021 (€000) Six months ended 30 September 2022 (€000)
Non-current assets
Investment properties 2,100,004 2,105,046
Plant and equipment 5,492 7,199
Intangible assets 4,283 4,129
Right of use assets 14,996 15,259
Other non-current financial assets 48,330 48,409
Investment in associates 24,142 26,739
Total non-current assets 2,197,247 2,206,781
Current assets
Trade and other receivables 24,571 24,420
Derivative financial instruments 329 1,573
Cash and cash equivalents 150,966 162,098
Total current assets 175,866 188,091
Assets held for sale 13,750 1,000
Total assets 2,386,863 2,395,872
Current liabilities
Trade and other payables (89,335) (76,993)
Interest-bearing loans and borrowings (19,630) (37,243)
Lease liabilities (1,090) (1,458)
Current tax liabilities (10,423) (4,978)
Total current liabilities (120,478) (120,672)
Non-current liabilities
Interest-bearing loans and borrowings (961,863) (943,176)
Lease liabilities (37,571) (37,233)
Deferred tax liabilities (75,893) (81,220)
Total non-current liabilities (1,075,327) (1,061,629)
Total liabilities (1,195,805) (1,182,301)
Net assets 1,191,058 1,213,571
Equity
Issued share capital - -
Other distributable reserve 570,369 544,419
Own shares held (6,274) (8,329)
Foreign currency translation reserve (1,701) (21,243)
Retained earnings 628,258 698,266
Total equity attributable to the owners of the Company 1,190,652 1,213,113
Non-controlling interest 406 458
Total equity 1,191,058 1,213,571
Condensed consolidated statement of cash flow
Six months ended 30 September 2021 (€000) Six months ended 30 September 2022 (€000)
Operating activities
Profit for the period after tax 67,792 70,060
Taxation 10,386 5,673
Profit for the period before tax 78,178 75,733
(Gain)/loss on disposal of properties 400 (4,801)
Net exchange differences - (309)
Share-based payments 1,403 1,947
Gain on revaluation of investment properties (48,414) (26,812)
Change in fair value of derivative financial instruments (160) (1,244)
Depreciation of property, plant and equipment 349 1,027
Amortisation of intangible assets 564 629
Depreciation of right of use assets 260 1,141
Share of profit of associates (2,463) (2,597)
Finance income (1,596) (1,129)
Finance expense 11,347 9,249
Changes in working capital
Decrease/(increase) in trade and other receivables (2,598) 3,786
Decrease in trade and other payables (2,053) (5,848)
Taxation paid (256) (2,717)
Cash flows from operating activities 34,961 48,055
Investing activities
Purchase of investment properties (20,221) (832)
Prepayments relating to new acquisitions (75,771) (3,639)
Capital expenditure on investment properties (10,494) (11,904)
Purchase of plant and equipment and intangible assets (1,461) (3,210)
Proceeds on disposal of properties (including held for sale) - 18,593
Increase in loan receivable due from associates (1,124) (74)
Interest received 1,596 1,129
Cash flows from/(used in) investing activities (107,475) 63
Financing activities
Shares purchased - (2,389)
Payment relating to exercise of share options (2,020) (1,686)
Dividends paid to owners of the Company (11,381) (26,211)
Dividends paid to non-controlling interest (5) -
Proceeds from loans 400,000 -
Repayment of loans (173,791) (2,699)
Payment of principal portion of lease liabilities (2,931) (775)
Exit fees/prepayment of financing penalties (3,697) -
Capitalised loan issue cost (7,559) -
Finance charges paid (4,170) (2,747)
Cash flows (used in)/from financing activities 194,446 (36,507)
Increase in cash and cash equivalents 121,932 11,611
Net exchange difference - (479)
Cash and cash equivalents as at the beginning of the period 65,674 150,966
Cash and cash equivalents as at the period end 187,606 162,098


Consolidated income statement
Year ended 31 March 2021 (€000) Year ended 31 March 2022 (€000) Year ended 31 March 2023 (€000) Year ended 31 March 2024 (€000)
Revenue 165,361 210,182 154,500 159,000
Direct costs (71,541) (87,689)
Net operating income 93,820 122,493
Gain on revaluation of investment properties 99,585 140,884
(Loss)/gain on disposal of properties 54 (623)
Recoveries from prior disposals of subsidiaries 65 94
Administrative expenses (27,823) (40,718)
Goodwill impairment - (40,906)
Share of profit of associates 4,977 6,940
Operating profit 170,678 188,164
Finance income 2,712 2,986
Finance expense (9,869) (23,219)
Change in fair value of derivative financial instruments 136 996
Net finance costs (7,021) (19,237)
Profit before tax 163,657 168,927 91,570 95,770
Taxation (16,097) (20,935)
Profit for the year after tax 147,560 147,992 95,500 97,950
Profit attributable to:
Owners of the Company 147,451 147,873 95,500 97,950
Non-controlling interest 109 119
147,560 147,992
Earnings per share
Basic earnings per share 14.16c 13.48c 8.00c 8.00c
Diluted earnings per share 13.96c 13.29c 8.00c 8.00c
Consolidated statement of financial position
Year ended 31 March 2021 (€000) Year ended 31 March 2022 (€000)
Non-current assets
Investment properties 1,362,192 2,100,004
Plant and equipment 2,682 5,492
Intangible assets 6,568 4,283
Right of use assets 1,919 14,996
Other non-current financial assets 44,960 48,330
Investment in associates 17,202 24,142
Total non-current assets 1,435,523 2,197,247
Current assets
Trade and other receivables 18,731 24,571
Derivative financial instruments 70 329
Cash and cash equivalents 65,674 150,966
Total current assets 84,475 175,866
Assets held for sale - 13,750
Total assets 1,519,998 2,386,863
Current liabilities
Trade and other payables (50,527) (89,335)
Interest-bearing loans and borrowings (9,114) (19,630)
Lease liabilities (5,857) (1,090)
Current tax liabilities (2,063) (10,423)
Derivative financial instruments (414) -
Total current liabilities (67,975) (120,478)
Non-current liabilities
Interest-bearing loans and borrowings (458,940) (961,863)
Lease liabilities (9,130) (37,571)
Derivative financial instruments (797) -
Deferred tax liabilities (56,331) (75,893)
Total non-current liabilities (525,198) (1,075,327)
Total liabilities (593,173) (1,195,805)
Net assets 926,825 1,191,058
Equity
Issued share capital - -
Other distributable reserve 449,051 570,369
Own shares held (2,903) (6,274)
Foreign currency translation reserve - (1,701)
Retained earnings 480,385 628,258
Total equity attributable to the owners of the Company 926,533 1,190,652
Non-controlling interest 292 406
Total equity 926,825 1,191,058
Consolidated statement of cash flows
Year ended 31 March 2021 (€000) Year ended 31 March 2022 (€000)
Operating activities
Profit for the year after tax 147,560 147,992
Taxation 16,097 20,935
Profit for the year before tax 163,657 168,927
Loss/(gain) on disposal of properties (54) 623
Recoveries from prior disposals of subsidiaries (65) (94)
Net exchange differences - (1,975)
Share-based payments 3,148 4,173
Gain on revaluation of investment properties (99,585) (140,884)
Change in fair value of derivative financial instruments (136) (996)
Depreciation of property, plant and equipment 669 1,167
Amortisation of intangible assets 897 1,164
Depreciation of right of use assets 521 843
Goodwill impairment - 40,906
Share of profit of associates (4,977) (6,940)
Finance income (2,712) (2,986)
Finance expense 9,869 23,219
Changes in working capital
Increase in trade and other receivables (2,518) (5,196)
Increase in trade and other payables 2,913 3,470
Taxation paid (632) (3,671)
Cash flows from operating activities 70,995 81,750
Investing activities
Purchase of investment properties (35,484) (162,844)
Prepayments relating to new acquisitions - (1,860)
Proceeds from loss on control of subsidiaries (net of cash disposed) 65 94
Capital expenditure on investment properties (31,104) (23,786)
Purchase of plant and equipment and intangible assets (2,718) (3,540)
Acquisition of a subsidiary (net of cash acquired) - (254,730)
Proceeds on disposal of properties (including held for sale) 30 15,297
Increase in loans receivable due from associates (5,950) (1,124)
Interest received 1,627 2,986
Cash flows used in investing activities (73,534) (429,507)
Financing activities
Proceeds from issue of share capital - 159,926
Transaction costs on issue of shares - (6,219)
Shares purchased (1,613) (5,545)
Payment relating to exercise of share options - (3,519)
Dividends paid to owners of the Company (24,248) (30,815)
Dividends paid to non-controlling interest (63) (5)
Proceeds from loans 20,000 750,000
Repayment of loans (33,753) (399,431)
Payment of principal portion of lease liabilities (5,681) (5,871)
Exit fees/prepayment of financing penalties - (5,335)
Capitalised loan issue cost (134) (14,369)
Finance charges paid (7,558) (7,067)
Cash flows from/(used in) financing activities (53,050) 431,750
Increase/(decrease) in cash and cash equivalents (55,589) 83,993
Net exchange difference - 1,299
Cash and cash equivalents as at the beginning of the year 121,263 65,674
Cash and cash equivalents as at the year end 65,674 150,966

References and notesEdit

  1. ↑ 1.0 1.1 Research shows that an investment has two main types of risks: 1) non-systematic and 2) systematic. Systematic risk is the risk related to the overall market, and non-systematic risk is the risk that's specific to an individual investment. Evidence shows that taking on non-systematic risk is inefficient, and it's, therefore, best to eliminate it; and in most cases, elimination is fairy easy to do [by holding a diversified portfolio of investments (i.e. around 15 investments)]. Accordingly, when assessing the riskiness of an investment, it’s best to look at the systematic risk only (i.e. ignore the non-systematic risk). A key measure of systematic risk is beta, and a main way to determine the riskiness of an investment is to compare the beta of the investment with the beta of the market, which is 1. For example, Sirius's adjusted beta (5 years, monthly data) is 1.06, and is, accordingly, 6% above the market beta (of 1); assuming that a 'low' level of riskiness is 10% or less above the market beta, then the riskiness of investing in the company is considered to be relatively 'low' (1.6%<10%). For estimating an asset's beta, in terms of time period, and frequency of observations, the most common choice is five years of monthly data, yielding 60 observations. In terms of the benchmark, we suggest using the iShares MSCI World ETF. One study of U.S. stocks found support for five years of monthly data over alternatives. The beta value in a future period has been found to be on average closer to the mean value of 1.0, the beta of an average-systematic-risk security, than to the value of the raw beta. Because valuation is forward looking, it is logical to adjust the raw beta so it more accurately predicts a future beta.
  2. ↑ Adjusting items include costs relating to share awards, costs relating to the repayment of secured debt and acquisition costs relating to the acquisition of BizSpace.
  3. ↑ Includes €3.7m Goodwill.
  4. ↑ Includes €15m Right of use assets.
  5. ↑ Includes €16.7m Lease Liability for Right of use assets.
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