Sirius Real Estate Limited

Summary

Sirius Real Estate Limited, a real estate company, engages in the investment, development, and operation of commercial properties in Germany and the United Kingdom. It owns and manages offices; warehouses, storerooms, and self-storage spaces; and production and workshop spaces. The company serves individuals and small to medium-sized enterprises under the Sirius brand name. It owns and manages business parks with approximately 4.3 million square feet of lettable space in the United Kingdom; and 1.8 million square meters of lettable space in Germany. The company was formerly known as Dawnay, Day Sirius Limited and changed its name to Sirius Real Estate Limited in October 2008. Sirius Real Estate Limited was incorporated in 2007 and is based in Saint Peter Port, Guernsey.

Operations

Strategy

Sirius specialises in the ownership, development and operations of business parks throughout Germany and the UK which have either attractive yields, value-add potential, or both. What makes Sirius different is its best-in-class operating platform and intensive asset management programme. Combining the Sirius property portfolio together with our unique operating platform gives us a range of advantages in the market which enable the delivery of strong and consistent returns for shareholders.

The company's core strategy is the acquisition of business parks in Germany and the UK that have either attractive yields, value-add potential, or both. Sirius transforms these business parks into higher-quality assets through investment and intensive asset management.

Once sites are mature and net income and values have been optimised, Sirius may then refinance the sites to release capital for investment in new sites or consider the disposal of sites in order to recycle equity into assets which present greater opportunity to deploy the Sirius team’s asset management skills.

There are five key value drivers:

1. Active Portfolio Management – increasing rental and capital value through active portfolio management.
2. Transforming and Converting Vacant Space - subdividing and improving existing space so that it can be marketed directly to occupiers using the different Sirius products.  
3. Occupancy and Rental Growth – transforming assets by delivering improvements to tenant mix, occupancy levels and rents.
4. Improvement of Service Charge Recovery – delivering best-in-class cost recovery by utilising advanced measurement and cost allocation techniques.
5. Growth Through Acquisition and Asset Recycling – optimising value and recycling equity into assets which present greater opportunity for active asset management.  

Mission

The mission of the company is to create and manage optimal workspaces that empower small and medium-sized businesses to grow, evolve and thrive. Sirius seeks to unlock the potential of its people, its properties and the communities in which it operates so that, together, it can create sustainable impact and long-term financial and social value.

Portfolio

Sirius operates a significant portfolio of assets across Germany and the UK. In Germany, its focus is on the seven largest cities: Berlin, Hamburg, Düsseldorf, Köln, Frankfurt, Stuttgart and München, with a secondary focus on a selection of key border towns such as Aachen, Saarbrücken, Mahlsdorf and Frieburg. In the UK, where it operates under the BizSpace brand its sites are in convenient, regional locations.

The company looks for mixed-use properties, primarily light industrial units, business parks or office buildings outside city centres, or on the edge of towns, in neighbourhoods which have a high density of commercial and industrial activity and good transport links. By revitalising, providing and actively-managing the optimum spaces for its tenants, Sirius helps them expand, move and multiply.

Board & Management

Non-executive Chairman

Danny Kitchen brings more than 25 years of property and finance experience in both the listed and private markets. After 14 years in corporate finance and M&A with the Investment Bank of Ireland, he was appointed in 1994 as chief finance officer of Green Property PLC, an Irish listed property company. In 2003 he left to join Heron International as group finance director and deputy chief executive. He is currently non- executive chairman of Hibernia REIT plc and was non-executive chairman of Applegreen PLC. Danny was appointed chairman of Irish Nationwide Building Society between 2008 and 2011 and was a Director of the Irish Takeover Panel until 5 June 2020.

Chief Executive Officer

Andrew Coombs joined the Sirius Facilities Group in January 2010. Prior to joining Sirius, Andrew worked for the Regus Group as UK sales director and before that as director and general manager for MWB Business Exchange Plc. Prior to working in the property sector, Andrew held a number of general management roles. Andrew’s responsibilities to Sirius Real Estate include formulating and agreeing the strategy for delivering shareholder value. He is also responsible for running Sirius Facilities GmbH, together with the group of other operating companies owned by Sirius in Germany, and it is through these operating companies that the strategy is ultimately executed.

Chief Investment Officer & Interim CFO

Alistair Marks joined the then external asset manager of Sirius in 2007 from MWB Business Exchange Plc just before the IPO on AIM and has remained with the Group following the management internalisation in January 2012. Prior to MWB Business Exchange, Alistair held financial roles with BBA Group Plc and Pfizer Ltd and qualified as a Chartered Accountant with BDO in Australia. Alistair is responsible for the Company’s banking relationships including restructuring, sourcing and negotiating all terms within the Group’s debt facilities. Alistair will focus on the Group’s investment activity, covering acquisitions, disposals and capex investment programmes, utilising his significant experience in the industrial, office and business parks sector, as well as deep operational experience and expertise to identify and execute on a wide range of opportunities that unlock value for the Group.

Independent Non-Executive Director

James Peggie is a director and co-founder of the Principle Capital Group and prior to that was head of legal and corporate affairs at the Active Value group. He is a qualified solicitor and, before working at Active Value, he worked in the corporate finance division of an international law firm. James graduated from the University of Oxford in 1992 and in 1994 from The College of Law. James has a wealth of experience as a director of various publicly listed and private companies, including Liberty plc from 2006 to 2010.

Independent Non-executive Director

Mark Cherry is a Chartered Surveyor having qualified in 1983 and brings a wealth of Real Estate knowledge in the investment and asset management markets. Mark was a main board director of Green Property PLC for 10 years, dealing with the UK market and left on the sale of the UK portfolio in 2003. Subsequently he held a board level role at Teesland plc, a Fund and Asset manager specialising in small industrial estates with offices throughout Europe, including three in Germany. Mark was asked to join Lloyds Banking Group as the head of asset management within the real estate “bad bank”, where he was responsible for setting up a number of initiatives to optimise recovery proceeds from defaulted loans. He is currently employed by Invesco Asset Management Limited as their advisor to the Real Estate lending team. He holds no further non-executive directorship positions.

Senior Independent Director

Caroline is a Chartered Accountant and was an audit partner at Deloitte LLP from April 2000 to May 2018, having qualified with its predecessor firm Touche Ross & Co. In addition to providing audit and advisory services in the financial services sector, Caroline ran the FTSE 250 Deloitte NextGen CFO programme. Caroline is a non-executive director of Moneysupermarket.com Group PLC and Revolut Limited, at both of which she chairs the audit committees.  Caroline will become the Chair of the Company’s Audit Committee at the close of the Annual General Meeting to be held on 31 July 2020.

Independent Non-executive Director

Kelly is a Chartered Accountant, having qualified in New Zealand in 2001 at PriceWaterhouseCoopers, and has worked in real estate in the UK since 2004. She is currently Head of Investment for British Land Co PLC, the FTSE100 REIT, where she has worked for more than nine years, including roles in strategy and corporate finance. Kelly previously held roles in corporate finance at the Grosvenor Group and as a financial analyst at Burberry Group PLC.

Independent Non-executive Director

Joanne Kenrick has had a commercial marketing career spanning over 30 years and has extensive listed, private and charitable board experience. For five years until 2015 she was the marketing and digital director for Homebase, prior to which she was chief executive officer of Start, where she established and oversaw HRH the Prince of Wales’s public facing initiative for a more sustainable future. Joanne’s former roles include marketing and customer proposition director for B&Q and marketing director at Camelot Group plc. She was previously a non-executive director of Principality Building Society for six years, during which time she was also a member of the audit and conduct risk committees. Joanne has a degree in law and started her career at Mars Confectionery and PepsiCo.

Joanne Kenrick is currently a non-executive Director and remuneration committee chair for both Welsh Water and Coventry Building Society, as well as being deputy chair and the senior independent director for the latter; and chair of Switching Services Participant Committee and of PayM for Pay.uk. She is also chair of trustees of the charity Make Some Noise.

Market

Total Addressable Market

Here, the total addressable market (TAM) is defined as the global real estate rental income market, and based on a number of assumptions, it is estimated that the size of the market as of today (23rd November 2022), in terms of revenue, is $2.4 trillion.

The most recent full-year revenue of Sirius is €210 million ($216 million), equating to 0.0090% of the entire global real estate rental income market.

Serviceable Available Market

Here, the serviceable available market (SAM) is defined as the global commercial real estate rental income market, and based on a number of assumptions, it is estimated that the size of the market as of today (23rd November 2022), in terms of revenue, is $1.2 trillion.

Serviceable Obtainable Market

Here, the serviceable obtainable market (SOM) is defined as the Germany commercial real estate rental income market, and based on a number of assumptions, it is estimated that the size of the market as of today (23rd November 2022), in terms of revenue, is $51 billion.

Note, last year, the company moved into the SAM (i.e. the global commercial real estate rental income market), by entering the United Kingdom commercial real estate rental income market, which is estimated, in terms of revenue, at $40 billion.

Financials

What are the assumptions used to estimate the financial forecasts?

Key inputs

Description	Value	Commentary
Revenue
What's the estimated current size of the total addressable market?	$2,400,000,000,000	Here, the total addressable market (TAM) is defined as the global real estate rental income market, and based on a number of assumptions, it is estimated that the size of the market as of today (23rd November 2022), in terms of revenue, is $2.4 trillion.
What is the estimated company lifespan?	50 years	Research shows that the average lifespan of a large corporation is around 50 years.
What's the estimated annual growth rate of the total addressable market over the lifecycle of the company?	3%	Research shows that the growth rate of the global real estate rental income market (i.e. the total addressable market) is similar to the growth rate of global gross domestic product, which has averaged (medium) around 3% per year in the last 20 years (2001 to 2022).
What's the estimated company peak market share?	1%	Stockhub estimates that especially given the leadership of the company, the peak market share of Sirius is around 1%, and, therefore, suggests using the share amount here. As of 31st March 2022 (i.e. the most recent Sirius full-year results), Sirius's current share of the global real estate rental income market (i.e. the total addressable market) is estimated at around 0.0090% and of the Germany and United Kingdom commercial real estate rental income market is 0.24%.
Which distribution function do you want to use to estimate company revenue?	Gaussian	Research suggests that the revenue pattern of companies is similar to the pattern produced by the Gaussian distribution function (i.e. the revenue distribution is bell shaped), so Stockhub suggests using that function here.
What's the estimated standard deviation of company revenue?	5 years	Another way of asking this question is this way: within how many years either side of the mean does 68% of revenue occur? Based on Sirius' current revenue amount (i.e. $210 million) and Sirius' estimated lifespan (i.e. 50 years) and Sirius' estimated current stage of its lifecycle (i.e. growth stage), the Stockhub company suggests using five years (i.e. 68% of all sales happen within five years either side of the mean year), so that's what's used here.
Growth stages
How many main stages of growth is the company expected to go through?	4 stages	Research suggests that a company typically goes through four distinct stages of cash flow growth. Research also shows that incorporating those stages into the discounted cash flow model improves the quality of the model and, ultimately, the quality of the value estimation. In addition, research shows that a key way to determine the stage which a company is in is by examining the cash flow patterns of the company. A summary of the economic links to cash flow patterns can be found in the appendix of this report. Stockhub estimates that with Sirius operating cash flows positive (+), investing cash flows negative (-) and its financing cash flows positive (+), the company is in the second stage of growth (i.e. the 'growth' stage), and, therefore, it has a total of three main stages of growth. Note, to account for one-off events, the three-year average (median) amount was used to calculate the cash flows.
What proportion of the company lifecycle is represented by growth stage 1?	30%	Research suggests 30%.
What proportion of the company lifecycle is represented by growth stage 2?	10%	Research suggests 10%.
What proportion of the company lifecycle is represented by growth stage 3?	20%	Research suggests 20%.
What proportion of the company lifecycle is represented by growth stage 4?	40%	Research suggests 40%.
Growth stage 2
Cost of goods sold as a proportion of revenue (%)	42%	Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 2), and the margin for its peers is 42%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
Operating expenses as a proportion of revenue (%)	19%	Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 2), and the margin for its peers is 19%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
Tax rate (%)	12%	Research suggests that it's best to use a similar rate as the one used by peers that are in the same growth stage (i.e. growth stage 2), and the rate for its peers is 12%.
Depreciation and amortisation as a proportion of fixed capital (%)	10%	Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 2), and the margin for its peers is 10%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
Fixed capital as a proportion of revenue (%)	10%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 2), and the amount for its peers is 10%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
Working capital as a proportion of revenue (%)	15%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 2), and the amount for its peers is 15%.
Net borrowing ($000)	Zero	Stockhub suggests that for simplicity, the net borrowing figure is zero.
Interest amount ($000)	Zero	Stockhub suggests that for simplicity, the interest amount figure is zero.
Growth stage 3
Cost of goods sold as a proportion of revenue (%)	62%	Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 3), and the margin for its peers is 62%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
Operating expenses as a proportion of revenue (%)	13%	Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 3), and the margin for its peers is 13%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
Tax rate (%)	14%	Research suggests that it's best to use a similar rate as the one used by peers that are in the same growth stage (i.e. growth stage 3), and the rate for its peers is 14%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
Depreciation and amortisation as a proportion of revenue (%)	4%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 3), and the amount for its peers is 4%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
Fixed capital as a proportion of revenue (%)	3%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 3), and the amount for its peers is 3%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
Working capital as a proportion of revenue (%)	10%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the amount for its peers is 10%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
Net borrowing ($000)	Zero	Stockhub suggests that for simplicity, the net borrowing figure is zero.
Interest amount ($000)	Zero	Stockhub suggests that for simplicity, the interest amount figure is zero.
Growth stage 4
Cost of goods sold as a proportion of revenue (%)	99%	Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the margin for its peers is 99%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
Operating expenses as a proportion of revenue (%)	15%	Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the margin for its peers is 15%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
Tax rate (%)	0%	Research suggests that it's best to use a similar rate as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the rate for its peers is 0%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
Depreciation and amortisation as a proportion of revenue (%)	37%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the amount for its peers is 37%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
Fixed capital as a proportion of revenue (%)	1%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the amount for its peers is 1%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
Working capital as a proportion of revenue (%)	10%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the amount for its peers is 10%. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
Net borrowing ($000)	Zero	Stockhub suggests that for simplicity, the net borrowing figure is zero.
Interest amount ($000)	Zero	Stockhub suggests that for simplicity, the interest amount figure is zero.

Income statement

	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
Fiscal Year Ends	31/03/2013	31/03/2014	31/03/2015	31/03/2016	31/03/2017	31/03/2018	31/03/2019	31/03/2020	31/03/2021	31/03/2022
Turnover	46.12	45.07	45.39	55.79	68.79	123.65	140.06	150.01	165.36	210.18
Expenses	22.32	21.54	23.64	23.06	29.74	83.25	85.02	85.95	98.67	121.30
EBITDA	-13.44	44.18	46.25	68.93	85.63	98.63	155.10	125.22	175.61	187.50
EBIT	-14.47	43.19	45.36	68.30	84.76	97.54	153.73	123.12	173.53	184.33
Operating Profit (reported)	23.80	23.52	21.76	32.73	39.05	40.40	55.04	64.06	66.69	88.88
Operating Profit (adjusted)	-	-	-	-	-	-	-	-	-	-
Investment Income	-36.98	21.05	26.70	44.17	49.86	60.95	100.50	58.00	104.62	147.20
Exceptional Items	-1.19	-1.36	-3.05	-8.54	-4.04	-3.68	-1.70	0.03	-0.50	-13.84
Net Interest	-15.10	-12.18	-12.75	-11.29	-8.44	-8.03	-9.12	-11.33	-7.16	-12.41
Pre-tax Profit	-29.47	31.03	32.65	57.08	76.44	89.65	144.71	110.77	163.66	168.93
Tax	0.78	2.10	5.65	2.39	9.50	8.29	15.99	12.62	16.10	20.94
Net Profit	-30.25	28.93	27.00	54.69	66.94	81.36	128.72	98.15	147.56	147.99
Minority Interests	-0.03	0.01	0.02	0.02	0.03	0.09	0.07	0.01	0.11	0.12
Profit For Financial Year	-30.23	28.93	26.99	54.67	66.91	81.27	128.66	98.14	147.45	147.87
Ordinary Dividends	-	-	-	-	-	-	-	-	-	-
Non Equity Dividends	-	-	-	-	-	-	-	-	-	-
Retained Profit	-30.23	28.93	26.99	54.67	66.91	81.27	128.66	98.14	147.45	147.87
Per Share Data
DPS	0.00	0.00	0.01	0.02	0.03	0.03	0.03	0.03	0.04	0.04
Normalized EPS	-0.09	0.07	0.05	0.08	0.08	0.09	0.13	0.09	0.14	0.14
Reported EPS	-0.10	0.07	0.05	0.07	0.08	0.09	0.13	0.09	0.14	0.13
Investment Ratios
Operating Margin	0.52	0.52	0.48	0.59	0.57	0.33	0.39	0.43	0.40	0.42
DPS Growth %	-	-	-	0.65	0.53	0.15	0.03	0.08	0.06	0.11
Dividend Cover x	0.00	0.00	21.32	3.86	3.26	56.50	3.22	3.82	2.26	3.93
Norm EPS Growth %	-	-	-0.30	0.59	0.02	0.08	0.43	-0.27	0.48	-0.01
Reported EPS Growth %	-	-	-0.33	0.51	0.11	0.10	0.47	-0.26	0.48	-0.05
Other
Market Cap at B/S Date	61.13	169.09	262.65	332.75	456.45	610.66	648.04	682.89	931.63	1,463.27

Balance sheet

	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
Fiscal Year Ends	31/03/2013	31/03/2014	31/03/2015	31/03/2016	31/03/2017	31/03/2018	31/03/2019	31/03/2020	31/03/2021	31/03/2022
Assets
Non Current Assets
Intangible	3.74	3.74	3.74	3.74	3.74	3.74	3.74	5.72	6.57	4.28
Tangible	2.54	1.83	1.68	1.94	2.56	3.13	3.44	4.81	4.60	20.49
Investments	-	-	-	-	-	-	0.00	12.31	17.20	24.14
Other	-	-	-	-	-	-	974.68	1,232.93	1,407.15	2,148.33
Total	416.77	446.66	551.04	693.32	733.84	923.27	981.86	1,255.77	1,435.52	2,197.25
Current Assets
Stock	-	-	-	-	-	-	-	-	-	-
Debtors	9.44	11.38	9.12	6.68	7.31	7.67	9.43	13.90	17.66	19.93
Cash and Securities	7.72	7.01	10.06	9.02	48.70	64.41	15.95	96.58	49.31	127.29
Total	26.65	27.37	29.66	31.83	62.99	122.92	47.42	136.40	84.48	175.87
Held for Disposal	27.66	2.63	-	0.00	96.00	17.33	164.64	10.10	0.00	13.75
Total Assets	471.08	476.67	580.70	725.15	892.82	1,063.51	1,193.91	1,402.27	1,520.00	2,386.86
Liabilities and Equity
Liabilities
Current	286.17	23.92	30.15	36.07	41.50	51.87	112.13	95.56	67.98	120.48
Non-Current	33.88	226.44	262.28	301.97	356.05	386.01	355.74	504.90	525.20	1,075.33
Total	320.05	250.36	292.44	338.04	397.55	437.88	467.87	600.46	593.17	1,195.81
Equity
Share Capital	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Reserves	151.01	226.28	288.22	387.05	495.19	625.46	725.81	803.09	929.44	1,196.93
Shareholders Funds	151.01	226.28	288.22	387.05	495.19	625.46	725.81	801.57	926.53	1,190.65
Minorities	0.02	0.02	0.04	0.02	0.03	0.17	0.24	0.25	0.29	0.41
Total	151.03	226.30	288.26	387.11	495.27	625.63	726.05	801.82	926.83	1,191.06
Total Liabilities and Equity	471.08	476.67	580.70	725.15	892.82	1,063.51	1,193.91	1,402.27	1,520.00	2,386.86
Net Borrowings	281.67	217.87	244.72	284.97	293.10	302.66	315.51	402.80	433.74	892.87
Investment Ratios
Net Tangible Asset Value Per Share	46.75	26.48	27.41	37.67	43.62	49.46	56.84	67.15	68.26	71.02
ROCE	-7.83	9.54	8.24	9.91	9.96	9.64	14.21	9.42	11.95	8.13
ROE	-18.20	15.33	10.49	16.19	15.17	14.51	19.04	12.85	17.07	13.97
Gross Gearing	191.63	99.38	88.40	75.96	69.02	58.69	45.67	62.30	52.13	85.68
Cash	5.11	3.10	3.49	2.33	9.83	10.30	2.20	12.05	5.32	10.69
Interest Cover x	-0.97	3.55	3.57	6.09	10.18	12.36	17.05	9.96	17.58	11.97
Quick Ratio r	0.06	0.77	0.64	0.44	1.35	1.39	0.23	1.16	0.99	1.22
Current Ratio r	0.19	1.25	0.98	0.88	3.83	2.70	1.89	1.53	1.24	1.57
Borrowings
Total Borrowings	289.39	224.88	254.78	293.99	341.79	367.08	331.46	499.38	483.04	1,020.15
Due < 1 Yr	258.15	2.81	3.30	5.64	7.07	7.84	7.41	37.59	14.97	20.72
Due 1-2 Yrs	-	-	-	-	-	-	-	10.72	75.98	-
Due 2-5 Yrs	-	-	-	-	-	-	-	8.44	3.38	8.16
Due > 5 Yrs	31.24	222.07	251.48	288.35	334.72	359.23	324.05	442.63	388.72	991.28

Cash flow

	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
Fiscal Year Ends	31/03/2013	31/03/2014	31/03/2015	31/03/2016	31/03/2017	31/03/2018	31/03/2019	31/03/2020	31/03/2021	31/03/2022
Operating Cash Flow	22.96	18.72	29.97	37.68	49.95	43.83	54.91	72.80	71.63	85.42
Taxation	-0.59	-0.19	-0.55	0.17	-0.02	-0.76	-1.81	-1.46	-0.63	-3.67
Investing Activities	16.81	10.22	-75.70	-100.03	-93.65	-74.07	-67.81	-122.24	-73.53	-429.51
Net Outflow/Inflow	39.18	28.75	-46.29	-62.18	-43.72	-31.00	-14.71	-50.90	-2.54	-347.76
Financing	-31.61	-31.72	52.68	61.92	72.54	61.91	-24.62	131.88	-53.05	431.75
Net Change in Cash	7.57	-2.97	6.39	-0.26	28.82	30.91	-39.32	80.98	-55.59	83.99
Foreign Exchange Adjustments	-	-	-	-	-	-	-	-	0.00	1.30
Opening Balance	9.15	16.72	13.75	20.14	19.87	48.70	79.61	40.28	121.26	65.67
Closing Balance	16.72	13.75	20.14	19.87	48.70	79.61	40.28	121.26	65.67	150.97
Investment Ratios
Cash Flow Per Share	0.07	0.04	0.05	0.05	0.06	0.05	0.05	0.07	0.07	0.07
CAPEX PS	0.00	0.00	0.00	-0.02	-0.02	-0.02	-0.03	-0.03	-0.03	-0.03

Sirius financial forecasts

€	FY 2022 Act	FY 2023 Est		FY 2024 Est		FY 2025 Est		FY 2026 Est
12 Months Ending	03/31/2022	03/31/2023	#	03/31/2024	#	03/31/2025	#	03/31/2026	#
FFO Per Share		0.0815	2	0.0875	2	0.09	1
Revenue	210182000	158333333.3	3	163666666.7	3	169000000	3	311000000	1
Operating Profit	181224000	120500000	4	125500000	4	130000000	4	147000000	1
EPS, Adj+	0.1329	0.0806	5	0.0838	5	0.0845	4	0.097	1
EPS, GAAP	0.1348	0.07	2	0.067666667	3	0.066	1
EBIT	188164000	120500000	4	125500000	4	130000000	4	147000000	1
EBITDA	190495000	92000000	3	114333333.3	3	129333333.3	3	147000000	1
Pre-Tax Profit	168927000	94475000	4	98575000	4	101000000	3	132000000	1
Net Income Adj+	147873000	107325000	4	121350000	4	126625000	4	115000000	1
Net Income, GAAP	147873000	95500000	2	97950000	2	120000000	2
Net Debt	869188000	829000000	2	293333333.3	3	276333333.3	3	935000000	1
BPS	1.015775144	1.09	2	1.075	2	1.07	2	1.15	1
CPS	0.077237606	0.064	3	0.065	3	0.065333333	3	0.088	1
DPS	0.0441	0.0538	5	0.0546	5	0.0596	5	0.057	1
Return on Equity %	13.96883125	6.99	2	7.88	2	8.02	2	7.56	1
Return on Assets %	7.569913544	3.52	1	4.37	1	4.44	1	4.22	1
Depreciation	1164000	4900000	1	4900000	1	4900000	1
Free Cash Flow		54504432.62	2	56568264.38	2	60140167.07	2	63425148.26	1
CAPEX		-51450000	2	-50250000	2	-15555000	2	-26000000	1
Net Asset Value		109000000	2	113500000	2	121500000	2
LTG %		10.1	1

Current multiples

	Last 2 Semis Act	FY 2023	FY 2024	FY 2025
Price/EPS, Adj+		11.93	11.5	11.36
Price/Book	0.95	0.89	0.9	0.9
Price/Cash Flow	12.55	15.09	14.86	14.86
Price/FFO		11.78	10.98	10.73
EV/Revenue	9.53	12.66	12.24	11.86
EV/EBITDA	8.89	21.78	17.53	15.5
EV/EBIT	11.06	16.63	15.97	15.42
EV/OPP	11.06	16.63	15.97	15.42
Dividend Yield		5.59	5.69	6.21

Risks

As with any investment, investing in Sirius carries a level of risk. The key risks that could affect the group's medium-term performance can be found in the table below. Overall, based on the Sirius' market beta (i.e. 1.06), the degree of risk associated with an investment in Sirius is low.

Risk area	Principal risk(s)
Financing	Availability and pricing of debt
	Compliance with loan facility covenants
	Availability and pricing of equity capital
	Reputational risk
Valuation	Property inherently difficult to value
	Susceptibility of property market to change in value
Markets	Participation within two geographically diverse markets
	Reliance on specific industries and the SME market
	Reduction in occupancy
Acquisitive growth	Decrease in number of acquisition opportunities coming to market
	Failure to acquire suitable properties with desired returns
Organic growth	Failure to deliver capex investment programmes
	Failure to refuel capex investment programmes
	Failure to achieve targeted returns from investments
Customer	Decline in demand for space
	Significant tenant move-outs or insolvencies
	Exposure to tenants' inability to meet rental and other lease commitments
	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
Systems and data	System failures and loss of data
	Security breaches
	Data protection
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
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

Valuation

What's the expected return of an investment in the company?

Stockhub estimates that the expected return of an investment in the company over the next five years is negative xxx%. In other words, an £1,000 investment in the company is expected to return £xxx in five years time. The assumptions used to estimate the return figure can be found in the table below.

Assuming that a suitable return level over five years is 10% per year and Sirius Real Estate Limited achieves its expected return level (of negative xxx%), then an investment in the company is considered to be an 'xxx' one.

What are the assumptions used to estimate the return?

Key inputs

Description	Value	Commentary
Which valuation model do you want to use?	Discounted cash flow	There are two main approaches to estimate the value of an investment: By calculating the present value of the investment's expected future cash flows (i.e. discounted cash flow valuation); and By comparing the investment to other similar investments (i.e. relative valuation). Research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more accurate is the discounted cash flow approach, so that's the approach that Stockhub suggests to use here; nevertheless, for completeness purposes, separately, the valuation of the company is also estimated using the using the relative valuation approach (the valuation based on the relative approach can be found in the appendix of this report).
Which financial forecasts to use?	Stockhub	The only available long-term forecasts (i.e. >15 years) are the ones that are supplied by the Stockhub company (the forecasts can be found in the financials section of this report), so Stockhub suggests using those.
Growth stage 2
Discount rate (%)	15%	There are two key risk parameters for a firm that need to be estimated: its cost of equity and its cost of debt. A key way to estimate the cost of equity is by looking at the beta (or betas) of the company in question, the cost of debt from a measure of default risk (an actual or synthetic rating) and apply the market value weights for debt and equity to come up with the cost of capital.
Probability of success (%)	90%	Research suggests that a suitable rate for a company in this growth stage (i.e. stage 2) is 90%.
Growth stage 3
Discount rate (%)	10%	There are two key risk parameters for a firm that need to be estimated: its cost of equity and its cost of debt. A key way to estimate the cost of equity is by looking at the beta (or betas) of the company in question, the cost of debt from a measure of default risk (an actual or synthetic rating) and apply the market value weights for debt and equity to come up with the cost of capital.
Probability of success (%)	100%	Research suggests that a suitable rate for a company in this growth stage (i.e. stage 3) is 100%.
Growth stage 4
Discount rate (%)	10%	There are two key risk parameters for a firm that need to be estimated: its cost of equity and its cost of debt. A key way to estimate the cost of equity is by looking at the beta (or betas) of the company in question, the cost of debt from a measure of default risk (an actual or synthetic rating) and apply the market value weights for debt and equity to come up with the cost of capital.
Probability of success (%)	100%	Research suggests that a suitable rate for a company in this growth stage (i.e. stage 4) is 100%.
Other key inputs
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 five years time	Research suggests that following a market crash, the average amount of time it takes for the price of a stock market to return to its pre-crash level (i.e. the recovery period) is at least three years. Accordingly, Stockhub suggests that to account for general market cyclicity, it's best to estimate the expected return of the company between now and five years time.

Sensitive analysis

The 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 size of the total addressable market (the default size is $xxx trillion);
2. Sirius Real Estate Limited peak market share (the default share is xxx%); and
3. The discount rate (the default time-weighted average rate is xxx%).

The impact of a 50% 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 size of the total addressable market
Sirius Real Estate Limited peak market share
The discount rate

Appendix

Relative valuation approach

As noted earlier in this report, research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more accurate is the discounted cash flow approach, so that's the approach that Stockhub suggests using to determine the estimated value of the company (the valuation based on the discounted cash flow approach can be found in the valuation section of this report); nevertheless, for completeness purposes, separately, the valuation of the company is also estimated using the relative valuation approach.

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

Accordingly, Stockhub estimates that the expected return of an investment in Sirius Real Estate Limited over the next five years is xxx. In other words, an £1,000 investment in the company is expected to return £xxx in five years time. The assumptions used to estimate the return figure can be found in the table below.

Assuming that a suitable return level over five years is 10% per year and Sirius Real Estate Limited achieves its expected return level (of xxx), then an investment in the company is considered to be a 'xxx' one.

What are the assumptions used to estimate the return figure?

Key inputs

Description	Value	Commentary
Which type of multiple do you want to use?	P/AFFO	The value of real estate typically appreciates, rather than depreciates; furthermore, REIT property sales and capital expenditure tends to result in material differences in the profitable of the REIT across its lifespan. Accordingly, Stockhub suggests valuing the company using the Price to Adjusted Funds From Operations (P/AFFO) ratio, which is calculated by adding amortization and depreciation to the net income and then deducting the gains on the sale of properties and capital expenditure.
Which financial forecasts to use?	Stockhub	The only available medium-term forecasts (i.e. five years from now) are the ones that are supplied by the Stockhub company (the forecasts can be found in the financials section of this report), so Stockhub suggests using those.
In regards to the P/AFFO multiple, for the AFFO figure, which year to you want to use?	Year 5	Stockhub suggests that to account for general market cyclicity, it's best to use five years from now (i.e. Year 5).
In regards to the P/AFFO multiple, what multiple figure do you want to use?	15x	In Stockhub's view, Sirius Real Estate Limited closest peer is xxx. xxx trades on a multiple of xxx.
Which financial forecasts to use?	Stockhub	The only available forecasts are the ones that are supplied by the Stockhub company (the forecasts can be found in the financials section of this report), so Stockhub suggests using those.
What's the current value of the Stockhub company?	£981.20 million	As at 22nd November 2022, the current value of its company at £981.20 million.
Which time period do you want to use to estimate the expected return?	Between now and five years time	Research suggests that following a market crash, the average amount of time it takes for the price of a stock market to return to its pre-crash level (i.e. the recovery period) is at least three years. Accordingly, Stockhub suggests that to account for general market cyclicity, it's best to estimate the expected return of the company between now and five years time.

Adjusted Funds From Operations calculation

Item	2021	2022	2023E	2024E	2025E	2026E	2027E
Funds From Operations (€'million)	60.9	74.6	97.0	102.0	108.8
Capital expenditure (€'million)	31.1	23.8	24.0	24.0	24.0
Adjusted Funds From Operations (€'million)	29.8	50.8	76.0

Sirius Real Estate Limited peer(s)

Valuation table

Investments	Primary exchange	Classification	Industry	Market capitalisation (£)	P/FFO	P/AFFO	Yield (%)
Sirius Real Estate Limited	United Kingdom	Multi Asset Class Own & Develop	Real Estate Owners & Developers	£996 million	11.6x		4.39%
FastPartner AB	Sweden	Multi Asset Class Own & Develop	Real Estate Owners & Developers	£1,150 million			2.99%
Cibus Nordic Real Estate	Sweden	Multi Asset Class Own & Develop	Real Estate Owners & Developers	£577 million			6.84%
Intershop Holding AG	Switzerland	Multi Asset Class Own & Develop	Real Estate Owners & Developers	£1,020 million			4.08%
Metrovacesa SA	Spain	Multi Asset Class Own & Develop	Real Estate Owners & Developers	£928 million	26.9x		14.02%
WCM Beteiligungs- und G	Germany	Multi Asset Class Own & Develop	Real Estate Owners & Developers	£493 million			2.89%
Brack Capital Properties	Italy	Multi Asset Class Own & Develop	Real Estate Owners & Developers	£658 million
TLG Immobilien AG	Germany	Multi Asset Class Own & Develop	Real Estate Owners & Developers	£1,830 million			5.00%
GAG Immobilien AG	Germany	Multi Asset Class Own & Develop	Real Estate Owners & Developers	£1,130 million			0.63%
Gateway Real Estate AG	Germany	Multi Asset Class Own & Develop	Real Estate Owners & Developers	£535 million
VGP	Belgium	Multi Asset Class Own & Develop	Real Estate Owners & Developers	£1,350 million			9.08%

Sirius Real Estate Limited peers

Peer	Three-year average COGS margin (%)	Three-year average SG&A margin (%)	Three-year average tax margin (%)	Three-year average depreciation rate (%)	Three-year average fixed capital margin (%)	Three-year average change in working capital ($000)	Three-year average growth stage	Discount rate (WACC, %)
FastPartner AB			20.56%	20%				5.38%
Cibus Nordic Real Estate			13.47%	1%				5.01%
Intershop Holding AG			22.99%	14%				3.79%
Metrovacesa SA			22.19%	NA				8.72%
WCM Beteiligungs- und G			32.64%	20%				5.66%
Brack Capital Properties			25.13%	11%				2.15%
TLG Immobilien AG			24.44%	202%				5.84%
GAG Immobilien AG			16.91%	73.74%				4.89%
VGP			14.90%					7.43%
Gateway Real Estate AG			22.03%					3.61%

Growth stage

Growth stage	Three-year average COGS margin (%)	Three-year average SG&A margin (%)	Three-year average tax margin (%)	Three-year average depreciation rate (%)	Three-year average fixed capital margin (%)	Three-year average change in working capital ($000)	Discount rate
One
Two
Three
Four

Notes

Calculation(s)

Currently, global real estate rental income accounts for an estimated 2.5% of the world's gross domestic product. Global GDP is estimated at $96.1 trillion. Accordingly, the size of the global real estate rental income market as of today (23rd November 2022), in terms of revenue, is $2.4 trillion.

Global commercial real estate rental income accounts around 1.25% of the world's gross domestic product. Global GDP is estimated at $96.1 trillion. Accordingly, the size of the global commercial real estate rental income market as of today (23rd November 2022), in terms of revenue, is $1.2 trillion.

Germany commercial real estate rental income accounts for around 1.25% of Germany gross domestic product. Germany GDP is estimated at $4.1 trillion. Accordingly, the size of the Germany commercial real estate rental income market as of today (23rd November 2022), in terms of revenue, is $51 billion.

United Kingdom rental income accounts for around 2.5% of the country's gross domestic product. UK GDP is estimated at $3.2 trillion. Accordingly, the size of the United Kingdom commercial real estate rental income market as of today (23rd November 2022), in terms of revenue, is $40 billion.

Investment risk

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. Sirius' beta is 1.06, and is, accordingly, 6% above the market beta (of 1); assuming that a 'low' level of riskiness is less than 10% below the market beta, then the riskiness of investing in Sirius considered to be 'low' (6%>10%).

Economic links to cash flow patterns

Economic links to cash flow patterns

Cash flow type	Introduction	Growth	Shake out	Mature	Decline
Operating	-	+	+/-	+	-
Investing	-	-	+/-	-	+
Financing	+	+	+/-	-	+/-

Glossary

An alphabetical list of terms and their definitions commonly used by Sirius.

Adjusted earnings: is the earnings attributable to the owners of the Company, excluding the effect of adjusting items net of related tax, gains/losses on sale of properties net of related tax, the revaluation deficits/surpluses on the investment properties (also to associates) net of related tax, profits and losses on disposals of properties net of related tax, changes in fair value of derivative financial instruments net of related tax, gain on loss of control of subsidiaries net of related tax, finance restructuring costs net of related tax and adjustment on revaluation expense relating to leased investment properties.

Adjusted net asset value: is the assets attributable to the equity owners of the Company adjusted for derivative financial instruments and deferred tax arising on revaluation gain, financial derivative instruments and LTIP valuation.

Adjusted profit before tax: is the reported profit before tax adjusted for gain on revaluation of investment properties, gains/ losses on sale of properties, changes in fair value of derivative financial instruments, other adjusting items, gain on loss of control of subsidiaries, revaluation gain on investment property relating to associates and adjustment on revaluation in respect to IFRS 16.

Annualised acquisition net operating income: is the income generated by a property less directly attributable costs at the date of acquisition expressed in annual terms. Please see “annualised rent roll” definition below for further explanatory information.

Annualised acquisition rent roll: is the contracted rental income of a property at the date of acquisition expressed in annual terms. Please see “annualised rent roll” definition below for further explanatory information.

Annualised rent roll: is the contracted rental income of a property at a specific reporting date expressed in annual terms. Unless stated otherwise the reporting date is 31 March 2020. Annualised rent roll should not be interpreted nor used as a forecast or estimate. Annualised rent roll differs from rental income described in note 5 of the Annual Report and reported within revenue in the consolidated statement of comprehensive income for reasons including:

• annualised rent roll represents contracted rental income at a specific point in time expressed in annual terms;
• rental income as reported within revenue represents rental income recognised in the period under review; and
• rental income as reported within revenue includes accounting adjustments including those relating to lease incentives.

Capital value: is the market value of a property divided by the total sqm of a property.

Cumulative total return: is the return calculated by combining the movement in investment property value net of capex with the total net operating income less bank interest over a specified period of time.

EPRA earnings: is earnings after adjusting for property revaluation, changes in fair value of derivative financial instruments, profits and losses on disposals (collectively the “EPRA earnings adjustments”), the gain on loss of control of subsidiaries, finance restructuring costs, revaluation gain on investment property relating to associates, the resulting tax adjustments and deferred tax in respect of these EPRA earnings adjustments.

EPRA net asset value: is the net asset value after adjusting for derivative financial instruments and deferred tax relating to valuation movements and derivatives.

EPRA net reinstatement value: is the net asset value after adjusting for derivative financial instruments, deferred tax relating to valuation movements and derivatives and real estate transfer tax presented in the Valuation Certificate, including the amounts of the above related to the investment in associates.

EPRA net tangible assets: is the net asset value after adjusting for derivative financial instruments, deferred tax relating to valuation movements (just for the part of the portfolio that the Company intend to hold should be excluded) and derivatives, goodwill and intangible assets as per the statement of financial position, including the amounts of the above related to the investment in associates.

EPRA net disposal value: is the net asset value after adjusting for goodwill as per the statement of financial position and the fair value of fixed interest rate debt.

EPRA net initial yield: is the annualised rent roll based on the cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the market value of the property, increased with (estimated) purchasers’ costs.

EPRA net yield: is the net operating income generated by a property expressed as a percentage of its value plus purchase costs.

Funds from operations: is adjusted profit before tax adjusted for depreciation and amortisation (excluding depreciation relating to IFRS 16), amortisation of financing fees, adjustment in respect to IFRS 16 and current tax excluding prior year adjustments and tax on disposals.

Geared IRR: is an estimate of the rate of return taking into consideration debt.

Gross loan to value ratio: is the ratio of principal value of total debt to the aggregated value of investment property.

Like for like: refers to the manner in which metrics are subject to adjustment in order to make them directly comparable. Like-for-like adjustments are made in relation to annualised rent roll, rate and occupancy and eliminate the effect of asset acquisitions and disposals that occur in the reporting period.

Net loan to value ratio: is the ratio of principal value of total debt less cash, excluding that which is restricted, to the aggregate value of investment property.

Net operating income: is the rental and other income from investment properties generated by a property less directly attributable costs.

Net yield: is the net operating income generated by a property expressed as a percentage of its value.

Occupancy: is the percentage of total lettable space occupied as at reporting date.

Operating cash flow on investment (geared): is an estimate of the rate of return based on operating cash flows and taking into consideration debt.

Operating cash flow on investment (ungeared): is an estimate of the rate of return based on operating cash flows.

Rate: is rental income per sqm expressed on a monthly basis as at a specific reporting date.

Total debt: is the aggregate amount of the Company’s interest-bearing loans and borrowings.

Total shareholder accounting return: is the return obtained by a shareholder calculated by combining both movements in adjusted NAV per share plus dividends paid.

Total return: is the return for a set period of time combining valuation movement and income generated.

Ungeared IRR: is an estimate of the rate of return.

Weighted average cost of debt: is the weighted effective rate of interest of loan facilities expressed as a percentage.

Weighted average debt expiry: is the weighted average time to repayment of loan facilities expressed in years.